Story Of The Week

Belt and Road Initiative: A New Roadmap

‘Development is about transforming the lives of people, not just transforming economies’

                                                                                                                                                              Joseph Stiglitz

Last week China hosted delegates from across the globe at Belt and Road Forum (BRF) to review the progress of its ambitious Belt and Road Initiative (BRI).  China has reasons to be satisfied with the summit because of the increase in overall participation from the previous edition of 2017. This time 126 countries participated in the forum, a substantial increase from 60 countries in the previous edition. 37 heads of state or government including strategic partner Russia took part in the summit.  However, for the second time, India did not take part.

What is Belt and Road Initiative?

Belt and Road Initiative is an ambitious plan by the Chinese government to improve regional cooperation and connectivity. Under this plan, China proposes to rebuild the ancient trade routes connecting Asia to Europe. It is a Chinese state-backed campaign often described as a 21st century Silk Road. Under BRI, one maritime route and six economic corridors are proposed including controversial China Pakistan Economic Corridor (CPEC), which passes through Pak occupied Kashmir (POK). The BRI is expected to cost more than USD 1 trillion as per various estimates. It requires construction at large level hence various Chinese companies are also engaged in construction work across the region. Though it is touted to be open for global participation, there are prevailing doubts that it is motivated by trade factors entirely.

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Source: The Australian Tribune

Objectives of the Initiative

Belt and Road Initiative is expected to transform the regional economic environment through an increase in regional cooperation, improved transport infrastructure, better regional connectivity and boosting trade at lower costs. It will help in bridging the infrastructural deficit in developing countries like Afghanistan and Pakistan. In recent years, the Chinese economy has slowed down due to various factors and it expects that this initiative will provide a boost to its slowing economy by boosting the trade. It can also expect to find new markets which will help in dealing with excess capacity at home. Though China is not a part of G7 countries, through this initiative it wants to exert greater regional influence and strengthen its position as a dominant player in the world. It also wants to boost its currency by increasing its usage amongst various countries and strengthening its role as an International reserve currency. China has faced regional disparity as Southern and Eastern regions of the country lag in terms of growth. As these regions will be expected to be better connected with the world, it will help in fixing the regional disparities. Through this, the Chinese will be able to address the separatist movement in the western part of the country more efficiently.

Challenges and Risk Involved

China and 70 other countries which account for one-fourth of the global GDP and half of the world population are covered under this initiative. Though it is expected to help developing countries by boosting their infrastructure and GDP by a massive increase in investment and trade, there are challenges involved as well.  Some of the countries involved have low sovereign credit rating and they might not be able to serve their huge debt. Though China is ready to provide cheap loan sourcing material on a high scale from China will result in increased borrowing cost for these countries.

Chinese projects are often faced by political backlash due to charges of environmental degradation and labor exploitation. It will be difficult for China to face the political uncertainty or backlash from poor countries and it may hamper the pace of the project. This has already happened in countries like Sri Lanka, Myanmar. On the other hand, countries in middle-east have an unstable environment and pose a significant risk to the success of the entire project. India, a major player in Asia and major economy in the world now has so far kept itself distant from the project and Beijing should understand that not having India on board is a major drawback for the entire initiative.

Source: Arabnews.com

Source: Arabnews.com

BRI: In the Context of India

India strongly believes that China Pakistan Economic Corridor (CPEC) part of BRI is an infringement on Indian sovereignty and territorial integrity and a major threat to its national security. CPEC enables China to showcase its military power in Eastern, North and Western front simultaneously and allows Pakistan to completely cut off India from Iran, a major exporter of oil to India. India in response to China’s flagship Gwadar project will invest $500 million in development of Iran’s Chabahar port. This port allows India to reach out to landlocked Afghanistan and Central Asia bypassing Pakistan. Iran and Afghanistan have already signed an agreement to give preferential treatment to Indian goods at Chabahar part. BRI through its huge investment challenges India’s dominant position in the Indian Ocean, the major cause of concern for India. BRI initiative has also faced an allegation of lack of transparency by India.

Source: The economic times

Source: The economic times

Certainly, India is losing out on a vast economic opportunity through not becoming part of this project. It also faces the risk of isolation from all its neighboring countries as almost all its neighboring countries except Bhutan has pledged support to this initiative. Whether India joins the initiative or not, the project will take place. India was able to garner huge domestic support against the BRI and able to garner significant support from the United States citing the same interest, but it will not be in a position to stop its neighbor countries from joining the project without having a strong alternative.

Conclusion

As indicated, the ambitious BRI is certainly not only about building the infrastructures such as Roads, Ports, Railways, it is a medium for China to dictate rules, build institutions that reflect or impose Chinese interests mostly. BRI is a part of a greater strategic plan of China to counter American hegemony in the world. Though China defines BRI as a public good, an open and inclusive economic cooperation initiative, not having India on board has its significant disadvantages for the entire project. The current summit was a makeover from the previous summit and indicated that having India on board is a vital part of the project. China needs to address Indian national concerns constructively and designation of Masood Azhar is one welcome step in that direction.

References:

https://www.livemint.com/news/india/china-tunnels-into-india-s-idea-of-kashmir-1550421875933.html

https://www.thehindu.com/news/international/china-ready-to-wait-for-indias-bri-participation/article26847994.ece

https://www.worldbank.org/en/topic/regional-integration/brief/belt-and-road-initiative

https://www.theguardian.com/cities/ng-interactive/2018/jul/30/what-china-belt-road-initiative-silk-road-explainer

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