China’s megaproject promises fall short of reality in Southeast Asia

More than US$50 billion in infrastructure funding promised by China to Southeast Asian countries has gone unfulfilled, reveals a new interactive feature from the Lowy Institute.

The Data Snapshot, Mind the gap: Ambition versus delivery in China’s BRI megaprojects in Southeast Asia, examines project funding promises by China — under its ambitious Belt and Road initiative (BRI) — against projects that have been delivered from 2015 onwards.

Lowy Institute scholars Alexandre Dayant and Grace Stanhope identified a significant gap between China’s promises and its implementation, between what Beijing commits to and what it delivers. This difference amounts to US$50 billion in unfulfilled project financing, with more than half allocated to projects that have been cancelled, downsized, or otherwise seem unlikely to proceed.

Political instability, poor engagement with local stakeholders, and a declining appetite to build fossil fuel-powered energy infrastructure have hampered many projects.

“There is much uncertainty about the future of the BRI,” write Dayant and Stanhope.

“Debt crises in many borrowing countries and deteriorating economic conditions in China itself have fuelled predictions that the BRI will languish.”

But they argue it would be premature to write off the BRI.

“There is clear intent at the highest levels in China to maintain a BRI that is long-lasting and responsive to changing circumstances.

“The BRI seems likely to continue to play a significant role in infrastructure development in the region alongside more targeted efforts under Beijing’s new Global Development Initiative.

“Even if [the next largest development financier] Japan were to implement all its current commitments while China maintained its existing pace of delivery, Japan would still fall short of catching up with China’s infrastructure disbursements in Southeast Asia,” they conclude.

KEY FINDINGS

• China has become Southeast Asia’s largest infrastructure financing partner. Yet there is an enormous gap between what Beijing promises and what it has delivered, amounting to more than $50 billion in unfulfilled project financing with more than half of this reflecting projects that have been cancelled, downsized, or otherwise seem unlikely to proceed.
• The reasons for this gap include China’s almost exclusive focus on financing ambitious megaprojects especially prone to problems and delays but also political instability in partner countries, weak stakeholder consultation, and increasingly stranded fossil fuel projects.
• China is, however, learning from experience, shifting away from megaprojects towards smaller programs and lifting its focus on risk management, project preparation, financial due diligence, and higher environmental and social standards.

The Data Snapshot Mind the gap: Ambition versus delivery in China’s BRI megaprojects in Southeast Asia is available to read and download at the Lowy Institute website.

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