China's Belt and Road Initiative: An ASEAN Economic Evaluation

This report provides an evaluation of China's Belt and Road Initiative (BRI), focusing on its economic impact on selected ASEAN countries: Malaysia, Indonesia, Singapore, and Vietnam. The introduction outlines the BRI's objectives, including infrastructure development, policy coordination, and trade promotion. The report examines the benefits to Southeast Asian nations, highlighting infrastructure improvements, trade expansion, and financial integration. Regression models are employed to assess the effects of export, import, and unemployment on GDP in each chosen country, comparing pre- and post-BRI periods. The analysis reveals that export and import significantly influence GDP in Malaysia, Indonesia, and Vietnam, with unemployment also playing a role. Furthermore, the report discusses the long-term sustainability of the BRI and offers predictions for the next five years. The study concludes with a synthesis of the findings and references relevant literature, offering a comprehensive overview of the BRI's economic implications for ASEAN economies.

Running Head: EVALUATION OF BELT AND ROAD INITIATIVE PROJECT
Evaluation of Belt and Road Initiative Project
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1EVALUATION OF BELT AND ROAD INITIATIVE PROJECT
Table of Contents
Introduction......................................................................................................................................2
Main aspects of Belt and Road initiative (BRI)...............................................................................3
Benefits to South East Asian countries........................................................................................6
Evaluation of BRI on the chosen countries.....................................................................................6
Comparison of Pre and Post BRI period....................................................................................11
Long term sustainability of BRI....................................................................................................14
Prediction for next five years.........................................................................................................16
Conclusion.....................................................................................................................................17
Reference list.................................................................................................................................20

2EVALUATION OF BELT AND ROAD INITIATIVE PROJECT
Introduction
The Belt and Road initiatives undertaken by China is considered as its biggest initiative
till data to strengthen its position in the global economy through projects that include 65 nations.
The project aims to connect different nations through building infrastructure that focusing on
transport and energy (Huang, 2016) Xi Jinping, the president of China in 2013 prosed to made
economic development through in terms of interlinking nations that can strengthen their trade
relation. The two proposed roots intended to cover more than sixty nations ranging from Asia to
Europe including nations in Southeast Asia, West Asia, Central Asia and Middle East. At
present, these nations together accounts around 30 percent world GDP and more than 35 percent
of total merchandise trade. The six main economic corridors built under BRI are- China-
Mongolia- Russia Corridor, China-Central Asia – West Asia Corridor, China-Indochina
Peninsula Corridor, China-Pakistan Corridor and Bangladesh- China-India-Myanmar Corridor
(Swaine, 2015).
The paper aims to evaluate impact of Belt and Road Initiatives for nation outside China.
The regions broadly covered under BRI are East Asia, Southeast Asia, Central Asia, Middle East
and North Africa, South Asia and Europe. The paper particularly focuses on BRI impact on
ASEAN economies. For this, four countries are chosen namely Malaysia, Indonesia, Singapore
and Vietnam as representatives of ASEAN. Apart from theoretical consideration evaluation is
largely based on empirical evidences obtained from the four chosen nations. To find out the
effect of BRI on economic growth of the respective nation for different regression models are
framed taking GDP as dependent variables and export, import and unemployment as explanatory
variables. The movement of average GDP, export, import and unemployment in the pre and post
BRI period are compared before reaching any firm conclusion about the potential impact of BRI.

3EVALUATION OF BELT AND ROAD INITIATIVE PROJECT
Additionally, the paper also discusses aspects related to long terms sustainability of the
initiatives based on which future prediction can be made.
Main aspects of Belt and Road initiative (BRI)
The five key objectives of Belt and Road initiatives are discussed as follows
Policy Coordination
The first priority of the project is to increase policy coordination among nation which will
enhance intergovernmental communication and coordination. The increasing communication and
coordination in turn promotes overall trade, transfer of knowledge, increase in trust and political
stability and reduction in political barriers present in regional projects (Wang, 2016). To fulfill
objective of the project, it is necessary to promote policy for building intergovernmental
mechanism which will help to build trust and mutual consensus for economic and political
cooperation.
Development of infrastructure
This is another important motivation behind the design of BRI. It encourages
development of infrastructure to establish connectivity across all the sub-regions of Asia, Africa
and Europe. The main rationale is that growing connectivity would help to reduce the existing
logistical and structural barriers in trade. The infrastructural development should be undertaken
keeping in mind each of the participating nation’s sovereignty and security. For this, the
participating nations should be make active plan to connect infrastructure and implement suitable
technical standard toward developing international passageways (Liu & Dunford, 2016). The
project intensively focuses on development of transport infrastructure, supporting energy
infrastructure, cross-border cable and different other communication network.

