China’s Belt and Road Initiative: The Impact on Sub-regional Southeast Asia 9780367518516, 9780367518530, 9781003055433

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China’s Belt and Road Initiative

This book evaluates China’s relations with sub-regional Southeast Asia through its Belt and Road Initiative (BRI) and the Lancang-Mekong Cooperation framework. The book looks at domestic drivers and regional receptivity of China’s BRI and also delves into the challenges of China’s engagement in the Greater Mekong Sub-region (GMS). The book examines how China’s BRI will contribute to the development of these countries, to regional economic integration and cooperation processes within a political-economic context. It addresses the BRI process within the GMS on three levels: regional, individual recipient countries and the Chinese perspective. The case studies in the book will help to provide insights on China’s growing economic influence in sub-regional Southeast Asia and its Belt and Road Initiative. This book will appeal to researchers interested in the BRI, China’s relations with Southeast Asia and China’s neighbourhood policy and how domestic considerations are influencing China’s policy making. Christian Ploberger is an Academic Researcher and Lecturer at the Faculty of Political Science, Thammasat University, Bangkok, Thailand. Soavapa Ngampamuan is Assistant Professor at the Faculty of Political Science, Ramkhamhaeng University, Thailand. Tao Song is Associate Professor at the Institute of Geographical Sciences and Natural Resources (IGSNRR), Chinese Academy of Sciences (CAS), Beijing, China.

Routledge Frontiers of Political Economy

Capital Theory and Political Economy Prices, Income Distribution and Stability Lefteris Tsoulfidis Value and Unequal Exchange in International Trade The Geography of Global Capitalist Exploitation Andrea Ricci Inflation, Unemployment and Capital Malformations Bernard Schmitt Edited and Translated in English by Alvaro Cencini and Xavier Bradley Democratic Economic Planning Robin Hahnel A History of Monetary Diplomacy, 1867 to the Present The Rise of the Guardian State and Economic Sovereignty in a Globalizing World Giulio M. Gallarotti Markets in their Place Context, Culture, Finance Edited by Russell Prince, Matthew Henry, Carolyn Morris, Aisling Gallagher and Stephen FitzHerbert China’s Belt and Road Initiative The Impact on Sub-regional Southeast Asia Edited by Christian Ploberger, Soavapa Ngampamuan and Tao Song

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China’s Belt and Road Initiative The Impact on Sub-regional Southeast Asia Edited by Christian Ploberger, Soavapa Ngampamuan and Tao Song

First published 2022 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 605 Third Avenue, New York, NY 10158 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2022 selection and editorial matter, Christian Ploberger, Soavapa Ngampamuan and Tao Song; individual chapters, the contributors The right of Christian Ploberger, Soavapa Ngampamuan and Tao Song to be identified as the authors of the editorial material, and of the authors for their individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Names: Ploberger, Christian, editor. | Ngampamuan, Soavapa, editor. | Song, Tao (Associate professor), editor. Title: China’s Belt and Road Initiative : the impact on sub-regional southeast Asia / edited by Christian Ploberger, Soavapa Ngampamuan and Tao Song. Description: Milton Park, Abingdon, Oxon ; New York, NY : Routledge, 2021. | Includes bibliographical references and index. Identifiers: LCCN 2021009879 Subjects: LCSH: Yi dai yi lu (Initiative : China) | China—Foreign economic relations—Southeast Asia. | Southeast Asia—Foreign economic relations—China. | Southeast Asia—Economic conditions. Classification: LCC HF1604.Z4 S6835 2021 | DDC 382.0951/059—dc23 LC record available at https://lccn.loc.gov/2021009879 ISBN: 9780367518516 (hbk) ISBN: 9780367518530 (pbk) ISBN: 9781003055433 (ebk) Typeset in Galliard by codeMantra

Contents

List of figures List of tables List of contributors List of abbreviations 1

Introduction and overview

vii ix xi xiii 1

C H R I S T I A N P L OBE R G E R

PART I

The regional level

19

2

21

Regional cooperation in the Mekong Basin C H R I S T I A N P L OBE R G E R

3

Rising energy demand in Mekong sub-region

38

P HOU M I N H A N , S OP H E A K M E A S , A N D H A T DA P IC H A N

4

Energy, SE Asia, Central Asia and BRI

60

K R I S S A DA P R O M V E K

PART II

Individual country focus 5

Thailand’s 4.0 development strategy in the context of the Belt and Road Initiative S OAVA PA N G A M P R A M UA N

75 77

vi Contents

6

Examining Laos’ policy responses to BRI

93

W EI LI A NG

7

Cambodia’s development potentials and BRI

109

K H A S OK

PART III

Chinese provincial level

127

8

129

Yunnan connecting China and Southeast Asia T AO S ON G

9

Multi-regional cooperation BRI and Guangxi

149

HON G L I , Y IC H UA N Z H A N G A N D M E N G H U

Index

171

Figures

3.1 3.2 3.3 3.4 3.5 3.6 7.1 8.1

Total Primary Energy Supply (TPES) by energy source, BAU vs APS Total Final Energy Consumption (TFEC) by sector, BAU vs APS Total Power Generation (TFEC) by energy source, BAU vs APS Investment in power generation by energy source, BAU vs APS CO2 emissions in the Mekong Sub-region, BAU vs APS Emissions standards for newly constructed CPPs in selected countries (SOx, NOx, and PM) Linkage with other major infrastructure projects Total volume of foreign trade of Yunnan from 2010 to 2019

48 49 50 51 52 53 120 138

Tables

3.1 4.1 4.2 5.1 9.1 9.2 9.3 9.4

Regional investment framework 2022 summary by sector Merchandise trade between Central Asia and ASEAN (2017) Energy production and exports of Central Asia in year 2017 Overview of the number of Chinese projects located in the EEC from 2012 to 2019 (categorised by year and by province) The total value of import and export of Guangxi and BRI countries (100 million yuan) The total import and export value of Guangxi with ASEAN countries (2010–2019, 100 million yuan) The number of overseas students from ten ASEAN countries to study in Guangxi (2010–2017, in person) Guangxi’s participation in the construction of southbound corridor trunk roads

47 62 63 87 154 160 160 163

Contributors

Phoumin Han is a Senior Energy Economist of the Economic Research Institute for ASEAN and East Asia. Meng Hu, member of the Business School of Guangxi University, China. Hong Li, Professor, International Economics Department of Business School, and International Relations Department in the Institute of China-ASEAN Research, Guangxi University. Wei Liang, Professor, Middlebury Institute of International Studies at Monterey (MIIS), USA. She is Gordon Paul Smith Chair of international policy in the School of International Policy and Management at the Middlebury Institute of International Studies. She served as the president of the Association of Chinese Political Science (ACPS) during 2014–2016 period and had a number of academic appointments as a visiting professor in the Peking University, visiting research fellow at the East Asian Institute, National University of Singapore and Meiji University in Japan. Her research interests include international political economy of East Asia, international negotiation and global governance. She has published and co-authored a number of books and articles with a focus on China and East Asia. Sopheak Meas is the Press Officer of the Mekong River Commission Secretariat and published various academic papers before. Soavapa Ngampramuan,  Assistant Professor, Faculty of Political Science, Ramkhamhaeng University, Bangkok, Thailand. She is a lecturer in International Relations, International Political Economy and regional organisations with a particularly focus on ASEAN and comparative ASEAN-EU studies for undergraduate and post-graduate courses. She is also a research fellow at the School of International Politics and Economics and Communication, Aoyama Gakuin University, Tokyo, Japan. Hatda Pich An,  Chief Executive Officer of the Mekong River Commission Secretariat.

xii Contributors Christian Ploberger, Lecturer at the Faculty of Political Science, Thammasat University, Bangkok, Thailand. He has a record of teaching International Relations and Security Studies with a specific focus on East Asia and on climate change-related risks. He also has a specific interest on international river basins like the Mekong region. He is the author of a number of academic articles and books with a focus on BRI, Chinese politics, sub-regional integration and environmental/climate change-related challenges. Krissada Promvek, Lecturer of the Faculty of Political Science, Ramkhamhaeng University, Bangkok, Thailand. Kha Sok  is a development consultant and researcher based in Phnom Penh, Cambodia with an established record of project research undertaken for the Cambodian government and various development partners. He is also a fellow at the Asian Vision Institute (AVI), based in Phnom Penh, Cambodia. Tao Song, Associate Professor, Institute of Geographical Sciences and Natural Resources Research, Chinese Academy of Sciences, Beijing. He has an established record of Belt and Road Initiative related research projects undertaken for the Chinese government and various development partners. Yichuan Zhang, member of the Business School of Guangxi University, China.

Abbreviations

ADB APS ASEAN BAU BCIM BFCRPZ BGEZ BGP BN BOI BRI B&R CAAC CABIS CAEXPO CAFTA CBTA CCTS CCSPEC CIPEC CYUA CO2 CPEC CPI CPPs CSCP EEC ERIA EWEC EU FETDZ FDI

Asian Development Bank Alternative Policy Scenario Association of Southeast Asian Nations Business as Usual scenario Bangladesh-China-India-Myanmar Border Financial Comprehensive Reform Pilot Zone Beibu Gulf Economic Zone Beibu Gulf Port Billion Board of Investment of Thailand Belt and Road Initiative The Belt and Road/One Belt and One Road Civil Aviation Administration of China China-ASEAN Business and Investment Summit China-ASEAN Expo China-ASEAN Free Trade Area Cross-Border Transport Agreement Clean coal technologies China-Central South Peninsula Economic Corridor China-Indochina Peninsula Economic Corridor Central Yunnan’s Urban Agglomeration Carbon Dioxide Chinese-Pakistan-Economic-Corridor Corruption Perception Index Coal-fired power plants China-Singapore Connectivity Project Eastern Economic Corridor Framework Economic Research Institute for ASEAN and East Asia East-West Economic Corridor European Union Fangchenggang Economic and Technological Development Zone Foreign Direct Investment

xiv Abbreviations GBA GDRC GHG GMS GXFTZ GZARBS HELE HMC IOT IRB Km Kv Lao PDR LEAP LMC LMB LNG EWEC MIEC MJC MoF MOFTEC MRC Mt-C Mtoe MCPRC MLC MNCs MOFCOM NADZ NDRC NDRC NILSTC NOx NRE NSEC NSEC ODA PBGA PDG PLAN PM PPRD PRP

Guangdong-Hong Kong-Macao Greater Bay Area Guangxi Development and Reform Commission Greenhouse gas Greater Mekong Subregion China (Guangxi) Pilot Free Trade Zone Guangxi Zhuang Autonomous Region Bureau of Statistics Highly Efficient and Low Emissions technology Ho Chi Minh Internet of Things International River Basin kilometers kilo volt Lao People’s Democratic Republic Long-range Energy Alternative Planning System Lancang-Mekong Cooperation Lower Mekong Basin Liquefied Natural Gas East-West Economic Corridor Mekong-India Economic Corridor Mekong-Japan Cooperation Ministry of Finance Ministry of Foreign Trade and Economic Cooperation Mekong River Commission million tonnes of carbon equivalent Million Tonnes of Oil Equivalent Ministry of Commerce of the People’s Republic of China Mekong-Lancang Cooperation Multinational corporations Ministry of Commerce of China Nanning Airport Demonstration Zone National Development and Reform Council National Development and Reform Commission New International Land-Sea Trade Corridor Nitrogen Oxides New and renewable energy Nanning-Singapore Economic Corridor North-South Economic Corridor Official Development Assistance The Pan-Beibu Gulf Area Preliminary Design Guidance for Proposed Mainstream Dams in the LMB People’s Liberation Army Navy Particular Matter Pan-Pearl River Delta People’s Revolutionary Party

Abbreviations  xv PRWREZ QBPZ QEC RCEP RMB SCPRC SCDZ SEC SEZ SHDS SO2 SOE Sox SREB SSEC TAD TFEC TPES TPIZ USD WGRRZ XEB XPREB YRD 21st CMSR

Pearl River-West River Economic Zone Qinzhou Bonded Port Zone Quadrangle Economic Co-operation Regional Comprehensive Economic Partnership Renminbi, Chinese money The State Council of the People’s Republic of China Vientiane Saysettha Comprehensive Development Zone Southern Economic Corridor Special Economic Zone Sustainable Hydropower Development for the Lower Mekong Basin Sulphur Dioxide State-Owned enterprises Sulphur Oxides Silk Road Economic Belt Southern Economic Corridor Temporary Admission Document Total Energy Consumption Total Primary Energy Supply Tieshan Port Industrial Zone United States Dollar Western Guangxi Resource-Rich Zone Xijiang Economic Belt Xijiang-Pearl River Economic Belt Yangtze River Delta 21st-Century Maritime Silk Road

1

Introduction and overview Christian Ploberger

A constant challenge in grasping the character of China’s Belt and Road Initiative (BRI) exists: does BRI signify a development strategy in support of regional cooperation within different regional settings in which China’s government has specific interests, a geo-economic strategy, or a national development strategy to support development within some of China’s remote provinces and borderland areas, with an international focus added? Those are the most relevant topics related to China’s BRI, and this book tries to address them by focusing on one specific regional setting: the Mekong region. There are no doubts that China’s central government has a vested interest in the Mekong region and the subregional cooperation processes within it, as does the provincial leadership of Yunnan and Guangxi. By ‘sub-regional setting’, we refer to the integration process based on the Greater Mekong Subregion (GMS).1 Within this context, the focus is to what extent BRI-related investment will generate benefits for the member countries and support for the established sub-regional integration dynamic within the Mekong region. It is obvious that China’s interest in sub-regional Southeast Asia goes back decades, if not centuries, as old trade routes, such as a section of the famous Silk Road, connected imperial China with Southeast Asia. In more recent times, the record of participating in the sub-regional integration process is rather mixed, as the strong interest in participating in the GMS process articulated at the provincial level, within China’s Yunnan and Guangxi provinces, was only recently matched by central government interests in Beijing; with the announcement of the BRI, there has been some stronger commitment from China’s central leadership with regard to participating in the GMS process, which began in the early 1990s. It is worth remembering that at the beginning of the GMS process back in 1992, not much was expected from this process, but this perception began to change in the early 2000s. Yet, the provincial leadership in Yunnan was quite eager to participate in that process because of its close geographic proximity and the associated expectation of supporting provincial development through closer economic cooperation and integration with the GMS economies. However, it should be remembered that, up to the late 1990s, the interconnectivity between Yunnan and sub-regional Southeast Asia was severely limited, and not just because of underdeveloped road and train infrastructure, but also because

2  Christian Ploberger of the closure of national borders, because offering strong support for facilitating Yunnan’s integration with sub-regional Southeast Asia was not identified by the central government as a priority target in the early stages of China’s reform and opening process. Yet, from the provincial perspective, things looked a bit different. Indeed, as early as the mid-1980s, local officials began urging for an opening of the borders to facilitate cross-border trade between Yunnan and Southeast Asia. At that time, Yunnan, like Xinjiang in the far west, was described as a remote, ‘dead-end’, a situation that contributed to the low level of development the province continued to experience while many other provinces were benefiting from China’s ongoing reform and opening process. It was only a short time after the BRI became a central topic in Chinese politics that China’s central government finally became more responsive to demands from Yunnan’s provincial government’s insistence on facilitating closer cooperation between Yunnan and sub-regional integration processes in the Mekong region. Indeed, within the context of BRI, Yunnan was now famously identified as a ‘bridge head’. However, even this description can be traced back to earlier discussions in Yunnan during the 1990s. After all, from a provincial and geographic perspective, Yunnan was closer to Southeast Asia’s markets than to the markets of China’s east coast. Even so, only with the BRI taking shape and developing into a major policy strategy did a change of perception with regard to Yunnan’s role within China’s leadership take place, as the central government now became more enthusiastic about the potential that Yunnan’s geographic location could offer for stronger China-Southeast Asia and even China-South Asia cooperation and infrastructure integration. While in the context of the current discussion within the BRI framework Yunnan is strongly associated with a ‘bridge’ function between China and Southeast Asia, Guangxi’s provincial leadership, too, entertains a similar perspective for its own role within the BRI. In Guangxi’s case, the argument presented is that it provides a linkage for parts of eastern China with Southeast Asia, emphasising that from a development zone perspective, it integrates the Greater Bay Area with the BRI’s Southeast Asia economic corridor development. While not covered in this book, BRI offers a similar provincial development prospect for Xinjiang province with a similar role for supporting China-Central Asia cooperation. Hence, ignoring the domestic focus from a Chinese perspective when assessing the BRI frameworks will miss a crucial character of BRI. This change of perspective from the central Chinese government, with regard to specific provincial demands, also offers a good example of how BRI can support domestic demands for provincial development among some of China’s lesser-developed provinces, a perspective that needs to be brought back into focus, since there is a tendency for international observations to focus almost exclusively on the international impacts BRI is generating. From a national perspective, deeper cooperation with sub-regional Southeast Asia countries and the GMS process would support China-Association of Southeast Asian Nations (ASEAN) relations as well. This was also recognised within the BRI framework and in the document that identifies the various underlying strategies BRI is built on: ‘Vision and Actions on Jointly Building Silk

Introduction and overview  3 Road Economic Belt and 21st Century Maritime Silk Road’ (Vision and Actions 2015). With regard to cooperation within the Mekong region’s sub-regional integration process, the document states that BRI offers strong support for cooperation in the GMS process, as this process is of strategic importance for China’s relations with Southeast and South Asia (Vision and Actions 2015). Guangsheng, for example, points out that China’s engagement with the GMS process was strengthened through the BRI by further reinforcement of China’s relations with the countries of the sub-region, which represents an important task within the BRI framework; the instigation of the Lancang-Mekong Cooperation (LMC) process offers another indication within this context (Guangsheng 2016). While the origin of the LMC goes back to a Thai proposal, which will be discussed more in Ngampramuan’s chapter, the LMC process took shape when China’s leadership started to support it. One can argue that Thailand does not have the political or economic resources required for such a process to be successful. The LMC process was rather recently set up (23 March 2016), when compared with the long-established GMS process, but offers another indication of the strategic relevance of the Mekong’s sub-regional cooperation within China’s BRI. The LMC founding document, the Sanya Declaration (2016), declares that development represents the top priority for the member countries but also identifies regional cooperation and connectivity as important tasks, describing the LMC as a new approach to sub-regional cooperation. However, if one reads relevant GMS documents regarding development and cooperation, the similarities between the two integration processes cannot be overlooked, and indeed, one could argue that the LMC offers another impetus within the longer-established GMS process. Consequently, the LMC and GMS processes are nearly identical, with similar aims in support of subregional integration dynamics; the biggest difference one could argue is that GMS was founded and is supported by the Asian Development Bank (ADB), which is strongly supported by Japan, whereas LMC is supported primarily by Beijing. Despite the improvements that have been undertaken since the beginning of the GMS process, interconnectivity and infrastructure gaps still present a challenge for development within Southeast Asia’s sub-regional integration process. It is a challenge recognised by the ADB itself, stating that Asian countries will continue to face a significant infrastructure challenge for a considerable time, citing an infrastructure investment gap of 2.4% of the projected regional GDP for the 2016–2020 period (ADB 2017). Therefore, any further contribution towards reducing this infrastructure gap is welcome. Indeed, China’s approach within the LMC framework, to focus on so-called ‘early harvest’ projects, projects that can be rather swiftly implemented, may also offer additional vigour for the GMS process itself. This focus offers another insight into the strategic importance that sub-regional Southeast Asia has gained for China, while a stronger engagement also supports provincial development for at least two of China’s provinces, as mentioned above. There is no doubt that such strong cooperation

4  Christian Ploberger at the sub-regional level will also generate additional benefits at the regional, ASEAN, level. In addition to addressing the impact BRI-related investments have on China’s relations with sub-regional Southeast Asia, the specific focus of the book will also add further insight into the extent to which BRI-related investment will contribute to the development process of the recipient countries and how much it will support existing sub-regional integration processes, such as the GMS/ LMC processes. At the same time, we should remember that China’s strong emphasis on closer economic cooperation with sub-regional Southeast Asia can also be interpreted from another angle, as support for domestic development, since closer cooperation will bring benefits to provincial development within Yunnan and Guangxi. Therefore, not only are we reminded of the strong domestic aspect of the BRI, but the interconnectivity also highlights the complex character of BRI and the challenge of how to characterise it—it may be a domestic development strategy, a regional integration strategy in support of China’s political-economic position within a particular regional context, or an umbrella for addressing a wide range of domestic and international policy issues the Chinese government is already engaged with. A closer evaluation of China’s BRI and its many characteristics will form the first step in our enquiry.

1.1 Taking stock of the Belt and Road Initiative The origin of the BRI is widely attributed to comments made by President Xi Jinping in September 2013, during a state visit to Kazakhstan. Indeed, on that occasion, he proposed closer economic cooperation with Central Asian countries by forming a new economic belt along the historic Silk Road. He stated that it was a foreign policy priority for China to develop a close and cooperative relationship with the countries of Central Asia (Xi Jinping 2013a). By applying the historical metaphor of the Silk Road and by emphasising connectivity, President Xi put renewed emphasis on the loose regional cooperation already existing between Central Asian countries and China, thus supporting a regional integration dynamic. In a similar way, by again placing renewed emphasis on a specific regional integration process, Xi’s address to the Indonesian parliament in October 2013 referred to the possibility of a Maritime Silk Road. This time, the regional context on which he was focusing was Southeast Asia, or, more specifically, China’s relationship with ASEAN. In his address to the Indonesian parliament, the overwhelming emphasis was on strengthening China-Indonesia and China-ASEAN relations by means of supporting ASEAN internal development and its role as a regional organisation, so China would offer closer economic and political cooperation (Xi Jinping 2013b). Even before Xi’s speech at the Indonesian parliament, Prime Minister Li Keqiang had already made a reference to the Maritime Silk Road at the 10th China-ASEAN Expo in September of the same year. He, too, mentioned BRI in the context of addressing regional cooperation, such as the ten-year-old China-ASEAN strategic partnership, emphasising that China and ASEAN were facing similar development challenges

Introduction and overview  5 and so were natural partners, consequently stressing further close cooperation (Li Keqiang 2013). Another important step in outlining the character of BRI occurred in 2015 when China’s National Development and Reform Council (NDRC) published the official document mentioned above—‘Vision and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Road’ (Vision and Actions 2015)—which had the State Council’s authorisation and outlined BRI in more detail. The document included a comprehensive evaluation of the various regional and development focuses inherent in BRI. The main aspects emphasised are centred on five features, namely policy coordination, facilitating connectivity, unimpeded trade, financial integration, and people-to-people connection. It further stated that BRI was an indication that China was willing to take more international responsibility in accordance with its capabilities. A hint at acting according to its great-power status, such as supporting the building of a Eurasian land bridge, provided the geographic dimension of BRI and further underlined the focus of this statement. In the document, much emphasis is placed on portraying the BRI as an open, flexible, and pluralist example of cooperation, in which the economic development strategies of the different countries will be recognised. It is further emphasised that China would support different regional integration processes within different regional settings; also, established mechanisms, as in the case of the Southeast Asia GMS, would be utilised in support of regional integration processes. This is an indication that BRI, although offering a new framework, cannot be interpreted as a completely novel undertaking, as in several cases, it aims to build on existing policy strategies and well-established international relations. The comprehensive focus and the emphasis on supporting regional integration within different regional settings by investing in a modern infrastructure network is a unique position for China to take. However, there is another characteristic of BRI that also builds on previous policy strategies: its domestic development focus (from a Chinese perspective). Indeed, it is crucial to remember this strong domestic focus, especially since this aspect is often neglected when different aspects of the BRI are evaluated by international observers, for whom the overwhelming focus of discussion is on whether BRI indicates a geo-political strategy for gaining and amassing strategic influence in support of Chinese dominance (as realists may argue); as pointed out by Mearsheimer (2014), every great power’s ultimate goal is to maximise its share of world power, to gain dominance. Indeed, ignoring the strong domestic focus of BRI on addressing the existing development imbalance that exists between Chinese provinces would amount to a great misperception about the character of BRI (Ploberger 2020). He (2019, 186) also emphasises that, from a domestic perspective, mobilisation for BRI-related projects occurs at the provincial level, which certainly supports the development of left-behind provinces; provinces which were less able of participating in China’s reform and opening process, represent an original and ongoing focus for BRI. It is crucial to remember that the Chinese government’s overall focus is on domestic development, as securing domestic development and, with it, political

6  Christian Ploberger and economic stability will strengthen the Communist Party’s hold on power. Within the NDRC publication, there is an extended emphasis on advancing the infrastructure integration between China’s inland regions to support the links between the eastern and western areas of China, with the added aim of propelling regional development among China’s provinces. In addition to outlining such a general emphasis for internal integration and development support, there are also specific focuses mentioned, for instance, to accelerate cooperation between the upper and middle sections of the Yangtze River, with Chengdu and Chongqing at the centre, or to build Xi’an into a centre of reform and a primary example for opening up China’s interior. In doing so, it may also indicate some references to Xi’an’s famous past; along with all its relevance to China’s history, Xi’an (the old Chang’an) was historically recognised as the beginning and the end of the ancient Silk Road. Yet, such a focus on supporting a closer integration of China’s different regions is not unique either, as a previous attempt at doing so in the early 2000s, the so-called Western Development Strategy, had a similar focus, but with less success. Once again, albeit providing a different and certainly more complex framework for cooperation and development, crucial aspects of BRI are based on previous policy strategies. Its historical background reinforces a perception that BRI represents an umbrella for a wide array of different policy strategies the Chinese government is following at the same time instead of a completely new or novel undertaking. He (2019) also supports a view which takes into account that a primary focus of BRI is to address China’s ongoing development challenges, an aspect largely to be missed by geopolitical inspired analysis of the BRI. Adding that provincial level demands for central government support generate a distinctive impact on how BRI unfolds. Nonetheless, it should be emphasised that the geographic space covered by the political-economic dimension, and the integration of domestic and international elements generates a different form of complexity when compared with the focus of previous development strategies. Certainly, supporting China’s political and economic rise also goes down well with Chinese patriotism and offers additional support for the communist leadership. At the same time, it should not be denied that implementing BRI, even only partially, will support and enhance China’s political-economic position in various regional settings. Since its introduction in 2013, BRI has expanded considerably in both scope and scale. Taking into account this extension and in measuring its impact, a recent World Bank report points out that the countries that are covered by BRI increased their share of global exports to 40% in 2017, while their share in global imports increased to 21%. Further, their intragroup share of exports grew to 44.3% in 2015 (Boffa 2018). By 2018, the BRI consisted of some 70 countries, covering 62% of the global population and 30% of global gross domestic product (World Bank Brief 2018). Considering those numbers and the potential for generating further positive economic impacts, the BRI’s potential for contributing to global trade cannot be ignored. Obviously, from such a perspective, the BRI represents an ambitious undertaking of regional cooperation on a transcontinental scale, the largest initiative to improve global connectivity to date.

Introduction and overview  7 On a more general level, the BRI supports regional infrastructure development, through a closer policy coordination with a focus on development, and offers support for trade and closer people-to-people contact within specific regional settings, particularly Central Asia, South Asia, and Southeast Asia. A transregional and trans-continental emphasis is included, with the additional focus on Chinese-EU cooperation. Indeed, BRI represents a comprehensive outline of China’s future regional cooperation strategies. But this comprehensiveness— with a focus on different regional settings within a global setting and at the same time an equally strong focus on supporting domestic development in various parts of China—complicates the challenge of how to characterise China’s BRI. Its comprehensiveness supports an interpretation that BRI represents an umbrella of various policy strategies the Chinese government is following concurrently, as BRI addresses critical domestic and international topics from a Chinese leadership perspective. We should remember that the current emphasis on developing infrastructure interconnectivity represents only a first step, with the prospect of further economic integration and even policy coordination to follow. For the time being, this is still a remote prospect, but the likelihood that BRI is aiming for further economic and policy integration within different regional settings should not be ignored. However, existing infrastructure gaps in intraregional connectivity need to be addressed first within the different regional settings covered by BRI. This focus on supporting regional infrastructure development makes it an attractive option for many less-developed countries. After all, a reliable road and rail network offers considerable economic development for a country as well as for its surrounding region. Importantly, once a reliable infrastructure has been built, it will offer various options of connectivity for the involved countries, which are not restricted towards a single direction, that is, China. Moreover, BRI-related investment may also offer additional development opportunities. The present United Nations Secretary-General, Antonio Guterres, has pointed out that China’s BRI also shares the Sustainable Development Goal vision for global development by creating economic opportunity and by supporting national and regional cooperation (Guterres 2017). Without a doubt, China will profit from such connections and cooperation, as well, especially in the sub-regional integration process within Southeast Asia, as it is the biggest economic actor in the region. Yet, supporting development is not a one-way route, and participating countries will have the opportunity of taking advantage of it, with Thailand offering a good example. Not without reason can we identify continuing support for sub-regional integration and for improving infrastructure interconnectivity with China from different Thai governments. In emphasising this ongoing significance for supporting infrastructure connectivity, Xi Jinping (2019), at the second Belt and Road Forum in Beijing, in April 2019, highlighted in his opening address that connectivity is crucial for advancing Belt and Road cooperation, and infrastructure forms the bedrock of connectivity, common development, and prosperity. The Joint Communique (2019) of the second Belt and Road Forum also stressed the fundamental importance of transport infrastructure for connectivity and cooperation.

8  Christian Ploberger Although infrastructure investment takes on a prominent role within the BRI, infrastructure development represents only the first step towards closer economic cooperation between the participating countries. China’s official document on the BRI (Vision and Actions 2015) points out that regional cooperation and integration represent an accelerating trend in contemporary global politics. Nevertheless, and based on its complex character, there is also a variety of critical voices regarding the aim and character of BRI, to which we turn now.

1.2 Critical voices Even though at the time of writing, about 138 countries are listed as participants in BRI, various critical voices are increasingly being heard. Certainly, there are the voices of China’s regional and global competitors, such as India, Japan, or the United States, who are empathically pointing out that geopolitical motivations alone drive China’s BRI. Some of the strongest dissenting comments are related to the maritime aspect of the BRI, such as the Gwadar Port project in Pakistan or the Hambantota Port project in Sri Lanka, with accusations that China, in the disguise of economic cooperation, actually aims to expand its military and geopolitical influence. The argument is that, in the near future, the People’s Liberation Army Navy (PLAN) will use these port facilities as bases for long-distance missions, and China will thus extend its operational and power-projecting capacity considerably. For the time being, there are no indications that a military use of those port facilities by the PLAN is being considered or that such a use is part of any BRI investment agreement. However, it should not be ignored that the PLAN is extending its reach by building a socalled ‘blue water navy’, a process which is well-underway. It is also noteworthy that the 2015 version of China’s Military Strategy paper states for the first time that seas and oceans contribute to China’s sustainable development and lasting stability. Consequently, securing its maritime rights and interests is a critical task for its navy. Accordingly, the PLAN aims to shift its focus from ‘offshore defence’ to a combination of ‘offshore defence’ and ‘open sea protection’ that will enhance its maritime capabilities for strategic deterrence and maritime counterattack (China’s Military Strategy 2015). This shift in strategy, as China over most of its history has been a continentally focused land power, has certainly not gone unnoticed by other regional and global powers and competitors. Even so, there is no indication to date that the BRI-related investments are supportive of the strategic change described in the Military Strategy paper. As for the Chinese leadership, it consistently denies such accusations, and as pointed out by China’s Foreign Minister, Wang Yi, the BRI should not be interpreted as expansionism because it is an open initiative and not a kind of Chinese ‘Monroe Doctrine’, adding that BRI constitutes a response to the development needs of Asian and European countries (Yi 2016). While this offers an indication of criticism the BRI encounters from a geopolitical perspective, there are also some critical voices associated with the financial aspects of BRI-related infrastructure projects, subsumed in what is described by

Introduction and overview  9 critics as ‘debt-trap’ diplomacy. Evidently, such a negative narrative has cast an enduring shadow on China’s BRI framework because it reflects concerns about the economic viability of projects being financed and the transparency of related bilateral financial agreements between China and the recipient countries. However, so far, we can observe only a very small number of those countries participating in the BRI asking for re-negotiation of infrastructure investment projects. In most cases, such a request has arisen in the context of government changes within those countries since the new government may reach a different conclusion about the costs and benefits of some infrastructure projects the previous government had signed. Within this category of countries that have voiced criticism, we can identify Malaysia and Sri Lanka, and even, to a lesser extent, Pakistan, a long-time ally of China and a major recipient of support within the BRI framework. Malaysia offers a good example, for such a domestic policy change inspired discussion and controversy about the so-called Chinese ‘debt-trap’. In the run-up to the 2018 general elections, Mahathir Mohamad and other opposition leaders strongly advocated the cancellation of projects related to BRI. When Mahathir took office, after his surprising victory, the demand evolved towards a renegotiation of BRI-related investments, making the argument that the previous Malaysian government had mismanaged economic affairs, which led to a soaring national debt of emerging proportions. In later statements, Prime Minister Mahathir also emphasised that a re-negotiation of BRI-related investment projects did not indicate a change in the Malaysia-China relationship. And in a major interview in early 2019, he made the following statement with regard to BRI investment decisions: ‘If countries prefer to borrow huge sums of money, well, that is your decision’ (Mahathir 2019). While this may sound simple enough, it seems that such truths are easily forgotten when those investments decisions are evaluated; yet, the decision to participate or not to participate in China’s BRI is still the sovereign national decision of a government. Jones and Hameiri (2020) also taking up this topic, emphasising that the receiving country government determines BRI-related projects to support their domestic policy agenda. Adding that this aspect of agency on the part of the host countries is neglected. The Malaysian case offers a good example of the potential hijacking of foreign investments for domestic political discourse, while it is true that Malaysia’s national debt level demanded a serious response. Of course, the utility of BRI-related projects and investments should always be at the centre when agreeing on infrastructure investment, but at the same time, it may also remind the government in Beijing that domestic political developments within participating countries should be considered additional risk factors in their lending policy. After all, successive governments and leaders in participating countries may hold a different perception from the previous governments about their countries’ development imperatives. A similar discussion about how different governments of the same country have different stances towards the economic benefits of investments in BRI-related infrastructure can be identified in Sri Lanka. Here, it has become a familiar

10  Christian Ploberger affair to speak about being lured into a debt trap, as China is offering easy loan terms as part of its BRI push. The close cooperation between the previous Sri Lanka President Mahinda Rajapaksa with China was sometimes described as the ‘Colombo Consensus’, and it would not be wrong to point out that the initiative came from the Sri Lankan side, reaching back to the final period of the decades-long Sri Lankan civil war, pre-dating China’s BRI. While other donors limited cooperation with the Sri Lankan government because of extensive human rights violations during the final episodes of the civil war, China’s government continued to offer financial resources for re-building the country and addressing infrastructure gaps. Based on one of China’s fundamental foreign policies, non-intervention in the internal affairs of other countries, its lending practices are minimally concerned with the domestic situation in a particular country. Its willingness to support infrastructure projects in the aftermath of the Sri Lankan civil war is a particular case in point, as there was considerable international criticism of how this war was brought to an end. Yet, over time, Sri Lankan-Chinese infrastructure projects growing out of BRI generated increasing controversy, in such cases Hambantota Port, Colombo Port city, and the Mattala airport. As Sri Lanka has a prominent geographic location along important global shipping lines, China’s investment has become an important topic in geopolitical terms. The 99-year Hambantota Port lease agreement between Sri Lanka and a Chinese consortium became such a case not only because of the possible military use of the port facilities by the PLAN but also because it became a so-called showcase for China’s debt diplomacy. Weerakoon and Jayasuriya (2019) disagree with such a narrative; they argue that Sri Lanka’s financial problems, the very possibility of default, and its repayment problems have very little to do with Chinese loans, as they comprise only about 10% of its total foreign debt. According to Weerakoon and Jayasuriya, the decision to lease the Hambantota Port to China was part of a strategy of generating cash to increase Sri Lanka’s national reserve funds by changing debt into a long-term lease contract and thus reducing the debt repayment level. A position shared by Jones and Hameiri (2020, 16), who assess that leasing the port to a Chinese company generated additional revenues for the Sri Lankan government to pay some Western creditors. Sautman and Yan (2019) pointed out that the Sri Lankan government had lobbied hart to lease Hambantota Port, approaching Japanese, Indian, and Chinese companies, yet only Chinese companies showed some interest in it. Another critical voice in portraying Sri Lanka as a case for the so-called Chinese debt-diplomacy is Esteban (2018) who argues in a similar way, pointing out that as Sri Lanka has accumulated a public debt of 77% of its GDP, its debt problem extends beyond its commitment to China. Based on the Central Bank of Sri Lanka’s annual report, the ownership of outstanding foreign debt also shows a rather different picture. The two leading lenders, by far, at a multilateral level, are the ADB and the World Bank’s International Development Association. The three leading countries lending to Sri Lanka, in the bilateral category, are Japan, India, and China, with Japan owning considerably more than either India or China (Central Bank of Sri

Introduction and overview  11 Lanka Annual Report 2018). However, all of them are dwarfed by the amount of money the Sri Lankan state owes to the financial markets through commercial lenders. Yet, as Weerakoon and Jayasuriya (2019) point out in their assessment, the reason why Sri Lanka is so widely portrayed as an example of the dangers of Chinese debt diplomacy is linked more to global politics rather than to the real facts of the Sri Lankan case. In addition, as was the case with Malaysia, a leadership transition within Sri Lanka also contributed to different assessments about the profitability of specific projects. As the example of the rapid construction of the Port of Colombo container terminal indicates, financing the port enhancement increased the port’s capacity considerably, which in turn would support economic development, while in the case of the Hambantota Port, the positive effects of the investment still have not materialised. Yet, as Gong (2020, 91) argues, in order to move beyond the current hype about the so-called debttrap policy, China’s government needs to increase transparency by establishing standards when financing projects. Additionally, BRI-related investments could try to become even more developmental in their character. We should take another aspect into consideration with regard to external investment funding, which also carries high value within China’s BRI, especially when considering that such projects represent just a starting point for supporting various national development processes. This was pointed out by McCartney (2018) in his evaluation of BRI-related investment in Pakistan, namely the Chinese-Pakistan Economic Corridor (CPEC). To achieve the utmost utilisation from such investments, in support of a wider economic impact on Pakistan’s economic development, development of the state’s foundational capacity, such as a professional and independent bureaucracy, would be required. However, McCartney argues, the Pakistani state lacks this capacity. Considering that most BRI participating countries are developing countries and that China insists that BRI-related investments should generate long-lasting, positive development effects, the issue of state capacity of participating counties becomes an important topic. Clearly, a close investigation into the perceived trade-offs of BRI-related infrastructure projects is required, and the case studies in this book offer such a perspective. At the same time, we should remember the domestic angle, from a Chinese perspective, of BRI investments. China’s engagement with the GMS offers an excellent example of this double focus on domestic and regional development, as it also aims to support the development of Yunnan and Guanxi province. From a more abstract perception, we may agree with Noort and Colley (2021), who describe the BRI as a strategic narrative. For them, a strategic narrative aims to construct a shared understanding of the past, present, and future to influence the behaviour of domestic and international actors (Noort and Colley 2021, 39). Making the notion of the historical Silk Road, an inherent element of the BRI concept seems to confirm that the BRI aims to facilitate a narrative of a shared future based on cooperation among a variety of diverse countries founded on common historical linkages. Such a narrative would be at least applicable for participating countries in Central and Southeast Asia.

12  Christian Ploberger

1.3 Organisation of the book The various chapters in this book offer more insight into the character of China’s BRI by investigating to what extent it can be described as a regional integration strategy and to what degree it can support the economic development of participating countries. While the BRI covers an extensive geographic space and various regional settings, this book focuses on the potential implications in one regional setting, the Mekong River basin. The book addresses the BRI process within the Greater Mekong River basin at three levels: regional (Chapters 2–4), individual recipient countries (Chapters 5–7), and from a selective provincial Chinese perspective (Chapters 8 and 9). While investigations into the character of the BRI as a regional integration strategy provide a reasonably wide framework, a strong emphasis is put on the potential economic contributions that BRI-related infrastructure investment may generate at the domestic level of participating states and the role domestic actors have played in the selection of BRI-related projects. This, in turn, will also contribute to our understanding regarding the character of the BRI in regional integration terms. For this reason, a variety of case studies from various authors with particular country associations have been brought together. In taking into account the various critical voices associated with China’s BRI, as outlined above, such a double focus on the potential support for regional integration and the perceived impacts of BRI infrastructure on host countries makes them highly relevant topics to be investigated. The chapter titled ‘Southeast Asia’s rising energy demand: Central Asia and the BRI’ was included to address another important, related topic: to what extent cooperation within the wider context of BRI, transcending a single regional setting, may contribute to regional cooperation within a particular regional setting. Organising the book around different case studies written by different authors also has the added benefit that a diverse set of resources, comprising primary language material and data, can be accessed, consequently contributing to the various perceptions offered by the book. It is also worth pointing out that some of the case studies presented in the book are based on local interview material.

1.4 Chapter overview In Chapter 2, the first chapter in the regional section, the conceptual outline for the book, based on a framework of sub-regional integration, is offered with a specific focus on regional integration dynamics and how China’s BRI is offering support for sub-regional integration processes within the Mekong region. Providing further infrastructure investment supports economic development by strengthening sub-regional integration, which in itself is based on geographic proximity. The importance of supporting infrastructure development is also recognised when considering that from a conceptual perspective, regional integration processes can be viewed as processes of contextualising space. The chapter also offers a short overview of what is described as ‘Old’ and ‘New’ regionalism and how they differ from each other. Within this context, a specific focus will

Introduction and overview  13 be on sub-regionalism since the integration processes we can identify within the Mekong River basin can be characterised as sub-regional integration dynamics. While an international river basin (IRB), such as the Mekong River basin, can extend over an extended geographical space, the proximity of the nations within it generates a functional and physical focus for sub-regional cooperation. Whereas the GMS process already offers long-term support for sub-regional integration dynamics within the Mekong region, China’s BRI-related investments add a fresh dynamic to this sub-regional cooperation. From a Chinese perspective, supporting sub-regional integration within the Mekong region also supports China’s relations with Southeast Asia and a number of other countries. Continuing with the sub-regional focus, Chapter 3 provides insights into the extent the Mekong’s sub-region can be transformed by inclusive growth, with a focus on supporting sub-regional energy integration strategies. While recognising the economic development success of sub-regional integration processes within the Mekong region, noting that it transformed the GMS into another hub within the global production network and support the livelihood of the people, the chapter points out that the availability of energy is becoming a major issue. Indeed, the authors point out that, within the context of raising pressure on the local energy resources, resource competition between the different states within the sub-region is increasing and, with it, the negative impact on the environment. As a consequence, a reconsideration of existing energy strategies among the states forming the GMS is required; this includes strategies for addressing energy efficiency and saving, support for a low-emission development path, and a doubling of the contribution coming from renewable energy sources. While the introduction of such changes is based on domestic policy reform, sub-regional cooperation may support a more concerted approach in addressing the rising energy challenges, as does support offered from China’s BRI and the associated LMC process. Chapter 4, the last chapter in the regional section, offers a connection between China’s BRI within a wider context by linking BRI-related energy investment in Central Asia and how it may support the increasing energy demand within the Mekong sub-region and ASEAN by tapping into the energy resources of Central Asia. This focus points out the potential for wider interconnectivity generated by BRI-related investments, transcending a single region. Such a focus also contributes to the ongoing and controversial discussion around the extent to which BRI-related investment only favours China’s own development. Without additional energy resources, either from within or from outside the region, economic growth in the sub-region but also within ASEAN member states faces considerable challenges. Clearly, Central Asia’s energy resources are of critical importance for addressing China’s own rising energy demands, so how much of those energy resources will be diverted to the GMS members and ASEAN may also offer an indication as to what extent BRI contributes to a wider regional integration dynamic and not to a solely Chinese development agenda. The chapter focuses on the formation of the discourse of engagement of Southeast Asia with Central Asia through the notion of the ‘Silk Road Narrative’. So, from the perspective of this

14  Christian Ploberger book, it will be of interest to learn how such national strategies in both regions could support close political and economic cooperation within the context of BRI. Chapter 5, the first chapter in the individual country section, examines the connection between Thailand’s most recent and long-term development strategy, Thailand 4.0, and its potential link to China’s BRI. Thailand 4.0 aims to support Thailand’s further industrial transformation, stimulating economic growth and development. While it represents a 20-year strategy, a number of short-term targets can be identified, in particular the support for Special Economic Zones (SEZ). One that is closely related to Thailand 4.0 is the Eastern Economic Corridor (EEC); yet, at the same time, the EEC is also based on the further development of the sub-regional integration process within the Mekong region and its trans-national economic integration focus. Considering the high relevance of the EEC as a special project within Thailand 4.0, Thailand is quite forthcoming in securing BRI-related investment in the EEC. There certainly exists a generally positive perspective on Chinese investment within Thailand because such renewed investment opportunities generated by China’s BRI and the associated LMC process are seen as supportive of Thailand’s own economic development and industrial upgrading within the context of the Thailand 4.0 development strategy. This case may offer another insight as to how far BRIrelated investments not only support China’s own development but may also contribute to other countries’ development perspective and therefore continue to be welcomed by numerous countries. After all, Thailand is also a staunch supporter of sub-regional integration processes within the Mekong region and interprets BRI-related infrastructure as supportive of this process. Chapter 6 focuses on the domestic development impact that China’s BRI investments generate; after all, China has become the largest foreign investor in Laos by providing funding to various infrastructure projects and by providing development aid. The chapter pays specific attention to the China-Laos Railway project and the increase in Chinese investment in the Lao farming sector, the potential implications for domestic policy issues and environmental impacts. So far, Laos has been characterised as the most accommodating country towards Chinese investment in Southeast Asia and a strong supporter of BRI. With its emphasis on BRI-related investment in Cambodia, Chapter 7 offers another country-specific focus. Back in the 1990s, the Cambodian government introduced a specific land concession strategy to attract domestic and foreign investment into the agricultural sector. Over time, China became a major investor in the agricultural sector, consequently contributing to the economic development of this sector and poverty reduction among the rural population. Within the BRI framework, Cambodia received further agricultural investment, with China becoming the second-largest foreign investor, after Vietnam, into Cambodia’s agricultural sector. While those investments fundamentally contributed to the development of the agricultural sector, it did not always proceed without generating local disputes. A related issue is data transparency and data disclosure linked to granting land rights, known as economic land concessions (ELCs). While relevant laws have been put in place to address those issues, they are hardly

Introduction and overview  15 ever implemented or enforced, not only generating a local backlash from the people but also hampering the international investment climate. With Chapters 8 and 9, we move on to the final section, which takes into consideration the view from China’s provincial level, with Chapter 8 focusing on Yunnan province and Chapter 9 on Guangxi. With regard to Yunnan, there is a long-established consideration at the provincial level for a stronger integration with Southeast Asia in general and with the sub-regional integration process within the Mekong region, so the BRI offered an excellent opportunity for doing so. The first important steps have already been undertaken within the longer-established GMS process, but from a domestic political concern, it was the setting up of the BRI that generated a more positive political setting for provincial demands within China’s central government. The saying ‘Yunnan has a bride function’ for China’s engagement with Southeast Asia became not only a familiar notion but was also followed up in the making of political decisions. From a provincial perspective, closer cooperation with Southeast Asia and a stronger integration into the Mekong Region’s sub-regional integration process carry the prospect of supporting provincial development within Yunnan. This is a very welcome perspective since Yunnan is among the lesser developed provinces within China. This, in turn, offers another perspective on the BRI, one that is often neglected: its domestic development focus. Since the announcement of the BRI, Yunnan’s importance within China has changed considerably for the better, as it moved up the rankings in its political relevance for the central government because of its geographic location as a link to Southeast Asia. This also generated tangible provincial development gains. Chapter 9 offers another specific provincial focus, as it evaluates the impacts BRI has generated on provincial developments in Guangxi, a sea-dependent province bordering Vietnam. Based on its location, it too can take on a specific role within the BRI framework and within China-ASEAN cooperation. Yet, as in the previous case of Yunnan, BRI-related investments have also contributed to the development of the province, and there even exists another similarity with Yunnan: within Guangxi province as well, voices have been advocating closer regional cooperation with ASEAN countries and stronger involvement in the Mekong region’s sub-regional integration process. Fortunately, BRI now offers a comprehensive strategic framework to articulate those provincial positions and with more financial support offered for cross-border infrastructure integration, there are high expectations at the provincial level that BRI will offer an exceptional opportunity for provincial development. The concluding chapter provides an overview discussing the linkages between BRI-related investments and potential support for sub-regional integration and national development of various countries.

