Interview

'Rivers of Iron': Changing the Face of Asia
'Rivers of Iron': Changing the Face of Asia
No items found.

October 7, 2020

Mike Lampton's full interview – fascinating and important.

‘This is going to change the face of Asia.’

Malcolm Riddell: ‘Mike, great to have you here today, and I am very excited about your new book Rivers of Iron.’

  • ‘Could you lay out what it's about and what the purpose is?’

Mike Lampton: ‘Well, the book is about an enormous effort that China in conjunction with eight Southeast Asian countries is making to build a high speed and conventional rail system that will knit China, particularly Southern China, into the Southeast Asian economic network.’

  • ‘China's talking about building three trunk lines from Southern China – Kunming - down to Singapore by three routes.’
  • ‘These would cross seven countries directly in Southeast Asia.’
  • ‘Different components of the different lines will have somewhat different speeds, but they will all have a consistent standardized system.’
  • ‘Each of these trunk lines would be longer than the U.S. transcontinental railroad.’

‘We’re talking about seven countries plus China, and also there's another project that China has with Indonesia.’

  • ‘So you could say eight countries plus China, and each country is its own story.’

‘Laos will have the railroad through to the Chinese border by 2021.’

‘The big question mark now is the line from Kuala Lumpur to the Thai border.’

  • ‘By probably 2026-2027, it will extend to the Thai border with Malaysia.’
  • ‘So I'm, I'm almost a 100%sure there’s going to be a line to the Thai border.’

‘I'm 90%+ sure that it won't be too long before it gets at least to Bangkok.’

  • ‘I think it will be to Bangkok easily by 2027.’
  • ‘Bangkok sees itself as sort of the equivalent to the Chicago's role in America, sort of a hub and for both transportation East-West and North-South.’

‘At the same time, they'll also be building up from Singapore towards a Kuala Lumpur.’

‘Each country is its own complex story.’

  • ‘But each linkyou build makes building the next flank more valuable.’
  • ‘This is one of those things where momentum gathers at each stage.’

Origin of the Idea

‘It would be easy to think that this idea came from Xi Jinping and his promotion of the Belt and Road Initiative [BRI],but actually that's not the case.’

  • ‘This idea of connecting Southeast Asia to China by railroads was actually a French colonial and British colonial undertaking in the late 1800s and early 1900s. And later the Japanese wanted to do it too.’

‘But what's happened now is that Southeast Asia is rich enough to contemplate such infrastructure and that the Chinese have the technology, money, and high-speed rail industry so that they can both finance or help finance and build it.’

  • ‘So this is not an imposition of a Chinese idea on Southeast Asia, but a Southeast Asian idea that the Chinese have sort of jumped on the train that Southeast Asia started.’

‘This is going to knit togetherSoutheast Asia’s major cities.’

  • ‘It's going to direct the flow of people, capital and goods North-South.’

‘It's part of a conception China has of itself as the economic hub and the goods and people and ideas and information are going to flow North-South.’

  • ‘The overall conception from China's viewpoint is to build a flow of goods and people, and pathways for these flows that lead to China.’

‘It includes not only the railroads, but highways, maritime routes, cyber routes, and so forth. It’s a very comprehensive vision.’

  • ‘This book looks at the just railroad component.’

‘This undertaking is a lot farther along than many people recognize.’

  • ‘While it might take decades for this to be fully realized, by 2027 there will be at least one line that reaches Singapore.’

Reactions from Southeast Asian Countries

Malcolm: ‘That’s amazing. You said it goes across a number of Southeast Asian countries.’

  • ‘How are each of these countries dealing with the project politically?’

Mike: ‘That’s one of the core questions in the book.’

  • ‘Not all of these seven Southeast Asian countries respond the same way.’

‘On one end of the continuum is Vietnam.’

  • ‘Vietnam is the most skeptical because they are very worried about the security implications of knitting themselves too closely with China, with which they have current maritime conflicts and historic problems in dealing with each other.’
  • ‘And Vietnam is afraid of being overwhelmed by goods coming in from China.’

‘On the other end of the continuum, you have countries like Thailand, which has better relations with China. The United States until very recently was putting pressure on Thailand because of its military government, and Thailand was turning to China for support.’

