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

Government shutdown – private vs. public responses

The recent shutdown of the government in America has caused a midsize crisis for state employees leaving them unpaid for 35 days straight. Although the shutdown ended on the 25th of January, one can still draw a conclusion about the crisis handling from a public and a private perspective.

A failure of government

When you take a closer look at the history of governmental crisis management, you mostly look at a huge collection of mismanagement. In the last few years there has been a tremendous amount of intriguing works dealing with the failures of public crisis responses, especially the case of hurricane Katrina (Wikipedia here lists more than 100 references), which has been one the of most investigated disasters in recent history.

Crisis can provoke the good as well as the bad inside humans. One might think of the countless volunteers after nature catastrophes doing their very best to help. On the other hand, there have also been stories of grieving and plundering mobs on the streets, after hurricane Katrina for example. So, what we can say for sure is that crises push human behaviour to the extremes. Keeping this in mind it sounds reasonable to leave it to the government to set up an agenda of rules to coordinate humanitarian efforts. However, the government fails most of the time to deliver effective responses to crises, whether they are man-made or exogenous.

Not being able to find an agreement over the federal budget indicates that the government also has very limited options to offer to their employees. And indeed, Lara Trump gave some very handy advice to unpaid workers: “Listen, it’s not fair to you, and we all get that, but this is so much bigger than any one person. It is a little bit of pain but it’s going to be for the future of our country. […] Their children and their grandchildren will thank them for their sacrifice right now.” Yes, please explain to your children how you nearly starved to death because of a dispute over a wall. Sounds reasonable.

Whereas Donald Trump’s kind of clumsy attempt to clarify Ross Wilbur’s statement that government workers should take out loans (Maybe a small loan of a million dollars, huh?) was not too stupid at all. He emphasizes that worker should “work along” with local grocery shop owners they know. He was very clear that employees could not expect help from the government, but instead, they should look out for support on a local level. I do not think that this is a good method of communicating this issue, but it is for sure a very honest one.

Mac & Cheese

A 35-day shutdown, so to speak nearly a missed monthly wage, might not sound unbearable for a central European. But keeping in mind the saving habits of many Americans, a huge amount of government workers are facing existential problems. A recent FED survey found out that about 40% of the American population is not able to cover a 400$ emergency expense without selling or borrowing something.

Witnessing the inability of the government to provide payments for their workers, private enterprises reacted in a remarkable way. The huge food company Kraft rented space for pop-up stores in Washington in which they gave away food entirely for free. One of the most demanded products was Mac & Cheese. The celebrity Chef José Andrés provided free groceries for affected government worker through his NGO “World Central Kitchen.” When the government stopped caring, people started to do so.

Learnings

The overwhelming care for the unpaid government workers by the private sector further strengthened the role and importance of individual responsibility. In situations of crises, people tend to be less submissive to authority and focus on voluntary cooperation of human beings. I feel like it is important to mention here that I do not want to praise crises as a suitable method of bringing people together. But when we take a closer look at the history of humanity it becomes evident that instead of governmental decisions, voluntary human cooperation made our modern life possible. And in times of crises, people become clear about the relevance of these values and processes, which normally guide human progress subconsciously and unnoticed. Private responses to crises are a sign to me that humans are capable to display kindness, cooperation, and humanity beyond the borders of government.

Sri Lankan strongmen and Chinese initiatives: India’s neighborhood is as bustling as ever

On October 25, 2018 Sri Lankan President Maithripala Sirisena suspended Parliament (till November 16, 2018) and sacked his Prime Minister, Ranil Wickremesinghe, replacing him with Mahindra Rajapaksa (who served as President of Sri Lanka for a decade, from 2005 till 2015). Sirisena had wrested power from Rajapaksa in 2015. Wickremesinghe decided to battle it out, saying that Sirisena’s decision was illegal since none of the conditions under which a Prime Minister can be removed, under provisions 46(2) and 48 of parliament were applicable to the current situation. Rajapaksa announced that the President will reconvene Parliament on November 5, 2018.

Rajapaksa has been gaining ground in recent months

First, Rajapaksa, who had been written off totally, set up a new political outfit, SLPP (Sri Lanka Podujana Peramuna), which performed well in the local elections of February 2018.

More recently, Sirisena, who was initially considered Pro-China, accused Indian intelligence agency RAW (Research and Analysis Wing) of meddling in Sri Lanka’s affairs and plotting his assassination. He supposed to have denied this in a conversation with Indian Prime Minister Narendra Modi.

