Kyaukphyu and Gwadar to provide sea access to China’s hinterlands

Puyam Rakesh *

By signing a 43 years lease agreement with the Gwadar Port Authority for developing a special economic zone (SEZ), China has strengthened its footprint in Pakistan. The SEZ that would be developed in an area of 2,300 acre could shape a new political and economic climate. The Gwadar port in Balochistan Province, however, falls under the shadow of instability. However, the two countries reached understanding on security cooperation to ensure stability along the Pakistan-China Economic Corridor. Undeniably, the completion of the port and the joint declaration issued on 20 April 2015 on the economic corridor indicated their commitment to greater economic integration.

Above all, under the “One Belt and One Road” (OBOR) Initiative, China will also enhance its presence along the Red Sea. The Chinese dragon lays eggs on the shores of the Red Sea. Why is this region a centre of attraction? Energy resources and maritime security are the vital interests. In this age of the 21st Century Maritime Silk Road, China would like to strengthen its presence in the region where Africa and Europe meet Asia. From Egypt to the Gulf of Aden, China has expanded its economic and strategic interests.

The ‘Chinese dream’ is depended on maintaining stability and freedom of navigation. Beijing knows well that the Strait of Malacca and the Suez Canal are vital communication lines. In addition to energy security, construction of road, sea port and railway in the Persian Gulf region form a core part of the Chinese strategy to secure maritime interests and enhance access to natural resources. Besides, China has a strong interest in the political stability and energy market of Middle East. In fact, China has strengthened its presence in strife-torn Yemen located in the strategic region opposite the Horn of Africa.

A network of sea ports in Indonesia, Malaysia, Singapore, Myanmar, Sri Lanka, Pakistan, Oman, Yemen, Kenya, Tanzania, Djibouti, Saudi Arabia, Eritrea, Sudan and Egypt will drive the rejuvenation of the Chinese nation. As part of the strategy, the hinterlands will be connected to sea ports in the neighbouring countries. Moreover, China is looking for more investment in mining, port construction, railway and ship-building under the OBOR Initiative.

For China, Pakistan is a key player in the whole game plan. Afghanistan is landlocked. A narrow strip of land in Afghanistan called Wakhan Corridor touches Xinjiang Uyghur Autonomous Region (XUAR) in China but it is not opened for security reasons. With China’s increasing economic presence, infrastructure developments in XUAR along this corridor and the need for safeguarding its interests in the Afghan-Pakistan region will guide how Beijing handles the situation in the autonomous region.

Protecting China from terrorist groups active in these Islamic countries and their joining hands with the home grown separatists in XUAR continue to shape China’s policy. Therefore, a closer relationship with Pakistan is a necessity for security and strategic reasons. This is further corroborated when President Xi Jinping expressed the “unique role” of Pakistan on Afghanistan during his Pakistan visit in April 2015. China called for joint efforts with Pakistan to push the peace and reconciliation process in Afghanistan. The joint declaration also pledged to make “concerted efforts” to crack down on the Eastern Turkistan Islamic Movement (ETIM).

Under the policy of opening-up, XUAR, Tibetan Autonomous Region (TAR) and Yunnan Province of China are aiming at opening their borders to the neighbouring countries. As a result, China approached Pakistan, India and Myanmar for various connectivity projects. Although Beijing stepped up opening of TAR through Nepal and India, the projects to get access to the Arabian Sea and the Bay of Bengal through Pakistan and Myanmar respectively, are moving at fast pace.

The Pakistan-China Economic Corridor connecting Gwadar Port to Kashgar in Xinjiang is in progress. Again, the negotiation for the Ruili-Kyaukphyu corridor for connecting landlocked Yunnan Province to the Kyaukphyu Port on the western coast of Myanmar is moving in the right direction lately. Together with the Hambantota port in Sri Lanka, the Gwadar and Kyaukphyu ports form a triangular maritime route that encloses India. These projects within the framework of the ‘Belt and Road’ Initiative would change the economic landscapes of the landlocked Chinese provinces/autonomous regions. It will also be accomplishment of the ‘Two-Ocean’ strategy of China.

Like Pakistan, Myanmar is another key player that China cannot disparage. China-advocated Silk Belt and Maritime Silk Road initiative is read as an opportunity to enhance regional infrastructure and development. But Myanmar is concerned about the people’s vocal resistance against many projects. Following the 2010 general elections, a new political system took birth in Myanmar that allows the people room to oppose development projects on the ground of social and environmental impacts. It has, no doubt, taught Beijing a hard lesson to give priority on people-to-people exchanges for cementing relationship and strengthen the partnership. It is a major change after decades of military rule in Myanmar that affects the investment environment. However, with good instructions from Beijing, the Chinese companies are moving on.

In April 2015, the heads of the two States met on the sidelines of the Asian-African summit in Jakarta, Indonesia. In addition to stability in northern Myanmar, the two sides talked about creating “new bright spots” in the bilateral relationship. They discussed issues relating to China-Myanmar strategic partnership, the OBOR Initiative and the BCIM Economic Corridor. Besides connectivity, agriculture, electricity and finance were also deliberated. Expressing support to the Asian Infrastructure Investment Bank (AIIB) and the OBOR Initiative, Myanmar President Thein Sein invited Chinese companies to take part in Myanmar’s infrastructure construction under the Silk Road Fund.

