Logo of Phnom Penh Post newspaper Phnom Penh Post - Global supply chains to be re-routed to Asean region

Global supply chains to be re-routed to Asean region

Content image - Phnom Penh Post
An artist’s rendering of the $1.9 billion Cambodian Phnom Penh-Sihanoukville expressway. MINISTRY OF PUBLIC WORKS AND TRANSPORT

Global supply chains to be re-routed to Asean region

Chinese investment in the region’s manufacturing sector will intensify in the upcoming decade as China uses its Belt and Road Initiative (BRI) to re-orientate the global supply chain towards Asean in response to its trade battle with the US, a geopolitical expert predicts.

“The Asean region will soon become a new base for China’s manufacturing hub as China seeks to reorient the Asia Pacific’s supply chain,” said Arm Tungnirun, a lecturer at Chulalongkorn Unversity’s faculty of law and author of the book China 5.0.

Arm spoke on Tuesday at an event titled Where China’s Belt and Road Initiative meets Indo-Pacific, which was organised by the Office of Academic Resources and the Asean Studies Centre of Chulalongkorn University.

As the US-China trade conflict drags on, he said, its most significant impact has been the realignment of the global supply chain towards the Asean region.

This is particularly so for foreign companies based in China and Chinese companies looking to invest abroad.

The BRI has so far focused on infrastructure construction in developing countries throughout the world. This creates a fruitful business environment for Chinese firms that are looking to invest abroad, Arm said during an interview at the event.

With Chinese firms being hurt by the US tariffs and sanctions, the next phase of the BRI will be focused on realigning the manufacturing supply chain from China towards the Asean region, Arm said.

From 2013 to last year, $737 billion of BRI-related capital flowed into the Asean region, according to research by the CIMB Asean Research Institute (CARI) titled China’s Belt and Road Initiative and Southeast Asia.

Of these Asean countries, Indonesia gained the largest BRI-related capital flows at $171 billion, followed by Vietnam with $152 billion, Cambodia $104 billion, Malaysia $98 billion and Singapore $70 billion. Behind them are Laos with $47 billion, Brunei $35 billion, Myanmar $27 billion, Thailand $24 billion and the Philippines $9 billion.

The key BRI-related projects in the region include phase one of the Bangkok-Nakhon Ratchasima railway, which was initiated in 2017 with an expected completion in 2021. The project is worth up to 179 billion baht.

Other projects include the Vientiane-Boten railway linking Laos with China at a cost of $5.8 billion, the $1.9 billion Cambodian Phnom Penh-Sihanoukville expressway, and the Morowali industrial park in Indonesia valued at $1.6 billion, according to the research.

The pace of the BRI projects and investment into the Asean region will accelerate even more due to the trade war, presenting the region with an unprecedented opportunity for economic growth, Arm claimed.

The Asean Development Bank (ADB) estimates that the total infrastructure investment needs in Asean from 2016 to 2030 will be between $2.8 trillion (the baseline estimate) and $3.1 trillion (a climate-adjusted estimate).

However, concerns were voiced by observers at the seminar about the risks of the BRI becoming a debt trap for developing countries.

The 414km Laos railway project linking Vientiane to Boten (on the Chinese border), for instance, has exacerbated Laos’ already precarious debt levels, which reached 68 per cent of its gross domestic product in 2016.

To optimise the benefits of the BRI and supply chain realignment in the region as well as minimise the debt risk of these Chinese-backed projects, Arm advised Asean governments to establish a common position on the BRI and cooperate as a region to assess the risks of the different BRI projects on a case-by-case basis. THE NATION (THAILAND)/ASIA NEWS NETWORK

MOST VIEWED

  • Omicron patients can stay home: PM

    Prime Minister Hun Sen has given the green light for anyone who contracts the SARS-CoV-2 Omicron mutation or any other variant to convalesce or receive treatment at home or in any other reasonable non-healthcare setting. The new decision supersedes a restriction on home care for

  • The effects of the USD interest rate hike on Cambodian economy

    Experts weigh in on the effect of a potential interest rate expansion by the US Federal Reserve on a highly dollarised Cambodia Anticipation of the US Federal Reserve’s interest rate hike in March is putting developing economies on edge, a recent blog post by

  • Cambodia’s first ever anime festival kicks off Jan 22 at capital’s F3 centre

    Phnom Penh's first ever Anime Festival will bring together fans, artists, shops and other local businesses with ties to the Japanese animation style for cosplay competitions, online games, pop-up shops and more on January 22, with Friends Futures Factory (F3) hosting. F3 is a project that

  • PM eyes Myanmar peace troika

    Prime Minister Hun Sen has suggested that ASEAN member states establish a tripartite committee or diplomatic troika consisting of representatives from Cambodia, Brunei and Indonesia that would be tasked with mediating a ceasefire in Myanmar. The premier also requested that Nippon Foundation chairman Yohei Sasakawa

  • Demining rat ‘hero’ Magawa dead at 8

    A landmine-hunting rat that was awarded a gold medal for heroism for clearing ordnance from the Cambodian countryside has died, his charity said on January 11. Magawa, a giant African pouched rat originally from Tanzania, helped clear mines from about 225,000sqm of land – the equivalent of 42

  • Hun Sen gets 4th Covid shot, urges compatriots to follow

    Prime Minister Hun Sen and his wife Bun Rany on January 14 received their fourth dose of Covid-19 vaccine and called on compatriots to follow suit as the Omicron coronavirus variant continues to spread in the community. This marks the launch of Cambodia's fourth-dose vaccination campaign,