Purpose of CMEC

According to the Center for Strategic and International Studies (CSIS), the purpose of the CMEC is to provide China direct access to the Indian Ocean, starting from Kunming in Yunnan province, and ending in Kyaukphyu, a small port town in Rakhine state. This would bypass the Strait of Malacca, a perceived vulnerability acknowledged by China’s former president, Hu Jintao, in 2003. According to China Aid, a Chinese foreign aid and international development agency, a Memoranda of Understanding (MoU) was signed between Myanmar’s Minister of Planning and Finance U Soe Win and China’s National Development and Reform Commission Deputy Director He Lifeng in 2017 to establish the CMEC as the collective name of the BRI projects in Myanmar, folding all existing Myanmar projects into it. The CMEC intends to provide a Y-shaped link covering both the western coast and the capital city, Yangon (Figure 1).

According to Transnational Institute, an international non-profit research and democratic advocacy think-tank, only 9 of the 40 CMEC proposed projects were agreed to by Myanmar in 2019. These projects include the development of three border trade zones, a special economic zone located near the anticipated Kyaukphyu deep-sea port, the gateway to the Indian Ocean, and the Muse-Mandalay Railway project to connect all three. China International Trust and Investment Corporation (CITIC) Group, a Chinese state-owned investment company, is leading a consortium of companies to complete the development of the KPSEZ deep-sea port and the industrial park in phases. According to CITIC Group’s KPSEZ introduction press release, the economic zone plans to have an industrial park, a deep-sea port on both Yabe and Made Island’s with a connecting bridge, and a highway system going from ports to industrial park (Figure 2) stating “Kyaukphyu will be the Pearl City of the Bay of Bengal.” However, the press release does not give a date when the project should begin.

Despite the declarations above, a gap exists between the public declarations of KPSEZ progress and the GEOINT evidence of markers that demonstrate construction progress. This report will provide GEOINT and other open-source information evidence that suggests energy projects with a bent towards benefits to China were prioritized for completion over industrial and housing projects in parts of Rakhine State in Myanmar. The report will demonstrate this by conducting a survey of the proposed projects in the KPSEZ and assess the status of completion.

Financial Investment

According to CITIC Group’s website, in 2015 CITIC won the bid to complete the KPSEZ project and formed CITIC Myanmar, a consortium of Chinese and Burmese companies, which includes China Merchants Holdings, TEDA Investment Holdings, China Harbour Engineering Company Ltd., and Yunnan Construction Engineering Group, to construct a $7.3 billion deep-water port and $2.7 billion industrial park as part of the special economic zone. The industrial park was set to be built in three phases, the first phase began in 2015 with an investment of $1.3 billion by 2020, according to the Sandhi Governance Institute. China National Petroleum Corporation’s (CNPC) gas and oil pipelines cost $2.54 billion to build and were completed in 2013 and 2014, respectively. According to BRI Monitor, a series of reports from the Sandhi Governance Institute, Chinese state-run media outlet Xinhua called both pipeline pioneer projects of the BRI and CMEC even though they were completed before the formal announcement. The Myanmar national news outlet, The Irrawaddy, reported that CITIC Myanmar holds a 70% stake and 50-year lease over the KPSEZ after the Myanmar government renegotiated a new framework through the KPSEZ Management Committee.

This report utilizes open-source information and satellite imagery to analyze the status of KPSEZ infrastructure projects. The KPSEZ was chosen because Kyaukphyu is the only BRI-led SEZ in Rakhine state, a state that has the longest coastal area in Myanmar. Kyaukphyu is of strategic interest to China because of its access to the Bay of Bengal and its proximity to the Shwe gas fields. Open-source information was supported by relevant documents such as MoU's and company press releases, as well as news reports that confirm bilateral agreements and project construction timelines. The imagery was sourced from Maxar and public layers in Google Earth. The projects are grouped under two categories:

• Delayed KPSEZ Projects
• Completed KPSEZ Projects

The status of KPSEZ will be contrasted, where appropriately comparable, with the Malaysia-China Kuantan Industrial Park, another special economic zone under the BRI in southeast Asia with comparable infrastructure projects to Myanmar.

