Kyaukphyu SEZ Project Awarded to China for Lack of Options, Ex-Minister Says

By Htet Naing Zaw 6 August 2018

NAYPYITAW—Myanmar’s government did not want Chinese investment in the deep-sea port and special economic zone (SEZ) projects in Rakhine State’s Kyaukphyu, said U Kan Zaw, who served as minister for national planning and economic development under U Thein Sein’s administration.

The previous government expected investment from the US and EU in the two projects, U Kan Zaw, who also served as chairman of the Kyaukphyu SEZ project tender selection committee, told The Irrawaddy in an exclusive interview.

“We invited tenders from international developers. Frankly speaking, we didn’t want China to come, but Hong Kong developers submitted tenders. We expected US and EU developers to come, but they didn’t,” the former minister said.

China International Trust and Investment Corporation (CITIC) won contracts for the two projects in 2015.

The deep-sea port project was initially valued at $7.3 billion and the SEZ at $2.7 billion. Under the terms of the deal, CITIC will build and then operate the project for 50 years with a potential extension of an additional 25 years.

According to the initial agreement signed with U Thein Sein’s administration, CITIC took an 85 percent stake in the deep-sea port and a 51 percent stake in the SEZ.

However, amid political sensitivity surrounding Chinese investment in Myanmar, CITIC agreed to drop its ownership stake from 85 to 70 percent, according to the Asia Maritime Transparency Initiative. New ownership stakes in the SEZ have yet to be finalized.

U Kan Zaw said that over 95 percent of lawmakers voted in favor of the project during the Union Parliament session on Dec. 31, 2015.

“The project was explained to the Union Parliament in detail. The state counselor [who was then a lawmaker] was also present during the decision-making process at the parliament session and related meetings chaired by U Shwe Mann [former Lower House speaker],” he said.

“There was a 95 percent ‘yes’ vote because the NLD [National League for Democracy] also supported it,” he added.

The decision was made according to the majority vote, which included votes by the Arakanese lawmakers, he said.

“I don’t agree that the project was not transparent. I have a clear conscience and can take responsibility for it,” said U Kan Zaw.

U Ba Shein, however, a Lower House lawmaker representing Kyaukphyu Township, said that Arakanese lawmakers did not support the 85-15 stake ratio between China and Myanmar.

Lawmakers were, however, able to debate with concerned ministers about the projects under President U Thein Sein’s administration, he added.

“We could debate with concerned ministers about the project under the previous government. But under this government we are informed about nothing. We don’t know more than what is reported in newspapers,” he said.

“The NLD hasn’t informed our ANP [Arakan National Party] of anything. The value [of the project] has dropped because China has dropped it. So it is clear that the owner of the project is China,” U Ba Shein added.

Due to concerns over the project’s potential to become a debt trap, the NLD-led government has decided to reduce the value of the deep-sea project from $7.3 billion to $1.3 billion, said U Set Aung, deputy minister for finance and planning and chairman of the Kyaukphyu SEZ management committee.

At a meeting in Beijing in December, State Counselor Aung San Suu Kyi and Chinese President Xi Jinping agreed to establish an economic corridor connecting Kyaukphyu to Kunming, in China’s landlocked Yunnan Province.