Kyaukpyu is a coastal town along the Bay of Bengal in Myanmar’s western-most state of Rakhine. In 2016, subsidiaries of China’s CITIC Group Corporation, including China Harbor Engineering Company, won contracts for two major projects in the town—the dredging of a deep-sea port and the creation of an industrial area in an accompanying special economic zone (SEZ). The port project is valued at $7.3 billion and the SEZ at $2.7 billion. Under the terms of the deal, CITIC will build and then run the project for 50 years with a potential extension of another 25 years.
Negotiations on Kyaukpyu predate the Belt and Road Initiative—CITIC signed initial memorandums of understanding (MOUs) for the harbor project and a railway connecting the SEZ to southern China in 2009. However, they languished amid political sensitivities in Myanmar surrounding Chinese investments following the 2011 suspension of the Myitsone dam project and violent protests starting in 2012 over the Letpadaung copper mine. The railway MOU was canceled in 2014 while the port and SEZ industrial area projects are moving forward, but slowly and with considerable pushback within Myanmar. Only in October 2017 did the two sides reach an agreement on ownership of the port project after CITIC agreed to drop its stake from 85 percent to 70 percent. Ownership stakes in the SEZ have yet to be finalized.
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