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‘One Belt, One Road’ initiative underway, but experts warn of difficulties ahead

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CHINA’S “ONE BELT, One Road” railway link with Asean has started to materialise as construction in Laos has progressed to more than 10 per cent of the project linking China’s border to Vientiane.

However, one expert has warned that the Chinese government’s financial support for the “One Belt, One Road” project could dry up in the future.
In a keynote address to an international conference titled “Belt and Road Initiative: Network Opportunities with CLMVT”, Wang Xiaotao, vice chairman of the National Development and Reform Commission of China, said the Chinese government has given priority to building road and rail connections with Cambodia, Laos, Myanmar, Vietnam and Thailand (CLMVT).

‘One Belt, One Road’ initiative underway, but experts warn of difficulties ahead
China also wants to continue improving trade and tourism with the five countries, which experienced a 30 per cent increase to $130 billion (nearly Bt4.25 trillion) between January and August this year, he said at the conference hosted by The Nation and partners.
Zhu Zhenming, a senior research fellow at Yunnan Academy of Social Sciences, said that Yunnan enjoyed a geographic advantage due to its proximity to Laos, Myanmar, Vietnam, Thailand, Cambodia, Bangladesh and India. A junction linking the Pacific and Indian oceans by land, Yunnan could play an important role in sub-regional cooperation.
Under the “Belt and Road” initiative, Yunnan has planned to advance the construction of an international transport corridor connecting China with neighbouring countries, develop a new high point of economic cooperation in the Greater Mekong sub-region, and make the region a pivot of China’s opening up to South and Southeast Asia, said Zhu. 
Already, he said, many roads have opened including the Kunming-Bangkok highway and an expressway from Kunming to the China-Myanmar border, China-Laos border and China-Vietnam border. 
For water transportation, there is international shipping along the Lancang-Mekong river corridor.
A railway from Kunming to Hekou, a border city on the China-Vietnam border has also opened, while railways from Kunming to the China-Laos border and the China-Myanmar border are now under construction, Zhu said.
Daochinda Siharath, deputy director of the Lao National Railway State Enterprise and deputy general manager of the Laos-China Railway Co, said that the Laos section of the China-Laos-Thailand railway is about 13.5 per cent built after construction began in January this year. 
The five-year project runs until December 2021, for an estimated total cost of $5.9 billion (Bt195 billion). Laos holds 30 per cent of shares in the company while China is taking the rest.
The Export-Import Bank of China is the main source of loans for the project, in which debt financing accounts for 60 per cent of the total cost.
Meanwhile, Thailand’s Minister of Transport Arkhom Termpittay-apaisith, said that the construction work of the Shino-Thai high-speed rail project could commence by the middle of next month with the first phase linking Bangkok and Nakhon Ratchasima. The second phase, Nakhon Ratchasima to Nong Khai, a border province with Laos, is under discussion with China and Laos. 
Thailand and the Chinese government have not yet reached agreement on loan terms acceptable to Thailand.
Susie Cheung, co-convenor of the Asia-Pacific Structure Finance Association based in Hong Kong, expressed concerns about funding the “Belt and Road” initiative due to limits to public funding. She said that financing is a critical issue. 
“Costs of bank loans are going to rise due to Basel rules and China’s liquidity is going to dry up,” she warned.
Cheung proposed China and other countries involved in the initiative should develop asset-backed securities (known as securitisation) in order to tap international funding. 
She urged the Chinese government to coordinate among countries to create a securitised asset class by introducing a standardised project document, harmonised rules and regulations and creating a credit rating agency.
The Chinese government’s initial 2013 Belt and Road Initiative vision dared to imagine a network covering 65 countries with 4.4 billion people and aggregate economic value to $21 trillion or 29 per cent of global GDP. 
The Asian Development Bank estimated that to bring it to reality, Asia would need to invest about $26 trillion between 2016 and 2030 in order to maintain growth momentum. For Asean infrastructure alone, the investment would need to be about $3.2 trillion.


Published : November 24, 2017