On the Road to Kyaukphyu: Issues and Debates around a Myanmar Special Economic Zone

As part of its Belt and Road Initiative (BRI), China has planned to create the China-Myanmar Economic Corridor (CMEC). Through Myanmar’s small town of Kyaukphyu (Rakhine State), China intends to gain direct access to the Indian Ocean which would significantly reduce its dependence on the Strait of Malacca. Already, oil and a gas pipeline have been constructed and lead from Kyaukphyu to China. Alongside these pipelines, a railway is planned. In Kyaukphyu, China and Myanmar have agreed to construct a special economic zone (SEZ) which is planned to consist of an industrial park and a deep sea port. With regard to these projects, this report addresses the following questions.

1. On a local level, what do residents think about the project and which demands do they voice?

2. On a national level, how could the projects be implemented so that they benefit Myanmar as a whole and without incurring too much debt?

3. On a geostrategic level, which interests do China and Myanmar respectively have and how do these interests shape the implementation of the projects?

1. Local Level

Kyaukphyu is situated in one of Myanmar’s poorest regions. As it provides only few jobs to young people, many of them leave the town to find their luck elsewhere. In conversations with locals, we found that many urban Kyaukphyu residents welcome the SEZ because they hope for more jobs. Rural residents, however, fear that their land will be taken away and that they are under-qualified for the jobs that will be created in the SEZ. Everyone demands proper trainings and compensation which will secure livelihoods. These demands are supported by evidence from Myanmar’s Thilawa SEZ. Here, monetary compensation was provided but displaced people could not find a job in the SEZ or elsewhere, leading to loss of livelihood issues and debt problems. Above all, the planning process in Kyaukphyu crucially needs more transparency and local participation.

2. National Level

Establishment of a port and an industrial zone requires the Myanmar government to contribute substantial finance. This has led to fears that similar to the Hambantota port in Sri Lanka, Myanmar may in the end have to cede authority over the port to China, if it became unable to repay the debts. While, in the meantime, the overall amount of required financial commitment has been reduced, research on SEZs worldwide shows that the most important factor for an SEZ to be successful is its integration into the national economy. In Myanmar, this firstly requires a significant upgrade of the transport infrastructure. Secondly, industries like a garment sector could be attracted to the SEZ. However, this is connected to many social and environmental risks and will also take time as there are no concrete plans yet.

3. Geostrategic Level

In the context of rising alienation between Myanmar and the West over the Rohingya / Rakhine crisis, China emerges again as one of Myanmar’s few remaining political allies. It is likely to use this leverage to realize its aim to secure unhindered access to the Indian Ocean through Myanmar. While China may have little immediate economic interest in establishing an industrial park in Kyaukphyu, it will thus strongly push for the construction of the port and the railway line. Myanmar could use this attention on Kyaukphyu to spur local development in Kyaukphyu. To create sustainable and socially inclusive growth, planning has to include the local population.

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