Note

16  Christian Ploberger

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Introduction and overview  17 Mearsheimer, J. J. (2014) Can China Rise Peacefully? The National Interest, October 25, 2014. [Accessed 27 November 2019]. Ploberger, C. (2019) Political Economic Perspectives of China’s Belt and Road Initiative: Reshaping Regional Integration. Abingdon, Routledge. Sanya Declaration (2016) Sanya Declaration of the First Lancang-Mekong Cooperation (LMC) Leaders’ Meeting - For a Community of Shared Future of Peace and Prosperity among Lancang-Mekong Countries 2016/03/23. Available from: https://www.fmprc. gov.cn/mfa_eng/zxxx_662805/t1350039.shtml [Accessed 08 January 2020]. Sautman, B. & Yan, H. (2019) The ‘Chinese Debt Trap’ and Its Sri Lanka Example. Institute for Emerging Market Studies. Available from: https://iems.ust.hk/assets/publications/ thought-leadershipbriefs/tlb29/sautman-yan-sri-lanka-cdt-hkustiems-tlb29.pdf [Accessed 12 September 2020]. Van Noort, C. and Colley, T. (2021) How Do Strategic Narratives Shape Policy Adoption? Responses to China’s Belt and Road Initiative. Review of International Studies, 47(1), 39–63. Vision and Action (2015) Vision and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Road. Issued by the National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the People’s Republic of China, with State Council authorization National Development and Reform Commission. People’s Republic of China. Available from: http:// en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html [Accessed 02 July 2016]. Weerakoon, D. & Jayasuriya, S. (2019) Sri Lanka’s Debt Problem Isn’t Made in China. East Asia Forum. Available from: https://www.eastasiaforum.org/2019/02/28/ sri-lankas-debt-problem-isnt-made-in-china/ [Accessed 10th March 2019]. World Bank BRIEF (2018) Belt and Road Initiative. World Bank. Available from: https://www.worldbank.org/en/topic/regional-integration/brief/belt-and-roadinitiative [Accessed 04 January 2019]. Xi Jinping (2013a) President Xi Jinping Delivers Important Speech and Proposes to Build a Silk Road Economic Belt with Central Asian Countries. Ministry of Foreign Affairs of the People’s Republic of China. Available from: https://www.fmprc.gov.cn/mfa_ eng/topics_665678/xjpfwzysiesgjtfhshzzfh_665686/t1076334.shtml [Accessed 12 September 2017]. Xi Jinping (2013b) Speech by Chinese President Xi Jinping to Indonesian Parliament. ASEANChina Centre. Available from: https://reconasia-production.s3.amazonaws.com/ media/f iler_public/88/fe/88fe8107-15d7-4b4c-8a59-0feb13c213e1/speech_by_ chinese_president_xi_jinping_to_indonesian_parliament.pdf [Accessed 12 September 2017]. Xi Jinping (2019) Xi’s Keynote Speech at the Opening Ceremony of the Second Belt and Road Forum for International Cooperation, Working Together to Deliver a Brighter Future For Belt and Road Cooperation. Belt and Road Portal, Xinhua News Agency. Available from: https://eng.yidaiyilu.gov.cn/home/rolling/88233.htm [Accessed 02 May 2019]. Xue Gong, X. (2020) China’s Belt and Road Initiative Financing in Southeast Asia. Southeast Asian Affairs, 2020, 77–95. Yi, Wang (2016) China’s Belt and Road Initiative Not Expansionism: FM Wang Yi. Statement by FM Wang Yi. The State Council, The People’s Republic of China. Available from: https://nation.com.pk/08-Mar-2016/china-s-belt-and-road-initiativenot-expansionism-fm-wang-yi [Accessed 08 March 2016].

Part I

The regional level

2

Regional cooperation in the Mekong Basin Christian Ploberger

2.1 Introduction From an analytical perspective, an international river basin (IRB) offers a particular geographic and structural context for investigating local integration dynamics (Ploberger 2020). By describing the Mekong region as an IRB, we also recognise that proximity takes on a specific relevance for contextualising space, for generating a specific spatiality. There are strong indications that the Belt and Road Initiative (BRI) does offer additional incentives for Chinese infrastructure investment and support for sub-regional cooperation within the Mekong region. We can already identify an established sub-regional cooperation process based on the Asian Development Bank (ADB) Greater Mekong Sub-region (GMS) process. As such, BRI-related investments already support an ongoing process of sub-regional integration and thus enhance this process. This is also clearly stated in what can be described as the key official Chinese document on BRI, Vision and Action which points out that facilitating infrastructure cooperation by enhancing existing multilateral mechanisms, like the GMS process, will make the Mekong region a pivot of China’s and Yunnan’s, integration with Southeast Asia (Vision and Action 2015). Therefore, the increasing relevance of sub-regional integration processes within the Mekong region for China also reflects some core domestic aspects of BRI to offer development support for Chinese provinces that could not profit much from China’s long-established reform and opening process. However, BRI-related support for sub-regional integration within the Mekong region has also to be interpreted as supporting ChinaAssociation of Southeast Asian Nations (ASEAN) cooperation, as well. As such, the political-economic relevance of the Mekong region increased considerably and with it the sub-regional integration processes within it. Moreover, China has given its support to the Lancang-Mekong Cooperation (LMC) process, offering another layer of cooperation. Adding depth to this topic is the lasting relevance of regions and regional integration processes as an analytical focus on international politics and the readiness of political decision-makers to support various regional integration processes at different levels. Therefore, from both a theoretical and practical political perspective, it is crucial to investigate to what extent China’s BRI would offer additional

22  Christian Ploberger support for a sub-regional integration process within the Mekong region. However, although regional integration processes represent a lasting and valuable focus in international relations, we can identify and observe a lively and ongoing debate about the character of regions, the character of regional integration processes, and the required internal strength and extent of institutionalisation. As a general assessment, most instances of integration processes, at both the regional and sub-regional level, are based on the perception that they will support economic development in the context of geographic proximity, an assessment that also applies to the sub-regional integration dynamic within the Mekong region. The chapter is divided into the following sections. The first part will outline the debate on regional and sub-regional integration, followed by a more detailed evaluation of how to apply the concept of sub-regional integration to the Mekong River basin, followed by an evaluation of to what extent China’s BRI represents an added layer for sub-regional integration dynamics within the context of the Mekong River basin.

2.2 Various approaches to regional integration and BRI When investigating regional integration processes, it is vital to remember Hurrell’s (1995, 334) assessment that all regions are politically contested, and Payne and Gamble’s (1996) observation that no regions exist permanently, as they are constructed through collective human action. Nonetheless, it should be emphasised that, while the regional level provides a specific framework for sub-regional integration dynamics, the global-level impact cannot be disregarded, either. From a rather general perspective, we can differentiate between several levels of integration: the global, macro, sub-regional, and micro. For the focus of this book, the sub-regional level is of specific interest. Söderbaum (2005), for example, describes sub-regions as being composed of a small number of states, which distinguishes them from regional-level integration processes. Breslin and Hook (2002) support a similar definition by pointing out that the only difference between sub-regionalism and regionalism is the former’s focus on a smaller scale and a lower level of issues. Alike argues Cottey (2009, 15), stating that a sub-region represents a smaller group of states as part of an integration process, enabling them to share the benefits that a closer co-operation on various issues may offer. Focusing on process, Manoli (2012) defines sub-regional integration as a process of regularised, significant political and economic cooperation characterised by low-level institutionalisation among a group of neighbouring states. With regard to the specific dynamics of regional integration processes, another vital differentiation can be identified, one between regionalism and regionalisation. Breslin and Hook (2002, 4) assert that regionalism refers to the deliberate and purposive attempts national states make to create formal mechanisms, often described as a ‘top-down’ integration process, whereas regionalisation refers to a ‘bottom-up’ process, informed by the actions of non-state actors, based on perceived economic returns at the local level. Making the same argument, Hettn et  al. (2002) state that regionalism is commonly associated with a deliberate

Regional cooperation in the Mekong Basin  23 strategy of national actors aiming for formal institution-building, while regionalisation connotes a processual dynamic based on the pattern of cooperation and integration within a particular space below the national level, but on occasion cross-national. Consequently, we can describe regionalisation as a process of increasing social and economic interaction within a specific geographical context, occasionally transcending national borders. In such conditions, proximity too takes on a vital aspect and with it how to address local underdevelopment and missing infrastructure interconnectivity. This, in turn, gives sub-regional integration a ‘bottom-up’ character, as political, economic, and social actors below the national level are the key actors in support of sub-regional integration dynamics, but with less interest in developing a stringent framework of specific regulations. However, with regard to sub-regional integration processes, it is worth remembering that, while displaying distinctive characteristics, the process may be embedded within the contextual setting in the case a regional integration process exist. In such a case, the regional integration process will generate an impact on how the sub-regional integration process will unfold. One can, for example, study the extent of the institutional framework informing the EU integration process at the regional level and compared it with the less institutionalised regional setting of the ASEAN integration process. Both regional integration processes generate a specific but different regional institutional setting, with different implications for sub-regional integration processes. For example, subregional cooperation within the EU does take advantage of agreements on open borders, on a common economic sphere, and on less restrictive trans-national traffic and investment regulations, to name some of them. Within the contemporary ASEAN integration process, such support in transcending national borders within a regional setting is not provided to the same extent. This, in turn, generates a different framework within which sub-regional integration dynamics will take place. Even so, the importance of geographic proximity and the potential for generating local gains from cooperation at the sub-regional level do exist independently from the regional institutional setting, even though the regional level could be supportive of a sub-regional integration process. Another critical aspect, with regard to sub-regional integration processes, includes developments at the global level. One merely has to remember how Cold War rivalry limited various regional and sub-regional integration dynamics within Europe and Asia by generating a stringent political divide between distinct ideological camps. This is an assertion supported by Telo (2014), who identified the system-level impact by emphasising that the end of the Cold War strengthened the plurality of political actors not only at the global but also at the regional level. As a result, the end of the Cold War rivalry did open political spaces, which, in turn, supported various regional and sub-regional integration dynamics. Indeed, a GMS-style integration process within Southeast Asia would not have been possible to instigate during the Cold War period. Only with the end of the Cold War period, with the accompanying political and economic change, could a sub-regional integration process like the GMS take place. In like

24  Christian Ploberger manner, the extended EU integration became possible only after the Cold War division within Europe ended. Consequently, overcoming the previously existing political–ideological division was a pre-requisite for regional and sub-regional integration processes to take hold. It was this fundamental transformation at the global level that supported a re-consideration of the political-economic space and thus enabled the Mekong River basin to be viewed from an encompassing perspective when considering the support for sub-regional integration dynamics. Another and almost equally relevant structural change at the global level occurred with economic globalisation, characterised by global production networks. While economic globalisation increases the pressure on different localities, it also offers opportunities for growth at the local level and participation in global production networks. This, in turn, may support a sub-regional integration process, which often focuses on generating economic development at the local level. In following the description of sub-regional integration outlined above, we do encounter some descriptive challenges as to how to characterise BRI in regional integration terms, especially in the context of supporting sub-regional integration within the Mekong region. It is worth remembering that China’s BRI was conceived with a keen consideration for deeper cooperation between the participating countries, such as integrating the different development strategies, enhancing policy coordination, supporting a deep integration of markets, enhancing intergovernmental cooperation, and facilitating regional cooperation (Vision and Action 2015). From such a perspective, BRI apparently conforms to a top-down, government-led process. As such, BRI does not respect another characteristic of sub-regional integration: to be based on a bottom-up process. Yet, at the same time, BRI is consistent with a description of sub-regional integration processes as outlined by Breslin and Hook (2002), Cottey (2009) and Manoli (2012), by including a small number of participating countries and opting for a low institutionalisation. Adding to the challenge of describing BRI in regional integration terms is that, while national governments take on an important role in facilitating cooperation at first, the selection, negotiation, and implementation of specific projects will be done at a lower level. Consequently, while it supports sub-regional integration processes within the Mekong region, BRI may be characterised as being closer to a top-down process, even though various non-central state actors, such as provincial governments and companies, are relevant operational actors, especially within China. Such a description can also be applied to two related integration processes within the Mekong region: the GMS and the LMC processes. Such a multifaceted characterisation of BRI is further supported by the circumstance that all involved countries within the Mekong region are strongly centralised countries, with central governments taking a strong lead in political and economic decision-making. As such, BRI-related regional integration support may also be characterised as regionalism instead of a regionalisation process. Even though this degree of integration represents a rather distant target, and it is questionable if it ever will be successful in reaching

Regional cooperation in the Mekong Basin  25 such a strong integration level, it is still emphasised as a strategic task. For that reason, the assessment made by Fawcett (2005, 26) that a certain degree of definitional and theoretical elasticity is required should be recognised. What is more, as emphasised by Calleya (1997) and Börzel (2012), an agreed definition of what a region is does not exist; consequently, a considerable amount of flexibility must be accepted when identifying regional integration processes.

2.3 The Mekong region as a focus for sub-regional cooperation The Mekong River basin spans a wide area with a varied terrain, and from an overall perspective, the Mekong, or the Lancang as the river is known in China, takes on various characteristics, first that of an inland river (China), then a border river, and eventually, an international river network (middle and lower sections of the Mekong). At 4,800 km, it is the third longest in Asia and Asia’s most international river, connecting China, Laos, Myanmar, Thailand, Cambodia, and Vietnam, or more specifically, particular parts of those countries. However, for its first 2,100 km, it is situated within China, an aspect not to be overlooked. Even so, by connecting different parts of countries, the Mekong River basin generates a specific space through interlinkages, so the Mekong basin can be perceived as a specific geographical setting, which supports a sub-regional integration dynamic. The Mekong River basin has been shown to have great economic potential, based on the available resources within it; an extensive workforce and potential customer base, with a population of over 250 million; and physical advantages centred on its geographic location, by being located in the centre of Southeast Asia, close to China and the sea alike. Living within an IRB, as the Mekong region undoubtedly is, with a major river at its core, generates an awareness of belonging and connectivity beyond one’s immediate neighbourhood, as people and communities depend on the river for their livelihood. In this way, geographic connectivity generates a specific feature of an IRB, even when communities are separated by national borders. An IRB, as a source for sub-regional integration processes, represents a combination of functional and physical aspects, since economic, social, cultural, and security issues not only exist but are supported by the physical aspects of IRBs, which generate an extended and connected geographical space. This is a position also advocated by Söderbaum (2015, 22), who identifies river basins as a particular focus for regional integration projects in their own right. It is also worth pointing out that the EU Commission defines the Danube region, another IRB, in functional terms, as a river basin, and not in political-economic terms (European Union Strategy for Danube Region 2010, 3). Similarly, the leaders of the LMC process also define their cooperation as being based on a geographical linkage through a shared river that binds the countries together (Vientiane Declaration 2020). Within this context, proximity in its various forms – geographical, environmental, and economic – takes on a specific relevance as a source for sub-regional integration processes within an IRB. Proximity within an IRB exists because of

26  Christian Ploberger the river forming the basin, since the people living around it are exposed to that river in one way or another in a positive way (supply of water, etc.) as well as in a negative sense, such as harmful environmental impacts extending along the river (instances of pollution or flooding events). For these reasons, proximity can be identified as a primary aspect when considering regional integration processes within an IRB (Ploberger 2020). Proximity within an IRB also implies that negative impacts are more likely to be shared within a wider space and over an extended geographical distance. In this sense, an IRB refers to an interlinked space, transcending national borders. Such a description of interlinked space sounds similar to what was described by Keohane and Nye (1973) as complex interdependence and corresponds with Painter’s (2010, 1093) statement that space can best be recognised as the consequence of networked relations. Another primary aspect related to regional cooperation in general is associated with the expectation that cooperation and infrastructure integration will support local development; this also applies within the context of an IRB and therefore supports the more traditional, positive perception of proximity. After all, infrastructure connectivity will further enhance and thus strengthen cooperation within an IRB, as well as related sub-regional integration processes, by supporting the development of a particular spatial setting, with the underlying expectation that this will support local development. A final aspect that needs to be considered is how to locate an IRB-based subregional integration process within a wider regional integration dynamic. We should remember, as stated previously, that sub-regional integration processes are part of, and cannot be isolated from, development at the regional or even the global level. As the sub-regional integration process increases the density of cooperation at the local level, it cannot isolate itself from developments at the regional level because integrational processes at the regional level may either offer or restrict incentives for sub-regional integration processes. This, of course, depends on the degree of regional level integration or the lack of it. No doubt, the political-economic integration framework at the regional level can either facilitate or restrict sub-regional cooperation processes. With regard to the Mekong region, ASEAN represents the relevant regional level. Since the ASEAN integration process is rather less encompassing than the European-style single market and free movement of people and goods, considerable nation-specific administrative and custom regulations continue to exist. Consequently, less additional support is offered for sub-regional integration dynamics. Even so, closer cooperation at the regional, ASEAN level, is envisaged and to some extent is in the process of being implemented, based on its 2015 guidelines ‘ASEAN 2025: Forging Ahead Together’, also known as the Kuala Lumpur Declaration. The stated aim is to implement a further step towards regional co-operation and integration (ASEAN 2025, 2015). Forging a stronger internal integration within ASEAN will also generate an impact on sub-regional cooperation since all the participating countries in the Mekong region’s sub-regional integration process, with the exception of China, are ASEAN members. However, there is still a long way to go to achieve a comparably strong internal integration when compared with the European integration

Regional cooperation in the Mekong Basin  27 process, so the actual support offered for the sub-regional integration process will be rather limited for the time being. We can take the example of cross-border trade, traffic, and customs regulations. Even at the Mekong’s sub-regional level, there exist constant challenges for goods crossing borders, based on a lack of unified customs regulations and border management. To ease those challenges, the GMS started to formulate and implement cross-border trade agreements. While making progress in their implementation, the movement is rather slow. It is worth recognising that such agreements are based on agreements between specific countries and have not been reached at the regional, ASEAN, level. Easing the administrative challenges in cross-border trade and economic cooperation is also a subject the BRI framework tries to address by calling for an easing and standardisation of processes between participating countries (Vision and Action 2015). This case once again offers an example, where a BRI-related strategic focus tries to address already identified shortcomings in some cooperation dynamics between the member countries of a sub-regional integration process. Yet, proximity within an IRB often becomes a serious political topic between up-stream and down-stream countries. How this challenge of equal distribution of resources within an IRB is addressed among the riparian countries will have an impact on sub-regional cooperation. Failing to address resource distribution and resource competition can also augment the negative aspects of proximity. If not managed thoroughly, resource competitions could generate serious political conflicts between up-stream and down-stream countries sharing an IRB. It is also worth remembering that supporting economic growth and development will also increase the demand for resources and thus add further pressure on how to share the resources within an IRB equally. For these reasons, the very success of a sub-regional integration process could therefore increase the potential for resource competition and associated political-economic conflicts.

2.4 The Mekong River basin’s sub-regional integration process and BRI We can observe both established and new processes of different but complementary sub-regional integration dynamics within the Mekong region, based on the GMS, BRI, and the related LMC processes. While one could point out that they may differ in their political backing – as the GMS process is supported by the ADB, which itself is strongly supported by Japan, whereas BRI and the LMC process are strongly Chinese-backed approaches – they have in common the need to address the continuous challenges the Mekong region is facing: infrastructure connectivity and underdevelopment. There exists an ongoing perception within the riparian countries that sub-regional cooperation will support the Mekong regions and their own development prospects. Yet, as within other IRBs, proximity does offer a special focus for sub-regional cooperation within the Mekong basin in both positive and negative terms. At the same time, the quest for equal resource distribution between up-stream and down-stream countries is a specific subject as well.

28  Christian Ploberger 2.4.1 Development and sub-regional cooperation Among the riparian countries, with Thailand and China, we can identify two of the more developed countries. While in both cases, only parts of each country are linked with the Mekong River basin, each central government shows a strong commitment to supporting economic development and sub-regional integration dynamics within the Mekong region. This is especially accurate for China, not least because of its economic strength and political interest in the sub-region, in offering domestic development incentives, but also from a wider strategic perspective by supporting China-ASEAN cooperation. Thailand too shows a strong commitment to being part of a sub-regional integration dynamic within the Mekong region, though its ability for support is rather more restricted, especially when compared with China’s resources. Another important actor supporting both the development and sub-regional integration within the Mekong region is the ADB’s GMS process, based on an early recognition of existing sub-regional integration potential, on local resources, and on the potential offered for local development within a sub-regional integration framework. While there is a general recognition of the success of the GMS process in enhancing infrastructure integration within the Mekong region, there is also a recognition that infrastructure development represents a continuous focal point for supporting the sub-regional integration process within the Mekong region. This is a topic recognised within the BRI framework and the more recent Chinese-led undertaking of the LMC process. For certain, infrastructure interconnectivity is not only an aim in itself but is also perceived as a factor supporting local economic development. In this context, BRI and the LMC processes are welcomed for the additional resources they offer for sub-regional infrastructure development. Such support is confirmed by the most recent LMC Leaders Meeting through their Vientiane Declaration, which states that the LMC process supports national development and sub-regional cooperation by narrowing the development gap between the member countries. It adds that the LMC process needs to be interpreted within the context of BRI and ASEAN’s Master Plan on ASEAN Connectivity (Vientiane Declaration 2020). This statement also reaffirms that the LMC process has to be interpreted not only within China’s BRI but also in the context of China-ASEAN relations. Busbarat (2018) points out that the LMC process will support the members’ own development as well as the cooperation between them and, by extension, cooperation within ASEAN by providing another source for integration and economic growth. This, in turn, also offers an indication of the interlinkage between interests at the regional and sub-regional level and how the two levels are interacting. Such an assessment also provides another indication that China’s BRI engagement within the Mekong region’s sub-regional integration process goes beyond the supposedly narrow focus of great-power interests, as is often claimed by geopolitically focused analysis, and supports a perception of BRI as being a continuation and umbrella of preBRI Chinese government policy strategies (Ploberger 2017). After all, Chinese

Regional cooperation in the Mekong Basin  29 investment based on the LMC and the BRI initiatives supports previous GMSfunded infrastructure investment and thus offers support for a shared vision of infrastructure connectivity, and it consequently further encourages sub-regional integration within the context of the Mekong region. This synergy between BRI, LMC, and GMS and its further potential is also recognised by Sak in his chapter on Cambodia by pointing out that their individual focuses do offer an opportunity for enhanced cooperation. Taking advantage of and enhancing the complementarity of the Mekong’s region sub-regional integration by supporting the synergetic effect between BRI, LMC, and GMS further contributes to the contextualisation of a sub-regional space and thus sub-regional integration dynamic within the Mekong region. Dittmer (2017) points out that China’s engagement with other countries through its BRI can be characterised as an alternative to a traditional alliance system by refusing to interfere in the internal affairs of other countries, but by instead favouring a creative involvement based on ‘strategic partnership’ and ‘win-win’ relations. Such a comprehensive, strategic approach is also applied in China’s BRI-related engagement to foster sub-regional cooperation within the Mekong region. The ‘win-win’ strategy expressed in the BRI supports a free flow of goods and investment between the participating countries, an enhancement of customs cooperation to reduce clearance time and costs, and the formation of cross-border economic zones in support of the national development of the involved countries (Vision and Action 2015). Such a supportive perspective of BRI is also shared by a number of countries within the Mekong region. Thailand, for example, was not only an early supporter of the GMS process but the original source for the LMC process, though it was taken up and implemented by China. As evaluated in Ngampramuan’s chapter, Thailand has also been quite forthcoming in welcoming BRI-related investments to support sub-regional infrastructure integration, like modern railway developments. However, Thailand also has a favourable attitude towards BRI’s supporting its own development and industrial up-grading process, the so-called Thailand 4.0 strategy, and welcomes BRI investment in its flagship regional developments zone, the Eastern Economic Corridor, as shown by Ngampramuan. From a Chinese perspective, offering stronger support for sub-regional integration processes through its BRI-related activities will also support provincial development within its Yunnan province, a province that, based on its development level, belongs among the lesser developed of China’s provinces. Provincial development is a critical aspect of BRI, regularly ignored in geopolitical analyses of the BRI framework. This domestic focus, from a Chinese perspective, within the BRI framework is also strongly supported by Li, Zhang, and Hushow in their chapter on Guangxi, stressing that BRI has generated considerable opportunities for provincial governments to support provincial development. Indeed, in the context of the Mekong region, the BRI framework offers not only Yunnan the opportunity for provincial development, as Guangxi province, too, tries to take advantage of the BRI framework in addressing its own development challenges. As pointed out by Li, Zhang, and Hushow, the opportunities offered

30  Christian Ploberger by BRI for forming land and sea corridors provide Guangxi with a valuable opportunity to enhance its cross-provincial and international integration. Like Yunnan, Guangxi too can take advantage of its geographic location in the south of China and at the border with Southeast Asia. Indeed, Guangxi is the only Chinese province that has a land and sea border with Southeast Asia, adding to its strategic location and Beibu Gulf Port provides not only an important port for Guangxi itself but also a transit point for other Chinese provinces and landlocked cities, like Chongqing or Chengdu. For these reasons, Guangxi can be identified as another supporter of BRI-related sub-regional cooperation. At the same time, it is also worth noting that Guangxi’s attempts at engagement with Southeast Asia pre-date the BRI, a similarity it shares with Yunnan. Another similarity they share is that pre-BRI engagement with the Mekong region was rather limited because of central policy strategies, which put more effort into opening the eastern provinces instead of the border area with Southeast Asia. Nevertheless, this offers another example of how the BRI framework has integrated previously existing provincial policy efforts. Those processes of sub-regional cooperation also supported provincial development within Guangxi. When we take a geographic perspective, Beibu Gulf is not only the closest Chinese coastal port cluster to ASEAN countries but it also offers a convenient seaport location for southwestern and south-central China. Therefore, based on those aspects, as emphasised by Li, Zhang, and Hushow in their chapter, Guangxi’s provincial government welcomed the opportunities offered for further cooperation within the BRI framework, since in 2005 it had formally joined the GMS process and the pre-existing sub-regional integration process within the Mekong region. Significant improvements to railroad, highway, and seaport infrastructure followed. The China–Indochina Peninsula Economic Corridor – connecting the Pearl River Delta with the Southeast Asian peninsula, via Guangxi, Vietnam, Laos, Cambodia, Thailand, and Malaysia – offers a good example and is one of the six economic corridors explicitly supported by the BRI. This domestic perspective from a Chinese angle is often disregarded by international observers when evaluating the BRI’s character (Ploberger 2017). This shortcoming is also identified by He (2019), who makes the claim that the domestic aspect of BRI is widely ignored because of the overwhelming focus on the perceived geopolitical and geo-economic implications BRI may generate. It is a perspective shared by Hong (2017), who points out that the main focus of BRI is to support the development of China’s landlocked western provinces by integrating them with the markets of Southeast Asia, consequently contributing to a further development impulse within the Mekong region’s sub-regional integration process. Yet, despite this past and ongoing success generating and upgrading the infrastructure connectivity within the Mekong region, one could argue that so far, the interrelated sub-regional cooperation within the Mekong region, linked to GMS, BRI and LMC, has been more successful in establishing infrastructure integration than in overcoming administrative barriers based on national boundaries. While this success should not be underestimated to enhance the internal coherence of sub-regional integration, it would also require that additional

Regional cooperation in the Mekong Basin  31 improvements be agreed on administrative obstacles in order to further support sub-regional integration within the Mekong region and the advancement of domestic development among the riparian countries. Sok, in his chapter on Cambodia, does emphasise this aspect by stating that Cambodia does perceive BRI as an opportunity for addressing its own investment and development priorities. Hence, considering that the Mekong region is characterised by a generally low development level and that pressure for facilitating development represents a prominent government target within the Mekong region, the pressure for a fair share of resources will only increase further. As such, the potential for political conflict exists over how to share the resources between up-stream and down-stream countries. But the issue of resources should look beyond a narrow, China-only focus, since activities in the middle section of the Mekong, based on Thai and Lao domestic development strategies, also generate negative impacts on countries further down-stream, like Cambodia and Vietnam.

2.4.2 BRI, sub-regional integration, and resource competition Although resource competition and the demand for equal distribution of resources have an inherent potential for generating political conflicts among the Mekong’s riparian countries, so far this has not occurred. However, all riparian countries have a special interest in the water resources available within the Mekong region. The issue is further complicated since harvesting the Mekong region’s water resources for hydropower plants, which has become a prominent topic, reduces its availability for alternative uses, like agricultural irrigation, and vice versa. Rising water demand based on sub-regional economic development and rising private consumption are additional issues to be considered. Let us take a closer look at the challenges at hand. While the extent of China’s hydropower development strategy along the upstream section of the Mekong IRB does attract a lot of criticism, there also exist plans by Laos for extensive hydropower development within the middle section of the Mekong region as well. Undeniably, the concerns of down-stream countries need to be taken into consideration, a subject especially relevant with regard to sub-regional cooperation. However, as mentioned before, almost half of the length of the Mekong is located within China, so criticising it for utilising the river’s resources for generating electricity in support of its own development is to some extent missing this aspect. Also, storing up water in dams could also allow water to be released in dry periods. While this actually has been applied in the past with regard to some of the Chinese dams – keeping the middle section supplied with additional water during the dry season – the criticism of Chinese up-stream dam building did not go away, not least because of the very low water levels along the middle and lower sections of the Mekong during the dry periods of recent years. It seems that critics of Chinese up-stream dam building are less inclined to recognise that most of the water for the middle and lower sections of the Mekong actually comes from sources within the Mekong region’s middle section (see below for details) and that climate change is also taking its toll on the

32  Christian Ploberger Mekong’s water resources. As pointed out in a recent MRC news statement, extreme flooding as well as recurrent droughts within the Mekong basin have been increasing in number over the last two decades, causing considerable economic losses for local agriculture and other occupations dependent on water supply, consequently generating a severe negative impact on people’s livelihoods. They are an indication of the risks the Mekong Basin is facing from extreme weather events (Flood and Drought Remain Key Challenges for the Mekong: Report 2020). Therefore, changing local and regional precipitation and the occurrence of extreme weather events are indications of the impact climate change generates not only on the water resources of the Mekong region but, by extension, on the livelihood of the people within the Mekong sub-region. In the case of Laos, the other crucial actor in hydropower development within the Mekong region, its motivation for extensive hydropower development plans is more complex, as Laos actually does not need all the energy the planned dams will produce. Indeed, hydropower plant development within Laos is being interpreted as a government strategy to generate revenue for national development, emphasising that Laos does not have many other resources at its disposal for supporting national development. After all, dam building by Laos is necessitated by the continually rising energy demands in Thailand and Vietnam; without those demands, dam building on the middle section of the Mekong would not be much of a subject at all. This interlinking, transnational aspect of energy demand and supply could be identified as a supportive argument for sub-regional cooperation. In this context, the economic success of the Mekong region’s sub-regional integration process enhances even further the issue of energy supply as the energy demand continues to rise, a topic well-addressed by Han, Meas, and An in their chapter on the rising energy demand within the Mekong region. They also point towards further related challenges, as a shift in energy resources will be critical to reducing the sub-region’s contribution to climate change, which, in turn, will require additional infrastructure investments to support such a shift towards the further inclusion of renewable energy resources and LNP. The critical issue of energy supply is also addressed in the official BRI description by stating that the connectivity of the energy infrastructure needs to be ensured by supporting the construction of oil and gas pipelines and cross-border power supply and transmission networks (Vision and Action 2015). Yet, with regard to dam building by Laos, it is also worth taking into account that it is constructing dams not only on the Mekong itself but on its tributaries as well. This is highly relevant as it will further reduce the amount of the Mekong’s water since Laos provides a considerable catchment area for the middle and lower Mekong section. A recent evaluation by the Mekong River Commission assessed that China contributes about 16%, Laos directly 30% and another 23% from a shared geographic area with Cambodia, and Thailand 6% of the water to the middle and lower sections of the Mekong region (MRC 2020). This assessment clearly indicates the significance of the middle section of the Mekong region for the contribution of water resources to the Mekong’s IRB and in supplying water for the countries located further down-stream, like Cambodia and Vietnam.

Regional cooperation in the Mekong Basin  33 This aspect even increases in its relevance when we consider that around 50 more hydropower plants are planned within the middle section of the Mekong region, on the mainstream and its tributaries. This situation offers a flip-side to the above argument for sub-regional cooperation based on sharing energy resources, since if all of those hydropower development plans were implemented, this would lead to a serious negative impact on the region’s water resources and, on the people, and communities depending on them, with the potential for generating serious political consequences and possibly undermining sub-regional cooperation. Such a scenario could generate further serious implications for supporting economic development and thus may have a negative impact on support for sub-regional integration processes like the GMS and BRI, as fostering development and improving the livelihoods of people also increase the demand for water resources. However, dam building is not the only serious challenge to the Mekong’s water resources; development in general, as a consideration of using the Mekong’s water resources for widespread agricultural irrigation, adds considerable pressure, as well. While within the total estimated area fit for irrigation of 4.3 million ha, 3.6 million ha are already used; this nonetheless indicates that a considerable extension of agricultural irrigation is still possible, with Vietnam (42%) and Thailand (30%) carving out the biggest sections from the total available agricultural irrigation potential (FAO 2016). In particular, Thailand has extensive plans for agricultural irrigation in its north-eastern provinces along the Mekong River. While this will support local development within north-eastern Thailand, it will increase the pressure on the Mekong’s water resources and thus add to the vulnerability of the Mekong’s IRB. It is also worth recognising that irrigation-based water withdrawal accounts for 90.5% of the total water withdrawal from the Mekong (FAO 2016). From the Chinese, Lao, and Thai perspective, using Mekong’s water resources to support domestic development is a rational national development strategy, as these are examples of nation-focused policy strategies. While representing understandable national approaches for supporting development, it does not help create a wider perspective on how to share the Mekong’s regional resources and thus how to address the underlying aspects of resource competition. This may also generate serious implications for BRI-related projects, which not only aim at supporting sub-regional integration but also nation development among the riparian countries and thus contribute to the resource competition challenge. Yet, it is worth recognising that such an effect is generated independently of what international development bank is supporting such national development projects. After all, down-stream countries like Cambodia and Vietnam are most exposed to the impact generated further up-stream. Two prominent examples that will be further exposed to reduced water flow and sediment sources are Cambodia’s Tonle Sap Lake and Vietnam’s Mekong Delta. After all, and in addition to the challenges faced by the Mekong’s delta in southern Vietnam (such as saltwater intrusion through sea-level rise), the reduced amount of water and sediments reaching it will increase its erosion and its degradation from a major agriculture

34  Christian Ploberger area. Similarly, Cambodia’s huge inland lake, the Tonle Sap, also confronts serious challenges associated with up-stream water use and the reduction of silk deposition transported down-stream, as this will reduce its fertility, as one of Cambodia’s major agricultural areas. In both cases, a further degeneration of both major agricultural areas will generate a serious domestic backlash, with potentially serious implications for sub-regional cooperation. Therefore, national development strategies, which often do not take into account the transnational and river-basin-wide impacts they may generate, can accelerate resource competition and consequently generate a political-economic backlash against subregional cooperation. After all, the concern with national development strategies and their basin-wide negative impacts represent a topic already identified in the MRC Annual Report 2019 (2020, 32), which emphasises that transboundary impacts of national development projects affecting the Mekong River basin need to be identified and addressed systematically. The failure to do so will return as a political challenge to further sub-regional cooperation. Indeed, the very success of sub-regional cooperation and the ability to generate further economic growth and development do carry a very real potential for increasing the resource competition within the Mekong region even further and, with it, the potential for political conflicts. Nevertheless, the political complexity of addressing the challenge of how to share the resources of the Mekong’s IRB, its development benefits, and the potential implications for sub-regional cooperation become rather evident when we take into account that, for example, Vietnam is co-founding some dam projects in Laos despite the potential negative impact this creates for the Mekong Delta. A similarly complex case represents Thailand, which is another important financier for the Laotian dam building along the middle section of the Mekong and a major customer for the energy generated by those dams. Cambodia, too, is in need of the electricity generated from the dams built in this section of the Mekong. Indeed, any further support for sub-regional development, based on the established strategies of the GMS, BRI, and LMC, while supporting the human development level within the sub-region, will inevitably raise energy consumption and thus energy demand. For these reasons, and rather ironically, development success presents further challenges for sub-regional cooperation. Even so, it should not be forgotten that the prospect for generating economic development represents an underlining aspect for sub-regional cooperation; therefore, what is perceived to support this aim will be welcomed since the Mekong region is still characterised by underdevelopment.

2.5 Preliminary assessment of sub-regional integration dynamics with the Mekong region and BRI Based on the evaluation of how to characterise sub-regional integration processes, BRI does conform to some of them while missing other aspects. After all, BRI, within the context of the Mekong region’s sub-regional integration process, can be characterised more as a top-down instead of a bottom-up integration process.

Regional cooperation in the Mekong Basin  35 This is also linked to the more centralised political systems of the involved countries, even though China itself offers more political space for provincial decisionmakers than the other countries do. Indeed, to characterise the Mekong region as a sub-region is also confirmed by the long-established GMS process, and there is no doubt that the Mekong region represents a sub-region within the regional-level context of ASEAN. As such, BRI-related support for infrastructure investment within the Mekong region does contribute to increasingly closer connectivity within the sub-region and to the sub-region’s economic development. BRI can be described, therefore, as supportive of sub-regional integration processes, at least within the context of the Mekong region, a characterisation that is supported by the official Chinese interpretation of BRI, which proposes that it should take advantage of and support different integration processes within various regional and sub-regional settings. What is more, in the official description of the character of BRI, there is also an emphasis on supporting closer economic integration between the participating countries by aligning policy strategies, integrating markets, and synchronising customs regulations, to name some examples – all of which points to a process of supporting closer integration. While we may expect a further integration among the counties of the Mekong region towards a more integration region, one which is also supported by the BRI framework, the assessment made by Elek et al. (2017) that the connectivity among the countries participating in BRI will be by the middle of the 21st century as entrenched as that between the Pearl River Delta and Hong Kong seems still to be a bit premature. Yet, at the same time, and based on the success of supporting sub-regional integration processes within the Mekong region, the demand for resources will increase and with it the pressure of how to distribute them equally among the riparian countries. As a consequence, this increase in resource competition could undermine sub-region cooperation in the future and, with it, raise critical questions of investment decisions within the sub-region. However, it is vital to recognise that such an impact has not yet materialised and for the time being seems rather remote; after all, despite considerable past infrastructure investment, more investment in sub-regional infrastructure is still required to support sub-regional development. But we should not overlook the serious likelihood that the very success of supporting sub-regional development will contribute to increasing resource competition, with the added feature that national development strategies of riparian countries are not sensitive to their potential region-wide impacts. Since further sub-regional infrastructure integration will no doubt take place, BRI-related investments in support of it will be viewed as contributing to this process and being supportive of sub-regional economic development.

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36  Christian Ploberger Börzel, T.A. (2012) Do All Road lead to Regionalism? In: Börzel, T. A., Goltermann, L., Lohaus, M., and Striebinger, K. (eds.) Road to Regionalism: Genesis, Design, and Effects of Regional Organisations. London, Routledge, pp. 255–263. Breslin, S. and Hook, G.D. (2002) Microreginalism and World Order: Concepts, Approaches and Implications. In: Breslin, S. and Hook, G.D. (eds.) Microregionalism and World Order. Basingstoke, Palgrave MacMillan, pp. 1–22. Busbarat, P. (2018) Grabbing the Forgotten: China’s Leadership Consolidation in Mainland Southeast Asia through the Mekong-Lancang Cooperation. Perspective, 2018(7), 6–7. Calleya, S. (1997) Navigating Regional Dynamics in the Post-Cold War World. Aldershot, Dartmouth. Cottey, A. (2009) Sub-regional Cooperation in Europe: An Assessment. Bruges Regional Integration and Global Governance Paper 3. Available from: http://www.cris.unu.edu/ fileadmin/workingpapers/BR IGG_papers/BR IGG_3-2009__revised_version.pdf [Accessed 16 October 2016]. Dittmer, L. (2017) Introduction. In Dittmer, L. and Ngeow, B.C. (eds.) Southeast Asia and China A Contest in Mutual Socialization. Singapore, World Scientific Publishing. pp. 1–18. Elek, A., Wylie, J., and D’Souza, S. (2017) The Future of the Belt and Road: Long-Term Strategic Issues. Shenyang, Qianhai Institute for Innovative Research. European Commission (2010) Strategy for the Danube Region, Impact Assessment Summary. European Strategy for the Danube Region. The Commission to the European Parliament, the Council, the European Economic and social Committee and the Committee of the regions European Union. Available from: http://ec.europa.eu/smartregulation/impact/ia_carried_out/docs/ia_2010/sec_2010_1491_en.pdf. [Accessed 14 April 2016]. FAO (2016) AQUASTAT website. Food and Agriculture Organization of the United Nations (FAO). Mekong, Water Resources. Available from: http://www.fao.org/nr/ water/aquastat/countries_regions/profile_segments/mekong-WR_eng.stm [Accessed 10 October 2020]. Fawcett, L. (2005) Regionalism from an Historical Perspective. In: Farrell, M., Hettne, B., and Langenhove, L.V. (eds.) Global Politics of Regionalism: Theory and Practice. London: Pluto Press. pp. 21–37. Flood and Drought Remain Key Challenges for the Mekong: Report (2020) Mekong River Commission, online, 16 June 2020. Available from: http://www.mrcmekong. org/news-and-events/news/annual-report-2019-pr/ [Accessed 17 June 2020]. He, B. (2019) The Domestic Politics of The Belt and Road Initiative and its Implications. Journal of Contemporary China, 28(116), 180–195. Hettn, B. and Söderbaum, F. (2000) Theorising the Rise of Regionness. New Political Economy, 5(2), 457–472. Hettn, B., Sunkel, O., Inotai, A. (2001) Comparing Regionalism: Implications for Global Development. Basingstok, Palgrave Macmillan. Hong, Z. (2017) One Belt One Road” and China–Southeast Asia Relations. In Dittmer, L. and Ngeow, B.C. (eds.) Southeast Asia and China A Contest in Mutual Socialization. Singapore, World Scientific Publishing. pp. 211–226. Hurrell, A. (1995) Explaining the Resurgence of Regionalism in World Politics. Review of International Studies, 21(4), 331–358. Keohane, R. and Nye, J.S. (1973) Power and Interdependence. Survival, 15(4), 158–165.

Regional cooperation in the Mekong Basin  37 Manoli, P. (2012) The Dynamics of Black Sea Sub-regionalism. Farnham, Ashgate Publishing Ltd. MRC Annual Report 2019 (2020) Mekong River Commission Part 1 Progress and Achievements. Available from: https://mrcmekong.org/assets/Publications/AR2019Part-1.pdf [Accessed 05 September 2020]. MRC (2020). Understanding the Mekong River’s Hydrological Conditions: A Brief Commentary Note on the “Monitoring the Quantity of Water Flowing through the Upper Mekong Basin Under Natural (Unimpeded) Conditions” Study by Alan Basist and Claude Williams (2020). Available from: Vientiane: MRC Secretariat. Understanding-Mekong-River-hydrological-conditions_2020.pdf (mrcmekong.org). [Accessed 17 September 2020]. Ngampramuan, S. and Ploberger, C. (2020) Sub-regionalism and International River Basins. Newcastle upon Tyne: Cambridge Scholars Publishing. Painter, J. (2010) Rethinking Territory. Antipode, 42(5), 1090–1118. Payne, A. and Gamble, A. (1996) Conclusion: The New Regionalism: The Political Economy of Regionalism and World Politics. In: Payne, A. and Gamble, A. (eds.) Regionalism and World Order. Basingstoke, Palgrave Macmillian, pp. 247–264. Ploberger, C. (2017) One Belt, One Road – China’s New Grand Strategy. Journal of Chinese Economic and Business Studies, 15(3), 289–305. Ploberger, C. (2020) International River Basin a Source for Regionalism: The Conceptual Challenge. In Ngampramuan, S. and Ploberger, C. (eds.) Sub-regionalism and International River Basins. Newcastle upon Tyne, Cambridge Scholar Publishing. pp. 27–40. Sanya Declaration (2016) Sanya Declaration of the First Lancang-Mekong Cooperation (LMC) Leaders’ Meeting - For a Community of Shared Future of Peace and Prosperity among Lancang-Mekong Countries. Available from: https://www.fmprc.gov.cn/ mfa_eng/zxxx_662805/t1350039.shtml [Accessed 08 January 2020]. Söderbaum, F. (2005) Exploring the Links Between Micro-Regionalism and MacroRegionalism. In Farrell, M., Hettne, B., and Langenhove, L.V. (eds.) Global Politics of Regionalism: Theory and Practice. London, Pluto Press, pp. 87–103. Söderbaum, F. (2015) Early, Old, New and Comparative Regionalism: The Scholarly Development of the Field. KFG Working Paper No. 64. Berlin, Freie Universität Berlin. Telo, M. (2014) Introduction: Globalization, New Regionalism and the Role of the European Union. In: Telo, M. (ed.) European Union and New Regionalism: Competing Regionalism and Global Governance in a Post-hegemonic Era. 3rd ed. Farnham, Ashgate Publishing, pp. 1–12. Vientiane Declaration (2020) Full Text of Vientiane Declaration of the Third Mekong-Lancang Cooperation (MLC) Leaders’ Meeting (2020) Source: LancangMekong Cooperation web page. Available from: http://www.lmcchina.org/eng/ n3/2020/0907/c416281-9757480.html [Accessed 14 October 2020]. Vision and Action (2015) Vision and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Road. Issued by the National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the People’s Republic of China, with State Council authorization National Development and Reform Commission. People’s Republic of China. Available from: http://en.ndrc. gov.cn/newsrelease/201503/t20150330_669367.html [Accessed 02th July 2016].

3

Rising energy demand in Mekong sub-region Phoumin Han, Sopheak Meas, and Hatda Pich An

3.1 Introduction At the regional level, Southeast Asia has in recent decades experienced fast economic development that has transformed the region into a manufacturing hub in the international production network. This offers the prospect of increased exports of manufactured products, textiles, and other primary high-quality valued-added products into the global market (Brooks, 2010; Han, 2018). This regional-level transformation is due to international investment, its favorable labor force, the growth of connectivity and innovation, and regional political stability based on the Association of Southeast Asian Nations (ASEAN) integration process, with the Greater Mekong Subregion (GMS) approach supporting sub-regional integration within the Mekong region. Stronger infrastructure connectivity, along with human resources development, has resulted in opportunities for growth at both the regional and sub-regional level. These developments have lifted the living standards through income generation and employment opportunities (Yoshimatsu, 2015). Quality infrastructure, connectivity, and innovation are thus considered key for supporting regional and sub-regional prosperity and sustainable development, with China’s Belt and Road Initiative (BRI) offering needed support for improving the sub-regional infrastructure further. After all, challenges to sub-regional development still exist, like the adequate supply of energy and in addressing the impacts of climate change and reducing local air pollution. At the intersection of these challenges is the corresponding need to rapidly develop and deploy energy efficiency, support low-emissions coal technologies, and double the share of renewables to the energy mix toward more inclusive and sustainable growth. This is because the Mekong Sub-region’s energy demand is expected to triple from 2017 to 2050, a condition that has brought both opportunities and challenges. Despite significant progress in recent decades in terms of energy poverty alleviation, countries such as Cambodia and Myanmar are still struggling to provide energy access to their rural populations. While recent improvements in sub-regional interconnectivity have offered the opportunity for participation in regional and global production network at different degrees (Stone & Strutt, 2010), further improvement and strengthening

Rising energy demand in Mekong sub-region  39 of sub-regional and regional infrastructure interconnectivity is essential to allow further gains to be made with regard of cutting logistics costs and thus creating additional synergies and location advantages. The sub-region is fortunate to have different stakeholders supporting its infrastructure improvement, like the Asian Development Bank (ADB) through its long-established GMS program, and the more recent China-led support through its BRI framework and the associated Lancang-Mekong Cooperation (LMC) initiative. Yet, the fast process of development that the sub-region is undergoing also raises issues of sustainability and of how to sustain its development process. Ensuring and enhancing the subregion’s energy security represents one critical aspect of this. We argue in this chapter that the regional governments need to redesign energy policy toward high-quality energy infrastructure so as to move away from coal, which is the current source of energy upon which these governments are currently strongly depending, and which will be doing a lot of harm to the environment in the long run. We further argue that what the countries in the Mekong Sub-region will need is an environmentally friendly, logistically feasible, and economically responsible alternative energy source and infrastructure. As the study sets out to address these issues, it employs several approaches to gathering data and information. Data on economic, investment, and in particular, energy for the Mekong Sub-region are available in different forms and time periods. We also review key regional initiatives for infrastructure investment and development platforms, such as quality infrastructure initiated by Japan at the G-20 in Osaka; the role of the Mekong River Commission (MRC) and subregional initiatives like China’s BRI and LMC and the GMS process. For energy demand and supply in the Mekong Sub-region, we employ energy modeling using the Long-range Energy Alternative Planning System (LEAP) software, an accounting system used to develop projections of energy balance tables based on final energy consumption and energy input and output in the transformation sector. Energy demand and supply consists of two scenarios: the Business-asUsual scenario (BAU), reflecting each country’s current goals, action plans, and policies; and the Alternative Policy Scenario (APS), which includes additional goals, action plans, and policies that countries could achieve with their best efforts given energy policy reforms and technological development. The APS consists of assumptions such as more efficient final energy consumption, more efficient thermal power generation, and higher consumption of new and renewable energy (NRE) and biofuels. The study, however, does not consider other required investments in the power grid or connectivity costs. It only estimates the required generation to meet the growing demand from 2017 to 2050.

