Will the Belt and Road Initiative succeed?
Although China introduced its ambitious mega infrastructure initiative, called Belt and Road Initiative (BRI), which can be termed its dream project, before the world in 2013, it seems that the same could turn out to be a nightmare for the dragon. The first conference of the BRI Forum was called in 2017. More than 100 countries participated, and it was thought that China was getting overwhelming support for the initiative from the rest of the world.
India boycotted that conference, as the China-Pakistan Economic Corridor (CPEC) being built through Pakistan-occupied Kashmir (PoK) was being projected as a part of BRI. However, when the second conference of the BRI Forum was organised in the last week of April 2019, again boycotted by India, a lot of apprehensions were expressed and questions were raised about several aspects of this project. China’s confidence was seemingly shaken this time. Experts across the world have started raising questions about the feasibility of this project.
What is BRI?
The Belt and Road Initiative is intended to give a boost to international trade by improving connectivity between different countries through road, rail and maritime routes. The proposal is being linked to the historical ‘Silk Road’, which the Chinese claim was first developed by the Han dynasty nearly 2,000 years ago. Apart from this, BRI will pave the way for a number of corridors in the world. In this initiative, there is the Silk Road Economic Belt, which would connect China with central and south Asia, and subsequently with Europe. Along with this there will be a new maritime ‘Silk route’ which would connect China with South East Asia, the Gulf countries, East Africa and Europe. Six economic corridors are being planned to connect other countries with this belt and road. How far this initiative will fructify and what shape it will take is still being talked about.
Countries which are proposed to be partners in BRI account for nearly one-third of the GDP and international trade of the world, while two-third of the world’s population lives in these countries. Up to 25 per cent of the population in many of these countries lives in poverty. In the absence of infrastructure, resources in these countries are not fully utilised, and therefore their development is impacted. It is being claimed that development of infrastructure would reduce constraints to trade, and therefore the condition of people in these countries may improve.
It is being said that the project would not only improve road, rail and maritime connectivity between different countries, but it would also make transportation of goods easier, cheaper, and faster. At present it takes nearly 30 days to take goods from China to central Europe by the sea route. This time would be reduced by half through the rail route. When it takes longer to deliver goods from the factory to the destination, obviously it poses an impediment to trade. The supporters of BRI claim that it would encourage growth in the world through trade. The success of BRI would make trade easier in different corridors of the world, they claim.
As per the proposals, nearly 70 countries, including China, are expected to participate in BRI. Since the project has not taken shape fully, it is difficult to conclusively estimate how much investment would be required for it. However, a broad estimate says that investments in BRI may total $1,000 billion to $8,000 billion. Apart from this, there will be investments from governments in different countries and also the private sector. All said and done, the total investment is expected to be so big that nobody is ready to say anything about the financial part of the project.
However, the benefits expected from BRI would not be easy to realise. Even if the transportation of goods through road, rail and maritime routes is facilitated, there is no guarantee that trade will improve automatically. Research by the World Bank shows that trade may remain inhibited due to a host of reasons. Building so much infrastructure needs several trillion dollars of investment, which China cannot make on its own. Moreover, the project looks too risky for other countries to finance it.
Most of the countries where the infrastructure is supposed to be built are so weak economically that they would be excessively dependent on other countries, including China. The proposed borrowing for the projects may increase their debt burden. The World Bank says that the debt/GDP ratio of the poorer BRI countries may impact their sovereignty. For this reason they are scared of participating in BRI.
According to the World Bank, in most of these BRI countries, legal systems are too weak to protect the rights of investors. To make this mega project take off, these countries may have to make structural changes, which will not be an easy task.
Danger of Debt Burden
Generally, sovereign nations decide to undertake infrastructure projects on their own. However, when these decisions are taken under the influence of other (powerful) countries, it may impact their sovereignty, as they might have to compromise on their national interests. One such example was seen in Sri Lanka recently. When China undertook the construction of Hambantota port in Sri Lanka, resulting in billions of dollars of debt on Colombo, the latter had to surrender its port to China on a 99-year lease.
India has boycotted BRI from the beginning, saying that it might take the debt burden of most BRI countries to unsustainable levels. However, the major cause of India’s opposition has been the CPEC being constructed by China through Pakistan-occupied Kashmir (PoK). India has said, “We are of the firm belief that connectivity initiatives must be based on universally recognised international norms, good governance, rule of law, openness, transparency and equality.
Connectivity initiatives must follow principles of financial responsibility to avoid projects that would create unsustainable debt burden for communities; balanced ecological and environmental protection and preservation standards; transparent assessment of project costs; and skill and technology transfer to help long-term running and maintenance of the assets created by local communities. Connectivity projects must be pursued in a manner that respects sovereignty and territorial integrity.” This Belt and Road Initiative was introduced to the world with much fanfare. However, the cold response of most large and rich countries, especially those from where major investment was expected, is raising questions about the likelihood of success of this initiative.
Dr. Ashwani Mahajan
Associate Professor, PGDAV College, University of Delhi
Email: ashwanimahajan@rediffmail.com