Swiss development cooperation needs to engage with China and its Belt and Road Initiative (BRI) to advance development progress in the Greater Mekong. Chinese investments under the BRI are transforming the region fundamentally and bringing benefits as well as risks. The Swiss Government’s recently published South East Asia Strategy 2023–2026 does not acknowledge the BRI’s importance sufficiently and misses to mention opportunities for cooperation with China.
by Basil Hürzeler
Laos is on the move. Since December 2021, Vientiane, the capital city, has a direct railway connection to Kunming in China. The train, which transports passengers during the day and freight during the night, is in many respects a success story. Up to now, the train line has handled over 10 million passenger trips – an impressive figure considering Laos counts only 7.5 million people. Due to the high passenger demand, the Laos-China Railway Company (LCRC) is operating two additional trains on the line since last year.
In Cambodia, the government is planning to modernise and expand its railway network. For example, the country announced a 4 billion USD project to overhaul the 382-kilometer railway section between the capital, Phnom Penh, and Poipet, near Thailand, and gear it up for the first high-speed train in the country’s history. A further railway line is planned to connect the Cambodian capital with Bavet, a border town close to Vietnam, promising new trade opportunities and strengthening the tourist sector.
These projects come, however, with substantive political and economic liabilities for the two countries. The infrastructure projects are part of the BRI and largely financed through Chinese loans. In Laos, for example, public debt reached 14.5 billion USD in 2021 and is expected to have increased to over 100% of the country’s GDP by 2023. A substantive part of the debt payments goes to China as its biggest creditor. Similarly, Cambodia’s foreign debt amounted to 8.8 billion USD in 2020 with China accounting for 3.9 billion USD, or 44 percent, of the country’s total debt. Similar major BRI infrastructure projects are being conducted in other countries in the Greater Mekong Region such as Vietnam or Myanmar.
The Federal Council’s new South East Asia Strategy 2023–2026 published in February 2023 only mentions the BRI in the ‘Geopolitical Overview’ section highlighting tensions in the South China Sea but fails to point out common interests and potential partnerships with China. Instead, the strategy refers to Germany and the United Kingdom as partners, which are arguably less relevant to the region.
Switzerland has to rethink its approach to development cooperation in the Mekong region and open up towards new forms of collaboration beyond Team Europe. Undoubtedly, BRI projects bring not only benefits but come with side effects such as debt risks or human rights concerns. However, projects financed by China already shape the region and Switzerland is better advised to sit at the table when BRI is being discussed rather than being absent.
Development partners and observers of South East Asia might be quick to blame China for a lacking willingness to cooperate. Should sincere Swiss cooperation attempts become futile, there are several multilateral approaches to engage in the BRI. The China-led Asian Infrastructure Investment Bank (AIIB) is fortunately mentioned in the SEA strategy and constitutes an interesting tool. Switzerland’s contributions to AIIB until 2021 amounted to 141.3 million USD, which could be expanded to gain influence in this organisation and BRI projects more broadly.
Additionally, there are more than 20 UN institutions active with projects ranging from mitigating potential negative environmental impacts of infrastructure projects to broader BRI impact studies, as done by the Economic and Social Commission for Asia and the Pacific (ESCAP). Swiss project-specific contributions to these initiatives could be a further area to explore as an opportunity to mitigate BRI’s negative externalities.
It’s time that Switzerland hops on the train if the country meaningfully wants to shape development in the region. The Swiss China strategy from 2021 constituted a step towards a cautious but pragmatic approach to the BRI, which is less reflected in the following strategic paper. The victims of lacking cooperation could be people in the Mekong region who rely on sustainable and human rights compliant infrastructure projects.
Image credits: Axel Drainville on flickr