Belt and Road opportunities cannot be ignored

While the federal government has been cool on China’s Belt and Road Initiative, the opportunities presented by the Beijing-driven infrastructure push — estimated by some analysts to be worth $1.2 trillion — have been debated in two different forums in Australia in the past week.

Last week saw the Australia China Business Council-sponsored conference on BRI in Darwin, attended by officials from China as well as Northern Territory Chief Minister Michael Gunner and China’s Ambassador to Australia, Cheng Jingye. The enthusiasm of the NT government for the conference confirmed that some state governments, particularly Victoria, Western Australia and Northern Territory, were still actively welcoming Chinese investment at a time when Canberra was cooling on the idea.

Yesterday, the Australia China Relations Institute at Sydney’s UTS held its own seminar on the implications of BRI, sponsored by global services firm Deloitte.

Australia has been cool on President Xi Jinping’s grand One Belt, One Road initiative — now more frequently described as the Belt and Road Initiative, or BRI — partly due to a belief that the strategy to more closely connect China with Europe, Asia and Africa has little real relevance for Australia.

Other concerns are over the lack of clarity of what is as much aspiration as a specific program, concern over how much it could be seen as an exercise in Chinese economic imperialism, the potential governance issues around BRI infrastructure projects and whether the projects are being too enthusiastically pushed on recipient countries that don’t have the money to pay for them. There is also a concern that BRI projects could be great for Chinese companies, particularly state-owned companies, but not so beneficial for local companies and local workers in the countries receiving the investment and risk leaving the recipient countries saddled with high debt.

The Chinese-developed Hambantota Port in Sri Lanka — which was opposed by locals who protested against the loss of land and fears that it could be used as a Chinese military base as well as concerns over the debt incurred for the project — has become the ­errant poster child for those concerned about the downside risk of BRI.

But BRI, now enshrined in the Chinese constitution, is resulting in significant new infrastructure and regional investment that Australia cannot ignore.

At a time when China is reining in what it sees as speculative offshore investment by its companies — particularly private sector companies — Xi has made it clear he sees investments in projects sponsored under the One Belt, One Road initiative as one of the most important venues for Chinese companies offshore.

Improving infrastructure in infrastructure-poor Asia is a good idea, but it comes at a time of increasing political and trade tensions between China and the US, in a world where Australia is struggling to work out its role in the region, particularly its political ties with its largest trading partner and the world’s second-largest economy. Some observers argue that BRI is merely a new official flag that is being waved over Chinese-sponsored infrastructure investments in Asia and Africa, which were happening or would have happened anyway.

One of the themes of yesterday’s Sydney conference was the need for Australia to move from its position of semi-detached observation of BRI, and begin to take the process more seriously — or at least develop a more coherent policy on how it might engage with the concept.

In a paper provided at the conference, Deloitte outlines its suggestions on “how firms can best position themselves to seize the ever-widening range of BRI investment opportunities”.

It also points out that while the initial BRI projects have involved infrastructure and energy, they are expanding to focus on a wider range of areas including trade, manufacturing and tourism, which could provide more opportunities for outside companies.

While the Australian government may not have signed up to support the BRI, this doesn’t stop individual Australian companies from seeking business opportunities from the projects, particularly those in Asia.

An important argument put yesterday was that Australia should use the Beijing-based Asian Infrastructure Investment Bank (AIIB) as its way of engaging with the process. After some initial hesitation, Australia was a founding member of the bank when it was formed in 2015.

In a paper prepared for the conference, Perth-based Jeffrey Wilson, head of research at the Perth USAsia Centre, said Australia should use the AIIB as its way to participate in China’s regional infrastructure initiatives.

He said the AIIB is a properly set-up global development bank with more than 60 members that has the advantages of more Western-style governance procedures with a much leaner, more focused way of operating than the World Bank or Asian Development Bank — and one with a clear focus on infrastructure.

Wilson argues that Australia has a vested interest in becoming a more active player in the AIIB because of its economic interdependence with Asia and its own skills at project management and project financing.

For political and economic reasons, Australia began to take a cooler view of the Pacific Island countries some years ago. The cooling on the Pacific meant that some in the island nations were glad to receive Chinese funding for their infrastructure projects.

The message from the two BRI conferences was the importance of Australia continuing to engage with what is going on in Asia, with China being by far its largest ­player. Wilson’s suggestion about seizing the opportunities, which could come from Australia becoming more engaged with the AIIB, is a constructive one and a way to have a seat at the table on its own terms.