Sat, June 25, 2022

perspective

Bumps of Belt and Road Initiative in the rear-view mirror


Hundreds of infrastructure projects worth hundreds of billions of dollars are being launched in Asian, European and African countries as part of China’s Belt and Road Initiative (BRI). Many are now dogged by controversy, hurdles, delays and polarised public opinion.

Physical infrastructure, as the backbone of economic development, is critical to the success of the BRI agenda. But with so many Chinese enterprises rushing overseas to expand their foothold across BRI countries, the process has been far from smooth.
Hence nearly five years after its launch in 2013, the third BRI summit in Hong Kong last week offered a time of reckoning for the pace of the implementation of projects. One prominent question was why BRI projects have polarised public opinion across their host countries.
The BRI plan designed by President Xi Jinping will see a network of overland road and rail routes, oil and natural gas pipelines, and other infrastructure projects stretching from central China, through Central Asia, Europe and Africa.
The BRI agenda certainly fits well with Indonesia’s top-priority development programme to improve connectivity within the country and beyond with global value chains.
Baker & McKenzie recently concluded that, from a geographic perspective, Indonesia stands to be the biggest beneficiary among Asean economies, with more than US$87 billion identified in the BRI-related pipeline for infrastructure.
Indonesia itself has signed a $5 billion contract for the Jakarta-Bandung high-speed railway project under the BRI, and has been promoting special economic zones in North Sulawesi, North Kalimantan and North Sumatra for the BRI.
But the core concerns raised about BRI implementation in several South and Southeast Asian countries are over the alleged lack of local companies and worker participation, the risk of unmanageable debts and the rather dominant geostrategic interest of China, rather than the economic viability and shared benefits, in several projects. 
As most BRI projects are funded by long-term, low-interest loans from China’s state banks, most of the investment and construction has understandably been made by Chinese companies.
Problems usually arise because these companies still lack work experience in foreign countries where they have to face a web of local and international laws, not to mention the full spectrum of political, security and economic risks.
Speakers and analysts at the Hong Kong summit, including Suteja Sidarta Darmono, chief executive officer of PT Jababeka, which manages two of Indonesia’s largest industrial estates and two special economic zones, reiterated the strategic importance of tie-ups with local partners, local hiring and the procurement of local materials.
“Look for local companies with a good track record as they are the ones who know the local rules, business landscape, the local culture,” Darmono asserted.
“Almost 90 per cent of China-funded projects have been implemented by Chinese companies,” cautioned Shinta Widjaja Kamdani, vice president of the Indonesian Chamber of Commerce and Industry.
This shows that in a more fundamental way, the biggest challenge is how China communicates its intentions and its vision for the BRI and reconciles its geostrategic interests with the interests of the host country, while it tries to flex its economic muscles as a regional and global power.
Fortunately, Hong Kong, seen as the super connector and most 
strategic gateway to mainland China, seems to have taken steps to counter problems the BRI has hit elsewhere.
One day before the summit, the Hong Kong Trade Development Council launched a global alliance, the Belt and Road Global Forum, comprising over 110 chambers of commerce, industry associations, investment promotion agencies and think tanks from around 30 countries. 
The forum will steadily admit new members from the BRI-related countries with a spirit of collaboration and openness in sharing experiences and views about infrastructure and business development.
Hong Kong has a significant role to play in the development and success of the BRI. The city is regarded among the world’s freest economies, with a vibrant capital market, and a regional logistics hub for sea and air cargo. 
On June 20, according to China Daily, the All-China Journalists Association along with 100 journalists from 47 countries gathered in Beijing to set up the BRI Journalists Forum. This is touted as a platform for mass media to nurture a better, comprehensive understanding of the BRI goals, through news sharing, mutual learning, policy studies and building bridges between cultures.
The BRI understandably still seems far away from being a coherent blueprint of interconnected international infrastructure investment. Such mega-investment is very complex, involving strategy planning, technical assessment, feasibility studies, deal structuring, financial and tax planning, financing, project management and risk control. 
The greatest benefit, though, is that physical connectivity could create a virtuous cycle that expands and deepens economic, social and cultural connectivity. The main challenges are identifying and designing the right projects, assessing the risks and then packaging projects in a way that ensures they are economically viable, beneficial, bankable and, most importantly, of direct benefit to the local people.

Published : July 05, 2018

By : Vincent Lingga  The Jakarta Post Asia News Network Hong Kong