Belt and Road Initiative’s new approach and what it means for Chinese investments in Indonesia

The Jakarta-Bandung high-speed train, the first in Southeast Asia, was funded by China as part of its decade-old Belt and Road Initiative (BRI) project. ANTARA FOTO/Hreeloita Dharma Shanti/sgd/aww Ahmad Syarif, Johns Hopkins University

A shift in China’s international Belt and Road Initiative (BRI) from focusing on massive projects such as roads, railways and ports to “small but beautiful” ones has been announced by President Xi Jinping.

Launched in 2013, the initiative provides loans to build infrastructure in partner countries worldwide, with connectivity as its main focus.

Indonesia is BRI’s biggest recipient in Southeast Asia. The initiative has helped the country finance Southeast Asia’s first high-speed train project and poured billions of dollars of investment into nickel processing, unlocking a critical mineral asset.

As a scholar in political economy and a former government relations consultant working closely with the Indonesian business sector, I’ve been considering what the “small-but-beautiful” approach means for Chinese investment in Indonesia.

What does “small-but-beautiful” BRI mean?

This shift in BRI strategy signifies a focus on projects that are of a smaller scale more efficient and less risky. It is a sensible move for China, considering the global economic slowdown, the country’s moderating domestic economy, and trade tensions with the US.

It is also an attempt to repair China’s global image, amid fears it is seen as a loan shark. Several countries, such as Zambia and Sri Lanka, have already gone into default. China’s reputation will suffer if too many countries fail to pay debts.

Defaults are a liability for the BRI cash flow and the Chinese economy. Beijing should find reliable debtors with solid and promising economic performance. That is precisely what Beijing sees in Jakarta: stable politics, a growing domestic market and pragmatic economic policies.

Chinese state investment in Indonesia

China’s state-driven investment in Indonesia focuses on public infrastructure project run by Indonesian state-owned enterprises and funded by Chinese state-owned lenders. The Jakarta-Bandung high-speed train is an example of China’s investments in Indonesia.

Indonesia received a loan from the China Development Bank for the project and began construction in 2016. The project hit a US$2 billion cost overrun due to problems in its land acquisition and feasibility study.

Due to the ballooning costs, China asked for financial reassurance from the Indonesian government. This prompted the use of the state budget the public having been promised that the project would not touch any government funds.

This might set a precedent for future Chinese investment requiring state collateral – especially given Indonesia’s plan to persuade China to invest in Indonesia’s new capital project in East Kalimantan.

Indonesia has asked China to chip in to the US$35-billion project, which has struggled to secure investment. There has been no formal answer from the Chinese on the request thus far. However, investing in the new capital – which is far bigger and riskier than the high-speed railway project – does not fit the “small-and-beautiful” approach due to its high risks.

China may still opt to invest in the mega-project, but a more modest input seems more likely. And as part of risk sharing, Indonesian government collateral will be likely critical for its willingness to invest.

The Chinese private sector

While Chinese state-owned firms focus on funding public infrastructure projects, its private sector is more profit-oriented. This means that changes in BRI – which now emphasises more on less risky, bankable projects – is unlikely to affect Chinese private investment in Indonesia.

One of the critical projects between the two countries’ private sectors is a joint venture between Tsingshan Holding Group Company Limited, the China-based biggest private investor in nickel processing, and Merdeka Copper and Gold.

Close relationships with domestic tycoons have helped Chinese private sector firms navigate Indonesia’s planning rules and guide the engagement with the country’s domestic politics.

Chinese private companies such as Tsingshan are also backed by their state-owned firms in their Indonesian ventures. The Morowali Industrial Park in Central Sulawesi, Tsingshan’s most prominent project and the largest nickel processing park in Asia, is funded with loans from Chinese state-owned banks. The park’s processing technology contractor is mainly run by a Chinese state-owned subsidiary.

The Chinese state-owned companies find Tshinghan and other Chinese private sector operators successful in navigating their investment in complex and highly political sectors such as natural resources and critical minerals processing due to their strong links with Indonesia’s powerful politicians and business people.

Chipping in via profit-oriented projects run by private companies makes more sense for some Chinese state-owned firms than being directly involved in Indonesia’s public infrastructure projects. The investments driven by Chinese private sectors are relatively more risk-averse and commercially sound.

In the future, we will likely see a continuing trend of Chinese private sectors, supported by their state-owned firms, partnering with domestic business groups to invest in Indonesia’s profitable critical minerals and other sectors.

Ahmad Syarif, Doctor of International Affairs candidate, Johns Hopkins University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Read More........ → December 14, 2023

Ex-UK PM David Cameron to promote SL, Colombo Port City

By Nisthar Cassim: Former UK Prime Minister David Cameron has come forward to promote the Colombo Port City, dubbed as Sri Lanka’s game changer for the future.

Cameron is slated to promote the Colombo Port City at a invitee-only separate top events in Abu Dhabi and Dubai on 26 September.

