The Belt and Road Initiative (BRI) is Chinese General Secretary Xi Jinping’s signature foreign policy project to expand the People’s Republic of China’s investment and trade ties in order to create “a big family of harmonious coexistence.” Hailed as the “project of the century,” its success is hard to ignore: between 2013 and 2018, total trade volume between China and other BRI countries amounted to over $6 trillion, over 30% of the global gross domestic product (GDP). By 2019, over 150 organizations and countries had signed agreements with China, covering over 60% of the world’s population.
An integral component of the BRI is Southeast Asia. China has invested $166 billion into the region, second only to that invested in Sub-Saharan Africa. But commentators have noted rising dissatisfaction with the BRI among Association of Southeast Asian Nations (ASEAN) members. From Indonesia to Malaysia to Thailand, government officials have complained about China’s use of “debt-trap” diplomacy and predatory lending. While analyses of this dissatisfaction have typically focused on the geopolitical concerns, local conditions and unique cultural-historical dynamics specific to each country are also incredibly important.
Malaysia: Local Politics and Global Affairs
Under the premiership of Najib Razak (2009-2018), Malaysia was widely regarded as China’s strongest BRI partner, with bilateral trade volume amounting to over $70 billion in 2017. China, for its part, sought the partnership for geopolitical reasons: increasing connectivity with Malaysia would provide China with more control over the Strait of Malacca and unmitigated access to the South China Sea.
By August 2018, however, a dramatic shift began: Najib’s successor, Mahathir Mohamad, decided to cancel three BRI projects, among them the East Coast Rail Link (ECRL). Few were surprised, given that prior to his announcement, allegations of corruption and misappropriation of funds plagued the three projects. Just one month earlier, the newly elected Malaysian government suspended the projects after its Anti-Corruption Commission (MACC) found that contract values for these projects had been inflated, and over $700 million had been diverted to pay off debts related to 1MDB, a state development fund.
Mahathir partly cancelled the project due to the poor fiscal health of the Malaysian economy and the unfavorable terms and conditions of BRI contracts. But he also linked it to the corruption of the Najib administration. Throughout the 2018 parliamentary election, Mahathir and his opposition coalition frequently painted the Najib administration as “selling off Malaysia’s ‘sovereignty’ to China,” capitalizing on the electorate’s distrust of the Najib administration and China itself. After the election, Mahathir blamed the massive debt accumulated through BRI projects on the previous government: “[Cancelling the projects] is not about the Chinese, it is about the Malaysian government. . . . [It] is Malaysians playing around with money, not even doing proper feasibility studies and due diligence before going into business.” Seeking to distinguish himself from his predecessor and appeal to the disgruntled populace, Mahathir has been more comfortable rebuffing China’s trade and investment propositions.
On April 15, 2019, the Malaysian government announced that it would resume construction of the ECRL after having renegotiated a reduction in the project’s costs (from $19.9 billion to $10.7 billion). Meanwhile, Najib was sentenced to 12 years in prison over 25 money laundering and corruption charges linked to the 1MDB scandal. It is clear that local politics have complicated, and will continue to complicate, the future of the BRI in Malaysia.
Ethnic Tensions in Indonesia and the Future of Sino-Indonesian Relations
Unlike Mahathir, Indonesian President Joko Widodo has actively pursued stable ties with China, hoping that a partnership could turn the country into a major maritime power. Indeed, as recently as April 2019, Indonesian Minister of Maritime Affairs Luhut Pandjaitan signed 23 memoranda of understanding with China, guaranteeing a total investment of $14.2 billion. Yet, historical and demographic circumstances could disrupt Sino-Indonesian trade relations: tensions between Javanese and Chinese-Indonesians and recent criticisms directed at the BRI could adversely affect the initiative’s future.
Today, there are around three million Chinese-Indonesians residing in Indonesia. Most are small-business owners, but a majority of Indonesia’s richest tycoons are ethnically Chinese. Anti-Chinese sentiment and pogroms have a long history in Indonesia. In 1998, riots triggered by food shortages and mass unemployment evolved into widespread violence against ethnic Chinese. Such sentiments have been encouraged by Indonesian political figures, from the late military dictator Suharto to political opponents of Widodo (who allege that Widodo had a Chinese grandfather) and of ex-Jakarta Governor Basuki Purnama.
