Thailand
Thailand: Belt & Road must be a two-way street
Connecting China’s renewed outbound investment focus with Southeast Asia’s infrastructure needs should be a priority for Thailand if it is to achieve greater economic resilience over the medium term.
At their recent summit in Bangkok, Asean government leaders noted the importance of foreign investment in infrastructure, technology and industrial productivity in order to maintain the region’s economic growth and trade trajectory amid global economic uncertainty.
Weaker global growth and a cyclical downturn in sectors that matter to Asean, including electronics, commodities and textiles, threaten to curb Southeast Asia’s export growth, regardless of trade tensions.
According to HSBC research, the keys to maintaining economic growth over the short to medium term in Asean will be continued investment — either domestically or from foreign sources — or domestic consumption.
Thailand faces further downside risks to growth, and much depends on the policies of the new government and whether it can revive local investment, in particular the country’s infrastructure.
It’s clear Asean and China are natural economic partners. On the one hand, Asean needs to dramatically improve its infrastructure and industrial capacity to move up the value chain.
At the same time, China is increasing its outbound investment, especially in lower-cost manufacturing, and strengthening its international trade links through the Belt and Road Initiative (BRI). Beijing has made clear its commitment to ensuring that BRI projects meet international standards and attract global corporate and financial participants. This new phase of the BRI should be positive for China and its partners in Asean.
THE CASE FOR BRI 2.0
China addressed concerns arising from some earlier phases of BRI projects at the Belt & Road Forum in Beijing in late April. Thirty-six national leaders, including nearly all those from Asean countries, attended the event. Chinese officials used the forum to address concerns about excessive debt and opaque structures for BRI projects, as well as perceptions that the BRI is closed to non-Chinese participants. The joint communique emphasised “high-quality Belt and Road cooperation” based on “extensive consultation, joint efforts, shared and mutual benefits”.
The forum demonstrated China’s commitment to ensuring the BRI evolves into a more inclusive, sustainable and market-driven initiative.
Southeast Asia has vast infrastructure needs. The Asian Development Bank estimates US$1.5 trillion a year is needed across developing Asia to 2030. The requirements are urgent given the region’s increasingly strong credentials as a manufacturing and consumer base and an established openness to strategic partnerships.
With China having long been Asean’s biggest trading partner, it is no surprise Southeast Asia was a major focus for the first phase of the BRI. But the combination of BRI 2.0 and the region’s distinctive characteristics mean that the new phase could have a more profound and lasting impact on Asean.
There is more to come. Fitch Solutions estimates there are $255 billion worth of pending projects (those at the stages of planning, feasibility study, tender or currently under construction) across the six largest Asean economies of Singapore, Malaysia, Thailand, Vietnam, the Philippines and Indonesia.
In places like Thailand, these projects will be game-changers for driving economic benefits.
Moreover, the Asean Secretariat last month announced 19 priority infrastructure projects crucial for building economic connectivity and deemed financially viable for private investment. These projects, with financing options and pre-feasibility studies, will be officially launched in November at the Asean Leaders’ Summit in Bangkok.
Among them are Thailand’s Hat Yai-Sadao Motorway, connecting the Malaysian border in Songkhla province, and the Bangkok-Nong Khai high-speed rail development, which is now under construction and scheduled to be completed by 2023.
It is expected that China will be a significant partner in these projects.
Elsewhere, construction of Thailand’s high-speed rail line has begun as part of a rule running from China through Laos to Singapore via Thailand and Malaysia.
SOUTHEAST ASIA’S PITCH
However, the BRI extends around the world and Southeast Asia also needs to make the case for being a viable investment partner for Chinese projects. The key to this is jump-starting the stalled regional integration programme started by Asean more than a decade ago, particularly when it comes to removing non-tariff barriers.
Areas of specific focus can include automating customs clearance across all Asean member states, expedited clearances for low-value shipments, electronic payments for cross-border duties and taxes, and harmonising of goods standards across sectors among Asean members to avoid country-specific standards.
A recent IMF paper estimated removing non-tariff trade barriers in Asia would increase intra-regional imports by 76%. Southeast Asia will not be immune to any global slowdown, so it needs to ensure it is setting up the necessary infrastructure to ensure resilience.
Kelvin Tan is the Chief Executive Officer of HSBC Thailand
Source: https://www.bangkokpost.com/business/1719203/belt-road-must-be-a-two-way-street