One Belt One Road and China-ASEAN Economic Cooperation
By Hong Zhao

One Belt One Road and China-ASEAN Economic Cooperation

Sep. 27, 2016  |     |  0 comments


Southeast Asia’s Position in One Belt One Road 

 

In September and November 2013, Chinese President Xi Jinping respectively proposed the building of the New Silk Road Economic Belt and the 21st Century Maritime Silk Road. During that period, the first “Central Work Forum on Diplomacy to the Periphery” since the founding of new China was held in October 2013. At the Work Forum, President Xi stressed the need “to highlight the important role of neighboring countries in China’s overall development and global diplomacy”, and proposed to “work together with relevant neighboring countries to speed up infrastructure connectivity and the building of One Belt One Road.”1

 

It can be said that the One Belt One Road (OBOR) initiative was first proposed in peripheral countries and intended to serve China’s peripheral diplomacy. Although it was inspired by the historic concept of the Ancient Silk Road, and even though the terminal points of OBOR will be in Europe, the initiative itself more reflects China’s desire to highlight the importance it attaches to its neighbouring countries and Beijing’s willingness to strengthen its peripheral diplomacy.

 

Regional connectivity and infrastructure construction are not new concepts. Actually, improving infrastructure and connectivity between China and Southeast Asia have already been key components of China’s diplomacy to ASEAN. For example, since the early 2000s Yunnan Province and Guangxi Autonomous Region have prioritized inter-regional physical transport connectivity with the ASEAN countries and they initiated the Gateway Strategy and the Pan-Beibu Gulf Economic Zone respectively.

 

Beijing’s long-term goals for infrastructure development within the framework of the broader OBOR initiative include the ambitious plan to build a Pan-Asia Railway Network that will see three 4,500-5,500 kilometer railway lines linking China and Southeast Asia. Central, eastern and western routes of this planned railway network will run from Kunming through Laos, Thailand, Myanmar and Singapore.

 

At the 13th China-ASEAN Expo and China-ASEAN Business and Investment Summit held in Guangxi on September 11, 2016, Chinese Vice Premier Zhang Gaoli said that “China will firmly support the building of ASEAN Community, support ASEAN’s central role in regional cooperation, and support ASEAN to play a greater role in international and regional affairs,”2 suggesting that China looks to ASEAN as a key partner for the OBOR initiative.

 

ASEAN Faces Challenges

 

The ASEAN Community is comprised of three pillars: the ASEAN Economic Community (AEC), the ASEAN Political-Security Community (APSC) and the ASEAN Social-Cultural Community (ASCC), which were envisaged by the ASEAN Summits of 2003 and 2005. The AEC Blueprint 2025 is envisioned to create a deeply integrated and highly cohesive ASEAN economy, and enhance ASEAN’s role and voice in global economic fora. But ASEAN still faces many challenges to meet these ultimate goals.

 

Firstly, ASEAN needs to narrow the regional divide among its member countries. It is an undeniable fact that the level of economic development across Southeast Asia is highly uneven and extremely diverse. Indeed, many observers agree that due to the divide, there is great uncertainty as to whether ASEAN can realize the goal of a single market. Kung believes, for example, “the biggest challenge to ASEAN’s unity and centrality is the unevenness of economic development within the group,”3 while Sellier claims that “given the wide development gaps between countries, combined with the lack of solid and inclusive institutional structures and agencies to govern the newly formed markets under the AEC, ASEAN as an entity is likely to emerge as a chain of disparate markets, divided between fast-growing modern economics (ASEAN-6) and inward-looking poor countries (CLMV).”4

 

Second, ASEAN needs to find a new growth model. Since the 1980s, all ASEAN countries have liberalized trade and adopted export-oriented economies. Southeast Asia has made substantial economic progress because its governments have liberalized markets, thereby enabling their integration into global supply chains. However, the ASEAN countries have become highly reliant on the US and EU markets. For example, in 2007 before the global financial crisis, ASEAN countries’ exports to the US and EU accounted for 30 percent of their total exports.5

 

Given the economic recession and the current political atmosphere in the EU and the US, the original Southeast Asian regional growth mechanism based on industrial chains and trade is facing a challenge. Chinese scholars believe that since “the traditional regional integration model which was initiated from building FTA does not necessarily apply to Asia which is geo-dispersed and diversified in economic development level,”6 Asian countries need to collaborate to find and innovate a new regional cooperation model that can adopt to the dynamic needs and realities of Asian countries.

 

Third, ASEAN needs to strengthen its role in regional construction. ASEAN started to take the lead in regional issues in the early 1990s, advancing economic dialogue through the Asia-Pacific Economic Cooperation (APEC) forum as well as discussions on political and security issues through the ASEAN Regional Forum. The grouping pushed ahead with engaging its larger neighbors through the ASEAN+3 exchanges with China, Japan, and South Korea, and with China alone through the ASEAN+1 framework. But momentum began to perish in the late 1990s, and after 2010, as the East Asian cooperation pattern changed, ASEAN’s centrality in regional cooperation has weakened. 



China and ASEAN can collaborate by identifying those industries which are best suited for immediate investment in ASEAN countries.



There are several factors for the weakening of ASEAN’s central position in regional cooperation, including the fact that China is becoming an active driver of the regional and global economy. ASEAN’s involvement in Sino-American competition may also have divided ASEAN.7 Since the US “rebalanced” its foreign policy towards Asia and led the Trans-Pacific Partnership (TPP) negotiations in 2009, ASEAN’s members have split into TPP participating and non-participating camps, and this has weakened the group’s ability to lead. Since the TPP is a high-standard free trade agreement (FTA), it can hardly meet the diverse needs of the ASEAN countries. Instead, it might enlarge the gaps in ASEAN in terms of economic opening up and development models between those TPP participating countries and non-participating countries. This will have a complex effect on the process of ASEAN integration, making it more difficult to coordinate its position and maintain its leadership role in regional construction. 

