ASEAN and China struggle to buckle the belt and road
China’s ambitious Belt and Road Initiative (BRI) continues to draw criticism and disapproval. Its sceptics brand it as China’s Marshall Plan or as a ‘neo-imperial project’.
To ensure the initiative’s success, China should heed some of these concerns and take steps to improve the implementation of BRI-related projects. Doing so is particularly important in ASEAN — a region that stands to greatly benefit from BRI investment, if done right.
ASEAN is the world’s sixth-largest economy with a total GDP of more than US$2.5 trillion.
Economies across the region are growing steadily at an average annual rate of around 5 per cent. Sustaining this growth requires the region to meet its growing infrastructure needs, which are estimated to amount to US$2.8 trillion from 2016 to 2030.
China’s BRI is important for ASEAN because it can help to fund and meet the region’s infrastructure needs.
It also supports the success of the ASEAN Community Vision 2025 and Master Plan on ASEAN Connectivity 2025 initiatives.
The Pan-Asia Railway Network designed to connect China with Southeast Asia
A major BRI–ASEAN project is the Pan-Asia Railway Network designed to connect China with Southeast Asia. Its three main railway routes — the eastern, central and western routes — all begin in Kunming, China.
The eastern route has a total estimated cost of US$600 million and will pass through Vietnam and Cambodia into Thailand. The central route will pass through Laos, Thailand and Malaysia into Singapore. As a high-speed railway project, it is the most expensive route with an estimated cost of more than US$33 billion. The western route will pass through Myanmar into Thailand and is estimated to cost US$2 billion.
Other BRI-related projects aim to boost ASEAN’s digital economy as China takes steps towards realising its vision for a Digital Silk Road. Thailand’s Eastern Economic Corridor, which includes a Smart Digital Hub to optimise cross-border China–ASEAN flows, has attracted US$5 billion from China’s HNA Innovation Finance.
Elsewhere, Malaysia is partnering with Chinese conglomerate Alibaba to develop the country’s Digital Free Trade Zone.
But there are hurdles that threaten to disrupt the smooth implementation of BRI projects in the region. In particular the initiative is criticised for its lack of transparency and inclusivity, which contradicts China’s BRI rhetoric of a ‘common destiny’ and ‘shared interests’.
Eighty-nine per cent of all contractors participating in BRI projects are Chinese companies.
This is unlike projects funded by the World Bank and Asian Development Bank where 40.8 per cent are local, 29 per cent are Chinese and 30.2 per cent are foreign. The lack of local involvement is attracting criticism. For example, a BRI rail project in Laos is receiving complaints from locals that the project’s labourers are mainly Chinese.
BRI and China backed ‘debt traps’.
Another worry is that BRI projects will expose partner countries to ‘debt traps’.
This perception was amplified in late 2017 when Sri Lanka handed over the management of its Hambantota Port to a Chinese company after struggling to repay its debt.
These concerns are inducing some ASEAN member states to renegotiate their investment agreements with China. In Malaysia, Prime Minister Mahathir Mohamad is pushing to lower the costs of BRI-related infrastructure projects.
In the meantime, the Malaysian government has ceased work on some Chinese-funded projects, including the East Coast Rail Link and two gas pipelines. Similarly, Myanmar’s Planning and Finance Minister Soe Win wants to reduce the scale of a China-led special economic zone project in the western state of Rakhine because of overinvestment concerns.
Phidel Vineles is a Senior Analyst in the Office of the Executive Deputy Chairman at the S Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore. The views and opinions expressed in this article are those of the author and do not reflect the position of any company or institution.