Coronavirus and the BRI

The Corona Virus epidemic has shaken the world in numerous ways. The virus, which first emerged in the Chinese city of Wuhan (Hubei province), has led to the loss of over 12,000 lives globally. The three countries most impacted so far have been Italy (4,825 lives lost), China (3,287 lives lost), and Iran (1,500 lives lost) as of Saturday, March 21, 2020.

While there are reports that China is limping back to normalcy, the overall outlook for the economy is grim, to say the least, with some forecasts clearly predicting that even with aggressive stimulus measures China may not be able to attain 3% growth this year.

The Chinese slow down could have an impact on the country’s ambitious Belt and Road Initiative (BRI). While China has been trying to send out a message that BRI will not be impacted excessively, the ground realities could be different given a number of factors.

One of the important, and more controversial, components of the BRI has been the $62 billion China Pakistan Economic Corridor (CPEC), which has often been cited as a clear indicator of ‘Debt Trap Diplomacy’ (this, some analysts argue, is China’s way of increasing other country’s dependency on it, by providing loans for big ticket infrastructural projects, which ultimately lead to a rise in debts).

The US and multilateral organizations like the International Monetary Fund (IMF) have predictably questioned the project, but even in Pakistan many have questioned CPEC, including politicians, with most concerns revolving around its transparency and long-term economic implications. Yet the Imran Khan-led Pakistan Tehreek-E-Insaaf (PTI) government, and the previous Pakistan Muslim League (Nawaz) (PML-N) government, have given the project immense importance, arguing that it would be a game changer for the South Asian nation.

On more than one occasion, Beijing has assured Pakistan that CPEC will go ahead as planned with China’s Ambassador to Pakistan, Yao Jing, stating on numerous occasions that the project will not be hit in spite of the Corona Virus. Senior officials in the Imran Khan government, including the Railway Minister Sheikh Rashid Ahmed and Foreign Minister Shah Mehmood Qureshi, in an interview with the Global Times, stated that while in the short run Corona may have an impact on CPEC, in the long run there would be no significant impact.

Analysts in Pakistan however, doubt that there will be no impact, given the fact that a large number of Chinese workers who had left Pakistan are unlikely to return. Since February 2020, a number of reports have been predicting that the CPEC project is likely to be impacted significantly.

Similarly, in the cases of other countries too, there are likely to be significant problems with regard to the resource crunch in China as well as the fact that Chinese workers cannot travel. Not only is Beijing not in a position to send workers, but countries hit by COVID-19 themselves will not be in a position to get the project back on track immediately, as they will first have to deal with the consequences of the outbreak.

Some BRI projects which had begun to slow down even before the outbreak spread globally were in Indonesia and Bangladesh. In Indonesia, a high speed rail project connecting Jakarta with Bandung (estimated at $6 billion) has slowed down since the beginning of the year, and ever since the onset of the Corona Virus, skilled Chinese personnel have been prevented from going back to Indonesia. Bangladesh too has announced delays on the Payra Coal power plant in February 2020. As casualties arising out of the virus increase in Indonesia and other parts of Asia and Africa, the first priority for countries is to prevent the spread of the virus.

While it is true that Beijing would want to send a clear message of keeping its commitments, matching up to its earlier targets is not likely to be a mean task. Even before the outbreak, there were issues due to the terms and conditions of the project and a number of projects had to be renegotiated due to pressure from local populations.

What China has managed to do successfully is provide assistance for dealing with COVID-19. In response to a request for assistance from the Italian government, China has sent a group of 300 doctors and corona virus testing kits and ventilators. The founder of Ali Baba and one of Asia’s richest men, Jack Ma, has also taken the lead in providing assistance to countries in need. After announcing that he will send 500,000 coronavirus testing kits and 1 million masks to the United States, Ma pledged to donate more than 1 million kits to Africa on Monday March 17, 2020, and on March 21, 2020, in a tweet, the Chinese billionaire said that he would be donating emergency supplies to a number of South Asian and South East Asian countries — Afghanistan, Bangladesh, Cambodia, Laos, Maldives, Mongolia, Myanmar, Nepal, Pakistan, and Sri Lanka. The emergency supplies include 1.8 million masks, 210,000 test kits, 36,000 protective suits and ventilators, and thermometers.

China is bothered not just about it’s own economic gains from the BRI, but is also concerned about the long term interests of countries which have signed up for BRI.

The Corona Virus has shaken the whole world, not just China, and the immediate priority of most countries is to control the spread of the pandemic and minimize the number of casualties. Countries dependent upon China, especially those which have joined the BRI, are likely to be impacted. What remains to be seen is the degree to which BRI is affected, and how developing countries which have put high stakes on BRI related projects respond.

2019: Year in Review

It’s been a heck of a year. Thanks for plugging along with Notes On Liberty. Like the world around me, NOL keeps getting better and better. Traffic in 2019 came from all over the place, but the usual suspects didn’t disappoint: the United States, United Kingdom, Canada, India, and Australia (in that order) supplied the most readers, again.

As far as most popular posts, I’ll list the top 10 below, but such a list doesn’t do justice to NOL and the Notewriters’ contribution to the Great Conversation, nor will the list reflect the fact that some of NOL‘s classic pieces from years ago were also popular again.

Nick’s “One weird old tax could slash wealth inequality (NIMBYs, don’t click!)” was in the top ten for most of this year, and his posts on John Rawls, The Joker film, Dominic Cummings, and the UK’s pornographer & puritan coalition are all worth reading again (and again). The Financial Times, RealClearPolicy, 3 Quarks Daily, and RealClearWorld all featured Nick’s stuff throughout 2019.

Joakim had a banner year at NOL, and four of his posts made the top 10. He got love from the left, right, and everything in between this year. “Elite Anxiety: Paul Collier’s ‘Future of Capitalism’” (#9), “In Defense of Not Having a Clue” (#8), and “You’re Not Worth My Time” (#7) all caused havoc on the internet and in coffee shops around the world. Joakim’s piece on Mr Darcy from Pride and Prejudice (#2) broke – no shattered – NOL‘s records. Aside from shattering NOL‘s records, Joakim also had excellent stuff on financial history, Richard Davies, and Nassim Taleb. He is also beginning to bud as a cultural commentator, too, as you can probably tell from his sporadic notes on opinions. Joakim wants a more rational, more internationalist, and more skeptical world to live in. He’s doing everything he can to make that happen. And don’t forget this one: “Economists, Economic History, and Theory.”

Tridivesh had an excellent third year at NOL. His most popular piece was “Italy and the Belt and Road Initiative,” and most of his other notes have been featured on RealClearWorld‘s front page. Tridivesh has also been working with me behind the scenes to unveil a new feature at NOL in 2020, and I couldn’t be more humbled about working with him.

Bill had a slower year here at NOL, as he’s been working in the real world, but he still managed to put out some bangers. “Epistemological anarchism to anarchism” kicked off a Feyerabendian buzz at NOL, and he put together well-argued pieces on psychedelics, abortion, and the alt-right. His short 2017 note on left-libertarianism has quietly become a NOL classic.

