In 2013, China introduced its Belt & Road Initiative (BRI) project with the aim of expanding trade networks over land, via a modern Silk Road Economic Belt, and over sea, via the 21st Century Maritime Silk Road. Along the land-belt and sea-road, China has invested in developing nations’ infrastructure by financing or constructing railways, ports, energy pipelines, and road transit. Additionally, the nation has expanded the use of their currency, the renminbi, and outlined economic zones for international cooperation and additional funding. The BRI chiefly aims to improve connectivity, via digital investments, infrastructure development, and facilitated trade. These improvements have allowed developing nations to engage in global trade in a more timely and cost-reducing way. 

As the project has expanded, many have branded the BRI as a form of debt-trap diplomacy. Critics of the BRI claim China is financially exploiting countries with corruption issues or challenges paying back loans. This has led to China’s opportunistic seizure of stranded assets as a form of loan payment. A notable example of this is the acquisition of the Hambantota port for 99 years, following Sri Lanka’s inability to pay back an ambitious loan in 2015. In 2018, Zambia relinquished its Kenneth Kaunda International Airport to China as debt repayment and Kenya raised concerns that further debt could put its lucrative Mombasa port at risk. Access to global ports secures raw materials and luxury goods demanded by China’s growing domestic populations and expendable income. Owning a port increases strategic potential, facilitates economic cooperation, and lowers the cost of doing business abroad.

Related image
Mapping the Belt and Road Initiative’s Progress. Image: Source

China, however, is still finding significant demand for their investments across Southeast Asia, Africa, and Europe. Despite the risks of debt and asset seizure, terms with China tend to be opaque, but less invasive at first, which contrasts with the IMF and their aims to restructure economic issues as part of lending. The involvement of EU member states, such as Italy, escalated international scrutiny and discussion of China’s future ambitions. The United States, particularly, has become vocally outspoken against the BRI as a security risk and extension of the Chinese Communist Party’s interests abroad. According to a report by Deloitte, the top investment and construction projects are all spearheaded by major Chinese businesses, many of which are state-owned enterprises in China. Other businesses, like Huawei, are securing early opportunities to enter developing markets for digital goods, expanding connectivity much to the dismay of critics who believe the company poses a security risk. The US and many EU members also criticize China for targeting countries at high risk of debt distress which increases likelihood of predatory asset acquisition, including such countries as Djibouti, Kyrgyzstan, Laos, the Maldives, Mongolia, Montenegro, Pakistan, and Tajikistan.

Foreign investment and aid, however, is not a new concept in 21st century international relations. While many state-sponsored and international initiatives seek positive outcomes from aid, other financial aid efforts have proved ineffective, enabling leadership complacency, or hiding a lender’s ulterior motives. Dambisa Moyo challenges development policy for Africa in her book Dead Aid, stating, “A constant stream of ‘free’ money is a perfect way to keep an inefficient or simply bad government in power. As aid flows in, there is nothing more for the government to do – it doesn’t need to raise taxes, and as long as it pays the army, it doesn’t have to take account of its disgruntled citizens.” According to Moyo, overreliance on aid, coupled with foreign interest, revives the imperialist history that has plagued many of the BRI’s developing partner nations.

BRI countries with the greatest debt risk. Image: Source

China is not the only nation with ambitious plans for investment abroad, with several other nations developing similar programs to capitalize on opportunity or combat Chinese influence. In late 2018, the US unveiled its ‘Prosper Africa’ program, stating that security on the African continent is a “national security interest of the United States.” This approach would replace prior, “indiscriminate” funding with more focused economic, commercial, and counterterrorism initiatives, because, “We [The USA] want something more to show for Americans’ hard-earned taxpayer dollars.” The statements also claimed that US initiatives would not be riddled with corruption or ethical infringements like China’s BRI, encouraging African leaders to choose “higher-quality projects.” The announcement highlighted, “America’s vision for the region is one of independence, self-reliance, and growth—not dependency, domination, and debt. We want African nations to succeed, flourish, and remain independent in fact and not just in theory.” While several NGO and corporate investments have been made via the Prosper Africa program, it is still unclear how much of the initiative aims to improve African outcomes as opposed to maintaining US regional presence and influence. The US is notably concerned about trade, security and international influence in the Horn of Africa, for example in Djibouti, where it has the US Naval Expeditionary Base, Camp Lemonnier

Additionally, in 2019, the US, Australia, and Japan revealed the trilateral “Blue Dot Network” at the 35th ASEAN summit. The plan aims to build infrastructure in the Indo-Pacific region, calling for a greater need of “global trust standards” like respect for transparency, accountability, sovereignty of property, local labor laws, and the environment. But the way to accomplish these ‘respectful standards’ are not globally agreed upon, and it is unclear which specific nations are privy to wielding power at the decision-making table. 

India also began investigating opportunities for its own infrastructure investments in S. Asia after regional disputes led the nation to avoid participating in the BRI. In 2017, India’s Ministry of External Affairs urged China to engage in meaningful dialogue on nearby BRI activity as it threatened sovereignty agreements in the China-Pakistan Economic Corridor (CPEC) and Kashmir region. Indian Finance Minister Nirmala Sitharaman stated, “We made our position very clear that we may not be able to participate in the Belt and Road initiative… Only because, at least in some parts it’s passing through what is essentially our territory, which is under illegal occupation [by] Pakistan, which is the CPEC, which is a crucial part of the Belt and Road initiative itself.”

While many of these plans seek to provide “quality or ethical alternatives” to China, most act in response to the BRI. Xi Jinping expresses geopolitical and economic motivations and seeks a more assertive role for China abroad while also claiming the BRI must be guided by win-win principles, high standards, and green cooperation. It is very likely, under the veil of promises for regional revitalization and mutual benefit, that plans by the US, India, Australia, and Japan have similar drivers. 

Image result for investment foreign in south asia

Many of these international foreign investment plans will take time to reveal long-term effects and ultimate success. However, if developed nations seize assets and take advantage of debt-distressed nations, neo-imperialist sentiments could grow again. The BRI, along with other plans, will be fighting for influence and regional hegemony. Weak and corrupt leaders may see foreign infrastructure opportunities as a way to earn kickbacks and national popularity without second guessing the long-term cost to their people. It will be key to question the motives of such programs – will it bring regional stability, or just serve as another outlet for outside interests at the expense of the borrower? At the end of the day, select players could be writing the rules for international trade. It is hard to say if developing nations can truly ‘win’ in such situations: turn down quality of life and infrastructure improvements, or risk foreign investment plans grabbing up a borrower’s remaining assets, wealth, and influence?

Leave a Reply