24 June 2020 - Source: The Irrawaddy

YANGON—The construction of the China-backed Kyaukphyu deep-sea port will begin soon, as preparations on both the Myanmar and China sides are on track, according to the Ministry of Commerce.

The project is a crucial part of the Kyaukphyu Special Economic Zone (SEZ) in western Myanmar. The SEZ is expected to boost development in China's landlocked Yunnan Province and provide China with direct access to the Indian Ocean, allowing its oil imports to bypass the Strait of Malacca.

The Kyaukphyu SEZ is a backbone project under the China-Myanmar Economic Corridor (CMEC), which is itself a part of China's ambitious Belt and Road Initiative (BRI). The project also includes plans to construct an industrial zone with facilities for textile and garment manufacturing, construction materials processing, food processing, pharmaceuticals, electronics, marine supplies and services and research. The entire project is planned to cover 4,300 acres.

Speaking at a press conference in Naypyitaw on Wednesday, Deputy Minister of Commerce U Aung Htoo said "We are working to form a company to construct the deep-sea port. We recently reached consensus for the company's constitution."

"We already proposed the list of directors, so I am confident that we will move forward on the construction of the deep-sea port project soon," U Aung Htoo said.

During Chinese President Xi Jinping's trip to Myanmar early this year, both sides signed concession and shareholders' agreements for the deep-sea port. According to the agreements, the two sides will incorporate a joint venture to carry out the construction and operation of the project.

In November 2018, the Kyaukphyu SEZ Management Committee and the China International Trust and Investment Corporation (CITIC) inked a framework agreement for the long-delayed development of Kyaukphyu SEZ.

CITIC struck a shareholder agreement with the previous Myanmar government, under President Thein Sein, just before the 2015 election. It gave the Chinese developer an 85 percent stake in the project and gave the rest to Myanmar. Critics of the project raised concerns that the deal could land Myanmar in a debt trap with China. After negotiations under the current National League for Democracy (NDL) government, China agreed that Myanmar would hold 30 percent of the shares.

The initial agreement called for a project worth US$9-10 billion, but the two sides have since agreed that the project will start out on a "small or medium-sized" scale.

U Aung Htoo said that the first phase of the deep-sea port will be implemented with a US$1.5 billion budget.

In July 2019, CITIC announced it hired Canadian company HATCH to supervise an environmental and social impact assessment (ESIA) of the project and a pre-geo survey. Last September, CITIC submitted a project proposal report (PPR) to the Ministry of Natural Resources and Environmental Protection (MONREC).

In January, CITIC said that MONREC has determined the deep-sea port project requires an EIA under Myanmar law. The Chinese company says it will choose an independent consultant to conduct the EIA through a bidding process.

The Ministry of Commerce said in February that both sides agreed that the CITIC Consortium will own 51 percent of the industrial zone and the Myanmar government will own 49 percent. The ministry said that the industrial zone will be developed on 2,400 acres of land and that a high-end housing project is planned for an additional 1,235 acres.

According to U Aung Htoo, the construction of the industrial zone will be led by China's CITIC Consortium and a total of 42 private Myanmar companies under Myanmar Kyauk Phyu Special Economic Zone Holding Public Company Limited.