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The role of Asean’s ports in China’s Belt and Road

China’s investments in deep-sea ports in Myanmar and Cambodia will provide critical links in the Belt and Road Initiative (BRI), but there are also concerns that they could give China undue economic leverage in the region.

On the Bay of Bengal in Myanmar, Chinese state-owned firms have been given the green light to construct a $7.3 billion deep-water port and a $2.7 billion industrial area in a special economic zone which would be 70 per cent owned by China and 30 per cent owned by Myanmar. However, if the costs of Myanmar’s share prove too much to bear there are concerns it could fall into a debt trap, as happened with Sri Lanka, which late last year handed over control of its Hambantota port to China. 
Apart from Myanmar, China is also investing in Cambodia and several ports in Malaysia, including a planned deep-sea port in Malaysia’s Melaka, once the hub of the ancient spice trade. The Melaka Gateway project will be jointly developed by Malaysian and Chinese firms.
A key consideration in these and other port developments is China’s security concerns, especially regarding energy. Over 80 per cent of China’s maritime oil imports pass through the Malacca Straits (between Singapore, Malaysia and Indonesia), and the development of alternative routes though the region would help to mitigate this risk.
China also has a strategic imperative to develop integrated supply chains, and investing in ports is an integral part of this. Already China holds direct stakes in ports that clear approximately two-thirds of the world’s container volume. Chinese companies also own some of the world’s largest container carriers, such as China COSCO Shipping, and are investing in logistics, warehouses, industrial estates, railroads, refineries and energy pipelines that feed into the supply chain. 
Naturally Southeast Asia is a major focus in this strategy as China is Asean’s largest trade partner and about half of China’s trade with Belt and Road countries is with Asean. 
However, there are many challenges that need to be overcome. In Cambodia’s Sihanoukville, where a Chinese-funded deep-water port and Special Economic Zone is being built, locals complain that it has become a Chinese enclave. In Malaysia, the new government is reviewing all Chinese projects including the ports and the planned new rail link with Singapore. And in Sri Lanka, the Hambantota port is far from being a commercial success. These situations illustrate some of the challenges facing the Belt and Road Initiative and the need to find a balance between strategic goals, economic imperatives and local needs.
While China isn’t a big investor in Thailand’s ports, the major deep-water port at Laem Chabang is being expanded as part of the Eastern Economic Corridor. Bids for the development of the port will take place later this year and, given that it will link up with the Belt and Road, clearly China will have an interest.
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Published : July 15, 2018

By : Suwatchai Songwanich CEO, Bangkok Bank (China)