Feb 10, 2013

Myanmar plans its own ‘mini Singapore’

The cows roaming the runway at Kyaukpyu airport make way a few times a week for the small prop aircraft carrying passengers to and from the island of Ramree, just 20km off Myanmar’s west coast.

The sleepy seaside town of Kyaukpyu, home to a faded collection of rickety wooden houses and once grand mansions, is the modest trading hub of one of Myanmar’s poorest areas. Electricity and running water are severely limited, local industry is almost non-existent and many live on just over a dollar a day.

But this former colonial outpost could yet be transformed, and with it, the surrounding region. It is at the heart not just of China’s voracious drive for natural resources and new trade routes but also of Myanmar’s plan to create a “mini Singapore” – replicating the city state’s economic success – on the under-developed west coast.

Just 100km from rich gasfields in the Bay of Bengal, the town fronts a natural harbour more than 25m deep, offering a shipping route to the Indian Ocean and onwards to south Asia, Africa and the Middle East. Already, it has attracted billions of dollars of Chinese and South Korean investment in gas and oil.

Now Myanmar’s reformist government has drawn up an ambitious plan to develop a vast special economic zone, commercial deep seaport, power plant, an international airport, a highway and a railway linking Kyaukpyu with south west China.

If successful, the plan could create about 250,000 jobs in the region, says U Myint Thein, deputy labour minister and head of the government’s new Kyaukpyu special economic zone agency. But he admits its success hinges not just on securing investor interest but also on avoiding mistakes made in the past – including a lack of government consultation with local people.

“We must take an inclusive approach,” he said.

Not far from town, nearly 2,000 workers are finalising one of Myanmar’s largest natural gas projects: the Shwe gas pipeline and onshore terminal, which is being built by South Korea’s Daewoo International in a consortium with state-owned Myanmar Oil and Gas Enterprise and others.

From May this year, this pipeline will pump about 12bn cubic metres of gas annually, most of which will go to China via nearby Maday island. There CNPC, parent of publicly listed PetroChina, in a venture with MOGE have built dual oil and gas pipelines that run 800km to Kunming in Yunnan province as well as a tanker terminal to receive oil tankers from the Middle East.

A recent visit by the Financial Times – the first by western media – showed that the complex is near completion. From early 2013, about 22m tonnes of crude oil annually will be piped to Kunming, helping China bypass the US controlled waters of the Strait of Malacca for its crude oil imports.

So far the South Korean and Chinese projects have cost more than $3bn, about 20 per cent over budget, say local officials. But that pales compared with the investment that could come if Myanmar’s plans take shape.

Other plans for industrial zones elsewhere in Myanmar floundered due to lack of funding and local opposition, though the Japanese-backed Thilawa industrial zone near Yangon is still going ahead.

Kyaukpyu’s strategic location and access to resources makes it different, Mr Myint Thein noted, not least because the government is determined to consult with local people. Investors “will come, because the opportunities are so good – this will revolutionise trade and boost both Myanmar and the regional economy”.

Already, China has signed a preliminary agreement to construct a 1,215km railway and parallel highway linking Kunming with Kyaukpyu, transport links seen as crucial to the project’s success. Once a new SEZ law is enacted, there will be open tenders for parts of the project, Mr Myint Thein said. Land issues would be dealt with “fairly”, he said, a reference to disputes that have delayed other industrial zones.

Although all appears peaceful in Kyaukpyu, last year angry mobs burnt down a Muslim part of town. Concerns linger about the sectarian violence that erupted in the majority Buddhist Rakhine state, though local officials say the “crisis is over”.

Meanwhile, environmentalists have warned they will campaign against the development. “What is the government thinking, handing over our pristine coastlands to foreign companies to turn into a toxic industrial zone?” said Arakan Oil Watch.

Win Myint, a leading urban planner, said: “There will always be protests over developments but this government is on the right track. It is consulting locals and they are listening – and they seem determined to avoid mistakes of the past.”

The same could be said for Kyaukpyu’s early investors. CNPC says it has spent more than $10m to build local schools, hospitals and infrastructure including a reservoir and drinking water facilities for the island’s five main villages, and plans to spend more.

In one such village, several Chinese managers fielded questions about why they had not trained locals. Only about 400 of the 1,800 workers at the CNPC complex are from Myanmar, the rest are Chinese.

“We want to help local people,” one manager said. “Our project is for 30 years, we need a good relationship with society.”

Source: Financial Times