The Silk Road was a network of trade routes, which was established during second century BC that connected China to the rest of the world. It continued up to 14th century AD. Today, the country is looking to rebuild a new Silk Route to connect Asia, Africa and Europe through its ONE BELT ONE ROAD initiative.
But the rest of the world is not ready to accept it, especially India, who feels that it is not just an economic initiative but also a push to political influence. This was evident through India’s backing out from The Belt and Road Forum for International Cooperation, or BRF that was held on May 14–15, 2017 in Beijing, China in which heads of states, governments and representatives from 29 countries and international organisations were present.
This week we are going to talk about OBOR, followed by perspective of China and India on OBOR, and then what is the reverse math of it, ending on the conclusion and future of OBOR.
Launched in 2013, the “One Belt One Road” Initiative is the ‘Brain -child’ of the Chinese President and is termed as the ‘project of the century’. It involves China, underwriting billions of dollars of infrastructure investment in countries along the old Silk Road and linking it with Europe and Africa. The emphasis is on enhancing land as well as maritime routes. OBOR/ BRI is a network of roads, railways, oil pipelines, power grids, ports and other infrastructural projects meant to connect China to the world.
The targeted region is home to 60 percent of the world’s population, and requires over $26 trillion in investment by 2030 to keep economies growing. Projects have already been launched in various countries like Tajikistan, Thailand, Kenya and Vietnam financed by Chinese loans claimed to be given at very low interest rates. China will be spending roughly $150billion a year in the 68 countries that have signed up for the scheme.
The OBOR initiative has been bifurcated into two parts:
The ‘belt’ refers to the ‘Silk Road Economic Belt ‘, which is land based. It will connect China with Central Asia, Eastern and Western Europe. The ‘road’ refers to the ‘21st Century Maritime Silk Road’ which is sea based. It will connect China to South-East Asia, Africa and Central Asia.
Six economic corridors and one maritime route have been proposed under the OBOR:
- New Eurasian Land Bridge. (connect Western China to Western Russia)
- China – Mongolia – Russia Corridor (North China to Eastern Russia via Mongolia)
- China – Central Asia – West Asia Corridor (Western China to Turkey via Central and West Asia
- China – Indochina Peninsula Corridor (Southern China to Singapore via Indo-China)
- China – Pakistan Corridor (South Western China to and through Pakistan)
- Bangladesh – China – India – Myanmar Corridor (Southern China to India via Bangladesh and Myanmar)
- Maritime Silk Road connecting Coastal China to the Mediterranean via Singapore-Malaysia, the Indian Ocean, the Arabian Sea and the Strait of Hormuz.
After more than a decade of speculation about China’s expanding universal dominance, the Chinese government has now flagged its aim to accept a more distinguished worldwide position of authority through the OBOR initiative to spur a new round of economic globalisation.
The SREB (Silk Road Economic Belt) / MSR (Maritime Silk Road) strategy is expected to feature prominently in China’s 13th Five-Year Plan, which will run from 2016 to 2020 and guide national economic and social development strategy throughout that period. It will promote the transport of oil and gas and access to the Central Asian energy resources needed to sustain China’s economy. China now prefers to make more direct investments overseas to utilise its more than $4 trillion economy in a better way.
The execution of this strategy can facilitate the entry of Chinese products into provincial markets, enabling utilization of China’s tremendous industrial overcapacity, thus counterbalancing the impacts of a falling investment rate and rising overcapacity at home.
The policy is significant for China since it aims to boost domestic growth in the country. Considering China’s exclusion from G7, OBOR policy might provide China an opportunity to continue its economic development.
China Pakistan Economic Corridor(CPEC), a $1.3 billion project, is a part of OBOR to expand the Karakoram Highway involving power plants, roads and railways that will span the length of Pakistan and link China’s western region of Xinjiang to the Gwadar port, which was built with Chinese help.
But the CPEC runs through Pakistan-occupied Kashmir. And India’s clear stand on the issue is that Pakistan is illegally occupying the Indian Territory. It would also involve a third country which goes against India’s stand of a bilateral issue which needs to be worked out between the two neighbours. Thus, posing sovereignty issue and territorial integrity.
India has a dominance in the Indian Ocean and is worried about the Chinese investment in the Maritime route through the Indian Ocean. Also, the OBOR initiative lacks transparency.
OBOR’s HIDDEN COST TO OTHER COUNTRIES:
In 2013, Sri Lanka built Mattala Rajapaksa International Airport (MRIA) in Hambantota by acquiring $301 million from China with an interest rate of 6.3%, although the interest rate on soft advances from the World Bank and the Asian Development Bank are just 0.25– 3%. Today, Sri Lanka’s estimated national debt is $64.9 billion, of which $8 billion is owed to China which can be attributed to the high interest rate on Chinese loans.
Sri Lanka’s handing over of Hambantota airport to India to repay the Chinese loan is expected to unfold in dozens of countries in Asia and Africa if China’s ambitious OBOR venture turns into a reality, despite the benefit in terms of infrastructure and trade to participating nations. China will loan cash for OBOR activities to host nations at high rates of premium which the nations will be unable to reimburse. This can prompt China securing value and afterward controlling stakes in these projects, getting a perpetual footmark in small nations which is almost outlandish for it to accomplish otherwise.
CONCLUSION AND FUTURE SCOPE
India may lose out in terms of economic boost through greater integration with other countries. It also risks isolation as all its neighbouring countries (apart from Bhutan) are a part of this initiative. To mitigate the damage, it should build ties with other countries and increase its spending on infrastructure.
OBOR does not come without risks. The $24 billion China-Bangladesh agreement is equivalent to almost 20% of Bangladesh’s GDP. Sri Lankan debt exceeds $60 billion and more than 10 percent is owed to China. Public perceptions toward China can become an existential issue.
The future of OBOR can be bright: accelerated economic growth along the routes, better connectivity between Asia, Africa and Europe, with rising standard of living. OBOR can also bring in a new quality of economic development, provided investors drive green growth and avoid the black fossil-fuelled economy. Finally, the development and investment initiative could also bring a new level of stability to Eurasia and Africa.