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Belt and Road Initiative
This Week in AsiaEconomics
Kaho Yu

Opinion | How will Covid-19 and the coup affect China’s belt and road investments in Myanmar and Southeast Asia?

  • The initiative is likely to remain a cornerstone of Beijing’s foreign and economic policies, with energy and infrastructure investments a key priority
  • However, Myanmar demonstrates that potential environmental, social and governance risks associated with megaprojects could be a long-term concern

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The development of the Kyaukphyu Special Economic Zone in Myanmar is part of Beijing’s wider plan to expand its footprint in Southeast Asia. Photo: Xinhua
Kaho Yu
Since its launch in 2013, China’s Belt and Road Initiative has stirred intense international debate over its political-economic impacts and a wide range of associated risks. Chinese spending on the initiative has slowed since 2018, and lockdowns during the Covid-19 pandemic have further worsened the already significant delays in belt and road infrastructure projects, amid geopolitical tensions.
Regardless of its eventual scale, the plan is likely to remain a cornerstone of China’s foreign and economic policies, with an increased strategic focus on Southeast Asia. Post-Covid-19 economic pressures and the demand for infrastructure investment will drive member states of the Association of Southeast Asian Nations (Asean) to work more closely with China. The question here is whether the parties involved can work together to achieve a win-win result.

Growing infrastructure and investment gap

Infrastructure investment is crucial to the economic growth and development of Asean member states. According to the Asian Development Bank (ADB), US$3 trillion of climate-adjusted investments will be needed from 2016 to 2030 to maintain the current development momentum in Southeast Asia. Although these investment needs vary by sector, energy is the largest, accounting for 56 per cent of the total projected investment need, followed by transport’s 32 per cent.

However, it is difficult for existing financial institutions, including the World Bank and the ADB, to fill this funding gap. ADB data indicates that there is an annual investment need of US$210 billion, but infrastructure spending in the region was only US$55 billion in 2018. This gap is set to increase due to the ripple effect of Covid-19 on Southeast Asian economies.

03:04

Myanmar protesters fight military’s internet shutdown with underground newsletter

Myanmar protesters fight military’s internet shutdown with underground newsletter

In general, to meet their growth objectives, Asean member states will have to attract more infrastructure investment, especially in their energy sectors. However, according to the Brookings Institute, traditional Western investments in Southeast Asia are either not keeping up with the region’s needs or are turning away from infrastructure. Although the barriers to investment in Southeast Asian infrastructure are the result of many factors, the most prominent ones are environmental, social and governance (ESG) risks.

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