Urbanisation, Institutional Quality and Environmental Quality in BRI

THERE is a growing recognition that the Belt and Road Initiative (BRI) unveiled by the Chinese President will be the most momentous development that envisions fostering shared prosperity in the global economy in the coming era.

For the record, BRI has stimulated colossal infrastructure investments worth trillions of dollars across Asia, Europe and Africa.

Without properly functioning institutions, BRI’s goals to deepen regional cooperation and improved connectivity on a trans-continental scale are unlikely to materialise.

Therefore, grabbing green urban development opportunities shaped by the BRI is an urgency with global significance. The 2030 Sustainable Development Goals will prevail only if the investment in urban infrastructure offered by BRI is in tandem with sustainable development principles and climate change mitigation.

Therefore, understanding the macroeconomic factors of GHG (greenhouse gas) emissions is of utmost importance for these countries to enhance their trade connectivity and collaboration.

The objective of this research is to determine the intermediate effect of “institutional quality” in urbanisation that affects GHG emissions and the direct impact of institutional quality on GHG emissions.

This study investigates the impact of urbanisation and institutional quality on GHG emissions in the BRI countries. The panel sample for this study was structured annually from 1984 to 2017, covering 48 BRI countries.

The urbanisation that leads to cities’ growth resulting from industrialisation and economic development has posed considerable challenges to our environment and society’s resilience as a whole.

Various studies posit urbanisation’s paramount importance as a critical variable to influence environmental pollution, supported by two main views.

The first view suggests that intensive urbanisation is deleterious to decarbonisation, as the urban population is more dense, the more pollution our environment will encounter due to its larger endowment of resources.

The second view proposes that urbanisation is promising for environmental quality enhancement as industrial agglomeration resulting from urbanisation is favourable to GHG emissions mitigation by inducing a lower abatement cost.

Shortly, the specific effects generated by urbanisation remain contentious.

From the aforementioned theoretical grounds, the empirical analysis of BRI countries will be carried out by incorporating panel regression models to examine the impacts of urbanisation on GHG emissions by encompassing energy used, foreign direct investment, economic growth, population and trade.

A political instrument is deemed necessary to foster a viable development that underpins the balance between rapid urbanisation and environmental degradation.

In relevant areas, institutions are essential for environmental pollution in institutional theories.

Sound and quality institutions should be considered as input to promote sound legislation that will reduce environmental menace in the global economy when applied appropriately.

Nonetheless, it is apparent from the preceding deliberation that the dominance of the above-mentioned urbanisation-environment nexus is critically reliant on the level of institutional quality.

Underlying the rationale of institutional conditionality between urbanisation and environmental pollution is that institutional quality could affect the rural-urban migration strategy in a region, hence indirectly influencing climate change.

For example, good quality institutions could efficiently regulate urbanisation concerns such as land use, so that urban planning would minimise environmental degradation.

The findings support the “life effect” theory that urbanisation in BRI countries will dampen environmental problems.

Meanwhile, a country’s institutional quality could diminish the adverse effects of urbanisation on emissions, accordingly, breaking up the

trade-off between urbanisation and environmental quality faced by a country.

Hence, to be cautious of its repercussions on the environment, a country’s urbanisation strategy must be complemented by institutional improvement.

A one-size-fits-all strategy for reducing GHG emissions in countries with varying levels of GHG emissions was ineffective.

This is because different countries have different pollution problems and institutional backgrounds that are at odds and failing to consider these differences will result in a misleading and erroneous policy.

These results hint at the following policy prescriptions. For the BRI countries to temper environmental degradation caused by urbanisation and pollution emanating from GHG emissions, they must reinforce their institutions to foster synergies.

Compelling and well-developed institutions in these countries deliver better institutional quality in terms of socio-economic conditions, ethnic tensions, corruption, military in politics, religion in politics and democratic accountability, which will moderate GHG emissions to address the interrelated challenges of environmental degradation in the BRI countries.

Particularly, to improve socio-economic conditions and ethnic relations, public services like access to education and healthcare, and the business environment must be placed under the microscope to ensure greater transparency and fairness.

Then, to curb corruption that is long rooted in many developing countries requires governments to fill legal gaps and improve politics and public office entry mechanisms.

This involves recruiting qualified professionals with a low tolerance for corruption, no clientelist ties, or private interests to ensure an independent discharge of their duties and an effective checks and balances system.

Also, the cost-benefit analysis for corruption must be changed. The costs must outweigh the benefits of corruption.

A higher cost of corruption includes longer jail sentences, compensation for the loss of stolen funds, and public shame for the corrupt and their families.

By controlling corruption, governments can restore public trust in democracy. Next, governments must balance secular power and religious authority to enhance religion in politics.

Governments should provide stronger civil service oversight while strengthening scrutiny of the links between local public services to increase their democratic accountability.

As one of the largest economies and emitters in the world, China ought to utilise its significant diplomatic and economic influence, expertise, and financial resources to lead concerted efforts and mobilise its neighbours and partners to implement a sustainable path.

Since environmental pollution is a vital barrier to sustainable development, it is essential to promote public awareness, such as green energy and storage technologies that can curtail GHG emissions.

China alone cannot achieve its sustainability goals in isolation, as global environmental and sustainability problems require global responses.

Countries in the BRI should work together to reap the tangible benefits created by the initiative manifest in their territories.

Dr. Lee Hui Shan is an Assistant Professor at Universiti Tunku Abdul Rahman.

The views expressed here are entirely the writer’s own.

The SEARCH Scholar Series is a social responsibility programme jointly organised by the Southeast Asia Research Centre for Humanities (SEARCH) and the Centre of Business and Policy Research, Tunku Abdul Rahman University College (TAR UC), and co-organised by the Association of Belt and Road Malaysia.