How Likely is the Successful Completion of the China-Myanmar Economic Corridor?

By Naing Thant Phyo —

Chinese pipeline under construction outside Hsipaw in Shan State, Myanmar. Source: Axelrd’s flickr photostream, used under a creative commons license.

On September 9, 2018, the Myanmar government signed a memorandum of understanding (MOU) with China to establish the China-Myanmar Economic Corridor (CMEC), which will connect Yunnan Province in China to Kyaukphyu in Myanmar’s Rakhine State by an estimated 1,000 mile-long-corridor of roads and railroads. Hailed as a key part of China’s Belt and Road Initiative (BRI), the CMEC is of great strategic importance to the Chinese leadership. When the project is fully operational, it will open a path from China’s landlocked southwestern provinces to the Indian Ocean, providing an alternative oil shipping route to the chokepoint in the Strait of Malacca. Kyaukphyu port will also be the latest addition to China’s “String of Pearls” – a series of Chinese-built ports in Pakistan, Sri Lanka, and Myanmar that will increase China’s strategic presence in the Indian Ocean. Negotiations for the CMEC have proceeded swiftly under the current Myanmar government led by the National League of Democracy (NLD), and there are two main forces driving it forward:

First, growing international criticism over the Rohingya crisis has pushed Myanmar farther into China’s strategic orbit. While the United States and Western Europe are withdrawing from Myanmar due to the human rights violations committed by the Burmese military in Rakhine State, Beijing has reassured Naypyidaw of its continuous support and spoken out against potential U.N. sanctions on Myanmar. Beijing has been seeking stronger ties with the NLD government since it first came into power in 2015. With the aim of strengthening “party-to-party” ties, the Chinese Communist Party (CCP) has invited several members of the NLD as well as the State Counselor Aung San Suu Kyi to Beijing. Now that Myanmar’s ties with Western powers, particularly the United States, are weakening, NLD officials’ visits to Beijing are increasing in frequency. At least 110 NLD members have visited China since 2016 and China is “number one among ‘party-to-party’ invitations,” according to the NLD’s spokesperson. Stronger NLD-CCP ties have undoubtedly facilitated smooth negotiations on the CMEC.

An additional layer to China-Myanmar relations is Myanmar’s internal peace process, which is the NLD government’s top priority. China is the sole foreign power that has leverage over some of the ethnic armed groups in Myanmar. One of the biggest armed groups under Beijing’s influence is the United Wa State Army (UWSA), a powerful militia active along part of the China-Myanmar border that has reportedly received arms from Beijing. The UWSA has previously voiced support and offered security guarantees for Chinese projects in their autonomous region. As border stability is essential to the CMEC’s progress, the NLD government is likely to push forward with the project to provide an incentive for China to use its influence on ethnic armed groups like the UWSA to ease conflict and benefit Myanmar’s peace process. Therefore, Myanmar under the NLD is likely to maintain strong ties with China and continue to receive China’s economic and diplomatic support.

Second, Myanmar is a geo-strategically important neighbor to China. Beijing has had plans to build oil and gas pipelines between its landlocked Yunnan province to Myanmar’s Kyaukphyu since 2008, and two of them became operational in 2013 and 2017 respectively. Myanmar is also one the only two countries (the other being Pakistan) to be a part of both the 21st Century Maritime Silk Road and the Silk Road Economic Belt – the maritime and overland aspects of the BRI. Moreover, the BRI’s growing reputation as a tool of “debt-trap diplomacy” has caused several of the host countries to reconsider Chinese investment. The most notable case of this is Malaysia, whose government recently cancelled three Chinese projects and halted the flagship railway project. Myanmar’s geo-strategic significance and the BRI’s stalled projects in other countries mean that China is especially likely now to accommodate Myanmar’s concerns to move the CMEC forward. In fact, the cost of the Kyaukphyu port has been negotiated down to $1.3 billion from the initially agreed $7.3 billion due to concerns about a debt trap, and the NLD government is in the process of negotiating a change in the stake ratio of the project in Myanmar’s favor.

Although the CMEC has been moving forward smoothly so far, its continuation will depend on two main factors – public perception and Myanmar’s internal politics. Myanmar’s public is cautious about Chinese investment particularly in the natural resources sector, and public backlash caused the Burmese government to halt the infamous Myitsone dam project in 2011. However, improvements in infrastructure and connectivity that the CMEC promises have also attracted some local support, particularly from the ethnically Chinese business community in Myanmar. In fact, a Myanmar construction company owned by an ethnically Chinese businessman has initiated a large commercial and residential development project in the border town of Muse, through which the CMEC will pass, showing great confidence in the BRI.

Myanmar’s internal politics will also play an important role in the progress of the CMEC.  Myanmar’s highly autonomous military, commonly known as the Tatmadaw, is suspicious of China’s influence and ambitions in the region, and it has tried to steer the country away from economic dependence on China. The previous military-backed USDP government was resistant to China’s economic influence in Myanmar. In fact, the Kyaukphyu project was only rewarded to the Chinese due to the lack of other options, as revealed by the former economic development minister under the USDP government. If the military, which currently holds 25 percent of the parliamentary seats, feels that the NLD government is ceding too much to China, they could intervene in the government’s decision-making process to prevent further development of the CMEC. The 2020 general elections, which will determine whether the current government remains in power, will also have deep implications for the project.

So far, the CMEC has not faced much public and military resistance. A new MOU has just been signed between two Chinese and Burmese railway companies to conduct a feasibility study of a rail link between Muse and Mandalay, which will be a part of the CMEC. Despite possible hurdles, if the current political trajectory continues in Myanmar, it is likely that the CMEC will be completed successfully.

Mr. Naing Thant Phyo is a research intern with the Southeast Asia Program at CSIS. He recently graduated from Middlebury College with a degree in International and Global Studies focused on South Asia.


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