December 4, 2018

In October 2018, the MoU on the feasibility study on the construction of the Muse-Mandalay railway, which is part of the China-Myanmar Economic Corridor (CMEC), was signed by the China Railway Second Board Engineering Group Co. Ltd and the state-run Burma Railway Company. This led to the speculation that the canceled Sino-Myanmar railway might be resumed. Under the MoU, the feasibility study — which will assess the environmental and social impact of the project — will be conducted within two years, and will go into operation after the approval from the Myanmar government.

 

The Muse-Mandalay railway is part of the Myanmar section of the USD 20 billion Sino-Myanmar railway which will comprise of the Myanmar section (from Kyaukpyu to Muse, via Mandalay) and the China section (from Ruili to Kunming), following the same route as the Sino-Myanmar oil and gas pipelines. Currently, the China section has been completed while the Myanmar section is still in the planning stage.

 

In China’s overall strategy, the railway project, which will connect Southern China and the Indian Ocean through Myanmar, would not only enhance its control over the Sino-Myanmar border and thus to further expand its influence in Myanmar, but will also extend its strategic presence in the Indian Ocean. By constructing the railway, Myanmar could get great economic benefits as well as political support from China — the resources that are necessary for the government to consolidate its power.

 

It is within this context that both China and Myanmar signed the MoU on the construction of the Myanmar section in April 2010 and agreed to launch the project within three years. The following September, the first meeting of Ruili-Kyaukpyu railway project was held, where both sides agreed to conduct feasibility studies in the Kyaukpyu-Magway section and draw a master plan.

 

However, Myanmar took a prudent stance on such cooperation because of the adverse effects of those connectivity projects on Myanmar’s economy since the suspension of the Myitsone dam in September 2011. These mainly include the flow of Chinese commodities and illegal Chinese immigrants into Myanmar. Myanmar also had growing concerns about the potential strategic and security consequences of the large-scale cross-border transport construction projects that would link Southern China and Myanmar — the Sino-Myanmar Railway in particular. Hence, Myanmar selectively implemented medium and small Chinese projects, but suspended or cancelled larger projects, including the Sino-Myanmar Railway which was canceled in 2014, resulting in a setback for China’s attempts to reach out to continental Southeast Asia and the Indian Ocean through ambitious multinational transportation construction projects.

 

Nonetheless, China has never gave up the efforts of promoting the physical connectivity between Kunming, the capital of Yunnan, and the big cities in Myanmar such as Mandalay. Since Myanmar is placed in a significant position of Belt and Road Initiative (BRI), China has a stronger momentum than ever before to promote its cooperation with Myanmar under the BRI, and thus to push forward this grand strategy. In fact, a lot of Chinese scholars deem that Myanmar, together with Pakistan, are the two most important partners in the implementation of the BRI. Furthermore, China has been keen on advancing its long-term interests in Myanmar as well as the region by investing many strategic projects in Myanmar and other countries around the Indian Ocean.

 

As the Myanmar government and military face difficulties in ending the conflicts and signing ceasefire agreements with the ethnic rebels, the negative effects of the security situation along the Sino-Myanmar border on the railway will be lasting.

 

Given this, China has seized the opportunity to upgrade its strategic cooperative partnership with Myanmar since the National League for Democracy (NLD) government came to power in 2016 and successfully lobbied Myanmar to accept many transnational infrastructure projects. These chiefly include the Border Economic Cooperation Zone (BECZ) along the Sino-Myanmar border which was proposed in May 2017 and has been officially launched, and the CMEC which was proposed in November 2017 and will be operated in accordance with the recent agreement signed by governments of China and Myanmar. Now, the Sino-Myanmar railway might be next.

 

For the democratic government in Myanmar, Chinese investment is beneficial to Myanmar’s economic development as well as bilateral ties, although the political and strategic consequences have been highlighted by some NGOs and scholars. More importantly, China’s support and assistance is necessary for the Myanmar government to settle the Rohingya refugee crisis, the biggest obstacle to Myanmar’s reintegration into the international community. Given this, Myanmar has shifted from a negative perception to a positive tone on Chinese investment, including cross-border projects. As Myanmar’s Transport and Communication Minister U Thant Zin Maung said, the railway (Muse-Mandalay) is economically and strategically important, and will contribute to the two countries’ long-term pauk phaw friendship.

 

To be sure, Myanmar is likely to be a trade hub after the construction of the cross-border transport project and would benefit much from the booming international trade between China, ASEAN, and South Asia. Moreover, Myanmar would also attract more investments from China as well as other states due to the improved transportation system, thereby promoting its economic growth and consolidating democracy in Myanmar. In addition, with more connectivity as a leverage, Myanmar could enlarge its space for maneuvering and increase its bargaining chip in the great power rivalry in the country as well as the region.

 

Despite the multiple benefits that both China and Myanmar would gain, the Sino-Myanmar railway is faced with a number of challenges. First of all, the railway is threatened by armed clashes between government forces and the ethnic armed groups along the route. Moreover, the much-anticipated political dialogue — the “21st Panglong Conference” has not been able to achieve a peace agreement between the government and the ethnic minorities. Some experts are pessimistic that substantial progress towards national reconciliation will not occur within the NLD era. As the Myanmar government and military face difficulties in ending the conflicts and signing ceasefire agreements with the ethnic rebels, the negative effects of the security situation along the Sino-Myanmar border on the railway will be lasting.

 

Second, in spite of the fact that both Beijing and Naypyidaw have taken actions to enhance their border management, various non-traditional security issues along the border — including arms smuggling, drug trafficking, and ethnic religious conflict as well as terrorist attacks in Rakhine State — hinder the construction of the railway. As Professor Yin Myo Thu at Yangon University has noted, there are not enough security forces and facilities to safeguard the railway and at the same time curb the illegal movement of goods.

 

Third, the new barrier to the Sino-Myanmar railway is debt sustainability. Currently, the “debt trap” or “debt diplomacy” claim has been used as a tool to criticize China’s BRI by some scholars and journalists, and Myanmar is at the center of such criticism. Government officials in Myanmar announced the downsizing of the Kyaukpyu deep sea port funded by a Chinese firm in August this year due to the high debt. Considering the high budget of the Sino-Myanmar railway, both China and Myanmar have to reduce the investment capital while ensuring the smooth implementation of it.

 

All in all, although China and Myanmar are willing to resume the Sino-Myanmar railway, it is actually faced with many economic and security challenges. Therefore, the future of the project will have to be determined by the security situation in the border region as well as its debt sustainability.

Peng Nian is an Assistant Research Fellow at the National Institute for South China Sea Studies. 

Link:  http://ippreview.com/index.php/Blog/single/id/846.html 

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