Shadow Exchanges along the New Silk Roads 9789462988934, 9789048541348

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Shadow Exchanges along the New Silk Roads

Publications The International Institute for Asian Studies (IIAS) is a research and exchange platform based in Leiden, the Netherlands. Its objective is to encourage the interdisciplinary and comparative study of Asia and to promote (inter)national cooperation. IIAS focuses on the humanities and social sciences and on their interaction with other sciences. It stimulates scholarship on Asia and is instrumental in forging research networks among Asia Scholars. Its main research interests are reflected in the three book series published with Amsterdam University Press: Global Asia, Asian Heritages and Asian Cities. IIAS acts as an international mediator, bringing together various parties in Asia and other parts of the world. The Institute works as a clearinghouse of knowledge and information. This entails activities such as providing information services, the construction and support of international networks and cooperative projects, and the organization of seminars and conferences. In this way, IIAS functions as a window on Europe for non-European scholars and contributes to the cultural rapprochement between Europe and Asia. IIAS Publications Officer: Paul van der Velde IIAS Assistant Publications Officer: Mary Lynn van Dijk

Global Asia Asia has a long history of transnational linkages with other parts of the world. Yet the contribution of Asian knowledge, values, and practices in the making of the modern world has largely been overlooked until recent years. The rise of Asia is often viewed as a challenge to the existing world order. Such a bifurcated view overlooks the fact that the global order has been shaped by Asian experiences as much as the global formation has shaped Asia. The Global Asia Series takes this understanding as the point of departure. It addresses contemporary issues related to transnational interactions within the Asian region, as well as Asia’s projection into the world through the movement of goods, people, ideas, knowledge, ideologies, and so forth. The series aims to publish timely and well-researched books that will have the cumulative effect of developing new perspectives and theories about global Asia. Series Editor Tak-Wing Ngo, University of Macau, Macau Editorial Board Kevin Hewison, The University of North Carolina at Chapel Hill, USA; Hagen Koo, University of Hawaii, USA; Loraine Kennedy, École des Hautes Études en Sciences Sociales (EHESS), France; Guobin Yang, University of Pennsylvania, USA

Shadow Exchanges along the New Silk Roads

Edited by Eva P.W. Hung and Tak-Wing Ngo

Amsterdam University Press

Publications Global Asia 11

Cover illustration: Unloading cargo from China; Attabad Lake, North Hunza, Pakistan Courtesy of Hasan H. Karrar, 2012 Cover design: Coördesign, Leiden Lay-out: Crius Group, Hulshout isbn 978 94 6298 893 4 e-isbn 978 90 4854 134 8 (pdf) doi 10.5117/9789462988934 nur 740 © Eva P.W. Hung & Tak-Wing Ngo / Amsterdam University Press B.V., Amsterdam 2020 All rights reserved. Without limiting the rights under copyright reserved above, no part of this book may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without the written permission of both the copyright owner and the author of the book. Every effort has been made to obtain permission to use all copyrighted illustrations reproduced in this book. Nonetheless, whosoever believes to have rights to this material is advised to contact the publisher.



Table of Contents

Preface

9

Abbreviations

13

1 Introduction

15

2 Fragmented sovereignty and unregulated flows

37

3 In and out of the shadows

75

4 Circulations in shadow corridors

97

Informal exchanges and contending connectivity along the shadow silk roads Tak-Wing Ngo and Eva P.W. Hung

The Bangladesh-China-India-Myanmar corridor Willem van Schendel

Pakistan-China trade across the Karakoram Mountains Hasan H. Karrar

Connectivity in the Northern Bay of Bengal Samuel Berthet

5 Past and present

125

6 Formal versus informal practices

145

7 Formal versus informal Chinese presence

163

8 State approaches to non-state interactions

183

Shadows of the China-Ladakh-Pakistan routes Vaijayanti Khare

Trade of medicinal and aromatic plants via Trans-Himalayan Silk Road Arjun Chapagain

The underbelly of hope in the Western Balkans Jelena Gledić

Cross-border flows in Xinjiang and Kazakhstan Olga Y. Adams

9 Integration in post-Soviet Central Asia

213

10 In the shadow of constructed borderlands

235

11 High-end globalization and low-end globalization

267

Index

287

Shadow-economy practices and the cross-Eurasian flow of commodities Ivan Zuenko

China’s One Belt One Road and European economic governance Susann Handke

African traders across Afro-Asia Gordon Mathews

List of Figures and Tables Figures Figure 1.1 Map of OBOR Figure 2.1 A section of Asian Highway 1 Figure 2.2 The ‘Indo Myanmar Friendship Gate’ marks the border crossing between Moreh (India) and Tamu (Myanmar) Figure 2.3 Indian forces patrolling Asian Highway 1 in an armoured vehicle, Manipur (India), 2012 Figure 2.4 Crossing the China-Myanmar border through a gap in the border fence, Yunnan (China), 2010 Figure 2.5 Chinese quilts and other commodities piled on top of a four-wheel drive on their way to market in India, 2012 Figure 2.6 Jade mined in Myanmar offered for sale in a Yunnan (China) border town, 2010 Figure 2.7 Smugglers are poised to rush across a grassy patch at a sign from the other side that goods have arrived. The grass marks the border between India (left) and Bangladesh, 2002 Figure 2.8 Pushing a load, freshly arrived from Myanmar, deeper into Indian territory, 2012 Figure 2.9 Long-distance peddlers from Myanmar on a road near the Bangladesh-India border, 2011 Figure 2.10 A Myanmar trader with merchandise in Manipur (India), 2012

17 47 49 51 53 54 54

57 57 58 58

9 Integration in post-Soviet Central Asia

213

10 In the shadow of constructed borderlands

235

11 High-end globalization and low-end globalization

267

Index

287

Shadow-economy practices and the cross-Eurasian flow of commodities Ivan Zuenko

China’s One Belt One Road and European economic governance Susann Handke

African traders across Afro-Asia Gordon Mathews

List of Figures and Tables Figures Figure 1.1 Map of OBOR Figure 2.1 A section of Asian Highway 1 Figure 2.2 The ‘Indo Myanmar Friendship Gate’ marks the border crossing between Moreh (India) and Tamu (Myanmar) Figure 2.3 Indian forces patrolling Asian Highway 1 in an armoured vehicle, Manipur (India), 2012 Figure 2.4 Crossing the China-Myanmar border through a gap in the border fence, Yunnan (China), 2010 Figure 2.5 Chinese quilts and other commodities piled on top of a four-wheel drive on their way to market in India, 2012 Figure 2.6 Jade mined in Myanmar offered for sale in a Yunnan (China) border town, 2010 Figure 2.7 Smugglers are poised to rush across a grassy patch at a sign from the other side that goods have arrived. The grass marks the border between India (left) and Bangladesh, 2002 Figure 2.8 Pushing a load, freshly arrived from Myanmar, deeper into Indian territory, 2012 Figure 2.9 Long-distance peddlers from Myanmar on a road near the Bangladesh-India border, 2011 Figure 2.10 A Myanmar trader with merchandise in Manipur (India), 2012

17 47 49 51 53 54 54

57 57 58 58

Figure 2.11 Truck drivers from Myanmar waiting for cargo in a border parking lot in Yunnan (China), 2010 59 Figure 2.12 Cross-border shoppers buying household goods in Yunnan (China), 2010; note the bilingual signs in Chinese and Burmese 59 Figure 2.13 Chinese timber truck leaving the Myanmar border, 2010 60 Figure 3.1 For centuries a branch of the Silk Road passed through 83 the north Hunza village of Misgar Figure 3.2 The Afiyatabad Commercial Centre (2700m) is located on the Karakoram Highway, adjacent to the Sost dry 87 port that opened in 2006 Figure 3.3 Returning Chinese containers passing through Afiyatabad after unloading their cargo at the Sost dry port88 Figure 3.4 New construction in Afiyatabad, a border market 91 along the Pakistan-China border 127 Figure 5.1 Ladakh as a highland connect 149 Figure 6.1 Average export value of MAPs, 2011/2012 – 2014/2015 149 Figure 6.2 Export value of MAPs, 2011/2012 – 2014/2015 Figure 6.3 Comparison of present annual export value with other studies156 Figure 7.1 Possible points of entry of the New Silk Road into Europe171 Figure 9.1 Divergence in customs statistics of China and its trade 223 partners, 2016 Tables Table 1.1 Table 6.1

Contending modes of connectivity 26 Export quantity and export value of MAPs, 2011/2012 – 2014/2015148 Table 6.2 The formal economy of MAPs sector, 2011/2012 – 2014/2015151 Table 7.1 Economic characteristics of the Western Balkans, 2015 168 Table 7.2 Estimates of shadow economy in the Western Balkans 169 Table 9.1 Imports from China to Kazakhstan and Russia, 2008-2016220 Table 9.2 Imports to Kazakhstan from China, EU and other 220 non-EAEU countries, 2008-2016 Table 9.3 Trends in economic activities, mid-2015 221 Table 9.4 Export of Chinese clothing, footwear and leather goods according to Chinese statistics, 2014-2016 222

Preface Observers have rightly pointed out that the ‘economy’ remains largely unproblematized as compared to notions such as state, nation, culture, class, and gender. Paradoxically, while social scientists have successfully deconstructed the state and the political, the concept of the ‘market’ remains unabated, despite Polanyi’s formidable arguments about the historicity of the market some decades ago. At best, economic exchanges and capitalist orders not conforming to the prescriptions of an autonomous, frictionless, self-regulated market are relegated to the margin or shadow. Believed to be haphazard, disruptive, and illicit, shadow exchanges are largely left to the attention of criminologists. We join the efforts of critical scholars who problematize and historicize the market and the economy. But unlike most of our predecessors who developed alternative theoretical perspectives to explicate the nature of economics, we deconstruct the problem in empirical terms by documenting concrete details of the operational mechanisms, governance structures, terms of exchange, and meanings of transaction of activities associated with intra- and trans-national flows of resources within and across territorial borders. Since these flows are not based on the familiar firm-driven logic of contractual exchanges, it requires a kind of ‘deep’ inquiry: delving beneath the surface of rules, policies, and institutional setups into the obscured realm of shadow activities and exposing the alternative logics of economic governance. We label these activities as ‘shadow’ exchanges, but only out of expedient considerations. They are seen as shadowy simply because they do not have a place in current economics textbooks and the Smithian conception of the market. In reality, many shadow activities have long found their place under the sun. They do not exist in complete separation from the conventional market economy. Rather, they operate side by side, clash and mesh, and at times compete with as well as supplement the dominant market order. More importantly, despite being theoretically marginalized, such activities constitute a substantial proportion of national and global economies. Revealing the particularistic logics of shadow economies across different regional and territorial spaces challenges the hegemonic discourse that ignores contingent forms of economic interactions besides free market transactions from our conceptual language. After all, the market is an institution embedded in particular histories as much as the state itself, since neither the market, nor the state has qualities that transcend time and place.

10 

Shadow Exchanges along the New Silk Roads

The current volume is one in a series of publications that sets to study shadow exchanges. We highlight the existence of shadow networks and informal connectivity on a global scale. Throughout the volume, we adopt a bottom-up perspective that analyses how the micro-practices of individual actors shape and are shaped by historico-institutional settings in the regional and international political economy. Needless to say, such sustained endeavor requires generous institutional and intellectual support. In the process, we have accumulated many debts to institutions and individuals who extended their help in one way or another. Financial support came from the Research Grants Council, Hong Kong. We also thank the International Institute for Asian Studies, the Hang Seng University of Hong Kong, and the University of Macau for their institutional backup. Since 2015, a number of workshops and conference panels have been organized to explore different issues relating to shadow economies. We began with the f irst international workshop ‘Cross-border Exchanges and the Shadow Economy’, held in Leiden on 14-15 December 2015. A second international workshop was held in Hong Kong in 2017, followed by the third workshop ‘In the Shadow of the New Silk Road’, held during the 11th International Convention of Asia Scholars (ICAS 11) in Leiden on 18-19 July 2019. In between these workshops, panel presentations were organized within a number of conferences, including ‘Politics of Gateway: Borderland Politics Beyond the Checkpoints’, Asian Borderlands Research Network Conference on Dynamic Borderlands: Livelihoods, Communities and Flows, Kathmandu, 12-14 December 2016; ‘Moral Economies of Charity and New Entrepreneurialism in the Borderlands’, Asian Borderlands Research Network Conference on Borderlands Spaces: Ruins, Revivals and Resources, Bishkek, 13-15 August 2018; and ‘Border Security and Bordering Practices: De-bordering, Re-bordering, and Co-bordering’, Conference on Global Asia in Interdisciplinary Perspectives: Sustainability, Security, and Governance, Singapore, 16-17 November 2018. Special thanks are due to Martina van den Haak for her earnest assistance in the organization of a number of these workshops and panels; Susann Handke who helped with the coordination; and Willem Vogelsang and Philippe Peycam for extending generous institutional and financial support. The present volume originates from the second international workshop ‘Shadow Silk Road: Non-State Flow of Commodity, Capital, and People across Asia and Eurasia’, funded by the Research Grants Council of the Hong Kong SAR Government (Project reference: UGC/IIDS14/H01/16) and held at the Hang Seng University of Hong Kong on 25-26 May 2017. We thank Jean-Pierre

Preface

11

Cabestan, Lang Kao, Linda Chelan Li, and Alvin Y. So who served as panel chairs and discussants of the papers. Colleagues at Hang Seng University have been most generous with their time and effort to make the workshop a success. They include Christopher Au-Yeung, Michael Chan, Rami Chan, Victor Chan, Pui Sze Cheung, Desmond Hui, Ice Kwok, Anselm Lam, Nga Li Lam, Thomas Luk, Lucille Ngan, Joe Poon, Kitty Wong, Maggie Wong, and Muk Yan Wong. Some initial findings have already been published in a special issue on ‘Checkpoint Politics in Cross-border Exchanges’, Journal of Contemporary Asia, vol. 49, no. 2 (2019). A popular version was reported in the IIAS Newsletter on ‘Informal Connectivity in Transnational Shadow Exchanges’, no. 83 (Summer 2019). We are grateful to numerous friends and colleagues for sharing their insights and criticisms. They include most notably Richard Boyd, Maryia Danilovich, Meine Pieter van Dijk, Sarah Elsing, Susanne Fehlings, Mohammadbagher Forough, Stéphane Grumbach, Leo van Grunsven, Heidi Østbø Haugen, Xiaoming Huang, Susanne Kamerling, Bartosz Kowalski, Sujeewa Nishanthi Kulatilake, Francisco Leandro, Hai Thanh Luong, Xiaohua Ma, Sango Mahanty, Anton Nikolotov, Roger Norum, Pál Nyiri, Gijsbert Oonk, Elisa Oreglia, Nipesh Palat, Ngai Pun, Frans-Paul van der Putten, Alessandro Rippa, Emilia Roza Sulek, Federico Varese, the late Eduard Vermeer, Pak Hang Wong, Akbar Zaidi, and Dmitry Zhelobov. During the preparation of this volume, Paul van der Velde and Mary Lynn van Dijk at the International Institute for Asian Studies, and Saskia Gieling at the Amsterdam University Press were full of patience and support. The final manuscript has benefited from the constructive comments of two anonymous reviewers. Our research assistants Theodore Charm, Leo Leung, and Cheung Fung Fan offered invaluable help in various stages of data collection, background search, editing, and publication works. To all these people and institutions, we offer our heartfelt gratitude.

Abbreviations BCIM BRI CEEC CPEC DOF EAEU EaP ENP EU ICBC MAPs NBB OBOR SEZ SREB TEN-T TEPC WTO XUAR

Bangladesh-China-India-Myanmar Belt and Road Initiative Central and Eastern European Countries China-Pakistan Economic Corridor Department of Forestry Eurasian Economic Union Eastern Partnership European Neighbourhood Policy European Union International Centre for Boundary Cooperation Medicinal and Aromatic Plants Northern Bay of Bengal One Belt One Road Special economic zone Silk Road Economic Belt Trans-European Networks Programme Trade and Export Promotion Centre World Trade Organization Xinjiang-Uyghur Autonomous Region

1 Introduction Informal exchanges and contending connectivity along the shadow silk roads Tak-Wing Ngo and Eva P.W. Hung Abstract This volume offers a bottom-up view of transborder informal exchanges across Asia and Eurasia and analyses their contention with the stateorchestrated One Belt One Road initiative. We argue that informal connectivity has a distinct logic and set of rules in terms of its organization, operation, and transactions. It constitutes a third way of globalization, alongside market-driven neoliberalism and state-led regionalism. The three modes of globalization differ in terms of the nature of actors, types of activities, rules of exchange, roles of the state, and major risks involved. Their clash and mesh prompt us to rethink the agency of global expansion, the nature of world city networks, and the linkage to the global value chain. Keywords: neoliberal globalization, state-led regionalization, low-end globalization, One Belt One Road, shadow silk roads, informal connectivity

Economic globalization has changed the historical geography of capitalism. Transnational networks now play a key role in global capitalist production, distribution, and accumulation. Such networks, created by various actors, represent new modes of coordination and governance. Complex webs of inter-statal, inter-urban, inter-firm, and inter-personal networks have been created, activated, and established to enable long-distance connectivity. They have become complementary but also competing socio-spatial projects that crisscross in multiple ways. The aim of this volume is to examine how such contending connectivity is articulated. Currently, the highest profile politico-spatial project is the ‘One Belt One Road’ (OBOR) initiative put forward by the Chinese government, which seeks

Hung, Eva P.W., and Tak-Wing Ngo (eds), Shadow Exchanges along the New Silk Roads. Amsterdam, Amsterdam University Press 2020 doi: 10.5117/9789462988934_ch01

16 Tak-Wing Ngo and Eva P.W. Hung

to re-define the historical geography of contemporary global capitalism. In just a few years, the OBOR initiative has developed into a grand strategy of transnational exchange, investment, and cooperation that stretches across more than 100 national borders from China to Asia, Eurasia, and Africa. It seeks to divert the flow of commodities, capital, and human labour away from the geo-economic centre of the United States in the Asia-Pacific towards a new historical geography that spreads across Eurasia, centring on China and its allies. However, long before China launched the OBOR project, vast networks of cross-border exchanges had been established across Asia and Eurasia. These exchanges, in the form of trade and resource flows, are largely conducted beyond the control of states, and can thus be regarded as belonging to the realm of the shadow/informal economy. The state-driven OBOR initiative therefore represents an alternative, or even a competitor, to the unofficial networks, seeking to extend the reach of the state to the shadow economies and to replace shadow exchanges with a state-sanctioned flow of resources across countries. This inevitably leads to both clashes and connections between the official strategy and the shadow networks. The implications are significant, for both OBOR and its shadow counterparts. This volume offers a bottom-up view of transborder informal exchanges across Asia and Eurasia and analyses their contention with the stateorchestrated OBOR initiative. We use the term ‘shadow silk roads’ to denote the evolving paths of non-state-sanctioned exchanges between traders of Asia and Eurasia, thus differentiating such geographical trajectories from the officially defined OBOR. Reviving the centuries-old networks of exchange, shadow silk roads are fluid and rhizomatic connections that link economic actors across geographical boundaries. Put differently, if OBOR denotes a road map charted by an officially designed grand project, shadow silk roads consist of myriad paths made by individual travellers and traders. Some of the paths may overlap with the OBOR routes and may take advantage of the benign official rhetoric and the hospitable bilateralism created by OBOR, but to a large extent they have developed independently of the OBOR initiative.

State-led regionalization and its challenge to neoliberalism To understand the contending connectivity between the different socio-spatial projects, let us first briefly examine the OBOR initiative. In 2013, the Chinese government unveiled a plan to launch the so-called Silk Road Economic Belt and the 21st Century Maritime Silk Road. Often abbreviated to ‘One Belt One Road’, this initiative encapsulates massive land- and sea-based projects linking

Introduc tion

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Figure 1.1 Map of OBOR

more than a hundred countries from China through Central Asia to Europe and Africa, thus covering around 55 per cent of the world’s gross national product, 70 per cent of its population, and 75 per cent of known energy reserves. It comprises roads, railways, energy pipelines, and telecommunications ties that link China to Western Europe via Central Asian states, Iran, Turkey, Russia, the Caucasus, and the Balkans. The maritime routes connect China with South Asia, Southeast Asia, the Middle East, Africa, and Europe through a strip of seaports via the South China Sea, the Indian Ocean, the Red Sea, and the Mediterranean Sea. The initiative is intended to be driven by the development of the six economic corridors of China-Mongolia-Russia, ChinaPakistan, Bangladesh-China-India-Myanmar, China-Indochina Peninsula, China-Central and West Asia, and the New Eurasian Land Bridge. The ostensible goals of OBOR include enhancing connectivity through infrastructural networks, improving regional economic policy coordination, removing barriers to trade and investment, increasing financial cooperation, and encouraging cultural ties to build support for the project. OBOR is thus intended as a long-term, cross-continental, grand strategy for cultivating a new geopolitical order that embraces development and connectivity. Furthermore, developmental and infrastructural projects are to be financed mainly by the newly founded Asian Infrastructure Investment Bank, the OBOR Special Fund, the New Development Bank established by the BRICs states, and China’s development banks. China alone has pledged at least US$1.41 trillion to the development of the whole OBOR initiative.

18 Tak-Wing Ngo and Eva P.W. Hung

The OBOR initiative can be viewed as emerging from a number of proposals undertaken over the years by China and its allies, such as China and Pakistan’s economic cooperation, the various economic agendas of the Shanghai Co-operation Organization, Bangladesh-China-IndiaMyanmar economic cooperation, and China-Mongolia-Russia economic cooperation. The combination of these initiatives under a comprehensive framework became the basis for OBOR. This framework has rapidly attracted global attention for its unprecedented scale and scope, the multiplicity of actors and participants, and the signif icant implications of the grand scheme. Unsurprisingly, this ambitious plan has aroused much controversy. Some see it as China’s new approach to opening up to the world, which represents the country’s readiness to share its development experience and dedication to encouraging global economic growth (Leandro, 2018). Others believe that it represents a counter strategy and China’s challenge to the US-led international trade and financial system (Ye, 2015). Its supporters expect OBOR to encourage new growth, potentially for vast areas of Eurasia, and that it will be a win-win game under multilateral cooperation. The sceptics, however, question whether investing hugely in low-return projects and high-risk countries surrounding China will be worthwhile. Opponents warn that exporting the Chinese development model to other developing regions may result in a new form of imperialist expansion. Our intention is not to enter the debate about the desirability of the OBOR initiative. Rather, our main concern is its implications for transnational connectivity. OBOR is primarily a state-initiated project aimed at developing cross-continental and cross-regional connectivity. In a certain sense, it can be compared with neoliberalism, hitherto the main driving force of globalization. As a signifier of the free market doctrine, neoliberalism typifies specific forms and pathways of market-led restructuring across territories and scales that sustain/reproduce the dominant global economic order. The cumulative effects of successive waves of neoliberalization on institutional landscapes in recent years are, according to Brenner, Peck, and Theodore (2010: 216), the reason for its endurance: [T]he post-1980s recasting of the (global) rules of the game of regulatory transformation in neoliberal terms, enabled and energized by new circuits of ‘fast policy’ development, has meant that the sociopolitical and institutional environment has increasingly induced and incentivized neoliberal strategies – securing their contradictory reproduction, even if it has not been able to secure their ‘success’.

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Unlike the market-driven logic of neoliberalism, OBOR exhibits a couple of distinctive characteristics. First, the kind of investment. From the outset, regional exchanges under OBOR often focus on infrastructural projects. Unlike conventional foreign direct investments that channel to the production of specific industrial/commercial products or components under the global value chain, transborder capital flows under OBOR are mostly project driven. They often involve not only the construction, but also the subsequent operation of infrastructural projects that are meant to improve physical connectivity. Examples include the Gwadar Port and Lahore Metro in Pakistan, the East Coast Rail Link in Malaysia, the Magampura Mahinda Rajapaksa Port in Sri Lanka, the Mombasa-Nairobi Standard Gauge Railway in Kenya, the Piraeus Port in Greece, and the Great Stone Industrial Park in Belarus. Second, the nature of actors. In contrast to neoliberal globalization that is spearheaded by multinationals and private enterprises, regionalization under OBOR accords a major role to the state. So far, most of the mega-scale cooperative projects have been initiated by states or state-owned enterprises. The states along OBOR routes not only establish bilateral economic agreements, but also become directly involved in the formulation and implementation of concrete investment projects. This mirrors the East Asian development model, in which the state leads the market in making adventurous investment decisions (Wade, 1990). Here statal and inter-statal institutions have played a transformative role in promoting regionalism. In short, OBOR represents a collaborative political exercise that enables active state intervention in the globalization process. Through it, the stateled development model is extended to inter-regional/cross-continental cooperation and connectivity. As such, an alternative path to regionalization is presented, which challenges the familiar conception of a firm-based, market-led process as the sole logic driving high-end globalization. Third, the nature of risks. Unlike development within a single nation, state-led development across national boundaries faces a far more unpredictable situation. Some of the projects launched in the last few years have already experienced setbacks, and many observers have highlighted the legal issues and sovereign risks in such arrangements (Brink, 2016). Since investments and exchanges are governed by contracts as well as bilateral agreements, any changes in governments, laws, and state policies may lead to disputes or non-compliance with the cooperative arrangements. Furthermore, critics have observed that the success or failure of OBOR projects is affected as much by societal contestations within a recipient state as by the mutual geopolitical interests between China and a particular state.

20 Tak-Wing Ngo and Eva P.W. Hung

In their study of OBOR projects in Malaysia, Liu and Lim (2019) argue that the projects are affected by three key conditions: the fulfilment of Malaysia’s ethnic policy, congruence in the interests and visions of local states and the federal authorities, and the advancement of geopolitical interests for both China and Malaysia. In other words, local domestic politics play a major role in shaping regionalization. It remains to be said that if OBOR represents an initiative rivalling the economic globalization previously driven by neoliberalism, several competing projects exacerbate this contentious process. For example, India has launched its own regional infrastructure projects under its ‘Act East’ strategy as an alternative to OBOR’s approach to connectivity. These projects include the Kaladan Multimodal Transit Project, the Trilateral Highway, the Sittwe Special Economic Zone, and the Trincomalee Port Project. In a similar vein, Japan has set aside around US$110 billion for collaborative projects under the Partnership for Quality Infrastructure Programme. Both countries have distanced themselves from the OBOR initiative and gone to great lengths to showcase their own initiatives as having more vision and potential than OBOR. These rival projects notwithstanding, the proliferation of transnational shadow exchanges along the shadow silk roads presents a different type of challenge. These exchanges constitute a kind of globalization from below – or what Gordon Mathews in this volume calls ‘low-end globalization’. Ironically, in challenging the market-driven logic of neoliberalism, OBOR’s state-led approach to high-end globalization is in itself confronted by informal connectivity created by rhizomatic networks of individuals and groups. How these three logics of globalization interact is therefore a new field for scholarly enquiry.

The shadow silk roads and low-end globalization OBOR has been promoted as a reinvention of the romantic image of an ancient trade route crossing the Eurasian continent. Some sceptics have argued that this is a smart repackaging of connectedness that has long existed, with horses, camels, and junk boats replaced by modern railroads, highways, pipelines, air and seaports, and banking institutions. In fact, this contemporary incarnation has a historical basis. Long before the OBOR initiative was put forward, a vibrant exchange culture had been active across Asia and Eurasia. This culture continues to rely on vast social networks of connectivity outside state control, and constitutes a web of

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shadow silk roads that both overlaps with and deviates from the political geography of OBOR. The scale and scope of these shadow silk roads are as impressive as those of OBOR in terms of quantity, reach, and resilience. Take suitcase trading – the most common form of cross-border shadow exchange – as an example, during which traders hand-carry their goods to evade border control. By disguising taxable commodities as personal items, these suitcase traders effectively escape customs and taxation. An estimated 20 to 30 million people engaged in suitcase trading in Central Asia during the mid-1990s (Humphrey, 2002); they provided 75 percent of all the consumer goods in the Russian market (Mukhina, 2009: 341). Currently, thousands of traders shift huge quantities of goods across the Chinese-Kazakh border at Khorgos, redistributing them via Almaty throughout Central Asia and beyond. Likewise, the Dordoi Bazaar has emerged as a centre of exchanges between China and Kyrgyzstan, with total transactions valued at several billion US dollars, which provides over 40,000 people with incomes (Alff, 2016: 441). Since the shadow economy has contributed significantly to the regional economy, it has received tacit support from state and political elites (Karrar, 2019). In Cambodia, revenues extracted from cross-border shadow exchanges have been used to support the ruling regime (Mahanty, 2019). During the peak period in southern China, more than 20,000 suitcase traders cross the sub-national border between Hong Kong and Shenzhen every day, creating an informal supply chain through which Western products can enter the Chinese market (Hung and Ngo, 2019). The quantity of informal exchange activities and values involved is not the only eye-catching characteristic about the shadow silk roads. Equally staggering is the reach of the networks. These are formed by a vast number of entrepreneurs, money brokers, and migrant labourers who move between different production and distribution centres. For example, Rippa (2019) mapped out the trading networks stretching from Tashkurgan and Sost in Pakistan, which reach markets in Gilgit, Rawalpindi, Karachi, Peshawar, and Kabul at one end, and Kashgar, Guangzhou, and Yiwu in southern China at the other. Pliez (2012) tracked the trade route linking Yiwu to Cairo, and Mathews, Lin, and Yang (2017) portrayed the nodes along the shadow silk roads from Guangzhou to Bangkok, Dubai, Istanbul, Nairobi, and Accra. Advancements in digital technology and social media have in most cases made these long-distance networks possible. The breadth and coverage of such informal networks are as impressive as the distances covered. In the Cambodia-Vietnam border region, the shadow

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networks of the timber and cassava trades connect a vast number of actors, including not only timber loggers and cassava farmers, transporters, traders, border customs, and border police, but also landlords, village heads, local political elites, border military, tax authorities, and even national-level authorities (Mahanty, 2019). In addition to the scale and scope of these networks, we have previously argued that various forms of exchange and mobility often intersect to give rise to specif ic patterns of connectivity (Ngo and Hung, 2019). The best example is that of China and Africa, in which cross-continental exchanges are made possible by traders who circulate capital and goods simultaneously when travelling between the two countries (French, 2014). Unlike OBOR projects, which rely on state-sanctioned banking and credit systems, shadow traders can only make use of informal credit, the most common form of which is the hawala system (Thompson, 2008). In the China-Africa case, African traders source their goods in China and place their orders, to be transported as air cargo and container shipments. On their return trip, they carry higher-value goods in their suitcases and sell them immediately on arrival in Africa. The money from the suitcase sales is remitted through their hawala networks to pay for the merchandise and shipment from China. After the shipment arrives, the merchandise is cashed in to provide the capital for a new round of sourcing trips to China (Haugen, 2019). In this regard, shadow exchanges in commodities and capital go hand in hand. The informal networks of connectivity and cross-border shadow exchanges along the shadow silk roads constitute what Mathews called ‘low-end globalization’ in his chapter in this volume. In Mathews’s (2011: 19-20) words, it is globalization as experienced by most of the people in the world: the transnational flow of capital and commodity carried out by ordinary people. Both ‘professional’ and casual traders with limited capital and resources conduct long-distance, intercontinental exchanges through a combination of licit and illicit, and formal and informal, means. It is in essence a kind of globalization from below. As mentioned, low-end global exchanges are possible because shadow mobilities in commodity, human, and capital are intricately linked. The value/profit created in one type of exchange is immediately transposed to another venture, thus sustaining the long process of transnational connectivity. This type of exchange thus hinges on the effective coordination of the commodity-capital-labour circuit, albeit informally organized. This low-end globalization constitutes a third logic of global capitalist expansion, in addition to market-driven neoliberalism and state-led

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regionalism under OBOR. It is based on a special type of network connectivity that transcends political boundaries and economic restrictions. To better understand the process of globalization from below, we need to look more closely at the nature of informal connectivity.

The nature of informal connectivity Elsewhere we have highlighted the unique characteristics of informal networks in cross-border connectivity (Hung and Ngo, 2019). It is useful to recapitulate the arguments briefly here. Shadow trade is often assumed to be an activity conducted on a small scale and over short distances by local inhabitants of borderlands. It can be characterized as a type of informal economic activity that is unregulated, interpersonal, relational, and reciprocal (Light, 2004). This contrasts with regulated and legally enforceable contractual exchanges, or formally coordinated divisions of labour across different producers and distributors in global commodity chains. Because of that, existing scholarship tends to categorize cross-border petty exchanges as informal sector activities. From this perspective, informality is associated with activities of those on the social margins. The informal economy is viewed as a product of urban unemployment, bureaucratic red tape, and state regulations (Priest, 1994; de Soto, 2000; Centano and Portes, 2006; Perry et al., 2007). As Anderson and Gerber (2008: 128) suggest, the informal sector serves multiple functions: it is a survival strategy for the poor; a provider of jobs; a training ground for underprivileged entrepreneurs; a source of new businesses; and a costreducing strategy for indigenous business. We have argued that equating informality in transnational networks with that of the urban informal sector can be misleading, as informal connectivity exhibits several distinct characteristics. First is the nature of the actors involved. In contrast with neoliberalism and OBOR regionalization, the active agents in low-end globalization are neither business firms nor the state, but shadow traders, who act either individually or in syndicates, and their networks. These traders often carry the goods themselves when crossing border checkpoints to evade off icial detection. They make use of their long-established social networks, including their acquaintance with border guards, when conducting transnational exchanges. Firms have almost no role to play, because a network can easily escape state attention while firm-based transactions will inevitably fall under official scrutiny.

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Second is the problem of marginality. Shadow traders do not necessarily live in the social margins or have been driven out of formal employment. Rather than having no choice but to take up unprotected work, they often engage in informal operations with deliberate intention. State regulations oblige them to conduct their trading activities informally, so they can take advantage of the grey areas in border control. Thus, informality is an organizational strategy to manipulate state regulations at border checkpoints and maximize profit in transnational exchanges. Third is the level of organizational sophistication. The activities carried out by shadow traders are often described as ‘petty’. This description connotes something casual, haphazard, and small-scale. In practice, however, many of these activities are organizationally sophisticated and resourceful. Viewing the networks involved in these activities as based mainly on familial and personal ties is a gross simplification. In reality, informal connectivity often involves multiple stakeholders, traverses both the formal and informal sectors, and extends far across borders, in addition to bridging the state and non-state divide. Furthermore, varieties of operational mechanisms are used to adapt to local circumstances, many of which are highly organized, commercially focused, and market oriented. At the extreme end, networks organized into syndicates can exhibit exceptionally sophisticated levels of coordination in overseeing the trade flow, responding to market signals, coordinating sourcing and distribution, arranging transportation, and co-opting/manipulating border controls. They behave like well-established business firms while remaining informal, relying on networks and trust rather than legally binding contracts in their transactions. In our previous work, we refer to this as ‘organized informality’ (Hung and Ngo, 2019). The fourth characteristic is that of resilience. This form of informal connectivity is certainly not haphazard and ephemeral, but highly routinized and stable. Individual traders may have limited mobility, financial resources, and market awareness (and only engage in small-scale activities), but they can be organized into highly coordinated operational networks. These individual traders may come and go, and join or exit the network in a casual and informal manner, but the network itself remains stable, coordinated, and resilient, with an elaborate division of labour. Fifth is political connection. An informal transnational exchange network typically links state and non-state actors. In the conventional urban informal sector, the state is kept at arm’s length, and networks are mainly between families and friends. In contrast, those along the shadow silk roads are consciously created and maintained by traders, local officials, border guards, and so on to ensure smooth transnational

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crossings (Walker, 1999; Phadungkiati and Connell, 2014). For example, the operational networks of suitcase trading require the involvement of local state officials at border checkpoints, since official discretion in the selective enforcement of border control plays a key part in the trade. Reciprocity between border guards and traders becomes a routine exercise under checkpoint politics. Every single cross-border transaction thus entails power exchange/negotiation – both overtly and covertly – between state actors and traders. Bribes are paid to border guards or customs authorities in exchange for smooth crossings. In extreme cases, rents extracted from local checkpoint networks are siphoned off to higher authorities, and even to the governing party (Milne, 2015). In this sense, while the urban informal sector is organized around socio-economic networks, informal connectivity in transnational exchanges depends as much on political as economic networks. Last is the negotiation of passage. The effectiveness and resilience of informal connectivity depends on the successful negotiation of passage through border checkpoints to ensure a smooth flow of goods, people, and capital. This requires a skilful manipulation of precarity in terms of space, time, and agency (Ngo and Hung, 2019). In general, skilled traders and brokers alter their paths of movement in response to frequent changes in the control routines, customs fees, import/export bans, or crackdowns at various points of border entry. Experience allows brokers to navigate these precarious situations and circumvent restrictions creatively at checkpoints. Equally important is the manipulation of time. Traders and brokers use their skills and experience to synchronize different junctional dates, timetables, and schedules, such as those of trains and shipments, the rosters and work shifts of border guards and customs off icials, the patterns and intensity of the flow of people and goods at specific times at particular border gates, and potential crackdowns on smuggling and suitcase trading (Nikolotov, 2017). Synthesizing this disjunctive information and assessing the potential risks will enable experienced brokers to successfully navigate the borders and, if necessary, to exploit backup plans or alternative routings effectively. In sum, informal connectivity has a distinct logic and set of rules in terms of its organization, operation, and transactions. It justifies our claim to consider informal connectivity along the shadow silk roads as a third way of globalization, alongside market-driven neoliberalism and state-led regionalism under OBOR. In this sense, the significance of the state-led OBOR and the network-driven shadow connectivity cannot be underestimated in the new phase of international political economy.

26 Tak-Wing Ngo and Eva P.W. Hung

Domination and dependence under contending modes of connectivity The emergence of state-led regionalization and low-end globalization raises the question about their challenges to conventional market-driven neoliberalism. From the outset, the three processes predicate upon very different logics of operation. Table 1.1 below compares the three modes of globalization and highlights their distinct characteristics. We can see that they differ in terms of the nature of actors, types of activities, rules of exchange, roles of the state, and major risks involved in the activities. Table 1.1 Contending modes of connectivity Neoliberal globalization

State-led regionalization under OBOR

Low-end globalization

Major actors

Private firms

Major types of activities

Commodity production under global value chain

Individuals and organized syndicates Distribution of finished goods

Rules of exchange Roles of the state Major risks for the actors

Business contracts

States and stateowned enterprises Investment in and operation of largescale infrastructural projects Inter-statal bilateral agreements Active player and investor Sovereign risk, debt crisis

Market regulator and contract enforcer Breach of contracts, market fluctuations

Inter-personal trust Gatekeeper against illicit exchanges Official crackdown

The three globalization processes remind us of the ‘markets, hierarchies, and networks’ debate surrounding the different modes of coordination in social life (Thompson et al., 1991). In this debate, the increasing importance of social networks has led observers to underline the rise of network society (Van Dijk, 2006). Some studies even argue that network has now become the social morphology of our age and is a more effective mode of coordination in knowledge-intensive capitalism (Castells, 2000; Adler, 2001). Intriguingly, notwithstanding the heated discussions, attention to date has largely been focused on the coordination of domestic economies, and few are aware that the market-hierarchy-network triology has replicated itself in global capitalist expansion. To a large extent, the three modes of globalization are not necessarily in direct competition with one another. There is even a certain division of

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labour, as shown in their respective types of activities. As mentioned earlier, market-driven globalization has been spear-headed by private enterprises and multinationals who mostly concentrate on the production of specific goods or product components. In contrast, state-led regionalization under OBOR focuses mainly on projects that seek to improve physical connectivity. The scale of these projects is often too big and their profit cycle too long for individual private investors. In the case of low-end globalization, many of the transborder exchanges involve the distribution of parallel goods or finished products, and often fill in a gap in the global value chain. In addition to the questions of contradiction, contention, and complementarity, a central issue in the rise of state-led and network-based globalizations is whether they subvert or reproduce transnational domination and dependence. In this regard, the extensive debate about modernization and dependency has alerted us to the existence of multiple layers of dependency, as well as opportunities for autonomous development even in strongly dependent situations. Active agency has made the structures of domination porous and ambiguous, at the very least. Transnational connectivity exhibits ambiguity in terms of both creating and escaping domination. Researchers have highlighted a spatial and economic division of labour among cities and nations that sustains transnational domination under global capitalism. Through economic globalization, the processes of accumulation, production, and distribution have been coordinated worldwide through city networks and global value chains. In the advanced producer service sector, interlocking networks connect major cities across the world through intra-firm flows. In the words of Taylor (2001: 181), the world city network consists of three structural levels: cities as the nodes; the world economy as the supra-nodal network level; and a sub-nodal level consisting of advanced producer service firms. The spatiality of global value chains has recently been explored within the context of world city networks (Derudder and Witlox, 2010), and the place-bound links between localities that constitute a global commodity chain has received increasing attention. A world city can thus serve as a nodal centre for specific commodity chains by providing services for sourcing, producing, and distributing various goods. Under market-driven globalization, advanced producer service firms such as Dresden Bank, Sidley Austin, and TMP Worldwide are the main actors in this process. They have strategically established offices in major cities including New York, London, Frankfurt, and Tokyo. Global resource flow takes the form of inter- and intra-firm exchanges across cityscapes in the forms of capital, information, knowledge, strategy, plans, and personnel.

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As such, multinationals and other leading firms control global value chains through their organizational and locational power. This world city network represents high-end globalization, and forms part of the structure of global domination under neoliberalism. The first of the two main criticisms against the world city theory rightly points out that it almost exclusively focuses on a few large Western metropolitan centres. Some advocates of the theory may believe that in its drive towards marketization and commodification, global neoliberalism has created an uneven distribution of spatial power, thus reinforcing a new international division of labour between the global ‘command centres’ of advanced capitalist countries and those on the peripheries (Brenner, Peck, and Theodore, 2010). Others may have constructed a narrow conceptual map and chosen to ignore most cities in the developing world (see the critique in Robinson, 2002). The OBOR initiative can be viewed as challenging both premises. The state-orchestrated strategy promises to establish alternatives by developing new city networks in the south that will compete with those established in the north. Under OBOR, new centres of resource flow have emerged, forming alternative networks linking places such as Chongqing and Urumqi (China), Cairo (Egypt), Moscow (Russia), and Duisburg (Germany). The end markets for global value chains are thus shifting and are no longer exclusively located in Europe and North America (Gereffi, 2014). This will inevitably influence the dominant structure of global capitalism. The second criticism is that studies often focus on a narrow range of economic processes and neglect many other connections. Networks based on informal connectivity are among those omitted, despite their extensive global presence. However, as other observers have pointed out, networks overlap and intermingle, resulting in multiple webs of transnational networks among cities and regions that defy simple description and delimitation (Leitner, Pavlik, and Sheppard, 2002; Hess, 2009). Coe et al. (2010) note that a world city may occupy a powerful position in some networks but not in others, and its socioeconomic fabric may consist of powerful and powerless actors alike. Thus, given the diversity of actors and capacities, they argue that we should expect equally diverse world cities to develop. We can extend this argument to reveal how informal connectivity has linked up many cities along the shadow silk roads that have hitherto been excluded from the analytical map of world city networks. Once peripheral areas such as Yiwu (China), Sost (Pakistan), Khorgos (Kazakhstan), Dordoi (Kyrgyzstan), and Ussuriysk (Russia) have emerged as nodal centres of long-distance resource flows. Furthermore, Haugen (2018: 307) describes the informal networks in the growing Chinese-African shadow exchange link as forming a ‘petty commodity

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chain’: a particular type of global value chain in which unregistered businesses produce and distribute goods. Personal relationships and informal infrastructure facilitate the transactions. Formal and informal institutions regularly link up in the governance of this petty value chain. As Haugen (2018) notes, although numerous actors are involved in every stage of the value chain, the relationships are relatively stable and maintained through cultural ties, repeated transactions, mutual trust, or symbiotic credit-and-debt contracts. Layers of differential power and dependency exist within these stable petty value chains. Van Schendel, in his chapter in this volume, shows us that the most precarious actors in clandestine trade are casual labourers, couriers, and cart-pushers. Higher up the value chain are suitcase traders, drivers, and border shoppers. Above them are the independent entrepreneurs who run shops and retail outlets. The top positions in the value chains are occupied by entrepreneurs or syndicates that coordinate large-scale flows across transnational borders. Notwithstanding this hierarchy of domination, petty value chains are mostly rhizomatic in nature, unlike the formal value chains controlled by leading firms in economic hubs. Because of that, the actors and places that occupy the positions of power are ephemeral and situational. It depends on the ‘positionality’ of particular actors and places, to borrow Sheppard’s (2002) concept, in their creation of asymmetric interdependencies. As such, the shadow city networks follow a different logic of dependency, which deviates from the dominant structure of global capitalism driven by neoliberalism. The relationships between firm-driven, state-centric, and network-based connectivities are therefore multi-faceted. Contention exists alongside complementarity. As Van Schendel points out in his chapter, the OBOR projects are bound to destroy some shadow practices but reinforce others. Some shadow activities will take advantage of the OBOR initiative to establish new footholds in the shadow silk roads, while others will be marginalized by state policies or obliged to break up old networks in search of new ones. Cities and local communities will thus be reconfigured as competing and multi-layered points of connection. These relationships, however, need not always be antagonistic, as the petty value chains may compete with, overlap, or link to the formal value chains in various ways. We previously argued that the two chains can be intimately linked in some circumstances (Hung and Ngo, 2019). Whilst existing studies tend to focus on the production side, the distribution side is often the bottleneck of the global chain in developing countries. Unreliable distribution channels, weak marketing platforms, the prevalence of counterfeit products, and dubious sales practices have rendered many

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distribution chains ineffective in the developing world. Here, informality and shadow exchanges are instrumental. Many international producers have taken advantage of the spontaneous informal distribution channels made available by shadow traders. Informal connectivity fills a void in the formal global value chain by offering an alternative channel that is more effective and trustworthy, despite its shadowy nature. In this peculiar circumstance, the relationship between the two chains appears to be complementary. Here, we caution against making generalizations too broad and too early. The processes are shaped as much by transnational activities as by the domestic circumstances of individual host countries. We echo Coe et al. (2010: 145), who argue that identifying the range of network actors, their interrelationships and power configurations, and the structural outcomes of their relationships is central to understanding how global economic networks operate. Our case studies in this volume therefore aim at documenting some of the emerging patterns or deviations across OBOR and the shadow silk roads.

Structure of the book A bottom-up perspective is taken in the chapters in this volume, in which the historical prevalence of shadow exchanges along Asian and Eurasian borders is analysed. A wide range of cases are studied and compared, covering countries in South Asia, Southeast Asia, Central Asia, Eastern and south-eastern Europe, and Africa. They present detailed empirical case studies that reveal the contending connectivities along the shadow silk roads. In tracking the shadow exchanges in South and Southeast Asia, Willem van Schendel (Chapter 2) challenges the ‘win-win’ situation envisioned as the result of the OBOR initiatives. He examines the ‘economic corridor’ that links the overland and maritime Silk Roads – the stretch of land connecting Kunming and Kolkata across Myanmar and Bangladesh – and argues that this corridor presents many obstacles to the shadow silk roads. In contrast, Hasan Karrar (Chapter 3) argues that the shadow economy of Sino-Pakistan cross-border trade has been in decline since 2010. An increase in the centralized control of frontier regions can also be identified in the OBOR initiative, in addition to the more explicit establishment of the China-Pakistan Economic Corridor, and both can serve as neoliberal mechanisms of capital flow and investment. In his study of the Northern Bay of Bengal, which is on the Maritime Silk Road, Samuel Berthet (Chapter 4) shows that illegal trade developed not only in the shadows, as a consequence of the border regime of the state,

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but also out of unregulated circulation in the margins of the new transport regime. Berthet argues that the flourishing shadow economy continues as a necessary complement to the formal one, rather than promoting diverse, multi-layered exchanges and circulations. The ‘shadowy’, ambivalent nature is clearly identifiable in the ChinaLadakh-Pakistan trade routes. Vaijayanti Khare (Chapter 5) examines these centuries-old routes through Ladakh that connect Tibet and Pakistan, and charts how a shadow route became a main route before once again slipping into the shadows. Khare reveals the essence of these routes and charts their formalization in terms of the dynamics of economic development. Arjun Chapagain (Chapter 6) assesses the formal and informal practices involved in the trade of medicinal and aromatic plants in Nepal. These are harvested by disparate individuals and channelled through intermediate actors within a confusing policy environment. Plants are mainly exported to India and China, and although permits are in fact required to engage in this trade, a hidden economy exists. Such formal-informal ambivalence also prevails in Eastern and southeastern Europe. In her study of the Western Balkans, Jelena Gledić (Chapter 7) describes the shadow economy associated with the local Chinatown, where there is an unofficial tolerance of activities with questionable legality. The states may have the ability to regulate and introduce order into the flow of economic resources, but this tolerance is a method of facilitating smoother official cooperation between states. Central Asia has a strategic position in China’s links with the West. Olga Y. Adams (Chapter 8) examines the state’s attempts to intervene in and/or co-opt the long-established tradition of transborder cooperation and flows between the Republic of Kazakhstan and the Xinjiang-Uyghur Autonomous Region of China. Transborder interactions are likely to increase in intensity under the OBOR initiative, and more government monitoring and participation will follow. Ivan Zuenko (Chapter 9) examines the flow of goods from China to Russian markets after the creation of the Eurasian Economic Union. The tension and ambivalence between formal and shadow activities are fully revealed. It has become more profitable to develop a ‘shadow sector’ in Kazakhstan and Kyrgyzstan due to access to the Russian market, but the local authorities want to keep control of cross-border trade, and thus attempt to return to national-level regulations despite declaring their willingness to engage in international cooperation. Susann Handke (Chapter 10) provides an overview of the emergence of the post-Cold War governance structures in Eastern and south-eastern Europe,

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through which the OBOR initiative must navigate to reach the economic core of the European Union. She argues that the economic opportunities provided by the borderlands to the east of the European Union are contextualized by the complexities of the region’s governance structures, which affect the implementation of OBOR-related projects. Finally, Gordon Mathews (Chapter 11) discusses how African traders and middlemen in Guangzhou buy products from Chinese factories, a major source of the goods involved in low-end globalization. They carefully pack containers and bribe customs agents in both China and their home countries to let copy goods through to the African markets. It is these Chinese copies and knock-offs, Mathews argues, that bring globalization to the developing world.

