Time for a Reality Check on BRI-related Projects
China Development Bank and Deutsche Bank inked a memo to cooperate on projects. (Photo: Shutterstock)
By Tai Wei Lim

Time for a Reality Check on BRI-related Projects

Jul. 18, 2019  |     |  0 comments

In the first six months of 2019, China moved on a number of fronts in the Belt and Road Initiative (BRI). China Development Bank and Deutsche Bank inked a memo to cooperate on projects. Chinese banks also funded a water facility and infrastructure in Saudi Arabia. Many of these projects aimed to create a win-win situation with the recipients of the funds. However, there were some high profile issues highlighted in the international media that brought to mind challenges of the BRI.

Much of the commentators and observers’ focus is on China’s intent and also a range of explanation for Beijing’s interests in BRI projects ranging from finding external growth for a slowing domestic economy and to expending excess steel and coal brought about by a slowing domestic Chinese economy plus some conspiracy theories too. But Chinese national priorities alone cannot drive these projects. There needs to be reciprocity and resonance of the borrowers and/or investments/funding recipients too. It is built both theoretically and practically on the “win-win” format.

Many media observers and commentators have focused heavily on the role and motivations of China in forwarding BRI loans, investments and funding initiatives. However, there are emerging narratives about funding recipients’ responsibilities as well. Some observers and commentators are now arguing that BRI funding recipients must also do the homework themselves and evaluate their own national interests in the BRI projects and cannot rely or blame Beijing entirely if they do not materialize or capitalize to the full extent as envisioned. Planning and implementation in this sense cannot be divorced, following this narrative.

A “buyers’ beware” approach and due diligence must also come from funding recipients to evaluate the projects usefulness for their own countries. Homework and research must be carried out on the part of the funding recipients as well. As such, some narratives along this line are selected for brief analyses below, as BRI matures and shapes itself to become a major player in the world’s connectivity infrastructure construction. There emerge a plethora of voices in support of the BRI and also asking funding recipients to be more savvy in applying for projects. They should understand their own needs and not blame others for issues, challenges and problems when they arise.

Standing firm on principles as a strategy? Voices for BRI engagements continued to be heard in Europe. The prescription to guard against perceived or real BRI exploitation by China, according to this line of arguments, is to stand firm on contractual terms. That appears to be the main line of argument adopted by the European Union (EU). The EU member states are keen to negotiate with China on equal terms and adopt a common stance to prevent division by Beijing negotiators. The EU it feels must be cognizant of its strengths (since the EU is itself a premium model of economic regionalism) and insist on its upholding the European value system in commerce and trade.

EU experts feel the Europeans must adopt a common long-term position and perspective in order to stand firm when negotiating with Beijing. The Europeans are also standing firm on fair trade and wants to have reciprocity from Beijing for bilateral trade. They want a win-win situation rather than one in which China seeks out poor members of EU to cajole them into acceptance of terms more favorable to the Chinese rather than the Europeans. Some Europeans put on a fierce defense of their value systems when dealing with the Chinese. In other words, they are arguing that Europeans themselves should be upfront when emphasizing their interests in protect human rights when negotiating BRI projects with the Chinese and not sweep it under the carpet and then later air grievances in this area.

The Europeans are sensitive about any divide and conquer strategy since they have a traditional sphere of influence in the Central and Eastern European backyards. Thus, the EU is keen to stress on a united stance when negotiating with a bigger singular unit like China. In addition, for the Europeans, the Chinese political system and values are different from traditional European ones. Thus, they have to understand the system before engaging with BRI so that EU-Beijing economic relations can be a sustainable one. Given that the EU consists of a large number of component countries, its countries should take time to reach consensus on certain strategic issues before committing to BRI projects. This can ensure an optimal, sustainable and complementary relationship.

Others argue that the fact that BRI is not making tremendous profits and may have even slowed down Beijing’s engineering revenue indicated that China may be absorbing some losses from BRI commitments.

Democracy as a prescription in recipient countries? Others in support of the BRI argue that it is not the lender that is the issue but the borrower. Following this line of argument, it is necessary for the borrower to be prudent to gauge what is good for their national interests and items that are not. Thus the argument goes that democratic countries and political systems like Indonesia need to constantly reference the lessons of other countries to ensure a satisfying deal for its own economic interests. Some Indonesian commentators argue that Indonesian democracy is a safety net to prevent excessive dependence on investments from any single country.

Therefore, it becomes possible for them to negotiate good deals from the Chinese through the BRI. Free speech and public accountability, it is said, can be the necessary scrutiny through which Indonesia can guard against excessive granting of advantages to Chinese negotiators in the BRI. In the Jakarta-Bandung high-speed rail deal, it is said that public scrutiny allows Indonesia to guard against overzealous officials (right up to the cabinet level) in giving away too much rights for Chinese BRI funding. Sometimes, even investigative journalism in a democratic setting can reveal shady deals made.

Another natural defense mechanism is based on traditional guarded suspicions against perceived and actual cases of Chinese excesses in bargaining power. Both Indonesia and China can be sensitized to the potentially politically-sensitive role of ethnic Chinese in Indonesia since it has in the past caused riots and serious anti-ethnic Chinese sentiments. The Indonesians can convey firmly and diplomatically to the Chinese of the need for BRI investments to benefit all Indonesians instead of just select groups. This assurance needs to be in place both in reality as well as perceptions.

Even international organizations like the World Bank argues that country themselves need to carry out reforms on their own before they can truly benefit from China’s BRI-related investments. Continents like Africa need to prep themselves socio-politically and socioeconomically before BRI’s connectivity funding can benefit them. Individual countries need to formulate their own domestic strategies, especially poverty alleviation strategies in order to shore up domestic support, resources, consensus and societal level of comfort before borrowing or/and taking up BRI projects.

Most importantly, countries also need to do their own homework to examine the question of debt sustainability. This can avoid the situations of the oft-circulated “debt trap” stories related to Malaysia, Sri Lanka and others. These stories are both based on facts as well as a dose of selective newsworthy details. Blame for any problems and challenges, if you follow the above arguments of sticking to firm principles and democratic transparency and accountability, cannot be laid entirely on the lenders but also on the recipient parties. Perhaps, in this sense, it takes two hands to clap. Domestic systems of accountability and transparency must also be taken into account and implemented.

On the side of the Chinese, they are also slowing down BRI investments to take stock of lessons learnt from the experiences thus far. Others argue that the fact that BRI is not making tremendous profits and may have even slowed down Beijing’s engineering revenue indicated that China may be absorbing some losses from BRI commitments, thus debunking the idea that Beijing is profiting off others in BRI.

In all cases, whether parties are supporting or against BRI projects, it is important to develop objective evaluative criteria based on domestic conditions and an assessment of market forces to determine whether projects are feasible and in line with national interests as well as domestic inclinations. Only then will connectivity projects be sustainable, not just applying exceptionally to BRI but all funding opportunities.

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