A Senior civil servant has branded the debt concerns raised by Sean Turnell regarding the proposed deep-sea port in Kyaukphyu “baseless”, while the economist insisted that Myanmar should not need to borrow anything for the SEZ project
Sean Turnell, economic adviser to State Counsellor Daw Aung San Suu Kyi, commented during a recent seminar held in Singapore that the US$7.5 billion estimated price tag for the Kyaukphyu deep-sea port “crazy” and “absurd”. “That’s way, way, way beyond what you would need for something like that, and this is something the government has paid attention to.”
The precedent set by the $1 billion Hambantota port in Sri Lanka, where the government in Colombo borrowed heavily to construct the port, but couldn’t repay the loans and had to give China a 99-year lease for debt relief, is “the example that stands out, that has been really taken notice of in Myanmar,” according to the adviser. To raise sufficient capital for the Kyaukpyu port, the government “will have to borrow from the Export-Import Bank of China about $2 billion to $3 billion,” he went on. “So in other words what’s on the table here is exactly what was on the table in Sri Lanka.”
However, a senior civil servant disagreed openly with the adviser’s remarks.
“Since the project is still under discussion, a decision has not been made whether loans are required. There is nothing to worry about at this point in time,” U Aung Soe, director general from the commerce ministry’s Trade Promotion Department, told The Myanmar Times. The commerce ministry is involved in overseeing the establishment of SEZs in the country.
“Worries are not practical as we haven’t signed any agreement yet,” he went on. As the project is yet to be finalised, those concerns raised by Dr Turnell can be resolved by addressing those points in the agreement. “Current concerns are baseless”.
In response, Dr Turnell said it is because the deal is not finalised, there remains a chance to come up with an agreement which will be “to the advantage of both Myanmar and China, and be the basis of new found economic cooperation and harmony between these two neighbours.”
“Concerns have never really been about the Kyaukphyu project itself, but simply the debt burden Myanmar is being asked to shoulder. In truth, Myanmar should not need to borrow anything for this venture.
“The concession to run the port is valuable, as is the sovereign land Myanmar is providing. That should be sufficient for both countries to push forward on something again, of great potential and mutual benefit. Hopefully this will all the the harbinger of a new relationship of mutual respect, mutual benefit, and ongoing amity,” the economic adviser responded to The Myanmar Times via email.
CITIC Myanmar, developer of the project, has declined to comment on the issue.
‘In truth, Myanmar should not need to borrow anything for this [Kyaukphyu] venture. The concession to run the port is valuable, as is the sovereign land Myanmar is providing..’ Sean Turnell, Economic adviser
“Go into debt only if necessary”
The proposed Kyaukphyu Special Economic Zone, located in Rakhine State, consists of an industrial park and a deep-sea port. In 2015, a CITIC-led consortium, including China Harbor Engineering, China Merchants, TEDA Investment, Yunnan Construction Engineering Group and Thailand’s Charoen Pokphand Group, won the bid to develop both the port and the park. Under the shareholder structure permitted by the government under U Thein Sein, China was to have an 85 percent stake in the deep-sea port, with Myanmar holding the remaining 15pc. Discussions under the National League for Democracy-led government have focused on shifting the stake ratio.
U Soe Win, chair of Kyaukphyu SEZ Management Committee (KSMC), said the stake ratio negotiations are not finalised yet. Earlier this year, he noted that the central SEZ body has tentatively agreed to the 30:70 ratio – the China-led consortium taking 70pc, with the remainder split between the Myanmar government and a consortium of domestic companies.
Since the stake ratio has not been agreed, a decision has not been made whether the project will involve a loan, he reasoned.
“In addition, everyone is aware that the debt burden should not be shouldered by the country. As we are aware of these concerns, those implementing this project will take into account these issues and make sure these things [debt burden] won’t happen,” he continued, adding that the investment agreement “might” be secured within this year.
“We will go into debt only when necessary … It depends on the capital required.”
U Aung Soe, who’s also secretary of the national-level SEZ Central Working Committee, stated that other investors will be able to take part in the industrial zone and infrastructure development within the SEZ in the future, as the CITIC-led consortium is only the developer. There will be no restrictions on which company can invest and take part, he said. The SEZ, in the future, will be able to be connected with the broader region by building roads and railways supported by Beijing’s Belt and Road Initiative. Production will scale up and trade will increase, benefitting the wider economy.
Strategic Environmental Assessment is another sticking point.
The Committee for Implementation of the Recommendations on Rakhine State, jointly chaired by the social welfare, relief and resettlement minister and Rakhine’s chief minister, issued the “Report to the People on the Progress of Implementation of the Recommendations on Rakhine State” in February and announced that the KSMC will conduct a Strategic Environmental Assessment (SEA) prior to Environmental and Social Impact Assessments (ESIA).
However, CITIC Myanmar said at that time that they “have not got any information” regarding the SEA, and that KSMC has already issued a notification on January 16 to authorise the consortium and its Myanmar counterpart to carry out EIA/ SIA and the site geological and topographical survey. The Myanmar Times has requested to a copy of the January 16 notification but has not seen the document to date.
International experts have long been calling for an SEA to be conducted prior to moving the Kyaukphyu SEZ forward. Last year, Vicky Bowman from the Myanmar Centre for Responsible Business and Sean Bain, legal adviser at the International Commission of Jurists in Yangon, argued that until there is a concrete and transparent plan to manage impacts from Kyaukphyu projects “current preparations for the SEZ should be put on hold”, including land acquisition.
“The government should also delay entering into investment agreements with the winning consortium of developers, which is led by China’s CITIC Group, until there has been broader multi-stakeholder debate about the SEZ, and how it may develop and interact with other investments in the area.
“A strategic environmental assessment in Kyaukphyu could contribute towards correcting a development process that has so far not contributed meaningfully to the realisation of human rights or addressed the economic needs of the population in Kyaukphyu or Rakhine State,” they stated.