Belt and Road, Kaladan and the future of Rakhine’s economy

THE economy in the resource-rich Rakhine State is throttled by the crisis as well as the accompanying international backlash, dashing any hope of massive foreign investment in the near future. In the meantime, local communities in Kyaukphyu have demanded the stake ratio of the proposed Kyaukphyu port to be restructured so as to allow a higher ratio for Myanmar. Nay Pyi Taw is negotiating with the stakeholders on adjusting the ownership percentage between the two consortiums.

Despite the fact that Rakhine is not in Myanmar’s heartland geographically, the state is crucial for the country’s economy. In addition to the renowned Ngapali beach, Rakhine State holds enormous economic potential because the state has oil, natural gas fields and maritime resources from the Bay of Bengal.

However, Rakhine remains the second poorest region or state in the country. Community and economic development are lagging behind, despite the prospect of several mega infrastructure projects, namely the Kyaukphyu project and the Kaladan multi-modal transit transport project.

Crisis and challenge

Following the recent attacks in August, the government’s information ministry has failed to effectively convey accurate information to the international community. Misinformation persisted until State Counsellor Daw Aung San Suu Kyi attempted to clarify the situation in a speech on September 19.

Nonetheless, international pressure has escalated. This enormous pressure poses a challenge to the region’s economy, according to U Oo Than Naing, MP from Yethetaung township in Rakhine State.

Out of all foreign investment in Myanmar, Western countries only amount to less than 10pc, according to the Directorate of Investment and Company Administration (DICA). They contribute little to the development of Myanmar and to supporting democratic values, U Oo Than Naing added.

This year, the Myanmar Investment Commission (MIC) issued licenses to two companies to build the station for supporting oil and natural gas in the Bay of Bengal with the permission of the state government and the Ministry of Electricity and Energy.

U Khin Maung Nyo, freelance economic columnist, is concerned that the international pressure on Rakhine State may worry foreign investors about the area’s stability, which can hinder the economic prospects of Rakhine.

“The instability is not just in Rakhine State, it is slowing down investment and decisions in the whole country. Due to the impact of the media on the issue, some foreign tourism agencies believe that the instability is only limited to Rakhine, but others believe it is affecting the entire country.

“In any case, Rakhine tourism suffered from the change in the perception of foreigners,” he said.

From the current situation, there doesn’t seem to be signs of economic sanctions on Myanmar, so the situation will not be worsening, said U Khin Maung Nyo.

The current conflict in Rakhine State is mostly limited to the Maungdaw region in the northern part of Rakhine. The relevant government authorities and state government have been doing their best to stabilise the region. At the moment, Rakhine State’s economy has stagnated.

Local citizens in Rakhine State either earn a living by fishing at sea (30pc of the population do so), or do businesses related to agriculture (70pc do so). Although rice is a staple crop, farmers are facing difficulties as they cannot extract a good price. Because of the instability, fishermen cannot go at sea, pushing them toward unemployment.

In this view, the regional unrest also affected the seafood factories in Maungdaw region in terms of reduced production, according to Rakhine State Fisheries Department Director Dr Nyunt Wai Maung.
“Our Rakhine State’s economic is much reduced. We have many natural resources on sea and land. We also have mountains. We, Rakhine citizens, are starving despite the fact that we have many natural resources,” U Oo Than Naing, a regional lawmaker, told The Myanmar Times.

“We want to escape away from that sort of life. We want the economy to improve. We want foreign investment to come to our region. We want them to learn about our region’s real situation and to pass the message. We want only investments which will benefit our country. We don’t want investment which does nothing for us,” he added.

Kyaukphyu’s grand scheme

China’s Kyaukphyu deep-sea port and Special Economic Zone (SEZ), which started under U Thein Sein’s government, are currently being developed in Rakhine State. Daw Aung San Suu Kyi signed up to the China-led Belt and Road Initiative when she visited Beijing in May.

The Kyaukphyu project, which consists of both the port and the SEZ, is seen as a core part of the Belt and Road Initiative.

