The future of ASEAN-China engagement and the impact on energy investments
Against the backdrop of a slowing Chinese economy and evolving political relationships between China and Southeast Asian countries, panellists at the ASEAN-China Energy Security and Connectivity roundtable at SIEW 2016 explored how China’s One Belt One Road (OBOR) initiative could contribute to future developments in - and increase engagement with – Southeast Asia...
By Lionel Choo
Against the backdrop of a slowing Chinese economy and evolving political relationships between China and Southeast Asian countries, panellists at the ASEAN-China Energy Security and Connectivity roundtable at SIEW 2016 explored how China’s One Belt One Road (OBOR) initiative could contribute to future developments in - and increase engagement with – Southeast Asia.
Over the years, China has shifted from being the world’s largest factory, importing energy and raw materials to feed commercial and industrial production, to becoming the largest consumer market in the world. Factories are moving from China to countries such as Vietnam and Bangladesh. This is causing industrial production in China to slow down.
“The unchanging is changing”, said Dr Liu Qiang, Secretary-General of the Global Forum on Energy Security. However, China continues to maintain an interest and willingness to explore investments overseas. There lie the opportunities for Southeast Asia.
The region’s economic growth is projected at 4-6 per cent and its energy demand is expected to double in the next 25 years. As a result, these countries will need to invest heavily to modernise energy systems and increase access to energy at an affordable price.
“The IEA estimates that over the next 25 years, countries in Southeast Asia will need US$2.8 trillion in investments in energy. That is $100 billion a year,” said Dr Philip Andrews-Speed, Senior Principal Fellow at the Energy Studies Institute (ESI), National University of Singapore.
Dr Kaho Yu from the Harvard University Kennedy School identified four aspects of possible collaboration between China and Southeast Asian countries – infrastructure construction, industry integration, financing, and multilateral governance.
Nevertheless, there remain challenges on both sides. While Chinese financing instruments such as the Asian Infrastructure Investment Bank offer relatively attractive terms compared to western development banks, there is limited financial capacity. The current regulatory framework and governance structure in Southeast Asian countries are not helpful either, making it difficult for investors to get projects going.
Wrapping up the roundtable discussion, Dr Liu said that while the Chinese government and companies were willing to invest, Southeast Asian countries and local leaders were equally responsible to pave the way for these investments. What was clear was there needs to be an alignment of expectations on both sides to maximise mutual benefits.