‘LONG GAME’ WITH CHINA’S BRI
For Southeast Asia, benefits and opportunities of the initiative must also be in the interest of the region, writes
IT’S been five years since President Xi Jinping announced China’s ambitious Belt and Road Initiative (BRI) with the long-term goal of powerful economic connectivity with Europe, Asia and Africa.
The plan also advocates greater cooperation at sea through a 21st century Maritime Silk Route.
Early interest was enthusiastic and a number of countries in Asia and Africa signed up for Chinese support for land transport and infrastructure construction — drawn by the apparently cheap and non-conditional nature of Chinese financing, particularly when compared to other, more traditional forms provided by the World Bank and Asian Development Bank.
But the past year has revealed some challenges, with some of China’s initial partners in South and Southeast Asia discovering and expressing reservations about the opaque nature of the financing, above-market costs associated with having to use Chinese construction firms, and difficulties in repaying the loans.
Last year, Sri Lanka gave China a 99-year lease on one of its ports to avoid default on some of its debts to China.
This year, Malaysia cancelled projects worth US$26 billion (RM108.94 billion), suspecting that the previous government’s estimation was excessive and speculating about who pocketed the excess.
In Pakistan, the new prime minister is seeking to renegotiate some current financial commitments to China.
In the Maldives, elections in September removed a president suspected of having indebted the country through Chinese financing.
In Africa, leaders in Zambia, Uganda and Kenya have been concerned at the greater expense of using Chinese construction firms.All that said, it’s hard to ignore the very positive impact on Southeast Asian economies since Xi announced the BRI.
A recent Development Bank of Singapore report noted that China’s foreign direct investment in Asean has surged since the BRI was launched.
FDI into the manufacturing sector rose from US$1.2 billion in 2013 to US$3.5 billion in 2016 — a compound annual growth rate (CAGR) of 43.9 per cent.
The report also pointed to 20.1 per cent CAGR over the same period in Chinese investment in the services sector.
Perhaps the most significant BRI infrastructure initiative for Southeast Asia is the creation of a Pan-Asia Railway network originating in Kunming — the closest major Chinese city to the region.
Eventually, the goal is that the whole region be seamlessly linked by rail through three key projects: The Eastern Route to Hanoi later going to Ho Chi Minh city; the Western Route to Yangon in Myanmar via the now under construction Dali-Ruili railway; and the Central Route from Kunming to Vientiane in Laos subsequently connecting with Bangkok.
From there, it can go to Kuala Lumpur ultimately reaching Singapore.
Each of them also connects to the maritime elements of China’s plan.
The Central Route is arguably the most significant as it will run through the region’s highest income countries — Thailand, Malaysia and Singapore.
The potential is enormous. DBS has commented: “Each of these routes hold tantalising promises of improving connectivity, and aiding the creation of rich ecosystems of producing, distributing, and consuming a wide range of goods and services.”
So unsurprisingly, despite some setbacks, China hasn’t been deterred from pressing on with an initiative which is central to both its “Go Global” economic strategy and its geopolitical ambitions.
No other country or international institution is planning a project that can generate such economic development and growth.
It is likely to be a central feature of China’s foreign policy over the next decade, especially given Xi’s dominance at home.
If there’s a concern — not just among Southeast Asian sceptics but also within other powerful governments and economic blocs — it is, of course, the degree of influence that China is building.
These questions and how best to navigate the challenges ahead are surely being looked at in every opportunity at international forums, by governments and business leaders.
This week, for example, at the ADIPEC oil and gas conference in Abu Dhabi, there will inevitably be discussion among policy makers and economists at top energy companies on the role of the BRI and the Maritime Silk Route in the supply chain for vital natural resources.
After all, Xi has pledged US$20 billion in loans to help BRI projects across the Middle East, along with a further US$100 million in foreign aid for countries in conflict, like Syria and Palestine.
As far as Southeast Asia is concerned — recent Chinese FDI growth notwithstanding — it must all be part of playing a “long game” to ensure that the benefits and opportunities presented by the BRI will always be at least as much about the region’s interests as they are about Beijing’s ambitions.
A recent Development Bank of Singapore (DBS) report noted that China’s foreign direct investment (FDI) in Asean has surged since the BRI was launched.
The writer has held various academic appointments, including in the Middle East. His research interests deal with emerging powers and conflict. His most recent book is Rising Powers and the Arab-Israel Conflict since 1947 (Lexington
Books, 2018).