Belt and Road Initiative

By Pratas Saharia.

The Belt and Road Initiative is a multi-nation infrastructure development and investment strategy adopted by the Chinese government with its purpose stated officially as, “To construct a unified large market and make full use of both international and domestic markets, through cultural exchange and integration, to enhance mutual understanding and trust of member nations, ending up in an innovative pattern with capital inflows, talent pool and technology database.”

BRI is the brightest indicator of the scale of China’s global ambitions. It has attracted interest from over 150 countries and international organisations in Asia, Africa, Europe, Middle East and Americas. This has been attributed to the fact that it meets the need of filling the void left by International Financial Institutions (IFI) as they shifted away from hard infrastructure development.

Formerly known as “One Belt One Road (OBOR)’, People’s Republic of China leader Xi Jinping originally announced the strategy in 2013. In the abbreviation, ‘Belt’ refers to the overland routes for road and rail transportation (also called “Silk Road Economic Belt”), whereas, ‘Road’ refers to the sea routes or the 21st Century Maritime Silk Road. It has been referred to as Belt and Road Initiative since 2016. Coinciding with PRC’s 100th anniversary, the Chinese govt has set 2049 as the targeted date for completion.

Objectives

The BRI’s potential lies in its multiple mapped out corridors for enhancing trade, foreign investments and living conditions for people in the countries that they connect. The initiative has a benign impact on all development projects undertaken as it is economically beneficial to all parties

Conceptualized as a strategy to develop productive outlets for domestic overcapacity and to diversify China’s foreign asset holdings, the initiative has taken a greater security profile over time. The access to ports around key waterways has strategic overtones though China’s approach to resolving debt, accepting payment in cash, commodities or the lease of assets in member countries is a key takeaway for nations opening up its markets.

China stands to benefit from all this as it will help develop its west and southern regions. Opening up of the border with Central Asia and lower obstacles to labour mobility will bring economic activity and development to the western and southern gateways of Urumqi and Kunming. And as the initial focus has been on infrastructure investment, construction materials, railway and highway, automobile, real estate and iron and steel, BRI has already covered an estimated 65% of the world’s population and 40% of the world’s GDP as of 2017.

Regions

The Belt and Road Initiative as we know has the potential to connect many countries across the world cutting across regional and continental lines. Here we see that BRI has been divided into six main corridors:

• New Eurasian Land Bridge

• China-Central Asia-West Asia Corridor

• China-Pakistan Corridor

• Bangladesh-China-India-Myanmar Corridor

• China-Mongolia-Russia Corridor

• China-Indochina Peninsula Corridor

According to an article on Brookings Institute website, BRI opens up three new gateways: Khorgos for the New Eurasia Land Bridge, Kashgar for China-Pakistan Corridor and Kunming for the Bangladesh-China-India-Myanmar and the China-Indochina Peninsula Corridors.

Economic Impact

The historical Silk Road was a network of trade routes which connected the East and West, primarily referring to the land routes connecting East Asia and SE Asia with S. Asia, Persia, the Arabian Peninsula, East Africa and Southern Europe. It helped in the spread of exquisite silk from China while also facilitating the exchange of many goods and ideas, most notably: paper and gunpowder.

A similar exchange of goods and items and now, infrastructure serves the purpose of this “New Silk Road”, as has BRI often been nicknamed.

A few recent examples from countries which have had positive returns from the initiative are –

1) Ethiopia

Ethiopia’s Eastern Industrial Zone (EIZ) is a manufacturing hub outside Addis Ababa built by China and which remains under the control of many major Chinese companies. Though direct technological transfer has not taken place but there are hopes to create a new model of manufacturing coupled with infrastructural developments along the lines of developing economies.

Another significant part of the partnership between Ethiopia and China has been the construction of Addis Ababa-Djibouti Railway. Stretching 750 kilometres, thereby shortening the journey between Addis Ababa and Djibouti to 12 hours which hitherto took 3 days.

2) Djibouti

Djibouti is a prominent part of the Belt and Road Initiative and has been able to take up key infrastructural projects like the Doraleh Multi-Purpose Port and the Hassan Gouled Aptidon Internation Airport.

3) Kenya

The Mombasa-Nairobi Standard Gauge Railway connecting Mombasa to Nairobi has reduced travelling time to 4 hours from the previous 12. A massive 600,000 tons of cargo alone were transported in the first year of operation.

4) Sri Lanka

Colombo International Financial City, funded with $1.40 billion of Chinese investment is a special financial zone to be built on reclaimed land which is a symbol of the burgeoning soft power of China. Another significant investment by China to a member country like Sri Lanka under the BRI is the development of ports for commercial purposes, an example of which is the Hambantota Port which will be the largest in Sri Lanka, after the Port of Colombo, loaned with investments from EXIM Bank of the People’s Republic of China

5) Argentina

The Argentine-China Joint Hydropower Project is said to provide 5000 direct jobs and an additional 15,000 indirect jobs in building 2 dams on the Santa Cruz River in southern Argentina.

6) Pakistan

Pakistan occupies an important place in the scheme of things for China as it provides a mirror to the usefulness and practicality for the world, especially as scepticism persists over the Belt and Road Initiative.

With investments amounting to upwards of $60 billion, China-Pakistan Economic Corridor is to upgrade most of Pakistan’s dilapidated infrastructure with the construction of many transportation networks and special economic zones.

