The story so far: At the recently concluded summit of G7 leaders in Germany, United States President Joe Biden and his allies unveiled their $600-billion plan called the Partnership for Global Infrastructure and Investment (PGII) to build infrastructure projects in developing and middle-income countries. This is being seen as a counter to China’s Belt and Road Initiative (BRI), valued at a trillion U.S. dollars by some experts.
When asked about the Chinese government’s response at a press conference, Zhao Lijian, spokesperson of the country’s Foreign Ministry, defended the BRI, countering the narrative that it is a debt trap. Citing a World Bank forecast, he said, “If all BRI transport infrastructure projects are carried out, by 2030, the BRI will generate $1.6 trillion of revenues for the world each year, or 1.3 per cent of global GDP”.
What is China’s Belt and Road Initiative?
In 2013, Chinese President Xi Jinping, during his visits to Kazakhstan and Indonesia, expressed his vision to build a Silk Road Economic Belt (SERB) and a 21st Century Maritime Silk Road (MSR), to break the “bottleneck” in Asian connectivity.
The initiative envisioned a Chinese-led investment of over $1 trillion in partner countries by 2025. More than 60 countries have now joined BRI agreements with China, with infrastructure projects under the initiative being planned or under construction in Asia, Africa, Europe, and Latin America.
In recent years, the BRI seems to have experienced a slowing down as annual Chinese lending to countries under the initiative slimmed from its peak of $125 billion in 2015 to around $50 to 55 billion in 2021. In recent years, multiple countries have renegotiated their loans with China, especially countries that were thrown into economic crises induced by the pandemic.
The initiative was also birthed to channel China’s excess manufacturing and industrial capacity, which was rapidly built after the 2008 global financial crisis. Industries such as construction, steel, and cement were facing a glut and BRI became a way to not just export finished goods but production capacity as well to other countries. Another reason was to bridge the economic disparity within China, between wealthy eastern provinces and under-modernised inland provinces.
As for financing BRI projects, instead of offering aid grants, China offers huge loans at commercial interest rates that countries have to pay within a fixed number of years. The west has accused China of debt-trapping by extending “predatory loans” that force countries to cede key assets to China. Research indicates that low and middle-income countries are often the ones to approach China after not being able to secure loans from elsewhere.
The progress of BRI in South Asia
On his 2015 visit to Pakistan, Mr. Jinping and then Pakistan Prime Minister Nawaz Sharif unveiled the BRI’s flagship project and its biggest one in a single country — the China Pakistan Economic Corridor (CPEC). Over time, China pledged $62 billion in low-interest loans and financing from Chinese state-owned banks and the Asian Development Bank (ADB), up from an initial $46-billion pledge.
The CPEC involved multiple projects, including the development of a port in the city of Gwadar in the Balochistan province, providing a port to China’s Xinjiang province that would be closer than other eastern ports in China. China envisioned that Gwadar would provide it with a position on the Arabian Sea without having to go through the busy shipping lane of the Malacca Strait. Some other projects included power — the bulk of the investment — transport, and telecommunication.
Since its inception, the CPEC has been met with multiple roadblocks, and China seems to have trimmed its $62-billion pledges to the project. According to Andrew Small, a research fellow at the German Marshall Fund and a China-Pakistan ties expert, China had spent about $25 billion on CPEC by mid-2020, but that investment was already pushing the upper limits of the project, instead of being the base for a “more ambitious plan.”
Coal power plants: While coal plants set up and managed by Chinese firms did help improve the power situation in Pakistan, former Prime Minister Imran Khan’s government sought renegotiation of payments to China in 2020 alleging that Chinese companies had overcharged the country by $3 billion over the 30-year lifetime of two power projects. In May this year, multiple Chinese power firms operating in Pakistan threatened to close down if the latter did not pay dues of 300 billion in Pakistani rupees (approximately $1.5 bn).
Main Line 1 (ML-1) rail: The project involved the total overhaul of the 1,872-km ML-1 railway line from Peshawar to Karachi with Chinese loans of over $8 billion, later reduced to $6.8 billion over China’s concerns about Pakistan’s ability to repay. The first phase of this project was supposed to be completed by 2017, and the second by 2021. However, due to delayed negotiations over the feasibility of the cost, the ML-1 overhaul is yet to kick off.