Conclusion Applauding the market order, which is seen as spontaneous but rule-binding, Hayek (1991: 297) forcefully argues that: ‘It is because it was not dependent on organization but grew up as a spontaneous order that the structure of modern society has attained that degree of complexity which it possesses and which far exceeds any that could have been achieved by deliberate organization’. In defending the spontaneous order of the market against the organizational order of the state, Hayek fetishizes the market as singular, normal, and lawful. He equates the market to modern capitalism, and overlooks the many forms of alternative transactions in which goods and services are exchanged and where commensurability is socially negotiated and agreed upon (Gibson-Graham, 2006: 62). We can add that the structure of modern society has attained such a degree of complexity not only because of the market, but also due to the simultaneous surge of various alternative exchanges and shadow networks, which remain a constitutive part of the ‘spontaneous order’. These alternative exchanges and shadow activities have existed since ancient times. The historical silk road, which is now much celebrated in official discourse and rhetoric, was essentially created and sustained by human interactions outside the reach of the states. Such interactions became outlawed or pushed into the shadows at various points in history when economic activities were put under state regulation. Contrary to what Hayek believes, all modern market activities have come under complete state supervision, from product quality, working conditions, and sales contracts to taxation, credit extension, accounting, and so on. The truly spontaneous economic activities that defy state control have been variously labelled as smuggling, trafficking, money laundering, and shadow exchanges.

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Recent advances in transport and communications have facilitated and strengthened the prevalence of this spontaneous alternative order in coordinating the transnational flow of resources. The rhizomatic web of shadow silk roads is not simply a revival of the old one, but also a creation of new connectivities across continents. It is based on the traditional social fabric of personal trust and networks and aided by the up-to-date technologies of digital communication, a knowledge of market information, and innovative forms of organization and coordination. Instead of confronting existing state power and market order, many shadow networks engage with the state and the market to their advantage. The result is an ambivalent relationship that both supplements and sabotages the state-led and market-driven logics of globalization. Notwithstanding the prevalence and significance of shadow exchanges, the study of informal connectivity is limited, precisely due to its shadowy nature. Current theories and paradigms do not offer sufficient conceptual tools and terminologies to describe the phenomenon. However, from a bottom-up perspective, these activities remain central to many local communities and social groups, and to the global political economy. The resilience of informal networks and their extensive reach have prompted us to rethink the agency of global expansion, the nature of world city networks, and the linkage to the global value chain. We believe that such contending connectivities will invite new scholarly inquiries into the coordination of socio-economic activity across the globe.

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Centano, Miguel Angel, and Alejandro Portes. 2006. ‘The Informal Economy in the Shadow of the State’. In Patricia Fernández-Kelly and Jon Shefner (eds), Out of the Shadows: Political Action and the Informal Economy in Latin America, 26-51. University Park, PA: Pennsylvania State University. Coe, Neil M., Peter Dicken, Martin Hess, and Henry Wai-Cheung Yeung. 2010. ‘Making Connections: Global Production Networks and World City Networks’. Global Networks 10(1): 138-149. De Soto, Hernando. 2000. The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. New York: Basic Books. Derudder, Ben, and Frank Witlox. 2010. ‘World Cities and Global Commodity Chains: An Introduction’. Global Networks 10(1): 1-11. French, Howard. 2014. China’s Second Continent: How a Million Migrants Are Building a New Empire in China. New York: Vintage. Gereffi, Gary. 2014. ‘Global Value Chains in a Post-Washington Consensus World.’ Review of International Political Economy 21(1): 9-37. Gibson-Graham, J.K. 2006. A Postcapitalist Politics. Minneapolis, MN: University of Minnesota Press. Haugen, Heidi Østbø. 2018. ‘Petty Commodities, Serious Business: The Governance of Fashion Jewellery Chains between China and Ghana’. Global Networks 18(2): 307-325. Haugen, Heidi Østbø. 2019. ‘China-Africa Exports: Governance Through Mobility and Sojourning’. Journal of Contemporary Asia 49(2): 294-312. Hayek, Friedrich von. 1991. ‘Spontaneous (‘Grown’) Order and Organized (‘Made’) Order’. In Grahame Thompson, Jennifer Frances, Rosalind Levačić, and Jeremy Mitchell (eds), Markets, Hierarchies and Networks: The Coordination of Social Life. London: Sage. Hess, Martin. 2009. ‘Investigating the Archipelago Economy: Chains, Networks and the Study of Uneven Development’. Journal für Entwicklungspolitik 25(2): 20-37. Humphrey, Caroline. 2002. The Unmaking of Soviet Life: Everyday Economies after Socialism. Ithaca, NY: Cornell University Press. Hung, Eva P.W., and Tak-Wing Ngo. 2019. ‘Organised Informality and Suitcase Trading in the Pearl River Delta Region’. Journal of Contemporary Asia 49(2): 233-253. Leandro, Francisco Jose. 2018. Steps of Greatness: The Geopolitics of OBOR. Macau: University of Macau. Leitner, Helga, Claire Pavlik, and Eric Sheppard. 2002. ‘Networks, Governance, and the Politics of Scale: Inter-Urban Networks and the European Union.’ In Andrew Herod and Melissa W. Wright (eds), Geographies of Power: Placing Scale. Oxford: Blackwell. Light, Donald W. 2014. ‘From Migrant Enclaves to Mainstream: Reconceptualizing Informal Economic Behavior’. Theory and Society 33(6): 705-737.

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Taylor, Peter J. 2001. ‘Specification of the World City Network’. Geographical Analysis 33(2): 181-194. Thompson, Edwina A. 2008. ‘An Introduction to the Concept and Origins of Hawala’. Journal of the History of International Law 10: 83-118. Thompson, Grahame, Jennifer Frances, Rosalind Levačić, and Jeremy Mitchell, eds. 1991. Markets, Hierarchies and Networks: The Coordination of Social Life. London: Sage. Van Dijk, Jan A.G.M. 2006. The Network Society: Social Aspects of New Media. Second edition. London: Sage. Wade, Robert. 1990. Governing the Market: Economic Theory and the Role of Government in East Asian Industrialisation. Princeton, NJ: Princeton University Press. Walker, Andrew. 1999. The Legend of the Golden Boat: Regulation, Trade, and Traders in the Borderlands of Laos, Thailand, China, and Burma. London: Curzon Press. Ye, Min. 2015. ‘China and Competing Cooperation in Asia-Pacific: TPP, RCEP, and the New Silk Road’. Asian Security 11(3): 206-224.

Acknowledgements The authors thank the generous support of the Research Grants Council, Hong Kong (project reference: UGC/FDS12(14)/H02/14), for the research and writing of this chapter.

About the authors Tak-Wing Ngo is Professor of Political Science at the University of Macau. He works on East Asian politics and political economy. He formerly taught at Leiden University and was the IIAS Professor of Asian History at Erasmus University Rotterdam. He is the editor of the refereed journal China Information and co-editor of the Journal of Contemporary Asia. Eva P.W. Hung is an Associate Professor at the Department of Social Science, the Hang Seng University of Hong Kong. Her research interests include contentious politics, cross-border exchanges, shadow economy, state-society relations, and China studies. She has published articles in the Journal of Contemporary Asia, Modern China, Communist and Post-Communist Studies, and Social Indicators Research.

2

Fragmented sovereignty and unregulated flows The Bangladesh-China-India-Myanmar corridor Willem van Schendel

Abstract The concept of the Silk Road has recently been repackaged as a China-led inter-state enterprise that will lead to ‘a win-win attempt for all’. This technocratic utopia of superior infrastructure, smooth transport routes, and boosted trade should be challenged, because it ignores the countless flows and networks across Eurasia that states fail to control. The zone connecting China to India across Myanmar and Bangladesh exemplifies the obstacles that the broader scheme is generally likely to face: distrust, implementation deficits, fragmented sovereignty, sensitive spaces, and unregulated cross-border flows. In this chapter, it is argued that the plan, far from offering benign progress for all, will damage many livelihoods and lead to adverse political, environmental, and security outcomes. Keywords: One Belt One Road, Belt and Road Initiative, BCIM corridor, aspiring sovereigns, social connectivity, India-China corridor

Introduction Policymakers across Asia have become extremely excited about a novel initiative, OBOR (One Belt One Road). Launched by the People’s Republic of China in 2013, the plan is also known as BRI (Belt and Road Initiative), or the New Silk Road.1 It promotes economic integration between China and the 1 In 2015, China officially abandoned the expression ‘One Belt One Road’ (OBOR) in favour of ‘Belt and Road Initiative’ (BRI), but the older, more distinct acronym is in wide circulation. Other

Hung, Eva P.W., and Tak-Wing Ngo (eds), Shadow Exchanges along the New Silk Roads. Amsterdam, Amsterdam University Press 2020 doi: 10.5117/9789462988934_ch02

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rest of Eurasia through investments in infrastructure, increased trade, and cultural exchange (Ngo and Hung, this volume). Playing on the ancient and nostalgic notion of the Silk Road, its publicity is full of romantic images of camel trains crossing deserts and ancient trade vessels braving the high seas (for example, Arif, 2013; China Economic Net, 2015; Gateway to Guangdong, 2015; Mao, 2015; Cheung and Lee, 2017; Silk Road Fund, 2017). The OBOR initiative signifies benign overland connectivity between China, Central Asia, West Asia, and Europe (the Silk Road Economic Belt) and maritime connectivity between China, Southeast Asia, South Asia, Northeast Africa, and Europe (the Maritime Silk Road).2 At first sight, this may appear to be simply a 21st-century repackaging of ancient trade routes – now without caravans and junks but with railroads, highways, oil and gas pipelines, state-of-the-art seaports, giant container ships, and an ‘e-Silk Road’ (Silk Road Chamber of International Commerce, 2017). These linkages are certainly not new, as evidenced by bronze-age crop dispersals, European-style textiles found with age-old mummies in the Tarim Basin, Himalayan aromatic oils in ancient Egypt, the early spread of Buddhism and Islam in China, Chinese silks in Rome, Roman glass in East Asia, and a first-century CE Greek manuscript describing the Asian coasts up to Burma (The Periplus, 1912; Mallory and Mair, 2000; Sen, 2011; Yang, 2012; Stevens et al., 2016). Trade, people, and ideas flowed across the Eurasian expanse in many directions long before 1877, when a German traveller and geographer coined the term ‘Silk Road’ to describe the network of trade routes across inner Asia (Richthofen, 1877: map facing 500; Chin, 2013). However, the present revival of the term conjures up a specific perception. In the past, the recurrent blossoming of empires facilitated Eurasian trade, but the dynamics of this trade were largely independent of state control and fluctuated greatly over time. In the current era, in which the construction of true empires is difficult, the idea of the Silk Road has been re-conceptualized as an inter-state enterprise led by China, which can provide essential investment and coordination. The investment is mainly channelled through China’s state-owned Silk Road Fund and the Asian Infrastructure Investment Bank, initiated by China and coordinated by the ‘Leading Group for Advancing the Development of One Belt One Road’, which reports directly to the State Council of the People’s Republic of China. The terms are the ‘Belt and Road’ and the ‘Silk Road Economic Belt and the 21st century Maritime Silk Road’ (Bērziņa-Čerenkova, 2016). 2 In 2017, China expanded its vision of the maritime Silk Road to include the Arctic and Pacific Oceans (State Council, 2017; Singh, 2017).

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buzz among Asian policymakers has much to do with their attempts to assess how these investments may further, or indeed harm, their own geopolitical and strategic interests. Is this a novel form of empire-by-infrastructure? Will the gains of OBOR be distributed equally? Who will be excluded? Who stands to win the most? Unlike their historical precursors, the new silk roads envisaged under the OBOR scheme are conceived as state-driven, state-organized, and state-controlled – the central idea is that states will be forging both ‘a new Eurasian land bridge’ and ‘smooth, secure and efficient transport routes that connect major sea ports’ (Maritime Silk Road Society, 2017). OBOR offers a politically and culturally sanitized venture across a well-ordered space, in which engineering feats and harmonious economic planning will lead to a ‘win-win attempt for all’.3 However, it is unlikely that this vision of idealized exchange will ever fully become a reality (Chin, 2013: 194). Its technocratic approach, state-centred conception, and dependence on China’s economic agenda and investments can certainly be viewed as frailties. China’s investments in infrastructure abroad are widely perceived as intended to secure the necessary resources and markets for the country’s continued industrial expansion. Geopolitical engineering is notoriously vulnerable to the vicissitudes of political discord, the vagaries of cultural divergence, and the agency of non-state actors – and the vast Eurasian region has a solid reputation for all of these. Political instability, divergent interests, and economic rivalry cast doubt on the likelihood that the dozens of states that China wants to be involved will ever reach an enduring agreement on how commodities and people are to flow smoothly through the corridors that make up OBOR. 4 3 ‘For the countries along “Belt and Road”, the foundation of cooperation is based on five major principles aimed at promoting: (1) Policy coordination; (2) Facilities connectivity; (3) Unimpeded trade; (4) Financial integration; and (5) Sharing of ideas among the peoples. The “Belt and Road” is a new strategic approach to attain international cooperation raised by China. The initiative can help different countries integrate more efficiently into regional economy leading to global economic prosperity and world peace. It is hoped that the “Belt and Road” will be a win-win attempt for all’ (Maritime Silk Road Society, 2017; see also State Council, 2015). 4 There are seven corridors: 1) the New Eurasian Land Bridge (running from western China through Kazakhstan and western Russia to Western Europe); 2) the China-West Asia Corridor (from western China via Central Asia to Turkey); 3) the China-Mongolia-Russia Corridor (from northern China to eastern Russia); 4) the China-Indochina Peninsula Corridor (from southern China to Singapore); 5) Bangladesh-China-India-Myanmar (BCIM) Corridor (from southern China to the Bay of Bengal); 6) the China-Pakistan Corridor (western China to the Arabian Sea); and 7) the Maritime Silk Road (from the Chinese coast via Singapore and the Indian Ocean to the Mediterranean).

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Beyond the behaviour of individual states, there are further reasons to question the viability of the OBOR vision. This chapter focuses on one: the inability of states – 21st-century or otherwise – to make good on their claim that they can control territories and manage flows of goods and people.

States and unregulated practices Modern nation states are organizations that assert sovereignty over a demarcated territory and a national population. State elites seek to reinforce their power by collecting detailed information about people and resources, and their technological ability to do so has grown immensely. Thus, we live in a world in which the state perspective (‘seeing like a state’) (Scott, 1998) is omnipresent and in which augmented state management of entire populations (‘biopower’) (Foucault, 2003, 2007) is taken for granted. However, this does not mean that we live in a ‘Big Brother’ world completely controlled by those in charge of the 200-odd states on the planet, or even by those in charge of the most powerful of these states. Much of the everyday world remains unregulated by states, and there are several reasons for this. First, technologies of surveillance and recording are neither perfect, nor fool-proof. Second, using and maintaining these technologies can be prohibitively expensive. Third, contemporary states cope with a huge information overload, which is increasingly diff icult to interpret and monitor. Fourth, states intentionally refrain from widespread surveillance, even if they give the impression that their control is comprehensive.5 Fifth, groups of state agents may engage in benef icial private activities that they shield from wider state scrutiny, creating further legibility deficits. In short, states see less – and their knowledge is less precise – than they pretend. State-centred projects on the scale of OBOR, in which states with very unequal surveillance capacities and willingness to share information co-operate, are bound to suffer from major legibility deficits. Their activities resemble other multi-state programmes such as the ‘War on Drugs’ and the ‘War on Terror’. 5 ‘States are not simply in pursuit of enhanced “legibility”; at times they also need to be able to “look away.” In explaining strategies of non-recording, our focus is on how subjects negotiate with state recording agencies, how non-recording relieves state agents from the burden of accountability, how the discretionary power of individual state agents affects (non-)recording in unanticipated ways, and how states may project an illusion of vigorous recording internationally while actually engaging in deliberate non-recording’ (Kalir and Van Schendel, 2017: 1).

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Shadow economy or unregulated practices? The world beyond state visibility is not apparent in data on national economies or the world economy, so policies based on such data will certainly be off target. The questions that arise are as follows: How far will they be off target? How much of economic life is obscured by ‘seeing like a state’? Guesstimates abound, but they are hard to verify or compare. The first issue is semantic. How can economic practices that are beyond the reach of states be described? Currently popular terms such as ‘shadow economy’, ‘underground economy’, ‘hidden economy’, ‘non-recorded economy’, and ‘black economy’(Gylys, 2005; Startienė and Trimonis, 2010; Jie et al., 2011; Ngo and Hung, this volume) are problematic because they all start from the state discourse, thereby ‘othering’ and censuring practices that are to those involved in them anything but shadowy or hidden. Their state-centred origin is evident in the discursive scaffolding: the ‘shadow economy’ is defined as a sector that does not contribute to state tax revenue and is penalized by state law. However, legal and illegal, and formal and informal, practices are intertwined in complex and fluid ways, and many people take part in both. Suggesting that there are two separate economies, one formal/legal and the other informal/illegal, is clearly misleading.6 Thus, focusing instead on economic practices, some of them regulated and state-endorsed and others not, appears more realistic than referring to separate economies or economic domains. Those that are unregulated often operate below the radar of the state and are routinely disregarded in official statistics and economic models, but they constantly interact with practices that states do detect and record. A second issue is how these unrecorded economic practices are defined and assessed (Schneider and Buehn, 2016). A recent study of European Union countries includes ‘legal business activities that are performed outside the reach of government authorities’ (such as undeclared work and underreported business income), but surprisingly excludes illegal activities. Even so, it concludes that almost a fifth of the economy of the European Union is invisible (Schneider, 2013). This restricted notion of the ‘shadow economy’ 6 ‘The current fascination with grandiose plans such as the New Silk Road conceals the intricate networks that already do exist and that successfully connect different parts of Europe and Asia to one another. These Actually Existing Silk Roads should not be treated as informal and illegal and thereby inevitably a security threat or a risk. They are better thought of as monuments to the creative activity of people who have been poorly served by the nation-state and the international system over the past decades. It is in this context that they have built their own infrastructures, both for life and for commerce’ (Marsden, 2017: 30; see also Heyman, 1999).

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is widely used but wholly inadequate in covering all unrecorded economic activities.7 When illegal activities are included in such calculations, the guesstimates rise considerably (sometimes to an unconvincingly high level) (Abraham and Van Schendel, 2005: 1-4). Burma/Myanmar, for example, has long been perceived as an example of an economy in which both state and non-state agents engage in the illegal trade of drugs, people, cash, timber, fish, and precious stones, and thus over half the economy is invisible (Kar and Spanjers, 2015: 27). A recent study of jade mining in Myanmar concluded that in this industry alone, ‘networks of military elites, drug lords and crony companies associated with the darkest days of junta rule’ controlled ‘an industry far bigger than previously thought, worth up to US$31 billion in 2014 alone. That would make the jade industry’s value equivalent to nearly half the GDP for the whole of Myanmar, but hardly any of the money is reaching ordinary people or state coffers’ (Global Witness, 2015).8 If quantifying unregulated economic practices in a single country is such an uphill task, attempting to do so across the territories included in the OBOR plan would be positively Sisyphean. However, even without exact data, it is evident that the combined effects of unauthorized trade and migration, corruption, tax evasion, irregular financial flows, off-the-record work, and deliberate non-recording are quite considerable – and policymakers and social scientists ignore them at their peril.

A closer look: Linking Yunnan to the Indian Ocean China’s conceptual mapping of Eurasia evokes not only an overland and a maritime Silk Road. It consists of seven ‘economic corridors’, four of which are links between overland and maritime routes.9 In this chapter, we explore the corridor running west from Yunnan (China) via Myanmar to the Indian 7 In another publication, Schneider et al. rejected a broader definition of shadow economy as ‘all currently unregistered economic activities that contribute to the officially calculated (or observed) Gross National Product’. Instead, but without explanation, they opted for restricting the concept to legal activities: ‘the shadow economy includes all market-based legal production of goods and services that are deliberately concealed from public authorities to avoid payment of income, value added or other taxes; to avoid payment of social security contributions; having to meet certain legal labour market standards, such as minimum wages, maximum working hours, safety standards, etc.; and complying with certain administrative procedures, such as completing statistical questionnaires or administrative forms’ (Schneider et al., 2010: 444). 8 For a more general treatment of extra-legal networks and unregulated practices, see Nordstrom (2004, especially Part Three; 2007). 9 See note 4.

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Ocean in Bengal (Bangladesh/India).10 Also known by the state-sanctioned acronym BCIM (Bangladesh-China-India-Myanmar Economic Corridor), this region epitomizes some of the on-the-ground realities that make lofty designs such as OBOR so difficult to implement. The corridor is hardly a new discovery – in fact, it had developed into a critical contact zone in global history long before any silk road came about. The first humans are thought to have reached this region from the west, possibly more than 40,000 years ago and, according to population geneticists, the corridor may have acted as the main thoroughfare for the peopling of eastern Asia and the Americas. Countless successive waves of migration – both from west to east and from east to west – are thought to have shaped the complex genetic makeup of its current population (Boivin et al., 2013: 41-42; Gazi et al., 2013; Manning, 2015; Zhang et al., 2015; Van Driem, 2016; Hazarika, 2017). This corridor may also have been where humans first domesticated rice (Van Driem, 2017). It is a web of truly ancient trade routes through which numerous goods and ideas have travelled for many millennia (Ray, 2003; Hazarika, 2016: 44-53, 2017). Agricultural crops (rice, millet, and wheat) and crop technologies are one example (Stevens et al., 2016). Another is the kauri (cowrie) shell, found off the Maldives Islands, shipped to Bengal, and transported inland by river and mountain trails to reach Yunnan and as far north as the Yellow River, where for centuries it was used as currency (Yang, 2012; Cederlöf, 2017). Conversely, silver from mines in Yunnan and north-eastern Myanmar found its way to Bengal, where the monetary system was based on both silver currency and kauris (Deyell, 2010: 89-90). Bengal has long been a pivot point between the vast maritime trade network in the Indian Ocean and overland trade in landlocked regions of Asia (Manning, 2015; Van Schendel, 2015; Berthet, this volume). The emergence of modern states and more secured borders between wary neighbours, however, progressively outlawed trade and human mobility across this corridor.11 The second half of the 20th century saw the culmination of this process, with the states of India, Bangladesh (before 1971 East Pakistan), China, and Burma/Myanmar almost completely banning trade across their borders 10 Another proposed overland corridor between the two Silk Roads runs from Yunnan to Singapore. A third corridor, the China-Pakistan Economic Corridor (CPEC), runs from Western Tibet through Kashmir and Pakistan to the Arabian Sea. 11 As Smyer Yü puts it, ‘borders, borderlands, territories, and sovereignties in the pre-modern world of the Himalayas were networked as a web of interconnected feudal states, kingdoms, and smaller-scale societies … The modern states’ reshaping, reterritorializing, and geostrategizing of the Himalayas have segregated themselves, along with the nodes of this network, behind their borderlines’ (2017: 4).

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(Van Schendel, 2015). By the late 20th century, these states had made the corridor a more ‘lumpy’ space than it had ever been before, with economic and social relations dense in certain places but diffuse in others.12 However, cross-border trade and mobility did not cease; these activities were driven underground and their composition changed. In other words, these states pursued disconnection but were unable to prevent connections continuing across their borders (Van Schendel, 2005a). The historical pathways embedded in the landscape turned out to be too resilient.13 These pathways, as Marsden (2017) refers to them, were the ‘actually existing Silk Roads’, which the OBOR initiative fails to acknowledge.14 It was not until the 1990s that the states administering the corridor began to unclench their fists. The ‘Kunming Initiative’ was born and Bangladesh, China, India, and Myanmar (BCIM) opened talks on easing cross-border mobility. Later renamed the ‘BCIM Forum for Regional Cooperation’, this effort ‘aims to restore the historical arteries of overland connectivity that once linked India’s eastern seaboard and Northeastern states with China’s Southwestern province of Yunnan, through present-day Bangladesh and northern Myanmar’ (Uberoi, 2016a: 74). The Kunming Initiative is of interest because it encompasses many of the obstacles that OBOR as a whole is likely to face, such as distrust, implementation deficits, fragmented sovereignty, and unmonitored flows of goods and people.

Distrust For decades, relations between the four states of China, India, Bangladesh, and Myanmar have fluctuated between unease and hostility. The state elites 12 ‘The world has long been – and still is – a space where economic and political relations are very uneven; it is filled with lumps, places where power coalesces surrounded by those where it does not, places where social relations become dense amid others that are diffuse. Structures and networks penetrate certain places and do certain things with great intensity, but their effects tail off elsewhere […] The movement of people, as well as capital, reveals the lumpiness of cross-border connections, not a pattern of steadily increasing integration’ (Cooper, 2005: 91-92, 95). 13 Saxer uses the term ‘pathways’ to describe ‘a conf iguration that is at once geographical and social. A pathway is thus not just another word for trade route […] Life along a pathway is shaped by things, stories, rumors, and people passing through – by motion, or by flows, if you will. However, a pathway is neither just another word for flow. While shaped by motion, pathways are also conditioned by terrain, infrastructure and environmental factors like climate and weather’ (Saxer, 2016: 105). 14 Marsden (2017) uses this term to analyse patterns of trade and exchange between China, Eurasia, and the Middle East.

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of China and India are strategic rivals (India fears Chinese ‘encirclement’ and has developed its own plans for inter-state Asian cooperation)15 and they have long-standing disagreements over vast disputed territories.16 India is extremely reticent about committing to OBOR in any way, and it does not see the BCIM corridor as a component of OBOR, merely as closely related to it (Uberoi, 2016b: 30; Hu, 2017; Iyer, 2017; also cf. Mishra, 2017). There is a more direct, far shorter route from China to the Indian Ocean – via Lhasa and the Nathu La border pass to Kolkata – but fear of Chinese influence in Sikkim and Bhutan, and Indian influence in Tibet, makes this too politically sensitive. The construction of railways and roads in this region has led to military stand-offs and India will still not countenance any Chinese presence on its soil.17 Transport is a sensitive issue in other situations, too. For example, Bangladesh state elites have long prevented India from using its roads, railways, rivers, and seaports, for fear of domination by their giant neighbour. Competition for resources, such as water, also leads to inter-state distrust. Downstream states fear the diversion of rivers and the construction of dams 15 See also Ngo and Hung, this volume. India worries about China’s ‘strategic encirclement’ by means of the BCIM corridor, the China-Pakistan corridor (which runs through Kashmir, claimed by India), and Chinese stakes in Indian Ocean ports in Myanmar (Kyaukpu), Bangladesh (Chittagong, Mongla), Sri Lanka (Colombo, Hambantota), and Pakistan (Gwadar, Karachi). India’s own plans for inter-state Asian cooperation have included the South Asian Association for Regional Cooperation (SAARC) in 1985; its ‘Look East’ (and later: ‘Act East’) Policy in 1991; the ‘Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation’ (BIMSTEC), involving Bangladesh, India, Myanmar, Sri Lanka, Thailand, Bhutan, and Nepal, in 1997; and ‘Project Mausam’ in 2014. India also competes with China in Central Asia by means of connectivity programmes such as the trade and transit corridor linking India, Afghanistan, and the port of Chabahar in Iran; and the ‘International North-South Transit Corridor’, in which India, Russia, Iran, Turkey, and the Central Asian republics participate. Additionally, India seeks admission to the Ashgabat Agreement between the Central Asian republics, Pakistan, Iran, and Oman (Bilal, 2017; Shepard, 2017). 16 Notably, Arunachal Pradesh/South Tibet and Aksai Chin – together half the size of the United Kingdom – and many smaller border regions. 17 Since 2006, a railway has connected Lhasa to OBOR’s main overland arteries, and there are plans to extend this railway to the Indian border at Yadong by 2020. In 2006, India and China agreed gingerly to open the border pass for a limited number of goods. There are no railways in Sikkim, on the Indian side of the border. Cross-border connectivity is always brittle, as demonstrated in mid-2017 when trade was stopped when China and India became embroiled in a diplomatic wrangle and a military stand-off over China’s attempt to build a road to Yadong across the Doklam (Donglang) plateau, which is disputed by Bhutan and China. As Bhutan’s guarantor in international affairs, India demanded the withdrawal of Chinese road builders and troops, and the ensuing media war of words whipped up nationalist emotions (see, for example, Gupta, 2017; Ministry of Foreign Affairs, 2017; Safi, 2017; Yang, 2017).

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upstream: India, for example, is apprehensive about Chinese dams, and Indian dam construction alarms Bangladesh (Mishra, 2010; Adel, 2012; Sinha, 2012; Christopher, 2013; Islam and Islam, 2016). China and India are vying for control of Myanmar’s resources and markets, with China currently gaining the upper hand, particularly after laying gas and oil pipelines running from China to the Myanmar coast, which give Chinese consumers access to the Shwe gas field in the Bay of Bengal and, crucially, make it possible for China to import oil and gas from the Gulf without having to pass through the Strait of Malacca and around Singapore. Finally, distrust can also take a discursive form. Both India’s and Myanmar’s leaders perpetuate ominous narratives warning of unauthorized immigration from Bangladesh and the ‘Islamic threats’ resulting from this mobility. These four countries are nervous neighbours embroiled in discourses of territoriality, and consequently the objectives of the state continue to overrule those of overland connectivity, cooperation, and economic integration.18 Distrust such as this threatens to affect the entire OBOR initiative.

Implementation deficits Despite high-minded policy pronouncements about corridors and gateways, implementing decisions concerning the BCIM corridor has proven to be difficult (Rana and Uberoi, 2012; Uberoi, 2016b). Reviving the road connection between north-eastern India and south-western China, severed after World War II, is a case in point. Plans to re-establish this as part of ‘Asian Highway 1’ – a 20,000 km road projected to link Tokyo to Istanbul – were formulated over 50 years ago and widely publicized, but no progress was made, and when it was again assessed in the late 2010s the problems of creating this international artery appeared insurmountable.19 This is not 18 According to former Indian Foreign Secretary Kanwal Sibal, ‘China is trying to rope India into its connectivity strategies through proposals such as the Bangladesh-China-India-Myanmar (BCIM) corridor linking Yunnan with our north-east. India has been promoting east-west connectivities through Myanmar, Thailand and on to Vietnam to balance China’s north-south connectivities to South-East Asia. We have had concerns about Chinese inroads into Myanmar. The BCIM corridor project counters our strategy and yet we are supporting it’ (quoted in Uberoi, 2016b: 30). 19 The Trans-Asian Highway was initiated in 1959 and rekindled by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in 1992. In 2003, ESCAP brokered an Intergovernmental Agreement on the Asian Highway Network that came into force in 2005. In 2009 the Indian government abandoned its plans for the Asian Highway (much to the chagrin of local politicians in Northeast India). Bilateral agreements were also explored, for example

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Figure 2.1 A section of Asian Highway 1

Note: Despite a sign proudly declaring this road near the India-Myanmar border to be a section of Asian Highway 1, it carries only light local traffic. The road roller behind the sign is used to flatten gravel into the largest holes. All photographs in this chapter © the author

just a question of engineering, and of upgrading local roads to highways (see Figure 2.1), but also of overcoming security paranoia and enabling planning regulations. None of the four states have agreed to relax constraints on cross-border mobility to any great extent, through for example opening up more border crossings or making them more efficient; waiving visa and permit restrictions; allowing foreign vehicles to freely travel through their territories;20 or by easing customs controls in the corridor. Amazingly, these international borders, which are hundreds of kilometres in length, are only controlled by single checkpoints, which are the only locations where goods and people are legally allowed to cross.21 India has in recent years between China and Bangladesh to construct a highway linking Kunming with Chittagong, but nothing came of it (Bhaumik, 2011; Pakistan Defence, 2012; Haokip, 2015). 20 India and Bangladesh are edging towards allowing vehicles into each other’s territories. In 2015 they signed a Motor Vehicles Agreement with Nepal and Bhutan to this effect, but it has not yet been implemented (see Nepal Foreign Affairs, 2015). 21 On the China/Myanmar border, the check-post is Ruili-Jiegao/Muse; on the Myanmar/ India border Tamu/Moreh; and on the India/Bangladesh border Dawki/Tamabil. There are a

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sought to further deter cross-border mobility by fencing its borders with Bangladesh and Myanmar. Thus, the many years of official talks and planning have not by any means resulted in smooth, secure, and efficient transport routes, and territorial anxieties appear not to have lessened along the corridor. Uberoi (2016b: 37) reminds us: [A]s everyone knows, South Asia is deemed to be the least integrated region on the planet. Though matters are no doubt improving, overland, waterway and maritime connectivity infrastructure and trade facilitation regimes with near neighbours – Myanmar, Bhutan, Bangladesh, Nepal, Pakistan, Afghanistan, Sri Lanka, some of them among the world’s poorest countries – remain woefully inadequate. […] Let alone grand corridors, even ‘mini-corridors’ serving the local needs of the ‘borderlanders’ and providing the building blocks for more ambitious connectivity projects are still a far cry.22

The few border checkpoints have become sites of state performativity, showcasing friendly cooperation between states that are in fact deeply distrustful of each other (Figure 2.2). Typically, agreements are not followed up or implemented, and those that have been are often reneged upon. For example, in 2010, the Bangladeshi and Chinese governments signed a plan for a major Chinese-financed deep-sea port at Sonadia near Chittagong, Bangladesh’s prime port city. In 2016, Bangladesh suddenly pulled out, reportedly following ‘intense political pressure from India and the United States, both of whom are concerned over China’s growing influence in the Indian Ocean region’ (Mooney, 2016). Japan was also competing with China to establish a deep-sea port in Bangladesh (Mooney, 2016; The Asian Age, 2017; Chaudhury, 2017; Berthet, this volume). Another example is the Bangladesh-Bhutan-India-Nepal Motor Vehicles Agreement, which was signed in 2015 but remained unimplemented, and in 2017 Bhutan decided against ratifying it (Kumar, 2017; Mitra, 2017). few more check-posts where local borderlanders are allowed to cross on a day-pass, but even these are few and far between – for example, the 1600 km border between Myanmar and India boasts only one other check-post, at Khawmawi (Rih)/Zokhawthar. There is not a single official crossing on the Myanmar/Bangladesh border. 22 Integration is usually expressed in terms of legal trade and investment. According to much-quoted World Bank figures, only five per cent of South Asia’s trade is within the region, compared with 35 per cent in East Asia and 25 per cent in Southeast Asia (see also Chaturvedi, Hussain, and Nag, 2017).

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Figure 2.2 The ‘Indo Myanmar Friendship Gate’ marks the border crossing between Moreh (India) and Tamu (Myanmar)

Such unpredictability is likely to trouble the OBOR initiative more generally. The mutual suspicion of state elites is, however, only one obstacle to its implementation and connectivity. Another is the internal turmoil caused by fragmented sovereignty.

Fragmented sovereignty23 Overland connectivity between China and the Indian Ocean depends on four sovereign states aligning their policies to guarantee the smooth movement of people and goods across their territories. However, this region has a long history 23 I take this term from Tilly (1992: 21): ‘In systems of fragmented sovereignty, temporary coalitions and consultative institutions played signif icant parts in war and extraction, but little durable state apparatus emerged on a national scale’. See also Lund (2011: 887): ‘When an institutional actor is able to define and enforce collectively binding decisions on members of society, it has state quality, or sovereignty. […] By referring to such sovereignty as fragmented we should not think of a once coherent whole, which is subsequently pluralized and fragmented. Rather, we are dealing with a range of competing institutions, endowed with different resources, which engage in the co-production of property and political subjects. This production is not the

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of contested state formation, multiple claimants to power, and fragmented sovereignty, which is likely to continue (Cederlöf, 2014). Three countries are currently far from realizing the ideal of stable territorial control, legitimate authority, and adequately regulated transport routes.24 Exerting centralized rule over their respective sections of the corridor has evaded them, because multiple, shifting cores of local power have challenged their territory. Much of the Myanmar section – notably in the Shan, Kachin, and Rakhine states – continues to be the scene of recurrent fighting between government troops and numerous rebel armies (Kyed and Gravers, 2015). Government forces only control specific positions, and substantial areas are beyond their reach. China’s recent offer as a peacemaker between armed rebel groups and the Myanmar government, and the subsequent approval of the OBOR initiative by an alliance of rebel groups in Myanmar, were not unconnected events.25 Similarly, almost the entire Indian section of the corridor is a contested, internally fragmented, and unruly area.26 For example, the only official entry point from Myanmar into India is at Moreh in the state of Manipur, where variously aligned militants regularly clash with Indian security forces, and where Indian territoriality is constantly challenged. Travelling from Moreh to Imphal, the state capital, on Asian Highway 1 means traversing multiple armed checkpoints (Figure 2.3), and the militarized capital Imphal has itself experienced overlapping, contingent, and shifting forms of sovereignty (McDuie-Ra, 2016). Insurgents also fight for territorial power in the Bangladesh state, notably in the southeast of the country (Van Schendel, 2016; 2009) (the current rulers of Bangladesh are in fact the heirs and beneficiaries of a successful regional insurgency) and its grip on cross-border flows of people and commodities purview of a single institutional actor; competing institutional actors engage in it and the ability to define and enforce property rights and political subjectivities is fragmented among them’. 24 Iyer (2017: 21) terms this ‘the lack of regional cohesion and the inherent instability in the sub-region’. 25 ‘China’s One Belt One Road (OBOR) policy is peaceful equal development of all neighboring countries. This policy is necessary for Burma’s economic development and security and as well benefits the arbitrator […] It is believed that China’s OBOR policy could successfully be implemented within Burma and beneficial for ethnic areas […] The ethnic armed resistance organizations agreed that security of the foreign investments will be guaranteed’ (Shan News, 2017; see also International Crisis Group, 2017; Phyo, 2017). China also offered its services as a negotiator between Myanmar and Bangladesh over their diplomatic deadlock concerning Rohingya refugees from Myanmar in Bangladesh (see Gao, 2017; The Irrawaddy, 2017). 26 Apart from movements challenging state sovereignty from without, the states themselves have variegated their sovereignty internally by implementing local legal regimes in different parts of the corridor. For example, Indian civil law is not applied in most of northeastern India, where a mosaic of four separate regional institutional arrangements applies. These arrangements deal with special protections of land and forestry rights (see Van Schendel, 2017; Scanlan, 2018: 39).

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Figure 2.3 Indian forces patrolling Asian Highway 1 in an armoured vehicle, Manipur (India), 2012

is weak (Van Schendel, 2005a). To complicate matters further, both sides accuse each other of harbouring and training rebels from across the border in attempts to undermine the other’s sovereignty. In short, the four internationally recognized states are not the only sovereigns of the corridor. It is the domain of many other state-like entities with territorial designs, economic policies, and border practices varying in intensity, scope, and duration. The corridor is a turbulent, unpredictable, contentious, lumpy, and fearsome route. As a concatenation of sensitive spaces, in Cons’s words, it can ‘embody the very uncertainties of territorial coherence and national survival’. Such spaces result from and also generate intense territorial concerns (2016: 20-21). The rulers of the four designated ‘corridor states’ cannot claim that they control uniform, contiguous territories, or that they can safeguard ‘smooth, secure and efficient transport routes that connect major sea ports’ (Maritime Silk Road Society, 2017) – a core requirement of the OBOR initiative. They lack both the soft and the hard power to succeed in their territorial strategy of exerting sustained control over people and resources throughout the regions they lay claim to. They must therefore admit that their regulations and control mechanisms have little influence over large stretches of the corridor within their borders.

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Brisk flows of goods and people The Kunming Initiative (renamed the BCIM Economic Corridor) is a connectivity project with a characteristically top-down approach. Its lack of progress is directly related to issues at the apex of the states involved: mutual distrust among policy elites and fragmented sovereignty. The cordial official discourse does not translate into effective implementation, and gradually it has reduced the corridor – notionally a tract of land identified by webs of heightened connectivity – to merely a projected but stalled highway and two oil and gas pipelines that already exist.27 Policymakers have not ignored the corridor, but it has become a veritable graveyard of top-down connectivity plans. Among the more ambitious over the last half-century are the Trans-Asian Highway (initiated in 1959), the Trans-Asian Railway (1960),28 India’s Look East/Act East Policy (1991), and the Kunming Initiative (1999). In addition, many other local initiatives were never realized. Despite all of this planning, the corridor remains a zone that suffers from poorly developed, inadequately maintained, and disjointed infrastructure. However, this does not mean that connectivity is blocked. Despite state obstructions, inferior infrastructure, and the absence of authorized border crossings, the BCIM corridor has remained a briskly functioning network of transport routes and pathways, crisscrossing borders that are officially impermeable. Some of the flows along these routes are bilaterally authorized, but most operate completely beneath the radar of the states. Other flows fall between these two extremes. For example, some local state agents contravene orders from above and allow these flows – for private profit or because they misinterpret the orders (Karrar and Khare, both this volume) – or non-state sovereigns promote and facilitate them. Thus, legibility is graduated: some flows escape notice and others are visible only at certain points and to certain observers. 27 The Myanmar sections of the oil and gas pipelines linking Yunnan to the Myanmar coast in Rakhine State became operative in 2014. 28 The idea of a trans-Asian railway dates back to 1960. It has been promoted by ESCAP, especially since the 1990s. The plan envisions a state-of-the-art rail connection between Kunming (China) and Kolkata (India), via Mandalay (Myanmar) and Dhaka (Bangladesh). Although construction is taking place on some sectors, there are still many bottlenecks and missing links (ESCAP, 2015, 2017). Such ideas are not new: for example, British colonial administrators debated a rail link between India and China as long ago as the 1860s, but decided against it because the security of the line could not be guaranteed.

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Figure 2.4 Crossing the China-Myanmar border through a gap in the border fence, Yunnan (China), 2010

Tens of thousands of people – labour contractors, migrants, day labourers, traders, refugees, insurgents, marriage partners, patients, monks, shoppers, and schoolchildren – use various unauthorized cross-border routes in search of livelihoods, services, profit, or safety (Figure 2.4). Chinese gamblers visit casinos in Myanmar, Indian recruiters source cheap labour from Bangladesh, Chins from Myanmar find work in Mizoram (India), Rohingyas from Myanmar flee to Bangladesh, Khasi children from Bangladesh go to school in Meghalaya (India), Buddhist monks from Bangladesh visit Myanmar, Myanmar artisans decorate pagodas in Bangladesh, and war-displaced people from Kokang (Myanmar) end up in Chinese refugee camps. In addition to people, various commodities pass through the corridor. Fresh fish and Buddhist paraphernalia travel from Myanmar to Bangladesh; Indian cattle find their way to Bangladesh (Sur, 2012); insurgents in India buy small arms in Bangladesh; opiates from Myanmar are consumed in China and India; Chinese quilts find a market in India (Figure 2.5); and jade from Myanmar is sold to Chinese consumers (Figure 2.6). Despite the anxious territoriality and formally blocked borders, the corridor is alive with movement and dynamism, and ‘things, stories, rumours, and people [pass] through […] conditioned by terrain, infrastructure and environmental factors like climate and weather’ (Saxer, 2016: 105).

54 Willem van Schendel Figure 2.5 Chinese quilts and other commodities piled on top of a four-wheel drive on their way to market in India, 2012

Figure 2.6 Jade mined in Myanmar offered for sale in a Yunnan (China) border town, 2010

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Winners and losers References to a ‘win-win’ outcome proliferate in the international commentary on the OBOR plan. Chinese sources assert that the plan will be achieved by means of ‘mutual consultation, mutual construction and mutual benefit’, and that it will bring prosperity to all through win-win cooperation and synergy (China Daily, 2016a, 2016b; Garlick, 2016; Maritime Silk Road Society, 2017). Some foreign dignitaries concur with this (Bhattarai, 2016; Foong, 2016; Guo, 2016), but other observers are more cautious. For example: While [Chinese President] Xi [Jinping] promises win-win situations, the biggest winner would be China. This is because Beijing is at once the project’s architect, financer and builder. The suspicion towards OBOR is also fuelled by China’s increasingly aggressive foreign policy [by which] the Chinese leadership risks losing the very thing it most needs from neighbouring countries to make OBOR become a reality: trust (Rudolf, 2016: 59).

This quotation is typical of most discussions of OBOR and its components: it revolves around the geopolitical issue of which countries may turn out to be winners or losers. The OBOR initiative clearly relies on the endorsements of national elites and hence states emerge as protagonists in discussions of its pros and cons. However, if we shift our perspective from states to transnational flows, networks, and pathways, a very different set of winners and losers comes into view. It is these networks, rather than states, that provide actual knowledge of how to connect Eurasia: Why sell the dream of a ‘New Silk Road’ when a multiplicity of silk – or perhaps more aptly nylon – roads already exist? Why impose a utopian vision of a connected world on people who are already familiar in sophisticated and intimate ways with the dynamics of a complex region? Why are communities that obviously have so much to offer into understanding the role played by trade in connecting Asia and Europe absent from the discourse of the New Silk Road? If the answer is because this category of actor is simplistically thought of as being either drug smugglers or people traffickers then the time has come to think again (Marsden, 2017: 23).

An ethnographic understanding is therefore of utmost importance in offsetting the geopolitical bombast of ‘Silkroadism’ (Alff, 2016a: 331). Such ethnographic studies have recently emerged in the context of Central Asia

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– or in OBOR-speak: the New Eurasian Land Bridge – but not for the BCIM corridor (Alff, 2016b; Parham, 2016; Marsden, 2017). The various forms of organization in these unregulated networks that criss-cross the corridor are often hierarchical, and they take specific shapes such as ‘double-funnel’ or ‘capillary’ forms (Van Schendel, 2005b; cf. Nordstrom, 2004, 2007) when crossing international borders.29 They provide livelihoods to many, which will be affected by the OBOR interventions. Thus, the inhabitants may not feel more connected but rather subject to ‘deepening perceptions of peripherality’, which they may express through a ‘language of loss’ (Alff, 2016b: 383; Parham, 2016: 365).30 The most precarious participants are day labourers, who earn low wages by moving goods clandestinely across borders – the smugglers depicted in Figure 2.7 – or by transporting these goods after they have crossed the border – the cart-pushers in Figure 2.8. Petty itinerant traders, such as those in Figure 2.9, also eke out a living from the flows. Higher up the supply chains are small traders, who may profit modestly by circumventing customs checks when bringing goods from across the border (Figure 2.10); truck drivers (Figure 2.11); and cross-border shoppers looking for bargains to resell back home (Figure 2.12). Larger-scale entrepreneurs may own shops that cater to cross-border shoppers, and they dominate the middle echelons of the supply chains. The top positions in these chains are occupied by magnates and corporations that can orchestrate voluminous and profitable flows across the corridor (Figure 2.13). Attempts to promote OBOR-style state-sponsored connectivity in the corridor will profoundly affect all these individuals and their dependents. In this lumpy space the states will not be able to fully attain the vision of ‘smooth, secure, and efficient transport routes’, but their policy interventions will result in partly reorganizing supply chains and who controls them. The impact of the OBOR policy package will depend on the vigour, coherence, and perseverance with which it is pursued. However, even if the Asian Highway, Asian Railway, dry ports, integrated check posts, automated customs processes, e-logistics systems, pipelines, and maritime ports are only partially realized, their effects on the current flows and networks will be evident. There will certainly be some winners, but most of those involved 29 It is important to recognize that these networks spread well beyond the BCIM corridor. For example, there are important flows of trade and (labour) migration connecting the four states with Thailand and beyond, and Yunnan is not the only link between China and India. For trade connections between Tibet and India, see Harris (2013). 30 These terms are used to describe the experiences of inhabitants of the increasingly connected borderlands of Central Asia.

