Belt and Road pledges by China in South-East Asia coming up short according to Lowy Institute analysis

“This gap amounts to more than $US50 billion ($77 billion) in unfulfilled project financing with more than half allocated to projects that have been cancelled, downsized, or otherwise seem unlikely to proceed.”

Among those in doubt are coal-fired power stations in Vietnam after investors Mitsubishi and HSBC withdrew their funding because of corporate climate change goals. The Vietnamese government had also emphasised renewables and gas in its energy plan, while Xi himself pledged to stop building coal-fired plants outside China.

Cambodia’s Phnom Penh airport had more than $US1 billion in financing from the China Development Bank but it has been delayed, in large part because of land disputes arising from insufficient consultation.

The Lowy Institute report cited Malaysia’s East Coast Rail Link, originally slated to cost $US12 billion, as one of the most expensive examples of a Belt and Road debacle.

First announced in 2016, the project was soon caught up in a domestic corruption scandal and suspended in 2018.

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The following year, then prime minister Mahathir Mohamad renegotiated the deal at the reduced cost, only for one of his short-lived successors to revert to the original plan.

“Current Prime Minister Anwar Ibrahim will continue the project, albeit with a substantial haircut,” the report said. “It was reported in 2022 to be costing the Malaysian government about $US16 billion.”

The Thailand-China High-Speed Railway Project fell into disarray because of homegrown political turmoil. Projects in war-ravaged Myanmar were still considered likely but faced obvious ongoing challenges.

While Beijing has cited the COVID-19 pandemic as seriously affecting the delivery of Belt and Road projects, Lowy crunched the numbers and found this was only a partial explanation.

“Other factors appear to have been far more instrumental in China’s low project implementation rate in South-East Asia,” the authors said. “These factors include the nature and scale of the projects, political instability, local stakeholder engagement, and the global energy transition.”

The analysis revealed Japan, South Korea and the Asian Development Bank, which were also building $US1 billion-plus projects in South-East Asia, had been more successful at meeting their promises with money.

But the dollar-value footprint of these investors was small compared to China’s.

“Even if Japan [the next biggest contributor] were to implement all its current commitments while China maintained its existing pace of delivery, Japan would still fall short of catching up with China’s infrastructure disbursements,” the report said.

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“The conservative assumption of a 35 per cent implementation rate for Chinese projects clearly suggests that even in a scenario where the external environment for Chinese projects does not improve, Beijing would remain the largest provider of infrastructure development in South-East Asia by a wide margin.

“Hence, the narrative suggesting a failure of the [Belt and Road] seems misplaced. A change of economic environment in China, however, means that the initiative is evolving to a more sustainable source of financing.”

Political instability and corruption, real or perceived, is a factor in the Australian private sector’s relatively low levels of investment in South-East Asia, which the Albanese government was hoping to turn around with a recently released and region-specific economic strategy.