BRI largesse leaves debtors squirming
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