Belt and Road Initiative- Challenges and Pitfalls


OBOR ( Credits- VOA)

One Belt and One Road Initiative or Belt and Road Initiative ( BRI) is a project by the Chinese government which involves the development of  a network of roads and ports transversing through the length and breadth of Asia and connecting Europe. A part of the road passes through Central Asia and reaches Europe. The flagship project under BRI is the China- Pakistan Economic corridor that connects China's restive Xinjiang province with the Pakistani port of Gwadar. BRI is the most ambitious project ever undertaken by a single country in recent years. 

So what is BRI:

The Silk Road Economic Belt and the 21st-century Maritime Silk Road, also known as the Belt and Road Initiative (B&R) and The Belt and Road (B&R), is a development strategy proposed by Chinese President Xi Jinping that focuses on connectivity and cooperation between Eurasian countries, primarily the People's Republic of China, the land-based "Silk Road Economic Belt" (SREB) and the oceangoing "Maritime Silk Road" (MSR). The strategy underlines China's push to take a larger role in global affairs, and the desire to coordinate manufacturing capacity with other countries in areas such as steel manufacturing.

It was unveiled in September and October 2013 in announcements revealing the SREB and MSR, respectively. It was also promoted by Premier Li Keqiang during the State visit in Asia and Europe. It was the most frequently mentioned concept in the People's Daily in 2016.

The Belt and Road initiative is geographically structured along 6 corridors, and the maritime silk road:

New Eurasian Land Bridge, running from Western China to Western Russia
China–Mongolia–Russia Corridor, running from Northern China to Eastern Russia
China–Central Asia–West Asia Corridor, running from Western China to Turkey
China–Indochina Peninsula Corridor, running from Southern China to Singapore
Bangladesh-China-India-Myanmar Corridor, running from Southern China to India
China–Pakistan Corridor, running from South-Western China to Pakistan
Maritime Silk Road, running from the Chinese Coast over Singapore to the Mediterranean

The coverage area of the initiative is primarily Asia and Europe, encompassing around 60 countries. Oceania and East Africa are also included. Anticipated cumulative investment over an indefinite timescale is variously put at US$4 trillion or US$8 trillion. The initiative has been contrasted with the two US-centric trading arrangements, the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership.
Bridging the 'infrastructure gap' in Asia and beyond

The Belt and Road Initiative is expected to bridge the 'infrastructure gap' and thus accelerate economic growth across the Asia Pacific area and Central and Eastern Europe: World Pensions Council (WPC) experts estimate that "Asia alone (excluding China) will need up to $900 billion in infrastructure investments annually in the next 10 years, mostly in debt instruments. This means there’s a 50 percent shortfall in infra spending on the continent."The gaping need for long term capital explains why many Asian and Eastern European heads of state "gladly expressed their interest to join this new [Chinese-led initiative] focusing solely on ‘real assets’ and infrastructure-driven economic growth".

Silk Road 

When Chinese leader Xi Jinping visited Central Asia and Southeast Asia in September and October 2013, he raised the initiative of jointly building the Silk Road Economic Belt and the 21st-Century Maritime Silk Road. Essentially, the 'belt' includes countries situated on the original Silk Road through Central Asia, West Asia, the Middle East, and Europe. The initiative calls for the integration of the region into a cohesive economic area through building infrastructure, increasing cultural exchanges, and broadening trade. Apart from this zone, which is largely analogous to the historical Silk Road, another area that is said to be included in the extension of this 'belt' is South Asia and Southeast Asia. Many of the countries that are part of this belt are also members of the China-led Asian Infrastructure Investment Bank (AIIB). North, central and south belts are proposed. The North belt would go through Central Asia, Russia to Europe. The Central belt goes through Central Asia, West Asia to the Persian Gulf and the Mediterranean. The South belt starts from China to Southeast Asia, South Asia, to the Indian Ocean through Pakistan. The Chinese One Belt strategy will integrate with Central Asia through Kazakhstan's Nurly Zhol infrastructure program.

Maritime Silk Road

The Maritime Silk Road, also known as the "21st Century Maritime Silk Road" is a complementary initiative aimed at investing and fostering collaboration in Southeast Asia, Oceania, and North Africa, through several contiguous bodies of water – the South China Sea, the South Pacific Ocean, and the wider Indian Ocean area.

