China’s Strategic Port Project Moves Step Closer to Reality as Myanmar OKs Joint Venture

By Nan Lwin 10 August 2020

YANGON—The Myanmar government’s investment agency last week approved the registration of a joint venture between a Chinese company and a government-backed committee to develop China’s strategic deep-sea port project in western Rakhine State.

The approval moves the long-delayed backbone project of the China-Myanmar Economic Corridor (CMEC) one step closer to actually getting off the ground. The CMEC forms part of China’s ambitious Belt and Road Initiative (BRI).

The Kyaukphyu Special Economic Zone and deep-sea port project is designed to provide China with direct access to the Indian Ocean, allowing its oil imports to bypass the Strait of Malacca and boost development in China’s landlocked Yunnan Province. The entire project covers 4,300 acres (about 1,750 hectares). It also plans to construct an industrial zone with facilities for textile and garment manufacturing, construction materials processing, food processing, pharmaceuticals, electronics, marine supplies and services, and research.

According to company registration documents from the Directorate of Investment and Company Administration (DICA), the agency on Thursday approved the registration of Kyaukphyu Special Economic Zone Deep Seaport Co. Ltd, a joint venture between Chinese consortium CITIC Myanmar Port Investment Limited and the Myanmar government-backed Kyauk Phyu Special Economic Zone Management Committee.

According to company extract records from DICA, the Chinese company holds a 70-percent stake in the venture and the Myanmar committee 30 percent, as agreed by the two sides in 2018 after several rounds of negotiations.

The China-backed project ran into delays shortly before Myanmar’s 2015 general election after critics raised concerns that the deal could land Myanmar in a “debt trap” with China. The initial agreement called for a project worth US$9-10 billion (12.23-13.59 trillion kyats) and gave the Chinese developer an 85-percent stake.

The current National League for Democracy (NDL) government successfully renegotiated the share ratio with China, along with an agreement that the project would be based on demand. Later, China agreed that Myanmar would hold a 30-percent stake. Moreover, the two sides agreed the project would start out on a “small or medium-sized” scale. After the deal was finalized, the Kyaukphyu SEZ Management Committee and CITIC inked a framework agreement for the development of the Kyaukphyu SEZ in 2018.

The two sides agreed that the first phase of the deep-sea port would be implemented with a $1.5-billion budget.

According to DICA’s records, on the Myanmar side, Deputy Minister of Planning, Finance and Industry U Set Aung, who is also chair of the Kyaukphyu SEZ Management Committee, and U Minn Minn, the director general of the Department of Trade under the Ministry of Commerce, will serve as directors in the joint venture company. On the Chinese side, CITIC Group (Myanmar) managing director Yuan Shaobin and deputy managing directors Liu Qing, Shan Liming, Ma Chuanfu and Sun Tiejun will serve as directors.

In June, Deputy Commerce Minister U Aung Htoo said the two sides had reached a consensus on the company’s composition. He expressed confidence that construction of the deep-sea port would get off the ground soon, once the lists of company directors were approved.

Kyaukphyu SEZ Management Committee Secretary U Yee Win told The Irrawaddy the project could start once an environmental and social impact assessment (ESIA) report was completed.

“Most responsible persons of the company went back to the China after COVID-19 emerged. We still need to hold further discussions relating to the actual construction on the ground. As far as we know, the company is still carrying out the EIA and SIA. Actual implementation of the project can start after that,” U Yee Win said.

In July 2019, the Chinese company hired Canadian company HATCH to supervise the ESIA and a “pre-geo survey”. Last September, the company submitted a project proposal report (PPR) to the Ministry of Natural Resources and Environmental Protection (MONREC).

In its 2017 report, Kofi Annan’s Rakhine Advisory Commission recommended the Myanmar government conduct a Strategic Environmental Assessment (SEA) and labor assessment for the SEZ before beginning the ESIA process, in order to determine the likely consequences on local communities, as well as the project’s risks and benefits for other industries in the area.

However, CITIC said in January that MONREC had determined the deep-sea port project required an EIA under Myanmar law. The Chinese company said it would choose an independent consultant to conduct the EIA through a bidding process. However, the company has yet to announce what progress has been made on the EIA.

According to the Commerce Ministry, the CITIC consortium will own 51 percent of the industrial zone and the Myanmar government 49 percent. The construction of the industrial zone will be led by CITIC and a total of 42 private Myanmar companies under Myanmar Kyauk Phyu Special Economic Zone Holding Public Company Limited, it said.

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