He will be involved in a conversation on “Now is the time to invest in the Port City Colombo, Sri Lanka.”

The exclusive event will also focus on the role of Sri Lanka in the new Indo-Pacific economy and position Port City as the nexus of trade investment and sustainability.

The event will showcase Port City Colombo as a new city rising from the Indian ocean, as a strategic financial, residential, medical, education, leisure and entertainment hub for South Asia, Indian-Sub Continent, Middle East, East Africa and Southeast Asia.

Prime movers of the event includes Senior Advisor to the President of Sri Lanka Nirj Deva Aditya who is a former UK MEP European Parliament and ex-MP of British Parliament and The Sovereign Wealth Fund Institute Chairman Lakshmi Narayanan and the Port City Economic Commission.

The event is supported by the Commonwealth Union, Khaleej Time Events among others.

The 56 year old Cameron served as Prime Minister of the United Kingdom from 2010 to 2016 and Leader of the Conservative Party from 2005 to 2016. He served as Leader of the Opposition from 2005 to 2010, and was Member of Parliament (MP) for Witney from 2001 to 2016. He identifies as a one-nation conservative, and has been associated with both economically liberal and socially liberal policies.

On its part the CHEC Port City Colombo Ltd., the promoters has been positioning the venture as “Building a world class city for South Asia.

It is a brand new city development built as an extension of the Central Business District of Sri Lanka’s vibrant commercial capital, Colombo. Spanning 269 hectares of reclaimed land from the sea, Port City Colombo will be South Asia’s premiere residential, retail and business destination, offering unmatched planned city living along the warm waters of the Indian Ocean. The development will comprise 5 different precincts including the Financial District, Central Park Living, Island Living, The Marina and the International Island.

When completed, Port City Colombo will have over 5.6 million square meters of built space, boasting the best in design and standards. Its lifestyle and business offerings will include world-class facilities and spaces in Healthcare, Education, Entertainment, Hotels and Restaurants, Retail and Office with an Integrated Resort and a Marina, offering the best in living by the sea. Built on the latest sustainable city designs and smart city concepts, Port City Colombo will be the most livable city in South Asia.

Last month the Colombo Port City Economic Commission achieved a significant milestone in its journey to transform the Colombo Port City into a globally competitive special economic zone (SEZ).

The Parliament approved a comprehensive incentives program proposed by the Commission in consultation with the Minister of Investment Promotion, the guidelines for granting exemptions or incentives to businesses designated as Businesses of Strategic Importance (BSI). This was published by Extraordinary Gazette No. 2343/60, on 4 August 2023.

To offer a competitive value proposition to potential investors, the Commission engaged with top international advisory firms such as PricewaterhouseCoopers, Ernst & Young, KPMG, and Boston Consulting Group for international benchmarking of selected factors. For more details see https://www.ft.lk/front-page/Fresh-Govt-Gazette-further-boosts-Colombo-Port-City/44-752328 Ex-UK PM David Cameron to promote SL, Colombo Port City | Daily FT

Read More........ → September 20, 2023

At G-20, Biden announces ambitious corridor connecting India, Europe

President Biden with PM Modi at Raj Ghat Sept. 10, 2023. PHOTO: X @narendramodi

NEW DELHI – President Biden and several other world leaders announced plans here Saturday afternoon for a new rail and shipping corridor that would connect India and Europe through the Middle East, an ambitious proposal aimed at further connecting a volatile region and countering China’s years-long backing of massive infrastructure projects around the world.

The announcement solidified a preliminary agreement among a range of participants – including the United States, India, Saudi Arabia, Jordan, Israel, the United Arab Emirates and the European Union – and came as leaders of the world’s largest economies tried to work through divisions on a range of thorny issues.

By midafternoon, the leaders here had reached consensus on a 37-page joint declaration on 83 points, several of which referred to Russia’s war in Ukraine. The debate over the war led some to predict that such a statement would prove elusive, particularly given that Russia is a member of the G-20. But they arrived at language that stated that “all states must refrain from the threat or use of force to seek territorial acquisition,” and also stated that “the use or threat of use of nuclear weapons is inadmissible.” The language was not as pointed as it was during last year’s conference and did not explicitly name Russia as the aggressor in the war.

The leaders did highlight the “suffering and negative added impacts of the war in Ukraine” on a range of issues, including global food supply and energy security. But in the dry language of diplomacy, the statement added, “There were different views and assessments of the situation.”

In a Facebook post, Ukraine’s Foreign Ministry spokesman Oleg Nikolenko said the G-20 has “nothing to be proud of” on the language over Russian aggression in Ukraine, and he offered his own edits of how the portions regarding Ukraine should have been written.

The declaration in another section also formalized that the United States would host the G-20 in 2026, overcoming some late opposition from China.

“This is a significant milestone for India’s chairmanship and vote of confidence that the G-20 can come together to address a pressing range of issues and also to deal with hard issues that actually very much [divided] some members from others – including, obviously, Russia’s brutal war against Ukraine,” Jake Sullivan, the national security adviser, said shortly after the deal was reached.