The Maritime Silk Road initiative was first proposed by Xi Jinping during a speech to the Indonesian Parliament in October 2013. Like its sister initiative the Silk Road Economic Belt, most countries in this area have joined the China-led Asian Infrastructure Investment Bank.

East Africa, including Zanzibar in particular, will form an important part of the MSR after improvements to local ports and construction of a modern standard-gauge rail link between Nairobi and Kampala is completed.

In May 2014, Premier Li Keqiang visited Kenya to sign a cooperation agreement with the Kenyan government. Under this agreement, a railroad line will be constructed connecting Mombasa to Nairobi. When completed, the railroad will stretch approximately 2,700 kilometers (1677.70 mi.) costing around 250 million USD.

In September 2015, China's Sinomach signed a strategic, cooperative memorandum of understanding with General Electric. The memorandum of understanding set goals to build wind turbines, to promote clean energy programs and to increase the number of energy consumers in sub-Saharan Africa.

China Pakistan Economic Corridor

China–Pakistan Economic Corridor also known by the acronym CPEC) is a collection of infrastructure projects currently under construction throughout Pakistan. Originally valued at $46 billion, the value of CPEC projects is now worth $57 billion. CPEC is intended to rapidly modernize Pakistani infrastructure and strengthen its economy by the construction of: modern transportation networks, numerous energy projects, and special economic zones.On 13 November 2016, CPEC became partly operational when Chinese cargo was transported overland to Gwadar Port for onward maritime shipment to Africa and West Asia.

First Chinese ship arriving in Gwadar ( Credits- VOA)
China–Pakistan Economic Corridor also known by the acronym CPEC is a collection of infrastructure projects currently under construction throughout Pakistan. Originally valued at $46 billion, the value of CPEC projects is now worth $ 54 billion.CPEC is intended to rapidly modernize Pakistani infrastructure and strengthen its economy by the construction of: modern transportation networks, numerous energy projects, and special economic zones. On 13 November 2016, CPEC became partly operational when Chinese cargo was transported overland to Gwadar Port for onward maritime shipment to Africa and West Asia.

A vast network of highways and railways are to be built under the aegis of CPEC that will span the length and breadth of Pakistan. Inefficiencies stemming from Pakistan's mostly dilapidated transportation network are estimated by the government to cause a loss of 3.5% of the country's annual gross domestic product. Modern transportation networks built under CPEC will link seaports in Gwadar and Karachi with northern Pakistan, as well as points further north in western China and Central Asia. A 1,100 kilometre long motorway will be built between the cities of Karachi and Lahore as part of CPEC,[10] while the Karakoram Highway between Rawalpindi and the Chinese border will be completely reconstructed and overhauled.The Karachi–Peshawar main railway line will also be upgraded to allow for train travel at up to 160 km per hour by December 2019. Pakistan's railway network will also be extended to eventually connect to China's Southern Xinjiang Railway in Kashgar. The estimated $11 billion required to modernise transportation networks will be financed by subsidized concessionary loans.

Over $33 billion worth of energy infrastructure are to be constructed by private consortia to help alleviate Pakistan's chronic energy shortages, which regularly amount to over 4,500MW, and have shed an estimated 2–2.5% off Pakistan's annual gross domestic product. Over 10,400MW of energy generating capacity is to be brought online by the end of 2018, with the majority developed as part of CPEC's fast-tracked "Early Harvest" projects.[19] A network of pipelines to transport liquefied natural gas and oil will also be laid as part of the project, including a $2.5 billion pipeline between Gwadar and Nawabshah to eventually transport gas from Iran. Electricity from these projects will primarily be generated from fossil fuels, though hydroelectric and wind-power projects are also included, as is the construction of one of the world's largest solar farms.

