China’s road map

China’s recent initiatives are going to change the course of the global economy, whether we like it or not.

And because China has become the new super power, many countries in the region are coming up with ways to be part of its so-called Belt and Road Initiative by linking their own projects with that of China.

The BRI includes building of the Silk Road Economic Belt (SREB) and the 21st Century Maritime Silk Road (MSR), to enhance connectivity between Asia, Europe and Africa, facilitate smoother trade flows, and, if successfully implemented, ultimately improve regional economic growth and development.

A recent article by Patrick Cooke, regional editor for Asia of the Oxford Business Group about China’s BRI notes that this bold vision for transnational infrastructure development, linking Asia to Europe, and Africa to the South Pacific through land and sea corridors and industrial clusters, has the potential to transform the dynamics of global trade and accelerate the pace of development across the emerging world.

He pointed out that the benefits for China are manifold, from securing a plurality of trade routes, to exporting excess manufacturing capacity and Chinese industrial innovations.

Each time the Chinese government or a Chinese firm inks a deal to build a rail network or communications infrastructure overseas, for example, they secure recurrent business for decades to come, as other countries become reliant on Chinese technology to upgrade and maintain their systems, he said.

Furthermore, by building infrastructure that links China’s underdeveloped interior provinces with the markets of Eurasia, ASEAN and beyond, China is able to accelerate the pace of development in its secondary and tertiary cities, making it easier for companies in the hinterland to export their goods and forge cross-border trading networks, Cooke added.

He pointed out that the BRI can also be seen as a longterm vehicle for internationalizing the renminbi as a rival trading and reserve currency to the US dollar.

It is estimated that China has around $900 billion worth of BRI projects in the pipeline or under way.

The report reveals that one of the most enthusiastic ASEAN members for BRI-linked projects is Thailand, with its government declaring that it is natural, logical and mutually beneficial, for its flagship $44 billion Eastern Economic Corridor to link up with the BRI, and in December 2017, construction on the high-speed rail line linking Thailand with China finally got under way.

In Indonesia, President Joko Widodo’s administration is said to be determined to make the most of their participation in this initiative, to help drive investment across the economy. With the government so far receiving investment pledges that cover just over half of the $327-billion worth of road, airport and rail projects in its five-year pipeline, China is an obvious source of funding to pick up the slack, OBG’s Cooke said. But not everybody is happy. The OBG report said that Sri Lanka has handed over 70 percent control of a port to Chinese interest after it was unable to service the loans from Chinese state-controlled entities it acquired to build the $1.3 billion maritime complex.

In Myanmar, there is bubbling opposition to some China-backed infrastructure projects in recent years, most notably a dam project which remains on hold due to grassroots protests against perceived Chinese exploitation of Myanmar’s resources.

At Papua New Guinea, Cooke revealed that China has been providing opaque concessional loans to the government, primarily for infrastructure investments. Financial assistance is now being packaged as BRI funding, including those for infrastructure upgrades and the development of an agriculture industrial park.

The report adds that so far, the US and allied regional powers, such as Japan, India and Australia, have failed to muster a coherent response to the BRI with opinions divided on whether to counter, ignore or embrace it. This as the presidency of Donald Trump has yet to demonstrate that it has the strategic sense to effectively respond to China’s long-term visions and ambitions, it said.

For Singapore, outgoing CEO of International Enterprise Singapore Lee Ark Boon has advised that with the creation of white elephants being the biggest risk for emerging countries participating in BRI projects, it is important to link infrastructure developments with long-term economic strategies focused on openness to international trade and investment.

Cooke emphasized that for BRI to be a road to prosperity rather than a belt around the neck of emerging economies in Asia-Pacific, participating states must ensure their projects are well structured, sustainably financed and compatible with the medium- to long-term needs of their respective economies. Has the Philippines embraced the BRI? A paper prepared by Darlene Estrada, foreign affairs research specialist with the Center for International Relations and Strategic Studies of the Foreign Service Institute noted that 13 bilateral cooperation agreements have been signed and $24 billion worth of Chinese funding and investment have been pledged.

It noted that Chinese Vice Foreign Minister Liu Zhien Min has affirmed and welcomed the Philippines’ participation in China’s BRI and correspondingly, the Philippines took action to become a full member of the China-led Asian Infrastructure Investment Bank (AIIB) – a move indicative of Philippine interest in China’s massive infrastructure project.

Estrada said that while the Duterte administration has yet to reveal its plans on how to approach BRI, its actions point towards Philippine participation in the project.

She, however, cautioned that the country’s participation in the BRI must have a practical consideration and that implementing BRI’s future infrastructure investment plans must be consistent with the Philippines’ infrastructure and other development plans.

Of the two BRI projects, Estrada noted that MSR bears more impact on the Philippines, as it deals with port network development that will connect Chinese coastal ports to Europe through the South China Sea and Indian Ocean, and to the southern Pacific Ocean through the South China Sea.

She said that a principal factor driving China to play an active role in the international maritime domain is trade. China is the world’s largest trading nation, responsible for 10 percent of the global trade in goods, which are mostly transported through ships.

The study noted that while a well implemented port development project would be beneficial for the Philippines, actually implementing the port infrastructure plan in the country as efficiently and corruption-free as possible is not only difficult, but also the most important part.

Estrada stressed that in the end, the success of MSR implementation depends not only on how good relations are between China and the Philippines, but also on the efficient and clean undertaking of infrastructure plans by the Philippine government.

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