What developing country could resist participating in China's One Belt One Road (OBOR) and Maritime Silk Road (MSR) initiatives to construct roads, railroads, bridges, and power plants that would enable a rural exodus to jobs in urban centers, employ the unemployed, stimulate manufacturing, and facilitate trade? What developed country could resist participating in the financial enterprise of investing in China's estimated $1 trillion to $8 trillion project?
That's the good news. Students are challenged to activate their critical thinking to anticipate, and even suggest solutions for, the problems that have and will develop along these routes.
Finance: Traditionally, the international financial institutions charged with funding major projects include the World Bank, dominated by the United States; the International Monetary Fund (IMF), whose president comes from Europe; and the Asian Development Bank headed by a president from Japan. Because the funding process of these institutions was considered too slow and the required plan preparation was too costly, a New Development Bank, Asian Infrastructure Investment Bank (AIIB), and Silk Road Fund were established to pick up the pace.
Since then, the Islamic Development Bank has agreed to jointly finance African projects with the AIIB, and Japanese, British, and US banks also are looking into ways to cooperate with China. Japan and the United States did not join the AIIB, because they suspected the bank would lack concern about labor, environmental sustainability, and requirements for democratic reform, since China considers all political systems equal and claims not to interfere with a recipient's sovereignty. As it has turned out, the AIIB is careful to abide by international norms, but the bank seems to retain its image by avoiding involvement with One Belt, One Road (OBOR) projects.
After World War II, the Marshall Plan helped rebuild a Europe that had existed. China's One Belt, One Road plan attempts to build something that never existed before what exits is ready to use it. As a result, Chinese development projects and financing bury recipients, such as Angola and Zambia, in debt. Half the countries in sub-Sahara Africa now have public debt greater than half their GDPs. There is growing concern about the raw materials, state power utilities, and other compensation China might require in case of loan defaults. Sri Lanka already was asked to share intelligence about traffic passing through its now bankrupt and Chinese-seized port. Zambia's default on a Chinese loan repayment resulted in immediate discussions that could lead to seizure of Zambia's electric company, ZESCO. The following eight countries have been singled out as in danger of assuming too great a Chinese debt burden: Laos, Kyrgyzstan, the Maldives, Montenegro, Djibouti, Tajikistan, Mongolia, and Pakistan.
Pakistan's new prime minister, Imran Khan, found out countries cannot escape hard financial realities. Fed up with "hand outs from the West," Pakistan hoped to avoid the scrutiny of loan requests submitted to the IMF. But even China, in the process of using Pakistan to gain access to the mineral riches in Afghanistan's mountains and to encircle India with its OBOR projects, balked at loaning funds to cover the $10 billion Pakistan needs for the next few month's fuel imports and foreign debt repayments. Saudi Arabia only offered to consider investing in the $60 billion China-Pakistan Economic Corridor (CPEC), the part of China's OBOR that includes a deep water port at Gwadar, Pakistan, and a major dam at Karot on the Pakistan-India-Chinese border. Now that the IMF is evaluating Pakistan's loan application, China also faces scrutiny of the secret terms of its CPEC contracts.
Reminiscent of the way Britain achieved control over the Suez Canal, China is creating influence and economic dependency in a wide swath of territory. With complex partnerships, including with the developing countries themselves, and enormous amounts of money at risk, diverse financial instruments handle equity participation, public-private partnerships, insurance, loan guarantees, debt instruments, first-loss equity, challenge funds, grants, and project preparation support. In cases of shared risk, allocating amounts to partners is challenging. Reducing risks also requires staff to monitor project progress and maximize the speed of fixing mistakes. At any time, China can call in loans for non-payment.
Political conflict: Beijing's Maritime Silk Road includes the deep water port China is building at Gwadar, Pakistan, to gain access to the Arabian Sea and avoid shipping oil farther east through the congested Malacca Straight. From Gwadar, China plans a route north and east toward the Karot hydroelectric power plant on the Jhelum River southeast of Islamabad and into China's Xinjiang Uighur Autonomous Region, China, which already uses facial recognition technology to track 2.5 million in its Xinjiang province, also would gain another way to control the restive Uighur Muslim minority that lives among the Chinese Han majority. Since China's President Xi Jinping came to power in 2012, he has pushed the idea that China's atheistic political system should be considered just as valid, especially for maintaining China's peace and security, as the governments of any other countries.
Try as hard as it might, however, the Chinese Communist Party has been unable to squelch Muslim Uighurs, but also Christians and Taoists in Chengdu's panda-breeding city and Buddhists in Tibet (as well as democracy activists in Hong Kong and Taiwan). More than a million Uighurs are said to be confined in re-education camps. Increased surveillance using facial recognition, AI, and computer monitoring systems tries to catch violations. Rather than be shut out of a major market, even Google was poised to develop a "Dragonfly" search engine that would meet China's censorship requirements by excluding keywords, such as Tiananmen, until its employees refused to compromise their ethics in order to work on the project.
A part of the Pakistan to China road also passes through Kashmir, the primarily Muslim site of a territorial dispute between the nuclear powers, Pakistan and Hindu India. For the first time in 30 years, the Kashmir flash point came under a major attack in February, 2019, when a suicide bomber from Pakistan killed 40 of India's security forces. To further complicate border tensions, Saudi Arabia's crown prince, Muhammad bin Salman, who is accused of directing the murder of journalist, Jamal Khashoggi, seemed to challenge China's influence in the area by visiting with a promise to invest in Pakistan and India.
