How China’s belt and road is connecting Southeast Asia, political wariness aside

The newly-opened Laos-China railway is just one page in Beijing’s growing portfolio of infrastructure projects in the region. Notwithstanding the challenges, China’s gambit is paying dividends in the form of contracts and clout

Lucio Blanco Pitlo III

Published: 7:00pm, 4 Dec 2021

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Last Thursday, Laos celebrated the completion of its first high-speed railway, a US$6 billion project backed by China. The inauguration came just a few weeks after Vietnam opened its first metro line in Hanoi, also built by China.

These infrastructure projects are proof that Beijing’s massive Belt and Road Initiative continues to break ground even amid a pandemic, with far-reaching implications for Southeast Asia. They will no doubt burnish Beijing’s appeal as a vital partner in promoting connectivity and spurring economic recovery in the region.

The new transport networks will be even more crucial after the world’s largest free trade agreement, the Regional Economic Partnership Agreement (RCEP), takes effect next year, bringing together all 10 countries of the Association of Southeast Asian Nations and its five dialogue partners, including China.

The newly-opened Laotian railway runs for 414km, connecting the capital Vientiane with Boten on the China-Laos border. Completed after five years’ work, it is a linchpin of deepening ties between the two one-party states.

The line runs across the border and ends in Kunming, the capital of China’s southwestern Yunnan province. Reducing transport costs by as much as 40 per cent compared to road travel, it will be a game changer for Laos, Southeast Asia’s lone landlocked country. Indicative of the high hopes attached to the new railway, its inauguration coincided with the 46th anniversary of the Lao People’s Democratic Republic.

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China-Laos railway set to open in latest advance for Beijing’s Belt and Road Initiative

But the Laotian railway is just one page in a growing portfolio of projects that will cement Beijing’s position in Southeast Asia when completed. In neighbouring Cambodia, the 190km Phnom Penh-Sihanoukville expressway, the country’s first, is expected to open next year after work began in 2020.

Unlike elsewhere, belt and road construction work in the two countries were largely spared from Covid-19 disruptions. Chinese companies are also busy building new airports in the Cambodian capital Phnom Penh and popular tourist city Siem Reap. Both projects began in 2020 and are due for turnover by 2023.

A similar high-speed rail connecting the Indonesian capital of Jakarta with the country’s fourth-largest city, Bandung, is due for completion late next year, while in neighbouring Malaysia, the 665km East Coast Rail Link, which began in 2017, is 25 per cent done and slated for completion by 2026. In the Philippines, work on the 71km Subic-Clark cargo railway funded by China will commence early next year, with target completion by 2024.

This flurry of construction gives shape to efforts by Asian neighbours to synergise the Master Plan for Asean Connectivity 2025 and China’s Belt and Road Initiative, a key item underscored in the Asean-China special commemorative summit held in November. Increased connectivity will reduce logistical costs for businesses, enhance travel for tourism, create spillover opportunities for those along the routes and facilitate better economic integration.

Guests walk past a map showing the route of East Coast Rail Link during a “document handover ceremony” between Malaysia Rail Link Sdn Bhd and China Communication Construction Company in Kuala Lumpur, Malaysia, on December 2. The project began in 2017 and is expected to be completed by December 2026. Photo: EPA-EFE

The Vientiane-Boten line, for instance, can build momentum for similar rail linkages in Thailand, Vietnam and Myanmar. Indeed, as regional countries slowly reopen for tourism and greater international trade, the need for such public works cannot be overstated.

So far, geography is still a key factor for getting projects off the ground; connectivity work between China and mainland Southeast Asian countries outpaces similar efforts with insular neighbours. Political relations between Beijing and host states, as well as affinity in governance systems, also play into the equation. This could account for faster progress in Cambodia and Laos.

Laos’ China-backed railway: hopes in Thailand, fears in Luang Prabang

Chinese projects faced more difficulties in countries with traditionally testy ties like the Philippines. The coming 2022 polls are expected to generate disquiet among Chinese investors anxious about the continuity of their contracts after a friendly administration in Manila bows out of office in May.

Cost overruns, delays, corruption, and debt sustainability also complicate Chinese projects in the region. Land acquisition and the securing of necessary permits put a strain on the timeline. More so if legal disputes arise. Poor feasibility work and overly ambitious targets undermine viability, diminishing anticipated revenues for both contractors and host countries.

Renegotiation, especially of big-ticket undertakings, may also bleed out of the commercial realm and cause problems for bilateral relations. In addition, leadership change may scuttle projects, making political risk a key concern for Chinese builders.

Philippine President Rodrigo Duterte attends the virtual Asean-China special summit from Davao City, Philippines, on November 22, in this handout photo made available by the Presidential Photographers Division. Photo: EPA-EFE / Handout

Worries about potential Chinese access and control of strategic assets when sovereign debtors default also fuel unease. This makes civil society and local political opposition in regional countries critical of unsustainable debt and conditions attached to foreign-funded projects. All these variables present hurdles for Beijing as it tries to deepen its involvement in the region’s construction market.

Indeed, as Southeast Asia recovers from the pandemic, infrastructure spending is likely to pick up once again. Notwithstanding the challenges, China’s gambit is paying dividends, with growing contracts and consequent clout among countries taking part in its global connectivity programme.

The rise of alternatives from Japan’s “Partnership for Quality Infrastructure”, the United States’ “Build Back Better World” to Europe’s recently unveiled “Global Gateway” shows how Beijing’s drive is forcing rivals to compete. But with the exception of Japan’s, these new endeavours have yet to manifest in terms of projects in the pipeline. Until then, China’s belt and road will continue to find strong resonance among regional countries.

Lucio Blanco Pitlo III is a research fellow at the Asia-Pacific Pathways to Progress Foundation, and lecturer at the Chinese Studies Programme at Ateneo de Manila University