US$50 billion in belt and road funding ‘left unfulfilled’
A sizeable sum of infrastructure funding China has allocated to Southeast Asia has gone unfulfilled due to political instability in recipient countries, poor engagement with local stakeholders and a declining appetite for energy projects powered by fossil fuels, a study has found.
The gap between what Beijing has committed to and what it has delivered has raised uncertainty about the future of the Belt and Road Initiative, in which Southeast Asian nations are key participants, Australian think tank the Lowy Institute said yesterday.
“This difference amounts to US$50 billion in unfulfilled project financing, with more than half allocated to projects that have been cancelled, downsized, or otherwise seem unlikely to proceed,” said the institute’s analysts Alexandre Dayant and Grace Stanhope, who co-wrote the report.
Among the 34 commitments to projects in Southeast Asia recorded by the think tank, were 24 from China, six from Japan, three from the Asian Development Bank and one from South Korea.
China’s projects were worth a combined US$77 billion in financing commitments, but also represent more than US$52 billion in implementation shortfalls. The average completion rate was 33 per cent, with eight projects worth about US$16 billion finished and another eight “on track”, although two have been “substantially downsized”.
“Five projects worth US$21 billion have been cancelled, while another three projects worth US$5 billion seem unlikely to proceed,” authors said.
China has shifted its strategy for the belt and road, prioritising smaller projects that are more efficient and less risky after some large deals ran into financial problems and drew international attention.
Many overseas analysts also attributed the changes to China’s deteriorating economic conditions and debt crises in borrowing countries. However, the Lowy report authors said a narrative suggesting a failure of the initiative “seems misplaced”. Instead, they said, the initiative “is here to stay” and is evolving into a more sustainable source of financing.
The authors named the East Coast Rail Link project in Malaysia, the Thailand-China high-speed railway, the PNR Bicol line and the Mindanao Railway in the Philippines, as well as a deepsea port in Myanmar’s Kyaukphyu Special Economic Zone as projects affected by a change in political situations.
A history of poor engagement with local stakeholders has also limited the delivery of projects, they said, specifically referencing the Jakarta–Bandung high-speed railway in Indonesia and Phnom Penh Airport in Cambodia.
Belt and road projects also appear to “have been caught out” by rising imperatives to accelerate the clean energy transition, the authors said, citing the Vinh Tan 3 and Nam Dinh 1 coal-fired power plants in Vietnam.
President Xi Jinping pledged China would stop financing and constructing new coal-fired plants overseas in 2021, a major moment in the global effort to combat climate change.
Were Beijing to address the challenges in the report, and with cancelled projects excluded, the authors said that China could fulfil its Southeast Asian infrastructure commitments with a total expenditure of US$62 billion, making it the region’s largest development partner by a wide margin.