China, Myanmar Move Ahead With Sea Port Project

[GeraltofRivia]

Nov 08, 2018 08:19 AM

China and Myanmar are moving ahead with a China-backed deep-sea port project in Kyaukpyu, 250 miles northwest of Yangon, following nearly three years of twists and turns.

Myanmar officials and Chinese investors are scheduled to sign a framework agreement for the Kyaukpyu port project Thursday in the capital city, Nay Pyi Taw, a spokesman at Myanmar’s Ministry of Commerce told Caixin.

A consortium led by China’s state-owned investment conglomerate Citic Group won a tender to build the port in 2015. It was part of a broader project for the Kyaukpyu special economic zone launched by Myanmar’s former President Thein Sein. Total investment in the port was estimated at more than $7 billion, of which China could account for as much as 85%, according to the original agreement.

But the project was held up after elections in 2015 ended Myanmar’s military rule and the new government had concerns about financing, equity and debt issues related to the project.

China-led investment under the Belt and Road Initiative has faced increasing scrutiny in neighboring countries out of concerns over potential debt-related risks. In early October, Pakistan cut the size of a key Chinese railway project by $2 billion, citing debt worries.

In August, Malaysia’s newly elected Prime Minister Mahathir Mohamad announced that more than $23 billion of Chinese projects, including railways, were “canceled for now.”

On the Myanmar port project, negotiations had made little progress by October 2017 as Myanmar investors “want more shares but they don’t want to take more financing responsibility,” Yuan Shaobin, executive president of Citic Myanmar, told local media.

In May this year, several international media outlets reported that the Myanmar government launched a re-evaluation of the port project because of concerns that it might put Myanmar heavily in debt to China.

But the freeze apparently thawed after the two countries signed a memorandum of understanding in September to establish the China-Myanmar Economic Corridor as part of the Belt and Road Initiative. The Kyaukpyu port is the first project to move forward under the accord.

In October, China and Myanmar also resumed feasibility studies on building a railway line from the border to the city of Mandalay four years after the Myanmar government shelved the proposed route.

The Kyaukpyu port is located at the west end of the 1,700 kilometer corridor that will connect Kunming, the capital of China’s Yunnan province, to Myanmar’s major economic hubs. Under the September memorandum, the governments agree to collaborate on infrastructure, manufacturing, agriculture, transport, finance, research and technology.

According to Aung Naing Oo, director of Myanmar’s Investment and Company Administration (DICA), the Chinese consortium will take a 70% stake in the port project with the remaining 30% split between the Myanmar government and a consortium of local businesses. The Myanmar stake was increased from the previously agreed 15%.

Investors in the China consortium include China Merchants Group, China Harbour Engineering Co. Ltd., Tianjin Teda Group, Yunan Construction Engineering Group and Thailand’s Charoen Pokphand Group.

The local newspaper Myanmar Times cited deputy commerce minister U Aung Htoo last week as saying that the port project will be carried out in four phases. The first-phase construction of a terminal with capacity for two to three vessels will involve initial investment of $1.3 billion, down from a previous estimate of $1.6 billion.

Citic Myanmar’s Yuan said the framework agreement will be just the beginning of a lengthy procedure before construction starts, including the signing of several related contracts and regulatory approvals.

https://www.caixinglobal.com/2018-1...ve-ahead-with-sea-port-project-101344159.html

 

[GeraltofRivia]

The key change from earlier agreement is that Myanmar increases its share to 30% from the previously agreed 15%. A Chinese consortium will take the rest 70% stake in the venture.

 

[royalharris]

It is good
I think CMEC will be built more smoothly

 

[8888888888888]

China has more experience doing those kind of projects successfully and on budget and on time.

 

[moweike]

The West tries to destroy this, so you will see more rohingya problems.

 

[GeraltofRivia]

A old article from AMTI, good summary on Kyaukpyu port project. A typical western storyline though .


