ASEAN and the Belt and Road Policy Initiative: Prospects and Challenges

ASEAN and the Belt and Road Policy Initiative: Prospects and Challenges

by Antoinette R. Raquiza/ 01 March 2016 / APPFI.PH

For many who study China, the land-based Silk Road Economic Belt and 21st Century Maritime Silk Road, which could more effectively extend China’s economic and geopolitical presence halfway around the globe, seem a natural progression of the country’s rise on the global stage.

In order to advance to a higher level of development, this economic juggernaut, with its population of 1.3 billion, requires ever-increasing access to resources and markets. And, if history is our guide, China is in a better place than those who came before it and had climbed to the top of the global economy in record time. Up until the first half of the 20th century, rising global powers had to contend with closed and segmented markets.  In contrast, China’s rise since the 1990s has largely been a product and comes during a period of open markets and free trade. Regardless of how one views the relationship between states and markets, globalization and economic integration today are the name of the game. Even among developing countries that jealously guard their sovereignty, state intervention has in fact meant readying the domestic economy for global competition. What this means is that China’s path parallels those of others in the developing world that are globalizing and seeking ways to gain from the greater flow of goods, services, ideas, and capital.

In this light, for many developing countries, including those in Southeast Asia, China’s rise has been a welcomed development. Since the late 1980s, China has worked to improve relations with ASEAN member-states.  China-ASEAN relations, which officially began in the 1990s, have culminated in a number of treaties, most notably the ASEAN-China Free Trade Area (ACFTA) in 2010. China today is ASEAN’s biggest trading partner; total trade between China and ASEAN reached US$350 billion in 2014 alone. ASEAN economies have also benefited from the flow of investments from mainland China. The raft of bilateral and multilateral agreements toward greater liberalization and the ASEAN member-states’ membership in the China-led Asian Infrastructure Investment Bank (AIIB) attest to the countries’ common economic interests.

Philippines-China economic relations have also been robust, albeit to a lesser degree than other Southeast Asian emerging economies. According to Philippine government data, in 2014, China was second only to Japan as the Philippines’s largest trading partner, with the total trade between the two countries amounting to US$18.337 billion. Of this amount, Philippine export receipts from China totaled US$8.467 billion while payments for imports reached US$9.870 billion. Chinese investments in the Philippines, however, have been minimal: in 2014, Chinese investments, registered with incentives-providing agencies (IPAs), totaled only about US$243.34 (at current prices).

It is noteworthy, however, that the flow of Chinese investments in the Philippines has dramatically shifted over the last five years, from the energy sector to manufacturing.  IPA-approved investments from China in the energy sector peaked in 2011, making up 90 percent of the total investments for that year. On the other hand, investments in manufacturing had increased annually since 2010, amounting to US$215.34 or 88% of total investments in 2014.  This trend parallels the Philippine government’s effort to revitalize its manufacturing sector, rolling out 29 industry roadmaps that it drew up with the domestic private sector. Besides manufacturing, the 2014-2016 Philippine Investment Priorities Plan has identified agro-industry, information-technology- business process management, tourism, logistics, and construction as strategic sectors. Definitely, there is much room for the economic relations between the two countries to grow, and the Philippines’s participation as founding member in the AIIB signals the national government’s intention to explore new areas of cooperation with China, regardless of the territorial dispute between them. Read more…

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