The Belt and Road Initiative and “Restored” Globalization
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By Farizal Razalli

The Belt and Road Initiative and “Restored” Globalization

May. 29, 2017  |     |  0 comments


The Belt and Road Forum for International Cooperation concluded in May 2017 in Beijing, China. Critics continued to deliberate on the Belt and Road Initiative (BRI) and are expected to do so in the many months and years to come. As with other initiatives, the BRI is not spared from negative, sometimes harsh, criticism from different quarters, both from countries along and outside the BRI routes.


India, for instance, has criticized the initiative as China’s latest geopolitical ploy, and consequently was officially absent from the Forum. The United States of America, still wary about China’s motives behind the initiative, decided only to send a small last-minute delegation of observers to the Forum.


On a general note, the fact that the BRI provokes varying responses from the global audience demonstrates clearly how the BRI matters a great deal to the world. Subsequently, criticisms take their course on two premises: China, the creator of the BRI, and the plausibility and sustainability of such an ambitious initiative. This article views the second premise as more critical and relevant as it allows one to appreciate and experiment with data and concrete observations based on the tangible achievements of the initiative.


On the contrary, by focussing on China and its motives, one risks creating a “threat” narrative at the expense of the “peace” narrative while exaggerating fear that will culminate with perpetual distrust. Having said that, this article by no means analyzes the BRI solely based on its peaceful approach but more importantly on the impetus such a peaceful approach has on global development.


Development Politics Vs. Politics of Development


The BRI indeed is qualified to be the most ambitious plan the world has seen after the Marshall Plan in the aftermath of World War II. While it is still premature to make a direct comparison between the two, both the BRI and the Marshall Plan present a number of comparable statistics. The United States contributed 1 percent of its USD 1.3 trillion GDP to reconstruct 16 European countries under the Marshall Plan in 1948.


In comparison, China’s total pledged contributions to the BRI to date stand at slightly above 1 percent of China’s USD 11 trillion GDP. In nominal terms, however, the Americans’ contribution of USD 13 billion pales in comparison to the Chinese pledges of over USD 130 billion. Even if one were to take into account the present value of USD 13 billion (now worth of USD 112 billion), the Chinese BRI is still in excess by 16 percent compared to the US-sponsored Marshall Plan.


Figure 1.



Given the above statistics, opponents of the BRI might quickly cast doubt over China’s hegemonic intention to conquer the world, the same way the US became a superpower for the rest of the 20th century. Unlike American hegemony which received a warm welcome from many if not all countries, Chinese hegemony is not yet conceivable. Furthermore, these critics would link the BRI to the already strong footing of controversial Chinese investments across the globe in multiple sectors, thus painting a bleak and gloomy picture of the world under China’s domination. Unsurprisingly, there is much talk now about China’s redefining globalization à la façon Chinoise; the world is simply not ready to substitute the fork-and-spoon for chopstick etiquette!


While such criticism might warrant some caution, such caution should not necessarily lead one to the same conclusions as the opponents. Those who strongly believe in great power politics — including those who liken China’s BRI to the US Marshall Plan in expanding China’s power base and influence — need to be cognizant of the context and the environment in which these two initiatives unfolded. Meanwhile, Occidental skeptics who cannot bear seeing emerging Oriental powers need to start learning about parity and co-existence. A winner in a race is always on relative terms — never absolute — hence the only parity comes from win-win cooperation, in this case between global actors.


When President Xi Jinping first mooted the BRI concept during his state visits to Indonesia and Kazakhstan in 2013, the idea was viewed as very much as his political vision, especially in setting the direction for his new leadership mandate. Xi proceeded to concretize his visionary idea by setting up a dedicated Silk Road Fund with an endowment fund of USD 40 billion (relatively the size of the Serbian economy) in 2014. Xi became more serious in pursuing his vision when China began throwing up the idea of establishing multilateral funding institutions — namely the Asian Infrastructure and Investment Bank (AIIB) and the BRICS New Development Bank — between 2014 and 2016. Tying all these institutions together will conclusively lead us to recognizing one fact — Xi is serious about his vision.


Rather than being suspicious of the huge financial clout of these institutions as being a function of China’s strategic geopolitical plan, this article is more inclined toward assessing China’s raison d’être for investing tremendously in these institutions. By framing the question in this manner, this article parts ways from the clichés of prejudice and the predetermined bias of the great powers’ interests driving their respective behaviors. This article argues that the BRI is an outright manifestation of China’s own and observed experiences with national and global developmental gaps.