KYAUKPYU: CONNECTING CHINA TO THE INDIAN OCEAN
BY GREGORY POLING | APRIL 4, 2018
AMTI UPDATE

• Chinese state-owned firms have reached agreements with Myanmar to construct a $7.3 billion deep-water port and $2.7 billion industrial area in a special economic zone at Kyaukpyu along the coast of the Bay of Bengal. The strategic town is the terminus of a $1.5 billion oil pipeline and parallel natural gas pipeline running to Kunming in China’s Yunnan Province.
• Despite fears that the project could eventually be used for Chinese military access, political and legal restrictions in Myanmar make this unlikely. The project is aimed mainly at helping China avoid the vulnerable Strait of Malacca and aid the development of its southwestern hinterland.
• Like many major projects under the Belt and Road Initiative, there are well-founded fears that the project could grant China a dangerous level of economic leverage over Myanmar, especially if the government in Naypyidaw is forced to turn to Chinese loans to fund its share of the port and SEZ, which combined could amount to 5 percent of national GDP.

Kyaukpyu is a coastal town along the Bay of Bengal in Myanmar’s western-most state of Rakhine. In 2016, subsidiaries of China’s CITIC Group Corporation, including China Harbor Engineering Company, won contracts for two major projects in the town—the dredging of a deep-sea port and the creation of an industrial area in an accompanying special economic zone (SEZ). The port project is valued at $7.3 billion and the SEZ at $2.7 billion. Under the terms of the deal, CITIC will build and then run the project for 50 years with a potential extension of another 25 years.

Negotiations on Kyaukpyu predate the Belt and Road Initiative—CITIC signed initial memorandums of understanding (MOUs) for the harbor project and a railway connecting the SEZ to southern China in 2009. However, they languished amid political sensitivities in Myanmar surrounding Chinese investments following the 2011 suspension of the Myitsone dam project and violent protests starting in 2012 over the Letpadaung copper mine. The railway MOU was canceled in 2014 while the port and SEZ industrial area projects are moving forward, but slowly and with considerable pushback within Myanmar. Only in October 2017 did the two sides reach an agreement on ownership of the port project after CITIC agreed to drop its stake from 85 percent to 70 percent. Ownership stakes in the SEZ have yet to be finalized.

The Strategic and Economic Rationale

China has remained committed to the Kyaukpyu projects primarily because the town is the terminus of a $1.5 billion oil pipeline and a parallel natural gas pipeline running to Kunming, capital of southwestern China’s Yunnan Province. Unlike the other projects related to Kyaukpyu, construction on the pipelines moved forward despite significant local opposition. They were constructed between 2010 and early 2015 by China National Petroleum Corporation and Myanmar Oil and Gas Enterprise—both state-owned firms—with the former the majority stakeholder. The gas pipeline entered operation in 2013 and can send 12 billion cubic meters of gas to China annually. After a two-year delay, the oil pipeline finally entered operations in April 2017. It can reportedly carry 22 million barrels of oil per year, which amounts to about 6 percent of China’s 2016 oil imports. The pipeline project is part of a strategic effort by Beijing to reduce its reliance on oil and gas imports through the Strait of Malacca, thereby avoiding the possibility that an adversary like the United States could close the strait to threaten China’s energy supply.

Building a deep-sea port at Kyaukpyu makes considerable economic and strategic sense for China in its drive to develop its inland provinces. Shipping goods from Europe, the Middle East, Africa, and India to Kyaukpyu and then overland to Yunnan could save thousands of miles. It would be far more efficient than sailing all the way through the Strait of Malacca and the South China Sea to ports along China’s southern and eastern coasts, and then traveling overland to China’s western provinces. Unsurprisingly, in December 2017 State Councilor Aung San Suu Kyi and President Xi Jinping agreed during a meeting in Beijing to establish a new China-Myanmar Economic Corridor connecting Kyaukpyu and Kunming. No details were released, but the project would likely include construction of a road and perhaps the restart of the suspended rail project. Mandalay, Myanmar’s second-largest city and the traditional hub for trade with southern China, would serve as a waypoint along this new economic corridor. Ultimately it seems Chinese planners envision the Kyaukpyu to Kunming oil and gas pipelines as just the first step in a new trade route that could change the economics of China’s hinterland.

