ASEAN Roundtable Series: Making BRI inclusive – are there opportunities for all?
Senior Fellow, CIMB ASEAN Research Institute
Her distinguished career includes her role as senior vice-president and China risk analyst at CIMB Securities. She was responsible for alerting clients to the changing dynamics shaping China in the 21st century and what they mean for investment decisions.
Previously, she had been a director at Jardine Fleming (now part of JPMorgan) where she headed its China department. She also served as head of research at Jardine Fleming China, a venture backed by the World Bank’s International Financing Corp.
At Jardine Fleming, she successfully guided clients through the most tumultuous decade in modern Chinese history: the Tiananmen Square crackdown in 1989, the death of Deng Xiaoping and the highly confrontational run-up to Hong Kong’s handover to Beijing in 1997.
Ms Loong’s Chinese Mainland connections are impressive and have been developed during three decades of close personal involvement in China’s economy – both as a market player and as a journalistic observer. Her Mainland experience, as well as her expertise, led to an executive position with CITIC Resources as it was developing its offshore business.
The foundations of her Beijing relationships had been laid when she had been among the first foreign correspondents in China in the 1980s as assistant editor of the Far Eastern Economic Review and Editor of its authoritative China Trade Report. In the early 2000s, she had extensive access to top policy circles in Beijing after her appointment as Editor-in-Chief of Euromoney’s stable of financial magazines in Asia.
Ms Loong’s awards include being voted “Best China analyst” in 1993 (representing Jardine Fleming) and being again ranked among the best analysts in 2007 (representing CIMB) in two global polls of fund managers by Asiamoney. She won Euromoney’s “Best Stories Award” in 2000 for her analysis on Asia’s growing hedge fund industry and in 2003 on the takeover of Jardine Fleming by Chase.
She graduated in English Literature from the University of Hong Kong. She was nominated by Jardine Matheson to undertake course studies on socialist economics and the Chinese political system at Peking University and at Tsinghua University in 1997.
Professor Christopher Coker
Director, LSE IDEAS
He was a NATO Fellow in 1981. He served two terms on the Council of the Royal United Services Institute. He was a serving member of the Washington Strategy Seminar; the Black Sea University Foundation; the Moscow School of Politics and the Academic Board of the Czech Diplomatic Academy. He is at present on the Advisory Board of the Brenthurst Foundation (Johannesburg). He was a Visiting Fellow of Goodenough College in 2003-4. He is a former editor of The Atlantic Quarterly and The European Security Analyst. Professor Coker has published extensively on war and conflict. His next book, The Rise of the Civilizational State will be published in January 2019.
Dr. Tang Siew Mun
Head of ASEAN Studies Centre, ISEAS-Yusof Ishak Institute
Dato’ Abdul Majid Khan
President, Malaysia-China Friendship Association
Tan Sri Dr. Munir Majid
Chairman, CIMB ASEAN Research Institute President, ASEAN Business Club
He has an extensive experience and is well known in the Malaysian corporate world. He had been the Group Editor of the New Straits Times, first executive chairman of CIMB and founding chairman of the Malaysian Securities Commission. After stepping down from the Securities Commission in 1999, he became Independent Non-Executive Director of Telekom Malaysia Berhad, Chairman of Celcom (Malaysia) Berhad and Non-Executive Chairman of Malaysian Airline System Berhad. He was Founder President of the Kuala Lumpur Business Club, established in 2003 and is a member of the Court of Fellows of the Malaysian Institute of Management.
Tan Sri Dr. Munir obtained a B.Sc (Econ) and Ph.D in International Relations from the London School of Economic and Political Science (LSE) in 1971 and 1978. He is an Honorary Fellow of LSE and continues the long association with his alma mater as Visiting Senior Fellow at LSE IDEAS (Centre of International Affairs, Diplomacy and Strategy). Tan Sri Dr. Munir is an associate of Southeast Asia Centre (SEAC) at LSE.
The Roundtable took place in conjunction with the launch of “China’s Belt and Road Initiative (BRI) and Southeast Asia”, a joint publication by CARI and LSE IDEAS. The publication was launched by Dato’ Seri Mohamed Azmin Ali, Minister of Economic Affairs, Malaysia who affirmed the country’s shared vision for the BRI project as a road for peace.
There was broad consensus among the panellists that the BRI’s grand ambition of enhancing infrastructure, investment and connectivity is “unmatched in human history” and is needed to fulfil the infrastructure needs of ASEAN. However, five years on, concerns are being raised about the implementation of BRI projects in light of what appears to be lopsided financing arrangements, ballooning debt and concerns over subsumed sovereign rights.
BRI’s challenges – 5 years later
Tan Sri Dr. Munir, Chairman of CIMB ASEAN Research Institute (CARI) kicked off the discussion by posing the question as to why in value terms, 32% of BRI projects which typically involve railway projects, have run into problems. 270 of the 1814 BRI projects spanning from Pakistan to Myanmar and even in Malaysia are either being reviewed, cancelled or have run into implementation problems.
