Logistics
OBOR COULD BRING OBLIGATIONS TO MEKONG
July 13, 2016

Details of how China’s ambitious One Belt, One Road programme could impact the countries of the Greater Mekong Subregion (GMS) – Thailand, Myanmar, Vietnam, Laos, Cambodia and parts of southern China –  emerged at the Euromoney Greater Mekong Investment Forum in Bangkok in late May.

 

OBOR, which is Beijing’s plan for an infrastructure belt to link it better with Europe, and a maritime road to connect it better with Africa and South America, is not usually seen as having much impact in Southeast Asia. One country, though, looks set to reset that – and possibly catalyze a broader regional wide change.

 

“For Cambodia, we see we can gate more investors, especially from China. We can develop more infrastructure; there are other benefits and projects,” Tekreth Kamrang, Cambodia’s Secretary of State, told the conference. Kamrang used as an example the building of a new seaport at Sihanoukville alongside the development of coastal special economic zones there.

 

“We need strong and efficient infrastructure,” Tekreth stressed, adding later that this includes power.

 

Improving infrastructure has two main implications for Cambodia. Firstly, it would allow Cambodia to start exporting more, and to diversify its exports. Secondly, by showing that money is available for a country as poor as Cambodia, it would allow other countries with similar economies to help get the funds they need for their infrastructure projects.

 

Self Photos / Files - Money istockWhat has long held development back in Asia, including Southeast Asia, is not so much a lack of ideas or issues such as land rights, but the lack of hard cash – large amounts of it, in some parts of the region.

 

“The investment needs are huge,” said Kamalkant Agarwal, first executive vice president and head of international banking business at Siam Commercial Bank.

 

One way of measuring just how huge those needs are floated up during a later session of the conference, when the investment needs of Myanmar were mentioned. In order to have reasonable, not state-of-the-art, infrastructure by 2030, Myanmar needs more than US$20 billion in infrastructure spending, according to Peter Brimble, principal country specialist for Myanmar at the Asian Development Bank.

 

“That’s going to be a massive challenge,” he said.

 

While Thailand is a country with a higher average income than many of its neighbours, it still has to plan and consider carefully how to ask other, usually richer, countries for money for large-scale infrastructure such as high-speed rail. This puts it one up on fellow GMS members Myanmar, Laos, Cambodia and Vietnam, all of which are relatively poor.

 

OBOR is shaping up to be one possible answer to all of this as it comes with a financing vehicle. “It’s quite a substantial amount, [which] should help the GMS,” Manop Sangiambut, executive vice president and head of the international banking business at Siam Commercial Bank said.

 

There was some feeling at the conference that OBOR and the Chinese money it brings, while not without problems, lessens the challenge, in the words of one speaker, of how to finance the necessary infrastructure.

 

OBOR does, however, bring with it a debate about how to access and utilize the funds involved – and some of it is a bit thorny.

 

One of the prompts for OBOR is China’s wish to export excess capacity, which has economic consequences to be thought of in terms of the possible impact on domestic industries.

 

The other one is the tendency for such projects to create political debts. Some of the precedents are not good, such as where China has created projects and insisted on the use of its own labour.

 

“The key challenge is how to benefit,” said one conference attendee. “How do you set up [these projects] so both sides benefit?”

 

What is also emerging to complicate this part of the debate is the idea that infrastructure is more than roads, bridges, railways, airports and ports – traditional transport hardware – but also power, and the the means to communicate, and at speed.

 

Power will be a particular problem in Myanmar, where some two-thirds of the population don’t have access to electricity, but Myanmar’s telecommunications problem has been tackled as the 40 million SIM cards already at work in the country prove.

 

“In addition, sufficient digital infrastructure should be put in place, as it will considerably strengthen other modes of connectivity,” Veerathai Santiprabhob, governor of the Bank of Thailand, said in the conference’s keynote address.

 

Internet and mobile connectivity will, he went on to say, radically change the ways businesses operate and interact, but will boost productivity and efficiency. It will facilitate financial, transport and logistics services, and allow people across the region to share information. That’s all for the good, but the unevenness of it is already been noted as a problem.

 

“While digital technology is rapidly improving in some GMS countries, there remains a large digital divide both within and between countries that should be narrowed,” Santiprabhob added, without outlining any solutions or where the money might come from to tackle the divide.

 

 

By Michael Mackey

Southeast Asia Correspondent | Bangkok

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