While the establishment of a deep-sea port at Kyaukpyu makes sense for China, its benefits for Myanmar will depend in large part on the success of the accompanying SEZ. Without successful industrial projects in the SEZ, Kyaukpyu could become little more than a waystation for goods headed to Yunnan. The former government of Myanmar under Thein Sein promoted three large SEZ projects to boost the country’s economy. Of these, the Japanese-led Thilawa SEZ just outside Yangon is the only one already up and running. Another, the joint Thai-Japanese Dawei project along the southern coast, has faced constant financial troubles but continues to move forward slowly. That puts Kyaukpyu third in a three-way race, and it is unclear whether the zone, with its late start and distance from Myanmar’s commercial and economic heart of Yangon, will be able to lure sufficient investment.

Dangers Both Real and Imagined

There are concerns among some in India and the West, as well as within Myanmar itself, that China could leverage the port at Kyaukpyu for military purposes, but such worries are premature at best. Myanmar’s leaders, both military and civilian, are famously jealous of the nation’s sovereignty and will not accept a permanent foreign military presence, whether from China or anywhere else. In fact, the country’s 2008 constitution expressly forbids the deployment of foreign troops on its soil. That means that commercial investment in the port at Kyaukpyu is not likely to lead to a permanent Chinese presence such as in Djibouti or, reportedly, Gwadar, Pakistan. Chinese naval assets could certainly pay calls to the port from time to time, as they do at Colombo in Sri Lanka, which is also majority-owned by a Chinese company. But such port calls should not by themselves be cause for concern.

A more realistic, and worrying, possibility is that China could gain a dangerous level of economic leverage over Myanmar due to the accumulation of too much Chinese-funded debt. Chinese loans and large-scale investments have proven highly controversial in other regional states, such as the Maldives, where Beijing has been accused of using them to leverage the recipient nation into making political and economic concessions against its national interest. Such fears are not unfounded. The Myanmar government’s 30 percent stake in the Kyaukpyu port amounts to $2.2 billion. If it takes a 50 percent stake in the SEZ, that would bring its total responsibility for the projects to $3.5 billion, or about 5 percent of GDP. As Yun Sun at the Stimson Center has pointed out, if the Myanmar government cannot handle that level of financing, it will likely turn to Chinese loans.

Concerns about Chinese economic leverage are not new to Myanmar, and help explain the continued local opposition to Kyaukpyu (and hence the glacial pace of its implementation). One of the driving factors behind Myanmar’s decision to move toward civilian government in 2010–2011 was a worry about overreliance on China amid continued Japanese and Western sanctions. For the time being, China remains a major but not overwhelming economic presence in the country. China has a major footprint in Myanmar, both in trade and investment, but so do other partners like Japan that provide Myanmar with a significant degree of maneuverability. That is not likely to change in the short term, though the potential debt burden from Kyaukpyu bears watching.

Kyaukpyu is of considerable strategic and economic value for China as it seeks to speed development of Yunnan and its other inland provinces. That value is centered on the development of a deep-water port and the construction of accompanying road and rail links to supplement the pipelines already running to Kunming. Whether the project also boosts Myanmar’s economic growth will depend on the success of the accompanying SEZ, and the terms under which it takes shape.

 

[TaiShang]

It is good
I think CMEC will be built more smoothly

I believe it will get completed earlier than CPEC -- judging by the speed the two pipelines were built.

No Rohinga Crisis can stop the pace of construction and build up. In fact, it is one of the solutions to the crisis.

 

[ZeEa5KPul]

Buh...buh...but muh debt trap! Muh democracy!!

 

[Feng Leng]

Myanmar knows which side of the bread is buttered.

 

[TaiShang]

Buh...buh...but muh debt trap! Muh democracy!!

The world has learned not to take the US regime (and its little minions) seriously.

They are talking everyday, using significant words, but they fail to create the desired "shock and awe," unlike what they managed when they invaded Iraq for the second time and killed women and children indiscriminately.

 

[oprih]

Nice! Another bitch slap to the already battered faces of the westerners and their hindu slaves.

 

[TaiShang]

Nice! Another bitch slap to the already battered faces of the westerners and their hindu slaves.

But Belt and Road is collapsing and South and South East Asia is quitting it because the US decided to invest a huge 130 million USD.

Almost a second Marshall Plan - on steroids.

This is what the US regime friendly media told me few weeks back.

 

[SuvarnaTeja]

CMEC is better route than CPEC from China's POV.