Professor Christopher Coker, Director of LSE IDEAS, pointed out that the reality of implementing mega projects such as the BRI is that they often go over time and over budget. “People rushed into this in 2014 with great expectations, it was the biggest project of its kind” he commented. Dato’ Abdul Majid Khan, President of the Malaysia-China Friendship Association added that implementation and governance issues such as the lack of local participation, transparency as well as insensitivity to local cultures played a bigger role in creating implementation bottlenecks, though not completely intentional. “The Chinese thought they can duplicate the success in China in all these countries. They have now realised a 100% Chinese model does not work”.
Pauline Loong, Senior Fellow at CIMB ASEAN Research Institute provided a contrarian view and cited that the slowdown in the roll-out of BRI projects by China is not due to project failures but to a slowdown of its economy, a situation made worse with the ongoing trade war with the US. “Funding has been the most important part of BRI projects – and China had the money to invest. But China is in a different place now versus where it was 10 years ago,” she commented. China has several key economic structural problems to address domestically, making it the worst time to be engaged in a trade war as its economy is dependant on US trade, where 60% of its trade surplus comes from the US. Despite such challenges, her outlook was that “The show will go on. The BRI will go on but there will be no free lunch.” She cautioned countries to study the details of cross-jurisdictional business contracts carefully.
Noble intentions lost in implementation
Despite the challenges, members of the panel were quick to contextualise that the motivation behind the formation of the BRI is China’s sincere efforts to use its own positive experiences to drive development elsewhere. “China has no sinister plans of imposing debt on countries. In fact, there is a brotherhood of countries that are going through development as China once did” said Dr. Tang Siew Mun, head of ASEAN Studies Centre and ISEAS-Yusof Ishak Institute. Abdul Majid added that from China’s perspective, the BRI represents a national mission which allows for the sharing of wealth and infrastructure development with those whom they think needs it the most:“It is ingrained into the Chinese Communist Party constitution”.
There was a consensus that complications could arise since the implementation of BRI projects involved various stakeholders with different perspectives on how BRI projects should be rolled out. For example, Abdul Majid commented that State Owned Enterprises (SOEs) value projects by solely optimising their return on investment instead of striving to enlarge the economic pie which would be more in line with the ethos of spreading the wealth. To illustrate further, Christopher Coker added that “9 different agencies handle BRI projects and many are competing against each other.”
Dr. Tang pointed out that China has been filling the gap to bank unbankable projects i.e., projects which would not be considered for financing by the IMF and commercial institutions. Thus, it is inevitable that the model to make BRI projects workable, would be complex and difficult. Nonetheless, if done right, the BRI could initiate critical infrastructure to spur development in places where it is most needed.
Opportunities and the way forward
“There are still opportunities. But China will rearrange its priorities on how to approach projects in ASEAN” said Pauline Loong. She cited the project beneficiaries’ willingness to accept the renminbi as a medium of transaction, contribution to funding and geopolitical reorientation as Beijing’s priority areas in assessing the suitability for engaging in joint projects. Abdul Majid also added that the reassessment of financing of BRI projects will be key. He commented that China is aware that the existing financing model was too burdensome in some countries. His view was that China is considering the Japanese model of providing soft loans for a shorter period of time.
While China is already repositioning its priorities, Dr. Tang commented that BRI countries need to wake up and own its engagement with China and BRI projects. “We need to be the bosses of BRI projects, we need to take control and ensure it’s a win-win situation”. On the same note, Christopher Croker highlighted the need for an ASEAN strategy that complements China’s, not only on the BRI front but concerning wider geopolitical issues too.
The need for ASEAN to strengthen its collective stance concerning BRI projects was also echoed by Tan Sri Munir. He had earlier proposed in his opening remarks for the setting up of a high-level task force to facilitate closer collaboration between ASEAN and China to ensure that implementation of BRI projects followed a set of mutually agreed principles. He added that inspiration for such principles could come from the existing Master Plan on ASEAN Connectivity 2025 (MPAC 2025). Abdul Majid and Dr. Tang concurred and echoed the need for a longer term shared vision but cautioned that from China’s perspective, the BRI projects are to be undertaken on a bilateral basis, not regional. Abdul Majid further added that there may be challenges in coming up with a common understanding of BRI in ASEAN as member states have vastly different needs and relationships with China.
The Roundtable concluded that the BRI is important for ASEAN especially given the significant infrastructure needs in the region which is estimated to require USD $110 billion. Further, the BRI can leverage the existing close China-ASEAN economic relationship as a foundation for greater future collaboration in that China has been ASEAN’s largest trading partner for close to 10 years. However, there is a greater need for both China and ASEAN to address governance issues to ensure BRI is not just a win for one country but a success for all.