China’s Belt and Road in Southeast Asia between Boons and Bumps

Prashanth Parameswaran

Around five years since China first announced its Belt and Road Initiative (BRI)—a grand economic vision to construct trade and infrastructure networks connecting parts of Asia, Europe, and Africa—it continues to generate a polarizing mix of optimism and anxiety. In Southeast Asia, which Beijing has considered a central part of the initiative from its inception, BRI has made a series of notable advances in recent years but also faces a number of daunting challenges that will need to be addressed if it is to truly continue its progress in the coming years.

From the outset, Chinese policymakers have considered Southeast Asia as being critical to the trajectory BRI’s future success. That is no surprise given the several advantages the region offers within the BRI region, including the geographical proximity to China’s southern provinces as well as the robust economic links Beijing had already built up with individual states as well as the ASEAN regional grouping as a whole. Indeed, it was in Indonesia, Southeast Asia’s largest member state, that President Xi Jinping chose to unveil the “Road” component of the BRI—the 21st Century Maritime Silk Road—back in October 2013, following the unveiling of the “Belt” vision or the Silk Road Economic Belt in Kazakhstan in September of the same year.

But for Southeast Asian states, BRI’s evolution so far, when viewed within the broader context of China’s growing power in the region, still presents a mixed picture of opportunities and challenges that need to be adroitly managed. While the initiative offers a valuable pathway for these regional states to advance their own development and to strengthen their ties with China, it also exposes them to various risks that extend beyond the economic realm, some of which require not just better management of their relations with Beijing but also more fundamental changes at home and abroad. Given this, it is no surprise that the BRI has seen a mix of advances and setbacks over the past five years in the region.

On the one hand, there is no doubt that the BRI has seen some progression in Southeast Asia since it was first unveiled back in 2013. China has been working with individual Southeast Asian countries to align the initiative with their national development goals and initiatives, and there has been a range of activities rolled out in association with the BRI, including a host of forums and conferences involving not just officials, but academics, businesses, and commentators. In this pursuit, Beijing has cast its net wide, including not just larger countries such as Indonesia and Thailand—the two Southeast Asian states that are among the top ten markets within the BRI—but also smaller nations such as Brunei and Cambodia.

These inroads reinforce a broader point: the BRI has appeal amongst a wide range of Southeast Asian leaders, be it populist leaders in larger democracies seeking to advance grand infrastructure designs, such as President Rodrigo Duterte of the Philippines, or longtime rulers in smaller, authoritarian states looking to preserve regime stability, such as Prime Minister Hun Sen of Cambodia, who just secured yet another term in office following the July elections. The BRI also speaks to the real, longstanding, and heretofore unmet demand for infrastructure investment in Southeast Asia, which the Asian Development Bank estimates at a whopping $2.8 trillion through 2030. Indeed, it is worth noting that Southeast Asian states individually and ASEAN collectively had been looking to make headway on this even before the BRI’s emergence, with an example being the initial Master Plan for ASEAN Connectivity unveiled in 2010 to work towards greater regional integration.

At a time of economic uncertainty, such new opportunities are also especially welcome as a starting proposition. Within the wider context of a populist backlash against globalization and strains on the global trading system, unhelpful actions by the United States—the chief architect of that order—under President Donald Trump, such as the withdrawal from the Trans-Pacific Partnership and the waging of a trade war against China, have the unintended effect of making Beijing’s initiatives like the BRI stand out even more. Speaking at this year’s Boao Forum for Asia in April, even Singapore prime minister Lee Hsien Loong, whose country has not been afraid to speak out about Beijing’s rising assertiveness over the past few years, placed the BRI within this broader, challenging environment for smaller states.

And while it is still early days, it is also true that, in some cases, general traction has translated into some initial gains on certain segments of the BRI. With respect to rail, for instance, a case in point is the plan to connect Kunming, the capital of Yunnan—the closest Chinese province—southwards down to Southeast Asia, which is a key plank of the BRI. While this idea has long been in the works and is rife with challenges, inroads have been made on the development of the “Central Route”—which runs from Kunming down to Laos and Thailand, and then potentially on to Malaysia and Singapore—with some agreements reached between China, Laos, and Thailand.

Another area of initial progress has been on ports, a priority for Beijing given the importance it attaches to the maritime realm, whether it be for advancing its security interests, as with the South China Sea where it has outstanding territorial disputes with several Southeast Asian states, or the Malacca Straits, on which it is currently heavily reliant for its energy needs in what has been referred to as the “Malacca Dilemma.” Notable in this respect are the initial Chinese inroads in recent years into the Malacca Gateway Project with Malaysia—which is flanked by the South China Sea and the Malacca Straits—as well as the development of Myanmar’s deepwater port at Kyaukpyu, a key strategic point which leads into the Indian Ocean perceived to mitigate the “Malacca Dilemma.”

