News Analysis: Economic community, Belt and Road initiative twin engines for ASEAN development

The Association of Southeast Asian Nations (ASEAN) will embrace a new starting point in its ambitious integration as the leaders from the 10-member bloc have pledged here at ASEAN's 27th summit their unwavering commitment to the realization of the economic community by the end of 2015 as scheduled.

The China-proposed Belt and Road initiative, or the Silk Road Economic Belt and the 21st Century Maritime Silk Road, has been a hot topic during the ongoing 27th ASEAN Summit and Related Summits, as hopes are pinned on the initiative to contribute to ASEAN's economic takeoff.

The ASEAN Economic Community (AEC) and the Belt and Road initiative are complimentary in each other. They will create vast opportunities for ASEAN and China to cooperate and serve as twin engines for the bloc's future development and prosperity.

The establishment of AEC will open up more regional cooperation and improve efficiencies, dynamism and competitiveness of all ASEAN members by enabling free movement of goods, services, investment, capital and skilled labor forces, thus offering new ways of coordinating supply chains and access to market.

Rather than fragmented economies, AEC envisions ASEAN as a single market and production base. As a single market, AEC will allow investors to seek and increase their market reach to the region with a total of 600 million people. As a single production base, AEC will allow businesses to tap product and services complementation in the region, establish a network across ASEAN and participate in the global supply chain.

AEC will also enable the bloc to look beyond its borders as the region presents opportunities for investors to access not only ASEAN markets but also some of the world's largest economies, including ASEAN's top trade partners such as China, Japan, South Korea, India, Australia, New Zealand, the EU and the United States.

In a recent interview with Xinhua, Cambodia's well-respected scholar Pou Sothirak, executive director of the Cambodian Institute for Cooperation and Peace, said AEC has huge potentials as a single economic bloc and when it comes to fruition, it will have an economy worth 2.5 trillion U.S. dollars and will lift the game from the current ASEAN Free Trade Area to the creation of single market and production base.

Located along the path of the China-proposed 21st Century Maritime Silk Road designed to go from China's coast to Europe through the South China Sea and the Indian Ocean in one route and from China's coast through the South China Sea to the South Pacific in the other, ASEAN countries will mainly benefit from the initiative.

Among the ASEAN member states, construction and upgrade of infrastructure such as roads, ports and airports is a must. Improved infrastructure is essential for sustaining economic growth in ASEAN as it enhances logistical efficiency, reduces transaction costs and supports greater flow of trade and investment.

Huge national infrastructure plans for the region have been announced to meet demand of the rapidly growing economy. At least 110 billion U.S. dollars a year will be needed in the region through to 2025 which covers transport, power, ICT, and water and sanitation developments, according to ASEAN Investment Report 2015: Infrastructure Investment and Connectivity.

China issued in March 2015 the principles, framework, and cooperation priorities and mechanism in the Belt and Road initiative to enhance regional connectivity. The action plan places strong emphasize on orienting the trade routes toward ASEAN countries to help the region upgrade its infrastructure and promote its connectivity.

Chinese Premier Li Keqiang, at the 5th leaders meeting on the Greater Mekong Sub-region (GMS) economic cooperation held in December last year in Bangkok, proposed to deepen the relations between China and the five countries along the Greater Mekong River, including jointly planning and building an extensive transportation network.

For the time being, the five countries along the Greater Mekong River, namely Myanmar, Laos, Thailand, Cambodia and Vietnam, are engaged in building cross-national highways, connecting east and west and linking north to south.

The North-South Economic Corridor has been taking shape with the fully opening of the whole Kunming-Bangkok Highway in 2013. China has also completed construction of an expressway in Guangxi leading to the Friendship Gate and Dongxing port at the China-Vietnam border. The highway from Kunming to its border with Myanmar and Vietnam has also been upgraded.

Building on existing infrastructure, China and Thailand have inked an agreement on a high-speed train project linking Laos and Thailand's Nong Khai to the southern border and Malaysia, with the ground-breaking of the project expected in December 2015.

China and Indonesia have also sealed an agreement to launch a joint venture for a high speed railway linking Jakarta with West Java provincial capital of Bandung.

The project will be conducted on business to business basis, in which the Indonesian side controls 60 percent of the joint venture's stake, while the Chinese partner controls the remaining 40 percent share.

"This is a brand new episode in Indonesia, particularly in transportation project as it will further boost economic activities in areas along the corridor served by the high speed train that eventually contributes to the national economic growth," Chairman of PT Pillar Sinergi BUMN Indonesia said after the signing of the deal.

The China-proposed Asia infrastructure Investment Bank (AIIB) is also expected to play a key role in bridging the huge investment gap in funding ASEAN's major cross-border infrastructure projects, such as the ASEAN Highway Network and Singapore-Kunming Rail Link.

China and other ASEAN countries are also actively investing in their maritime infrastructure. China has carried out ocean-related cooperation with Indonesia, Thailand and Malaysia.

To further boost connectivity in the region, visiting Chinese Premier Li Keqiang, while addressing a meeting between China and ASEAN here on Saturday, pledged infrastructure loans totaling 10 billion U.S. dollars for Southeast Asian countries and proposed railway and production capacity cooperation.

The Belt and Road initiative strikingly resembles the ASEAN Master Plan for Connectivity as both initiatives encompass transport connectivity to scale up their economic exchange, social and cultural exchanges through a system of roads and railway links as well as a system of ports, Sothirak commented.

"The initiative will contribute positively toward the enhancement of trade, investment, tourism and people-to-people exchange thereby forging China-ASEAN relations that are even closer to one another." Endit