Cari: Asean-China — Get closer on BRI

This article first appeared in Forum, The Edge Malaysia Weekly, on December 10, 2018 - December 16, 2018.
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At last month’s Asean and Asean Plus summits in Singapore, the Asean-China Strategic Partnership Vision 2030 was adopted. After becoming the first country to have a strategic partnership with Asean in 2003, China now takes its relationship with the grouping a notch higher. A particular emphasis reiterates the target of achieving US$1 trillion in trade and US$150 billion in investments by 2020 “through deepening of economic linkages and improvement in connectivity”.

There was reference in the overall objectives of Vision 2030 to synergising the common priorities of China’s Belt and Road Initiative (BRI) and the Master Plan for Asean Connectivity (MPAC) 2025. While this is a good reference, Asean should work on this point assiduously to ensure the synergy results in sustainable infrastructure development.

The BRI has hit a rough patch. According to one estimate, of 1,814 BRI projects in 78 countries, 270 have either been cancelled, stalled or lapsed. While this is a 15% failure rate, in value terms, it is even higher — 32%.

Some high-profile project failures include the Hambantota port in Sri Lanka where debt default last year resulted in China obtaining absolute control of 69 acres of the port area through a 99-year lease. This has been seen as a serious loss of sovereignty.

Pakistan is weighed down by huge debts particularly of BRI projects and has been trying to postpone or scrap entirely the Karachi-Peshawar railway project. Awards of projects, even in Europe, such as the Budapest-Belgrade railway link, are being investigated.

In 2014, the Yangon-Mandalay railway project was allowed to lapse because of protests by the populace. The Jakarta-Bandung high-speed rail project is stalled because of land problems. In Laos, the Vientiane-Kunming rail link is to cost US$6 billion — about 40% of the country’s gross domestic product. Can the country afford it without sinking into a debt trap, which would cause Laos to lose its ability for self-rule?

Of course, in Malaysia, we now know of the highly suspicious arrangement of monies paid to Chinese contractors based on a fixed timetable and not for work done in the East Coast Rail Line and the Sabah gas pipeline projects, which has the hallmark of sinister corrupt practice.

All this points to something seriously wrong at the heart of BRI projects. Between offeror and offeree, an outcome seems to be conspired, which has very little to do with infrastructure development for the economic development of the particular country, but is instead directed at making money against its future.

Indeed, in this situation, conspiracy theories begin to take root, including the BRI being China’s grand design to dominate the world by making countries beholden to Beijing, especially financially. One analysis of 78 most risky economies involved in the BRI estimates on a scale of 1 to 7, registered a score of 5.2 (a score of 7 being the most risky). The risk factor for the average emerging market is 3.5.

So, are the more susceptible countries being targeted to consign them to a debt trap that would place them under China’s control? US Vice-President Mike Pence fulminated about this at the Apec meeting in Papua New Guinea, which followed the Asean summits in Singapore. Do not touch the BRI, he said. But what does America have to offer to fulfil the infrastructure needs of developing — Asean — countries, which are not able to get sufficient financing from multilateral institutions or countries like the US?

A report by CIMB Asean Research Institute (Cari) and LSE IDEAS (Centre for International Affairs, Diplomacy and Strategy) finds that if truly collaborative the BRI can work for all (Tan Sri Dr Munir Majid and Dr Yu Jie eds, China’s Belt and Road Initiative (BRI) and Southeast Asia, October 2018).

Without eschewing the geopolitical implications and risks, the report finds that there will be much good coming from the BRI if the excesses and corruption attending to it can be excised. This is an initiative for connectivity unmatched in living memory, which should not be allowed to go down the drain. There can be tighter control and collaboration to make it succeed.

The report notes Asean member states do not have an adversarial attitude towards the BRI, based on China’s global intentions and geopolitical calculation. They are not swayed by the argument and narrative about China’s grand design to dominate the world through the initiative.

Nevertheless, there has been opposition to BRI projects as a result of the fear of being buried under Chinese debt, of losing sovereign rights in dealing with Chinese companies, of unfair financial and contract terms, and of limited participation by locals in project implementation.

This is where the Asean-China Strategic Partnership Vision 2030, with respect to its references to the BRI, could be made to work for the region in collaboration with China. It is important to demonstrate BRI success in our region if it is to get buy-in elsewhere.

The synergies between BRI and MPAC 2025 should be addressed by a working group set up to secure this success and to arrest the failings that have become evident, which can be constructed as attempts by adventurers to extract narrow (but deep) benefit for themselves without regard to common and wider interests.

The Vision 2030 document talks about the need to “strengthen anti-corruption through relevant mechanisms”. It cannot be left hanging just like that. The working group should work on a “mechanism” to keep corruption at bay. Rooting out corruption is one of the central planks of President Xi Jinping’s national policy; it should be brought to bear to the initiative he first announced in 2013.

Asean’s own MPAC 2025 refers to five principles that should underpin the master plan — sustainable infrastructure, digital innovation, seamless logistics, regulatory excellence and people mobility. Two of them particularly should be brought to the BRI table — regulatory excellence and sustainable infrastructure.

While particular details on specific projects obviously have to be left to each country, high-level guiding principles must attend to them to protect that country from self-harm. Future generations have to be protected even as leaders who come and go may want to play hard and fast.

Singapore signed a memorandum of understanding with China in April for collaboration between companies from the two countries in BRI projects. With its good financial and legal infrastructure, Singapore could help ensure sustainable agreements. Indeed, Singapore could share its expertise and capability within the effort to synergise the BRI with MPAC 2025 as outlined in the Asean-China Strategic Partnership Vision 2030.

There is a huge challenge for Asean and China to make the so many words in Vision 2030 a reality on the ground with regard to making a success of the BRI — indeed of regional infrastructure development from whatever source.

It is with China, however, that the greatest challenges and opportunities lie.

It would be interesting to note if Asean can work together, and with China, to achieve positive outcome, on which all are agreed, even as it could not, on the South China Sea disputes, because of different interests. If Asean cannot work together when there is common interest and purpose, there really will be not much point in investing too much hope in the grouping.

Asean has to stand up and deliver. It can participate in the BRI not only by receiving but also by giving, in offering regional perspectives, advisory services and legal frameworks. In this way, many of the BRI project problems that have surfaced can be avoided, and the BRI can be seen as a not totally China-dominated enterprise — something that Beijing has so often said.


Tan Sri Dr Munir Majid is chairman of CIMB Asean Research Institute and visiting senior fellow of LSE IDEAS

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