Date : 20/10/2023

Relevance: GS Paper 2- International Relations - Bilateral, regional and global groupings and agreements.

Keywords: BRI, Strait of Malacca, Asian Infrastructure Investment Bank (AIIB), CPEC, String of pearles, IMEC

Context-

• China's ambitious Belt and Road Initiative (BRI) is celebrating its 10th anniversary. The Belt and Road Initiative (BRI) is a comprehensive development strategy with the goal of fostering global connectivity and collaboration. Commencing in 2013, its overarching objective is to establish an intricate network of both land and sea routes connecting Southeast Asia, Central Asia, the Gulf region, Africa, and Europe.
• Initially labeled as 'One Belt, One Road,' the initiative underwent a name change to the BRI, reflecting a more open and inclusive approach rather than one dominated solely by China.

The Genesis of the Belt and Road Initiative

• The BRI, often compared to China's Marshall Plan, is a comprehensive strategy aimed at transforming China from a regional power to a global powerhouse. BRI serves as a gateway for China to extend its global influence, while others say that it's China's attempt to rejuvenate globalization and address its shortcomings.
• The BRI is multifaceted, combining economic, political, and strategic objectives. One of its primary drivers was the need for alternative transport and trade routes, reducing China's dependence on the Strait of Malacca, a critical artery for its economy.

Financial Foundations of the BRI

• China's commitment to the BRI is underscored by the establishment of the Asian Infrastructure Investment Bank (AIIB) with a $100 billion capital, aimed at challenging established lending institutions.
• The AIIB enables President Xi to capitalize on the BRI's early gains, and it signifies China's aspirations to shape a new economic order with the Renminbi as a prominent currency in international trade.

Global Expansion and Domestic Embrace

• The BRI has not only positioned China as a global player but also allowed President Xi to project himself as a global statesman. It found its way into the Chinese Communist Party's constitution in 2017 and featured prominently in the 14th Five-Year Plan in 2021.
• China's recent white paper on the BRI reveals that over 200 cooperation agreements have been signed with more than 150 nations. These agreements have seen a significant two-way investment between China and its partner countries, reaching $380 billion from 2013 to 2022. The BRI is, in Mr. Xi's words, an effort to provide more public goods to the world, addressing the massive global infrastructure deficit.

Global Infrastructure Deficit and the Role of BRI

• The World Bank estimates that 675 million people globally lack access to electricity, 2.3 billion lack potable water, and 450 million live beyond the reach of a broadband signal.
• To bridge this infrastructure gap, an annual capital infusion of $1.5 trillion through 2030 is needed, roughly 4.5% of the GDP of low- and middle-income countries.
• Under the BRI, China has initiated projects involving motorways, power plants, ports, railway networks, and digital infrastructure to address these deficits.

Challenges and Unintended Consequences

• Inadequate Implementation: Despite the appeal of China's swift loan approvals and project kick-offs, these practices often led to poor coordination and oversight from Chinese authorities, resulting in a less-than-ideal project selection. Consequently, this has translated into financial losses for China and substantial debt burdens for the developing nations involved.
• Disregard for Local Interests: A striking statistic reveals that around 89% of contractors in China's BRI projects are Chinese companies, leaving local businesses with limited benefits from these investments. For instance, the BRI's investment in Pakistan's Gwadar port has adversely affected local fishing communities, causing a substantial decline in their livelihoods with no apparent advantages. For instance, in Indonesia, concerns have arisen over Chinese laborers taking positions designated for locals.
• Transparency Shortcomings and debt trap: The BRI has faced significant criticism for alleged debt trap diplomacy, a lack of transparency, and onerous loan conditions, making the initiative widely unpopular. The case of Sri Lanka handing over one of its Chinese-financed shipyards to a Chinese-backed company for a 99-year lease is such an example.
• The China-Pakistan Economic Corridor (CPEC) was once hailed as a symbol of deep friendship between the two countries. However, it has come under scrutiny as reports indicate that China retains 91% of Gwadar port's revenue, while Pakistan receives only 9%. These issues have led to a tarnished reputation for the BRI, especially the concept of 'win-win cooperation.'
• Environmental Concerns: A 2017 report by the WWF revealed that nearly 1,739 Important Bird Areas and Key Biodiversity Areas face the risk of disruption due to extensive overlap between BRI projects and ecologically sensitive environments. Furthermore, a recent study indicates that the BRI could introduce over 800 alien invasive species into various countries along its routes and developments, posing a significant threat to local ecosystems.
• In Laos, despite the impressive infrastructure projects like super-fast trains and dams, residents have suffered due to inadequate compensation and droughts resulting from dam construction. In particular, Laos owes China approximately $12.2 billion, which constitutes about 65% of its GDP.

Geostrategic Concerns:

• The BRI has raised geopolitical concerns, particularly regarding China's growing influence and control over critical infrastructure in partner countries. These concerns have led some countries to reevaluate their participation in the initiative.
• China’s port development projects in the Indian Ocean raise security concerns for India.

• Increasing Chinese presence in Nepal, Pakistan, Sri Lanka, and Myanmar has raised concerns for India. For India, BRI seems driven by large geopolitical aims.

Global Alternatives to BRI

• In response to the BRI, various countries and international organizations have initiated alternative infrastructure projects. During the Trump administration, the United States and Japan collaborated on the "United States-Japan infrastructure investment alternatives in the Indo-Pacific region."
• The Biden administration later introduced the 'Build Back Better World' (B3W) initiative, now reorganized as the Partnership for Global Infrastructure and Investment. This initiative aims to attract private capital for projects related to climate change, energy security, healthcare, digital technology, and gender equity.
• India, while opposing the China-Pakistan Economic Corridor (CPEC) over sovereignty concerns and unsustainable debt, has proposed an alternative known as the India-Middle East-Europe Corridor (IMEC). This ambitious corridor seeks to connect India, West Asia, and Europe through railways, shipping lines, electricity, and digital infrastructure. It also envisions a clean hydrogen export pipeline.

Conclusion and Future Prospects

As the Belt and Road Initiative marks its tenth year, it stands at a crossroads. While it has made significant strides in addressing global infrastructure deficits and establishing China as a global player, it also faces considerable challenges, including environmental and social issues.

The emergence of alternative infrastructure projects and initiatives from other nations demonstrates that the BRI is not without competition. The future of the BRI will depend on China's ability to address these challenges and concerns while navigating its own economic challenges. The world will be closely watching to see how the "project of the century" evolves in the years to come.

Source - The Hindu