China’s Belt and Road initiative presents risks and rewards for South-east Asia

SINGAPORE –– China made a big shout as a champion of globalisation and positioned itself as a global leader at the inaugural Belt and Road summit earlier this week.

For countries in the region, President Xi Jinping’s ambitious and unprecedented initiative promising billions in infrastructure projects linking Eurasian trade routes is both alluring and risky, say observers.

Concerns still abound over the viability and the geopolitical risks associated with the scheme, particularly at this early stage.

But coming at a time when United States is turning inwards under President Donald Trump, Mr Xi’s One Belt One Road (OBOR) scheme to link dozens of economies in a China-centred trade and investment network could further draw Asia closer to Beijing.

“Certainly, the OBOR initiative has catapulted China to the most prominent position in advancing connectivity between Asia and Europe. It is a huge investment by China,” Mr Ong Keng Yong, a veteran diplomat and the executive deputy chairman of the S Rajaratnam School of International Studies (RSIS) told TODAY.

“The returns from this investment will not be known for a while. Investing in infrastructure development is a long-term exercise,” he added, noting that there are also factors beyond the control of China such as political developments in the countries along the OBOR route.

Leaders from nearly 30 nations attended the two-day summit hosted by Mr Xi at a Beijing suburb, including Russian President Vladimir Putin, Indonesian President Joko Widodo and Malaysian Prime Minister Najib Razak, who has described OBOR as a gamechanger for the region.

Beijing’s grand vision for OBOR – unveiled by Mr Xi in 2013 – includes the “Silk Road Economic Belt”, which extends from China to central Asia through Europe, linking northern Xi’an city with Dushanbe in Tajikistan, Moscow, Rotterdam and Venice.

OBOR also includes the “21st-century Maritime Silk Road”, a maritime transport route that plans to connect China’s east coast with Europe via the South China Sea and the Indian Ocean.

If everything goes as planned, OBOR could usher in an age of unprecedented globalisation and civilisation exchanges.

Dr Oh Ei Sun, Adjunct Senior Fellow at RSIS and president of the Sabah Ma Zhong (Malaysia-China) Friendship Association, said this will give regional economies a huge boost.

“The long overdue infrastructural connectivity among Asean countries will be realised. And Asean economy would hopefully be uplifted from the current doldrums,” he said.

Mr Najib was among several leaders who openly spoke about how their countries will benefit greatly from OBOR.

“Just imagine the Belt and Road network, which is on a large scale and comprehensive. It will definitely give a boost to the development of various sectors and industries, hence generate bigger growth through good infrastructure as the catalyst,” he wrote on his blog on Tuesday after returning from Beijing.

“Insya-Allah (God willing), with the concept of shared prosperity and win-win situation, I believe Malaysia, as well as other countries, will be able to realise its potential under the One Belt, One Road initiative.”

Malaysia is among 68 countries and international organisations which inked deals with China at the summit.

Singapore was represented at the meeting by Minister for National Development Minister and Second Minister for Finance Lawrence Wong.

Mr Wong’s attendance has sparked some speculation about why Prime Minister Lee Hsien Loong did not attend, and questions have been raised about Singapore-China ties as a result. When asked, Mr Wong said the invitation was decided by the Chinese, The Straits Times reported earlier this week.

LINGERING CONCERNS

While it is easy to see why many countries are drawn to the prospects of such an ambitious project by China, there remains lingering unease over Beijing’s possible political motives in pursuing the trade initiative.

Some suspect the Asian giant of attempting to promote its influence on a larger scale, rather than opening itself up to further trade and investment.

The worry is especially pronounced in South-east Asia where nations which have benefitted from China’s largesse will feel indebted towards it and make compromises that may not be in the best interest of its people or the regional order.

“That is inevitable. The only variable is what China wants in return and South-east Asian countries feel that they can actually sacrifice,” said Ms Yun Sun, a Senior Associate with the East Asia Programme at the non-partisan policy research Stimson Center. "So yes, these countries might feel indebted and compromise to Chinese demand, but such acquiscence are not without its limits."

A regional survey released this month by the Asean Studies Centre at the Iseas-Yusof Ishak Institute this month found that China is now seen as the most influential player in South-east Asia, but there is little trust that Beijing will be a good leader in maintaining regional peace and stability.

Mr Ong, who is also Singapore’s Ambassador-at-Large and a former secretary-general of the Association of South-east Asian Nations (Asean), noted that participating in OBOR could also come with some strings attached.