3.2 Review on regional initiatives for infrastructure development The Mekong Sub-region is arguably very fortunate to have different stakeholders supporting its infrastructure improvement in a manner that bridges the missing links in the wider ASEAN region. But quality is far more critical than quantity

40  Phoumin Han et al. if the region is to develop sustainably. The sub-region and particularly ASEAN, therefore, should focus on key development partners that promote long-term development sustainability, especially those that promote quality infrastructure, build responsible human resources, and bring new knowledge and innovation to the region. To begin with, the longest established source for sub-regional cooperation within the Mekong region comes from the ADB, based on its GMS program. Indeed, it can be argued that the GMS concept marks the dawning of sub-regional integration dynamic within the Mekong region, though some earlier attempts were made in the 1950s and early 1960s (see Krahl & Dosch, 2018; Krongkaew, 2004). From its inauguration in 1992 to the present day, the GMS, as ADB’s Southeast Asia Department Director-General Kunio Senga argues, has played a pivotal role in establishing infrastructure connectivity within the Mekong region (Senga, 2012). In doing so, it has contributed to the economic development of the sub-region. It is worth recognizing, however, that Japan is the strongest supporter of the ADB and that the consideration of Japanese business interests in the Mekong region and its resources has also supported the GMS process within the ADB framework (Ogasawara, 2015). Yet, Japan’s interest in supporting the economic development within the Mekong region extends beyond the support for the GMS process as the Mekong-Japan Cooperation (MJC) clearly indicates. In the past, Japan advanced cooperation relating to infrastructure development such as Cambodia’s Sihanoukville Port, Myanmar’s Yangon-Mandalay railway, and Thailand’s high-speed railway. During the MJC meeting in 2018, with the first meeting taking place in November 2009, it was reported that, in 2015, Japan pledged Yen 750 billion of ODA (Official Development Assistance) to support quality growth over three years. Of this, two-thirds have already been allocated (Han, 2018). However, strengthening the soft aspect of connectivity by aligning customs regulations and processes is identified as a continuous challenge to reduce cost and waiting time regarding cross-border trade and cooperation and to further support sub-regional development (Brooks, 2010; Ksoll & Brimble, 2012), a topic also recognized by the ASEAN at the regional level. Without doubt, Japanese business and government interests in the Mekong region are also linked to its regional-level engagement with ASEAN. Japan supports industrial connectivity through the formation of Special Economic Zones (SEZ), industrial promotion measures, and economic corridor development1 to facilitate a stronger economic integration within the sub-region and in extension within the ASEAN. Over time, the Mekong region and the sub-regional integration process within it has benefited significantly from the infrastructure improvement brought by Japan’s ODA support. While Japan has been pioneering and promoting infrastructure development within the Mekong region for a lengthy period (see Ogasawara, 2015), it launched another initiative at the 2019 G-20 Meeting in Osaka: the G-20 Principles for High-quality Infrastructure Investment, as a key to promoting investment for sustainable development. According to Japan’s Ministry of Finance (MoF, 2019), the principles of the initiative should ensure that the quality infrastructure is in harmony with local

Rising energy demand in Mekong sub-region  41 environments, communities, and people’s livelihoods through generating local employment and facilitating technology transfer. So far, Japan has committed USD 110 billion for quality infrastructure in Asia from 2015 to 2020 (Han, 2020b). This is in line with Japan’s global commitment to promote high-quality infrastructure investment to address sustainable economic growth and reduce poverty and disparity. While the focus of this initiative is on Asia as a whole, further positive impacts for the Mekong region sub-regional integration process are expected. Another actor which became quite engaged with the Mekong region and its sub-regional integration process is China. While two of its provinces, Yunnan and Guanxi, participated early in the GMS process, with the onset of China’s BRI, its engagement with the Mekong region took on a different quality. The BRI in general is expected to involve over USD 1 trillion in investments, largely in infrastructure development for ports, roads, railways, and airports as well as power plants and telecommunications networks (OECD, 2018). Financing sources will include those typical of Chinese overseas investments such as Chinese banks (commercial and policy), bonds, state-owned enterprises (SOEs), private Chinese equity, private/public partnerships, the Asian Infrastructure Investment Bank, and others. However, it is expected that the Chinese banks will continue to be the main source of financing for Chinese overseas projects, including those along BRI routes. Numerous projects have been proposed or are already in development. According to data from China’s Ministry of Commerce (MoC, 2016), from January to August 2016, Chinese companies signed about 4,000 project contracts in more than 60 countries, amounting to almost USD 70 billion.2 But because of projects rebranding, it is difficult to actually tell which ones are under the BRI and which are not (Gong, 2018). In one way or another, the BRI is considered as a second wave of Chinese overseas investment and should be seen as a renewed version of the Chinese policy, also known as China’s ‘Go Global’ strategy (FoE US, 2016). This policy was the first to call on Chinese enterprises and industries to ‘go out’ and invest abroad. It is also seen as the key driver to advance China’s interests overseas and demonstrates its growing influence as a rule-shaper in the economic governance of the region and beyond (Yu, 2017), something that countries in the Mekong Sub-region need to deal with carefully. There are, however, growing concerns from recent experiences of BRI megaprojects. There is fear that the BRI could be a ‘debt-trap diplomacy’ due to high interest rates associated with some of the BIR’s projects as in the notorious case of Sri Lanka’s Hambantota Port (Abi-Habib, 2018; Baviera, 2016; Sultana, 2016). There are concerns that projects under the BRI are not transparent and that the BRI itself will be damaging the environment (Russel & Berger, 2019) because it does not offer explicit guidelines on how Chinese investors ought to regard environmental protection or civil society (FoE US, 2016). There is, too, another fear that, despite its effectiveness in relation to construction speed (Sultana, 2016), the BRI’s projects are not sustainable but are the cause for environmental and social issues (OECD, 2018). Thus, if the BRI is to be successful,

42  Phoumin Han et al. the Principles of High-quality Infrastructure initiative will need to be considered in all infrastructure investments with clear regards to environmental protection, and local communities developing BRI projects will have to play an active role. In addition, host-country stakeholders will need to improve the quality of their governance systems to address transparency and finally project sustainability issues. Another Chinese-related initiative in support of sub-regional integration within the Mekong region is the LMC. Despite its relatively recent inauguration, it is one of the most rapidly progressive and has become a notable platform in the Mekong Sub-region. It took only four years – from 2012, when Thailand first proposed an initiative for sustainable development of the Mekong Sub-region – for the LMC to actually come into being. In March 2016, China and the other five Mekong countries held their First LMC Leaders’ Meeting, which released the Sanya Declaration and officially launched the LMC mechanism (LMC, 2017). Although the LMC seeks to promote many aspects of cooperation on security, economic, cultural, agriculture, and poverty reduction issues (Gong, 2020; LMC, 2017; Zhang & Li, 2020), the major driving force is seen through its emphasis on infrastructure development for the region. Some of the major examples are Myanmar’s Kyaukpyu Port and gas pipeline, Laos’ and Thailand’s high-speed railway projects, Cambodia’s irrigation systems, and transport infrastructure and more plans to develop better capacity for navigation along the Mekong River (Busbarat, 2018). A sub-regional cooperation mechanism connecting the six countries along the Mekong River, the LMC has seen China emerge as a willing investor and guarantor for everything as part of its wider BRI. While a comprehensive list of LMC projects is not publicly available, the LMC has provided financial support for at least 132 projects in the Mekong region as of 2018 (The ASEAN Post Team, 2019). In 2019, during the LMC Ministerial Meeting, the LMC also proposed a further 101 projects, all of which were considered fast track to be carried out in one-year or shorter in the six Mekong countries (LMC, 2019b) in order to respond to “socio-economic demands and water related challenges” (LMC, 2019a, p. 2). The LMC, just like the BRI, is often promoted as an effective platform that offers countries in the Mekong Sub-region the resources they need for development (see Liena et al., 2018; Xing, 2017; Xinhau, 2020a, 2020b). But critics argue that China’s strong interest in driving the development of the LMC stemmed from gaining substantial control over the Mekong Sub-region, delimiting influence of external actors such as the US and Japan, and pushing forward its neighborhood diplomacy (Biba, 2018; Middleton & Allouche, 2016). While the LMC can be a building block for deeper sub-regional integration, it can also work against the advancement of broader ASEAN regional cooperation and marginalize other Mekong Sub-regional bodies (Busbarat, 2018; Gong, 2018). Among all the seemingly unchecked development that has flourished as a result of the LMC, perhaps, none has had such an impact on local communities and the environment than the hydropower dams that have sprouted up across the region where China has taken the role of developer or funding agency (The ASEAN Post Team, 2019). While Chinese investment in infrastructure development

Rising energy demand in Mekong sub-region  43 through the LMC is a welcome source of capital for Mekong countries (Gong, 2018), Southeast Asia should approach it more critically to avoid a development that later becomes a trap, does not last, and benefits only the few. Next to the two influential international actors China and Japan, we can also identify a local actor: the MRC. The MRC is another key driving force behind quality energy infrastructure development in the region. As the only treaty-based river basin organization in the region, the 25-year-old MRC has put in place two crucial strategies to guide its four member countries – Cambodia, Laos, Thailand, and Vietnam – in assessing and developing hydropower projects in the Lower Mekong River Basin (LMB) to optimize transboundary benefits while minimizing adverse cross-national impacts. One of them is the Basin-wide Strategy for Sustainable Hydropower Development for the Lower Mekong Basin (SHDS) adopted in 2001 by the MRC Council of Ministers, the organization’s highest governing body. The SHDS recognizes that while each member country has its full responsibility and rights to plan and implement hydropower projects nationally, the MRC is tasked to strike a balance between regional and basin needs and economic development and environmental protection (MRC, 2016). The SHDS, thus, sets out strategic priorities and actions at the basin level to address hydropower opportunities and risks and strengthens basin-wide cooperation and sustainable development (MRC, 2001). It also draws a closer linkage between the energy and water sectors because the need for linked planning between these two sectors in the Mekong region is now more critical than ever before. The Preliminary Design Guidance for Proposed Mainstream Dams in the LMB (PDG) is another key strategic guidance. Adopted in 2009, the PDG provides performance targets and principles for the design and operation of mainstream dams that can help avoid, minimize, and mitigate harmful effects and limit the potential for substantial damage (MRC, 2009). It seeks to establish a common design and operational approach, aiming to meet common objectives and mitigate commonly understood risks and making it possible for developers to plan for and undertake the assessments and designs for mitigation and management measures as early as possible in the project cycle. However, both documents are aging and need to be revisited. With rapid development in the basin, especially in the hydropower sector, it is important that the documents are updated, taking into account major changes that the basin has faced over the last two decades. Studies by the MRC (see MRC, 2018, 2019, 2020a, 2020c) and others (Kondolf et al., 2014; Kummu & Varis, 2018) have indicated that hydropower dams constructed on the mainstream in the upper part in China where the river is called Lancang and on the lower reaches where the river is called the Mekong and on tributaries in the LMB had changed the natural flow regime of the river, yielding both opportunities and risks on hydropower development now and in the future. Gathering the significant economic and greenhouse gas reduction benefits offered through hydropower development should not come at the expense of the unique and abundant ecosystem services and biodiversity on which so many communities in the basin depend. Besides, although the MRC has a critical role to play in water diplomacy and energy infrastructure

44  Phoumin Han et al. development in the region, this and its wider role have not received sufficient credit (Kittikhoun & Staubli, 2018). Thus, the Commission needs to evolve, and its four member countries need to empower it further if the Mekong River is to develop sustainably and responsibly (An et al., 2020; Sok et al., 2019).

3.3 The economic impacts of connectivity and infrastructure investment The coordinated development of soft and hard infrastructure is also essential to maintain growth in the region. The new international division of labor calls for a novel approach in infrastructure development, in which the Mekong Sub-region is prepared to participate actively for the promotion of economic corridors: the Southern Economic Corridor (SSEC), the East-West Economic Corridor (EWEC), and the North-South Economic Corridor (NSEC). These economic corridors, together with the fast acceleration of domestic infrastructure development including SEZ, urban amenities, and other economic activities, have already promoted regional participation in the production network by reducing the cost-of-service links that connect remote locations. Mekong Sub-region connectivity is just one piece of the puzzle in ASEAN connectivity with the rest of the world. China’s BRI is another very large connectivity of development strategy linking China to Eurasian countries and the rest of Asia. As the region embarks on rapid infrastructure development, quality infrastructure, connectivity, and innovation are considered key for the region to ensure prosperity and sustainable development. Infrastructure development and stages of economic development can be explained by the development of recent economic theories; namely, fragmentation theory and new economic geography (ERIA, 2015). The theory classifies infrastructure projects into three tiers. Tier  1 includes projects that serve countries/regions that are already in production networks and have started forming industrial agglomerations. Tier 2 consists of projects supporting countries/regions that are about to participate in production networks. Tier 3 is comprised of projects in remote areas where participation in production networks is difficult in the short run but better and more reliable connectivity can generate new business models in agriculture, mining, tourism, and other industries. Thus, the ultimate aim of quality infrastructure and services development is in Tier 1, in which some of the ASEAN member countries are experiencing and enjoying quality growth, particularly Singapore and to some extent Brunei Darussalam. Thailand and Malaysia are also doing well with the quality of infrastructure in Tier 2 possibly moving to Tier 1 in the near future. However, the overall Mekong Sub-region has achieved lower middle-income status, improving infrastructure quality from Tier 3 possibly joining Tier 2 in the near future. The Philippines and Indonesia have achieved middle-income status, and infrastructure development is in the early stage of Tier 2, likely catching Thailand and Malaysia in the near future. By and large, connectivity and innovation promote agglomeration forces and dispersion forces generated by production-consumption interactions in both

Rising energy demand in Mekong sub-region  45 internal and external economies in which people and ideas can move easily. Agglomeration forces mean that economic activities and people are attracted to the core center, where positive agglomeration effects are found in the form of the ease of finding business partners and proximity to the market, etc. On the other hand, dispersion forces generate movements of economic activities and people from the core to the periphery. One source of dispersion forces is negative agglomeration effects or ‘congestion’ in the core, which includes wage increases, land price hikes, traffic congestion, and environmental pollution (ERIA, 2015). One practical example of new economic geography creating ‘location advantages’ through connectivity and innovation is Cambodian labor force migration. Currently, about 1 million (from a population of 16 million) Cambodians are in Thailand working in unskilled labor-intensive sectors and the informal sector rather than in Phnom Penh. The question is: How can Phnom Penh attract labor from rural areas and, at the same time, attract production blocks from Thailand? If the wage gap between Bangkok and Phnom Penh is too large, people will not move to Phnom Penh; however, at the same time, production blocks may be motivated to come. On the other hand, if the wage gap is too small, production blocks will not come even though people may flow into Phnom Penh. How can Phnom Penh attract both production blocks and people? The answer is the improvement of location advantages and livability in Phnom Penh. Another example is the Mekong–India Economic Corridor/ East–West Economic Corridor (MIEC, EWEC) connecting Ho Chi Minh (HCM) City, Phnom Penh, the Bangkok Metropolitan Area, and Dawei. This has great potential to become a major manufacturing corridor in the near future. However, the question rests in how to attract the labor force and investment into Dawei. In this regard, MIEC will need to have at least three projects implemented at the same time – industrial estates, highway connection to Thailand, and a deep seaport. According to Han (2018), the road situation between Phnom Penh and HCM City was relatively bad in 1999. Before the road was upgraded, travel time from Phnom Penh to HCM City was about nine to ten hours, and cross-border trade at Moc Bai (Vietnam)-Bavet (Cambodia) was worth about USD 10 million per year. However, the situation was completely changed in 2014 after both hardware and software infrastructures were implemented between Phnom Penh and HCM City. The travel time was reduced to five to six hours, and cross-border trade at Moc Bai–Bavet grew to USD 708 million per year (ERIA, 2015). Further, connectivity also promoted other economic development corridors such as investment brought to Trang Bang Industrial Park (in Moc Bai) consisting of 41 projects with USD 270 million in new investment, creating about 3,000 jobs. The Economic Research Institute for ASEAN and East Asia (ERIA) assessed the top beneficiaries from the connectivity. They are Dawei, Phnom Penh, Dong Nai, Kawthoung, HCM City, Kandal, Sihanoukville, Banteay Meanchey, Svay Rieng, and Battambang. For Phnom Penh, it was estimated that the connectivity will bring about cumulative impact of GDP, amounting to almost 400%, from the period 2021 to 2030 (ERIA, 2015). The ERIA also estimated the remainder

46  Phoumin Han et al. of the economic corridor in the Mekong Sub-region and found significant impacts for all participating countries in the connectivity. For power connectivity in the GMS, ERIA’s study on energy markets in ASEAN and East Asia examined the power trade and development in the Mekong Sub-region for the foreseeable future (see Han & Fukunari, 2014). The study showed that the 2030 Scenario (in which the GMS realizes the potential of hydropower) will provide both economic and environmental benefits. The GMS region at large will benefit by about USD 40 billion and reduce carbon dioxide (CO2) emissions by almost 70 mt per year. For ASEAN power connectivity as a whole, the study estimated that ASEAN would save USD 25 billion over 20 years by substituting hydropower for fossil fuels. It is helpful to provide an overview of past and ongoing infrastructure development a closer evaluation of related projects. The GMS regional investment framework 2014–2022 (RIF 2022) pipeline projects consist of 143 investment projects requiring USD 65.7 billion and 84 technical assistance projects requiring USD 295 million (ADB, 2019). Of the total 227 prioritized projects, which require investment of about USD 66 billion, there are financing gaps for 121 projects amounting to USD 27 billion (about 40% of the total investment). Of the projects currently identified with available financing, 70% have government financing, 18% ADB financing, 6% financing through other development partners, and 6% private-sector investment or public–private partnerships. The RIF 2022 is heavily skewed toward transportation sector projects, as Table  3.1 shows. However, inter-sectoral linkages, such as tourism supported through transport networks, are more prominent in the RIF 2022. Furthermore, there is an increase in transportation subsectors, with new projects in ports and waterways, logistics, and border crossing, which were missing or underrepresented in earlier pipelines. Railway infrastructure, because of its greenfield nature and extensive civil works, continues to make up the bulk of the required investment costs in the RIF 2022. Some railway projects have commenced with domestic budgets and bilateral assistance from China. The GMS Railway Association is assessing which railway lines to prioritize for the sub-region and examining alternative modalities to address the vast financing needs for rail infrastructure (ADB, 2019). In addition to projects in new transport subsectors in the RIF 2022, there are projects in border area or border zone development that involve multi-sector interventions such as road and/or border infrastructure, trade facilitation, technical and vocational education and training, schools, urban infrastructure, and tourism. The GMS Tourism Infrastructure for Inclusive Growth projects also takes this multi-sector approach. Of the total transport sector investment projects (see Table 3.1), railways took 62% of the total (approx. USD 35 billion investment in the RIF 2022), followed by roads and bridges at 36% (approx. USD 20 billion). If the railway, road, and bridge projects under construction and potential new projects are realized in the near future, the GMS will be a region of connectivity by rail and road, which will play out very well for connectivity to Malaysia and Singapore. Thus, the flows of goods and services could see potential increases in volume, positively affecting economic growth in the region.

Rising energy demand in Mekong sub-region  47 Table 3.1 R egional investment framework 2022 summary by sector Sector

Transport Energy Agriculture Environment Health and other HRD Urban development Others/BEZ Tourism TTF ICT Total

Number of projects

Cost estimates (USD million)

Investment

TA

Total

Investment

TA

Total

85 11 9 3 4 7 6 12 3 3 143

12 8 10 4 7 6 6 17 9 5 84

97 19 19 7 11 13 12 29 12 8 227

55,753 2,230 1,695 560 702 1,147 2,085 1,430 91 28 65,722

10 15 96 13 22 10 8 83 17 22 296

55,763 2,245 1,791 573 724 1,157 2,093 1,513 108 50 66,017

BEZ = border economic zone, HRD = human resource development, ICT = information and communication technology, TA = technical assistance, TTF = transport and trade facilitation. Source: ADB (2019)

3.4 Energy landscape in the Mekong Sub-region As mentioned earlier, supporting development and successfully upgrading the people’s living conditions does increase the demand and pressure on energy supply, a challenge the Mekong region is increasingly facing.

3.4.1 Energy supply in the Mekong Sub-region The total primary energy supply (TPES) in the Mekong Sub-region (Cambodia, Laos, Myanmar, Thailand, and Vietnam) is predicted to increase by 189% in the BAU and by 121% in the APS from 2017 to 2050. In actual amounts, it will increase from 234 Million Tonnes of Oil Equivalent (Mtoe) in 2017 to 675 Mtoe in the BAU and to 516 Mtoe in APS by 2050. It is observed that the Mekong Sub-region is heavily dependent on fossil fuel consumption (oil, coal, and gas). At the current baseline data in 2017, the fossil fuel share in the energy supply is around 75% of the total in the Mekong Sub-region. It is further predicted that the Mekong Sub-region will see growing dependency on fossil fuels in the future. In this regard, the study results showed that by 2050, fossil fuels share in the energy supply will be about 88% in the BAU and 81% in the APS scenario. In actual terms, the combined coal, oil, and gas in the energy supply is expected to increase from 175 Mtoe in 2017 to 595 Mtoe in the BAU and to 420 Mtoe in the APS by 2050. Oil is the dominant energy source in the energy supply followed by natural gas and coal (see Figure 3.1). Oil is expected to increase from 74 Mtoe in 2017 to 255 Mtoe for the BAU and to 197 Mtoe for the APS by 2050. Natural gas is expected to increase from 49.3 Mtoe in 2017 to 184.3 Mtoe for the BAU and to 133.6 Mtoe for the APS by 2050. Coal will increase from 51.6% Mtoe to 155.8 Mtoe for the BAU and to 89.3 Mtoe for the APS by 2050. Other sectors, including biomass, wind, solar, and electricity, will see

48  Phoumin Han et al. 300

-22.7% Million Tons of Oil Equivalent

250

-27.5%

200

-42.7% 150 100 50

20.6%

0

BAU '17

APS '50

Coal

BAU '17

APS '50

Oil

BAU '17

APS '50

Gas

BAU '17

APS '50

Others

Figure 3.1 Total Primary Energy Supply (TPES) by energy source, BAU vs APS. BAU = Business-as-Usual Scenario; APS = Alternative Policy Scenario (APS). Source: Authors’ calculations.

increases from 58.8 Mtoe in 2017 to 80 Mtoe for the BAU and to 96.5 Mtoe for the APS by 2050. The difference between the BAU and the APS is the energy-saving potential in the total energy supply. Coal will see the largest energy saving with the potential of 42.7%, followed by 27.5% for natural gas, and 22.7% for oil. These large energy savings are expected from the implementation of energy efficiencies with improved efficiency in thermal power plants and energy efficiency in end-user sectors such as transportation, industry, commercial, and residential sectors. The Mekong Sub-region is expected to see an increase in renewables of about 20.6% in the energy supply mix by 2050 as well (see Figure 3.1).

3.4.2 Final energy consumption in the Mekong Sub-region In the total final energy consumption (TFEC), industry accounts for the largest share, followed by transportation and other commercial and residential sectors (see Figure 3.2). Energy consumption in the industrial sector is expected to increase from 68 Mtoe in 2017 to 217 Mtoe for the BAU and to 184 Mtoe for the APS by 2050. Energy consumption in the transport sector is predicted to increase from 48 Mtoe in 2017 to 160 Mtoe for the BAU and to 104 Mtoe for the APS by 2050. For other sectors, including the commercial and residential sectors, the increase is expected from 46 Mtoe in 2017 to 105 Mtoe for the BAU and to 89 Mtoe for the APS by 2050. The non-energy is also used in the TFEC sector, especially for the refinery and petrochemical industries, with its use remaining the same for the BAU and the APS in 2050.

Rising energy demand in Mekong sub-region  49

Million Tonnes of Oil Equivalent

250

-15.2%

200

-35.2%

150

-15%

100 0.0% 50 0

BAU 2017

APS

2050 Industry

BAU 2017

APS

2050 Transport

BAU 2017

APS

2050 Others

BAU 2017

APS

2050

Non-energy

Figure 3.2 Total Final Energy Consumption (TFEC) by sector, BAU vs APS. BAU = Business-as-Usual Scenario; APS = Alternative Policy Scenario (APS). Source: Authors’ calculations.

Energy saving is expected to be highest for the transportation sector at 35.2%, 15.2% for the industrial sector, and 15% for the commercial and residential sectors (see Figure 3.2). The reduction in energy consumption in the TFEC sector will derive from fuel efficiencies in the transportation, industry, commercial, and residential sectors, for example, the introduction of more efficient heat and power; a shift to electric vehicles, hybrid and fuel-cell vehicles; more efficient electric appliances; and energy-saving buildings.

3.4.3 Power generation mix in the Mekong Sub-region In the power sector, remarkable progress has been made in the Mekong Subregion over the past two decades. This includes rural electrification access, rapid provision of large-scale and high-volume national grid systems, successful mobilization of indigenous resources, the adoption of new technologies, the gradual share of renewables into energy mix, and the beginnings of cross-country trade. However, the future energy landscape in the Mekong Sub-region will rely on today’s actions/policies and investments to change course toward a cleaner energy system. Natural gas is the dominant fuel source in power generation, followed by coal and hydropower (see Figure 3.3). It is expected to increase from 170.4 megawatt hours (MWh) in 2017 to 798.7 MWh in the BAU and to 690.3 MWh in the APS by 2050. Electricity from coal-fired power generation will increase from 116 MWh in 2017 to 374 MWh in the BAU and 150 MWh in the APS by 2050.

50  Phoumin Han et al. 900.0

-13.6%

800.0 Terawatt Hours (TWh)

700.0 600.0 -2.7%

500.0

-59.7%

400.0 300.0

-97.7%

200.0 100.0 0.0 -100.0

BAU '17

APS '50

Coal

BAU '17

APS '50

Gas

BAU '17

APS '50

Hydro

BAU '17

APS '50

Others

Figure 3.3 Total Power Generation (TFEC) by energy source, BAU vs APS. BAU = Business-as-Usual Scenario; APS = Alternative Policy Scenario (APS). Source: Authors’ calculations.

Electricity from hydropower is expected to increase from 133 MWh in 2017 to 252 MWh in the BAU and to 245 MWh in the APS by 2050. Electricity from ‘others’ including biomass, wind, and solar will see a large increase from 6.2 MWh in 2017 to 87.2 MWh in the BAU and to 172.4 MWh in the APS by 2050. Significant energy saving is expected in coal-fired power generation (59.7% saving, a reduction from BAU to APS), followed by the gas combined cycle (13.6%). Energy saving in power generation is expected due to the introduction of high thermal efficiency. Electricity from renewables such as biomass, wind, and solar is expected to increase sharply by 97.7% due to upscaling renewables in the power mix in the APS scenario compared with the BAU scenario. To satisfy growing energy demand in the Mekong Sub-region, huge power generation infrastructure investment is necessary between now and 2050 (see Figure 3.4). This study estimates that between USD 191 and USD 217 billion will be needed for cumulative investment in power generation in coal, gas, and hydropower. The investment in natural gas combined cycle power generation will require from USD 55 to USD 67 billion for the BAU and APS from 2017 to 2050. Coal-fired power generation will require around USD 59 billion in the BAU. However, coal-fired power plant capacity may be reduced in the APS depending on the Mekong Sub-region’s energy policy. In this case, the estimate for coal-fired power investment could drop to about USD 8 billion from 2017 to

Rising energy demand in Mekong sub-region  51 250 BAU

APS

217 191

Billion USD

200

150

100 67

59

76 55

50

54

51 37

8 0

Coal

Gas

Hydropower

PV/Wind/Biomass

Total

Figure 3.4 Investment in power generation by energy source, BAU vs APS BAU = Business-as-Usual Scenario; APS = Alternative Policy Scenario (APS). Source: Authors’ calculations.

2050. For renewables such as solar PV, wind, and biomass, the required investment is expected to increase from USD 37 billion in the BUA to USD 76 billion in the APS. More broadly, at the ASEAN level, the energy outlook projects that USD 2.1 trillion will be required for oil, gas, coal, and power supply (IEA, 2017). More than 60% of investment goes to the power sector with Transmission and Distribution accounting for more than half. Thus, the huge potential for energy infrastructure-related investment will need to be guided by the right policy to promote quality infrastructure and resilience in the Mekong Sub-region for growth and sustainability. Otherwise, it will fall in the morass of grow now and clean up later.

3.4.4 Carbon dioxide emissions in the Mekong Sub-region The region will continue to rely on fossil fuel consumption in the foreseeable future (see Figure 3.5). This is mainly because of the presence of the high combined share of fossil fuels in the power generation mix of the Mekong Sub-region at 67% in 2017 and 78% in the BAU by 2050 as well as the high share of fossil fuel use in the total final energy consumption. CO2 emissions rose dramatically from 42 million tonnes of carbon equivalent (Mt-C) in 1990 to 127 Mt-C in 2017, and they are expected to rise to 457 Mt-C in the BAU and to 318 Mt-C in the APS by 2050. Thus, the clean use of fossil fuels through clean technology deployment is indispensable in decarbonizing the Mekong Sub-region’s emissions. Further, natural gas should be promoted as a transitional fuel for bridging toward more renewable energy in the future.

52  Phoumin Han et al.

Million Tonnes of Carbon Equivalent

500 450 400 350 300 250 200 150 100 50 0

BAU 1990

2017

APS 2050

Figure 3.5 CO2 emissions in the Mekong Sub-region, BAU vs APS.

3.5 Energy transition in the Mekong Sub-region The Mekong Sub-region faces mounting challenges in matching its energy demand with a sustainable energy supply. That is because the whole region relies heavily on fossil fuel consumption at the present time and until the foreseeable future in 2050. The transition to a lower carbon economy will require the region to develop and deploy greener energy sources and clean use of fossil fuels through innovative technologies such as Highly Efficient and Low Emissions (HELE) technology. Coal-use patterns in the region reflect the rising demand for electricity to power and steer economic growth. Hence, building low-efficiency coal-fired power plants (CPPs) is an obvious choice for power-hungry emerging Southeast Asia due to less capital costs, a sector that China has been supporting the sub-region enormously over recent years. China as a matter of act is a leader in public financing of low-efficiency CPPs not bound by the OECD’s rules and obligations to restrict financing of carbon-intensive projects (Han, 2020a). Through its BRI, China will continue to expand its energy sector financing, with a majority of projects supporting coal-fired generation across the region. However, such plants cause more environmental harm and other health issues as clearly evidenced in China itself (see Tang et al., 2015), which will ultimately cause a lot of negative effects on the region’s environmental security. Widespread coal power plant construction could also point to the low environmental standards for coal-fired power generation in the Mekong Sub-region (Mitsuru et al., 2017). The Mekong Sub-region countries have relatively high allowable emissions in terms of sulfur oxides (SOx), nitrogen oxides (NOx), and particulate matter (PM) (see Figure 3.6). This means that countries in the Mekong Subregion have lower emission standards compared with advanced countries such as

Rising energy demand in Mekong sub-region  53 1,200 1,000

SOx

NOx

PM

mg/m3

800 600 400 200 0

Figure 3.6  Emissions standards for newly constructed CPPs in selected countries (SOx, NOx, and PM). CPP = coal-fired power plant, mg/m3 = milligram per cubic meter, SOx = sulfur oxides, NOx = nitrogen oxides, and PM = particulate matter. Source: Mitsuru et al. (2017)

Germany, Korea, and Japan, where clean coal technology (CCT) is mandatory. Major harmful air pollutants, such as SOx, NOx, and PM, come from fossil fuel and biomass power plants, which therefore need to be carefully regulated. It is known that short-term exposure to sulfur dioxide (SO2) can harm the human respiratory system and make breathing difficult. Thus, the Mekong Sub-region’s leaders may need to consider the promotion of CCT, higher standards or stringent environmental regulation for coal-fired power plants, coupled with effective enforcement, that may push investors to select more advanced technologies, especially Ultra-supercritical technology for CPPs. Such plants are considered clean power because they use coal more efficiently and cleanly compared to traditional sub-critical coal-fired power plants. Furthermore, supporting frameworks to ensure that developing countries can afford CCTs are an urgent matter to be built because upfront investment costs of CCTs are much higher than traditional coal-fired power plant technologies. Although the ADB’s GMS has been doing very well in promoting regional power trade development, interconnection, and energy infrastructure development over the last two decades (see Krahl & Dosch, 2018), it has not done enough yet to advance or support the Mekong Sub-region governments to transition toward low-emission coal technologies. The role of natural gas in the energy transition cannot be overlooked. That is because it can be used as a bridging fuel between high emissions fuels (such as coal and oil) and cleaner energy systems in which renewables and clean fuels take the major share in the energy supply mix. The prospects for using natural

54  Phoumin Han et al. gas in the Mekong Sub-region are good with demand likely to increase by four times depending on the future stability of gas and liquefied natural gas (LNG) prices in the market, whether a competitive gas/LNG market can be created in Southeast Asia, and the role of gas/LNG from Australia, the US, and other sources. The Mekong Sub-region is expected to be a key market for future gas demand, and thus gas infrastructure investment, such as gas pipelines and LNG terminals, will be key in supporting the demand for gas in the region (Kobayashi & Han, 2018). Japan has been one of the key players in promoting LNG and LNG-related infrastructure development in the region. In late 2019, Japan along with the US announced its intention to facilitate “high-standard investment in projects to supply LNG or build LNG infrastructure by aligning the Japanese government’s target of $10 billion in public and private finance and capacity-building training” (US DoS, 2019, p. 1). A year later, it announced to double the amount in public and private financing toward LNG market development in Asia. But more support is needed from other international and regional players, especially from China. In the current situation, hydropower accounts for quite a large share of the energy mix in the Mekong Sub-region. However, as energy demand is expected to increase further, hydropower sources will be fully utilized. Thus, the share of renewables such as wind, solar, and biomass will play a critical role in the future clean energy system in the Mekong-sub region. The lower cost of these renewables will make it possible for a higher share of wind and solar in the energy mix (Denholm & Cochran, 2015). Since electricity from wind and solar sources are variable and intermittent, there is a need to invest in grid infrastructure with smart grids using the Internet of Things (IOT) and other technology to predict electricity production. With the renewed Basin Development Strategy 2021–2030 for the wider Mekong (see MRC, 2020b), the MRC can certainly work with other regional platforms to advocate for cleaner, more affordable, and more environmentally friendly energy sources with countries in the sub-region. However, this work will involve a great many challenges because of the current political landscape and energy policy in each country. The Mekong Sub-region may still benefit greatly from the development of renewable hydrogen as the region has large hydropower potential and the possibility of a higher share of solar and wind power. Thus, electricity from wind and solar plus other unused electricity during low-demand hours should be converted to hydrogen as stored energy. Fast-moving technological development will drive down the cost of hydrogen production in the future and give hydrogen a bigger role in the clean energy future (IRENA, 2019). Thus, the Mekong Sub-region ought to prepare a roadmap for rolling out a hydrogen plan in the future.

3.6 Conclusions and policy implications The Mekong Sub-region’s connectivity improvements, including rail, road, port, aviation, and energy infrastructure, have integrated the region further in terms of compressing time and space for the movement of goods and services.

Rising energy demand in Mekong sub-region  55 However, the wider ASEAN faces challenges in guiding investments for longterm sustainability, especially on quality infrastructure. In the region, key players channel their investments through regional and sub-regional initiatives and platforms such as China’s BRI and LMC, the ADB-led GMS process, and Japan’s MJC. Although there is a continued need for resilience and quality infrastructure in the Mekong Sub-region, policy measures and actions undertaken in each country toward high-quality infrastructure vary, reflecting the differences in socio-economic, political, and geographical contexts. Thus, this makes it difficult for the region to promote sustainable growth and a low carbon economy, energy access and affordability, and resilient and sustainable quality infrastructure, even as the sub-region internal infrastructure cohesion increases. As the Mekong Sub-region continues to rely on fossil fuels, its energy transition will need to consider its cleaner use through clean technology investment such as CCTs and other high-quality energy infrastructure. Currently, investment in renewable energy and clean technologies is unstable and high in cost. These challenges need to be addressed through political commitment to ensure that an energy technology development and deployment support framework can scale up the share of renewables and clean fuels. Without redesigning energy policy toward high-quality energy infrastructure, it is very likely that the increasing use of coal will lead to the proliferation of coal-fired power plants construction, which, without the employment of the best available clean-coal technology, will result in increased GHG and CO2 emissions. The investment opportunities for energyrelated infrastructure are huge. Our study estimates that around USD 190–220 billion will be required from 2017 to 2050 for power generation alone. However, this estimate does not include the Transmission and Distribution network, LNG terminals, and refineries. The challenge will be to ensure quality infrastructure to promote sustainability in the region, which, in Herberg and Johnson’s (2020, p. v) word, “reinforces the importance of forceful action to alter the underlying trajectory of rapidly rising demand for electricity”. Energy sustainability in the Mekong Sub-region requires an increase in the share of renewables in the energy mix. Currently, it is dominated by coal, gas, and hydropower. Although the intermittent renewables – solar and wind – comprise the most abundant energy resources in region, they have so far taken only a negligent share of the power mix. Thus, what countries in the Mekong Sub-region will need, as development accelerates and climate change intensifies, is an environmentally friendly, logistically feasible, and economically responsible alternative energy source and infrastructure. Considering the sub-region vulnerability to climate change, regional and sub-regional platforms and initiatives will need to promote high-quality infrastructure investment and related technology deployment within the sub-region. A specific topic concerning the application of CCTs is critical in this process, primarily because there are less available alternative energy options in the medium term to meet energy demand without using coal, even as the cost factor associated with its implementation represents a serious challenge. At the same time, promoting a higher contribution of LNG within the sub-regional energy mix needs to be supported as well, which in

56

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turn would require specific investments to be made. The Mekong countries, thus, need to be supported in this building process for credible alternative energy sources, but this support, as Tsafos (2020) argues, must go beyond asking them to deny coal or reject Chinese financing. Indeed, China has a massive financing capacity and can direct investments through its BRI and LMC to the region. However, with a track record of neglecting the environmental protection and not being transparent in its investments (see Gong, 2018; OECD, 2018; Russel & Berger, 2019), it is necessary that these issues are tackled as soon as feasible. If China truly wishes to develop the Mekong Sub-region sustainably and responsibly through its BRI and LMC or other means, it will need to embed environmental standards into its funding mechanism, increase transparency in all its energy infrastructure investments, and promote public engagement in its project consultation. With a very good record of caring for the environment and rules of law (see Ogasawara, 2015), Japan can play a crucial role here. In fact, there are good opportunities for it. For example, Japan can continue to encourage countries in the region to implement market reforms, strengthen local institution, encourage Japanese companies to provide the needed investments and financing support, and accelerate the energy policymaking capacity, training, and skills required to evaluate new projects and investments in natural gas and renewable energy infrastructure.

Notes 1 For example, the Southern Economic Corridor connects Ho Chi Minh, Phnom Penh, Bangkok, and Dawei. The East-West Economic Corridor that extends from Da Nang to Mawlamyaing. Improvement of both corridors will enable overland access across the Indochina Peninsula, benefitting transportation and the distribution of goods. 2 Data on BRI investments are known to vary, particularly since it is unclear if existing projects are retroactively categorized by the Chinese government as BRI investments. This figure from the MoC is considered official.

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Russel, D. R., & Berger, B. (2019). Navigating the Belt and Road Initiative. The Asia Society Policy Institute. Available from: https://bit.ly/2X0zCd9 [Accessed 5 October 2020]. Senga, K. (2012). Foreword. In P. Srivastava & U. Kumar (Eds.), Trade and trade facilitation in the Greater Mekong Subregion. ADB Institute. pp. vii–viii. Sok, S., Meas, S., Chea, S., & Chhinh, N. (2019). Regional cooperation and benefit sharing for sustainable water resources management in the Lower Mekong Basin. Lakes & Reservoirs. 24 (3), 215–227. Stone, S., & Strutt, A. (2010). Transport infrastructure and trade facilitation in the Greater Mekong Subregion. In D. H. Brook & S. F. Stone (Eds.), Trade facilitation and regional cooperation in Asia. ADB Institute, pp. 156–190. Sultana, G. (2016). Sri Lanka after Rajapaksa: Can it ignore China? Strategic Analysis. 40 (4), 245–254. Tang, X., Snowden, S., McLellan, B. C., & Höök, M. (2015). Clean coal use in China: Challenges and policy implications. Energy Policy. 87, 517–523. The ASEAN Post Team. (2019, April 3). Lancang-Mekong Cooperation: Blessing or curse? The ASEAN Post. Available from: http://bit.ly/3rLvLyO Tsafos, N. (2020). The outlook for power generation in Southeast Asia and the Geopolitics of the Indo-Pacific. In H. Phoumin, M. E. Herberg, N. Tsafos, & C. Weatherby (Eds.), Power Southeast Asia: Meeting the region’s electricity needs. The National Bureau of Asian Research, pp. 1–11. US DoS. (2019). 2019 Japan-US strategic energy partnership statement: Recent major developments. US Department of State. Available from: https://bit.ly/3rPv4ou [Accessed 25 December 2020]. Xing, W. (2017). Lancang-Mekong River cooperation and trans-boundary water governance: A Chinese perspective. China Quarterly of International Strategic Studies. 3 (3), 377–393. Xinhau. (2020a, February 21). Chinese state councilor lauds progress in LancangMekong cooperation. Xinhau. Available from: http://bit.ly/3hyOr0d [Accessed 5 October 2020]. Xinhau. (2020b, September 13). Commentary: Hyping Mekong water resources issue a political farce. Xinhau. Available from: http://bit.ly/3b75sgV [Accessed 5 October 2020]. Yoshimatsu, H. (2015). The United States, China, and Geopolitics in the Mekong region. Asian Affairs: An American Review. 42 (2), 173–194. Yu, H. (2017). China’s Belt and Road Initiative and its implications for Southeast Asia. Asia Policy. 24, 117–122. Zhang, H., & Li, M. (2020). China’s water diplomacy in the Mekong: A paradigm shift and the role of Yunnan provincial government. Water International. 45 (4), 347–364.

4

Energy, SE Asia, Central Asia and BRI Krissada Promvek

4.1 Introduction Central Asia (CA) consists of five former Soviet Union states – Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. After the collapse of the Soviet Union, on 25 December 1991, the five states were formally recognised as independent. The five countries are all at the same early stage in their nation-building process and are all landlocked countries located in the heart of Eurasia, neighbouring regional powers, Russia (to the North and West) and China (to the East). Yet, CA, with its extensive gas and oil resources and being located at the crossroads of Eurasia, once again became the focus of geopolitics. China’s thirst for oil and natural gas has stimulated Chinese-CA relations and Chinese extensive investment in the markets of CA. Of particular relevance are China-Kazak relations that will continue to be a particular target for energyrelated investment. Of course, China is not the only country eyeing the natural resources of CA. Western Europe, Russia, India, and the US are interested as well. Thus, it is no surprise that CA in recent years has become the centre of world’s attention again (Masoud 2014). After all, we should remember the geopolitical evaluation of Mackinder’s 1904 Heartland theory that puts CA into the spotlight of geopolitics (Hess 2004, 95–106). Being located in the heart of Eurasia and surrounded by a number of regional and major powers such as in China, Russia, Iran, and India, CA’s geopolitical significance cannot be denied (Mackinder 1981). According to the Zbigniew Brzezinski’s book The Grand Chessboard: American Primacy and Its Geostrategic Imperatives, Eurasia is identified as the world’s most dynamic continent (Brzezinski 1998, 265–269). Because of its strategic position and rich oil and gas resources, CA is a major focus of competition for the world’s political and economic powers, which has all launched their respective Central Asian strategies in an attempt to expand their influence and gain a competitive advantage. Huntington too has in his work, The Clash of Civilizations and the Remaking of World Order, emphasised that the CA is a dangerous geopolitics and ethnically unstable region (Huntington 1996). Because the CA region consists of many security problems, including Water Security, Energy Security and Pipeline Politic, Terrorism, Narco – Trafficking, Migration and Human Trafficking, Nuclear Security and Border Management and Security (Lopour 2015). Moreover, CA states are also confronted with a

Energy, SE Asia, Central Asia and BRI  61 series of problems – social inequality, poverty, backwardness, the drying of the lake Aral, rise of organised crime, and inter-tribal conflicts, to name a few – and also have great possibilities for economic development. While nowadays Russia is regaining some of its role and influence it lost. However, its position far from what it was as it has now to deal with a variety of foreign involvement, like China’s, Turkey’s, US, or Iranian ambitions (Behbahani 2020). Another aspect to be considered is the region’s geopolitical context.

4.2 ASEAN’s rising energy demand and Central Asia For a decade, all eyes were on China, but now, the focus of global growth is shifting towards Southeast Asia, a patchwork of 10 nations and nearly 700 million people to the south of China and east of India. With rapid urbanisation and industrialisation, a young demographic, sweeping digitisation, growing access to education and rising female empowerment, Southeast Asia is poised to acquire a new standing in the world (Parag 2020). With it, its energy consumption has nearly doubled between 1995 and 2015, growing at an average pace of 3.4% annually, supporting its economic growth and increasing the living standards of its populations (IRENA 2018, 5). According to the International Energy Agency (IEA), energy demand in Southeast Asia has increased by over 150%. While industry was the largest energy consumer of the region, with shares of the total consumption ranging from around 12% in Myanmar to nearly 40% in Viet Nam (IRENA 2018, 5), fossil fuels, led by oil and natural gas, account for more than half of the region’s energy supply. Crude oil and its derivatives are predominantly used in the transport sector, where fuel demand has also grown rapidly. While the share of natural gas in the total primary energy supply (TPES) has risen considerably over the past two decades. The IEA also forecasted that the growth for energy demand in the Southeast Asia region will increase another 80% from the current consumption or reach 1,070 Mtoe (million tonnes of oil) by 2040 (Shamasundari 2017). The IEA also forecasted that Southeast Asia’s net crude imports will grow to 5.5 million barrels per day (bpd) by 2040 from 2.1 million bpd now, as refining capacity grows by 60% to 7.7 million bpd, whereas oil production in the region could drop by 30% to 1.7 million bpd in 2040, led by declines in Indonesia, Malaysia, and Thailand, against demand of 8.8 million bpd (Tan and Peng 2017). In line with the region’s continued rapid economic expansion, energy demand is expected to grow by an average of 4.7% per year in the period to 2035. Growth in energy demand will be highest in the power sector, followed by industry, transport, and buildings (IRENA 2018, 5). Fatih Birol, the IEA Executive Director, states in The Southeast Asia Energy Outlook 2019 that Southeast Asia is set to have a major impact over the next two decades, adding the equivalent of Japan’s entire energy system to global demand. This rapid growth underscores the importance of Southeast Asian countries’ energy policies for their citizens, but also for the world. (IEA 2019)

62  Krissada Promvek As the region’s economic development and demographic growth continues to boom, Southeast Asia’s huge demands for energy continue, with it the challenge for Southeast Asia as a region to address its energy security challenge. Hence CA’s considerable oil and gas resources become an increasing potential target for addressing Southeast Asia’s rising energy demand (Bin 2014, 596– 605). Table  4.1 provides an overview of those resources and the leading role of Kazakhstan as a source of oil reserves and Turkmenistan as a leading source for gas reserves. Southeast Asia’s growing demand and its source for resources underline the improving relationship between the two regions. It also offers an opportunity for Central Asian states to become more independent from traditional power interests within the region, like Russia’s influence and US demands. While Southeast Asia’s influence is not at the same level as China’s rising influence within CA, it still contributes to shift the focus within CA not least as new energy infrastructure projects are financed by Japan, South Korea, and India. As such, one can identify a new trend in foreign policy cooperation from within CA (Бланк 2001). The rising interest of Southeast Asian countries within CA may contribute to regional stability by offering another potential destination for its energy resources for generating regional revenues and development. At the same Table 4.1 Merchandise trade between Central Asia and ASEAN (2017) Cumulative exports Country

Economic centres

Period

US$ billion

Kazakhstan

ASEAN

1992– 1999 2000– 2012 1992– 1999 2000– 2012 1992– 1999 2000– 2012 1992– 1999 2000– 2012 1992– 1999 2000– 2012

0.40

Kyrgyz Republic

ASEAN

Tajikistan

ASEAN

Turkmenistan ASEAN

Uzbekistan

ASEAN

2000s/ US$ 1990s billion ratio 2.5

0.99 0.00

16.0

3.7

0.31

28.8

0.47

0.00

0.00

1.1

0.00

14.8

0.09 0.48

6.6

0.01

15.6

0.09 21.1

0.01

6.4

0.06 95.3

0.46 1.3

2000s/ 1990s ratio

3.15

0.03

0.02 0.24

US$ billion

0.07

0.03 0.02

0.07

Cumulative total trade

2000s/ 1990s ratio

2.15

0.02 0.01

Cumulative imports

0.03

18.7

0.48 5.3

0.33

2.4

0.80

Source: Adjust from “Trade Ties between Central Asia and Economic Centers”. In Connecting Central Asia with Economic Centre. [Online], Available URL: https://www.adb.org/sites/ default/files/ publication/159307/adbi-connecting-central-asia-economic-centers-final-report.pdf

Energy, SE Asia, Central Asia and BRI  63 Table 4.2 Energy production and exports of Central Asia in year 2017 Crude Oil

Kazakhstan Kyrgyz Republic Tajikistan Turkmenistan Uzbekistan

Natural gas

Production

Export

Production

Export

million bbl/day

million bbl/day

billion cu m

billion cu m

1.856 1,000 bbl/day 180 bbl/day 244,000 bbl/day 41,000 bbl/day

1.409 0 0 67,790 bbl/day 27,000 bbl/day

22.41 28.32 19.82 77.45 52.1

12.8 0 0 38.14 9.401

Source: Adjust from 2017 CIA World Fact-book – Explore All Countries. Kazakhstan/Kyrgyzstan/ Tajikistan/Turkmenistan and Uzbekistan https://www.cia.gov/the-world-factbook/countries/

time, it increases the potential for resource competition between the countries interested on CA’s energy resources, notably, Russia and China (Table 4.2).

