China seeks up to 85% stake in strategic port in Myanmar
The Kyauk Pyu port is the entry point for a Chinese oil and gas pipeline which gives it an alternative route for energy imports from the Middle East that avoids the Malacca Straits, a shipping chokepoint.Updated: May 06, 2017 15:43 IST
China is looking to take a stake of up to 85% in a strategically important sea port in Myanmar, according to documents reviewed by Reuters, in a move that could heighten tensions over China’s growing economic clout in the country.
Beijing has been pushing for preferential access to the deep sea port of Kyauk Pyu on the Bay of Bengal, as part of its ambitious One Belt, One Road infrastructure investment plan to deepen its links with economies throughout Asia and beyond.
A consortium led by China’s CITIC Group has proposed taking a 70-85% stake in the $7.3 billion deep sea port, according to negotiating documents seen by Reuters and three people familiar with the talks between the Chinese state-owned conglomerate and Myanmar’s civilian government.
The size of the proposed Chinese stake is substantially larger than the 50/50 joint venture proposed by Myanmar late last year, an offer rejected by CITIC, said two people involved in the talks.
Well-placed sources told Reuters last month that China had signalled it was willing to abandon the controversial $3.6 billion Myitsone dam project in Myanmar, but would be looking in return for concessions on other strategic opportunities in the Southeast Asian nation — including the Bay of Bengal port.
Kyauk Pyu is important for China because the port is the entry point for a Chinese oil and gas pipeline which gives it an alternative route for energy imports from the Middle East that avoids the Malacca Straits, a shipping chokepoint
.The port is part of two projects, which also include an industrial park, to develop a special economic zone in Myanmar’s western Rakhine State. CITIC was awarded the lead role in both initiatives in 2015.
Beijing-based CITIC, China’s biggest and oldest financial conglomerate, did not respond to several requests for comment on Friday. China’s foreign ministry did not immediately respond to a faxed request for comment.
Negotiations between Myanmar and CITIC, which sources said were set to start next week in the country’s commercial hub Yangon, come amid a Chinese diplomatic push to forge better ties with its resource-rich neighbour.
Myanmar’s leaders have traditionally been wary of domination by China. But the country last month signed an agreement that will see oil pumped through the pipeline from Kyauk Pyu across Myanmar to southwestern China, while leader Aung San Suu Kyi is due to visit Beijing for a summit on One Belt, One Road, President Xi Jinping’s signature policy, in mid-May.
One of the sources, who declined to be named, said CITIC was in the “driving seat” on the port project, and that Myanmar was unlikely to ask for a stake of more than 30 percent due to opposition from the Chinese firm.
“Some people worry that China would have the power to do anything they want and control the project if it owns 85%,” said the person, who is familiar with the thinking of policymakers in Myanmar. “But Myanmar doesn’t have other options,” the person added, citing the Myanmar government’s financial constraints.
The nearly $10 billion Kyaukphyu Special Economic Zone, which Myanmar’s government has said would create an economic hub akin to Singapore covering 4,289 acres, is part of Myanmar’s plan to boost the economy in one of its poorest regions.
The economic zone faces opposition from activists and residents who criticised the tender process and said the development would have a negative impact on local people.