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Figure 2.7 Smugglers are poised to rush across a grassy patch at a sign from the other side that goods have arrived. The grass marks the border between India (left) and Bangladesh, 2002

Figure 2.8 Pushing a load, freshly arrived from Myanmar, deeper into Indian territory, 2012

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58 Willem van Schendel Figure 2.9 Long-distance peddlers from Myanmar on a road near the BangladeshIndia border, 2011

Figure 2.10 A Myanmar trader with merchandise in Manipur (India), 2012

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Figure 2.11 Truck drivers from Myanmar waiting for cargo in a border parking lot in Yunnan (China), 2010

Figure 2.12 Cross-border shoppers buying household goods in Yunnan (China), 2010; note the bilingual signs in Chinese and Burmese

60 Willem van Schendel Figure 2.13 Chinese timber truck leaving the Myanmar border, 2010

Note: Moving timber from Myanmar forests to Chinese customers requires large investments in personnel, equipment, quality control, and dealing with power holders.

are likely to suffer. The plans that follow may be much more wide-ranging, such as those for the China-Pakistan Economic Corridor (CPEC). These have sounded alarm bells in Pakistan because of their scope and reliance on enormous loans, which the country may never be able to redeem.31

Unintended consequences Unregulated flows and networks will not disappear as a result of new statesponsored connectivity. Many will prove to be resilient and adaptable, and simply take another shape, fostering new conf igurations of evasion and surveillance. New life strategies will emerge across the corridor, 31 The plans include the leasing of agricultural land in Pakistan to Chinese farm and livestock enterprises, Chinese involvement in mineral extraction and various other industries, the introduction of systems of 24/7 monitoring and surveillance in Pakistan’s cities, the development of coastal tourism, and a national fibre-optic grid, not only for Internet traffic, but also for TV broadcasts, ‘which will cooperate with Chinese media in the “dissemination of Chinese culture” […] The plan envisages a deep and broad-based penetration of most sectors of Pakistan’s economy as well as its society by Chinese enterprises and culture. Its scope has no precedent in Pakistan’s history in terms of how far it opens up the domestic economy to participation by foreign enterprises’ (Hussain, 2017).

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and there will be many unintended economic and political outcomes. Some, such as the escalation of existing domestic armed conflicts and the triggering of new struggles, can be predicted (Shwe Gas Movement, 2011; Ying, 2014: 4). The inhabitants of the corridor have much experience of state-sponsored transport route initiatives, and violent confrontations are often focused on these routes. Attempts to force the development of OBOR-type routes across the corridor are likely to become new rallying points, making returns on investments uncertain. The range of current protests is impressive. They have taken the form of street demonstrations (Shwe Gas Movement, 2011, 2013; Ying, 2014: 2, 4; Than, 2015), attacks on oil and gas pipelines (Upstream, 2006, 2016; Gronholt-Pedersen and Fernandez, 2013), long-term blockades of road traffic (The Hindu, 2017; The Statesman, 2017), highway skirmishes (Hindustan Times, 2017), assaults on long-distance trains (India Today, 2012), general strikes (Gulf Times, 2014; Kashyap, 2014; The Daily Star, 2016a, 2016b), and many more. Thus, connectivity is often unreliable and sudden shifts in the political landscape frequently result in traffic jams, trade losses, insecurity, shortages, and hardship. The OBOR initiative will inevitably become entangled in these pre-existing dynamics. Another unintended outcome is population mobility. Bypassed market towns will contract, leading to migration, and OBOR may deprive people of their livelihoods in other ways. Dispossession, land-grabbing, and soil pollution caused by the China-Myanmar gas pipeline have already forced cultivators in Myanmar’s Rakhine state to leave their homes in search of a living (Shwe Gas Movement, 2011). Such developmental refugees are likely to find a niche in the reconfigured networks of unregulated practices.

Conclusion: building Silk Roads in the air The OBOR mindset cannot countenance any of this. It simply ignores the deep history of ‘actually existing Silk Roads’ and refuses to factor in the local dynamics that it must deal with, along with any deleterious effects it will inevitably have on existing trade networks, communities, and environments across Eurasia. The OBOR initiative proposes a specific cognitive mapping of the world, in which new corridors, belts, and roads are foregrounded, and combines it with a narrative of inexorable progress on virgin ground. Packaged as benign development, and presented with executive verve, it speaks assertively about a bright future for all, just beyond the horizon. It proclaims that superior infrastructure, boosted trade, and cultural exchange will

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serve everybody’s interests. We must bear in mind, however, that ‘utopian projects of international development that overlook on-the-ground realities frequently bring untold misery to those whose lives they were designed to improve’ (Marsden, 2017: 23). Building Silk Roads in the air is one thing; turning them into benign on-the-ground realities is quite another. The OBOR initiative may exploit the sentimental recollection of the historical Silk Road – a tangled and unregulated network if there ever was one – but it is more usefully compared to the ‘Great Game’, a geopolitical gambit among states. As Eurasia’s major powers – China, Russia, India, and the European Union – get ready to play this new Great Game, they aim to supersede the myriad unregulated networks that criss-cross and connect the continent. This unprecedented design comes with equally far-reaching risks and uncertainties. As states try to implement elements of the OBOR initiative, they may create a new socio-spatial order – but one that is inherently unstable and riddled with powerful practices beyond state control. As state elites jostle for pole position on a foggy ‘New Silk Road’, the many losers – and some winners – that emerge from the haze may well astonish and unsettle them. If components of the plan are realized, they are bound to destroy or distort some unregulated practices and reinforce others. These effects may take several forms. First, the OBOR plan will enhance China’s role as ‘the world’s cornucopia of globalization from below’ (Mathews and Alba Vega, 2012: 13) by facilitating the distribution of copy goods, which are outlawed internationally and therefore travel across the world as contraband. The flexibility of Chinese law enforcement and the state’s deliberate ‘looking away’ will actually make China a major propagator of unregulated trade flows via the ‘New Silk Road’ (Kalir and Van Schendel, 2017). Second, some unregulated practices will feed off the OBOR initiative, infiltrating its implementation and intertwining with regulated and stateendorsed practices. Such practices take familiar forms – corruption, tax evasion, irregular financial flows, smuggling, and deliberate non-recording – and they illustrate how non-state actors shape state policies. Third, other unregulated networks will use the new connectivity to scale up, primarily in moving people and goods more effectively, but without state sanction, across the expanse of Eurasia. In areas of fragmented and contested sovereignty, the OBOR initiative will up the ante: it will stir up old (and likely new) armed conflicts over resources. The BCIM corridor is only one of several such zones included in the OBOR plan. Other particularly turbulent regions – Kashmir, Baluchistan, Kurdistan, and Southern Thailand – and precarious sea lanes – the Strait of Malacca, the northern Bay of Bengal,

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and the Somalia littoral zone (all known for recurrent pirate activity) – are also included in the OBOR endeavour.32 Off icial discourse about the OBOR initiative is signif icant, because of the sheer immensity of its scale, but is also deceptive, because of its ahistorical, politically sanitized, state-blinkered, and upbeat nature. This official discourse can only predict a future of harmonious progress for all by ignoring its likely impact on inequalities across Eurasia, and by being silent about its politics of distribution and exclusion. Finally, the OBOR initiative promotes two myths. First, it assumes sovereignty to be both a state perquisite and an accomplished fact. Neither is true. Theorists have argued that sovereignty is ‘a tentative and always emergent form of authority grounded in violence’ (Hansen and Stepputat, 2006: 297), and that it is not the prerogative of states. ‘Rebel movements with state-like ambitions are not simply lagging behind purportedly normal states, struggling toward some fixed yardstick of sovereignty. They are better thought of as laboratories of sovereign rule that actively transform the way sovereignty is practiced and understood’ (Klem and Maunaguru, 2017: 630). States, warlords, rebels, syndicates, private corporations, and various transnational groups can all be aspiring sovereigns struggling to enforce their rule, exploit resources, and ward off competitors by means of coercion, alliance, or subterfuge. Together, they shape the way sovereignty is practised in an area. The OBOR mindset is insensitive to these complex geographies of sovereignty. The state-centricity of the OBOR initiative will result in a failure to generate the policy outcomes that its proponents strive for, both in the BCIM corridor and presumably throughout Eurasia. Closely linked to this myth about sovereignty is a myth about space. The assumption is that OBOR policies operate in smooth, compliant spaces across integrated national territories, and thus the implementation of these policies depends on successful negotiations between state elites. We have demonstrated that this is a fallacy, and that aspiring sovereigns – both state and not-yet-state – share intense apprehensions about territorial coherence, security, access to resources, and sovereign survival. These apprehensions warp space and result in patchworks of sensitive spaces and lumps – ‘places where power coalesces surrounded by those where it does not, places where social relations become dense amid others that are diffuse’ (Cooper, 2005: 91-92; see also Cons, 2016). 32 There are no officially approved maps of the OBOR plan, but the Mercator Institute for China Studies has made a much-copied approximation that shows the new silk roads traversing each of these contested and disturbed regions and sea-lanes (Mercator Institute for China Studies, 2017).

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These patchworks are not contained within national territories but cross international borders, together with the aspiring sovereigns, mobile people, and expansive networks that thrive on cross-border connections. Social space is not smooth, compliant, or nationally bounded, but variable and can be sensitive and lumpy. Frictions between competing, overlapping sovereignties, and the constantly fluctuating spatiality of unregulated practices, demand a more sophisticated approach to disentangling the complexities of social space. The OBOR initiative may officially ignore fragmented sovereignty, sensitive space, and unregulated practices, but it cannot tame them. Social scientists must delve beyond the polished technocratic and diplomatic language to reveal the capricious spatial configurations and ‘actually existing Silk Roads’ that the OBOR initiative must confront (Marsden, 2017). In this ethnographic endeavour, it is helpful to think of regulated and unregulated practices as eternally intertwining, rather than as belonging to two separate economic domains. Anodyne slogans such as ‘a win-win attempt for all’ or ‘mutual consultation, mutual construction and mutual benefit’ are deeply misleading if we wish to apprehend the real social, political, and economic repercussions of OBOR’s grandiose policies for people across Eurasia and beyond.

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Van Schendel, Willem. 2017. ‘Contested, Vertical, Fragmenting: De-partitioning “Northeast India” Studies’. In Mélanie Vandenhelsken, Meenaxi BarkatakiRuscheweyh, and Bengt G. Karlsson (eds), Geographies of Difference: Explorations in Northeast Indian Studies, pp. 272-288. London and New York: Routledge. Yang, Bin. 2012. ‘The Bengal Connections in Yunnan’. China Report 48(1,2): 125-145. Yang, Siling. 2017. ‘India has Most to Lose in Border Spats’. The Global Times, 4 July, http://www.globaltimes.cn/content/1054882.shtml, accessed 12 July 2017. Ying, Hongwei. 2014. Chinese Investments in Myanmar: The Sino-Myanmar Oil and Gas Pipeline Project Could Become a Chess Piece, pp. 1-5. Cologne: Stiftung Asienhaus. Zhang, Xiaoming, Shiyu Liao, Xuebin Qi, Jiewei Liu, Jatupol Kampuansai, Hui hang, Zhaohui Yang, Bun Serey, Tuot Sovannary, Long Bunnath, Hong Seang Aun, Ham Samnom, Daoroong Kangwanpong, Hong Shi, and Bing Su. 2015. ‘Y-chromosome Diversity Suggests Southern Origin and Paleolithic Backwave Migration of Austro-Asiatic Speakers from Eastern Asia to the Indian Subcontinent’. Scientific Reports 5, no. 15486.

About the author Willem van Schendel (University of Amsterdam & International Institute of Social History) works in the fields of history, anthropology, and sociology of Asia. For his publications, please see https://uva.academia.edu/ WillemVanSchendel.

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In and out of the shadows Pakistan-China trade across the Karakoram Mountains Hasan H. Karrar Abstract This chapter describes overland trade between Pakistan and China since 1969 until the present. Overland trade between the two countries takes place over the high-altitude Karakoram Highway, connecting Pakistan’s mountainous Gilgit-Baltistan region to the Xinjiang Uyghur Autonomous Region in western China. The Karakoram Highway is popularly described as a contemporary silk road; this idea has been reinforced by the 2013 announcement of the One Belt One Road initiative, which includes the China-Pakistan Economic Corridor. In this chapter, I explore the relationship between a documented, regulated silk route trade and its shadows; shadows take the form of traditional pathways between the two countries that are no longer used, as well as the undocumented movement of licit goods and smuggling of illicit substances. Keywords: border trade, informal economy, high mountain regions, Pakistan-China, shuttle trade

Introduction The Khunjerab Pass (4693 metres), the Pakistan-China border crossing in the Karakoram mountains, is increasingly represented in Pakistani electronic media, such as online advertisements, blogs, and social media. The legibility of this place, until recently considered remote, is new. It dates back fifteen years and is primarily due to two landmark state initiatives: the 2006 opening of the Sost Dry Port along the border, and a long-overdue upgrade, between 2008 and 2013, of the Karakoram Highway that connects Pakistan and China’s westernmost Xinjiang Uyghur Autonomous Region.

Hung, Eva P.W., and Tak-Wing Ngo (eds), Shadow Exchanges along the New Silk Roads. Amsterdam, Amsterdam University Press 2020 doi: 10.5117/9789462988934_ch03

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Both initiatives were undertaken to streamline overland trade with China. More recently, the crossing at Khunjerab gained importance following the China-Pakistan Economic Corridor (CPEC), which was announced in May 2013 and became one of six economic corridors under President Xi Jinping’s signature One Belt One Road (OBOR) initiative. Pakistan now sees itself as pivotal to Chinese plans for global connectivity;1 Pakistani leaders have described relations between the two countries as ‘higher than the Himalaya, deeper than the ocean, sweeter than honey, stronger than steel, dearer than eyesight’ (The Nation, 2010). The Karakoram mountain range, on the western terminus of the Himalayan mountains spanning South Asia, is the most glaciated region outside extreme latitudes (Hewitt, 2006). The Karakoram is located in Pakistan’s northernmost administrative region, Gilgit-Baltistan. The region is sparsely populated, with its approximately two million residents clustered along the Karakoram Highway. The Highway connects this northern mountain region to Xinjiang. For much of Pakistan’s post-colonial history, this region suffered from poor connectivity, its local economy supported by state subsidies and development initiatives by non-governmental organizations. Administratively, Gilgit-Baltistan is divided into ten districts; the two that I describe in this chapter are Gilgit district, where Gilgit Town (pop. 200,000) is located, and Hunza, which leads to the border at Khunjerab via the Karakoram Highway. Due to Pakistan’s increasing connectivity with China, the Karakoram is viewed less as a distant margin of the polity and more as a lucrative gateway to its giant neighbour. Pakistan’s anticipation of a windfall through these ties with China is evident at a bazaar officially known as the Afiyatabad Commercial Centre, located at an altitude of about 2700 metres and 75 kilometres from the Pakistan-China border. At first sight, Afiyatabad appears unremarkable; it is a nondescript market along a desolate stretch of the Karakoram Highway, its 240 shops are either along the road or in cul-de-sacs.2 The Centre houses the immigration offices for travellers to and from China, and the bazaar is adjacent to the Sost Dry Port, where clearance takes place for goods arriving from China, and where the merchandise is reloaded onto Pakistani trucks. The billions in cross-border investment that are being 1 In addition to the China Pakistan Economic Corridor, the others are: China-RussiaMongolia; New Eurasian Land Bridge; China Central and West Asia; China Indochina; and Bangladesh-China-India-Myanmar. 2 Afiyatabad is frequently conflated with and referred to as Sost, which is inaccurate; Sost, the village, is located 2.5 kilometres south of Afiyatabad.

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channelled along the newly planned economic corridor are commonly expected to have a trickle-down effect in Afiyatabad. Skyrocketing land prices, a migrant labour force, and hastily constructed shopping plazas (many of which remain empty) reveal the extent to which the latest incarnation of the silk road is fuelling local speculation. Where Afiyatabad was previously insignificant in terms of both regional trade and global capital flows, this is anticipated to change. Nearby to the Afiyatabad Commercial Centre and the Sost Dry Port is another silk road, which has all but been forgotten in the excitement over CPEC. A gorge joins the Karakoram Highway a few kilometres beyond Afiyatabad; a single-lane road climbs up this valley before ending at a small village, Misgar. From Misgar, two historic paths lead to high mountain passes on the Pakistan-China border: one across Kilik (4827 metres) and the other across Mintaka (4709 metres). Situated off the Karakoram Highway, the village of Misgar, with its 1000 residents has little to suggest that, for centuries, an earlier silk road passed through here. Compared with Afiyatabad, where 40-foot shipping containers pass through the bazaar after crossing the border at Khunjerab, the pace of Misgar is slow. Typical of Karakoram villages, it is underpopulated, with terraced fields and small houses set apart; the educated youth having long since migrated to cities. When I visited in summer 2017, inhabitants told me little about the historical trade through the area. They mentioned Misgar’s famed past, but offered little detail, other than to escort me to a post office built by the British in 1918. Thus, two silk roads exist in close vicinity.3 One emerges from contemporary geopolitics and is materialized in the form of container traffic; it promises enhanced connectivity via the Karakoram Highway, which has become a key artery in the OBOR initiative since 2013. This silk road is framed by a discourse around the development of economic corridors. The map illustrating this, ubiquitous in Pakistan’s planning and development circles, shows China linked to Pakistan via the Karakoram Highway. On such maps, roads fan out across the country before converging again at Gwadar, the Arabian Sea Port in Baluchistan province. This silk road takes 3 In addition to referring to the physical Silk Road, my use of the term in this chapter is in keeping with recent scholarship that views the Silk Road as a spatial concept that had its roots in the nineteenth-century empire in Asia (Wood, 2002; Hansen, 2012; Chin, 2013). I also use ‘Silk Road’ as a trope for connectivity across the borders of modern states, specifically China and Pakistan. In both countries, it translates into cultural form. In Urdu, Silk Road translates readily as Shahra-e-Reesham; in Chinese sichou zilu. In addition, since the Belt and Road Initiative was announced in 2013, in many parts of China, but in particular the northwest, public spaces have been festooned with images of camel caravans as an illustration of the Silk Road.

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a familiar form; a web linking particular points on the map. Conversely, the other, earlier silk road has today all but faded from memory. Beyond Misgar, there is no knowledge of the intra-Asian pathways, one branch of which had earlier passed through the village. In centuries past, these intra-Asian pathways had criss-crossed the continent and were continually shifting. The historical commercial webs have faded from public consciousness and receded into shadows, like the rock carvings along the Indus and Hunza rivers, left behind by merchants, monks, and refugees from past millennia. In this chapter, I argue that today there are two ways of approaching the silk road and its shadows. First is the contemporary constructed silk road in the form of a highway that connects point A to point B and which is represented as a line on a map. This silk road overshadows routes that have vanished from popular consciousness, such as historical pathways over high mountain passes that have long-since been disused. Hence the silk road can simultaneously be legible and instantly recognizable, or said to have receded into the shadows. What is legible and what is in the shadows are spatially and temporally framed. Overland trade across the Karakoram mountains between Pakistan and China has evolved over the last 50 years. The three stages of its development, since overland trade began in 1969, are as follows: (1) barter, between 1969 and 1986; (2) commercial exchange, from 1986 until 2013; and (3) economic corridor development and trade, since 2013. These temporal divisions are due not only to the speed and efficiency enabled by new infrastructure, but also a consequence of political changes in the regions that are connected by trade. Trade routes are determined by political economies, and both the legible and the shadow routes are results of political projects on either side of the border. Additionally, there is another way of thinking about shadows, namely the undocumented cross-border exchanges that occur in many parts of Asia as Chapter 1 and other contributions in this volume illustrate (see also Mathews, 2011; Fehlings, 2018; Elsing, 2019; Haugen, 2019; Mahanty, 2019; Ngo and Hung, 2019). Undocumented exchanges are primarily of two types: the import of licit goods that bypass state regulatory mechanisms, as well as the smuggling of illicit goods. Both types of exchanges take place along the Pakistan-China border, illustrating that state aspirations to legibility are often confounded. Human and financial resources are often a stumbling block. Limitations on resources indicate the inability of the state to attract officials with the required skillsets, and highlight domestic financial constraints (Skocpol, 1985: 16). These limitations are often insurmountable. The result, as Scott reminds us, is that ‘although records, courts, and ultimately coercion’ are important in their attempt to increase legibility, their effects are never so thorough ‘as to precisely fit the grid’ (1998: 24).

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Thus, despite the shift towards formal regulatory frameworks aimed at erasing shadow exchanges, such as those that were put in place following CPEC, the state is unable to bring all trade out of the shadows. State attempts at legibility are further undermined through the tenacity of these shadow exchanges, and because petty trading networks are often flexible. Marsden describes itinerant Afghan merchants who move goods between Pakistan, Afghanistan, Tajikistan, and beyond as ‘portfolio capitalists’ who may be trading in tangerines at one time, cement at another, and cosmetics at still another (2016: 82). These itinerant merchants also have the flexibility to cross not only ‘boundaries of territories’, but also ‘institutions and ideologies’ (Duara, 2015: 242). Although traders’ perceptions of success and failure are influenced by a range of variables, they are ultimately guided by the pragmatism that is required in cross-border trading as other contributions in this volume affirm (also Hung and Ngo, 2019; Karrar, 2019). While many smaller networks are erased by expansive commercial and financial assemblages – economic corridor development, trade agreements, new tariff regimes – in borderlands, discrete networks continue operating in the shadows, moving both licit goods, such as clothes, shoes, and household appliances, and also contraband, such as narcotics and alcohol. Cross-border trade across the Karakoram is therefore multiscalar. 4 I take a long view of Pakistan-China trade across the Karakoram along the Pakistan side of the border. I draw on my multiple visits to Afiyatabad since 2012, where I have spoken with traders and shopkeepers, police and port officials, hoteliers and restaurateurs, and more broadly on visits to the Karakoram over the last 25 years, from which I have gained a long-term perspective on changes to the ecology and infrastructure. This chapter has five parts. In Part 2, I survey Pakistan-China relations until the resumption of overland trade in 1969. In Part 3, I describe this resumption in trade. In Part 4, I consider the period after 1986, when the Karakoram Highway opened for commercial traff ic, until 2013, when the China-Pakistan Economic Corridor was announced. Finally, in Part 5, I consider recent developments since the economic corridor was announced. Although economic corridor development seeks to regulate trade and erase shadow exchanges, one consequence appears to be that the existing unregulated trade is pushed yet further into the shadows. 4 Similar multiscalar networks operated in Asia through the nineteenth and until the midtwentieth century. As scholars have demonstrated, although many indigenous networks were destroyed or subsumed by imperial powers in Asia and Africa, indigenous commercial networks continued to operate in parallel (Ray, 1995; Bose, 2004; Tagliacozzo, 2005; Wang, 2007).

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China in Pakistani eyes: A geopolitical opening Pakistan, along with its neighbour India, came into existence in August 1947 following the dismantling of British colonial rule. The Karakoram and the neighbouring Himalaya mountains span the former principality of Jammu and Kashmir; immediately after the partition of South Asia, India and Pakistan disputed the position of Kashmir. For decades afterwards, both India and Pakistan had designs on the parts of Kashmir held by the other. The inability to successfully resolve these bilateral differences became the basis of hostility between the two countries. After 1947, Pakistan’s sovereignty over the Karakoram was increasingly framed by its bilateral relations with India; Gilgit had become part of Pakistan through secession in autumn 1947 and Baltistan followed in spring 1948, the same year India and Pakistan first went to war over Kashmir. Pakistan also had to define its relationship with China, its other neighbour across the Karakoram, and extended its diplomatic recognition to the People’s Republic on 4 January 1950. Unlike its relations with India, which deteriorated, Pakistan cultivated closer ties with China in the 1950s and 1960s. Despite a period of uneasy relations during the tenure of Prime Minister Huseyn Shaheed Suhrawardy (1956-1957), Pakistan successfully positioned itself as supportive of China’s foreign policy concerns. In addition to being one of the first countries to extend diplomatic recognition to China later that year, Pakistan had vigorously campaigned for China’s admission into the United Nations. Pakistan’s support for Beijing was contrary to its broader foreign policy orientation: as the Cold War set in, Pakistan found itself drawn to the anti-communist camp, although Pakistan’s then Prime Minister Mohammed Ali (1953-1955) successfully reassured China that Pakistan had no hostile intentions towards it (during his 1956 visit to Beijing, Prime Minister Suhrawardy was less successful in allaying Chinese fears). The following decade, during his visit to the United States in 1961, President Ayub Khan (1958-1966) continued to advocate for China’s entry into the United Nations. In another expression of fraternity, in 1962, Zulfiqar Ali Bhutto declared in the national legislature that Pakistan’s friendship with China was ‘unconditional’, which was followed by the granting of Most Favoured Nation status to China on 5 January 1963, allowing for cash and barter trade between the two countries. Finally, in an agreement later that year, Pakistan International Airlines began regular flights to Guangzhou and Shanghai, to the consternation of the US State Department. The last point is symbolically important: Pakistan’s national carrier was the first airline from the other side of the Iron Curtain to fly into China (Qureshi,

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1962: 320; Dobell, 1964: 284, 291; Montagno, 1965: 309-312; Shabir and Kazmi, 2007: 176; Ali, 2017, Ch. 1). The Chinese reciprocated Pakistan’s overtures, extending symbolic support in a key area. During Zhou Enlai’s visit to Pakistan in February 1964, he broke with China’s policy of neutrality on Kashmir, and called for a plebiscite in Jammu and Kashmir (Montagno, 1965: 316). A plebiscite in Indian and Pakistani Kashmir had been Pakistan’s stance since 1948, as it had assumed that when such a plebiscite was held, Indian Kashmiris would vote to join Pakistan. Improving relations between Pakistan and China also resulted in a border accord. In March 1963, the two countries announced that they had successfully demarcated their boundary. This was a milestone, as Pakistan and China shared a land border in the Karakoram, long stretches of which had not been demarcated (Qureshi, 1962: 322; Ali, 2017: 41-43). For both countries, the border agreement was timely: China had fought a border war with India in 1962, and for Pakistan the agreement was a tacit legitimization of its control over the Karakoram. It was not coincidental that the expressions of fraternity between China and Pakistan were both framed in the Cold War language of combating hegemony and bloc politics (a reflection of China’s frontline concerns) and referred to Kashmir’s selfdetermination (Pakistan’s foreign policy focus). When Pakistan’s goodwill delegation travelled to Beijing on 28 September 1967, it was greeted at the airport by thousands of Red Guards waving copies of the Little Red Book, some of whom – amidst the banging of drums and crashing of cymbals – ran up to the delegation to present its members with Quotations from Chairman Mao and pin Mao badges on them. ‘Resolutely support the Pakistan people’s struggle against imperialism and colonialism!’ and, ‘Firmly support the just struggle of the Pakistan people against foreign aggression!’ they reportedly shouted. The reporting of this visit in the official Peking Review does not, of course, mention Pakistan’s close relations with the US, or that Pakistan had been a member of the anti-communist Southeast Asian Treaty Organization (est. 1954) and the Central Treaty Organization (est. 1955). The sloganeering was also, in part, directed towards the common adversary, India, with whom both countries had fought a war; the call for ‘self-determination’ and support for Kashmiris in their struggle against ‘Indian reactionaries tyrannical rule’ addressed Pakistan’s foreign policy concerns. Marshall Nie Rongzhen (1899-1992), who threw a banquet in honour of the 1967 delegation, urged people of both countries to ‘strengthen their unity’ (Peking Review, 1967). Road building was an ongoing development in the Karakoram mountains on both Pakistan and Chinese sides. During the colonial era, the Himalayan

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frontier was poorly connected to central India. Although Gilgit Town had been linked to Srinagar by the late nineteenth century (Flowerday 2009), Srinagar had become part of India after the 1947 division of South Asia. Hence, after Gilgit and Baltistan seceded to Pakistan in 1947 and 1948, the region was not accessible by road from Pakistan. The Rawalpindi-Gilgit road was completed a few years later; it crossed the 4163-metre Babusar pass, although it was passable only in summer. The first motor vehicle reached central Hunza only in 1957 (Kreutzmann 1991: 712, 723). By contrast, Kashgar had become accessible by road for the first time in 1949, and by the mid-1960s, there was rapid road construction in western Xinjiang (New York Times, 1965). Following border demarcation, Pakistan and China’s border policy developed along two fronts. First, both countries sought to resume trade across the Karakoram. The Mintaka Pass was a regular crossing point in the early 20th century but had been closed since May 1949. In October 1967, the two countries concluded a border trade agreement for exchanging goods between Gilgit Town and Kashgar. This caravan trade was localized and served local people through barter. On 24 August 1969, the first caravans for over 20 years, one travelling from Gilgit (using mules and jeeps, and following the Hunza river) and the other from Kashgar (on camels and horses over the Mintaka Pass), met at Misgar (New York Times, 1969, 1971). Newspaper accounts suggest that the volume and value of this overland trade was small, unlike Pakistan’s seaborne bilateral trade with China the same year, which was worth $56 million (Malik, 2017: 73). Pakistan and China also began constructing a road link in 1966, signalling a second development in border policy. The Karakoram Highway was completed in stages. The first stage, the Kashgar-Khunjerab section, was completed in 1968. Early in 1971, Chinese crews linked up with Pakistan Army construction units. An opening ceremony was held on 16 February, and the Chinese delegation was headed by the Minister for Communication, Yang Chieh. Speaking at the ceremony, Yang exalted Sino-Pakistani relations and eulogized the Chinese and Pakistani construction workers who had laid down their lives constructing the road. In the following statement, Yang explained how China had aligned itself with Pakistan’s strategic interests: The Chinese government and people will, as always, f irmly support Pakistan government in their just struggle against foreign aggression and interference, and fully support the Kashmiri people’s struggle for the right to national self-determination. We firmly believe that our just cause will triumph and that friendship between our two peoples will be further consolidated and develop (Khalid, 2009: Vol. 2, 261-262).

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Figure 3.1 For centuries a branch of the Silk Road passed through the north Hunza village of Misgar

Note: With the opening of the Karakoram Highway in the 1970s that crosses the Pakistan-China border further south, this village – and its place in inter-Asian connectivity – has receded into the shadows.

The construction of the Highway continued on the Pakistani side, and in 1974, another agreement was signed to increase the volume of border trade (Ali, 1974: 56), although the value of the goods moving along the Highway remained far lower than that of Pakistan’s seaborne trade with China. The Karakoram Highway finally became passable by trucks in 1972, and it was officially inaugurated in 1978 (Kreutzmann, 1991: 723-724). As border trade shifted to the Karakoram Highway, Misgar and the route over Mintaka Pass slipped into the shadows. A second opening of the Karakoram Highway was held on 16 June 1978. The Chinese delegation was headed by Vice-Premier Geng Biao (1978-1981). In their speeches at a banquet hosted by Pakistan’s head of state General Zia-ul-Haq (1978-1988), both leaders denounced hegemonism and attempts to create spheres of influence. General Zia-ul-Haq expressed his appreciation of the Chinese projects in Pakistan, which he saw as bringing about a ‘radical transformation in Pakistan’. The hope was that the highway would lead to closer bilateral economic ties, a view that Geng reiterated. Geng also called for self-determination for the Kashmiri people (Peking Review, 1978). China’s off icial Peking Review also commented on the historical significance of the event:

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The highway has given reality to a dream of several thousand years. Ancient travellers in the Western Han dynasty (206 B.C.-25 A.D.) who journeyed from China’s northwest to a land of what is now Pakistan today had to go through the rigours of traversing perilous mountain paths and fording swift rivers. Now it is made easy with this new highway. To describe it as a contemporary ‘silk road’ is not exaggeration (Peking Review, 1978).

Although the Karakoram Highway was celebrated as a silk road, it had developed out of a need for strategic cooperation between the two countries. Whilst reflecting Pakistan and China’s bilateral concerns, these early descriptions neglected to address its role in enabling trade. The silk road trope was not only referenced by the Chinese. In a short report on the opening of the highway, the Washington Post (1978) also described it as having been carved through ‘the mountains of northern Pakistan along the ancient silk route from China’. The report also noted that the road provided the Chinese with greater influence in Pakistan and access to the Arabian Sea port of Karachi. The trade potential of the Karakoram Highway was also picked up by Reuters. Echoing the connectivity narrative, a Reuters story carried by the New York Times (1978) noted that it would speed goods towards the port of Karachi for transshipment, and that it would connect with ‘a railhead in China, cutting days, perhaps weeks off the route across the Pacific from China to West’, highlighting that the bilateral relations should be viewed through the frame of geopolitics.

From barter to commercial exchange Between 1969 and 1985, the overland trade between the two countries took the form of official border trade and did not facilitate the large-scale movement of goods across the border. In addition, another route passed into the shadows in this period. Although overland trade had been ‘re-opened’ in 1969, with the official barter trade over the Mintaka Pass, within a few years the caravan route was overshadowed by vehicular transport across Khunjerab. The Chinese also began encouraging border trade via Khunjerab after the mid-1980s, seeing it as an opportunity for impoverished minority regions to benefit through local entrepreneurship. Trade across Khunjerab also increased because of the consumer demand from the increasing population. For example, Gilgit Town’s population doubled in the 1970s (Kreutzmann, 2000: 503) and new marketplaces were developed within it, and the other

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major town in Gilgit-Baltistan, Skardu (pop. 200,000), was connected to the Karakoram Highway in 1982 with the opening of the Skardu Road. The Karakoram Highway was opened to commercial traffic in 1986. Itinerant merchants then began moving light manufactured goods from China to Pakistan (fewer goods travelled from Pakistan to China, which is still the case today). Although some shuttle traders were Chinese, the majority were Pakistanis who benefitted from a border regime that allowed residents of Gilgit-Baltistan to cross at Khunjerab using a pass issued by Gilgit-Baltistan’s Home Department (Rippa, 2015: 166-167, 2019). In my conversations with traders over the years, I discovered that most of them saw cross-border trade as contributing to a diversified family economy. These Gilgit-Baltistani traders typically made a few trips to China between spring and autumn and migrate to work as seasonal labourers down country in Rawalpindi or Karachi in the winter when the border was shut. They also usually continued subsistence farming on a small family plot and raised livestock. For example, a north Hunza trader I met in 2016 occasionally travelled to China to trade in gemstones. For most of the year he lived in Rawalpindi where he managed a marriage hall with others from his village, and in the summer months he picked up work as a tourist guide. He exemplified Marsden’s ‘portfolio capitalist’ (2016: 242), and in Duara’s words, crossed the ‘boundaries of institutions’ (2015: 82). We became well acquainted, and he told me that the restrictive border regime had discouraged him from travelling to China for two years (although he had no experience in the tourism business, he was hopeful that he could supplement his family income through guiding). We must bear in mind, however, that overland trade constituted only a small proportion of the total trade between Pakistan and China.5 The high elevation of Khunjerab means that it is impassable from November to May due to heavy snowfall. Its utility is further limited because the regions of northern Pakistan and westernmost China that it connects have relatively small populations and are distant from manufacturing and consumption centres. The Pakistani traders with whom I spoke in 2003, 2005, and regularly since 2012 all confirmed that the Karakoram Highway did not connect national markets but only regional markets in Xinjiang with the central and northern regions of Pakistan (Gilgit-Baltistan, north Punjab, and Khyber-Pakhtunkhwa provinces). In summary, the cost of moving large quantities of cargo long distances over a high mountain pass means 5 Prior to the opening of the Karakoram Highway to commercial traffic, Pakistan-China trade fluctuated from a low of $4.7 million (in 1959) to a peak of $192 million (in 1979). By the end of the decade, in 1989, trade volume had reached $500 million (Malik, 2017).

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that Khunjerab will never carry more than a small percentage of China’s trade with Pakistan, and the majority has remained seaborne. In 2009, Pakistan’s ambassador to China estimated that only five per cent of total trade was border trade (The Nation, 2009); that year, the total bilateral trade was $8 billion (Malik, 2017: 80). Thus, the silk road was itself a shadow of this larger seaborne trade. Nevertheless, local population on both sides of the border benefitted from the trade. As previously noted, the town-based population of Gilgit-Baltistan increased in the 1970s, and connectivity within the region improved. Restrictions on petty trade in China were lifted, which facilitated an increase in Chinese exports to Pakistan. In China, economic liberalization began in the coastal areas in the late 1970s and gradually spread to the interior. By the early 1980s, regional state farms in Xinjiang were able to sell their surplus for profit (Woodward, 1982). When Christopher Wren of the New York Times visited Kashgar in 1983, he reported that its famous Sunday bazaar was already attracting 20,000 people. Eisa Shakir, a deputy commissioner of the Kashgar prefecture (then with a population of around two million), noted that there were 2000 to 3000 full-time traders in the region and another 10,000 who worked part-time. The authorities attempted to impose a flat five per cent tax on every transaction, but sellers and buyers were still able to determine buying and selling prices (New York Times, 1983). Even before the Karakoram Highway opened to commercial traffic, travellers moving between the two countries carried personal goods for sale. For example, 2000 Muslims from Xinjiang were granted permission to travel to Mecca through Pakistan in 1985, and were permitted to carry manufactured goods, such as curios, cotton garments, and silk, to sell along the way (Peking Review, 1985). Informal exchanges were part of the wave of economic liberalization that began under Deng Xiaoping. Some of these informal exchanges occurred in China, while some took place in border markets in Kazakhstan, Kyrgyzstan, and Pakistan, which were now connected to Xinjiang; by the end of the 1980s, cross-border trade between China and Soviet Central Asia was flourishing (Karrar, 2016). In the 1990s, the Chinese state increasingly promoted border trade. Deng’s calls for accelerated border trade led to the People’s Liberation Army becoming involved in the logistics of moving larger volumes of goods across the border (Wiemer, 2004; Ibraimov, 2009). Nevertheless, much of the trade remained in the shadows, with one expert at the Chinese Academy of Social Sciences suggesting that the level of undocumented trade in the 1990s equalled that of documented trade (Liu, 1998: 182). In Gilgit-Baltistan, the effects of trading with China were felt throughout the 1990s. In 1990, as documented by Kreutzmann (1996: 306), the Afiyatabad

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Figure 3.2 The Afiyatabad Commercial Centre (2700m) is located on the Karakoram Highway, adjacent to the Sost dry port that opened in 2006

bazaar had about a dozen shops, a hotel, a long-distance bus station, and a few godowns (warehouses). I also visited Afiyatabad in 1990 and found it to be a nondescript place, marked by a road barrier and a few buildings. During my subsequent visits I saw Afiyatabad grow. The number of hotels increased, a migrant population that worked at the dry port moved in, and the shops multiplied. In 2016, when my research assistant and I surveyed the bazaar we counted 240 shops, although tellingly about two thirds of them were either closed or had never been occupied. This high level of vacancy illustrates that the growth of a market detached from large population clusters was limited, and that much of the construction was, and remains, speculative. The value of goods entering Pakistan through Khunjerab between 1986 and 2015 cannot be accurately established. In part, this was because residents of Gilgit-Baltistan could officially claim up to 300 kilograms of merchandise as personal and were hence exempt from customs duties. Consequently, traders from the Punjab or Khyber-Pakhtunkhwa often hired Gilgit-Baltistanis to shuttle goods for them, thus ensuring that a proportion of the trade remained in the shadow. In addition, until 2005 there was no official dry port. Although an empty lot at the northern end of Afiyatabad served as an unloading area – today described as the ‘old

88 Hasan H. K arr ar Figure 3.3 Returning Chinese containers passing through Afiyatabad after unloading their cargo at the Sost dry port

dry port’ – it was, in fact, not designated as a port. Like the land crossings between Pakistan and Afghanistan or Pakistan and Iran, bureaucrats were content to either let a small shadow economy continue, or extract rent in exchange for reduced customs duties. Even after the dry port opened the regulations were arbitrary: taxes collected at Afiyatabad could be 200 to 400 per cent less than those collected at the Karachi seaport (Daily Jang, 2009). Contraband was also smuggled across the border, often in the form of narcotics from Afghanistan routed via Pakistan into China, and alcohol from China smuggled into Pakistan (which controls alcohol production and distribution). The state is understandably secretive about its anti-narcotics activities, although occasionally information is leaked to the media. For example, in 2004 it was reported that Pakistani authorities launched a crackdown to prevent Afghan narcotics being smuggled out Pakistan, and it was suspected that some may have crossed Khunjerab (The News, 2004). This was confirmed in 2006, when over 53 kilograms of heroin were seized in Xinjiang. Xinhua reported that state officials had complained that drugs were ‘pouring into’ Xinjiang from across the border (BBC Monitoring Asia Pacific, 2006). By 2008, two years later, the volume of heroin seized had nearly doubled, reaching more than 95 kilograms, and once again Xinhua reported that officials had identified the narcotics as being from the ‘Golden

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Crescent’ of Afghanistan, Iran, and Pakistan (BBC Monitoring Asia Pacific, 2008; Xinhua 2008). A contraband trade also flowed in the other direction; in July 2005, an alleged 10,000 bottles of alcohol hidden in 80 refrigerators were seized from a container that had been abandoned at the old dry port (The News, 2005).

The legible state: Dry ports and economic corridors A dry port along the Pakistan-China border would provide, in principle, a mechanism for assessing the value of goods entering the country over the Karakoram Highway. For example, in 2005, Chinese figures showed that merchandise worth $2.4 billion had crossed into Pakistan, whereas $1.4 billion had been declared to Pakistan’s customs authorities. By sharing information between China and Pakistan, the intention was that a dry port would bring this economy out of the shadows and make it fully taxable (The Nation, 2006). In addition to generating revenue through taxation, the dry port was envisioned as a pivot point in a new, expansive network of connectivity. Pakistan’s then head of state, General Pervez Musharraf (1999-2008), spoke at the inauguration of the dry port on 4 July 2006. Highlighting what was perceived as Pakistan’s strategic location in Asia (between Afghanistan, Central Asia, China, India, and the Persian Gulf states), he noted that the country could serve as a trade and energy corridor between China and the landlocked Central Asian republics. He presented a long list of projects and emphasized renewed state commitment to developing connectivity across the region: We are talking Pakistan-China connectivity in terms of energy and trade, improvement in the Karakoram highway, development of railway link and gas and oil pipeline linkages and even fibre optics connectivity along the [Karakoram Highway] under one project simultaneously will open up immense prospects of trade and economic growth (Associated Press of Pakistan, 2006).

At the time, the dry port facility had the capacity to handle forty containers a day; Musharraf promised to increase capacity a hundred-fold. The deputy chief executive of the Northern Areas, Mir Ghazanfar Ali Khan, was more modest in his projections, forecasting an increase in revenue of only 25 times. While these projections were hyperbolic, they were based on the

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potential opportunities for new trade flow across Asia. Musharraf’s finance minister from 2004 to 2008, Salman Shah, also emphasized Pakistan’s transit potential (Associated Press of Pakistan, 2006). A similar process was underway in Gilgit-Baltistan when the ChinaPakistan Economic Corridor was announced during Premier Li Keqiang’s visit to Pakistan in May 2013. As CPEC is arguably a new venture, it is too early to assess its impact or the extent to which the pledged $46 billion dollars of Chinese investment in communication and energy generation infrastructure will actually be a said ‘game changer’. Nevertheless, this is how the corridor is described on the front page of the government of Pakistan’s official website: [Introduction] CPEC is a framework for regional connectivity [which will have] a positive impact on Iran, Afghanistan, India, Central Asia […] [Visions and Mission] To improve the lives of people of Pakistan and china [sic] by building an economic corridor promoting bilateral connectivity, explore potential bilateral investment [sic] […] [Significance/Potential] Regional connectivity, Industrial Cooperation, Diverse Investment Opportunities, Financial Cooperation (CPEC, n.d.).

Connectivity is an underlying theme in the CPEC narrative. Current OBOR narratives mainly focus on the scale and speed of connectivity; the visual depiction of the OBOR initiative is a map of Afro-Eurasia with lines running across half the globe (as a subset of the OBOR initiative, a similar cartography is used for CPEC). The idea of connectivity – or transnational transit routes – is not a new one. As in the case of Pakistan, the idea that the country could serve as a transit corridor for China dates back to the 1970s. While the Pakistani state has been upbeat about the country’s transit potential, including in its projections of how Gilgit-Baltistan will benefit immeasurably from cross-border investments, the traders I spoke with at the Afiyatabad Commercial Centre in 2016 and 2017 were more sceptical. They noted that there has been little state investment in either infrastructure or public services. They have also enjoyed few benefits from corridor traffic. ‘CPEC bypasses us’ and ‘All we are getting is dust and exhaust fumes’ were common refrains. Thus, shadows can be created in yet another way. With the economic corridor comes a new border regime that pushes the peddling of goods deeper into the shadows, as it does not allow goods to be brought across the border tax free. The petty traders I spoke with in 2017 all explained that

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Figure 3.4 New construction in Afiyatabad, a border market along the PakistanChina border

Note: Since the announcement of the China-Pakistan Economic Corridor in 2013 speculation has driven property prices upwards leading also to new construction in Afiyatabad. But as of 2017, the majority of shops were still empty.

they had found it increasingly difficult to make money since CPEC, and only those importing larger volumes of goods, who happened to be from down-country Punjab and Khyber Pakhtunkhwa provinces, were making a profit. ‘If the corridor is meant to be so beneficial for us’, a trader asked me, ‘how do you explain the fact that in 2015, 2500 had applied for a border trading permit, in 2016, 1500 people, and in 2017, only 350?’

Conclusion I began this chapter by noting that the Pakistan-China border has recently become increasingly legible. I was reminded of this while watching a video advertisement for a cellular service provider, which follows a lone man travelling through Pakistan. He is equipped with a smart phone, a MacBook Pro, a boom mic, and a USB Wi-Fi adapter. In a country of more than 200 million, he moves between empty spaces: we see aerial shots of his Land Rover Defender cruising across deserted coastlines, nomads dancing around a bonfire, shrines with chanting devotees, and a woman perched on a ridge high above the Hunza valley in the Karakoram mountains, singing a ballad. The video ends with Pakistan’s representative ethnicities – wearing their

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requisite costumes – swooning on a pamir (grassland) on the Pakistan-China border.6 Frontiers such as those depicted in this advertisement are not selfreferential; instead, as Tsing notes, the frontier is a ‘traveling form’ requiring translation (2005: 31). I offer two translations here. First is the emergence of a stratum within Pakistani society that is young, upwardly mobile, adventurous, empowered by mobility and equipped with technology that enables them to navigate territorial, cultural, and apparently mystical spaces. Second is the story of a physical journey, which ends at the Pakistan-China border. The final destination is not coincidental. Unlike its other neighbours – Afghanistan, India, and Iran – Pakistan enjoys fraternal relations with China, making Khunjerab the high mountain gateway to a friendly state on which Pakistan’s dependency steadily deepens. This has made the Pakistan-China border crossing a trope for endings and continuity, which is a theme that also resonates in other media.7 Fraternity with China – at a time when it is positioning itself as a global economic and strategic power – encourages Pakistan to see itself as being connected to its giant neighbour along a silk road. The silk road trope is expansive; it offers more than road connectivity between two countries, and the emphasis shifts to connecting Asia. More often than not, these linkages are framed in a civilization discourse, whereby people from one part of Asia connect with people from another, for the benefit of all. Today, these Silk Road narratives have been assigned erstwhile ambassadors – Zhang Qian (d. 113 BCE) for example, and Xuanzang (d. 664 CE) – the envoy and the monk, who in official projections dutifully brave high mountains, torrential rivers, and endless deserts in their selfless endeavours to bring people together. Although the silk road is considered timeless in popular imagination, and hence ahistorical, as I argue in this chapter, contemporary overland 6 This video advertisement is posted on YouTube and has more than 1.6 million views. It opens with a barely audible ‘where am I going? where am I going?’ (mein kahan ja rah hoon). In the description below the video, we are told that the advertisement ‘takes you on a journey that stretches beyond the bounds of physical dimensions and leaves you with a desire to explore what lies beyond the horizon’. In merely 4 minutes and 29 seconds, we travel across frontiers of the mind and of the state (see https://www.youtube.com/watch?v=AVSPIv6maDU, accessed 16 May 2017). 7 Space making continues to manifest in other, peculiar ways, too: the installation of an automated teller machine, which has the pointless distinction of being the world’s highest, and the construction of a parking lot at the border (Reuters, 2017). During summer months, day tourists from both countries flock to the border to see the place where the so-called Iron Brothers (tie xiongdi) – Pakistan and China – are conjoined (for a recent example, see https:// www.youtube.com/watch?v=Vevp3RnYSdM, accessed 16 May 2017).

