Gov’t Inks Agreement with Chinese Firm to Develop Kyaukphyu SEZ

By The Irrawaddy 8 November 2018

YANGON—After many rounds of negotiations, the Myanmar government and a Chinese company have inked a framework agreement for the development of a special economic zone (SEZ) in Rakhine State. The project will offer China access to the Bay of Bengal while enhancing its regional connectivity as part of Beijing’s Belt and Road Initiative (BRI).

Thanks to its strategic location between three economically vibrant and dynamic markets—China, India and ASEAN—the Kyaukphyu SEZ is uniquely positioned to serve as a trade corridor connecting the three economies.

Identifying the SEZ project, which includes a deep seaport, as a part of the BRI, Commerce Minister U Than Myint said the signing of the agreement between the Kyaukphyu SEZ Management Committee and the China International Trust and Investment Corporation (CITIC) was an “initial success”.

According to the initial master plan, the Kyaukphyu SEZ will cover a total of 520 hectares—20 for the port, 100 for housing and 400 for an industrial park. Some 50 percent of the land is allocated to fisheries, 30 percent to garment factories and the rest to other small enterprises.

“We are ready to proceed on many fronts. For those, we will have to negotiate for the good of both parties. I hope those negotiations will happen,” the minister said at the signing ceremony in Naypyitaw on Thursday.

Since the 2015 elections that swept the National League for Democracy (NLD) to power, the government has been negotiating with the China International Trust and Investment Corporation (CITIC) to raise Myanmar’s stake in the Kyaukphyu SEZ in Rakhine State.

CITIC struck a shareholders agreement with the previous government under President Thein Sein just before the 2015 election. It gave the Chinese developer an 85 percent stake in the project and Myanmar the rest. Critics of the project raised concerns that the deal could land Myanmar in a debt trap with China. After negotiations under the NLD government, China agreed that Myanmar would hold 30 percent of the shares.

The initial agreement called for a project worth US$9 billion or $10 billion, but current SEZ chairman Deputy Planning and Finance Minister U Set Aung earlier told The Irrawaddy that the two sides had since agreed that the project would start out on a small or medium-sized scale.

CITIC chairman Chang Zhenming said the framework agreement reflected the Myanmar government’s wish to promote economic and social development in Kyaukphyu and attract foreign investment.

“This framework agreement is a major step for the SEZ and the deep seaport. It’s historic,” he said.

According to the framework agreement, Chang Zhenming said, a joint Myanmar-Chinese consortium will have concession rights to operate the port.

He added that the first phase of the project would be carried out after environmental and social impact assessments are conducted. Phase 1 will involve the construction of two jetties with a total investment of not more than $1.3 billion.

The term of the project was initially agreed at 50 years. Once the seaport and SEZ are in operation, they are expected to provide 100,000 jobs for local people. The government will earn $7.8 billion in revenue from the SEZ and $6.5 billion from deep seaport, according to CITIC.