Belt and Road Initiative: Southeast Asia’s boon or bane?
6 Jun 2017|

Image courtesy of Pixabay user moerschy.

As a country’s power grows, it naturally seeks a greater global status and expands its influence overseas. The Belt and Road Initiative (BRI) is China’s means towards that end. Some analysts have even compared the initiative—which proposes to invest in infrastructure development projects in more than 60 countries across Asia, Africa and Europe—to the US Marshall Plan after the Second World War. Despite being dismissed by some Chinese commentators, the comparison remains a useful reminder of the significance of the initiative to China’s foreign policy as well as its global impacts.

The initiative has been welcomed by most countries within its geographical scope, including Southeast Asian states. At a summit in Beijing to celebrate the initiative last month, delegations from nine out of ten Southeast Asian countries were present, and seven of them were led by heads of state or government. This fact reflects the importance that Southeast Asian states attached to the initiative. From their perspective, the BRI can bring them tangible economic benefits that they shouldn’t ignore.

Most importantly, the initiative could be a significant source of funding for Southeast Asian governments to develop their infrastructures. According to a report by the Asian Development Bank, between 2016 and 2030, Southeast Asian states will need $2,759 billion, which is equal to 5% of their GDP, for infrastructure investment. Access to Chinese investments through the BRI is therefore valued by Southeast Asian countries, especially when funding through private investors and international financial institutions remains limited and falls short of the region’s demand.

Moreover, as poor and outdated infrastructure continues to impede ASEAN countries’ economic growth, new infrastructure projects funded by the BRI may help promote their economic performance. This is particularly meaningful to some Southeast Asian leaders, such as Indonesian President Jokowi Widodo or Philippine President Rodrigo Duterte, who based their electoral campaigns on the pledge to improve their countries’ infrastructure systems and strengthen economic growth. Without securing enough investment to deliver the promise, these leaders’ domestic political standing or electoral prospects will be harmed.

At the regional level, Chinese investment into infrastructure development may also be useful for the development of the ASEAN Economic Community (AEC) given that improving infrastructure connectivity is a key component of the AEC project. Improved infrastructure, including highways, airports, seaports, and rail systems, will also facilitate intra-ASEAN trade and tourism.

Promising as it may be, the BRI also faces certain challenges in Southeast Asia. ASEAN states shouldn’t be over-optimistic about the potential benefits of the initiative either.

As the old adage goes, ‘There is no such thing as a free lunch’, China will likely tie BRI investments to certain conditions. As one of the hidden intentions of the BRI is to promote Chinese economic interests overseas, recipient states would have to use Chinese technology, equipment and contractors for projects funded by the initiative. That practice may be problematic for both recipient states and China itself. In countries like Vietnam, capital projects funded by Chinese soft loans and undertaken by Chinese contractors have a poor reputation due to various problems, such as project delay, cost overrun, shoddy construction, low-quality equipment, high maintenance cost, and the influx of Chinese labourers brought in by the contractors. If those problems are repeated in BRI projects, they will not only deprive ASEAN recipient states of their expected economic benefits but also harm the credibility of the BRI.

Even when China takes measures to pre-empt such problems, ASEAN states may still face other risks, such as that posed to ASEAN unity and their ability to respond to China’s maritime assertiveness in the future. For example, as countries in the region compete with each other for BRI loans, they may have to enter into bilateral arrangements with China that bypass ASEAN mechanisms. Such a practice, if repeated, may undermine ASEAN’s relevance to its members as well as regional affairs.

At the same time, by receiving China’s money, certain ASEAN states will be unwilling to criticise China if the latter takes more assertive and destabilising steps in the South China Sea, and reaching consensus on the politically sensitive topic will become increasingly difficult. Even main ASEAN claimant states such as Vietnam and the Philippines will be constrained in their reactions if they accept large BRI investments and become beholden to China.

That said, Southeast Asia’s perception of the BRI remains generally positive, at least for now. America’s inward-looking trade policy under the Trump administration and the perceived relative decline of Washington’s strategic position in the region have played into China’s favour and turned the BRI into a symbol of China’s benign rise to an alternative regional leadership. Just as the Marshall Plan contributed to America’s rise to the global superpower status after the Second World War, the BRI may also be one of the stepping stones for China to claim its regional leadership role.