Going against the new silk road…

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Irawan Ronodipuro
INDEPENDENT OBSERVER

IO, Jakarta – What was once hailed as China’s Great Leap Outwards and embraced by over 100 countries because of its promise to help modernize the infra­structure of emerging and developed economies alike, Xi Jingpin’s multi­trillion dollar One Belt One Road ini­tiative, otherwise known as OBOR, has come under increasing scrutiny and criticism over the past year. Ray Washburne, president and CEO of the Overseas Private Investment Cor­poration, which is the U.S. govern­ment’s international finance develop­ment agency, recently said “[China] is not in it to help countries out, they’re in it to grab assets.”

This critique is echoed by policy­makers in many other countries, who complain China’s financing model for OBOR-related projects is, in fact, predatory because it often overbur­dens recipient countries with debt they can’t repay with the ultimate ob­jective of grabbing their assets, which is often referred to as ‘loan-to-own’.

Perhaps Beijing’s intentions are not entirely malicious, but already there are plenty of examples where debt burdens from OBOR-related projects have placed economies in harm’s way, such as in Pakistan as a consequence of its US$62 bil­lion-worth of infrastructure projects under the so-called China-Pakistan Economic Corridor.

Just this past week Pakistan ap­proached the International Monetary Fund for a bailout, which the min­ister of finance, Asad Umar, said is necessary since his government in­herited unserviceable loans worth billions of rupee from the previous administration.

Then there is case of Sri Lan­ka. Suspicions that China is actual­ly playing loan-to-own schemes were heightened when, last December, it acquired a 99-year lease on the Ham­banthota Port after the island nation defaulted on the Chinese loans that funded the project. China’s critics argue the Sri Lankan port project was a ‘white elephant’ from the on­set and Beijing’s real, hidden agenda was taking control over a highly stra­tegic piece of maritime real estate in the Indian Ocean. Indeed, there are grave concerns that strategic OBOR port projects—not only in places like Sri Lanka but also in Malaysia and Indonesia along the Straits of Ma­lacca, the Maldives and in Djibouti in East Africa—could end up being used by the Chinese navy for military purposes.

Such concerns are warranted, and there is a growing chorus of pol­iticians, not only in Washington but within the EU and in Asia as well, who are starting to talk tough and are beginning to take measures in mak­ing sure Beijing does not exploit its economic prowess to compromise the sovereignty of others and therefore prevent the rise of what some China watchers are now calling a ‘new im­perialism’.

In Europe, leaders in Brussels have seen Chinese foreign direct investment in the European Union increase manifold over past years, topping US$40 billion in 2016. Bei­jing claims their investments will ultimately bring huge economic ben­efits by knitting together Eurasian countries through a network of ports, roads and railways.

Others see alternative motives, beyond the economics. Some China analysts see a grand strategy unfold­ing—they believe Beijing is blending commerce with politics as a means of keeping Europe from joining arms with Washington to contain China’s rise and neutralize opposition to its foreign policy.

Just one example of this is Hun­gary and Greece, both of which have benefitted handsomely from Chinese investment. In 2016, both countries prevented the European Union (EU) from siding with the United States and Australia in backing the Perma­nent Court of Arbitration’s ruling in favor of the Philippines over China in a dispute involving the South China Sea.

In another case, in 2017, Greece vetoed a EU statement criticizing Chi­na’s human rights record at a United Nations Human Rights Council meet­ing held in Geneva. The fact China’s largest shipping company, known as China COSCO Shipping, bought a majority stake in the Greek port of Piraeus in 2016 as Greece continued to face pressures from international creditors in the midst of an economic depression was, undoubtedly, a ma­jor factor in Athen’s decision to break ranks with the EU.

Not wanting to give Beijing a chance to become even further en­trenched in Europe’s corridors of power, European legislators are re­acting by introducing and tightening laws to screen investments. And, France and Germany are now urging the EU to establish a common frame­work to establish norms, for exam­ple, on asset acquisitions by Chinese firms and accounting standards. It is expected the European Parliament will pass the new legislation in the coming year.

Here in Asia, most leaders in the region have decidedly tilted towards Beijing and, unlike their European counterparts, have not shown much alarm over China’s leveraging on its commercial diplomacy as a means of influencing domestic and regional politics. Indonesia’s Jokowi, the Phil­ippines’ Duterte, and Cambodia’s Hun Sen are prime examples; this is especially troubling when it comes to crucial policy issues on a regional scale, such as the South China Sea dispute.

One important exception is Ma­laysia’s new prime minister Mahathir, who, at 93, is Asia’s undisputed se­nior statesman. Coming back into the political arena after a fifteen-year hiatus, Mahathir deserves kudos for pushing back against China when he sees it is warranted. Mahathir has said he does not want Malaysia to become beholden to China, and Bei­jing’s use of economic leverage over its smaller neighbors in the region is “a kind of colonialism.”

Indonesia, as the de facto leader of the Association of Southeast Asian Nations, or ASEAN, should take lessons from the EU and one of her most important neighbors, Malaysia. Brussels has realized creating a re­gional framework of norms passed through the European Parliament would be the best, if not only, way to protect European interests and val­ues from China’s oversized political ambitions.

Malaysia’s Mahathir also recog­nizes that commercial deals coming from Beijing with a political agenda behind them often make for bad in­vestments, and his government has begun to screen, appraise and, where necessary, reject OBOR-related deals for the sake of protecting the coun­try’s economic well-being and sover­eignty.

Although ASEAN does not have a legislative body such as the Euro­pean Parliament, leaders of ASEAN, first and foremost Indonesia, should develop regional fora under the aus­pices of ASEAN and invite experts to advise member states on how to address the challenges posed by a rising China. After all, politics and security are inextricably intertwined with economics, and it would be a major mistake to ignore the question of how China’s OBOR initiative has, and could further, compromise our national and collective interests.

(Irawan Ronodipuro)