16 July 2022, NIICE Commentary 8127
Vaishnavi Sharma

More than eight years have passed since President Xi Jinping announced the Belt and Road initiative in 2013, which aims to connect several countries. This Belt and Road Initiative consists of an economic belt connecting land and a maritime silk road connecting sea routes. Southeast Asia is a prominent region with its geography and new economic opportunities that remain crucial to this China-led initiative. It not only provides many opportunities for China to establish a strong foothold in the international world, but it also provides an opportunity for the receiving end countries to grow their economies and infrastructure. Southeast Asia is considered one of the regions critical to the trajectory of BRI’s success. The most heavily invested countries in the Southeast Asian region are CLMV countries (Cambodia, Laos, Myanmar, Vietnam), Singapore, Thailand, and Malaysia. However, for Southeast Asia, BRI offers extensive economic opportunities. As a BRI sponsor, China also reaps many benefits from the ASEAN countries. China, through BRI, sees this as an opportunity to be well connected with Southeast Asia, South Asia, and the Indian Ocean.

Southeast Asia lies between China, India, Australia, and the Pacific Ocean. The southeast Asian region comprises eleven countries rich in diversity in religion, culture, and history. The region is divided into “Mainland” and “Island” zones. The mainland zone includes Thailand, Myanmar, Laos, Cambodia, and Vietnam, whereas the island zones include Malaysia, Singapore, Indonesia, Philippines, Brunei, and Timor-Leste. Southeast Asia is one of the most economically dynamic regions, which accounts for the region’s international significance. Mainland Southeast Asia is one of BRI’s six economic corridors. Maritime Southeast Asia is located at the crossroads of the Indian Ocean and Pacific oceans, providing an essential route for communications, trade, energy, and other critical resources. The sea and land routes in Southeast Asia will permit China to build inroads in the markets of Africa and Europe. Through BRI, China will ensure global connectivity and, as mentioned above, market integration through infrastructure development abilities. The ASEAN countries are in the middle of the Maritime Silk Road path, the region being a major sea lane of China’s maritime trade, and since more than 90 percent of world trade is done through sea lanes, maritime connections with Southeast Asia play a leading role.

Prospects and Challenges: The Belt and Road Initiative (BRI) serves as a major medium through which China has interacted with ASEAN since its inception in 2013, apart from its close bilateral ties with the Southeast Asian region. BRI economies account for one-third of global GDP (Gross Domestic Product), trade, and nearly two-thirds of the world population. For some countries, especially in Southeast Asia, BRI is an opportunity to increase people’s living standards. If BRI projects are successful, they stand to benefit many poor people and huge swaths of the world’s economies, with large positive spillover effects on global welfare like Laos and Timor-Leste. Through BRI, the countries will tap their unused potential. Many countries before BRI investments had weak infrastructure, policies, and other gaps. BRI has the potential to fill these gaps. BRI aims to improve connectivity in Southeast Asia, and many projects have already been mentioned. These projects will improve regional and cross-border connectivity. Southeast Asia rose to become the top BRI investment destination in 2020, despite a decline in China’s overall BRI investments worldwide. Seven major recipient countries are from Southeast Asia: Singapore, Indonesia, Malaysia, Vietnam, Laos, Thailand, and Cambodia, alongside Bangladesh, the United Arab Emirates (UAE), and Kazakhstan. This shows the commitment of BRI toward Southeast Asian nations.

However, BRI involves several risks for the countries in Southeast Asia. First, it is noted that countries receiving investments from China through BRI have stricter and burdensome FDI policies and customs procedures. Second, some large projects under BRI involve potential environmental corruption risks. The local population protests these projects in some countries, like Myanmar. Then, many researchers and scholars are even considering these investments by China as part of China’s debt trap policy which will affect the poorer countries more who cannot return the loans taken from China. China struggles to get the project on track in the countries that need it most. Negotiating the interest rates, a country pays on loan from a Chinese bank, and the size of a local government or company will often be the subject of long-standing negotiations. The forced or inadequate compensation transfer for farmers to give way to the project has caused endless protests and dissatisfaction, driving many into poverty. Internal factors also serve as challenges like internal political turmoil in the countries, resistance from the locals, and weak domestic structures of the nations.

The conclusion drawn concerning prospects and challenges in Southeast Asia is that the region was and will remain a crucial part of BRI. Southeast Asia has become an important zone for BRI due to the economic dynamism of Southeast Asia, a significant lack of infrastructure in the region, and its strategic location on the border with the southwestern states of China and the major Asia-Pacific Sea routes. The ASEAN countries do not seem hostile toward BRI projects and welcome the development and connectivity these projects promise to bring to the countries with open arms. It must also be realized that BRI is an effective tool that will bring about development to the participating countries’ economies, especially in Southeast Asia and to countries in the region like Timor-Leste, which is a 21st century sovereign nation. In addition, China is the most important trading partner for most ASEAN countries and shares strong economic ties, making BRI a natural development of partnerships. Countries like Malaysia, Cambodia, and Singapore, which openly support and welcome these BRI projects’ developments, are the prime example of BRI as a natural development of partnerships. While all the key developments are being noticed, one should not forget the challenges that the countries in the region face due to the implementation of the BRI projects. The challenges faced by the countries are both external and internal like loss of sovereign rights to the Chinese companies, unable to return the debt, unfair contract terms, lack of raw materials, internal political turmoil in the country, and domestic structural weaknesses that prevail as a hindrance to these developmental projects. Despite all these issues today, we see an era of cooperation between China and Southeast Asian nations on various issues like the South China Sea, where both sides are working to establish cooperative ways to deal with such issues and peace in the region.

Vaishnavi Sharma is a Research Intern at NIICE.