4EVALUATION OF BELT AND ROAD INITIATIVE PROJECT
Unimpeded trade
Flawless trade is one of the primary objective of designed BRI project. One key
motivations for the project is to create a favorable business environment for different countries
and regions connected through the routes by eliminating barriers and attract investors. All these
should be done by designing agreement on bilateral investment protection in order to protect
their legitimate rights and interest (Cheng, 2016). The focus is to broaden trade areas and
improvement of trade structure besides identifying new growth areas and promote a balanced
trade.
Financial Integration
One vital part of implementation of BRI is enhancement of financial integration among
countries through stabilizing currencies exchange, credit system and investment and financing
system. In connection to this, Asian Infrastructure Investment Bank (AIIB) was developed to
accomplish this role. The institution was formed to provide financial support and necessary
funding to implement BRI. This is further enhanced by creation of Shanghai Cooperation
Organization (SCO). Countries involve in AIIB and SCO will cooperate in the financial
integration to make better use of Silk Road Fund along with sovereign wealth fund (Djankov &
Miner, 2016). This will also encourage investment through commercial equity funds and other
private investors to participate in developing BRI projects.
People-to-people bonds
The Belt and Road Initiative projects aims to promote cultural and academic exchange
between people in different nations and regions. Successful achievement of this goal will help to
gather great public support and strengthen bilateral and multilateral cooperation across countries.

5EVALUATION OF BELT AND ROAD INITIATIVE PROJECT
The B&R initiative has the potential to foster cross border exchange leading to multinational
cooperation (Wang, 2016). This in turn will create stability and encourage investment which us
beyond the home country.
Benefits of Belt and Road Initiative outside China
The benefits of the proposed Belt and Road initiative project is not limited to China only.
It covers numerous countries of Europe, Africa and Asia. The foreign trade and investment
relation plays an important role in distributing the benefits of Belt and Road initiatives to other
nations. International trade explains a mutually beneficial exchange of goods or services among
different nations. In the process, both the participating nations are benefitted by producing and
exporting goods in line of their specialization (Callahan, 2016). One of primary objective of Belt
and Road Initiative project is to promote a barrier free trade among nations. The active
participation of China in foreign trade offers a broad market for its trading partners. China’s
import since 2001 have grown approximately by five times accounting 20 percent of the annual
growth. The growing imports of China contribute a significant proportion of world economic
growth by providing nations a widely extended export market. Currently, China offers the largest
export market to nations like Japan, Republic of Korea, ASEAN, Australia, South Africa and
Brazil. China is the second largest export market for EU and third largest export market for US
and India. The main imports of China include crude oil, plastic in the primary forms, iron ore,
copper, copper alloys and soybeans. Different exported goods of China help to satisfy demand of
these goods in different nations. The main exports of China include computers, telephones,
broadcasting equipment, machine part and integrated circuit. China export these items in
different regions of nations like United States, Hong Kong, Germany, Japan and South Korea