Mary had a phenomenal year at NOL, which was capped off with some love from RealClearPolicy for her “Contempt for Capitalism” piece. She kicked off the year with a sharp piece on semiotics in national dialogue, before then producing a four-part essay on bourgeois culture. Mary also savaged privileged hypocrisy and took a cultural tour through the early 20th century. Oh, and she did all this while doing doctoral work at Oxford. I can’t wait to see what she comes up with in 2020.

Aris’ debut year at NOL was phenomenal. Reread “Rawls, Antigone and the tragic irony of norms” and you’ll know what I’m talking about. I am looking forward to Dr Trantidis’ first full year at NOL in 2020.

Rick continues to be my favorite blogger. His pieces on pollution taxes (here and here) stirred up the libertarian faithful, and he is at his Niskanenian best on bullshit jobs and property rights. His notes on Paul Feyerabend, which I hope he’ll continue throughout 2020, were the centerpiece of NOL‘s spontaneity this year.

Vincent only had two posts at NOL in 2019, but boy were they good: “Interwar US inequality data are deeply flawed” and “Not all GDP measurement errors are greater than zero!” Dr Geloso focused most of his time on publishing academic work.

Alexander instituted the “Sunday Poetry” series at NOL this year and I couldn’t be happier about it. I look forward to reading NOL every day, but especially on Sundays now thanks to his new series. Alex also put out the popular essay “Libertarianism and Neoliberalism – A difference that matters?” (#10), which I suspect will one day grow to be a classic. That wasn’t all. Alex was the author of a number of my personal faves at NOL this year, including pieces about the Austro-Hungarian Empire, constructivism in international relations (part 1 and part 2), and some of the more difficult challenges facing diplomacy today.

Edwin ground out a number of posts in 2019 and, true to character, they challenged orthodoxy and widely-held (by libertarians) opinions. He said “no” to military intervention in Venezuela, though not for the reasons you may think, and that free immigration cannot be classified as a right under classical liberalism. He also poured cold water on Hong Kong’s protests and recommended some good reads on various topics (namely, Robert Nozick and The Troubles). Edwin has several essays on liberalism at NOL that are now bona fide classics.

Federico produced a number of longform essays this year, including “Institutions, Machines, and Complex Orders” and “Three Lessons on Institutions and Incentives” (the latter went on to be featured in the Financial Times and led to at least one formal talk on the subject in Buenos Aires). He also contributed to NOL‘s longstanding position as a bulwark against libertarian dogma with “There is no such thing as a sunk cost fallacy.”

Jacques had a number of hits this year, including “Poverty Under Democratic Socialism” and “Mass shootings in perspective.” His notes on the problems with higher education, aka the university system, also garnered plenty of eyeballs.

Michelangelo, Lode, Zak, and Shree were all working on their PhDs this year, so we didn’t hear from them much, if at all. Hopefully, 2020 will give them a bit more freedom to expand their thoughts. Lucas was not able to contribute anything this year either, but I am confident that 2020 will be the year he reenters the public fray.

Mark spent the year promoting his new book (co-authored by Noel Johnson) Persecution & Toleration. Out of this work arose one of the more popular posts at NOL earlier in the year: “The Institutional Foundations of Antisemitism.” Hopefully Mark will have a little less on his plate in 2020, so he can hang out at NOL more often.

Derrill’s “Romance Econometrics” generated buzz in the left-wing econ blogosphere, and his “Watson my mind today” series began to take flight in 2019. Dr Watson is a true teacher, and I am hoping 2020 is the year he can start dedicating more time to the NOL project, first with his “Watson my mind today” series and second with more insights into thinking like an economist.

Kevin’s “Hyperinflation and trust in ancient Rome” (#6) took the internet by storm, and his 2017 posts on paradoxical geniuses and the deleted slavery clause in the US constitution both received renewed and much deserved interest. But it was his “The Myth of the Nazi War Machine” (#1) that catapulted NOL into its best year yet. I have no idea what Kevin will write about in 2020, but I do know that it’ll be great stuff.

Bruno, one of NOL’s most consistent bloggers and one of its two representatives from Brazil, did not disappoint. His “Liberalism in International Relations” did exceptionally well, as did his post on the differences between conservatives, liberals, and libertarians. Bruno also pitched in on Brazilian politics and Christianity as a global and political phenomenon. His postmodernism posts from years past continue to do well.

Andrei, after several years of gentle prodding, finally got on the board at NOL and his thoughts on Foucault and his libertarian temptation late in life (#5) did much better than predicted. I am hoping to get him more involved in 2020. You can do your part by engaging him in the ‘comments’ threads.

Chhay Lin kept us all abreast of the situation in Hong Kong this year. Ash honed in on housing economics, Barry chimed in on EU elections, and Adrián teased us all in January with his “Selective Moral Argumentation.” Hopefully these four can find a way to fire on all cylinders at NOL in 2020, because they have a lot of cool stuff on their minds (including, but not limited to, bitcoin, language, elections in dictatorships, literature, and YIMBYism).

Ethan crushed it this year, with most of his posts ending up on the front page of RealClearPolicy. More importantly, though, was his commitment to the Tocquevillian idea that lawyers are responsible for education in democratic societies. For that, I am grateful, and I hope he can continue the pace he set during the first half of the year. His most popular piece, by the way, was “Spaghetti Monsters and Free Exercise.” Read it again!

I had a good year here, too. My pieces on federation (#3) and American literature (#4) did waaaaaay better than expected, and my nightcaps continue to pick up readers and push the conversation. I launched the “Be Our Guest” feature here at NOL, too, and it has been a mild success.

Thank you, readers, for a great 2019 and I hope you stick around for what’s in store during 2020. It might be good, it might be bad, and it might be ugly, but isn’t that what spontaneous thoughts on a humble creed are all about? Keep leaving comments, too. The conversation can’t move (forward or backward) without your voice.

Despite pressure from Trump, Iran’s world role will continue to be important

Introduction

Ever since taking over as President, Donald Trump’s approach towards Iran has been excessively rash and lacking in nuance. The US withdrawal from JCPOA (Joint Comprehension for Plan of Action), the imposition of sanctions, and brash statements by Trump have heightened tensions between both countries. Allies of the US, including EU member states (especially Germany and France), have expressed their disapproval of Trump’s Iran policy on numerous occasions.

In August 2019, during the G7 Summit at Biarritz (France), it seemed that Trump might have changed his approach towards Iran. The US President expressed his openness to engaging with Iran and dubbed it as a country of immense potential. After the attack on Saudi Oil facilities, there has been a visible shift in the approach of Germany, France, and the UK towards Iran. All three countries blamed Iran for the attacks. In a meeting on the sidelines of the United Nations General Assembly (UNGA) these three countries issued a statement condemning the attack. They also held Iran squarely responsible for the attack. Said the joint statement:

It is clear to us that Iran bears responsibility for this attack

Why China is giving importance to Iran Continue reading

Nightcap

  1. Italy’s waltz with China is business as usual Dario Cristiani, War on the Rocks
  2. Italy and the Belt and Road Initiative Tridivesh Singh Maini, NOL
  3. China’s liberals and benevolent hegemony Pär Nyrén, the Diplomat
  4. The dictatorship of the present John Michael Colón, The Point

Italy and the Belt and Road Initiative

There has been a growing scepticism with regard to the Belt and Road Initiative (BRI) project in many quarters, due to the lack of transparency with regards to terms and conditions as well as the economic implications for countries which are part of the project. A report published in April 2018 by the Center for Global Development (CGD) in Washington flagged 8 countries (including Pakistan, Maldives, Laos, and Djibouti) where the level of debts are unsustainable.