  • ‘Malaysia, under Mahathir and now under the current government - and indeed the government even before Mahathir - was very much hopeful that they could kickstart their economy by hooking up to China.’
  • ‘Singapore wants to hook up with China even more than it already does, but it also wants to keep its military ties to the United States for security purposes.’

‘Each of these Southeast Asian countries is balancing its security fears with its economic desires to hook into the Chinese economic juggernaut.’

East-West Versus North-South

Mike: ‘Countries like India, like Japan, and indeed like Singapore itself would like to balance this North-South dependence on China with East-West connectivity.’

  • ‘India is talking with Thailand, Myanmar, Cambodia, and Vietnam about building East-West connectivity to the coast and then up the Pacific Ocean to Japan and Korea.’

‘The larger game is who's going to build out the North-South connectivity versus the East-West.

  • ‘So there's a very interesting geopolitical game going on.’

‘The Southeast Asians would like to get all the money they can from China to do this.’

  • ‘And they would also like to get all the security and investment they can from Japan, the United States, and from the involvement of India.’

Financing

Malcolm: ‘How are these projects going to be financed?’

  • ‘We've heard so much about Chinese financing methods and the kinds of deals that have been cut. Is there a concern about “debt-trap diplomacy”?’

Mike: ‘That’s been the outcome in some cases with China's building railroads in Africa and trying to build them in Latin America. So this concern isn't limited to Southeast Asia.’

  • ‘There've been some unhappy experiences of too much debt and too little revenue-flow to poor countries.’

The seven countries I'm looking at are at very diverse economic levels.’

  • ‘Singapore has no problem financing its relatively short link in this ultimate chain.’
  • ‘Thailand originally wanted to borrow money from China, but China was charging them more interest than China charged Indonesia. So Thailand said, well, we'll just do it ourselves rather than pay your exorbitant interest.’

‘On the other hand, a country like Laos with only 7 million people and a very small GDP is in effect undertaking a project that is half its GDP.’

  • ‘It is indebted in ways that are not entirely clear to outsiders. It's not very transparent.’
  • ‘The Laotians express a very great deal of worry about the degree of debt and obligation they've undertaken.’

‘But, from their viewpoint, they don't really have a choice.’

  • ‘If China doesn't go through Laos, it's going to go through Myanmar to the West or Vietnam to the East.’

‘And the worst fate for Laos is to be left out of the whole thing.’

  • ‘So they've just sort of taken a leap of faith and borrowed and hope it's going to pay off.’

‘Each of these countries is an interesting story. Each has different capabilities.’

Balanced Connectivity

‘In the long run,I think the U.S. should not be of the mind that this is a bad development. Look at what the transcontinental railroad did for the U.S.’

  • ‘It built up the cities along the pathways.’
  • ‘It opened up our midriff of our country to export goods - agricultural and industrial - to the Pacific.’
  • ‘It made us a Pacific power.It allowed us to move across the Pacific.’

‘This connectivity idea is a driving force in development.’

  • ‘And rather than oppose, we ought to be figuring out how we can participate in it.’

‘I don't mean participate necessarily in BRI.’

  • ‘But we can work with the Japanese and the Australians and the Koreans, and probably the EU countries to build what I would call balanced connectivity in this region.’

‘Southeast Asia has a rapidly growing middle class. Per capita GDP going up quite substantially. A growing population of young, dynamic people. This is really a frontier area for the global economy.’

  • ‘I wouldn't want to just cede this to China because we're either unaware or not sufficiently entrepreneurial.’

Malcolm: ‘Why do you think the U.S. is not participating in the ways you're talking about?’

Mike: ‘First of all, of course, there is the difference that China has an industrial policy enforced by a strong central government.’

  • ‘It can in effect tax its own people and invest money where it wants.’
  • ‘China made a determination to make itself a regional power, and they can direct investments through their state enterprises into such infrastructure.’

‘The U.S.,of course, for the most part, is a private economy.’

  • ‘The central government can't tell shareholders where they ought to want to put their money. And so that's a problem.’

‘China controls the banks and therefore the allocation of credit in China to a substantial degree.’

  • ‘That's, generally speaking, not true in the United States.’

‘China's government is forcing on its people a priority for developing infrastructure in, say, Laos, rather than meeting the health care needs of Chinese people.’

Pushback in China

Malcolm: ‘I've heard there's some pushback there in China because of this.’