 

Given the above challenges that ASEAN countries must overcome to realize the AEC vision, it is imperative that ASEAN leaders go beyond the current approach, which is mainly focused on reducing barriers and building infrastructure connectivity as articulated in the AEC Blueprint 2015. In other words, they must foster regional economic integration by focusing not only on freer movement of goods and capital, but also on much higher level of collaboration, such as policy coordination and growth-model innovation. In this regard, ASEAN should get more integrated with China and other big powers through the OBOR initiative and other cooperation frameworks (including TPP and RCEP). Their interaction may speed up the emergence of ASEAN as a world economic power.

 

How Can OBOR Synergize with AEC Blueprint 2025?

 

The “Vision and Actions” on OBOR which was issued by the Chinese government in March 2015 signals a significant evolution in China’s approach, as it stresses that OBOR should help promote policy coordination, infrastructure connectivity, financial integration, and mutual understanding among the people along the routes. Therefore, it “should be jointly built through consultation to meet the interests of all, and efforts should be made to integrate the development strategies of the countries along the Belt and Road.”8

 

Obviously, an important component of the “Vision and Actions” is to promote OBOR to synergize and connect with the development strategies of the countries along the Belt and Road. Therefore, synergy is policy coordination and collaboration. Without doubt, the synergy of the OBOR and AEC development programs is of great significance. It is the result of the past development of China-ASEAN economic cooperation, as well the future direction of their bilateral economic relations.

 

Concretely speaking, the OBOR initiative and the AEC Blueprint 2025 can be synergized and connected at two levels. At the national level, China hopes to strengthen policy coordination with individual ASEAN countries regarding production capacity cooperation. China has the potential to transfer some of its high-quality production capacity (such as steel and cement) to the CLMV countries (Cambodia, Laos, Myanmar, and Vietnam). Beijing sees this as a way to both deal with the surplus of its production capacity while also meeting the demand for more investment and technology in Southeast Asia. More importantly, “China needs to ‘digest’ these countries’ growing industrial production capacity by importing more of their products,”9 as only when the related countries need or even rely on China’s consumption market can OBOR be more sustainable. In this regard, China and ASEAN can collaborate by identifying those industries which are best suited for immediate investment in ASEAN countries.

 

At the regional level, OBOR can synergize with and complement the AEC Blueprint 2025. The “Vision and Actions” stress that connectivity covers five major areas of interest: policy coordination, infrastructure construction (including railways and highways), unimpeded trade, financial integration, and people-to-people ties.10 OBOR can complement and synergize with the AEC Blueprint 2025’s initiatives for enhanced connectivity and sectoral cooperation, including the Initiative for ASEAN Integration Work Plan and the Master Plan on ASEAN Connectivity. China and ASEAN can also jointly design Asian interconnectivity plans, and promote regional connectivity to a new level.

 

It should be noted that the synergy of OBOR and AEC does not merely cover investment and infrastructure connectivity. It should cover other priorities. OBOR is, in general, an economic and cultural initiative, and is not largely relevant to ASEAN’s diplomacy and security issues in its implementation process. From the perspective of the development of China-ASEAN relations, macro-policy coordination and innovation is more important.

 

Conclusion

 

China’s OBOR initiative was first proposed to serve China’s peripheral diplomacy and develop infrastructural connectivity with the Southeast Asian countries. The concept of OBOR has undergone a constantly clear and deepening process: from infrastructural connectivity to “policy coordination, facilities connectivity, unimpeded trade, financial integration, and people-to-people ties;” and from “inviting” related countries to join the OBOR initiative, to stressing strategic synergy and connection with local development plans and projects.

 

China and ASEAN have great potential and space for cooperation under the framework of OBOR. In order to realize strategic synergy between the OBOR and AEC visions, in addition to strengthening policy coordination with individual countries in terms of infrastructure construction and production capacity cooperation, it is more important to have policy coordination with ASEAN as a group. In this regard, ASEAN may need to arrive at a collective position on engagement with the OBOR initiative so as to coordinate macro-policies, innovate new ideas for regional economic integration, and jointly participate in global governance.


Notes

 

1. Xi Jinping’s speech at the Central Work Forum on Diplomacy to the Periphery, adapted from Zhang, J., & Chen, Z. (2015). China-EU cooperation under the “One Belt One Road” initiative: From a two-level EU perspective. World Economics and Politics, 11.

 

2. Zhang, G. (2016, September 12). Further promote the construction of 21st Maritime Silk Road and build a closer China-ASEAN community of destiny. People’s Daily.

 

3. Phoak, K. (2015, June 3). Is China a threat to ASEAN unity? East Asia Forum.

 

4. Sellier, E. (2016, January 12). The ASEAN Economic Community: The force awakens? The Diplomat.

 

5. ASEAN Statistical Yearbook, 2007.

 

6. Wang, Y. (2015). One Belt One Road and the Reconstruction of Asian Integration Model. China: Social Science Press.

 

7. Quang, M. P. (2015). ASEAN’s indispensable role in regional construction. Asia-Pacific Review, 22(2).

 

8. National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce, PRC (2015, March). Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road (English version).

 

9. Xu, J. & Gao, C. (2014). Strategic fulcrum countries for China’s periphery security. World Knowledge, 15.

 

10. National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce, PRC (2015, March). Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road (English version).


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