OBOR and Risks: Insights from China and Central Asia
Picture source: Google
This blog bases on a Skype-based discussion on Al Jazeera Youtube channel. I only watch and reflect and share my opinions with no further attempts. I am not responsible for further interpretations or uses of this blog.
This article of mine summarizes and reflects over potential risks of countries involved in OBOR with insights from China and Central Asia particularly India. It is not just out of my dream but with reference to a Skype discussion held by Al Jazeera and jointed by Pauline Loong (Asia-Analytica via Hong Kong), Jabin T Jacob (Institute of Chinese Studies via New Delhi) and Bruno Macae (Portugal's former junior minister for Europe, via London) [Please see ‘Reviving the Silk Road’—Inside Story by Al Jazeera. May 14, 2017].
In a nutshell, this writing answers to questions of what is actually OBOR and what are the risks lying behind the scheme from perspectives of countries involved. First thing first, we have to understand what is OBOR and what are characteristics of financial supports to related OBOR projects.
China plans to import 2 trillion USD of products from countries involved with purposes of enhancing economic relations. The scheme does not legitimize anything related to Chinese hegemony—It is not an Asian version of EU. “It is not a free trade zone like WTO or TPP, but OBOR seems to put China in front—In front of what? What exactly it is then?” asked by Al Jazeera.
In response to this, Pauline Loong states that OBOR is more than trading and economic ends, but it also has things to do with international relations in a context of increasing global risks and instability. Economic and business perspectives alone do not help while the scheme covers things more than that. It is easier to understand that OBOR facilitates and stabilizes international relations through one road of business partnership. “No matter of tough it is in political relations, business relations can help ease it up” she claims. Understandably, OBOR puts China in front center of mediating peace and stability.
If allowed to have a comment, I have to say that such the development model did exist earlier in Myanmar within the context of entrepreneurial turn toward Chinese investment. Studies show that in 1990s ceasefires between Burmese central government and minor state leaders, opening up for series of land concessions to Chinese investments in previous tricky areas in conflict.
Different from Western model which adopts peace for development, Chinese model (i.e. OBOR) has to do with development for peace (see Kevin Woods, 2011 and Ken MacLean, 2008). At the first glance, Chinese investments play a key role in making gun drop in Myanmar; however, unintended consequences persists while more conflicts emerge; resource confiscation persists chasing hill people out of development. Thus, from perspectives of weaker states involved of OBOR, it is necessary to get ready for such the lessons.
Standing on the same view as Pauline, Jabin T Jacob gives an interesting insight in name of India, saying that it is unnecessary to complicate the scheme or stick to competition mainstream. Less than rivalry perspective, India must know what it is about. It is about bringing China in front of Asian politics once again due to geostrategic and historical evidences. If I am not wrong, we have to get reminded of Moa Zedong time. It is all about what involves China. Human Rights Watch raises fears on conditions for new Silk Roads Project. Basically this project is run bilaterally not multilaterally—Between China with one country [Pakistan]. Thus India concerns with rising fears in corridor at Kashmir in terms of sovereignty contradiction. This means that China has to clarify its mechanisms to Kashmir-India conflicts; otherwise, India and China will go back to same old past.
In addition to political relations, India is unhappy with Chinese-dominant cultural image of OBOR. The project is about cultural exchange between people to people, but to certain extent this project is putting forwards history and politics where China is predominate. Silk Road is historically written as a possession to China while other civilizations like India were ignored.
In this sense, I may conclude that limits to OBOR have to do with clarification of political and cultural principles which have to give common values to other superpowers like India. Past already answers to this limit in the sense that over domination in politics does not help much but sparking wars.
Now let me leave politics aside by beginning next discussion on economic corner. President Xi Jinping invites many heads of state to internationalize the project. The World Economic Forum Study says the project can boost region’s GDP from 4 to 7 %. “Is it [OBOR] a sound economic game from everybody’s perspective?” asked by Al Jezeera.
Europe perspective by Bruno Macae is that there must be imbalances between construction sizes and capacity of individual states involved. Gigantic projects like dry ports and high speed roads go beyond capacity of individual countries in need of rushing hard to catch up with the scheme. There are huge infrastructure deficits especially those countries in Central Asia. What we need is a right monitoring mechanism for lowering such the risks.
Another concern is security risks which may upset economic growth. It seems that OBOR shifts global system in the decline of grant projects in the West. However, we cannot forget thinking about strings attached and still remain affective. For an instance, Russia hits by economic sanctions by the UN due to its involvement in Ukraine, needless to mention Kashmir conflicts.
Out of my opinion, I argue that OBOR takes a long way but the way is closer to possibility in the context that “if you scratch my back, I will scratch yours.” It is easier to understand that while Europe is being fragile by protectionism-vs-liberalism dichotomy, it needs other partners to heal its torn wounds, so Chinese becomes their potential pal. UN sanctions should be no longer a problem. However, what we have to situate is uncertainty of financial mechanisms and structures related to OBOR—let say AIIB (450 billions USD) and BRICS Bank (100 billion USD). Recently, Pakistan government has signed nearly 500 $ worth of new deal with China. In relation to financial system, in spite of prior effort in studying about that I still end up with uncertainty in the way that money is funded and repaid.
Pauline Loong responses from Chinese perspective that China is exposing itself to the risks while running the project through some tricky areas. Right now the players in this project are state-owned banks and enterprises only. Private sectors involvement is so far from sights. 4 state banks together have agreed 90 billion USD lent for various OBOR projects so far, while two Chinese banks are to set up lending schemes at 55 billion USD.
However, what happens if those projects cannot be finished according to the plan. It may end beyond the expected schedule and consume much more money than it should do. “[…] There is no collateral as such…” says Pauline, “You have someone [building] the road. They defraud. What you do? You [then] dig up the road and bring back the cement?” she carries on, “You have someone [building] the port. You start crawling and then they say ‘Ok! I am going to nationalize the port.’” It is therefore understood that China is at risks of infrastructure supports without collaterals. Perhaps China should have foreseen such the loss already without having spent with on results. Only we cannot access to certainty of financial information.
To wrap things up, OBOR is distinctive in contemporary world system as it plays not only business game but also IR games as a mediator linking countries together through a principle of “development for peace or stability.”, unlike classic principle where peace goes first. OBOR situates in less confrontational perspective but more linkable with other international schemes.
From weaker state’s perspective, what concerns me the most is the people’s resentment and fears of infrastructure deficits which come from uncertain conditions provided by Chinese banks. Additionally, human rights violation has to be considered while debtor governments see no structural adjustments. China is not that silly to lend money without collaterals or compensation. Therefore, to extent of corruption, infrastructure deficits are more likely to happen. The suffered are not government but innocent people affected by the project. States will do things beyond expectation as collateral.
References:
Al Jazeera
2017 “Revived the Silk Road” in Inside Story by Aj Jazeera. Accessed at https://www.youtube.com/watch?v=FH-X8vv2rGk
Lim Ta Wei and etl
2016 China’s One Belt One Road Initiative. Imperial College Press: Singapore