Apart from the red flag raised by a number of researchers, the removal of Pro-China leadership in countries like Malaysia, Maldives, and Sri Lanka has also resulted in problems with the BRI project, and China’s economic dealings (which are clearly skewed in favour of Beijing) with other countries is drawing more attention.

The most vocal critic of China’s economic links has been Malaysian Prime Minister Mahathir Mohamad. During a visit to China in August 2018, Mahathir, alluded to China’s trade relations with poorer countries as ‘a new version of colonialism’. Mahathir later on denied that his statement was targeted at China or the BRI. The fact is that the Malaysian Prime Minister did scrap projects estimated at well over $20 billion (which includes a rail project, East Coast Link, as well as two gas pipelines).

Top officials in the Trump Administration, including US Vice President Mike Pence, have also been critical of the BRI project for a variety of reasons. The major criticism from US policy makers has been the economic ‘unsustainability’ of the project as well as the point that the project is skewed in favour of China.

Italy to join BRI Continue reading

Southeast Asia, China, and Trumpian foreign policy in 2019

A survey titled, ‘State of Southeast Asia: 2019’ conducted by the ASEAN Studies Centre (between November 18 and December 5, 2018 and released on January 7, 2019) at the think-tank Iseas-Yusof Ishak Institute came up with some interesting findings. The sample size of the survey was over 1,000 and consisted of policy makers, academics, business persons, and members of civil society from the region.

It would be fair to say that some of the findings of the survey were along expected lines. Some of the key points highlighted are as follows:

According to the survey, China’s economic clout and influence in South East Asia is steadily rising, and it is miles ahead of other competitors. Even in the strategic domain, Washington’s influence pales in comparison to that of Beijing’s. As far as economic influence in South East Asia is concerned, a staggering 73 percent of respondents subscribed to the view that China does not have much competition. A strong reiteration of this point is the level of bilateral trade between China and ASEAN (Association of Southeast Asian Nations), which comfortable surpassed $500 billion in 2017. After China, it is not the US, but ASEAN which has maximum economic clout in the region. If one were to look at the strategic and political sphere, 45% of respondents opined that China is the most influential player in South East Asia, followed by the US at 30 percent.

Second, China’s increasing influence does not imply that it is popular in South East Asia. In fact, a large percentage of the respondents expressed the opinion that China’s lack of integration with global institutions is not a very positive omen. South East Asian nations also have clear reservations with regard to the Belt and Road Initiative (BRI). 50% of respondents believed that the project would increase ASEAN countries dependence upon China, and there were serious apprehensions, with one third of respondents raising question marks with regard to the transparency of the project. A small percentage of respondents (16%) also felt that the BRI was bound to fail. Many ASEAN countries have been alluding to some of the shortcomings of the BRI, of course none was as vocal as Malaysian Premier Mahathir Mohammad. In the survey, respondents from Malaysia, Thailand, and the Philippines expressed the view that their countries should be cautious with regard to the BRI. Interestingly, even respondents from Cambodia, a country where China has made significant inroads, Japan is the most trusted country and not China.

Third, US isolationism, especially under Trump, has led to an increasing disillusionment with Washington DC in the region. The current administration has been aggressive on China, and it has sought to take forward former US President Barack Obama’s vision of ‘Pivot to Asia’ in the form of the Indo-Pacific Narrative. Senior voices within the Trump Administration, including current Secretary of State Mike Pompeo, have been trying to give a push to the Indo-Pacific Narrative and reaching out to South East Asian Countries. In July for instance, while addressing the Indo-Pacific Economic Forum at the US Chamber of Commerce in Washington, Pompeo said that the US was going to invest $113 million in new U.S. initiatives in areas like the digital economy, energy, and infrastructure. Pompeo also stated that these funds were a ‘down payment on a new era in U.S. economic commitment to peace and prosperity in the Indo-Pacific region’. Pompeo’s address was followed by a visit to South East Asia (Singapore and Indonesia), where he met with leaders from a number of ASEAN countries.

On December 31, 2018, the US also signed the ARIA (Asia Reassurance Initiative Act), which sought to outline increased US economic and security involvement in the Indo-Pacific region. ARIA has flagged US concerns with regard to China’s expansionist tendencies in South East Asia. Other key strategic issues, such as nuclear disarmament on the Korean Peninsula, have also been highlighted.

The Trump Administration has also earmarked $1.5 billion for a variety of programs in East and South East Asia.

Trump’s decision to pull the US out of the Trans Pacific Partnership (TPP) led to a lot of disappointment in the region, with allies like Singapore putting forward their views. Speaking at the ANZ Forum in November 2018, Former Prime Minister of Singapore, Goh Chok Thong stated:

…It is still a superpower but it has become less benign and generous. Its unilateral actions in many areas have hurt allies, friends and rivals alike […] America First is diminishing the global stature, moral leadership and influence of the US.

This view was also echoed by a number of experts who commented on the finding of the survey.

The Former Singapore PM also made the point that Asia needed to recalibrate its policies in order to adjust to the new world order.

ASEAN

What is clearly evident is that ASEAN needs to build a new vision which is in sync with the changing geopolitical situation. While Malaysian PM Mahathir Mohammad, by scrapping Chinese projects and referring to a new sort of colonialism emerging out of China’s BRI project, has taken an important step in this direction, it remains to be seen whether other countries in the region can also play their role in helping ASEAN weave its own narrative. For a long time now, countries have been dependent upon both the US and China, and have thought in terms of choices, but there has never really been a concerted effort to create an independent narrative.

What ASEAN actually needs is a narrative where it does not shy away from taking an independent stance, and where it is also willing to take a stand on issues of global relevance. One such issue is the Rohingya Issue. Apart from Malaysia and Indonesia, none of the other members of ASEAN has taken a clear stand. In the past, many ASEAN countries thought that they could refrain from commenting on contentious issues. Respondents to the survey felt that ASEAN states should be more involved in the Rohingya Issue.

The United States and other countries which are wary of Chinese influence should come up with a feasible alternative. So far, while members of the Trump Administration have repeatedly raised the red flag with regard to China’s hegemonic tendencies, and predatory economics as has been discussed earlier, it has not made the required commitment. While the Trump Administration has not been able to pose a serious challenge to Beijing, it remains to be seen if the Asia Reassurance Initiative Act is effective.

It is also important for Washington, and other countries, not to look at Chinese involvement from a zero-sum approach. Perhaps it is time to adopt a more pragmatic and far sighted approach. If Japan and China can work together in the Belt and Road Initiative, as well as other important infrastructural initiatives in South East Asia, and India and China can work together in capacity-building projects in Afghanistan, the possibility of US and China finding common ground in South East Asia should not be totally ruled out. Amidst all the bilateral tensions, recent conversation between US President Donald Trump and Chinese President Xi Jinping, and statements emanating from both sides are encouraging.

