November 8, 2018 / 12:00 PM / 6 days ago

Myanmar agrees smaller deal for China-backed port after 'debt-trap' concern

YANGON, Nov 8 (Reuters) - Myanmar on Thursday signed an agreement with China’s state-run CITIC Group to begin work on a deep-sea port in the west of the country, after negotiations that saw the initial phase of the project scaled back over fears of a “debt trap”.

Myanmar Deputy Minister of Planning and Finance Set Aung said Myanmar and CITIC signed a “framework agreement” for the port in Kyauk Pyu, in conflict-hit coastal Rakhine State.

“We estimate the total cost of the first phase of the project will be $1.3 billion,” he told reporters at a signing ceremony in the capital, Naypyitaw.

Myanmar’s previous military-backed administration awarded CITIC a tender in 2015 to develop a deepwater port and special economic zone with a combined price tag of nearly $10 billion.

Thursday’s agreement covers the construction of two deepwater berths, said Set Aung, who was chosen to lead negotiations for the government of Nobel laureate Aung San Suu Kyi that came to power in 2016.

Earlier proposals for the project set aside $7.3 billion for the port, but Myanmar officials raised concern about the cost due to reports that Chinese-backed projects in Sri Lanka and Pakistan had entangled those countries in debt.

Set Aung said the two parties had agreed on a phased rollout so the feasibility of the project’s different stages could be assessed.

“We will implement the project phase by phase, step by step,” said Set Aung.

He said the project would be “transparent and according to international standards,” adding that international experts would be involved in environmental and social impact assessments.

The agreement comes as Myanmar moves closer to its large neighbour, especially since the exodus of more than 700,000 Rohingya Muslims from Rakhine State from August 2017.

China has been supportive of Myanmar in the face of calls from Western countries for Myanmar’s generals to be held accountable for the brutal crackdown that drove them out.

Myanmar also needs the help of its major trading partner China to end ethnic conflicts on their common border. But many in Myanmar are wary of becoming too dependent on China.

Chinese oil and gas pipelines run from Kyauk Pyu across Myanmar to western China.

Those projects raised the ire of people in the area for their impact on the environment and on communities, spelling possible resistance to the new port.

Rakhine State chief minister Nyi Pu told reporters in Naypyitaw the project would bring jobs and “long-term development” to the state, one of the poorest parts of Myanmar.

“The locals who are experienced and wise welcome this very much and they want this to happen as fast as possible,” he said. (Reporting by Thu Thu Aung and Simon Lewis Editing by Robert Birsel)

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