Australia should embrace China's 'belt and road' initiative

Out-Law Analysis | 09 Apr 2018 | 9:41 am | 3 min. read

ANALYSIS: Australia's government should embrace the prospect of increased Chinese investment to deliver a much-needed longer term boost to the country's infrastructure.

Through its Silk Road Economic Belt and 21st Century Maritime Silk Road Initiatives, China has set out a strategy to finance and deliver projects along land routes to Europe, across Asia and the Middle East, and across trade routes over the South China Sea, South Pacific Ocean and Indian Ocean.

The particular focus of policy, known more commonly as China's 'belt and road' initiative, is on energy and transport infrastructure projects.

For Australia, the 'belt and road' plans offer a chance to upgrade the country's road, rail and port networks and provide a much needed shot in the arm to the economy on a longer term basis.

By building up a deeper understanding of the 'belt and road' plans, the Australian government would open up significant opportunities for the country's infrastructure, construction and engineering companies to work with Chinese partners on major projects in Australia and across the surrounding region, where there is a huge appetite for new infrastructure.

Australian companies are well-placed to deliver these projects. Australian expertise in the infrastructure life cycle – be it funding, design, construction, or management of infrastructure assets – is world class.

One of the pre-requisites for participation in the 'belt and road' initiative is the establishment of a bilateral agreement with China, by which China and their investment partners spell out specific objectives for working together. Many countries around the world, including New Zealand, have already created MoUs with China to kick-start belt and road investment.

Australia has so far resisted signing its own MoU with China on the initiative. In fact, the government's response to the Chinese strategy has been lukewarm, at best.

While talks have taken place between the two countries on the issue, Australian prime minister Malcolm Turnbull reportedly declined an invitation from Chinese president Xi Jinping to participate in the belt and road initiative last year.

In October 2017, Turnbull said that while his government "obviously welcome Chinese investment that meets our foreign investment guidelines", it would "prefer to focus on specific projects and investments rather than engaging in generalities".

A month later, Turnbull moved to dismiss claims that Australia's hesitancy towards the belt and road initiative was down to wider geopolitical issues centred on China's growing influence over global trade. Paul Keating, chair of the international council for the China Development Bank, had described Australia's policy on China as "barren".

"Nobody is talking about containment. I mean...we have an enormous trade relationship with China," Turnbull said, according to "You know, we have a big trade surplus with China. We could not imagine modern Australia without a million or more Australians of Chinese ancestry. This is a warm, it is a positive, it is a strong relationship."

However, according to The Australian, some within the Australian government have expressed reservations about aspects of the 'belt and road' initiative.

On the topic of the initiative, Frances Adam­son, secretary of Australia's Department of Foreign Affairs and Trade, said: "While we are...supportive in ­principle of more infrastructure in this region and beyond, we are ­concerned about...transparency, about rules, about open contracts and governance arrangements."

If the Australian government could be said to be hesitant about embracing China's 'belt and road' initiative, it could be said to be proactive in its approach to enhancing cooperation with some of China's neighbours on infrastructure initiatives.

Most recently, Australia agreed to set up a new 'infrastructure cooperation initiative' in partnership with the 10-nation ASEAN group, which includes Indonesia, Malaysia, Singapore and Thailand.

According to a report by The Australian, the new initiative provides for Australia to "play a role in the design, feasibility and planning of projects", which would be funded by businesses, "regional institutions like the Asian Development Bank" and from national aid budgets.

Some may view the newly formed ASEAN- Australia infrastructure cooperation initiative as a countermeasure to China's 'belt and road' plans. However, there is room for the two initiatives to collaborate. As the article by The Australian made clear, neither the 'belt and road' initiative nor the ASEAN-Australia infrastructure cooperation initiative can fulfil infrastructure needs across the Asia Pacific region on their own. Both promise to ultimately increase the volume of infrastructure work in the region.

China is by far Australia's largest trading partner – its investment is central to the success of Australia's economy. It is incumbent on the Australian government to find a way forward with Chinese officials to facilitate fresh investment in the country's infrastructure and enhance the economy in doing so.

Of course, it is right that prospective Chinese investment is subject to the same scrutiny that applies to others. There is no question that Australian regulators should waive existing regulatory approval or foreign investment approval processes that might apply. The discussion, however, must move forward to allow Australia's business community to derive the benefit of China's ambitious strategy.

Penny Wong, spokesperson for foreign affairs for Australia's opposition Labor party, was right when she said earlier this year that China's 'belt and road' initiative represents a "fundamental change in the way that strategic business is done". However, now is not the time for the country to be timid in response to that change.

As Wong herself said in an article for The Australian last year, Australia needs to "display much greater confidence in harnessing the opportunities" of China's 'belt and road' initiative.

Victor Lau is a former engineer and an infrastructure expert at Pinsent Masons, the law firm behind