China's attempt to share its investment capital with the world and project its economic might through the Belt and Road (B&R) initiative has captured the interest of countries with desperate infrastructure needs, including Asean economies looking to secure long-term growth.
The B&R initiative -- the Silk Road Economic Belt and 21st Century Maritime Silk Road -- is intended to promote economic, trade, cultural and political ties between mainland China and the rest of Eurasia as well as Africa. President Xi Jinping sees it as a way to strengthen global cooperation.
However, critics say that as Beijing pursues a bigger role in global affairs, a lot of its investment will be directed at countries where it can also build up political capital. These include underdeveloped countries off the radar of Western multinationals, especially in Central Asia, and those that have an uneasy relationship with the United States, such as Pakistan and Afghanistan.
Southeast Asia as a bloc is also emerging as a competitor to China for global investment, mainly as a lower-cost manufacturing production base at a time when costs in China are rising. Even so, Asean remains a strategic investment destination for China, which could build a lot of goodwill by helping the region overcome its infrastructure deficiencies.
Asean as a whole has yet to indicate a united stand on its participation in the B&R. Cambodia and Laos can be counted on to welcome Chinese investment, though it tends to come with political strings attached.
"Many Asean countries are rich in resources but lacking in construction funding which slows our economic growth, causing an infrastructure deficit and resulting in a low level of industrial development," says Teresita Sy-Coson, vice-chairperson of SM Investments Corporation, a Philippine conglomerate with interests ranging from retailing, real estate and banking to tourism.
China, she said, has the expertise and excess capacity to help Asean overcome its infrastructure shortfall. Chinese overseas investments are gradually shifting toward manufacturing and other infrastructure development, rather than natural resources extraction. And shifting some of its production bases overseas requires adequate infrastructure to support it.
"We have an understanding that the China B&R initiative is a directed response to the neighbours' huge infrastructure needs," Ms Sy-Coson said. "Since China's development is pretty much linked to that of its Asean neighbours, it starts as a network of planned ports and other coastal infrastructure projects that aim to bring economic benefits to the region."
The B&R will also help stimulate China's domestic economy by redirecting excess capacity and capital, and at the same time improving relations with Asean nations, she added.
Asean trade with China has been expanding thanks to their free trade agreement, which could be reinforced further by the planned Regional Comprehensive Economic Partnership (RCEP) which links Asean with six other major Asia Pacific economies including China.
More connectivity by land and sea will encourage more trade and movement of people. Policy coordination to reduce trade and logistics barriers will also promote optimum use of planned infrastructure projects such as ports.
Even though there is a concern that the B&R could overlap or even conflict with the plan for the Asean Economic Community (AEC), proponents believe both can help the bloc address its priorities.
"The objectives of both the AEC and the B&R initiative are about the same in terms of promoting connectivity among all nations in terms of the financial, trade and logistics integration, especially in maritime transport," Ms Sy-Coson said, adding that archipelagoes such as the Philippines and Indonesia could be big beneficiaries.
Indonesia, with 17,000 islands stretching across 5,271 kilometres, has always faced huge challenges moving goods and people. Logistics costs in the country are about 28% of gross domestic product (GDP), compared with 8% in Singapore and 12% in Malaysia.
However, Indonesia is fortunate to be strategically situated, with its territory taking in three major maritime trade routes: the Malacca, Sunda and Lombok straits.
"Indonesia is important in Asean because we are the biggest economy in Asean," said Suryo Bambang Sulisto, founder of PT Satmarindo Group.
"When we hear about Belt and Road, it sounds like music to us because it fits really well with [the Indonesian] government's priority development programme. Cooperation with China is just perfect, timely for us. It comes at the right time."
The Philippines faces similar infrastructure struggles, said Ms Sy-Coson. "I just hope that the political relationship between the Philippines and China will improve, so we can help each other," she said, referring the tensions over their competing claims to islands in the South China Sea.
From an Asean perspective, Mr Sulisto said, a closer relationship with China offers both benefits and potential problems. On one hand, Asean is able to access less expensive goods and services from China. But that could lead to perpetual import dependence that is not healthy for Asean economies in the long run.
"Why bother to manufacture locally when you can get it from China at much cheaper prices? There could be growth in imports, chiefly in consumer goods, and this could be a problem for Asean," he said.
Indonesia, he said, had a trade deficit of about US$12 billion with China, and "Asean also runs a big deficit. This is an area that I think should be managed and needs a solution, so we can export [more] to China."
Francis Yeoh, managing director of the Malaysia-based YTL Group, says infrastructure development benefits the population of a country by fostering expanded trade and improved productivity.
He points to the potential of a planned high-speed rail link between Kuala Lumpur and Singapore, which is being revived after a delay of many years.
YTL Group has several large infrastructure projects in Malaysia, but it does about 85% of its business abroad, including power plants in Singapore, Indonesia and Australia, and water utilities in Britain and Singapore.
Mr Yeoh believes that Asean needs to be more open-minded about what China can offer, saying it can look to the experience of Europe after the end of World War II. The United States after 1945 came up with the Marshall Plan to aid Western Europe, providing $12 billion (about $120 billion at current values) in economic support to help rebuild the region's economies. The Marshall Plan, he said, contributed greatly to the productivity and success of Europe, and the B&R initiative could support Asean in a similar way.
However, he added: "Forty years after the Marshall Plan, they stopped. Europe became unproductive. They want to maintain their quality of life without wanting to work hard for it. What made Brexit an issue today is because Britain was telling Europe, you are too unproductive. You need to reform. That's an issue."
The lesson for Asean, he said, was that if it wants to benefit from B&R investments, it cannot relent in its drive to improve productivity afterward.
"Are we productive today in Asean and Asia? We are still very productive. We have a young and intelligent population, but if we don't do a few things that we have learned from Europe, then we will not get there," he added.
Mr Yeoh pointed to Hong Kong and Singapore as role models because they have seriously embraced the rule of law, disdain for corruption, and a clear regulatory framework with transparency and coherence.
"They don't change their minds and all their infrastructure is built by the private sector successfully and priced correctly with government encouragement, allowing competition in services infrastructure for the people" he said.
"These two economies have something in common. They punch above their weight. That means their per capita income and GDP are bigger than many economies in Europe.
"If China's economy follows those of Hong Kong or Singapore, every city along the B&R will learn something. Any city with a population of 10-20 million, their per capita income can be bigger than America's. Then we will be living in the most prosperous region."
Chinese investors, he said, have already learned how to invest successfully in Singapore and Malaysia where they have major interests in power plants. They have learned that they can invest in a nuclear plant in Britain and they can also own 9% of Thames Water in the UK.
"What do these economies allow China to do? They have a regulatory framework to allow China to invest transparently. That's the secret. And you've got to have a framework that allows long-term investment because infrastructure is very long-term," Mr Yeoh said.
A successful B&R would open opportunities for the Chinese private sector to bankroll billions of dollars worth of projects overseas, and to do it more quickly than multinational funding organisations such as the Asian Infrastructure Investment Bank and World Bank which take two years or more to approve a project.
"For me this is a time in history, never let this go because the lessons are terrible. The war has stopped and there is economic peace. If we don't solve this infrastructure problem for our people in Asia, it's not going to be very pretty," he said.
"The Asean-China community is beginning to understand that it's not a zero-sum game, and that they can invest in each other's assets. We should not be distracted again by geopolitics. We should move on and build, and for me, a transparent, coherent regulatory framework is the answer."
