Asian ports: Pitfalls of China’s One Belt, One Road Initiative

February 26, 2017

Asian ports: Pitfalls of China’s One Belt, One Road Initiative

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Troubled ports in Pakistan and Sri Lanka exemplify political pitfalls that threaten Beijing’s ambitious One Belt, One Road project.

By James M. Dorsey

Troubled ports in Pakistan and Sri Lanka, envisioned as part of China’s string of pearls linking the Eurasian heartland to the Middle Kingdom, exemplify political pitfalls that threaten Beijing’s ambitious One Belt, One Road project.

Political violence over the past decade has stopped Pakistan’s Gwadar port from emerging as a major trans-shipment hub in Chinese trade and energy supplies while turmoil in Sri Lanka threatens to dissuade Chinese investors from sinking billions into the country’s struggling Hambantota port and planned economic hub.

The problems of the two ports serve as pointers to simmering discontent and potential resistance to China’s ploy for dominance through cross-continental infrastructure linkage across a swath of land that is restive and ripe for political change.

Chinese, Pakistani and Russian officials warned in December that militant groups in Afghanistan, including the Islamic State (IS) had stepped up operations in Afghanistan. IS in cooperation with the Pakistani Taliban launched two months later a wave of attacks that has targeted government, law enforcement, the military and minorities and has killed hundreds of people.

China is investing $51 billion in Pakistan infrastructure and energy, including Gwadar port in the troubled province of Balochistan that is struggling to attract business nine years after it was initially inaugurated. The government announced this week that it had deployed 15,000 troops to protect China’s investment in Pakistan, a massive project dubbed the China-Pakistan Economic Corridor (CPEC).

Image result for china-pakistan economic corridor (cpec)

For Gwadar to become truly viable, Pakistan will have to not only address Baluch grievances that have prompted militancy and calls for greater self-rule, if not independence, but also ensure that Baluchistan does not become a playground in the bitter struggle for regional hegemony between Saudi Arabia and Iran.

To do so, Pakistan will have to either crackdown on militant Afghan groups with the Taliban in the lead who operate with official acquiescence out of the Baluch capital of Quetta or successfully facilitate an end to conflict in Afghanistan itself.

That is a tall order which in effect would require changes in longstanding Pakistani policies. Gwadar’s record so far bears this out. Phase II of Gwadar was completed in 2008, yet few ships anchor there and little freight is handled.

Success would also require a break with long-standing Chinese foreign and defence policy that propagates non-interference in the domestic affairs of other countries. China has pledged $70 million in military aid to Afghanistan, is training its police force, and has proposed a four-nation security bloc that would include Pakistan, Afghanistan and Tajikistan.

A mere 70 kilometres further west of Gwadar lies Iran’s southernmost port city of Chabahar that has become the focal point of Indian efforts to circumvent Pakistan in its access to energy-rich Central Asia and serve as India’s Eurasian hub by linking it to a north-south corridor that would connect Iran and Russia. Investment in Chabahar is turning it into Iran’s major deep water port outside the Strait of Hormuz that is populated by Gulf states hostile to the Islamic republic. Chabahar would also allow Afghanistan to break Pakistan’s regional maritime monopoly.

Image result for Hambantota

Former Sri Lankan President Mahinda Rajapaksa warned Chinese officials in December that public protests would erupt if plans proceeded to build in Hambantota a 6,000-hectare economic zone that would buffet a $1.5 billion-deep sea port, a $209-million international airport, a world-class cricket stadium, a convention centre, and new roads. Protests a month later against the zone turned violent. Similar protests against Chinese investment have also erupted in recent years in Kyrgyzstan, Kazakhstan and Tajikistan.

In Sri Lanka, the government has delayed the signing of agreements with China on the port and the economic zone after the protests catapulted the controversy onto the national agenda with opposition politicians and trade unions railing against them. A Sri Lankan opposition member of parliament moreover initiated legal proceedings to stop a debt-for-equity deal with China.

China’s Ambassador to Sri Lanka, Yi Xianliang warned that the protests and opposition could persuade Chinese companies to walk away from the $5 billion project. “We either go ahead or we stop here,” Yi said.

“The Hambantota fiasco is sending a clear message to Beijing: showing up with bags of money alone is not enough to win a new Silk Road,” commented Wade Shepard, author of a forthcoming book on China’s One Belt, One Road initiative.

Adding to China’s problems is its apparent willingness to at times persuade its partners to circumvent or flout international standards of doing business. A European Union investigation into a Chinese-funded $2.9 billion rail link between the Hungarian capital of Budapest and Belgrade, the capital of Serbia, could punch a hole into Chinese plans to extend its planned Asian transportation network into Europe. The investigation is looking at whether the deal seemingly granted to Chinese companies violated EU laws stipulating that contracts for large transportation projects must be awarded through public tenders.

The sum total of problems China is encountering across Eurasia highlight a disconnect between grandiose promises of development and improved standards of living and the core of Chinese policy: an insistence that economics offer solutions to deep-seated conflicts, local aspirations, and a narrowing of the gap between often mutually exclusive worldviews. It also suggests that China believes that it can bend, if not rewrite rules, when it serves its purpose.

