When Singapore assumes the chairmanship of ASEAN in 2018, its priority for the regional bloc will be to advance cooperation, innovation, and inclusive growth.
This presents a golden opportunity for ASEAN and China to cooperate and push forward the One-Belt-One-Road (OBOR) initiative in the region; stimulating governments, multilateral organisations and the private sector to join forces to cultivate international cooperation and shared economic advancement.
OBOR connects businesses and people around the world at reduced costs. This is a natural desire of economies craving a better tomorrow, particularly for an increasingly integrated Asia. Intra-regional trade in Asia has surged in recent years to levels comparable with the Eurozone economies. Furthermore, high-level cross-border investments reflect the integration of complementary production capabilities and resources to serve both traditional Western consumers and surging Asian consumption.
According to the Asian Development Bank (ADB), Asia accounts for 60 per cent of the world’s growth. To sustain this, we must identify and capture cross-country synergies and stimulate innovation. Achieving this requires economic openness and good physical infrastructure which strengthens connectivity.
OBOR’s benefits are clear. In the long run, it promises a rosy outlook: affordable connectivity that will lead to economic cooperation and innovation. In the short run, infrastructure investment will immediately stimulate global growth.
The intriguing consideration is that, in the intermediate term, OBOR’s promise of an attractive economic outlook inspires improvements in government behaviour and capital markets. The gist of this logic is that OBOR’s obvious rosy outlook combined with severe resource constraints will induce disciplined economic behaviour.
Infrastructure investment is costly. A recent report by McKinsey estimated that US$57 trillion in infrastructure investment is required between now and 2030 to simply keep pace with global GDP growth. For economic infrastructure alone, the report said, Asia will require US$8 trillion.
Attracting private investors requires bankable projects: developments that will reliably deliver private sector investors their principle and promised returns
There are many other similarly startling numbers. No governments can meet these capital needs, not even China.
Clearly, the private sector must play a role, but attracting private investors requires bankable projects: developments that will reliably deliver private sector investors their principle and promised returns.
This means governments will have to behave, prioritising the selection of infrastructure opportunities and ensuring good governance. Additionally, to live within tight capital constraints, governments have to learn to be economical in implementation, raising productivity and driving innovations in developing infrastructure.
OBOR projects by design require meaningful government cooperation. Governments will oblige if there is a win-win situation.
This inter-government cooperation is a particularly fascinating possibility. ASEAN countries can certainly benefit from good infrastructure investment – not just in roads, transportation and ports, but also utilities such as water and electricity.
This is a good opportunity for ASEAN and China to cooperate using complementary capabilities. Singapore, for example, can offer capabilities in project management, airport engineering, and water management, while China has experience and expertise in railroad engineering.
Such cooperation can form the basis for long lasting friendship between ASEAN, China, and other Asian countries.
Multilateral organisations such as the World Bank, Asian Infrastructure Investment Bank and Asian Development Bank also have great roles to play, cultivating information sharing, monitoring project implementation, and enforcing government promises to alleviate fears they may renege on their commitments. These organisations can guide the development of standard documentation for investment prospects, which will enhance investment instruments’ tradability.
Further, bankability depends on liquidity. The need for capital may stimulate development in capital markets, including advancing appropriately governed and standardised securitisation contracts.
There could be obstacles – projects could run into shortages of construction materials, for example, while engineering and project management capabilities may be lacking. But these can be overcome.
The greatest obstacle to the attainment of the OBOR vision is countries’ self-centredness and short-term orientation. It takes leadership to do the right thing: not to compete for short-term glory, political results and not to let national ego distort long-term rationality.
The OBOR vision is for the long term – harmonious cooperation and shared development for the world.
In a world threatened by nationalism, nativism, and self-serving statesmanship, this is an opportunity for Singapore, ASEAN, China, and other Asian countries, with long-term vision and courage to show leadership.