September 30th 2023.
As Myanmar's economy continues to stagnate, junta leader Min Aung Hlaing is looking for a few Chinese-backed projects to kickstart growth and ensure Beijing's long-term commitment to Myanmar. In August, Min Aung Hlaing called for the completion of the Kyaukphyu special economic zone and container port, as well as an 810-km railway connecting Kyaukphyu with Muse.
The project has its roots in a 2011 memorandum of understanding between China and Myanmar, which eventually became part of China's ambitious Belt and Road Initiative (BRI). Although the BRI is set to celebrate its tenth anniversary in October, it's unlikely Min Aung Hlaing will be invited, denying him the recognition he desires.
Oil tanks on Maday island, outside Kyaukphyu, Myanmar, have been up and running since 2013, and in 2017 a US$2.5 billion oil pipeline and gas pipeline to Kunming became operational. This enabled PetroChina to open a refinery in Kunming, capable of processing 7% of China's total refining needs.
In 2018, China and Myanmar established the China-Myanmar Economic Corridor (CMEC) to jumpstart the projects. However, there was little movement, as the Myanmar government, led by Aung San Suu Kyi, was fearful of becoming heavily indebted to China. As a result, the agreement was renegotiated, lowering China's stake to 70% and decreasing the overall debt.
In January 2020, Xi Jinping took advantage of Suu Kyi's diplomatic isolation to sign more than 30 agreements, many related to Kyaukphyu and its rail links. This was just days before the February 2021 coup, when Chinese Foreign Minister Wang Yi met with Suu Kyi to push for the quick implementation of CMEC projects.
As Myanmar's economy continues to decline with inflation and depreciating kyat, junta leader Min Aung Hlaing is turning to Chinese-backed projects to jumpstart growth. In August, he called for the completion of the Kyaukphyu special economic zone, and engineering work has begun on the 810-km railway connecting Kyaukphyu with Muse. This project is part of China's ambitious Belt and Road Initiative (BRI).
However, the BRI is failing to meet expectations. Chinese projects in Myanmar were already facing trouble before the coup, and now they are facing unrest, power shortages, and transport woes. Kyaukphyu initially only had a small port for offshore and imported oil, and the 51-49 joint venture between China National Petroleum Company and the Myanmar Ministry of Oil and Gas Enterprises constructed a pier and 12 tanks, which commenced operations in 2013.
The US$2.5 billion 750 km oil pipeline and 770 km gas pipeline to Kunming became fully operational in 2017. In 2018, the two sides established the China-Myanmar Economic Corridor (CMEC) as part of the BRI, and the December 2015 tender between the government and a Chinese consortium established the Kyaukphyu SEZ and deepwater port.
Despite ambitious projections, there has been little progress in developing the projects. The National League of Democracy government led by Aung San Suu Kyi renegotiated the agreement to decrease China's stake and reduce the overall debt for the project. But violence in Rakhine state has kept everything at a standstill.
Before the February 2021 coup, Chinese Foreign Minister Wang Yi met with Suu Kyi to push for the quick implementation of CMEC projects, including Kyaukphyu. Xi Jinping's January 2020 visit included more than 30 agreements related to Kyaukphyu and its rail links.
Min Aung Hlaing is hoping these projects will kickstart growth and ensure Beijing's long-term commitment to the State Administrative Council. However, with the slow pace of CMEC implementation, China looks unlikely to extend an invitation to Min Aung Hlaing to the BRI tenth anniversary summit in Beijing in October, denying him the recognition he covets.
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