  • ‘How is that going to have an impact?’

Mike: ‘You’re seeing the Chinese already get tougher on their deals and more selective because they're getting criticized at home for spending money on, let's say, economically unsound projects.’

  • ‘Or ones that are built, like in Pakistan, that are insecure in physical security.’
  • ‘I've heard the Chinese have even mentioned they've thought about hiring Blackwater to protect their workers on some of these projects.’

‘In U.S.,if we’re going to have money to spend on these sorts of projects, we have to tax either current taxpayers or pass bonds that tax future generations.’

  • ‘And we're more limited in our capacity either to direct the companies or to finance the operations.’

‘This having been said, the U.S. in 2018 passed what was called the Build Act, which has empowered a new version of the Overseas Private Investment Corporation.’

  • ‘I think they've thrown about $60 million in this direction - a lot more than we used to, but it's so little that it’s just kind of irrelevant.’

‘The U.S. is also working with what's called the Blue Dot Network.’

  • ‘That includes Australia and Japan to try to build a kind of concerted effort to at least get involved in the infrastructure game in Asia.’

Problems

Malcolm: ‘What problems are these projects encountering?’

Mike: ‘There are and are going to be legion problems.’

  • ‘You already have huge corruption problems in Malaysia – in part involving land development relevant to where the railroad would have a terminus.’
  • ‘The Chinese bring in workers, and then they don't always get along very well with the locals. Or locals resent local labor not being hired and Chinese being brought in instead.’
  • ‘Environmental problems, big; displacing local people, big.’
  • ‘So you're going to read a litany- you can already read it a litany of all the problems - and that's true.’

‘But if you look at the building of the transcontinental railroad, there were all sorts of problems there to.’

  • ‘Probably the biggest corruption scandal the U.S. ever had.’’

‘My point is that is happening, and it's going to be transformative.’

  • ‘It's going to be messy. It is messy. It's going to be ugly. People are going to get hurt.’

‘But this is going to change the face of Asia.’

Conclusion

Malcolm: Anything else you want to tell us about your book or about the project?’

Mike: ‘No, but I just hope people enjoy it.’

  • ‘We’ve tried our best to make it very readable and user friendly.’

‘It's based on interviews. So there are lots of opportunities to hear what people from all of these countries have to say about this project - and it's not all great praise.’

  • ‘On balance,I think readers will get a sense of the texture and forward movement that's ongoing.’

‘And as the U.S. deals with all its problems domestically and abroad, we’ve got to keep our eye on the ball, on the big forces changing the world. And this was one of them.’

Malcolm: ‘From the parts I've read, it's terrific.

  • ‘Mike, thank you so much for taking the time to talk to us.’
more
Interview

Columbia University

Shang-Jin Wei

Professor, Columbia University & former Chief Economist, Asian Development Bank

Why China's Economy is Growing Faster than Others

Aug 27

European Union Chamber of Commerce in China

Joerg Wuttke

President, European Union Chamber of Commerce in China

The Chinese Communist Party Fears Ending Up Like the Soviet Union

May 20

Harvard Kennedy School of Government

Tony Saich

Professor, Harvard Kennedy School of Government

The Party is Infallible

May 13

U.S.-China Business Council

Craig Allen

President, U.S.-China Business Council

The Phase One Trade Deal

May 6

Center for Strategic and International Studies (CSIS)

Bonnie Glaser

Director of the China Power Project

South China Sea & Taiwan

May 2

Federal Reserve Bank of Richmond

Tom Barkin

President & CEO, Federal Reserve Bank of Richmond

Why Inflation Should Not Be A Problem

Apr 29

Harvard Asia Center

Bill Overholt

Senior Fellow at Harvard Asia Center

China, America, & the 'Jaws Syndrome'

Apr 25

Carnegie Endowment

Yukon Huang

Carnegie Endowment

Why We Need Stronger Global Institutions

Apr 22

Center for Strategic and International Studies (CSIS)

Bill Reinsch

Senior Adviser and Scholl Chair in International Business

The Pandemic's Impact on Trade

Apr 18

University of Miami

John Quelch

Dean, Miami Herbert Business School at the University of Miami

The Pandemic May Increase China's Economic Strength vis-à-vis the U.S.

Apr 11