As President, Rajapaksa had a close relationship with China (there were allegations of a Chinese company even providing financial assistance for his campaign) and New Delhi was relieved to see his back.

The strategically important Hambantota Port Project was awarded to the Chinese during Rajapaksa’s presidency. China provided assistance to the tune of $190 million, and Sri Lanka had to lease out the project for a period of 99 years to Beijing in 2017, since debts to Beijing are mounting (total Sri Lankan debts to China are estimated at $13 billion). The Hambantota Project is now presented as a symbol of what has been referred to on more than one occasion as China’s debt trap diplomacy.

It would be pertinent to point out that the project had first been offered to New Delhi in 2010, but India declined stating that the project was not economically sustainable.

It would also be pertinent to point out here that, after his removal, Rajapaksa has made some statements in favor of close ties with both Beijing and New Delhi. Indian PM Narendra Modi has met him on both his visits to Sri Lanka. In September 2018 Rajapaksa was himself in New Delhi.

How to approach the China factor

While there is no clarity as to how long this new arrangement will last in Sri Lanka, there are some broader issues which need to be dealt with.

The first question which arises is: should New Delhi view China’s involvement with suspicion or work jointly? While there is absolutely no doubt that, in recent years, India too has tried to come up with its own responses to the China’s Belt and Road Initiative (BRI) in South Asia. This includes promoting greater connectivity within South Asian countries through the BBIN (Bangladesh, Bhutan, India, Nepal) framework on the one hand, while also exploring synergies with Japan in order to check Beijing’s growing clout on the other. This includes not just cooperation under the umbrella of Japan’s PQI (Partnership for Quality Infrastructure) initiative, but also in areas like infrastructure and energy (two key instances being the metro project in Dhaka, where India’s Larsen & Toubro and Japanese companies are working jointly for developing Line 6, as well as an LNG terminal in Sri Lanka where Petronet and Japanese companies are making a joint investment to the tune of $300 million).

During Wuhan Summit one of the important issues discussed was that India and China will work together in Afghanistan (only recently both countries set up a joint training program for Afghan Diplomats). Pakistan has been trying to obstruct any big ticket cooperation between both countries, and that is cited as one of the main reasons why Beijing is shying away from any big ticket investments into a joint project in Afghanistan.

If Japan and China can work together in connectivity projects (Japan has even expressed its willingness to join the BRI), as was discussed during Abe’s recent China visit, New Delhi and Beijing too can explore certain instances where they work together. It would be pertinent to point out that the Global Times made an interesting argument in favor of New Delhi and Beijing working in tandem for Sri Lanka’s infrastructural development. While this may appear to be a pipedream currently, in the long run it can not be ruled out given the changing geopolitical equations.

Apart from this, there are clear lessons for New Delhi: that it should not put all eggs in one basket, and realize that certain leaders will have good relations with China. A former Diplomat, Ashok Kantha, who was India’s envoy to Sri Lanka, made the point that India needed to stop looking at domestic politics from a lens of ‘Pro-India and Pro-China’, as this is too simplistic.

While India was apprehensive about the election of K.P. Oli as Nepalese Prime Minister, he has been speaking about close ties with both Beijing and New Delhi. During his visit to China in June 2018, Oli spoke about the possibility of Nepal emerging as a bridge between China and India.

In conclusion, New Delhi has to watch out for it’s own interests in South Asia, and should certainly ensure that no country has a stranglehold, but paranoia will be of no use. India needs to come up with viable alternatives to the BRI, while also being open to cooperation, as and when feasible. Apart from this, New Delhi needs to realize that countries in the neighborhood will give precedence to their own interests and even if they do maintain close economic linkages with China, it is not always targeted at India.

American protectionism and Asian responses

On October 10, 2018, a senior Chinese diplomat in India underscored the need for New Delhi and Beijing to work jointly in order to counter the policy of trade protectionism being promoted by US President Donald Trump.

It would be pertinent to point out that US had imposed tariffs estimated at $200 billion in September 2018, Beijing imposed tariffs on $60 billion of US imports as a retaliatory measure, and US threatened to impose further tariffs. Interestingly, US trade deficit vis-à-vis China reached $34.1 billion for the month of September (in August 2018, it was $31 billion). Critics of Trump point to this increasing trade deficit vis-à-vis China as a reiteration of the fact that Trump’s economic policies are not working.

Ji Rong, spokesperson of the Chinese Embassy in India, said that tariffs will be detrimental for both India and China and, given the fact that both are engines of economic growth, it is important for both to work together.

The Chinese diplomat’s statement came at an interesting time. Continue reading

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.