Conclusion

An isolationist Washington DC and a hegemonic Beijing are certainly not good news, not just for ASEAN, but for other regions as well. The survey has outlined some of the key challenges for ASEAN, but it is time now to look for solutions. Hopefully, countries within the region will shape an effective narrative, and be less dependent upon the outside world. The survey is important in highlighting some broad trends but policy makers in Washington as well as South East Asia need to come up with some pragmatic solutions to ensure that Beijing does not have a free run.

How the United States can woo Africa away from China

On December 13, 2018, US National Security Advisor John Bolton, while speaking at the Heritage Foundation, highlighted the key aims and objectives of ‘Prosper Africa,’ which shall probably be announced at a later date. The emphasis of this policy, according to Bolton, would be on countering China’s exploitative economics unleashed by the Belt and Road Initiative, which leads to accumulation of massive debts and has been dubbed as ‘Debt Trap Diplomacy’. A report published by the Centre for Global Development (CGD) (2018) examined this phenomenon while looking at instances from Asia as well as Africa.

During the course of his speech, Bolton launched a scathing attack on China for its approach towards Africa. Said the American NSA:

bribes, opaque agreements and the strategic use of debt to hold states in Africa captive to Beijing’s wishes and demands.

Bolton, apart from attacking China, accused Russia of trying to buy votes at the United Nations through the sale of arms and energy.

Bolton also alluded to the need for US financial assistance to Africa being more efficient, so as to ensure effective utilization of American tax payer money.

The BUILD

It would be pertinent to point out that the Trump administration, while realizing increasing Chinese influence in Africa, set up the US IDFC (International Development Finance Corporation), which will facilitate US financing for infrastructural projects in emerging market economies (with an emphasis on Africa). IDFC has been allocated a substantial budget — $60 billion. In October 2018, Trump had signed the BUILD (Better Utilization of Investments Leading to Development) because he, along with many members of the administration, felt that the OPIC (Overseas Private Investment Corporation) was not working effectively and had failed to further US economic and strategic interests. Here it would be pertinent to mention that a number of US policy makers, as well as members of the strategic community, had been arguing for a fresh US policy towards Africa.

Two key features of IDFC which distinguish it from OPIC are, firstly, deals and loans can be provided in the local currency so as to defend investors from currency exchange risk. Second, investments in infrastructure projects in emerging markets can be made in debt and equity.

There is absolutely no doubt that some African countries have very high debts. Members of the Trump administration, including Former Secretary of State Rex Tillerson, had also raised the red flag with regard to the pitfalls of China’s unsustainable economic policies and the ‘Debt Trap’.

According to Jubilee Debt Campaign, the total debt of Africa is well over $400 billion. Nearly 20 percent of external debt is owed to China. Three countries which face a serious threat of debt distress are Zambia, Republic of Congo, and Djibouti. The CGD report had also flagged the precarious economic situation of certain African countries such as Djibouti and Ethiopia.

US policy makers need to keep in mind a few points:

Firstly, Beijing has also made efforts to send out a message that BRI is not exploitative in nature, and that China was willing to address the concerns of African countries. Chinese President Xi Jinping, while delivering his key note address at the China-Africa Summit in September 2018, laid emphasis on the need for projects being beneficial for both sides, and expressed his country’s openness to course correction where necessary. While committing $60 billion assistance for Africa, the Chinese President laid emphasis on the need for a ‘win-win’ for both sides.

African countries themselves have not taken kindly to US references to debt caused as a result of China. While Bolton stated that Zambia’s debt is to the tune of $6 billion, an aide to the Zambian President contradicted the US NSA, stating that Zambia’s debt was a little over $3 billion.

At the China Zhejiang-Ethiopia Trade and Investment Symposium held in November 2018, Ethiopian State Minister of Foreign Affairs Aklilu Hailemichae made the point that Chinese investments in Ethiopia have helped in creating jobs and that the relationship between China and Ethiopia has been based on ‘mutual respect’. The Minister also expressed the view that Ethiopia would also benefit from the Belt and Road Initiative.

During the course of the Forum of China-Africa cooperation in September 2018, South African President Cyril Ramaphosa had also disagreed with the assertion that China was indulging in predatory economics and this was leading to a ‘New Colonialism,’ as had been argued Malaysian Prime Minister Mahathir Mohammad during his visit to China in August 2018.

Washington DC needs to understand the fact that Beijing will always have an advantage given the fact that there are no strings attached to it’s financial assistance. To overcome this, it needs to have a cohesive strategy, and play to its strengths. Significantly, the US was ahead of China in terms of FDI in Africa in 2017 (US was invested in 130 projects as of 2017, while China was invested in 54 projects). Apart from this, Africa has also benefited from the AGOA program (Africa Growth and Opportunity Act), which grants 40 African countries duty free access to over 6000 products.

Yet, under Trump, the US adopts a transactionalist approach even towards serious foreign policy issues (the latest example being the decision to withdraw US troops from Syria) and there is no continuity and consistency.

US can explore joint partnership with allies

In such a situation, it would be tough to counter China, unless it joins hands with Japan, which has also managed to make impressive inroads into Africa, in terms of investments, and has also been providing financial assistance, though it is more cautious than China and has been closely watching the region’s increasing debts. Japan and India are already seeking to work jointly for promoting growth and connectivity in Africa through the Africa-Asia Growth Corridor. The US is working with Japan and India for promoting a free and open Indo-Pacific, and can work with both countries for bolstering the ‘Prosper Africa’ project.

Perhaps, Trump should pay heed to Defence Secretary Jim Mattis’ (who will be quitting in February 2019) advice where he has spoken about the relevance of US alliances for promoting its own strategic interests.

There are of course those who argue that US should find common ground with China for the development of Africa, and not adopt a ‘zero-sum’ approach. In the past both sides have sought to work jointly.

Conclusion

African countries will ultimately see their own interests, mere criticism of China’s economic policies, and the BRI project, and indirectly questioning the judgment of African countries, does not make for strategic thinking on the part of the US. The key is to provide a feasible alternative to China, along with other US allies, or to find common ground with Beijing. Expecting nuance and a long term vision from the Trump Administration, however, is a tall order.

Tokyo’s holistic approach to Africa needs to be applauded

A Ministerial meeting attended by representatives from 52 African nations was held ahead of the 7th Tokyo International Conference for African Development (TICAD) to be held in Yokohama in August 2019.

TICAD (which is co-hosted by the Government of Japan, The UNDP, World Bank Group and African Union Commission) was launched over two decades ago, in 1993, with the main objective being to bring back global interest in Africa (a number of key geopolitical developments, such as the end of the Cold War, had resulted in the global community shifting its focus away from Africa).

In the past two decades, TICAD forum has played a key role in Africa’s development. In recent years, the government of Japan has contributed to Africa’s development in a number of important areas. In the phase between 2008-2013, for example, the Government of Japan built a number of elementary and middle schools, upgraded healthcare and medical facilities, and also provided drinking water to rural villages.

