Wednesday, January 26, 2011

China using development aid to spearhead Asian push.

The building above in central Phnom Penh was built by the Chinese government for use as the prime minister's office. It is currently being used by the deputy prime minister.
Asahi Shimbun (Japan)

The extent of China's ambition in Southeast Asia is taking concrete form in a village less than a dozen kilometers east of Vientiane, the Laotian capital.

Last Nov. 18, at a ceremony attended by Laotian Deputy Prime Minister Somsavad Lengsavat and the head of the Chinese Communist Party's Yunnan provincial committee, the foundation stone was laid for a colony for Chinese people on about 1,000 hectares of Laotian farmland.

Whispers about the construction of a city for the Chinese have been rife in Laos since the end of 2009, with talk that the Chinese government had agreed to build stadiums for the Southeast Asian Games in Vientiane that year in return for the construction of a district for Chinese people about 10 kilometers to the west of the current site.

Some Laotians were angered by rumors that their government had granted the right to rent the land for a maximum of 75 years, and would allow 50,000 Chinese to settle in the area.

Those plans appear to have been shelved, but the ceremony in November made clear that the construction of a Chinese town in the middle of Laos was not a pipe dream. Vientiane already has a well-known market with a large Chinese presence, but it will soon have a suburb built expressly for the citizens of its huge northern neighbor.

A joint venture company has been established to develop the 1,000 hectares into homes for Chinese people, as well as agricultural land, factories for food processing and light industrial units to support the community.

China has contributed about 75 percent of the company's capital, with Laos putting in 25 percent to pay for the land and the expense of moving existing residents out of the area.

The local mayor, who said he was only informed about the foundation ceremony two weeks before the dignitaries descended on his district, said he welcomed the jobs the development promised to provide for residents but added, "I am worried about whether they will be able to get along with the Chinese."

The development is part of a growing pattern of China-backed construction across Southeast Asia, which is being facilitated by Chinese development assistance programs and improving relations with members of the Association of Southeast Asian Nations.

In the northern Laotian city of Houayxay, Chinese workers are preparing to erect a bridge across the Mekong River connecting Laos with Thailand. About the half of the workers on the project are Chinese, and the Chinese company handling the construction work on the Laotian side belongs to the same group as the entity that used to run China's railways.

Gao Feng, the company's local manager, said, "We feel this is very worthwhile because we can contribute to the development of ASEAN."

China is leading the construction of the "south-north corridor" linking China with Laos and Thailand, part of the Greater Mekong Subregion economic cooperation project promoted by the Asian Development Bank.

Roads already link China with Houayxay. Trucks carrying petroleum and corn from Laos now regularly cross the border to China, with cement, fruits and other products going in the other direction.

And Chinese companies working closely with Beijing have won contracts for other construction projects in northern Laos, including a new runway at an airport in Luang Prabang and a 420-kilometer expressway connecting Vientiane with Boten near the Chinese border. That expressway is eventually expected to extend through Thailand to Singapore.

A Laotian government official said the link promised to connect the isolated, landlocked nation much more closely with its neighbors, but some Laotian officials admit to worries that it could end up making Laos little more than a passageway to other destinations.

From China's point of view, the developments fit into a strategy of integrating its southern provinces with ASEAN countries and securing access for its oil tankers to ports in the Bay of Bengal and in the southern parts of ASEAN member countries.

In Indonesia, in the south of the region, China's influence is increasingly apparent. The 5.4-kilometer-long Suramadu Bridge, connecting Surabaya in central Indonesia with the island of Madura, opened for traffic in 2009. The bridge, the longest in Indonesia, was constructed by a Sino-Indonesian joint venture. The local fishermen call it the "Made in China bridge."

About 2.2 trillion rupiah (about 22 billion yen, or $263 million) in loans from Chinese government-affiliated financial institutions, with easy terms and low interest, funded half of the total construction cost for the main part of the bridge's central span.

More than half of about 630,000 tons of steel used in the bridge came from China, and about 750 workers were shipped in from China. They lived in renovated containers under the bridge during their stay.

A bridge linking Surabaya and the relatively poor Madura island has been a long-standing dream of the Indonesian government's, dating back to the 1950s when President Sukarno ran the country. It was only in 2003, under the presidency of Sukarno's daughter, Megawati Sukarnoputri, that the decision was made to accept Chinese financing.

Arief Witjaksono, the deputy director for Region V in the Indonesian Ministry of Public Works, was in charge of the bridge project. He said: "When we asked Japan, European governments or the World Bank for financing, all sorts of conditions were placed, such as the impact on the environment and whether corruption was involved. China did not once say anything about our political or economic systems in connection with the Suramadu bridge."

However, Witjaksono said there were also issues with China's approach to economic assistance.

"We are not asking China to provide steel or workers," he said. "What we want are funds and technology transfer."

Negotiations are now under way for loans from China for an expressway in western Java and several electric power plants.

China is also taking an increasingly prominent development role in Thailand, Cambodia and Vietnam, countries in which Japan has traditionally been highly active.

Last May, China finished construction of a bridge over the Mekong River in Phnom Penh, the Cambodian capital. It was the second so-called "China-Cambodia friendship bridge," and represented a defeat for Japanese prestige in the country. There had been plans for Japan to construct a bridge downstream, but compensation negotiations and a delay in receiving Cabinet approval in Japan gave China a head start.

Chinese construction workers employed by a Shanghai company are also working on three key Cambodian road links: National Road No. 8, about 10 kilometers from the new bridge; National Road No. 1, running parallel to the No. 8 road and connecting Cambodia to Vietnam; and National Road No. 5 to Thailand.

Japanese private and public sector workers in Cambodia say that the Chinese have been getting many of the most promising development projects. While the quality of construction and road paving by the Chinese companies can be unsophisticated, local communities are often just happy to get transport links, the Japanese officials report.

Japan was once Cambodia's largest provider of assistance, contributing $120 million in 2008. However, in 2009, China multiplied its budget by 2.8 times to $260 million, leaving Japan in the dust. In Laos, where Japan was the leading assistance provider for many years, very little progress was made in Japanese infrastructure projects last year, causing major construction companies and trading companies to leave the country.

A Japanese diplomat said Japan's influence in the region was declining: "Unlike China, which sends dignitaries on frequent visits, Japan does not have much presence, because there is little exchange at the political level. This is occurring in what could be considered Japan's backyard."


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