China’s
President Xi Jinping announced last November that China will promote Asia’s
connectivity by creating a $40 billion USD fund for the 21st Century
Maritime Silk Road. This is part of the now called Chinese Dream, which according
to President Xi Jinping consists on “the
great rejuvenation of the Chinese nation”. [1] And according to SCMP, the “New
Silk Road Economic Belt” and the “21st Century Maritime Silk Road” will build
roads, ports, airports and railways across Central and South Asia”. [2]
President
Xi Jinping was also quoted saying that “the
Silk Road Fund will be open and welcome investors from Asia and beyond to
actively take part in the project”. [3] It is therefore evident that this
investment is not only a business opportunity for many regional and global
companies, but also a political opportunity of regional cooperation for the
countries of Southeast Asia, South Asia, Central Asia, East Africa and Middle
East. This is a project that might have a positive global impact and could even
re-launch the much needed regional cooperation with strategic partnerships in
the South China Sea and the Indian Ocean.
 |
| Picture 1 - Current and Xi Jinping's routes [2] |
The
main challenges and opportunities of the “21st Century Maritime Silk Road”
initiative are considerably dependent on how other key regional players – such as
Indonesia and India – will engage with or influence the Chinese plan.
Let’s
start by Indonesia. Indonesia has a new leader, President Joko Widodo, who is a
pro-business reformer with an ambitious modernization plan for the country,
projecting Indonesia as a “maritime axis” between the Pacific and the Indian
oceans. Last Thursday, the 5th of March 2015, I was privileged to
meet in Brussels the Indonesian Deputy Minister of the Coordinating Ministry of
Maritime Affairs, Mr Arif Havas Oegroseno. As he said, the 5 pillars of
Indonesia’s new maritime strategy are:
- Maritime
Culture
- Maritime
Economy
- Maritime
Connectivity
- Maritime
Security
- Maritime
Diplomacy
According
to Mr Oegroseno, next 4 years Indonesia will invest $57 billion USD in
upgrading 24 harbors and 5 deep sea ports. Additionally, Indonesia will invest
$70 billion USD in building 7 new yacht and cruise harbors and 9 new airports.
This fundraising is currently being done and in Europe the main investors are
from Denmark, France, Spain, Italy, Netherlands and Germany. All of these goals
seem to work well for the Chinese Maritime Silk Road initiative. Moreover,
general perception is that China and Indonesia have very close relations and
Indonesia’s leadership in the Indian-Ocean Rim Association (IORA) next 2 years
could play favorably for China’s projects in the Indian Ocean. Indonesia could
also be helpful in softening relations between China and other ASEAN countries
as Vietnam and the Philippines, with which there are some sovereignty disputes
over islands and reefs in the South China Sea. The Silk Road Fund has
definitely a big potential to be a key diplomatic and economic integration tool
from which China and ASEAN countries can benefit.
Historically
Indonesia has had an important role in Chinese exports to places like, for
instance, Oman. Indonesia’s efforts to restore its infrastructures are crucial
for the country to maintain that status of “maritime axis” between the Pacific
and Indian oceans. Economic projections are also positive for the country. Indonesia
is currently the 16th biggest economy in the world. As we can see
below, PricewaterhouseCoopers (PwC) projects that Indonesia will be the 11th
biggest economy by 2030 and the 8th biggest economy by 2050. While
China will have a stable status quo as leader, India will dispute the 2nd
place with the United States. [4]
 |
| Table 1 - Actual and projected top 20 economies ranked based on GDP in PPP terms [4] |
Regarding
South Asia, the situation is not simple. We must bear in mind India’s crucial role
in it. China has a strong alliance with Pakistan, as we can see by emblematic
Chinese sponsored infrastructures such as the Karakoram highway and the Gwadar
deep-sea port. Besides that, China has a close relation with the current
government of the Maldives [5] and has major investments in Sri Lanka and
Bangladesh. This is why the String of Pearls Theory is popular not only in
India but also within international analysts. According to this theory, China
would have as strategy the encirclement towards India, its economy and
military, in order to dominate the Indian Ocean. In fact, the “21st
Century Maritime Silk Road initiative” has been seen by the Indian media as a
Chinese rebranding of its String of Pearls. [6]
With
the election of Prime-Minister Narendra Modi in India last year, many things
have been changing India as well as in South Asia. With programmes like “Make
in India” [7] or by reducing bureaucracy, the new Indian government has shown
that pro-business policies are their main priority. Also in neighbor countries
like Sri Lanka things are changing. Sri Lanka’s previous President Mahinda
Rajapaksa developed in his 10 years consulate a very close relation with China,
endorsing China’s Maritime Silk Road initiative and welcoming Chinese
investment in the country’s infrastructures, such as in the ports of Colombo,
Tricomalee and others. [8] But in January 2015, against all odds, President
Rajapaksa lost the elections and the new President Maithripala Sirisena took
office. President Sirisena is much closer to India than its predecessor was and
he promised to establish “equal relations” between China, India, Pakistan and
Japan. [9] In Sri Lanka, as in Bangladesh and also in inland countries as Nepal
and Bhutan, China must have India’s role in consideration for its Maritime Silk
Road project. China has some diplomatic challenges in these cases, since cooperation
and even coordination with India will probably be much more effective for
business than competition or confrontation. Prime-Minister Modi is visiting its
neighbor countries in South Asia in a second round since his election last
year. This tells us that India will not open hand of his leading role in the
region.