 

[TaiShang]

CMEC is better route than CPEC from China's POV.

It is a bit further but the advantage is it does not have to pass through the SCS。Most likely, the two (CPEC and CMEC) are complementary, serving different regions of Mainland China.

How China feels about it should also depend on how the governments in those line-passing countries approach the issue.

Myanmar has made some strides and taken some advantageous position, in this regard. I think Pakistan comes under the pressure of a lot more proximodistal forces, including the US.

Myanmar seems to be better able to ignore the US.

 

[Buddhistforlife]

A old article from AMTI, good summary on Kyaukpyu port project. A typical western storyline though .


KYAUKPYU: CONNECTING CHINA TO THE INDIAN OCEAN
BY GREGORY POLING | APRIL 4, 2018
AMTI UPDATE

• Chinese state-owned firms have reached agreements with Myanmar to construct a $7.3 billion deep-water port and $2.7 billion industrial area in a special economic zone at Kyaukpyu along the coast of the Bay of Bengal. The strategic town is the terminus of a $1.5 billion oil pipeline and parallel natural gas pipeline running to Kunming in China’s Yunnan Province.
• Despite fears that the project could eventually be used for Chinese military access, political and legal restrictions in Myanmar make this unlikely. The project is aimed mainly at helping China avoid the vulnerable Strait of Malacca and aid the development of its southwestern hinterland.
• Like many major projects under the Belt and Road Initiative, there are well-founded fears that the project could grant China a dangerous level of economic leverage over Myanmar, especially if the government in Naypyidaw is forced to turn to Chinese loans to fund its share of the port and SEZ, which combined could amount to 5 percent of national GDP.

Kyaukpyu is a coastal town along the Bay of Bengal in Myanmar’s western-most state of Rakhine. In 2016, subsidiaries of China’s CITIC Group Corporation, including China Harbor Engineering Company, won contracts for two major projects in the town—the dredging of a deep-sea port and the creation of an industrial area in an accompanying special economic zone (SEZ). The port project is valued at $7.3 billion and the SEZ at $2.7 billion. Under the terms of the deal, CITIC will build and then run the project for 50 years with a potential extension of another 25 years.

Negotiations on Kyaukpyu predate the Belt and Road Initiative—CITIC signed initial memorandums of understanding (MOUs) for the harbor project and a railway connecting the SEZ to southern China in 2009. However, they languished amid political sensitivities in Myanmar surrounding Chinese investments following the 2011 suspension of the Myitsone dam project and violent protests starting in 2012 over the Letpadaung copper mine. The railway MOU was canceled in 2014 while the port and SEZ industrial area projects are moving forward, but slowly and with considerable pushback within Myanmar. Only in October 2017 did the two sides reach an agreement on ownership of the port project after CITIC agreed to drop its stake from 85 percent to 70 percent. Ownership stakes in the SEZ have yet to be finalized.

The Strategic and Economic Rationale

China has remained committed to the Kyaukpyu projects primarily because the town is the terminus of a $1.5 billion oil pipeline and a parallel natural gas pipeline running to Kunming, capital of southwestern China’s Yunnan Province. Unlike the other projects related to Kyaukpyu, construction on the pipelines moved forward despite significant local opposition. They were constructed between 2010 and early 2015 by China National Petroleum Corporation and Myanmar Oil and Gas Enterprise—both state-owned firms—with the former the majority stakeholder. The gas pipeline entered operation in 2013 and can send 12 billion cubic meters of gas to China annually. After a two-year delay, the oil pipeline finally entered operations in April 2017. It can reportedly carry 22 million barrels of oil per year, which amounts to about 6 percent of China’s 2016 oil imports. The pipeline project is part of a strategic effort by Beijing to reduce its reliance on oil and gas imports through the Strait of Malacca, thereby avoiding the possibility that an adversary like the United States could close the strait to threaten China’s energy supply.