During the last TICAD event, in 2016, held at Nairobi (Kenya), Japanese PM Shinzo Abe had committed $30 billion in assistance over a period of three years for key areas such as infrastructure and health care.

Beijing would be closely observing the recent meeting for a number of reasons. Continue reading

The EU’s laudable Asia Connectivity Strategy

The European Union (EU) has put forward a plan for enhancing connectivity within Asia, and has been dubbed as the Asia Connectivity Strategy.

The EU does not want to give an impression that the Asia Connectivity Strategy (ACS) is a counter to the Belt and Road Initiative (BRI). Yet, senior officials of the EU, while commenting on the broad aims and objectives of the project, have categorically stated that the primary goal of the Asia Connectivity Strategy is enhancing connectivity (physical and digital) while also ensuring that local communities benefit from such a project, and that environmental and social norms are not flouted (this is a clear allusion to the shortcomings of the BRI). There are no clear details with regard to the budget, and other modalities of the project (EU member countries are likely to give a go ahead for this project, before the Asia-Europe Meeting in October 2018). The EU has categorically stated that it would like to ensure that the ACS is economically sustainable.

Other alternatives to BRI: the US

It is not just the EU, but also the US, along with Japan and Australia, which are trying to create an alternative vision to the BRI.

Continue reading

China-Myanmar Economic Corridor and the limits of ‘Cheque Book Diplomacy’

On September 9, 2018 Myanmar and China signed a memorandum of understanding (MoU) for establishing the China-Myanmar Economic Corridor (CMEC), as part of China’s ambitious Belt and Road Initiative (BRI). The corridor will traverse a distance of approximately 1700 kilometres and seeks to connect Kunming (in China’s Yunnan Province) with Myanmar’s key economic points – Mandalay, Yangon, and Kyauphkyu.

According to the MOU, both sides have agreed to collaborate in a number of areas. Some of the important areas identified for collaboration by both countries are: infrastructure, construction, manufacturing, agriculture, transport, finance, human resources development, telecommunications, and research and technology.

Chinese Foreign Minister Wang Yi had first announced the proposal to build CMEC during his meeting with Myanmar’s State Counselor Aung San Suu Kyi in November 2017. The MOU had been finalized in February 2018.

The CMEC is an ambitious project from which Myanmar could benefit immensely. Yet, there have been apprehensions with regard to the economic feasibility of the project, and Myanmar does not want to meet the fate of other countries which have fallen into what has been dubbed as a ‘Debt Trap’.

Opposition to Kyauphkyu

There has been skepticism with regard to the BRI project in general, and China’s involvement in the SEZ and Sea Port to be set up in Kyauphkyu (a coastal town in the Rakhine Province) in particular. Large sections of the population have been questioning the economic rationale of the project – and the benefits for Myanmar. CITIC (China’s biggest financial conglomerate) was awarded both projects, but it had to reduce its stake from 85 percent to 70 percent in the Sea Port after vehement opposition from the local population. Locals found the 85-15 arrangement unreasonable. Fearing a debt trap, the NLD government in Myanmar has also reduced the initial value of the Sea Port project – a whopping $7.3 billion USD to $1.3 billion. There has been opposition to the SEZ as well (mainly on environmental grounds), and while the initial Chinese take in the SEZ (originally valued at $2.7 billion) was 51 percent, it is likely to be revised.

U Kan Zaw, a Minister in the erstwhile Than Sein government (and Chairman of the Kyauphkyu SEZ tender committee), confessed that Myanmar was not very keen for Chinese investment (it had sought investments from the UK and Europe), but it was not left with any other option once other countries declined to invest.

China beginning to acknowledge shortcomings of BRI projects

Of late Beijing has expressed a willingness to re-examine some aspects of BRI-related projects (including CMEC and the China Pakistan Economic Corridor – CPEC). On the face of it, at least Beijing seems open to addressing the worries of countries which are part of the BRI.

Chinese media itself is trying to send a message that Beijing is responsive to concerns of countries which are part of the BRI initiative. A recent example is an article in CGTN on CMEC, which acknowledged not just the drawbacks of the project, but also the fact that the response to CMEC has been tepid so far in Myanmar. Said the article:

CMEC is temporarily suffering from a cold reception, we believe that it is an excellent endeavor.

The authors of the article also makes a significant point: that Chinese businessmen are not familiar with Myanmar. While the article could be referring to the lack of familiarity with Myanmar’s policies, many host countries have been critical not just of the ‘one sided’ nature of Chinese economic investments, but their unwillingness to understand local cultures, and the fact that they remain aloof from the local population.

On a number of occasions, Chinese businessmen have even misbehaved with locals. In Pakistan, on two occasions, Chinese businessmen have beaten up policeman, and this did not go down well with the local population.

While alluding to the failure of big ticket infrastructure projects, the article also refers to the need for Chinese investments in ‘light industry’ as opposed to ‘heavy industry’ (in a reference to infrastructural mega projects, such as those which were scrapped by Malaysian Prime Minister Mahathir Mohammad).

One of the interesting aspects of CMEC is that Myanmar was keen to have third party investments, and not restrict itself only to Chinese investments. Investments will come from countries in South East Asia and East Asia — Thailand, South Korea, and Japan. While China’s economic presence in Myanmar is staggering, this has not gone unchallenged and of late countries like South Korea are also increasing their presence in Myanmar. The authors of the CGTN article also try to pitch for Chinese cooperation with other countries, arguing that joint investments will mean not only lesser economic and political burden for China, but that they could also reduce hostilities between Western and Chinese companies.

Finally, the article speaks about the need for greater cooperation between Myanmar and China in the sphere of agriculture (especially aquaculture), and that this cooperation should be economically beneficial for the local population.

Conclusion

It remains to be seen whether China will actually acknowledge the genuine concerns of countries participating in the BRI, and whether or not it will actually take some tangible steps to address the apprehensions. As stated earlier, Beijing seems slightly more flexible in its negotiations, but whether this is a short term trend (which many would argue is a consequence of Malaysian PM Mahathir Mohammad’s straight talking with China) or not remains to be seen.

China may be further compelled to change its approach towards overseas economic investments after the recent electoral rout of Abdulla Yameen (outgoing Maldivian President), considered to be pro-China. One trend which is clearly emerging, as was evident from the electoral verdict of Maldives, was that leaders (many of whom position themselves as strongmen) blindly following Chinese diktats for short term economic goals does not go down well with ordinary citizens, and China may need to address its perception problem by looking beyond Cheque book Diplomacy.

India’s approach towards BRI: Need for pragmatism

(new title)

Recently, China’s consular general in Kolkata, Ma Zhanwu, while speaking at a function, proposed a bullet train connecting Kunming (in China’s Yunnan Province) with Kolkata, the capital of India’s eastern state of West Bengal. Said Ma:

With joint efforts of India and China, a high-speed rail link could be established between the two cities.