Deep-Water Port and Connecting Highways

The deep-water port, according to CITIC Group’s press release, is intended to “generate sustainable economic growth and prosperity for KPSEZ…[through] port services.” The current Myanmar-built port in Kyaukphyu is localized to fishing boats and occasional visits from the Myanmar military. It is located east of Kyaukphyu township on the northeastern point of Ramree Island. The separate tanker port on Made Island was built to accommodate tankers for oil transport and provide Rakhine state an oil terminal for the previously built pipeline. However, according to a CITIC rendering made in November 2018, the deep-sea port will be split into two deep-water berths on Yabe and Made Island (Figure 3-4).

Imagery analysis of Made and Yabe islands from November 2018 to March 2024, shows no newly cleared farmland, paved roads, construction materials, or survey sites developed in either region (Figure 5).

Imagery analysis from November 2018 to March 2024 shows a lack of construction or development (Figure 6). As of March 2024, no construction development of roads or bridges connecting Yabe to Made or Ramree islands was observed.

Industrial Park and Housing

According to the KPSEZ informational presentation on CITIC Group's website, the KPSEZ Industrial Park will span 2400 acres and include textiles, construction materials, food processing, pharmaceutical, and electronics industries. A small section of the industrial park will include an integrated residential area with high-end housing. An image from CITIC Group’s November 2018 press release shows a rendering of the residential area in the proposed industrial park (Figure 7).

Imagery analysis of the proposed site on Ramree Island in March 2024 (Figure 8) suggests no newly cleared farmland, paved roads, construction materials, or survey sites have been developed in the region.

This section will describe the Malaysia-China Kuantan Industrial Park (MCKIP), a progress marker to compare the KPSEZ industrial park and housing section with the development of a similar BRI-led special economic zone in southeast Asia. The MCKIP is a Chinese-Malaysian joint industrial park and deep-sea port project totaling over 3500 acres and located in Kuantan on the east coast of Pahang state, Malaysia (Figure 9).

Like Myanmar’s KPSEZ, Malaysia’s MCKIP began construction prior to a formal BRI agreement. According to the official MCKIP website, MCKIP construction began in February 2013. It was placed under the umbrella of the BRI after China and Malaysia signed an MOU in May 2017 aiming to “promote joint economic development in the Silk Road and the 21st Century Maritime Silk Road,” according to a report from the Malaysian Investment Development Authority. China and Malaysia officially announced the MCKIP project in 2019. Unlike the Myanmar’s industrial park and high-end housing, Malaysia’s MCKIP has experienced consistent development since 2013. A comparison of satellite imagery from February 2011 to August 2022, shows steady development of the high-end housing section of the MCKIP 1 industrial park. The 2014 image shows survey sites and cleared land for construction vehicle access. The 2017 image shows all the vegetation cleared in preparation to pave roads, and foundations for a water tank. The 2018 image shows a significant jump in development with construction of small-scale apartment complexes and a parking lot for the residents. The 2023 image shows near-completion of the apartment block and the south end of manufacturing facilities identified by green roofing (Figure 10-13).

Aerial drone footage of MCKIP from 2020 made by Southern Corridor Malaysia, a Malaysian marketing company, shows the completed apartment block of the residential section of MCKIP 1 (Figure 14).

Malaysia is a more stable investment environment than Mynamar in general as active conflict is not present in Malaysia as it is in parts of Myanmar. However, contrasting Mynamar projects with comparable Malaysian projects creates a framework to view priorities and resource allocation.

Oil and Natural Gas Pipeline Projects

The location of the industrial zone lies between the end terminals of an oil and natural gas pipeline running from Kunming, Yunnan to Kyaukphyu, Rakhine (Figure 15).

Project Scope and Structure

According to BRI Monitor, China and Myanmar agreed on the pipelines in 2007, with construction of the gas and oil pipelines starting in 2010. The pipelines were jointly managed and constructed by China National Petroleum Corporation (CNPC) and Myanma Oil and Gas Enterprise (MOGE), both state-owned enterprises (SOE) of their respective countries. According to the BRI Monitor, the oil pipeline moves imported oil transported by tanker from Middle Eastern suppliers, while the natural gas pipeline moves gas extracted from the Shwe fields off the coast of Rakhine. Despite pipeline construction starting before the BRI’s inception, MOGE received over $1.6 billion in loans in November 2010 from the China Development Bank (CDB), an SOE finance institution that currently provides long-term lending to support the BRI.

