READERS ask: What’s this Belt and Road Initiative (BRI) which so dominated regional conversations during the last week of April until mid-May 2019?
BRI is the impetus behind a revival of the ancient Land Silk Road along Central Asia, connecting East and West, and the 21st Century Maritime Silk Road – sea routes that wind through South-East Asia to Africa and beyond.
Today, it already links more than 120 countries and about 4½ billion of the world’s population. Its development platform is multilateral in nature; aimed at boosting inclusive global growth as well as strengthening cooperation between China and international organisations to enhance multilateral cooperation, serving as China’s contribution to the world economy and global governance, through dialogue and collaboration.
BRI seeks to accelerate modernisation in emerging and developing economies (EDEs) with the participation of advanced nations.
Yet, Washington has claimed the initiative’s projects are “debt traps” for Belt and Road (B&R) countries.
As I see it, B&R projects seek to promote more inclusive global development. China emphasises the win-win nature of B&R projects and its new model of commercial operations that are expected to bring mutual benefits. No doubt, BRI clearly strives to improve struggling economies.
Nations in which BRI resonates most are the ones that suffer from resource deficits which hindered development of basic infrastructure, as a precursor to economic development.
Certainly, China has had its share of mistakes, but it now has a track record of learning quickly from those mistakes. Unlike the Marshall Plan (European Recovery Program after WWII), BRI does not require participation in military alliances. The US$13bil aid then (which need not be repaid) boosted economic re-development of Europe, and emerged as one of the catalysers of the Cold War and reinforced prolonged divisions throughout Europe. BRI, however, is focused on 21st Century global economic development.
With global economy slackening, global investment too is slowing down. World foreign direct investment (FDI) fell from US$1.47 trillion in 2017 to US$1.2 trillion last year. The continuing decline over the past three years has seen FDI fall to the lowest point since the global financial crisis. Contrary to the overall global trend, however, FDI in the countries along B&R has increased. Data from 2013 to 2018 showed that Chinese enterprises invested more than US$90 billion in countries along B&R, rising at an average annual rate of 5.2%. Investments in B&R projects have not only boosted global investment, but also created more growth opportunities for EDEs, especially those in Asia and Africa.
Chinese enterprises have helped establish a number of trading cooperation zones in countries along B&R, with a cumulative investment of more than US$30bil. These zones in turn have helped raise local economic growth and created nearly 300,000 job opportunities. World Bank reports the transportation projects under the Initiative’s framework, once completed, will reduce the shipment time and trade costs for B&R economies by between 1.7% and 3.2%, and 1.5% and 2.8% respectively.
The Initiative will also help raise actual income growth in local areas by 1.2% to 3.4%, and global income growth by 0.7% to 2.9%.
When BRI was first espoused in 2013, it generated much excitement outside China because: (i) it tapped into the desire among Asian countries to develop economically, in a manner similar to China, on the back of significant infrastructure development in highways, railways, airports, ports and other public infrastructure.
China’s potential involvement in partly funding some of these infrastructure projects stirred excitement among many Asian countries; (ii) of the prospect of enjoying ancillary benefits arising from positive spill-over effects, such as industrial development, FDI and tourist traffic from China; and most significantly, (iii) with its engagement strategy covering most of Asia, many Asian countries projected their own aspirations onto BRI.
Trade volumes between China and participating economies have since exceeded US$6 trillion, with investments of more than US$80bil. China’s living standards 70 years ago was barely 5% of the United States’.
Since “reform and opening-up” of the late 1970s, living standards in China had continued to improve steadily. Today, it’s about one-third of the United States; i.e. it has multiplied six times relative to the United States, thus supporting the rise of the world’s largest emerging middle-income group.
In the 1980s, the share of the United States in the world economy was more than 20%; in the last four decades, it has steadily declined to around 15%.
At the same time, China’s share (in purchasing power parity terms) has soared to about 20% (from a mere 5%). This structural shift means that in the future, the well-being of advanced nations will depend on the rising living standards of less-wealthy EDEs. And, just as US leadership supported the role of ANs in the 20th Century world, China has the potential to foster growth in the share of EDEs in the 21st Century. In particular, BRI is expected to redirect China’s domestic over-capacity and capital for regional infrastructure development to improve trade and investment relations with South-East and South Asia, Middle East and Europe – even across to the Americas and Sub-Saharan Africa.
The Second B&R Forum for International Co-operation which took place on April 27, 2019 (the first being held in 2017), focused on building further international consensus on BRI; emphasising its multilateral economic development platform and its principle of achieving shared growth through dialogue and collaboration.