“I have got good news. From our team’s hard work, we have reached an agreement on the G-20 declaration,” Prime Minister Narendra Modi, the summit’s host, said in Hindi, prompting a long round of applause from the G-20 leaders.

Biden came to the conference determined to try to showcase that the G-20 can maintain its relevance even after Chinese President Xi Jinping and Russian President Vladimir Putin sent deputies instead of attending themselves, amid tensions over the war in Ukraine.

Asked whether Xi’s absence affected the summit, Biden said, “It would be nice to have him here but, no, the summit is going well.”

Shortly after the declaration was announced, Biden joined other leaders to announce the rail corridor.

“This is a big deal,” he said. “This is a real big deal.”

The cost of the project was unclear, but senior Biden administration officials view it as a way to link key areas of the world, India to Europe, opening up new trading partnerships and a flow of energy and digital information. Also significant is having Israel working with a historical adversary such as Saudi Arabia; Biden is separately hoping to broker a deal to normalize relations between the two countries.

Deputy national security adviser Jon Finer noted the significance of reaching an agreement in an area that “has, obviously often been a net exporter of turbulence and insecurity.”

“Linking these two regions, we think, is a huge opportunity, building on our broader efforts over the last couple of years to turn the temperature down across the region,” Finer said.

Officials in the countries involved are expected within 60 days to come up with a timeline for the projects – linking energy grids, laying undersea and overland cables, and providing more digital connections. Some of the tasks involve installing hydrogen pipelines from Israel to Europe, which administration officials hope will advance clean energy goals.

The summit took place against the backdrop of a city that largely has been shut down amid tight security, with police officers standing at nearly every intersection and shops and restaurants closed.

Most of the conference meetings were closed to the news media, but Biden entered the opening session planning to outline his opposition to Russia’s invasion of Ukraine.

American officials unsuccessfully lobbied to have Ukrainian President Volodymyr Zelensky address the conference, something he did in person during a Group of Seven gathering in Hiroshima, Japan, and which he did virtually during last year’s G-20 in Bali.

“Our view is that it is fundamentally a good thing when President Zelensky is able to make his case and Ukraine’s case for, you know, how damaging this conflict has been to his people and to his country,” Finer said. “He is the most effective messenger for that. And it’s certainly in a format in which, you know, Russian representatives will be able to give their views about the conflict that is appropriate for Ukraine to be able to offer its perspective.”

Biden arrived at the summit on Saturday morning, walking down a long corridor to greet Modi. “How are you?” he asked as he approached, appearing to jog up a slight incline before the two leaders shook and held hands while examining a G-20 logo that had the motto, “One Earth. One Family. One Future.”

They later met in a large room with three rows of desks in an oval, a chandelier hanging above them and small flags denoting where each country’s leader was to sit.

During the first session, Biden was between British Prime Minister Rishi Sunak and Indonesian President Joko Widodo. Before Biden sat down, several others greeted him, among them leaders from Australia, the Netherlands, Germany and Nigeria.

“This period in the 21st century is a time to give the entire world a new direction. It is a time when age-old problems are demanding new solutions from us,” Modi said in an address to the global leaders as he sat behind a nameplate reading not India but Bharat – the Hindi name for the country – signaling a branding shift that has been the source of controversy for many in the nation.

The negotiations over a joint communiqué had been difficult, especially around language regarding the Ukraine war.

While it did note the harm of the war and the importance of territorial sovereignty, it did not name Russia as the perpetrator and was less direct in some of the language than was agreed to last year during the G-20 in Bali. At that meeting, while noting there were some disagreements, it referred to a U.N. resolution that “deplores in the strongest terms the aggression by the Russian Federation against Ukraine and demands its complete and unconditional withdrawal from the territory of Ukraine.”

When asked about the change in text over the course of a year, Indian Foreign Minister S. Jaishankar said that some conditions have changed in the war.

“Bali was Bali and New Delhi was New Delhi,” he said. “Bali was a year ago and the situation was different. Many things have happened since then.”

He went on to add, “One should not have a theological view of this. New Delhi declaration is responding to the situation of today just as the Bali declaration did to the situation a year ago.”

The language also was the result of a lengthy negotiation. India’s chief G-20 coordinator, Amitabh Kant, said that Brazil, South Africa and Indonesia were helpful in reaching consensus.

“It was a tough, ruthless negotiation that went on for several days nonstop,” he said.

Indian officials expressed frustration that the war has overshadowed other issues, such as successfully negotiating the African Union’s acceptance into the G-20. For the first time, a representative of the African Union joined the gathering, with the chairman of the 55-member bloc, Comoros President Azali Assoumani, being introduced by Modi.“For all our moral idealism in foreign policy, we accept things as they are and find a way around it,” said India expert Aparna Pande of the Hudson Institute. “At the end of the day, you work with what you got.”At G-20, Biden announces ambitious corridor connecting India, Europe

Read More........ → September 11, 2023