Topic : Taking advantage of BRI
Topic in Syllabus: General Studies Paper 2: International Affairs
The China-led initiative’s global reach signals the advent of a new order led by Asia, which cannot exclude India.
Belt and Road Initiative:
- The Belt and Road Initiative is a Chinese foreign policy initiative promoted by president Xi Jinping in 2013
- Initially the idea of Silk Road Economic Belt (SREB) and Maritime Silk Road (MSR) was put forward
- Subsequently, the two projects together came to be known as ‘One Belt One Road’ (OBOR) Initiative. Later, it came to be known as Belt and Road Initiative (BRI)
- Aim of BRI: Build a trade, investment, and infrastructure network connecting Asia with Europe and Africa along the ancient trade routes
- The Communist Party of China (CPC) has incorporated Belt and Road Initiative into the Chinese Constitution.
Why India should participate in BRI?
There are at least five reasons why India should have sent an observer to the Belt and Road Initiative (BRI) Forum that begins in Beijing on April 25.
Significance for Asia:
- The defining feature of the 21st century is that Asia, not China, is at the centre of the world.
- The BRI is part of a transformation triggered by colonialism and industrial capitalism from the 1840s and influenced by the UN institutions and global rules from the 1950s.
- The estimated $30 trillion increase in middle-class consumption growth estimated by 2030, only $1 trillion is expected to come from Western economies and most of the rest from Asia.
- China’s population is nearly one-third of the total population of Asia but by 2050 its population of working age will shrink by 200 million people while in India the working-age population will increase by 200 million.
- Asians are not subscribing to a “China-led Asia”, which would imply returning to the colonial order.
Changing global order:
- The global spread of the BRI signals the political end of the old order where the G7 shaped the economic agenda.
- Italy, a member of the G7, is joining the BRI, despite the publicly voiced objection of the U.S., just as Britain joined the Asia Infrastructure Investment Bank in 2015.
- Asians are gravitating to the new as it better meets their needs, not because the old is crumbling.
Meeting infrastructure needs:
- The Asian Development Bank, not China, drew global attention to infrastructure as the key driver of economic growth in Asia and the financing gap of $26 trillion.
- The most visible feature of the BRI is the network of physical and digital infrastructure for transport, energy transmission and communications, harmonized with markets for advanced manufacturing and innovation-based companies.
- Two-thirds of the countries funded by the initiative have sovereign debt ratings below investment grade, and their being part of supply chains is a catalyst for growth.
- A recent analysis identified only eight out of 68 countries at risk of debt default, which does not affect the overall viability of the $3 trillion reserves of China for potential investment.
- There are cases of excess debt, political corruption and policy shifts following change in governments but overall the BRI remains popular. For example, Nepal has just chosen the Chinese gauge over the Indian one for its rail network.
Evolving towards standards of multilateralism:
- The BRI, faced with criticism over lack of transparency and insensitivity to national concerns, is evolving towards standards of multilateralism, including through linkages with the United Nations Sustainable Development Goals.
- The International Monetary Fund describes it as a “very important contribution” to the global economy and is “in very close collaboration with the Chinese authorities on sharing the best international practices, especially regarding fiscal sustainability and capacity building”.
- China is now also seeking co-financing with multilateral institutions as well as private capital for a Silk Road Bond.
- For the BRI to have strategic objectives is not unusual.
- The Marshall Plan in the 1950s also required recipients to accept certain rules for deepening trade and investment ties with the U.S. Chinese control over supply-chain assets like ports provides the ability to project naval power, which will however remain minuscule compared to that of the U.S. — comprising 800 overseas bases.
- The BRI’s commercial advantage has certainly increased China’s international weight and India needs to shape the new standards to benefit Indian technology companies.
Challenges to BRI:
- Very high development costs of projects.
- Sources for financing project development, to be financed either through public grants or through equity are scarce
- Limits to debt financing, particularly in foreign currencies is also a major challenge
- Countries along the Belt and Road have different levels of development and at times poor governance conditions. This may hinder infrastructure development and the development of trade and investment.
Political instability in countries along BRI:
- According to the Fragile States Index (FSI), Yemen, Somalia, Syria, Afghanistan, and Iraq are very unstable politically.
- Further, in the previously considered stable countries, political instability has been increasing. Example: Turkey- Conflict between the government and PartiyaKarkerên Kurdistan (PKK).
- The political instability in growing number of countries along BRI poses serious security concerns for BRI
Regional Disparity and Ethnic Tensions in China:
- Regional disparity between western and eastern provinces of China complicates the use of the western region to connect to neighbouring countries
- Separatist movements and ethnic tensions particularly in Xinjiang is a serious challenge for development of BRI
Cooperation from neighbouring countries:
- China has raised sovereignty disputes by putting forward territorial claims against neighbouring countries
- China rejected the ruling of the UN tribunal regarding its claims in the South China Sea.
- In 2017, at Doklam, China challenged Bhutan’s sovereignty. This had led to a military standoff with India
Issues with transparency in tenders and deal conditions:
- In 2017, the government of Nepal abandoned deal to build the Budhigandaki hydroelectric project dam with a Chinese company. The reason highlighted was that it was signed without an open tender process
- Pakistan pulled out from a deal to build Diamer-Bhasha dam with China. The reason cited was strict deal conditions.
- India should respond to the strategic complexity arising from the BRI, a key part of which cuts through Gilgit-Baltistan and Pakistan-occupied Kashmir, through three related but distinct diplomatic initiatives.
- India needs to highlight that a British-led coup by the Gilgit Scouts led to Pakistani occupation of this territory and seek appropriate text recognizing India’s sovereignty.
- India should give a South Asian character to the two BRI corridors on India’s western and eastern flanks, by linking them with plans for connectivity in the Association of Southeast Asian Nations (ASEAN) region.
- India needs work towards ‘multilateral sing’ the BRI with a set of rules.
- India now needs to match ambition with commensurate augmentation of its capacities that allows it to be a net security provider in the Indian Ocean region.
- This will require the government to not only overcome its chronic inability to take speedy decisions with respect to defence partnerships and procurement, but will also necessitate a sustained period of predictable economic growth; BRI can assist in the latter.
- Chinese railways, highways, ports and other capacities can serve as catalysts and platforms for sustained Indian double-digit growth.
- India can focus on developing last-mile connectivity in its own backyard linking to the BRI — the slip roads to the highways, the sidetracks to the Iron Silk Roads.
- India has neither the resources nor the political and economic weight to put in place competitive and alternative connectivity networks on a global scale.
- Therefore, for the time being, it may be worthwhile to carefully evaluate those components of the BRI which may, in fact, improve India’s own connectivity to major markets and resource supplies and become participants in them just as we have chosen to do with the AIIB and the NDB.
Critically examine the objectives and reasons behind the proposal of creating a “One-Belt-One-Road” (OBOR) project by the China? Should India join it? Comment.