But the past few years have also made clear that concerns remain with respect to the BRI as well. Some of these are commercial in nature and relate to specific project terms, such as costs or interest rates. In Laos, concerns have had to be managed around the $6.7 billion China-Laos railway—a key node in the aforementioned “Central Route”—considering that it represented, by one account, nearly half of Laos’ GDP. In the Philippines, while the administration of Duterte has been eager to secure Chinese financing for infrastructure projects, concerns have been raised on the specific terms under which such collaboration would proceed, including the higher interest rates relative to other competitors. Commercial concerns are at times exacerbated by anxieties about developments within China itself with respect to the BRI, including the reality that domestic financing has been moving along slower than initially planned.

There are also wider domestic political concerns. Chinese investments through the BRI can intensify existing negative perceptions about Beijing within the wider public, especially in countries where the role of ethnic Chinese minorities presents an additional complicating factor. In Indonesia, for example, while President Joko “Jokowi” Widodo has been receptive to the BRI in general, he has had to actively step in to quell rumors that have surfaced about a massive flood of Chinese workers in Indonesia. Meanwhile, in neighboring Malaysia, while the previous government led by Najib Razak had been among the biggest supporters of the BRI, Najib’s rising unpopularity at home resulted in the Chinese government being dragged into the crossfire of anti-Najib sentiment. With the opposition claiming a shock victory in May elections, Beijing now finds itself in a position where several projects may be renegotiated or canceled.

There are also broader strategic concerns about overdependence on China, even though these are often not expressed directly in a public setting. In May, Myanmar significantly scaled down an existing project with China involving Kyaukpyu port, a move that was partly motivated out of strategic considerations which have been at play in other cases within the BRI as well, including the Sri Lankan government’s handover of a port to a Chinese firm on a lease in late 2017 due to debt servicing issues. In Vietnam, a country which has long lived under China’s shadow, including nearly a millennium of Chinese rule, officials have been ambivalent about moving forward with new infrastructure projects with China under the explicit banner of the BRI, even as they ramp up economic collaboration more generally. That is no surprise given Hanoi’s range of concerns vis-à-vis Beijing, including with respect to the South China Sea.

These concerns are not insurmountable, and, indeed China has already been working on ways to address some of them. The effort has been wide-ranging, including attention to managing the image of Chinese companies in the region, a greater emphasis on so-called “soft infrastructure” areas like e-commerce and innovation, a focus on developing common rules and standards, and more shaping of BRI messaging by engaging journalists and other key influencers. Specific to Southeast Asia, sensitive to anxieties that China may be looking to undermine or bypass regional institutions, Chinese officials have also been reinforcing the importance of those institutions including ASEAN and the ways in which the BRI can work to advance shared goals such as regional connectivity and the digital economy. While those sensitivities may be more rhetorical than real, they are nonetheless appreciated by those in the region that worry about being mere pawns among major powers.

But whether or not those Chinese efforts will be sufficient to secure enough buy in from Southeast Asian states to get the initiative off the ground remains to be seen. Despite suggestions of a linear Chinese learning curve on the BRI and a comparison to other major powers in the recent past, some of the specific challenges, be it the scrutiny of certain Chinese companies or the fear of overdependence among Southeast Asian states, are tied to structural realities that are difficult to change or confront, such as China’s glaring asymmetry relative to Southeast Asian states, the nature of Beijing’s political system, and the way in which Chinese firms choose to do business with respect to certain specific projects. The BRI will also be measured not just against what China offers, but how that compares to alternatives which countries can conjure on their own as well as with other outside actors as well, which is another important component to all this.

In that context, it is important to emphasize that Southeast Asian states, for their part, are not standing still waiting for the BRI to evolve, and are in fact actively looking for ways through which they can balance the opportunities and challenges that the BRI offers. Beyond renegotiating terms with China on individual projects, Southeast Asian countries are also thinking through other key elements of an approach, from better communicating their ties with Beijing to their population to recalibrating their economic and security engagements with other outside actors as well, including the United States as well as Japan, which has positioned itself as a provider of quality infrastructure and a capacity builder in areas such as maritime domain awareness and cybersecurity.

Despite the endless stream of forecasts and multiple rounds of hype around individual BRI project developments, China’s new initiative as a whole is still very much a work in progress, and it is still far too early to assess where it is headed. Southeast Asia in many ways best captures this mixed and messy outlook for the BRI as it stands now: where countries are willing to work with China to realize the opportunities emerging from the initiative, even as they remain equally determined to work themselves as well as with others to manage the manifold challenges it can pose for their prosperity and security. How that process evolves, and the calibration between its various constituent parts, is the key question that will determine the BRI’s evolution moving forward.

#BRI #Central Route #Malacca Dilemma #South China Sea