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Watch out for Kyaukpyu port and China-Myanmar Economic Corridor


The port will give China access to the Bay of Bengal and cut short almost 5,000 km of sea route.

Last year on 19 November, China’s Ministry of Foreign Affairs revealed that during his meeting with the State Counsellor and Foreign Minister Aung San Suu Kyi in Nay Pyi Taw, Foreign Minister Wang Yi proposed the establishment of China-Myanmar Economic Corridor (CMEC), which will connect China’s southwestern province of Yunnan to Mandalay in central Myanmar, and then east to Yangon and west to the Kyaukpyu Special Economic Zone (SEZ), forming an equation of three-terminal support (sanduan zhicheng) and three-legged cooperation (sanzu dingli). Wang Yi pointed out that the CMEC would open up new vistas for the building of “Belt and Road Initiative” between China and Myanmar. At the time, the news hardly made any headlines for it was overshadowed by China’sthree-phase proposal to address the Rakhine State issue. On 9 September 2018, China’s National Development and Reform Commission (NDRC) issued a statement that China and Myanmar had signed an MoU to build the CMEC. This would be the second bilateral economic corridor after the China-Pakistan Economic Corridor (CPEC) and perhaps another flagship of Xi Jinping’s pet project, the BRI. It was only on 8 November, when China and Myanmar signed a renewed agreement as regards the Kyaukpyu port, that it hit the headlines in the Indian press, pronouncing it as the third “pearl” in the “string” after Gwadar in Pakistan and Hambantota in Sri Lanka.

The CMEC envisages to have Kyaukpyu deep sea water port ($1.3 billion) with two berths in its initial phase including Kyaukpyu SEZ ($2 billion); China-Myanmar oil and gas pipeline ($5 billion); Mandalay Yida Economic and Trade Cooperation Zone ($4 billion); Tagaung Taung (Dagongshan) Nickel Industry Development Project ($820 million); Letpadaung copper mine project ($1 billion); Kunming-Kyaukpyu railway line; Mandalay-Tigyaing-Muse expressway, Kyaukpyu-Nay Pyi Taw highway projects, etc. Though the CITIC Myanmar CEO Yuan Xibin argues that China didn’t want to have the present 70% stake in the Kyaukpyu port, however, it is widely believed that China wanted to have between 70%-85% stake owing to the aborted $1.5 billion Myitsone dam project, where China suffered huge economic losses. Also, owing to the debt trap issue, Myanmar cut to size the originally conceived ten-berth port worth $7.5 billion to the present scale of investment. Many of these projects predate the BRI and were negotiated by China, taking the so called “Arial route”.

It could be discerned that China’s economic engagement has deepened irrespective of the change of government in Myanmar. In 2017, the bilateral trade between China and Myanmar totalled $13.54 billion and registered a year-on-year increase of 10.2%, of which 79.8% was in the value of border trade. In terms of investment, according to the data provided by the Myanmar Investment and Corporate Administration, by 28 February 2018, China (including Hong Kong and Macao) ranked first in foreign direct investment (FDI) in Myanmar, investing in 344 projects totalling $24.85 billion. The port is of great strategic and economic significance to China, as it will give it access to the Bay of Bengal, diversify its energy routes, and cut short almost 5,000 km of sea route, thus getting rid of the so-called Malacca dilemma. China would be able to stock its energy and other imports from the Middle East, Europe, Africa, India and other countries in Kyaukpyu and transport these to China through the already functional pipeline, roads and the proposed rail connectivity. As reported in July this year by various Chinese news reports, the pipeline has unloaded a record 10.98 million tonnes of crude oil. As of September, this year, the cumulative transportation volume has been recorded at 21.426 billion cubic meters, of which 18.715 billion cubic meters was shipped to China.

The Myanmar government has allayed the security fears of India and western countries saying that there would not be any Chinese military presence at the port, however, since the lease is supposed to be for 50 years and extendable to another 25 years, the apprehensions remain. Furthermore, since the Rakhine has seen unprecedented Rohingya refugee crisis, marred by sectarian violence and terror attacks, large-scale Chinese investments in Rakhine State will surely call for more security measures. It can be expected that in order to protect its long-term interests, China will certainly demand from the Myanmar government that it provide security, as Beijing has done in the case of the CPEC. Failing this, it may leverage its influence in the Kachin and Kokang areas to drive home a point, even though China has responded positively to Myanmar restarting the peace process in these areas. China’s special envoy, Sun Guoxiang even held talks with the leaders of the Myanmar-Northern coalition forces in Kunming. It is believed that the participation of rebel groups in the peace process was owing to Chinese mediation.

As far as India is concerned, it has been out of the BRI owing to its core issue involving sovereignty, however, it has rightly remained open to business transactions with China. The BCIM economic corridor, where India is a stakeholder along with Myanmar and Bangladesh, is yet to take off, owing to various degree of indifference shown by the respective parties. The CMEC will further dilute the multilateral corridor as China is increasingly taking the bilateral route. Therefore, it becomes pertinent that while engaging multilaterally, new bilateral corridors are negotiated with China with desired stakes, which then could be docked to our connectivity initiatives in the immediate and extended neighbourhood. The trans-Himalayan region from India’s Kashmir to the Northeast would be crucial for transport, trade and tourism, and also for poverty alleviation and integrating these regions with the mainstream. While we must not compromise with our security, at the same time we must think beyond the security prism as far as these issues are concerned.

Interestingly, though India has been wary of China’s forays in the Indian Ocean, however, it has advocated Chinese inclusion in the Indo-Pacific pivot before and after the Wuhan unofficial summit, which is not necessarily a bad thinking. At the same time, India has been hedging China’s advances by concluding logistical agreements with the United States, France, Japan, etc., by linking its onshore facilities with those of offshore facilities of its defence partners. Nevertheless, the kind of buffers and naval and overland infrastructure China has been able to create in the last four decades is unprecedented and India may have to play catch up for a long time. The logic is simple—as long as your domestic economic drivers are not strong, you may not be able to bridge the asymmetrical gap with China and others. Therefore, why not to take a cue from Deng Xiaoping’s strategy of “hide your capabilities and bide your time” for at least a decade or two.

Source: Sunday Guardian Live

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