China's high-speed track to diplomacy in South-east Asia: The Jakarta Post columnist

Rush hour traffic next to a construction site for a light railway in Jakarta, Indonesia, Feb 11, 2016.
Rush hour traffic next to a construction site for a light railway in Jakarta, Indonesia, Feb 11, 2016. PHOTO: REUTERS

Beijing sees railway projects as a geopolitical tool to support its ambitions

By Rene Pattiradjawane

The Jakarta Post/ Asia News Network

China's iron diplomacy is an attempt by the world's second biggest economy to expand its clout in South-east Asia.

Indonesia President Joko "Jokowi" Widodo has signaled that the Jakarta-Bandung high-speed railway (HSR) will top his priority list.

The mega project is indeed stipulated in the presidential decree on national strategic planning as a project that needs to be accelerated despite the public debate over its tender process, feasibility studies, transportation regulations, financial arrangements and environmental issues.

The project has raised the question of what kind of economic diplomacy Indonesia is playing by choosing the Chinese over the Japanese proposal.

Is Indonesia entrapped in the Chinese sphere of influence due the growing vested interests among its conglomerates?

Or is the HSR project held hostage by Indonesia-China economic relations that have resulted in Indonesia's US$15 billion (S$21 billion) trade deficit?

For China, HSR projects across South-east Asia, including in Indonesia, are regarded as a geopolitical tool supporting its ambition for hegemonic power, softly pressuring Asian countries into accepting its rise as a global power for two reasons.

First, China is facing an unprecedented economic slowdown that its leaders describe as the new normal. An impending Asean economic integration would provide China a vast market of around 600 million people for its exports and establish a new economic zone outside mainland China to produce new external demand for raw energy and other natural resources.

This perspective explains the ambition to build the HSR project connecting Kunming and Singapore, which are 3,900 km apart.

The route will be divided into several corridors dissecting Vietnam, Laos, Thailand and Malaysia. The mainland South-east Asia HSR project is part of China's short- and long-term economic expansion strategy.

Second, the HSR projects manifest China's new geopolitical direction without having to lose the interdependence of economic cooperation. At this stage, the geo-economic process will be affected by geopolitical factors in view of avoiding any potential conflict between neighboring countries.

One of the reasons is the challenge from the US through its Asian pivot to rebalance Asia-Pacific region.

At the same time, we do understand that the rivalry between China and Japan in the 21st century has taken on a new twist.

China is in the process of adjusting to its new normal for economic development due to slowing demand for Chinese products worldwide, increasing labour wages and volatile domestic stock markets that need to be adjusted in the face of expanding capital outflow.

In Japan, meanwhile, the Abenomics that PM Shinzo Abe claims to be a panacea for boosting the economy has not yet borne fruit, i.e. increased domestic consumption to combat deflation and ended a two decade-long recession.

Recently, the Bank of Japan announced a negative interest rate policy, which requires commercial banks to pay interest on deposits, in an attempt to exit from economic stagnation.

The HSR project connecting Jakarta-Bandung that pitted Japan against China head-on has something to do with the domestic economic problems plaguing the two countries.

In late 2014, President Xi Jinping transformed China's foreign policy by introducing what he called "big country diplomacy with Chinese characteristics".

The new approach takes shape in xinxing guoji guanxi (new type of international relations).

At the same time, China is promoting gaotie waijiao (iron diplomacy), which refers to HSR projects as an object of international relations and an important element of China's diplomacy.

If the Japanese are known for their miniaturised electronic appliances, the Chinese want HSR mega projects to be their national icon.

By constructing their HSR network, China is moving to build a tradition of high-tech railway systems that its neighbouring countries will rely on given its experience in building over 16,000 km of high-speed railway networks.

For President Jokowi, facing two economic powerhouses at the same time did not only confuse the balance of national interests, but also posed a challenge to the outlook of Indonesian foreign policy, especially concerning economic diplomacy.

Never before has a foreign investment in Indonesia created such chaos among domestic political actors. The HSR project not only divides the Cabinet but also casts doubt over the benefits of the investment itself.

Indonesia once perceived China as an enemy in terms of ideology, politics, economy, trade, military and socio-culture.

The image of China as a giant, however, should not be followed by mislabelling it as arrogant, aggressive and expansionist toward countries that it seeks to cooperate with. President Jokowi needs to understand that the business-to-business cooperation with China in the HSR project is a case of "you scratch our backs, we'll scratch yours".

China's investment in the HSR project is a model of finance cooperation that will be paid back with interest. We need to understand the project as a win-win deal, not an empty pledge by leaders of the two countries. In this regard, we need to admit that the HSR project is high-risk due to its uncertain return of investment.

President Jokowi should be convinced of two things.

First, there is no mega project in the world for public services that is backed up or guaranteed by the government. Of China's HSR projects, only the Beijing-Tianjin, Beijing-Shanghai and Shanghai-Hangzhou routes have started to make money.

In Taiwan, that used Japan's Shinkansen technology, the Taipei-Kaohsiung route is already in bankruptcy and needs debt restructuring from the government.

Second, we need to articulate the HSR project in the context of national interests rather than a Sino-centric order. It is important therefore to uphold and respect the law in keeping national interests intact. It is also pivotal to maintain positive public opinion regarding the HSR project.

Both Indonesia and China can learn from Petronas' gas-station business in Indonesia that eventually collapsed because of Indonesian consumers' nationalistic sentiment in response to border disputes between Indonesia and Petronas' home country Malaysia..

The Jakarta-Bandung HSR project should become a model of strong and comprehensive cooperation among the two nations. The HSR system marks a revolution in national transportation infrastructure and a path to genuine and honest win-win cooperations.

* The writer is a senior journalist and founder of the Centre for Chinese Studies.