It would be pertinent to point out that the proposal for a bullet train connecting Kunming and Kolkata had been discussed earlier at the Greater Mekong Subregion (GMS) meet in 2015. In fact, enhancing connectivity between India and China through the Kolkata-Kunming multi-modal corridor (officially the Bangladesh-China-India-Myanmar Economic Corridor, or BCIMEC), which covers a distance of 2,800 kilometres, has been under discussion for over 2 decades, through the Track II K2K (Kolkata-Kunming) dialogue. During former India Prime Minister Manmohan Singh’s China visit, in October 2013, sister city relations were established between Kunming and Kolkata.

In recent years, China has been pro-actively reaching out to West Bengal Chief Minister Mamata Banerjee, and has invited her to visit on repeated occasions, though she has been unable to visit (she was all set to visit in June 2018, but her trip was cancelled at the last moment). Apart from this, a number of Chinese investors have expressed interest in investing in West Bengal and even attended the Bengal Global Business Summit 2018.

Given the increasing emphasis on connectivity with South East Asia, through India’s North East (one of the key aims of India’s ‘Act East Policy’), it was believed that the BCIMEC would tie in neatly with India’s vision for connectivity.

However, tensions between India and China – due to the Doklam standoff as well as Beijing’s insistence that BCIMEC be included in its official Belt and Road Initiative (BRI) –  have contributed to a wane in New Delhi’s interest in the project, at least for the time being. The Rohingya crisis, and more general tensions between Bangladesh and Myanmar, are also a major impediment to the project.

The China Myanmar Economic Corridor: Why New Delhi should pay close attention

While a high speed train is an ambitious project, New Delhi can not be closed to the BCIMEC and should pay close attention to the China-Myanmar Economic Corridor (the Memorandum of Understanding for this project was signed on September 9, 2018). While the China-Myanmar Economic Corridor (CMEC) has been under discussion for some time, there have been numerous debates with regard to the economic implications for Myanmar (the Kyaukphyu Deep Sea Port project, as well as Special Economic Zones, have been contentious). The increasing debate on the issue of ‘debt trap diplomacy’ has only increased apprehensions within sections of the Myanma government (the stake of Chinese conglomerate CITIC in the deep sea port has been reduced from 85 percent to 70 percent due to domestic pressures). Myanmar has also made it clear that it would not like to depend only on Chinese investments, and the recently-signed MOU categorically states that third party investments from Japan, South Korea, and Thailand in CMEC projects are more than welcome. Interestingly, an article on CMEC in Chinese media acknowledges some of the apprehensions vis-à-vis CMEC, and also bats for closer cooperation between China and other Asian and Western countries.

The proposal for the bullet train connecting Kolkata-Kunming came days after the agreement had been signed between China and Myanmar. China would like to extend this corridor all the way to India (while speaking about rail connectivity between Kunming and Kolkata, the Chinese diplomat also spoke about an industrial cluster along the route).

How should New Delhi play it?

While New Delhi’s objections to the BRI are valid, it does need to shed blinkers. It is free not to participate in those components of the project with which it is not comfortable, but there are projects, like the BCIMEC, where it can easily find common ground with China. This will give a boost to India’s infrastructure in the eastern and northeastern part of the country, and complement it’s Act East Policy. If third countries are allowed to invest in CMEC, Indian companies should explore opportunities, as this will enhance their presence in Myanmar while also bolstering the Act East Policy.

China’s narrative in South Asia

Post the Wuhan Summit, there has been a clear change of narrative from the Chinese side. China has expressed its keenness to work jointly with India in Afghanistan – in capacity-building projects. This was unthinkable a few years ago.

China’s burgeoning economic relationship with Nepal has sent alarm signals in New Delhi. China’s decision to give Nepal access to its ports (Tianjin, Shenzhen, Lianyungang and Zhanjiang) raised the hackles in New Delhi. Pragmatists realize that New Delhi can not dictate Nepal’s ties with China, and the fact is that Kathmandu would like to benefit economically from its ties with both China and India.

Interestingly, China has been urging Nepal to strengthen economic ties with India. During his visit to Beijing, Nepal’s Prime Minister, K.P. Oli, made an unequivocal pitch for strong ties between Kathmandu and New Delhi (as well as Kathmandu and Beijing). He stated that the economic progress of both India and China was an opportunity for Nepal, and stated that Nepal wanted to emerge as a bridge between both countries, and would not like to get embedded in zero sum geopolitical games. Nepal’s former Prime Minister, Prachanda, during his visit to India, also referred to the need for close ties with both India and China.

India should also keep in mind a few other points

While many in New Delhi are pointing to Malaysian Prime Minister Mahathir Mohammad’s stand against Chinese projects, it is important to keep in mind that while the Malaysian PM has scrapped a few projects, he has continued to reiterate the relevance of the China-Malaysia relationship (there is need for nuance). Second, it is one thing to point out the shortcomings of the BRI project, but India needs to prove its own track record in big ticket connectivity projects (New Delhi has been extremely slow when it comes to the implementation of connectivity projects within the neighbourhood). Third, there are areas where India is already working with China, so rigidity and paranoia do not make much sense. If even Japan is willing to participate in certain projects of BRI, there is absolutely no reason why India should not at least be open to elements of the project. It is also important to look at connectivity from an economic dimension and not a narrow security prism as large sections of India’s strategic community do. Finally, New Delhi can not put all its eggs in the American basket. While India’s strategic relationship with the US has witnessed an improvement, and Washington has repeatedly spoken about the need for greater connectivity within the ‘Indo-Pacific’, the US is not likely to invest significantly in economic connectivity projects. India thus can not be totally dismissive of Beijing-led connectivity initiatives.

While New Delhi needs to exhibit pragmatism, Beijing on its part needs to address the concerns of India, and other countries, with regard to the BRI.

A short note from New Delhi on the 2018 Eastern Economic Forum

Chinese President Xi Jinping recently attended the Eastern Economic Forum (EEF), hosted by the Russian city of Vladivostok, which was held on September 11th and 12th of 2018. President Xi (who became the first Chinese President to attend the EEF) met with Russian President Vladimir Putin for the third time in as many months. Significantly, Japanese Prime Minister Shinzo Abe also attended the Forum, which was titled “The Russian Far East: Expanding the Range of Possibilities.”

Both Xi and Putin repeatedly referred to not just their close personal rapport (Chinese President Xi Jinping, while referring to their individual ties, stated that his and Putin’s ‘friendship was getting stronger all the time’), but also the deepening of economic and strategic ties between Russia and China, as well as the convergence on key global issues (neither side missed the opportunity to target the US for it’s inward looking economic policies).

China was also participating in military exercises, held in Siberia, which have been dubbed ‘Vostok 2018’ (Beijing clarified that these military exercises were not targeted at any third party). The military exercise (September 11-17, 2018) involves 300,000 troops, 1,000 planes, and a number of warships. China sent over 3,000 People’s Liberation Army personnel for the military exercises.

China-Russia Economic Times

A number of issues were discussed during the course of the Forum. Both sides agreed that there was a need to accelerate bilateral economic ties. Trade has witnessed a significant rise in recent years, while in 2017 it was estimated at over $80 billion. In 2018, bilateral trade could surpass $100 billion. Chinese investments in Russia have also been increasing. According to the Russia-China Investment Fund (RCIF; set up in 2012), 150 representatives from China and Russia have already identified 73 projects estimated at $100 billion. Also according to the RCIF, 7 projects estimated at well over $4 billion have already been undertaken.