The vision is thus called an “initiative” suggesting requirements beyond just monetary terms but more importantly knowledge and expertise in implementing real developmental projects. It then makes sense why Xi only convened the Forum four years after launching the BRI. Xi understood the need for building the blocks gradually through putting in place necessary institutions (e.g. AIIB), engaging partners (e.g. the IMF and the World Bank, which were present during the recent Forum), and amassing critical initial funds (e.g. its contribution to the Silk Road Fund).


Infrastructure Development as Cornerstone of the BRI


Xi’s BRI is a focused initiative. It addresses the key bottleneck to prosperity and growth: infrastructure development. At a glance, the Marshall Plan did exactly the same thing in Europe. However, while the Marshall Plan specifically reconstructed the then war-ravaged European economies, the BRI is constructing infrastructure in some of the world’s poorest economies. The great difference here is the BRI, unlike the Marshall Plan, is expected to develop economies from scratch in places where basic economic infrastructure has been absent altogether.


Such poor infrastructure echoes China’s own national experiences during the 1990s. Hitherto, China suffered poor infrastructure investments in power and telecommunications. As the government embarked on infrastructure upgrades between the late 1990s and 2005, some 100 million Chinese began to enjoy better standards of living. Between 2001 and 2004, rural Chinese saw more than 50 percent annual growth in rural road investments which helped narrow the urban-rural development gap. The government was convinced that infrastructure investment needed to be enhanced to ensure a smooth running modern economy.


China’s concern with infrastructure is well quantified by the data. Based on various studies by the Organization for Economic Cooperation and Development in 2006, 2007 and 2012, the global demand for infrastructure is well over USD 80 trillion until 2030. This gives an average of USD 3 trillion of investment in infrastructure per annum or slightly above 4 percent of the world’s GDP.1 These figures only concern physical infrastructure, like roads, power plants, ports, and railroads. When social infrastructure like health, education, and green infrastructure are included, the figure may increase to between USD 3.5 to 5 trillion per annum.


Figure 2.


This article argues that it is imperative to underscore the BRI’s strong emphasis on infrastructure development as this is its core approach to promoting regional integration, empowering the poor, facilitating trade and investments, as well as bringing people to a global market that offers not only financial capital but knowledge and cultural exchanges, skills enhancement, and technology and innovation. It may sound ambitious but this is what is extremely lacking in today’s version of globalization. If the BRI were to rewrite history, it will be how it “restored globalization.”


Redefining Globalization


The globalization we know today has predominantly been defined by financial markets. Financial capitalists determine what, where, and how capital will circulate in the global economy. With advances in information technology, such control by capitalists — more often than not, western capitalists — has become even stronger and more efficient, with global capital flows being conveniently managed from several key locations at a stroke of the keyboard. The rise of financial technology (fintech) makes it possible to link up all the different economies regardless of their geographical locations.


Nonetheless, this very same world experiences one shock after the other, as financial crises affect not only the developing but also the developed world (the European debt crisis); poverty emerges in not only poor but also rich countries; unemployment increases as a result of poor and inflexible skill and educational training programs; and governance inefficiency arises due to corruption and unethical behavior from the top leadership to the bottom. To be fair, financial capitalists have not necessarily caused all the aforementioned calamities, but their obsession with the capital market and its fundamental role in any country’s assured path to success may be blamed.


The rule of the game is clear: to be successful in the global economy, one has to undertake necessary prescribed market reforms that almost naturally shocks domestic political and social institutions, especially in fragile political systems in underdeveloped countries. Failing to undertake these reforms will often diminish the chances of seeing the needed capital inflows from the so-called global financial community.


What President Xi is imagining through the BRI is not to sabotage the financial capitalists nor to render them obsolete. Rather, the BRI invites everyone to take a step back and to temporarily loosen up their complex and sophisticated financial market reforms and focus instead on the basics. Hence, Xi reinvigorates history to remind us how human development and progress is not an overnight process (the ancient silk road spanned over thousands of years). Patience, endurance, and perseverance are key to achieving a prosperous economy and more importantly, sustainable development. It makes no sense to talk about trade and investment, therein implementing structural reforms, when the basic infrastructure that facilitate trade and investment, like functioning ports and reliable roads and railways, are not in place.