4.3 China, Central Asia, and BRI According to the China’s foreign policy, China puts efforts to modernise the image of Sino-Central Asian relations. China has focused on economic development and reform especially the open-door policy (Wei 1992, 73–104). Moreover, China encouraged a good neighbour policy with newly CA states based on deep mutually beneficial cooperation and ensures that they will benefit more from its country-to-country relationships. Zhang Zhiju – Vice Foreign Minister of China – also emphasised the “peaceful development” and “Win – win” Cooperation approach in chaotic world. China will strengthen its good-neighbourliness and friendship, deepen mutually beneficial cooperation, and make sure that the country’s neighbours will benefit more from its development (GMA News online 2012). This aspect on equal gains also constitutes an important aspect of the Belt and Road Initiative (BRI)’s international focus, emphasis through its win-win wording. On a more fundamental basis, as pointed out by Behbahani (2020), there are four specific topics regarding China’s good neighbourhood policy with Central Asian states. First, Chinese strategists realised the strategic significance of CA in the 21st century and its energy and economic potential. Second, China considers Central Asia in a wider, Eurasian, context as CA can be described as a bridge between the East and West not only in geographical terms but also especially in civilisational terms. From a Chinese perspective, this further enhances the regions’ prospect for prosperity. Third emphasises the expansion of bilateral and multilateral relations with Central Asian states to foster closer relations and to support regional development. Fourth, China views the relations with CA countries in terms of the stability and development of Xinjiang with the perception that stable relations with CA will support the stability and development of Xinjiang (Behbahani 2020). Thus, Chinese domestic security and development

64  Krissada Promvek considerations add to its emphasis on having good relations to the Central Asian countries. Such a perception of development cooperation is also emphasised in China’s BRI. China and Central Asian countries also share a variety of security concerns, like border demarcation and the threat of radical Islam and in its relations with the Central Asian countries China emphasise the five principles of peaceful coexistence, which are peace, cooperation, development, trade and mutual welfare, and progress and understanding. Yet, while the collapse of the USSR undermined Russian influence in CA, Russia remains the strongest power in the region and a major player in regional relations. This is especially true with regard to security as Russia is still able to act as a security provider to different countries within CA, not least by establishing some form of regional security framework (Behbahani 2020). Interestingly enough, Russian military security personal is still more welcomed than Chinese military security personal within CA. From all of these reasons, China has actively promoted BRI projects sometimes referred to as the “New Silk Road” in CA since 2013. From the Chinese point of view, especially Kazakhstan has strategic relevance to the BRI. That is the reason why the BRI was launched during Chinese President Xi Jinping’s September 2013 visit to Astana, Kazakhstan at Nazarbayev University, reconfirming Kazakhstan’s crucial role as a land bridge between China and Europe and for China’s investment within CA. Kazakhstan has already received China’s BRI investment to upgrade its infrastructure and develop transport hubs. From China’s perspective, the BRI is the way to deliver public goods, promote global connectivity, and portray itself as a responsible stakeholder. But for CA, especially Kazakhstan, BRI projects look highly promising, allowing regional countries to increase connectivity, expand regional trade, and modernise their obsolete transport infrastructure (Nurgozhayeva 2020b). There could be several channels through which the BRI may influence the foreign trade of Central Asian economies: (i) development of transport infrastructure facilitating trade of these countries with China and/or transit of goods from/to China to/from Europe and West Asia, (ii) development of other infrastructure (electricity, irrigation systems, product quality testing, certification infrastructure, etc.) in order to lower production and export costs, (iii) Chinese FDI into production sectors of the countries of the region, (iv) cooperation in trade policy and trade facilitation in order to reduce trade costs, and (v) macroeconomic effects (Mogilevskii 2018).

4.3.1 China, Kazakhstan, BRI, and Kazakhstan’s ‘Nurly Zhol’ policy The BRI provides new economic, development, and trade opportunities for its Member States, which might improve connectivity and access to different markets and technologies but not necessarily lead to the increase of local production or employment. Like, in other cases, BRI-related focus on CA and related investments followed earlier Chinese investments made in CA and especially in Kazakhstan. As such, the history of collaboration between Kazakhstan and China started long before Chinese President Xi Jinping introduced his new

Energy, SE Asia, Central Asia and BRI  65 strategy of the ‘new Silk Road’ in September 2013. Indeed, Kazakhstan signed a Bilateral Investment Treaty with China in 1992, very shortly after it had become an independent country (Mogilevskii 2018). In 2002, China and Kazakhstan signed the Treaty on Good Neighbourhood, Friendship, and Cooperation. From this treaty, China and Kazakhstan restated their willingness to develop and strengthen their strategic partnership and cooperation. Moreover, in 2004, the two countries signed a framework agreement on cooperation in the field of oil and gas. The purpose of this agreement was to facilitate joint projects in the areas of exploration, production, processing, and transportation of oil and gas from Kazakhstan to China (Office of the Commissioner of the Ministry of Foreign Affairs of the People’s Republic of China in the Macao Special Administrative Region 2017). The agreement especially mentions the joint project for the construction of an oil pipeline from West Kazakhstan to China. Up to now, the two countries have planned 51 projects with a total worth of US $27 billion, funded by Chinese investors and with a time line until 2022 (OECD 2018). In addition, China is also interested on investment in infrastructure and logistic in Kazakhstan. In November 2014, the first Kazakhstan’s President Nursultan Nazarbayev announced its new development program ‘Nurly Zhol’, which seeks to drive investments into critical infrastructure and priority sectors, including agribusiness, manufacturing, logistics, tourism, information technology, and finance (Назарбаев ́ 2014). The announced total costs of the program are US $9 billion, with the forecast of creating 4,500 new jobs, and was finally approved by the president degree 1030 dated April 6, 2015. The meaning of ‘Nurly Zhol’ is ‘the Bright Path or Bright Road’ that will drive state and foreign direct investment into critical infrastructure and priority sectors and drive economic growth (The Business Year 2015). Thus, the overall goal of it is to develop Kazakhstan into a successful market economy with an effective infrastructure to support longtime economic growth and focus on seven areas of investment: Development of transport and logistics infrastructure including a link between China and Western Europe; Development of industrial infrastructure, like special economic zones; Development of energy infrastructure to secure energy supply within the country; modernisation of public utilities infrastructure and water and heat supply networks; strengthening of housing infrastructure; development of social infrastructure; and support for small and medium-sized enterprises and business activities (Embassy of the Republic of Kazhakstan 2015). This program will transform Kazakhstan into a robust transport and logistics hub in CA. Within the framework of the program, Kazakhstan has launched 16 projects to increase the country’s transit traffic (Official Information Source of the Prime Minister of the Republic of Kazakhstan 2020). The BRI program focuses on infrastructure development that essentially aligns with the ‘Nurly Zhol’ strategy and, as such, makes the Kazakhstani government enthusiastic about Chinese investments. Two routes of the BRI are reflected in the program: from China, via CA and Russia, to Europe, and from China, via CA and West Asia, to the Persian Gulf and the Mediterranean Sea, offering an indication of

66  Krissada Promvek how BRI support country-specific development strategies. The Khorgos project offers a specific interesting example and one of the BRI’s flagship projects in Kazakhstan with a transcontinental focus as it functions as a cross-border transport centre and a free-trade zone to connect 27 Chinese cities with 11 European cities and various locations along the route (Ruehl 2019). There are some speculation that it might become the ‘Rotterdam of the future’ (Corre and Kirişci 2018). By developing into a crucial transport hub, Khorgos became a very important project for both countries, and while it is rightly be interpreted as a flagship project of BRI, its origin is located back in 2002, when a framework agreement was signed between Kazakhstan and China to establish the Khorgos Cross-Border Centre (Hanayi 2017). While there is a clear link to transcontinental trade, Khorgos also aims to facilitate Kazakhstan’s own domestic development through ‘Khorgos-Eastern Gates’ special economic zone (Nurgozhayeva 2020b). The SEZ focus on the regional development and increasing employment opportunities for the local community consist of an industrial zone, residential areas, and supporting infrastructure. In 2015, the two countries signed an agreement on strategic cooperation for the joint development of projects of the SEZ and the Shanghai Cooperation Organization’s international logistics zone in Lianyungang. According to the document, China plans to invest US $600 million in the SEZ (Мордвинова 2015). Although the cooperation with China will make Kazakhstan play the role of China’s strategic partner in CA, but it is only framework. It does not information about implementation. However, there is anxiety about the Khorgos Dry Port project. First, the Port is still far from reaching its maximum capacity. Second, the bulk of goods does not reach Europe but remains in CA. Finally, up to now, it is still significantly more profitable to ship goods to Europe by sea rather than by railway. Observers claim that most freight trains travelling from China to Europe return empty (Nurgozhayeva 2020, 271–272). Still, BRI provides new economic, development, and trade opportunities for CA countries; yet, it has also offered Beijing an opportunity of rapidly expanding its presence in CA, replacing Russia as the leading investor and supporting its soft power base within CA. China established more than 20 scientific centres focused on Central Asian studies and opened four Confucius institutes in Kazakhstan (Guschin 2015). Both Russia and China consider Kazakhstan as an essential partner in many sectors, including energy and transport. China still cannot compete with Russia’s institutional, cultural, and legal legacy in the region, and Kazakhstan remains part of a Russian-speaking sphere of influence. It is a member of several organisations established and led by Russia.

4.4 BRI as bridge between Central Asia and ASEAN CA countries and the countries of the Association of Southeast Asian States (ASEAN) have been gradually enhancing their economic partnership to promote increased transit connectivity, joint infrastructure projects, and free trade agreements, especially Singapore. The bilateral trade between Singapore and Kazakhstan in goods amounted to S$133.6 million last year more than three

Energy, SE Asia, Central Asia and BRI  67 times the total trade a decade ago. Total bilateral trade in services grew 16% over the last five years to reach S$40 million in 2016. Similarly, bilateral investment grew approximately 30% over the same five-year period. In 2016, Singapore’s direct investment abroad amounted to S$180 million, and Kazakhstan’s foreign direct investment into Singapore was S$2.5 billion. While the growing trend in our bilateral trade is in the right direction, we have headroom for trade to grow further. Hence, the Kazakhstan-Singapore Business Forum is a timely platform to encourage businesses from both sides to look for opportunities in each other’s markets. We are doing more to put in place a more robust trade architecture to boost investor and business confidence (Koh 2018). Singapore, for example, is eyeing Kazakhstan’s emerging market as an opportunity to expand its growing business sector, thus increasing their economic cooperation. Following the collapse of the Soviet Union in 1991, Kazakhstan’s first president, Nursultan Nazarbayev, invited the Singapore’s then-Prime Minister Lee-Kuan Yew to visit the newly independent Central Asian Republic to gain insight from Lee on how to transform Kazakhstan into a booming economic hub like Singapore. Since then, both countries have retained close economic partnerships. In November 2018, the two countries signed the Bilateral Investment Treaty to develop more joint business opportunities for Kazakhstani and Singaporean businesses. Singapore also reaffirmed its commitment to this strategic partnership by becoming the second Southeast Asian nation to sign a free trade agreement with the Eurasian Economic Union (EAEU), of which Kazakhstan is a member, in October 2019. Vietnam was the first to sign such an agreement. After that, in 2015, Indonesia, Cambodia, and Thailand have all signed Memorandums of Cooperation with the Eurasian Economic Council (EEC) of the EAEU, a possible first step to sign a free trade agreement with the union. Moreover, in 2017, the Kazakhstan-Vietnamese trade increased by 48% amounting to $542 million. Exports from Kazakhstan to Vietnam grew by 63% due to an increase in supplies of food, agricultural products, and metals (Levina 2019). Kazakhstan’s ambitions to become a booming centre for Islamic finance are also drawing the predominantly Muslim ASEAN members of Indonesia and Malaysia to improve bilateral relations with their Central Asian partner. There have been discussions between the Astana International Finance Centre (AIFC) and firms in the Malaysian financial sector on improving the Islamic banking partnership between the two countries. Similarly, Kazakhstan’s Deputy Foreign Affairs Minister Akylbek Kamaldinov noted that his country could learn from Indonesia if it wishes ‘to become a centre for Islamic finance and halal industry in Central Asia as well as a center for Islamic finance. Adding that his country seeks to learn from Indonesia on these matters’ (Schulz, 2020). Kazakhstan’s decision to develop its Islamic finance sector will likely attract the Muslim nations in Southeast Asia to bolster their economic ties with the country. While China already realised the potential of both regions and stated its interest in closer relations with the countries of both regions, with the BRI offering a specific case in point to improve infrastructure connectivity in both regions, linking both regions through BRI has not yet been implemented. Though

68  Krissada Promvek CA and ASEAN are located at different points on China’s geopolitical network in Asia, however, BRI has considerable potential to increase collaboration between the two entities. For example, China is not alone in its plan to move goods overland through CA as Southeast Asian nations are also exploring the possibility of using Kazakhstan as a route to transport products to Europe. In March 2019, Vietnam launched the Vietnam-China-Kazakhstan transit route which allows Vietnamese goods to be transported by rail to Europe in 21 days, with the land route is at least twice as fast as shipping goods across the Indian Ocean. The Central Asian country benefits from BRI-related investment projects by linking Kazakhstan to Southeast Asia through their mutual relationship with China. Kazakhstan’s emerging market is also promising for Southeast Asian countries looking to invest in non-traditional partners. By diversifying its BRI trade partners beyond China, Kazakhstan will be better equipped to avoid future reliance on China for trade and would elevate Kazakhstan’s status as an emerging global market and regional transit hub (Schulz 2020). Another potential crucial aspect of cooperation can be identified in Southeast Asia’s increasing energy demands and in CA’s energy resources. According to a statistic of EIA, 58.8% oil, 79.9% natural gas, and 54.0% coal of the world’s total energy are under the hand of OBOR partner countries (Sarker, Hossin, Hua, Sarkar, and Kumar 2018). So, energy cooperation among the partner countries helps to stable and ensure energy security and trading under BRI partner countries. Worth to remember that on May 12, 2017, China’s National Energy Administration issued The Silk Road Economic Belt and the 21st-Century Maritime Silk Road vision and action of energy cooperation, put forward the energy cooperation to adhere to the six principles of tolerance, mutual benefits, open market operation, safe development, green development, and harmonious development, which also indicated the determination that China leads the way for friendly cooperation and jointly promote the development of global energy with BRI regional countries (Zheu 2017). Yet, there will be potential conflicts of interests between China’s own energy demand and to what extent it will facilitate the diversification of CA’s energy resources or at least parts of it to supply Southeast Asian countries. Recent established pipelines, connecting Yunnan with Myanmar, may offer one route of distribution, while establishing other pipelines connecting Southeast Asia with China may offer alternative opportunities.

4.4.1 China-Myanmar oil and gas pipelines project China’s rapid economic growth has led to a huge increase in its domestic energy needs. China’s economic boom and its stagnating domestic oil production led Chinese NOCs (national oil companies) to quest energy resources overseas in the early 1990s. Therefore, until the early 2000s, China now ranks the second largest importer of oil in the world bringing in over 4 million barrels per day (bpd) or 48% of its oil demand from foreign sources in 2009 (Seaman 2010). At present, China has northwest, southwest, northeast, and North Sea-lane energy

Energy, SE Asia, Central Asia and BRI  69 corridors, including Central Asian gas pipelines, the China-Russia oil and gas pipeline, the China-Myanmar oil and gas pipeline, and a marine energy corridor. Myanmar, a neighbouring energy-rich nation, provides an overland route for energy supplies that offers China economic and strategic advantages. China currently receives 95% of its energy imports by sea, with approximately 80% passing through the Malacca Strait. Most of those supplies come from the Middle East. Myanmar’s location on the Indian Ocean presents a money-saving alternative route and strategic geopolitical advantage by avoiding the Malacca Strait, a major international shipping lane dominated by the US Navy. Energy resources can be shipped through the Andaman Sea and Bay of Bengal and transported to China from Myanmar through pipelines, cutting off 3,000 kilometers, reducing transport time by five to six days, and avoiding a potential confrontation with the US (Topcu 2020). In addition, Myanmar has the potential to help China decrease its dependence on liquefied natural gas imported from the Middle East. According to the 2019 data, China is second in the world in LNG imports. LNG is more costly than natural gas. Shipping also presents potential dangers from bad weather, pirates, and accidents. Currently, China imports natural gas through a pipeline connecting Turkmenistan, Uzbekistan, Kazakhstan, and Russia. Nowadays, energy supplies already are flowing from Myanmar to China through the Myanmar-China Natural Gas Pipeline and the Myanmar-China Oil Pipeline (Topcu 2020). The natural gas pipeline starts in Kyaukpyu city in Myanmar’s Rakhine State and ends in China’s Yunnan region. China and Myanmar agreed on the project in 2009, and the pipeline went online in 2013. The pipeline, which was started in June 2010, commenced operations in April 2017 as a state-operated collaboration between China, Myanmar, and international commercial partners. It has helped ensure energy security of the world’s second-largest economy while creating an energy channel that benefits the people of both Myanmar and China. Industry experts said that the project, comprising a 793-kilometre-long natural gas pipeline and a 771-kilometer-long crude oil pipeline, which run parallel from Myanmar to China’s Yunnan, enables China, Myanmar, and the entire ASEAN region to realise the interconnection of energy pipelines while promoting the economic integration of local areas through complementary strengths. The project has helped change the lives of many local residents, with more than $27 million invested through the project in 282 social and economic assistance programs along the pipeline, enabling about 30,000 students to enjoy better education conditions, 900,000 residents to access more convenient and reliable medical services, and many villages to enjoy 24-hour power and safe drinking water. However, natural gas through the China-Myanmar pipeline is far less than its designed capacity of 12 billion cubic metres. This is mainly due to the shortage of natural gas supply in Myanmar itself, while the oil transportation capacity designed by the China-Myanmar pipeline is also very limited compared to the import volume through the Strait of Malacca. At present, China’s major oil supply still comes from the Middle East and Africa, reaching China through the sea corridor across the Malacca Strait to the South China Sea. As for natural gas, 42.83% of it depends on pipelines from CA, Myanmar to China, while the rest is

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mainly transported by sea to China. Moreover, a single transportation corridor and few suppliers pose huge risks to China’s energy security. Therefore, there are two major problems in China’s energy corridors at present. First, the sources of energy cannot be diversified nor can the suppliers of existing energy corridors guarantee sufficient and controllable energy resources. Second, the energy transport corridor is dominated by the Malacca Strait, which fails to solve the dilemma of Malacca. China urgently needs to open up a new energy corridor to reduce the reliance on the Malacca Strait (Guo, Huang and Wu 2019). After all, one of the strategic objectives of the BRI in CA is to provide China with alternative import/ export and energy supply routes (Aminjonov et al. 2019).

4.5 Conclusion In general, the CA is a region of great geostrategic and economic significance for China. To a great extent, Chinese involvement in CA is a case of economic inter-dependence. During the last 15 years, China has emerged as leading investor, trade partner, and strategic stake-holder in CA. BRI mega project was also launched from Kazakhstan’s capital Astana in 2013. A number of BRI projects on ICT, rail, road, energy, and transport are being carried out or completed in Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Turkmenistan, and Afghanistan. At the same time, BRI also supported deeper infrastructure connectivity with the Mekong region and with ASEAN countries. The ASEAN as a group increased its economic relevance, even not all members are at the same development level. Indeed, most ASEAN members within the Mekong region are still facing a development challenge and within it a challenge of generating enough energy to support their development process. Yet, one of the biggest challenges faced by Central Asian energy producers is transforming their resources into actual output and then finding a way of delivering it. While BRI -related projects can help to address these problems of the CA countries by linking CA energy resources with the energy demand in China and could also form a regional bridge that connect the CA Region and Southeast Asia Region so far this rather can be described as a potential which still awaits implementation. The riches of energy resources of CA countries could offer an answer the increasing of energy demand of the Southeast Asian Countries in the future. But all BRI Project in CA seems too far to answer the energy-thirst problem of ASEAN. As such, one promise of BRI, to connect the participating countries of different regions, away from a China focus, has not been implemented yet.

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Part II

Individual country focus

5

Thailand’s 4.0 development strategy in the context of the Belt and Road Initiative Soavapa Ngampramuan

5.1 Introduction This chapter focuses on the economic, trade, and investment relations between Thailand and China within the context of the Belt and Road Initiative (BRI), with a specific focus on Chinese investment in Thailand’s Eastern Economic Corridor Framework (EEC), which represents a core undertaking associated with Thailand’s own development strategy. While this chapter concerns itself with the relationship between Thailand and China through the BRI perspective, Thailand’s own development strategy, Thailand 4.0, needs to be integrated within that focus. Moreover, the strong supporting role that Thailand has played from the beginning of the Greater Mekong Sub-region (GMS) process – and thus in the sub-regional integration dynamic – should not be overlooked. Indeed, Thailand took on a leading political role within the GMS process, as sub-regional integration within the Mekong region was expected to provide an additional positive impact on Thailand’s own economic development. This early and continuous commitment to sub-regional cooperation was also underlined by the foreign policy of then Prime Minister Chatichai Choonhavan towards the Mekong region after the cold war, as expressed in his 1988 slogan, “To change battle fields into market places” (Busbarat 2012, 3). This policy was confirmed by the Statement of the Council of Ministers of Prime Minister Chatichai Choonhavan Delivered to Parliament on 1st January (Choonhavan 1990). Thailand intended to stimulate economic activities through border trade, in particular, through the expansion of transport infrastructure that linked Thailand to the Mekong region. The most recent Thai Industrial development strategy, Thailand 4.0, aims to modernise Thailand’s industrial base by attracting further foreign investment as well as offering continuous support for sub-regional cooperation. Within this development focus, the EEC represents a key economic growth zone comprising three Thai provinces: Chonburi, Rayong, and Chachoengsao. The EEC is also recognised as a specific part of the Thailand 4.0 development strategy. Within this context, and based on durable Thai-Chinese relations, China’s BRI investments are welcome, as this constitutes further support for sub-regional integration processes within the Mekong region, namely the Lancang-Mekong

78  Soavapa Ngampramuan Cooperation (LMC). While China has the political and economic strength required for such a cooperation process, the origin of the LMC as a concept is credited to Thailand. Back in 2012, the Thai government declared the birth of the concept based on considerations to promote sustainable growth and to further facilitate infrastructure integration within the Mekong region and with China, through the construction of a railway network system between Thailand-China and Laos-China. In evaluating the economic impact of Chinese BRI investment, this chapter focuses on Chinese investment within the EEC by evaluating policy papers and documents of the Thai and Chinese governments as well as statistical data from 2012 to 2019. The analysis also comprises a focus on the relevant Thai regulation agencies, including the Office of the National Economic and Social Development Council (NESDC), the Board of Investment of Thailand (BOI), the Ministry of Industry, the Federation of Thai Industries, the Industrial Estate Authority of Thailand, the EEC Policy Committee, the Ministry of Transport, the Chamber of Commerce of Thailand, and the Asian Development Bank (ADB). From a conceptual perspective, this chapter follows a sub-regional focus that emphasises cross-border cooperation within a sub-regional setting, namely that of the Mekong sub-region. It further emphasises that the national interests are a driving force for sub-regional cooperation, and the framework is less institutional and rather more informal in its character. Even so, sub-regionalism does offer a perspective for evaluating trans-national cooperation initiatives like the BRI, the GMS, and the LMC, not least because geographic proximity represents a critical feature of sub-regional cooperation.

5.2 Thai-Chinese cooperation within a sub-regional setting: GMS, BRI, LMC, and EEC While sub-regional cooperation is based on supporting development within a wider context, national interests in supporting domestic development cannot be ignored. Less-developed countries aim to secure foreign direct investment not only to generate additional financial resources for domestic development but also with a focus on supporting industrial up-grading and on gaining competitive advantages. Another critical aspect is to ensure that vital infrastructure investments are undertaken, which are essential at the sub-regional level to support further integration and cross-border economic cooperation, which represents another feature of sub-regionalism. It should be pointed out that the focus of economic development in cross-border sub-regionalism is on the economic cooperation between members of a sub-region. This form of economic cooperation promotes the creation of economic activities across territories, and it supports the infrastructure networks and the integration of trade and investment in the sub-region driven by or authorised by a national government. In the creation of a cross-border sub-region, it is the duty of the related governments to reach agreements, to find common solutions for issues that could arise in the member countries’ closely related business, economic, and investment dealings, and to

Thailand’s 4.0 development strategy  79 cooperate in improving coexistence for their peoples. A sub-regional focus on cooperation also offers additional insight into the impact that BRI and LMC could generate on Thailand’s EEC development process and their contribution to Thailand’s 4.0 development strategy.

5.2.1 Thailand’s domestic considerations on sub-regional cooperation within the Mekong region Thailand has for a long period connected its domestic development strategy with the key agenda of sub-regional cooperation within the Mekong region. In the late 1990s, Thailand’s leaders emphasised sub-regional cooperation, a diplomatic strategy born in 1988, which focused on commercial opportunities by transforming the Mekong area from a battlefield into a marketplace and turning Thailand into a regional commercial hub (Busbarat 2012, 3). Thailand was also a committed and early supporter of the GMS process from the beginning. As a result, Thailand’s Indochina policy was launched by the Chuan government in 1992 in order to show Thailand’s belief in the endurance of its leadership in this regional initiative; for example, it initiated the Quadrangle Economic Co-operation (QEC), which included Thailand, Laos, Myanmar, and Yunnan province of China, and it joined the GMS (Leekpai 1992). Ever since, Thailand’s national leadership has supported sub-regional cooperation within the Mekong region; indeed, it has even strengthened its commitment to subregional cooperation. Another indication of this strong commitment can be identified in Thailand’s most recent domestic development strategy, Thailand 4.0, in which sub-regional cooperation is identified as a vital aspect for supporting the growth and modernisation of the domestic economy. According to Agenda 4 of the Thailand 4.0 model, Thailand aims to strengthen the internal economy by ensuring that the benefits of economic growth spread to all regions, promoting regional employment and regional investment, and ensuring equal distribution of economic benefits in order to promote competition and reduce social inequality (National Science and Technology Development Agency 2016). Strategy No. 2 stipulates that the government establishes the Upper Northern Region 2 (Chiengrai, Phayao, Phrae, and Nan) in a strategic economic locus, as Gateway to GMS and ASEAN+3 and a Green Tourism Destination; it also establishes the Upper Northeastern Region 1 (Udonthani, Loei, and Nongkhai) as the GMS Trading Centre and Gateway to Eastern ASEAN (Association of Southeast Asian Nations) and China (Office of the National Economic and Social Development Council 2018). Within this context of supporting domestic development through sub-regional cooperation, China’s BRI initiative was very welcome, as was the more recent LMC framework, not least as the latter was of Thai origin, although Thailand did not have the economic power to implement it. Proposed by Thailand in 2012, the LMC concept was accepted in 2014 at the 17th China-ASEAN Summit, with the first LMC Leaders Meeting conducted in 2016 in Sanya (Hainan province, China). Despite China’s leadership,

80  Soavapa Ngampramuan Thailand continues to provide strong support for the LMC process; for instance, it presented the concept of “Peace River and Sustainable Development” at the second LMC Leadership Meeting in 2018. Five concrete goals are mentioned in the document, namely cross-border economic connectivity, water resource sharing, productivity development, new forms of farming, and poverty reduction. The overall goal of the LMC is to support sub-regional infrastructure development in order to reduce inequality and the existing development gaps within the sub-region; these are goals it shares with the GMS process and with China’s BRI. According to the summary report by the Ministry of Foreign Affairs, People’s Republic of China (2016), there was a bilateral meeting in 2016 between the Thai foreign minister and Chinese foreign minister in China to discuss the bilateral cooperation between these two countries, particularly cooperation under the One Belt One Road Policy of China and the Connectivity Policy of Thailand. Thailand affirmed its cooperation with China on infrastructure links between the two countries, especially the high-speed railway, and extended its investments in special economic zones. Supporting cross-border cooperation is another focus shared by the two nations, as this is perceived as an economic and development benefit to all member countries. Thailand revealed the policy of the EEC in 2016, the flagship project titled “Thailand 4.0”, stating that it was in line with the GMS East-West Economic Corridor (EWEC) project, adding that it also fits well with China’s BRI and the LMC process. At the fourth consultative strategic meeting between China and Thailand on 4 July 2019 in Beijing, the action plan offered a strong indication of how Thailand’s domestic development strategy was linked to and supported sub-regional integration processes within the Mekong region. From a Thai perspective, the EEC should be developed into a world-class economic zone in order to promote investment in cluster industries for companies using advanced technology as well as a super-cluster of future industries and Thailand’s target industries (Ministry of Foreign Affairs, Thailand 2019). The meeting agreed to link the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) to the East Economic Corridor. Taking into consideration the high relevance for Thai domestic development, and regarding the implications for sub-regional cooperation, a more detailed evaluation of Thailand’s National Economic and Social Development Plan (NESDP) is necessary.

5.2.2 Thailand’s national economic and social development plan Thailand’s strong support for sub-regional cooperation within the Mekong region allows Thailand to benefit economically, especially through international cooperation and investment. China’s BRI and its support for LMC offer another valuable source for additional financial resources for infrastructure and industrial investment within Thailand, consequently supporting its domestic development strategy, Thailand 4.0. Therefore, it is necessary to study Thailand’s economic and social development policies, especially those related to cooperation in this sub-region. The economic structure follows the pattern of semi-industrial

Thailand’s 4.0 development strategy  81 countries that rely on exports, especially exports of large industrial products in many fields of production and services. Thailand attaches considerable importance, in the context of bilateralism and multilateralism, to the growth of foreign and bilateral cooperation, with Thailand as a hub and a platform to promote economic, social, and political progress. The Thai economic system, however, remains in many ways weak and will restrict its long-term sustainable growth, especially in the face of changes in the global context. The development system of Thailand has changed from an agricultural base to an export-focused economy, for which foreign investment is the main driving force. Therefore, the drive of Thailand’s economic and social plan depends on the NESDP, which is currently in the 12th version. The first National Economic Development Plan (1961–1966) had special characteristics that differed from the other plans. It had a length of six years, divided into two periods of time, namely the first three years (1961–1963), focusing on investment and creating economic fundamentals in various forms, and phase two, which covered the last three years (1964–1966), focusing on industrial investments, especially the finished goods industry and agricultural production. The development plan Nos. 2–11 focused on economic growth, growing manufacturing power, and addressing the issues of poverty and injustice among the nation’s population. They embraced the “sustainable growth” philosophical concepts that comprise the growth of the economy, culture, natural capital, and the environment. In all respects, “people are at the centre of development” holistically, and the plans are devoted to growth that balances individuals, culture, the economy, and the environment, especially the creation of a good internal management system. (Texts of the plans are available for downloading at the Office of the NESDC.) However, the 12th Development Plan (2017–2021) relies on the Thailand 4.0 strategic model and the 20-year National Strategy (2018–2037). From an economic point of view, the goal is to increase Thailand’s productivity, increase its manufacturing and technical capacity, and make Thailand a hub for trade and investment in the region. The vision of the 20-year National Strategy will enable Thailand to “realize its vision as a developed nation with stability, prosperity, and sustainability, in accordance with the principles of Sufficiency Economy Philosophy”, as expressed in the national motto, “Stability, Prosperity, Sustainability” (Government Public Relations Department 2018). The vision of the 20-year National Strategy is linked to the economic context in the second strategy, the long-term competitiveness strategy, which is to increase productivity by using machines and development, science, technology, research knowledge, and development of innovations, combined with human resource development as a support, which will result in improved efficiency and value creation of products and services. It must support the development of manufacturing and service sectors, entrepreneurial society, supporting factors, and infrastructure development to increase competitiveness and to lay a solid foundation that will support the enhancement of competitiveness. It can be seen that the vision of the 20-year National Strategy has led to the conception of the economic development framework called Thailand 4.0,

82  Soavapa Ngampramuan which emphasises the transformation of several sectors: (1) traditional farming to smart farming; (2) traditional SMEs, which the state constantly assists, to smart enterprises and start-ups with high potential; (3) traditional services with relatively low-value to high-value services; and (4) low-skilled workers to knowledgeable workers with high expertise and skills (Digital Government Development Agency 2017). To encourage investors to invest and thus expand the economy and foreign trade in response to the National Economic and Social Growth Agenda, the Thai government has decided to develop the eastern region to increase the competitiveness of the country. Therefore, the Cabinet approved the principles of EEC Development on 29 June 2016, in line with the national development policy towards the Industrial 4.0 era. And since the eastern region is located in one of the ASEAN region’s most strategic locations, it can also connect China and India. The region comprises three provinces: Rayong, Chonburi, and Chachoengsao. According to the Cabinet Resolution dated 17 November 2015, the aim is to extend the Eastern Seaboard project to serve as a foundation for increasing the investment in ten target industries (Vimolsiri 2015).

5.3 Prospects for cooperation: supporting Thailand 4.0 strategy through China’s BRI and LMC approach China’s BRI, with LMC as one element, can benefit by supporting Thailand’s domestic development, China’s engagement within the Mekong region, and Thai-Chinese relations in general. The cooperation between the two countries has reinforced the connection of China’s BRI with Thailand’s economic development plans, such as the EEC, Thailand 4.0, and others, in correlation with the development direction of the LMC. This is a direction that Thailand countenances and willingly includes in the BRI project, as China’s financial investment is quite welcome in Thailand, especially within the context of the EEC project. In the context of Thailand 4.0, Thailand government has adopted ten key manufacturing industry goals – modern vehicles, smart electronics, health tourism, food processing, agriculture and biotechnology, automated machinery and robots, aviation and logistics, biofuels and biochemistry, digital, and integrated medicine – which will be matched in accordance with China’s plan to strengthen cooperation in the international manufacturing industry. It is worth recognising that since 2015, the Chinese government has announced 12 industries that will be promoted for international cooperation: steel, non-ferrous, construction equipment, railway, electricity, chemical industry, textile, automobile, telecommunication, machinery, aviation, and ships and marine industries. From the aforementioned industries, it can be seen that six of them are related: automobile, chemical, telecommunication, textile, machinery, and aerospace. Thailand and China may even choose related industries as further potential targets to deepen the cooperation between the two countries. The principal one is, in line with the BRI strategy, the growth of the Thai transport network, in particular, the acceleration of the construction of high-speed rail projects between Thailand

Thailand’s 4.0 development strategy  83 and China, along with other important infrastructure development ventures that will boost industrial cooperation. Regarding Thai-Chinese cooperation, one can also take the example of the agreement on Railway Cooperation signed on 21 December 2017. China’s Premier Li Keqiang stated: [T]the China-Thailand railway project is a flagship project of bilateral cooperation in production capacity under the Belt and Road initiative, which reflects the spirit of extensive consultation, joint contribution and shared benefits. It will effectively improve infrastructure and connectivity in Thailand and the region, facilitate the sustainable development of Thailand, drive the development and prosperity in the region and improve people’s livelihood (Embassy of the People’s Republic of China in the Kingdom of Thailand 2017a) Thai Prime Minister General Prayut Chan-o-cha also issued Decree No. 30/2017 in the Royal Gazette to clear the existing legal issues and allow the Sino-Thai railway project to start because of its potential to enhance the Thai-Chinese strategic partnership for transportation infrastructure including roads, railways, waterways, and aviation; the decree allows adjustments to relevant laws and regulations (Ministry of Transport 2015). Equally worth remembering is the fact that sub-regional cooperation within the Mekong region will support economic development by supporting further integration of the participating countries. This focus is shared by all existing sub-regional cooperation schemes. The focus is on four main recommendations: security and politics, economy and sustainable growth, culture and civil exchange, and support for public and private-sector cooperation. Cross-border trade and cooperation are considered major aspects in achieving those goals which are strongly supported by Thailand. BOI records show that a total of 69 ventures were invested by China in 2017, reflecting an overall investment of US$15 billion, a 120% increase compared with 2015. Based on the available data, after Japan, China was the second-ranked nation for direct investment in Thailand up to 2018 (Board of Investment of Thailand n.d.). However, China became the Thailand’s largest investor in the year 2019, when it submitted 429 projects (262 billion baht) to BOI from January to December for promotional support from the Thai government, while there were 227 Japanese investment projects (totalled 73 billion baht) submitted (Kaewsang 2020). The goals of the LMC, which is a part of China’s BRI activities, emphasise four main points: (1) development of a more modern mechanism for cooperation; (2) promotion of the relation between the Lancang-Mekong system and the definition of the BRI; (3) support for the LMC system, which is a crucial mechanism for driving the sub-region as an economic centre; and (4) sustainable development through the use of modern technologies, including the enhancement of cooperation between the ASEAN Member States on the subject of water to benefit mutually on the basis of shared responsibility. This would help the

84  Soavapa Ngampramuan agricultural sector in each country to be more sustainable, especially after ironing out urgent issues of sustainable water management. The Thai government approved five projects in 2019, with the goal of solving water supply issues with other nations and developing the effectiveness of water resources because certain downstream areas have been lacking in water during past dry seasons. The need to do so in the future will no doubt be a major concern. There are three important areas in which LMC is involved: (1) political and internal security issues; (2) economic development and sustainable development issues; and (3) social, cultural, and strong community issues. With this broad reach, the LMC is an important element of China’s strategy for increasing its role in trade and investment with ASEAN countries located in the Mekong sub-region. It is an official extension of China’s influence to pave the way for investment under BRI in ASEAN countries. Thailand has a direct benefit in gaining trading volume and investment in smaller projects, such as ecotourism, sea freight, and international trade in food, fruits, and other products. Currently, more financial resources are expected to be mobilised for infrastructure development. Meanwhile, General Prayut Chan-o-cha, the current Prime Minister of Thailand, assisted China’s formulation of a model scheme for the LMC (Chongkittavorn 2019). Chongkittavorn claims that this model will support and connect the sub-regions with the BRI and LMC and will also support other economic corridors in the sub-region in connecting with the bilateral economic corridor, such as the GMS, EWEC, North-South Economic Corridor (NSEC), Southern Economic Corridor (SEC), and the EEC. It is apparent that China is highly interested in developing the NSEC, seeing that it provided assistance in building a high-speed rail route in the northern part of Laos and then to Thailand (expected to start in 2021). The soon-to-be constructed railway will become one of the intermediaries that will help China in expanding its trade via the roads, ports, and routes created under the BRI policy. In the future, it will be promoting trade and investment between Thailand and China, primarily in the GMS economic corridors that connect to the EEC, and mainly in connection with important developments, such as cooperation on water resources, the development of transport routes, economic cooperation between border areas, the support on developing skilled labour, the cooperative expansion of agriculture, and cooperation on public health along the economic corridors of Thailand and other member countries. At the same time, China has focused on investing in infrastructure, oil pipelines, gas pipelines, oil drilling, natural gas extraction, hydropower, forest products, the apparel industry, banana plantations, and casino businesses in border towns. According to Transborder News (n.d.), the Chinese government implemented a plan for the green development of Lancang-Mekong to help make it pollution-free and the Five-Year Action Plan for LMC deals with cooperation on water resources. This cooperative effort in building a green and pollution-free area with countries sharing the Mekong River basin will help to solve the problems of sharing the Mekong River, such as summer droughts, flooding, and the dynamiting of islands. Therefore, it is evident that Thailand is gaining advantages

Thailand’s 4.0 development strategy  85 from China’s BRI and the associated LMC. What is more, Thailand also takes an active stance in supporting further cooperation within both concepts, as indicated at the second LMC Leaders’ Meeting, held on 10 January 2018 in Phnom Penh, Cambodia. At that meeting, Thailand agreed with Chinese initiatives in support of the LMC connectivity projects that aimed at assisting the wider BRI approach, as they would offer additional financial resources for sub-regional infrastructure projects and thus strengthen sub-regional cooperation within the Mekong region. In this meeting, Thailand took into account the connection between LMC and BRI as well as that linking the GMS-based economic corridor approach with BRI investment to foster economic and development benefits for the sub-region. The Prime Minister made proposals for the future direction of LMC by stressing that LMC can play an important role in modernising the sub-region through innovation while becoming a centre of excellence and sustainable development. He also stated that LMC could become an economic hub and sustainable development model through innovation and modern industries, consistent with Thailand 4.0 and EEC development policies (Press Division, Department of Information, Ministry of Foreign Affairs n.d.). Thailand gave its endorsement to the creation of an economically focused LMC by pushing forward bilateral connections between the BRI and the GMS, EWEC, NSEC, and SEC. The connections to Sino-Thai foreign policy are evident in “Made in China 2025” and BRI, which were discussed at the third Thailand-China Strategic Dialogue on 1 April 2017. Both sides agreed to strengthen the connection between development strategies, promote the complementary advantages of BRI construction, Thailand 4.0, and Thailand’s EEC, and constantly strengthen cooperation in new economic structures and new formats (Embassy of the People’s Republic of China in the Kingdom of Thailand 2017b).

5.3.1 Impacts on Eastern Economic Corridor from Belt and Road Initiative The EEC is a good example of the domestic policy implementation of the special economic zone (SEZ) concept within the sub-context of economic activities across borders, that is, cross-border economic cooperation that promotes the creation of economic activities across territories and supports the infrastructure network and the integration of trade and investment in the sub-region, as it is intended to facilitate trade and investment in specific border areas. The EEC is integrated into the SEC of the GMS, under the current administration of Prime Minister General Prayut Chan-o-cha. The previous Eastern Seaboard Development Programme, which started in 1981, was associated with cooperation on GMS by adopting the SEZ concept. What is more, the EEC plays a leading role in the Prime Minister’s strategy for raising Thailand’s economy, the Thailand 4.0 strategy; the EEC will be the spearhead of Thailand 4.0 and become the future technology base for Thailand (Rungruangsi 2019). Furthermore, the Thai government is also focusing on the economic reformation, with the aim of enhancing Thailand’s growth potential in order to achieve

86  Soavapa Ngampramuan a higher income and comprehensive growth, as expected in the 20-year National Strategy. The EEC itself is also considered an incentive for the locals in the SEZ. This is because there are no borders that need to be crossed; yet, there is an emphasis on the modernisation of the Eastern Seaboard production centre. Even though the original concept of the Eastern Seaboard Development Strategy was to support industries, the government still had to use other strategies for industrial development as well. The EEC also aims to establish an industrial group in accordance with the Thailand 4.0 strategy; the focus will be on high-value industries, such as high-end tourism, biotechnology, food processing, robot production, aviation, and logistics, representing a wide range of opportunities for sub-regional development that relate to the GMS alliance (Rungruangsi 2019). The EEC includes the existing industrial provinces, which are Chonburi, Rayong, and Chachoengsao, provinces to the east of Bangkok, in the SEZ located between Bangkok and Phnom Penh. These provinces are under the supervision of centralised organisations that develop policies and facilitate investments. They can be divided into five working groups, according to different frameworks: (1) the modernisation of old industries in the Eastern Seaboard; (2) bio industries and agriculture industries; (3) digital industries, such as e-commerce; (4) robotic industries; and (5) logistics industries (Board of Investment n.d.). The EEC is interpreted, in a specific context, as the cooperation between cross-border regions, but it was also recognised as a part of Thailand’s national development strategy – in other words, Thailand 4.0, with the aim of modernising Thailand’s economy. As a result of the Thailand 4.0 policy, the EEC is considered the pilot area for the type of transformation and development that will support import/export businesses and outside investments in Cambodia and Vietnam. The Thai government, therefore, recognises the EEC as the region’s high-tech manufacturing hub, which facilitates cross-border cooperation with neighbouring countries possessing a variety of raw materials and inputs. Their cooperation will result in the development of the high-tech industry of Thailand, the Ba Ria – Vung Tau industrial zone in Vietnam, and the Koh Kong SEC in Cambodia (Kaewsang 2020). According to a BOI press release (2020), investment incentives for the EEC include a 15-year income tax exemption, exemption of import duty on machinery and raw materials imported for export, good credit allocation for investment in research and development, permission for freehold ownership of land for various types of businesses, permission to lease the land for 50 years (which could be extended by up to 40 years), and a personal income tax deduction and a fiveyear work visa for experts employed by the company (Board of Investment n.d.). These generous incentives make the EEC an area full of prospects, along with a policy to further enhance the potential with additional infrastructure investment and allocation of facilities, according to the distinct needs. Conjointly, it can also be linked with the nearby industrial areas. Together with the GMS economic corridors, the EEC policy is a policy that promotes the transfer of products and personnel between economic zones. The government expects that the cooperation projects between the EEC and GMS will immensely complement one another and stimulate economic growth in the sub-region.

Thailand’s 4.0 development strategy  87 According to interviews (Kaewsang 2019) and statistics provided by the BOI (2020), Chinese investment projects in the EEC have increased from 2012 to 2019, especially since a surge in 2015 and 2016 (see Table 5.1). Table 5.1 shows that, in 2012, there were 2 Chinese projects in Chachoengsao province, 7 in Chonburi province, and 13 in Rayong province. And later, in 2014 – the year that LMC was established – there were five Chinese projects in Chachoengsao province, 24 in Chonburi, and 32 in Rayong. Five years after the establishment of LMC, in 2019, there were 21 Chinese projects in Chachoengsao, 105 in Chonburi, and 147 in Rayong. The increase in Chinese projects clearly shows the rapid growth rate. In comparison with 2014, the increase in Chinese projects by 2019 is 4.20 times in Chachoengsao province, 4.38 times in Chonburi province, and 4.60 times in Rayong province. Overall, the EEC in Rayong province is considered the largest area of Chinese project investments as well as an area with the highest growth rate. Moreover, in order to achieve higher economic and investment benefits as per the Thailand 4.0 policy and the EEC developmental strategy, the LMC supports investments, integrated trade, and joint production to expand the supply chain’s connection with external markets, such as processed food products, consumer products, and electronic products, including investments in connectivity, transportation, and tourism by linking China’s BRI project with Thai development plans. What is more, the acceleration of high-speed railway projects between Thailand and China, including other infrastructure construction projects, will further drive industrial cooperation between Thailand and China. For instance, the EEC places importance on the production of auto parts, new machines, and energy. Presently, Chinese businesses have invested in building more industrial factories, with the target industries of 80 factories. As mentioned before, in supporting domestic industrial development, the Thai government selected ten industrial categories, specifically for the manufacturing factories; in all of them, Chinese investment plays an important role with the aim of strengthening the capacity of Thailand’s domestic manufacturing industries. This offers another example of how China’s BRI and the associated LMC process supports domestic development within Thailand’s own development strategy. Nevertheless, as discovered in interviews with Chinese entrepreneurs, there still are some disadvantages to investing in Thailand. The biggest disadvantage is that there are more Chinese companies investing in Thailand at present, Table 5.1 O verview of the number of Chinese projects located in the EEC from 2012 to 2019 (categorised by year and by province) Province

2012

2013

2014

2015

2016

2017

2018

2019

Chachoengsao Chonburi Rayong

2 7 13

3 14 25

5 24 32

7 34 59

11 39 88

14 49 104

19 78 124

21 105 147

Source: Board of Investment, 2020.

88  Soavapa Ngampramuan especially in the EEC area. There were 273 factories in 2019 (Board of Investment 2020), which originated from different provinces all over China, which indicates that the competition is intense. Another problem is the obtaining of work permits because they cannot always be processed in time. Therefore, it has been suggested that the Thai government lessens some requirements in order to facilitate paperwork for the Chinese employees who work in Thai industrial estates. Apart from those, there are problems with acquiring highly skilled labour and reaching target industries; the Chinese companies find that highly skilled workers are scarce in Thailand; therefore, it is strongly recommended that the Thai government develops a long-term development plan for producing high-quality labour and come up with a sustainable long-term plan.

5.4 Assessing Thailand’s participation in China’s BRI and the related LMC process Thailand has a strong commitment to participating in and taking on a central role in sub-regional integration processes within the Mekong region, as doing so will support its own industrial upgrading and development agenda based on Thailand 4.0 and the flagship project of the EEC. Within this context, Thai-Chinese economic cooperation gains further value from a Thai perspective since China can offer additional financial investment and the transfer of industrial know-how. Therefore, both BRI and the associated LMC process are valued as additional avenues not only for Thai-Chinese relations but also for supporting sub-regional integration within the Mekong region. This cooperation covers trade, joint production, supply chain expansion into external markets, the implementation of processed food products, consumer products, and electronic products, along with the investment in connectivity and transportation, for the purpose of joint tourism. These are complex matters that all six countries must discuss closely. However, there is a further need to provide connectivity in order to meet the people’s needs for basic requirements, to provide access to resources and education, and to strengthen the capabilities of future employees, in accordance with the knowledge society. This indicates a comprehensive coverage with regard to the Thailand 4.0 development strategy. Colonel Chaisit Tantayakul, a senior researcher at the Thai-Chinese Strategic Research Centre, National Research Council of Thailand (NRCT), concluded after attending the second LMC Leaders’ Meeting that Thailand’s Prime Minister places emphasis on the following four main points: (1) developing a modern cooperation framework; (2) promoting the connection between LMC and BRI; (3) supporting the LMC to make it the key component in driving the sub-region as an economic hub; and (4) embracing sustainable development through the use of modern equipment and enhancing the cooperation among member countries, on the basis of mutual responsibility for water resources (Tantayakul 2018). This will help the agricultural sector in each country to become sustainable, particularly with regard to the issues of sustainable water resources management. Results of the meeting in Phnom Penh are presented in two notable documents,

Thailand’s 4.0 development strategy  89 which are the Five-Year Plan of Action on LMC (2018–2022) (Office of the Council of Ministers 2018a) and the Phnom Penh Declaration (Office of the Council of Ministers 2018b). The two display the clear political will of national leaders, with the aim of further supporting a sub-regional integration process supported by the LMC process, as the LMC offers a cooperation framework for achieving its goals of social and economic development for the people in the Mekong River basin, and it sets forth the vital role China’s BRI and the associate LMC process play in supporting sub-regional integration in the Mekong region. At the same time, Thailand’s leadership connects China’s BRI sub-regional integration support with the established GMS process. Prime Minister Prayut Chan-o-cha believes that the process of GMS should be closely monitored and updated for the development of a sustainable community (Ministry of Foreign Affairs, Thailand 2018). In his view, “The Thailand 4.0 policy will stimulate the development of modern industries, along with the development of human resources, together with helping countries advance with GMS cooperation that is environmentally sustainable, because it is essential that governments preserve the environment”. The Prime Minister also expressed appreciation for the support of the ADB for its sincere cooperation and its significant support in the development of GMS cooperation projects. It can, therefore, be said that BRI and the associated LMC represent a Chinese strategy for increasing its role in trade and investment within ASEAN countries located in the Mekong sub-region, but one that seems to be welcomed by Thailand. However, this will also increase China’s formal influence within the sub-region, with implications for the regional, ASEAN level, as well. Other member countries will also benefit directly in terms of gaining opportunities for greater trade and investment in smaller projects, such as ecotourism, sea freight, and international trade in customer products – especially food, fruits, and other merchandise. At present, more financial resources are forecast, specifically for infrastructure development since the introduction of BRI and LMC. It is worth remembering, however, that in spite of all its advantages and potential benefits, the Mekong sub-region still lacks some of the necessary infrastructure and support for the necessary capital flows, and it urgently needs support for cross-border trade and investment in the region, which could be done by establishing consistent rules and regulations in accordance with standard guidelines and requirements for transport and customs. At the same time, Thailand’s own development success also contributes to sub-regional integration within the Mekong region, such as the adoption of the Cross-Border Transport Agreement (CBTA) on 1 August 2018 with the GMS; it allows the first 200 vehicles of each country to carry a Temporary Admission Document (TAD), which is stamped and dated by customs officials at the border when entering and exiting another GMS country – equivalent to the vehicle’s “passport” (Vairatchapanich 2019). The aim of the CBTA cooperation is to overcome previous transport restrictions, as currently, trucks must trans-ship cargo at most of the border crossing points in the GMS, so it will contribute to an emerging trans-border economic space within the sub-regional setting of the Mekong region.