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trade along these historical trade routes has been framed both by a temporal political economy, and by those who negotiated the border in particular ways. As I have also sought to argue, shadow silk roads exist alongside their legible versions. These shadow roads are created when new trade routes emerge, and new border regimes come into effect. Shadow trade can also appear when the state – in the form of bureaucracy – chooses to bypass its own regulatory mechanisms, forming a margin that itinerant merchants are able to exploit through exchange in licit or illicit goods.

Bibliography Ali, Mehrunnisa. 1974. ‘Pakistan-China Relations’. Pakistan Horizon 27(2): 52-56. Ali, Ghulam. 2017. Pakistan-China Relations: A Historical Analysis. Karachi: Oxford University Press. Associated Press of Pakistan. 2006. ‘President Lauds Pakistan’s ‘Geostrategic Strength” at Dry Port Opening’, 4 July. BBC Monitoring Asia Pacif ic. 2006. ‘Chinese Agency Reports 27 Foreign Drug Traffickers Held in Xinjiang Jan-Nov 2006’, 13 November. BBC Monitoring Asia Pacific. 2008. ‘Police in Northwest China Seize 16 Foreign Drug Dealers in 2008’, 29 January. Bose, Sugata. 2004. A Hundred Horizons: The Indian Ocean in the Age of Global Empire. Harvard, MA: Harvard University Press. Chin, Tamara. 2013. ‘The Invention of the Silk Road, 1877’. Critical Inquiry 40(1): 194-219. CPEC (China Pakistan Economic Corridor). No date. http://cpec.gov.pk, accessed 11 May 2017. Daily Jang. 2009. ‘Major Scams Exposed in Customs Duty along Border with China’, 2 November. Dobell, W. M. 1964. ‘Ramifications of the China-Pakistan Border Treaty’. Pacific Affairs 37(3): 283-295. Duara, Prasenjit. 2015. The Crisis of Global Modernity: Asian Traditions and a Sustainable Future. Cambridge: Cambridge University Press. Elsing, Sarah. 2019. ‘Navigating Small-Scale Trade Across Thai-Lao Border Checkpoints: Legitimacy, Social Relations and Money”. Journal of Contemporary Asia 49(2): 216-232. Fehlings, Sussane. 2018. ‘Informal Trade and Globalization in the Caucasus and Post-Soviet Eurasia’. In Manja Stephan-Emmrich and Philipp Schröder (eds), Mobilities, Boundaries, and Travelling Ideas: Rethinking Translocality Beyond Central Asia and the Caucasus, pp. 263-291. Cambridge: Open Book Publishers.

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Flowerday, Julie M. 2009. ‘Blasting a Boulder and Building Memories’. In Mark Strong and Laena Wilder (eds), Viewpoints: Visual Anthropologists at Work, pp. 99-115. Austin, TX: University of Texas Press. Hansen, Valerie. 2012. The Silk Road: A New History. New York: Oxford University Press. Haugen, Heidi Østbø. 2019. ‘China-Africa Exports: Governance Through Mobility and Sojourning’. Journal of Contemporary Asia 49(2): 294-312. Hewitt, Kenneth. 2006. ‘Glaciers of the Hunza Basin and Related Features’. In Hermann Kreutzmann (ed.), Karakoram in Transition: Culture, Development and Ecology in the Hunza Valley, pp. 49-72. Karachi: Oxford University Press. Hung, Eva P.W., and Tak-Wing Ngo. 2019. ‘Organised Informality and Suitcase Trading in the Pearl River Delta Region’. Journal of Contemporary Asia 49(2): 233-253. Ibraimov, Sadykzhan. 2009. ‘China-Central Asia Trade Relations: Economic and Social Patterns’. China and Eurasian Forum Quarterly 7(1): 47-59. Karrar, Hasan H. 2016. ‘The Resumption of Sino-Central Asian Trade, c. 1983-1994.’ Central Asian Survey 35(3): 334-350. Karrar, Hasan H. 2019. ‘Between Border and Bazaar: Central Asia’s Informal Economy’. Journal of Contemporary Asia 49(2): 272-293. Khalid, M. Mumtaz. 2009. History of the Karakoram Highway, 2 vols. Rawalpindi: Self-published. Kreutzmann, Hermann. 1991. ‘The Karakoram Highway: The Impact of Road Construction on Mountain Societies’. Modern Asian Studies 25(4): 711-736. Kreutzmann, Hermann. 1996. Ethnizität im entwicklungsprozess: Die Wakhi in Hochasien [Ethnic Development: The Wakhi of High Asia]. Berlin: Reimer. Kreutzmann, Hermann. 2000. ‘Improving Accessibility for Mountain Development: Role of Transport Networks and Urban Settlements’. In Mahesh Banskota, Trilok S. Papola, and Jurgen Richter (eds), Growth, Poverty Alleviation and Sustainable Resource Management in the Mountain Areas of South Asia, pp. 485-514. Feldafing: International Centre for Integrated Mountain Development. Liu, Qingjian. 1998. ‘Sino-Central Asian Trade and Economic Relations: Progress, Problems and Prospects’. In Zhang Yongjin and Rouben Azizian (eds), Ethnic Challenges Beyond the Borders: Chinese and Russian Perspectives on the Central Asian Conundrum, pp. 179-200. London: Macmillan Press. Malik, Ahmad R. 2017. ‘The Pakistan-China Bilateral Trade: The Future Trajectory’. Strategic Studies 37(1): 66-89. Mahanty, Sango. 2019. ‘Shadow Economies and the State: A Comparison of Cassava and Timber Networks on the Cambodian-Vietnam Frontier’. Journal of Contemporary Asia 49(2): 193-215. Marsden, Magnus. 2016. Trading Worlds: Afghan Merchants across Modern Frontiers. New York: Oxford University Press.

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Mathews, Gordon. 2011. Ghetto at the Centre of the World: Chungking Mansions, Hong Kong. Chicago, IL: University of Chicago Press. Montagno, George. L. 1965. ‘Peaceful Coexistence: Pakistan and Red China’. The Western Political Quarterly 18(2): 309-317. The Nation, 2006. ‘Pak-China Customs Info Exchange at Sost Dry Port Hits Snag’, 27 April. The Nation. 2009. ‘Pakistan China Vow to Increase Border Trade’, July 3, http://nation. com.pk/03-Jul-2009/pakistan-china-vow-to-increase-border-trade, accessed 10 November 2017. The Nation. 2010. ‘Pak-China Friendship is Higher than Mountains, Deeper than Ocean and Sweeter than Honey: PM’, 19 December, https://nation.com.pk/19Dec-2010/pakchina-friendship-is-higher-than-mountains-deeper-than-oceanand-sweeter-than-honey-pm, accessed 24 October 2019. New York Times. 1965. ‘Marco Polo Path a New Trade Link’, 15 August. New York Times. 1969. ‘Chinese Caravan Enters Pakistan’, 31 August. New York Times. 1971. ‘Pakistani Open China Road Link’, 21 February. New York Times. 1978. ‘New Chinese Road Opens Remote Area to the West’, 18 June. New York Times, 1983. ‘On Fabled Silk Road, Free Trade Thrives in China’, 21 June. The News, 2004. ‘Pakistani Authorities Take Steps to Block 400 Tonnes of Narcotics Shipment’, 2 November. The News. 2005. ‘Huge Quantity of Liquor Seized at Pakistan-China Border’, 23 July. Ngo, Tak-Wing, and Eva P.W. Hung. 2019. ‘The Political Economy of Border Checkpoints in Shadow Exchanges’. Journal of Contemporary Asia 49(2): 178-192. Peking Review. 1967. ‘Visit of Pakistan Goodwill Delegation’, 6 October. Peking Review. 1978. ‘Keng Piao Visits Pakistan and Sri Lanka’, 29 December. Peking Review. 1985. ‘Islamic Culture Thriving in Kashi’, 30 December. Qureshi, Khalida. 1962. ‘Pakistan and the Sino-Indian Dispute – I’. Pakistan Horizon 15(4): 310-322. Ray, Ranajit K. 1995. ‘Asian Capital in the Age of European Expansion: The Rise of the Bazaar, 1800-1914’. Modern Asian Studies 29(3): 449-554. Reuters. 2017. ‘Pakistan’s Glaciers Face New Threat: Highway’s Black Carbon’, 3 November, https://www.reuters.com/article/us-pakistan-glaciers-highway/ pakistans-glaciers-face-new-threat-highways-black-carbon-idUSKBN1D30WK, accessed 4 November 2017. Rippa, Alessandro. 2015. Across the Khunjerab Pass: A Rhizomatic Ethnography along the Karakoram Highway, between Xinjiang (China) and Pakistan. Unpublished PhD thesis, University of Aberdeen. Rippa, Alessandro. 2019. ‘Cross-Border Trade and “the Market” between Xinjiang (China) and Pakistan’. Journal of Contemporary Asia 49(2): 254-271.

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Scott, James C. 1998. Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed. New Haven, CT and London: Yale University Press. Shabir, Samina, and Kazmi, Reema. 2007. ‘Economic Effects of the Recently Signed Pak-China Free Trade Agreement’. Lahore Journal of Economics (September; sp. ed.): 173-202. Skocpol, Theda. 1985. ‘Bringing the State Back In: Strategies of Analysis in Current Research’. In Peter B. Evans, Dietrich Rueschemeyer, and Theda Skocpol (eds), Bringing the State Back In, pp. 3-37. Cambridge: Cambridge University Press. Tagliacozzo, Eric. 2005. Secret Trade, Porous Borders: Southeast Asian Trading along a Southeast Asian Frontier, 1865-1915. New Haven, CT: Yale University Press. Tsing, Anna. L. 2005. Friction: An Ethnography of Global Connection. Princeton, NJ: Princeton University Press. Washington Post. 1978. ‘Pakistani Highway Opened’, 19 June. Wang, Hui. 2007. ‘The Politics of Imagining Asia: A Genealogical Analysis’. Inter-Asia Cultural Studies 8(1): 1-33. Wiemer, Carla. 2004. ‘The Economy of Xinjiang’. In S. Frederick Starr (ed.), Xinjiang: China’s Muslim Borderlands, pp. 163-190. Armonk, NY: M.E. Sharpe. Wood, Frances. 2002. The Silk Road: Two Thousand Years in the Heart of Asia. Berkeley and Los Angeles, CA: University of California Press. Woodward, Dennis. 1982. ‘A New Direction for China’s State Farms’. Pacific Affairs 55(2): 231-251. Xinhua. 2008. ‘China, Pakistan Cooperate in Combat Drug Smuggling from Golden Crescent’, 27 July.

About the author Hasan H. Karrar is an Associate Professor in the Department of Humanities and Social Sciences at the Lahore University of Management Sciences. He specializes in Chinese and Central Asian history, politics, and economy.

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Circulations in shadow corridors Connectivity in the Northern Bay of Bengal Samuel Berthet Abstract The Northern Bay of Bengal has a legacy of human trafficking from at least the seventeenth century. It has left its footprint in the popular culture of Bengal. Today, human trafficking is still running very high but is almost invisible. This invisibility thrives on the pre-modern sea transportation system being unrecorded and considered as part of the informal economy. In turn, this invisibility facilitates the luring of job seekers by middlemen and slavery across the Bay towards Thailand. The dramatic situation of the Rohingya in the Arakan State in Myanmar and the instability at the border with Bangladesh strengthen the trafficking network along unsettling borders. Keywords: shipbuilding, Indian Ocean, contemporary slavery, human trafficking network, border instability

Introduction Across borders: Shadow ‘Malaysia airports’ and shadow human circulation Himchari National Park and Reju canal are on a strip of hilly and riverine land, south of Cox’s Bazar Town, between the Bay of Bengal and the Naf river dividing Bangladesh and Burma (Myanmar). This strip is known for being at the receiving end of clandestine and dramatic migration from Arakan state in Burma to Bangladesh. Cox’s Bazar district accommodates United Nations High Commissioner for Refugees (UNHCR) camps for Rohingya refugees in Kutupalong and Nayapara, a few miles south of the Reju River. The

Hung, Eva P.W., and Tak-Wing Ngo (eds), Shadow Exchanges along the New Silk Roads. Amsterdam, Amsterdam University Press 2020 doi: 10.5117/9789462988934_ch04

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camps host around 30,000 people, and approximately 500,000 Rohingyas are estimated to be living clandestinely in Bangladesh.1 The new wave of exodus in summer 2017 may have doubled this uncertain figure. Many of them share the same linguistic basis and many cultural features and therefore move through the Chittagong region in relative anonymity (Berthet, 2013). One evening in 2012, I was enjoying the cool breeze of the Reju canal south of Cox’s Bazar. The mouth of the Reju canal can be seen from there, opening on both sides of the Bay of Bengal and found on one of the world’s longest and most beautiful sand beaches. Moonboats are dotted along the beach like notes on a silken music sheet. The channauka in Chatgaya (the Chittagonian language), or the chengudulu in Arakanese, is a versatile type of ship that can sail in the shallow coastal waters, crossing the sandbars close to the shores and landing directly on the beach, or sail up the even shallower rivers during high tide. They are typically used for half-day or day-long fishing trips. They are not mentioned in studies of shipbuilding, but their beauty strikes all who see them.2 An employee of the eco-resort where I stayed engaged me in conversation. Gazing at the estuary, our dialogue moved towards sailing. ‘Boats are coming daily in the night’, he told me. Soon he would board one of them to Thailand, where he would get a job in a restaurant. How was he so sure? An uncle had told him so.3 Neither crossing the borders, nor getting a job seemed an issue. From this casual chat, the channel sounded like a regular shipping line known only to local people. But no infrastructure or any other sign of this activity was visible. I did not know then that the Reju channel accommodated some of the ‘Malaysia airports’4 that are invisible to outsiders. His aim was to move across borders in the opposite direction to the Rohingya refugees in the camp nearby, and then beyond Burma. I could imagine the small vessels gliding through the estuary at night before boarding passengers and sailing southwards towards the large Naf estuary dividing Bangladesh and Burma, passing Saint Martin island, the last dot 1 Chittagong is a port, a town, a district, a region, and also the name of the three hill districts east of the town on the border with India and Burma. 2 I facilitated the work done by a team of Bangladeshi and French photographers and boat specialists on these unique vessels. Part of this work can be seen at http://www.zeppelin-geo. com/galeries/bangladesh/coxsbazar/coxsbazar.htm. 3 He used the English word ‘uncle’, which has a generic connotation of almost any senior person, unlike Bengali words, which tend to designate a precise kinship relationship. 4 This term is used by locals and traffickers to refer to the various secretive departure points along the coast used to sail to Thailand and Malaysia (Hossain, Zinnat, and Gazi, 2015a).

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of Bangladeshi territory, sailing along the coast of Arakan, then past the Irrawaddy delta to the Andaman sea towards Tenasserim and the Mergui archipelago near Thailand, and then to the Andaman sea along the ThaiMalay peninsula. Across borders: New corridors, new shadows? During my five-year stay in Chittagong, next to the booming steel ship industry and one of the world’s biggest shipbreaking yards, which is regularly under the scrutiny of reporters and photographers due to its haphazard, extremely dangerous, and precarious working conditions, I witnessed the vitality of and regularly visited the light wooden sea vessel construction sites. The shipyards emerge on the creeks or directly on the beaches between monsoon seasons, disappearing again before the rains begin. Manpower comes cheap and the wood is often smuggled from neighbouring Burma. Apart from a single engine in the main wooden ship construction yard at Chittagong, between the fish market and Gangabari in Patharghata,5 there is no external power supply. Scaffolding and other equipment are all handmade and manually powered. During the monsoon, when the work comes to a halt, there is nothing to attest to the construction of sea vessels. Based on a cottage mode of industry, the ships appear to be mainly commissioned by fishing industry businessmen. While on rare occasions one may spot oared coastal vessels, from the 1990s onwards Chinese engines replaced the sails and oars. However, the general design of the wooden sea ships remained the same. These light sea vessels support substantial economic activity, in the context of the very scarce opportunities offered by the formal sector. In 2013, the total cost of the lightest wooden sea-going vessels, such as moonboats, was reported as 4000-5000 euros, increasing to around 6000-7000 in 2017. Around 20,000 euros would buy a trawler that could remain at sea for a few days or even weeks. These wooden vessels are adapted forms of the ships that ruled the trade in the Northern Bay of Bengal (NBB) during the past two millennia and were part of the emporia economy of the Indian Ocean. A few miles north of the Reju canal is the islet of Sonadia, which until very recently was targeted by a Chinese consortium for the construction of a deep seaport (Rahman, 2015). The Bangladeshi authorities finally chose a rival project with Japanese funding in Matarbhari, in the Moheshkhali 5 The banks of the Karnaphuly river in the city of Chittagong are outside the port area under army control and have recently been the site of major urban redevelopment.

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subdivision of Cox’s Bazar district close to Sonadia (bdnews24.com, 2015). China has been offered alternative deep-seaport projects, in India6 and in locations such as Payra in south-central Bangladesh in the Ganga-MeghnaBrahmaputra delta (Bhattacharjee, 2017). These various deep-seaport projects highlight the renewed strategic importance of access to the Bay of Bengal for a huge Asian landmass, as it is on the edges of the two most populated countries in the world and their growing economies. The Chinese investments in Bangladesh (bridges, tunnels, container and anti-radiation scanners, and other port infrastructure) are part of the One Belt One Road (OBOR) Initiative (Shepard, 2016; see also Devichand, 2010) and are also known as the Maritime Silk Road. The paradisiacal scenery of what Bangladeshi people regard as the longest uninterrupted sand beach in the world, crowned by lush coconut and nutmeg trees, is the site of intense competition and negotiation for the control of international trade corridors.7 Neither this strategic position, nor the competition is new. From at least the fourteenth century, Chittagong was almost continuously disputed by local, regional, and imperial powers, but retained a large degree of autonomy until its integration into the East India Company’s empire in 1760. During this period, it remained a nodal place, the main and most resilient emporium of the NBB, and the main intersection between what is now called the Maritime Silk Road. Networks of exchanges and circulation in the NBB generated some of the most profitable trade in the world. This trade relied on local shipbuilding expertise for its transfer from the hinterland to overseas, which was adapted to the very specific navigation conditions of the Bengal delta.

Circulation in the Northern Bay of Bengal The NBB is composed of regions that enjoyed dense circulation (mobility and networks) from the end of the first millennium BC to the seventeenth century. Thereafter, it underwent fragmentation and marginalization. Recent international rivalries to develop corridors to the Bay of Bengal brought it back into global scrutiny, newly referred to as the Maritime Silk Road. Illegal trading had emerged as a consequence of the colonial and 6 In the southern region of Patuakhali, in Barisal division. 7 Analysts spread conspiracy theories, largely echoed by online journals, concerning the impact on Bangladesh’s internal security of this rivalry between the two alliances over the control of the future deep seaport(s) (Yoichi, 2016).

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post-colonial border regimes, but also from new transport developments that led to the widespread use of the steam engine. Coastal transportation activities in the NBB had to adapt in the shadow of this new transport regime. Fernand Braudel’s (1972) comparative study of big and small ships, and the longue durée approach, proves useful in the study of the making of the ‘shadow maritime silk road’. Sluices and dykes: Water, seasonality, and circulation in the NBB The term NBB was coined to name this space, in the Braudelian sense of regions that are brought together by circulations and networks of exchanges that foster a high level of interdependency (Mukherjee, 2011). Yunnan, Eastern Tibet, Bhutan, Sikkim and Eastern Nepal, the states of North Odisha, Bengal, Assam, Arunachal Pradesh, Nagaland, Meghalaya, Manipur, Mizoram, Bangladesh, Arakan, Chin, Kachin, and the Sagaing division (Sichuan, Shan, and Pegu states, and to an extent the eastern part of the state Bihar) can be considered as components of this space. For centuries, these networks challenged the designs of imperial and pre-nation states, as it was almost impossible to build any permanent roads here. The topography is characterized by the meandering Bengal delta, and its rivers, particularly the Brahmaputra,8 contributed to the difficult access of the passes in hilly forests and mountains, and also to the resistance of polities such as the Ahom kingdom in the eighteenth century. The NBB was part of a larger overseas economy. Cowries imported from the Maldives islands and rice from Bengal became defining features of this space, most probably from the third century BC onwards and possibly earlier. The NBB included silver-rich Yunnan in an Indian Ocean-oriented economy, while imperial China used the copper coin system (Yang, 2004; Majumdar and Sharmista, 2014). By the second century BC, trading networks linking Yunnan to the north-eastern and eastern parts of the peninsula had been brought to the attention of the Chinese emperor, who subsequently attempted to play a direct role in this circulation (Ray, 2004; Yang, 2008). Local rulers appear to have successfully resisted this first attempt. The networks were already active and had probably taken shape by the seventh century BC, based on evidence of the circulation of beads (Beaujard, 2010). 8 The debate over the location of Bangala or the floating palaces and kingdoms reported in European cartography bears testimony to this elusive territoriality. Even Rennell’s map (1776) proved inadequate by the early nineteenth century, as some of the river courses had already dramatically changed.

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During the Middle Ages, rice from Bengal was exported throughout the Indian peninsula and eastwards to the Malay-Indonesian archipelago, up to its easternmost edges and the Sunda islands. Among other important trade and exchange products were bamboo, rattan, malabathrum, cotton, raw and refined textiles, silk, sugar, silver, gold, precious stones, pearls, elephants, horses and cattle, long pepper, ambergris, cosmetic products, locally made chinaware, and religious paraphernalia. Trade in astrologers, healers, and religious figures also featured, along with a slave trade. Written records often omit mention of the many forms of fish, particularly dry and fermented, which are locally known as nappi. A sense of the NBB – although it is never named as such – is conveyed in both Arab and European travellers’ accounts (Berthet, 2017a). The NBB represents a very wide and diverse geographical area. Most of this part of Asia is highly fertile, with high biodiversity, and is rich in mineral resources but also technology and value systems. The Bengal delta provided the area with its main access to regions outside the Bay of Bengal, including the Andaman Sea, the Chinese seas, the Arabian Sea, the Red Sea, and the Persian Gulf. Local participation in this circulation played a pivotal role in the wealth of the NBB by retaining, releasing, and adding to the flow of humans, animals, and other resources (Berthet, 2017a). Hills and mountains have often been identified in slowing down the progress of the state machinery, and in giving local inhabitants an edge due to their first-hand knowledge of the terrain. In the case of the Bengal-Assam-Arakan arch, waterscapes played a similar role through marshlands, flooded terrain, shallow coastline, channels and rivers, which are difficult to navigate during the dry season, and overflow leading to collapsing shores and strong currents during the monsoon. The waterscape both facilitated circulation through the expert use of its seasonal flow and prevented any easy and continuous inroads. It facilitated resistance to the polities’ basic attempts to expand their control over the flourishing trade and the resources of the NBB. The authority Delhi rulers had over Bengal was more nominal than effective, particularly in the eastern part of Bengal, while the Chittagong region completely eluded Bengal rulers. The construction of durable roads was next to impossible in the unstable terrain, which was marked by strong seasonality. The famous Grand Trunk Road reached the western edge of the Bengal delta and from there onwards it was left to the initiative of local rulers (Deloche, 1994: 106-112). With annual monsoons reshaping the landscape, in which rivers could break the dykes, flood the plains, and change their course, circulation depended on both local and seasonal management. For a few months a year, villages turned into islets with boats as the only connectors. The Ahom and

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Tripura kingdoms used their water resources against the expansion of the Mughal army, and the Arakanese kingdoms similarly used the release of water through dykes and sluices to repulse enemies. The Venetian traveller Cesare Federici in the sixteenth century considered the Arakanese fleet and its use of water as defence, reporting that: The kingdom of Aracan is in the mid-way between Bengal and Pegu, and the king of Pegu is continually devising means of reducing the king of Aracan under subjection, which hitherto he has not been able to effect, as he has no maritime force, whereas the king of Aracan can arm two hundred galleys or foists; besides which he has the command of certain sluices or flood-gates in his country, by which he can drown a great part of his country when he thinks proper, when at any time the king of Pegu endeavours to invade his dominions, by which be cuts off the way by which alone the king of Pegu can have access (Kerr, 1824: 201-202).

The Thai and Burmese managed to retain a level of control due to their familiarity with the terrain. Until the late seventeenth to eighteenth century, empires from the Indian peninsula, China, and Burma were not able to seize control of the circulation in the NBB. Ibn Battuta, the Muslim explorer, witnessed the flourishing trade along the rivers of the Ganga-Meghna-Brahmaputra system: The way to Bengal and Lakhnauti lies through this river, and along the bank of this river to the right as well as to the left there are water wheels, gardens and villages such as those along the banks of the Nile in Egypt. […] For fifteen days we sailed down this river passing through villages and orchards as though we were going through a mart. There are innumerable boats there and each bout contains a drum. When two boats confront, each beats its own drum and thus the sailors transmit their mutual greetings (Husain, 1976: 241).

While travelling from Bengal to Central Tibet via Assam and Bhutan in 1627, the Portuguese Jesuit missionary Estêvão Cacela wrote: There are sixty and more of those (choquis or duty station) on those rivers up to Azó (Hajo). The journey went on by the Ganges’ arms, very fresh and very pleasant, of excellent water, and lined with countless villages, where everything abounds. Azó is the main city and the capital of the kingdoms of Cocho, wide countries very populated and very rich (Didier, 2002: 219).

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Duties were administered on the markets but more importantly on the ghats, or landing steps, of the riverbanks, and on trans-shipment locations between rivers and the sea, sometimes by way of mints, and at duty houses in the ports (Deyell, 2010). During the sixteenth century, the duty levied on the goods entering Bengal was around 37.5 per cent, but this was considered light compared with the profits the trade afforded, which ranged from two and a half to three times the value of the goods, or 250 to 300 per cent (Pires, 1944: 93; Deyell, 2010: 86). The trade also flourished in the valleys between the hills and passes in Upper Burma, Manipur, and Cachar, and in the foothills and bazaars of the cities in the plains approaching the mountains, as witnessed by Pemberton as late as the nineteenth century (Pemberton, 1835). The easternmost itineraries spanned Yunnan to Manipur, Arakan, or Ava without travelling via the delta river system. The coastal trade still, however, brought a proportion of the goods via Arakan or Ava to Chittagong. The Ganga-Meghna-Brahmaputra river system provided waterways into the rich hinterland up from the Bay of Bengal, which was the interface with regions overseas, so the delta was of major economic importance. European travellers clearly perceived this. In the early sixteenth century, Tomé Pires wrote about the neighbouring kingdoms of Coos9 and Tripura: The rich things there are in Bengal are made in these kingdoms, and because they cannot live without the sea, they obey him, because he allows them an outlet for their merchandise (Pires, 1944: 90-91).

Pyrard de Laval, the French navigator, also described his visit to Bengal in 1606: They (the kings of Aracan, of Chaul)10 also pay him tribute for such harbours as they have in their territories; and at all of these a great trade is carried on in all sorts of merchandise, the merchants exporting large quantities of goods, by reason whereof they dare not risk the loss of this king’s good-will (Pyrard, 1887: 327).

From the rivers, locally built vessels took charge of the goods in the shallow waters of the delta. They were able to navigate the coast, which was notoriously hazardous, and transported the goods either to larger cargo ships or directly overseas. The delta was thus the gateway to the riches of 9 Coos, or Cõus in the manuscript: Cooch Bihar and Cooch Assam. 10 Probably Chaul Khoya River (Assam).

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the NBB, and vessels able to sail the open sea, the coast, and the rivers along the shoals and in the creeks and channel were required. Goods were thus carried from the NBB to elsewhere in the Indian peninsula, Southeast Asia, and further afield, to the Indian Ocean and the Chinese and Arabian seas. The channauka, which still traverse the coast between the Reju canal and Teknaf, the sampan of Chittagong, the trawler, and the balami were part of this network of transportation of goods from rivers to the sea. Fragmentation of the NBB and shadow networks As the influence of the financial sector grew and the power of Bengal’s moneychanger-bankers increased, cowries were gradually replaced by coins up to the sixteenth century (Deyell, 2010).11 By the second half of the seventeenth century, the end of the cowrie monetary system – partly caused by the diversion of the flow of cowries to the Atlantic slave trade – was a decisive move towards integrating Yunnan into the Chinese empire (Yang, 2004). The Ahom kingdom also resisted the attempt to integrate it into the Moghul Empire, instigated by Mir Jumla, who retained tight control over trade and circulation (despite challenges to this control in the late eighteenth century). More radical shifts took place in the circulation of the NBB during the nineteenth century. The Burmese expanded into Arakan, Assam, Manipur, and Cachar; the British f irst moved into Assam and the neighbouring kingdom, and later into Burma, creating both inner and outer borders and imposing its trade policy; and finally, in the 1820s, the steam engine and other capital-intensive technologies took over the main commodity flows. The border-making and socio-territorial ethnicization conducted by the East India Company from the late half of the eighteenth century, and by the British Crown from 1857 to 1947-1948, had multiple and fractal effects, which have been highlighted by scholars in a growing corpus of studies. Whilst the local networks allowed the circulation of goods, but also the movements of groups of tribal immigrants, as well as traders, warriors and ambassadors (Bareh, 1970: 129), the British enforced an extremely restrictive mobility regime both within their territory and between the newly drawn borders of their empire and the neighbouring areas. The Inner Line set up in the Bengal Eastern Frontier Regulation in 1873 and the MacMahon Line of 1914 inscribed these mobility restrictions in law. They cordoned off hilly 11 But cowries remained in use well into the nineteenth century in some parts of Bengal, in Assam, and in neighbouring regions.

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areas and broke apart the synergies between the hills, mountains, and plains (Zou and Kumar, 2011: 159), but also cut across the hill-littoral synergies that were crucial to the southeast Bengal-Chittagong-Arakan arch. Here, the hills, rivers, and littoral zones are interspersed, and the circulation and social networks reflected the complex interdependencies. The territorial strategies of the East India Company and the British Raj were based on specific guidelines. One was to develop and protect the plantation economy, particularly the tea and the rubber plantations in the hills. Another was to create buffer zones to check any possible attacks from both the newly acquired territories that were only loosely administered and from the neighbouring Burmese, Chinese, or Russian powers. The regulated trade12 was reoriented towards the British Empire in a core-periphery pattern, as depicted by Wallerstein (2004) in his world-system theory. This reorientation and the bypassing of local intermediaries were facilitated by the newly implemented steam engines used to navigate seas and rivers, and by the railways for land transportation, which were to the detriment of the former transport regime, as was the insurance system, which also favoured the new capital-intensive transport. The printed press, the telegraph, and other communication media also ensured the control and information flow of the state, and other capital-intensive bodies dominated the forms of information circulation. The process of constructing multiple borders under colonial rule, and thereafter under nation-states, created legal and other obstacles, but did not stop circulations. Rather, it recast them, as the new and remote legal regime rapidly led to intense smuggling in the border areas. The NBB was turned by all sides into a frontier region (Van Schendel, 2002a), and the illegal trade soon assumed an almost structural dimension. Indeed, each new border and ban on trade and mobility created new opportunities for lucrative smuggling, particularly in the trades of opium, counterfeit currencies, firearms, and humans (in the form of ransoming). Smuggling by light sea vessels along the Arakan-Chittagong coast was described as early as 1799 by Hiram Cox (1821): But an object of much more serious import to the trade of this place [Rangoon] than the above is the communication […] over land by way of Arakan. To which place it is only 7 days from the banks of the Irrawaddy. From Arakan the merchants go by boats to Chittagong and from there to Cossimbazar and Dhaka and all the original manufacturing places. 12 Regulated by the law of the state and the international laws it recognizes.

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Here they purchase with silver smuggled out of the country their goods. They return by nearly the same route, employing the coolies of Arakan to carry their goods (Van Galen, 2008: 21-22).

Restriction on circulations in the new borderland supported a lucrative business in an ever-expanding clandestine economy. The more borders there were, the more possible entry points. By the beginning of the 20th century, the British authorities regarded the French enclave of Chandernagor in Bengal as a major gateway for the entry of illegal firearms (Popplewell, 1995; Misra-Besnard, 1998; Berthet, 2006: 167), of which Burma remained a major provider. However, they themselves revived Bhamo, the old nodal market of the NBB, by providing weapons to the Shahn in their attempt to weaken the Burmese king (Dzuvichu, 2014: 57-60). Dzuvichu (2010: 46-47) shows how the trafficking of firearms along the North East frontier increased from the 1860s onwards, particularly among the Kukis, but also by other groups such as Lushais, Shendus, Khasis, Nagas, and the Chins. The increasingly strict regulations made this trade, which used multiple entry points, more profitable, from Calcutta to Upper Burma but also in Cachar, the Sunderbans, and the Chittagong region (Dzuvichu, 2010: 51-52). Ransoming people in return for firearms became a relatively widespread practice, notably by the Lushai and Shendu across the Arakanese border. The flow of weapons also changed the nature of the domestic rivalry and warfare among various communities, and transformed the environment due to the changing of hunting practices. The supply of weapons was sourced in numerous ways, such as raids on guards and posts; the desertion of soldiers with full equipment, which encouraged the hiring of non-local communities to prevent the outflow; from the crews of the steamers companies in Assam, including those from all ranks; licensed sellers; the regular militia; and even from army and police stations (Dzuvichu, 2010: 69). The role of the steamers highlights that from its inception, the new transport regime also played a role in the clandestine trade. The first instance of the illegal trade in firearms recorded by the British authorities in the eastern part of their Indian empire was of muskets circulating among the Kukis of the Chittagong hills in 1863. An inquiry by A. P. Phayre, chief commissioner of Burma, revealed that the weapons were being smuggled from the Arakanese territory via native vessels to the coast. A higher level of surveillance on the Arakanese and Cox’s Bazar coast was declared necessary, but with little effect. Rivers, creeks, and the immense sand beach between Teknaf and Chittagong offers innumerable landing places for the versatile sea vessels. Their sailors, like those today,

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mastered the skills to manoeuvre in the shallows using the currents and the tide. Thus, firearm smuggling from the Bay of Bengal to north-eastern India continued unabated (Dzuvichu, 2010: 46-47). Almost a century and a half later, an event similar to this first instance of illegal firearms trade occurred. On 1 April 2004, ten trucks of the state-owned Chittagong Urea Fertilizer Ltd. were seized while being loaded from two fishing trawlers onto the jetty. An impressive arsenal was recovered: 4,930 types of sophisticated firearms, 27,020 grenades, 840 rocket launchers, 300 rockets, 2,000 grenade launching tubes, 6,392 magazines, and 1,140,520 bullets. A long enquiry and prosecution followed. The ‘10 Truck Arms and Ammunition Haul in Chittagong’ featured in the Bangladesh press for over ten years, and even gained a Wikipedia entry.13 It is believed that the arsenal was intended for the Union Liberation Group of Assam, a militant group known for its violent actions in India. High-ranking army officials from the then ruling government, along with the chief of the ULFA military wing, were sentenced to death in 2014 (Habib and Talukdar, 2014). For many years, the illegal trade of weapons was facilitated across socio-cultural and ethnic borders by the light coastal ships, the hills of the north-eastern peninsula, the network across the formal and informal strata of the State. Throughout, the wooden vessels that had ruled the trade to and from the NBB remained active but were out of sight of the regulators and their registers.

Circulation in the shadow of modern transport: the case of coastal transport Falling out of sight: The ‘native’ coastal trade In the 1950s, Fernand Braudel examined the alternate domination of large and small ships and cargo in the Mediterranean Sea and found that the latter often corresponded with periods of prosperity and expansion (Braudel, 1972: 295-311). The shifts between the two corresponded with the dominant investment structures rather than any technological hierarchy. Large ships required large-scale state-sponsored investment, while smaller fleets were sustained by privateers, were less risky and offered more flexibility. However, the mainstream conception of technology suggests that the shift from sails to steam was a linear change. Steam-, and soon after, steel ships could 13 See https://en.wikipedia.org/wiki/10-Truck_Arms_and_Ammunition_Haul_in_Chittagong.

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travel more quickly and carry more cargo than slower and smaller wooden vessels. Yet, a close study of the situation in the NBB reveals a much more complex history. The light wooden ship fleets had become marginalized,14 along with the marine resources that were central to the diet and livelihoods of those in the Bengal delta. Much of these came from coastal fishing (Cederlöf, 2014).15 The sidelining of local shipbuilding contributed to the creation of a littoral zomia in the NBB, as a counterpart of the concept of the hill zomia, defined first by Van Schendel (2002b) and developed by James Scott (2009), and also played a role in the decline of the mobility that characterized the littoral cottage industries, along with the development of a shadow maritime silk road. Hornell, the shipping expert, has made an observation critical to the understanding of the sea trade in the NBB: [T]he number and the average size have become reduced, not on account of lack of skill on the part of the present-day designer and workpeople but solely owing to the difficulty which owners experience in earning remunerative freights with large tonnage sailing vessels, part of the handicap lying in the difficulty of effecting insurance upon cargo carried in native craft (Hornell, 1920: 178).

This downsizing of ships was observed in the NBB, as exemplified by the fate of the sampan.16 Unlike vessels powered by steam, light vessels had the advantage of versatility, and they were used for fishing, as ferries for small and intermediary journeys, in coastal and river trade, but also for smuggling in the dangerous coastal and estuarine shallow waters. They therefore remained economically relevant on the margins of the new formal and registered circulation regime, but not apart from it. This fleet of light and highly manoeuvrable ships has gone unnoticed in academic studies, which focus on steam ships, as only they were registered in the official records (Ray, 2011: 171-204). Compared with those constructed in the large-scale 14 See, for example, a remark by Flory, a timber merchant, in the novel, Burmese Days, ‘Where are the Indian muslins now? Back in the forties or thereabouts they were building sea-going ships in India, and manning them as well. Now you couldn’t build a seaworthy f ishing boat there’ (Orwell, 2009: 39). 15 Around 25 to 35 per cent came from coastal fishing, the rest coming from fisheries, rivers, ponds, and flooded land during the monsoon. Marine resources represent a central input of protein in the Bangladeshi diet. 16 Whilst three sizes of sampan plied the coast and rivers of the NBB, including large sampan for cargo transport on sea, only the smallest one, for river ferrying, is still in use (Marre, 2013).

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shipyards of British or Indian industrialists, wooden ships required less investment and were extremely adaptable. Many continued to be produced, supplying a still extensive economic sector. Hornell (1920: 178) further elaborated on how the new forms of transport affected the traditional economy, which for centuries had carried huge cargoes by both land and sea: Of ships in contradistinction to boats properly so-called many f ine examples ‘running from 50 to 300 tons’ register were engaged in the Indian coasting trade a few years ago. The baggala and pattamar are run so cheaply that true ships were never able to compete with them on the West Coast. In the Bay of Bengal this competition was not severe, and as there has always been much carrying trade between Bengal and Burma on the one hand and the South Indian and Ceylon ports on the other, a fine fleet of brigs, barques and dhonis found these remunerative runs till the regularity and insurance advantages of steam traffic ran the slow and irregular sailors almost off the sea (Hornell, 1920: 178).

The light vessels in the NBB were not run off the sea by regular shipping lines, as scholars such as Jansen et al. (1989) and Greenhill (1971) and the film directors Hollander and Mertes (1984) testify. The native transport system adapted to the new economy, downsizing its vessels and taking charge of the transport not covered by the new vessels and insurance regime. Parallel to the capital-intensive and recorded circulation was an informal one that was barely controlled or registered. Nevertheless, the native boats, or country boats as they are now referred to, carried considerable cargo, as Greenhill (1971: 41-42) observes of river boats in the 1960s: It was always difficult to find facts in this industry. Boats are not registered; there were no statistics of cargo carried. But I was told of men who own over five hundred bi cargo boats outright which could mean something like one hundred thousand pounds as the private capital of one individual. Some of these men, I was told, would boast of never using bank finance.

Jansen et al. (1989) also make similar observations in their study of the boats of Bangladesh. Not only did smaller ships retain economic relevance through their unregistered traffic, but they also complemented registered vessels. In the

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absence of a modern deep seaport, constant trans-shipment from modern huge cargo ships by lighter vessels was, and is still, required (Shepard, 2016). In the shallow coastal waters of the delta, the locally built vessels retained an edge. This role, alongside the ships of the regular shipping lines moored on the bay, ensured that they would survive. Consequently, their smuggling activities were even more difficult to distinguish from the legal ones, and thus more difficult to detect. Light sea vessels, illegal circulation, and human traffic Piracy against the fishermen travelling on the wooden fishing vessels such as trawlers or channauka regularly features in Bangladeshi newspapers. The usual targets are the catch and fishing nets, and sometimes the engine too. However, the ransoming of the crew is the most profitable aspect. Compiled data on the subject are not readily available, but it has been reported that at least 4411 fishermen were killed and 1000 more wounded between 2008-2009 and 2013-2014, according to Mujibur Rahman, Chairman of Cox’s Bazar District Fishing Trawler Owners Association (Chakma, 2014).17 In addition, from 2011 to 2012 around 1000 fishing boats were attacked and more than 3000 fishermen abducted (of whom 45 were killed) around the coastal town of Chakaria and the island of Maheshkhali just a few miles away. Around US$1.28 million is reported to have been acquired in ransoms. Cox’s Bazar and the deltaic and labyrinth mangrove across the Bangladesh-India border of the Sunderbans appear to be the two areas affected most. Cox’s Bazar-Chittagong region is also regularly reported to be a landing point for the import of yaba (or ya ba), a mixture of methamphetamine and caffeine produced in Burma that has replaced heroin in recent years. The drug generates a considerable trade and numerous press reports, such as the seizure of 980,000 pills worth 290,000,000 taka (3,270,234 euros) in the Koriyakhali area of Teknaf Upazila in Cox’s Bazar, on 16 April 2017, from a boat deserted by its crew (Greenwatch, 2017). Again, light coastal ships, most of them wooden, are used. Out of sight of the main regulated traffic, the regular (fish, trans-shipment) and clandestine (piracy, drugs, etc.) coastal traffic on light ships evades studies and data. The clandestine trade largely relies on transborder traffic. The most dramatic and least reported is the human trade. State-regulated labour migration in Bangladesh is of a massive scale and is essential to the country’s economy (Abrar, 2013). The illegal circulation of people – of 17 The article does not say whether these figures apply to the whole of Bangladesh.

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Bangladeshi towards India (Berthet, 2017b), and Rohingyas towards Bangladesh – developed alongside that of products in a continuous clandestine flow supported by many small-scale operators. The migration towards India is regularly reported and became an electioneering theme (ibid.) in India, but the coastal-sea clandestine flow from Bangladesh towards Thailand and beyond is rarely mentioned. It is part of a transnational network and the commodity system in the new global economy. From the conversation reported at the beginning of this article, I could vaguely discern the existence of shadow human circulation. I had no idea about the scale, nature, or intricacy of the clandestine networks, or that one of my favourite places in the world was a ‘Malaysia airport’. I learned this about two years after I left Bangladesh in a series of articles published in The Daily Star (Hossain, Zinnat, and Swapan, 2015a, 2015b, 2015c). This revealed a dense human trafficking structure supported by manoeuvrable light vessels that can land at any point along the almost 150-kilometre beach, interspersed with creeks and channels. In the shadow of a massive regular economy of migration, and of numerous although incomplete humanitarian reports on the Rohingyas’ exodus, this flow could be heard of in chance conversations like the one I had, but it was hardly reported on until this series in The Daily Star revealed the dramatic scale and conditions of the phenomenon. A long article published by The Guardian (Hodal and Kelly, 2014a, 2014b) on slavery in the fishing industry in Thailand helped to complete the picture. This mentioned trafficked people from Burma, Laos, and Cambodia, but not the networks in Bangladesh. Similarly, the investigation published in The Daily Star did not mention the fishing industry in Thailand. Connecting them provides a broader picture of human trafficking and clandestine circulation from the coast of the NBB to the Andaman seas, and in the even larger shadow economy of global commodities. In May 2015, The Daily Star published the first part of a series entitled ‘Transnational Crime Network, Slave Trade Booms in Dark Triangle. Transnational traffickers lured some 2.5 lakh Bangladeshi fortune-seekers through sea route in 8 years, held them in Thai jungles for ransom, used them as slaves’ (Hossain, Zinnat, and Swapan, 2015a). Based on a long investigation, the first article details the various stages of the trafficking and attempts to assess its scale: According to a UN report released in December last year, about 53,000 people from Bangladesh and Burma voyaged to Malaysia and Thailand by sea that year alone. Estimates by local and international NGOs are based on secondary sources, mainly media reports, and do not reflect the true magnitude

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of the problem. In November last year, this newspaper interviewed eight trafficked victims at home and in Malaysia, six union chairmen of Cox’s Bazar’s coastal area and several rights activists to get an idea of the trade. The figures they gave are staggering: At least two cargo vessels, each carrying about 500 people, leave Bangladesh territory from about 20 nautical miles southeast of the St Martin’s Island every week, eight months a year. Usually, the business is down in June-September because of rain and turbulent sea.

The article indicates that 4000 people are trafficked every month, or about 32,000 during the eight months of the sailing season every year. The ransom expected is between two and 3.5 lakh takas (2255 to 3950 euros), the potential turnover is about 640 to 1220 crore takas (72,170,681 to 126,400,000 euros), and more than 200 million euros if we go by the estimates of trafficked people for 2014.18 The prospective migrants are detained in retention camps, often in the rubber plantations in Songkhla province near the Malaysian border, or in ships moored in the Andaman seas. When families cannot afford the payments, the trafficked people are either killed or enslaved and sold mainly to ship or plantation owners. Mass graves have been discovered in Songkhla province. The detainees are treated badly throughout their ordeals, sometimes leading to their death. If the ransom is received the trafficked may be taken to neighbouring Malaysia. The trafficking network is a complex nexus involving Bangladeshis in villages across the country and at the departing sites on the coast: those who provide shelter for the night(s) preceding the boarding, shopkeepers who provide food, boatmen, a chain of brokers sometimes including those formerly trafficked, those taking care of the money transfers via telephone banking, Thai traffickers, businessmen, and the officials at every border between Bangladesh, Thailand, and Malaysia. Among the trafficked people, the number of Rohingyas is very approximately estimated, given the lack of accurate data, at around ten to fifteen per cent. According to UN official figures, some 140,000 Rohingyas live in Malaysia and 132,000 in Thailand, but the actual number could be much higher (Palma and Bin Habib, 2015). Hence a large majority are Bangladeshi people from all over the country. They are transported in the ‘ghost boats’ of the Thai fish industry, which travel the Thai Gulf and beyond in international waters, and through networks bring in other trafficked people from Burma and neighbouring countries (Hodal and Kelly, 2014a, 2014b). This local economy is directly connected to the global economy, particularly through 18 Mistakenly calculated at 62 crores in the article, i.e., 620,000,000.

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the shrimp industry and the mainstream retail global companies involved. In Thailand, 500,000 people are estimated to be enslaved, mainly in this fishing industry. The involvement of officials and politicians is considered essential. These 21st-century slaves are considered to be less expensive than those trafficked in the nineteenth century. Hence, the shadow economy of the NBB and the clandestine transborder migration are connected to the global economy by means of coastal transportation, which is itself in the shadow of the regular shipping lines. A similar evolution was described for the slave trade in the NBB in the seventeenth century, when the Arakanese kingdom subcontracted part of the trade to the Portuguese, who connected it to the wider colonial trade across Asia and beyond. However, unlike the population of the Bengal delta during the late medieval and early modern periods, the potential victims today are unaware of the threat. Evolution of human trafficking in the NBB Fernand Braudel’s (1972) study of the Mediterranean Sea again proves useful. His three-pronged approach suggests that time is required before the continuity and changes in human trafficking and the slave trade can be assessed within the space of the NBB. Human trafficking in Bangladesh is facilitated by a larger mental landscape, in which narratives of migration are pervasive and fed by the more or less realistic and truthful accounts of kin or others involved. Migration plays a central part in the domestic economy through remittances (Abrar, 2013: 18). The narrative of human trafficking brokers easily slots into a frame in which the state does very little to raise awareness about the numerous potential dangers of migration. This allows them to sustain the myth of overseas job opportunities waiting for takers, in a country where unemployment is on a massive scale, particularly among the youth (Sohel and Khan, 2015),19 who represent a very large part of the population. It is also facilitated by the extended conception of kinship in Bangladesh, which allows brokers to enjoy a fair amount of trust, and so the first and crucial step in the journey may be taken voluntarily by a victim lured by a broker. However, once the victims approach the landing point on the coastal strip south of Cox’s Bazar, all of their belongings are taken away and they are detained (Hossain, Zinnat, and Swapan, 2015c). 19 The article states that ‘In 2013, about 41 per cent of Bangladeshi youth were considered NEET (not in employment, education or training) and the portion of young unemployed NEETs was 78 per cent, according to the report’.

