China and Myanmar revive stalled Belt and Road Initiative project

This move comes at a crucial time, as violence between ethnic rebel groups and the junta continues to escalate in Myanmar’s western Rakhine state.

China and Myanmar have recently signed a supplementary agreement to revive the stalled Belt and Road Initiative project, specifically the Kyaukphyu deep water port. This move comes at a crucial time, as violence between ethnic rebel groups and the junta continues to escalate in Myanmar’s western Rakhine state.

Under the agreement, the Chinese state-owned Citic Group will maintain a majority stake of 70 per cent in the port. This deep water port is expected to provide China with an alternative route for oil imports, granting them access to the Bay of Bengal. During the signing ceremony, Citic Group president Xi Guohua emphasized the port’s significance in fostering practical cooperation between China and Myanmar.

While the details of the addendum have not been disclosed to the public, this agreement is seen as a positive indication that the China-backed infrastructure project is back on track. Since the military coup in early 2021, the project has experienced little progress.

The Kyaukphyu port project, valued at $1.3 billion, is situated on Maday Island near the fishing village of Kyaukphyu. It is an integral part of the Kyaukphyu Special Economic Zone, which aims to attract textile and oil refining industries. Moreover, it plays a central role in China’s relationship with Myanmar and is a crucial component of the planned 1,700km China-Myanmar Economic Corridor. This corridor envisions a network of railways, roads, and oil and natural gas pipelines connecting Kunming in China’s Yunnan province to the Indian Ocean.

By gaining access to the Kyaukphyu port, Beijing will secure strategic access to the Indian Ocean while also establishing an alternative energy route to the Strait of Malacca. Currently, the Strait of Malacca serves as the primary transportation route for approximately 80 per cent of China’s oil imports from the Middle East.

Citic, a prominent financial conglomerate based in Beijing, was selected in 2015 to spearhead the Kyaukphyu Special Economic Zone and deep seaport initiatives. However, progress was sluggish until 2018 when Citic and the then Myanmese government, under the leadership of Aung San Suu Kyi’s National League for Democracy, reached a framework agreement. This agreement resulted in a reduction of the port investment from $7.3 billion to $1.3 billion. To oversee the projects, a joint management committee was established between Citic and the Myanmar government, with Citic holding a 70% stake and a 50-year lease.

Amidst the ongoing domestic conflict in Myanmar, there are indications that the military government, facing increasing international sanctions following the 2021 coup, is seeking to revive China-backed projects. In February, Citic announced the completion of a 10-month field survey for the port project. Subsequently, a report was published in September, clearing the path for construction, and the SEZ committee initiated the bidding process last month. Just recently, Aung Naing Oo, the Myanmese commerce minister, declared the successful conclusion of negotiations with Citic Group regarding the deep seaport business license agreement signed by the previous government.