CONNECTING LIVES

Malaysia 2017 | ECONOMY | FOCUS: ONE BELT, ONE ROAD

OBOR has the potential to reshape global trade, connect major economic blocs, and affect the lives of 4.4 billion people in 65 countries.

China's One Belt, One Road (OBOR) initiative is a network of trade routes that will stretch from the most southern part of mainland Asia, namely Johor-Singapore, all the way to Rotterdam. OBOR has two core pillars, the Silk Road Economic Belt—going over land—and the Maritime Silk Road—over sea—both featuring major implications and opportunities for Malaysia. In one of the major components of the land trade route, the Pan-Asia Railway Network, the centerpiece is Kuala Lumpur, while the maritime route is destined to pass through the Straits of Malacca.

The Strait of Malacca is the second-busiest waterway in the world and currently around 70,000 vessels pass through per year, carrying almost half of the world's total annual seaborne trade tonnage. This figure is projected to reach 140,000 by 2020, mostly because of the increased Chinese appetite of China for crude oil—anticipated at 7.3 million barrels by 2020. Currently, 85% of China-bound oil crosses through the Straits of Malacca and, with OBOR in full swing, China is set to have more options.

Malaysia will also play a role in connecting the overland Silk Road with its maritime brethren, as shipments can be sent via a proposed railway starting at the ports of along the Straits of Malacca, across the peninsula to Kuantan Port on the South China Sea. An alliance of 10 Chinese and six Malaysian ports has been formed to materialize this project.

The Pan-Asia Railway Network, meanwhile, is intended to connect Kunming in China to Singapore via Vientiane, Bangkok, and Kuala Lumpur. Part of the journey, and a definitive game changer for the two capitals involved, will involve the High-Speed Rail (HSR) connecting Kuala Lumpur and Singapore. In 2016, an MoU was signed between the prime ministers of both countries and the line—backed by Chinese investments—is expected to be operational in 2026. With plans to extend the line to Bangkok, the Pan-Asia network could become reality.

In Kuala Lumpur itself, the centerpiece of OBOR will be Bandar Malaysia, an almost 200ha mixed-development project where the main station to HSR will be built, and from where all major railways and highways will be connected. The area is set to become one of the main corridors in the rail corridor. The consortium that won the almost-USD38.5 billion project includes the state-owned China Railway Engineering Corporation. Bandar Malaysia is designed to include decorative canals, a financial center, residential buildings, and a theme park.
One political building block of OBOR is the Regional Comprehensive Economic Partnership (RCEP), a China-initiated alliance that includes Australia, New Zealand, China, India, Japan, South Korea, and ASEAN. Negotiations for RCEP have been ongoing for two years, and once ratified, it encompasses a free trade bloc of 16 countries with a combined GDP of USD22.7 trillion. For Malaysia, one of the signatories of the TPP, RCEP may serve as a vital alternative to the Trans-Pacific Partnership (TPP) that seems to have become an uphill battle after US participation became uncertain. China understands the importance of connectivity and is therefore heavily committing itself to investments in infrastructure throughout the region. The Asian Infrastructure Bank, founded in 2015, is one of the tools to materialize this ambition. The total OBOR project involves a territory equal to 70% of the global population, 55% of the global GDP, and 75% of its known energy reserves. The project, therefore, has the potential to reshape global trade, connect major economic blocs, and affect the lives of 4.4 billion people in 65 countries. The rail and road links of OBOR are projected to be constructed within 35 years.