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Myanmar scales back Chinese-backed port project over debt fears

Myanmar has scaled back plans for a Chinese-backed port on its western coast, sharply reducing the cost of the project after concerns it could leave the south-east Asian nation heavily indebted, a top government official and an adviser told Reuters.

The Kyaukpyu port is a key part of China’s ambitious Belt and Road initiative, aimed at expanding trade links across the world. While Beijing says Belt and Road is mutually beneficial for it and its partners, questions have been raised about countries taking on excessive debt to build projects.

The initial $7.3bn (£5.6bn) price tag on the Kyaukpyu deepwater port, on the western tip of Myanmar’s conflict-torn Rakhine state, set off alarm bells due to reports of troubled Chinese-backed projects in Sri Lanka and Pakistan, the official and the adviser said.

Deputy finance minister Set Aung, who was appointed to lead project negotiations in May, told Reuters the “project size has been tremendously scaled down“.

The revised cost would be “around $1.3bn, something that’s much more plausible for Myanmar’s use”, said Sean Turnell, economic adviser to Myanmar’s civilian leader, Aung San Suu Kyi.

China’s state-run Citic Group, the main developer of the project, said negotiations were ongoing and that the $1.3bn was to be spent on the “initial phase” of the port, adding the project was divided into four phases. It did not elaborate on plans for subsequent stages.

A Chinese foreign ministry spokesman, Geng Shuang, said on Monday that “according to what I understand, at present both sides are having commercial negotiations” on the Kyaukpyu project.

The original plan was to develop around 10 berths at the 25-metre deep sea port to accommodate bigger oil tankers, but the size will now be revised to only two berths, Set Aung said in an interview.

The Myanmar government faces a delicate balancing act in renegotiating the project with China, analysts say.

The country is increasingly reliant on diplomatic support from Beijing as it faces western criticism over its treatment of the Rohingya Muslim minority in Rakhine state, and needs Beijing’s help to end ethnic conflicts on its borders. But many in Myanmar are also wary of becoming too dependent on China.

Beijing has pushed for strategic opportunities in Myanmar, including preferential access to the Kyaukpyu port, after being driven to all but abandon a hydroelectric project in the country amid widespread local opposition last year.

Kyaukpyu is an entry point for a 480 mile (770km) pipeline delivering oil and natural gas to China’s Yunnan province. That gives China an alternative route for energy imports from the Middle East that avoids the strategic chokepoint of the Malacca Strait.

Under the original plan, Kyaukpyu would have had a container capacity to rival that of ports such as Manila or Valencia in Spain.

Construction on the port, and an accompanying special economic zone, which together were supposed to cost up to $10bn, was expected to start in 2018. A 4,200-acre industrial park worth $2.3bn was planned to attract textile and oil refining industries.

But Myanmar officials said the experience of Sri Lanka, where this year the government signed over to China the lease on a strategic port to pay off Chinese-backed loans used to finance it, had raised concerns the country could be walking into a debt trap.

Source: The Guardian

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