This anti-Chinese prejudice could exacerbate criticisms against BRI projects in Indonesia and impede further Chinese investment. Beyond the belief among the Indonesian public that China is engaging in “debt-trap diplomacy,” many criticize the China-led projects for only benefitting the migrant workers brought in from China. In the past five years, there has been a surge in the number of Chinese guest workers residing in Indonesia (from 17,515 people in 2015 to just over 30,000 in 2018), while unemployment has remained relatively high at around 5%. This surge in Chinese migrant workers has coincided with a large drop in the Indonesian public’s view of China: according to a 2018 Pew Research Center report, 53% of Indonesians viewed China in a positive light, down from 66% in 2014.
In 2017, ex-Jakarta Governor Basuki Purnama, the second governor of Jakarta of Chinese descent, lost his reelection bid and was handed a two-year prison sentence for “blasphemy”—essentially for making a statement on the Qur’an that angered Indonesian Muslims. Many Chinese business groups in Indonesia subsequently expressed worries about the “uglier mood” and the loss of a “business-friendly leader of Jakarta” capable of executing Widodo’s infrastructure reform agenda. Trent Huang, a Chinese businessman, noted that while “Chinese companies feel welcomed in North Sulawesi, where the majority of the population is Christian, pork is freely available and there is a sizeable ethnic Chinese community . . . investors looking elsewhere in Indonesia are worried.” Rumors of Indonesia being “invaded by millions of Chinese workers” and Chinese plots aiming to “poison the food supply” run rampant, affecting a variety of Chinese businesses in Indonesia.
Chinese investment in Indonesia seems to be heading towards an uncertain path. Certainly, Widodo’s electoral victory in April 2019 could be seen as a sign of “tacit endorsement” by the Indonesian public of strengthening ties with China and increasing BRI investment. At least Widodo saw it as such, as he quickly moved to ask Xi for a “special fund” under the BRI framework during the 2019 G-20 summit in Japan. But whether this relationship will remain stable depends on how the Chinese and Indonesian governments react to ethnic relations embedded in Indonesian politics and society. Widodo’s opponent in the 2019 election, Prabowo Subianto, spoke to a large segment of the Indonesian public when he hammered Widodo on his acquiescence to China. The sentiment Prabowo capitalized on likely will not go away any time soon.
Resistance in the Philippines: The Power of Indigenous Groups and Civil Society
Philippine President Rodrigo Duterte has actively sought closer ties with China and courted Chinese investments throughout his presidency. Duterte’s ambitions of implementing his own “Build, Build, Build” infrastructure program would benefit from BRI investment. The Chinese have been very receptive, pledging $24 million in investments in November 2018. The Duterte administration is planning on completing a total of 75 major projects before 2022, of which 19 will be funded by China.
As with Malaysia and Indonesia, local politics have acted as an obstacle for several BRI projects. The Kaliwa Dam Project, a $211 million project to build a 60-meter concrete dam and a 25-kilometer conveyance tunnel at the boundary of the Rizal and Quezon provinces, is facing serious opposition from nongovernmental organizations, indigenous communities currently residing within the proposed dam site (particularly the Dumagats and Remontados), and even government officials.
In theory, Filipino law allows these groups to convey their concerns to the Filipino government and even halt these projects indefinitely. In practice, however, the Filipino government has used deceitful and coercive means to get indigenous communities to sign “free, informed, and prior consent” (FICP) approvals and cede their land, for example, under the guise of “registering attendance at a food distribution program.” Other communities have been fractured by cash incentives offered by the government. On May 2, 2016, village elder Alan Buenodicio died from a heart attack after allegedly being forced by military personnel to drink whisky every morning for refusing to cede his community’s claim to the land. While it remains to be seen whether FICP approvals can be secured from the indigenous communities to halt the Kaliwa Dam Project, the government’s use of intimidation tactics and Duterte’s authoritarian tendencies make this more likely. In the meantime, similar BRI projects operate in limbo.
