January 17, 2016 7:00 am JST
Myanmar infrastructure

Anti-Chinese sentiment casts shadow over SEZ development

MOTOKAZU MATSUI, Nikkei staff writer

YANGON -- As Chinese companies begin developing Myanmar's Kyaukpyu Special Economic Zone, an area important to Beijing's energy security, concerns linger that anti-Chinese sentiment could stymie the project.

Grand plans

A public-private partnership devised a basic plan in summer 2014 for the SEZ, which was envisioned as a way to attract foreign investment in underdeveloped western Myanmar. Myanmar's government granted development rights in the zone at the end of last year to a consortium of Chinese state-owned companies, including Citic Group and China Harbor Engineering.

     Many of Myanmar's ports lie along rivers, where shallow water keeps larger ships out. Kyaukpyu boasts a natural harbor with a water depth of more than 15 meters, letting it accommodate even tankers. This gives Kyaukpyu the potential to become the country's top import and export base. Citic plans to build Myanmar's largest port facility there by 2025, with an annual cargo processing capacity of 7 million 20-foot-equivalent units. A roughly 1,000-hectare industrial park planned outside the facility is expected to become a hub for the apparel and petrochemical industries.

     The Chinese contingent was favored from the outset in the tender process that began in September 2014, due to China National Petroleum Corp.'s construction of an oil pipeline between Kyaukpyu and inland China. The pipeline, started in 2010 and completed in January 2015, now carries nearly 10% of China's oil imports, providing an alternative to the sea route running through the Strait of Malacca. The Chinese government considers it a strategic point in terms of security.

Friction with the locals

But not all of Myanmar welcomes Chinese involvement with open arms. The government originally planned to select the Kyaukpyu developers in 2014. The yearlong delay before development rights were granted owed to rising anti-Chinese sentiment. China had cozied up to Myanmar during the military junta's rule, when the country was otherwise isolated, making energy-related investments such as pipelines and dams. But because these projects were chiefly intended to supply energy to China, they set off protests around Myanmar.

     And when clashes between Myanmar's military and ethnic Chinese rebels along the Chinese border intensified last February, rumors that Beijing was supporting the rebels further inflamed anger at China. Development stalled at Kyaukpyu, where Chinese companies were set to take the leading role.

     The situation changed with the November election. As it became clear that power would shift to the opposition National League for Democracy led by Aung San Suu Kyi, President Thein Sein directed the legislature and government agencies in December to accelerate development of the Kyaukpyu SEZ. Development rights were granted to the Chinese consortium shortly thereafter. "The president, who no longer had to worry about public sentiment, fulfilled his final responsibility," a diplomatic source said.

     The project likely will face further complications. China Harbor Engineering, the company handling the bulk of development, is the advance guard for Beijing's "string of pearls" strategy of building port facilities to defend sea lanes running from the Middle East to the South China Sea. Chinese-led port construction in Sri Lanka has run into trouble amid local opposition. The Kyaukpyu SEZ's Chinese developers could face protests as well if they blatantly put Beijing's interests first.

     But for Myanmar's cash-strapped government, it is unrealistic to pursue development without China, the country's biggest investor. Suu Kyi will need to consider carefully how to balance strengthening ties with China and respecting public opinion when the new government is formed in the spring.

Get Insights on Asia In Your Inbox

To read the full story, Subscribe or Log in

Get your first month for $0.99

Redeemable only through the Subscribe button below

Once subscribed, you can…

  • Read all stories with unlimited access (5 articles per month without subscription)
  • Use our smartphone and tablet apps

To read the full story, Subscribe or Log in

3 months for $9
SUBSCRIBE TODAY

Take advantage of this limited offer.
Subscribe now to get unlimited access to all articles.

To read the full story, Update your account

We could not renew your subscription.
You need to update your payment information.

To read the full story, Subscribe or Log in

Once subscribed, you can…

  • Read all stories with unlimited access (5 articles per month without subscription)
  • Use our smartphone and tablet apps

To read the full story, Subscribe or Log in

3 months for $9
SUBSCRIBE TODAY

Take advantage of this limited offer.
Subscribe now to get unlimited access to all articles.

To read the full story, Update your account

We could not renew your subscription.
You need to update your payment information.