The economic stakes for China in Myanmar’s restive Rakhine
A China-led consortium is behind a US$7.3 billion deep-water port development and a US$2.3 billion oil and gas pipeline
In the west of Rakhine state, just 200km from the worst of the recent fighting between Myanmar’s military and so-called insurgents is the KyaukPhyu Special Economic Zone.
Covering more than 1,700 hectares, the area was established in 2013 as a joint venture between the governments of Myanmar and China, with the aim of providing an industrial and infrastructure base serving the two countries and wider trade channels.
While the original investments were made at the state level, private firms have since become involved, with the largest Chinese investor now being a five-party consortium led by Citic Group.
The three largest projects in the zone are:
1. Deep-water Port
At US$7.3 billion, this development is the most valuable within KyaukPhyu.
According to a Reuters report in May, the Citic consortium, which includes three other Chinese firms and a Thai company – has proposed taking a 70-85 per cent stake in the project with the rest held by the Myanmar government.
A port already exists at the site, though it is used mostly for the export of local goods and its operations are relatively small. Once redeveloped as a deep seaport, the facility will have an annual capacity of 7.8 million tonnes of bulk cargo and 4.9 million TEU – the standard unit for measuring the capacity of container ships.
The port will be a strategic addition to the maritime infrastructure for China’s “Belt and Road Initiative” and will complement existing facilities in Chittagong in Bangladesh, Gwadar in Pakistan, and Colombo in Sri Lanka.
It will also provide an alternative, overland, route for the transport of cargo from Western countries to China. Currently, such goods – including the bulk of China’s oil imports – have to pass through the Strait of Malacca, the world’s busiest shipping route.
2. Oil and gas pipelines
Built at a cost of US$2.45 billion, these dual pipelines – known officially as the Thelong Myanmar-China Oil and Gas Pipeline Project – run 771km from the coast of Rakhine state to Yunnan province in southwestern China.
Construction began in 2010 and the lines went into operation in April of this year.
Owned by the China National Petroleum Corporation (51 per cent) and Myanmar Oil and Gas Enterprise, the lines are designed to carry 22 million tonnes of oil – up from 13 million tonnes currently – and up to 12 billion cubic meters of natural gas per year.
The oil is imported from Arab countries and shipped to KyaukPhyu via the Bay of Bengal.
3. Industrial zone
The second-largest development being handled by the Citic consortium is a USS$2.3 billion trading estate. According to the Reuters report, the group has agreed to take a 51 per cent stake in the project, the development of which began in early 2016.
Once completed – in 20 to 30 years – the zone will cover 100 hectares, Xinhua reported. Its first phase will be divided into areas for agriculture, ecotourism development and industry.