Gwadar development- At the centre of the CPEC was the $700-million development of the arid city of Gwadar, with an estimated population of over two lakh, into a smart port city that would become the “Singapore of Pakistan”. Gwadar is strategically important as it is an hour’s drive from Iran and less than 320 km from Oman. According to the master plan for Gwadar’s development under BRI, approved in 2020, it would increase the city’s GDP to $30 billion by 2050 and create over a million jobs.
However, multiple reports have shown that shipping activities at the Gwadar Port are almost negligible so far, with only some trade to Afghanistan. The port has also not attracted many Pakistani traders willing to route their freight through it.
Besides, it took the Balochistan administration three years to grant approval to build a Chinese coal-fired plant in Gwadar, despite the city facing chronic power and water shortages. The $230-million, 4,300-acre New Gwadar International Airport is also facing delays and is now expected to start test flights by December this year. The Eastbay Expressway in Gwadar aimed at enabling goods transit to the Karachi port was opened to traffic this month, as against its completion deadline of October 2020.
Gwadar residents have also protested against the large security force deployment in Gwadar to protect Chinese nationals involved in projects after they became the target of multiple deadly attacks by Baloch nationalists. In late 2021, thousands of Gwadar residents staged a sit-in protest against the lack of promised basic amenities in Gwadar and Chinese deep-sea trawlers reducing fishing opportunities for locals.
Orange Line Metro: The $1.6-billion Orange Line Metro covering 27 km in Lahore, described as “China’s gift” to Pakistan, became operational in late 2020.
Besides being mired in controversies over endangering UNESCO heritage sites, labour malpractices, and displacement of locals, many Pakistani political figures have deemed the Orange Line a ‘white elephant’ due to its high development and operating costs. Besides repaying China, the Pakistan government is also expected to spend 5 bn rupees ($24 million) in taxpayer money on subsidies each year, according to The Guardian.
In Sri Lanka, multiple infrastructure projects that were being financed by China before the launch of the BRI in 2013, many of them conceivably came under its fold. Costly Chinese projects have come under focus amid Sri Lanka’s ongoing economic crisis.
The $1.16 billion Central Expressway project connecting with two other highways- the Outer Circle Highway and the Colombo-Katunayake Expressway, and multiple other roads in Dambulla and Kandy, is currently under construction. China has pledged to fund 85 per cent of this project, with the Export-Import Bank of China (EXIM) investing $989 million. China also developed the Colombo International Container Terminxal (CICT) at the Colombo port, where a Chinese state-owned firm holds an 85 per cent stake under a 35-year Build-Operate-Transfer (BOT) agreement.
Sri Lanka in the last couple of years has witnessed competition between India and China in port terminal and energy projects. In 2021, Colombo ejected India and Japan out of a deal to develop the East Container Terminal at the Colombo Columbo port, getting China to take up the project. It then awarded the project for the Western Side of the Terminal to the Adani Group.
In March this year, Sri Lanka picked India to build three hydropower projects, scrapping a deal it had signed with China for the same projects last year. India was offering a grant, unlike China’s loan.
Hambantota port: Some BRI projects in Sri Lanka have been described as white elephants- such as the Hambantota port, a deep seaport on the world’s busiest east-west shipping lane, which was meant to spur industrial activity. The port had always been secondary to the busy Colombo port until the latter ran out of capacity. The Sri Lankan government took $1.4 billion in Chinese loans for the port’s expansion. Unable to service the huge loan and incurring $300 million in losses due to delays, the government handed Hambantota port to a Chinese state-owned company on a 99-year lease in 2017. The rate of traffic at the port currently remains slow.
Airport: The Hambantota International Airport or the Rajapaksa Airport, built with a $200 million loan from China became operational in 2013. Described as the “world’s emptiest airport” it is used sparingly, and was unable to cover its electricity bill at one point.
Kathmandu formally joined the Belt and Road Initiative in 2017, submitting a list of 35 infrastructure projects it wished China to finance. China asked Nepal to narrow the list to an achievable target and after nearly two years of negotiations, nine projects including an ambitious trans-Himalayan rail road from Nepal to China, construction of roads, laying of power transmission lines, hydropower projects, and a technical institute were shortlisted.
Five years after signing the framework agreement in China,work has not been started on any of the nine projects as of May this year.
