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Thursday 19 July 2018

China's modern Silk Road hits political and financial hurdles

Work in progress at the site of Pakistan China Silk Road in Haripur, Pakistan. (AP Photo/Aqeel Ahmed)
Work in progress at the site of Pakistan China Silk Road in Haripur, Pakistan. (AP Photo/Aqeel Ahmed)

China's plan for a modern Silk Road of railways, ports and other facilities linking Asia with Europe hit a 14 billion dollar (£10.3bn) pothole in Pakistan.

From Pakistan to Tanzania to Hungary, projects under President Xi Jinping's signature Belt and Road Initiative are being cancelled , renegotiated or delayed due to disputes about costs or complaints host countries get too little out of projects built by Chinese companies and financed by loans from Beijing that must be repaid.

Plans for the Diamer-Bhasha Dam have been thrown into turmoil after the chairman of Pakistan's water authority said Beijing wanted an ownership stake in the hydropower project. He rejected that as against Pakistani interests.

"Pakistan is one of the countries that is in China's hip pocket, and for Pakistan to stand up and say, 'I'm not going to do this with you,' shows it's not as 'win-win' as China says it is," said Robert Koepp, an analyst for the research firm Economist Corporate Network.

Belt and Road announced by r Xi in 2013, is a loosely defined umbrella for Chinese-built or financed projects across 65 countries from the South Pacific through Asia to Africa and Europe.

They range from oil drilling in Siberia to construction of ports in Southeast Asia, railways in Eastern Europe and power plants in the Middle East.

Other governments welcomed the initiative in a region the Asian Development Bank says needs more than 26 trillion dollars (£19.2tn) of infrastructure investment by 2030 to keep economies growing.

Nations including Japan have given or lent billions of dollars for development, but China's venture is bigger and the only source of money for many projects.

Governments from Washington to Moscow to New Delhi are uneasy Beijing is trying to use its Belt and Road to develop a China-centred political structure that will erode their influence.

China's significance to Pakistan as a source of financing increased following US president Donald Trump's decision to suspend security assistance to Islamabad in a dispute over whether it was doing enough to stop Afghan militants.

Among projects that have been derailed or disrupted are:

:: Authorities in Nepal cancelled plans in November for Chinese companies to build a 2.5 billion US dollar (£1.5bn) dam after they concluded contracts for the Budhi Gandaki Hydro Electric Project violated rules requiring multiple bidders.

:: The European Union is looking into whether Hungary violated the trade bloc's rules by awarding contracts to Chinese builders of a high-speed railway to neighbouring Serbia without competing bids.

:: In Burma, plans for a Chinese oil company to build a 3 billion dollar (£2.2bn) refinery were cancelled in November due to financing difficulties, the newspaper Myanmar Times reported.

"It's probably too early to say at this point how much of the overall initiative will actually be implemented," said Christian Zhang, a BMI analyst.

The stumbles for one of the world's most ambitious infrastructure ventures could help temper concerns Beijing will increase its strategic influence.

"There is a big possibility that China is going to have a lot of disagreements and misunderstandings," said Kerry Brown, a specialist in Chinese politics at King's College London.

"It's hard to think of a big, successful project the Belt and Road Initiative has led to at the moment."

AP

Press Association

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