Strained relations with Philippines and Vietnam hurt BRI

The ongoing tussle between China and the Philippines has escalated to another level, making the Belt Road Initiative (BRI) its casualty. Vietnam too is losing interest in the mega project. The disputes over maritime territory in the South China Sea have already led China’s relations with these countries to deteriorate, urging them to ally with the US to counter Chinese hegemony. The brewing tension is creating major hurdles for the BRI, which is China’s geostrategic venture for economic and military expansion.

China had decided to fund three railway lines totalling 551 km as a part of the BRI plan. However, the Philippines blamed China for delaying the release of the pledged funds and left the BRI. “We can’t wait forever and it seems like China isn’t that interested anymore. So, our government is looking for other sources of funding,” said Philippine Transportation Secretary Jaime Bautista.[1] The new investors can possibly be the US, India, South Korea or Japan. 

The prime reason for the Philippines to officially terminate the BRI projects worth USD 4.9 billion appears to be the growing conflict over the control of the Second Thomas Shoal in the South China Sea. Manila-based geopolitical analyst Don McLain Gill said “The decision to withdraw from these projects can be assumed to be motivated by issues centred on their sustainability and the mounting concerns brought by Beijing’s unwillingness to act like a responsible neighbour.”[2]

Moreover, the Ferdinand Marcos Jr government felt that the previous Rodrigo Duterte-led administration was trapped under China’s illusory investment pledges.[3] None of the promised infrastructure projects under the BRI worth USD 24 billion ever took off.[4] Marcos Jr had long been planning to leave BRI as there was no meaningful progress on the ground despite frequent follow-ups.[5] 

The Philippines may not face difficulty in arranging funds to carry on with its infrastructure building. Filipino economist Jan Carlo Punongbayan said “Chinese foreign direct investments are not that substantial. The stoppage of BRI investments will not substantially affect investments in the Philippines.”[6]

Marcos Jr administration has stood up to Chinese aggression in the South China Sea, which has led to serious confrontations between the two neighbours. Moreover, the anti-China sentiments are growing in the Philippines. The State of Southeast Asia 2023 survey showed 62.7 percent of Filipinos have “little confidence” or “no confidence” in China to “do the right thing” to contribute to global peace, security, prosperity, and governance.[7]      

Gill said the delinking with China allows the Philippines with opportunities to partner with other countries. “Such developments will in fact prove to be beneficial for the Philippines’ long-term development agenda, given Manila’s willingness to broaden and diversify its economic and development partners. Manila is now looking at Japan and India as viable sources of funding for railway projects,” he said.[8] Japan has already committed USD 6.5 billion to construct a subway system, USD 4 million for a radar system and five coast guard patrol boats to the Philippines.[9]

Global researchers Phuong Vu and Zachary Abuza said recent reports revealed that Vietnam’s debt burden to China was far beyond than what was commonly thought, which now has created political risk for Hanoi. They said the leadership and policy advisors in Vietnam now expressed grave doubts about the BRI. “Vietnam has long been suspicious of the BRI and to date, no new infrastructure project in Vietnam has been officially labelled as part of the BRI in the public domain,” they wrote.[10]    

Huy Hai Do, a researcher at Hanoi University, said “Vietnam has also started distancing itself from China out of fear of falling into a Chinese ‘debt trap’ and because of intensifying tensions in the South China Sea.” [11] China economics analyst Antonio Graceffo said the disputes in the South China Sea have strained China’s relationships with Vietnam and the Philippines. Like in the Philippines, there have been online and on-street protests in Vietnam against Chinese bullying in the South China Sea and controlling the Mekong River flow.[12]         Vietnam’s growing partnership with the US has worried mandarins in Beijing as this allows major involvement of the US in China’s backyard.  “Hanoi chose to elevate the partnership (with the US) is a strong indication of its growing concerns about Beijing’s rising assertiveness,” said Derek Grossman, Senior Defense Analyst at the RAND Corporation.[13] The Philippines is already protected by the US against any Chinese military action under a bilateral defence pact.[14]         The number of BRI participants is dwindling and the geopolitical problems in crucial South East Asia can hurt its prospect badly.