The Stigmatized Kyaukpyu Project: The Biggest Trap is the “Debt Trap” Theory Itself

Debt Trap is originally a western economic term, meaning that a debtor accepts a debt tempted by certain interests and then is trapped in a long-term debt obligation which is hard to get free from due to high interest rates, changing pay-off plans or unreasonably high penalties for late payments.

By Zhang Tian

Kyaukpyu, a major town in northern Rakhine State, Myanmar, is the starting point of the China-Myanmar gas pipeline and the final destination of the China-Myanmar railway. More importantly, the port in Kyaukpyu is where the Kyaukpyu Special Economic Zone (KSEZ) is located, hence making its significance obvious.

A joint venture(not completely Chinese investments) led by China International Trust and Investment Corporation Group won the bid on the Kyaukpyu project in 2015. China and Myanmar then began negotiations on matters including the equity ratio, staged construction plans and project fund operation for the next two years and finally agreed on an equity ratio of 7:3 between the joint venture and Myanmar, with China offering a loan to Myanmar for the unfunded portion.

However, right before the original launch time of the project in 2018, a so-called “Debt Trap” theory went viral in the media both inside and outside Myanmar, forcing the launch of the Kyaukpyu project to be postponed.

The Debt Trap Theory is a Trap

Debt Trap is originally a western economic term, meaning that a debtor accepts a debt tempted by certain interests and then is trapped in a long-term debt obligation which is hard to get free from due to high interest rates, changing pay-off plans or unreasonably high penalties for late payments.

In their speculation of the Kyaukpyu Debt Trap theory, Western academics prefer to add another word to describe the case:“Debt Trap Diplomacy.” They tag it to China, who is now proactively implementing the Belt and Road Initiative, saying that China is taking advantage of the Debt Trap to force developing countries to transfer their sovereignty to China, so as to gain strategic and economic interests. Debt Trap mania runs in the same current with the former fictitious“neocolonialism”accusation, which was used by Western media to describe China-Africa cooperation. They are now using this new title to describe port projects in Hambantota, Sri Lanka and Kyaukpyu, Myanmar and the railway project in Malaysia.

A spokesperson from the Chinese Foreign Ministry responded to these slanders by saying that they were complete nonsense and reminded everyone that facts speak louder than words and that justice will prevail. As a matter of fact, he added, the trap represented by the Dept Trap theory is actually a linguistic trap that intends to whip up public opinion.

On the one hand, Debt Trap is not a neutral term. It connotes a presupposed fraudulent intention. However, Chinese investments intend to offer public goods to the international community. No political terms or pre-conditions are attached to the investments, let alone fraud or temptation.

On the other hand, the noise of Debt Trap, particularly Debt Trap Diplomacy, in the context of international—especially Western—public opinion is clearly aimed at China. It is just the so-called “China Threat”theory in another form. However, the China Threat theory has already been lambasted by academics around the world.

The Kyaukpyu Project Needs Destigmatization

First, we need to review the process of how the Kyaukpyu project is being stigmatized.

After the bid in 2015, China and Myanmar began a slow but constant negotiation process. When Chinese Foreign Minister Wang Yi proposed the construction of a Y-shaped China-Myanmar Economic Corridor in November 2017, the approach of achieving shared growth through discussion and collaboration started to invigorate the Kyaukpyu project.

At the end of May, Australian academic Sean Turnell, the self-proclaimed chief economic adviser to the incumbent State Counsellor of Myanmar Aung San Suu Kyi, described the $7.5 billion project as crazy and absurd during a seminar in Singapore. His opinion was then massively cited by Western media and other academics. The well-known Swedish researcher Bertil Lintner equated the Kyaukpyu project to port projects in Hambantota, Djibouti and even Gwadar, Pakistan, claiming that it is just another Dept Trap. It was reported that the new Myanmar Minister of Finance and Planning U Soe Win noted in an interview in early July that in order to avoid the Debt Trap, Myanmar will shrink the scale of the KSEZ. The Deputy Minister of Finance and Planning of Myanmar U Set Aung claimed in early August that the scale of the KSEZ had already been massively cut.