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5.5 Conclusion The impact of Chinese investment has been increasing progressively in Thailand since 2016, with a specific focus on Thailand’s EEC project. This dynamic movement of Chinese investment within Thailand can be linked to China’s BRI and the associated LMC process. From a Thai perspective, it fully supports the LMC process and its three pillars: (1) politics; (2) economic development and sustainability; and (3) social and cultural exchanges. This strong Thai support for the Chinese investment is based on domestic considerations and on the perception that economic cooperation within the BRI and LMC framework will support Thailand’s own development and its position within the sub-regional integration process. At the same time, Thailand also recognises that BRI-supported infrastructure investment within the Mekong region, such as the ongoing railway projects in northern Thailand and Laos, will contribute further to the integration process within the sub-region and thus add further strength to the longer-established GMS process. Therefore, supporting Thailand’s domestic development and contributing to sub-regional integration within the Mekong region, which is also of interest to Thailand, in turn further support the already well-established Sino-Thai economic and political cooperation. From a Thai perspective, it is apparent that China places high importance on its foreign policy towards Thailand, a perception further strengthened by the investments associated with China’s BRI. Thailand’s economic development strategies comprising Thailand 4.0 and the related flagship EEC project are profiting from BRI and the investments associated with LMC. To make the most of these factors and policies, the government should provide greater facilitation for Chinese entrepreneurs and investors in the SEZ, especially with regard to labour skill development and the provision of more services and infrastructure to increase Thailand’s ability to attract further Chinese investment.

Bibliography Board of Investment (n.d.) Strategic Data of foreign Investment in Thailand from 2013 to 2019 (in Thai). https://www.boi.go.th/un/statistics_condition_promotion Board of Investment (2020). Information Showing China’s Investment Projects in the Eastern Economic Corridor (EEC) from 2012 to 2019. International Affairs Division, Bangkok, Thailand. Busbarat, P. (2012) A review of Thailand’s foreign policy in mainland Southeast Asia: Exploring an ideational approach. European Journal of East Asian Studies. 11 (1), 127–154. Choonhavan, C. (1990) Policy Statement of the Council of Ministers of Prime Minister Chatichai Choonhavan Delivered to Parliament on 1 January 1990 (in Thai). Government House. Available from: https://library2.parliament.go.th/giventake/content_ sp/sp46.pdf [Accessed on 5th May 2020]. Chongkittavorn, K. (2019) Interview, July 2019. Digital Government Development Agency (2017) (in Thai). Available from: https://dga. or.th/upload/download/file_32600e26a233b3fc9c88e48300c10334.pdf [Accessed on 15th November 2019].

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Embassy of the People’s Republic of China in the Kingdom of Thailand (2017a) Groundbreaking of First Phase of China-Thailand Railway Project. Available from: http://www. chinaembassy.or.th/eng/dszl/dshd/t1522966.htm [Accessed on 5th February 2020]. Embassy of the People’s Republic of China in the Kingdom of Thailand (2017b) Joint Press Release for the Third Round of China-Thailand Strategic Dialogue, 2017/04/01. Available from: http://www.chinaembassy.or.th/eng/sgxw/t1793678.htm Government Public Relations Department (2018) The Goal of Stability, Prosperity, and Sustainability in Thailand’s National Development, 25 January 2018. Available from: https://thailand.prd.go.th/ewt_news.php?nid=6287&filename=index [Accessed on 1st November 2019]. Kaewsang, C. (2020) Interview, February, 2020. Leekpai, C. (1992). Policy Statement of the Council of Ministers of Prime Minister Chuan Leekpai Delivered to Parliament (in Thai). Government House. Ministry of Foreign Affairs, People’s Republic of China (2016) Foreign Minister Wang Y i Holds Bilateral Meeting with Foreign Minister Don Pramudwinai of Thailand. Available from: https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1360260.shtml [Accessed on 6th May 2020]. Ministry of Foreign Affairs, Thailand (2018) Thai Prime Minister joined 2nd LMC Summit in Phnom Pehn, Cambodia (in Thai). Available from: https://www.mfa.go.th/th/ content/5d5bd0e415e39c3060021ec2 [Accessed on 6th May 2020]. Ministry of Foreign Affairs, Thailand (2019) Thai- Chinese Strategic Meeting on 4 July 2019 at Beijing, China (in Thai). Available from: https://www.ryt9.com/s/ mfa/3016919 [Accessed on 6th May 2020]. Ministry of Transport (2015) Railway Cooperation between Thailand and China (in Thai). Available from: https://complain.mot.go.th/gis_group/pao/about.html [Accessed on 15th November 2019]. National Science and Technology Development Agency (2016) Academic Focus Thailand 4.0 (in Thai). Available from: https://waa.inter.nstda.or.th/stks/pub/2017/20171114parliament-library.pdf [Accessed on 6th April 2020]. Office of the Council of Ministers (2018a) Five-Year Plan of Action on LancangMekong Cooperation (2018–2022). Available from: https://pressocm.gov.kh/ wp-content/uploads/2018/01/ENG-Five-Year-Plan-of-Action-on-Lancang-MekongCooperation-2018-2022.pdf [Accessed on 6th May 2020]. Office of the Council of Ministers (2018b) Phnom Penh Declaration of the Second Lancang-Mekong Cooperation (LMC) Leaders’ Meeting: “Our River of Peace and Sustainable Development”. Available from: https://pressocm.gov.kh/en/archives/21699 [Accessed on 6th March 2019]. Office of the National Economic and Social Development Council (n.d.) The National Economic and Social Development Plan. Available from: https://www.nesdc.go.th/ nesdb_en/main.php?filename=develop_issue [PDF downloads of the 12 plans in English] [Accessed on 6th April 2020]. Office of the National Economic and Social Development Council (2018) Thailand Development Plan (in Thai). Available from: https://www.nfc.or.th/wp-content/ uploads/download-manager.pdf [Accessed on 6th May 2020]. Press Division, Department of Information, Ministry of Foreign Affairs (n.d.) Chinese Strategic on EEC of Thailand (in Thai). Available from: https://www.youtube.com/ channel/UCZ0Ne1k7c1QUFsKQYAeHErQ [Accessed on 6th May 2020]. Rungruangsi, P. (2019) Interview, May 2019. Tantayakul, C. (2018) Chinese Policy to Thailand under BOI (in Thai). Strategic Research

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Centre, National Research Council of Thailand. Available from: http://www.vijaichina. com/author/9 Transborder News (n.d.) Issues on Mekong River (in Thai). Available from: https:// transbordernews.in.th/home/?p=23235 [Accessed on 3rd August 2019]. Vairatchapanich, N. (2019) Interview, May 2019. Vimolsiri, P. (2015) Enhancing Infrastructure Development for Thailand’s Future Growth. National Economic and Social Development Board. Available from: https://www.boi. go.th/upload/content/5.%20Enhancing%20Infrastructure%20Development%20f_ 92919.pdf [Accessed on 16th January 2020].

6

Examining Laos’ policy responses to BRI Wei Liang

6.1 Introduction With the steady rise of China’s political and economic clout, Beijing has adopted a more crafted and assertive foreign policy in order to redefine its relationship with countries in Southeast Asia. In recent years, the Belt and Road Initiative (BRI) has emerged as the cornerstone of Chinese foreign policy today. According to the Chinese government, the 21st-century version of the Silk Road will take shape around a vast network of transportation, energy and telecommunications infrastructure accompanied by strengthened trade and investment and increased people-to-people exchanges. Within China’s BRI, Southeast Asia is identified as a key region in itself and also in connecting China with South Asia. This region is also considered by many as China’s “backyard”, given its strategic and geopolitical importance for China. We have seen the connective infrastructure constructions through a massive network of ports, industrial/special economic zones, logistics facilities, inland transportation nodes and railways throughout the region. Seven years after its inception, it is still not certain how this endeavour, which involves dozens of countries, projects running in the tens of billions of dollars, hundreds of multinational corporations (MNCs) and dozens of Chinese provinces, will unfold as Beijing planed. This chapter tries to provide more careful consideration of what is occurring and what obstacles are being encountered from the “participant nations” in the region of Southeast Asia. To address this problem, this paper focuses on current developments regarding China’s BRI in Laos, one of the key participants in Southeast Asia. Laos is a small and underdeveloped country by its size and level of economic development. It is known as a landlocked country which has no access to seaports and hence difficult to conduct international trade beyond its immediate neighbours. But geopolitically, its location is strategically important for China to expand its sphere of influence into the region and beyond, and of course, for the US, Japan and others to counter China’s expansion. As Eisenhower famously said during his meeting with Kennedy, Laos was the ‘cork in the bottle’ of Indo Pacific (Greenstein and Immerman 1992).

94  Wei Liang There is a proliferation of researches on defining and making sense of the strategic response made by Southeast Asia countries being caught in the middle between the US, a global hegemon that is far away but has provided lasting security protection to some Southeast Asian countries and China, a rising power that has become the largest trading partners for almost all countries in the region and happens to be located in the same neighbourhood. Most scholars believe that the Philippines, Indonesia, Vietnam and Singapore are adopting more hedging strategies, while Thailand and the other three smaller developing countries, Cambodia, Myanmar and Laos, have become more attracted into China’s orbit of influence. Each country, however, has adopted subtly different strategies, and it also varies under different leadership ranging from pure bandwagoning to balancing and hedging as China is trying to project its economic power in a region where the US still has had a dominant influence, especially on the political and security arena (Roy 2020). In this chapter, close attention will be paid to better understand how Laotian’s domestic interests and policy preferences towards China’s economic engagement through BRI projects has evolved over time and to what extent it has differed from the other small states in the Mekong region. This paper will address three main research questions. First, what domestic factors have helped to explain the generally accommodating response from Laos to the Chinese BRI projects? Second, what leverages do small states like Laos have in dealing with big powers like China? Third, what implications can be drawn from Laos’ experience for a better understanding of the BRI and the great power competition in the region? The rest of the chapter proceeds as follows. First, I briefly discuss the political economy of Laos, its domestic political system, interests, policy preferences and constraints in Section 6.2. Then, in Section 6.3, I provide an overview of the drivers and motivations behind China’s BRI as its grand strategy to engage Southeast Asia. Section 6.4 examines why China values the strategic importance of Laos despite it is a small and poor developing country in the region. Section 6.5 explains the reasons that Laos has shifted its China policy from balancing to binding engagement, and there is a potential to move to direct bandwagoning in the post-COVID-19 era through a domestic lens. The last section offers a conclusion and policy implications for the region.

6.2 The political economy of Laos Since the Lao People’s Democratic Republic (Lao PDR) was established on December 2, 1975, the Laotian government adopted a socialist regime and a centrally planned economy. For centuries, it was sandwiched between the influence and power between Thailand and Vietnam. Culturally, it is very close to Thailand, and Laotian people still enjoy the Thai pop culture and TV programs on a daily basis. Politically, it was and still is heavily influenced by Vietnam. The party structure remains typical of communist parties of the Soviet Model. The highest organ is the Political Bureau, with its members elected from and by the Central Committee of the Party. But just like China or Vietnam today, the Marxist-Leninist ideology has faded to become a lip service; rather, the accurate description of the

Examining Laos’ policy responses to BRI  95 Laotian political system is an authoritarian single-party state (Stuart-Fox 2007). For a long period of time, its high-level party officials studied in Vietnam. Economically, despite a decade of rapid economic growth on an average of 7% and the government’s ambitious policy objective to graduate from Least Developed Country (LDC) status by 2020 and later deferred to 2024, it remains one of the poorest countries in the region and is heavily dependent on foreign aid for a significant portion of the state’s annual budget expenditures (Creak and Barney 2018). As a socialist country, the Laotian government still maintains ownership stakes in key sectors of the economy such as telecommunications, energy, finance, airlines and mining. The Lao government’s most recent figures report that there are now more than 187 state-owned enterprises (SOEs) in Lao PDR. 133 SOEs are 51–100% state-owned. The registered capital was more than USD 26 billion. At the end of 2017, the total assets of 60 SOEs managed by the State Property Management Department of Ministry of Finance was more than USD 13 billion (80.51% of GDP) (US State Department 2020). In other words, its economy is still currently controlled by the state, and the public sectors are responsible for much of the national employment and taxation. In 1986, the Party Congress approved the New Economic Mechanism (NEM) to officially begin its pro-market economic reform. As steps taken to open up the country, it joined the Association of Southeast Asian Nations (ASEAN) membership in 1997 and began the process of integrating into regional institution economically and politically. After it joined the WTO in 2013, it has prioritized economic development in its domestic agenda, and the ruling party, People’s Revolutionary Party (PRP), has begun to encourage foreign investments. According to the figures released by the Ministry of Planning and Investment of Laos, from 1989 to 2019, the Laotian government approved a total of 6,144 investment projects with an overall investment value of $36.8 billion (Xinhua News 2020). The Laotian government’s effort to conduct pro-market economic reform has resulted in stable economic growth in the past decade. Specifically, it has set two main goals for its national development. First, the Laotian government hopes to transform Laos from a landlocked country into a landlinking ASEAN states. This vision of infrastructure connectivity was incorporated ­ in the National Growth and Poverty Eradication Strategy and was emphasized by the Laotian government in various regional and sub-regional summits, including ASEAN, Greater Mekong Sub-region (GMS) and ACMECS (Nouansavanh 2010). When Laos hosted the third GMS Summit in 2008, the theme chosen for the meeting was exactly “enhancing Competitiveness through Greater Connectivity”. The Laotian government has determined to turn its country’s ‘biggest obstacle to development’ to ‘regional advantage and development opportunity’.1 Second, utilizing its resources, especially hydropower resources, the Laotian government hopes to make Laos a ‘battery’ of ASEAN by providing electricity to its neighbouring countries. Large-scale hydropower projects are considered one of the few policy options for the Laotian government to attract foreign direct investment (FDI) and gain export earnings by selling the electricity generated to its neighbours, thus reducing poverty. According to the National Poverty Eradication Programme,

96  Wei Liang investment in large-scale projects will contribute to the creation of wealth through a market-oriented, taxable transformation of natural resources (Lao PDR 2003). This is a more than decade-long policy goal highlighted in both Lao’s10-Year SocioEconomic Development Strategy until 2020 and the 8th National Socio-Economic Development Plan (2016–2020). The Mekong River, stretching 4,350 kilometers, arises in China and then flows through five ASEAN countries, Laos, Thailand, Cambodia and Vietnam. By 2016, Laos has completed 40 dams on Mekong Tributaries. After the tragic accident at the Xe-Pian Xe-Namnoy hydropower project that flooded 13 villages, killed 71 and left around 7,000 homeless in 2018, the Laotian government put a temporary halt to its effort of getting rich by ‘damming Mekong’ (Bangkok Post 2020). But the temporary ban was lifted soon after the tragedy. As recently stated by Laotian Deputy Energy and Mines Minister Sinava Souphanouvong, “Laos would build 100 dams across the country by 2030, with 78 were already operational and capable of producing 9,972 megawatts of electricity” (Hunt 2020). In December 2020, Laos just approved another four dams to be built at the mainstream of Mekong. This cluster of dams around Xayaburi would cost about $12.5 billion compared to Lao’s national GDP of $18 billion. Thailand is the largest buyer of Laos’ electricity. It purchases 3,877 megawatts from Laos, representing 9.16% of its total intake (Rujivanarom 2019). But the infrastructure construction and dam-building are not just expensive but they also bear severe social and environmental costs. The Mekong is the largest inland fishing reserve in the world and is second only to the Amazon in terms of biodiversity. Not surprisingly, China is financing and building about half of Laos’ hydropower projects and infrastructure projects under BRI. With China now the largest investor and creditor of Laos, there is no doubt that Laos has developed a significant degree of dependence on the Chinese market, investment and development assistance. But it is important to stress that the Laotian government has developed a domestic policy preference towards balancing among China and two other regional powers, namely, Thailand and Vietnam and other great powers. By embracing the ASEAN integration, it could develop some bargaining chips with the coordinated and collective bargaining power of the ten member states. In a most recent survey on attitudes towards ASEAN by the ASEAN Foundation, 99% of the Laotian respondents agreed that membership in ASEAN was beneficial to their country. This approval rate is much higher than any other ASEAN states (Gnanasagaran 2018). While some larger states in the region are pursuing a hedging strategy of building a closer economic tie with China and securing alignment with the US on political and security matters, this is not the case for Laos. Being one of the smallest countries in the region, it is more important for Laos to balance among all its neighbours. It has a long history of juggling ties with the bigger powers around it. As one Laotian diplomat said: we are right stuck in the middle and every country surrounding is bigger and more powerful than us. One thing that we have learned from history is to keep good relationship with all of them and carefully balance among them.2

Examining Laos’ policy responses to BRI  97 Even when we compare Laos with Cambodia, both are small and underdeveloped countries, with lots of similarities, they have formulated their China policy with subtle differences. Cambodia has had an ‘ironclad friendship’ with China for decades, and Laos is a relatively new friend of China. Also, Laos enjoys smoother relations with Vietnam, a country also run by the Communist Party, and Thailand, a key economic partner with whom it shares a long border (Hart 2017). As some scholars observed, “Laos has come across as more ‘even-handed’ in handling their Chinese benefactor” (Pang 2017). Based on the amount of aid and assistance it has received, which have been showcased as the big signs of friendship projects such as hospitals, schools and roads donated by China, different observers may come to different conclusions if Laos is able to avoid to side completely with China, but at least it has been held as a policy preference by the Laotian government for a decade. On the other hand, it is also noticeable in Laotian politics that, as an LDC with limited government capacity, they realize that their country is reliant on the foreign aid provided by the international community. Hence being questioned as too dependent economically on another country is less concerning compared to other countries. The Lao economy has always been dependent on external assistance. One diplomat has bluntly stated that “to Laos’ government it makes little difference if we are receiving aid from the World Bank or China Development Bank, or borrowing loans from Japan or China”, and in many cases, we have no room to manoeuvre and no choices to select from.3

6.3 China’s BRI investments and projects in Laos China’s FDI in ASEAN has been growing steadily. But, in Laos, it has been skyrocketing. In 2003, Chinese investment contributed just under 1.5% of Laos’ FDI. By 2013, China had become the largest country investing in Laos, at over US$5 billion (Bt170 billion). According to the China Global Investment Tracker (CGIT) compiled by AEI, China has invested $27.74 billion in Laos (not counting the infrastructure projects and aid; AEI 2020). In 2018, China accounted for over 80% of FDI going into Laos (Economist 2020). Chinese investment, to a large extent, contributed to the continuous GDP growth in the country between 2005 and 2018. Even though growth fell from 6.3% in 2018 to 4.8% due primarily to natural disasters that affected the agricultural sector in Laos, it is still considered one of the fastest-growing country in the region. The anchor project of Chinese BRI in Laos is undoubtedly the 422.4 kilometer railway, which connects Vientiane to the Chinese border. It will pass through 75 tunnels, and the total cost of construction reached $5.986 billion (37.4 billion RMB). The financing arrangement for the railway project is divided as such: a joint venture of the Laos-China Railway Company was created with a 70%/30% ownership split between China and Laos. China provided a 35-year concessional loan with an amount of $480 million to help the Laotian government to cover the remaining 70% (Morris 2019). It is the biggest investment project ever for Laos, as the construction cost was about 37% of its national

98  Wei Liang GDP in 2016 (Strangio 2020). Therefore, it has added significant pressure to Laos’ public debt distress. But the Laotian government is confident that with the completion of the project, it will boost economic growth, job creation, industrialization of the economy and tourism. In other words, the spillover effects of the railway connection will make the tremendous construction cost totally worthy. By December 2020, the work on the tunnel and bridges was about 95% done, and the railway is scheduled to be complete and open for use in December 2021 (Laoin 2020). The Laotian government believes that infrastructure building is central to not only trade promotion but also help build its manufacturing capacity. Due to the poor infrastructure and relatively low-skilled labours, the Laotian government has had difficulty to attract manufacturing FDI. According to Lao government statistics, mining and hydropower accounted for 95.7% of FDI and agriculture accounted for only 2% of FDI in 2019 (US State Department 2020). To break this impasse, Laos announced plans to construct as many as 40 special economic zones (SEZ), but as of 2020, it has only established 12 SEZ. As part of the BRI, 160 Chinese enterprises have invested $1.5 billion in building SEZs, constituting 23% of the total SEZ investment (Pakhem 2019). Most of them are built near the new infrastructure built by China, such as the new expressway or the railway station. For example, the Laotian government signed an agreement with Laos-China Railway Co. to develop the areas near the Railway station (Laoin 2020). Hydropower is one of the key areas that China has developed many BRI projects. The Chinese construction SOEs soon occupied Laos’ major rivers, with various mega-dam plans to supply neighbouring markets. China has the technology know-how, capital and skilled workers to help build dams in Laos. In fact, because the average cost of dam-building by the Chinese construction companies are at least 30% lower than their foreign competitors such as South Korean and Australian firms,4 the fierce competition has taken place among the Chinese SOEs from different provinces. As one scholar described, this is a diplomacy-branded dam-building race where one Chinese firm’s project was matched with bigger projects by its hoe rivals (Liao 2019). The first BRI hydropower project China launched in Laos was the seven dams on the Nam Ou River (a tributary of Mekong River) in 2015, with a total cost of $ 2.7 billion. The Chinese firms were granted the operation rights for 29 years. Dam-building has long been questioned by environmentalists for its detrimental impact on the local ecosystem, fishing and displacement of thousands of families who have lived by the river and made a living there. Furthermore, the Mekong River flows from China into Myanmar, Laos, Thailand, Cambodia and on into Vietnam. A report by the Mekong River Commission has shown that upstream hydropower dams along the Mekong River, mostly in China or built by China in upstream countries, have caused drought in downstream countries (Mekong River Commission 2020). Even worse, the fact that China is located upstream and has controlled water flow through the 11 dams it has built has raised great concerns among the downstream countries that China may politicize or even weaponize the water flow management (Eyler 2020).

Examining Laos’ policy responses to BRI  99 In order to encourage more private investments in the public sector of the developing countries, the World Bank and the Asian Development Bank have promoted the Build-Operate-Transfer (BOT) model for decades. With a BOT model, the government makes a concession agreement with a company that constructs a utility and operates it for the duration of concession period. At the end of this period, operating rights (or ownership in some cases) are transferred free of charge to the host government. This seems to be an effective way to help the developing country government with little financial capability to build the well-needed infrastructure. China has applied the BOT model for most of the infrastructure projects it invested in Laos. For example, BOT will apply to the Nam Ou River Cascade Hydropower Project. Once completed, it will contribute to more than 12% of Laos’ electricity supply (Zhong 2020). The power supply project for the China-Laos railway is also a BOT power grid project in Laos. The project runs along the China-Laos railway and builds 20 circuits of 115 kV transmission lines with a total length of 268 kilometers (Xinhua News 2019c). Another example is the Vientiane to Vang Vieng expressway. This four-lane highway costs $1.3 billion and under the BOT agreement, the Chinese company will operate for 50 years (Vaenkeo 2020). Though it was praised as a ‘win-win’ by both governments, many international observers expressed their concerns about the lack of transparency, missing feasibility studies and the overlook of the social and environmental damages done to the local community (Economist 2020). Land is another controversial issue in Laos since BRI projects often require large swaths of land on which to develop infrastructure and industrial zones. The Laotian government has not done a great job placing those local farmers who have lost the land. For instance, media reveals that a railway project (initiated before BRI but then placed under it) is grabbing the land of over 4,400 farming families, who are being displaced without compensation (Radio Free Asia 2019). There are also reports of declining soil quality on Chinese plantations caused by input-heavy farming practices. The overuse of fertilizer by Chinese farmers who have leased land from Laotian for farming has upset the local communities. Food safety is an issue, but over the long run, they are worried that soil contamination might damage agriculture. There is a disparity in how the Laotians see China’s BRI projects between the elite who are involved in policymaking and the farmers who have been negatively affected. The narrative that China is engaging in ‘debt trap diplomacy’ has taken off around 2018 and is now closely associated with BRI projects that China has invested in the developing world. The findings of the World Bank report show that for most of the BRI participating countries, the danger of a debt trap is exaggerated (Rajah et al. 2019; World Bank 2019a). But a handful of countries are indeed in risky debt dependence on China for BRI projects financing. Unfortunately Laos is one of the countries which are at the higher risks of debt vulnerability. Because of the impact of COVID-19, the already bad debt situation in Laos got worsen. Debt levels are expected to increase from 59% of GDP in 2019 to 65% of GDP in 2020 (Macan-Markar 2020). Within limited foreign exchange reserve and export capacity, the country is facing real difficulty to make repayment of the debt, with the majority of it

100  Wei Liang denominated in foreign currency. China is now a creditor of about half of Laos’ public debt and has financed dozens of over one billion dollars’ infrastructure projects in Laos. Starting from this year, the Laotian government needs to make the first cut repayment of the loans they borrowed from China. In September 2020, the state-owned Electricite du Laos (EdL) and China Southern Power Grid cosigned a power grid shareholding agreement to give majority control of the new EdL Transmission Company Limited (EDLT) to the Chinese company (Zhai and Johnson 2020). This is one example for the two countries to start renegotiating Laos’ debt repayment scheme with China. The concern is that given the financial difficulties of the Laotian government this year and in the near future, more renegotiations will take place to transfer shareholding from Laotian companies to Chinese companies or for Chinese firms to secure resources supply in order to settle the debt repayment issues. Despite all the controversies abovementioned, it seems that Laos as a country has greatly benefited from China’s BRI projects. According to the World Bank report assessing the global impact of China’s BRI in 2019, Lao PDR is among the biggest beneficiary of China’s BRI projects in terms of economic gain (Maliszewska and Mensbrugghe 2019). This is directly linked with the high level of trade cost reductions due to infrastructure improvements. These important gains will be associated with faster access to the sea, therefore benefiting trade with partner countries that can be reached through maritime connections. The BRI projects cover the new rail link from Vientiane to the Bangkok Port in Thailand. Also, the infrastructure building through the BRI projects in Laos’ neighbouring countries is important to help it conduct trade in the region and globally. For example, the improvement of the Sihanoukville Port in Cambodia and the rail improvements in Vietnam also facilitated Laos’ trade. In addition, the Kra canal in Thailand is particularly beneficial for all sea shipments going west – this will prevent ships from taking a long detour. The largest increases in the volume of exports of Lao PDR are recorded in chemicals, rubber and plastics as well as in energy-intensive manufacturing. Now, Laos has started to manufacture and export some labour-intensive textile and wood products.

6.4 China’s geopolitical and geo-economic interests in Lao PDR Laos is one of the most heavily invested-in countries under China’s BRI relative to its GDP. In 2009, Laos became the ‘comprehensive strategic partner’ of China. When the Laotian president visited Beijing in 2018, the two governments and the two parties signed “Action Plans for China and Laos to build a community of common destiny”. It is also the country that the Chinese President, Premier and other high-level government officials paid frequent visits. President Xi Jinping visited Laos in 2017, marking the first international trip of his second term. These are signs that China has greater interests in this small, 6.8 million population country that outsized its size and attention it has received from the international community. What are the geopolitical advantages of Laos that China

Examining Laos’ policy responses to BRI  101 is taking advantage of? First, Laos can be taken as a hub for China to reach out to other ASEAN countries. Laos is strategically located at the heart of the land of Southeast Asia that is adjacent to China, Myanmar, Cambodia, Thailand and Vietnam, all five states in the mainland ASEAN. As shown by a map of it is the region one of the key gateways for China to reach out to the larger economies of Southeast Asia. Laos could become the land-linked core of the GMS. This would allow China overland access to the region’s other large economies. The ambitious ‘Pan-Asia Railway’ is the best illustration of the importance of Laos. In order to reach out to Thailand and eventually Malaysia and Singapore from Southern China, Kunming-Vientiane high-speed railway has become the most important starting point. It will pass through Laos’ countryside and mountains for more than 250 miles, passing over 150 new bridges and through 76 new tunnels to link up China and Thailand. Once complete, the railway project will provide China with access to trading ports on the Andaman Sea and the wider Indian Ocean region through the land. Transport by rail will be a lot cheaper and faster than moving goods through mountainous road, cutting the transport time between southern China and Singapore to just ten hours (Hart 2017). Second, Laos may become a convenient energy, minerals and natural resource supplier for China. Energy security now is one of the top concerns of the Chinese government. Ensuring energy security would require China to diversify its dependence on oil shipping through the Malacca Strait, South China Sea and Indian Ocean, which now accounts for over 80% of China’s oil supply. Furthermore, the Mekong River runs through mountainous Laos and makes it resourceful in terms of building hydroelectric dams. With China’s recent commitment to achieving ‘carbon neutral’ by 2060, it is facing increasing domestic and international pressure to reduce the use of coal for generating electricity. The abundance of hydropower in Laos, right next to China’s southern provinces, is viewed as a valuable resource for China. In addition, Laos is endowed with minerals, lumber and other natural resources important for China’s economic growth. Third, Laos is a secure location to establish value-added production chains centred on China and to access growing consumer markets in Southeast Asia. Some Chinese small and medium manufacturing firms have relocated to Laos as China’s domestic costs of production have continued to increase. Its underdeveloped land has become profitable farms for the Chinese migrants to grow rice and fruits to supply the Chinese market. Fourth, Laos has become a new market for China’s excessive industrial capacity, especially in the construction, mining and energy sectors. These are the sectors that Chinese SOEs account for a large share and are frequently associated with (Dong et al. 2015). As identified by China’s state council during 2006– 2013, the sectors that have suffered the most severe surplus capacity included steel, cement, plate glass, coke, coal, electrolytic aluminium, electric power, etc. In particular, four of these products, namely cement, iron and steel, aluminium and plate glass, were inputs for construction (Lai 2020). With a similar political system and especially the similarity of the dominant role played by SOEs in the national economy, it is convenient for the Chinese SOEs to operate in Laos than

102  Wei Liang in other Southeast Asian countries. Many of these BRI projects were contracted with China’s SOEs, including China Resources (Holdings) Co Ltd, State Power Investment Corp and China Energy Engineering Group Co Ltd. Zhang Jianping, director-general of the China Centre for Regional Economic Cooperation emphasized the role played by Chinese SOEs in building infrastructure. Fifth, Laos can and has played an important role to support China’s political interests and agenda regionally and globally. Despite being a small country in the region, Laos has become a tireless advocate of China’s BRI. For example, Lao president Bounnhang Vorachit openly voiced the Lao government’s support at the second China BRI Summit in April 2019, stating that the infrastructure projects will help to transform Laos from being landlocked into a land link (Xinhua News 2019a). Regionally, Laos has also become a trustworthy though sometimes low-key supporter at the regional forum, especially within the ASEAN. The ASEAN way is known to be respecting each other’s sovereignty, non-interference, consensus-driven and non-confrontational. This has worked to China’s benefit as ASEAN can’t develop a common position against China on issues such as the South China Sea when some pro-China members are not joining the coalition. Without collective action or coordinated China policy, it seems that ASEAN members are not left the options of engaging or balancing China (Beeson and Murray 2020). Laos is not a claimant state in the South China Sea, so having Laos along with Cambodia, Myanmar and Thailand has de facto divided ASEAN from taking any collective move on the South China Sea.

6.5 Why accommodating? If these geopolitical and geo-economic considerations have driven China’s BRI investment in Laos and turned Laos into an important ally of China in the region, how it has been received in Laos? According to a poll of more than 1,000 experts, analysts and business leaders in Southeast Asia conducted by the Singapore-based ASEAN Studies Centre at ISEAS-Yusof Ishak Institute in 2019, the people and government of Laos gave most positive responses to China’s BRI projects in the region. About 75.9% of Laotians believe that China’s BRI has brought the much-needed infrastructure to the region (Mun et al. 2019). Like in other Southeast Asian countries, how to make an effective China policy and how to respond to their country’s increasing dependence on China economically or even politically is a pressing challenge for the Laotian government. During the 2016 election, the former Prime Minister Thongsing Thammavong was replaced by Thongloun Sisoulith, and Bounnhang Vorachith became the president. It was widely interpreted by the West and ASEAN as a signal that the Laotian government was trying to maintain a more balanced approach or even a distance away from China as both leaders were labelled as being closer to Vietnam (Hart 2017). But the development since then has showed that the current leaders have endorsed the China policy adopted by their processors to embrace Chinese investment without reservation. What are the reasons behind this accommodating policy?

Examining Laos’ policy responses to BRI  103 As an LDC, Laos needs foreign capital and investment. Since Laos acceded into the WTO in 2013 and joined the ASEAN Economic Community (AEC) in 2015, the Lao government has begun to make many efforts to attract foreign investment. Nonetheless, it is not a preferred investment destination by commonly accepted standards. Corruption is still a serious problem in the eyes of foreign investors despite the efforts made by the Laotian government, especially since Prime Minister Thongloun Sisoulith assumed office in 2016 to develop several anti-corruption laws. The enforcement still seems to be weak at all levels of the government. Consequently, it ranks 154 out of 190 countries, only ahead of Myanmar among ASEAN states in the World Banks’ ‘Ease of Doing Business’ rankings (World Bank 2019b). In addition, as an LDC, Laos currently has a poorly developed legal sector. From 1975 to 1991, Laos did not have a constitution. The government aims to become a rule of law state by 2020 and has carried out a comprehensive legal sector reform plan (Lao Government 2012). Its Corruption Perception Index (CPI) ranked 130 out of 180 countries (Transparency International 2019). Even though Southeast Asia as a region has attracted one of the largest amounts of FDI from the developed world, the top destinations are always those more developed, more legally sound countries such as Thailand, Malaysia and Indonesia. Until today, Laos’s leading foreign investors are only China and a couple of its neighbouring countries. More importantly, China’s BRI investments complement nicely with the goals set by the Lao government. Over the last decade, the exploitation of natural resources and development of hydropower drove economic growth in Laos, but they have not been able to create lots of jobs. China’s BRI projects aim to combine connectivity building with the establishment of special economic zones with a focus on light manufacturing, which will eventually help improve the labour skills in Laos and integrate Laos into the existing regional production network. High-value agriculture and tourism are another two areas that Chinese investors have demonstrated strong interests. Second, different from the bilateral relationship China has with other Southeast Asian countries, there exists a newly developed strong tie between the two communist parties. LPRP has begun to switch from Vietnam to China for training its party members. Every year, there are several cohorts of LPRP members studying at the Central Party School in Beijing. The two ruling parties even made concrete plans to train more LPRP members in China by making available the provincial party schools in Yunnan province, Hunan Province and Guangxi Province. That’s why the Chinese President Xi Jinping describes the two countries as “friendly socialist neighbours with shared ideals, the same social systems and similar paths of development” (Xinhua News 2019b). In addition, though rapid economic growth in the past decade has legitimized the single-party rule of the PRP, economic growth has slowed since 2019. According to the World Bank, Laos’ GDP growth fell from 6.3% in 2018 to 4.8% in 2019 due primarily to natural disasters that affected the agricultural sector. The COVID-19 outbreak is expected to further intensify the country’s macroeconomic vulnerabilities in 2020, with little government financial reserves to

104  Wei Liang manage the pandemic. Current Prime Minister Thongloun Sisoulith’s economic reform agenda included cutting fiscal deficits and selling ineffective SOEs into joint public-private ventures have largely failed. Unemployment rate has risen to around 25% (Hunt 2020). On top of that, Laos will face at least $1 billion debt repayment obligation each year until 2023. Among them, about $250 million is the payment of the loans Laos received from China. But Laos’ foreign exchange reserves are only worth $1 billion and good for one month’s imports (Macan-Markar 2020). The next Party National Congress of the ruling LPRP is scheduled for early next year, and through this process, new leaders and a new politburo will be elected. However, the party is currently facing a number of serious challenges (Gunn 2020). Among them, debt repayment, domestic corruption, budget deficit and negative economic growth rate due to the COVID-19 in 2020 and the prospect to recover from its economic vulnerability are all more severe and urgent crises facing the Laotian party-state than its dependence on China. Hence it is very likely that Laos will move from its long-standing balancing strategy to accommodate China more and its BRI projects for the sake of its own regime survival.

6.6 Conclusion Why does Laos seem to be the most accommodating country in Southeast Asia to support China’s BRI? As one of the poorest countries in the region, the projection of Chinese influence has been felt most acutely in Laos. Whether to accommodate or resist China depends on the domestic calculation of Laos in terms of the cost and benefit calculations. This chapter argues that in deciding how best to deal with China, two domestic factors have influenced the decisionmaking of Venetians. First, the Laotian government endorses China’s development model highlighting the importance of infrastructure building and wants to copy its success in Laos. Second, geographically, economically and politically, it does not have any policy incentive and viable alternatives to engaging China’s massive investments in Laos. Laos has heavily dependent on foreign aid and loans. Besides its geopolitical importance to China, it is not a place that has successfully attracted foreign investment. The lack of an alternative source of capital has made Laos more accommodating to the Chinese BRI projects. Furthermore, a similar socialist ideology and bureaucracy have made the two governments easy to communicate and trust each other more. One important factor that has contributed to this policy outcome is that a growing number of government officials in Laos have experience studying in China, whom has become a change agent in the domestic politics. A lot has been said about China’s ambition and pressure it has imposed on the BRI participating countries. In this chapter, I want to highlight the importance of understanding the interests, priorities and domestic politics of the BRI participating countries. The Laotian development approach has put a sole focus on infrastructure building and the utilization of its hydropower, land and other resources to attract foreign investment. The Laotian government chose to receive

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the loans to build these BRI projects and see them as the best way to alleviate poverty and grow economy, although they are aware of various debt, social and environmental risks and impacts. As Chinese president Xi Jinping wrote in an open letter upon his visit to Vientiane in 2017 that ‘there is a high degree of complementarity between China’s BRI and the strategy of Laos to transform itself from a landlocked to a land-linked country’ (Rowedder 2020). To turn Laos into a land link has been a strategy developed by Laos more than two decades ago. To some extent, Laos is the one country that the Chinese government did not need to sell hard its investment-driven infrastructure-based development model. Yet, China’s financial clout and its control of half of Laos’ public debt may prove too tempting to resist for a country in urgent need of development assistance. After all, accepting such large-scale Chinese BRI investment may bring economic benefits in the long run, but in the short- or medium term, it has carried unpredictable risks.

Notes 1 2 3 4

Interview with Ministry of Foreign Affairs official in Vientiane, 2019. Interviews done in summer 2019 in Laos. Interview done in Vientiane, Laos with a manager of the Laos office, World Bank. Interviews done in Vientiane, Laos in summer 2019 with a Chinese Hydropower Construction Company manager.

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World Bank (2019a) BELT AND ROAD ECONOMICS Opportunities and Risks of Transport Corridors. Available from https://www.worldbank.org/en/topic/regionalintegration/publication/belt-and-road-economics- opportunities-and-risks-oftransport-corridors [Accessed 2 May 2020]. World Bank (2019b) Doing Business Report 2019. Available from: http://www. doingbusiness.org/en/rankings [Accessed 2 May 2020]. World Bank (2020) The World Bank in Laos. Available from: https://www.worldbank. org/en/country/lao/overview [Accessed 22 December 2020]. Xinhua News (2019a) Lao Backs BRI Trade Infrastructure Expansion. April 29. Available from: http://www.xinhuanet.com/english/2019-04/29/c_138021636.htm [Accessed 12 November 2020]. Xinhua News (2019b) 中国共产党和老挝人民革命党关于构建中老命运共同体行动计划 （全文）-新华网. Available from: (xinhuanet.c https://www.worldbank.org/en/ country/lao/overviewom) May 1. [Accessed 12 November 2020]. Xinhua News (2019c) China-Laos Railway Power Supply Project Launched in Lao Capital - Xinhua | English.news.cn (xinhuanet.com) December 30. [Accessed 12 November 2020]. Xinhua News (2020) Laos Attracts Investment of about 437 Billion since Opening Up. May 14. Available from: http://www.xinhuanet.com/english/2020-05/14/c_139056086. htm [Accessed 12 November 2020]. Zhai, K. & Johnson, K. (2020) Taking Power-Chinese Firms to Run Laos Electric Grid Amid Default Warnings. Reuters, September 4. Zhong, N. (2020) State Enterprises Power ASEAN Projects. China Daily, December 4. Available from: https://www.chinadaily.com.cn/a/202012/04/WS5fc98f daa31024ad0ba99be3.html [Accessed 27 December 2020].

7

Cambodia’s development potentials and BRI Kha Sok

7.1 Introduction Different narratives have colored the understanding of BRI differently since its inception in 2013 by President Xi Jinping. Still, the number of delegates attending the Second Belt and Road Forum (2nd BRF) demonstrated how BRI continues to capture increasing interest and support. Cambodia is one of the most receptive countries regarding BRI. As far as the Mekong is concerned, however, BRI is not the only cooperation initiative pertaining to the subregion. In fact, BRI is among the latecomers. In 1951, the then United Nations Economic Commission for Asia and the Far East conceived a scheme for Mekong development which eventually led to the establishment of the Mekong Committee in 1957 with a wide range of responsibilities encompassing financing, management, and maintenance of water resources. The membership includes Cambodia, Laos, Thailand, and Viet Nam. However, the implementation of this and other related plans was ceased following years of wars and conflicts running from the 60s to 80s (Hew, 2009). The revive of large-scale and multilateral cooperation frameworks in the region commenced in the early 90s with the establishment of the GMS, grouping together Cambodia, Laos, Myanmar, Thailand, Viet Nam, and Yunnan Province and Guangxi Zhuang Autonomous Region in the southern part of China. Geographically, the proposed economic corridor linking China and Mainland Southeast Asia under BRI covers the geographic area of the GMS program. There is also a strong common sectoral focus of both initiatives on transport infrastructure along evolving economic corridors. In this regard, this chapter explores the enabling environments and opportunities for an enhanced cooperation between BRI and the GMS around this and proposes the developmental benefits of China’s BRI will be greater in the context. However, we have identified existing and emerging challenges alongside opportunities regarding the effort to promote this enhanced cooperation. It also argues that the internal attributes of the host country will also become defining factors for unlocking greater development potentials in the context of BRI-GMS cooperation. The chapter proceeds onward into four sections. Section 7.2 presents a brief overview of Cambodia’s engagement with China, with the aim to analyze various

110  Kha Sok factors that contribute to establishing and progressing Cambodia’s strong receptivity to BRI. It also illustrates the major developmental benefits of selected BRI projects in the country. Section 7.3 maps some major regional cooperation and integration initiatives (RCIs) pertaining to the Mekong Subregion. Section 7.4 presents the rationales regarding why cooperation between BRI and these RCIs is called for. The section also discusses the prospects for an enhanced BRI-GMS cooperation, focusing on enabling environments, opportunities, and challenges. The primary focus will be on the contribution of Belt and Road-related initiatives to progressing the subregional integration processes within the GMS. Section 7.5 concludes.

7.2 Cambodia’s strong receptivity of BRI The exchange between China’s Premier Zhou Enlai and Cambodia’s Prince Norodom Sihanouk at the Bandung Conference in 1955 led to the establishment of a formal diplomatic relation in 1958. Although domestic political changes in Cambodia disrupted the bilateral ties for some time, the relationship has been restored and is advancing substantially, with the establishment of “Cambodia-China Comprehensive Strategic Partnership of Cooperation” in December 2010 (Sok, 2019c; Xinhua, 2010). Economically, China has become Cambodia’s largest influencer and contributed to the growth and development in the later in various fields from foreign investment and aid to cross-border trade to the source of foreign tourist arrival. China’s investment amounted to US$1.6 billion or over 43% of the FDI inflow in 2019.1 Their investment portfolios run across a broad range of sectors such as garment and textile, other light manufacturing, infrastructure, energy, real estate, construction, agriculture, and service. China’s aid amounted to over US$496 million in 2019, accounting for over 30% of total foreign aid in the country.2 China has become the largest foreign buyer of Cambodian rice, overtaking France since 2014 and accounting for 40% of the international market for Cambodian rice in 2019.3 The number of Chinese tourists in Cambodia stood at over 2 million, accounting for over 35% of all international tourist arrivals in 2019.4 Cambodia’s trade volume with China reached US$8.5 billion in 2019 and grew at an average annual rate of nearly 26% over the last ten years.5 The two countries signed their bilateral free trade agreement (FTA) in October 2020. This is Cambodia’s first bilateral FTA alongside various regional FTAs where Cambodia participated under the Association of Southeast Asian Nations (ASEAN) framework. The signing of the agreement was also accompanied by China’s grant agreements for a hospital renovation and sewage system in the coastal city of Sihanoukville (VOA, 2020)

7.2.1 The growing bilateral relationship, with BRI adding additional dynamic to it Among the proposed five routes of the Silk Road Economic Belt and the 21st-Century Maritime Silk Road,6 Cambodia and other Mekong region countries are noticeably covered by the one linking Southwest of China through

Cambodia’s development potentials and BRI  111 mainland Southeast Asia to South Asia and the Indian Ocean. Under the framework of six economic corridors, one is pertaining to Cambodia, namely the China-Indochina Peninsula Economic Corridor. Cambodia host some of the large BRI projects that fit under the BRI’s six means of communication framework, which refers to such infrastructures as rail, highways, maritime transport, aviation, pipelines, and aerospace-integrated information network. That said, before BRI, China already engaged in multiple infrastructure development activities in Cambodia – from roads to bridges to Special Economic Zones (SEZs) construction. Cambodia’s strong support of BRI is attributed to an interplay of both Cambodia’s pull and China’s push factors. On the one hand, Cambodia takes BRI as an investment tool to accelerate economic growth and serve Cambodia’s development priorities needs, specifically in addressing physical transportation and logistics obstacles and labor market development. For example, Prime Minister Hun Sen noted that the country needs US$500–700 million a year for infrastructure development such as roads, bridges, electricity, and irrigation systems (Xinhua, 2017). BRI-associated financing vehicles such as the Asian Infrastructure Investment Bank (AIIB), Silk Road Fund, and the New Development Bank are alternative financing sources for infrastructure and connectivity development in Cambodia. This has become especially critical after Cambodia’s development status was revised by the World Bank and elevated to the lower-middle-income territory. While this status upgrade indicates success in poverty alleviation and income-level improvement and is a point of pride for many, it comes with its own set of challenges. The World Bank and Asian Development Bank (ADB) use countries’ income levels to determine whom to lend to and at which interest rates. Political imperatives in Cambodia have also worked in favor of furthering Cambodia’s receptivity of BRI. The case in point includes the Cambodian government’s increasingly strained relationships with the US and Europe following the Supreme Court’s decision to dissolve the Cambodia National Rescue Party in November 2017, only months before the national election in July 2018. Viewed by many in the West as politically motivated, this effectively removed the only viable electoral threat to Prime Minister Hun Sen’s grip on power. His Cambodian People’s Party won all parliamentary seats in the election. This event led to the EU’s decisions to scale-back Everything but Arms (EBA), which further intensifies the declining Cambodia-West relations. From the perspectives of government elites in Cambodia, China has been a strong backup against frequent pressure from the West regarding alleged issues of human rights abuse, democratic space restriction, and the likes and provides alternative support to development in the country, which has played an important role in maintaining legitimacy for the leading regime. In other words, the emerging of China’s new cooperation initiatives including BRI and Lancang-Mekong Cooperation (LMC) adds oil to the engine of bilateral cooperation between the two countries, now spanning across all key areas including infrastructure and connectivity development, industrial development,

112  Kha Sok capacity building, culture and tourism, trade and investment, use of Chinese currency, amongst others. On the other hand, BRI in Cambodia is seen as China’s economic statecraft that helps advance China’s geostrategy in the Mekong region, in Southeast Asia, and beyond. While China upholds the peace and cooperation, openness and inclusiveness, mutual learning, mutual benefit, and win-win results as the characteristics of BRI, international observers have focused more on China’s strategic interests and ambition. They often colored the understanding of this initiative as a symbolism that shows Beijing’s effort to claim a dominant place in Asia and the world. While this narrative should be understood in terms of geopolitical rivalry, it helps explain the Cambodia-China dynamic relations. To China, the mere size of Cambodia’s economy is of little significance. The relationship, however, has far more worked in supporting China’s push to gain influence in the country where China can leverage to protect its strategic and economic interests and advance its bid to seek a dominant role in the region and beyond. For instance, many observers held Cambodia responsible for ASEAN’s failure to issue a statement on the South China Sea in 2012 (Mogato et al., 2016).

