Beijing needs to take belt and road worries of nations on board
- Not all works have gone smoothly in the great infrastructure push, with elections bringing in governments that fear the costs involved and the US trade war creating economic uncertainty for China
President Xi Jinping unveiled the “Belt and Road Initiative” five years ago with the message that China and participating countries would benefit equally. The developing nations targeted in Asia, Africa and the Middle East needed infrastructure such as ports, roads and power plants, and Beijing had a proven track record with constructing major projects and seemingly endless amounts of capital for financing. But not all works have gone smoothly. Elections have brought in governments that fear the costs involved and the US trade war mean economic uncertainty for China. Beyond being mindful of the political possibilities, Beijing has to be ready to review, adapt and revise deals.
Xi and US Vice-President Mike Pence traded barbs at the Asia-Pacific Economic Cooperation summit over the viability of the initiative. Xi brushed aside American claims that it was a debt trap for nations and China had a hidden agenda. At its heart are infrastructure development, trade and joint benefit. But a port project in Sri Lanka has been a lightning rod for critics; unable to service the loan, the island had to hand over the facility to Beijing on a 99-year lease and there has since been political instability.
Worries among voters about agreements with Chinese firms that are claimed to be costly or unnecessary have been in part the reason for governments losing power in elections this year in Malaysia, Pakistan and the Maldives. Amid accusations of schemes being oversold by Beijing, new leaders have been quick to review infrastructure deals and there has been talk of cancellations, suspensions and scaling back. Myanmar recently adopted the latter strategy with a deep-sea port in the country’s west, signing an agreement with China’s state-run Citic Group for a first-phase cost of US$1.3 billion, US$6 billion less than the original proposal.
But the terms of loans and the scale of projects have not been the only concerns. The lack of transparency of some deals has led to accusations of corruption. Chinese companies carrying out work have used labourers from the mainland rather than locals, further irking citizens, and at times, costs have spiralled. All has taken place under the cloud of uncertainty of the trade war.
One positive is that China and Japan have ended a chill in relations and Tokyo has agreed to help with projects in Southeast Asia. India, Australia and other nations reluctant to join should follow suit – after all, the belt and road offers a winning formula for growth. But Beijing should also take stock of the initiative and its direction, noting worries and sensitivities. There could be value in being less ambitious, opening tenders to non-Chinese companies, employing local workers and being flexible with financing arrangements.