Both sides also agreed to promote stronger synergies between the Belt and Road Initiative (BRI) and the Eurasian Economic Union (EEU).

Given the fact that the Forum was held in Russia’s Far Eastern Region (RFE), the need to increase Chinese investment in the RFE was high on the agenda. President Xi stated that China has always been a key participant in development projects in the Eastern parts of Russia. China’s Shandong Hi-Speed Group is also likely to invest in highway projects in the RFE.

Recent years have witnessed an increasing Chinese economic presence in Khabarovsk, which is the second largest city in the Eastern Region and 800 kilometres from Vladivostok. It may also be pertinent to point out that a large number of Russians have been uncomfortable with the growing Chinese economic clout, as well as immigrants. In 2010, the Chinese population in the Russian Far East was estimated at less than 30,000, though according to some estimates the population is much higher.

Protectionism

Both Russia and China warned against growing economic protectionism. Xi stated that he was all for greater international cooperation, and even lashed out at the growing tendency towards protectionism. Xi’s views were echoed by Putin, who stated that ‘the world and global economy are coming up against new forms of protectionism today with different kinds of barriers which are increasing.’

Putin made the point that protectionism was a threat, especially to Asia-Pacific (significantly, the current Trump administration has been using the term ‘Indo-Pacific,’ much to the chagrin of the Chinese).

What was also significant was that Xi came down heavily on ‘unilateralism’ at a time when China itself is being accused of ‘expansionist tendencies’ and promoting ‘Debt Trap Diplomacy.’ What was even more interesting was a reference to ‘UN Charter.’

The message emanating from the forum was clear: that the economic as well as strategic partnership between Moscow and Beijing is likely to strengthen, and both will try to develop an alternative narrative to that currently emerging from Washington.

Significance of meeting: Why India would be watching

New Delhi would be observing the Forum and meetings between Putin and Xi, since it’s own relations between Russia and China are of vital importance. While Russia is important in the security context, economic ties with Beijing are important for New Delhi.

New Delhi attaches immense significance to ties with Moscow

There are many in analysts in New Delhi who argue that India should be cautious in strengthening strategic ties with the US, given that this could cause friction in New Delhi’s relations with Moscow (Russia’s improved defense ties with Pakistan are often cited as a consequence of New Delhi moving too close to Washington DC). There are others who argue that New Delhi’s ties with Moscow are robust and time-tested, and will not be impacted by close ties with Washington DC. Russian President Vladimir Putin will be visiting India in October 2018 (for the 19th annual India-Russia Summit), while Indian External Affairs Minister Sushma Swaraj, during her Moscow visit, met with Deputy Prime Minister Yuri Borisov. Both of them jointly chaired the 23rd India-Russia Inter-Governmental Commission on Trade, Economic, Scientific, Technical, and Cultural Cooperation (IRIGC-TEC) meeting. A number of issues, including the need to boost bilateral trade and enhance people-to-people contact, were discussed. Significantly, this was Swaraj’s third visit to Russia in 11 months and she stated that India accorded ‘high priority’ to ties with Russia.

The fact that Swaraj’s visit to Russia took place after a successful 2+2 dialogue with the US, where a number of important defense agreements including COMCASA were signed, shows that New Delhi realizes the importance of ties with Russia. India is likely to sign a deal with Russia for the procurement of the S-400 air defence system, even though the USA has not given India any assurances with regard to a waiver from CAATSA (Countering America’s Adversaries through Sanctions Act) if India purchases defence equipment from Russia. During the visit, India is also likely to go ahead with an agreement with Russia for four frigates for the Indian Navy. While two of these will be manufactured in Kaliningrad, two will be manufactured in Goa.

New Delhi-Beijing ties

The issue of trade tariffs, which was highlighted by Putin and Xi, has also not gone unnoticed by New Delhi. One of the reasons (apart from the desire for peace and tranquility on borders) why India has been pro-actively reaching out to China is a convergence on economic issues. In fact, days after the 2+2 Summit, US President Trump, while referring to India and China, stated that the US has been providing subsidies to India and China for far too long and can not afford to do so any longer.

In terms of investments, there has not been much progress so far due to political disputes, but there is scope for greater economic cooperation between both countries through enhanced connectivity. New Delhi, on its part, should be open to projects like BCIM Corridor (Bangladesh, China, India, Myanmar). The recent proposal out of Beijing to start a railway line from Kunming to Kolkata may not seem possible in the short run, but in the long run it is definitely worth examining, and would give a boost to economies of India’s Eastern and North Eastern states. Interestingly, on September 9th, 2018, Myanmar signed a memorandum of understanding (MoU) with China for agreeing to establish the China-Myanmar Economic Corridor (CMEC). New Delhi should see this connectivity project as an opportunity rather than an obstacle.

Conclusion

New Delhi, while enhancing strategic cooperation with Washington, needs to keep in mind that there is a plethora of economic as well as other issues of global importance where New Delhi can find common ground with Beijing and Moscow. India bilaterally shares robust economic ties with China, and a strategic relationship with Russia. All three countries are also working closely in BRICS as well as SCO. New Delhi also needs to keep in mind that while strategic ties with Washington are important, Trump’s unpredictability will compel New Delhi to keep all its options open and think in a nuanced manner. While historically New Delhi shares close ties with Moscow, the logic of geography can not be ignored in the context of India-China ties.

China and the liberal vision of the Indo-Pacific

Mike Pompeo’s recent speech (titled ‘America’s Indo-Pacific Economic Vision’) at the Indo-Pacific Business Forum hosted by the US Chamber of Commerce in Washington, DC, has been carefully observed across Asia. Beijing has understandably paid close special attention to it. Pompeo emphasized the need for greater connectivity within the Indo-Pacific, while also highlighting the role which the US was likely to play (including financial investments to the tune of $113 million in areas like infrastructure, energy, and digital economy). The US Secretary of State, while stating that this vision was not targeted at anyone, did make references to China’s hegemonic tendencies, as well as the lacunae of Chinese connectivity projects (especially the economic dimension).

The Chinese reaction to Pompeo’s speech was interesting. Senior Chinese government officials were initially dismissive of the speech, saying that such ideas have been spoken in the past, but produced no tangible results.

A response article in the Global Times is significant here. Titled ‘Indo-Pacific strategy more a geopolitical military alliance’ and published in the communist state’s premier English-language mouthpiece, what emerges clearly from this article is that Beijing is not taking the ‘Indo-Pacific vision’ lightly, and neither does it rule out the possibility of collaboration. The article is unequivocal, though, in expressing its skepticism with regard to the geopolitical aspect of the Indo-Pacific vision. Argues the article:

[…] the geopolitical connotation of the strategy may lead to regional tensions and conflicts and thus put countries in the region on alert.