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As mentioned, ransoming was already practised in the illegal firearms trade during the nineteenth century, but it had an older legacy linked to slavery under Arakanese rule from at least the fifteenth to the seventeenth centuries (Van Galen, 2008). Travellers’ accounts relate the brutal enslavement and ransoming of the population of the Bengal delta by both Arakanese and Portuguese sailors. The seventeenth-century traveller François Bernier depicted how the king of Arakan used the Portuguese as an ‘advanced guard’ to keep the Moghuls at bay. To protect his frontier, he allowed them to settle in Chittagong, granting them land and a portion of the benefits from the duties. The freebooters soon became famous for their ‘unawed and unrestrained’ depravities, which deeply resonate in the memories of the inhabitants of eastern Bengal: They scoured the neighbouring seas in light galleys, called galleasses, entered the numerous arms and branches of the Ganges, ravaged the islands of Lower Bengale, and, often penetrating forty or fifty leagues tip the country, surprised and carried away the entire population of villages on market days, and at times when the inhabitants were assembled for the celebration of a marriage, or some other festival. The marauders made slaves of their unhappy captives, and burnt whatever could not be removed […] Their treatment of the slaves thus obtained was most cruel ; and they had the audacity to offer for sale, in the places which they had but recently ravaged, the aged people whom they could turn to no better account. It was usual to see young persons, who had saved themselves by timely flight, endeavouring today to redeem the parent who had been made captive yesterday. Those who were not disabled by age the pirates either kept in their service, training them up to the love of robbery and practice of assassination, or sold to the Portuguese of Goa, Ceylon, San Thome, and other places. Even the Portuguese of Ogouli in Bengale, purchased without scruple these wretched captives, and the horrid traffic was transacted in the vicinity of the island of Galles, near Cape das Palmas. The pirates, by a mutual understanding, waited for the arrival of the Portuguese, who bought whole cargoes at a cheap rate; and it is lamentable to reflect that other Europeans have pursued the same flagitious commerce with these pirates […]. (Bernier, 1891: 176)

Michael Charney, in his study of human settlement and the slave trade in Arakan, notes that raids in the Bengal delta and human traff icking started before the Portuguese arrived and partly took it over, probably in the fifteenth century (Charney, 1999: 144-185). It was a deliberate policy

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carried out through raids aimed at supplying skilled labour and farmers to the plains and valleys of Arakan. Subcontracting to the Portuguese gradually resulted in the inclusion of the regional slave trade in the wider Indian Ocean transnational trading networks, and other European nations took part in it, notably the Dutch, as Bernier mentions. The local oral stories collected by Dineschandra Sen (1926) in his famous The Ballads of Eastern Bengal transmit the memories of the raids that occurred up until the 20th century. The ballads also recount the resistance of the Eastern Bengal people, who also at times organized collective maritime expeditions to retaliate against the harmads. The extension of Mughal rule contributed to the gradual ending of the trade, although raids continued until the end of the eighteenth century. A chain was laid across the Hooghly river to protect Calcutta from raids by the Maghs, as the Arakanese were called by outsiders, and was still evident in the 1770s (Hardgrave, 2001: 106). By then, however, the raids had become more sporadic. This period of Arakanese rule and frequent raids is still remembered in the collective memory of Bengal as an unruly time. In 1826, Bengal and Arakan came under British administration, followed gradually by the rest of Burma, first in 1853 and then in 1886, which lasted until 1937. The circulation of workers between Chittagong and the Arakan region, and beyond in Burmese territory, was officially acknowledged and reported as a voluntary seasonal migration following agrarian cycles, with some of these migrants settling in Burma (Hunter, 1876; O’Malley, 1908). It contributed to the expansion of the agrarian economy. Compared with the Burmese, the ‘Chittagonians’ had a reputation as hard workers in the eyes of the British (O’Malley, 1908; Mazumder, 2017: 9). The phenomena of illegal migration, exodus, and communal confrontations emerged after the new nation-state territoriality was established, and was subsequently sustained by the dividing of the population into ethnic categories in colonial surveys and censuses. Thus, divisions were created on both sides of the border of British India – later East Pakistan – and Burma, but also India and East Pakistan. The 166 India-East Pakistan enclaves represent the apex of fragmentation, in which any mobility became clandestine (Van Schendel, 2002a). It triggered illegal circulation networks across the borders that fed a clandestine economy, which assumed a structural dimension (Berthet, 2017b). Burma became an administrative entity distinct from British India in 1937 and Pakistan and India became independent in 1947, as did Burma in 1948. In addition, officially recognized Burmese communities were listed and the Constitution of India referred specifically to religions. Each of these developments represented a step towards creating outer and inner

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borders and contributed to further marginalizing transborder communities such as the Arakanese, and to marginalization within the margins, such as the Muslim population of Arakan, who were identified as the Rohingyas.

Conclusion: Shadow Silk Roads and circulation in the new transport regime The shadow circulation along the Maritime Silk Road is one of the consequences of linear borders, along with fragmented and exclusive territoriality, which push some minorities away. The state’s remote control of circulation and the lack of adjustment to the regional and local context result in clandestine mobility, leading to profitable opportunities in the illegal economy. The border region flow is locally managed but is de facto outside the formal sanction of the state as part of its shadow economy – linked to its very presence and actors – and connected to the wider global shadow economy. In 1865, the Under Secretary to the Government of India, H. Lepoer Wynne, emphasized that circulation should be examined through spaces rather than regions or countries: Considering the efficacy of the existing surveillance measures in Assam, Hopkinson in his letter to the Secretary, Government of Bengal, thus rather apprehensively remarked that the shutting up of Assam would be insufficient unless Sylhet and Cachar were equally well closed, even then Manipur would not suffice without British Burma or the latter without Bangkok [and that] no measures taken would hermetically close the sources from which arms might eventually reach our frontiers for even Bangkok and China are not too remote (Dzuvichu, 2010: 64-65).

Within-region or within-country circulation control had little chance of working, either then or now. By locating circulation management in a Braudelian framework of space, transborder circulation and identity can be better understood. Otherwise, the interlocking and the interconnectedness of sea, river, and land circulation in the NBB may be overlooked. Both transborder circulation and identities are intertwined. Contemporary borders marginalize local and regional communities and circulations. State or inter-state-driven capital-intensive corridors, deep seaports, and shipping lines will not reverse the trend and trigger a revival of the circulations referenced in the expression of ‘the Silk Road’. Instead, it is likely that borderland/sea communities and circulations will be marginalized further.

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The NBB developed as a space over the centuries, probably beginning in the first half of the first millennium BC, and developed its own ecosocio-management system of circulation that brought together different regions and led to strong interdependencies between them, in addition to connections with some regions overseas. The circulations referred to as the ‘Maritime Silk Road’ were part of this multi-scale management system in the NBB. Local stakeholders had a primary role in these circulations and their management. The dynamics of this space evolved over time with the rise of the financial sector in Bengal, the integration of Yunnan into the currency regime of mainland China, the expansion of the kingdom of Burma, and border delineation during British colonization. Rather than a space, the competing entities linked together by different levels of interdependencies became frontier regions vis-à-vis each other, ruled by very restrictive circulation regimes and exclusive territoriality. This immediately led to the growth of clandestine trade. The networks cut across geographical and social strata and interfaced with the legal sector. By the nineteenth century, the new borders, transport regime, and coreperiphery colonial economy had helped to turn the NBB, a major trading space, into a series of peripheries tied to respective cores (centres/capitals), with a growing shadow economy. The new political and transport regime marginalized but did not end the previous circulations. They rather fell out of sight and/or were pushed into the margins of legality, thus becoming part of the larger unrecorded and illegal economy. Today’s human trafficking between Bengal and Arakan and beyond to the Thai-Malay Archipelago cannot be viewed as simply an updated version of previous types of circulation. The ransoming and enslaving of people in Bengal, North East India, and Arakan have gone through different phases. During the fifteenth to eighteenth centuries, raids on the littoral of Bengal and North Odisha were led or subcontracted by the State of Arakan. The potential victims – the population of the Bengal delta – and Arab or European foreigners identified it as extremely brutal and often deadly. Today’s human trafficking operates in the shadows of state control. It is facilitated by exclusive territorialities that prop up this clandestine trade and reject transborder communities, making them stateless and subject to illegal migrations. The Mughal administration appeared to put an end to the trafficking between Bengal and Arakan. The normalization of human circulation presented by the British administration should be viewed in the context of bounded labour and the plantation economy. The communal citizenship designed under the British rule also paved the way for the marginalization

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of minorities and transborder communities in the second half of the 20th century, which has continued to the present day. It fed an economy of illegal human mobility and migration leading to the revival of a slave trade within the domain of the new global economy, such as the global prawn market. The most striking aspect of this trade today is that, unlike in the fifteenth to seventeenth centuries, the potential victims are unaware of this shadow human trade. This unawareness facilitates their trafficking. Will the recent push to open corridors, as part of the One Belt One Road or of rival projects, revive the former circulation of the NBB? As the initiatives of governing states include minimal involvement from local communities in their design and administration, they are likely to take the new transport regime a step further. Deep seaports will probably have the most radical impact on the former transport eco-social system. After their roles in long distance overseas transport were lost in the nineteenth century to the new shipping lines, pre-steam vessels adapted by focusing on the areas not covered by the steam vessels, but also took care of the trans-shipment from the larger steam vessels to the ports. The direct access deep draft ships now have to ports in the NBB may deprive the smaller vessels of this trans-shipping role too. Will we witness a new adaptation phenomenon? What kind of economy will grow under the shade of the new corridors?

Bibliography Abrar, C.R. 2013. ‘Sustaining Gains from Labour Migration’. The Daily Star, 19 March. Bareh, Hamlet, ed. 1970. Nagaland District Gazetteers – Kohima. Calcutta: Government of Nagaland. Beaujard, Philippe. 2010. ‘Three Possible Iron-Age World-Systems to a Single AfroEurasian World-System’. Journal of World History 21(1): 1-43. Bernier, François. 1891. Travels in the Mogul Empire, AD 1656-1668. Westminster: Constable. Berthet, Samuel. 2006. Cultural Dynamics and Strategies of the Indian Élite (18701947). Delhi: Manohar. Berthet, Samuel. 2013. ‘Chittagong: La présence invisible des Rohingyas en leur “capitale” [Chittagong: The Invisible Presence of the Rohingyas in Their “Capital”]’. Moussons, No. 22, IrAsia, Université d’Aix-Marseille. Berthet, Samuel. 2017a. ‘Circulation in the Northern Bay of Bengal: Lows before Areas Studies and Contemporary Borders’. Paper presented in Connected Landscapes: The Alternative Understanding of Asian Societies, History and Ecology, Yale University Inter-Asia Context and Connections Workshop, 5-6 May.

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Berthet, Samuel. 2017b. ‘The Thwarted Flows of Bengal. Reflections on the IndiaBangladesh Border’. Books and Ideas, 27 February, http://www.booksandideas. net/The-Thwarted-Flows-of-Bengal.html, accessed 12 September 2019. Bhattacharjee, Rupak. 2017. ‘Payra Port Fulfils Bangladesh’s Needs and Aspirations’. bdnews24.com, 18 January, http://opinion.bdnews24.com/2017/01/18/payra-portfulfils-bangladeshs-needs-and-aspirations/, accessed 18 May 2017. Braudel, Fernand. 1972. The Mediterranean and the Mediterranean World in the Age of Philip II, Vol. I. New York: Harper & Row. Cederlöf, Gunnel. 2014. Founding an Empire on India’s North-Eastern Frontiers 1790-1840. Delhi: Oxford University Press. Chakma, Anurag. 2014. ‘Maritime Piracy in Bangladesh’. International Policy Digest, https://intpolicydigzeest.org/2014/06/24/maritime-piracy-bangladesh/, accessed 11 May 2016. Charney, Michael. 1999. Where Jambudipa and Islamdom Converged: Religious Change and the Emergence of Buddhist Communalism in Early Modern Arakan, 15th-19th Centuries. Unpublished PhD thesis, Department of History, University of Michigan. Cox, Hiram. 1821. Journal of a Residence in the Burmhan, Empire London: J. Warren & G. & W.B. Whittaker. Deloche, Jean. 1994. Transport and Communications in India prior to Steam Locomotion. Delhi: Oxford University Press. Devichand, Mukul. 2010. ‘Is Chittagong One of China’s “String of Pearls”?’ BBC News, 17 May, http://news.bbc.co.uk/2/hi/business/8687917.stm, accessed 12 September 2019. Deyell, John. 2010. ‘Cowries and Coins: The Dual Monetary System of the Bengal Sultanate’. Indian Economic Social History Review 47(1): 63-106. Didier, Hugues. 2002. Les Portugais au Tibet. Les Premières relations jésuites (1624-1635) [Portuguese in Tibet. The First Jesuits’ Accounts (1624-1635)]. Paris: Chandeigne. Dzuvichu, Lipokmar. 2010. Opening up the Hills: The Politics of Access along the Northeast Frontier, 1866-1942. Unpublished PhD thesis, Jawaharlal Nehru University, Delhi. Greenhill, Basil. 1971. Boats and Boatmen of Pakistan. Newton Abbot: David & Charles Publishers. Greenwatch. 2017. ‘9.80 Lakh Yaba Tablets Seized in Cox’s Bazar’, 16 April, https:// greenwatchbd.com/9-80-lakh-yaba-tablets-seized-in-coxs-bazar/, accessed 18 May 2017. Hardgrave, Robert L. 2001. Boats of Bengal: Eighteenth Century Portraits by Bakthazar Solvyns. Delhi: Manohar. Habib, Haroon, and Sushanta Talukdar. 2014. ‘ULFA’s Paresh Barua Sentenced to Death in Bangladesh’. The Hindu, 30 January, http://www.thehindu.com/news/

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international/south-asia/ulfas-paresh-barua-sentenced-to-death-in-bangladesh/ article5634460.ece, accessed 23 April 2017. Hodal, Kate, and Chris Kelly. 2014a. ‘Trafficked into Slavery on Thai Trawlers to Catch Food for Prawns’. The Guardian, 10 June, https://www.theguardian.com/ global-development/2014/jun/10/-sp-migrant-workers-new-life-enslaved-thaifishing, accessed 22 April 2017. Hodal, Kate, and Chris Kelly. 2014b. ‘Revealed: Asian Slave Labour Producing Prawns for Supermarkets in US, UK’. The Guardian, 10 June, https://www.theguardian. com/global-development/2014/jun/10/supermarket-prawns-thailand-producedslave-labour, accessed 22 April 2017. Hollander, Neil, and Harald Mertes. 1984. The Last Sailors: The Final Days of Working Sail. London: Angus & Robertson in association with Channel Four Television Co. Ltd. Hornell, James. 1920. ‘Origins and Ethnological Significance of Indian Boat Design’. Memoirs of the Asiatic Society of Bengal 7(3): 139-256. Hossain, Emran, Zinnat Mohammad Ali, and Gazi Robin. 2015a. ‘Part I: Transnational Crime Network Slave Trade Booms in Dark Triangle’. The Daily Star, 4 May, http://www.thedailystar.net/frontpage/slave-trade-booms-dark-triangle-80354, accessed 22 April 2017. Hossain, Emran, Zinnat Mohammad Ali, and Gazi Robin. 2015b. ‘Part II: Abduction & Trafficking. Traffickers Kidnap Bangladeshis and Send to Malaysia as Slave Labour’. The Daily Star, 5 May, https://www.thedailystar.net/frontpage/ kidnapped-treated-slaves-past-80511, accessed 22 April 2017. Hossain, Emran, Zinnat Mohammad Ali, and Gazi Robin. 2015c. ‘Traffickers Call Departure Points in Teknaf of Bangladesh “Malaysia Airports”’. The Daily Star, 6 May, http://www.thedailystar.net/frontpage/malaysia-airports-teknaf-80715, accessed 22 April 2017. Hunter, W.W. 1876[1973]. A Statistical Account of Bengal. Delhi: DK Publishing House. Husain, Mahdi, trans. 1976. The Rehla of Ibn Battuta (India, Maldive Islands and Ceylon). Baroda: Oriental Institute. Jansen, Erik G., Anthony J. Dolman, Alf Morten Jerve, and Nazibor Rahman. 1989. The Country Boats of Bangladesh. Social and Economic Development and Decisionmaking in Inland Water Transport. Dhaka: UPL. Kerr, Robert. 1824. General History and Collection of Voyages and Travels, Arranged in Systematic Order Forming a Complete History of the Origin and Progress of Navigation, Discovery, and Commerce, by Sea and Land, from the Earliest Ages to the Present Time, in India, Vol. 7. Edinburgh: William Blackwood. Majumdar, Susmita Basu, and Banerjee Sharmista. 2014. ‘Cowries in Eastern India: Understanding their Role as Ritual Objects and Money’. Journal of Bengal Art 19: 39-56.

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Marre, Yves. 2013. Voiles anciennes du Bangladesh [Ancient Sails of Bangladesh]. Paris-Brest: Musée National de la Marine. bdnews24.com. 2015. ‘Matarbarhi Deep Sea Port Work to Start “Next Year”’, 24 June. http://bdnews24.com/bangladesh/2015/06/24/matarbarhi-deep-sea-port-workto-start-next-year, accessed 18 May 2017. Mazumder, Rajashree. 2017. ‘Illegal Border Crossers and Unruly Citizens: BurmaPakistan-Indian Borderlands 1940s-1960s’. Paper presented in Connected Landscapes: The Alternative Understanding of Asian Societies, History and Ecology, Yale University Inter-Asia Context and Connections Workshop, 5-6 May. Misra-Besnard, Kamakshi. 1998. Le mouvement nationaliste en Inde. Le cas de Chandernagor: le premier maillon de la décolonisation (1905-1952) [Indian Nationalist Movement. The Case of Chandernagor: The First Step Towards Decolonization (1905-1952)]. PhD thesis, Université de Nantes, France. Mukherjee, Rila. 2011. Pelagic Passageways: The Northern Bay of Bengal before Colonialism. Delhi: Primus. O’Malley, L.S.S. 1908. Eastern Bengal Gazetteer. Chittagong. Calcutta: The Bengal Secretariat Book Depot. Orwell, George. 2009. Burmese Days. Delhi: Penguin. 1934. Palma, Porimol, and Walid bin Habib. 2015. ‘Rohingyas Are the Easy Prey of Human Traff icking’. The Daily Star, 5 May, http://www.thedailystar.net/frontpage/ rohingyas-the-easy-prey-80514, accessed 22 April 2017. Pemberton, Capt. R. Boileau. 1835. Reports on the Eastern Frontier of British India, Calcutta: Baptist Mission Press. Pires, Tomé. 1944. The Suma Oriental of Tomé Pires: An Account of the East, from the Red Sea to Japan, Written in Malacca and India in 1512-1515. London: The Hakluyt Society. Popplewell, Richard. 1995. Intelligence and Imperial Defence: British Intelligence and the Defence of the Indian Empire 1904-1924. London: Frank Cass. Pyrard, Francois. 1887. The Voyage of Francois Pyrard of Laval to the East Indies, the Maldives, the Moluccas and Brazil, Vol. 1. Translated by Albert Gray. London: The Hakluyt Society. Rahman, Mizan. 2015. ‘China to Build Deep-Sea Port for Bangladesh’. Gulf Times, 16 April, http://www.gulf-times.com/story/435200/China-to-build-deep-seaport-for-Bangladesh, accessed 12 September 2019. Ray, Haraprasad. 2004. Chinese Sources of South Asian History in Translation: Data for Study of India-China Relations through History. Kolkata: Asiatic Society. Ray, Indrajit. 2011. Bengal Industries and the British Industrial Revolution (1857-1857). New York: Routledge. Scott, James C. 2009. The Art of Not Being Governed: An Anarchist History of Upland Southeast Asia. New Haven, CT: Yale University Press.

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Sen, Dineschandra. 1926[1988]. The Ballads of Eastern Bengal, Vol. 2. Delhi: Mittal Publications. Shepard, Wade. 2016. ‘Bangladesh’s Deep Sea Port Problem’. The Diplomat, 7 June, http://thediplomat.com/2016/06/bangladeshs-deep-sea-port-problem, accessed 18 May 2017. Sohel, Kayes, and Mohammad Jamil Khan. 2015. ‘Youth Unemployment a Big Problem for Bangladesh’. Dhaka Tribune, 14 October. Van Galen, Stephan. 2008. Arakan and Bengal: The Rise and Decline of the Mrauk U Kingdom (Burma) from the Fifteenth to the Seventeenth Century AD. Unpublished PhD thesis, Research School CNWS, Faculty of Arts, Leiden University, Leiden. Van Schendel, Willem. 2002a. ‘Stateless in South Asia, the Making of the IndiaBangladesh Enclaves’, Journal of Asian Studies 61(1): 115-147. Van Schendel, Willem. 2002b. ‘Geographies of Knowing, Geographies of Ignorance: Jumping Scale in Southeast Asia’. Development and Planning D: Society and Space 20: 647-668. Wallerstein, Immanuel. 2004. World-Systems Analysis, an Introduction, Durham, NC: Duke University Press. Yang, Bin. 2004. ‘Horses, Silver, and Cowries: Yunnan in Global Perspective’. Journal of World History 15(3): 281-322. Yang, Bin. 2008. Between Winds and Clouds: The Making of Yunnan (Second Century BCE to Twentieth Century CE). New York: Columbia University Press. Yoichi, Shimatsu. 2016. ‘Effort to Contain China Failed: Bangladesh Strike Cuts Down Abe’s Covert Naval Gambit’. 4th Media, 8 July, http://www.4thmedia. org/2016/07/bangladesh-strike-cuts-down-abes-covert-naval-gambit, accessed 18 May 2017. Zou, David V., and Satish Kumar. 2011. ‘Mapping a Colonial Borderland Objectifying the Geo-Body of India’s Northeast’. The Journal of Asian Studies 70(1): 141-170.

About the author Samuel Berthet is a historian specialized in India and French relations as well as maritime history in the Indian Ocean, particularly shipbuilding and circulation in the Indian Ocean. He was director of Alliance Française in Chittagong where he resided for five years. He taught in Visva-Bharati, Jawaharlal Nehru University and Shiv Nadar University.

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Past and present Shadows of the China-Ladakh-Pakistan routes Vaijayanti Khare Abstract The mountainous desertscape of Ladakh borders China and Pakistan. The political borders appear to be invisible to the pashmina goatherders of Changthang, the apricot farmers of Baltiyul, and the yak herders of Demchok, who wander, absent-mindedly, through this arid land. Often thought of as shadow trade routes, these circuits are a constant in the lives of the people and their relationship with nature. This paper outlines the prevalent interactions and emotions of the people, commodities, and processes that underpin the shadow nature and future prospects of this region. Running through history and security, governance without government, social relationships between state and non-state actors, the study highlights the relevance, or not, of formalizing these routes in view of current economic development dynamics. Keywords: informal trade practices, cross-border trade, traditional exchange, Ladakh, shadow routes

Introduction The Silk Road is a vast tradescape. It embodies historical, geographical, religious, and socio-cultural spaces and has long held sway over fact and fiction, reality and imagination. Even today it fascinates, challenges, and attracts the bold and adventurous from the spheres of economics and geopolitics. The term ‘globalization’ was coined in the early 20th century to capture the economic scenario of the modern world, but the old Silk Road tells the globalization story of a bygone era. The use of the present tense is purposeful, as it has not entirely shifted into the past in the minds of many

Hung, Eva P.W., and Tak-Wing Ngo (eds), Shadow Exchanges along the New Silk Roads. Amsterdam, Amsterdam University Press 2020 doi: 10.5117/9789462988934_ch05

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people across its direct and indirect landscapes, which form a long chain of ‘trade segments’. In short, the Silk Road still exists, just in a different form. Fragmented, specialized by commodity and geography, variously governed or semi-administered, and decentralized, arguably it extends beyond today’s understanding of global trade and international business. The current nature of the Silk Road invites awe, but also raises questions about its identity, relevance, legitimacy, direction, and vision. The vastness of this tradescape, which straddles borders, ideologies, landforms, and sociocultural econo-fiscal systems, brings both opportunities for and obstacles to the development of all people in its wake. With this old Silk Road as our backdrop, we focus on Ladakh, which has been a trans-Asian highland crossroads for trade and culture for thousands of years (Fig 5.1). Ladakh, whose name is derived from la-dags, meaning ‘land of high passes’, is a region frequently defined in relation to its surroundings. Situated on India’s northern borders with Pakistan and China, at the western edge of the Tibetan Plateau, Ladakh is nestled between the Himalayas to the south and the Karakoram Range to the north. Ladakh can thus be viewed as part of the southern boundary of Central Asia, which is traditionally divided into Western Central Asia, including today’s Afghanistan, Kyrgyzstan, Tajikistan, and Turkmenistan, and Uzbekistan and Eastern Central Asia, comprising today’s Xinjiang Province in China. From another perspective, Ladakh can be seen as the northern boundary of South Asia and the Indian subcontinent, which is home to Pakistan, India, Bhutan, Bangladesh, Nepal, and Sri Lanka. Whilst today’s casual travellers may assume these high mountains are impassable, they did not prevent trade in the past. Overland trade caravan routes were a vital feature of Central Asia, linking east with west and connecting regions to the south. Silk Road trade first appears in the archaeological records of the second century BCE, and as the demand for Chinese silk increased during the first and second centuries CE, the local populations of Central Asia emerged as middlemen between empires that stretched from the Roman World to China.

Geography matters Ladakh’s geographical location made it essential to these South and Central Asian trade routes. In this ‘land of many passes’, Ladakh’s towns were the conduits and markets where traders and middlemen from South and Central Asia mingled.

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Figure 5.1 Ladakh as a highland connect

Contemporary Ladakh shares a landscape with Tibet to the east, the Lahaul-Spiti regions to the south, the Kashmir, Jammu, and Baltiyul regions to the west, and the southwest corner of Xinjiang across the Karakoram Pass in the far north. The nature of Ladakh’s mountainous desertscape, which borders both China and Pakistan, means that one can wander unawares into these lands, just like the pashmina goatherders of Changthang, the apricot farmers of Baltiyul, or the yak herders of Demchok. All of these areas are contiguous with China, Pakistan, and Tibet. Ladakh covers an area of approximately one million square kilometres and lies between the two highest mountain ranges in the world: the Himalayas in the south and the Karakorum and Kunlun range in the north. It is divided into five administrative regions: Leh; Nubra; Rupshu; Zanskar; and lower Ladakh. Leh is the administrative headquarters of Ladakh and is situated in the wide, flat valley of the Indus River. Nubra lies in the north-north-eastern direction, on the ancient route linking the Kashmir Valley to Yarkand. The valley of Nubra is one of the more easily accessible areas and so is traversed by caravans bearing a range of goods, which cross steep terrain and make use of natural mountain passes on their journeys between Yarkand and Kashmir. On the western borders, the Kargil-Drass region leads into

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Skardu and Baltistan, and the Zoji La pass leads into Kashmir. Of all the dips in the ranges, the Zoji La is the lowest, at 3500 metres, and the most-favoured route for the caravans’ travelling to and from Leh. The Shyok and Indus rivers have become tracking and navigation lines, their frozen, flooded, or broken conditions being a decisive factor in the trading caravans’ timing and duration. Relatively populated and comfortable geographical way stations include Gilgit, Skardu, Kargil, and Srinagar on the western side, Panamik, Shahdullah, Sangju, and Karghalik to the north, Chushul and Rudok on the eastern side, and Demchok and Tashigang to the south. They make the long trading journeys a little more endurable for both man and animal. The western and northern segments lead to the main markets in Pakistan and Xinjiang China, and the eastern and southern lead into Tibet. Thus, although today Ladakh is regarded as a cul-de-sac, remote and isolated and approachable only from Kashmir and Himachal, its geography was clearly conducive to a trans-Himalayan trading pattern and logistical support.

Historical perspective The beginnings of commercial activity between Leh and Tibet can be traced back to the Lo-pchak and the Zhung-Tsong traditions (Rizvi, 1996) which could well have been the precursors to the subsequent wider trading patterns. These were almost reciprocal ceremonial quasi-religious missions, with the Lo-pchak travelling from Leh to Lhasa and the Zhung-Tsong coming from Lhasa to Leh. The former was a triennial mission of homage and tribute from the King of Ladakh to Tibet’s religious establishments via the Lhasa monastery and the Lamas. The gifts for the Dalai Lama were very specific: gold; perfume; saffron; and bales of a certain type of cloth. The reciprocal Zhung-Tsong was, however, devoid of any ‘tribute’ connotation. Once a year, an official trader of the Tibet government came to Leh with 100 loads of tea, incense sticks, musk pods, turquoise, and herbs, and returned with apricots, saffron, and sugar. As tea was the main product of and reason for this officially instigated mission, the trader gained the title of Cha-pa, the tea-man. Even today, the traders in the Leh market fondly remember this ‘brick-tea’ (so named as it came in big rectangular bricks). Dating the beginning of the trade is difficult, but it clearly continued up until the middle of the twentieth century. The origin of the trans-Karakoram trade route is not documented, but references to it are found in the notes of travellers and missionaries. It appears

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to have been well established by the sixteenth or seventeenth century, by which point it had been in existence for many centuries. Ladakh’s first recorded European visitor in around 1600, the Portuguese merchant Diogo d’Almeida, noted that ‘the King does not tolerate any infidel except the passing merchants’ (Rizvi, 1996). The not-so-regular correspondence between the Celestial Empire and Ladakh (1740s-1750s) shows that China had a continuing interest in East Turkestan and Tibet, which also made Ladakh important, and these descriptions reveal the trade between Ladakh and Yarkand. As a polity, Ladakh was considered ‘free’ before the Dogra invasions from Kashmir, which was briefly supplanted by Sikh rule before regaining control of the region. Religio-culturally, Ladakh was a Tibetan outpost, but administratively, it was governed by other powers. The royal Khan family of Turtuk, the region of passage north of Leh, traces its genealogy back to 1000 CE, as the family history mirrors that of the region (Fewkes, 2009). They were the descendants of the Yabgo dynasty, which ruled the region before the sixteenth century. Once the second-largest kingdom in the region, the Yabgo administered a section of the ‘feeder route’ connecting Ladakh to Kashgar and Samarkand (now in China and Uzbekistan, respectively). Although linguistically connected to Tibet, Baltistan and Ladakh share a cultural and historical affinity with Muslim-dominated Central Asia; Kargil, Leh, and Baltistan constituted a kingdom called ‘Ladakh Wazarat’. The region became part of the Jammu-Kashmir state under the Dogras for over a century. Pakistani forces occupied it in 1947, and in the ceasefire that defined the de facto border in 1949, the entire region was a contested area between India and Pakistan. It remained so until a thin slice of Baltistan was won back by India in 1971. Ladakh and Baltistan are now separated into India and Pakistan, respectively. A little over 100 miles from Leh, the Turtuk sector, as it is now known, is considered a sensitive zone. It was opened to outsiders only in 2010. Thyakshi and Thang, the villages closest to the current Line of Control, are still out of bounds for non-residents. Interestingly, in the nineteenth century, the British considered the Leh bazaar to be a ‘listening post’ (Bellew, 1989). The British suspected that Russia aimed to invade Ladakh, so a Joint Commissioner was posted here, ostensibly to monitor trade, but in reality, his main role was to monitor spies. The Partition of India and the closure of the Sino-Tibetan border in the north made Ladakh a district, along with Kargil, of the state of Jammu and Kashmir. The Line-of-Control and the Line-of-Actual-Control between India-Pakistan and India-China, respectively, now make Ladakh accessible from Kashmir and the Himachal state to the west and south, respectively.

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Ladakh has been denoted as home of a specific ‘people’ (Ladakhis) and has been given extensive benefits under Article 370 of the Indian Constitution. Members of this group have income tax exemptions, loan waivers, low-priced rations of all essentials, a range of subsidies, the benefit of admission to educational institutions, and preferential employment opportunities in the rest of the country. Ladakh continues to voice its protest and demands to be separate from the state of Jammu and Kashmir, wanting at different times to be either a State or a Union Territory of India. This is of great significance in terms of the formalization of trade routes to China and Pakistan through Ladakh.

The ‘informal’ in context Ladakh has been, and still is, of interest to explorers, mountaineers, geographers, geologists, religious and diplomatic missions, anthropologists, social scientists, botanists, wildlife enthusiasts, environmentalists, hydrologists, and, of course, military strategists and geopolitical experts. Numerous related travelogues, letters, reviews, surveys, research papers, and books have been published. The local populations, particularly those of Leh, Kargil, Turtuk, and Nubra, and the monastery inhabitants and the traders of the market towns, have been sensitized to this interest in Ladakh by foreigners, scholars, tourists, and researchers, which is both a help and a hindrance. My method and sources of study are similar to those of scholars before me, but the focus of my enquiry and readings is different. Most published works dwell on the what, who, and how of Ladakh as a trading port, both internal and external. They also touch on the circumstances of its waning or closure, and the political and geographical landscape of this part of the Silk Route trade. In addition to my reading of and gleaning from such published work, my personal interviews and inspection of the material trade items of then and now have shaped my study. I met with traders, government personnel, members of trade associations, NGOs, border military/police/customs officers, Changthang livestock herders, and families in Leh. The Central Asian Museum in Kargil, a legacy of the Aziz Munshi Bhatt, was a source of information on commodities and of my material study of then, and the Moti Market, Leh main market, Changs-pa, Nausher, and the markets of Khaltse, Nubra, and Kargil were the source of my material study of now. Visiting local towns, including those on the borders, provided significant insights into the reality of shadow trade and human interactions in these areas.

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The ‘informal’, with regard to Ladakh, must be understood in terms of recent studies of the concept. The International Labour Office first used the term ‘informal’ in relation to labour in some of its 1972 reports. Since then, the adjective has been bracketed and used in the contexts of ‘labour’, ‘sector’, ‘economy’, ‘trade’, and ‘practices’. As the concept has developed, researchers have questioned its relevance to developing economies, and now consider the distinction between the formal and the informal to be no longer meaningful (Cantens, 2012). The term ‘informal’ has many meanings and is generally based on a quantitative concept. It is associated with small-scale labour that entails few human resources, limited finance, low-level production, and low-volume or low-value trade. The concept of the informal, as evident in analyses of informal trade, relates mainly to border areas and undeclared overland trade between neighbouring countries. In these small cross-border areas, the definitions become more qualitative and seek to identify the goods specifically associated with informal activity. In general, these have the characteristics of economically challenged target customers, or they are prohibited, or there is a shortage or a price difference between the two regions. The idea of concealment has distinguished the informal from the formal, but this distinction now proves to be insufficient, as informal trade is more than just the shadow economy working independently (Taneja, 2005). It now fits in with the formal sector and the state apparatus. Shadow operators may ‘selectively’ fit into the informal sector by accepting some rules but not others. Some traders make declarations to the local authority and pay charges or fees, but not the taxes of the state authorities. This creates a semi-formal grey area in which business is both formal and informal. An operator working in the formal sector may also use his logistical resources to collaborate with informal operators or works independently, by diversifying his business and entering into shadow trade. The concept of informal trade thus extends beyond the cross-border context. Informality in terms of international trade has some or all of these characteristics: a wide geographical area; the organization of financial and goods flows; links between formal and informal operators; a mixture of informal and formal practices; and informal activities grafted on to administrative practices and corruption. The 1970s can be viewed as a turning point in the political approach to the informal. States no longer categorized it as solely a breach of laws, as in the colonial period. It became an economic and statistical approach driven by bilateral and international cooperation. Customs offences, if discovered, have come to be included in a more political and economic framework.

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Some liberalizers see the dynamism of informal activity as an indication of the need for state deregulation and the idea of a developer state, using taxation to finance development rather than to regulate wealth. In this school of thought, the formal is viewed as the first positive indication of the liberalization of an economy. The predominance of the informal is then associated with corruption and the degree of regulation; the more regulation there is, the more informal activity and corruption will develop. The Ladakh story is different, albeit with echoes of the above accounts of informal and formal. The most interesting aspect is how this feeder route of the Silk Road has become a ‘shadow route’, an informal route. India’s territorial claims indicate which of these it is viewed today, and whether it will again become a main or a feeder route. Thus, the centuries-old routes through Ladakh that connect China and Pakistan are worthy of study. Often referred to (and thought of) as shadow trade routes with illicit, illegal, questionable, and nefarious connotations, they are a constant for the people and their occupations, traditions, and their relationships with nature. The word ‘shadow’ connotes both a historical feeder route and a contemporary semi-formal route, partly beyond the reach of governance and fiscal systems. At different times, these routes have, for different people, been the Fur Route, the Grain and Livestock Route, the Salt Route, and the Silk Route. They may now be a part of the developing Land to Sea Route and Oil Route, or even the New Silk Road. My study focuses on the prevalent movement of commodities and the processes that underpin its shadowy nature and its future. I ask whether there can be governance without government, and address the central issue of formalizing these routes in the emerging economic development dynamics of China and India.

Routes then: East, west, and central connecting routes Ladakh does not appear to be a region in which inter-regional trade would flourish, let alone inter-kingdom or international trade. However, even the earliest European visitors noted trading communities and practices. William Moorcroft, who stayed in Leh from 1820 to 1822, described widespread trade in his letters (Moorcroft and Trebeck, 1841). From a late-twentieth-century perspective, Ladakh appears to be on a route to nowhere, and yet through commercial necessity, human ingenuity, and religious devotion, gaps in the series of ranges dividing the Indian subcontinent from the central Asian interiors were found and exploited. Ladakh became the best prospect for

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long-distance trade in the region, and the capital city Leh gained a level of commercial importance that was way out of proportion to its size. The Silk Road includes the oasis land route, the steppe route, and later the sea route. Of these, the oasis route is the most well-known, as it developed with constant and consistent human movement. For over 1000 years, people travelled on this route, often risking their lives for trade, religion, conquest, livelihood, and adventure. On the margins of the main Silk Road, numerous secondary routes contributed to the exchange of goods and works of art and the dissemination of languages, religions, and cultural influences. Many such smaller routes join the main routes, connecting northern India to Tibet, China, and Eastern Central Asia. However, the main routes are considered to be the four most travelled and recorded. The first runs through the high Tibetan plateau and down to the Ganga and Sravasti; another can be traced through the valleys and mountains of western Nepal to the fertile valleys of the Ganga; a third goes down the Ganga from Delhi to Chandraketugarh in West Bengal; and the ‘Ladakh route’ considered here covers the Western Himalaya (Mason, 1929). The term ‘Ladakh route’ is a misnomer. It was, in fact, a network of routes offering a range of choices to the traders of the north Indian plains, depending on their points of origin and destination. Once in Ladakh, the two main routes that entered Central Asia, or more specifically reached Lhasa, Yarkand, or Kashgar, were the Leh-Lhasa and Trans-Karakoram routes. The mountainous summer and winter routes of the Nubra valley not only linked the traders passing through Ladakh with the main Central Asian Silk Road via Khotan, Yarkand, and Kashgar, but even facilitated migration from Central Asia into the southern subcontinent. These routes remained open till 1950, and the last major caravan to come this way did so in around 1939-40. As recently as between 1937 and 1949, the Nubra Valley route provided passage for three instances of exodus, when the Kazakhi people fled due to disturbances on the Sino-Russian border (Rizvi, 1996). These refugees entered Chushul-Ladakh through the Nubra Valley and passed through western Tibet via the Spungar gap, after traversing one of two routes from opposite sides of the great Gobi Desert: the western via Kashgar and Khotan, and the eastern via the Taklamakan desert and Lopnor. They travelled with a large entourage and numerous animals, such as horses, mules, sheep, yaks, and double-humped camels. Many refugees remained and settled in the Nubra Valley and were accepted by the local population. Trade, both internal and external, was the main source of revenue for Ladakh in the Silk Road era. The internal trade was mainly conducted between districts within the region. Thus, the people of Rupshu brought salt

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to Zanskar and took barley in exchange. Zanskar then exchanged salt with the inhabitants of Suru for winter clothing. The Changthang goatherders bartered barley for salt and meat. The lower Ladakh traded apricots, walnuts, and saffron for salt, wool, and meat from Leh and Nubra. The highlands and the valleys thus had a seasonal, continuous trading pattern, and this very internal pattern also fed into the emerging external one. Thus, in this subsistence trade, food grains grown in the lower valleys of the Indus were exchanged for wool and salt from Changthang and western Tibet. Goods such as food grain, cotton, dyeing materials, gunny bags, utensils, dry fruits, silk, saffron, shawls, and works of arts from the Western Himalayas, and precious and semi-precious stones, herbs, gold dust, musk, salt, borax, and pack animals from Tibet thus found their way into Central Asia through the passes of the Himalayas. The external trade was maintained through Central Asian trade routes and other roads that connected Ladakh with various points in the lower Himalayas and plains. A trend also emerged for traders from Central Asia to stay on in Leh for months before returning. Even today, traders in the Leh market remember the Yarkandis, Kashgaris, and sometimes the Khotanese as visitors in the harvest months between August and October. Although no evidence has been found of the earliest trade between the various traders, locals tell of the tradition known as Singchyad (‘piece of wood’). This was typically a piece of wood or stone broken into two pieces, marked with the identity of each party, and retained to be tallied, thus confirming the trade contact. This was followed by rituals that strengthened the relationship and provided confidence in the parties’ reputation and honesty. Later, as the volume of trade increased and long-distance trade developed, this was recorded as a written promissory note that gave details of the trade transaction (Markovits, 2000). In the early twentieth century, three main trade routes passed through Ladakh: the Tibetan route east to the city of Lhasa, the South Asian route south through Kashmir, and the trans-Karakoram route north and east into Chinese Central Asia. These routes were open for brief periods in the summer, when the snow melts and traders could cross the high passes. The terrain necessitated the use of pack-animals such as yaks, donkeys, ponies, dzo (crossbred offspring of yaks and cows), and sometimes camels for different parts of the route. At the intersection of these trade routes, busy bazaars emerged, mainly in Leh and Kargil. Loading-unloading areas and storehouses were sites of intense commercial activity, where commodities were transported, traded, and taxed. Bazaars were also zones of cultural interaction. Traders from

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throughout Central and South Asia stayed together in caravanserais, and the tax and trading posts also served as inns for traders during their journeys. During the late nineteenth and early twentieth centuries, visiting Europeans typically described their astonishment at the diversity of the Leh bazaar. The commodities brought by traders to Ladakh during the early twentieth century reflect cultural influences from afar. The most high-profile artefacts traded were the fine carpets and exquisitely wrought household objects of silver and gold brought to Ladakh by Central Asian traders. Historical trade commodities are not simply representations of past cultural contact; they also had meaning to those who produced them and those who sought to obtain them, and the nature of this meaning continues to be debated long after their trade has ceased. For example, large bronze plates made in Chinese Central Asia during the early twentieth century are still treasured by Ladakhi families today. They represent a high socio-economic status and are a reminder of the families’ ethnic identity as Yarkandis. Such goods are not simply ‘foreign’: they are a mark of traditional social relations. A review of goods traded from the early twentieth century reveals that a significant proportion were everyday items manufactured in Europe, Japan, and the United States. Most of this foreign merchandise came through Ladakh on its way to Central Asia from British colonial South Asia, and only a few items came the other way, through Central Asia to Ladakh. Common household goods such as kitchen utensils, textiles, jewellery, medicines, and toiletry items were brought from South Asia to Ladakh for trade in Chinese Central Asia, and their high resale value made the long trip profitable. When examining the trade items on display at the Central Asian Museum in Kargil, one considers how the meaning of objects can change in different contexts, and how these meanings can change the wider world. The trade in British and Japanese cotton textiles provides a tangible example. The shift in Indian consumption from British to Japanese cotton goods was the result of a social movement in local Indian markets, which was part of the Indian freedom struggle. One of the keystones of Gandhi’s fight for independence was a boycott of British textiles in favour of khadi, an Indian handspun fabric. As an extension of this sentiment, Japanesemanufactured cloth appealed to Indian consumers. In the Central Asian Museum, records from the time illustrate a growth in the sales of cotton piece goods manufactured in Japan, which is not surprising as Japanese goods were often marketed with Indian nationalist concerns in mind and given Hindi names to appeal to public sentiment. The significance of the trade with Central Asia through the Karakoram Pass lies not only in the items exchanged, but also in the employment

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opportunities it created for many skilled and unskilled people. It encouraged the cultivation of crops in the hilly and rugged areas and provided extensive grazing along the Indus, Sutlej, and Ganga. The rivulets and shelters near hot springs could be used for sheep rearing. Trade promoted art, religion, and folk industries and created symbiotic relationships between diverse communities. The trade pattern from Punjab in Pakistan through Kashmir and Ladakh, and onwards to Xinjiang-China and Tibet-China, was a relay system, mainly involving barter activities. The ‘Caravans Connect’ system ensured that the traders rarely travelled point-to-point along the entire route, and little actual money changed hands. In a few places, yambos, or silver ingots, and gold were used to pay for items. The brick tea from China, pashmina thread, charas from Yarkand and Kazakh, silk carpets and suchlike were exchanged for currency, although not always. The significance of the Caravans Connect system to the trans-Karakoram route to Ladakh, and to the Ladakhis, did not lie in direct profits. Leh, like many other points on the route, was just one of many relay stations for the goods. Its significance lay in the demand created for transport and services. Food for people and animals, pack animals, grazing grounds, labour for loading and unloading, rooms and board for traders, and other incidental services were all required. Meeting this demand brought social and economic benefits to the Ladakhis. As these services were rendered at a charge, those providing them earned the name of kiraiyakash (from a word meaning ‘hire’, ‘fare’, or ‘fee’). Kiraiyakashi thus became a way of life. The Sherpas, Thakalis, and other mountainfolk of Nepal were viewed as far superior in providing these intermediate services, but such work was the lifeline of Ladakhi society.1 The Ladakhis were thus engaged as long as the trade across the Karakoram existed. At the time, this led to the development of a higher social stratum in the Ladakhis, and even today some of the illustrious families of Ladakh are kiraiyakash descendants. Yarkandis and Ladakhis plied the Leh-Yarkand route, the Drass people worked between Srinagar and Kargil or Leh, and Kashmiris and Ladakhis operated between Kargil and Leh. The relay system was so well organized that the points of the Caravans Connect system were ready before the caravans reached them. The culmination of Indian independence in the Partition of 1947-1948 brought an abrupt close to the Skardu-Kargil route, cutting off an important limb of the feeder trade. The trans-Karakoram trade, which was already 1 People I met made it a point of saying that it was mainly the Muslim community, along with the Punjabis and the Sikhs, who engaged in this work, but not the Buddhists of Ladakh.

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waning due to political disturbances and insecurity in Central Asia, was brought to a halt by China’s communist revolution in 1949, and the SinoIndian wars of the 1960s sealed the borders. Even without such radical geo-political shifts, however, this feeder route could not have stood up to the coming of modern transport, particularly the railways. By 1947, the Indian rail network connected Rawalpindi, Pathankot, and Amritsar to the foothills of eastern Himalaya in Siliguri and Kalimpong. The rail network on the plains was complemented by the fast-emerging road network in the hills. The centuries old Caravans Connect system was now a broken line, leaving fragmented communities, segments of feeder routes, and routes to nowhere across the tradescape.

