OBOR

The One Belt, One Road (OBOR) is a strategy that has impacted the least developed nations in Africa and West Asia, as well as ASEAN nations – particularly Cambodia, Indonesia, Laos, Malaysia and Vietnam. In 2013, President Xi Jinping of China visited Kazakhstan and Indonesia where he formally announced the “Silk Road Economic Belt” and the “21st Century Maritime Silk Road” initiatives.

This marked the beginning of the “OBOR” or “Belt and Road” policy. The OBOR initiative impacts directly 4.4 billion people with a collective GDP of US $2 trillion once completed (BDO) amongst countries along the “Belt” and “Road” routes (BDO).

The Belt and Road concepts designed by China are based on the Silk Road routes. “Silk Road” reflects the Silk Road that was once upon a time, the world’s oldest trade route. Its route evokes images of caravans wading through desert sand and smell of exotic spices, and to this day the Silk Road continues to fascinate travellers. The name ‘Silk Road’ is given to a number of ancient trade routes linking China and Central Asia.

“Belt’ depicts the line in the shape of a belt, covering the land-based Silk Road Economic Belt- it starts from Xi’an, China and linking up with the rest of Central Asia, Europe, the Middle East and Russia. Today, there are several ongoing projects of OBOR in Malaysia, Pakistan and other countries under the policy, proving that OBOR is becoming vital for China in promoting economic cooperation amongst countries along the “Belt” and “Road” routes.

The route that complements Silk Road Economic Belt is the 21st Century Maritime Silk Road Economic Belt. This route focuses on using sea routes and Chinese coastal ports to link China with Europe via the South China Sea and the Indian Ocean, and the South Pacific Ocean through the South China Sea.

As a coastal state of the Strait of Malacca, Malaysia is one of the ASEAN states that serves as an opportunity for cooperation and also geographically a good connecting port for broader infrastructure plans, including a high-speed railway running from Kunming, China down to Laos and Thailand and on to Malaysia and Singapore. Whilst OBOR is relatively a new form of economic cooperation between Malaysia and China, there has already been a series of projects linked to the initiative. These include the launch of the world’s first-ever 21st Century Maritime Silk Road bond, a commercial alliance between Chinese and Malaysian ports, and the development of rail infrastructure.

Among the well-known OBOR-related project is the China-Pakistan Economic Corridor (CPEC), worth approximately US$62billion. CPEC is a framework of regional connectivity that enhanced geographical linkages through road, rail and air transportation system-its framework stretches from Gwadar Port in Pakistan to Prefecture Kashgar, Xinjang in China. The CPEC official website describes CPEC as an enhancer of “frequent and free exchanges of growth and people to people contact”. In fact, CPEC boosts “understanding through academic, cultural and regional knowledge and culture, activity of higher volume of flow of trade and businesses, producing and moving energy to have more optimal businesses.” The CPEC will make an impact not only for China and Pakistan, but also Iran, Afghanistan, India, Central Asian Republic, and the region.

As between China and Malaysia, a Chinese-funded project for the year is the RM55billion East Coast Rail Link (ECRL) in Malaysia, designed with the spirit of aiding the economy of Malaysia. Other ASEAN-related projects include the China-Laos Railway, Jakarta–Bandung High Speed Rail as well as one high-speed rail project in Thailand.

The China-Malaysia trading relationship

On 31 May 1974, the late Tun Abdul Razak Hussein, Malaysia’s second Prime Minister and father of current Prime Minister Datuk Sri Najib Tun Razak, and Premier Zhou (Chou), the bilateral relations began when both parties signed the communiqué on the establishment of diplomatic relationship between Malaysia and China. Malaysia became the first member country of ASEAN to enter into agreement with China.

Today China is Malaysia’s largest trading partner. In fact, the ASEAN-China Free Trade Agreement signed in 2002 was the first free trade agreement (FTA) for the ASEAN region and Malaysia’s first FTA. Since then, Malaysia and China have built closer economic relations through various initiatives, whether bilaterally or regionally, through ASEAN, or through Asia-Pacific Economic Cooperation (APEC) and the World Trade Organization (WTO).