To be sure, protests in Sri Lanka and Central Asia are as much about China as they are expressions of domestic political rivalries that at times are fought at China’s expense. Even so, they suggest that for China to succeed, it will not only have to engage with local populations, but also become a player rather than position itself as an economic sugar daddy that hides behind the principle of non-interference and a flawed economic win-win proposition.

Dr. James M. Dorsey is a Senior Fellow at the S. Rajaratnam School of International Studies, co-director of the University of Würzburg’s Institute for Fan Culture, and the author of The Turbulent World of Middle East Soccer blog, a book with the same title, Comparative Political Transitions between Southeast Asia and the Middle East and North Africa, co-authored with Dr. Teresita Cruz-Del Rosario and a forthcoming book, Shifting Sands, Essays on Sports and Politics in the Middle East and North Africa



6 thoughts on “Asian ports: Pitfalls of China’s One Belt, One Road Initiative

  1. time, opportunity wait for nobody. faith in your achieving success by sheer hard work and determination makes the difference. just see how China despite all odds manages to bring itself up to this point we all are able to see what should work best in our interest.

  2. Political Economy — you cannot do the economics without taking care of the politics; simple as that.

    The old European colonial masters succeeded for over 200 years to enrich their homeland with the plundered resources of the colonies because they also controlled the politics, principally through a system of patronizing control of the weak and fun-loving royalties and chieftains who in turn controlled the uneducated feudal masses.

    China probably thought that doing the same, but with control of only the ruling politicians, would do the same trick.

    In Malaysia, so the Chinese probably thought, it would be easier given that almost 20% of the population is ethnic Chinese who might still have some lingering loyalty for the motherland.

    As part of this global “Yellow Ocean” strategy, the Chinese government actually subsidizes the costs of foreign tour groups if 100% of the tour members are overseas Chinese from anywhere in the World. This was told to me by our guide when I toured China recently with a Malaysian tour company. The not-so-funny or funny part, (depending on how you look at it), was when we visit certain sites which require an entrance fee, the site operators demanded to see our passports because we all looked like China Chinese, though some of us couldn’t read or write Chinese and speaks only “pasar” Chinese at best.

  3. The ambitious scheme of One Belt One Road (OBOR) seeks to connect China more closely with Europe, Southeast and Central Asia, the Middle East and Africa, covering a total of 65 countries. The project is bound up with the promotion and exercise of China’s “soft power,” aimed at devising Asian solutions for Asian problems. Like any large-scale and ambitious undertaking, OBOR entails not just great opportunities, but great risks as well.

    One set of risks stems from the complicated political situation prevailing across large stretches of overland and maritime covered by the project. Big power rivalry in ASEAN countries, South Asia and Central Asia may threaten Chinese investment activities in these areas. Chinese investment in countries along OBOR may be exposed to regional turmoil and conflicts, terrorism and religious conflicts.

    Chinese enterprises with investments in OBOR countries face economic risks. One major risk is the potential of these countries defaulting on foreign lending and investment projects. Many of the OBOR countries are among the poorest economies in the world and have dysfunctional and corrupt governments.

    Another source of risk lies within the Chinese companies themselves doing business in OBOR countries. A great deal remains to be done with respect to engineering safety and management issues. At times, firms also have difficulties obtaining sufficient intelligence and financing to effectively carry out investment projects. When these fail to properly gather information and conduct due diligence, they are more prone to engage in speculative, bubble-like investment behavior. Chinese companies planning to “go global” by undertaking OBOR projects need to up their game when it comes to corporate governance and investment decision-making.

    I can go on and on and on… The fact is, with such a large-scale and ambitious undertaking, it is not surprising that there will be a lot of pitfalls and troubles along the way. But China is determined to carry on with the project and, thus far, with relative success. Or else the United States and India would not be so nervous to finding every which way to sabotage it.

  4. I disagree with the negatives that are been narrated here.

    China “One Belt One Route” is built on mutual trusts, shared benefits and of responsibilities, SaBoR, NOT on drum-up suspicions as many instigating piece, including this, tend to highlight selectively the negatives, rather its enormous long term benefits ,positives and potentials- socio-economic, security and political stability, relatively.

    That would require trillions in funding and decades to realize fully its potentials, navigate and overcome the great challenges that involve a total of the world’s 60 %population and 30% GDP.

    That is a tall order. I believe China will make it happens, basically with perseverance, hard work, determination and non- interference of other countries internal affairs, peacefully – lifting up to a billion or more people to above the poverty line.

    Silk Road and ChengHo, had historically proven, China is capable of repeating the same, on a astronomical scale, WITHOUT War, Dominance or Colonialisation.

    Fittingly it should be renamed ” One Belt Two Routes “.

    So much has been written on this topic, yet so little does this generation of Chinese reads it.
    I was excited about the new silk road back in 2014. Yet, today I am wary of the effort and cost to the individual Chinese citizens. Haijin benefitted the elites of the past. So did the expansion of the ZhengHe fleet. It cost a lot of harm to the economy then. It is likely to do so to the billions of hardworking Chinese. I am just thinking of their donation to 1MDB, which should be counted as part of the cost of OBOR.

  6. I think the multiplier effects that triggers down to the 4-5 billion people along the OBOR are many times more than during ZhengHe era for the amount money invested.

    Present ease of interconnectivity will help too. Participants financial contributions and commitments could be sought for greater chance of success.

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