Trawlers, bankers and engineers battle for SE Asia
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Sea lanes and railway tracks are the new frontline in the war of influence being fought between China and Japan
The fault lines of discord in East Asia may centre on the South China Sea, but the front lines of geostrategic battle in Southeast Asia are manned by innocuous fishing boats, be-suited financiers and railway engineers.
Gone are the days of gunboat diplomacy and zero-sum realists. These days, it’s all about presence, influence and preponderance.
The South China Sea is witnessing a construction blitz on symbolic middle-of-nowhere islets as a maritime militia of fishing boats supplant the need for frigates to show force.
The second phase of this “war of attrition” has just begun, emulating the modes of expansion of centuries past – from the days of Cheng Ho, railway imperialism and the Allies of World War II.
Admiral Ho’s 15th-century fleet established entrepots and prestige for the Middle Kingdom.
Railways expanded 18th-century European imperialism in Asia from seaports to the hinterland.
The Allies’ victory in 1945 was founded on economic strength, innovation and logistics as much as on tactics, courage and luck.
Japan last week threw down a gauntlet in a bid to check China’s dominance in the construction of a new Asia.
Japan Prime Minister Shinzo Abe’s proposed two elements that directly challenged Chinese initiatives.
The first was to prop up the Asia Development Bank (ADB) and yen loans by providing US$110 billion over the next five years for Asian infrastructure investment.
The move pits it directly against China’s Asian Infrastructure Investment Bank (AIIB) and Beijing’s bilateral pledges.
Infrastructure race
The second was to repeatedly emphasise that Asia needs “quality infrastructure” – which Japan can provide. A brief from the Japanese government included the term in almost every other sentence, along with examples like the Delhi Metro, the Nhat Tan Bridge in Vietnam and the Ulan Bator Railway Flyover.
It implied that infrastructure from other sources was not on a par with Japan’s. The brief argued that while “quality infrastructure” may appear expensive, its durability, ease of use and disaster-resilience make it cost effective.
“There is no room for cheap or subpar,” Abe said.
Key to this challenge will be the construction of high-speed railways, not only because they provide a base for connectivity in Asia, but also for the historic symbolism railways provide. Most Asian railway lines are derived from the colonial past.
China and Japan have upped the ante. Both have a proven record in the financing and development of high-speed railways.
Since the 1960s Japan has been the recognised leader with its Shinkansen bullet train.
However, the last decade saw China become the high-speed railway centre of the world with inexpensive technology adopted from Japanese partners and a rail network of more than 10,000 kilometres.
As competition emerges between these two Asian powers, railway tracks are becoming the new battle lines.
The largest envisioned project is the Kunming–Singapore Railway network connecting all the countries of mainland Southeast Asia.
While the business impact of the route is invaluable, the significance of making southwest China the hub for Southeast Asia is even more strategic.
Region’s first high-speed line
The jewel will be the 350-km Kuala Lumpur-Singapore leg, which would be Southeast Asia’s first truly high-speed rail line.
Tenders are due to be completed by the end of this year and the China Railway Construction Corp (CRCC) is the leading bidder.
Other bidders include Japan’s JR East, Germany’s Siemens AG and France’s Alstom. The CRCC’s bid is believed to be lowest while offering the quickest construction time.
Indonesia, too, is being wooed with railway diplomacy. However, unlike its neighbours on the mainland, its geopolitics allow Jakarta to be cautious without fearing being overrun or unduly influenced by regional powers.
It was no accident that during a visit to Japan and China in March, President Joko Widodo travelled by bullet train from Tokyo to Nagoya and a day later in China took the express train from Beijing Airport to the city centre.
Both Widodo and his vice president Jusuf Kalla realise the opportunity at hand and have pledged to get the best out of it.
They also know full well that it is not simply a question of what is more cost efficient.
On the immediate horizon is the development of a 150-km Jakarta-Bandung high-speed railway.
Japan began studying the project three years ago.
However, last month China and Indonesia signed a memorandum that seems to have cemented a deal for a high-speed line provisionally costing US$6.7 billion.
During Kalla’s visit to Tokyo last week the Japanese prime minister repeatedly expressed keen interest in the Jakarta-Bandung line, despite being steered toward the more lucrative 600-km extension connecting Bandung to Surabaya.
It may also have been coincidence that Kalla’s talks with Abe coincided with Japan’s new “quality infrastructure” initiative.
But so far Jakarta seems to be carefully hedging its bets in the railway wars.
Jakarta’s massive MRT project is adopting the Standard Urban Railway System for Asia, which was developed to promote the export of Japanese systems to Asian countries.
Sumitomo Corp. and Nippon Sharyo, Ltd. in March were awarded a $90 million-plus contract by MRT Jakarta to supply subway cars for its North-South Line.
Some call it hedging, others say it’s strategic balancing. The winners of the next round of tenders will be as much a political consideration as a technological or financial one.
Indonesia will likely have four prime considerations.
Value, defined by quality in relation to cost, will be the first. Does Indonesia really need an astronomically costly bullet train with speeds of over 300kph, or will a less expensive 200kph line suffice? Even at the lowest average pace these trains would nearly triple the speeds of current locomotives.
Second is financing. Japan has an advantage with its ability to provide better interest rates.
Third is the ratio of local to foreign content. How would this create jobs? How many foreign imports and how much foreign labour would be required?
The final element is technology transfer. Indonesia needs to steal a page from China’s play-book when it emulated Japanese technology to develop China’s first high-speed railway.
At the very least Indonesian engineers must maintain a standard of know-how to autonomously conduct maintenance and further develop the new line.
It will be another six months or so before the Jakarta-Bandung tender is finalised. Until then Indonesia has much to consider.