In 2012, China has established the Qinzhou (Ching chou) Industrial Park (QIP) and subsequently the Malaysia-China Kuantan Industrial Park (MCKIP) in the following year. That was the first time a twin park model is introduced anywhere in the world, serving complementary roles with the same principles. The Chinese Central Government has approved a RMB 2.4billion development fund for QIP, over and above the RMB 1billion pledged by the Government of Guangxi, where QIP is located. The Malaysian Federal and State Government have allocated RM 700million to MCKIP.

In October 2013, both China and Malaysia signed the Five Year Programme for Economic and Trade Cooperation. This is a broad agreement that provides for bilateral cooperation in agriculture, energy and mineral resources; information and telecommunications; manufacturing, infrastructure, and engineering; tourism, logistics and retailing. This forms the basis of our economic and trade cooperation with China for the next five years and provides the foundation of bilateral economic relations for decades to come. This Five Year Programme reflected a commitment between the two governments to enhance trade and investment environment, business and investment opportunities, including in the area of sustainable development. This programme is a “rolling plan”, an early harvest of low hanging fruits- those that have been identified for immediate implementation, as well as those which require more time for execution.

Clearly Malaysia and China are not mere trading partners. Strategic comprehensive partnership has been launched over a series of meeting between both Prime Minister Najib and President Xi to elevate the status of the long-term relationships between both nations. Despite the friction caused by the South China Sea issue, Malaysia continues to view a strong economic relationship with China, its top trading partner. Malaysia perceives that China will assist Malaysia in realizing the goal of becoming a high-income country by 2020. OBOR has become an important part of bilateral ties over the past few years, with Malaysia not only playing a role in the initiative but also promoting it through a series of meetings and conferences.

As much as OBOR is not a legally binding agreement, it has its own unique way in contributing to ASEAN integration. Whether the benefit is reaped at the expense of disintegrating ASEAN as a trade bloc is certainly a long-term concern for the ASEAN leaders to scrutinise.

OBOR and the Rise of China

The global order shifted when China outdone Japan as the world’s largest economy in 2010. China is expected to overtake the US, although India at the same time is in the same race towards becoming the fastest growing large economy. In a recent conference on One Belt One Road by the Malaysia-China Chamber of Commerce (MCCC), Datuk M. Supperamaniam, Distinguished Fellow of Institute for Strategic and International Studies, Malaysia, highlighted that one of the objectives of OBOR is for China to offset its overcapacity of steel production. In addition, Xinjiang is also created as a manufacturing base for OBOR due to its strategic location-proximity to cotton and textile producing countries. But more importantly, Xinjiang as a base allows reduction of arising ethnic disparities within the Western Chinese province itself.

The creation of OBOR is also a strategy to support China’s domestic economy by boosting trade and creating new business opportunities for Chinese corporations. Local Chinese firms will be able to fulfil the demand of the new connectivity through many overseas engineering projects-roads railway, ports and pipelines. The improved transport links is beneficial to many Chinese exporters. Indirect but in an obvious way, China’s effort in aiding its neighbours’ development will create new international market.

OBOR or Free Trade Agreements for ASEAN?

Professor Ba at the East Asia Forum 2016 stated that the Trans-Pacific Partnership Agreement (TPPA) which may not be precipitating after the withdrawal of the US, involved nearly twice the population of the EU Common Market and almost 40 per cent of the world’s economy, but OBOR will connect more than 60 emerging foreign markets and a population of over four billion. The amount is approximately US$21 trillion. Though linked to APEC, TPPA is an agreement comprising twelve different nations of North and South America, Northeast and Southeast Asia, and Oceania. It has been the Washington’s general position that regional cooperation should proceed not from a commitment to a pre-set idea of the region, but from a set of common functional interests. The TPPA was founded by participating states of a common agenda. Within the concept of international trade, the TPPA is plurilateral in nature rather than it is regional.

Apparently, ASEAN has been the focus of both Washington and Beijing as the connective link between land and sea, as well as between the Pacific and Indian Oceans. As a trading bloc, ASEAN signify a huge, united and symbolic Asian audience for the initiatives made by both super powers. ASEAN is in need of developmental assistance and OBOR seemed to be the ideal option as it is Chinese-funded through China’ s policy banks of China Development Bank and China Exim Bank.

