Although ASEAN’s inception was mainly driven by security reasons, it has increasingly become an important driver of economic development. Due to concerns about losing its competitive edge to China and India, in 1992 ASEAN created the ASEAN Free Trade Area (AFTA) in order to turn the region into a competitive destination to absorb foreign direct investment (FDI). However, the implementation of AFTA has not sufficiently turned the region into the competitive destination that was envisioned. Concretely, ASEAN countries need to have massive, well-connected infrastructure throughout the region in order to realise the aforementioned goal. Having perceived ASEAN’s need for regional infrastructure development, Japan and China have begun competing for influence over ASEAN through investment in infrastructure projects. Does this competition provide a net benefit to ASEAN? Though competition affords ASEAN countries more funding options and opportunities to have more quality infrastructure in the region, it may also create an internal struggle for funding among ASEAN member states.
China introduced its Belt and Road Initiative in 2013 with an aim to build grand infrastructure connecting Asia, Europe and Africa. Since 2000, China has invested approximately US$155 billion in the infrastructure development of ASEAN states. In 2014, China created the Asian Infrastructure Investment Bank (AIIB) to provide financial and technical support to BRI projects. Apart from the AIIB, China has two more mechanisms to back ASEAN infrastructure development—the China-ASEAN Investment Cooperation Fund (CAF) and the Silk Road Fund.
In order to counter China’s ASEAN growing influence through these infrastructure projects, Japan, in 2015, pledged US$230 billion to support the Partnership for Quality Infrastructure (PQI) in ASEAN over the following five years. The notable features of this initiative are the combination of bilateral support through the Japan International Cooperation Agency (JICA) and the Japan Bank for International Cooperation as well as multilateral commitments, represented by the Asian Development Bank (ADB), as a strategy to provide high-quality infrastructure in ASEAN. The PQI differentiates itself from China’s infrastructure development by emphasising the high quality of its infrastructure projects. Nevertheless, China quickly realised the shortcomings of its projects and has committed to rectify them in order to intensify its influence through connectivity projects. This is evidenced by the joint communique at the second Belt and Road Forum in Beijing last April, during which Chinese President Xi Jinping committed to building high-quality infrastructure in the BRI’s participating countries, including in ASEAN.
As seen, both Japan and China have both competed for influence over ASEAN on the issue of infrastructure connectivity, giving ASEAN opportunities to access more funding and quality infrastructure development. However, competition between these two regional powers may result in certain ASEAN priority projects being left behind, ultimately worsening the intra-ASEAN division. For example, while Japan and China have focused more on infrastructure development projects in Indonesia and Thailand, they have paid less attention to the building of a Cambodian missing rail link connecting Cambodia’s Poipet with Thailand’s Aranyaprathet. This track, an important linking of the Singapore-Kunming railway line, was only connected with the help of the Thai government in April 2019.
In order to overcome this problem, ASEAN countries should work together to identify the priorities of connectivity projects in the region. This can be done by strengthening the roles of the ASEAN Connectivity Coordinating Committee (ACCC). The ACCC should regularly discuss the priorities of connectivity projects in order to ensure the compatibility between what the two regional powers can offer and the priorities of ASEAN. This will also ensure that the developed and less-developed ASEAN members will not be caught in a struggle for obtaining project funding from Japan and China.
Thearith Leng , Director, Mekong Centre for Strategic Studies
Asian Vision Institute (AVI)