Summary 
China’s Belt & Road Initiative (BRI) is facing another challenge in Southeast Asia. On July 5, Myanmar announced it would be ceasing the continuation of billions of dollars of Chinese-sponsored projects. In the beginning of August, multiple sources indicate Myanmar was now scaling back on the Chinese-led Kyauk Pyu deep-water port project over cost concerns. Deputy Finance Minister Set Aung, who led the negotiations with China, reported that the project size has been scaled down to a more reasonable $1.3 billion from $7.3 billion, though this price tag is expected to only cover the first of four phases of the project. The potential debt resulting from the project could potentially lead to a Chinese seizure, a similar fate to that of Sri Lanka’s Hambantota Port last year. Located in the country’s western Rakhine state, the Kyauk Pyu port would connect China’s southwest region to the Indian Ocean. The Rakhine state is the epicenter of a continued humanitarian crisis surrounded more than 600,000 displaced ethnic Rohingya Muslims which observers blame on the Myanmar military and anti-Muslim sentiment in the embroiled state.
FAO Global Assessment
Western firms conducting business in the region need to pay close attention to the development of this agreement. Should the port’s construction continue as planned, there will be major opportunities for investment in the immediate area. While it would be beneficial for firms to get in early, the uncertainties surrounding recent projects in Myanmar make too early of a commitment or investment a big risk. Additionally, investing into government sponsored projects in the Rakhine State could lead to unintended blow back due to the continued humanitarian crisis and extensive due-diligence must be conducted to ensure that no potential partners are on internationally sanctioned lists.
Related Links
- Bloomberg- China’s Silk Road Isn’t So Smooth
- South China Morning Post- How negotiations gave Myanmar and China both a better deal in joint port project
- Reuters- Myanmar scales back Chinese-backed port project due to debt fears – official
- Nikkei- Myanmar will ask China to downsize project, minister says
- Financial Times- Myanmar reviews $9bn China-backed port project on cost concerns
Analyst Bio
Weiting Li -International Policy Associate-
Weiting Li is an international policy intern at FAO Global, where she focuses on international trade, technology, and environmental policies. Weiting is currently a second year graduate student pursuing dual master’s degrees in public policy at Georgetown University and Business Administration at University of Geneva. Prior to Georgetown, she was the assistant for government relations and working groups at European Chamber of Commerce in China. She graduated from Gettysburg College with a major in Sociology and a minor in Business.
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