in order to broaden its economic relations and mitigate its excessive dependence on China.

Currently, three SEZs are being implemented in Myanmar: Kyaukphyu in Rakhine state, Thilawa in the Yangon region and Dawei in the Tanintharyi region. China has been mainly involved in the Kyaukphyu SEZ, in the troubled western Rakhine state, where a Chinese consortium, led by the Chinese state-owned China International Trust and Investment Corporation (CITIC), began development in February 2016.

But Chinese involvement in SEZs in Myanmar can be traced back to a note on the master plan for ‘Thanlyin-Kyaukdan Industrial zone’ signed in 2004. While the proposed site was located in same area as the present Thilawa SEZ, the project was not implemented at the time, since neither the military regime nor China viewed it as a high priority.

China’s strategic involvement in Kyaukphyu is motivated by sea lane and energy security concerns, as the site provides an alternative to the Strait of Malacca sea route. An oil and gas pipeline constructed by the China National Petroleum Corporation now links Kyaukphyu overland to the landlocked Yunnan Province. This has attracted the ire of locals over displacement, inadequate compensation and environmental degradation.

CITIC first started a feasibility study for the US$10 billion development of Kyaukphyu in 2007. Yet approval of the first phase was delayed by several years due to doubts about commercial viability, financing and rising anti-Chinese sentiment as well as weakening bilateral ties in the face of Myanmar’s burgeoning relationship with Japan.

Japan is equally eager to be a part of Myanmar’s SEZ development. A key point in Myanmar–Japanese economic cooperation came during former president Thein Sein’s visit to Tokyo in April 2012, with the signing of a bilateral memorandum for the development of Thilawa. Construction began in 2013, in cooperation with Japan. The Thilawa SEZ become operational in September 2015 as the first and most successful SEZ in Myanmar.

Two months before the opening of Thilawa, the Japanese government decided to participate in the Dawei SEZ projects, along with Myanmar and Thailand, though this project ran into funding problems. Tokyo also pledged to provide 750 billion yen (US$6.7 billion) for economic assistance to the Mekong Region at the seventh Mekong–Japan Summit in 2015. The Dawei SEZ, just 300 kilometres west of Bangkok, is to be linked with the GMS Southern Economic Corridor. Its abundance of low wage labour makes it an ideal production location for Japanese companies.

In response to Japan’s involvement — and to progress the ‘One Belt, One Road’ (OBOR) initiative, including the proposed Bangladesh–China–India–Myanmar Economic Corridor — Beijing ingratiated itself with Myanmar. China has established financing bodies such as the Asian Infrastructure Investment Bank and the Silk Road Fund to fund OBOR projects amounting to US$250 billion.

A consortium including private and state-owned Chinese companies is also currently being formed for infrastructure projects in Dawei, including three deep sea ports and a 132 kilometre four-lane road linking Dawei with Kanchanaburi in Thailand. Originally, the projects were to be jointly implemented by Thailand, Myanmar and Japan, but it is uncertain whether the Chinese consortium will now get approval from the Dawei SEZ management committee instead.

The Kyaukphyu SEZ development, though it has already attracted financing, is more problematic. The government stresses that the SEZ would be very beneficial for economic growth both nationally and in Rakhine State. Compared to other SEZs, Rakhine State is home to numerous ethnic, religious and other minorities, including Rakhine, Muslims and Rohingya. And it is far from major commercial cities and borders — unlike other planned SEZs, which are suitably located for light and labour-intensive industries. It may therefore be more likely to face community disapproval.

Ba Shein, an Arakan National Party member for the lower house ,has already expressed concern, declaring that ‘it looks like the current government just wants to go ahead with the project as planned, rather than [adjust it] for the region’s benefit … it seems they want certain companies to have a go’.

For her part, Aung San Suu Kyi declared that Myanmar would keep friendly policies with all countries, including China, and praised China’s OBOR. The National League for Democracy has declared that it will decide whether to continue the development of the Kyaukphyu and Dawei SEZs after analysing the commitments made by the former government to investors, state and regional governments and local residents.

The Kyaukphyu SEZ has the potential to become the country’s largest and busiest port. But the distance from commercial and industrial clusters may delay its incorporation into production and sales networks in the Mekong region. Although there is potential for oil and gas processing, this will employ less people than the labour-intensive manufacturing industry. And linkages between the resource-based industry and other sectors are weak. SEZs may therefore provide fewer benefits to the local economy than politicians and foreign investors would have the public believe.

Atsuko Mizuno is Associate Professor at the Faculty of Economics, Kyushu University.