SINGAPORE (Oct 1): Neo-colonialism. A new version of the Marshall Plan. These are just two descriptions of the Belt and Road Initiative, China’s ambitious plan to invest in infrastructure projects — ports, railways, power plants — that will be critical developments in the participating countries. And, a year ago, the word on the street was Singapore was not going to be a beneficiary of the billions of dollars Beijing was expected to dole out as part of BRI.
The BRI blueprint spans Southeast Asia, and stretches west towards Sri Lanka, Pakistan and Bangladesh. Projects include a US$6 billion ($8.2 billion) high-speed railway between Laos and China that is partly financed by Beijing. In Cambodia, Chinese companies have invested in several hydropower plants as well as been involved in a deal to build a US$1.8 billion expressway. According to Oxford Economics, Chinese investments in the BRI project totalled US$402 billion in the first half of this year. Chinese direct investments in foreign companies and infrastructure assets totalled US$146 billion, or more than double what it was before the initiative was launched in 2013.
Yet, with those dollars have come controversy, and concerns about the debt burdens shouldered by the countries the investments were meant to help. A case in point is the Hambantota Port in Sri Lanka. Colombo was forced to lease the US$1.5 billion deepwater port to China after it was completed, as it was unable to keep up with the loan payments. Sri Lanka reportedly owed Chinese state-controlled firms more than US$8 billion. Indeed, a large part of China’s BRI investments have been in the form of project financing, rather than foreign direct investment, according to Oxford Economics. “That is because such involvement is more obvious in the case of infrastructure development, which is a key aspect of the [BRI] initiative,” note economists He Tianjie and Louis Kuijs. “Also, political considerations make many [BRI] countries unwilling to accept large-scale Chinese ownership of their infrastructure.”
China appears to be marshalling its economic prowess into a form of statecraft. Last year, after South Korea decided to install a US-designed antimissile system, China boycotted the country, costing South Korea at least US$6.5 billion in lost revenue. There are also concerns about Chinese influence extending beyond commerce, as dependency on Beijing’s economic support could limit foreign policy options, for one.
Singapore and China are each other’s top investment partners. As we detail in our Issues pages this week, both share a longstanding trade and investment relationship, and have undertaken substantial collaborations over the last three decades. These include the Chongqing Connectivity Initiative- Southern Transport Corridor, launched in 2015, which effectively links the Silk Road Economic Belt, which runs overland, to the Maritime Silk Road sea route.
In April this year, Singapore Prime Minister Lee Hsien Loong met Chinese Premier Li Keqiang in Beijing. The leaders witnessed the signing of a BRI-related agreement between the two countries. Under the agreement, Singapore’s Ministry of Trade and Industry, and Enterprise Singapore will work with the Chinese National Development and Reform Commission to help Singapore and Chinese companies collaborate on BRI projects in other countries.
Does it matter then, that Prime Minister Lee was absent from the BRI summit held last May? At some level, the ports and railways on BRI’s path are designed to reroute 200 years of “tradewinds” through the South China Sea and Straits of Malacca — routes that called at the port of Singapore. The benefits of Singapore’s collaboration with China may not be as evident as a bustling new port or railway, but the payoffs are likely to come in the longer term. It is preferable to being on the hook for billions of dollars in infrastructure loans.
