What does China’s new maritime silk road mean for Asean?

OCTOBER is a month of significance for the Chinese diplomacy. While US President Barack Obama's cancellation of his Southeast Asian trip has diverted the media attention to the rising superpower's diplomatic manoeuvres in the region, the Chinese overtures in Indonesia and Malaysia on the days before the commencement of the Asia-Pacific Economic Cooperation (Apec) summit, is another raison détre for China's high visibility among local and international media, so to speak.

During his visits to Indonesia and Malaysia, the Chinese delegation, headed by President Xi Jinping, pledged to foster comprehensive strategic partnerships with both countries and inked a wide array of important agreements with the two Asean member states. Apart from agreeing on five-year trade plans with Jakarta and Kuala Lumpur, the high-level visits saw Chinese corporate players signing several memoranda of understanding (MOUs) with local companies for collaborations in the areas such as industrial parks, currency swaps, aviation, and tourism.

What surprised observers, however, was his proposal of re-building of the so-called "new maritime silk road" in Southeast Asia.

In his speech delivered in the Indonesian parliament on Oct 3, the Chinese president made no reservation in echoing the Chinese plan to turn the centuries-old maritime passageways (the Straits of Malacca and the South China Sea) into one that would spur maritime connectivity in the 21st century.

In order to support his proposal, Xi reiterated the Chinese government's readiness to fund Asean's maritime-related projects through its new state investment arm, the China-Asean Maritime Cooperation Fund. While such an announcement was not new, it seemed China is now taking a much more proactive approach in this matter.

While this is a positive development, there is still a lack of information on the fund itself. First, unlike the investment bank idea that has a clear focus in assisting Asean countries in the area of capacity-building (infrastructure provision), the maritime cooperation fund could be utilised for different capacity-building projects. From the limited information revealed by the Chinese side, it seemed Beijing is planning to invest in not just maritime infrastructure such as ports, ocean satellite and fishery technology, marine products manufacturing equipment, but also trying to establish capacity-building collaboration programmes in the security field, with maritime enforcement and disaster prevention being the two areas identified thus far.

While the fund is expected to derive monetary returns for the projects involved, the inclusion of security-related programmes would pose the critical questions: How are we going to quantify the turnover from these programmes which in the first place, are not industry-driven but rather government-oriented? How would China define or justify its financial returns for these programmes? These are the questions that Beijing has to clarify to Asean countries.

Second, there is inadequate information on the government agencies handling the fund, the management profile of the maritime cooperation fund and the investment returns involved. While it is highly likely that the fund has yet to begin its operations, it would be helpful for the Chinese government to provide the latest updates on the fund's developments to all Asean countries. This in turn, would ensure all relevant government and private stakeholders in Asean member states acquired the most recent news regarding the maritime fund.

Finally, there is a lack of a one-stop centre for which all the required information and advisory services regarding this fund could be disseminated to both public and private sectors. In this case, a good example is demonstrated by Anbound Malaysia.

Being the strategic partner for China's older private equity fund, the China-Asean Investment Cooperation Fund (CAF), Anbound Malaysia is providing reading materials and advisory services to the Malaysian government and private players to utilise the fund for the country's national development and business projects.

A similar model could be developed by Beijing in order to facilitate business pairing and negotiation initiatives between Asean and China's interested parties.

Henceforth, the Chinese president's "new maritime silk road" vision, if implemented successfully, is bound to facilitate maritime connectivity within Asean as well as between the regional bloc and China. For Asean countries, this would be a great opportunity to expedite the Asean Economic Community (AEC) by 2015.

Karl Lee is an analyst at the KL office of Anbound Research, the largest independent think tank in China. Any feedback can be directed to lcleong@anbound.com.