Other
countries like Japan, Australia or New Zealand could be also interested in the
new infrastructures and opportunities generated by the “21st Century
Maritime Silk Road” initiative. Arguably, the ongoing negotiations of the Trans-Pacific
Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP)
can somehow affect the flow of investment, commerce and partnerships related to
the Maritime Silk Road. However, for the time being, this threat is not
meaningful for two main reasons: first, the negotiations completion will take
time; and second, it will probably result in a complementary market rather than
in damaging competition.
 Picture 2 - CSCL Globe, the biggest cargo ship in the world, with capacity for 19100 TEU containers |
In
Europe the “21st Century Maritime Silk Road” initiative is being
received with great expectations. Just this week the Chinese cargo ship passed
by the Port of Zeebrugge in Belgium, increasing people’s interest on the issue.
[10] Illustrating this, the Port of Zeebrugge has offices in Shanghai and the
King of Belgium will visit China by June 2015.
Finally,
this week Heritage Foundation and New Direction Foundation presented in
Brussels [11] the 2015 Index of Economic Freedom [12]. According to this index,
Hong Kong maintained the status as the world’s freest economy for the 21st
consecutive year. Singapore ranks 2nd in this index that considers
as indicators the rule of law, government size, regulatory efficiency and open
markets. As Goldman Sachs recognizes, the Shanghai-Hong Kong Stock Connect launching
in the 17th of November 2014 “allows
mainland Chinese investors to purchase select Hong Kong and Chinese companies
listed in Hong Kong, and lets foreigners buy Chinese A shares listed in
Shanghai in a less restrictive manner than has previously been the case.”
[13] Such policies and the Maritime Silk Road investments will allow Hong Kong
and Singapore to reinforce their status as the main business centers of
Southeast Asia.
António M.C. Vieira da Cruz
Brussels,
the 7th of March 2015
---
Sources:
[1]
http://www.nytimes.com/2013/06/05/opinion/global/xi-jinpings-chinese-dream.html?pagewanted=all&_r=1
[2]
http://www.scmp.com/news/china/article/1657213/road-chinas-past-future
[3]
http://www.reuters.com/article/2014/11/08/us-china-diplomacy-idUSKBN0IS0BQ20141108
[4]
http://www.pwc.com/gx/en/world-2050/assets/pwc-world-in-2050-report-january-2013.pdf
[5]
http://www.scmp.com/news/china/article/1593453/maldives-supports-chinas-plan-maritime-silk-road
[6]
http://thediplomat.com/2014/02/the-maritime-silk-road-vs-the-string-of-pearls/
[7]
http://www.makeinindia.com/
[8]
http://www.maritimesun.com/news/sri-lanka-supports-chinas-initiative-of-a-21st-century-maritime-silk-route
[9]
http://www.the-american-interest.com/2015/01/09/a-snag-in-chinas-string-of-pearls-strategy/
[10]
http://www.marinelink.com/news/zeebrugge-globe-calls386567.aspx
[11]
http://newdirectionfoundation.org/content/how-free-are-european-economies-brussels-march-4th-2015
[12]
http://www.heritage.org/index/
[13]
http://www.goldmansachs.com/our-thinking/trends-in-our-business/stock-connect/
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