China's quest for energy in Southeast Asia: Impact and implications

By Zhao Hong, Institute of Southeast Asia Studies

 

Executive Summary

 

  • Energy cooperation between China and ASEAN countries since its initiation in the late 1970s has been viewed as an important part of China-ASEAN relations. As China expanded its FDI to Southeast Asia after the global financial crisis in 2008, cooperation in this field developed to a new level, extending from energy trade to energy resource exploration and related infrastructure-building.
  • However, while some momentum exists towards continued cooperation, several factors are pushing the region towards competition and conflicts. The expansion of China’s outward FDI, the country’s resilience during the global financial crisis and its continuing rapid growth have raised questions about the ‘China model’ of investment abroad. While seeking to maintain regional energy cooperation, China and ASEAN countries are nevertheless more concerned each with their national energy security than with regional energy security as such.
  • This is exemplified in how China’s half-hearted engagements at the local level in Myanmar, alongside poor crisis management, have nurtured the perception that China is solely concerned about the security of its own business operations and energy security, and has been ignoring the needs and interests of ethnic nationalities.
  • Placing national interests and domestic energy security concerns well above regional ones is understandably a common practice. For example, Indonesia recently made several major domestic economic adjustments to benefit local firms and improve employment conditions. New regulations, such as the export ban it put on unprocessed nickel in 2012 to encourage the development of domestic refining and processing of the metal, will certainly affect Sino-Indonesian energy resource cooperation.
  • The extent to which China’s energy resource cooperation with Southeast Asian countries can develop depends on whether or not constituencies in these countries, primarily labour unions, organized businesses and civil society groups, feel that their concerns about China’s influence on their political economy are being taken into consideration.
  • Beijing’s willingness to comply with Indonesia’s quest to correct the unbalanced trade profile between the two countries by reducing textile exports and urging Chinese firms to expand investment in the country’s manufacturing sector; and the promise to make corporate social responsibility programmes an integral component of Chinese SOE operations in Myanmar are positive signs that Beijing is giving consideration to sensitivities in Southeast Asian countries.

 

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