Besides, the proposed Himalayan railway project Kerung-Kathmandu Rail link will connectKerung city (also known as Gyirong) in south Tibet to the Nepalese capital of Kathmandu. The rail link is the extension of the railroad being built to connect China’s Qinghai province to Tibet. A pre-feasibility study of the project conducted by China revealed that building the Kerung-Kathmandu link will require the construction of several tunnels or bridges to navigate through the Himalayan terrain, and thetotal cost of the railway could reach $2.75 billion, according to the Kathmandu Post. Moreover, the work for the Nepal-Tibet line will start after the one reaching Tibet from China is completed (which is not scheduled to happen before 2025).
Nepal has had a complicated relationship with India, especially after the Indian blockade in September 2015.
Afghanistan has not comprehensively been brought into the BRI, despite a Memorandum of Understanding (MoU) to promote BRI projects being signed with China in 2016. China had promised investments worth $100 million in Afghanistan, small in comparison to what it shelled out in other South Asian countries. The projects have not materialised so far and uncertainties have deepened after the Taliban takeover last year. Many analysts contended that China would step in with the BRI to fill the void left by the withdrawal of the United States.
The Taliban regime has called China its “main partner” and China also said last year that Taliban leaders support BRI and believe it will enhance much-needed infrastructure development in the country, but tangible projects are yet to kick off.
China had been emphasising plans to make Afghanistan a part of the China-Pakistan Economic Corridor but the former Ashraf Ghani government had its differences with Islamabad regarding the Taliban.
Situated in the middle of the Indian Ocean, Maldives comprises two hundred Islands, and both India and China are strategically attracted to it. One of the most prominent BRI projects undertaken in the Maldives is the 2 km long Sinamale bridge or the China-Maldives Friendship Bridge- a $200 million four lane bridge.
Most of China’s infrastructure investment happened in the Maldives under former President Abdullah Yameen, seen as pro-China. Mr. Yameen was elected in 2013, the year Mr. Jinping launched the BRI. Over the years, the opposition protests grew against the large borrowing from China and Mr. Yameen was defeated in 2018. This is when the current Speaker of the Maldives Parliament Mohammed Nasheed made claims that the country owed China a massive $3.1 billion. Former Maldivian officials and China, meanwhile, peg the debt at $1.1 to $1.4 billion.
The Maldives’ current regime of President Ibrahim Solih has tried to distance itself from the BRI, focusing more on its ‘India First’ policy. India has also in recent years sought greater ties with the Maldives under Prime Minister Narendra Modi’s ‘Neighbourhood First’ policy, funding the Greater Male Connectivity Project in the Maldives by providing a $100 million grant and a $400 million loan.
Bangladesh, which joined the BRI in 2016, has been promised the second-highest belt and road investment by China (about $40 billion) in South Asia after Pakistan.
Multiple studies, including research by the Council on Foreign Relations, show that Bangladesh has been able to benefit from the BRI while maintaining diplomatic and strategic ties with both India and China. It has managed to not upset India by getting India to build infrastructure projects similar to BRI in the country. In 2016, when the Chinese government promised Dhaka BRI investment worth around $40 billion , India followed up in 2017 by extending a $5 billion line of credit and economic assistance.
Bangladesh has also avoided Chinese interference in its internal matters by stressing its sovereign power when China warned it about joining the Quad. Dhaka also agreed to work on a free-trade agreement with India.
BRI projects include China-Bangladesh Friendship Bridges, special economic zones (SEZs), the $689.35 million-Karnaphuli River tunnel project, upgradation of the Chittagong port, and a rail line between the port and China’s Yunnan province. Multiple projects have been delayed, however, owing to the slow release of funds by China. Besides, the Marine Drive Expressway was hampered after Sri Lanka blacklisted the Chinese company building it, over bribery reports. Work on the project is now expected to start in 2022.
China also refused to carry out two rail projects after Bangladesh adjusted their costs downwards. According to Nikkei Asia, the Bangladesh government last year reduced the total cost of the $1.045 billion Joydebpur-Ishwardi rail line by over 12 per cent and that of the $1.2 billion Akhaura-Sylhet line by about 20 per cent.
- Since its inception, the CPEC has been met with multiple roadblocks, and China seems to have trimmed its $62-billion pledges to the project.
- The Maldives’ current regime of President Ibrahim Solih has tried to distance itself from the BRI, focusing more on its ‘India First’ policy.
- Bangladesh has also avoided Chinese interference in its internal matters by stressing its sovereign power when China warned it about joining the Quad.