Can Myanmar Afford China’s Belt and Road? (The Diplomat)

Chinese Foreign Minister Wang Yi (R) shakes hands with Myanmar’s Minister of the Office of the State Counsellor Kyaw Tint Swe at the Diaoyutai State Guesthouse in Beijing (June 28, 2018).
(Photo: The Diplomat, Greg Baker/Pool Photo via AP)

Two years after the Belt and Road Summit in Beijing, Myanmar seems ready to be integrated into Beijing’s Belt and Road Initiative via the China-Myanmar Economic Corridor (CMEC) — despite criticisms and concern over a potential debt trap. A 1,700-plus kilometer corridor stretching from Kunming, the capital of Yunnan province in China, to the seaport at Kyaukpyu in Myanmar’s Rakhine state, CMEC will be one of the largest single packages of foreign direct investment in Myanmar in decades, and the government in Naypyitaw is anticipating a quick economic lift.

Ranging from trade to technology, China and Myanmar’s Pauk Phaw (fraternal) relationship is advancing. A drafted but delayed Memorandum of Understanding (MoU) is expected to be signed in the upcoming weeks and will become the first agreement to be inked by the newly appointed minister of planning and finance. Despite some concern over the affordability, the initial proposal incorporates over 20 projects as early harvest projects within CMEC for an estimated budget of $2 billion. The Ministry of Agriculture, Livestock, and Irrigation took the largest slice of the pie, with $400 million planned for upgrading irrigation systems.

The total estimated budget of $2 billion, however, does not include the cost of major infrastructure projects to be implemented by the Ministry of Construction and Ministry of Transportation and Communication. Three major road upgrade projects, the construction and renovation of airports, and the development of inland port projects, are all planned without any feasibility studies and budget estimates to date. In drafting the proposal, these projects seem to have a political green light from the cabinet, but so far there has not been much debate over or attention paid to these initiative. The biggest concern is how to finance the infrastructure development.

New cities, industrial parks, business districts, resorts, and urban development projects have also been proposed by private sector entities as Private Priority Projects related to CMEC. New Yangon City Development is one highlight of these proposals; the MoU between China Communications Construction Company (CCCC) is expected to be signed in the coming months, though controversies remain. In addition to New Yangon City, the estimated budget for other Private Priority Projects under CMEC is more than $100 billion. Major cities like Mandalay and Muse, some of these proposed project sites, are beyond the primary CMEC area, hinting that the project could be extended toward Irrawaddy regions, the rice bowl of Myanmar. Pathein (Bassein), once a colonial port, is now being thrown in the mix again in the context of development, and Pathein Industrial City could become an additional seaport to supplement China’s strategic investment in Kyaukpyu.

As of now, all of these projects to be integrated into CMEC are still only drafted on paper. Negotiations are still in the initial stage and require significant further deliberation, especially on financing. Rising concerns over Chinese megaprojects under the BRI and the potential risks of a debt trap continue to make headlines in the region, and Myanmar is no exception.

Mitigating financial risk by investing land as a kind of equity for the projects is a feasible and attractive option for the administration, but not a popular choice with the public. The renegotiation of the equity ratio for Kyaukpyu and ongoing negotiations over New Yangon City have contributed to anti-Chinese sentiment among the local population. Taking a financial risk or offering long-term land leasing would open another can of worms.

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The Diplomat

29 August 2018

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