Routes now: Narratives in sand, blueprints in grey Roads and railways brought change to the routes. Across Ladakh, the roads built for motor vehicles, some narrow and unpaved but most broad and tarmacked, made distant destinations accessible. Four-wheelers and SUVs brought towns, commodities, and people closer than ever before. The ubiquitous Indian Army was not only the engineer and creator of these roads, but also presented an additional, lucrative, and risk-free ‘market’ for local grain, vegetables, and fruit. The high passes that connect Ladakh to the rest of India are now only closed due to snowfall, not because the crossing is difficult, and the high passes that connect Ladakh to ‘outside India’ are closed due to national borders, disputed or otherwise. Now two main roads reach Ladakh: LehSrinagar Highway from Srinagar in Kashmir, still fondly referred to as Treaty Road, and Leh-Manali Road from Himachal. Internally, Leh is well connected right up to Turtuk in the northwest and Demchok to the southeast, just short of the Lines of Control with Pakistan and China, respectively. Ladakh is also connected by air to Srinagar, Jammu, Delhi, and Mumbai. For all this ‘connectedness’, however, Leh can be cut off during the winter months of November to April, as the Zoji La into Srinagar and the many passes into Manali are snowed in. That said, these winter months are known to be those with the highest ‘commodity crossings’. One of the two crossings, the bigger in terms of quantity and ease, is from Tibet into Ladakh. The point of entry is generally Chushul, a small settlement on the Changthang and Demchok, where the Indus enters India. The commodities are Chinese manufactured goods such as: utensils; small household items; crockery; cutlery; decorative items; clothes; shoes; boots;

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winter footwear; socks; woollens; knitwear; cigarettes; liquor; cosmetics; herbs; dried and processed foodstuffs; turquoise; and coral. What goes out via this route includes foodstuffs such as dried apricots, saffron, and grain and carpets, pearls, semi-precious stones, and shawls (the latter not necessarily pashmina, but often Himachali woven soft wool or yak wool). The second crossing, through which fewer but perhaps more valuable goods pass, is from Baltistan. The point of entry is in Turtuk. The commodities range from dried fruits, pistachio and almond nuts, and household items to opium. Through this route goes a variety of goods such as shawls, dried apricots, kernel oils, saffron, semi-precious stones, and pearls, and also some of the goods that come in from the first crossing. The movement of charas, opium, gold, and currency from both these routes is said to have been mainly halted, but it is rumoured that small quantities are still transported. As soon as the Leh-Srinagar and Leh-Manali highways open, grain, vegetables, fruit, household items, textiles, clothes, fast food, beverages, and other essentials for the tourist season and the shops in the Leh markets are transported from the neighbouring states. In April, when the weather is warmer, the locals begin to plough and plant the fields with barley, potatoes, and other vegetables. The apricots and apples bud and blossom. However, the produce is largely consumed within Ladakh by locals, tourists, and of course the Indian Army. A certain amount is processed and preserved for the winter months or for dispatch outside Ladakh. In addition to this internal commodity production and trade, an external commodity exchange can be discerned – very similar to that in the earlier history of the Silk Road. Earlier, the exchange mainly served subsistence livelihoods and supported the caravans and traders, whilst today it supports subsistence and the tourism industry. In the past, Leh was a major conduit; today it is almost an end-consumer of the internal trade networks, and a very small conduit for the external trade network. The markets in Leh are already full of Chinese goods, and one need simply walk through Moti Market and the main Leh market to see these wares. It is also common knowledge that these goods come in via informal channels, and that the local authorities and traders involved have a mutually beneficial arrangement. Thus, it is no surprise that informal trade between Ladakh and Western Tibet is steady. A couple of hundred crores of rupees has been suggested as the ballpark figure, but obviously there are no records to support this. What, then, is the politics of gateway, and how do the state and nonstate actors relate to each other? Interestingly, this gateway is viewed as a simple ‘way of life’ and has no hidden or dark connotations in the minds

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of the people here. There is therefore no politics of the gateway, and all those involved are beneficiaries; no local ‘goonism’ or protection groups are evident. My conversations with traders and officials in Leh, Kargil, Khaltse, and Turtuk, and in the border towns of Chushul and Demchok suggested that they were open and ready to talk about this (in)formal channel. They all squarely blamed the state government for the prevalence of such transactions and firmly claimed that Ladakh (and thus ladakhis) is being neglected and does not benefit from cross-border trade. In addition, both the traders and officials clearly benefited from each other; indeed, most occupied both roles. It seems, therefore, that local officials repeat the letter of the law in claiming that this trade should be formalized to regulate commercial flows, generate customs revenue, and prevent undesirable activities. However, the traders are fine with the current arrangement. Both believe that the reluctance to allow formal trade between Ladakh and Tibet or Kargil and Baltistan can only be explained by differences in perceptions of the alignment of the Lines of Control (by respective national governments). How do traders negotiate their crossing with border off icials at the checkpoint? They (or the middlemen) do not cross the border, but only meet there. They transfer their goods, make their payments and go on their way, much like in the old Silk Road era when traders did not actually travel end-to-end through the regions, kingdoms, and mountain ranges but offloaded goods from one set of pack-animals/caravans to another. The small border settlements are sufficient for a couple of nights’ stay. As in Turtuk, these settlements are the homes of the immediate and extended families of the traders, middlemen, and officials. The exchanges do not occur year-round anyway, and the commodity crossings are at their highest only in the winter months. How extensive is this gateway? As the volume and value of such informal trading are not recorded, it is difficult to ascertain its extent. The goods are evident in local markets, particularly in the Tibetan refugee tent markets in Leh and elsewhere. They then travel downstream to neighbouring states. The Indo-Tibetan Border Police and the Indian Army are present for security reasons; they are not tasked with monitoring such border transactions, which on the face of it are relatively benign and not easily recognizable as covert activity. The Indian Army, in collaboration with the authorities, has been successful in minimizing the crossing of charas and contraband from Leh to Baltistan and Tibet. The strategy for navigating this gateway and ensuring that such trade remains lucrative for all involved is multi-faceted, as discussed above. The seasonality, the close-knit players, a perception of what is informal,

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a collective understanding of the role of governments (or its absence), the continuation of ancient trade practices, and a kind of obviousness, all commingle in this strategy.

The way forward: Formalization, strategy, and structure The routes through Ladakh that connected the northern Indian plains to the markets of Xinjiang and Tibet of China were feeder routes and not the main Silk Road. The trade would clearly have been regular and lucrative. Due to its location, Ladakh provided logistic support, and its people were not the main producers or traders. The large-scale trade that has been glamorized by many Western writers is obviously a fiction, as local officials, traders, moneylenders, associations, and NGOs engaged in development and economic activity can attest. The pioneers of this route were the bold and astute traders of Yarkand, Khotan, Hoshiarpur, and Kashmir. Buddhist trails for pilgrimage and tribute may have been the initial inspiration for these caravan routes and provided many co-travellers along the way. This feeder route became a shadow route for numerous reasons, including the shift in the political landscape of Central Asia, Pakistan, India, and China, the closing of national borders, the lack of economic opportunities in Ladakh, and the traders of Kashmir and Punjab who were already established and settled there. From 1947-1949 to the early 1950s, the route gradually metamorphosed into the shadow it is today – in terms of its informality, its nefarious trade (particularly in contraband, as a vestigial remnant of the earlier volume and variety of trade), and its low-level existence in seasonal flourishes. Other more compelling reasons reduce or even eliminate the possibility of this shadow route’s turning into a feeder route or main route. The special status accorded to Ladakh gives it plentiful benefits in terms of food, finance, education, and employment, thus eliminating its dependency on cross-border trade. Since the early 1970s, Ladakh has benefitted from the Indian model of economic growth, the rise of the middle class, and the boom in tourism as an industry and as consumption. The kiraiyakashi dimensions of today are thus those of tourist transport, hotels, restaurants, guesthouses, and homestays. Ladakh and Ladakhis enjoy an unfettered socio-economic stability and prosperity and have better opportunities for social mobility. The Centre of Central Asian Studies of Kashmir University has conducted surveys to investigate the political, social, and economic reasons for restoring the route. An essay based on the responses of people of the Leh-Chushul link

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of the Silk Road suggests that ‘the opening of the traditional route might help strengthen relations between India, China and Central Asia, and the great cultural and technological exchange along the Silk Route needs to be revived’ (Wani, 2015). The Washington-based Gilgit Baltistan National Congress has urged the US and the UN to open trade routes that are based on trade and not violence: ‘United Nations and USA are requested to pressure Pakistan to open travel and trade routes towards Tajikistan, Afghanistan and Indian Ladakh so that Shias are not forced to travel on the roads that have become killing f ields and virtually controlled by ISI-led militants like Lashkar Toaiba, Lashkar Jhangvi and Sipah Sihaba’ (Hindustan Times, 2012). Thus, the shadow routes from Ladakh may be difficult to eliminate. This shadow trade involves ethnic networks between trading partners that continue to facilitate the trade by reducing transaction costs. It could be argued that if the transactional environment of informal trade is more efficient than of formal trade, it should be left to continue; however, the dangers associated with money laundering, contraband, unchecked/undesirable migration, and suchlike are obvious. Focusing on law enforcement agencies that can detect and obstruct the informal transit of goods across borders is problematic, as it increases enforcement mechanisms, which may increase corruption. Political boundary issues and national security aside, in Ladakh the mere reduction of tariffs and a better transactional environment for formal trade will not be enough incentive. Improving awareness and education levels, strengthening the power of local officials, and building robust relations with the state will go a long way towards curtailing this shadow route. The variety, volume, and value of trade envisaged and made possible through more efficient systems of transport, logistics, fiscal order, industrial competencies, and robust government-to-government relations are clearly preferable to informal trade in Ladakh. The multinationals and businesses engaged in textiles, woollens, garments, footwear, cosmetics, and ‘fastmoving consumer goods’, which are the products closest to those of the shadow route trade, can then supply cleaner, more efficient, and more lucrative markets that are both established and emerging. On the western border, the relations between India and Pakistan are strained over Kashmir, and the possibility of formalizing any feeder or shadow route across Ladakh to Baltistan is slim, especially given the nature of the traded goods. Goods of such variety, volume, and value are better handled through already established trade networks that benefit from systems of finance, logistics, and industry.

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In India’s drive to promote regional cooperation and economic partnerships, it has initiated the opening of traditional ‘feeder routes’ of the old Silk Road, such as Srinagar-Muzaffarabad, Poonch-Rawalakot, and Sikkim-China. As China’s economic and development efforts reach their far western corners in Tibet and Xinjiang, and relations between New Delhi and Beijing improve, India and China are exploring and strengthening economic partnerships in both their own and other countries. The opportunities for cultural, technological, and developmental exchanges are surely far greater within such partnerships. Continuing the earlier comparison with Nepal, perhaps it makes more economic sense to pursue the possibility of developing Nepal as a transit country rather than formalizing Ladakh’s shadow routes. In the broader geopolitical landscape, India’s search for energy and resource self-sufficiency, China’s growing influence in Central Asia, and both countries’ exploration of economic partnerships in the form of oil routes, land to sea routes, and energy security may all converge in robust trade routes rather than nebulous networks of shadow routes.

Bibliography Bellew, H.W. 1989[1875]. Kashmir and Kashgar: A Narrative of the Journey so the Embassy to Kashghar in 1873-74. New Delhi: Asian Educational Services. Cantens, Thomas. 2012. Informal Trade Practices. WCO Research Paper no. 22, World Customs Organization. Fewkes, Jacqueline H. 2009. Trade and Contemporary Society along the Silk Road. New York: Routledge. Hindustan Times. 2012. ‘UN, US asked to pressure Pak to open Gilgit-Ladakh trade route’, 17 August. https://www.hindustantimes.com/world/un-us-asked-to-pressure-pak-to-open-gilgit-ladakh-trade-route/story-M5djtydAuJ1VRivwvhmydL. html, accessed 31 March 2017. Markovits, Claude. 2000. The Global World of Indian Merchants 1750-1947: Traders of Sind from Bukhara to Panama. Cambridge: Cambridge University Press. Mason, Major Kenneth. 1929. Routes in the Western Himalaya, Kashmir and Ladakh. Calcutta: GOI Press. Moorcroft, William, and George Trebeck. 1841. Travels in the Himalayan Provinces of Hindustan and the Punjab (1819 -1825), 2 vols. London: John Murray. Rizvi, Janet. 1996. Ladakh: Cross-roads of High Asia. New Delhi: Oxford University Press. Taneja, Nisha, 2005. Informal Trade in South Asia. Briefing paper, CUTS Centre for International Trade, Economics and Environment, India.

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Wani, Arif Shafi. 2015. ‘Clamour to Restore JK’s Ties with Silk Route Go Shriller’. Greater Kashmir, 14 March, https://www.greaterkashmir.com/news/kashmir/ clamour-to-restore-jks-ties-with-silk-route-go-shriller/, accessed 6 December 2019. Younghusband, Francis. 1924. Wonders of the Himalaya. London: John Murray.

About the author Vaijayanti Khare is a visiting Professor for Silk Road Studies and International Relations at various Universities in Nepal and India. Her current research is in areas of cross-border trade and development and Asian Studies. She is a consultant for projects in the corporate and development fields.

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Formal versus informal practices Trade of medicinal and aromatic plants via TransHimalayan Silk Road Arjun Chapagain Abstract The trading of medicinal and aromatic plants (MAPs) is a traditional means of livelihood in rural areas along the Trans-Himalayan Silk Road and is an important source of revenue for the government of Nepal. Researchers estimate that the officially recorded export value of Nepalese MAPs is many times less than the amount actually exported. MAPs in Nepal are harvested by individuals mostly from the wild and are channelled through intermediate actors within a confusing policy environment. An off icial permit is required to collect ‘non-timber forest products’ and the Department of Forestry is responsible for regulating the MAPs trade in Nepal by issuing permits and collecting revenue. The hidden economy and informal practices are thus more likely to be used in sectors where permissions are necessary for harvesting, locally transporting, and exporting any commodity. Keywords: Trans-Himalayan Silk Road, medicinal and aromatic plants, informal practices, Nepal

Introduction Medicinal and aromatic plants (MAPs) are defined as plants, mushrooms, and lichens, or parts derived from them, that are traded to produce pharmaceuticals, dietary supplement products, natural health products, cosmetics, and foodstuffs (Gurung and Pyakurel, 2017; Smith-Hall et al., 2018). The global export market of MAPs was valued at around US$2.6 billion in 2016 (World Bank, 2018), with China and India being the major players (Khan

Hung, Eva P.W., and Tak-Wing Ngo (eds), Shadow Exchanges along the New Silk Roads. Amsterdam, Amsterdam University Press 2020 doi: 10.5117/9789462988934_ch06

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and Rauf, 2014). Nepal, as a biodiverse country with a wide range of climate and altitudinal variations (FAO, 2009), is also rich in growing medicinal plants. The trade in medicinal plants is economically significant to many rural livelihoods (Olsen and Larsen, 2003) and is an important source of revenue for the government (Phoboo, Devkota, and Jha, 2006). But only a small amount of these MAPs is consumed in Nepalese domestic markets (Chapagain et al., 2019); the bulk are exported to India, China, and abroad (Olsen, 2005; Ghimire et al., 2016; MOC, 2016; Pyakurel, Sharma, and SmithHall, 2018; World Bank, 2018; Pyakurel et al., 2019; Smith-Hall et al., 2019). MAPs are highly sought after in China and India (Khan and Rauf, 2014; World Bank, 2018) due to their high levels of bioactive compounds and medicinal efficiency (Phoboo, Devkota, and Jha, 2006). Of the 700 to 1700 species of medicinal plants growing in Nepal, up to 300 species are commercially traded each year (Pyakurel et al., 2019) for the making of traditional medicine (such as Ayurvedic and Tibetan medicine), aromatic products, cosmetic, plant fibres, herbal dyes, food, and flavourings, etc. (NPC, 2011). Around 90 per cent of the MAPs collected from the wild in Nepal are exported legally or illegally to India, and then further exported to other countries in crude or processed forms (Phoboo, Devkota, and Jha, 2006). Olsen (2005) estimated the annual trade volume of MAPs and its products harvested in the fiscal year of 1997/1998 to be 14,500 tons, with an annual export value of US$16 million. About 13,230 tons of MAPs and derived products are exported annually from Nepal, with an average annual value of US$39.34 million for the fiscal years of 2005 to 2014 (Ghimire et al., 2015). However, the exact export volume and value of Nepalese MAPs are not clear, as there is no way to systematically track the income and employment generated from them (NPC, 2011). Informal practices of trade apply to most commodities, and hidden economies are common in most developing countries. In a hidden economy, activities are not recorded or are imperfectly reflected in the official national accounting system. Studies reveal that the main reasons for the growth of hidden economies in developing countries are increases in the tax burden and social security contributions, increased regulation in the off icial economy, forced reductions of weekly working times, earlier retirement, and a decline in civic pride and loyalty to public institutions combined with a decline in tax morale (Raut, Chalise, and Thapa, 2014). The extent of a hidden economy can be measured directly and indirectly. Direct methods include sample surveys and tax audits, and indirect methods include assessing income-expenditure differences, national accounts discrepancies, official vs. actual labour differences, a transaction approach, the currency demand

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method, measuring electricity consumption, and by taking a model approach (Raut, Chalise, and Thapa, 2014). However, these empirical approaches cannot be used in this study to estimate the hidden economy of particular goods or services, as they are mainly used for estimations at national or subnational levels. Few studies have been conducted to estimate the hidden economy in Nepal. Schneider, Buehn, and Montenegro (2010) estimate it as on average 36.7 per cent of the official GDP from 1999 to 2007. Raut, Chalise, and Thapa (2014) estimate the growth rate of the hidden economy of Nepal to be 19.21 per cent between 1991 and 2000; 16.68 per cent between 2001 and 2010; and 31.7 per cent between 2011 and 2012. In this chapter, the economy generated from the MAPs sector of Nepal as officially recorded is assessed and the formal and informal practices observed in the trading of MAPs in Nepal are compared. Specifically, the MAPs trade across the Trans-Himalayas is discussed. This chapter gathers information on formal and informal spending in the MAPs sector through various channels of trade, descriptive statistics such as mean, percentage, and trend are then derived to interpret the findings. Data records from off icial sources such as the Department of Forestry (DOF) and the Trade and Export Promotion Centre (TEPC) of Nepal from the fiscal years of 2011/2012 to 2014/2015 are used to generate information on the official trade, in terms of both the volume and the value of MAPs, according to importing countries. Primary information was collected from formal and informal interviews with medicinal plant traders and exporters to understand the reality and the process of trading MAPs within the country in 2016. Secondary data were obtained from the annual reports of the DOF and the TEPC, and from available published and unpublished forest and forestry literature. The export volume and value derived from TEPC are used to establish the annual export amount for different countries in four fiscal years. Of 35 countries, the thirteen that continuously imported MAPs from Nepal are averaged. The countries with the highest proportions are China and India and the remaining eleven countries are combined (as ‘other third countries’). The average annual export value and the percentage of export as volume and value, among China, India, and the other third countries, are further analysed. These official values are compared with previous results such as those of Olsen (2005) and Ghimire et al. (2015; 2016) to illustrate the huge inconsistency in the trade data records of MAPs in Nepal. The formal versus informal practices in the trade of MAPs in Nepal are then examined.

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Official records of MAPs trade Between 2011 and 2015, MAPs from Nepal were exported to 35 countries1 but supplied to only thirteen countries in all four fiscal years. China has the highest average export value, at US$8.22 million (US$1 = Nepalese rupee NPR 105), followed by India (US$3.57 million), Singapore, Italy, Germany, Bangladesh, the US, France, Pakistan, and Canada. Taiwan, Japan, and Australia share the least average export values, of US$4795.84, US$2002.55, and US$994.75, respectively (Figure 6.1). MAPs were exported to six other countries (Hungary, Israel, Netherlands, Poland, Thailand, and the UK) in three fiscal years, five other countries (Ireland, Isle of Man, Spain, the US, and Vietnam) in two fiscal years, and eleven more countries (Austria, Belgium, the Czech Republic, Finland, the Republic of Korea, Malaysia, Netherlands Antilles, New Zealand, Peru, Sweden, and the Ukraine) in any one fiscal year. On average, 78.20 per cent of MAPs are exported to India, which are worth about 30.32 per cent of the total export value. However, the 17.07 per cent of MAPs exported to China are worth about 52.48 per cent of the total export value. The remaining 4.73 per cent exported to other third countries are worth about 17.20 per cent (Table 6.1). The total export value of MAPs in 2011/2012 was US$7.86 million, which increased to US$15.87 million in 2014/2015, with an annual export value of US$12.95 million (Figure 6.2). Table 6.1 Export quantity and export value of MAPs, 2011/2012 – 2014/2015 (%) 2011/2012

2012/2013

2013/2014

2014/2015

Average

Country

KG %

Value %

KG %

Value %

KG %

Value %

KG %

Value %

KG %

Value %

India China Others

89.26 5.67 5.07

50.68 23.61 25.70

76.90 17.78 5.32

25.69 54.63 19.68

68.44 27.89 3.67

14.41 73.33 12.25

78.20 16.92 4.88

30.48 58.33 11.18

78.20 17.07 4.73

30.32 52.48 17.20

The global markets of MAPs-based products tripled in the past fifteen years, with a three per cent increase annually since 2010 (World Bank, 2018). Khan and Rauf (2014) estimate the total global medicinal plant market of 1 Unpublished database of MAPs export with information on country wise volume and value for fiscal year 2011/2012 to 2014/2015 provided to author in 2017 by Trade and Export Promotion Centre, Government of Nepal.

149

Formal versus informal pr ac tices

Figure 6.1 Average export value of MAPs, 2011/2012 – 2014/2015 Average Export Value (in million USD) 9.00 8,22 8.00 7.00 6.00 5.00 4.00

3,57

3.00

0,01

0,00

0,00

0,00 Australia

0,02

Japan

0,03

Taiwan

0,03

Canada

0,03

Pakistan

0,04

France

0,08

U.S.A.

Singapore

India

China P. R.

0.00

Bangladesh

0,33

Italy

1.00

Germany

2.00

15,64

18.00

0.00

India

12,95

2013/14 China P.R.

2014/15 Others

Total

1,16

3,57 0,89

1.04

4,84

2012/13

2,25

3,19

2011/12

1.76

2.00

0,96

4.00

3,98 2,92

8.00

7,47

7,86

10.00

8,22

12.00

10,15

14.00

12,35

12,43

16.00

6.00

15,87

Figure 6.2  Export value of MAPs, 2011/2012 – 2014/2015

Average

150 Ar jun Chapagain

plant-based drugs to be worth US$25-30 billion annually, and report that the international herbal trade is focused on China and India, also the major importers of raw Nepalese MAPs. They also estimate the annual number of herbal drugs exported from China to be over 120,000 tons, followed by India with approximately 32,000 tons. Europe is the primary importer and around 400,000 tons of remedial plants are imported annually by different European countries, which are used locally to manufacture herbal formulations. The MAPs demand in India increased by about fifteen to sixteen per cent between 2002 and 2005, but less than two per cent of the total demand for most MAPs has been supplied. This demand in India has a direct impact on the Nepalese MAPs market, as more than 90 per cent of Nepalese MAPs are exported to India (Phoboo, Devkota, and Jha, 2006). China has a demand for highly valued MAPs, including Caterpillar fungus (Ophiocordyceps sinensis).

Formal practices in the MAPs trade The trade and export of MAPs in and from the Nepal Himalayas involves many participants, including facilitating and regulatory actors. Olsen and Bhattarai’s (2005) typology of actors in the Himalayan MAP trade consists of harvesters, traders, and wholesalers including actors from cultivators and collectors, sub-local and local traders to the central wholesalers (exporters in the major cities of Terai or Kathmandu) and the regional wholesalers (importers in India and China) (Smith-Hall et al., 2018). Typically, there is a fixed harvesting season for collecting many medicinal plants. District forest offices regulate the entire process of MAPs harvesting and trading at the local level following their Five-Year Forest Management Plan. This adheres to all the national and international laws related to medicinal plants trade and may enforce the control of certain species if their statuses are found to be under pressure or threatened at the local level. Generally, harvesters must obtain collection permits prior to the harvesting time and present a time plan to the District Forest Office with the number of particular MAPs they propose to harvest. They must show additional proof if the collected MAPs are cultivated, and then receive a reduced royalty rate. The trader buys MAPs from harvesters with references of their collection permits and pays royalties to the district forest office. The royalty rates of non-forest products, including medicinal plants, are published in the Gazette of the Government of Nepal and regularly revised. The forest officers verify each species with its respective amount and issue a release permit covering

151

Formal versus informal pr ac tices

two to three weeks for transporting the MAPs out of the district (Phoboo, Devkota, and Jha, 2006). Some district development committees may charge ten per cent as a royalty. All papers need to be valid when transporting MAPs within the country. Finally, the role of the exporter is to issue further permits from the customs office, the plant quarantine office, after a laboratory test for essential oils, recommendations from the DOF for protected species, etc., with the support of papers provided by the trader. Table 6.2 shows the formal economy of MAPs sector between 2011 and 2015. Table 6.2 The formal economy of MAPs sector, 2011/2012 – 2014/2015 (in NRP)

2011/2012 2012/2013 2013/2014 2014/2015

Royalty1

Customs tax2

Export value3

14,956,066 11,262,141 25,094,935.3 27,046,986.9

7,276,891 5,726,553 5,412,286 4,294,064

805,371,208 1,272,946,785 1,602,189,916 1,626,121,408

Sources: 1 Department of Forest, various years. 2 Exporters estimated value with reference to TEPC’s MAPs export volume. 3 Trade and Export Promotion Centre, various years.

The trade in MAPs is a traditional means of livelihood in rural areas of Nepal. A general lack of sustainable production practices, inappropriate harvesting and post-harvest practices, product adulteration, poorly organized marketing, and a lack of international recognition of Nepalese products are the major challenges to maximizing the return from this sub-sector (Rawal, Acharya, and Subedi, 2001). The main difficulties for harvesters of MAPs lie in obtaining reliable information, processing technologies, and market access, as many high-value MAPs are found in very remote areas, so their processing and marketing costs are high (NPC, 2011). The permits provided at each level also impose time constraints, and if for any reason the MAPs are not transported, the additional time is again added to the permit.

Informal practices in the MAPs trade Informal practices in the MAPs trade of Nepal, however, prosper, and take several forms. Illegal harvesting: The valuable wild MAPs is believed to have declined in many regions due to unsustainable collection and harvesting practices

152 Ar jun Chapagain

driven by market forces (World Bank, 2018), beyond the quota permitted by the local regulatory body (District Forest Office). Highly valued and banned MAPs are collected by local people and sold, which can be either an independent decision or due to persuasion by the traders. According to Iversen et al. (2006), there is no control of illegal MAPs harvesting, so illegal procedures persist up to the export level. Poor system for tracking revenue: Nepal has no proper system for systematically tracking the revenue from forest resources. The local regulatory bodies of all 74 districts must manually submit a report to the central authorities before the end of every fiscal year. The poor management of the district records, the replacement of responsible personnel, the remoteness in terms of communication and transportation, and even the falsifying of records to justify collection and release permits as per the Five Year Plan result in significant variations in the trade data records of both the local and central authorities. Unequal share of benefits among actors: The exporter buys the illegally collected MAPs from the traders at a fraction of the price, pays tax, and then exports them at a huge profit (Phoboo, Devkota, and Jha, 2006). This is then shared among the stakeholders and through the extremely active informal pathways. Most traders at district level are informed that they must pay an equivalent of a royalty in gross terms, shared with the foresters, the District Development Committee, transport, locals, etc. Exporters in Kathmandu and Tarai are informed that they should informally spend around one to two Nepalese rupees per kilogram. The benefits of the MAPs trade are unequally distributed among the different stakeholders. The price of MAPs often increases dramatically when they are brought from the resource origin to the nearest trading centre, due to the lack of proper transportation facilities and because the resource origin is usually very remote and not easily accessible (Phoboo, Devkota, and Jha, 2006). The stakeholders who benefit the most are local traders and exporters, but they must also pay for various legal and illegal formalities. Time-constrained permits: MAP resources are concentrated in the high hills and mountainous regions. The harvesters cannot practically travel to the local authorities from remote villages to acquire the collection permits before the harvesting season for the designated time period. Additional problems are caused if they have to separately acquire collection permits for MAP with different harvesting seasons in different time periods. Alternatively, traders can obtain the collection permit from the local authorities as per the announced period, and harvesters can collect the MAPs when available and store or sell them to the traders via sub-local traders. Similarly,

Formal versus informal pr ac tices

153

permits act as time constraints when transporting and exporting MAPs. Gathering permits and permissions for numerous locations forces traders and exporters to pay bribes to ensure they can efficiently sell their products. Insignificant increases in royalty rates: Royalty rates differ between MAPs species. For example, the rate for Phyllanthus emblica is NPR1 per kilogram, that for Terminalia bellirica is NPR2 per kilogram, that for Acacia rugata is NPR3 per kilogram, that for Aconitum bisma is NPR10 kilogram, that for Swertia chirayita is NPR15 per kilogram, that for Lycopodium clavatum is NPR50 per kilogram, that for Dendrobium denudans, an orchid, is NPR200 per kilogram, that for Morchella conica/ M. esculenta, a morel mushroom, is NPR300 per kilogram, and that for Ophiocordyceps sinensis, caterpillar fungus, is NPR25,000 per kilogram (DOF, 2016). A significant increase in royalty rates and government revenue, which does not result in harm to biodiversity or the environment, will affect the trade of MAPs at different levels (Shrestha and Stoian, 1995). However, the government of Nepal revises the royalty rate based on the market demand for particular species, rather than supporting the process and managing the markets for medicinal plants in Nepal. Unscientific banning of species in demand: The trading of MAPs is typically dynamic, and according to market demand new species emerge, such as livlite chyau (Ganoderma lucidum), jewel orchid (Goodyera biflora) and ganaino (Hymenidium dentatum) are in contemporary trade since last decade (Pyakurel et al., 2019) and some are yet to be listed in the royalty rates. Specific MAPs are protected and appear in the ‘threatened’ categories of the Conservation Assessment and Management Plan, the International Union for Nature Conservation Red List, and the Convention on International Trade in Endangered Species of Wild Fauna and Flora. These cannot be harvested and traded without permission from the authorities concerned, as Nepal is a party to various conventions on sustainable development (NPC, 2011). However, some traded MAPs are unexpectedly banned by the government of Nepal, such as lichens that are widely available in forests. The decision to ban MAPs in Nepal is influenced by global trends rather than by assessing local resources. Incorrect identification and misinterpretation of traded MAPs: A knowledge of the species that are traded commercially is the basis for identifying threatened taxa and for comparing regional and national markets (Williams, Balkwill, and Witkowski, 2000). Harvesters, traders, and exporters can easily identify MAPs, but it may be more difficult for regulatory authorities such as District Forest Office personnel, customs officers, and Plant Quarantine off icers (Gurung and Pyakurel, 2017). The incorrect identif ication and

154 Ar jun Chapagain

misinterpretation of traded MAPs can knowingly or unknowingly result in an unclear picture of the mode of trade and the value, thus making it difficult to estimate the actual amounts of traded MAPs (Gurung and Pyakurel, 2017).

MAPs trade via the Trans-Himalayan Silk Road The ‘Trans-Himalayan Silk Road’, or the trade route across the Himalayas, was the first Silk Road in human history (Amatya, 2017). Over 90 per cent of the frontier marking the Nepal-China boundary runs through high-altitude regions and is rocky and snow-covered, with numerous glaciers (Prasad, 2015). Many rivers from east to west, originating from Tibet penetrate the Himalayas of Nepal and flows to the Bay of Bengal via India. This landscape supports as trade corridors that join the Tibetan Plateau with the plains of India (Van Spengen, 2000). For centuries, these landscape corridors route have been traversed by many merchants, pilgrims, traditional healers, and armies. These practices have long transcended a trans-Himalayan interface, expressed through religion, language, culture, tradition, and kinship, increasingly subject to modern demarcations of a bordered world (Murton, 2017). Until the beginning of the nineteenth century, Nepal had greater cultural and economic ties with Tibet than with India. Travelling to and communicating with the north were easier and safer than with the south (Pyakurel, 2017). Despite adverse topography and weather conditions, long caravans transported edible goods, cloth, metal utensils, and Buddhist religious items from Nepal, and silk, gold powder, yak-tails, salt, etc. from Lhasa and beyond. The Nepal Trade Integration Strategy of 2010 identified nineteen potential types of export goods and services from Nepal to China, one of which was MAPs. The history of trans-Himalayan MAPs trade can be traced to the eighth century with the establishment of the Tibetan medicine system relying extensively on raw materials not native to Tibet (Saxer, 2009). Between 2000 and 2017, the overall size of the Tibetan medicine industry has grown tenfold; and in 2017 it produced pharmaceuticals worth US$615.3 million. China, understandably, leads the industry in absolute and relative numbers (Ratimed Project Team, 2019). Although Nepal’s trade with China is increasing, it is far below its potential. Previously, due to the poorly developed transport system, the trade between the two countries was unable to flourish (Prasad, 2015). Recently, there are about 23 small and local border markets on the Tibetan side as new trading points (He et al., 2018) connecting to the Tibet-Xinjiang Highway (completed in 2013 running close to the north of Nepal Himalayas) along

Formal versus informal pr ac tices

155

the Nepal-Tibet transborder. At present, two Highways connect Nepal to Tibet, and about a half dozen highways are being constructed. Besides, in the Nepal-Tibet borderlands around 235 local pathway crossings can be easily crossed by borderland citizens. With the huge demand of MAPs in China, these local pathways crossing to Tibetan border markets could serve as the supplying routes. It is probable that high-value MAPs are transported overland or airlifted to China via Kathmandu. Informal practices in the MAPs trade of the Trans-Himalayan Silk Road or across the Himalayas include illegal harvesting and trade across the NepalChinese Tibet border. Most Nepalese around the border are of Mongol origin and have affinities with the Tibetans. Traditionally, people from the Tibet and Nepal border areas raised yaks and produced crops such as potatoes, barley, buckwheat, and millet (Pyakurel, 2017). They travel and trade in various legal and illegal goods, including both permitted or banned MAPs, across the Himalayas, as the customs checkpoints are not well-maintained throughout the 1414-kilometre Nepal-China border. This unrecorded MAPs trade from the high mountainous districts to Tibet does not appear in the official export scenario. Exporters from the northern regions sometimes use this secret route, employing local people at the borders. Paying additional charges is worthwhile for them if the lengthy customs procedures can be reduced and the trade can be conducted more efficiently. All of the MAPs from the western, central, and eastern parts of Nepal are brought to Puran, Gyilong, and Rio/Shigatse, and are finally accumulated in Lhasa, Tibet. They then pass to Xining, Lanzhou, Chengdu, Kunming, Guangzhou, Beijing, and other major Chinese cities. The MAPs are airlifted from Kathmandu passes to Guangzhou, Beijing, and Hong Kong (He et al., 2018). Of the seventeen per cent of MAPS that arrive in China, about five per cent reach Hong Kong. Once they cross the Himalayas, they can be easily mixed with Tibetan MAPs, as much Nepali and Tibetan flora are shared along the many northern frontiers, particularly in the trans-Himalayan regions, and MAPs can be easily traded further.

Estimation of informal MAPs trade The annual average export value of MAPs found in this study (US$12.95 million) is less than the US$16 million estimated by Olsen (2005) for the fiscal year of 1997/1998, and much less than the average annual value of US$39.34 million for the fiscal years from 2005 to 2014 estimated by Ghimire et al. (2015) (see Figure 6.3).

156 Ar jun Chapagain Figure 6.3  Comparison of present annual export value with other studies 70.00 60,09

60.00 50.00 41,50

40.00 27,49

30.00 20.00

39,34

16,00

12,95

10.00 0.00

1997/98

2005

2010

2014

2005 to 2014

Present Study

According to Ghimire (2006), the huge variations in the estimates of volume and value of trade make it diff icult to estimate the actual amounts traded, due to a lack of transparency in the market circuit. Olsen (2005) and Ghimire et al. (2015) estimate an almost comparable volume of MAPs exported in 1997/1998 and 2014, respectively, but the export value rapidly increased by almost f ive times. The present export value appears to be less than that estimated about two decades ago, which is surprising as there has been a rapid increase in the price of MAPs. The average value estimated by Ghimire et al. (2015) of US$39.34 is three times higher than the off icially recorded value estimated in the present study, although the figures for the past few fiscal years were comparable. Olsen (2005) report that the total export value of MAPs from Nepal was 25 times higher than the off icially recorded value for the f iscal year of 1997/1998. This suggests a high level of smuggling and corruption. The revenue collection f igures of the DOF may only be a fraction of the actual amounts collected from the traders, and the reduced government revenue from the increasing hidden economy may further result in an ineff icient bureaucracy (Raut, Chalise, and Thapa, 2014). The MAPs trade in most locations is very secretive, mainly based on traditional channels and networks (Ghimire, 2006) and the stakeholders involved are reluctant to speak about it (Phoboo, Devkota, and Jha, 2006). Large volumes of MAPs are illegally traded, making it impossible to determine the exact trade data, status, exploitation rate, and resource availability. The high-altitude topography also conceals the actual off icial export scenario. No authentic data on the real volume of MAPs exported from

Formal versus informal pr ac tices

157

Nepal are available, so the broader picture of the mode of trade and trade data is unclear (Phoboo, Devkota, and Jha, 2006).

Conclusion The global market for medicinal plant-based products is rapidly increasing. China and India are the main importers of raw MAPs from Nepal, on which the international herbal trade relies. Many rural Nepalese can improve their economic status through the Nepalese MAP trade. MAPs are harvested by individuals from the wild or cultivated, and then channelled through intermediate actors within a vague policy environment. An official permit is required to collect non-timber forest products, including MAPs from forests, and the DOF is responsible for regulating the trade of these products in Nepal by issuing the permits and collecting revenue. The actual volume of Nepalese MAPs exported may be many times more than the officially recorded level. Informal practices in the Nepalese MAPs trade are due to illegal harvesting, the lack of an adequate method of systematically tracking revenue from forest resources, unequal benefits among the actors involved, the time constraint imposed by permits while harvesting, transporting, and exporting the MAPs, an insignificant increase in the royalty rates, the unscientif ic banning of species in demand, incorrect identification and misinterpretation of traded MAPs, and lack of custom checkpoints in around 235 local pathway crossings on the Nepal-China border. Effective management and marketing of MAPs could, however, lead to a sub-optimal level of income and employment for local people. Drafted rules and regulations should be implemented on the local level, or more powerful actors will reap the benefits of forest management through underhanded processes. High-value MAPs from Nepal are transported overland to Tibet via the Trans-Himalayas Silk Road or airlifted to China via Kathmandu. The Chinese Belt-and-Road Initiative will become a major route for trading Nepalese MAPs with China, thus opening up new market opportunities, even for low-value MAPs through new systems, and controlling the illegal MAPs trade via open customs checkpoints on the Nepal-China border. These plans testify to a bilateral action taken by both sides to formalize, scale up, and regulate the trans-Himalayan trade and connectivity that is envisaged as far below its potential.

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Saxer, Martin. 2009. ‘Herbs and Traders in Transit: Border Regimes and the Contemporary Trans-Himalayan Trade in Tibetan Medicinal Plants’. Asian Medicine 5: 317-339. Schneider, F., A. Buehn, and C.E. Montenegro. 2010. Shadow Economies all over the World: New Estimates for 162 Countries from 1999 to 2007. Policy Research Working Paper No 5356. Washington: The World Bank. Smith-Hall, Carsten, Marieve Pouliot, Dipesh Pyakurel, Niels Fold, Arjun Chapagain, Suresh Ghimire, Henrick Meilby, Laura Kmoch, Deep Jyoti Chapagain, Abhoy Das, He Jun, Kriti Nepal, Mukti Ram Poudeyal, Helle O. Larsen. 2018. Data Collection Instruments and Procedures for Investigating National-Level Trade in Medicinal and Aromatic Plants. IFRO Documentation, No. 2018/2. Copenhagen: University of Copenhagen, Department of Food and Resource Economics. Smith-Hall, Carsten, Arjun Chapagain, Abhoy K. Das, Suresh K. Ghimire, Dipesh Pyakurel, Thorsten Treue and Marieve Pouliot. 2019. Trade and Conservation of Medicinal and Aromatic Plants: An Annotated Bibliography for Nepal. Kathmandu: Central Department of Botany, Tribhuvan University. Shrestha, K.N., and D. Stoian. 1995. ‘The Forest Rules 1995 and their Relevance to the Utilisation of Medicinal and Aromatic Plants’. In Shekhar Kumar Yadav and Dietmer Stoian (eds), Proceedings of the Seminar on Medicinal and Aromatic Plants in Gorkha District: How to Promote their Utilisation and Marketing, pp. 1-6. Gorkha: District Forest Office. Van Spengen, Wim. 2000. Tibetan Border Worlds: A Geo-historical Analysis of Trade and Traders. London: Routledge Williams, Vivienne L., Kevin Balkwill, and Edward T.F. Witkowski. 2000. ‘Unravelling the Commercial Market for Medicinal Plants of the Witwatersrand’. Economic Botany 54(3): 310-327. World Bank. 2018. Strategic segmentation analysis: Nepal. Medicinal and aromatic plants., Washington DC: World Bank Group.

Acknowledgements I am thankful to Prof. Carsten Smith-Hall, Prof. Suresh K. Ghimire and Dr Dipesh Pyakurel for their valuable guidance; officials at the Trade and Export Promotion Center, Kathmandu, for providing MAPs export data; and traders of Jadibuti Association of Nepal, Nepal Herbs and Herbal Products Association and Herbal Entrepreneurs Association of Nepal for sharing the current scenario of MAPs trade and export. The study was supported by Federation of Community Forest User’s Nepal (FECOFUN) under the Danish Ministry of Foreign Affairs, Grant No. 13-07KU.

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About the author Arjun Chapagain holds a Master of Science in Botany from Tribhuvan University, Nepal. He has research experience in the study of green economy, forest rights, and resource, trade and market assessment of non-timber forest products and medicinal and aromatic plants. Currently, he is doing a PhD at City University of Hong Kong researching on trade, trajectory and policies in Belt and Road countries, with a special focus on medicinal and aromatic plants.

7

Formal versus informal Chinese presence The underbelly of hope in the Western Balkans Jelena Gledić

Abstract The turbulent history of the Western Balkans has led to both diverse economic development in the region and complex relationships with China, particularly for ex-Yugoslav countries. Examining the shadow economies associated with local Chinese communities in the region is therefore of particular interest. The aim of this chapter is to analyse the complex interplay of official policies and unofficial rules, regional tensions and global interests, and the local socio-economic problems and international aspirations of countries in the region in terms of their position in the so-called Belt and Road Zone. Keywords: Chinese presence in Europe, Chinese migrant communities, One Belt One Road, shadow economy

Introduction The development of the modern world is a history of creating alliances based on ideology and interest, often seemingly spearheaded by opposing centres of power. However, attempting to analyse these processes has long been recognized as difficult, as the very nature of world power is subject to change (Nye, 1990) and any attempt to balance it through the formation of alliances and partnerships is extremely challenging (Walt, 1985). A functionalist approach to international relations would suggest that states can cooperate in limited areas (Rosamond, 2000), which might hold true for contemporary society, but the polarized world that was a reality up until the final decade of the 20th century meant that those without ambitions

Hung, Eva P.W., and Tak-Wing Ngo (eds), Shadow Exchanges along the New Silk Roads. Amsterdam, Amsterdam University Press 2020 doi: 10.5117/9789462988934_ch07

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or prospects for global power were faced with the choice of either taking a side or attempting to remain independent. In today’s connected world, the idea of complex interdependence (Keohane and Nye, 1977) appears to be the most viable option, as the development of various relations between different actors is increasing, with power balancing remaining an important albeit less prominent factor. However, when faced with more powerful states, those that are smaller still need to resort to alternative strategies, such as bandwagoning with a stronger partner or spreading their risks through hedging, if balancing or neutrality are not viable options. In these processes, a significant but under-explored field of research concerns the importance of non-state domains, particularly shadow activities, as outlined in the introductory chapter. Informal flows remain by their very definition elusive, and consequently, any thorough investigation aimed at formulating an overarching geopolitical or geo-economic theory is challenging. However, their influence can nonetheless be explored, illustrated well by the empirical cases analysed in this volume. By considering the regional and local levels of impact and the shadow economy from a position of theoretical eclecticism, the aim of this chapter is to explore how interdependency is negotiated in the local economies and politics of Western Balkan countries in their relations with the People’s Republic of China (hereafter China), particularly when dealing with local Chinese communities in the Western Balkan region. Geographically, the Western Balkan territories are part of the European continent and so the region might be expected to gravitate towards the European Union. However, due to their historical heritage, these formerly communist countries also look to other centres of power. Past social and cultural ties are thus revived and fortified to aid political and diplomatic efforts to establish connectivity beyond the European Union. The process of accession of new member states to the European Union is a long and complicated path of negotiations, and the target – the year for joining – is often repositioned, which, although transparent, increases the likelihood of looking elsewhere. As this complex process can cause discontent in local populations, offering alternate routes can give leverage to those in power. In the current political and economic realignment, the One Belt One Road (OBOR) initiative – also known as the Belt and Road Initiative (BRI) – offers an attractive alternative. By analysing both the formal and the informal Chinese presence in the Western Balkan region, the aim of this study is to explore the complex interplay of official policies and unofficial rules, regional tensions and global interests, and local socio-economic problems and international aspirations of countries in the Western Balkan region, in terms of their position in the so-called Belt and Road zone. In considering

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the political, social, and economic ramifications of the Chinese presence in the Western Balkans, it is argued that an orientation towards short-term economic gains and populist-driven decisions can obstruct the Western Balkan countries’ paths towards sustainable economic development.

The politics and economy of the Western Balkans Political background ‘The Balkans’ is a cultural and political term used to describe the southeast part of Europe, which most often refers to Albania, Bulgaria, Greece, Romania, the European part of Turkey, and the former Yugoslav territories of Bosnia and Herzegovina, Croatia, Macedonia, Montenegro, Serbia, Slovenia, and Kosovo.1 After the concept of a unified West was formulated, the Balkan peninsula was seen as a region that is historically and geographically part of Europe, but not part of the modern Western world (Gray and Sloan, 2014). The region had long been perceived as a borderline between cultures, religions, and even civilizational worldviews, but it also became regarded as a place of constant conflict and chaos (Todorova, 2009). As the frontier zone of great empires for centuries, the region continued to serve as a battleground for different ideologies in the 20th century, while the peoples inhabiting the Balkan peninsula made efforts to develop independent, modern nation states. The process of state-building at this ethnic and religious crossroads faced specific challenges, and although attempts have been made to overcome them through continuous dialogue and educational and cultural cooperation (e.g., Couroucli, 1997), many tensions and issues remain unresolved. The Balkans continue to be seen as a volatile region. In addition to recent conflicts (the dissolution of Yugoslavia) and territorial disputes (Kosovo’s unilateral declaration of independence), the perceived instability can also be rightly attributed to the fact that parts of the region have attempted to remain politically, economically, and culturally in-between, and continue to do so in the 21st century. 1 Kosovo unilaterally declared independence from Serbia in 2008, and the recognition of the Republic of Kosovo is an ongoing diplomatic issue. In 2012, it was agreed that Serbia would participate in international forums with the territory if it was represented under the name Kosovo, followed by an asterisk linked to a footnote reading: ‘This designation is without prejudice to positions on status, and is in line with UNSC 1244 and the ICJ Opinion on the Kosovo declaration of independence’. This paper uses the politically neutral term ‘Kosovo’ to indicate an economic entity, as the territory was also a province with a certain level of autonomy within Serbia and before that Yugoslavia.

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During the Cold War, Greece and Turkey positioned themselves by joining NATO, while Bulgaria and Romania were part of the Warsaw Pact, but Yugoslavia and Albania refused to side with either the West or the Soviet Union. Both countries sought to remain independent, while also developing strong ties with China. As relations with the Soviet Union became increasingly tense and competitive, China turned to these independent communist countries. From the 1960s, Albania moved annual motions in the United Nations to recognize the People’s Republic of China as the sole legal China, and they succeeded in 1971. As for Yugoslavia, although its leader Josip Broz Tito was a key figure in the Non-Aligned Movement, strong cultural ties were established between the two countries. The former federation’s legal successor, Serbia, still builds on the strong cultural ties made with China in the 1970s. For example, the World War II-themed Yugoslav films Walter Defends Sarajevo and The Bridge were among the first foreign films to be released in China after the Cultural Revolution, influencing a whole generation of Chinese (Wang 2014).2 The films remain popular in the country (Šešić, 2006), and their leading actor, Bata Živojinović, continued to promote Sino-Serbian cooperation until his recent death, which was mourned in leading Chinese media (Beloti and Bojović, 2016). Paradoxically, several Albanian films that were equally popular in China during the same period could now be banned in Albania as part of a move to outlaw communist propaganda (Tsui, 2017). As the Cold War drew to an end and the communist regimes in the region were dismantled, the Balkans’ diplomacy of balance faced new challenges. The military conflicts during the break-up of Yugoslavia added further negative connotations to the term ‘Balkans’, and a distancing from the name is evident in the attempts to introduce the term ‘Southeast Europe’ instead, even though it is geographically imprecise (Bideleux and Jeffries, 2006). In addition, after the formal establishment of the European Union, a new term was coined for the unallied territories viewed as candidates-in-waiting on the path towards membership: the ‘Western Balkans’ (Pond, 2007). The global political changes in the 1990s introduced new possibilities for actors in the Western Balkans – they no longer had to negotiate a position of being neither East, nor West to remain neutral, as they could now promote the idea of benefiting from being both. Although there are strong incentives and encouragement to join existing unions and alliances, the narrative of being in-between remains officially 2 Both films depict a stereotypical black-and-white vision of war, with strong hero figures f ighting the ‘bad guys’. The f ilms were likely aimed at inspiring and promoting patriotism and self-sacrifice for the good of society, values that could have been easily understood and appreciated within the Chinese cultural context of the time.