Following this, the then Chairman of the Union Solidarity and Development Party Shwe Mann also appreciated the OBOR Initiative during his visit to China. Following such positive remarks, in May, Chinese State Councillor and Secretary General of State Council Yang Jing visited Myanmar to engage Naypyitaw on the AIIB, investment in the energy sector, the 21st Century Maritime Silk Road and development of the Kyaukphyu special economic zone (SEZ). The Myanmar side advocated industrial cooperation while expressing support to the infrastructure bank and the OBOR initiative. Consequently, Myanmar signed the Articles of Agreement to establish the AIIB on 29 June in Beijing.

Again, in August 2015, Vice President Sai Mauk Kham met with Chinese Ambassador Hong Liang. During the meeting, the two sides discussed flood relief, rural development, agriculture, border areas stability and the Ruili-Kyaukphyu economic corridor. Furthermore, during Thein Sein’s meeting with Chinese Premier Li Keqiang on the sidelines of the 70th Anniversary of the Victory of the World Anti-Fascist War, the two sides discussed prospects for enhancing China-ASEAN ties, promotion of youth exchange programmes and development of the Kyaukphyu SEZ. On the return journey via Kunming, Thein met with the CPC’s General Secretary of Yunnan Province Li Zhihan in Kunming. The Yunnan authorities advocated promotion of trade, implementation of Ruili(Shweli)-Muse Economic Zone, cooperation on narcotic drug, human trafficking and illegal logging.

In fact, China has been holding painstaking negotiation with Myanmar to push ahead the plan for constructing an economic corridor connecting Yunnan to Kyaukphyu port in Rakhine State (formerly Arakan). Interestingly, on 4th September, Myanmar Vice President Nyan Tun interacted with the members of the Central Work Committee for Myanmar SEZs. He expressed the need for ‘one stop service centres’ to attract foreign investors. Some revelations were made about the Kyaukphyu SEZ. It is most likely that the pace of economic reform will catch up after the November 2015 general elections. For China, the moment calls for attention to environmental and social impact assessment and people-to-people exchanges to neutralise any anti-Chinese feeling in Myanmar. Undoubtedly, maintaining a healthy relationship with Beijing seems to be a foreign policy priority for Naypyitaw.

If successfully implemented, these economic corridors and SEZs will boost China’s reform and opening up policy. The Yunnan provincial authorities have been demanding to develop railway and road links to Myanmar’s western coast. The oil and natural gas dual pipeline projects have strengthened Chinese presence along the Rakhine coast. Ruili, a border town in Yunnan province bordering Myanmar’s Muse town, will see larger volumes of trade with the opening of the Ruili-Muse economic zone. This border economic zone will find greater vitality when the Kyaukphyu SEZ comes into operation.

However, it has not been a smooth sail. In April 2011, China and Myanmar signed a memorandum of understanding on a joint rail transport project connecting Muse and Kyaukphyu. It was a part of the plan to establish Kunming-Kyaukphyu railway and road connectivity. This project is not moving since then though then Chinese Ambassador to Myanmar denied scrapping of the project in July 2014. There was report of cancellation of the railway project. Not long after this, during Chinese Premier Li Keqiang’s visit to Myanmar in November 2014, interconnectivity, the ‘OBOR’ Initiative and the Kyaukphyu SEZ were on the agenda.

Interestingly, in August 2015, the two sides talked about the Ruili-Kyaukphyu economic corridor. So China persuades Myanmar to establish the SEZ and the economic corridor for Yunnan Province to become a hub of regional trade and financial services. In this regard, the Ministry of Information and Yunnan Radio and Television has approached concerned authorities in Myanmar to produce a television documentary about the China-Myanmar Silk Road.

Though Pakistan and Myanmar are gearing up to provide sea access to China’s hinterlands, India has shown a little or no enthusiasm to make similar arrangement for China. There is no talk about an economic corridor to connect Lhasa and Kolkata port. A road connecting Gyangze (also written Gyantse) to Kolkata Port will closely integrate the TAR into India and South Asia. Unfortunately, the crossing through the Nathu La pass is the best agreed so far. Nevertheless, the Xigaze prefecture (Shigatse) will long to touch the water of Bay of Bengal. To set the record straight, without resolving the territorial dispute and the Dalai Lama issue, only geo-economics will find it hard to build bridges across the Himalayas.

China has found Pakistan and Myanmar to open its landlocked XUAR and Yunnan Province to get access to the Indian Ocean. However, TAR is not as lucky as the XUAR and Yunnan Province. By constructing these economic corridors and investing in the SEZs, China could take active role in the shaping the geo-politics and geo-economics of the Afeurosian (Africa-Europe and Asia) realm. Therefore, the Gwadar SEZ and the Kyaukphyu SEZ would undeniably be the bright spots in China’s neighbourhood diplomacy.