The SEZ development could potentially impact India’s strategic interests in the region where it has been a traditional net security provider even as China has been trying to gain a foothold.
Myanmar’s military junta and Chinese state-owned company CITIC recently signed an addendum to the concession agreement for the Kyaukphyu Special Economic Zone (SEZ) and deep sea port.
The project is being developed by the Kyaukphyu SEZ Deep Seaport Co. Ltd, a joint venture between the CITIC Myanmar Port Investment Ltd and the Myanmar government-backed Kyaukphyu SEZ Management Committee. The junta allegedly offered concessions in the addendum, said people familiar with the matter.
CITIC holds a 70% stake and the Myanmar partner 30% in the project. The Kyaukphyu port and SEZ are key to the 1,700-kilometer China-Myanmar Economic Corridor connecting Kunming in China’s Yunnan province to the Indian Ocean. While the Kyaukphyu SEZ has a budget of $1.3 billion, the budget for the port is $7.3 billion.
In 2015, CITC won a tender to build the Kyaukphyu SEZ, and a framework agreement was signed in 2018 under the then National League for Democracy government.
The signing of the addendum comes as Myanmar’s ruling junta suffers major losses from an offensive launched by the Brotherhood Alliance along the border with China in the northern Shan State. It is seeking assistance from China, which reportedly has influence over ethnic armed groups in the region.
Border trade with China and investment in BRI projects in Myanmar have been stalled due to the fighting in Shan State. Although China has twice mediated talks between the junta and the Brotherhood Alliance, fighting continues and the junta has rapidly lost large territory in Shan State in just two months, according to Myanmar watchers.
Shareholders and concession agreements were signed in 2020, but the project was delayed by the pandemic.
When completed, it will become the trade hub connecting the markets of Asia, Africa and Europe, and will spur the socio-economic development of Myanmar and the region, providing a new gateway to the world, according to the Chinese government.
Meanwhile, local residents have complained about the damage to their fisheries industry due to the project. Ongoing fighting in Ramree, which borders Kyaukphyu, could also make it difficult for the massive project to proceed.