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acceptable. This is most noticeable in the case of Serbia, as European Union High Representative Federica Mogherini noted when addressing the Serbian president during her recent visit to the Western Balkans (March 2017): ‘There is a perception that full membership implies having to make a choice between the East and the West. One does not rule out the other, and work must be done to change this perception’ (EWB Archives, 2017). This position is tolerated for many reasons, and a particularly significant issue is the potential for Serbia’s full integration into the modern West through NATO membership. Montenegro’s recent accession was seen as a sign of NATO finally overpowering the influence of Russia in the region (The Economist, 2015); but, even if Macedonia and Bosnia and Herzegovina were to join, Serbia – the largest Western Balkan country – is likely to remain outside the alliance due to tensions related to the 1999 military intervention. The bombing of the Chinese Embassy in Belgrade during this intervention, in which three Chinese citizens were killed, also offered a tragic opportunity for Serbia and China to reinforce their ties and their implicit alliance against NATO. Finally, the Western Balkan’s management of international relations with global powers must be considered in terms of the still ongoing regional tensions and territorial disputes. The aforementioned issues mean that it is unlikely that the entire region will become unified under a single alliance or union. Whilst the formerly Western Balkan countries such as Croatia and Slovenia strongly advocate European Union and NATO accession for their neighbours, there is an awareness of strong Russian and Chinese influences. This situation poses a threat to stability, as actors in the region may seek out international support for their conflicting agendas, such as in the recent political crisis in Macedonia or the tensions between Serbia and Albania. For example, Serbia strongly relies on the support of China when considering the territory of Kosovo, as the issue is often compared in the local media to that of Taiwan. The awareness of the risks of future conflicts in the region and the lack of a unifying political ideology lead to the view that economic development and cooperation can be potential solutions to enable a peaceful future for the turbulent Western Balkan region. Economic background Countries in the Western Balkans are considered to be developing and transition economies. Recent reports of their overall economic development note that the rate of regional growth is increasing and that poverty is in decline, but that further fiscal consolidation and structural reforms are required (World Bank Group, 2017). The most recent World Bank data

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available on the relevant economic indicators are given in Table 7.1. Despite relatively steady growth, the crisis of the 1990s served as a low starting point for Western Balkan economies, and so living standards in the region remain relatively low. Serbia, in both geographical and economic terms, is by far the largest of the Western Balkan territories, and in view of its aspirations towards economic cooperation with China, the 2017 World Bank report (World Bank Group, 2017) states that Serbia’s GDP has been significantly rebalanced towards external demand (exports). Table 7.1 Economic characteristics of the Western Balkans, 2015 GDP (million USD) Albania Bosnia & Herzegovina Kosovo Macedonia Montenegro Serbia

GDP per capita (USD)

GDP growth (%)

Global ranking Population (0,000) by nominal GDP (of 194)

11,398.39 16,191.72

3,945.20 4,249.30

3 3.2

127 111

2,889.17 3,810.42

6,400.69 10,086.02 3,987.06 37,160.33

3,552.40 4,852.70 6,408.40 5,237.30

5.1 3.5 3.1 1.3

147 136 155 92

1,801.80 2,078.45 622.16 7,095.38

Source: World Bank Open Data (https://data.worldbank.org/)

In addition to fears of political instability, a major factor influencing the future of economic development in the Western Balkans is the noted presence of a substantial shadow economy. Recent figures available for the Western Balkans are provided in Table 7.2 (those for Croatia and Slovenia prior to their accession to the European Union are also included). Although it is notoriously difficult to precisely measure the extent of the shadow economy, it has been the subject of research for many decades (Schneider and Williams, 2013). Depending on how it is defined, the shadow economy can comprise both unreported and illegal activities, and it often amounts to a significant percentage of GDP and results in large financial outflows. The estimates of the shadow economy involving mostly unreported flows comprise around 30 per cent of the GDP of the Western Balkan territories, which is about half of the average for the least developed countries, and around double that of the European Union and the most developed nations, as results from previous studies have shown. These estimates are also in line with local Western Balkan media reports and studies conducted in collaboration with national institutions (e.g., Krstić et al., 2013).

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Table 7.2 Estimates of shadow economy in the Western Balkans

Albania Bosnia & Herzegovina Croatia Macedonia Montenegro Serbia Slovenia Yugoslavia (Serbia & Montenegro)

1999/2000 (% of GNP)1

1999-2007 (% of GDP)2

Latest available data (% of GDP, year indicated in brackets)3

33.4 34.1

34.3 33.6

32.9 (2007) 32.8 (2007)

33.4 n/a n/a n/a 27.1 29.1

32.1 37.6 n/a n/a 26.2 n/a

28.4 (2013) 34.9 (2007) n/a 30.1 (2010) 26.5 (2004) n/a

Sources: 1 Schneider (2002); 2 Schneider et al. (2010); 3 Schneider (2013), Schneider et al. (2010), and Schneider et al. (2015)

As unreported economic activities are, by definition, meant to be difficult to detect, the factors influencing the development of a shadow economy cannot be determined with certainty. On a global level, the significant driving forces are assumed to be high taxes and complex government regulations (Schneider, 2005). In transition economies, avoiding the burden of taxation is also a significant driver, but it has been proposed that economic activities go unreported because of the low quality, rather than the complexity, of services provided by the state (Sergi, 2001). Thus, the shadow economy is not necessarily seen as negative, and it is even argued that it can help open up markets by indicating how the state can reform and facilitate – but not plan – the economy (Eilat and Zinnes, 2000). However, the studies and reports analysed do not generally consider the unreported activities of foreign citizens whose contributions to the development of the local economies are questionable, as discussed in the following sections.

Chinese presence in the Western Balkan region Economic collaborations between China and Western Balkan countries most often take the form of bilateral state-to-state cooperation, but since the launch of the OBOR initiative in 2013, the region as a whole has become an important focus of discussion of the corridors that are ambitiously

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planned to connect Asia and Europe. OBOR is a major potential response to existing free trade agreements supported by the United States, and has thus prompted extensive studies of the geopolitical relevance of China’s move to increase its economic and political power in Europe (e.g., Van der Putten and Meijnders, 2015; Casarini, 2016), and specifically of the effects on Southeast Europe (e.g., Dumitrescu, 2015; Van der Putten et al., 2016). The Chinese initiative is generally viewed as an opportunity to overcome Europe’s economic problems, but caution is also advised as it is argued that its success would have serious implications for global politics and security. Recent studies even suggest that the European Union has been reformulating its agenda in order to constrain the ability of the Western Balkan countries to independently cooperate with China (Pavlićević, 2019). Nonetheless, the idea of creating a strong maritime and terrestrial logistical infrastructure to facilitate trade across China and Europe has reverberated across Central, Eastern, and South-eastern Europe (Pavlićević, 2015), as the exact routes of the proposed corridors are yet to be defined (Figure 7.1). Several points of entry into Europe may be planned in the future development of the project, but the first is likely to immediately benefit the region selected. Candidate and recent member countries need substantial investments in infrastructure, and due to the European Union’s credit restraint, Chinese investments can enable these small countries to gain more power on the international stage (Dumitrescu, 2015). A year before the launch of OBOR, a platform for Chinese financial involvement in Central and Eastern European Countries (CEEC) was created at the first China-CEEC Summit, held in Warsaw in 2012, and the subsequent annual summits witnessed various actors struggling to become Beijing’s key regional partner. Since the launch of the OBOR initiative, most of the implemented developments have been in Asia, but Serbia now stands out as China’s leading partner for expanding the New Silk Road into the CEEC region. The symbolic Sino-Serbian Friendship Bridge over the Danube was completed in 2014, the acquisition of a steel plant in the city of Smederevo by the Chinese Hesteel Group was the largest foreign investment in Serbia in 2016, and the agreement to construct a high-speed railway from Belgrade to Budapest is considered a milestone in the planned development of a trans-Balkan route connecting Western Europe with the port of Piraeus (Tonchev, 2017). In comparison, investments in Montenegro, Bosnia and Herzegovina, and Macedonia have thus far mainly been in constructing and upgrading motorways and developing power plants. Albania has benefited from its coastal location and is now a key point in the development of the maritime New Silk Road, enjoying significant investments in its energy resources

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Figure 7.1 Possible points of entry of the New Silk Road into Europe

Note: Estimated based on existing corridors and projects, data obtained from the official Belt and Road Portal, https://www.yidaiyilu.gov.cn/

and transport infrastructure. Serbia’s large economy, compared with other Western Balkan territories, appears to clearly indicate its potential as the regional leader in future cooperation with China, but despite Albania’s strong stance against communist politics and a state-run economy, its historic role in China’s global recognition and potential expansionist ambitions, as recently observed in Kosovo and Macedonia, should not be disregarded. The China-CEEC Summit also includes Balkan countries that, although part of the European Union, may also consider participating in developments enabling the construction of OBOR – both to reap the economic benefits and to contribute to regional cooperation and stability. The growing interdependence of China and the Western Balkan region has become increasingly controversial, in terms of both foreign policy and domestic affairs, as reported in regional and local media. As previously mentioned, the region remains a crossroads, and various actors are attempting to use their relations with global powers as leverage to both resolve local tensions and achieve their international aspirations. Western Balkan countries continue their path towards the European Union and continue to struggle with the potential revision of existing borders,3 against the backdrop of a strengthening Chinese presence. However, local populations and politicians – mainly from opposition parties – have voiced concerns over the benefits China will bring for their national economies. Across the Western Balkans, the media reports on overzealous law reforms aimed at attracting foreign investments, which then lead to suspicions of corruption due to insufficiently transparent contracts that bring questionable 3 Tensions around borders, e.g., between Kosovo and Serbia or within Bosnia and Herzegovina, are often mentioned as significant hurdles on the path towards European Union integration.

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benefits to the local population. Whilst these concerns apply to other foreign countries, a significant fear is that investments are a method of exporting Chinese labour, which is a particular concern as unemployment rates in the Western Balkan region are high. In addition, suspicions have been raised over the financial nature of the agreements, as they may be misinterpreted in populist attempts to highlight the supposed success of those in power, and increasingly political leaders are being urged to clearly distinguish loans from investments. Finally, in a region that has been in transition for decades, any shifts in the projected completion dates of major projects are subject to public criticism, and potentially seen as yet another empty promise made by the government. For example, at the recent Forum for International Cooperation within the OBOR framework in Beijing (May 2017), the Serbian Prime Minister mentioned that work on the high-speed railway between Belgrade and Budapest would begin by the end of 2017, but in 2014 (when the agreement was signed) the completion date was stated to be 2017, which was noted and criticized in the local media. Cooperation with China may thus be a potential solution for the development of the Western Balkans in terms of future investments, but the Chinese presence in the region obviously raises various complex political, social, and economic issues.

Local Chinese communities As previously mentioned, cooperative state projects and agreements under the OBOR initiative have been widely analysed and publicized, but official and comprehensive information on local Chinese populations and trade in the Western Balkans is scarce. The region has been discussed in several studies on Chinese and Asian migration to Europe (e.g., Nyíri, 2003; Chang and Rucker-Chang, 2013), and the general consensus is that China is a major source of irregular migration (Laczko, 2003), which may be why researching the local Chinese communities is difficult for both scholars and journalists. However, several articles and papers consider the transition of Chinese merchants from Hungary to Serbia during the mid1990s (Mihić, 1995; Milutinović, 2005; Nyíri, 2011), and one study published in German focuses on the Chinese diaspora in Serbia (Đorđević, 2006). Several studies of various topics related to the local Chinese communities in Serbia have been conducted and published in Serbian, including the perceptions of local populations (Blagojević, 2009; Trklja, 2009) and life in different local diasporic communities (Mančić, 2007; Jovićević, 2013; Rakić, 2014). This indicates that Serbia hosts the largest number of Chinese

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migrants in the Western Balkans, which is likely due to its size, although no precise data is available. The Chinese have, however, been identified as the largest foreign community in Serbia, contributing around a quarter of the country’s total immigration rate (Bobić and Babović, 2013). In the following sections, the available data are summarized and a general picture of local Chinese communities in Serbia is provided, based on the aforementioned research, on local and regional media reports, and on the author’s exploratory ethnographic fieldwork in Belgrade’s Chinatown, with reference to the entire Western Balkan region where possible. Official status The two main challenges to obtaining precise information on local Chinese communities are the lack of any clear responsibility for data gathering among relevant institutions and the confusion regarding terminology. Most of the studies analysed note that only unofficial data were obtainable, and often the response was that the institution – whether a national agency, the government or a foreign embassy – is not responsible for the local Chinese community. As for the terminology, the few available sources offer information on various types of presence, such as permanent residence, temporary residence, visitors, and working permit applicants, but it is unclear whether there are overlaps between the categories. In addition, the cited papers also note a suspicion that is echoed in the media across the Western Balkans, which is that many Chinese immigrants attempt to gain citizenship by paying locals a significant sum to marry them, although official data on the number of registered marriages with foreigners refutes this claim. Still, the unclear status of Chinese migrants in Serbia leaves room for speculation that the two countries have an interest in keeping it in the shadows, which was also claimed by respondents in studies of the perceptions of local populations. Size and origin Although there are no conclusive data, the Chinese population in Serbia has been estimated to be as large as 15,000 people, two thirds of whom are residents and one third temporary residents. At least half are estimated to live in the capital, Belgrade, and the vast majority are traders from Zhejiang province. However, they did not move to Serbia directly from China. The 1990s saw the first large influx of Chinese migrants into the Western Balkans, and although reliable data offers a clear explanation for this, its origins are still

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a matter of speculation among the general public. The research shows that Hungary’s abolishment of visa requirements for Chinese citizens in 1988 led to the arrival of around 40,000 immigrants in only a few years, and so in the early 1990s, the Chinese trading centre in Budapest became a symbol of the shadow economy in Eastern Europe. Large amounts of goods were imported from China and then often sold wholesale but in smaller quantities, and then exported to neighbouring countries, all with few regulations. However, after 1992 there was a pushback – stricter regulations were enforced and changes in import procedures reduced profits. Particularly after UN sanctions on Yugoslavia were lifted in 1996, the Chinese traders gradually moved south, with only around a quarter remaining in Hungary. These Chinese migrants are assumed to have moved through transitioning regions as they were attracted by the potential of doing business in shadow economies with liberal or loosely implemented laws. However, from the mid-1990s, and particularly towards the end of the authoritarian rule of Slobodan Milošević, local and global media speculated that the Chinese were brought into Yugoslavia as part of an agreement between Milošević’s socialist regime and China. The idea behind this conspiracy theory is that China was happy to reduce its massive population – by some accounts even paying them to emigrate – while Milošević needed to secure votes in a time of political instability and amidst efforts to topple his regime. These speculations have long been discredited, but media stories of tens and even one hundred thousand Chinese being brought into Serbia as part of a political project still resonate in the views of the respondents found in the cited studies. Business practices The vast majority of the local Chinese are involved in trade, with a much smaller percentage running restaurants, medical practices (offering traditional Chinese medicine), or agricultural businesses. As in the European Union, capital cities have become the main borderlands for Chinese migrants and almost every major city now has Chinese shops or Chinatowns. These areas unofficially tolerate shadow economic activity, from starting a business to daily operations, and the shadow flows appear to be routinized or even institutionalized. As foreigners must deposit several thousand euros to open a business, the Chinese are reported to regularly seek the help of locals to be the official founders of their businesses. Although around 10,000 Chinese-run shops are estimated to be operating in Serbia, less than 2000 are officially registered as being owned by Chinese citizens. The goods they import consist of mainly low-quality items, which supposedly match

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the local purchasing power. The transport route originally led through the Montenegrin port of Bar, but it then switched to Slovenian Kopar with transit through Croatia, and now goods supposedly travel from Greece through Macedonia – all in an effort to reduce import costs. Disagreements between Serbia and Montenegro, which were then still part of a union, have been cited as the reason for the move from Bar. Montenegrin officials were not willing to transfer funds to Serbia, so the Chinese traders had to pay import duties twice. After moving the route, they encountered a different problem. The declarations issued in China at the port of origin appeared to significantly undervalue the goods, but as the local customs agencies did not have sufficient resources to monitor all traffic they simply enforced higher taxes, after discovering through routine inspections that a large portion of the cargo was undeclared. Attempting to increase profits by avoiding taxes is part of the traders’ daily business operations – Chinese shops are renowned for not providing fiscal receipts, and prices are often negotiated and determined on the spot. Whilst Chinese traders are certainly not the only ones implementing such practices in these shadow economies, the tolerance of unregulated activities appears to extend to all of the areas in which they operate, which in the food industry can be potentially very dangerous. With this overall lack of regulations, restaurants in Chinatowns or Chinese shopping centres, which mainly serve Chinese shop owners, but also local shoppers, are often not subject to the required health inspections. A visit to supermarkets that sell Chinese goods can quickly demonstrate that the information in Serbian about food items is often incorrect in terms of content, expiration dates, etc. The reported shadow activities are often viewed as a response to the condition of the local economies. Efforts to establish reciprocal trade partnerships failed due to the low quality and small quantities of goods offered by Western Balkan countries, and attempts to initiate larger-scale agricultural projects were aborted after severe floods in the region, as it was determined that basic infrastructure was often not properly maintained. 4 Consequently, the Western Balkan countries are often viewed as transit countries for Chinese migrants en route to Western Europe, who will leave the region if their purchasing power decreases or the market becomes more strictly regulated. 4 In May 2014, the Balkans were affected by a cyclone that caused severe floods and landslides, with Serbia and Bosnia and Herzegovina suffering the heaviest rainfall ever recorded. More than a million people were affected, and the cost of damage was estimated at several billions of euros. It took several years for agricultural areas to recover.

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Whilst the benefits of these unregulated practices for Chinese businesses are apparent, it is also important to consider their positive effects on local communities. First, low-cost Chinese goods can increase the living standard for local populations, even if that standard remains relatively low. Survey respondents were quoted as saying that if it were not for the Chinese, they would have been barefoot during the economic crisis of the 1990s. Second, the shadow economy in which Chinese businesses operate also extends to the local population. Numerous studies note that many people benefit from providing services to Chinese traders, such as renting out living and storage space, bookkeeping, interpreting, and transportation, and are paid in cash, thus avoiding taxes. Under the high unemployment rates and the relative weakness of the Western Balkan territories’ transition economies, these people would likely otherwise struggle to make a living. However, whilst they can fall back on the shadow economy there is no enthusiasm for the difficult, yet necessary reforms required to significantly increase their living standards. Perceptions held by local populations The Chinese are often negatively perceived by local populations. They are regarded as messy and their goods as cheap, low-quality, and even hazardous. Although, as the previous section shows, there may be some truth to these claims about the goods sold in the Western Balkans, the main criticism is that the Chinese are taking away business opportunities from locals. These negative perceptions have led to the emergence of various urban legends, such as the diverse opinions about what happens to Chinese migrants when they die. Media across the Western Balkans from time to time report that no Chinese migrants are ever buried at local graveyards, which appears strange and suspicious. Several of the cited studies mention this and explain that first, the Chinese population in the Western Balkans is still relatively young, and second, they adhere to the custom of cremating the dead and transporting the ashes back to China to be buried with their families. Still, these types of stories only serve to further alienate the already isolated Chinese communities. The rare positive perceptions of Chinese traders are more related to their actions than to the people themselves. As mentioned, their contributions to the local economies are viewed as positive, even though their influence on meaningful reforms and progress is uncertain. Media across the Western Balkans have recently reported on the waves of Chinese migrants moving out of the region, and have often praised them for this wise decision, in

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light of the political and economic situation. However, these reports often end up instrumentalizing the local Chinese communities, using them as a yardstick for how low the region has sunk, proclaiming that people can no longer even afford cheap Chinese goods.

Viability of a common future5 The informal presence of the Chinese in Western Balkan countries was not initially connected to state-led cooperation initiatives, but the extent and significance of the OBOR initiative turned the spotlight onto the interdependence of political/diplomatic and social/cultural connectivity. Political efforts certainly guide the development of social ties, but the success of diplomatic endeavours requires a cultural basis. Thus, the viability of future cooperation between China and the region largely depends on how the actors address significant issues in the domains of domestic and foreign affairs. Within the Western Balkans, there have been clear efforts to reinforce past ties and promote a vision of China as an advanced country and a global leader. The stark contrast between this positive image and the negative view of local Chinese communities does not appear to have entered the media narrative, which may be because countries in the region have a long history of economic migrations. Extensive anecdotal evidence highlights how the development of Yugoslavia after World War II led to major differences between local urban populations and those who had emigrated to Western Europe after the war mainly as manual labourers. This dichotomy may have parallels with the apparent contrast between the image of local Chinese and the broader view of China. However, even if the cultural issue of negative perceptions is overcome, the economic issues of scale and sustainability remain. In terms of scale, media reports about establishing trade with China often question the capacity of small Western Balkan countries to satisfy the large Chinese market, which also echoes concerns that local markets could be overtaken by Chinese goods and services. However, issues of sustainability also emerge when considering the actual long-term effects of the OBOR initiative on the region. A good example is Serbia, where reports of potential cooperation with Chinese companies are necessarily viewed through the lens of the overall economic policy, which has been criticized 5 The author expresses her sincere gratitude to Susann Handke (IIAS Centre for Regulation and Governance), whose invaluable input led to the addition of this section to the final version of the paper.

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for its stance towards foreign investments. For over a decade the Serbian government has been providing significant benefits and subsidies to attract foreign investors, but with no apparent robust system to ensure that this will lead to developments or benefits for local communities. In terms of foreign policy, the future relationships of the Western Balkan countries with China will depend on the development of relations between global powers. From the Chinese side, the planning of the route of OBOR is likely to be affected by how open the European Union is to Chinese investments. Whilst Western Balkan countries may hope to become key locations for investment, alternative routes through Eastern Europe may be more attractive. Still, concerns over potential regulatory conflicts may mean that China remains just outside the gates of the European Union for the time being, and the European Union may even try to strengthen its influence to control China’s involvement at its borders. From the perspective of the Western Balkan countries, projects under the OBOR initiative should be viewed within wider initiatives to remain unaligned, or rather aligned with both Western and Eastern global powers. Serbia is a case in point, as all collaborations with China have recently been brought under the authority of the newly founded national Office for Cooperation with Russia and China.6 With constant questions about conflicting influences in the region, whether European Union and the US versus Russia or NATO versus Russia and China, politics, economy, and culture are clearly inseparable when envisioning the future of the Western Balkans.

Conclusion By comparing the official narratives of state actors with everyday practices at the local level, two visions of China can be clearly identified – that of a rapidly developing global power or a factory producing low-quality goods. A deeper analysis reveals that these two seemingly disparate visions are closely connected through a complex interplay of official and unofficial policies and global, local, and regional interests. The possibility that these may be two sides of the same coin should be a significant determinant of the 6 In May 2017, the newly elected President of Serbia founded this office and named the previous president of the country the director. This move was assessed as highly controversial by the media, as both politicians belong to the same political party and it was unclear whether the previous president would run for a second term, so it was speculated that the newly established office was part of an unofficial political deal.

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aspirations of Western Balkan countries and their populations in terms of the OBOR initiative. Whilst development usually comes at a cost, the actual price can be easily obscured if only its positive aspects are presented or if distant future goals are referenced. Western Balkan states can potentially regulate and introduce order into the flow of economic resources, particularly with foreign citizens, but this may disrupt the fragile transition economies and perhaps endanger their negotiating position with China, at a time when a regional leader could emerge. The transactions identified in the shadow economy may, for the Western Balkans, reflect the underbelly of a hope – a possibility that with Chinese help, the region can finally overcome the socio-economic issues that have challenged its development for decades. These flows also offer an excellent populist tool for those in power to ‘keep the peace’: if they were abolished, the local populations would certainly be affected, as they have become accustomed to maintaining their living standards by purchasing numerous goods from Chinese shops at below-market prices. However, tolerating a complex shadow economy in the hope of transitioning to a better future may actually impede any meaningful changes that could lead to sustainable socioeconomic progress at both national and regional levels. In developing future regional and global alliances and partnerships, and also domestic policies, Western Balkan actors should be aware that populist-driven decisions and the hope of short-term economic gain may seriously damage their long-term prospects, as the shadow activities could simply perpetuate the transition economy indefinitely, while the potential state investments in infrastructure do not necessarily bring about sustainable economic development.

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Bobić, Mirjana, and Marija Babović. 2013. ‘Međunarodne migracije u Srbiji – stanje i politike’ [International Migrations in Serbia – State and Policies]. Sociologija 55(2): 209-228. Casarini, Nicola. 2016. ‘When All Roads Lead to Beijing. Assessing China’s New Silk Road and its Implications for Europe’. The International Spectator 51(4): 95-108. Chang, Felix B., and Sunnie T. Rucker-Chang (eds). 2013. Chinese Migrants in Russia, Central Asia and Eastern Europe. London: Routledge. Couroucli, Maria (ed.). 1997. The Balkans, Ethnic and Cultural Crossroads: Educational and Cultural Aspects. Strasbourg: Council of Europe Publishing. Đorđević, Ivan. 2006. ‘Chinesen in Serbien – (un)erwünschte Gäste [Chinese in Serbia – (Un)Desirable Guests]’. Ost-West. Europäische Perspektiven 7: 115-122. Dumitrescu, George Cornel. 2015. ‘Central and Eastern European Countries Focus on the Silk Road Economic Belt’. Global Economic Observer 3(1): 144. The Economist. 2015. ‘In the Balkans, NATO has Outmuscled Russia’, 11 December, https://www.economist.com/europe/2015/12/11/in-the-balkans-nato-hasoutmuscled-russia, accessed 27 September 2019. Eilat, Yair, and Clifford Zinnes. 2000. ‘The Evolution of the Shadow Economy in Transition Countries: Consequences for Economic Growth and Donor Assistance’. CAER II Discussion Paper 83. EWB Archives. 2017. ‘Mogherini in Western Balkans: Key Messages’. European Western Balkans, 8 March, https://europeanwesternbalkans.com/2017/03/08/ mogherini-in-western-balkans-key-messages/, accessed 27 September 2019. Gray, Colin S., and Geoffrey Sloan. 2014. Geopolitics, Geography and Strategy. London: Routledge. Jovićević, Bojana. 2013. Kinezi u Pančevu: ekonomsko antropološka studija [The Chinese in Pancevo: An Economic Anthropological Study]. Zemun: MostArt. Keohane, Robert O., and Joseph S. Nye. 1977. Power and Interdependence: World Politics in Transition. Boston, MA: Little, Brown & Co. Krstić, Gorana, Friedrich Schneider, Mihail Arandarenko, Milojko Arsić, Branko Radulović, Saša Ranđelović, and Irena Janković. 2013. Shadow Economy in Serbia: New Findings and Recommendations for Reform. Foundation for the Advancement of Economics. Laczko, Frank. 2003. ‘Europe Attracts More Migrants from China’. Migration Information Source, Migration Policy Institute. Mančić, Mirjana. 2007. Način života Kineza na Novom Beogradu [The Way of Life of the Chinese in New Belgrade]. Unpublished bachelor’s thesis, University of Belgrade, Serbia. Mihić, Žarko. 1995. ‘“Kinezi dolaze”: kineska trgovina u istočnoj Evropi [The Chinese are Coming: Chinese Trade in Eastern Europe]’. Ekonomska Politika 2260: 27-29.

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Milutinović, Svetlana. 2005. ‘Kineski transnacionalni preduzetnici u Budimpešti i Beogradu: u potrazi za tržištima tranzicionih ekonomija [Chinese Transnational Entrepreneurs in Budapest and Belgrade: In Search of Transition Economy Markets]’. Sociologija 47(2): 143-160. Nye, Joseph S. 1990. ‘The Changing Nature of World Power’. Political Science Quarterly 105(2): 177-192. Nyíri, Pál. 2003. ‘Chinese Migration to Eastern Europe’. International Migration 41(3): 239-265. Nyíri, Pál. 2011. ‘Chinese Entrepreneurs in Poor Countries: A Transnational “Middleman Minority” and Its Futures’. Inter‐Asia Cultural Studies 12(1): 145-153. Pavlićević, Dragan. 2015. ‘China’s New Silk Road Takes Shape in Central and Eastern Europe’. China Brief 15(1): 9. Pavlićević, Dragan. 2019. ‘Structural Power and the China-EU-Western Balkans Triangular Relations’. Asia Europe Journal 1-16. Pond, Elizabeth. 2007. Endgame in the Balkans: Regime Change, European Style. Washington, DC: Brookings Institution Press. Rakić, Zoran. 2014. ‘Kinezi u Leskovcu – život sa kineskim zidom oko sebe [The Chinese in Leskovac – Life with a Chinese Wall Around You]’. Leskovački zbornik 54: 441-454. Rosamond, Ben. 2000. Theories of European Integration. Basingstoke: Macmillan. Schneider, Friedrich. 2002. ‘Size and Measurement of the Informal Economy in 110 Countries’. Paper presented at Workshop of Australian National Tax Centre, ANU, Canberra, 17 July. Schneider, Friedrich. 2005. ‘Shadow Economies around the World: What Do We Really Know?’ European Journal of Political Economy 21(3): 598-642. Schneider, Friedrich. 2013. ‘Size and Progression of the Shadow Economies of Turkey and Other OECD Countries from 2003 to 2013: Some New Facts’. International Economics Journal 2(2): 83-116. Schneider, Friedrich, and Colin Williams. 2013. The Shadow Economy. London: The Institute of Economic Affairs. Schneider, Friedrich, Andreas Buehn, and Claudio E. Montenegro. 2010. Shadow Economies All Over the World: New Estimates for 162 Countries from 1999 to 2007. Policy Research Working Paper 5356, The World Bank. Washington DC: World Bank. Schneider, Friedrich, Gorana Krstić, Milojko Arsić, and Saša Ranđelović. 2015. ‘What Is the Extent of the Shadow Economy in Serbia?’ In Krstić Gorana and Friedrich Schneider (eds), Formalizing the Shadow Economy in Serbia, pp. 47-75. Heidelberg: Springer-Verlag. Sergi, Bruno. 2001. ‘Do the Balkans Look West or Simply to the EU? From a Distorted Economy to a Prospective Open Economy’. SEER-South-East Europe Review for Labour and Social Affairs 3: 89-112.

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Šešić, Rada. 2006. ‘Valter brani Sarajevo/Walter Defends Sarajevo’. In Dina Iordanova (ed.), The Cinema of Balkans, pp. 97-115. London and New York: Wallflower Press. Todorova, Maria. 2009. Imagining the Balkans. Oxford: Oxford University Press. Tonchev, Plamen. 2017, February 15. China’s Road: Into the Western Balkans. Brief – No. 3, European Union Institute for Security Studies. Trklja, Aleksandra. 2009. Pozicija kineskih imigranata u svesti građana Beograda [The Position of Chinese Immigrants in the Minds of the Citizens of Belgrade]. Unpublished Master’s thesis, University of Belgrade, Serbia. Tsui, Clarence. 2017. ‘Why Albanian Films are Big in China: Cultural Revolution Nostalgia’. South China Morning Post, 24 March, https://www.scmp.com/culture/ film-tv/article/2081841/why-albanian-films-are-big-china-cultural-revolutionnostalgia, accessed 27 September 2019. Van der Putten, Frans-Paul, and Minke Meijnders. 2015. China, Europe and the Maritime Silk Road. The Hague: Clingendael (Netherlands Institute of International Relations). Van der Putten, Frans-Paul, Francesco Saverio Montesano, Johan van de Ven, and Peter van Ham. 2016. The Geopolitical Relevance of Piraeus and China’s New Silk Road for Southeast Europe and Turkey. The Hague: Clingendael (Netherlands Institute of International Relations). Walt, Stephen M. 1985. ‘Alliance Formation and the Balance of World Power’. International Security 9(4): 3-43. Wang, Kaihao. 2014. “Generation of Chinese Film Goers Took Yugoslav Drama into its Heart”. China Daily, 18 December, https://www.chinadaily.com.cn/ world/2014livisitkst/2014-12/18/content_19112061.htm, accessed 27 September 2019. World Bank Group. 2017. Faster Growth, More Jobs. Western Balkans Regular Economic Report No. 11. https://issuu.com/world.bank.europe.central.asia/ docs/wbrer11final, accessed 27 September 2019.

About the author Jelena Gledić is Senior Instructor at the University of Belgrade Faculty of Philology, where she has been teaching a range of courses on Chinese language and culture. Her research has mainly focused on the role of culture in different aspects of society, research, education and international relations.

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State approaches to non-state interactions Cross-border flows in Xinjiang and Kazakhstan Olga Y. Adams

Abstract The chapter focuses on cross-border relations between the Republic of Kazakhstan and Xinjiang-Uyghur Autonomous Region of China, examining the attempts of respective states to intervene in and/or co-opt long-established traditions of transborder flows. Despite having existed on opposite sides of closely guarded borders for most of the 20th century, the two adjoining regions managed to keep alive long-established traditions of cross-border interactions thanks to shared ethnic, cultural, and linguistic features. The frontier societies there today have lived through multiple challenges – the indiscriminate border policy of the Soviet era on Kazakhstan’s side and the tumultuous early years of socialist China engendered exoduses of people across semi-controlled borders. Almost all official interactions stopped until the 1990s when new challenges and opportunities presented themselves and, with them, the revival of informal cross-border exchanges and states’ attempts to co-opt and control them. Keywords: China-Kazakhstan border, Khorgos, ICBC, frontier society, cross-border exchanges, border control

Introduction Governmental authorities recognize that unless borders are officially closed, flows will pass through them. Participating in the international community involves acknowledging that, inevitably, people will cross state boundaries unofficially. States do attempt to monitor the unofficial flows of capital,

Hung, Eva P.W., and Tak-Wing Ngo (eds), Shadow Exchanges along the New Silk Roads. Amsterdam, Amsterdam University Press 2020 doi: 10.5117/9789462988934_ch08

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goods, services, people, information, and influence for a variety of reasons, most concerning safety, security, sovereignty, and salient policymaking. The state’s attempts to intervene and/or co-opt the long-established tradition of transborder cooperation and flows between the Republic of Kazakhstan and the Xinjiang-Uyghur Autonomous Region (XUAR) of the People’s Republic of China is the focus of this article. Kazakhstan and Xinjiang share a long and complicated history. Kazakhs are an ethnic minority of China (around 1.4 million live in Xinjiang), and there is a substantial Uyghur presence in Kazakhstan (around 300,000). Both XUAR and Kazakhstan play pivotal roles in the Silk Road strategy, or One Belt One Road (OBOR) as it has come to be known. Cross-border interactions, mostly of an economic nature and both official and non-state, are already well-established and likely to increase in intensity, as will government monitoring and participation in the latter. Governments monitor the flow of goods and services across their borders not only to collect taxes and/or tariffs, but also to inform policy with respect to trade agreements and sectoral support. Flows of goods and services that are beyond the state’s view are acknowledged to represent an opportunity cost, in the form of lost import/export duties and other state revenues. These flows may also hinder a clear understanding of trade balances. At present, border crossings actively function between Kazakhstan and Xinjiang with fledgling border towns and communities. For China, these become gateways to Central Asian, Russian, and further European markets, firmly integrating XUAR in global production and logistics systems. Kazakhstan is developing the required infrastructure as part of its Nurly Zhol (Bright Way) policy of domestic development, which, while feeding into larger regional logistics systems, also serves the goal of national economic development and diversification. Close attention is being paid to inter-state migration by state actors both in Kazakhstan and Xinjiang, although it is not as sensitive an issue as it has become in Europe. Immigrants represent both potentially productive additions to a country’s work force and a drain on strained public resources, and possibly the introduction of such unwelcome subjects as religious extremism and separatism. People crossing the borders outside mandated avenues represent ‘unknowns’ in this equation and are likely to be viewed as a security threat by both sides. However, communities overlapping official state boundaries may also prove instrumental in solving pressing issues such as environmental concerns. It is therefore both challenging and rewarding to write on frontier- and migration-related subjects today. The migration crises unfolding in Europe undoubtedly colour the research perspectives,

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particularly those addressing non-state actors in cross-borders exchanges as potentially aggravating the situation. Globalization has brought about a steady increase in legal flows of people, goods, and financial instruments across state boundaries, and in many cases has had a profound impact on borderland settlements, in which unique communities reside close to the border. The Russian Far East and China’s dongbei (northeast) are specific neighbouring areas that were completely shut off from each another for many years (1949-1991), and have been actively rediscovering each other since the fall of the Soviet Union and the subsequent easing of border controls on both sides. There are, as yet, no ‘twinned’ cities with shared ways of life, like those on the US-Mexican border, as the border crossings are mainly distant from smaller villages in Russia, and the cross-border activities of larger county-level towns on the Chinese side are mainly business-related – trading, small-scale manufacturing, and agriculture. Ambitious plans are afoot for cross-border joint development, with much hinging on productive collaboration, and so far, this has progressed in fits and starts. Despite the urgent need for foreign investment in the Russian Far East, the regulatory framework has been slow to develop and the suspicion of China’s ‘true motives’, in terms of its massive resettlement in the region, according to alarmist media reports1(even though the area has been steadily losing its Russian population in the years since the fall of the Soviet Union), remains strong in both the corridors of power and public perceptions. The aim of this chapter is to examine the adjoining states’ attempts to intervene in and/or co-opt long-established traditions of transborder flows between Kazakhstan and XUAR. First, some of the key terms are clarified, and the theoretical and methodological approaches taken are briefly reviewed, concluding with a note on the sources. While the Western tradition of frontier-border studies is the basis for the study, this chapter has attempted to use as many sources from the countries of interest as possible, particularly considering schools of thought from Central Asia, China, the USSR, and post-Soviet Russia regarding the harnessing of the potential of frontier areas and communities to ensure the development is well-balanced. A brief review of Xinjiang’s and Kazakhstan’s most important historical legacies is required to highlight the backdrop of the deeper ethnic, cultural, and religious connections that people on both sides of the border perceive as transcending state-imposed limitations. The respective states may, however, 1 For an insightful overview of changes in public perception of ‘China threat’, see Alexeev (2014).

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view these ties as challenging the security of political systems, although they do not always attempt to subvert state policies or purposefully evade state controls.

Theoretical approaches and methodological challenges Central Asia has remained somewhat removed from the global effects of the worldwide migration crisis, which has further politicized research related to crossing state borders and cultural frontiers. However, the border issues here are not completely settled, and can still potentially be exploited for narrow political interests. The issue of migration, even of a legal kind, also remains sensitive. In this chapter, we focus the definitions of ‘frontier’ and ‘border’ and their important differences. The reflection of these concepts in the policy documents of neighbouring countries helps to reveal the states’ approaches to cross-border cooperation. The concept of ‘frontier’ has mainly been developed in North America. Frederick J. Turner, the prominent historian of the American frontier, refers to it as ‘the outer edge of the wave – a meeting point between savagery and civilization’ (Turner, 2010: 16). This nineteenth-century juxtaposition of ‘civilized’ and ‘primitive’ is clearly outdated, but the core meaning of a frontier area remains – it is a region at the geographical edge of an older settled area, nowadays usually close to legally defined borders, where different cultural practices meet and work out patterns of relatively peaceful and productive co-existence. For Turner, the frontier is about ‘winning a wilderness’, first in the sense of conquering nature, and subsequently by expanding a new state’s power into new territories. Here, he is not talking about delimiting formal boundaries, but about expanding a state’s influence, or the ‘soft power’ in modern political vocabulary. Over the long course of their history, Xinjiang and Kazakhstan have witnessed both processes, although a changing cast of actors have been involved. This vast area has been and remains a ‘frontier’ in the full sense, as tribes, languages, and ways of life interact, cultural influences spread, wax, and wane, and conflicts flare. As Dillon (2004: x) points out, ‘[t]he Xinjiang issue is a complex one […] partly because of geographical position […] poised as it is between the Chinese, Russian and Turkic worlds, and partly because of the torturous history from which present-day Xinjiang has emerged’. In addition, there are a host of unresolved problems, such as the unequal regional economic development of China, in which ethnic minority areas lag behind, the disparate standards of living between the Han and Uyghur

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populations, and underlying cultural challenges. These issues shadow both centrally formulated border policies and their local implementation. The border is a significant legal and political attribute of the modern state, and a fundamental principle of international law that delineates the powers of a state, including its symbolic power, within a specific space. Scott (2015: 27) argues that ‘it is borders that “fix” space and make space concrete as lived in and comprehensible social places’. Here, we use Clement’s (1997: 48) definition of a border: ‘a political line of demarcation between two autonomous nations or systems, a barrier to each through which the flow of people, goods and services is monitored and controlled’. The political line of demarcation is a particular feature in present-day XUAR and Kazakhstan. In XUAR’s regulations on border zone management, the border is defined as a border range which has been delineated and demarcated on territory and includes counties (villages) located in the border vicinity, military regiments’ farming and animal husbandry farms, and also the border itself, border crossings, border roads, transborder areas of economic cooperation, areas of special control, areas of border residents’ trading activities, and tourist areas (Renmin wang, 2017).

The border itself constitutes a space within a 2-kilometre range of the demarcated boundary, and no less than 20 metres from the line. The legal-institutional discourse to studying transborder collaboration between Xinjiang and Kazakhstan allows us to widen the scope to include the tasks and challenges that political systems of both China and Kazakhstan are faced with and which, inevitably, influence their border policies. Both states are devoting considerable funds and effort to developing adjoining areas, while simultaneously considering all matters of ‘sovereignty’ and ‘unity’. Kazakhstan’s ‘Strategy-2030’, the first roadmap of the development milestones in a new independent country, refers to ‘protecting national security of independent Kazakhstan’ as a political goal. To achieve this, it must ‘protect its national sovereignty, territorial integrity and inviolability of state borders’ (Strategy Kazakhstan-2030, 1997). Kazakhstan’s military doctrine states that ‘the potential for conflicts in Central Asia is due to a variety of factors: instability in Afghanistan, the tense socio-political situation in the region, unresolved border and water-sharing issues, economic, religious and other contradictions with the mechanisms for rectifying them still lacking. Drug trafficking and illegal migration has assumed a transnational character’ (Ministry of Defense, 2017). These concerns lead to the assumption that the control of all cross-border

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activities will be further tightened by Kazakhstan, with particularly close monitoring of existing and potential connections that are not based on shared economic interests, for example, religion or ethnicity. The situation is even more complicated on Xinjiang’s side. For years, the region was referred to as the ‘restive Muslim part of China’ by Western academic sources, the news media, and Chinese sources focusing on ‘Xinjiang’s problems’. The region remains an impoverished area, with tensions between Uyghur and Han population always close to the surface. The vast multi-ethnic and multicultural region is the centre of China’s Develop the West (xibu da kaifa) initiative introduced in 2000. As geopolitical changes gradually took place in Central Asia in 1991, China’s large-scale effort to calm and develop XUAR began to include elements of the ‘going out’ policy (zouchuqu zhanlue) from the early 2000s. For this restive autonomous region, this had the potential of active participation in cross-border relations that were tailored to local needs, albeit still under tight central control. Xinjiang is uniquely positioned to become a gateway for China to the newly independent countries of Central Asia: a position it reinforced during the 1990s-2000s. However, China’s policy documents constantly reiterated the need for these countries to meet stability and socioeconomic growth indicators within their borders before ‘going out’. Strengthening international connections both at local and state level is important, but is viewed as a supplementary tool. This is an important consideration when analysing XUAR’s cross-border policies. The riots in Urumqi in 2009, which left 197 people dead and thousands injured, once again brought the area’s unresolved problems to the surface. After a serious clampdown, the policy of ‘The Whole Country Assisting Xinjiang’ (Quanguo duikou zhiyuan Xinjiang) was introduced.2 It laid out plans for XUAR’s development from 2010 to 2020 not only in the economic realm, but in all other important facets of life. The maxim ‘to resolutely oppose’ the three evil forces of terrorism, extremism, and separatism has since become the benchmark for assessing the efficacy of new development strategies. Thus, along with substantial investments and the creation of infrastructure aimed at making XUAR ‘more accessible and connected to the rest of the country’, the central government uses other schemes of what critics call ‘subduing’ rather than truly developing the area. These include a heavy military presence, questionable tactics with regard to Muslim religious traditions, the steady elimination of Uyghur language education, and encouraging massive Han migration, which is altering the region’s 2 The progress of initiatives is reported through annual conferences. On the inaugural conference in 2010 with Li Keqiang’s speech, see Renmin wang (2010).

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ethnic and cultural composition. Responding to rising tensions about these issues, a new ‘four-pronged approach’ in social work (si guan qi xia) was introduced in 2016, which urged local united front departments, together with departments of religious affairs, to ‘strictly follow the principle of fairness, engage cultural resources, accept legal restrictions and promote a scientific approach’ (Tongzhanbu, 2016). Cadres, teachers, and ‘patriotic religious leaders’ are thus the designated actors for implementing the strategy. Due to the above-mentioned events and issues, research into XUAR’s socio-political situation is highly sensitive. It is a restricted field even for China’s academics, and there are certainly far more barriers for foreigners, both bureaucratic and social, which severely limit the possibility of fieldwork. This chapter adopts a political science research approach in which the perspective of legal-normative and developmental goals is complemented by insights from the region’s social history and the backdrop of contemporary challenges in both China and Central Asia. I use primarily Kazakhstani, Chinese, and Russian sources and literature. Official policy documents, statistical data, census results, research notes and papers, media reports etc., are accessible from numerous internet and print sources, although relatively little has been translated into English. On the Chinese side, the XUAR government maintains an informative website with up-to-date policy amendments and an extensive legal database. The Office of the Leading Group for the Western Region Development under the State Council’s National Development and Reform Commission (guojia fagaiwei xibu kaifa shi) also publishes extensive reports on economic development, along with updates to social policy. Numerous state-run research organizations carry out fieldwork in border areas and with minority ethnic groups. The Collaborative Innovation Centre for the Security and Development of China’s Western Frontier Area (Zhongguo xibu bianjing anquan yu fazhan xietong chuangxin zhongxin) gathers research from the universities of Yunnan, Sichuan, and Tibet, and from the Ethnic Theory and Policy Research Department of State Ethnic Affairs Commission and the Minority Research Office of the State Council’s Centre for Development Research. Research work by China’s foremost authority on border studies such as Ma Manli (Ma and Zhang, 2005) and Ma Dazheng (2012) are included. In its quest to expand its imperial frontiers in the late seventeenth century, Russia established the tradition of field research in Central Asia by sending trade-cum-ethnographic expeditions to its uncharted expanses. The observations and records of traveller-academics became invaluable sources, and although some need re-evaluating today, others proved to be remarkably visionary. Gradually, the concept of Central Asia as the empire’s ‘frontier’ and

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‘buffer’ area against competing interests and unfamiliar, presumably hostile, cultures took shape and remained an influential paradigm throughout the Soviet period. The concept of formalized borders was late to arrive in the region, and region-specific interpretations of the concepts of ‘border’ and ‘frontier’ are particularly relevant in the Central Asian context. Russia’s perspective of border history is further analysed by Yury Galenovich, a renowned Soviet-Russian sinologist and participant in border-related discussions with the PRC government (Galenovich, 2001). Kazakhstan’s border policy is detailed in the strategic documents Strategy Kazakhstan-2030 (1997) and Strategy Kazakhstan-2050 (2012). The issue of Kazakhstan-China relations is regarded as of paramount importance, but it remains sensitive and no in-depth studies of social aspects of transborder collaboration have yet been published. However, throughout the Soviet period Kazakhstan was a centre for Xinjiang studies, and substantial expertise was accumulated in the neighbouring area. The works by the country’s preeminent authority on the ‘Uyghur question’, Konstantin Syroezhkin (2015), provide a unique perspective on a region in which close ethnic and cultural connections influence many aspects of policymaking and development.

