ANP, Kyaukphyu businessman defend China’s reported majority stake
Shwe Gas terminal in Kyaukphyu, Rakhine State, 26 April 2014. Photo: EPA
THE head of Arakan National Party defended China’s majority stake in Kyaukphyu SEZ and advised against placing too much emphasis on the stake ratio. Meanwhile, a member of the Myanmar consortium said Myanmar will now own 30 percent of the project.
Kyaukphyu is the location of various major projects, including a deep-sea port and oil and gas terminal at Madae Island, which already serves as the starting point for an oil and gas pipeline that runs across central Myanmar to Yunnan Province in southwest China. Kyaukphyu is also a core part of China’s Belt and Road Initiative (BRI).
U Aye Maung, chair of Arakan National Party (ANP), stressed that Rakhine State is a vital link for China to gain access to the Indian Ocean. No one can deny the fact that Kyaukhyu is the trade centre.
“The Rakhine people should be prepared to get along with BRI developments as the BRI can provide the stimulus to spur Rakhine’s economic growth.
“We need to improve the laws and regulations relevant to the special economic zone and issues related to land ownership. The laws and regulations must be flexible to attract foreign investment, and they need to be consistent over the changes in government [political leadership],” he said.
U Aye Maung said that, rather than just concentrating on Kyaukphyu SEZ’s stake ratio, Myanmar should focus on its long-term national interest.
“We don’t have the [infrastructure] experience and capital. But what we can do is to design the policies based on the expertise, input and capital from international investors, and then to transfer the ownership of the projects back to Myanmar afterwards,” he said.
The ANP chair added that Kyaukphyu SEZ is drastically different from the two other SEZs in the country, Thilawa and Dawei SEZs. Kyaukphyu SEZ is a business-to-business project while Dawei and Thilawa are implemented under government-to-government agreements.
“The business to business model is entirely shaped by the commercial interest of both sides, the two consortiums.
The issue of majority stake is not as important as the transfer of technology and investment capital. The latter two are vital for the Kyaukphyu project to succeed. – U Aye Maung, Arakan National Party
“Taking shares is to shoulder financial responsibility. Apparently, neither the Myanmar government nor Myanmar companies can afford to invest the amount of capital required by the deep-sea port or has the technology to manage the project at the moment,” he said.
U Aye Maung’s line of defence differed from those who are concerned about China’s reported majority stake of the SEZ, but echoed the views of a member of the Myanmar consortium.
A consortium led by China’s CITIC Group has proposed taking a 70-85 percent stake in the US$7.3 billion deep-sea port, according to Reuters on May 5. One of the sources, who declined to be named, said Myanmar was unlikely to ask for a stake of more than 30pc due to opposition from the Chinese firm.
“There is nothing to be worried about”
U Kyauk Taung, chair of the public company Htar Wa Ra Aung Myay and central executive committee member of Myanmar Kyaukphyu SEZ Holding Company (MKSHC), told The Myanmar Times that CITIC’s 85 percent stake was approved by the previous government and that the new government merely inherited the project with the 85pc-stake agreement. The MSKHC is a consortium of Myanmar companies involved in the SEZ project.
“Regarding the Chinese majority stake, there is nothing to be worried about.
“This is because we have a SEZ management committee which was formed by the government to manage the issues related to the project.
“We have been in negotiations with different parties for the Myanmar side to acquire a 30pc stake in the project. And, on this issue, the Myanmar consortium, the SEZ management committee and CITIC have reached an agreement late last month,” U Kyauk Taung said.
According to U Kyauk Taung, many meetings between the Chinese consortium and its Myanmar counterpart were held before the two sides agreed on the 70-30 stake ratio, but further negotiations regarding other details are needed before the signing of the MoU.
He added that the road networking connecting Kyaukphyu SEZ and its port with China is by far the most important priority for the project.
“If not, the project is nothing,” he remarked.
U Kyauk Taung explained that the Myanmar consortium, including his company, do not have sufficient capital to take a majority stake of the $7.2-billion deep-sea port. If even the consortium has the capital to construct the port, they do not have the technology to manage its operation.
Kyaukphyu vs Thilawa
China’s reported majority stake in Kyaukphyu is categorically different from Japan’s minority stake in Thilawa SEZ.
Myanmar Japan Thilawa Development, a joint venture between Japan and Myanmar which is in charge of development and management of Thilawa SEZ, is owned 49pc jointly by three major Japanese trading houses – Marubeni, Sumitomo and Mitsubishi – and Japan International Cooperation Agency (JICA). 51pc of the venture is owned by the Myanmar government and the Myanmar consortium of companies.
When asked by The Myanmar Times why Japan took 49 percent and Myanmar took 51pc of Thilawa, Takashi Yanai, MJTD president, said that the 2pc stake difference, i.e. giving Myanmar a majority stake, reflects MJTD’s intention to allow Myanmar to harvest more benefits from the SEZ than Japan.
“Our intention is to share the benefits of the Thilawa SEZ project with Myanmar more than with Japan. For this project, both Myanmar and Japan are on the same boat and have cooperated with each other well,” said Mr Yanai, who declined to comment on issues related to Kyaukphyu.
On September 4, U Soe Win, Kyaukphyu SEZ Management Committee chair, told The Myanmar Times that nothing is confirmed regarding Kyaukphyu SEZ yet since everything is still under negotiations.
“Nothing can be confirmed yet. Everything can be changed for now, including the stake ratio,” he said.
Doing good to Rakhine vs Myitsone dam 2.0
The Kyaukphyu project has received mixed commentary from experts and businesses in the past.
During the 2nd ASEAN-Myanmar Forum hosted by the Singapore Institute of International Affairs on June 28 in Sedona Hotel, Ong Chao Choon, managing director of PwC Myanmar told The Myanmar Times that the BRI provides the much-needed political will and financial resources for Myanmar and Asia’s infrastructure gap.
“The biggest project is the test case [of the BRI] and we hope to see it breaking ground in the next six to 12 months, for the Kyaukphyu project.
“That is an investment in a part of Myanmar that really needs investment, one of the poorer parts of Myanmar – Rakhine State.
“The Kyaukphyu project will do a lot of good to Rakhine State and Myanmar as a whole,” he observed.
In contrast, Simon Tay, chair of SIIA, told The Myanmar Times in the same occasion that China’s reported majority stake in Kyaukphyu is “unwise for China and for Myanmar in the long term”.
Mr Tay said that the difference in foreign ownership between Kyaukphyu and Japan-led Thilawa SEZ is “stark” and “noticeable”.
“The Japanese really make an effort to work with Myanmar by giving Myanmar 51 percent. Of course, the 2pc isn’t so important [practically] but it is an important symbol as a sign of friendship and equality.
“The Japanese are really trying to make an effort to be a partner rather than to dominate.
“If I was advising the Chinese, I would never ask for 85 percent in natural gas and oil because it’s the heritage and soil of Myanmar,” he said.
“You want to structure the Kyaukphyu project so you are always aware that, unlike Myitsone dam, you cannot take the benefit and leave the problems behind [to the community].
“If you give someone 85 percent of the vote, or ownership of the project, I think it’s very hard [to find a solution which works for both sides],” Mr Tay continued.
For more details : https://www.mmtimes.com/news/anp-kyaukphyu-businessman-defend-chinas-reported-majority-stake.html