7.2.2 BRI projects and their developmental benefits in Cambodia The Outline of Bilateral Cooperation Plan to Jointly Build the Silk Road Economic Belt and the 21st-Century Maritime Silk Road signed in May 2017 during Prime Minister Hun Sen’s visit to China to attend the Belt and Road International Cooperation Summit. This plan seeks to align both countries’ development strategies and focus on a wide range of areas for cooperation. The implementation of the Outline in Cambodia falls under the mandate of the Ministry of Foreign Affairs and International Cooperation (MFAIC) who works to raise higher awareness within the government and coordinates policies from different sectors. The Ministry of Economy and Finance (MEF) is the leading agency to consolidate a list of priority project proposals from line ministries and present them to leaders of both countries for their approval to include under the BRI framework. The BRI project formulation process is unclear, however. They can simply be an extension of the existing bilateral projects or newly established projects. These projects are often announced around specific points of official visits of the leaders of both countries. Thus, many observers in Cambodia focus on joint statements of the two countries that MFAIC releases after every meeting of the leaders. For example, there were 19 development and cooperation projects signed during the Chinese premier Li Keqiang’s visit to Cambodia in early 2018 (MFAIC, 2018). There is generally a strong focus on physical infrastructure investment projects, aiming to address physical transportation and logistics obstacles and labor market development. We have argued elsewhere that these projects align well with Cambodia’s most recent and important economic growth strategy – the Industrial Development Policy 2015–2025 (IDP). The IDP lays out key concrete measures to strengthen and diversify Cambodia’s industrial sector as well as

Cambodia’s development potentials and BRI  113 increase and diversify exports through enhancing connectivity in transport and logistics and improving the labor market and skills (Sok, 2019a; Sok, 2019b). Examples of identified BRI-linked projects include the Sihanoukville Special Economic Zone (SSEZ), Phnom Penh-Sihanoukville Expressway, New Phnom Penh Airport, Siem Reap Angkor International Airport, a huge coastal development project at Dara Sakor in Koh Kong Province, and the implementation of the White Paper on China ready for Cambodia Tourism (Sok, 2019d). As a matter of illustration, this chapter elaborates on the developmental benefits of SSEZ and the expressway projects. They are among the major national-level infrastructure development campaign that aims to develop Preah Sihanoukville into an industrial, trade, and tourist hub with a modern city, international gateway, multi-purpose SEZ, national logistic center, and industrial center. This is a coastal province in Cambodia’s south-west on the Gulf of Thailand and home to the country’s only deep-sea port – Sihanoukville Autonomous Port – that handled more than 70% of Cambodia’s total containers shipment in 20197 and has a significant role in facilitating the flow of merchandise trade between Cambodia and the rest of the world. SSEZ is one of the first batches of eight overseas economic and trade cooperation zones approved by China’s commerce ministry in 2006 under its Overseas Economic and Trade Cooperation Area (OETCA) zone promotion system.8 The SSEZ developer aims to build the ‘model industrial park of win-win cooperation along the One Belt & One Road’ and transform it into the ‘Shenzhen’ of Cambodia.9 Despite being established in 2008, years before the inception of BRI, SSEZ has been promoted by both governments as one ideal representation of the BRI projects in Cambodia. During his visit to Cambodia as president for the first time in October 2016, Xi Jinping constantly praised the SSEZ during his talks with Prime Minister Hun Sen and expressed his government’s continuous commitment to implement the SSEZ (MFAIC, 2016). At the 2nd BRF in Beijing in 2019, Hun Sen highlighted the SSEZ as a clear proof of BRI’s positive developmental impact in Cambodia. SSEZ, an 80:20 joint investment scheme between China’s Hongdou Group Co., Ltd. and Cambodia’s International Investment Development Group Co. Ltd., is strategically located 12 km from Sihanoukville Autonomous Port, 3 km from Sihanoukville Airport, and 210 km from Phnom Penh on National Road 4, which currently serves as the main road facilitating the flow of merchandise trade between Cambodia and the rest of the world through its connection to the Sihanoukville Autonomous Port. The author observed that the necessary infrastructure of the zone including road, electricity, water, communication, water sewage network, wastewater treatment network, and waste management was well-constructed and well-maintained. As of September 2020, there are over 190 registered factories, among which 60% are currently operational, 27% having had operation suspension due to the Covid-19 situation, and the remaining 13% having not started operation yet. Over 92% of the registered factories are of Chinese origin, while others are from the US, Japan, Thailand, France, Ireland, Germany, Canada, South Korea, and Viet Nam. In this regard, SSEZ attracted

114  Kha Sok the inflow of foreign capital from these countries and stimulates Cambodia’s embrace of the “factory Asia” growth model and contributes to boosting the country’s industrialization and exports. These factories produce such merchandise as garments, footwear, leather products, hardware, and machinery that help diversify Cambodia’s export base of primarily apparel and footwear. The volume of exports amounted to over US$55 million in December 2019, a 52% increase compared to December 2018. Two-thirds of the exports were destined for the North American market, followed by Asia (13%) and Europe (12%). The operational factories employ nearly 22,000 Cambodian workers, nearly 60% of whom are female. They are mostly low-skilled workers who would face difficulties finding alternative work without factories. While 70% of the district population work at these factories (AKP, 2020), some workers are from as far as the north-eastern provinces, the population of which has frequently been reported being prone to illegal migration to neighboring Thailand. While basic salary varies from one factory to another, the workers are ensured by the Cambodian law to receive a minimum monthly wage of US$190 in 2020. Some workers reportedly earn over US$400 a month. This source of income is substantial considering the extent of indirect employment and income generation, i.e. the benefits for the immediate families of the workers, the need for other businesses to support the livelihood of the workers. SSEZ also hosts a Cambodian government’s polytechnic training center, which is currently in operation and provides courses from basic technical skills to technical certificates and higher diplomas to students from poor families, including school dropouts. The institute, now officially named Preah Sihanouk Cambodia-China Friendship Polytechnic Institute (PCCFPI), cooperates with the SSEZ and its factories to also provide pre-employment Training and contribute to human resources development and supply to the SSEZ factories and beyond. The Phnom Penh - Sihanoukville Expressway project is undergoing construction and a representation of Cambodia’s striving for private-sector engagement in public infrastructure investments. It is built under the 50-year Build-Operate­­ Transfer (BOT) concessional agreement between the Cambodian government and China’s state-owned China Communications Construction Company (CCCC), linking Cambodia’s two major economic poles: Phnom Penh and Preah Sihanoukville. The investment size amounts to nearly US$2 billion. CCCC incorporated its subsidiary company China Road and Bridge Corporation (CRBC) at the Ministry of Commerce and formed a new entity named Cambodian PPSHV Expressway Co. Ltd. in May 2018 to carry out its project duties. It obtained approval from the Council for the Development of Cambodia (CDC) in June 2018 with a registered investment capital of US$1.87 billion. The construction started in March 2019 and is scheduled to complete in 2022. The construction and operation of the project generate 9,515 jobs for Cambodian workers.10 With the length of 190 km, it will be Cambodia’s first expressway and provide a complementary logistic route to the existing National Road 4, which logistic providers opined as congested, lack of maintenance, and timeconsuming route to transport goods from Phnom Penh to the Sihanoukville

Cambodia’s development potentials and BRI  115 Port. Currently, container truck running between Phnom Penh and Sihanoukville takes up to eight hours. The expressway is expected to cut travel time in half, improving logistic efficiency and reducing trade costs. The project will also increase regional economic activities, investments, and tourism along the five municipal city and provinces the expressway runs through. Both SSEZ and the expressway projects are not financed by China’s loans. SSEZ is purely a private venture, while the expressway project is financed by multi-stakeholder public-private partnership (PPP) arrangements. The financing of both projects does not build up pressure on the national budget while at the same time creates more room for Cambodia to leverage more effectively the external resources for reinforcing developmental benefits.

7.3 Overview of existing regional cooperation and integration initiatives As an ASEAN member and a riparian country in the Mekong Subregion, Cambodia has become part of the many existing and emerging RCIs. The Mekong Subregion alone has at least a dozen initiatives pertinent to them (Parks et al., 2018). The first batch of the large scale and multilateral cooperation mechanism in the subregion commenced with the launch of the GMS in 1992 by ADB and backed by Japan, grouping together Cambodia, Laos, Myanmar, Thailand, Viet Nam, and the southern part of China. The GMS aims to realize the economic cooperation among member countries through the so-called 3Cs strategies: (1) increasing connectivity through sustainable development of physical infrastructure and transformation of transport corridors into transnational economic corridors; (2) improving competitiveness through efficient facilitation of cross-border movement of people and goods and integration of markets, production processes, and value chains; (3) building a greater sense of community through projects and programs that address shared social and environmental concerns (GMS Secretariat, n.d.). Subsequent intra-Mekong subregional cooperation initiatives include the Ayeyawady-Chao Phraya-Mekong Economic Cooperation (ACMECS) and Cambodia-Laos-Viet Nam Development Triangle, among others. Some initiatives pertaining to the Mekong countries are also under the broad cooperation framework within ASEAN. Examples include the establishment of ASEAN-Mekong Basin Development Cooperation (AMBDC) in 1996 to promote and sustain the development of the Mekong Basin through the development of infrastructure and human capital and enabled the sharing of the resource base between ASEAN Member States and Mekong riparian countries11 and with China. One of the AMBDC’s most famous projects is the Singapore-Kunming Rail Link (SKRL), aiming to provide a land transport mode connecting from the southern part of China to Singapore spanning across all the Mekong region. Other initiatives are largely linked with different powers, who frequently lead most of the cooperation dialogue processes and become deeply engaged in the Mekong. Among them include BRI and the other China-led Lancang-Mekong

116  Kha Sok Cooperation (LMC),12 the Mekong-Japan Cooperation, and the Lower Mekong Initiative (LMI). Some of these initiatives are worth elaborating on more. For example, LMC is strongly associated with BRI. Rather than grouping the Mekong region countries with only the southern part of China like GMS, the LMC brings these countries together with the whole of China. It was formally launched at the First LMC Leaders’ Meeting in China’s Sanya on 23 March 2016. It aims to promote regional connectivity, production capacity, cross-border economic cooperation, trade and investment facilitation, customs and quality inspection, financial cooperation, water resource management, agriculture, forestry, environmental protection, and poverty reduction. China established the US$300 million Special Fund to support the implementation and encourages other members to financially commit to expanding available resources. LMC also seeks support from financial institutions such as the AIIB, the Silk Road Fund, and the ADB. In 2017, 16 of Cambodia’s projects were approved and received support from this fund. In 2018, an additional 19 projects were also secured. One project example is a training program on project management and sectoral development of the five key areas of the LMC: (1) Connectivity, (2) Production Capacity, (3) Cross-Border Economy Cooperation, (4) Water Resources, and (5) Agriculture and Poverty Reduction. As for the LMI, it was initiated by the US in 2009 under Obama administration, originally with Cambodia, Laos, Thailand, and Viet Nam but also onboarded Myanmar in 2012. The initiative aims to strengthen public institutions, empower civil society, promote social justice and human rights, and support sustainable and inclusive development.

7.4 Prospects for an enhanced BRI-GMS cooperation The emerging of power-led subregional cooperation initiatives has illustrated the growing significance of the Mekong region but at the same time created concerns that the subregion has more become a battleground of great power rivalry. Any attempt to politicize and securitize these subregional cooperation initiatives for strategic gains for any one country without genuinely considering the real developmental needs in the host country and region should be avoided. On the contrary, attempts to manage the competition among different powers and explore the synergies, linkage, and complementarity between different cooperation initiatives should be encouraged and advanced towards an enhanced cooperation between them. This will realize greater developmental benefits. As a participating country in the BRI, Cambodia welcomes the effort for an enhanced cooperation between BRI and other initiatives, specifically GMS, for several reasons, and three in particular. These rationales formulate enabling environments that, in turn, create opportunities whereby both initiatives can work together to realize greater developmental benefits for the host country while at the same time furthering subregional integration processes.

Cambodia’s development potentials and BRI  117 7.4.1 Controversies regarding the implementation and impacts of BRI Despite many positive stories around the developmental benefits of BRI in Cambodia as highlighted before, there also remain controversies regarding its implementation and impacts in the country. These controversies continue to persist and have often led to increasing discontent among Cambodian locals toward China and its projects, ranging from issues of overdependency, transparency, quality and standard, elite-centric approach, minimal trickle-down benefits, and adverse effects on the local people’ job, livelihood, and environment. For example, the overdependency concern arises from Cambodia’s dual deficits of imbalanced partnership and absence of investment diversification, increasing the country’s vulnerability to disruptions in the flow of raw materials, workers, and capital from China. Regarding the transparency issue, China is often perceived as an opportunist who exploits Cambodia’s strained ties with other powers and cultivates strong relationships with government elites. Many observers view this elite-courting approach as having facilitated the approval of China-funded and -initiated projects. This subsequently leads to limited information dissemination and engagement at a wider societal level, presenting minimal opportunities among civil societies to develop an informed opinion of the BRI and its associated projects in the country. The controversies are to a large extent also attributed to the difficulty in conceptualizing the BRI with its evolving nature that often results in the lack of clarity in scope. While this reflects the action-oriented Chinese approach, it creates challenges in specifying which are the BRI projects and which are not, at least from the perspectives of people at the grass-root level. The case in point is the issue one can easily witness in Preah Sihanoukville. While many Cambodian workers and businesses have been left better off by SSEZ and its factories, some other Chinese investments in Preah Sihanoukville have left many locals frustrated. With the development speed in the province picking up momentum over the last several years following the influx of investment from China, the construction and casino sectors have received the biggest boom. The locals increasingly view these projects as non-inclusive, i.e., staffing too many Chinese, offering limited job opportunities to local people, increasing crimes by the Chinese citizens. We also observe local businesses being crowded out by Chinese small businesses, and local prices being inflated by the inflow of Chinese money that skyrockets the demands for all kinds of commodities from accommodation to food to services. In January 2018, the Sihanoukville governor wrote a report to the Ministry of Interior describing the ongoing Chinese problems in the province. The report stressed the economic grievances, including the rise of rental prices, discriminative acts of some Chinese restaurants and hotels in providing services to non-Chinese, and the prospect of Chinese investment outcompeting small local businesses. The governor also highlighted the behavioral misconduct of some Chinese in the province, including drunk fights

118  Kha Sok and criminal acts, which have caused a substantial public disorder in the city (Mech & Alessandro, 2018). These instances are not necessarily directly associated with BRI and BRI projects per se but have already created perceptual deficits among Cambodian locals toward China and their investment projects. The deficits, in turn, have constrained and challenged China’s BRI agenda and implementation in the country. Megaprojects also involve problems regarding land acquisition and resettlement. The PHN-SHV Expressway, for example, still has outstanding conflict issues with families living along the route (May, 2020). The SSEZ also induces the development of several coal power plants by its local partners and other developers in the province, which raised concerns about environmental sustainability. While these plants have contributed to addressing energy shortage in the province in the short to medium term, they also make the government’s commitment to environmental protection questionable (Sao, 2020). There is a growing need for greater emphasis on sustainable and renewable energy going forward. The BRI projects also face challenges when they are associated with the Cambodian partners, allegedly seen to have had records of improper practices, e.g. land acquisition and resettlement management, favoritism, and elite legitimacy. Where the SSEZ is concerned, the local partner firm appears to be owned by ruling party Senator Lao Meng Khin and his wife. The couple has built multiple business partnerships with different Chinese firms and is often reputed to have the ability to move projects forward even when there are controversies regarding human rights abuses, environmental destruction, and corruption (Baliga & Khouth, 2017; Miller, 2011; Sok, 2011).

7.4.2 China’s response: fine-tuning of BRI China wants to make BRI better. It is in China’s interest to secure broader support in Cambodia to ensure a more durable foothold in the country and at the same time showcase to the world the successful implementation of BRI in Cambodia and the region commonly regarded as China’s backyard. It coincides in time with the “BRI 2.0”, where China explores new modalities of the BRI as one could witness at the 2nd BRF in 2019. In his remarks at the forum, President Xi highlighted the need to address some of the emerging concerns and challenges from exclusivity issues to sustainability to standards. He expressed China’s strong support for multilateralism and willingness to work more closely with multilateral development banks in third markets to align the BRI implementation with multilateral rules and international best practices of project development, operation, procurement, and tendering and bidding (Ministry of Foreign Affairs of the People’s Republic of China, 2019a). The launching of the “Debt Sustainability Framework for Participating Countries of the Belt and Road Initiative” also reflects the many positive steps undertaken by China to build a better BRI and unlock greater development potentials for participating countries. Alike, China also aims to increase the cooperation with the ADB at the project-level cooperation, after all BRI and GMS are not strategically competitive.

Cambodia’s development potentials and BRI  119 As a multilateral organization with China alongside Japan being the main actors in providing loans and grants to support regional development of economic corridors in the Mekong countries, ADB would make an ideal showcase of partnership in which China feels more comfortable to work with, with the aim to enhance cooperation activities amid the improved relationship between China and Japan. Both countries have already pushed forward their cooperation to develop third-country infrastructure spanning construction, tech, and finance. ADB (2018) notes the role of ADB in RCI from four perspectives: (1) as financier, providing, or mobilizing financial resources for RCI; (2) as knowledge provider, creating, consolidating, and disseminating knowledge on RCI; (3) as capacity builder, helping developing member countries and coordinating bodies build their capacity to manage RCI; and (4) as honest broker, serving as catalyst and coordinator of RCI in the region. GMS’s Strategic Framework 2012–2022 and Hanoi Action Plan 2018–2022 also highlight the need to work closely with other subregional organizations and initiatives, and particularly see China-led BRI and LMC as a significant development in terms of funds mobilization for infrastructure development. Various official documents of BRI present its commitments to collaborate with the other like-minded, highlighting the principle of consultation, cooperation, and broad participation. Indeed, both parties have already signed a Memorandum of Understanding in 2017 on Collaboration on Matters of Common Interest under BRI between China’s finance ministry and ADB along with several other multilateral development banks, with the aim of supporting infrastructure and connectivity projects, building stable, diversified, and sustainable development financing mechanism, improving business climates, strengthening coordination and capacity building, and supporting the implementation of the UN 2030 Agenda for Sustainable Development and the Paris Agreement on Climate Change (New Development Bank, 2017). This will be a good entry point for an enhanced BRI-GMS cooperation. Both stand out among all existing subregional cooperation initiatives in that they have a significant focus on infrastructure development along evolving economic corridors in the subregion. GMS works primarily on developing economic corridors in the subregion. The GMS flagship program includes three key economic corridors, namely the North-South Economic Corridor, the East-West Economic Corridor, and the Southern Economic Corridor. Under the GMS, member countries can proactively engage external partners, including China, in the economic corridor development program as financiers, providers of technical assistance, and knowledge partners. BRI has also promoted the concept of economic corridors as a central mechanism for its implementation. Though a newcomer, BRI has the advantage of infrastructure export capacity, given its mammoth size of funding commitment. However, the broad conceptualization of the BRI has resulted in a lack of a systematic approach to the implementation. Despite noticeable progress has been made at the policy level, the operational framework remains insufficient. In this regard, ADB’s extensive experience at promoting project-level cooperation regarding GMS economic corridor development can

120  Kha Sok serve as a bridge in the implementation of the BRI and be integrated into proposed China-Mainland Southeast Asia economic corridor development. Indeed, economic corridors in the GMS are already seen in the list of the 35 connectivity projects in the joint communique issued on 27 April 2019 at the end of the 2nd BRF (Ministry of Foreign Affairs of the People’s Republic of China, 2019b). BRI-GMS Joint Working Group on Transport was also established to support cross-border projects in the Mekong focusing on information sharing and technical cooperation.

7.4.3 Project complementarity and synergies Infrastructure projects occurring within a geographically proximate area will naturally have impacts on each other. Their combined potentials become greater and manifest in multiple domains simultaneously from resource mobilization to integrated infrastructure development to employment and human capital enhancement. The Phnom Penh-Sihanoukville Expressway, for example, will provide a high-capacity road link between the capital city of Phnom Penh and the country’s main port city, where the SSEZ has also formulated itself into a merchandise manufacturing hub. Both BRI projects promote regional development in Preah Sihanoukville. They are also linked to other major infrastructure projects in their vicinity, also mostly under Cambodia-China cooperation as well as the GMS Southern Coastal Subcorridor (Figure 7.1). For example, the Steung Hav deep seaport project was agreed upon and signed together with the agreement for the expressway project when Chinese Premier Li Keqiang visited Cambodia

Figure 7.1 Linkage with other major infrastructure projects. Source: Author’s illustration.

Cambodia’s development potentials and BRI  121 in early 2018. Cambodia’s Try Pheap Group and China’s Guangxi Beibu Gulf International Port Group jointly develop a new deep seaport in a nearby province of Kampot. Dara Sakor, a US$3.8 billion Chinese project in Koh Kong province, is perhaps the largest BRI project in the country. This project features the development of an international airport, deep seaport, and industrial park, along with a tourism resort, power stations, water treatment plants, and medical facilities.13 By and large, these projects are still at an earlier stage of development. Once completed, their synergies and linkages with the GMS Southern Coastal Subcorridor create important connections between different economic nodes or hubs, enhancing connectivity and logistics for goods transportation, while cultivating multiple planned measures under the IDP and deepening Cambodia’s regional integration process. The Southern Coastal Subcorridor runs across Cambodia’s Koh Kong, Preah Sihanoukville, Kampot, and Kep and connects Cambodia to both Thailand and Viet Nam. Such project complementarity and synergies are particularly appealing amid the lack of full institutional alignment and cooperative mechanism between BRI and GMS. The complementarity and synergies among BRI projects and between BRI projects and GMS’s economic corridor network happen not only in Cambodia but also across the Mekong countries. For example, the Muse Central Business District and Muse Border Trade Zone in Myanmar, Two Corridors One Economic Belt in Viet Nam, Mohan-Boten Economic Cooperation Zone and Lao-China High Speed Railway in Laos, and Thailand-China Railway in Thailand are directly linked with GMS’s North-South Economic Corridor. Thailand’s Eastern Economic Corridor (EEC) and Thai-Chinese Rayong Industrial Zone are directly linked GMS’s Southern Economic Corridor. Multiple challenges emerge alongside the opportunities that could undermine the potentials of BRI-GMS cooperation. The broad conceptualization of BRI has more details emerging at the policy level but little at the implementation level. China often describes this as Chinese efficiency, reflecting its approach to safeguards by relying on the host country’s government to realize its development objectives and requirements under its own systems and rules. This approach has worked in favor of creating certain flexibility for the Cambodia-China cooperation and bullet-training the implementation of certain big projects. It should be also understood that this fits reasonably well with the eagerness in Cambodia to develop and deliver large tangible infrastructure projects that are easily visible to the countrymen and thus contribute to maintaining and progressing the legitimacy of Cambodia’s government elites. This creates a vis-à-vis situation between the eagerness to produce results fast and a large amount of time spent on careful analysis and tailoring solutions as well as stakeholder engagements in GMS’s approach. GMS relies on its regional investment framework that provides explicit targets, timelines, review, and update process to ensure ongoing monitoring and support of the projects. The perceptual deficits among Cambodian locals toward China will continue to result in divergent responsiveness to the BRI 2.0. This is particularly true with the increasing flow of foreign media rhetoric in Cambodia that tends to look at the BRI

122  Kha Sok from a geopolitical rivalry context. The perceptual deficits, if not addressed consistently and sustainably, will continue to create prejudices toward projects associated with China, in terms of non-inclusivity and adverse effects on local livelihoods and the environment. This will continue to constraint the BRI implementation while at the same time complicate the prospect and process of BRI-GMS cooperation. Amid the intensified geopolitical rivalries in the subregion and beyond, China continues to develop a unique identity and value proposition for its grand strategy to stand out and promote its geostrategic ambition. In this regard, any joint project development and implementation risk creating brand competition between the BRI and GMS. Amid the lack of well-formulated cooperative mechanisms, “Chinese domination” risk, i.e., in project design, Chinese versus local resource, unsustainable dependency, cannot be ruled out either. Moving toward an enhanced BRI-GMS cooperation, both BRI and GMS must avoid as much as possible the competitive approach. They both must focus on building a stronger foundation of trust and confidence and deliberate more positive signals of comfortability in terms of coexisting and alignment with each other. Needless to say, their cooperation must be made corresponding to the development priorities and policies of the host country. Establishing more and frequent learning and sharing platforms is important. ADB’s Policy and Advisory Technical Assistance (TA) Study of the BRI in the five Mekong countries plus Malaysia to support China State Council’s Development Research Center (DRC) in its knowledge work is a good telling example of the existing cooperation activity and one that represents a low-hanging fruit that BRI and GMS can achieve together. Equally important is the willingness to adjust and adapt. They are particularly critical to move forward formulating full cooperative mechanisms and building concrete workstreams to support their joint efforts. It is also important to jointly address the reputation risks evolving around the BRI process and implementation. This requires joint efforts from the host country. Specifically, Cambodia and China must level up their cooperation to not only engage at the elites’ level but also other levels of society to ensure sustainability and shared benefits among all Cambodians. Engaging more with the mainstream media in both Cambodia and China so that they become more objective in their reporting is also important to address the reputation issues of BRI. This equally applies to engagement with other relevant stakeholders (i.e., think tanks, academy, NGOs, and civil societies). In Cambodia’s own affair, sufficient information access must be promoted so that the country’s citizens can develop an informed opinion toward the BRI and its associated projects in the country. Public capacity must be strengthened to optimize the use of BRI and GMS resources while at the same time efficiently and effectively regulate, scrutinize, and ensure that their projects align with Cambodia’s development needs and priorities.

7.5 Conclusion Cambodia’s strong receptive response to BRI is attributed to both Cambodia’s pull and China’s push factors. The significance of the initiative in Cambodia has been

Cambodia’s development potentials and BRI 123 twofold. On the one hand, Cambodia has benefitted significantly from cooperation with China under the BRI framework and related initiatives, from physical infrastructure and connectivity development to employment and income generation, to cross-border investment and trade promotion. On the other hand, implementation risks and issues persist and could undermine the BRI’s potential contributions. Enhancing cooperation between BRI and other emerging and existing RCIs unlocks greater developmental potentials and benefits in Cambodia and beyond. The case in point is the cooperation between BRI and GMS, which has been among the first and the long-standing multilateral cooperation initiative in the Mekong Subregion. There are identified challenges alongside opportunities in terms of moving toward their enhanced cooperation. With the absence of full cooperation mechanisms between themselves, both initiatives can focus on achieving some low-hanging fruits through information sharing and by ensuring project complementarity and synergies. This already takes place in Cambodia and across the subregion and needs to be promoted further. Going forward, both initiatives must build more trust and confidence in each other and progress the work to formulate a full cooperation mechanism to support the joint effort in realizing greater developmental benefits for Cambodia and other riparian countries in the Mekong. Cambodia, for its part, will need to work more with China to address outstanding constraint issues regarding the BRI implementation in the country and encourage the effort toward an enhanced cooperation between BRI and other regional cooperation initiatives.

Notes 1 2 3 4 5 6

7 8 9 10 11 12 13

National Bank of Cambodia. CRDB/CDC ODA Disbursement Database. Secretariat of One Window Service for Rice Export Formality. Ministry of Tourism. ASEANstatsDataPortal. The five routes include three of the Silk Road Economic Belt and two of the 21stCentury Maritime Silk Road. Under these five routes, a framework of six corridors, six means of communication, and multiple ports serves as a basis for cooperation among countries along the BRI. Ministry of Public Works and Transport. This system allowed China to spread its successful SEZ model to other countries to help them develop and at the same time guided Chinese enterprises in going global. Author’s interview with SSEZ’s management. Council for the Development of Cambodia. Cambodia, Lao PDR, and Myanmar were not yet members of ASEAN when the AMBDC was formed. LMC and MLC are used interchangeably. When the meeting was held in any of the five Mekong countries, MLC is used. Likewise, if the meetings were held or the documents were signed in China, LMC is used. There are allegations around the Dara Sakor project for its potential to be transformed into a Chinese military base in Cambodia, to which both Cambodia and China have repeatedly denied. The Union Development Group Co., Ltd. (UDG), a Chinese enterprise developing this project, was sanctioned only recently by the US government based on claims that land was forcibly seized from local people.

124 Kha Sok

References Aphibal Khet Preah Sihanouk Anunhat Oy Prathean Krom Preksaphibal Nei Kromhon Dombon Sethakech Krong Preah Sihanouk Juob Samdaeng Ka Kuosom [Preah Sihanoukville governor allows courtesy visit by chairman of SSEZ]. (2020, January 14). Agence Kampuchea Press (AKP). Available at: https://akp.gov.kh/kh/post/ detail/24086. [Accessed 07 April 2020]. Asian Development Bank (ADB). (2018). ADB Project Document TA9124 PRC: The Study of the Belt and Road Initiative. Asian Development Bank. Baliga, A. and Khouth, S. C. (2017, February 03). Boeung Kak: A Disastrous Decade. Phnom Penh Post. Available at: https://www.phnompenhpost.com/national-postdepth-politics/boeung-kak-disastrous-decade. [Accessed 05 May 2020]. Greater Mekong Subregion Secretariat (GMS Secretariat). (n.d.) Overview of the Greater Mekong Subregion Economic Cooperation Program. Available at: https:// greatermekong.org/overview. [Accessed 13 November 2019]. Hew, D. (2009). Study to Realign the AMBDC with the ASEAN Economic Community. Institute of Southeast Asian Studies, (s 10). May, K. (2020, March 03). Expressway Construction 20% Complete. Phnom Penh Post. Available at: https://www.phnompenhpost.com/business/expressway-construction20-complete. [Accessed 07 April 2020]. Mech, D. and Alessandro, M. S. (2018, January 29). Preah Sihanouk Governor Bemoans Chinese Influx. Phnom Penh Post. Available at: https://www.phnompenhpost.com/ national/preah-sihanouk-governor-bemoans-chinese-influx. [Accessed 13 November 2019]. Miller, T. (2011, June 16). Power Play at Assembly. Phnom Penh Post. Available at: https://www.phnompenhpost.com/national/power-play-assembly. [Accessed 15 November 2019]. Ministry of Foreign Affairs and International Cooperation (MFAIC). (2016). Joint Statement between the Kingdom of Cambodia and the People’s Republic of China. Available at: https://www.mfaic.gov.kh/site/detail/3295. [Accessed 07 April 2020]. Ministry of Foreign Affairs and International Cooperation (MFAIC). (2018). List of Documents Signed During the Official Visit of H.E. Li Keqiang, Premier of State Council of the People’s Republic of China to Cambodia, on 11 January 2018. Available at: https://www.mfaic.gov.kh/site/detail/16465. [Accessed 07 April 2020]. Ministry of Foreign Affairs of the People’s Republic of China. (2015). Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road. Available at: https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1249618.shtml. [Accessed 07 April 2020]. Ministry of Foreign Affairs of the People’s Republic of China. (2019a). Keynote Speech by H.E. Xi Jinping President of the People’s Republic of China At the Opening Ceremony of the Second Belt and Road Forum for International Cooperation. Available at: https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1658424.shtml. [Accessed 07 April 2020]. Ministry of Foreign Affairs of the People’s Republic of China. (2019b). Joint Communique of the Leaders’ Roundtable of the 2nd Belt and Road Forum for International Cooperation. Available at: https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/ t1658766.shtml. [Accessed 07 April 2020]. Mogato, M., Martina, M., and Blanchard, B. (2016, July 25). ASEAN Deadlocked on South China Sea, Cambodia Blocks Statements. Reuters. Available at: https://www.

Cambodia’s development potentials and BRI 125 reuters.com/article/us-southchinasea-ruling-asean/asean-deadlocked-on-southchina-sea-cambodia-blocks-statement-idUSKCN1050F6. [Accessed 13 November 2019]. New Development Bank. (2017). Memorandum of Understanding on Collaboration on Matters of Common Interest. Available at: https://www.ndb.int/wp-content/ uploads/2018/09/MOU-on-BRI-signed.pdf. [Accessed 07 April 2020]. Parks, T., Maramis, L. Sunchindah, A., and Wongwatanakul, W. (2018). ASEAN as the Architect for Regional Development Cooperation: Advancing ASEAN Centrality and Catalysing Action for Sustainable Development. The Asia Foundation. Available at: https://asiafoundation.org/wp-content/uploads/2018/09/ASEAN-asthe-Architectfor-Regional-Development-Cooperation.pdf. [Accessed 13 November 2019]. Sao, P. N. (2020, February 08). Cambodia’s Coal-Fueled Power Plants and their Environmental Costs. Cambodianess. Available at: https://cambodianess.com/article/ cambodias-coal-fueled-power-plants-and-their-environmental-costs. [Accessed 05 May 2020]. Sok, K. (2019a, April 30). Belt and Road in Cambodia: Successes and Challenges. The Diplomat. Available at: https://thediplomat.com/2019/04/the-belt-and-road-incambodia-successes-and-challenges/. [Accessed 28 October 2019]. Sok, K. (2019b). Cambodia: Transforming China-Led and Other Regional Initiatives into a Source of Development. AVI Commentary, 2019(6). Sok, K. (2019c, May 18). In Cambodia, the BRI Must Benefit Locals Too. East Asia Forum. Available at: https://www.eastasiaforum.org/2019/05/18/in-cambodia-thebri-must-benefit-locals-too/. [Accessed 28 October 2019]. Sok, K. (2019d). National Assessment Report: Cambodia, ADB Project Document TA9124 PRC: The Study of the Belt and Road Initiative. Asian Development Bank. Sok, R. (2011, June 22). Miner Encroaches on Ancestral Lands. Radio Free Asia. Available at: https://www.rfa.org/english/news/cambodia/bauxite-06222011171620. html. [Accessed 05 May 2020]. Voice of America (VOA). (2020, October 12). Cambodia Signs Free Trade Agreement with China. VOA. Available at: https://www.voacambodia.com/a/cambodia-signstrade-agreement-with-china/5618112.html. [Accessed 20 November 2020]. Xinhua. (2010, December 13). China, Cambodia Agree to Build Comprehensive Strategic Partnership. People’s Daily Online. Available at: http://en.people. cn/90001/90776/90883/7229822.html. [Accessed 28 October 2019]. Xinhua. (2017, April 06). Cambodia to Focus on Infrastructure Development at Forthcoming B&R Forum: PM. China Daily. Available at: http://www.chinadaily.com.cn/ business/2017-04/06/content_28819476.htm. [Accessed 28 October 2019].

Part III

Chinese provincial level

8

Yunnan connecting China and Southeast Asia Tao Song

8.1 Introduction This chapter focuses on the transformation of Yunnan from a remote border area of becoming a significant border province for China’s leadership in the context of the Belt and Road Initiative (BRI), as the province provides a land connection with Southeast Asia with a possible extension to South Asia as well. Within this context, the provincial expectations are focused on the development opportunities this will offer to Yunnan’s own development. Yunnan’s position within China’s provinces changed with the BRI as its remote location now becomes an asset for supporting trade between China and Southeast Asia, China-ASEAN relations, but also to support industrial development within the province. To some extent, Yunnan’s economy was always close to the markets of Southeast Asia, though separated by the previous more stringent border regulations and missing infrastructure links. The strategic context of BRI changed this political-economic setting considerably even there had been earlier attempts made of opening-up Yunnan towards Southeast Asia. Subsequently, the chapter compares the economic structures and dynamics of Yunnan Province before and since BRI, especially focusing on its relationships with its bordering countries, Myanmar, Vietnam and Laos. The chapter will also illustrate how BRI’s launch in 2013 boosts the shift of Yunnan’s position in an increasingly interconnected Asian mobility network. However, even BRI introduced a comprehensive drive for development, to nurture and sustain Yunnan’s role as a sub-regional hub in Southeast and South Asia further changes at the provincial level are required like a reform in economic and management strategies as well as a focus on innovation. The following section is constructed by initially profiling Yunnan, especially highlighting the development of Central Yunnan’s Urban Agglomeration (CYUA) in the context of growing BRI connections. We then offer a more nuanced analysis by considering the cross-border connectivity corridors, including traffic, energy and information corridors with South and Southeast Asia. It is discussed that Yunnan’s opening-up strategies support its position as a nexus hub. Finally, we discuss the new initiatives and planning undertaken at both national and local level as the BRI has enhanced the cross-border connectivity, for example, overseas economic cooperation zones, cross-border economic

130  Tao Song cooperation zone and city-to-city contacts, by selecting three specific case studies, Ruili, Mohan and Hekou cities in Yunnan Province.

8.2 Profile of a border province: Yunnan Yunnan, a border province of China, is located near the conjunction of Southeast Asia and South Asia, with Myanmar to thewest and Laos and Vietnam to thesouth. The land boundary in Yunnan stretches roughly 4,060 km, taking up one-fifth of the national total. There are eight border prefecture-level cities with an area of 202,000 km 2 and a population of around 18,829,000, accounting for 51.4% and 39.9% of Yunnan, respectively. Yunnan is the most ethnically diverse province in China with 26 officially recognized ethnic minorities (Ptak etal. 2020), and many smaller groups, such as Zhuang, Miao, Hani, Yi, Dai, Jingpo, and Lisu, accounting for 33% of the population, which totalled 47.75 million in 2016. Yunnan is also regarded as a bridge to connect the Pacific Ocean and the Indian Ocean; China, South Asia and Southeast Asia as well as the BRI corridor regions: China-Myanmar Economic Corridor and Bangladesh-ChinaIndia-Myanmar Economic Corridor. Yunnan has 19 border ports on land, and 11 of them connect Myanmar with five ports of the first category; six of them connect Vietnam with four ports of the first category and one of the second category; two of them connect Laos. It is also worth pointing out that based on its geographic location, Yunnan also being part of the Mekong region and indeed supporting the province cooperation with the Mekong region represents a long-established objective at the provincial level. Another characteristic of the province is its mountainous geography, which does not support economic and industrial development within the province. Even so, we can identify some dynamic urbanization process, which also offers support for economic development at the provincial level. The most relevant is referred to as Central Yunnan’s Urban Agglomeration (‘DianZhong Chengshiqun’ in Chinese, abbreviated asCYUA). It is one of the 19 national urban agglomeration processes supported by the central government and centred at the capital of Yunnan, Kunming. As such, it represents an important constituent part of the China’s national agenda of ‘new-type urbanization’. This CYUA covers 49 counties, including Kunming, Qujing, Yuxi, Chuxiong and seven counties in northern Honghe Prefecture, with an area of 111,400 km 2accounting for 28.3% of the provincial total. By the end of 2018, the number of permanent residents reached 21million, accounting for 44% of the provincial total (Yunnan State Government 2020). Since the start of the BRI,in 2013, CYUA rapidly developed in economy and society, with the highest speed within Yunnan. In 2018, the GDP arrived at 1,020 billion RMB, accounting for 61.6% of the province. It served as the opening-up centre for both domestic and international markets. CYUA is one of the industrial bases of Yunnan, basically covering all types of industry. It boasts the largest Tin industry worldwide and largest tobacco industry in Asia. Titanium industrial base here is one of the three national titanium bases. Oil refining and its supporting industries are speeding

Yunnan connecting China and Southeast Asia  131 up. A modern industrial system is initially formed with tobacco, steel, nonferrous metallurgy, chemical engineering, building materials, energy, biological medicine, green food processing and equipment manufacturing as the main bodies. In recent years, the urbanization rate in CYUA increased quickly, arrived at almost 60% in 2020, projected to 65% in 2025. Remarkable progress has also been made in the construction of infrastructure. The modern transportation network was preliminarily formed with Kunming as its centre. The power generation has been well-promoted; and the construction of oil and gas pipeline network has made a breakthrough. The China-Myanmar natural gas pipeline was complete and put into operation. However, the construction of urban agglomerations is faced with some problems. The main issues are as follows: (a) the overall development level is still relatively lagging behind in China. Its economic performance, such as GDP and its per capita GDP, ranked 17 out of China’s 19 national urban agglomerations. The modern industrial system could be further improved. The current export products are still at a low level, with a relatively small scale and lack of characteristics. At the same time, the urbanization quality could be enhanced by optimizing the urban spatial structure, aggregating more rural population in central cities and strengthening its radiation function. (b) Yunnan still features inadequate connectivity of infrastructure network to both domestic and overseas markets, characterized by high transportation cost, insufficient transportation capacity and low-comprehensive transportation efficiency. The cooperation with bordering regions needs to be strengthened, which is now scattered, small and weak. There lacks extensive cooperation with South Asia and Southeast Asia, especially with Myanmar, Laos, Vietnam, etc. Kunming, the central city, lags behind in export-oriented service industry, such as finance, commerce, physical distribution and information. (c) The mechanism for coordinated regional development is not yet sound. The working mechanism of cross-border cooperation has not been set up. In August 2020, State Government of Yunnan Province issued Development Planning of CYUA, which clarifies that the development orientation of CYUA should be targeted into: a core area facing the radiation centre of South Asia and Southeast Asia, a comprehensive hub connecting South Asia, Southeast Asia and the Indian Ocean, an important economic growth pole in western China, a powerful engine for modernization, and an eco-liveable plateau urban agglomeration. In the future, CYUA should take its advantage of position, lead its modernization, support the ecological civilization construction, promote the new development of ethnic unity and progress, construct a new pattern of reform and opening-up, embark on a new journey of prosperity and stability in the border areas and construct a portal urban agglomeration opening to the South Asia and Southeast Asia. Despite the optimistic tone created by the BRI in CYUA, the realization of this blueprint nevertheless is still underway. It is necessary for Yunnan to solve

132  Tao Song the problems and conflicts that restrict regional integrated development of urban agglomeration. On one hand, the measures include the acceleration of industrialization, informatization, urbanization and agriculture modernization, the promotion of the free flow of production factors, the equalization of delivering public service, speeding up the integrated development between urban and rural areas, the improvement of the mechanism for coordinating urban agglomerations, the advancement of the joint prevention, governing of the ecological environment and the integrated development in CYUA. On the other hand, it is of great importance to continuously deepen and widen regional cooperation. Taking the BRI as an opportunity, Yunnan should further cooperate with its bordering countries and regions, get involved in the construction of the BRI, improve the level of opening-up and cooperation of CYUA and enhance the ability of China’s inland in radiating South Asia and Southeast Asia.

8.3 Cross-border connectivity corridors Yunnan is the key province that offers interlinkages within the BRI as it provides a strategic location for linking various international corridors. Since the BRI was proposed, Yunnan has been actively involved in the building of the BRI, especially in the construction of the international cross-border economic corridors. However, Yunnan aimed for a long period to increase its connectivity with the Mekong region and Southeast Asia, pre-dating the BRI. Since the opening-up in 1978, Yunnan has been making preparations for the opening to South Asia and Southeast Asia, such as the reconstruction of Kunming-Hekou Railway and Yunnan-Vietnam Railway, the strengthening of the construction of the Red River waterway, China-Thailand Highspeed Railway, China-Myanmar Expressway, China-Myanmar Land and Water Transport Corridor, Lancang-Mekong International Shipping Corridor, etc. The railway construction has been continuously promoted. In 2019, the railway operating kilometrage reached 3,682 km, among which that of high-speed railway is 706 km. Currently, the Pan-Asia Railway is still under construction, which makes Yunnan the hub of the BRI railway network. The eastern, central and western routes of the Pan-Asia Railway run from Kunming and then via many ports in Yunnan and finally reach countries in South Asia and Southeast Asia. The eastern route in China has already been completed, and the Yuxi-Mohan section will be soon finished. China-Laos Railway (Moding Port-Vientiane in Laos) is being built with smooth progress, which is expected to open at the end of 2021. Thus, since the beginning of the 21st century, Yunnan has speeded up the construction of railway network (eight connecting the surrounding provinces, three connecting the surrounding countries). Even so, the development of expressway interconnectivity was not ignored either as seven expressways connecting Yunnan with the surrounding provinces, while five connecting Yunnan with surrounding countries,enhancing the airline network and water transport channel with two connecting Yunnan with the surrounding provinces and three connecting it with the surrounding countries.

Yunnan connecting China and Southeast Asia  133 Thus, taken together, this forms a compressive transportation system covering South Asia and Southeast Asia and initially makes the international corridor for traffic approaching to Southeast Asia and South Asia come into being. In 2017,the finished Kunming-Bangkok Expressway offers an important example as it offers a land route for China via Yunnan to link with Southeast Asian countries, and it also facilitates the cargo transportation between Yunnan and Laos. However, there are now seven international expressway routes opened for cargo transportation linking Yunnan and in extension China, with Vietnam (Hanoi and Hai Phong), with Myanmar (Kunming-Ruili and extend to Rangoon, Lashio and Mandalay) and with Laos (Kunming-Mohan). Air transportation is another key mode of Yunnan’s traffic transportation. In 2019, the number of airports reached 15, with 413 air routes to 159 cities at home and abroad, covering all the capitals of South Asia and Southeast Asia countries except the capitals of Pakistan and Bhutan. The Kunming Changshui International Airport is one of the largest gateway hub airports in China, which connects 14 cities in the surrounding countries of Southwest China and radiates more countries. As for water transportation, China has signed Lancang-Mekong Multilateral Transport Agreement with Laos, Myanmar and Thailand, which makes it easier for the goods to be transferred to the upstream and downstream. It deepens the trade flows and communication with countries in Southeast Asia and South Asia. Projects of China-Vietnam Red River Water Transportation and China-Myanmar Irrawaddy River and Land Combined Transport are smoothly under construction. Two water transportation ports – Jinghong Port and Simao Port – connect six countries through the Lancang-Mekong River. The route is regarded as a golden water passage that connects Yunnan with Southeast Asia. Based on its geographic location, Yunnan also provides a key link for energy corridors, China’s fourth strategic energy corridor, also known as the China (Yunnan)-Myanmar oil and gas pipeline, has been completed in May 2013. On 30 September of the same year, it was put into an operation for the gas delivery. The projects of 500 kV networking China with Myanmar and Thailand, as well as transmission lines of Yunnan’s electricity to Thailand and Bangladesh, are actively promoted. Relying on the Kunming Power Exchange Centre, Yunnan has gradually become a cross-border electricity cooperation platform facing South Asia and Southeast Asia. Yunnan has achieved the interconnection of highvoltage networks with Vietnam, Laos and Myanmar, and it is pushing forward the interconnection with Thailand. Yunnan also increases its digital connection with its surrounding countries. Meanwhile, Yunnan improves Kunming’s function of regional international communication service entry and exit, expands the international communications export bandwidth and facilitates the integration of internet, big data, AI and the real economy. To date, Kunming has gradually become a regional international video communication and data exchange centre that connects China with five countries in the Greater Mekong Subregion (GMS) as well as India, Sri Lanka and Bangladesh. Yunnan also proposed a three-year action plan of digital Yunnan for 2019–2021, expecting to build a digital hub

134  Tao Song that may radiate South Asia and Southeast Asia, speed up the construction and operation of dedicated internet access and provide the international business of big data service, cloud computing service, etc. to South Asian and Southeast Asian markets. Hence, taken those developments into consideration, Yunnan’s role as an important logistic channel and a hub that connects China with South Asia and Southeast Asia is considerably enhanced, which also facilitates the rapid development of the modern logistics industry. Yunnan carries out international multimodal transportation that faces South Asia and Southeast Asia, comprehensively increases the application serviceability of the smart logistics industrial, promotes the progress of facilitation of international road transportation, and speeds up the construction of international logistics gateways of China-Myanmar, China-Vietnam, China-Laos and China-Laos-Thailand, in order to form a cross-border logistics system. At present, the cross-regional logistic network of Yunnan is expanding. There are many cross-border logistics enterprises, such as Yunnan-Laos, Yunnan-Thailand, Yunnan-Vietnam and Yunnan-Myanmar. Eight international freight airlines were opened, with allcargo aircrafts, such as Kunming-Dubai. However, the comprehensive transportation networking of Yunnan with surrounding countries is at a relatively low level, and its connections and communication of traffic infrastructure and logistics system with its surrounding countries are insufficient. Meanwhile, the service is at a relatively low level. The relatively high transportation cost, inconvenience traffic and relatively low transportation efficiency are issues that need to be solved. In view of the road construction, as Yunnan is located in mountainous areas, most of the roads here are curved instead of straight lines. That is the reason why the main road mileages exceed 500 kmand even reach 800–900 km. Long-distance road transportation leads to relatively high cost. As for railway construction, the shortage of mileages, small-size road network, irrational size of economy, etc. are the main problems. Besides, the imbalance between supply and demand is prominent, such as low daily loading demand. Finally, from the angle of waterway construction, according to statistics, the inland river mileage in Yunnan is about 3374.76 km, only occupying onefourth of the length of rivers that can be exploited. Among them, low-level channels take up a relatively large proportion. The number of ports is small, and only 12 ports are under normal operation. River shipping is faced with problems such as low degree of development and utilization, low-level channels, insufficient port facilities and defective connection of land transportation. As for the international connectivity network, national specific rules and regulations, different custom regulations and procedures are not supporting trans-national cooperation and thus undermine broader transport cooperation between Yunnan and South Asian and Southeast Asian countries, especially with Myanmar, Laos and Vietnam. Enhancing cross-border cooperation and aligning custom regulations and procedures with the countries of the Mekong region need to be more encouraged.

