China Must Collaborate Closely With its Neighbours to Ensure Success of the Belt and Road Initiative

The FINANCIAL — China’s neighbours in Southeast Asia are pivotal to the success of its ambitious Belt and Road development strategy, a new joint report from LSE IDEAS at the London School of Economics and Political Science (LSE) and CIMB ASEAN Research Institute (CARI) argues.

The report, jointly launched in Kuala Lumpur today (30 October), analyses 88 countries involved in China’s ambitious plans to fund and build infrastructure abroad, and notes the project’s success will depend heavily on the participation and support of countries in Southeast Asia including Malaysia, Vietnam, and Thailand.

The Belt and Road Initiative (BRI) is important to China’s economic future and the report finds nearby states generally welcome it due to the scale of infrastructure development and connectivity it promises to bring to their economies. The Association of Southeast Asian Nations (ASEAN)

Development Bank estimates that the total infrastructure investment needs in ASEAN from 2016 to 2030 will be between US$2.8tr and US$3.1tr. BRI projects will help alleviate this need.

For example, upon completion, land bridges being built in Laos and Malaysia, such as the Vientiane–Boten Railway, will greatly facilitate the export of goods from continental ASEAN countries into China and Europe.

However, the authors warn there is growing resistance from host countries in Southeast Asia to adopting BRI projects due to fears of incurring debt, as it is the recipient country that often bears the financial risk of infrastructure projects while China benefits from the financing and construction.

There are also concerns host countries will lose some of their sovereignty when dealing with Chinese companies and be subjected to unfair contract terms. The authors note agreements often feature lengthy tax concession periods and long-term leases for Chinese imports and quotas plus exemptions from foreign worker quotas.

The authors strongly warn China against entering dependent and unequal relationships with host countries and note this could jeopardise the Initiative for all involved. They urge China to work collaboratively with countries and respond to any concerns they have about BRI to ensure its success.