Harbouring ambition
Ports in Myanmar are central to China’s strategic vision, but Dawei megaproject continues to lag others.
Ports planned in Myanmar will provide the final link in a transport network connecting China with Southeast and South Asia and onward to the Middle East. The ports are to be linked by rail and road to China in the north and Thailand to the west.
Recent agreements between the Myanmar and Chinese governments have given renewed impetus to ideas that have been on the drawing board for decades — or centuries in the case of the Kra Canal in Thailand.
They have also cast a harsh spotlight on the lack of meaningful progress at the Dawei megaproject, where the future of the original contractor, Italian-Thai Development Plc, is unclear.
As part of its huge Belt and Road Initiative (BRI), China needs a west coast outlet in Myanmar for its inland rail and road connections. “It is also China’s strategic step to replace the Bangladesh-India-China-Myanmar (BICM) economic corridor after it ran into headwinds from India, and focus on the China-Myanmar connection,” says Andre Wheeler, author of the recently released book, China’s Belt Road Initiative.
“But it is a vision that benefits Beijing most, and one which has significant strategic and military implications for Myanmar,” he told Asia Focus by email.
The scope of the BRI extends beyond simply building infrastructure. It is a logistics and transport network that could ultimately serve 65% of the world’s population and a third of the world’s production.
“To achieve this level of connectivity, the Maritime Silk Road converges with the Inland Belt at strategic ports,” said Wheeler. “By pairing ports with rail networks a new logistics ‘hub and spoke’ framework is developed, focusing on end-to-end delivery rather than the current port-to-port model.”
This would optimise trade routes between China and Europe by integrating logistics and transport networks with terminals that serve logistics platforms and supply chains, he explained.
China and Thailand have long yearned to find faster and more efficient access to the markets of South Asia, the Middle East, and as far as Europe. Over the last decade, the construction of road and rail links in the Mekong region has helped the region come closer to accomplishing this dream.
And now that Myanmar has taken the final steps to developing two key ports — one in the northwest and the other in the southeast — the ultimate vision is within reach.
The ports will be linked by road and rail to the southern Chinese city of Kunming, and to Myanmar’s key commercial centres — all part of the China-Myanmar Economic Corridor (CMEC).
The two deep-sea ports — at Dawei in the far south in Tanintharyi Division, and Kyaukphyu to the north in Rakhine state — will serve large special economic zones (SEZ) and complement existing ports at Yangon and Mawlamyine (in Mon state).
Three SEZs are taking shape: Dawei is a joint venture between Myanmar and Thailand; Thilawa on the outskirts of Yangon is a joint venture between Myanmar and Japan; and Kyaukphyu involves China and Myanmar.
Thilawa has made the most progress of the three, with many Japanese factories already doing business there. And now that Kyaukphyu has finally been given the green light, questions are being raised about the continuing delays at Dawei, which was initiated a decade ago.
Construction of the Dawei port appeared to be finally ready to start 18 months ago following intense discussions between Thai and Myanmar authorities. But little has been done since then and the Myanmar government is now considering replacing
Italian-Thai Development Plc (ITD) as the lead developer.
Deputy Commerce Minister Aung Htoo told reporters in Nay Pyi Taw last week that the government was planning to transfer the project to another company, as ITD had been unable to deliver on its promises.
But the existing contract between ITD and the government for the construction of the SEZ makes it difficult to change developers at this stage, according to government officials. There could also be financial repercussions for Myanmar if the contract is abrogated, according to Aung Soe, secretary of the Myanmar SEZ Central Working Body. The current contract states that another company can only get involved if ITD voluntarily opts out of the project.
Commerce Minister Than Myint, who chairs the SEZ Central Working Body, said in July that the Dawei SEZ project would resume with both the initial and latter phases implemented “simultaneously”.
Port construction and work on an industrial zone will involve both the public sector and businesses from Myanmar, Thailand and Japan, the working body announced in the summer. Construction of the 156-kilometre, two-lane highway from the Thai border at Kanchanaburi to the SEZ site was scheduled to begin as well. Myanmar will borrow 4.5 billion baht from Bangkok to finance the road, which Myanmar legislators approved earlier this year.
But work has stalled again, to the dismay of the Chinese who want the China-Myanmar Economic Corridor to extend to Dawei. Beijing is keen to have access to maritime routes in the Andaman Sea through Dawei as well as farther north at Mawlamyine (formerly known as Moulmein).
Both have many potential advantages, and more road and rail links would improve the attractiveness of the Greater Mekong Sub-regional corridors linking Myanmar, Thailand, Cambodia, Laos and Vietnam.
China is especially keen on optimising rail transport as far as Europe and has already launched a rail-freight service to London. Chinese train volume to Europe has more than doubled and is set to increase further this year.
“Furthermore, China looks to increase its rail freight volume by 1.1 billion tonnes and by sea of 500,000 million tonnes,” said Wheeler. “This will be achieved by the BRI’s holistic pairing of the seaport networks with rail networks, as demonstrated by Cosco (China Ocean Shipping Group Co) operating 150 sea-rail routes, covering 100 major ports — both sea and land — across 27 provinces.”
The countries in the Mekong region could also benefit from this link when the roads and rail links through Kunming are established, reducing transport costs and time.
For Chinese and Thai manufacturers, Dawei would provide even speedier access to the markets of India, the Middle East, and even Europe.
Meanwhile, both China and Thailand are interested in constructing a canal across Thailand as a supplementary link. At its narrowest point in Chumphon, near the southernmost tip of Myanmar, the isthmus is just 44 kilometres wide.
Enthusiasts including China see a canal as a faster, safer route for crude oil imports from Africa and the Middle East. About 60% of China’s crude imports now pass through the congested Strait of Malacca.
Lobbying by a group of retired military men and their supporters for a rebranded “Thai Canal” project has gathered pace over the past year. Prime Minister Prayut Chano-cha recently ordered national planning and security agencies to conduct the latest in a long line of studies.
Interestingly, the Strait of Malacca was originally regarded as suboptimal for shipping, and a proposal to bypass it with a canal through Siam was first mooted in 1677. Various plans came and went, before the Thai and British governments agreed in 1897 not to proceed with the canal.
“It emerged that the intent was to protect the regional dominance of the Port of Singapore,” said Wheeler. “Some argue that this confirms that shipping via the Straits is based on political expediency and not optimal trade efficiency.”
While Kyaukphyu is currently the centre of Beijing’s plans for the development of the CMEC, it remains interested in making use of the port at Dawei. But it also has its eyes on Mawlamyine. It has proposed to build a road from Kunming to Mawlamyine, bypassing Mandalay, but running parallel to the road network from Kunming to Mandalay and Yangon.
Clearly Beijing is eying Myanmar as its key transit point to South Asia, the Middle East and Europe. It also wants various options to link China to the Indian Ocean, so SEZ development at Dawei and Kyaukphyu would be an integral part of the strategy. But it also raises concerns about the possible military use of the ports in the future.