Opening Remarks by Dr. Arvind Gupta, Director, VIF

China is holding a high-profile meeting of the Belt and Road Initiative (BRI) for on 27th April in Beijing. According to the Chinese media reports, over hundred countries will be represented at the meeting. Since the first meeting of the forum held in 2017, in which India did not participate, the BRI has covered over 200 projects in 70 countries. Italy and Luxembourg were the latest in Europe to have endorsed Belton Road initiative.
The Chinese have been promoting the BRI, a $ 1 trillion initiative spread over 60 countries, as the initiative aimed at providing funding to country’s deficit in infrastructure. They deny that there are any geopolitical motives behind the initiative. As the New York Times put it, BRI is “global commerce on Chinese terms”.

The Chinese media has noted that India might boycott the second meeting of the forum. These reports, however, warn India that it will lose out on the vast economic opportunities that the BRI provides to India. Some reports have suggested that India will eventually join the BRI.

Push Back against BRI

The BRI has proved to be controversial because of its opaque nature, onerous terms and conditions and the debt traps it has created in countries like Sri Lanka. Several countries like Myanmar and Malaysia have reviewed some of the projects under BRI. The BRI has also been criticised on the grounds that it tends to favour the Chinese companies and also help China to export its surplus manufacturing capabilities. Concerns over the nature of BRI projects have been expressed in evil Pakistan which is one of the main beneficiaries of the BRI linked China Pakistan economic corridor. But despite these concerns, it is also apparent that more and more countries are being attracted to the BRI.

According to Ian Hutchinson on April 1, 2019, “Chinese companies are often heavily saddled with debts that have led a record number into default.” As noted in the Financial Times, “big Chinese state-owned enterprises that build, operate, and invest in many BRI projects are—on average—extremely highly leveraged.” And further, “Outside of China, 2018 also saw push-back against BRI from its biggest customers… A government transition in Malaysia jettisoned several projects…In the Maldives, the electoral defeat of a pro-China president in favor of the more skeptical Ibrahim Mohamed Solih lead to an ongoing renegotiation of BRI-related debt. In Sierra Leone’s capital, Freetown, the cancellation of a planned Chinese-funded airport marked the first termination of a BRI project in Africa.”¹

The BRI has geopolitical implications as well. The various corridors being built under the BRI pass through the heart of Asia into Europe, provide access to China to the Indian Ocean, link the land and the Maritime roots girdling of the world. In Southeast Asia, the BRI projects are aimed at linking all the countries. In Africa, BRI projects are operational in Djibouti, Ethiopia, Kenya, Algeria and Sudan. In Europe, China is building infrastructure in Armenia, Greece, Italy and Luxembourg. 15 European cities today have direct connectivity to China. In South America, Argentina has signed up to the belt and Road initiative projects.²

BRI projects, designed and conceptualised by the Chinese, are linked with Chinese priorities of getting access to far off places, sensitive spots and enhancing China’s own influence. The fact that Sri Lanka had to lease out land worth several thousand hectares to China to avoid repayment default has alarmed many countries that BRI is a new tool of colonialism in 21st-century. Nevertheless, many countries, who have pressing requirements of building infrastructure, are attracted to the belt and Road initiative projects. They are not fully aware of the dangers which lie ahead. And even if they are, the politicians in many of these countries stand to benefit from their dealings with China.

What about the AIIB? Is this an arm of the BRI? Was the bank set up to fund BRI projects? AIB was set up in 2015. It now has over 90 members. Many European countries have also joined. The fear was that AIB funding would be lax and compete with funding of other multilateral banks like the ADB, World Bank et cetera. However, the record shows that AIB has been prudent in so far in funding projects. So far only 20+ projects costing about US$ 4 billion have been funded and not all of them are BRI projects. In fact India has also benefited in the power sector from the loans it has taken from the AIIB. Thanks to the intervention by many countries, the standards of the World Bank and ADB in granting loans are being enforced.

BRI has another dimension that is the Maritime Silk Road. China has been eyeing various ports in different parts of the world. In India’s neighbourhood, apart from the Hambantota Port in Sri Lanka, China has investments in Gwadar Pport in Pakistan, Sonadia Port in Bangladesh, Kyaukpyu in Myanmar, and a facility in the Maldives. India has reasons to be concerned about these activities.

