Southeast Asian leaders are hailing economic cooperation with China in helping it realize its ambitious “One Belt, One Road” infrastructure initiative, despite questions about financing and concerns that Beijing’s massive undertaking ignores sovereignty and territorial integrity.
China on Monday wrapped up its first international conference during which Beijing laid out its plans to invest more than U.S. $1 trillion in building a network of ports, roads, railways and other logistics-related projects stretching through Southeast Asia, South Asia and beyond.
Leaders and officials from dozens of countries, including Malaysia, Indonesia, Thailand, the Philippines and Bangladesh, attended the two-day Belt and Road Forum for International Cooperation in Beijing.
The so-called Maritime Silk Road is part of China’s multi-pronged strategy to boost its global trading links by developing overland and maritime routes connecting the world’s most populous nation and economic powerhouse to markets in Europe.
“I believe that the Belt and Road initiative will strengthen economic relationships between both countries as Indonesia is focusing on its infrastructure development,” Indonesian President Joko “Jokowi” Widodo said after meeting with Chinese counterpart Ji Xinping in Beijing on Sunday.
But Chinese regional rival India stayed away. New Delhi issued a strongly worded statement over the weekend voicing its misgivings about China’s grand geo-political strategy.
“We are of the firm belief that connectivity initiatives must be based on universally recognized international norms, good governance, rule of law, openness, transparency and equality,” the Indian government said.
“Connectivity initiatives must follow principles of financial responsibility to avoid projects that would create unsustainable debt burden for communities.”
As part of Beijing’s “One Belt, One Road” initiative, Chinese engineers are drilling hundreds of tunnels in Laos to support a 260-mile railway, preparing for a $5 billion high-speed railway in Thailand, and building power plants in Pakistan, along with hundreds of other projects stretching from China to Southeast Asia, South Asia, Africa and Europe.
Beijing is building power plants in Pakistan as part of an expected $46 billion worth of investment in the country. Other high-profile plans include a $1.1 billion port project in Sri Lanka, a high-speed rail link in Indonesia and an industrial park in Cambodia.
Veena Sikri, India’s former ambassador to Bangladesh and Malaysia, said New Delhi’s decision to snub the forum involved sovereignty issues.
China itself has attached the highest importance to its sovereignty over Taiwan and Tibet, Sikri said.
“Throughout the conference, the China-Pakistan Economic Corridor is the flagship project, which is going through India’s sovereignty. How can China adopt double standards here when in different parts of the world, they have placed sovereignty on the top?” Sikri told BenarNews.
“It would have been much more embarrassing had India gone and participated,” she added. “There is no problem in having connectivity across boundaries but certainly sovereignty, environmental impacts and other concerns of India have to be looked into.”
Southeast Asian leaders said the Chinese-driven projects would further enhance bilateral diplomatic and economic ties as well as map out new trade routes.
Malaysian Prime Minister Najib Razak said the initiative consisted of some “game-changing infrastructure projects.” He cited railway projects in his country as well as Laos, Indonesia and Thailand.
“It may seem ridiculous to readers in China or other visitors at the forum, but there are some opposition politicians in my country who say we are selling our sovereignty by agreeing to such projects,” Najib said.
“But I make no apologies for wanting to build world-class infrastructure for Malaysia that will … open up huge swathes of our country, bringing more trade and opportunity to our people.”
Malaysia and China have signed nine memorandums and agreements involving U.S. $7.22 billion in investments as part of the initiative, including the building of a Robotic Future City in the state of Johor by Johor Corporation, the state government’s investment arm.
The project, worth U.S. $3.5 billion, is scheduled to kick off by the end of this year. It involves the development of a 400-hectare property to set up a futuristic hub focused on the robotic industry, potentially spurring the growth of various supply chains in Malaysia.
Indonesia’s Jokowi invited the Chinese leader to invest in three mega projects, including the building of port facilities in Kuala Tanjung, North Sumatra and a power plant project in North Kalimantan, according to a statement from the Indonesian government.