The Chico River Pump Irrigation Project, a $88 million project financed by a $62 million loan from the China Export-Import Bank, is facing similar domestic criticisms. Lawyer and former Congressman Neri Colmenares accused the project of being “onerous” and “one-sided” in China’s favor and for “pitting the Philippines’ natural resources as a ‘collateral’ in this transaction” with China. While Antonio Carpio, a retired Supreme Court Senior Associate and frequent critic of the Duterte administration, warned that China could seize natural gas deposits in the Recto Bank of the West Philippines Sea if the Philippines is unable to pay back their loans.
And the Sangley Point International Airport project, a $10.2 billion plan to expand a local airport and push out a military base, recently faced pushback from the Philippine Navy, when Vice Admiral Giovanni Carlo Bacordo, the Navy’s flag officer in command, criticized the involvement of the China Communications Construction Co, a company recently banned by the United States for its alleged role in the illegal construction of artificial islands within the Philippines’ exclusive economic zone. He told media outlets, “We want to remain [at Sangley Point] so to ensure that there are no security violations.”
Looking to Local Politics?
Local political issues have played a large role in the success or failure of the BRI in Southeast Asia—and are becoming key drivers of Sino-ASEAN relations more broadly. The examples in Malaysia, Indonesia, and Philippines show that countries are much more than just national government officials and elites.
China has clearly taken notice. In light of the pushback from numerous Southeast Asian countries, China has taken steps to improve the BRI. At the Second Belt and Road Forum in April 2019, Chinese officials attempted to “repair the BRI’s brand.” Xi, in a conciliatory speech that departed from his speech at the first forum in 2017, addressed four key pillars of concern: transparency, finance, environmental impacts, and inclusivity.
Xi showed his commitment to enhancing the transparency of BRI projects and curbing corruption by introducing the “Beijing Initiative for Clean Silk Road,” which calls on companies and governments to make information more readily available and strengthen supervision of BRI projects through stronger legal systems. On the finance front, he committed to creating a debt sustainability framework to “build a long-term, stable, sustainable financing system that is well-placed to manage risks . . . [since] debt sustainability needs to be taken into account when mobilizing funds to finance the BRI cooperation for sustainable and inclusive growth.” He committed to making the BRI “open, green and clean” and convinced a number of countries to adopt the “Green Investment Principles” (GIP). Shortly after the forum, Chinese companies tapped to build major railways in the Philippines pledged to hire up to 1,000 Filipino workers for basic construction work—a budding sign of China’s commitment to inclusivity.
However, now, a year later, China seems to have promised much more than it is able—and willing—to achieve. As a November 2019 report from the Chinese Academy of Social Sciences showed, Chinese companies on the whole “failed to meet [transparency] standards,” generally only disclosing information in annual reports and rarely responding to specific requests of information from the public. Moreover, BRI memoranda of understanding have yet to be made publicly available. Corruption abroad is proving hard to tackle, as many countries lack the regulatory capacity to cooperate and assist. The debt sustainability framework remains a “non-mandatory policy tool”; it only encourages BRI countries to conduct debt sustainability analysis. And the GIP is similarly full of broad and nonbinding statements.
In short, efforts to improve the BRI have been hampered by China’s reliance on voluntary guidance and initiatives and continued refusal to consult with local communities. It is no wonder that citizens across Southeast Asia still generally disapprove of Chinese investment.
As the United States continues to build geopolitical and economic alliances in Southeast Asia, it must consider domestic factors, such as partisan conflict, legal and environmental issues relevant to the implementation of large-scale projects, and the perception of its goals among the wider population beyond the political and economic elite. As it embarks on the development projects of the “Better Utilization of Investments Leading to Development Act” (BUILD Act), it must never forget to emphasize the building of “public accountability and transparency” and work closely with local communities and constituencies in Southeast Asia—not just government agencies and federal officials. Most crucially, this requires understanding the complexities of domestic politics within each country.
The views expressed in this article are those of the authors alone and do not necessarily reflect the position of the Foreign Policy Research Institute, a non-partisan organization that seeks to publish well-argued, policy-oriented articles on American foreign policy and national security priorities.