In attempting to place participating states in a common economic and developmental framework, both the TPPA and OBOR are often perceived as regionalising efforts. In reality, Professor Ba emphasized that “neither truly adheres to the conventional usage or current practices of regionalism”.

The TPPA and OBOR relate to cooperative frameworks, but both established the connection in different ways. The TPPA connects countries of different economies around common rules and common regulatory approaches. OBOR connects diverse parts through national development. OBOR does not pursue connectivity using standardised economic rules and market liberalisation, but instead through new infrastructure, trade and investment facilitation zones and targeted development projects.

Both TPPA and OBOR have the potential to reorder Asia in ways that make ASEAN and its concerns less central. Without emphasis in special and differential treatment to developing countries in ASEAN, the TPPA has sidestepped ASEAN’s interest in bridging developmental gaps. As for OBOR, China has been entering into various bilateral dealings that now allowing structural advantage to China to set the terms in OBOR.

Prior to OBOR infrastructure projects, the Asian Regional Comprehensive Economic Partnership (RCEP) agreement that has been under negotiations among ASEAN plus 6 (Australia, New Zealand, China, Japan, Korea and India) is said to be the way to ASEAN centrality. This is perhaps due to Guiding Principles found under the RCEP that allow special and differential treatment for countries such as Laos and Cambodia before graduating into the developing country status. Upon the US withdrawal from the TPPA, focus has shifted to RCEP and OBOR. But be it OBOR or RCEP, ASEAN does have an influential role to play in strengthening its own regional integration, security and economic interests.

OBOR for ASEAN?

The World Bank regarded OBOR as a stimulant for both Asian and global economic growth. Countries along the corridor-particularly those with undeveloped infrastructure, low investment rates, and low per-capita income-will potentially experience a boost in trade flows and benefit from development of infrastructure.

The Maritime Silk Road begins in Quanzhou in Fujian Province, passes Guangzhou (Guangdong province), Beihai (Guangxi), and Haikou (Hainan) before extending to south to the Malacca Strait. From Kuala Lumpur, the Maritime Silk Road heads north around Africa and moves through the Red Sea into the Mediterranean, with a stop in Athens before the line meets the land-based Silk Road in Venice. Clearly ASEAN is part of the Belt and Road, and OBOR funding has been accepted to create infrastructure project here in Malaysia.

All along, ASEAN itself has had a patchwork of bilateral and regional free trade agreements (FTAs). The trend to enter into FTAs started when the World Trade Organization (WTO) has failed to progress with fruitful rounds of liberalisation between Member Countries. Multilateral trading system through the WTO has ground to a halt. In Asia, the range or network of FTAs is known by the term “noodle bowl”, which reflects the complex web of agreements that are not sustainable. Failure of the FTAs is due to complexity and costs to navigate them.

Perhaps it is timely for the emergence of OBOR, which brings greater and a better-paced development for ASEAN as a trading bloc, in comparison with the arguably unworkable FTAs?

Indeed OBOR brings benefits to ASEAN, subject to implementations of few guidelines.

Firstly, while Belt and Road is Chinese initiative to upgrade itself to become a middle-income country, one must bear in mind that ASEAN region is also to implement our Sustainable Development Goals (SDGs). To change the geopolitical landscape is China’s task as one of the leading superpowers of the world, but let’s not forget that ASEAN is ASEAN; ASEAN is our priority and until SDGs are implemented in more forceful forms, OBOR projects should not disintegrate ASEAN as an economic region. To wipe out small-medium enterprises (SMEs) within Malaysia for example, is not a positive change. While many claim that Malaysia may be reluctant to push forward, it is unbecoming to allow OBOR to eliminate the SMEs growth. In the same, recent One Belt One Road Conference organised by the Malaysia-China Chamber Of Commerce (MCCC), Kuala Lumpur, Dr Zhang of Universiti Malaya asserted that without progressive economy, infrastructure projects could not play a significant role.