In the process of stigmatization, there are several points worth noting. First is the China-U.S. trade war provoked by the White House; second is closer China-Myanmar economic cooperation, especially the progress achieved in the Muse Economic Cooperation Zone negotiations and the growth in rice trade; third is the fact that China stood out in support of Myanmar and in opposition to international intervention when it was accused by the West around issues concerning Rakhine. The facts are clear. Against the backdrop of an international trade war that no one will benefit from, major Western powers want to intervene in Myanmar’s domestic affairs, while at the same time, Myanmar’s economic ties with China are getting closer, which in turn earn the enmity of Western powers. The process of stigmatization of the Kyaukpyu project is just a reflection of the animosity toward China.

Hence, the process of destigmatization is not solely to avoid conspiracy theories or trap theories during the construction of the Belt and Road, but also a process to protect China’s overseas interests and the image of the country. More importantly, at the backdrop of growing world economic uncertainty and risks due to the unilateralism and trade wars launched by Trump Administration,  it is a process to protect the growing amicable relationships between China and developing countries along the Belt and Road, a process to secure the fruits of realizing common modernization with these countries, and a process to promote connectivity and reduce the interference of powers outside of the region in these countries.

Furthermore, the support and participation of Myanmar as the stakeholder in the region are needed more in the process of destigmatization, notwithstanding the fact that many positive voices can be heard in Myanmar around this issue. Since the rise of the Debt Trap theory, many Myanmar officials have spoken in favor of the project. National Security Advisor U Thaung Tun, who is also the President of the Myanmar Investment Commission, pointed out in June that there is no so-called Chinese Debt Trap, while U Than Myint, Minister of Commerce, also underlined that there is no such Debt Trap. Meanwhile, more voices from Myanmar academics and celebrities criticized Sean Turnell, challenging his would-be chief economic advisor identity, and voiced support for Chinese investments in Myanmar.

Cooperation at a Time when Myanmar is under Trans

Myanmar is now at a crucial moment of national trans, which involves the construction of the country, including national stability, ethnic reconciliation and the signing of a federal union agreement; the construction of politics, including national political and legal mechanisms, the promotion of anti-corruption and education, science, culture and health; and the development of the social economy, including infrastructure construction, foreign investment and the improvement of people’s livelihood. This mega project, though an investment in economic development,  still falls under the greater category of national and political construction.

In an environment when political construction is still incomplete, Myanmar’s domestic problems are rather complex and its decision-making may be less efficient. Hence, China is not the only foreign country being affected. For example, the construction of the Dala bridge in Yangon led by the Republic of Korea was suspended due to compensation issues and local protests during U Thein Sein’s government. The project was suspended again in June due to technical problems. The thermal power station project in Karen Pa-an led by Japan also faced many obstacles during construction, including queries towards its environmental assessment and even local protests. The fact that Chinese projects are of greater scale and that the rise of China has attracted a lot of Western media attention, compounded by the current trade war, it is not surprising that Chinese overseas cooperation projects are getting so much scrutiny.

Instability exists in every trans country, and it is hard for foreign investment to dodge all the effects caused by these variables. This kind of problem does not only exist in Myanmar. There are several countries along the Belt and Road under trans, such as Afghanistan, Pakistan, Bangladesh, etc. With domestic political powers manifesting internal rivalries, it is inevitable that the decision-making mechanism becomes unstable. Typical conditions include disputes between the domestic army and government and conflicts among different fractions; ethnic tensions and the rise of a separatist regime by force of arms; and religious conflicts and potential terrorism. Out of its own political motives, Western media tends to spin up negative opinions about Chinese investment, and their pretext will not be limited to the theory of the Debt Trap.

Finally, it is important to know that even though problems have arisen, the Kyaukpyu project is beneficial to Myanmar’s national construction and the development of China-Myanmar relations in the long run. Myanmar cannot develop without infrastructure construction, especially the construction of electric power and transportation. China and Myanmar should enhance negotiations and cooperation on settling specific operational problems. Both countries should advance mutual trust. Even though there are ups and downs, current cooperation is still positive and healthy. More importantly, both countries should join together to draw up an emergency plan for possible shocks and strengthen communication when problems arise to avoid being alienated by other forces and provoking unnecessary disputes.


Zhang Tian, Reacher Assistant at Institute of Myanmar Studies, Yunnan University

Editor: Yanan