Burma China, Myanmar Agree 15-Point MoU on Economic Corridor

State Counselor Daw Aung San Suu Kyi greets Chinese Defense Minister Wei Fenghe in Naypyitaw on June 16. / State Counselor’s Office

YANGON — Chinese and Myanmar officials agreed a 15-point Memorandum of Understanding (MoU) on building a China-Myanmar Economic Corridor, part of China’s One Belt One Road Initiative, said U Min Zaw Oo, the director of the Directorate of Investment and Company Administration (DICA).

“The agreements have been reached. The 15-point MoU is ready,” U Min Zaw Oo told The Irrawaddy.

“We hope both countries will sign it this year,” he said.

The MoU on the China-Myanmar Economic Corridor was finalized at the working-group level in February. The Cabinet then reviewed it, he added.

The corridor will run from China’s Yunnan Province to Mandalay in central Myanmar, and then east to Yangon and west to the Kyaukphyu Special Economic Zone (SEZ), according to DICA.

Under the MoU, the governments agree to collaborate on many sectors including basic infrastructure, construction, manufacturing, agriculture, transport, finance, human resources development, telecommunications, and research and technology in order to develop the China-Myanmar Economic Corridor, U Min Zaw Oo said.

For the implementation of the economic corridors, related ministries are required to form working groups and joint committees between the two countries, so that the ministries can set priorities in terms of infrastructure development projects.

“Infrastructure development projects [SEZ, railways, road projects and industrial zones] will be undertaken by the related ministries. We need to propose the establishment of working groups and joint committees [Myanmar/Chinese] to the government’s Economic Committee,” U Min Zaw Oo said.

Officials of at least the deputy minister level from both sides need to discuss the infrastructure projects, he said.

In November 2017, Chinese Foreign Minister Wang Yi announced China’s proposal to build the Myanmar-China Economic Corridor following a meeting with State Counselor Daw Aung San Suu Kyi in Naypyitaw. Wang claimed that the economic corridor would enhance investment in development and trade under Chinese-Myanmar cooperation as part of the One Belt One Road Initiative.

One Belt One Road is Chinese President Xi Jinping’s signature foreign policy project. Unveiled in 2013, it is also known as the 21st-century Maritime Silk Road. The project aims to build a network of roads, railroads and shipping lanes linking at least 70 countries from China to Europe passing through Central Asia, the Middle East and Russia, fostering trade and investment.

According to a Hong Kong Trade Development Council report, the One Belt One Road Initiative includes six economic corridors spanning Asia, Europe and Africa; the New Eurasia Land Bridge Economic Corridor, China-Mongolia-Russia Economic Corridor, China-Central Asia-West Asia Economic Corridor, China-Indochina Peninsula Economic Corridor, China-Pakistan Economic Corridor and Bangladesh-China-India-Myanmar Economic Corridor.

Myanmar occupies a unique geographical position in the Belt and Road Initiative, at the junction between South Asia and Southeast Asia, and between the Indian Ocean and southwestern China’s landlocked Yunnan province. From a strategic perspective, Myanmar is one of the two direct access points to the Indian Ocean for China. The other is Pakistan, but various issues make that country problematic.

On June 16, State Counselor Daw Aung San Suu Kyi met with Chinese Defense Minister Wei Fenghe in Naypyitaw to discuss bilateral relations. At the meeting, Daw Aung San Suu Kyi vowed to strengthen cooperation on the One Belt One Road Initiative with China, Chinese media reported.

At a meeting with State Counselor’s Office Minister Kyaw Tint Swe on June 28 in Beijing, Wang pushed Myanmar to move forward with the China-Myanmar Economic Corridor agreement and highlighted the need to protect peace and stability in the border regions, according to a statement from China’s Foreign Ministry.

The newly appointed chairman of the Myanmar Investment Commission, Union Minister U Thaung Tun, attended the Third Belt and Road Summit 2018 in Hong Kong from June 27-29. He told the attending delegates that, “Myanmar is now open for business under the new management of the MIC. Business opportunities are still abundant and the critical need for foreign investment remains,” he said, according to a Hong Kong Trade Development Council statement.

U Thaung Tun told the South China Morning Post that Myanmar intends to prioritize economic cooperation with China, particularly the China-Myanmar Economic Corridor Agreement.

However, concerns have been raised about the debt that will be incurred in the Kyaukphyu Special Economic Zone, in Rakhine State, in the western part of Myanmar. This is a strategic port as a gateway to access Asia and beyond.

According to a shareholder agreement reached under then-President U Thein Sein, China was to hold an 85-percent stake in the project, while the Myanmar government would hold 15 percent. However, the Kyaukphyu project was deeply unpopular among the Myanmar public, prompting the government to seek a renegotiation of the shareholder agreement.

New Planning and Finance Minister U Soe Win told the Nikkei Asian Review on Tuesday in an exclusive interview that Myanmar will seek to reduce the scale of the Kyaukphyu SEZ, and, to avoid falling into a debt trap, Myanmar will try to cut off all unnecessary expenses.

“Myanmar can’t sidestep the One Belt One Road Initiative, even though we have many views regarding the debt threat,” said U Maung Maung Lay, the vice president of the Union of Myanmar Federation of Chambers of Commerce.

He said the MoU is just a general agreement outlining what both sides will contribute to the project. He said the two sides need to discuss each project at the ministerial level. Even if Myanmar signs the China-Myanmar Economic Corridor MoU, it can still negotiate the details and financial issues, he said.

Kyaukphyu is not the only project facing debt-trap concerns. For the China-Myanmar Economic Corridor agreement, there are industrial zones, railways, roads and other infrastructure projects to be built along the corridor for which Myanmar cannot find financing.

Experts in Myanmar also warn that both governments need to consider that the China-Myanmar Economic Corridor project runs through conflict zones in Shan, Kachin and Rakhine states, so there is a danger the project could provoke conflicts in ethnic areas.

“China has carefully developed a strategic plan for a long time. How about the Myanmar government? Are they prepared for the consequences of that agreement?” said Daw Khin Khin Kyaw Kyee, lead researcher at the Institute for Strategy and Policy Myanmar.

She said the Myanmar government needs to consider the following questions: Has it prepared a strategic plan to avoid the debt trap? How will it negotiate the financing process, especially investment in each infrastructure project? Do they have the right to invite a third party into the investment? And with the corridor running through conflict areas, will the authorities engage with local people living along the corridor?

China is Myanmar’s largest investment partner. Between 1988 and May of this year it invested USD20.01 billion in the country, according to DICA.