6EVALUATION OF BELT AND ROAD INITIATIVE PROJECT
(Winter, 2016). International trade is an important channel that transmits benefits of Belt and
Road Initiative to other nations including China.
Benefits to South East Asian countries
South East Asian nations are expected to gain enormous benefits from China’s Belt and
Road Initiative Project. The members of Association of South East Asian Nations are benefitted
in terms of development of infrastructure, expansion of trade and financial integration. ASEAN
requires huge capital investment to materialize its Master Plan to enhance connectivity
(Summers, 2016). The Belt and Road Initiative that gain support from Silk Road Fund and Asian
Infrastructure Development Bank offers potential benefits to ASEAN region. ASEAN would
require an infrastructural investment of nearly $60 billion to $146 billion annually until 2025.
The Belt and Road Initiative plays a crucial role in upgrading Belt physical infrastructure of
these nations. Improved infrastructure helps these nations to achieve a sustained economic
growth in terms of improving logistical efficiency, reduction in transaction costs and increased
flow of trade and investment. The cooperation between ASEAN and China in terms of
connectivity is highly compatible with to the ASEAN connectivity. China and ASEAN
cooperation thus opens up broader prospects and huge potential gain (Lingliang, 2016).
Evaluation of BRI on the chosen countries
This section evaluates impact of China’s Belt and Road Initiative on the four chosen
members of ASEAN – Malaysia, Indonesia, Singapore and Vietnam. The impact of concerned
initiative is measured is terms of economic growth of the respective nations. Gross Domestic
Product is taken as a representative variable for economic growth. The variables that are likely to
be affected from implementation of BRI include export and import through channel of

7EVALUATION OF BELT AND ROAD INITIATIVE PROJECT
international trade, rate of unemployment and other economic variables. As GDP of a nation
changes with change in these variables, regression model is formed taking GDP as dependent
variables and export, import and unemployment as independent variables. The regression model
helps to explain the potential impact of these variables on GDP.
Malaysia
The table below shows the effect of export, import and unemployment rate on GDP of
Malaysia
Table 1: Regression model of GDP on Export, Import and Unemployment for Malaysia
Regression Statistics
Multiple R 0.99
R Square 0.98
Adjusted R Square 0.96
Standard Error 7871748501.88
Observations 9
ANOVA
d
f SS MS F Significance F
Regression 3 1.3285E+22 4.43E+21 71.46592 0.00015842
Residual 5 3.09822E+20 6.2E+19
Total 8 1.35949E+22
Coefficients
Standard
Error
t
Stat P-value Lower 95% Upper 95%
Intercept 1.4752E+11 1.10899E+11 1.33 0.241 -1.37558E+11 4.32592E+11
Export -1.5359011 0.312341404 -4.92 0.004 -2.338800255 -0.733001976
Import 2.84950789 0.316452051 9.00 0.000 2.036041993 3.662973779
Unemployment -1.911E+10 21065496085 -0.91 0.406 -73260688886 35040474301

8EVALUATION OF BELT AND ROAD INITIATIVE PROJECT
The value of R square is obtained as 0.99. This indicates export, import and rate of
unemployment together constitute 99 percent variation in GDP of Malaysia. Unemployment has
a negative impact on GDP of Malaysia. That is as unemployment decreases, there is a gain in
economic growth in terms of an increase in GDP. The statistical significance of the explanatory
variables can be examined from the p value associated coefficients. The p value of coefficient for
export and import are 0.004 and 0.000. Both the p values are less than 5% significance level.
This implies import and exports are statically significant determinant of GDP. Finally, overall
significance of the model can be examined from the F statistics. The obtained F value is less than
0.05 indicating the model has an overall significance at 5% level of significance.
Indonesia
The regression result of GDP and associated variables for Indonesia is presented in the
following table.
Table 2: Regression model of GDP on Export, Import and Unemployment for Indonesia
Regression Statistics
Multiple R 0.98
R Square 0.96
Adjusted R Square 0.94
Standard Error 34813043160.21
Observations 9
ANOVA
d
f SS MS F Significance F
Regression 3 1.45117E+23 4.84E+22 39.91275 0.000645868
Residual 5 6.05974E+21 1.21E+21
Total 8 1.51176E+23