A special mention of Gwadar Port has to be made as this port in the province of Baluchistan forms the crux of CPEC and China’s BRI project. Iran has a lot to gain from the prospect of the functioning of this port because of the Iran-Pakistan gas pipeline. A floating liquefied natural gas facility is to be built which will mean a huge creation of jobs for the struggling labour unemployment scenario prevailing in Pakistan and also provide opportunities to both countries for cleaner fuel. Previous agreements were also made between India concerning the 3-way sharing of liquefied natural gas from Iran but due to sanctions imposed on the modern Persian state by the US administration, work is still underway to break ground.

Strategic significance:

United States of America in its quest for global economic and cultural dominance opened up lines of credit to a lot of different countries in the aftermath of the World War II and followed similarly in the ensuing decades.

The Marshall Plan in Europe had helped rebuild the continent and also promote free trade in the region to the benefit of the large American companies, an action which has been the precursor of total American soft power dominance that spread out through newly independent colonies of Asia and Africa.

Free market policies around the globe benefit countries open for business today but have its dependence on the American financial system which took roots after the imposition of US dollar as the standard medium of exchange.

The United States of America now controls most of the independent financial institutions such as the IMF, World Bank and large multinational corporations advocating freedom of monetary controls imposed by governments and its insistence on basic economic as well as physical infrastructure, most of which made possible by loans from American controlled lending institutions. This strategy of credit infusion as well as investment in the basic infrastructure of a country is the ideal behind Belt and Road Initiative.

Chinese companies and banks, state-owned or private, are lending out billions of dollars in credit to many countries in Asia, Central Asia and also the former Soviet states of Eastern Europe, thus creating a string of countries dependent on China. As a result, China has gained an upper hand and for thereby becoming able to influence the ruling governments on decisions favouring it.

Why is China doing it?

The answer lies in the Malacca Dilemma for China.

China is the world’s biggest oil importer. Almost 80% of China’s oil import from the Middle East and Africa pass through the Strait of Malacca which is roughly 12,000kms. It is a narrow stretch of nearly 900kms between the Malay Peninsula and the Indonesian island of Sumatra. Disputes regarding ownership of islands surrounding these waters are a source of conflict between China, Taiwan, Vietnam, Philippines and US which in case of hostility can result in an economic paralysis for the Chinese making it essentially very important for energy security.

Gwadar Port in Pakistan and Xinjiang province in China are only about 3000kms apart. Thus, making the development and functioning of Gwadar port an important strategic mission for the Chinese. It is cheap and time-saving as well as important from the perspective of China’s growing stature as an economic powerhouse while making overtures to countries who have previously been under the influence of erstwhile USSR. People’s Republic of China, with its huge energy needs, a burgeoning economy, large population and an eye towards gaining superpower status cannot remain isolated from inducing its influence on developing countries.

Criticisms

As it is with nature, human beings too take time to adjust to a new normal. After having seen colonialism for over 4 centuries across the world, we were subjected to a duopoly world order in which nation-states all over the world were subjected to an ideological divide from which it had to take sides and ensure its survival.

Similarly, after the dissolution of the former Soviet Union, the world order again shifted to a unipolar world where the United States of America by its sheer economic and military might became the harbinger of freedom. And now, the rise in China’s prowess has ruffled feathers in the ‘Old Gentlemen’s Club’ as a superpower from Asia will be a new addition to the modern political theory book.

Valid criticisms arise as we question the legitimacy of China’s indulgence in sharing its wealth amidst the slowing down of developed economies in the western world and Japan.

Some of which are:

1) Corruption

Belt and Road Initiative is a $1trillion project. But to take a detour and highlight the prevalence of corruption in China will be a practical beginning. Corruption in China occurs in the process of decision making, examination and approval, land acquisition and material procurement of the BRI projects. In African countries where most of the manufacturing takes place, there is no transparency or accountability, especially because of unstable administrative frameworks and lack of vigilance.

2) Political Intrusions

Opposition to China’s overtures in foreign countries are heavily stigmatised. This is in part because of the unitary system of governance in these countries where there are few to none prominent opposition voices and the role of media in protecting the interests of the state. Siphoning off funds for the projects is a common area of concern but more importantly, often political leaders are accused of toeing Beijing’s line on account of some benefits accruing to them based on welcoming investments from China.

3) Debt

Lucrative deals running in billions of dollars are a hallmark of the New Silk Road grouping, as BRI is portrayed by the Chinese state media. The investment in the creation of infrastructure of roads, railways, ports, airports, SEZs etc, while find acceptance in the deplored environs of many third world countries, but as all such investments are loans, we have to ask how they plan to repay them. Financial mismanagement is a prevailing social norm in these nations. Embezzlement, non-repayment of loans and inflation are issues plaguing them. So how will these nations manage to produce enough capital out of these structures to not attract defaulter status on their loans?

With many unanswered questions, this new investment initiative has started to catch up with under-performing economies, which has been surreptitiously called ‘debt-trap diplomacy’.

Illusion of development aside, countries such as Pakistan has given China tax-free occupancy of sites well into the future. This may augment well for the next elections; however, economic indicators hardly point to the pragmatic nature of their economy now. With development parameters in the doldrums, our next-door neighbour might end up becoming a satellite state of the Chinese empire in the future.

Conclusion

China is on the rise, whatever may be the timeline for it. Debates, discussions and disagreements may continue to defer the topic of the rise in a Sino-centric world order for the largely multi-polar world loving nation-states but China’s impact on global debates on climate change, environmental pressures weighed upon by the unfettered access to fossil fuels, terrorism, regime change, border disputes, historical interpretations of important events, the influence of institutions and their safeguards against state tyranny, the authority of international laws are some pointers that are of importance already.