Thus far, India's military buildup, economic shortfalls in the region, and ethnic/religious conflict have prevented Beijing from surrounding India. The two countries, India and China, already needed to resolve a 2017 border dispute by establishing a hotline between them. With the launch of its Arihant submarine in November, 2018, India enhanced its military capability in the area by adding sea-based, short-range nuclear missiles capable of reaching China and Pakistan to its air- and land-based missile systems.
In the south, the Indian Ocean's strategic Maldive Islands ousted China's hand-picked president. Under former President Yameen, Chinese influence had started to replace the protection India provided after the Maldives and India achieved independence from Britain. Millions in low interest Chinese loans began funding construction of a bridge from the Maldive capital in Male to the main airport, as well as housing and a hospital that could support a naval base. Saudi Arabia also has showed interest in the Maldive atolls and constructed a major mosque there.
Beijing's effort to eliminate the need to import oil through the congested Malacca Straight also moves China closer to India in the southeast. China plans to construct a road-rail-pipeline corridor through Myanmar, from its Shan state in the east to a port on the Bay of Bengal in the Rakhine state on the Bangladesh border. The Chinese conglomerate constructing the port is financing 70% of the project, but Myanmar is hard-pressed to fund its 30%, much less the rest of the country-wide project. Myanmar's Buddhist government and military face warring factions: the Muslim Rohingyas; the Arakan Army of Buddhist Rakhine that opposes the Burman-dominated Buddhist government; and the Northern Alliance Brotherhood, a coalition of insurgents from Kachin and Shan states.
In Central Asia, China runs into conflict with Russia, especially in resource-rich Kazakhstan, sometimes called the buckle of the new Silk Road.
The South China Sea finds China challenged by the United States, Japan, the Philippines, Vietnam, Thailand, Malaysia, and Brunei. Of course, there is a chance that rising waters on the overheated planet may swamp the atolls, small islands, and reefs China has militarized there, as well as in the Maldives in the Indian Ocean.
Finally, any country's government can stall, kill, or seize a project on China's land and sea routes. History recalls how France and England struggled to build and finance the Suez Canal only to have Gamal Nasser seize it in the spirit of anti-colonial nationalism. Three months into his new position, after defeating Chinese-backed Najib Razak, Malaysia's new, 93-year-old prime minister, Dr. Mahathir Mohamad, termed Chinese loans Chinese "colonialism." He traveled to Beijing to cancel the previous government's $20 billion agreement to let China build a high speed railway and two oil pipelines. China may have a way to regain these contracts, however. Malaysia is eager to prosecute Jho Low, the Malaysian mastermind behind a plot that misappropriated funds raised by three bond offerings Goldman Sachs underwrote for a Malaysian wealth fund. China could offer to turn over Mr. Low in exchange for the resumption of the cancelled projects. To block a Chinese-financed upscale Malaysian housing project wealthy Chinese investors, but not most Malaysians, could afford, Dr. Mohamad said Malaysia would not grant visas for foreigners to live there. Anwar Ibrahim is expected to replace Mahathir Mohamad, when he resigns as prime minister.
Sierra Leone's new president, Julius Maada Bio, canceled the previous administration's contract for the Chinese-financed Mamamah International Airport. As the country's aviation ministry observed, construction of a new airport would be uneconomical when the existing one is underutilized.
China also experienced opposition, when Nepal referred a Chinese project to review by anti-corruption watchdogs. Feeling overextended, Pakistan shut down projects on the China-Pakistan Economic Corridor Beijing views as its access to the Arabian Sea. It seeks more lending from China instead of an IMF loan. Even at home, Chinese citizens are beginning to view potential defaults on loans, especially to Africa, as foreign aid better used to finance domestic needs.
Environment: Constructing roads, railroads, bridges, and power plants has a major impact on the environment. At the same time cutting trees to make way for roads, rails, and tunnels, and laying thousands of miles of concrete invite flooding by eliminating anchors for soil and ground to absorb rain, increased truck and car traffic and the added heat from burning fossil fuels to generate electricity from power plants will warm the planet and increase the need for trees to absorb greenhouse gases.
Railroad projects in Kenya and seaport construction at Walvis Bay, Namibia, led locals to demand protection for wild life. China remains a major market for the ivory and rhino horn poachers obtain by killing Africa's elephants and rhino.
Infrastructure projects also can be expected to encounter objections from non-governmental organizations (NGOs) with environmental, as well as religious, human rights, and other concerns.
Employment: With a population of 1.4 billion people, China is in a position to provide all the skilled and unskilled labor needed to design, engineer, construct, administer, staff, monitor, and maintain its OBOR and MSR projects. Should governments along these routes expect China to employ their countries' unemployed, China will see no need to pay desirable wages nor to establish exemplary working conditions. Experience in Africa shows China's railroad projects have generated protests over poor pay and treatment. African construction companies even have seen contracts to build government buildings go to Chinese firms instead of local ones. Also, African industries and shop owners that expected to benefit from Chinese-financed roads and rails have found themselves unable to compete with cheaper Chinese imports.
What cannot be ignored is how the hundreds of migrant workers employed on China's widespread infrastructure projects could pose a major threat of disease transmission, especially of AIDS. Despite the attempt of Chinese managers to confine workers to monitored compounds, employees likely will be determined to find ways to meet local women.
Looking at topographical maps will give students an idea of the challenges of constructing routes through mountains, forests, and deserts and over rivers. (The earlier post, "All Aboard for China's African Railroads," describes problems of terrain, as well as financial and other problems, that can arise with projects in developing countries.) All in all, watching the progress along China's One Belt One Road and Maritime Silk Road will give students an interesting learning experience for years to come.
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