“At the minimum, the investor (China) will expect some kind of favourable treatment by the beneficiaries of the OBOR initiative. It could merely be some mundane favours or a political consideration with a wider significance. As we all say, there is no free lunch,” he said.

“For now, however, the OBOR initiative will yield many positive results because China and the participating countries are opening up the market-place and allowing people to transact businesses across territories which they could not do so previously.”

Dr Xia Le, chief economist for Asia at Banco Bilbao Vizcaya Argentaria SA, noted that China needs to address these concerns, including the fact that projects undertaken under the OBOR initiative do not inherently serve China’s own interests.

“It is important for Chinese dominated projects to follow international practice and increase the transparency of the procedures,” he said.

Some analysts are also sceptical over how OBOR scheme will be implemented, noting that the concept still needs to be refined.

“OBOR is very vague and confusing concept that even many Chinese officials and scholars are not sure what it is,” said Dr Jinghan Zeng from the Royal Holloway, University of London’s Department of Politics and International Relations.

There are also concerns that the scheme would expose participating nations to undue debt burden. Participating countries may struggle to pay back loans for huge infrastructure projects being carried out and funded by Chinese companies and banks.

India, which skipped the Belt and Road summit, had warned of an “unsustainable debt burden” for countries involved, with Indian foreign ministry spokesman Gopal Baglay saying that “connectivity initiatives must follow principles of financial responsibility to avoid projects that would create unsustainable debt burden for communities.”

Security considerations on the ground further complicate the picture, given that some OBOR projects are taking and expected to cut through the volatile Central and South Asian regions.

In February, the Chinese government announced that 5,000 troops will be deployed to protect its investment in Pakistan dubbed the China-Pakistan Economic Corridor that falls under OBOR.

But last week, 10 Pakistani working on a road project near the strategic Gwadar port in Baluchistan province were shot dead by gunmen. The province forms the southern hub of the corridor.

From the Chinese perspective, it seems to believe it can ameliorate the volatility in the regions by bringing about opportunities and economic developments by connecting them to new infrastructure and markets.

“It remains to be seen however whether this pacification strategy will work as it has never been seriously tested in these unstable regions by other major powers,” said Dr Oh of RSIS.

Professor Jeffrey Kingston, director of Asian studies at Temple University’s Japan campus added: “As China flexes its muscles and stretches its wings, it will find money alone will not solve its problems and it will have to content with forces opposed to its initiatives.”

“This may take China beyond its comfort zone because it will require not just a security presence but actual use of force to protect its interests and workers that may be threatened or targeted.”

CHALLENGING AMERICAN HEGEMONY

Beijing’s push to promote OBOR comes as Washington’s leadership in global trade is changing under Mr Trump’s “America First” stance. In Europe, anti-globalisation sentiment has grown among voters and the continent has been rattled by Britain’s looming exit from the European Union.

“Leaning towards China has a good economic justification currently. And given the Trump administration lack of attention to South-east Asia, there are less leverage for them to balance against China. But the current state is certainly not perpetual,” said Ms Yun of Stimson Center.

Analysts say Beijing needs to do more if it wants to compete with Washington.

“The (Belt and Road) summit is more about asserting China’s position as a global leader. It does help to project China has a global economic leader but China still needs to prove itself and being a leader is more than hosting a summit,” said Dr Zeng of Royal Holloway.

“It is still incapable of replacing the US as the global leader. At this stage, China still largely benefits from the existing liberal international order and thus, is not very motivated to overthrow the existing order and the US leadership”.

Mr Xi has stressed that the Belt and Road initiative will not change existing multilateral order, saying “we have no intention to form a small group that would dismantle stability but we hope to create a big family of harmonious coexistence”.

Dr Zeng’s views were echoed by Dr Xia, the economist, who said China has yet to show its leadership in formulating a new framework for the global economy and finance since the 2008/2009 global financial crisis. “Thus far, China is still an acceptor of the existing economic and financial order. China needs to do more in this respect to become a real global leader. The OBOR is one of the perfect test grounds for China to learn how to lead the world,” said Dr Xia.

Meanwhile, Mr Sourabh Gupta, a senior fellow at the Institute for China-America Studies predicted that China is poised to replace the US as the world’s largest economy in the next decade.

“As it keeps growing richer, it must commensurately assume the mantle of collaborative leadership and provider of global public goods. The BRI is an appetising start but the proof of the pudding will ultimately be in its eating, as well as its ability to draw as-yet sceptical bystanders in the West and in Asia to the banquet,” he wrote in a commentary.