Take the Gwadar port construction in Pakistan as an example. It was a dream the Pakistani government has had since a decade ago when Pakistan, with the help of Singapore, planned to construct a deep-water port in Gwadar. Nevertheless, the plan failed, and after Singapore pulled out of the project, China stepped in. Packaged as part of the China-Pakistan Economic Corridor (CPEC) under the BRI, the USD 25 billion Gwadar port construction project also includes coal-fired, wind and solar power stations which altogether contribute to some USD 35 billion of energy-related investments under the CPEC.


The project is politically important for Pakistan as the development of Gwadar, one of the country’s poorest regions, means lifting thousands out of poverty through job creation pre- and post-project construction, unleashing Gwadar’s potential in sectors like tourism and hospitality, and enhancing national security, as an economically developed Gwadar can effectively put a check on the existing transnational smuggling of goods from the neighboring Iran, as well as potentially curbing civil unrest in the nearby region of Kashmir.2


Potential Good Faith Masked in Regional Rivalry


Critics of CPEC, notably India, strongly argue that the BRI is the overarching framework for China’s grand strategy to intrude into their spheres of influence. China’s appetite for Gwadar is strategically embedded in China’s geopolitical interest to get better access to the Arabian Sea. Such access is crucial for both military and geo-economic reasons, for China can flag its naval superiority in the Indian Ocean region and thus create a potential clash with other powers, namely India and the United States of America.


While such a typical “threat” based narrative might hold water in its own right, it remains speculative and heavily contentious. Assuming New Delhi invests in such a narrative, it is not surprising why the largest democracy on earth has barely achieved equivalent, if not higher, economic numbers compared to those of the world’s largest communist country.3


Being the key player in the sub-region, India could have played the role China is currently playing in elevating the level of development in her neighboring countries. Unfortunately, India has not done so but is instead entangled in continued politico-strategic skirmishes with her neighbors, namely Pakistan, Sri Lanka, Bangladesh, Myanmar, and of course China. The South Asian sub-region remains one of the world’s most impoverished and the World Bank has identified it as a development paradox. Although South Asia has attracted enough global attention for rapid economic growth, it is home to the largest concentration of people living in debilitating poverty and social deprivation. While the BRI cannot address this entire paradox, little by little, with strong consistency, its infrastructure investment focus can tackle the developmental gap between the leading and lagging regions in South Asia.


Conclusion


Given the BRI’s ambitions, there is a limit to what China can offer, particularly the monetary sponsorships for sustaining the project. The idea is to spark the initial stage and to accumulate more contributions from the rest of the global society over the years as the BRI itself is a long-term development initiative. The spillover effects from the various key initial projects across the routes are expected to feed new capital needed by future projects, thus making the whole initiative sustainable over time.


Meanwhile, the socioeconomic benefits accrued from the successful infrastructure developments are expected to spur economic efficiency and good governance at home, making it possible to improve economic efficiency and governance at the regional and global levels. Although all these ideal achievements may not entirely remove conflicts across the globe, the aggregate effects of peace through those achievements could be enough to prevent large-scale global catastrophes.


China, through the BRI, is simply offering its hands to assist those in need of development to grow. These needy countries have long suffered the ignorance and ego of the present developmental approach. It is a responsibility that China is trying to make given its position in the elite echelon of global economic powerhouses. Allowing China the chance to undertake its responsibility and to offer its share of experience and expertise does not at all deny the role of the de facto global players namely the United States and Japan.


If only, for once, the world can measure China’s actions through a non-strategic and confrontational lens, we could perhaps see positive impacts coming out of the BRI as a result of our being positive in our thoughts. Many of the problems we now find having to solve today come from negative thinking fueled by overly exaggerated suspicions. We need to learn to stop doing that for the sake of a better and prosperous future.


Notes


1. Inderst, G. (2016, January). Infrastructure Investment, Private Finance, and Institutional Investors: Asia from a Global Perspective. ADB Working Paper Series(555), 5-6.


2. Interview with senior Pakistani diplomat, September 23, 2016.


3. A snapshot on China-India economic figures clearly puts China far ahead of India. With equally populous population, China, in 2015, produced GDP (current USD) worth of USD 11 trillion compared to India with USD 2.1 trillion. The Chinese are not only more productive than the Indians but also more prosperous at USD 7,900 GNI (current USD) per capita vs. India’s USD 1,590. Even China is outdoing India on the poverty score where only 1.9 percent of the former’s population live at USD 1.90 per day (2011 PPP) as opposed to the latter’s 21.2 percent population (based on the latest available data by the World Bank database).

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