China and Myanmar Agree to $1.3 Billion Port Project


By The Maritime Executive 11-08-2018 07:07:00

The government Myanmar has reached a final, scaled-down agreement with Chinese engineering conglomerate CITIC for an expanded seaport at Kyaukpyu, on the Bay of Bengal. The framework agreement calls for a $1.3 billion terminal with two deep water berths, and is much smaller than an earlier version of the plan, which would have seen the construction of a $10 billion port and free zone complex. 

Negotiations over the port have been under way for years, and Myanmar's government ultimately decided to proceed with a de-scoped version of the project due to concerns over excessive foreign debt. Comparable infrastructure investments in Sri Lanka and Pakistan have left those nations indebted to Chinese banks; in Sri Lanka's case, the underperforming Chinese-built port of Hambantota was eventually transferred to a Chinese firm in order to pay back loans.

China will finance 70 percent of the port's construction and Myanmar will cover the balance. An earlier version of the proposal called for a Chinese share of 85 percent. 

Set Aung, the lead negotiator for Myanmar on the Kyaukpyu project, told media that the construction will proceed by phases so that the  economic viability of each step can be assessed. When fully built out, the port should generate about $3.2 billion in annual economic activity, according to Chinese state outlet Global Times. It will provide an Indian Ocean terminus for a road and rail connection across Myanmar to the Chinese border, which will allow China-bound cargoes from the west to bypass the Strait of Malacca.

The new deepwater terminal at Kyaukpyu will add to China's presence at the port, where China National Petroleum Corporation already operates a large crude oil terminal. The terminal feeds a transnational pipeline that carries the crude to Kunming, in China's Yunnan Province. 

The project will bring new investment to Myanmar's Rakhine State, where the national government has allegedly conducted a campaign of ethnic cleansing to displace the Rohingya, a Muslim minority group with a strong presence in the province. Over 700,000 Rohingya refugees have fled Rakhine into neighboring Bangladesh since violence began in August 2017, according to the UN. Bangladesh intends to begin repatriating the refugees this month, against the UN's objections. China has defended Myanmar's government against charges of impropriety related to the Rohingya campaign.