BRI largesse leaves debtors squirm­ing

The Australian - - THE NATION - BRAD NORINGTON AS­SO­CIATE EDI­TOR

Vic­to­rian Pre­mier Daniel An­drews signed up to China’s tril­lion­dol­lar Belt and Road in­fra­struc­ture pro­gram de­spite in­creas­ing alarm in coun­tries al­ready hitched to the deal that it has sad­dled them with too much debt, and forced de­pen­dence on Bei­jing.

Signed-up na­tions are also ques­tion­ing whether the BRI is a part­ner­ship with mu­tual eco­nomic ben­e­fits, as pro­moted, when China stands to gain most from spread­ing its in­flu­ence with agree­ments through­out Europe, the Mid­dle East, Africa and South­east Asia.

There is anx­i­ety that re­liance on China could pose sov­er­eign risks to na­tions with big in­fra­struc­ture spend­ing on new rail­ways, high­ways, bridges, ports and dig­i­tal tech­nol­ogy “lay­ing the foun­da­tions” for China’s fu­ture ex­pan­sion of mil­i­tary bases — and lit­tle room for the in­debted to re­sist.

A big blow to the BRI was the re­cent de­ci­sion of Malaysia to can­cel $22 bil­lion of Chi­nese projects, in­clud­ing a new rail line along the na­tion’s east coast.

Prime Min­is­ter Ma­hathir Mo­hamad, elected in May, was deeply con­cerned about the close­ness of his pre­de­ces­sor Na­jib Razak to Bei­jing and had cam­paigned against the for­mer govern­ment’s al­leged cor­rup­tion. More broadly, the Ma­hathir de­ci­sion re­flected dis­quiet about the opaque­ness of the Chi­nese regime and how its lack of trans­parency and ac­count­able prac­tices ex­tended to the BRI.

In Au­gust, he even branded the BRI “a new form of colo­nial­ism”.

Out of al­most 70 de­vel­op­ing na­tions signed up for BRI projects with sub­stan­dard credit rat­ings, as many as 23 face po­ten­tial dif­fi­culty ser­vic­ing debt, ac­cord­ing to a study by the Cen­tre for Global De- vel­op­ment, a Wash­ing­ton-based think tank.

Among iden­ti­fied pos­si­ble de­fault­ers are Pak­istan, Laos, Mon­go­lia, Ta­jik­istan, Kyr­gyzs­tan, Dji­bouti, Mon­tene­gro and the Mal­dives.

Pak­istan, build­ing the BRI-backed Gwadar Port as part of a planned “China-Pak­istan Eco­nomic Cor­ri­dor”, is rated the coun­try at high­est risk, with China pro­vid­ing 80 per cent of $US62bn ($85bn) in bor­row­ings.

The Wash­ing­ton study also sin­gles out Laos be­cause its $US6.7bn debt ex­po­sure for a new China-Laos rail­way is equiv­a­lent to al­most half the na­tion’s GDP. The In­ter­na­tional Mon­e­tary Fund has also is­sued warn­ings about the ca­pac­ity of Laos to ser­vice its debt.

Mean­while, Myan­mar has re­duced the scale of its Bay of Ben­gal port project be­cause it owes China 40 per cent of its ex­ter­nal debt.

Sri Lanka’s govern­ment has also sus­pended some BRI projects.

Vic­to­ria, as the sec­ond-largest state of a de­vel­oped na­tion with an en­vi­able credit rat­ing, might not face dire debt but its ex­po­sure on large projects could none­the­less make the state more China client than part­ner.

The drive of many South Pa­cific and African na­tions to se­cure Chi­nese fund­ing for in­fra­struc­ture has ex­posed an­other prob­lem: a lack of lo­cal en­gage­ment. Fund­ing for “bridges to nowhere” is raised by BRI crit­ics as ev­i­dence China’s sup­port may be linked more to gain­ing a foothold for re­gional se­cu­rity pur­poses rather than for al­tru­is­tic eco­nomic devel­op­ment.

The more ba­sic com­plaint about China’s al­leged BRI dis­con­nect is how its fi­nanc­ing of projects has favoured em­ploy­ment for its own na­tion­als.

Work­ers in Laos and Turk­menistan were de­prived of jobs when Bei­jing in­tro­duced its sta­te­owned en­ter­prise model with­out re­gard for lo­cal con­di­tions.

Pak­istan, which is build­ing the BRI-backed Gwadar Port, is rated as the coun­try with the high­est risk

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