 CCPEC's potential impact on Pakistan has been likened to that of the Marshall Plan undertaken by the United States in post-war Europe.Pakistani officials predict that CPEC will result in the creation of upwards of 2.3 million jobs between 2015–2030, and add 2 to 2.5 percentage points to the country's annual economic growth. Were all the planned projects to be implemented, the value of those projects would be roughly equivalent to all foreign direct investment in Pakistan since 1970 and would be equal to 17% of Pakistan's 2015 gross domestic product

Plans for a corridor stretching from the Chinese border to Pakistan's deep water ports on the Arabian Sea date back to the 1950s, and motivated construction of the Karakoram Highway beginning in 1959. Chinese interest in Pakistan's deep-water harbour at Gwadar had been rekindled by 1998 and in 2002 China began construction at Gwadar port which was completed in 2006. Expansion of Gwadar Port then ceased thereafter owing to political instability in Pakistan following the fall of General Pervez Musharraf and subsequent conflict between the Pakistani state and Taliban militants.

The current form of the project was first proposed by Pakistan Peoples Party when President Asif Ali Zardari invited heads of all the political parties to a Luncheon in honour of the Chinese Premier Li Keqiang at the Aiwan-e-Sadr on 22 May 2013. Chinese Premier Li Keqiang and the Pakistani President Asif Ali Zardari have agreed to build an economic corridor between the two countries.

Both sides have decided to further enhance mutual connectivity and both sides are connected to develop the long term plan for a China-Pakistan economic corridor.

Motivation and Risk Involved

A report from Fitch Ratings suggests that China's plan to built ports, roads, railways, and other forms of infrastructure in under-developed Eurasia and Africa is out of political motivation rather than real demand for infrastructure. The Fitch report also doubts Chinese banks' ability to control risks, as they do not have a good record of allocating resources efficiently at home, which may lead to new asset-quality problems for Chinese banks that most of funding is likely to come from.

BVR meet in Beijing ( Credits- VOA) 

The Belt and Road Initiative is believed to be a way to extend Chinese influence at the expense of the US, in order to fight for regional leadership in Asia. China has already invested billions of dollars in several South Asian countries like Pakistan, Nepal, Sri Lanka, Bangladesh, and Afghanistan to improve their basic infrastructure, with important implications for both China’s trade regime as well as its military influence. China has emerged as one of the fastest-growing sources of Foreign Direct Investment (FDI) into India – it was the 17th largest in 2016, up from the 28th rank in 2014 and 35th in 2011, according to India’s official ranking of FDI inflows.

Other Risks

The recently concluded BRI Meet in Beijing saw participation from many countries. But there has been few commitment from international banks and financial institutions. The biggest player India, stayed away from the meet citing reason of CPEC passing through the Indian Territory. China desperately needs India onboard to make the project successful and viable. For eg; the corridor passing through Nepal has to finish in India for the same to be viable as the Nepali economy has it's limits. Further the BRI passes through several countries that has a major law and order problem including insurgency. That also holds true for Pakistan through which the flagship CPEC passes through. For Pakistan, the threat are much more. Pakistan has virtually opened up it's entire country to China. Recent revelation by a leading Pakistani News Paper shows that Pakistan has virtually pledged it's own autonomy to China. China is investing around $62 Billions in Pakistan. But the problem is that this money comes a s a loan and not as a Foreign Direct Investment. It is yet to be seen how Pakistan can repay such a huge amount. If Srilanka's experience is anything to go by, Pakistan will be forced to make huge compromises towards China in the coming decades. Further China's investments and projects will have a negative impact on the Pakistan's environment as can be seen in the drive to initiate power generation projects based on coal, a fuel which China itself is phasing out. The next threat comes from the fact that besides China, no other country has committed or invested in CPEC. Thus the entire project hangs on China's ability to complete the same. Pakistan has announced several tax holidays and other incentives that will benefit China. But no tangible benefits for Pakistan can be seen. In other words, many analysts compare the CPEC to the East India Company which colonised India for over three centuries.   

The second concerns regarding the viability and affordability of the project. The project doesn't have multinational cooperation, but is undertaken and executed by China. Whether China can afford such a huge project will only be answered in time  in decades to come. But international organisations doesn't have much hope as they have painted a negative impact for the viability of the project in the long run. It is to be seen how China keep the project from falling pray to the pulls and pressures of local politics in countries through which the project passes which has some of the most volatile regions in it's path. To conclude, let is wait and see how BRI evolves, an answer only time can tell. 



Post a Comment