China and Myanmar finally go from the front with a $ 7 billion port

by
Han Wei

Pekin | China and Myanmar are moving ahead with a China-backed deepwater port project in Kyaukpyu, 250 km northwest of Yangon, after nearly three years of twists and turns.

Officials from Myanmar and Chinese investors have signed a framework agreement for the Kyaukpyu port project in the capital, Nay Pyi Taw, a spokesman for the Myanmar Ministry of Commerce told Caixin.

A consortium led by the Chinese public investment conglomerate Citic Group won a tender for the construction of the port in 2015. It was part of a larger project for Kyaukpyu Special Economic Zone. launched by the former president of Myanmar, Thein Sein. The total investment in the port has been estimated at more than 7 billion, of which 85% according to the terms of the original agreement.

But the project was suspended after the 2015 elections ended Myanmar's military regime and the new government was concerned about the project's financing, equity and debt issues.

China's investments in the Belt and Road infrastructure program have received increasing attention from neighboring countries, who are worried about the potential risks of indebtedness. In early October, Pakistan reduced the size of a key railway project in China by US $ 2 billion, citing debt problems.

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In August, newly-elected Prime Minister Mahathir Mohamad announced that more than $ 23 billion worth of Chinese projects, including railways, were "canceled for now".

With regard to the Myanmar port project, negotiations had made little progress in October 2017, as Burmese investors "wanted to acquire more shares, but they did not want to take on more financial responsibility," said Yuan Shaobin, chairman of the board. executive of Citic Myanmar, to local media.

In May of this year, several international media announced that the Myanmar government had launched a re-evaluation of the port project, fearing that Myanmar would be heavily indebted to China.

But the freeze seems to have been cleared after the two countries signed in September a Memorandum of Understanding to establish the China-Myanmar Economic Corridor under the Belt and Road program. The port of Kyaukpyu is the first project made under the agreement.

According to Aung Naing Oo, director of the Myanmar Investment and Corporate Management Department (DICA), the Chinese consortium will take a 70% stake in the port project, with the remaining 30% split between the Myanmar government and consortium of local businesses. Myanmar's participation has been increased compared to the previously agreed 15%.

Chinese consortium investors include China Merchants Group, China Harbor Engineering, Tianjin Teda Group, Yunan Construction Engineering Group and Charoen Pokphand in Thailand.

Earlier this month, the Myanmar Times Deputy Trade Minister U Aung Htoo said the port project would be divided into four phases. The first phase of building a terminal with a capacity of two to three ships will require an initial investment of $ 1.3 billion, compared to a previous estimate of $ 1.6 billion.

Yuan, of Citic Myanmar, said the framework agreement would only be the beginning of a lengthy procedure before the start of construction work, including the signing of several contracts and related regulatory approvals.

This article was originally published by Caixin.