China struggles to fend off allegations of debt trap diplomacy
By James M.
Dorsey
A podcast version of this story is available on Soundcloud, Itunes,
Spotify,
Stitcher,
TuneIn, Spreaker,
Pocket
Casts,
Tumblr, Podbean, Audecibel,
Patreon and Castbox.
Desperate
for cash, Tajikistan is about to sell yet another vital asset to China at a time that countries like Sri
Lanka and the Maldives are demanding renegotiation of debt settlements that either
forced them to surrender control of critical infrastructure or left them with
unsustainable repayments.
The pending
Chinese acquisition of a stake in
Tajikistan’s aluminium smelter, coupled with earlier tax concessions to Chinese
companies that would
substantially reduce the trickle down effect of investments for the troubled
Tajik economy, suggest that China has yet to fully take account of frequent criticism of its commercial
approach to Belt and Road-related projects.
The
Washington-based Center for Global Development warned last year that “23 of 68 countries benefiting from
Belt and Road (BRI) investments were “significantly or highly vulnerable to
debt distress.”
The centre
said eight countries — Tajikistan, the Maldives, Pakistan, Djibouti,
Kyrgyzstan, Laos, Mongolia, and Montenegro — were particularly at risk.
“There
is…concern that debt problems will create an unfavourable degree of dependency
on China as a creditor. Increasing debt, and China’s role in managing bilateral
debt problems, has already exacerbated internal and bilateral tensions in some
BRI countries,” the report said.
Progress on
the construction of a road in Afghanistan’s Wakhan Corridor, a
narrow strip in the east of the country that touches the Chinese border and
separates Tajikistan from Pakistan and Pakistan-controlled Kashmir, may explain
China’s seeming insensitivity to the concerns of beneficiaries of the People’s
Republic’s largesse.
The road
would link the corridor to Central Asia in the north and Pakistan’s
Chinese-built Arabian Sea port of Gwadar in the south, a crown jewel in China’s
infrastructure- and energy driven Belt and Road initiative.
To be sure, the road has local rather than
geopolitical significance for workers building the road and the region’s shepherds as documented
by anthropologists Tobias Marschall and Till Mostowlansky.
The road
creates temporary employment for labourers. For shepherds, it facilitates
access to mountain pastures.
For China,
the stakes are geopolitical and economic.
The road
would not only facilitate commerce with Central Asia as well as traffic from
Gwadar but also construction of shorter pipelines as well as a fibre optic cable.
Perhaps more
importantly, it would together with a military base in Tajikistan and
Chinese cross border operations in the corridor itself, facilitate the movement of troops
in China’s gradual projection of military power beyond its borders,
particularly in regions adjacent to its troubled north-western province of
Xinjiang.
The road’s
potential military significance raises questions about the sustainability of a
presumed division of labour between Russia and
China under which
Russia shoulders responsibility for security in Central Asia while China
concentrates on economic development.
Ironically,
if the examples of Sri Lanka, the Maldives, Pakistan and Malaysia coupled with
anti-Chinese sentiment in Central Asia, fuelled in part by the brutal crackdown on Turkic Muslims in
Xinjiang, are
anything to go by, China’s approach to Belt and Road-related development could
turn out to be a threat to its broader geopolitical ambitions and regional
security policy.
Sri Lanka
became the poster child of allegations that China was pursuing debt trap
diplomacy when it two years ago surrendered to China control of the port as
part of a deal to reduce the country’s debt payments.
China lent
Sri Lanka US$5 billion between 2010 and 2015 for infrastructure projects that
included development of Hambantota at interest rates of up to 6.3 percent.
By
comparison, World Bank and Asian Development Bank rates on soft loans range
from 0.25 to three percent.
“The perfect
circumstance is a return to the norm. We pay back the loan in due course in the
way that we had originally agreed without any disturbance at all,” said newly
appointed Sri Lankan prime minister Ajith Nivard Cabraal.
Similarly, the
foreign ministry of the Maldives said earlier this month that
it was seeking to restructure its Chinese debt.
“Borrowings
by the previous government were unreasonable and put us in difficulty. But we
can solve this mess through diplomatic means,” said foreign minister Abdulla
Shahid.
Last month,
former president Abdulla Yameen was jailed for five years and fined US$5
million for corruption during his term that ended late last year. Mr. Shahid’s
government has accused China of land grabs during Mr. Yameen’s reign.
In a rare
success, Malaysia earlier this year negotiated a one third reduction in
the cost of a US$15.7 billion Belt and Road-related rail project.
In a further concession, China agreed that 70 percent of the workforce
would be Malaysian and that Malaysian contractors would get 40% of the civil
works.
China has
repeatedly been accused of employing Chinese rather than local labour for
Chinese-funded projects along the Belt and Road and importing materials from
China rather than sourcing them locally.
The
government of Pakistani prime minister Imran Khan has been less successful than
its Malaysian counterpart.
It recently bowed to Chinese pressure to revive hundreds of projects initially
suspended after it
came to office in 2018.
The
appointment of a retired lieutenant general as head of a new authority
overseeing the China Pakistan Economic Corridor (CPEC) that groups Belt and
Road-related projects reflected China’s wariness towards messy Pakistani
politics and preference for dealing with the country’s military.
With Sri
Lanka as the anti-thesis, analysts suggest that China is determined to make
Pakistan a success story.
“The big
battle at the moment is about CPEC’s reputation, and Beijing cares about
salvaging that. They need to show BRI has been a success, that it hasn’t put
Pakistan’s economy in trouble and that there isn’t a backlash. If they can’t do
it in a context like this, it suggests that there is something flawed in the
model,” said Pakistan and China scholar Andrew Small.
Dr. James M. Dorsey is a senior
fellow at Nanyang Technological University’s S. Rajaratnam School of International
Studies, an adjunct senior research fellow at the National University of
Singapore’s Middle East Institute and co-director of the University of
Wuerzburg’s Institute of Fan Culture
Comments
Post a Comment