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China's Developing Rail Links With ASEAN

By Jan Willem Blankert

30 January 2019

China's Developing Rail Links with ASEAN

China’s ambitious plans to develop rail links in SE Asia have met a mixed response although there is a desperate need to improve infrastructure in the region.

In December 2011, ASEAN presented its Master Plan on Connectivity which was less about new initiatives and more about pulling together already agreed plans and ongoing activities. The great merit of the Master Plan was that it presented these existing plans and activities in an overall policy context together with an implementation strategy which made funding by the IFIs easier.

The Master Plan was not only about (i) infrastructure for which it was estimated that some 60 billion USD in investment per year would be needed for at least ten years (over 2% of ASEAN’s GDP). It was also about (ii) institutional connectivity: trade facilitation, standards, making systems inter-operational (communication systems, railways, border crossing) and (iii) people-to-people contact by facilitating mobility and exchanges in employment, education and culture (mutual recognition of qualifications, exchanges of students and scholars, etc.). 

The Plan elaborated on how ASEAN could plug into to the world economy as a hub in the middle of the thriving and larger East Asia region, and "how that region can further integrate and become the biggest market in the world". It was certainly an ambitious project as the challenges were huge. Institutional connectivity requires important changes in people’s attitudes and mind-set. Infrastructure works require lots of money. From the beginning it was clear that financing the Master Plan would imply considerable loans and by implication debts. 

Fast forward to 2019. Two interesting developments highlight the drive for cooperation and integration in East and South East Asia.  First, the progress that is being made on the Regional Comprehensive Economic Partnership (RCEP), that aims to be concluded by the end of this year. The RCEP, hardly noticed by western media, is the trade agreement linking 16 countries in Asia, together accounting for 45% of the world population, 33% of world GDP and 40% of world trade. The 16 are the ten members of ASEAN plus China, Japan, Korea, Australia, New Zealand and India.

Second, remarkable infrastructure development is going on both within ASEAN and between ASEAN and its neighbours. Inevitably China plays a major role through its Belt and Road Initiative which overlaps in part with ASEAN’s Master Plan on Connectivity. Japan is also increasingly involved in infrastructure projects in ASEAN. There is a certain rivalry between Beijing and Tokyo for influence but what is not in doubt is the desperate need for more investment in infrastructure.

Rail Links

The potential for synergies is thus high even though some outsiders look at growing Chinese influence with concern and suspicion (and jealousy?). These concerns have often focused on China’s development of high speed train connections between China and SE Asia. The construction of the high speed train from Chinese Kunming through Laos and Thailand to Singapore is often presented as an example of the threat China poses with some arguing that such rail links could lessen Singapore’s security relationship with the US.

This seems rather far-fetched as Singapore knows very well how to protect its own interests.  Furthermore, ASEAN has been talking about the Kunming-Singapore rail link for over a decade. This rail link was included in the ASEAN Connectivity Master Plan of 2011. No one rang the alarm bell then but there is now a growing distrust of China in some quarters although ASEAN seems to handle the relationship with China in a calm and balanced way. 

A recurring criticism is that Chinese financing comes in the form of loans and not grants. But this is also the case with World Bank and ADB financing of projects. China’s infrastructure activity (and that by Japan) can help ASEAN succeed with its Connectivity Plan. The important point is that ASEAN members coordinate and ensure that they do not fall into any debt traps. 

In May 2018, however, Malaysia’s new Prime Minister, Mahathir Mohamad, put the rail plan on hold stating that he wanted to reconsider the plan and renegotiate the terms with China. Mahathir’s decision may be more disappointing for Singapore than for China.  It remains to be seen whether his successor will take a similar firm stand on China. But the question remains - why should Singapore not have a proper high speed railway connection with Kuala Lumpur, Bangkok and Kunming if the terms and conditions are right?

Jan-Willem Blankert is a Senior Associate of the EU-Asia Centre