Yunnan connecting China and Southeast Asia  135

8.4 Yunnan’s opening-up strategy supports its position as a nexus hub Although Yunnan is located in the southwest corner of China, it serves as the nexus hub in an increasingly interconnected Asian mobility network further supported by the BRI, characterized by multiple location advantages. To begin with, Yunnan is the conjunction of three economic circles, comprising China, Southeast Asia and South Asia. It is close to the sea (via Guizhou and Guangxi to the east), Central China Plains (via Sichuan and Chongqing to the north), Thailand and Cambodia (via Vietnam and Laos to the south) as well as India and Pakistan (via Myanmar to the west). Thus, it is regarded as a central hub, connecting China to the five regions of South Asia, Southeast Asia, Middle East, South Europe and Africa (Goodman 2001). Meanwhile, as Yunnan shares similar nationalities and languages with its surrounding countries, there has been a close relationship and exchanges between governments and people with extensive cooperation. More specific and within a closer geographic setting, it is important to understand Yunnan as a nexus hub linking itself and China with South Asia and Southeast Asia due to its salient market advantage from easy reach to South Asia and Southeast Asia. Both South Asia and Southeast Asia are rich in energy resources. The large population (nearly 2.3 billion) also brings about a huge market potential. Recently, BRI strategy plays important roles in the activation of multilateral cooperation mechanisms. There has been increasing trade cooperation between Yunnan and Myanmar, Laos and Vietnam. Another aspect, especially relevant from a domestic perspective, is that Yunnan development level as a western border province falls behind that of the eastern and central regions in terms of economic development. It has to carry on the industrial upgrade of the eastern and central provinces to achieve the rapid economic development and advance the coordinated development between regions. With the industries moving to South Asia and Southeast Asia, Yunnan’s role and function as land route and strategic pivot in Chinas’ national development strategy and opening-up have been further promoted. This highlights the diplomacy advantage Yunnan enjoys in the surrounding countries and contributes to its newfound role as the radiation centre for Southeast Asia, within various strategic settings, such as the BRI, China-ASEAN Free Trade Area (CAFTA), Regional Comprehensive Economic Partnership (RCEP), GMS Economic Cooperation, Bangladesh-China-India-Myanmar Economic Corridor, ChinaMyanmar Economic Corridor and China-Indochina Peninsula Economic Corridor. All of these measures facilitate the connection and trade between Yunnan and its surrounding countries, enhancing its strategic position and its provincial position within China. Economically, Yunnan has experienced several developmental stages since China’s opening-up policy debut in 1978. The initial stage between 1978 and 1990 focused on border trade. Beginning in 1978, Yunnan opened its border trade with Myanmar. In 1985, more flexible trade policies were formulated, and

136  Tao Song it represents the full-fledging development phase of border trade. The 26 border counties within the province were all classified as border trade zones. In the year 1990, border trade featured multi-scalar and multi-form, including petty trade, intergovernmental trade, among others. During the opening-up from 1990 to 1999, the Fifth Yunnan Provincial Party Committee Congress in 1990 decided to shift the opening-up focus to South Asia and Southeast Asia, while in 1992, the State Council of China approved Kunming to implement the policy of opening-up like coastal cities. Three border cities, namely Wanding, Ruili and Hekou, became opening-up cities and became national border economic cooperation zones. After 1993, Yunnan Province and the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) co-organize the Kunming (China) Import & Export Fair once a year that offered another stimulus for foreign trade and Yunnan’s position within it. In 1999, following the China’s western development strategy, the Yunnan Provincial Party Committee and the People’s Government of Yunnan Province specified the objective to build the province into a major corridor connecting Southeast Asia and South Asia and its overall objectives of opening-up. At the same time, Yunnan actively promoted its cooperation and expansion with the GMS and became the leading province of Southwest China in cooperation with this sub-region. This was followed by a more vigorously opening-up period between 2000 and 2008, during which Yunnan carried out the ‘bringing in’ and ‘going out’ strategy and formulated a series of policies. Meanwhile, Yunnan speeded up the preparation and construction of highways, railways, shipping and water transportation linking other provinces or countries and positively promoted its access to surrounding countries regarding the railway/highway, electricity, commercial activities and customs. In addition, Yunnan was actively involved in the construction of CAFTA, the cooperation between the Lancang-Mekong Subregion and the economic cooperation between Bangladesh, China, India and Myanmar. This was the time when Yunnan has become the frontier of China’s opening-up to Southeast Asia and South Asia instead of the past tail end. The following period, until 2013, was marked by establishing Yunnan as an important bridgehead opening-up to Southwest Asia. In July 2009, Hu Jintao, then general secretary of the CPC Central Committee, visited Yunnan and pointed out that: we should make full use of Yunnan’s advantage as a land linkage to Southeast Asia and South Asia, further promote the communication and cooperation with Southeast Asia, South Asia and Greater Mekong Subregion, and improve the quality and efficiency of the opening-up, so as to make Yunnan into an important bridgehead opening to the southwest. (Su 2012) He affirmed the special position of Yunnan’s opening-up as a national strategy and also the frontier for the first time. The provincial party committee and provincial government also actively prompt measures and confirmed the new three strategic goals of “two strong provinces and one bridgehead”that are one

Yunnan connecting China and Southeast Asia  137 strong province in the green economy, one strong province in ethnic culture and one bridgehead connecting Southeast Asia, South Asia. Meanwhile, in May 2011, the State Council unveiled Opinions on Supporting Yunnan Province in Speeding up the Construction of An Important Bridgehead for Opening-up to the Southwest. The provincial government sets up a leading group and its office for planning and coordination. From 2013 onwards up today, Yunnan was being transformed into a radial centre for opening-up to South Asia and Southeast Asia. In January 2015, Xi Jinping, general secretary of the CPC Central Committee, visited Yunnan and proposed that: Yunnan should actively serve and participated in national development strategy and break to a path of leapfrog development. It should endeavour to be the best practice of national unity and ecological civilization construction, as well as the radical centre facing South Asia and Southeast Asia. (Xinhua News 2020) When revisited Yunnan in January 2016, Xi stated that “the advantage of Yunnan is its position, and its way out is development” (Xinhua News 2020), which clarified Yunnan’s economic development direction. Indeed, since the BRI began in 2013, the construction of China-Indo-China Peninsula Economic Corridor, China-India-Myanmar-Bangladesh Economic Corridor, China-Vietnam Economic Corridor, China-Laos Economic Corridor and China-Myanmar Economic Corridor were put forward and promoted. On 2 August 2020, Yunnan Pilot Free Trade Zone was established. Yunnan has grown from the tail end of the opening-up to the connection hub with ASEAN and South Asia as well as ‘the radical center’ facing South Asia and Southeast Asia. In recent years, Yunnan’s export-oriented economy was booming rapidly, with increasing cross-border cooperation in foreign trade and foreign direct investment (FDI). In 2017, the border trade occupied 27.3% of the provincial foreign trade volume. In 2019, its total foreign trade value was 33.7 billion USD (see Figure 8.1), of which 16.6 billion USD was with ASEAN. Myanmar, Vietnam and Laos ranked top third in terms of the trade volume. In 2019, the investment of Yunnan to the countries along the BRI was 0.35 billion USD, taking up 70% of the total overseas investment. In 2016, the contracted engineering projects of Yunnan in foreign countries reached roughly 1.8 billion USD; in 2017, the outward FDI was nearly 1.9 billion USD. By the end of 2017, there were 728 nonfinancial foreign-invested enterprises, with a total investment, over 9.2 billion USD. Among them, 543 were in countries along the BRI, with a total investment of 5.98 billion USD, accounting for 65% of the provincial total. Electrical energy, water production, supply industry, mining, commercial service and agriculture accounted for 68.75%, while the rest was manufacturing, construction, real estate, transportation, culture industries, etc. Currently, Yunnan has four national border economic cooperation zones, three cross-border economic cooperation zones, eight national economic and technical development zones (new and hightech zones and resort areas) and 63 provincial-level development zones.

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As the China’s National BRI planning (Vision and Actions 2015) points out, by taking advantage of its geographic location, Yunnan Province should highlight economic cooperation in the GMS and make the region a pivot of China’s opening-up to South and Southeast Asia. To be specific, Yunnan should play a vital role as the opening-up platform and cooperative bridge in constructing BRI by jointly developing the opening-up-oriented economy with surrounding countries such as Vietnam, Laos and Myanmar. As the radial centre facing South Asia and Southeast Asia (Su 2016), Yunnan’s development covers both infrastructure and soft power, including economy, market, transportation, social public serviceand science and education.

8.5 Various approaches for opening-up: special economic zones and city-to-city cooperations Since the beginning of the BRI, Yunnan has achieved significant achievements in the construction of the Special Economic Zones (SEZs) and City-to-City cooperations, which supports its opening-up process. Within the context of the BRI, Yunnan makes use of the leading roles of established and newfounded cooperation mechanisms, like the GMS and the Lancang-Mekong Cooperation, the construction of economic corridors (e.g. China-Myanmar, China-Laos, China-Vietnam, Bangladesh-China-India-Myanmar and ChinaIndo-China Peninsula) and five national economic and technical development zones of Kunming, Qujing, Mengzi, Yanglin and Dali; the core position of two national key development open-up areas of Ruili and Mengla (Mohan); of three cross-border economic cooperation zones of China-Vietnam, ChinaLaos and China-Myanmar; the supporting of two comprehensive-bonded zones (Kunming and Honghe); nine border economic cooperation zones (e.g.

Yunnan connecting China and Southeast Asia  139 Hekou); and the opportunity provided by 25 ports of the first and second categories (e.g. the airport in Kunming). It gradually builds an all-round, multidimensional SEZ system as followings (Yunnan State Government 2016). As for City-to-City cooperation, so far, Yunnan has established a friendly relationship with 33 cities of 11 countries in South Asia and Southeast Asia and now has 23 offices of commercial representative based in all countries of South and Southeast Asia to support economic and trade cooperation. In 2013, the Association of Yunnan Outward Investment and Economic Cooperation was founded to offer further support for provincial companies in their international investment strategies. Another but the related strategy is to transform Kunming into a regional centre for international conferences and trade exhibitions as well as to support the BRI and Lancang-Mekong Cooperation framework. However, a strategic outward move also requires a solid economic foundation at the provincial level. At present, Yunnan has 139 industrial parks, of which more than 70 are provincial-level parks, basically covering all the counties (county-level cities) and districts. Industrial-added value above the industrial park scale accounts for 81% of the province’s total. The industrial parks are important platforms for the industrial development and technology innovation. In addition to these provincial-level industrial parks, there also exist a number of national-level development zones. Such a zone is an important facilitator and growth pole to the economic development of Yunnan. Five national industrial parks exist and include Kunming High-tech Industrial Development Zone, Kunming Economic and Technological Development Zone, Yanglin Economic and Technological Development Zone in Songming County, Qujing Economic and Technological Development Zone and Yuxi High-tech Industrial Development Zone are all located in innovation-driven leading areas. The main industries within those national industrial parks consist of biological medicine, electronic information, new materials as well as advanced equipment manufacturing such as new energy automobile and intelligent manufacturing. Yet, it is worth recognizing that provincial-level industrial parks are the main driving force of Yunnan’s industrial upgrading process, which is of great relevance to the total industrial base of the province. Compared with national-level and provincial-level industrial parks, other industrial up-grading strategies have a rather weak development perspective. It is suggested that Yunnan should consider the situation of industry and resource base carefully and sufficiently to figure out the potential and focus on long-term development, which may be an important supplement to the national-level and provincial-level industrial parks. Indeed, there are a plenty of industrial parks, but the majority of them are small-sized, characterized by insufficient production factors and weak competitiveness on the whole, with the government as the main investor. To solve the problems of low agglomeration, no prominent industries, irrational industrial distribution, etc., it is suggested to further promote the intensive, featured and green development and accelerate an open and innovative platform for economic development. It is also vital to rely on new power and figure out new objective to guarantee the vivid development of these industrial parks.

140  Tao Song The following two subsections will first focus on overseas economic cooperation zones and then on Cross-border Economic Cooperation Zone and City-toCity contact by selecting three specific case studies. Those are Ruili, Mohan and Hekou cities in the Yunnan Province.These three border cities were growing in size and their relevance since the BRI was announced because of its geographic significance at the frontier with Southeast Asia as well as key nodal point status as a nexus radiation centre facing Southeast Asia which enabled the concentration of production, finance and commodity trade.

8.5.1 Overseas economic cooperation zones Overseas economic cooperation zone provides a platform for the overseas investment of Yunnan’s enterprises and for industrial agglomeration and can also be described as a clustered international development platform in support of Yunnan’s enterprises. Yunnan’s overseas investment is concentrated in the countries along the BRI. In order to promote the going-out of enterprises, Yunnan has, since 2018, impelled ten overseas foreign trade and economies cooperation zones with a focus on including processing and manufacturing, trade logistics, agricultural industry, culture industry, to name some. They are mainly located in countries within the GMS. Two examples of overseas economic cooperation zones are listed below.

8.5.1.1 Vientiane Saysettha Comprehensive Development Zone Vientiane Saysettha Comprehensive Development Zone (SCDZ) is located in Laos and is a state-level cooperative project jointly initiated by the governments of China and Laos. As both the National SEZ of Laos and China (National Overseas Economic & Trade Cooperation Zone of China), SCDZ has been listed as one of the flagship projects during the early implementation of the BRI strategic planning in China. Its progress is a great concern under the support of both countries. Covering an area of 11.5 km 2, the SCDZ is located 14 km away from the northeast part of downtown Vientiane, the capital of Laos. It is in the core area of New City of Vientiane. It has an excellent geographic location as it has connection to various highways to the Lao-Thai border and the Wattay International Airport and close to the soon-to-be-open China-Laos Railway, which shall become a transportation junction of China and Southeast Asia. SCDZ is a project led by Yunnan Construction Investment Holding Group, which is to promote the connectivity and international cooperation on production capacity with the countries along the BRI. It is projected to facilitate the industrialization progress of Laos and enhance the economic and trade cooperation between China and Laos. The joint venture is responsible for the construction and operation of the park. Meanwhile, the provincial state government of Yunnan provides support on capital, policy, investment attraction, human resources, etc.

Yunnan connecting China and Southeast Asia  141 8.5.1.2 Baoshan Mandalay Myo Thar Economic Cooperation Zone Baoshan Mandalay Myo Thar Economic Cooperation Zone is a project inside the industrial park that is developed jointly by Baoshan City and the Myo Thar Industrial Park in Mandalay, Myanmar, with a total construction area of 1,009,524 m 2. It is 58km away from the downtown of Mandalay, known as the economic centre of central Myanmar; 11km from downtown of Myo Thar; 18km from Semekhon Port of Irrawaddy River; 38km from the airport, which shows that it has good transportation condition and locational advantage. The construction of the project sets up a platform for the going-out of Chinese enterprises, which makes it convenient for the products to enter the market of South Asia, Southeast Asia, Europe and the US. It is of great importance to the export-oriented economic development of Baoshan and even of Yunnan as well as the strengthening of the connection between China and countries along the China-India-Myanmar-Bangladesh Economic Corridor. In addition, to Overseas Economic Cooperation Zones, there also exist a number of cross-border Economic Cooperation zones some of them are listed below.

8.5.2 Cross-border Economic Cooperation Zone and city-to-city cooperation 8.5.2.1 Mohan-Boten (China-Laos) Economic Cooperation Zone Mohan-Boten Economic Cooperation Zone is located at the southern most part of Yunnan. Its location, 701 km away from Kunming of Yunnan; 58 km from Namtha of Laos; 228 km from Chiang Khong of Thailand, is characterized as a good location. Laos, which is also the key node of China-Laos Railway, Kumming-Bangkok International Highway and North-South Highway of Laos. Mohan Port is the most convenient land passage between China and Southeast Asia. In 2013, the government of Yunnan proposed to promote the construction of a cross-border Mohan-Boten Economic Cooperation Zonein the context of China’s Bridgehead Strategy. In August 2015, the governments of China and Laos signed the General Plan of the Construction of Mohan-Boten Economic Cooperation Zone with China’s State Council officially approved the establishment of the cooperation zone in March 2016. The cooperation zone is one of the traffic hubs between China and the Indo-China Peninsula. Lancang-Mekong Golden Waterwayis the only waterway that links China with the Indo-China Peninsular, and the Kunming-Bangkok International Highway is the most convenient land way to Southeast Asia, with the middle line of the Pan-Asian Railway under construction and while Mengla Airport also facilitates the economic development of the cooperation zone. It is the second cross-border economic cooperation zone constructed jointly by China and its bordering countries and became Yunnan’s second largest trade port. The cooperation zone has broad collaborative

142  Tao Song opportunities in different industries. First, the industries in domestic and foreign regional industrial cooperation have strong complementarities, such as the resource complementarities with surrounding countries such as Laos, Thailand, Vietnam, Cambodia and Myanmar. The Mohan-Boten Economic Cooperation Zone and Vientiane Saysettha Development Zone serve as the flagship projects orchestrated by Chinese state governance and enterprises, both of which have passenger and freight railway stations. They serve as an accelerator for industrial cooperation and complementary development between China and Laos. Another positive economic effect is that the living standard of the people living on both sides of the border has already improved considerably. With Chinese investment continuously increasing in Laos, the relevance of the Mohan-Boten Cooperation Zone will increase as does its role as a crucial border port. However, the geographic conditions of the border area and of Lao in general, which is overwhelmingly mountainous, increase the infrastructure development cost considerably. Thus, while improvements have been made, the infrastructure area of the border area is still underdeveloped.

8.5.2.2  Hekou-Lao Cai (China-Vietnam) Cross-border Economic Cooperation Zone Hekou has long been an important road connection of China with Southeast Asia in terms of trade and communication, which historical relevance as it was the second channel of the southern Silk Road, connecting China with Vietnam and Southeast Asia. With the completion of the Yunnan-Vietnam Railway in 1992, the Hekou-Lao Cai crossing once again became a major transport hub, connecting China with Southeast Asia. Its geographic locations, 469 km from Kunming, 296 km from Hanoi and 416 km from Hai Phone Port on the South China Sea, add to its position as a major trade hub. Border Economic Cooperation Zone was approved to be a national-level border economic cooperation zone in China’s State Council in 1992. As a national port of the first category, it is the most comprehensive and completed cross-border economic cooperation zone in Yunnan equipped with various ancillary facilities, with an area of 130 km 2. Hekou takes the lead in the ranking of Yunnan’s ports regarding total volume of foreign trade, volume of freight traffic and the number of exit-­entry people. As important facilities in the port area, the China-Vietnam Honghe Highway Bridge and a co-inspection building were finished and put into use in September 2009. China-ASEAN Hekou International Trade Centre competed in November 2010 functioned as the venue of China-Vietnam Border Trade Fair in Hekou in 2010. The Hekou economic cooperation zone is regarded as the centre node of Kunming-Hanoi-Hai Phong Economic Corridor, an important regional logistics hub, an import and export processing and trade service base as well as an experimental base along the border for comprehensive financial reform. Its leading industries include processing and manufacturing cross-­ border commerce, international finance, modern logistics, cross-border tourism and international conventions and exhibitions. In 2015, Honghe Autonomous

Yunnan connecting China and Southeast Asia  143 Prefecture of Yunnan and Lao Cai Province of Vietnam reached a consensus on Honghe (China)-Lao Cai (Vietnam)Economic Cooperation Zone Programme. The construction of this cross-border economic cooperation zone achieved great support from both governments of China and Vietnam. In 2015, the government of Lao Cai puts forward Decision No. 2381 and indicates that Lao Cai shall encourage investment projects of tourism, commerce, industries, etc. in 2015–2017. In 2016, Hekou became a reform trial and took the Beishan Development Zone as a border trade zone. It achieves great progress, with more than 60% increasing value of transactions compared to last year. In 2017, the government of Hekou cooperated with a number of enterprises. For example, Shenzhen Huike Electronic Information Industry Park entered the cross-border zone with a total investment of over 5 billion RMB. Meanwhile, taking advantages of the platform of enterprises and “financing construction +EPC” for the advancement of infrastructure, the cross-border area is able to solve the current issues. The cross-border cooperation zone adopts simplified access procedures but focuses more on the qualified and close-off management; as such, the preliminary framework of the China-Vietnam cross-border economic cooperation mechanism has been formed. This further increased the trade within the border area rather rapidly in recent years. Even so, it should be recognized that the country of Hekou, of which Hekou town belongs to, so far has lesser profit from the economic success of the border crossing. While the county’s infrastructure has been continuously improved, it still requires more investment, as does its economic base, which is so far mostly based on transit trade, missing any major and competitive industrial investment.

8.5.2.3 Ruili-Muse (China-Myanmar) Economic Cooperation Zone The Myanmar-China borderland encompassing parts of eastern and northeastern Myanmar features a geopolitical ‘great game’ played by countries, such as India, China, Japan and the US (Scott 2008). Despite the booming border trade, Ruili is still a small-town border city; at the same time, it is just opposite to Myanmar’s largest border city, Muse. It also has a historical record of being located along the Silk Road’s south-western route. Hence, becoming the largest trading city with Myanmar, accounting for one-third of China’s national trade with Myanmar, in 2018, Ruili developed into a vibrant border economy, attracting a relatively big population among all the Chinese border cities, which arrived at 200,000 in 2017, with 65% urban population thereof (Song et al. 2020). Ruili Muse Border Economic Cooperation Zone is a national-level zone approved by the China’s State Council in 1992, which is also one of the earliest national-level development zones in the notification list in September 2005. It takes to import and export processing, storages and logistics, characterized agriculture and border tourism as the leading industries. Key products under sales are redwood furniture and jade. It is a zone covering international economy and trade, bonded storage, import and export processing and assembly, international conventions and exhibitions, cross-border finance and insurance services,

144  Tao Song cross-border travelling, cross-border investment and cooperation in border social development affairs. It is also regarded as a free trade zone of international logistics and tourism trade. It is reported that the planning of the construction of the Ruili-Muse cross-border cooperation zone was put into the Memorandum of Cooperation on Jointly Building up China Myanmar Economic Corridor. Close ethnic ties, as Han, Shan, and Kachin people in Myanmar sprawling hills shared the similar lifestyles with Han, Dai and Jingpo, in China generated a positive trade environment, even in the messy political conditions of Myanmar’s northeast warlord regions (Qian and Tang 2018). Even so, the trade environment is not immune to repeated periods of violence as it happens in 2017 and May 2018. Still, Ruili had been positioned by all levels of states, national, provincial and urban states as a significant connection hub for the close Sino-Southeast Asia network, especially since BRI. Ruili’s opening-up as new forms of state spatiality dates back to the 2000s, when the free economic zone policy, Jiegao border trade zone, was approved by the China’s State Council. However, within the context of the BRI, a new Master plan for the Ruili National Key Experimental Zone for Development and Opening-Up (abbreviated as Ruili Experimental Zone) issued by the central government, which tasked 238 new projects to boost Ruili as a gateway of China’s cooperation with Southeast Asia. In this planning, Ruili Experimental Zone covers the area of Ruili City, including two national first-class ports (Wanding Port and Ruili Port) and two adjacent second-class ports (Zhangfeng Port and Yingjiang Port). By this, national governments deployed various forms and formulated a series of preferential policies in the areas of finance, taxation, investment and financing, industry, trade and land to attract both international and state capital from China’s coastal-developed areas (Song et al. 2018). For example, growing enterprises specialized in e.g. motorcycles, vehicles, home appliances and fabrics, in this zone, enjoy exemptions for local income tax in the first five years and a half in the next five years. The provincial and local states have also become key scales due to their roles in lobbying and implementing these strategic planning zones by the locational innovative policy, institutional experiments and financial incentives. It is of equal significance that newly emergent state spatial projects are superimposed upon Ruili’s entrenched morphologies as new state spaces. As the largest trade port along the Sino-Myanmar border in the context of BRI, Yunnan’s government and the central government also invested in upgrading Ruili’s major ports such as Jinghong, Jiegao and building new passenger docks and modern freight berth, with the capacity to handle 400,000 passenger arrivals and 100,000 tonnes of cargo annually. Even so, the promotion of Ruili as a crucial border post continues. In 2018, China and Myanmar officially signed the Memorandum of Understanding of building China-Myanmar Economic Corridor, which encompasses T-shaped China-Myanmar economic corridor, starting from Kunming, passing by Ruili and south to Myanmar, China-Myanmar border economic cooperation zone in Ruili and Muse in Myanmar, as well as a bunch of megaprojects of infrastructure, e.g. completed gas and oil pipeline to secure China’s energy import. These

Yunnan connecting China and Southeast Asia  145 state projects entailed mechanisms of an interregional resource, capital and people transferring and reterritorializing state economic spaces for borderlands. Indeed, the context of the BRI generated multiple transitions within China’s southwestern border towns, like Ruili, which was selected as a pilot city for developing cross-border connectivity. A new master plan for the Ruili Experimental Zone was issued in 2013 by the Chinese Central Government, which tasked 238 new projects to boost Ruili as a gateway for cooperation with Southeast Asia. This plan formulated a series of preferential policies in the areas of finance, taxation, investment, financing, industry, trade and land use (Song et al. 2018). The boom of Ruili has been further characterized by an increase in industrial enterprises attracted to these SEZs since the BRI. The Ruili Experimental Zone was envisioned to serve two purposes: ‘bringing in’ (‘yin jinlai’) investments from economically developed regions of China and ‘going out’ (‘zouchuqu’) to expand Chinese products and investments to neighbouring countries in South and Southeast Asia. This focus envisioned a particular form of border urbanization based on territorial hubs and corridors connecting extractive hinterlands with sites of production and consumption through BRI mobility and flows of connectivity. Understanding these connectivity flows at the small border scale can shed a great deal of light on the broader attributes, structures and impacts of diverse urbanization forms at various scales and enables scrutiny of the relative importance of hubs and margins in organizing urbanization networks. In particular, the accelerated development of the processing manufacturing industry has also created a new dynamic for urban development. A number of exports assembly and processing enterprises focused on the electromechanical assembly of motorcycles also grew rapidly. One example is the Yinxiang Motorcycle Company; manager Chen in charge of production noted that: the first phase of the company’s project was put into operation in 2016. Last year, the company produced 700,000 motorcycles, mainly sold to Southeast Asia and South Asian countries. More than 50,000 sales service points have been established in Myanmar. Motorcycles and mobile phones manufactured in Ruili have generated new export flows to Southeast Asia since 2010 and are welcomed by markets in South Asia and Southeast Asia, notably Myanmar. In light of this rescaling of state power across all scales, major border regions have become important geographical targets for a variety of far-reaching institutional changes, policy realignments, and infrastructural re-configurations designed to foster cross-border economic growth and capacity. In 2015, when General Secretary Xi Jinping visited Yunnan Province, he proposed that this region should now serve as the Chinese nexus hub for South and Southeast Asia. The proposed Bangladesh-China-IndiaMyanmar (BCIM) economic corridor within the BRI is a mega-project, linking Kolkata with Kunming; the aims of this project include toindustrialize vast hinterlands, surmounted by important nodes that fall along this route, such as Ruili and Kunming in China, Dhaka and Sylhet in Bangladesh and Mandalay in

146  Tao Song Myanmar (Chen 2018). The soon-to-be-finished Da-Rui Railway (Dali to Ruili) and Long-Rui Expressway will also provide further traffic accessibility for Ruili within the Southwest hinterland of China. The city of Ruili has also become the through point for a Chinese oil and gas pipeline allowing imports to pass from the port city of Kyaukpyu on the west coast of Myanmar to Kunming (Chen 2018). Ruili is also a cross-border RMB financial service centre, noted by the government of Yunnan Province in 2013; a number of financial institutions, especially major state-owned commercial banks in Yunnan Province, signed RMB agency settlement agreements with Myanmar Economic Bank. In 2016, China initiated a special management policy for the accounts of Myanmar nationals to create the ‘Ruili Index’, the exchange rate between RMB and the currency of Myanmar issued by the Ruili China-Burma Currency Exchange Centre. It is worth remembering that to create a China-Myanmar border, economic cooperation zone, located in Ruili, was a primary subject at the 1st Belt and Road Forum for International Cooperation, which was held in Beijing in May 2017. Another component of the Chinese-initiated BRI was to establish a Myanmar-China economic corridor to reinforce the position of Ruili as a vital hub in the China-Southeast Asia nexus. China proposed building a T-shaped China-Myanmar economic corridor during Chinese Foreign Minister Wang Yi’s visit to Myanmar in November 2017. This corridor starts from Kunming in Yunnan Province, passes by Ruili and extends south into Myanmar, before further extending east to Yangon and west to the Kyaukpyu SEZ. The Presidential Office of Myanmar announced the establishment of a BRI steering committee in December 2018 to promote coordination between the federal and the provincial governments at all levels and to enable smooth construction in Myanmar. This Committee, chaired by Aung San Suu Kyi, Myanmar’s State Minister, and vicechaired by Min Rui, Myanmar’s First Vice-President, has 27 members including government ministers and provincial chief ministers. In time, the port of Ruili has become the largest trade port on the China-Myanmar border in the context of BRI. In 2017, the total import and export volume of ports at Ruili equalled US$6.6 billion dollars, an increase of 33.59% over the previous year and accounting for 74% of the total import and export volume of Yunnan’s border ports with Myanmar and 49.08% of China’s total trade volume with this neighbour. Over the same period, more than 5 million domestic and foreign tourists arrived at the port of Ruili, such that tourism income rose to 9.88 billion RMB in 2017. One caveat, however, is warranted; despite the optimistic tone created by the BRI in Ruili, the realization of this blueprint nevertheless faces a number of critical unknowns. In the first place, in contrast to increase in manufacturing industries, traditional commercial grassroots trade has experienced an unsteady decline over the last decade. Although it seems premature to note that some neighbourhoods within the Jiegao Border Trade Zone have experienced depopulation, certain groups were left behind by this round of the BRI due to strict surveillance over trade in logs and jade along the border as well as skyrocketing housing costs. Second, the developments discussed here also hinder smooth trade connections and flows along borders as these are sometimes informal and

Yunnan connecting China and Southeast Asia 147 based on ethnic and social ties. These developments raise complex geopolitical tensions between Chinese ambitions, the state of Myanmar, and the internal fragmentation of local states within the latter country, especially armed ethnic groups (Qian and Tang 2018). The economy of Ruili has also suffered since the start of the BRI from Chinese anti-corruption campaigns and limited quotas for the imports of raw materials such as red timber and jadeite. Megaprojects along the border have invigorated ‘exported-orientated’ manufacturing industries rather than small-scale, grassroots trade practices, which are central to livelihoods in borderlands (Song et al. 2020).

8.6 Conclusion This chapter has sought to further an understanding of BRI through a focus on the economic repositioning of Yunnan, China since 2013. Yunnan developed from an ‘ordinary’ border province to become the hub of cooperation between China and South and Southeast Asia. This transformation was driven by the transnational connectivity and cross-border trade as well as the elevated position occupied by Yunnan in state planning and mega-project investment deployed by the authorities. Indeed, border province can be mobilized as important spaces of transnational cooperation, as they have been in the Chinese state’s endeavours to implement the going-out strategy, BRI and curtail uneven development. Yunnan’s new positioning as China’s ‘radiation centre’facingSouth and Southeast Asia has been specifically created as an ad hoc project that aims to enhance the region’s competitiveness. This competitiveness draws on Yunnan’s assets such as geographical proximity and cultural affinity with South and Southeast Asia, the established cooperation mechanisms between itself and its neighbours and a relatively stable geopolitical condition throughout the region (Su 2012). To convert these assets into concrete policies, the Chinese state (national, provincial and local) is focusing on cross-border corridors, transnational border cooperation zones, as well as overseas economic zones, endeavouring to maximize Yunnan’s place-specific locational advantages and promoting the differentiation of regional developmental trajectories across China’s national territory. Despite the optimistic tone created by the BRI, the realization of this blueprint nevertheless is still underway:the overall development level in Yunnan is still relatively lagging behind than coastal regionsin China. It is of complex dynamics for border development when facing border conflicts or emergencies such as the recent COVID-19 pandemic. Finally, it urgently needs a nuanced analysis of the transnational governance tool to smooth the transnational connectivity.

References Chen, X. M. (2018). Globalisation Redux: Can China’s inside-out strategy catalyse economic development and integration across its Asian borderlands and beyond? Cambridge Journal of Regions, Economy and Society. 11, 35–58.

148 Tao Song Goodman, J. (2001)The Exploration of Yunnan. Yunnan People’s Publishing House, Kunming, Yunnan. Ptak, T., Laine, J.P., Hu, Z.D., Liu, Y.L., Konrad, V., & Velde, M.V. (2020) Understanding Borders through Dynamic Processes: Capturing Relational Motion from South-West China’s Radiation Centre, Territory, Politics, Governance, DOI: 10.1080/21622671.2020.1764861 Qian, J.X.& Tang X.Q. (2018) The Rising Small City as Ordinary City: Rethinking Development and Urbanism from China’s South-West Frontier. Urban Studies. 56 (6), 1215–1233. Scott, D. (2008) The Great Power ‘Great Game’ between India and China: The Logic of Geography. Geopolitics. 13 (1), 1–26. Song, T., Chahine, T., & Sun, M. (2020) Ruili, China: the China–Myanmar Nexus Hub at the Crossroads. Cities. 104, 102766. Song, T., Liu, W.D., Liu, Z.G.,& Wuzhati, Y. (2018) Chinese Overseas Industrial Parks in Southeast Asia: An Examination of Policy Mobility from the Perspective of Embeddedness. Journal of Geographical Science. 28(9): 1–19. Su, X. (2012) From Frontier to Bridgehead: Cross-border Regions and the Experience of Yunnan, China. International Journal of Urban & Regional Research. 37(7), 1213–1232. Su, X. (2016) Repositioning Yunnan: Security and China’s Geoeconomic Engagement with Myanmar. Area Development and Policy. 1(2), 178–194. doi: 10.1080/237929 49.2016.1197780 Vision and Action (2015) Vision and Actions on Jointly Building Silk Road Economic Belt and 21stCentury Maritime Silk Road. Issued by the National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the People’s Republic of China, with State Council Authorization National Development and Reform Commission. People’s Republic of China. Xinhua News (2020) Caiyun zhinan pu xin zhang [General Secretary Xi Jinping’s 5th Anniversary Speech on Yunnan]. 20 January [WWW document]. Available from: http://cpc.people.com.cn/n1/2020/0120/c419242-31556917.html.htm [Accessed 20 January 2020]. Yunnan State Government (2016) Planning of Industrial Parks in Yunnan (in Chinese). Yunnan State Government (2020) Planning of Central Yunnan Urban Agglomeration (in Chinese).

9

Multi-regional cooperation BRI and Guangxi Hong Li, Yichuan Zhang and Meng Hu

9.1 Introduction The Belt and Road Initiative (BRI) was rolled out in late 2013 by Chinese leader, which envisions closer cooperation among dozens of countries in Eurasia and mainly in five areas: policy coordination, infrastructure connectivity, trade promotion, financial cooperation, and people-to-people exchanges. It is described as “the most ambitious and all-encompassing economic development program in human history” (Luft 2017) and “the most ambitious global connectivity project in ever launched by China or any country” (Chatterjee and Kumar 2017). While there is an overwhelming focus in interpreting from a geopolitical perspective, especially outside China, in reality, the primary aim of BRI is to develop the western part of China, which have been left behind by the eastward export-oriented strategy and political frictions with neighbouring countries compared with the rest of China (Ferdinand 2016). Therefore, many provincial governments are actively involved in the BRI policy formulation and implementation, for instance, Chongqing, Yunnan, and Tibet, to name a few. It is no exaggeration to say that local provinces have contributed substantive content to the Belt and Road (B&R) and have become the main promoters of the BRI (Li 2019). Within this domestic focus of BRI, several provinces in China have been assigned different roles, and Guangxi has been given an important mission among other subnational government. Such as the Vision and Actions encourages Guangxi to aspire to “build an international corridor opening to the ASEAN region, create new connection port for mid-south and southwest regions of China, and form an important gateway connecting the Silk Road Economic Belt and the 21th-Century Maritime Silk Road” (NDRC 2015). It can be seen that Guangxi was selected in terms of geography, sub-regional economic cooperation, infrastructure construction, and ‘pivot’ formula compared to southwestern provinces such as Yunnan and Tibet (Summers 2019). Although the BRI has been the subject of extensive analysis since late 2013, very few studies focused on the western provinces of China and the domestic dynamic of the BRI. In fact, there were some studies on sub-regional economic cooperation that in western provinces and can be considered as sub-frameworks under BRI. Cheng (2013) did not emphasize the BRI, but he explored the motivations, strategies, strengths, and limitations on the part of Guangxi in its participation

150  Hong Li et al. in the Pan-Beibu Gulf Area (PBGA) project. While Wang (2015) emphasized the importance of the South Silk Road to the economic and social development of the southwestern provinces and noted that it would complete the overall strategic layout of the “Belt and Road”. It is worth mentioning that there were certainly some studies that explore the dynamics of the BRI at the provincial level in the country. Li (2019) focuses on Guangxi as a case study of how a Chinese province has actively participated in the BRI and in China’s relations with Southeast Asia. Summers (2019) has emphasized domestic dynamics of BRI by examining responses to the BRI in southwestern province of Yunnan and has found that it is far from unique among Chinese provinces in citing ‘locational advantage’ and focusing on economic and development goal, rather than geopolitical ones, which is similar to Li (2019). On the basis of Summers (2019), Liu and Song (2020) used the examples of Guangdong and Yunnan in a comparative way and examined how these two provinces have satisfied the criteria for being international relations actors through an evaluation of their engagements in the BRI. While most studies show that BRI has brought opportunities to western provinces and regions, some scholars have questioned it. Such as the China-Pakistan Economic Corridor and the Bangladesh-China-India-Myanmar Economic Corridor under the Belt and Road framework have brought certain negative impacts to the border areas. Security issues in Xinjiang limit cross-border trade in Pakistan, and the strict border regime in Yunnan is detrimental to local trade players (Rippa 2020). Unlike previous scholarship on the BRI, our study explores Guangxi’s responses and contributions to ASEAN in the context of the B&R framework from the perspective of a Chinese province. We found that local government of Guangxi has served as a policy propeller, implementer, and booster of BRIrelated policies, consequently enhancing Guangxi’s positions among China’s provinces. To provide a comprehensive outline of Guangxi’s role within the ChinaASEAN relationship in the context of the BRI framework, the chapter will be divided into the following sections. First, we introduce Guangxi’s strategic orientation in the context of multi-regional cooperation and trade with countries along the “Belt and Road”. Then, we analysed Guangxi’s opening-up and cooperation with ASEAN countries including five aspects based on the Nanning channel: policy coordination, infrastructure connectivity, trade promotion, financial cooperation, and people-to-people exchanges. Furthermore, we comment on Guangxi’s all-round openness pattern of “southward development, northward connection, eastward integration and westward combination” within the context of the BRI framework. In addition, we discussed the challenges encountered by Guangxi, including excessive policy superposition and rapid iterations, lack of core industries that can easily become “passages”, excessive competitive pressures, and unformed competitive synergies. Finally, we concluded and found that while the BRI brings challenges and opportunities to Guangxi, Guangxi is an implementer, promoter, and participant of it, and the cross-regional cooperation policy of Guangxi’s government adds substance into the development of the BRI.

Multi-regional cooperation BRI and Guangxi  151

9.2 Guangxi at a glance: geographical location and economic development Located in the southern part of the motherland, Guangxi Zhuang Autonomous Region, short for “Gui”, connects the Socialist Republic of Vietnam in the southwest, with Nanning as its capital city. Guangxi being one of the coastal provinces and regions (MCPRC 2007), administering the Beibu Gulf area of approximately 40,000 square kilometers, with a coastline extending 1,500 kilometers (Guangxi’s Overview 2020). The total land area of Guangxi is 23.67 square kilometers, accounting for 2.5% of the national total and ranking ninth in China’s provinces. Guangxi straddles four major water systems (Pearl River, Yangtze River, Red River, and Binhai) and has a special topography of mountains, rivers, and the sea with a distinctive geopolitical economy based on its land and sea borders. Based on this specific geographic setting, Guangxi is home to a variety of ethnic groups with close historical, language, and cultural ties to Southeast Asian people like Thailand, Vietnam, Laos, and Myanmar (Fan 2007). Hence, based on its geographic location and the existing ethnic and culture ties with Southeast Asia, Guangxi has a well-established focus in facilitating a closer cooperation with sub-regional integration processes within Southeast Asia, with the BRI framework offering another opportunity of strengthen this integration process from a provincial perspective. Within this context, taking a closer focus on Guangxi’s own economic development trajectory is worthwhile. Guangxi has roughly gone through three stages of economic development: namely the Founding of the People’s Republic of China, the Reform and Opening-up, and the “13th Five-Year Plan”. Especially after the implementation of the 13th Five-Year Plan, the opening-up gradually penetrate from coastal and broader areas into inland areas. What’s more, the expansion of the global economy and the opening of domestic and international markets transformed the once underdeveloped province into a knot and bridge of China-ASEAN cooperation and another focal point of the BRI framework. Guangxi’s gross domestic product (GDP) per capita and disposable income grew steadily, but are still below the national averages. By the end of 2019, the provincial GDP was 2,123.71 billion yuan, up to 121.13% from 2010, accounting for 2.14% of China’s national GDP, ranking 19th among China’s provinces. The GDP per capita marked RMB 42,964, increased 111.73% compared to 2010, equivalent to 60.91% of the national GDP per capita, ranking 29th among all provinces in China. The annual per capita disposable income of the entire region was RMB 23,328, which saw an increase of 36.71% over 2010, which was about 75.91% of the national average. As the population and economy steadily growing, the industrial structure of Guangxi is also experiencing a constant adjustment. The proportion of primary, secondary, and tertiary industries has been adjusted from 17.6: 47.5: 34.9 in 2010 to 15.2: 32.5: 52.3 in 2019 (Statistical Communiqué 2010; 2019), thus the ratio of secondary and tertiary industries, especially the proportion of tertiary industries rising steadily. Under China’s multi-dimensional national opening-up strategy, Guangxi achieves a gradually

152  Hong Li et al. increase in import and export trade volume, foreign capital utilization, and cross-border tourist visits, but still accounts for a rather small proportion of the whole national development over the same period. By the end of 2019, the total import and export volume of goods at the provincial level reached 469.47 billion yuan, which accounted for around 1.49% of the national import and export trade volume, achieved a trade surplus of 49.96 billion yuan, and represented a provincial trade increase of about 291.68% since 2010. There were 388 new enterprises (projects) in the province in 2019, and the actual utilized foreign investment is about 1.11 billion U.S. dollars, an upward of nearly 5.5 times compared to 2010. In addition, the number of inbound overnight tourists in the region was 6,239,600, an increase of 3,372,200 compared with 2010.

9.3 Guangxi’s multi-regional cooperation role in the BRI As already mentioned above, Guangxi’s engagement with Southeast Asia is based on a number of strategic settings, within China’s national and provincial interests. While the BRI framework was not the first one to support such national and provincial strategic objective, it certainly adds another strong dynamic to it. To evaluate this impact in more detail, a closer evaluation of provincial interests and developments needs to be taken into consideration.

9.3.1 Strategic positioning, multi-directional cooperation, and trade The “Vision and Action on Jointly Building the Silk Road Economic Belt (SREB) and the 21st Century Maritime Silk Road (21st CMSR)” issued by the NDRC in March 2015 is the basis for the Guangxi local government’s authority participation in the BRI construction policy. Vision and Actions pointed out that Guangxi’s special geographic location with the ASEAN countries by land and sea will be taken advantage of by developing Guangxi into a strong location within the framework of the SREB and the 21st CMSR. Adding, that from a domestic perspective, this support should also add further dynamic to the ongoing opening of the CentralSouth and southwest regions of China (NDRC 2015). Xi Jinping stated that Guangxi has the conditions to play a greater role in the construction of ‘BRI’. It should releases the potential of the ‘marine’, stimulates the vitality of the ‘river’, makes full use of the ‘border’ to fully implement the openingdriven strategy, and to take key projects into practice. (Xi Jinping 2017) This offers strong indications of how Guangxi can consolidate and enhance the China-ASEAN platform for cooperation and build a new pattern of all-round open development based on its unique location. Obviously, Guangxi’s strategy in the BRI fully supports parallel cooperation processes the province is engaged in, such as the ASEAN, Beibu Gulf, Pearl River-Xijiang River, Southwest,

Multi-regional cooperation BRI and Guangxi  153 Central-South, and Sea-River-Border multi-regional cooperation processes. The year 2019 marked a special year as the concept of building international trade corridors has become an official approved national strategy, which can further strengthen Guangxi’s position as a transit hub. As the “backbone”, Guangxi can take on a bridge-function for economic and trade cooperation by facilitating construction between other western provinces and Southeast Asian countries. For example, Guangxi signed in January 2019 a framework agreement on cooperation in building the China-Singapore Connectivity Project (CSCP) “New International Land-Sea Trade Corridor (NILSTC)” (Eight Western Provinces 2019). Within this context and in supporting Guangxi’s own development, by accelerating provincial-level infrastructure development with an aim of supporting sub-regional integration with Southeast Asia as well as supporting its economic opening-up, Guangxi took full opportunity of the BRI framework. After all, as an intermediate hub, a logistics node, and sea passage in the construction of BRI and new international land-sea trade corridor, Guangxi has been supported by strategies in connecting with the Central-South and southwestern regions and other location along those routes.1 When considering the existing and relatively small-scale cross-border cooperation such as China-ASEAN, Sino-Vietnam “Two Corridors, One Circle”, and Greater Mekong Sub-regional Economic Cooperation (GMS), accelerating the construction of cross-border industrial clusters and cross-border industrial parks, strengthening the improvement of infrastructure such as border ports, and accelerating the connection of cross-border highway and railroad networks will not only increase the sub-regional integration process but also contribute to the Guangxi’s provincial development. This, in turn, has solidified its participating in international strategies and the provincial support for strategic frameworks like the BRI. Because of the province’s geographic location, Guangxi also play an important nexus role for other Chinese provinces in south and central China, which will further accelerate the BRI framework. Seven years have passed since the announcement of the BRI framework, and during this period, Guangxi has actively participated in the implementation process and was able to profit from progress made in economic and trade cooperation. The total value of import and export of Guangxi and BRI countries in Table 9.1 offers a good overview. Guangxi’s total foreign trade import and export with countries along the “Belt and Road” was 254.99 billion yuan, 2.30 times increase over 2013, and account for 2.75% of the total import and export trade between China and BRI countries during the same period. In terms of import and export comparison, Guangxi’s trade surplus with the BRI countries is relatively obvious, but the trade surplus has grown relatively steadily, with an increase of only 1.79 billion yuan in 2019 compared with 2013. As for trading partners, ASEAN countries have always been the largest trading partner with Guangxi, and this trend has become more apparent. In 2019, the total import and export trade between Guangxi and ASEAN accounted for 91.56% of the total amount along with the BRI countries, which has seen an increase from 88.73% in 2013. Vietnam is still the largest trading country with Guangxi, accounting for 68.8% of the total import and export volume between Guangxi

Brunei Cambodia Indonesia Laos Malaysia Myanmar Philippines Singapore Thailand Vietnam Mongolia Iran Iraq Turkey Syria Jordan Lebanon Israel Palestine Saudi Arabia Yemen Oman UAE

B&R countries

0.00 0.99 51.59 0.42 35.74 0.02 7.51 14.16 17.64 78.22 0.00 0.96 13.48 2.95 0.00 0.00 0.04 0.03 0.00 1.01 0.00 14.34 2.16

0.25 0.84 11.73 0.54 11.64 2.24 4.42 26.74 12.78 708.16 0.28 1.35 0.33 2.71 0.03 0.32 0.17 1.59 0.07 2.86 0.13 0.13 2.27

0.17 0.35 39.81 0.22 28.79 0.62 16.59 8.87 286.94 549.32 0.00 0.16 0.00 3.31 0.00 0.00 0.00 0.08 0.00 5.53 0.00 0.37 4.55

Import

Import

Export

2019

2013

0.14 4.65 36.10 1.35 55.09 5.33 10.89 53.06 31.77 1204.59 0.68 6.73 2.26 7.09 0.36 1.15 0.99 3.41 0.01 15.49 0.37 1.33 20.16

Export Nepal Bhutan Kazakhstan Uzbekistan Turkmenistan Tajikistan Kyrgyzstan Russia Ukraine Belarus Georgia Azerbaijan Armenia Moldova Poland Lithuania Estonia Latvia Czech Republic Slovakia Hungary Slovenia Croatia

B&R countries

0.00 0.00 9.40 17.37 0.00 0.00 0.66 0.33 0.00 0.47 0.00 0.00 0.04 0.03 0.12 0.04 0.02 0.00

Import

2013

Table 9.1  The total value of import and export of Guangxi and BRI countries (100 million yuan)

0.01 0.00 8.52 1.16 0.09 0.08 0.23 0.02 0.02 2.72 0.19 0.08 0.06 0.30 0.06 0.06 0.12 0.13

Export

0.00 0.00 0.29 0.00 0.00 0.00 0.00 9.08 8.18 0.02 0.03 0.00 15.79 0.00 0.19 0.04 0.00 0.01 0.43 0.13 0.11 0.00 0.03

Import

2019

0.34 0.00 1.32 2.02 0.07 0.35 0.31 8.73 2.19 0.74 0.21 0.62 0.07 0.02 11.41 0.72 0.46 0.26 2.41 0.30 0.31 1.08 0.75

Export

154  Hong Li et al.

5.88 1.94 0.02 0.14 0.00 0.61 4.03 0.66 0.22 0.00 0.01 0.00

0.13 0.47 0.11 0.23 0.08 1.94 13.44 0.76 0.66 0.00 0.15 0.00

1.09 3.00 0.00 0.15 0.00 0.00 10.29 0.89 0.14 0.00 0.03 0.00

0.68 1.00 0.64 4.15 0.05 7.74 31.53 2.23 3.88 0.02 1.26 0.10

Bosnia and Herzegovina Montenegro Serbia Albania Romania Bulgaria Macedonia Total trade The total of B&R The total of ASEAN ASEAN/B&R (%) ASEAN/Total (%)

0.00 0.01 0.09 1.77 0.00 875.84 285.14 206.29 72.35 23.55

Source: According to the statistical data of the General Administration of Customs of China over the years. Note: “-” means no data is available.