Secondly, let us also not forget that OBOR is not a legally binding agreement- it is a form of initiative that a country can choose to sign for a certain project. There is no legally binding terms and conditions between China and OBOR participating countries. Instead, OBOR is a pledge made by China to promote infrastructure investment and economic development that links China to the rest of Asia and onward to Europe. Malaysia for instance, ought to refine its national policies to maximise its benefits from the Malaysia-China relations. Malaysia has to be selective in choosing developmental projects based on underlining national policies.

Thirdly, at least arbitration system or “dispute settlement mechanism” between the two countries needs harmonization. This was highlighted in an exclusive envoy to China, Ong Ka Ting, chairman of the Malaysia-China Business Council (MCBC) represented Malaysian Prime Minister Najib Razak. Ong Ka Ting suggested during a meeting in Beijing, that Malaysia and China could collaborate in facilitating dispute settlement between countries along OBOR, including through arbitration. Ong stated that the two countries could cooperate through the Kuala Lumpur Regional Center for Arbitration (KLRCA) and the China International Economic and Trade Arbitration Commission (CIETAC). Harmonizing arbitration law among countries along OBOR will ensure a transparent, certain, uniform and consistent way of the enforcement of awards, thereby enhancing legal protections for investments and projects.

Fourthly, the goals and objectives of OBOR must linger around the concept of inclusivity. ASEAN has a sustainable development goal (SDG) namely “No Poverty” set as the first goal under the SDG plan. On 27 April recently, the Prosperity for All Summit Speakers in Manila was held, where panellists included were Malaysian Prime Minister Najib Razak, Thailand Prime Minister Prayut Chan-o-cha, Vice President Leni Robredo and former president Gloria Macapagal-Arroyo.

According to council chairman of the Summit, Joey Concepcion, the main target of this Summit was to convince developed countries to help out struggling nations, and for large corporations to help micro, small and medium enterprises.

“ASEAN is inclusive. It is to benefit not only the large corporations out there, not only to benefit the more successful countries among the 10 but it is to benefit all nations among the 10 and every Filipino and every nationality in the 10 countries,” he said. The follow-up to the summit will be held on September 6 through the ASEAN Business Awards, an event that awards businesses that help small entrepreneurs.

Can ASEAN thrive without OBOR?

The aims of ASEAN Economic Community (AEC) ratified in 2015 could be realized if ASEAN member states were genuinely united in striving for the common good. Delays in delivering AEC prior to 2015 indicated that AEC was one of the most unnerving trials faced by ASEAN. We are unable or unwilling to see ourselves as a true single market. This is manifested in one instance whereby Indonesia refrained from ratifying the ASEAN Multilateral Agreement for Full Liberalization of Air Freight Services (MAFLAFS), in protecting its domestic aviation industry from regional competitors, such as Singapore, Malaysia and Thailand. Undeniably, without the participation of Indonesia, the “single aviation market” of ASEAN exists in name only, for there is no “open sky” above ASEAN territory. Narrower national interests outdo the broader regional vision, while short-term mind-set offsets long-term benefits.

ASEAN does have a number of serious deficiencies, and has been criticised because of its reputation for endless discussions and its refusal to address difficult differences. The ‘ASEAN Way’ refers to a methodology or approach to solving issues that respects the cultural norms of Southeast Asia. Masilamani and Peterson summarise it as: “a working process or style that is informal and personal.

Policymakers constantly utilize compromise, consensus, and consultation in the informal decision-making process… it above all prioritizes a consensus-based, non-conflictual way of addressing problems. Quiet diplomacy allows ASEAN leaders to communicate without bringing the discussions into the public view. Members avoid embarrassment that may lead to further conflict. It has been said that the merits of the ASEAN Way might “be usefully applied to global conflict management”.

Nevertheless, the ASEAN way is not applicable when addressing major conflicts and setting our trade policies. Whether it will be RCEP or OBOR or any free trade agreement with future superpowers, ASEAN has to wake up and realize the importance of harmonization of ASEAN rules and sustainability within the region. And ASEAN has to wake up now.

Dr Amalina Ahmad Tajudin is a Malaysian Access reader. With a firm belief in freedom of writings, Malaysian Access tries its best to share suitable content from our readers. Articles written is strictly the writer’s personal opinion and it does not represent the views of Malaysian Access.

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