9EVALUATION OF BELT AND ROAD INITIATIVE PROJECT
Coefficients
Standard
Error t Stat P-value Lower 95% Upper 95%
Intercept 1.32006E+12 1.84642E+11 7.15 0.001 8.45421E+11 1.7947E+12
Export 6.456416878 1.571610196 4.11 0.009 2.416464257 10.4963695
Import -4.821788462 1.562081146 -3.09 0.027 -8.837245882 -0.806331042
Unemployment -1.71972E+11
2631808800
9 -6.53 0.001 -2.39624E+11 -1.04319E+11
From the model the R square value is obtained as 0.98. The associated R square value indicate
goodness of fit of the estimated model. The model can be said as a good fit model as the three
explanatory variables (export, import and unemployment) together explain 98 percent variation
in GDP of Indonesia. The coefficient of export is positive indicating export has a positive
relation with GDP that is GDP of Indonesia increases with increase in export. For import and
unemployment, the coefficients are negative implying both the variables have an adverse effect
of GDP of Indonesia. With more and more import, GDP of Indonesia declines. Similarly, with
increase in incidence of unemployment, there is a decline in GDP. All the three explanatory
variables are statistically significant (p value less than 0.05) The model has an overall,
significance as obtained from the significant F value.
Singapore
Table 3: Regression model of GDP on Export, Import and Unemployment for Singapore
Regression Statistics
Multiple R 0.97
R Square 0.95
Adjusted R Square 0.92
Standard Error 12234157114.58
Observations 9
ANOVA
d
f SS MS F Significance F
Regression 3 1.38E+22 4.62E+21 30.83446 0.001190682

10EVALUATION OF BELT AND ROAD INITIATIVE PROJECT
Residual 5 7.48E+20 1.5E+20
Total 8 1.46E+22
Coefficients Standard Error t Stat P-value Lower 95% Upper 95%
Intercept 1.82311E+11 1.3257E+11 1.375 0.227 -1.58471E+11 5.23093E+11
Export 0.200755083 1.576510269 0.127 0.904 -3.851793577 4.253303743
Import 0.150662284 1.649821179 0.091 0.931 -4.090338072 4.39166264
Unemployment -27694281594 18161722832 -1.525 0.188 -74380476411 18991913223
From the model the R square value is obtained as 0.97. The associated R square value indicate
goodness of fit of the estimated model. The model can be said as a good fit model as the three
explanatory variables (export, import and unemployment) together explain 97 percent variation
in GDP of Singapore. The coefficient of export is positive indicating export has a positive
relation with GDP that is GDP of Singapore increases with increase in export. For
unemployment, the coefficient is negative implying has an adverse effect of GDP of Singapore.
With increase in unemployment, there is a decline in GDP. The model has an overall
significance, as obtained from the significant F value.
Vietnam
Table 4: Regression model of GDP on Export, Import and Unemployment for Vietnam
Regression Statistics
Multiple R 0.997
R Square 0.995
Adjusted R Square 0.991
Standard Error 3803730389.942
Observations 9
ANOVA
d
f SS MS F Significance F

11EVALUATION OF BELT AND ROAD INITIATIVE PROJECT
Regression 3 1.31326E+22 4.38E+21 302.5579 4.5166E-06
Residual 5 7.23418E+19 1.45E+19
Total 8 1.32049E+22
Coefficients Standard Error t Stat P-value Lower 95% Upper 95%
Intercept 65420764979 17715797651 3.693 0.014 19880857334 1.1096E+11
Export 1.777881702 0.603970883 2.944 0.032 0.22532512 3.33043828
Import -1.11729891 0.648810164 -1.722 0.146 -2.785118533 0.55052071
Unemploymen
t rate 2915291002 9532410660 0.306 0.772 -21588550690 2.7419E+10
From the model the R square value is obtained as 0.99. The associated R square value indicate
goodness of fit of the estimated model. The model can be said as a good fit model as the three
explanatory variables (export, import and unemployment) together explain 99 percent variation
in GDP of Vietnam. The coefficient of export is positive indicating export has a positive relation
with GDP that is GDP of Vietnam increases with increase in export. For import and
unemployment, the coefficients are negative implying both the variables have an adverse effect
of GDP of Vietnam. With more and more import, GDP of Vietnam declines. Similarly, with
increase in incidence of unemployment, there is a decline in GDP. The overall significance of the
model has been established from the significant value of F statistics.
Comparison of Pre and Post BRI period
In the previous section, four significant regression model has been developed fir
modeling GDP and economic growth of the four chosen countries. After having the impact of
concerned variables on GDP, the potential effect of BRI can be measured through the impact of
the concerned project on export, import and unemployment rate. The Belt and Road Initiative has
been undertaken in the year 2013. By comparing the movement of these factors before and after