Qatar Kuwait Bahrain Greece Cyprus Egypt India Pakistan Bangladesh Afghanistan Sri Lanka Maldives

0.00 0.02 2.17 0.07 0.00 1157.82 825.69 779.35 94.39 67.31

0.00 0.00 0.00 0.11 0.00 0.01 0.01 2,097.56 995.73 931.68 93.57 44.42

0.04 0.04 0.15 0.11 2.64 0.24 0.01 2,597.15 1,554.21 1402.98 90.27 54.02

Multi-regional cooperation BRI and Guangxi  155

156  Hong Li et al. and BRI countries. Although the proportion of cooperation with Thailand, Malaysia, Indonesia, and other ASEAN countries has increased, it still took up a smaller piece of the total. Also, Guangxi still maintained close trade cooperation with Western Asian countries such as the UAE, Saudi Arabia, and Armenia. The proportion of total import and export trade has increased from 0.39%, 0.34%, and 0.03% in 2013 to 0.96%, 0.82% and 0.62% in 2019 separately. However, it is worth remembering the decisions made on Guangxi development strategy pre-dating BRI like the December 2009 decision of China’s State Council to divide Guangxi into ‘two zones and one belt’: Beibu Gulf Economic Zone (BGEZ), Western Guangxi Resource-Rich Zone (WGRRZ), and Xijiang Economic Belt (XEB) (SCPRC 2009). While pre-dating the BRI, it nonetheless indicated the direction for Guangxi’s role within the BRI framework. That is to say, Guangxi will rely on its resource advantages and industrial foundation in the region to form the three major development patterns and complementary advantages and resources. BGEZ, a coastal area, located in the southwest of China, is composed of administrative regions under the jurisdiction of Nanning, Beihai, Qinzhou, Fangchenggang, Yulin, and Chongzuo. Two main goals supported the creation of the BGEZ. First, creating an international regional economic cooperation zone, a logistics base, trade and processing, manufacturing base, and an information exchange centre for China-ASEAN open cooperation. Second, with regard to cross-regional cooperation, it is an important channel to serve southwest, south, and south-central China and for supporting interconnectivity with Southeast Asia. Over time, and within the BRI framework, Guangxi BGEZ has gradually formed a coastal industrial cluster dominated based on its remarkable location advantages, rich resources, and strategic position. As for the WGRRZ, it covers an underdeveloped frontier area inhabited by ethnic minorities but rich on resources (GDRC 2012). With abundant mineral resources, water energy, health, and other resource advantages, the western region of Guangxi has gradually become home to Guangxi’s non-ferrous metals, electric power, building materials, food processing, and other industries towards the path of industrial development characterized by the ecological economy. With regard to the XEB, it consists of 1,480 kilometers of inland waterways connecting Nanning, Guigang, Wuzhou, Baise, Laibin, Liuzhou, and Chongzuo and covers 1,218 kilometers of important waterways. The XEB has achieved initial results in creating traditional and emerging industries and supported an industrial transfer process of parts of eastern China. Cities close to the Pearl River Delta (PRD) pioneered in building industrial transfer bases to undertake industrial transfer in the eastern developed regions, so the economic cooperation between the five provinces in Xijiang River Basin has made progress. Take Nanning, for example, it was the first city in Guangxi that has built the Guangdong Industrial Park, Guangdong Commercial Street, and Macao Commercial Street. Actively participated in the construction of the Xijiang Economic Corridor is not only beneficial for opening the east-west corridor and promoting the western region to receive economic achievements and industrial transfer from Guangdong, Hong Kong, and Macao but also helps to strengthen Guangxi’s industrial agglomeration base in the construction of BRI-related NILSTC.

Multi-regional cooperation BRI and Guangxi  157 9.3.2 Regional cooperation towards ASEAN From the provincial perspective of Guangxi, BRI support for supporting closer interconnectivity with Vietnam and the ASEAN represents a crucial aspect since it is the only Chinese province that has a land and sea connection with the ASEAN. It is further emphasized that Nanning, Guangxi’s provincial capital, is the closed Chinese provincial capital to the ASEAN and figures as the permanent venue of the China-ASEAN Expo (CAEXPO). A long-established framework of cooperation, based on summits, trade-forums, officials meeting, starting in 2004, connects Nanning with Southeast Asia, which sometimes described as the “Nanning Channel”. From a geographic location, Beibu Gulf is the closest Chinese coastal port cluster to ASEAN, next of being a convenient seaport for southwestern and south-central China. Thus, based on those aspects, Guangxi’s provincial government welcomed the opportunities offered for further cooperation within the BRI framework. Among the projects supported at the provincial level are a two-way policy coordination strategy by building various open platforms for ASEAN countries and promoting cross-border interconnection, building a new digital highland China (Guangxi) Free Trade Zone (GXFTZ), and Nanning Airport Demonstration Zone (NADZ) for ASEAN countries featured open and cooperative. Another project aims in building a China-ASEAN information port under the background of the development of digital technologies such as 5G, artificial intelligence, and cloud computing will not only help build a China-ASEAN cyberspace community with a shared future but also help accelerate the construction of Guangxi’s digital economy. It is a vital support for the upgraded version of the China-ASEAN Free Trade Area (CAFTA) and a powerful measure to support the cooperation within the BRI framework. In August 2019, for giving full play to the leading and exemplary role in CAFTA for openness and cooperation, GXFTZ was officially established, covering Nanning, Qinzhou Port, and Chongzuo. The GXFTZ will focus on intelligent logistics, cross-border logistics, port, and air transport logistics in line with the NILSTC (Guangxi News 2019). In July 2020, the NDRC and the Civil Aviation Administration of China (CAAC) issued a joint reply to support the construction of NADZ (Guangxi News 2020) to build a regional gateway hub in BRI and a national pilot zone for the innovative development of the airside economy and accelerate the formation of an international corridor for ASEAN. Besides, to wield its function as a channel and to promote the construction of a major open platform, Guangxi made great efforts to organize the 17th “Two Sessions”, namely the CAEXPO and the China-ASEAN Business and Investment Summit (CABIS). As for cross-border customs clearance, several first-class ports in Guangxi have been exploring new modes of customs clearance under the framework of FTA to fully synergize the importance of border ports as direct gateways to ASEAN. Since the construction of the CAFTA, for solving the problems such as low overall customs clearance efficiency, high cost of customs clearance for enterprises, and slow speed of cross-border interconnection and intercommunication, Guangxi has taken part in the construction of a “single window” for

158  Hong Li et al. international trade and put the strategies of “Internet + quality inspection” and “smart port” into practice (Guangxi Daily 2017). And now, under the framework of the GXFTZ, for realizing the port infrastructure connectivity and the free movement of cross-border in terms of people, vehicles, goods, and capital with neighbouring countries, Guangxi has launched a new model of “two countries, one inspection” customs clearance management, which compressed the overall customs clearance time by more than 75%. With the construction of highway and railroad transportation networks, Guangxi has connected ports with major node cities at home and abroad and compressed import and export freight time. Yet, it is worth noting that a major provincial infrastructure construction project the Nanning-Youyiguan Expressway, known as ‘the first road at the southern gate of the country’, has been completed in 2005. Moreover, since the BRI was proposed in 2013, Guangxi has actively promoted the ‘6 horizontal 7 vertical 8 feeders’ highway network construction to effectively support the SREB and the 21st CMSR framework and to enhance the province positions in its role as a crucial gateway to Southeast Asia (Nanning Daily 2017). Hence, by the end of 2019, the total mileage of Guangxi’s expressways exceeded 6,000 kilometers, with a strong focus on connecting beyond provincial borders and connecting with the sea, therefore creating important transport nodes with other provinces and towards the ASEAN countries, like Laos and Thailand, via Vietnam. Together, this has created a relatively convenient and smooth southbound international channel, which has shortened the time and space distance between Guangxi and ASEAN and other international markets. Thus, a comprehensive transport network has been formed in three border cities and eight counties with highways and railways as its main skeleton, and national and provincial trunk roads have been coordinated and connected. It should be noted that railway infrastructure development has not been ignored either, as intra-regional, inter-provincial, and cross-border railway connect east to west and north to south. At present, the total mileage of railroad operation in Guangxi has reached about 5,200 kilometers (of which 1,800 kilometers are high-speed railway and express railway), basically forming a railway transportation hub with Nanning, Liuzhou, and Guilin as the main destinations. In 2017, amid the construction of the southbound corridor, the international railway intermodal transport corridor through the Pingxiang Port was listed as an important element in the advance construction. At the end of 2017, Sino-Vietnam cross-border containers have been first introduced, and till now, there are more than 280 trains that have been opened. By the end of 2018, 55 international railways intermodal (Chongqing-Hanoi) trains and 38 cross-border bi-directional trains between China and Vietnam (Nanning, Pingxiang-Hanoi) had been launched constantly. The international railway interconnection network links to Indochina has been continuously perfect, which takes Chongqing as a transportation hub and through border ports such as Pingxiang Port. While infrastructure development is important in itself, by increasing provincial and sub-regional connectivity, it is also vital for supporting trade and trade relationship at the sub-regional level and within the wider China-ASEAN context. Although the scale of import and export trade with ASEAN countries has expanded and cooperation fields broadened, while the main trading partners of Guangxi

Multi-regional cooperation BRI and Guangxi  159 were spatially concentrated and the trade mode is relatively single. In terms of total trade volume, the total trade import and export volume of Guangxi-ASEAN rose from 45.48 billion yuan in 2010 to 233.47 billion yuan in 2019, representing an increase of about 5.13 times, and the total foreign trade import and export volume of Guangxi and ASEAN in 2019 accounted for almost half (49.73%) of the total. Cross-border trade relies on the three border economic cooperation zones of Dongxing, Pingxiang, and Jingxi. Regarding the specific items of trade, industrial, and agricultural products, tourism, electronics, textiles, and pharmaceutical have become the main aspects with warehousing, logistics, and tourism added. In 2019, the total value of processing trade and small border trade reached 81.27 billion yuan and 109.08 billion yuan, respectively. As for trade partners, ASEAN has become the largest trading partner, largest export market, and the largest import source of Guangxi for many years. However, there were obvious polarization and extreme imbalance in trade between Guangxi and ASEAN countries. Among which, Vietnam being Guangxi’s largest trading country, followed by Thailand, Malaysia, and Indonesia. Table 9.2 ‘The total import and export value of Guangxi with ASEAN countries’ provides you some data on this development. In terms of commodity export, Guangxi has gradually changed the previous situation of mainly exporting agricultural and sideline products and low value-added products. Instead, electrical and mechanical products and manufactured goods have seen a rapid growth, and the structure of export commodities has been constantly optimized. In 2019, for example, Guangxi exported 130.95 billion yuan of electrical and mechanical products and 52.83 billion yuan of high-tech products, accounting for more than half of the total export trade. As such, the impact of BRI-related investments is not only contributing to an increase of trans-provincial trade but also to change in the quality of goods traded from Guangxi’s perspective. In addition to the trade aspects of Guangxi’s relations with Southeast Asia, it is also worth remembering the existing ethnic, linguistic, and cultural ties, which are further supported through closer infrastructure development and the BRI framework. In support to those links, various programs exist like a two-way educational exchange, establishing city cooperation, constructs cultural platforms, and promotes cultural exchanges. During the 12th Five-Year Plan period, Guangxi has established the Guangxi-ASEAN Scholarship for International Students, which actively promote the talent exchange program with ASEAN countries by increasing the number of studies abroad spots and quotas in universities, expanding study abroad subsidies and channels. At present, more than 30 universities in Guangxi have enrolled students from ASEAN countries. From 2010 to 2017, the total number of international students from ASEAN countries coming to study in Guangxi reached 55,702, accounting for 76.91% in total, making Guangxi became one of the provinces with the largest number of international students from ASEAN countries in China. At the same time, Guangxi also encouraged local students and teachers to study and teach in ASEAN countries. In 2017, Guangxi sent more than 5,000 students to study abroad, and Guangxi actively extended cooperation with ASEAN universities as nearly 200 colleges and universities in the region became partners. Table 9.3 provides you an overview of some data related to oversee students in Guangxi.

2010

62.83 19.43 9.57 13.22 17.42 489.23 617.35

2011 0.17 1.33 70.19 0.60 19.22 3.95 12.26 23.49 15.27 613.78 760.27

2012 0.25 1.83 63.39 0.95 47.44 2.27 11.94 40.94 30.46 787.24 986.71

2013 0.18 2.68 63.24 3.96 31.90 2.24 25.27 52.86 35.53 1,003.14 1,221.00

2014 0.06 2.74 99.24 0.87 41.87 8.22 36.07 51.27 32.08 1,535.07 1,807.51

2015 0.06 5.20 121.29 2.63 31.28 2.22 21.06 32.21 30.25 1,589.24 1,835.44

2016 0.30 4.35 67.31 3.26 48.60 2.73 43.45 51.06 46.53 1,626.26 1,893.85

2017

9 60 379 358 28 74 32 10 822 3,571 5,343 6,164 86.68

Brunei Cambodia Indonesia Laos Malaysia Myanmar Philippines Singapore Thailand Vietnam Total (ASEAN) Total (Guangxi) Proportion of ASEAN Overseas Students (%)

Data source: the website of Guangxi Education Department

2010

Year 15 129 522 586 52 121 22 11 1,318 4,171 6,947 8,028 86.53

2011 10 126 590 581 107 114 38 58 1,897 3,889 7,410 9,312 79.57

2012 0 160 837 777 86 127 17 64 2,608 3,656 8,332 10,130 82.25

2013

0 171 654 734 101 122 17 50 2,405 2,538 6,792 9,535 71.23

2014

0 183 673 748 95 126 16 55 2,437 2,415 6,748 9,873 68.35

2015

Table 9.3 The number of overseas students from ten ASEAN countries to study in Guangxi (2010–2017, in person)

Data source: Guangxi Statistical Yearbook.

Brunei Cambodia Indonesia 34.71 Laos Malaysia 17.93 Myanmar Philippines 5.46 Singapore 16.67 Thailand 20.21 Vietnam 357.41 Total 454.80

Country

Table 9.2 The total import and export value of Guangxi with ASEAN countries (2010–2019, 100 million yuan)

4 192 684 752 97 128 21 56 2,443 2,564 6,941 9,964 69.66

2016

0.17 3.82 67.40 6.17 70.19 3.35 25.66 43.99 91.37 1,749.37 2,061.49

2018

6 201 676 748 102 133 18 54 2,513 2,738 7,189 10,124 71.01

2017

0.32 5.00 75.91 1.57 83.88 5.95 27.48 61.93 318.71 1,753.92 2,334.67

2019

160  Hong Li et al.

Multi-regional cooperation BRI and Guangxi  161 The Guangxi’s foreign city cooperation program with the aim of exchanging experience and supporting technology transfer has also shown some success. Many cities in Guangxi have established sister cities cooperation with Thailand, the Philippines, Vietnam, Cambodia, Indonesia, Myanmar, Malaysia, Laos, and other countries. By the end of 2019, the number of established sister cities with ASEAN countries reached 55, ranking first within China, accounting for 49.11% of all the friendly cities linked by Guangxi. Among them, Vietnam boasts the largest number of sister cities with Guangxi, amounting to 18 pairs. In fact, the role of sister cities in local cultural promotion is more than other practical cooperation. Though, Guangxi has taken further advantage of its culturally based ties with the ASEAN countries by supporting cultural exchange platforms, book publishing, film and television media, and cultural and sports activities (China Press and Publication 2013). However, the cultural exchange between Guangxi and ASEAN is still limited, just among the traditional education, tourism, exhibition, youth, and art exchanges. Normal and institutionalized in-depth exchanges in science and technology, sports, health care, and academia are still weak. BRI may offer support for extending the cultural and ethnic-based linkages with Southeast Asian states further, after all, supporting people-to-people contacts representing a vital part of the BRI framework.

9.3.3 Supporting regional cooperation and integration with Southeast Asia From a provincial perspective, BRI supports various existing and new provincial cooperation efforts and the constructing of international land and sea corridors in different directions, described as ‘Southward Development’, ‘Northward Connection’, ‘Eastward Integration’, and ‘Westward Combination’. Like the ‘Northward Connection’ by strengthening cooperation with provinces and cities such as Chongqing, Guizhou, Sichuan, and Gansu and in terms of joint construction of trains and industrial parks. Other examples include the further development of international land-sea trade with southwestern and mid-south provinces, an eastward expansion by integrating the Beibu Gulf area with the PRD area in supporting not only cross-provincial cooperation but also to some extent the infrastructure connectivity between ASEAN countries and the PRD area (People’s Daily 2020). In February 2019, the ‘Guangdong-Hong KongMacao Greater Bay Area Development Plan’ was issued, offering additional opportunities for regional coordination and development. In other cases, some cross-provincial initiatives pre-dating the BRI, like the 2003, founded PPRD region process. Such cross-provincial cooperation project includes land, river, and sea-based infrastructure development, with the aim of integrating the different geographic locations. The stated aim is to support provincial economic development, to alleviate the development differences between provinces, and to increase the interconnectivity between ASEAN countries with Guangdong and Hong Kong. For example, in July 2014, the construction of the Pearl RiverWest River Economic Zone (PRWREZ) was officially elevated to a national

162  Hong Li et al. strategy, bringing opportunities for promoting the economic integration between Guangxi and Guangdong and the development of Guangxi (The Plan for Development 2017). However, from the perspective of the book, the focus will be on the southward infrastructure development process that further supports Guangxi’s integration with Southeast Asia, covering what was above identified as ‘Southward Development’ and ‘Westward Combination’. For ‘Southward Development’, port development and creating access to port facilities is essential, with Beibu Gulf Port (BGP) offering a convenient sea gateway for China’s inland cities, like Chongqing and Chengdu, to connect with ASEAN countries. Thus, the construction of NILSTC has given a new mission to BGP with the BRI a welcome support is offered. After all, both cities are crucial node points with the BRI’s framework of supporting domestic development and function as important national trade and logistics centres. As such, capacity improvements in BGP represent a critical aspect, and progress has been already achieved. By the end of 2019, the port has now 95 berths compared with 55 berths in 2010, and added emphasis has been given to increase the ports international competitiveness to develop into an international gateway port within the Beibu Gulf. Meanwhile, the capacity of cargo throughput has risen as well, increasing from about 119 million tons in 2010 to 233 million tons in 2019, an increase of nearly 95.80%. Container throughput rose from 565,600 TEUs in 2010 to 3.82 million TEUs in 2019, a nearly 5.8-fold growth (New Star 2020). Up to now, there are 52 container routes in Guangxi BGP, realizing the connection with more than 200 ports in more than 100 countries and regions around the world (Guangxi Accelerates 2020), covering Southeast Asia, Northeast Asia, as well as some ports in South America and Africa. Despite this improvement in capacity, it should not be neglected that the viability of the port and of crossprovincial and international interconnectivity is linked to the continuous industrial and economic growth generated. In addition to the port development strategy, Guangxi is also actively promoting the construction of new southbound land-sea corridors. The new land-sea corridor is an important part of the BRI framework. It offers a vital platform to accelerate China-ASEAN economic integration, and for a new strategic corridor for China’s Midwest region to keep pace with the national development strategy and open up to the outside world. Guangxi’s role in the construction of the southbound corridor is mainly to participate in the construction of major trunk routes such as railway-sea transportation, cross-border highways, and international railroad transportation (cf. Table 9.4). Since the “13th Five-Year Plan” and within the framework of the BRI, Guangxi has focused on the development of its seaward economy that gradually has become a new engine of economic growth. Guangxi is committed to building 700-billion-dollar harbour-front industrial clusters of non-ferrous metals, green chemicals, electronic information, light industry and food, forest pulp and paper, equipment manufacturing, and energy. At present, three industrial parks with an output value of over 100 billion yuan have been built in the Tieshan Port Industrial Zone (TPIZ) in Beihai city, the Fangchenggang Economic and

Multi-regional cooperation BRI and Guangxi  163 Table 9.4 Guangxi’s participation in the construction of southbound corridor trunk roads Transportation method Main content Rail and sea transportation

Cross-border road transport

International railroad transportation

Six main rail and sea transport routes have been opened: Yugui, Ronggui, Qiangui, Beibu Gulf Port-Yibin, Diangui, and Langui. Six trunk roads have connected shipping to ports such as Singapore and Hong Kong and to the international shipping network. In April 2016, the eastern line of the Great Passage, namely Chongqing Nampang-Guangxi Pingxiang-Hanoi, Vietnam, was completed, with a total length of about 1,500 kilometers. From Chongqing to Guangxi along the side of the port of exit by road, leading to Vietnam, radiating the countries of the central and southern peninsula. Take advantage of the railroad network in southwest China to connect with the Trans-Asian Railway network being built by China and ASEAN countries through the Pingxiang Port in Guangxi.

Source: Compile from different news.

Technological Development Zone (FETDZ), and the Qinzhou Bonded Port Zone (QBPZ) (Guangxi Strives 2020). With the promotion of BRI, one of the important directions of development is to strengthen industrial cooperation within the region as Guangxi focuses on the construction of cross-border industrial chains by utilizing the Special Development Zone concept.2 Beyond that, Guangxi also accelerate the construction of other cross-border industrial platforms such as the China-Indonesia Economic and Trade Cooperation Zone, the Brunei-Guangxi Economic Corridor, and the China-ASEAN Agricultural Cooperation Base. The industrial clusters and industrial parks have been gradually completed, and new forms of inter-industrial cooperation and channel construction shape an interactive mechanism that lays an industrial foundation for Guangxi’s cross-border economic and trade cooperation. While the seaward economy should continue to improve the level of harbour industries, at present, Guangxi’s harbour industries development levels are at mid-low, and industrial development in key parks are still at the initial stage, with traditional industries dominating and a lack of high-tech industries. In addition to this provincial southward integration strategy, a provincial westward integration strategy also exists, as mentioned previously, called westward combination. This strategy offers another interesting link with the BRI with its focus of increasing infrastructure integration and provincial cooperation with Yunnan province. It is worth recalling that from a geographical perspective, both provinces offer a special link between China and Southeast Asia, and evolving sub-regional integration processes within the Mekong region as both provinces are member of the GMS process. With Guangxi formally joining the GMS process in April 2005 (Guangxi Participation in the GMS 2014), Nanning and Kunming are the starting points of the Sino-Vietnamese “Two

164  Hong Li et al. Corridors, One Circle” and the China-Central South Peninsula Economic Corridor (CCSPEC). In recent years, both sides have carried out many joint efforts on the construction of infrastructure, platform, and industrial park projects, making contributions to link countries in the Lancang-Mekong River Basin, building economic corridors together, accelerating the development and opening of the southwest border that were also supported by addition infrastructure projects focusing on building expressways and railroad connections. For example, the opening of the Kunming-BGP expresses through freight train providing a new logistics solution for Yunnan’s commodities export. With 16 railroad freight stations in six cities, the train from Beibu Gulf would pass Kunming, Yuxi, Qujing, Dali, Honghe, and Chuxiong. Also, platforms like the Baise-Wenshan Interprovincial Economic Cooperation Park, Guangxi BGEZ, Yunnan Seafront Industrial Park, and the Border Financial Comprehensive Reform Pilot Zone (BFCRPZ) have provided industrial support for cross-provincial and cross-border sub-regional cooperation. Hence, both provinces are actively participating in cross-border and sub-regional cooperation within the Mekong region. There have been even efforts made to generate international economic corridors incorporating the whole Mekong region. As is in the case of the GMS, taking advantages of existing economic corridor development strategies favoured originally by the Asian Development Bank and also supported by the Lancang-Mekong Cooperation process. Indeed, since Guangxi became part of the GMS process in 2005, the construction of railroads, highways, seaports, and airports linking it to the ASEAN has accelerated significantly. Guangxi Economic Corridor cooperation is extending as far as Singapore, via the Nanning-Singapore Economic Corridor (NSEC) with the strategic aim of promoting transportation, tourism, economic, and trade cooperation among the seven countries along the corridor. This, in turn, also supports provincial-level cooperation with Vietnam’s border provinces (Ha Giang, Cao Bang, Lang Son, and Quang Ninh) and supporting cross-border infrastructure development and economic cooperation, clearly indicating Guangxi role as a bridge between the Southeast Asian countries and various Chinese eastern provinces. The China-Indochina Peninsula Economic Corridor (CIPEZ) is another example and one of the six economic corridors explicitly supported by the BRI. The corridor starts from the PRD Economic Zone in the east and runs through Vietnam, Laos, Cambodia, Thailand, Myanmar, Malaysia, and other countries in the Central-South Peninsula. Adding further impetus to this integration process is the May 2016 started ‘China-Central South Peninsula Economic Corridor Construction Initiative’ in which Guangxi and Yunnan cooperate to enhance the connection between the PRD region with the countries in the Central-South Peninsula, with the aim of creating a new economic growth pole. Adding another vital infrastructure section within the BRI framework, which also fosters Guangxi own position as a bridgehead connecting China and ASEAN and a centre of trade, information, and tourism in Southeast Asia.

Multi-regional cooperation BRI and Guangxi  165

9.4  Challenges and strategic opportunities for Guangxi within the BRI framework Guangxi has played a unique role in supporting domestic infrastructure development in integrating various provinces within the western, southern, and eastern part of China and in supporting their interconnectivity with Southeast Asia, consequently contributing to Guangxi’s provincial development. Nonetheless, Guangxi continues to face challenges of excessive policy accumulating and fast iteration and lack of core industries, which can easily shape a “passage” to Guangxi and develop excessive competitive pressure and immature competitive synergy. Similar to other provinces in China, Guangxi is pursuing multiple incentives from the central government for many years. Just take the example of regional openness and cooperation, where it has developed a variety of sub-regional cooperation and economic circles, from early open cities, export processing zones, comprehensive bonded zones, high-tech development zones, economic and technological development zones, western region policy coverage zones, and the CAFTA, to new development zones, such as “Two Countries, Two Zones”, the pilot development and opening-up zone, the Beibu Gulf Urban Agglomeration, river basins (such as the Xijiang-Pearl River Economic Belt (XPREB)) and transportation arteries (such as NILSTC from China to Singapore), pilot financial and free trade zones, and airside demonstration zones. These regional policies indeed facilitate local openness and cross-provincial as well as international cooperation. At the same time, they can also generate a combined effect of “policy superposition”. However, new policies that have already been declared or issued before the former policy hasn’t been completely implemented represent a potential serious topic for over accumulating of policies strategies and rapid iterations. In fact, Guangxi enjoys policy superposition and bonuses from the central government, but most of these benefits have not yet been revealed. National preferential policies require many local environmental factors support as well as time for trial until they are finally implemented. While the problem of policy superposition may eventually lead the government to generate a weary symptom on policies, little effect can be acquired. As it has been mentioned before, it can be seen that over several years, Guangxi’s openness and cooperation with foreign countries just reap little effect. Hence, although Guangxi is in a “node” position of many policies and enjoys the dividends of policy overlap, it also has the disadvantage of having too many policies that cannot be implemented one by one. While the implementation, planning, and realization of policies require a long period of time to trial and error, the local governments may be overwhelmed by the accumulation of policies in a short period of time. Still, Guangxi continues to be committed for building a seaward economy and to facilitate and industrial upgrading of the provincial industrial base. However, the harbour industry in Guangxi and even the pillar industries of many cities are still dominated by traditional industries characterized by mid-to-low end-level development stage. The industries in key parks are still in their infancy, lacking

166  Hong Li et al. high-tech industries, and a technology innovation system based on enterprises has not been formed. At the same time, although Guangxi emphasizes that it has an all-round open cooperation system of southward development, northward connection, eastward integration, and westward combination, it has not yet formed regular cooperation of producing, trading, and investing with neighbouring countries. As multi-lateral coordination is mostly concentrated on road network construction, there are rising risks for Guangxi to make itself become a place of passage, along a transit corridor, and make Beibu Gulf just to take on a rather more traditional role as simple shipping port, consequently missing out on potential provincial development gains. Adding to this provincial development challenge is that Guangxi faces competitive pressure from Guangdong and the Greater Bay Area. For example, with a relatively late construction, Beibu Gulf lacks direct international shipping routes and competitiveness with ports in the BGA and the Yangtze River Delta (YRD). Therefore, cargo has not converged towards Beibu Gulf as expected. To seek direct shipping and convenient customs clearance, Guangxi enterprises even do not go through a local port. At the same time, Guangxi has not yet formed a competitive force with neighbouring provinces and countries, and the lack of cooperation between industry, trade, and investment has made it more difficult for Guangxi to participate in the construction of the BRI framework. With the advantages of the open platform and the implementation of various policies, Guangxi’s top priority is to develop core industries with the help of external and endogenous driving forces. Especially through optimizing the business environment, developing the private economy, promoting precision investment, taking advantage of policy accumulating, and building connective channels to introduce several modern manufacturing and service industries, Guangxi will generate development opportunities in the new development stage. In other words, the future development prospect of Guangxi lies in connectivity and industrial agglomeration. To be more specific, Guangxi should not only establish a logistics channel but also promote industrial agglomeration through the established logistics channel. In this way, Guangxi will eventually serve as a corridor of industrial cooperation and an important node of the logistics channel to realize two-way interaction between channel and industry. Moreover, supported by policies and the New International Land-Sea Corridor, Guangxi should seize the opportunity better and work on forming the Southbound Passage into a new international land and sea trade channel which linked the BRI more flexible. This is how Guangxi can drive Guangxi to achieve a new round of high-level development for opening.

9.5 Conclusion The BRI launched by Chinese government in late 2013 has brought challenges and opportunities for provincial development. This chapter focuses on provincial dynamics of the BRI by examining responses and contributions to the BRI in the southwestern province of Guangxi. By tracking Guangxi’s major policies, infrastructure construction, and regional cooperation inside and outside the

Multi-regional cooperation BRI and Guangxi  167 province, executing the comments made by Party General Secretary Xi Jinping on an inspection tour of Guangxi, it shows that Guangxi’s responses and contributions to BRI were to further promote the externally oriented development, coalescing around the vision of making the province a ‘pivot’ to southeast Asia. In particular, Guangxi keeps taking its advantage of ‘geographical advantage’ at the intersection of various regions within China and southeast Asia, to build sea and land corridors enhancing Guangxi’s external connectivity, and to continue engagement with sub-regional cooperation with international and internal partners such as CAFTA, GMS, and CCSPEC. In more detail, we find that on the one hand, Guangxi is an implementer, promoter, and practitioner of BRI, and Guangxi government adds substance to the development of BRI. Under the framework of BRI, Guangxi connects midsouth and southwest China and Southeast Asia through the construction of new land and sea corridors, actively promotes the multi-lateral trade by the construction of industrial parks, various platforms, and road network, and builds bridges for people-to-people exchanges through the exchange of students, the construction of friendly cities and cultural activities. Guangxi is actively catering to the BRI and has made achievements in policy communication, facility connectivity, trade flow, capital financing, and people-to-people exchanges. On the other hand, cross-border cooperation in which Guangxi participated laid some foundation for the emergence of BRI. Long before the BRI, Guangxi has took part in the construction of export processing zones, comprehensivebonded zones, pilot zones, and border economic cooperation zones for development and opening-up along the border region. Later on, it participated in other cross-border cooperation, such as GMS and CCSPEC, PBGEZ, and Sino-Vietnamese “Two Corridors and One Circle”. In addition, it is worth mentioning that under the China-ASEAN framework, Nanning has hosted the CAEXPO and the CABIS for 17 consecutive years to build bridges for cooperation between enterprises from China and ASEAN countries. The above evidence shows that Guangxi’s participation in cross-border economic cooperation before the Belt and Road was a driving force behind the emergence of BRI. Of course, we also find some problems in Guangxi’s response to the BRI, as mentioned above, such as the prolonged overlapping of policies that have not yet been fully absorbed by Guangxi and the pursuing of another new policy. In addition, Guangxi has always been a province with the lower technological industries, and even though it actively participates in the construction of “interconnected” road networks, it lacks core industries or core competitiveness. It is important to note that the speed of development in Guangdong and other western provinces are putting a lot of pressure on Guangxi, especially the development of the GBA, which is also putting pressure on the BGEZ. In any case, the contribution made by Guangxi government is worthy of study. In its subsequent development, we can see that Guangxi will not only actively participate in the construction of the Belt and Road, strengthen the construction of core industries, but also actively take advantage of its nodes and strive to get closer to the goals in the Vision and Actions of BRI.

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9.6 Acknowledgement The authors would like to thank the National Nature Science Foundation of China (NSFC), grant number 41561026 and 71763002, for their help and the valuable comments and suggestions of the editors.

9.7 Division for work Hong Li is responsible for research design and coordinating, Yichuan Zhang is responsible for draft writing, and Meng Hu is responsible for data collecting and paper revise with Li.

Notes 1 This includes for example the Pan-Pearl River Delta regional cooperation, the full integration of the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), the acceleration of the construction of the Beibu Gulf Urban Agglomeration and the Pearl River-Xijiang Economic Zone. 2 Examples include Beihai High-tech Development Zone, Guangxi-ASEAN Economic and Technological Development Zone, and other national economic and technological development zones first, and to build China-Thailand (Chongzuo) Industrial Park, China-Thailand (Yulin) Tourism and Culture Industrial Park, China-Malaysia Qinzhou Industrial Park, China-Malaysia Kuantan Industrial Park, and China-Malaysia Kuantan Industrial Park.

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Index

Note: Bold page numbers refer to tables, italic page numbers refer to figures and page numbers followed by “n” refer to end notes. accommodating policy 102–104 agglomeration 44–45, 130–132, 139, 140, 156, 166 Alternative Policy Scenario (APS) 39, 47–51, 48–52 ASEAN Economic Community (AEC) 103 ASEAN-Mekong Basin Development Cooperation (AMBDC) 115 Asian Development Bank (ADB) 3, 10, 21, 27, 28, 39, 40, 46, 53, 55, 78, 89, 111, 115, 116, 118, 119, 122 Association of Southeast Asian Nations (ASEAN): and Central Asia 61–63, 62, 63, 66–70; integration process 23, 26, 96; regional cooperation 157–159, 160, 161 Association of Yunnan Outward Investment and Economic Cooperation 139 Astana International Finance Centre (AIFC) 67 Bangladesh-China-India-Myanmar (BCIM) 145 Baoshan Mandalay Myo Thar Economic Cooperation Zone 141 Behbahani, S. A. 63 Beibu Gulf Economic Zone (BGEZ) 156, 164, 167 Beibu Gulf Port (BGP) 162 Belt and Road Initiative (BRI) see individual entries Belt and Road, The/One Belt and One Road (B&R) 149, 150, 154–155 Bilateral Investment Treaty 65, 67

Board of Investment of Thailand (BOI) 83, 86, 87 Border Financial Comprehensive Reform Pilot Zone (BFCRPZ) 164 border province 130–132 Börzel, T. A. 25 bottom-up integration process 22 Breslin, S. 22, 24 BRI-GMS cooperation 116–122 Brzezinski, Z. 60 Build-Operate-Transfer (BOT) model 99, 114 Business as Usual scenario (BAU) 39, 47–51, 48–52 Calleya, S. 25 Cambodia 14, 29–34, 40, 42, 45, 109– 110, 122–123; bilateral relationship 110–112; BRI-GMS cooperation 116–122; Mekong Subregion 115–116; projects and development 112–115 carbon dioxide (CO2) emissions 51, 52 Central Asia (CA) 60–68, 62, 63, 70 Central Yunnan’s Urban Agglomeration (CYUA) 129–132 China-ASEAN Business and Investment Summit (CABIS) 157 China-ASEAN Expo (CAEXPO) 157, 167 China-ASEAN Free Trade Area (CAFTA) 136, 157, 165 China-ASEAN Hekou International Trade Centre 142 China-Central South Peninsula Economic Corridor (CCSPEC) 164 China Communications Construction Company (CCCC) 114

172 Index China Global Investment Tracker (CGIT) 97 China-Indochina Peninsula Economic Corridor (CIPEC) 30, 111, 135, 164 China (Guangxi) Pilot Free Trade Zone (GXFTZ) 157, 158 China-Singapore Connectivity Project (CSCP) 153 China’s Military Strategy 8 Chinese- Pakistan Economic Corridor (CPEC) 11 Choonhavan, C. 77 Civil Aviation Administration of China (CAAC) 157 Clash of Civilizations and the Remaking of World Order, The (Huntington) 60 clean coal technologies (CCTS) 53, 55 clean coal technology (CCT) 53, 55 coal-fired power plants (CPPs) 52–53, 53 Cold War 23, 24, 77 Colley, T. 11 corruption 103, 104 Corruption Perception Index (CPI) 103 Cottey, A. 22, 24 COVID-19 94, 99, 103–104, 147 cross-border connectivity corridors 132–134 Cross-Border Transport Agreement (CBTA) 89 dam-building 96, 98 Da-Rui Railway (Dali to Ruili) 146 Dawei 45 debt-trap 9, 11, 41 Dittmer, L. 29 Eastern Economic Corridor (EEC) 14, 29, 67, 77–80, 82, 84–88, 90, 121 East-West Economic Corridor (EWEC) 80 Economic Cooperation Zone: Hekou-Lao Cai 142–143; Mohan-Boten 141–142; Ruili-Muse 143–147 economic land concessions (ELCs) 14 Economic Research Institute for ASEAN and East Asia (ERIA) 45–46 EdL Transmission Company Limited (EDLT) 100 Electricite du Laos (EdL) 100 Esteban, M. 10 Eurasian Economic Union (EAEU) 67 European Union (EU) 23–25 Fangchenggang Economic and Technological Development Zone (FETDZ) 162–163

Fawcett, L. 25 Foreign Direct Investment (FDI) 95, 97, 98, 103, 110, 137 Gamble, A. 22 gas and liquefied natural gas (LNG) 54 GMS Railway Association 46 Grand Chessboard: American Primacy and Its Geostrategic Imperatives, The (Brzezinski) 60 Greater Mekong Subregion (GMS) 1–5, 11, 13, 15, 21, 23, 24, 27–30, 33–35, 38–41, 46, 53, 55, 77–80, 84–86, 89, 90, 95, 101, 109, 110, 115, 116, 118–123, 133, 136, 138, 140, 153, 163, 164, 167 greenhouse gas (GHG) 55 gross domestic product (GDP) 3, 10, 45, 95–100, 103, 130, 131, 151 Guangdong-Hong Kong-Macao Greater Bay Area (GBA) 80, 167, 168n1 Guangxi 1, 2, 4, 15, 29, 30, 109, 121, 135, 149–150, 166–167; ASEAN 157–159, 160, 161; challenges and opportunities 165–166; geographical location and economic development 151–152; Southeast Asia 161–164, 163; strategic positioning, multi-directional cooperation, and trade 152–153, 154–155, 156 Guangxi Zhuang Autonomous Region Bureau of Statistics (GZARBS) 109, 151 Guterres, A. 7 Hambantota Port 10, 11, 41 Hameiri, S. 9, 10 Han, P. 45 He, B. 5, 6 Hekou-Lao Cai Cross-border Economic Cooperation Zone 142–143 Herberg, M. E. 55 Hettn, B. 22–23 Highly Efficient and Low Emissions technology (HELE) 52 Ho Chi Minh (HCM) City 45 Hook, G. D. 22, 24 Huntington, S. P. 60 Hurrell, A. 22 hydropower 31–33, 42, 43, 46, 49, 50, 54, 55, 95, 96, 98, 99, 101, 103, 104 Industrial Development Policy 2015–2025 (IDP) 112–113, 121 infrastructure projects 120–122 International Energy Agency (IEA) 61

Index  173 international river basin (IRB) 13, 21, 25–27, 31–34 Internet of Things (IOT) 54 Jayasuriya, S. 10, 11 Johnson, A. 55 Joint Communique 7 Jones, L. 9, 10 Kamaldinov, A. 67 Kazakhstan 4, 60, 62, 64–70 Keohane, R. 26 Khorgos Cross-Border Centre 66 Khorgos project 66 Kuala Lumpur Declaration 26 Kunming-Bangkok Expressway 133 Lancang-Mekong Cooperation (LMC) 3, 4, 13, 14, 21, 24, 25, 27–30, 34, 39, 42, 43, 55, 56, 77–80, 82–85, 87–90, 111, 116, 119, 123n12 Lancang-Mekong Golden Waterway 141 Lao People’s Democratic Republic (Lao PDR) 94–95, 100–102 Laos 14, 32, 93–94, 104–105; accommodating policy 102–104; with Cambodia 97; geopolitical and geo-economic interests 100–102; investments and projects 97–100; political economy 94–97 Least Developed Country (LDC) 95, 97, 103 Li Keqiang 4, 83, 112, 120 Li, M. 150 Liu, T. 150 Long-range Energy Alternative Planning System (LEAP) software 39 Long-Rui Expressway 146 Lower Mekong River Basin (LMB) 43 LPRP 103, 104 McCartney, M. 11 Mahathir, M. 9 Malaysia 9, 11, 67, 101, 103, 122 Manoli, P. 22, 24 Mearsheimer, J. J. 5 Mekong-India Economic Corridor (MIEC) 45 Mekong-Japan Cooperation (MJC) 40, 55 Mekong-Lancang Cooperation (MLC) 123n12 Mekong region 1–3, 12–15, 21, 22, 24–35, 38, 40–43, 47, 70, 77–80, 82, 83, 85, 88–90, 94, 110, 112, 115, 116, 130, 132, 134, 164

Mekong River basin 12, 13, 21–22, 24, 25, 27–34, 84, 89; regional integration processes 22–25; sub-regional cooperation 25–27; sub-regional integration process 27–35 Mekong River Commission (MRC) 32, 39, 43, 54, 98 Mekong sub-region 38–39, 54–56; carbon dioxide emissions 51, 52; CCT 53; CPPs 52–53, 53; economic impacts 44–46, 47; infrastructure development 39–44; natural gas 53–54; power generation 49–51, 50, 51; TFEC 48–49, 49; TPES 47–48, 48 million tonnes of carbon equivalent (Mt-C) 51 Million Tonnes of Oil Equivalent (Mtoe) 47, 48, 61 Ministry of Commerce (MoC) 41 Ministry of Economy and Finance (MEF) 112 Ministry of Finance (MoF) 40–41 Ministry of Foreign Affairs and International Cooperation (MFAIC) 112 Ministry of Foreign Trade and Economic Cooperation (MOFTEC) 136 Mohan-Boten Economic Cooperation Zone 141–142 MRC Annual Report 2019 34 Multinational corporations (MNCs) 93 Myanmar 38, 42, 61, 68–70, 103, 130–138, 141–147 Nanning Airport Demonstration Zone (NADZ) 157 Nanning-Singapore Economic Corridor (NSEC) 164 Nanning-Youyiguan Expressway 158 National Development and Reform Council (NDRC) 5, 6, 152, 157 National Economic and Social Development Plan (NESDP) 80–82 National Poverty Eradication Programme 95–96 natural gas 53–54 Nazarbayev, N. 65, 67 New and renewable energy (NRE) 39 New Economic Mechanism (NEM) 95 New International Land-Sea Trade Corridor (NILSTC) 153, 156, 157, 162, 165 New Silk Road 64, 65 nexus hub 135–138, 138 Nitrogen Oxides (NOx) 52, 53

174 Index

Qinzhou Bonded Port Zone (QBPZ) 163 Quadrangle Economic Co-operation (QEC) 79

Sanya Declaration 3, 42 Sautman, B. 10 SCDZ see Vientiane Saysettha Comprehensive Development Zone (SCDZ) Senga, K. 40 Sen, H. 111, 112 Shenzhen Huike Electronic Information Industry Park 143 Sihanouk, N. 110 Sihanoukville Autonomous Port 113 Sihanoukville Special Economic Zone (SSEZ) 113–115, 117, 118, 120 Silk Road Economic Belt (SREB) 152, 158 Singapore-Kunming Rail Link (SKRL) 115 Sisoulith, T. 102–104 Söderbaum, F. 22, 25 Song, Y. 150 Southeast Asia 161–164, 163 Southern Economic Corridor (SEC) 56n1, 119, 121 Southern Economic Corridor (SSEC) 44 Southward Development 161, 162 Special Development Zone 163 Special Economic Zones (SEZ) 14, 40, 44, 66, 85, 86, 90, 98, 113, 123n8, 139, 140, 146 Sri Lanka 9–11 State Council of the People’s Republic of China, The (SCPRC) 156 State-Owned enterprises (SOE) 41, 95, 98, 101, 102, 104 sub-regional cooperation 25–31 sub-regional integration process 27–35 sub-regionalism 13, 22, 78 sub-regional Southeast Asia 1–4 Sulphur Dioxide (SO2) 53 Summers, T. 150 Sustainable Hydropower Development for the Lower Mekong Basin (SHDS) 43

Rajapaksa, M. 10 Regional Comprehensive Economic Partnership (RCEP) 135 regional investment framework 2022 (RIF 2022) 46, 47 regionalisation 22–24 Renminbi, Chinese money (RMB) 97, 130, 143, 146, 151 resource competition 27, 31–35, 63 Ruili Experimental Zone 145 Ruili-Muse Economic Cooperation Zone 143–147

Tantayakul, C. 88 Telo, M. 23 Temporary Admission Document (TAD) 89 Thailand 4.0 strategy 77–79; EEC impact 85–88, 87; LMC approach 82–86, 88–90; Mekong region 79–80; national economic and social development plan 80–82 13th Five-Year Plan 151, 162 3Cs strategies 115 Tieshan Port Industrial Zone (TPIZ) 162

North-South Economic Corridor (NSEC) 44, 84 Nurly Zhol policy 65 Nye, J. S. 26 Official Development Assistance (ODA) 40 Overseas Economic and Trade Cooperation Area (OETCA) zone promotion system 113 overseas economic cooperation zone 140–141 Pan-Beibu Gulf Area (PBGA) 150 Pan-Pearl River Delta (PPRD) 161, 168n1 Particular Matter (PM) 52, 53 Payne, A. 22 Pearl River Delta (PRD) 156, 161, 164 Pearl River-West River Economic Zone (PRWREZ) 161–162 People’s Liberation Army Navy (PLAN) 8, 10 People’s Revolutionary Party (PRP) 95, 103 Phnom Penh 45, 86, 88 Phnom Penh-Sihanoukville Expressway 114, 120–121 PHN-SHV Expressway 118 power generation 49–51, 50, 51 Prayut Chan-o-cha 83–85, 89 Preah Sihanouk Cambodia-China Friendship Polytechnic Institute (PCCFPI) 114 Preliminary Design Guidance for Proposed Mainstream Dams in the LMB (PDG) 43

Index  175 top-down integration process 22 total final energy consumption (TFEC) 48–49, 49, 50 total primary energy supply (TPES) 47–48, 48, 61 12th Development Plan 81 21st-Century Maritime Silk Road (21st CMSR) 152, 158 20-year National Strategy 81–82 “Two Corridors, One Circle” 153, 163–164 Union Development Group Co., Ltd. (UDG) 123n13 United States Dollar (USD) 41, 45, 46, 47, 50, 51, 95, 137, 138 Van Noort, C. 11 Vientiane Declaration 28 Vientiane Saysettha Comprehensive Development Zone (SCDZ) 140 Vientiane Saysettha Development Zone 142 Vietnam 15, 25, 32–34, 94–98, 100–103, 135, 137, 142–143 Wang, M. 150 Wang Yi 8 Weerakoon, D. 10, 11

Western Development Strategy 6 Western Guangxi Resource-Rich Zone (WGRRZ) 156 Westward Combination 161, 162 World Bank 6, 10, 97, 99, 100, 103, 111 Xijiang Economic Belt (XEB) 156 Xijiang-Pearl River Economic Belt (XPREB) 165 Xi Jinping 4, 7, 64–65, 100, 103, 105, 109, 113, 137, 145, 152, 167 Xinjiang 2, 63, 150 Xue Gong, X. 11 Yangtze River Delta (YRD) 166 Yan, H. 10 Yinxiang Motorcycle Company 145 Yunnan 1–2, 4, 11, 15, 21, 29, 30, 41, 68, 69, 79, 103, 109, 129–130, 147; border province 130–132; cross-border connectivity corridors 132–134; crossborder Economic Cooperation Zone and city-to-city cooperation 141–147; nexus hub 135–138, 138; overseas economic cooperation zone 140–141; traffic transportation 133 Zhang Zhiju 63 Zhou Enlai 110