Kyauk Phyu and China’s One Belt One Road – Fake news or wishful thinking?

Andre Wheeler

Those that have attended my briefings and updates on the opportunities for Myanmar regarding the China One Belt One Road (OBOR) initiative – particularly with regards the Bangladesh/China/India/Myanmar economic corridor, will see the significant opportunity that has been identified for a deep-water port in KyaukPhyu  in Rahkine State.

When looking at the map below and knowing the large economic and energy interests (Oil and Gas Pipeline), it makes sense that China would have a vested interest in developing port facilities.

Furthermore, China, as part of its OBOR program, wants a West Coast seaport that will ease energy security concerns by allowing delivery to bypass the Malacca Straits.

So it was interesting to read a recent Reuters news article claiming that China seeks 85% control / ownership of the Kyauk Phyu development. In my view, this is an unlikely outcome and I will share my reasons as to why I make this claim.

Note that my writing is based on a field trip into the area in September 2016 and on the discussions held with local community groups, NGO’s, State functionaries and military. This piece will not focus on the obvious advantages that Kyauk Phyu offers in terms of geography and ocean conditions, but will highlight the geo/socio – political issues that need to be considered and dealt with very carefully.

Where I do agree with the article, is that China has considerable economic muscle to exert pressure on the civilian government. As suggested in earlier writings and presentations, the stalling of the Myitsone Dam project has left Myanmar exposed to significant debt. This debt would become a leverage point to acquire Kyauk Phyu and in exchange abandon the dam project and debt. This has been mentioned in quiet conversation with those involved in the project, and now confirmed in the observations gathered by Reuters. Talks between the two countries regarding Myitsone / Kyauk Phyu are due to commence this week and will no doubt continue when The Lady attends the OBOR Summit in Beijing next week.

Now to the issues. As I am quick to remind potential investors and businesses in Myanmar, having a contract or agreement to proceed with a project / investment does not necessarily mean that the project will proceed. What many fail to recognise are two important cultural / community imperatives, and these are:

  • After fifty years of isolation the community wants not only consultation , but economic participation as well,
  • Ethnic issues are prevalent, particularly as 40% of the Myanmar population are part of an ethnic minority.

So what does this mean for Kyauk Phyu and the China OBOR Port?

Firstly, whilst the political leadership may agree, as is suggested by Reuters, to China having 85% ownership, the community are unlikely to agree to this. The reasons given are:

  • Distrust of the intentions of China as experienced by them when the Gas Pipeline facilities were built in which the local community not engaged or given meaningful participation in the project outcome,
  • Fear that lack of access to facilities would harm opportunities in the Oil and Gas offshore development as only Chinese firm would have access thereby stopping employment and economic engagement opportunities,
  • Loss of land and access to their livelihoods.

Secondly, recent geo-political events, not just in Myanmar, but in the Region have suggested that community activism is increasingly playing a role in project roll out. One needs only look at the Hambantota Port in Sri Lanka in which the Sri Lankan government agreed with Citic, giving them 85% control of the facility, but as of March 2017, this agreement is being revisited due to community dissent and protest. It will be interesting to see what settlement will be reached as Sri Lanka searches for financial assistance to repay the $1.4bn debt.

Recall how the recent by -election results in Myanmar point to the divide between State and Central government. The NLD only won 9 of the 19 seats of those up for grabs in the recent voting. Votes were largely lost to ethnic minority parties, who represent groups that feel the Government does not have their interests at heart. Rakhine State is no different, it is an ethnic minority State, and the local Arakan people want to enjoy the benefits of economic progress and not have development models foisted upon them.

I would suggest that China pay particular attention to the stated ‘people to people” objectives set out in the OBOR policy document. Through effective engagement and consultation that would allow the people in Rakhine State to have meaningful participation and ownership in their economic development. This can be achieved by embarking on employment initiatives, training and facilitating transition of locals to a new industrial economic paradigm.

Contrary to a comment made by a party attending the current discussions, whilst Citic may be in the driver’s seat, the outcome is not inevitable. Ignoring the concerns of the local community will doom the project to failure.

Commentary courtesy of Andre Wheeler

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