After both pipelines began operations in 2017, state-run media outlet Xinhua retroactively called both pipelines a “pioneer project of the Belt and Road Initiative.” According to the BRI Monitor, the BRI-led energy projects included in the KPSEZ oil and gas pipelines include an oil terminal, tanker port with storage facilities, offshore natural gas rigs, a natural gas terminal, and a gas-fired combined cycle power station. The oil pipeline begins at the Made Island oil terminal and tanker port, whereas the natural gas pipeline begins at the MOGE natural gas terminal and is fed from the offshore rig. The gas-fired combined cycle power station receives gas from a separate gas line and was built to satisfy the needs of Kyaukphyu as per the cooperation agreement. According to Pei Hua Yu and People's Map of Global China, an independent publication that tracks China's international activities, the CNPC owns Southeast Asia Pipeline Company (SAPC) which joined two consortiums, South-East Asia Gas Pipeline Company (SEAGP) and South-East Asia Crude Oil Pipeline Company (SEAOP), and has 50.9% ownership of both pipelines (Figure 16).

1. Oil Terminal and Tanker Port

The oil pipeline is capable of transporting 22 million barrels of oil annually, accounting for 5% of China's daily import demand, with CNPC-SAPC holding a 51% share in ownership. MOGE holds a 49% share. The pipeline terminates at the tanker port and oil storage facility on Made Island. Imagery shows the oil pipeline terminal connected to a berth for tankers to unload oil imports for storage or delivery (Figure 17).

Imagery analysis from 2010 to 2014 (left to right) shows cleared land for construction, administrative buildings and concrete roads, and the addition of 12 crude oil storage tanks to accommodate increased supply (Figure 18-19).

2. Offshore Natural Gas Rig and Gas-Fired Combined Cycle Power Station

According to the China state-run news outlet Global Times, over 52 billion cubic meters of natural gas have been shipped by the natural gas pipeline since July 2013. A cooperation agreement between China and Myanmar states "10 billion cubic meters of natural gas will be supplied to the PRC per year for 30 years," whereas Myanmar is allowed no more than 2 billion cubic meters per year which cannot affect China's overall volume. From ownership percentage perspective, CNPC-SAPC through SEAGP owns 50.9% of the gas pipeline, while MOGE owns 7%. In addition, according to the CNPC website, China controls the operation of three offshore blocks for natural gas in the Shwe fields and moves it to an onshore gas terminal near the west coast of Ramree Island (Figure 20).

The gas-fired combined cycle power station was built by Kyaukphyu Electric Power Co. Ltd., a joint venture between SOEs Power China Resources and Myanmar's Supreme Group. According to The Irrawaddy, the station is a 135-megawatt power plant that uses Myanmar's share of natural gas to power the Kyaukphyu region. A press release from Power China Resources noted the power station began operation in October 2022, stating that Power China has "fulfilled its social responsibilities" and intends to "strengthen cooperation under the [BRI] and the [CMEC]." Imagery analysis from 2018 to 2023 showed consistent annual development of the gas-fired power station. In 2018, only the administrative buildings and dirt roads for transport were constructed (Figure 21). In 2021, farmland was cleared for development of the combined cycle turbine to power the station with a completed substation southwest of that (Figure 22). Imagery also showed development of roads for construction vehicles. In 2022, the construction site was widened considerably for the foundation of pipes that would run natural gas to the turbine (Figure 23). Imagery showed the excavation for a man-made cooling lake. In 2023, the power station was completed with the addition of water in the cooling lake (Figure 24).

As an added note, according to The Irrawaddy, there were initially four Chinese-backed natural gas power plants under development, with only the combined cycle power station currently in operation. The other three projects, operated by Hong Kong power company VPower, have been shuttered due to a "limited supply of natural gas" according to former Kyaukphyu lawmaker U Poe San. He went on to say, "[now] we only have four to five hours of electricity a day."