IPP REVIEW – Chinese and Japanese investment in ASEAN: from competition to cooperation?

Southeast
Asian countries still face major challenges in market integration
connectivity development. ASEAN has proposed several initiatives in a
try to fill in the gaps in development. ASEAN plans to strengthen connectivity
through the development of a series of rail, road and maritime links not only
offer the possibility of investment contracts, but also the possibility of
regional powers to shape the infrastructure of Southeast Asia in their favor. This
provoked and intensified competition between the two Asian giants of China
and Japan, particularly in the areas of infrastructure financing and
railway construction (TGV)

Japan
started its large-scale investments in Southeast Asia since the late 1970s and had
formulated and invested his vision of infrastructure connectivity across
Southeast Asia in the 1990s The basic idea of ​​the development of interconnectivity in Japan
in South-East Asia is to establish interregional and inter-regional relations
interconnectivity and, particularly with large urban agglomerations as
build economic corridors between the different developing countries of the region,
to promote the industrialization and regional integration of the ASEAN countries.

Japan
considered ASEAN as "a market where Japan can never lose and be behind".
Japan outbid for Indonesia's LGV project between Jakarta and Bandung
September 2015, the Japanese government was prompted to adjust its loan
policies and promised to contribute to the development of "high quality" infrastructure
In the future. In February 2018, Prime Minister Shinzo Abe and his cabinet
described Japan
new aid strategy promising to use Japan's power of assistance
realization of the "Free and Open Indo-Pacific Strategy" announced by
Abe in August 2016 and aimed to improve connectivity through "high quality"
infrastructure and implementation of maritime law enforcement.

China
started cultivating its economic ties with South Asia much later than Japan.
Commitments for infrastructure development in Southeast Asia
the early 2000s when Yunnan Province and Guangxi Zhuang Autonomous Region
Priority inter-regional physical transport connectivity with ASEAN countries
and launched the gateway strategy and economic zone of Pan-Beibu Gulf
respectively. They aimed to strengthen their terrestrial connectivity with the Southeast
Asia by expressways and railways, as well as the construction of
and air connectivity through port, port and airport infrastructure
cooperation.

China
initiatives to strengthen infrastructure connectivity in Southeast Asia
dynamic in 2013 when President Xi Jinping proposed the belt and the road
Initiative (BIS). This initiative has the strategic objective of advancing
practical economic cooperation for the development and strengthening of infrastructure
links with neighboring states based on values ​​and distinctive ideas
from the old silk road.

Beijing & # 39; s
long-term goals for infrastructure construction in Southeast Asia in the context of
of the wider IRB include ambitious plan to build a pan-Asian railroad
Network that will see three 4,500-5,500 km railway lines connecting China and
South East Asia. Central, east and west roads of this planned railway
The network will extend from Kunming through Laos, Thailand, Myanmar, Malaysia and
Singapore.

China-ASEAN
The transport cooperation plan has paved the way for international transport.
Corridor between China and the countries of Southeast Asia. More importantly, the
Sino-Laotian and Sino-Thai railways to form vast railway network
connecting local areas, and it's a salient feature that neither Japan nor
from other countries can match. While Chinese investment in the ten ASEAN countries
is far behind Japan and even the United States it will only increase
IRB implementation in China continues and policy coordination is strengthened
between China and ASEAN.

If we
look at the respective Chinese and Japanese plans to develop rail networks
in Southeast Asia we find that both countries have different and strategic ideas
considerations Japan focuses mainly on the construction of East-West lines, with the intention of
synergy with several east-west economic corridors involved in Japan that
connect Myanmar, Thailand, Laos and Vietnam and aim to help the Japanese
companies develop their activities and optimize production networks
outside the ASEAN region through the infrastructure connectivity

contrast, Beijing's long-term goals for the development of infrastructure in the Southeast
Asia as part of the wider IRB is to build a Pan-Asia North-South
Railway Network, with the intention of creating a synergy with the proposed Kuala
HSR Lumpur-Singapore and improve its access to Southeast Asia and beyond. This
said, investment activities in Sino-Japanese infrastructure in Southeast Asia are
not largely influenced by their geopolitical rivalry. Their respective investment
activities are based on sound considerations of market expansion.

In Japan, the government explicitly located the export of infrastructure systems
(including HSR) as a key to revitalizing its long-stagnant economy and
new sources of economic growth. The infrastructure sector was considered
company that extends from manufacturing to services and was a key element for
get the world market. The Abe government was therefore determined to
strengthen sales of Japanese infrastructure products through
investment.

For
China, its infrastructure projects in the region carry a certain
considerations (mainly through the intermediary of the IRB and the AIIB), but they rely more on
economic interests. One of the main goals of the IRB in China is to reduce
the disparities in China by stimulating the growth of the country's underdeveloped countries
l & # 39; hinterland. It seeks to accelerate the development of the region of the West
by accommodating and synergizing with the development strategies of
neighboring countries, with approaches including the creation of new corridors
international economic cooperation, the establishment of a system of
regional communication route. In this sense, Japan and China have common objectives and
economic interests in Southeast Asia, and this competition is generally good
for global development in Southeast Asia.

The countries of ASEAN, China and Japan are important sources of investment,
important markets and key trading partners. In 2015, Japanese and Chinese FDI
inflows to ASEAN were $ 17.3 billion and $ 8.1 billion respectively,
accounting for 21.3% of total FDI inflows ($ 119.9 billion),
according to the 2016 ASEAN Statistical Database on Foreign Direct Investment. Both
China and Japan were able to mobilize their financial and construction resources
ability to finance infrastructure projects in Southeast Asia. So, in the order
avoid late competition between the two major powers, China and Japan
need to consider a possible harmonization with the policies of the other and to find
approach.

Regional
connectivity is the long-term goal of the ASEAN Community, and ASEAN has its own
own agenda, including the ASEAN Integration Work Plan and the ASEAN Master Plan
Connectivity 2025. It is possible that investments of other powers are not
in accordance with the agenda and initial intentions of ASEAN.

example, as China's investment in some countries increases, it
are in growth
concerns that "the new infrastructural connections – which would link
Nations of Southeast Asia individually to China, rather than connecting China with
ASEAN as a whole – would pose a threat to the connectivity of ASEAN,
the strength of the organization. "In addition, like the Japanese and Chinese HSR
systems use different types of construction it is possible that
networks could be incompatible if various countries in the region choose to
adopt different systems and technologies.

Therefore,
an effective mechanism for coordination and dialogue on the
connectivity between ASEAN, China and Japan is needed. More important again,
multilateral collaboration would foster trust between China and Japan and
improve the effectiveness of their infrastructure development efforts in a broader regional perspective
the narrow purpose of national interests.