The piece is optimistic with regard to the geo-economic dimension, saying that American investment would be beneficial and would promote economic growth and prosperity. What must be noted is that while the US vision for an ‘Indo-Pacific’ has been put forward as a counter to the Belt and Road Initiative (BRI) of China, the article also spoke about the possible complementarities between the US vision for an ‘Indo-Pacific’ and China’s version of BRI. While Pompeo had spoken about a crucial role for US private companies in his speech, the article clearly bats in favor of cooperation between the Indian, Japanese, Chinese, and US governments, rather than just private companies. This is interesting, given the fact that China had gone to the extent of dubbing the Indo-Pacific vision as “the foam on the sea […] that gets attention but will soon dissipate.”

While there is absolutely no doubt that there is immense scope for synergies between the Indo-Pacific vision and BRI, especially in the economic sphere, China’s recent openness towards the Indo-Pacific vision needs to be viewed in the following context.

First, the growing resentment against the economic implications of some BRI projects. In South Asia, Sri Lanka is a classical example of China’s debt trap diplomacy, where Beijing provides loans at high interest rates (China has taken over the strategic Hambantota Project, since Sri Lanka has been unable to pay Beijing the whopping $13 billion). Even in the ASEAN grouping, countries are beginning to question the feasibility of BRI projects. Malaysia, which shares close economic ties with Beijing, is reviewing certain Chinese projects (this was one of the first steps undertaken by Mahathir Mohammad after taking over the reigns as Prime Minister of Malaysia).

Secondly, the Indo-Pacific vision has long been dubbed as a mere ‘expression’ that lacks gravitas in the economic context (and even now $113 million is not sufficient). Developments over recent months, including the recent speech by Pompeo, indicate that the American Department of State seems to be keen to dispel this notion that the Indo-Pacific narrative is bereft of substance. Here it would be pertinent to point out that Pompeo’s speech was followed by an Asia visit to Indonesia, Malaysia, and Singapore.

The US needs to walk the course and, apart from investing, it needs to think of involving more countries, including Taiwan and more South Asian countries like Sri Lanka and Bangladesh in the Indo-Pacific partnership.

The Indo-Pacific also speaks in favor of democracy as well as greater integration, but countries are becoming more inward-looking, and their stands on democracy and human rights are more ambiguous than in the past. Japan is trying to change its attitude towards immigration, and is at the forefront of promoting integration and connectivity within the Indo-Pacific. Neither the US, nor India, Japan, or Australia have criticized China for its human rights violations against the Uighur minority in Xinjiang province.

Here it would also be important to state that there is scope for China to be part of the Indo-Pacific, but it needs to look at certain projects beyond the rubric of the BRI. A perfect instance is the Bangladesh, China, India, Myanmar (BCIM) Corridor, which India was willing to join, but China now considers this project as a part of BRI.

In conclusion, Beijing can not be excluded from the ‘Indo-Pacific’ narrative, but it cannot expect to be part of the same, on its own terms. It is also important for countries like the United States and India to speak up more forcefully on key issues pertaining to freedom of speech and diversity (and ensure that these remain robust in their own respective countries), given that one of the objectives of the Indo-Pacific vision is a ‘Free and Open Indo-Pacific’.

Hegemony is hard to do: China, globalization, and “debt traps”

As a result of an increasingly insular United States, with US President Donald Trump’s imposition of tariffs, China has been trying to find common cause with a number of countries, including US allies such as Japan, India and South Korea, on the issue of globalization.

While unequivocally batting in favor of an open economic world order, Chinese President Xi Jinping has also used forums like Boao to speak about the relevance of the Belt and Road Initiative (BRI) (also known as the One Belt and One Road Initiative, or OBOR). At the Boao Forum (April 2018), the Chinese President sought to dispel apprehensions with regard to suspected Chinese aspirations for hegemony:

China has no geopolitical calculations, seeks no exclusionary blocs and imposes no business deals on others.

There is absolutely no doubt that the BRI is a very ambitious project, and while it is likely to face numerous obstacles, it is a bit naïve to be dismissive of the project.

Debt Trap and China’s denial

Yet China, in promoting the BRI, is in denial with regard to one of the major problems of the project: the increasing concerns of participant countries about their increasing external debts resulting from China’s financial assistance. This phenomena has been dubbed as a ‘debt trap’. Chinese denialism is evident from an article in the English-language Chinese daily Global Times titled ‘Smaller economies can use Belt and Road Initiative as leverage to attract investment’. The article is dismissive of the argument that BRI has resulted in a debt trap:

It is a misunderstanding to worry that China’s B&R initiative may elevate debt risks in nations involved in massive infrastructure projects. Countries are queuing up to cooperate with China on its B&R initiative, but many Western observers claim the initiative will create a problem of debt sustainability in countries and regions along the routes, especially those with small economies.

The article begins by citing the example of Djibouti in Africa, and how infrastructure projects are generating jobs and also helping in local state-capacity building. It then cites other examples, like that of Myanmar, to put forward the point that accusations against Beijing of promoting exploitative economic relationships with participant countries in the BRI is far from the truth.

The article in Global Times conveniently quotes Myanmar’s union minister and security adviser, Thaung Tun, where he dubbed the Kyaukpu project a win-win deal, but it conveniently overlooked the interview of Planning and Finance Minister, Soe Win, who was skeptical with regard to the project. Said Soe Win in an interview with Nikkei:

[…] lessons that we learned from our neighboring countries, that overinvestment is not good sometimes.

Soe Win also drew attention to the need for projects to be feasible, and for the need to keep an eye on external debt (Myanmar’s external debt is nearly $10 billion, and 40 percent of this is due to China).

The case of Sri Lanka, where the strategically important Hambantota Port has been provided on lease to China (for 99 years) in order to repay debts, is too well known.

The new government in Malaysia, headed by Mahathir Mohammed, has put a halt on three projects estimated at over $22 billion. This includes the $20 billion East Coast Railway Link (ECRL), which seeks to connect the South China Sea (off the east coast of peninsular Malaysia) with the strategically important shipping routes of the Straits of Malacca to the West. A Chinese company, China Communications Construction Co Ltd, had been contracted to build 530km stretch of the ECRL. On July 5, 2018 it stated that it had suspended work temporarily on the project, on the request of Malaysia Rail Link Sdn Bhd.

The other two projects are a petroleum pipeline spread 600km along the west coast of peninsular Malaysia, and a 662km gas pipeline in Sabah, the Malaysian province on the island of Borneo.

During a visit to Japan, Mahathir had categorically said that he would like to have good relations with, but not be indebted to, China, and would look at other alternatives. The Malaysian PM shall also be visiting China in August 2018 to discuss these projects.

Conclusion

While Beijing has full right to promote its strategic interests, and also highlight the scale and relevance of the BRI, it needs to be more honest with regard to the issue of the ‘debt trap’ (especially if it claims to understand the sensitivities of other countries, and does not want to appear to be patronizing). While smaller countries may be economically dependent upon China, the latter should dismiss the growing resentment against some of its projects at its own peril. Countries like Japan have already sensed the growing ire against the Chinese, and have begun to step in, even in countries like Cambodia (considered close to China). A number of analysts are quick to state that there is no alternative to Chinese investment, but the worries in smaller countries with regard to Chinese debts proves the point that this is not the case. China needs to be more honest, at least, in recognizing some of its shortcomings in its dealings with other countries.