This was the highest-level conversation on BRI, driven by China’s president in dialogue with many heads of state/government. As I see it, China considers BRI as a path to common prosperity. It opens up more space for global growth, builds a platform for international cooperation and makes new contributions to building a community with a shared future. It seeks high-quality development and high-quality cooperation.
Further, it supports comprehensive infrastructure connectivity as a way to foster economic growth and to build high-quality, reliable and resilient infrastructure, and uphold green and sustainable growth.
Highlights on the consensus agreed include:
I. BRI cooperation should:
> Be based on joint efforts, for shared mutual benefits;
> Be open, green, clean; and
> Pursue people-centered and sustainable development.
II. To strengthen development synergy, nations will have to:
>Further open markets and reject protectionism;
> Seek stronger cooperation in FDI & joint ventures;
> Foster a predictable investment environment; and
> Encourage more cooperation in innovation & protect IP rights.
III. To boost infrastructure connectivity, nations need to:
> Promote viable and environmentally friendly projects;
> Encourage developing compatible infrastructure; and
> Enhance connectivity among financial markets.
IV. To promote sustainable development, nations should:
> Enhance environmental protection and energy efficiency;
> Encourage cooperation in sustainable agriculture & forestry; and
> Support international anti-corruption cooperation;
(V) To strengthen practical cooperation, nations should:
> Support developing economic & trade cooperation zones; and
> Encourage multilateral financial institutions to reinforce support for connectivity projects in fiscally sustainable ways.
(VI) To advance people-to-people exchanges, nations must:
> Welcome expansion of people-to-people exchanges;
> Boost exchanges in science & technology and in innovation; and
> Welcome exchanges involving cities and think tanks.
BRI – Phase II
BRI as we know it today, goes way beyond infrastructure to actively promote economic and social cooperation to enhance connectivity and multilateralism in trade, investment and sustainable development.
For Tun Dr Mahathir Mohamad: “BRI will move China-Malaysia ties to a higher level. BRI not only helps solve problems of infrastructure connectivity, but also addresses unbalanced development; adding that the initiative is conducive to promoting dialogue between different cultures, and eliminating such problems as conflict, extremism and terrorism.”
Similarly, for Mongolia, BRI calls for greater efforts to advance practical cooperation in jointly building the China-Mongolia-Russia economic corridor. Indeed, BRI presents an important opportunity for reaching UN’s development goals. For its secretary-general: “rising debt is a global problem, and should not be confused with questions related to the funding of B&R projects. There is no peace without development and no development without peace.”
Also, China is known to support Thailand in chairing Asean this year, and works to align the joint construction of B&R projects with Asean’s plan on connectivity with different regions and with different nationalities and cultures.
Further, like Greece, Italian participation in BRI acts as a vital bridge between East and West to bring about win-win cooperation. It helps fend off charges that BRI lacks transparency, encourages corruption and creates debt traps. As I see it, the West must do more than nag poorer nations not to accept Chinese money.
At a minimum, they should help B&R nations assess schemes and show them how to gain from transparency, high standards and formal contracts. If the West fears a Chinese-led order, its governments have choices. There is no reason why China’s rather attractive B&R should be the world’s only option.
What are we to do
I sense China understands the challenges and recognises the value of partnerships, with European countries in particular. For China, this means there is now an unprecedented opportunity to build world-class, multicultural and multidisciplinary partnerships among China, ANs and B&R EDEs. Such partnerships can not only help further push the boundaries of capability for Chinese enterprises, but also offer a way to work across the value chain.
I agree that the formation of project teams with EDEs that integrate world-class expertise and skills is fundamental to the success of BRI. This challenges individuals to operate outside their comfort zone, and focus on building personal relationships, trust and understanding. No doubt, BRI is now moving into a second phase.
As a multi-decade program, the ambition stretches far beyond the initial stage of infrastructure development (transportation, communications and power) to softer sectors, such as e-commerce, healthcare, education and financial services benefiting EDEs as well as advanced nations. What’s clearly needed is to build an internationally adaptable and educated workforce, in order to integrate expertise and technology to build & deliver world-class partnerships.
In the end, it is people who implement projects; it is people who interact with other people; and it is people who carry the hopes of world-shaping projects which BRI aspires to achieve. Here, China can leverage and learn, in my view, to be sympathetic towards diversity in culture, religion, history, language and practices.
Former banker, Prof Tan Sri Lin See-Yan of Sunway University is the author of The Global Economy in Turbulent Times (Wiley, 2015) and Turbulence in Trying Times (Pearson, 2017). Feedback is most welcome.
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