Thailand’s Foreign Ministry, in a statement released ahead of the Beijing forum, described the One Belt, One Road initiative as a “win-win cooperation” that would “promote mutual development through the strengthening of infrastructure connectivity.”
China and Thailand agreed last week that the first phase of a planned high-speed railway project will cost 179 billion baht ($5.15 billion), Thailand's transport minister said, with both countries calling for closer ties following rocky negotiations. The 873-km (542-mile) rail line will link Thailand’s border with Laos to the ports and industrial zones in Thailand’s east.
Beijing has railway plans to connect the southwestern Chinese city of Kunming to Thailand, through Laos, and Thailand wants to modernize its aging rail network.
Questions about Chinese loans
The New York-based Fitch Ratings, one of the three largest credit rating agencies, said more than U.S. $900 billion in projects were planned or under way.
It said most funding would likely come from the China Development Bank, its largest commercial banks and the Export and Import Bank of China, which announced early last year that it had started financing over 1,000 projects.
“We estimate that outstanding loans from Chinese banks total US $1.2 trillion, and a large portion of that has financed infrastructure projects involving Chinese state-owned enterprises,” Fitch Ratings said in a report.
A flood of lending to smaller countries lacking strong foreign exchange reserves might not be able to repay the loans if projects fail to generate revenue as expected, Fitch Ratings warned.
Rajiv Biswas, a Singapore-based Asia-Pacific chief economist at IHS Global Insight, said in a report published by the Warton business school that apart from concerns about environmental standards, some economists question if the massive infrastructure development would turn out to be economically sound.
“Let’s see what kinds of projects they are getting in the next couple of years and what kinds of returns they are getting,” Biswas said.
“Because in the end, if they are not delivering on the returns, then the banks that are lending will eventually say ‘we need to be careful and we cannot keep doing this without any returns because it has to be commercially viable,’” he added.
Other analysts upbeat
But in interviews with BenarNews, other analysts and political observers tried to allay fears that the “One Belt, One Road” initiative would be a one-way street benefiting China.
“This initiative will certainly bring economic benefits for Bangladesh. This is because lots of infrastructure will be developed for implementing the project. This connectivity will benefit every nation taking part in the initiative,” Munshi Faiz Ahmed, Bangladesh’s former ambassador to China, told BenarNews.
“I do not see any reason for fears of Chinese influence over the project,” he said.
In late April, Bangladesh held its third meeting on the Bangladesh-China-India-Myanmar (BCIM) Economic Corridor, during which representatives discussed the road map for the corridor – which would be the first expressway between India and China that would pass through Myanmar and Bangladesh.
In Thailand, Aksornsri Phanishsarn, director of the Thai-Chinese Strategic Research Center, said that bilateral military and diplomatic visits with China had grown since a junta came to power in Bangkok three years ago.
“China is the top trade partner and the No. 1 export market for Thailand. Our revenues depend on exports to China,” Aksornsri told BenarNews on Monday.
In Jakarta, academic Muhammad Arif viewed the Chinese initiative as potentially benefiting Indonesia and other Southeast Asian nations.
“The details of how this would benefit Indonesia are still unclear,” the researcher at the Jakarta-based nonprofit Habibie Center told BenarNews, emphasizing that current bilateral talks have been focused on “maritime initiatives, connectivity and infrastructure.”
Elsewhere, Azmi Hassan, a geo-political expert at the Universiti Teknologi Malaysia, said the projects would inherently serve China’s construction industry, but Malaysia should grab the economic benefits of early involvement.
“If Malaysia was slow to join this program, it would definitely be difficult to determine whether such program would be beneficial to the country,” he said. “What is crucial is that ‘intelligence’ is needed, so that the benefits do not fall only on China.”
Hata Wahari in Kuala Lumpur, Tia Asmara in Jakarta, Pimuk Rakkanam in Bangkok, Akash Vashishtha in New Delhi, and Kamran Reza Chowdhury in Dhaka contributed to this report.