An MoU is expected to be signed between Chinese state-owned CITIC – which won the tender of the project: to establish the port and the SEZ – and the state government. The developments of Kyaukphyu region will be shaped by these two projects, explained U Kyaw Aye Thein, Rakhine State planning and finance minister.

Local communities observed that Rakhine State economy is in a difficult position to develop. There has not been any formal agreement between the two parties so far, suggesting that there are many differences to be bridged before an agreement can be reached.

Under U Thein Sein’s government, CITIC was contracted to implement the projects with the condition that the Chinese consortium will invest up to 85 percent in the strategic port and will carry all the financing responsibilities. This was not well received by the locals, U Oo Than Naing said.

As a result, the National League for Democracy-led government is currently working on a change in the ownership percentage between the two consortiums.

Local communities have expressed their desire that Kyaukphyu SEZ is structured in the same way as Thilawa SEZ – Myanmar owns 51pc while Japan owns 49pc. Additionally, there are concerns about land compensation, which has not been planned, a local resident said.

“Rakhine State government welcomes companies which carry out transparent investments and beneficial investments to invest in the region.

“Under the current arrangements for the Kyaukphyu project, investors are taking the lion’s share by cooperating with the government,” said U Thein Naing, MP of Rathedaung township.

Although the Kyaukphyu SEZ is considerably larger than Thilawa SEZ, the current arrangement is one-sided so it does not sufficiently benefit the region and local economy. On the other hand, better synergy with local communities could hasten the realisation of the project, the regional lawmaker noted.

Kaladan multi-modal transit transport

The Kaladan multi-modal transit transport project is supported by a full grant from India. Sittwe jetty and Paletwa marine terminal have already been completed. When the jetty operates, bilateral trade will improve. In its wake, the development of agriculture, livestock and SME will follow.

“The downturn in regional investment will not worsen, thanks to projects such as Kyaukpyu SEZ and Kaladan project. Chinese investment and trade are important for Myanmar, and relations with India is good as they side with us,” an economic expert said.

The US and other Western countries do not have much investment in Myanmar. Investment agreements between Myanmar and the EU are not yet signed. Only once the investment protection agreement is signed will they invest more in Myanmar. Irrelevant of the Rakhine issue, EU investment will not come in en masse. It will take time for regional development projects to take shape, economic observers said.

Tourism and promotion

Rakhine has a long coastal line well suited for regional tourism. Ngapali beach in Rakhine State ranks as the 8th best beach in the world, according to CNN 2016 rating. During tourism season, the coast host many visitors with insufficient hotels. The state government plans to expand the resort area. Along these lines, Kan Thar Yar beach in Gwa township is currently being developed.

A circular road along the beach from Gwa to Ayeyarwady Region was agreed by Rakhine State and Ayeyarwady Region governments this year to strengthen economic cooperation. It aims to develop tourism development, electrification, and trade from Ayeyarwady to Maungdaw trade zone and international market via Sittwe jetty.

“If resources in Rakhine are exploited, Rakhine economy will develop a lot, we hope. There are some beaches on a path from Gwa to Ayeyarwady. But due to the difficulty in transportation, those areas are not developed. We agreed to provide electricity on Gwa,” Rakhine State planning and finance minister U Kyaw Aye Thein said.

There are many prospects for Rakhine’s development following hotel upgrades in Ngapali and Thandwe, he said.

A delegation led by the tourism Union Minister U Ohn Maung will attend a photo tourism promotion in Japan to attract tourists in Rakhine State, Kayah State, Chin State and Tanintharyi Region. The state government is also planning to hold an investment forum targeting international investors next year.

“We are planning to hold an investment forum to show that only a part of Rakhine is unstable and the remaining majority area is peaceful,” he added.

Foreign investment in Ngapali hotels creates job opportunities for local people and a certain percentage of the tax revenue from the region is being allocated by the Union Government to the state government.

More investment into the region would create more job opportunities and foster economic prosperity and hence stability, numerous government officials and local businessmen emphasised.

Source : Myanmar Times

To see the original Myanmar Times article click link here

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