Hong Kong Looks to Take Up Role as Facilitator in the Belt and Road Framework
BY :SARAH YUNIARNI AND SHEANY
MAY 17, 2018
Jakarta. At the Belt and Road Forum in Beijing last year, President Joko "Jokowi" Widodo expressed optimism and eagerness to partake in China’s Belt and Road Initiative, or BRI, which offers a wealth of opportunities in line with Indonesia’s own infrastructure and economic ambitions.
"I appreciate this initiative, because it is a realistic one. It is not merely talk, but it is actually building something. From ports to railways, these are industries we can see and touch. This is exactly the sort of courage and real action the world needs right now," Jokowi said at the forum in Beijing on May 2017.
China’s President Xi Jinping announced the initiative in 2013, which has become known as the One Belt One Road (OBOR). The program comprises a grand plan to develop infrastructure connecting Asia, Europe and Africa.
Indonesia and China have maintained cordial relations over the years, with the most recent visit of China’s Premier Li Keqiang this month further reaffirming the strong bilateral ties.
As reported by China Daily, Li expressed China’s intent on increasing high-level exchanges with Indonesia and enhanced alignment within the framework of BRI to Indonesia’s own development plans during his meeting in April with coordinating minister for maritime affairs, Luhut Pandjaitan.
Last year, China accounted for Indonesia’s fourth largest investor, making up 10.4 percent of total foreign direct investment (FDI) with $3.4 billion, according to data from the Investment Coordinating Board (BKPM).
While plans are in the works and both countries look keen to step up relations through the initiative, Indonesia still has ways to go to seize the potential offered by BRI.
At a seminar in Jakarta last month, which was attended by high-level officials and business leaders from Hong Kong, the country expressed interest in playing a matchmaking role to help integrate the world’s resources to realize the vision set forth by the BRI.
"Hong Kong is a global financial center, we are very strong in services in the professional sectors … we have a lot of experience in infrastructure construction, so we are ideal to be that integrator of these investments," said Vincent Lo, chairman of the Hong Kong Trade Development Council (HKTDC).
Hong Kong was one of the largest contributors to Indonesia’s FDI in 2017, just after China, with $2.1 billion, a 6.6 percent increase compared to 2016.
What is the Belt and Road Initiative?
The Belt and Road Initiative covers two development strategies; the Silk Road Economic Belt and the 21st Century Maritime Silk Road. The program showcases China’s intent to promote economic cooperation among countries within the BRI route.
An analysis issued by the Lowy Institute stated that the "Belt" aims to connect China’s underdeveloped hinterlands to Europe through Central Asia, whereas the "Road" seeks to connect Southeast Asia to China’s southern provinces through ports and railways.
According to data issued by China’s Ministry of Commerce, the country’s investment toward the BRI reached more than $14 billion in 2017. That figure was the same compared to the year prior.
At a meeting with Jokowi on the sidelines of the Belt and Road Forum last year, Xi called for stronger Indonesia-China cooperation on the BRI, especially considering Indonesia’s special connection with the ancient network of trade routes, the Silk Road.
"I proposed the 21st Century Maritime Silk Road for the first time when I delivered a speech in Indonesia in October 2013. The alignment of the proposal with Indonesia’s Global Maritime Fulcrum has enriched bilateral ties," Xi said, as quoted by Xinhua.
Jokowi also highlighted Indonesia’s role in the ancient Silk Road trade route during his speech at the forum, and urged Asean countries to join and play a part in the initiative, as suppliers of raw materials and natural resources for the production of goods and services in the rest of the world.
Indonesia could stand to gain a lot from the initiative, as it may push forward connectivity within the Association of Southeast Asian Nations (Asean), facilitate Indonesia’s plans to become a top maritime nation, and boost national infrastructure, which would certainly help facilitate Indonesia to tap into both traditional and non-traditional markets to further strengthen its growing economy.
BRI itself is comprised of five interconnected principles: infrastructure connection, policy coordination, financial integration, trade and investment, as well as cultural exchanges.
In 2016, the Asian Infrastructure Investment Bank (AIIB) began its operations. The multilateral development bank is headquartered in Beijing and has 86 members. It focuses on investing in infrastructure construction and promoting regional inter-connectivity and economic integration.
In Indonesia, BRI will be focused on developing North Sumatra, North Kalimantan, North Sulawesi and Bali, BKPM chairman Thomas Lembong told reporters on the sidelines of the seminar in Jakarta last month.
"We’ve met some potential investors who could do a project on hydropower in North Kalimantan," the chairman added.
Indonesia, Hong Kong and the BRI
"For the past forty years, since the opening of China, Hong Kong has played a critical role in China’s growth and development," Vincent said.
China’s National Bureau of Statistics (NBS) showed that country's GDP per capita increase from around $200 in 1978 to more than $8,000 in 2017.
"That can happen in BRI countries, including Indonesia, if you are progressive in your reforms," Vincent added.
Indeed, the competition for foreign investments in the context of BRI will be tight, with dozens of countries along the BRI route. Vincent stressed that whichever countries move faster will benefit most from the program.
Hong Kong operates as an independent territory under the "one country, two systems" mechanism, though it is still officially part of China.
"The Belt and Road Initiative will rise into a global economic force deep into the 21st century,” Carrie Lam, Hong Kong’s chief executive, said during the seminar in Jakarta.
During the speech, Lam focused on efforts to create new opportunities for businesses and foster trade and investment growth between Hong Kong and Asean countries, including Indonesia.
She also noted the likelihood of expansion on Islamic finance mechanisms, in which Indonesia, as the world’s most populous Muslim country, will have a big role to play.
In 2017, total trade between Indonesia and Hong Kong was valued at around $4.2 billion, according to data from the Ministry of Trade, showcasing an increase of around 7.5 percent from the year before.
On this significant gap, Carrie told the audience at the Jakarta seminar that she promised Jokowi she will do better to facilitate more tourists from Hong Kong to visit Indonesia.
"Indonesia is one of the key countries we want to work with, one of the first ones that we believe is viable," Vincent said, alluding to the BRI framework.
However, he also added that Hong Kong’s role is merely as a facilitator, where it can bring prospective investors, while Indonesia "must bring bankable projects."
Hong Kong can be a facilitator because of its expertise in providing professional services spanning across trade, financial, accounting, engineering and project management.
"Hong Kong has a very important role in this global program … these professional services are exactly what we need to prepare and then implement the infrastructure projects under the BRI," Thomas said.
The seminar saw HKTDC bring along a number of companies, not only those from China but also multinational corporations, including China’s state-owned enterprise Citic, asset management company Blackstone and HSBC Bank.
The council has identified over 50 potential infrastructure projects for these investors as part of the seminar, which was used as a space for matching between key players. The projects, Vincent said, include roads, bridges and mass transit.
"Indonesia is a very important part of Asia, huge population, big country and good economy – factors that are to your advantage in the competition. But the thing is, how can you plan these investments to help you grow your economy even faster?" Vincent said.