According to Vijaya Sakhuja,³ “China has, by way of agreements, obtained long term leasing rights to a number of ports and maritime spaces in the Indian Ocean and the Mediterranean Sea. These are: Gwadar Port (Pakistan) for 40 years; Piraeus Port (Greece) for 35 years; Djibouti Port for 10 years; Hambantota Port (Sri Lanka) for 99 years; 20 percent of Cambodia’s total coastline for 99 years; and Feydhoo Finolhu Island (Maldives) for 50 years. It is pursuing similar arrangements in other port projects such as Kyaukpyu Port (Myanmar) and Malacca Gateway (Malaysia) for 99 years.”

And further, “The China-Sri Lanka 99-year lease agreement for Hambantota Port involves 70 percent stake in the port to the state-controlled China Merchants Port Holdings. The port was developed using Chinese financial and technical assistance totaling nearly US$ 1.3 billion, and the deal invited severe criticism in Sri Lanka. The agreement has been labeled as a ‘debt trap’. Similar fears have echoed elsewhere, particularly in Pakistan, Nepal and Myanmar, who have either canceled or temporarily put on hold major projects planned by Chinese companies.”⁴

China has made impressive inroads into Central Asia. Presently, three gas pipelines from Central Asia or taking natural gas to China and an oil pipeline is under construction. Chinese trains now passed through Kazakhstan and Russia and connect with the European railway network. The Chinese have also built a railway line which connects with Tehran via Tashkent. Looking around India, Pakistan, Sri Lanka, Bangladesh, Myanmar, Maldives have all signed up to BRI. Apart from the China Pakistan Economic Corridor, China is also building a China Myanmar Economic Corridor. It is also helping Bangladesh with several infrastructure projects. It is also building a railway line in Nepal. Thus, BRI is very much around it.
What should India do? The reasons why India did not attend the first BRI for a meeting in 2017 have not disappeared. The sovereignty and territorial integrity questions surrounding the China Pakistan Economic Corridor remain. Therefore, it is unlikely that the government of India would decide to participate in the second meeting of the BRI forum.

It must also be recognised that if other countries wish to go ahead with the BRI, India cannot stop them. At best, India can have its own program of building infrastructure and connectivity with the neighbouring countries. The government should insist on certain transparency and norms in the building up of infrastructure. The Japanese and many other countries have similar views. These views should be articulated forcefully. The government has already come out with its position that the infrastructure projects should meet international standards of transparency, be viable, donot imping on anybody’s sovereignty and based on mutual consultations. Unless India is satisfied that these conditions are met, it cannot serve to endorse the BRI.
Conclusion

It is becoming increasingly clear that BRI is an effort by the Chinese to shape globalisation through connectivity and financial tools in accordance with the Chinese priorities. No other country has come up with anything comparable with the BRI. At the same time, the backlash against BRI in some countries is also visible. Often, the investments are in projects which are not viable. This can land the recipient countries into serious trouble.

The government should be circumspect before it thinks of supporting the BRI for whatever reasons. India should continue to follow its existing policy of not supporting the BRI. On 13 May 2017, and again on 5 April 2018, the Ministry of external affairs issued statements which were balanced and forward-looking: “Our position on OBOR/BRI is clear and there is no change. The so-called ‘China-Pakistan Economic Corridor’ violates India’s sovereignty and territorial integrity. No country can accept a project that ignores its core concerns on sovereignty and territorial integrity. We are of firm belief that connectivity initiatives must be based on universally recognized international norms, good governance, rule of law, openness, transparency and equality, and must be pursued in a manner that respects sovereignty and territorial integrity."

The government should stick to that position. At the same time, India has several connectivity projects in Myanmar, Bangladesh, Nepal, Iran, Afghanistan et cetera. This projects have been well received by the recipient countries, having been developed after joint consultations. India should improve its capabilities for timely delivery.

Thank you.

References

1. Ian Hutchison, http://www.chinabusinessreview.com/belt-and-road-in-2019-recalibration-or-retrenchment/, accesed on 7.4.2019
2. http://www.chinabusinessreview.com/belt-and-road-in-2019-recalibration-or-retrenchment/ acceesed on 7.4.2019
3. https://www.vifindia.org/article/2018/april/03/china-s-maritime-infrastructure-projects-in-the-indian-ocean-lend-and-lease-agreements Accessed on 7.4.2019
4. Ibid. Accessed on 7.4.2019