The New Silk Roads and Southeast Asia
Although bilateral cooperation between China and members of the Association of Southeast Asian Nations (ASEAN) is likely to continue increasing as China promotes its One Belt, One Road Initiative (OBOR) in 2017, three factors threaten China’s investment in the region. These include differing degrees of support for the initiative, regional political instability and terrorism.
Proposed by President Xi Jinping in 2013, OBOR consists of two international trade connections: the land-based Silk Road Economic Belt (known as One Belt) and the ocean-faring Maritime Silk Road (called One Road). Collectively, OBOR connects Europe, Asia, the Middle East, and parts of Africa. Encompassing 55 percent of world Gross National Product (GNP), 70 percent of the world’s population and 75 percent of known energy reserves, OBOR is set to become the world’s largest platform for regional collaboration.
Several Southeast Asian states are already engaged in OBOR through joint ventures with Chinese stateowned entities, and private businesses. To facilitate this, over the last three years, China has increased transport and connectivity infrastructure projects in the region, as well as investment and trade. In addition to focusing on trade and infrastructural development, OBOR also seeks to strengthen political ties and enhance cultural exchanges between China and ASEAN states. Despite enjoying significant success to date, support for OBOR and associated Chinese investment varies across ASEAN states.
Degrees of support depend on bilateral relations, economic dependence and territorial disputes with China. As such, Laos, Cambodia, and Thailand have remained the most supportive of the initiative, whereas Vietnam and the Philippines, China’s two biggest challengers to its claims in the South China Sea, remain the least supportive. Indeed, territorial disputes in these countries have occasionally resulted in protests.
Ethnic Chinese citizens of ASEAN states have also faced discrimination in Malaysia and Indonesia. Political stability is also a potential concern for investors, as it could result in business disruptions and cancellations of projects. For example, in Thailand, power struggles between the royalist-military establishment and the Shinawatra’s populist alliance have resulted in several changes of government. Although the Thai military junta is likely to stay in power until the next elections, currently postponed until 2018, the country will remain politically volatile and the risk of violent protests remains.
Changes in government are also likely to affect a country’s policy orientation towards China, and subsequently OBOR. Under Cambodia’s current administration, for example, the ruling Cambodian People’s Party, a pro-China party, widely supports OBOR. However, if the opposition Cambodian National Rescue Party, a pro-Western party, were to come into power in the 2018 general election, this could have significant ramifications for China-Cambodia relations.
Domestic militant Islamist groups, and the increasing influence of Islamic State (IS) in the region, poses an additional threat to foreign investment. Low to medium impact attacks were reported in Indonesia, the Philippines, Malaysia, and Thailand by both domestic groups and IS affiliates in 2016. While Chinese foreign companies have not been targeted, the penetration of IS in Southeast Asia, coupled with China’s engagement in global and domestic counter-terrorism initiatives, is likely to make Chinese assets in the region more attractive targets for future attacks. Despite these risks and challenges however, China will continue to view Southeast Asia as an important piece of its OBOR puzzle. The initiative ultimately serves its geopolitical and economic interests in the region. Not only is there is a large enough demand for trade and infrastructure to improve and facilitate private economic engagements between China and its Southeast Asian neighbours, but Beijing will also likely direct its state-owned entities to invest given its overarching objectives.