Building a deep-sea port at Kyaukpyu makes considerable economic and strategic sense for China in its drive to develop its inland provinces. Shipping goods from Europe, the Middle East, Africa, and India to Kyaukpyu and then overland to Yunnan could save thousands of miles. It would be far more efficient than sailing all the way through the Strait of Malacca and the South China Sea to ports along China’s southern and eastern coasts, and then traveling overland to China’s western provinces. Unsurprisingly, in December 2017 State Councilor Aung San Suu Kyi and President Xi Jinping agreed during a meeting in Beijing to establish a new China-Myanmar Economic Corridor connecting Kyaukpyu and Kunming. No details were released, but the project would likely include construction of a road and perhaps the restart of the suspended rail project. Mandalay, Myanmar’s second-largest city and the traditional hub for trade with southern China, would serve as a waypoint along this new economic corridor. Ultimately it seems Chinese planners envision the Kyaukpyu to Kunming oil and gas pipelines as just the first step in a new trade route that could change the economics of China’s hinterland.

While the establishment of a deep-sea port at Kyaukpyu makes sense for China, its benefits for Myanmar will depend in large part on the success of the accompanying SEZ. Without successful industrial projects in the SEZ, Kyaukpyu could become little more than a waystation for goods headed to Yunnan. The former government of Myanmar under Thein Sein promoted three large SEZ projects to boost the country’s economy. Of these, the Japanese-led Thilawa SEZ just outside Yangon is the only one already up and running. Another, the joint Thai-Japanese Dawei project along the southern coast, has faced constant financial troubles but continues to move forward slowly. That puts Kyaukpyu third in a three-way race, and it is unclear whether the zone, with its late start and distance from Myanmar’s commercial and economic heart of Yangon, will be able to lure sufficient investment.

Dangers Both Real and Imagined

There are concerns among some in India and the West, as well as within Myanmar itself, that China could leverage the port at Kyaukpyu for military purposes, but such worries are premature at best. Myanmar’s leaders, both military and civilian, are famously jealous of the nation’s sovereignty and will not accept a permanent foreign military presence, whether from China or anywhere else. In fact, the country’s 2008 constitution expressly forbids the deployment of foreign troops on its soil. That means that commercial investment in the port at Kyaukpyu is not likely to lead to a permanent Chinese presence such as in Djibouti or, reportedly, Gwadar, Pakistan. Chinese naval assets could certainly pay calls to the port from time to time, as they do at Colombo in Sri Lanka, which is also majority-owned by a Chinese company. But such port calls should not by themselves be cause for concern.

A more realistic, and worrying, possibility is that China could gain a dangerous level of economic leverage over Myanmar due to the accumulation of too much Chinese-funded debt. Chinese loans and large-scale investments have proven highly controversial in other regional states, such as the Maldives, where Beijing has been accused of using them to leverage the recipient nation into making political and economic concessions against its national interest. Such fears are not unfounded. The Myanmar government’s 30 percent stake in the Kyaukpyu port amounts to $2.2 billion. If it takes a 50 percent stake in the SEZ, that would bring its total responsibility for the projects to $3.5 billion, or about 5 percent of GDP. As Yun Sun at the Stimson Center has pointed out, if the Myanmar government cannot handle that level of financing, it will likely turn to Chinese loans.

Concerns about Chinese economic leverage are not new to Myanmar, and help explain the continued local opposition to Kyaukpyu (and hence the glacial pace of its implementation). One of the driving factors behind Myanmar’s decision to move toward civilian government in 2010–2011 was a worry about overreliance on China amid continued Japanese and Western sanctions. For the time being, China remains a major but not overwhelming economic presence in the country. China has a major footprint in Myanmar, both in trade and investment, but so do other partners like Japan that provide Myanmar with a significant degree of maneuverability. That is not likely to change in the short term, though the potential debt burden from Kyaukpyu bears watching.

Kyaukpyu is of considerable strategic and economic value for China as it seeks to speed development of Yunnan and its other inland provinces. That value is centered on the development of a deep-water port and the construction of accompanying road and rail links to supplement the pipelines already running to Kunming. Whether the project also boosts Myanmar’s economic growth will depend on the success of the accompanying SEZ, and the terms under which it takes shape.

China and Myanmar's relation should become a brotherly relation. I mean why not? Chinese and Burmese are linguistically, physically and culturally similar, historically these two countries integrated together and also both countries have a substantial Buddhist population and so i believe they are quite similar and China and Myanmars relation should become a brotherly relation.