Xinjiang and Kazakhstan: From empires and khanates to contemporary Central Asia Both Kazakhstan and Xinjiang have been frontier areas for centuries, in the full sense of the word – merchants travelled along trade routes, nomadic, farming and trade cultures interacted, and official borders meant little. The area has a tumultuous history of various state-like formations based on ethnicity and religion, and has suffered under the rule of strongmen leaders, and over the centuries has been heavily influenced by Chinese culture (Tyler, 2004). During the reign of the Qing dynasty, the Treaty of Peking of 1860 delineated the border between the then imperial China and Tzarist Russia, with additional protocols for the Kazakhstan-Xinjiang area. On Kazakhstan’s side, agreements were made with emissaries of the Russian Empire, which was actively establishing its presence in Central Asia, from the steppes of Kazakhstan all the way to the fertile Ferghana valley. At this time, Kazakhstan was home to tribes of nomadic herdsmen roaming the vast area with very little regard, or need, for official borders. Piles of stones vaguely marking the borders were routinely repositioned, dismantled, and used for other purposes. This changed with the Russian Empire’s resettlement policy, which was initiated at the end of the nineteenth

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century, under which many peasants were relocated in Kazakhstan. It significantly diversified the demographic composition, thus becoming a basis for the future multi-ethnic and multicultural Kazakhstan. Russians, Tatars, Ukrainians, Uyghurs, Uzbeks, and others were making the country their home. Kazakhstan assumed a critically important geopolitical role as an integral part of the Tsarist empire and a springboard for further ventures into the Central Asian expanses. After the Chinese and Russian empires collapsed in the 1911 and 1917 revolutions, systemic changes occurred on both sides of the border. There were now five socialist republics, three of which bordered Xinjiang – Kazakhstan, Kyrgyzstan, and Tajikistan, with the Kazakh Soviet Socialist Republic having the longest border. Warlords and nationalists also brought chaos and suffering to Xinjiang. No future vision was set for the area, other than it continuing to be a buffer against potential threats from the West and Central Asia. The Soviet Union followed the same logic. Gradually, the borders began to acquire the formal functions of demarcation and protection. However, this did not prevent the mass exodus of Kazakhs from their ancestral homeland to Xinjiang in the 1920s to escape brutal policies of collectivization and forced settling. Xinjiang preserved its traditional way of life, although it was also experiencing a tumultuous period. The Ili Rebellion in the mid-1940s was the last attempt at a state, and it resulted in the establishment of the Eastern Turkistan Republic in the present-day Ili-Kazakh Autonomous Prefecture (Benson, 1990; Tyler, 2004: 119-125). There remains much debate over the roles and claims of actors such as the Soviet Union, the Uyghurs, and the Kazakhs. Importantly, from the outset, the Eastern Turkistan Republic movement attempted to widen its support base by avoiding appealing to specific ethnic or religious interests, and instead setting the common goal of establishing a state structure. Unfortunately, as had happened time and again in Xinjiang, societal forces proved much too powerful to negate or negotiate, and the Eastern Turkistan Republic ended up being led by religious leaders, resulting in atrocities being committed against ‘hostile’ ethnic groups. This example of ‘cross-border collaboration’ (for want of a better phrase) through an appeal to religion and ethnicity other than Han resonated with people separated by official borders and resulted in the establishment of an alternative political system that significantly influenced China’s policy of the western region of the 1950s; indeed, echoes of it remain to this day. Major policies were introduced to improve the situation in the impoverished area of Xinjiang. The province was granted the status of autonomous region in 1955, and its full name was changed to Xinjiang Uyghur

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Autonomous Region (XUAR), thus acknowledging the substantial Uyghur presence. A resettlement policy in XUAR was also implemented, and the state encouraged large numbers of Han migrants to move to the far west ‘to assist with its development’3 and unofficially to tilt the ethnic balance in China’s favour. In 1954, the Xinjiang Production and Construction Corps, which was a paramilitary force, was brought in to pacify and develop the area, and has been the major policy actor since. It remains a formidable economic and political presence, with 2.68 million people and constituted 30 per cent of the ethnic Han population in XUAR (Xinjiang bingtuan, 2014). The corps’ director emphasizes its business character, referring to it as ‘the biggest business group in China,’ thus discounting the significance of its military provenance and methods (The Economist, 1999). The tight ideological and security control in XUAR is not showing any signs of being relaxed, so it is too early to see a shift towards the corps’ demilitarization, or any decrease in its involvement in regional policymaking. The establishment of the Soviet Union in Central Asia in the 1920s and 1930s was accompanied by multiple shifts in administrative divisions within the area, although they had little influence on daily life, with its complex ethnic, tribal, and religious characteristics. Russia, as the largest constituent state, had the final say in the delineating boundaries of the new socialist republics. The full impact of these poorly formulated policies would only be felt after 1991. The Soviet Union’s border with Xinjiang remained unchanged, in accordance with border treaties between Russia and the Qing dynasty. When the relations between China and the Soviet Union deteriorated in the 1960s, the borders were subsequently sealed, and another mass exodus of ethnic Kazakhs from XUAR occurred. Chinese sources blame the Soviet consulates in Ili and Tacheng for ‘inciting and assisting them’ (Tursin, 2016). The Ili-Tacheng incident was illustrative of the region’s persistent frontier characteristics – the limited reach of state authority, little regard for official borders, and shared linguistic and cultural backgrounds that provide support for thousands of people moving between the two states; from a state-building perspective, however, it was a liability. To summarize, during Soviet times Kazakhstan and other Central Asian republics formed an integrated, almost autarchic macro-region. However, 3 This was not the first attempt at the de facto colonization of Xinjiang. Upon incorporating the territory as a Chinese province in 1884, its governor Yang Zengxin began ‘aggressive colonization […] The Turkis were to be assimilated and turned into Confucian Chinese as fast as possible’. Soldiers who stayed after Xinjiang’s reconquest were followed by traders from China’s interior. Of those Tianjin people fared the best because ‘they shunned drugs and alcohol’ (Tyler, 2004: 89-90).

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historically close ethnic and social ties could still easily be maintained across these intra-regional borders that were of a nominal character. Despite the existence of a state border between the Soviet Union and China, it was not fully controlled until the early 1960s, and even then, the challenging terrain, climate, and sheer geographical vastness made total oversight impossible. Thus, transborder exchanges between Soviet and Chinese Kazakhs never completely ceased. As they were mainly traditional and small-scale, these exchanges were tolerated by the authorities on both sides: violations of the state boundaries by herdsmen and their livestock were not viewed as subversion. Occasional exchange of diplomatic notes and protests occurred but they were mostly presented locally, and rarely reached the capitals. Anecdotal evidence also suggests that kinsmen ties were maintained between Soviet and Xinjiang Uyghurs. After the collapse of the Soviet Union in 1991, the established communities, entrenched habits of communication, and economic exchanges of the Central Asian republics were thrown into chaos. Overnight, the borders that vaguely delineated administrative areas within Soviet Central Asia became state boundaries. Many cut through communities, families, fields, and transportation arteries, particularly on the Uzbek-Kyrgyz and Uzbek-Tajik borders. Kazakhstan then had to build a system of international relations from the ground up, working simultaneously in two very different directions: redefining relations with its neighbours and finding its voice independent of China and Russia, which were the bigger players. Potential solutions to many questions were played out in these cross-border relations, from economic revival to intraregional security to people-to-people connections.

Transborder cooperation in 1991-2013: Setting the foundation and pinpointing persistent challenges The border between Xinjiang and Kazakhstan is about 1785 kilometres long. It separates vast, unevenly populated territories: around sixteen million people in Kazakhstan, with an area of 2.7 million square kilometres, and 21.85 million in Xinjiang’s 1.5 million square kilometres. The Tianshan mountains divide XUAR into southern and northern regions, with the former being an ancient agricultural area with an oasis culture that is still farmed predominantly by Uyghurs and the latter more industrially advanced and ethnically diverse with a larger Han presence. This is where interactions between XUAR and south-eastern Kazakhstan take place. XUAR borders the provinces of eastern Kazakhstan, which is the country’s most densely

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populated region and home to Almaty, its biggest city.4 It is the older settled area and is in close proximity to ancient silk road routes. An industrial and scientific base was developed here during the Soviet era (particularly in World War II) in addition to agriculture. The two most actively used border crossings, Khorgos (Kazakhstan)Khorgas5 (China) and Dostyk (Kazakhstan)-Alashankou (China), are in Almaty province. Eastern Kazakhstan is an old industrial region with a significant Russian influence and presence. The notorious Semey (Semipalatinsk) nuclear test site is located here. The area’s numerous rivers and lakes hold about 40 per cent of the country’s fresh water supplies, and thus it is suitable for agriculture and a potentially attractive tourist destination. The ethnic composition of the two areas differs and has changed significantly in the years since the downfall of the Soviet Union. In Almaty province, the proportion of the Russian population declined from over 40 per cent to 16 per cent, and Kazakhs now dominate, with a 68 per cent share. Uyghurs constitute around 6.2 per cent of the population. In eastern Kazakhstan, the proportion of Kazakh people is around 55 per cent and Russian around 40 per cent. The Uyghur proportion is smaller, with 0.1 per cent. XUAR is home to people from 47 ethnicities. According to the 2010 population census, seven of them, the Kazakhs, Kyrgyz, Tajiks, Mongols, Uzbeks, Tatars, and Russians, constitute 8.97 per cent of XUAR’s total population (Shijie renkou wang, n.d.). A unique feature is the cross-border ethnic groups (kuajie minzu), defined as ‘people of the same origin basically retaining the defining features of their original national identity and identifying (rentong) themselves with it, but living in two or more different states that can border each other or not’ (Ma and Zhang, 2005: 21). XUAR also has twelve Kazakh ethnic townships (hasakezu xiang). On the other hand, according to its constitution, Kazakhstan is a multinational state and home to 120 nationalities, who are dispersed throughout its territory with no national autonomy. Cross-border economic cooperation between Xinjiang and Kazakhstan has blossomed since 1991. China was the first country to establish relations with all of the new independent states of Central Asia. Before the Soviet Union was formally dissolved in December 1991, the then President of Kazakh Republic, Nursultan Nazarbayev, visited China earlier in June and was received in both XUAR and in Beijing. Connections with XUAR are still 4 The capital of the Republic Kazakhstan until 1997, when it was moved to Astana in northern Kazakhstan. 5 Other English spellings are Korgas, Horgos, Chorgos, and Gorgos.

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an integral but distinct aspect of Kazakhstan-China interstate relations. The policies implemented in the vicinity of the states’ borders retain their unique focus and are attuned to local needs. These policies do, however, follow the foreign policies of the states and reflect specific internal requirements and challenges. For example, accelerated urbanization is the favoured method of attempting to equalize the economic disparities between the more industrialized northern Xinjiang and the traditionally agricultural south, and for raising standards of living in ethnic areas. Thus, the established towns along the border of northern XUAR naturally became centres for transborder business, in which the state was closely involved and designed policies, allocated financial resources, and regulated demographic flows. Khorgas, Alashankou, Tacheng, Jeminay, Aheytubiek, and Muzart6 are both border crossings and towns, and Ili Autonomous Prefecture of XUAR is a designated special economic zone that has led the development of connections with Kazakhstan. Their status was first established between 1990 and 1999, as was the reciprocal legal basis for border towns on Kazakhstan’s side. However, only the political decision was taken to open borders and to designate specific locations as centres for transborder cooperation, and the finer details of regulating the rapidly growing number of small-scale localized economic exchanges had barely been addressed. The State Council relaxed regulations on border trade in 1992, allowing local enterprises to directly participate, share revenues, and benefit from a preferential tax policy – a 25 per cent corporate tax. However, few enterprises in XUAR produced goods marketable across the border at the time, as the majority came from the far more advanced eastern China. The types of transborder economic cooperation were similar to those developed between China’s northeast and Russia’s Far East, such as barter exchanges between enterprises, and private citizens were involved in a shuttle trade, frequently travelling across the border to Chinese markets to purchase popular, inexpensive, and often low-quality consumer goods, to be resold in markets in Kazakhstan or Russia. Almost no statistics on the number of trips Kazakhstan citizens took to China and the financial flows of the period exist, but Chinese sources cite 116,000 ‘tourist’ visits from the newly independent states to XUAR in the f irst ten months of 1992, and around 580,000 such visits in 1994 (cited in Bekturganova and Dzhadaibaeva, 2011). The 1991-1995 period of ‘barter, cash, and cash-trading’ opened up sixty XUAR counties to foreigners, and an impressive revenue of US$577 million was earned in 1993 alone. 6 The last two are not operational.

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The focus of China’s policy developers on the new opportunities presented by developments in Central Asia included the closely related problems of nationalism and stability. In a state conference on nationalities issues in 1992, the then Secretary General Jiang Zemin acknowledged the ‘considerable progress achieved in solving nationalities’ issues, but he also pointed out the need to ‘accelerate economic development of national regions and minorities by way of perfecting the system of national autonomy […] and to fight both Han and local nationalism’ (Kitaiskaya Narodnaya Respublika, 1994: 184). The discussions and conclusions were reflected in the ‘Notice of the State Council on Questions Concerning the Further Implementation of the Law on Regional National Autonomy’ (December 1991), which emphasized the need for ‘accelerating economic development of minority areas based on reliance on their own resources’. As was the established practice, China’s central authorities were putting the economy first and reasonably concluding that state-subverting activities would be less likely to occur in wealthier locations. This approach also set the tone for China-Kazakhstan relations, in which economic ties remained the priority. China’s representative trade offices in the newly independent states of Central Asia were often established long before any diplomatic presence. Kazakhstan’s extreme systemic changes led to the disintegration of the centrally controlled economic system, and the country had to adjust to the new realities. Thus, its focus was solely on alleviating its socioeconomic woes, such as a sharp drop in industrial output, massive emigration, and drastic decline in living standards, by attracting resources from China. Developing cross-border and inter-state ties became a priority, as these were viewed as an impetus for modernizing the country. This approach was markedly different from the goals set for XUAR, where internal development was aimed at encouraging the process of ‘going out’. Transborder relations took on a new significance, with XUAR becoming a de facto gateway to the greater part of China for Kazakhstan. However, rather than alleviating China’s concerns over ‘Turkic separatism’, the tumultuous situation in Central Asia in the 1990s became worse. This was reflected in Article 4 of the ‘Joint Declaration on Further development and the Deepening of Friendly Relations between Kazakhstan and China’ (September 1995), stating that ‘in their political relations, both Signatories pledge to fight any national separatism and not to allow any separatist activities on their territory carried out by any force or organization and aimed against one of the Signatories’. Kazakhstan was going through an active nation-building period, and at the World’s First Kazakh Kurultai (Congress) convened in 1992 in Almaty, President Nazarbayev announced the ‘Return to the Motherland’ appeal

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to ethnic Kazakhs residing outside Kazakhstan, which was soon shaped into an oralman (returnee) policy. The state offered financial incentives in the form of the reimbursement of moving expenses, subsidized housing, and social benefits such as pensions and healthcare, and subsidized or free education. Another incentive was fast track to citizenship. From 1991 to 2010, 1,376,412 people relocated to Kazakhstan, with the vast majority (1,239,451) coming from former Soviet republics, which came to be known as the New Independent States or the ‘near abroad’. The proportion of ethnic Kazakhs was around 75 per cent, and over 80 per cent for repatriates from foreign countries (Mursalimova, 2012). The new policy was met with reservations in XUAR. In 1995, an article tellingly entitled ‘Kazakh Compatriots, Please Do Not Leave!’ described the case of Aksai Kazakh Autonomous County, where 680 ethnic Kazakhs – 25 per cent of the county’s Kazakh population – had already left or had registered to relocate to Kazakhstan (Sang, 1995). Among the first 186 oralmans departing for Kazakhstan were ten party members, three of whom were also county workers. As ‘herdsmen, workers and lower-level cadres’ also left, relocation was clearly appealing to various social strata. The situation aroused concern in the XUAR government and party officials cited ‘agitation among Aksai residents caused by Kazakhstan’s propaganda of financial incentives, free healthcare and education’. Those who had left earlier ‘coming back for funerals, family visits and other occasions […] were talking about lots of land and little population in Kazakhstan which makes it possible for families to live together in their “natural villages” (zirancun)’.7 The promise of free education was particularly attractive, as was the possibility ‘for people with religious knowledge to become mullahs’. There was also the widespread but unsubstantiated conviction among XUAR Kazakhs that ‘one needs to move quickly in order not to miss a chance to make a fortune’ (Sang, 1995). The official conclusion was that Kazakhs had difficulties adapting to life in XUAR, and therefore emigration became a popular option. In China this en masse relocation led to demographic concerns, as the remote regions were already underpopulated. Kazakhs also took their livestock with them, sold them off, or slaughtered them, which had a detrimental effect on the local economy. However, there was no attempt to quell this ethnic-centred migration. The eagerness to establish, or rather renew, connections across borders that had been severed some 60 years earlier did not lead to any automatic 7 As opposed to ‘administrative villages’ that often cut through extended family (clan) connections.

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relaxing of rules in the border areas, rapid trust-building, or resolution of entrenched problems. Progress was cautious, and the Chinese-Kazakh border was fully demarcated in 2002, settling ‘questions remaining from [the] Soviet era’ (Ministry of Foreign Affairs, 2013). In 1996, China, Russia, Kazakhstan, Kyrgyzstan, and Tajikistan signed the ‘Agreement on Confidence-Building in the Military Field along the Border Areas’, which was followed by statements and resolutions to encourage border cooperation, conduct joint military exercises to combat terrorism, mutually reduce troop numbers, etc. (China Daily, 2017). These were all aimed at creating a favourable backdrop for facilitating bilateral and multilateral economic ties. The participants had to ensure the safety of borders and the efficiency of controls, evident in the simple yet thorough customs clearance procedures for goods and the transparent rules for the unfettered movement of people. Nonetheless, reservations persisted on both sides as to what a true opening of borders might entail. The visa policy, for example, remains a sensitive and opaque issue. The first attempt to simplify the process was an agreement in 1996 that allowed visa-free stays not exceeding 30 days for holders of Kazakhstan’s so-called ‘work passports’ in China.8 This policy is still in place, although it is only applicable to a tiny percentage of travellers and is of no help to private businesses. At present, holders of a Kazakhstan passport may stay up to 30 days visa-free in the Khorgos International Centre for Boundary Cooperation (ICBC), and move freely between its Chinese and Kazakhstani sides. However, there are limitations – crossing the kilometre-long suspension bridge marking the border on foot is prohibited, and visitors cannot venture beyond ICBC territory. At the time of writing, the only example of relaxed visa requirements geared specifically to residents of Kazakhstan border areas remains the 72-hour visa-free regime for visits to Chuguchak. This was introduced in 2012 ‘in order to facilitate people-to-people contacts and cross-border trade’. Visitors, who usually travel to see relatives or for shopping, must arrive in groups of ten to 30, register with the border authorities, must not leave the town, and must return to Kazakhstan only via the border crossing of Bakhty. Sources suggest that China expects Kazakhstan to reciprocally relax visa requirements for domestic tourists visiting Chuguchak (up to 400,000 in 2013) and possibly the scenic area of Alakol Lake in eastern Kazakhstan (Kazinform, 2013), but this has yet to materialize. Kazakhstan’s 8 Issued by the Ministry of Foreign Affairs for certain government employees for off icial travel. Upon returning to Kazakhstan, ‘work passports’ must be turned in to the Ministry for safekeeping.

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strict visa regulations may be partially responsible for the signif icant disparity between the numbers of mutual visits – according to Kazakhstan’s Tourism Association (January-September) 1370 Chinese citizens visited Kazakhstan and 21,740 Kazakh citizens went to China in 2012; while in 2013 the difference was even greater, with 366 tourists from China vs 43,610 from Kazakhstan. There are vociferous opponents of any steps towards relaxing visa rules for visitors from China. Civic activist and one-time presidential candidate Zhasaral Kuanyshalin’s position is that Kazakhstan is too weak compared to China and therefore cannot afford to relax its entry visa rules. Even China’s inclusion in 2014 of Kazakhstan in the list of countries citizens of which can visit Hainan Island visa-free did not seem to lessen wide-spread fear of China’s ‘takeover’ or ‘colonization’ of Kazakhstan.9 On 21 July 2011, the ‘Law on Special Economic Zones in the Republic of Kazakhstan’ was signed by Kazakhstan’s president, along with the ‘Special Decree on Establishing Free Economic Zone Khorgos-Eastern Gate’ on 29 November of the same year. The goal was to ‘create efficient logistics and industrial center for trade and export purposes and for fully realizing the transit potential of the Republic of Kazakhstan […], for facilitating economic and cultural connections with foreign countries […] and boosting local employment’.10 The existence of the special economic zone (SEZ) is restricted to 25 years (thus Khorgos functions until 2035). The territory of Khorgos SEZ or, as it was named in 2012, the Khorgos ICBC, is 4591.5 hectares in size, and ‘is an integral part of the territory of the Republic of Kazakstan’ (Tengrinews, 2011). Again, official hopes are that international links will boost the development of these specific areas. As a special economic zone, Khorgos must adhere to relatively strict quotas in terms of so-called ‘Kazakhstani content’ – the purchase of goods and services produced on Kazakhstani territory. It has more freedom in human resource decisions, as they can invite in foreign workers who are not included in the country quotas, thus bypassing the in-country search for qualified specialists. The opening of this SEZ was delayed by the slow progress in infrastructure building on the Kazakhstani side, and by ‘insufficient bilateral trade policy collaboration’. The Head of Xinjiang’s Commerce Bureau also mentioned that ‘policies for [Kazakhstan’s] in-house companies were not finalized by the originally planned date’ (China Daily, 2011). The 9 Rules for visits to neighbouring Xinjiang remained unchanged at the time and it took another few years for visa-free policy in regard to Hainan to actually start. 10 In 2012, the plan was altered so the centre would focus exclusively on logistics.

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ICBC finally opened in April 2012 with a full-scale operation planned for 2018, promising a ‘completely new format for cross-border cooperation’.11 On China’s side, Khorgas had more far-reaching plans. This prefecturelevel town belongs to the Ili Kazakh Autonomous Prefecture and was touted as ‘the world’s only cross-border cooperation zone’ (kuajing bianjing hezuoqu) where citizens of China, Kazakhstan, and third countries can arrive with only their passport or enter-and-exit border zone pass (churujing tongxingzheng) and conduct ‘face-to-face business negotiations and trading’. It included a support centre, railway ‘dry port’, cargo vehicle (truck) entry point, grain import point, and financial service centre. The goal was to create a ‘single-window’ export-import transborder cooperation point to facilitate export-oriented production and expedite logistics. The success stories of Shenzhen, Shantou, and other coastal SEZs are undoubtedly appealing to the autonomous region’s authorities, but there are significant differences, as Wu Fuhuan, director of the Xinjiang Academy of Social Sciences, cautioned in 2010. ‘It is quite unlikely that we would open up our western borders to create a regional market in Central Asia as we opened up our coastal areas because there are significant political risks in the countries bordering China in the west’ (Hille, 2010). This consideration remains relevant today. On 1 July 2011, the Customs Union (the forerunner of the Eurasian Economic Union) between Russia, Kazakhstan, and the Republic of Belarus came into effect. The Khorgos ICBC thus became a gateway to not only Kazakhstan, but also the much larger (both geographical and financial) markets of Russia and Belarus, and enjoyed easy connections to Europe. This was a welcome development, but Kazakhstan’s unresolved border security issues also reemerged in the form of corruption and the resulting, potentially massive, flow of contraband goods. A 2007 study noted that 36,000 trucks passed through the Khorgos crossing according to Chinese customs, but only 3000 entered Kazakhstan according to its customs and border control. Corruption among border officials is the likely reason for such a significant discrepancy (Orange, 2011). In summer 2012, fourteen border guards and a civilian forest ranger were killed at the remote outpost of Arkankergen in the Almaty region on the Chinese border. The lone survivor, Vladislav Chelakh, was found a few days later and accused of revenge killing and is currently serving a life sentence. However, many facets of the crime remain unexplained. It occurred in an almost inaccessible location (with no cell phone reception) on ‘the calmest 11 See the off icial website of the Khorgos ICBC (http://www.mcps-khorgos.kz/en) for an overview of the project.

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border in Central Asia’. The incident was referred to as a ‘terrorist attack’ and a ‘horrible accident’ (the post building was burned down). A rumour also persisted that smugglers ferrying millions of dollars’ worth of goods across the border were involved, which is plausible as repeated corruption scandals had occurred on the Kazakhstan border. In addition, the alleged culprit was a seventeen-year-old conscript only three months into his army service, so the allegation that he single-handedly killed fifteen people before setting the guard post on fire appears somewhat unlikely.12 Corruption has plagued the ICBC since its inception. Before the SEZ law was implemented, in 2006 several customs officials at Khorgos were arrested and charged with bribery and the ‘organizing of a criminal ring’. In charge of the investigation was the then vice-chairman of Kazakhstan’s National Security Committee, K.K. Karbuzov, later Head of the Customs Committee of the Ministry of Finance, who resigned from that post after another customs’ corruption scandal broke out in 2012. The ‘customs’ criminal ring was protected by high-ranking officials and demanded payments of US$25,000 to 30,000 from every truck arriving at the border crossing. Only US$5000 went to the state budget with the remainder divided between criminals and their patrons. Individual traders were also ‘taxed’, paying KZT600 instead of the official rate of KZT800 per kilogram of goods to ‘unidentified civilians’, and ‘cleared’ goods were then transported onto Kazakhstan’s side with the uniformed customs officials turning a blind eye. In total, 45 officials were arrested, including the head of the border control post at Khorgos, the head of Almaty province customs, and several officers from the regional department of the National Security Committee. The hearing was in the Almaty City military tribunal and was closed to the media due to the ‘sensitive nature of the case’ and its connection to ‘state security’. The convicted were sentenced to fourteen- to seventeen-year prison terms (Alimova, 2013).

Xinjiang-Kazakhstan regional cooperation from 2013 to present: New tasks and remaining questions In 2013, China’s President Xi Jinping visited Central Asian countries (in reminiscence of the official delegation visit in recognition of new independent 12 The alleged culprit later retracted his confession, saying that he had made it under intense pressure, and testified instead that the border post had been ambushed by unknown men in civilian clothing (Tengrinews, 2012).

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states in 1992) and at a meeting in the brand-new Nazarbayev University in Astana unveiled the hugely ambitious OBOR strategy to connect China and Europe. Central Asia will play a geographically critical role in the Economic Belt of Silk Road, which will originate in China, pass through Central Asia and/or Russia, to finally reach Europe. The foundations of the dialogue between the very different civilizational and developmental perspectives involved are referred to as the ‘five connections’: ‘closeness of political course, logistics, barrier-free trade and unhindered movement of goods, and of people’s shared aspirations’ (Xin, 2016). Transborder bilateral relations are thus once again the focus of attention. China-Kazakhstan economic cooperation has progressed under challenging circumstances, for example, the increasing instability in the Middle East has spilled over into Central Asia, with numerous cases of citizens of Central Asian states and, allegedly, residents of XUAR, fighting for the Islamic State,13 leading to security being tightened on both sides. However, in the four years since the announcement of the OBOR initiative things appear to have picked up pace. Improved government-controlled services now enable goods to clear customs in Khorgos and leave for Kazakhstan in a day, and 2017 (January to August) saw 3.7 million visits14 to ICBC, an increase of nine per cent from 2016 (Xinhua News, 2017). There are also plans to expand SEZs by including the city of Kashgar in its jurisdiction, which is another important transit stop on the traditional Silk Road and currently the site of the biggest livestock market in Central Asia. It is located close to the Kyrgyz border, and 476 kilometres to Osh, southern Kyrgyzstan’s biggest urban centre. Due to its remote position it has not enjoyed an increase in investment yet, but inclusion in the Khorgos SEZ and improved transportation links are likely to change that. The updated ‘Regulations on Border Administration in XUAR’ that came into effect on 1 January 2017 highlight the security challenges: ‘Any unit or individual citizen has the duty to defend the border, protect border markings and facilities, maintain social order and security of the border 13 In an interview with the Russian news agency Novosti, the Syrian ambassador to China suggested there were ‘five thousand Chinese citizens fighting on the side of Syrian Islamists’. According to Ambassador Mustafa Hamid, they had come to Syria from XUAR via Turkey. Russian experts dispute the number of extremists, but according to Novosti’s sources, 324 Chinese citizens were among the 924 foreign fighters detained at the Turkish-Syrian border in 2015. There is a possible connection with the ‘Islamic Movement of East Turkestan’ extremist group, according to the source (Sidorkova, 2017). 14 Statistics on ‘visits’ to the border areas may be difficult to interpret. Here the number refers to the number of inbound and outbound border crossings (churujing luke).

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areas. Enterprises, institutions and grassroots mass self-government organizations may establish people’s security organizations in order to assist in development of border management work’. This was further reinforced by the campaign of strengthening border security in XUAR in the spring of 2017 (National People’s Congress, 2017). The citizens’ initiative is intended to enhance the efforts of the government, party, and army, including the PLA border security forces and the Border Protection Department of Public Security Bureau. Among the new additions is the list of those ineligible for the ‘Managed Border Area Pass’ (bianjing guanliqu tongxingzheng): those under criminal investigation or sentenced or still serving a sentence; workers15 suspected of committing a crime; smugglers; workers convicted for crimes harming border areas and other crimes; those who finished serving a sentence less than a year ago; workers who had received administrative penalties less than a year before; and ‘other circumstances listed in state laws and regulations’. All visitors and vehicles must check in with border control checkpoints, and border management workers must promptly report unauthorized arrivals. There are many more specif ic restrictions clearly pertaining to the lifestyles of minorities: livestock are forbidden to graze too close to border, and ‘suspicious items’ floating in cross-border rivers or on the ground in the immediate vicinity of the border cannot be retrieved. Many more actions are proscribed, such as mining, logging, blasting, and other ‘production activities’, and herb picking, fishing, and grass burning outside of designated areas. Foreigners cannot enter border areas, hide there, hire helpers, or trade or slaughter livestock that crossed into the country from neighbouring states. Flying unmanned apparatus for broadcasting, and displaying or disseminating propaganda materials, both audio and printed, is prohibited. All these actions are punishable by RMB5,000 to 10,000 fines and the confiscation of illegal property (Renmin wang, 2017). Interestingly, there is no mention of reporting offences to border control authorities or the possibility of taking matters further. Thus, the listed offences appear to be token, and while state authorities are aware of them, they accept the practices as part of daily life in the region. On the Kazakh side, the slow economy, the widespread corruption that limits opportunities and blocks ‘socioeconomic lifts’, combined with the increasing Islamist threat from the Middle East prioritises security in its broadest sense in the list of concerns of the Kazakhstan authorities. The complicated nature of present-day security challenges, both existing and 15 ‘Workers’ here refers to state employees.

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potential, is reflected in various government policies. The repatriation policy has stalled after oralmans from Uzbekistan were allegedly involved in the tragic Zhanaozen events of 2011.16 In Xinjiang, those who return for visits after moving to Kazakhstan have not always been welcomed, sometimes perceived as unknowing pawns in ‘foreign hostile forces’ play when they might be used ‘to incite national separatism’. That in turn is viewed as a result of extremist religious teachings that visitors may acquire – or are subject to – abroad and then bring with them to China. Thus, people trying to maintain their familial and business connections across border might be viewed as an additional challenge in border management, rather than an additional asset in building productive cross-borders relations. The Kazakhstan-China visa policy is not clarified, and in 2016, for some time individual visas to China were not granted to Kazakhstani citizens. Business visas were also frequently denied. Observers viewed this as a frustrated reaction to Kazakhstan’s visa regime, which China’s ambassador to Kazakhstan, Zhang Hanhui, referred to as ‘the most complicated in Central Asia’ and called for ‘more flexibility’. The ambassador was referring to difficulties in obtaining visas for relatives of Chinese diplomats working in Kazakhstan and for workers involved in preparing the EXPO-2017, and also for the exhibition’s potential visitors (Mikhailov, 2016). Financial flows (including cross-border flows) are now more tightly controlled by the Committee on Financial Monitoring under the Ministry of Finance. In 2014, Sofiya Aisagaliyeva, the acting head of the Committee, pointed out that ‘Kazakhstan’s unique geopolitical position is beneficial, but also puts it close to countries with active drug trafficking and terrorist activities […] Thus blocking channels of financing illegal activities is of paramount importance’. The ‘Law of the Republic of Kazakhstan on Countering Illegal Income Legalization (Money Laundering) and Terrorism Financing’ went into effect in 2010, and is focused on preventing shadow banking activities, such as the establishment of shell banks and corresponding with them, or opening bank accounts under false names or anonymously. It aims to thoroughly investigate the ‘ultimate beneficiaries’ of financial activity and at criminalizing laundering assets acquired as a result of corrupt or insider actions, manipulating markets, etc.17 16 This refers to a strike over pay by oil field workers, which was declared illegal by a local court. The authorities suppressed the protests by ordering police to f ire at the workers. The death toll remains unknown. 17 The full text of the law can be found at https://online.zakon.kz/document/?doc_id=30466908 (in Russian).

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In 2015-2016, the Committee actively investigated corruption in the Khorgos ICBC, which is a major hindrance to its development. The arrest of customs officials resulted in numerous delays in processing shipments and at passport control for visitors. In the summer of 2015, tourists and businessmen protested against new rules requiring the goods brought in for personal use to be shipped from the border crossing via the Kazakh Post at an additional cost of KZT50 (around 20 cents) per kilogram. The post service was ill-equipped to handle large amounts of goods, which resulted in dayslong delays for visitors waiting for their purchases to be shipped (Karpova, 2016). In September 2015, the head of the ICBC, Vasily Ni, was appointed, but was arrested barely a year later for demanding a US$1 million bribe for awarding a tender for building a five-star hotel on the Kazakhstani side of the SEZ. Inexplicably, the case against him and his deputy was dropped in May 2017, due to his ‘repentance’, and the judge referred to his demand for a bribe as merely ‘an attempt to commit a crime’. The decision was met with disapproval from Kazakhstani citizens, and caused significant reputational damage to the ICBC (Benditsky, 2016).18 The idea of leasing agricultural land to Chinese companies was introduced in 2015 to diversify China-Kazakhstan bilateral economic ties and develop non-extractive sectors. It was a mutually benef icial initiative aimed at reviving and modernizing agriculture in the border areas of Kazakhstan, and at creating an alternative source of food imports for China. However, public opinion was not favourable, and after a series of protests the idea (as well as the proposed amendment to the Land Code that would allow agricultural land to be auctioned exclusively to Kazakhstani citizens) was shelved. The President demanded an ‘explanation of land rights to citizens and punishing those who spread unsubstantiated rumours’ (Tengrinews, 2016). The incident again demonstrated the entrenched suspicions of Kazakhstan’s powerful neighbour. Despite China’s popularity as a tourism, shopping, and increasingly an education choice, there are worries about China’s ‘takeover of Kazakhstan’, ‘assimilation of Kazakh ethnicity’, ‘loss of Kazakh unique culture’, etc. Even the increased economic cooperation, officially acknowledged as vitally important for the country, is habitually viewed from an expansionist perspective by Kazakhstan. The task of trust-building, which is of paramount importance for the success of any intra-regional initiative, may well prove to be the most difficult. 18 The previous leaders, Nurlan Seidali and his deputy Erlan Rakhimbayev, were also serving nine and seven years, respectively, for defrauding the ICBC out of KZT200 million.

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Conclusion Very few borders are truly closed, and the capital, goods and services, people, information, and influence that flow through them are not necessarily illegal, but may be outside of direct government regulation, usually due to their long existence and the particular circumstances of given countries. States must understand and monitor them for safety, security, sovereignty, and policymaking reasons. The example of cross-border ties between China and Kazakhstan illustrates how various state policies are aimed at absorbing these borders into the officially regulated realm or, at the very least, making them more transparent and understandable. Thus, the authorities must consider the historical background, which is important for countries and regions that share a long tradition of being geographical and cultural frontiers, have experience in state-building initiated by both indigenous and ‘outside’ actors, and accommodate ethnic, cultural, and religious characteristics that are shared across borders. Assessing the proposed policies from the unique historical, political, and cultural perspectives of the frontier areas will reveal contentious issues that must be addressed. Otherwise they may negatively influence the border population’s view of official policies and affect their implementation. Numerous examples of successful cross-border cooperation can be identified across the world. China’s north-eastern provinces have developed relatively beneficial transborder ties with Russia’s Far East (albeit not without its share of mutual frustration) under conditions that are in many respects similar to those of XUAR. The success of China’s southern SEZ, Shenzhen, which has been developed to efficiently interact with larger Asian markets, is something XUAR and Kazakhstan are probably keen to replicate, although there will be significant geographical and historical challenges. The Economic Silk Road Belt policy was first introduced by Chinese President Xi Jinping in Kazakhstan in 2013 and later expanded into the OBOR strategy. The aim is to ‘develop a community of joint prosperity’ along its route. An impressive amount of financial, political, and scientific resources has been allocated by China to enable its implementation. For Xinjiang, implementation of this ambitious strategy would mean reclaiming its advantageous geopolitical position as a gateway to Central Asia – a key region for OBOR – and addressing attendant domestic and foreign challenges. Kazakhstan hopes to capitalize on the opportunities OBOR will bring to the country’s various industries and logistics, but to do so many problems must be solved. The main issues are border security and transparent and

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efficient border and customs control, which are currently plagued by corruption. Various issues concerning Kazakhstan’s regional development, from demographics to ecology, must also be resolved. Transborder ties, both official and unofficial, highlight the above-mentioned factors, and the border policies of neighbouring states will undoubtedly influence practical solutions. Of paramount importance to the governments on either side of a border is the prosperity of their own nations. Customs, immigration, investment policies, and the potential international relations reflect this. There is a difference between China’s approach, organizing its internal resources before ‘going out’, and Kazakhstan’s, viewing its connections with the outside world as prompting internal development. The ICBC in Khorgos illustrates how difficult it can be to encourage growth in a regional economic corridor. An obvious pattern in these developments is that the theoretical state-sanctioned and visible support over the long term, aimed at promoting closer economic integration in this cross-border region, is in practice limited for various reasons. However, for as long as China’s OBOR policy remains a priority, we should expect Xinjiang to continue to lobby for the role of the OBOR gateway to Central Asia, which may lead to similar progress across the border. The question will then be one of timing, which we can continue to gauge through further examination of the region’s history and development milestones.

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Shijie renkou wang (World Population Net). n.d. ‘Xinjiang renkou [Population of Xinjiang]’, https://www.renkou.org.cn/china/xinjiang/, accessed 12 February 2017. Sidorkova, Inna. 2017. ‘Kitajskie boeviki vojujut za sirijskih islamistov [Chinese Militants Fight for Syrian Islamists]’. Gazeta, 14 February, https://www.gazeta. ru/army/2017/02/14/10525685.shtml#page1, accessed 20 March 2017. Strategy Kazakhstan-2030. 1997. ‘Prosperity, Security and Ever-growing Welfare of All the Kazakhstanis’. The General Prosecutor’s Office of the Republic of Kazakhstan, http://prokuror.gov.kz/eng/state/acts-president/strategy-kazakhstan-2030, accessed 22 April 2017. Strategy Kazakhstan-2050. 2012. ‘New Political Course of the Established State’. Official Site of the President of the Republic of Kazakhstan, http://www.akorda. kz/en/events/astana_kazakhstan/participation_in_events/address-by-thepresident-of-the-republic-of-kazakhstan-leader-of-the-nation-nnazarbayevstrategy-kazakhstan-2050-new-political-course-of-the-established-state-1, accessed 22 April 2017. Syroezhkin, Konstantin. 2015. Xinjiang: Bol’shoi Vopros dlya Kitaya I Kazakhstana [Xinjiang: Big Question for China and Kazakhstan]. Kazakhstan: The Institute of World Economy and Politics at the Foundation of the First President-Leader of the Nation. Tengrinews. 2011. ‘O sozdanii specialʹnoj eonomicheskoj zony “Horgos – Vostochnye vorota” [On the Creation of the Special Economic Zone “Khorgos – East Gate”]’, https://tengrinews.kz/zakon/prezident_respubliki_kazahstan/hozyaystvennaya_deyatelnost/-U1100000187/, accessed 25 April 2017. Tengrinews. 2012. ‘Kazakh Guard Sentenced to Life for Mass Border Killing’, 12 December, https://en.tengrinews.kz/crime/kazakh-guard-sentenced-tolife-for-mass-border-killing--15198/, accessed 20 April 2017. Tengrinews. 2016. ‘Nazarbaev vyskazalsja o sporah vokrug prodazhi I arendy zemel [Nazarbayev Spoke About Disputes Over the Sale and Lease of Land]’, 25 April, https://tengrinews.kz/kazakhstan_news/nazarbaev-vyiskazalsya-sporahvokrug-prodaji-arendyi-zemel-293323/, accessed 25 April 2017. Tongzhanbu [United Front Work Department], PRC. 2016. ‘Quanguo tongyi zhanxian duikou zhiyuan Xinjiang gongzuo huiyi zhaokai [Conference on a United Front Approach in Assisting Xinjiang Was Held]’, 28 June, http://www.zytzb.gov.cn/ tzb2010/shixun/201606/d3a9a60912c04e7888b102dc9a6743b7.shtml, accessed 18 February 2017. Turner, Frederick J. 2010. The Frontier in American History. Minelo, NY: Dover Publications. Tursin, Nurbahit. 2016. ‘Zhongguo hasakezu kuaguo yimin yanjiu: yi hasakesitan weili [The Study of Chinese Kazak’s International Migration: Taking Kazakhstan as An Example]’. Xibei minzu yanjiu 1(88): 85-98.

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Tyler, Christian. 2004. Wild West China: The Taming of Xinjiang. Brunswick, NJ: Rutgers University Press. Xin, Wen. 2016. ‘Shenmo shi wu tong [What Are the Five Connections]?’ The Belt and Road Initiative, 18 November, http://news.china.com.cn/2016-11/18/ content_39735529.htm, accessed 20 February 2017. Xinhua News (Russian). 2017. ‘V MTsPS Khorgos v avguste zaregistrirovan rekordny rost turpotokov’ [Record-high Number of Visits Registered in August in the ICBC Khorgos], 1 October, http://russian.news.cn/2017-10/01/c_136652162.htm, accessed November 9, 2017. Xinjiang bingtuan. 2014. ‘China Xinjiang Production and Construction Corps’, http://www.xjbt.gov.cn/c/2015-01-16/531255.shtml, accessed 26 November 2019.

About the author Olga Y. Adams received her specialist degree in Sinology at the Far-Eastern State University in Vladivostok, Russia. She then earned her PhD at the Institute of Asian and African Studies (IAAS) of Moscow University in 2001 and has since taught at the Institute’s Political Science department. Her research area primarily focuses on Central Asia. Her other academic interests include China’s legal system and anti-corruption policy, social issues and comparative political culture of Confucian heritage countries and newly independent states of Central Asia, and changes in frontier societies.

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Integration in post-Soviet Central Asia Shadow-economy practices and the cross-Eurasian flow of commodities Ivan Zuenko Abstract The 2010s became the time of active search for new forms of integration in the wide Eurasian space between Europe and East Asia. The most well-known is China’s One Belt One Road (OBOR) initiative and the Eurasian Economic Union (EAEU). A 7000-kilometre border between China and the EAEU was formed in 2015, which became a crucial factor in the cooperation of China and Post-Soviet Central Asia. Many regard the EAEU as just a Moscow geopolitical project and underestimated its real impacts on economic and political ties in Eurasia, particularly in post-Soviet Central Asia. This chapter examines the EAEU as a factor of international relations in the global discussion about the OBOR initiative. Keywords: One Belt One Road, regional integration, shadow economy, cross-border exchanges, trans-continental transportation

Introduction Multinational integration and globalization are major trends in world history today, and the beginning of the 21st century has become a time of conflicting movements. Just as globalization has become a globally accepted ideal, a strong momentum has emerged across societies worldwide for the ‘recovering of local identity, which was challenged by diminished national politics, culture and economic sovereignty in a globalized world’ (Baunov, 2017). This has resulted in the conservative, anti-globalist, and even nationalist agenda popular worldwide today, empowering leaders who appeal directly for national self-reliance without the intermediacy of

Hung, Eva P.W., and Tak-Wing Ngo (eds), Shadow Exchanges along the New Silk Roads. Amsterdam, Amsterdam University Press 2020 doi: 10.5117/9789462988934_ch09

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globalized elites. Along with Brexit, this trend has become the most serious challenge to the neoliberal model of globalization since the previous Cold War dichotomy of a bipolar world. In the post-Soviet space (particularly in Russia), this trend is met with encouragement, as the neoliberal model of globalization is associated with US domination, while moving away from this model is seen as forming a ‘polycentric world’ with Russia as one of its centres. Paradoxically, ideas of multinational integration still dictate the foreign policy agenda in most countries, including post-Soviet nations. There are several reasons for this. First, nostalgia for the Soviet Union is strong in parts of these societies (particularly in Russia), and elites seek to use this agenda to legitimize their ruling position (White, 2010). Second, the weakness of certain post-Soviet states, the diff iculties of forming autonomous economies there, and the dependence of their economies on infrastructure networks inherited from the Soviet Union (Obydenkova, 2011: 88) all compel them to look for greater regional integration. Third, the integration discourse has been popular amongst elites and intellectual communities, which use ‘integration rhetoric’ in foreign policy documents to legitimize their status internally and project a positive image externally. All of the former Soviet republics attempt to balance themselves between ‘major powers’, one of which is Russia. Their fear of once again becoming too dependent on one nation forces them to seek cooperation with others. For example, cooperation with China is frequently viewed as a source of cheap investment and as a convenient balance to relations with other countries. This situation stimulates an active yet contradictory integration rhetoric that coexists alongside anxious and even alarmist attitudes towards China. The coexistence of these conflicting tendencies, integration rhetoric versus anti-globalization movements, leads to important questions: How will these states act during the implementation of integration agreements? And, how will this affect cross-border activities, including the flows of commodities and people in Eurasia? Expert communities worldwide increasingly consider the process of integration in Eurasia in the context of Beijing’s ‘One Belt One Road’ initiative (OBOR). Several years after its declaration, OBOR is still a philosophical concept with no specific content other than a workable action plan. Despite this, numerous experts and officials still consider it to be a ‘locomotive’ for future key changes in Central Eurasia; changes that will make the region flourish and will transform the global economic and geopolitical map. However, integration in the framework of OBOR is impossible without taking into account the actions and positions not only of China itself, but also of its neighbours and partners, particularly in post-Soviet Central Asia,

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which is likely to be a key transit route for transport infrastructure projects linking the Chinese economy with European markets. Thus, research into the current integration dynamics in the region, and the involved states’ reactions under the framework of integration, will also help us to draw conclusions about its future under OBOR initiative. I focus on two factors, namely, integration dynamics and states’ reactions, in the Eurasian Economic Union (EAEU). The EAEU was founded in 2015 on the basis of a previously existing structure: the Customs Union of Russia, Belarus, and Kazakhstan. In 2015, the EAEU was enlarged when two other post-Soviet countries were added: Kyrgyzstan and Armenia. In February 2018, an active discussion about the possibility of further enlarging the EAEU by including Uzbekistan and Tajikistan began. In contrast with OBOR and its most important component, the Silk Road Economic Belt (SREB), the EAEU is following the development of the European Union by forming an international multilateral organization via membership, supra-national authorities, and regulations and standards. The EAEU provides the freedom of cross-border flows of commodities, services, and labour forces, combined with an arrangement for conducting consolidated policies in the economic sphere. In fact, the EAEU is uniting five of the sixteen former Soviet republics, and thus it has become pivotal to post-Soviet integration, aimed at utilizing the common economic and cultural ties that still exist between post-Soviet states. The leaders of EAEU countries have declared their willingness to ‘conjugate’ the integration processes with other multinational integration projects. The so-called Conjugation of the SREB and the EAEU was announced in Moscow in May 2015 during the Putin-Xi Summit. The idea of a so-called Greater Eurasia was announced by Vladimir Putin at the Saint Petersburg Economic Forum in June 2016. Cooperation between the EAEU and the European Union (EU) was also declared by Nursultan Nazarbaev, then President of Kazakhstan, at the same forum. In what follows, I first review briefly the theoretical approaches used in this research. To assess the current situation along with further integration in the framework of the EAEU, part three of this chapter analyses the dynamics of cross-border flows of commodities initially of Chinese origin. This focus is determined by the access to objective data – the customs statistics of Russia, Kazakhstan, and China.1 The analysis of these statistics leads to 1 Kyrgyzstani statistics in general are also accessible, but as the country only recently joined the EAEU, it is not possible to review changes in flow dynamics for a representative period of time. However, it is possible to estimate the scale of illegal cargo shipment via the Sino-Kyrgyzstani border according to the divergences in Chinese and Kyrgyzstani customs statistics.

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the assertion that changes have occurred in the geographical distribution and characteristics of Chinese commodities entering EAEU territory, before moving to Russian and European markets. The divergence between the customs statistics of China and EAEU Central Asian countries has led me to conclude that various illegal and informal practices are widely and implicitly implemented during the cross-border movement of cargos. Part four consists of an analysis of Central Asian EAEU members’ actions after the enlargement of the EAEU, and an examination of how they dealt with its effects, both positive and negative. This leads to conclusions about the motivation of the state and bureaucracies in post-Soviet Central Asia (and in Russia), and to predictions regarding their reaction to the further integration of the EAEU in terms of the liberalization of cross-border flows of commodities, capital, and labour force, and the future of OBOR in the post-Soviet space.

State, sovereignty, and economic integration The central concepts used to address the above problems – the shadow economy, bureaucracy, the state, and integration – have been the focus of attention of specialists from various social studies disciplines. This chapter adopts a multi-disciplinary approach and some clarifications of the concepts are in order. The research into bureaucracy and the related issue of why it acts in a particular way is informed by the ideas of Weberian and post-Weberian sociologists, e.g., Weber (1922), Beetham (1987), and Mann (1984); the elite theory of Vilfredo Pareto and Gaetano Mosca (c.f. Ashin, 2003); and the concept of the semi-autonomous social field by Sally Falk Moore (1973). There are several key elements in this theoretical framework. First, the state has autonomous power, which it wields as a monopoly on legitimate violence (Weber, 1922) or a monopoly on introducing obligatory norms for those living in their territory (Mann, 1984). Second, bureaucracies are semi-autonomous social groups (Moore, 1973) that attempt to protect their own interests under the pretence of those interests being those of the state, despite the fact that their interests can widely differ. Third, the concept of an elite (and a ruling elite) is broad and includes not only the highest levels of authorities, but also representatives of the business, culture, and intellectual communities whose views have a significant impact on the dominant discourse of that society, which therefore allows them to influence political decisions. Fourth, the interests of different groups of bureaucrats, regardless of their common

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culture, values, and patterns of activities, can differ. Fifth, authorities try to protect the ruling functions of the bureaucratic apparatus to preserve their positions and provide access to material benefits. Thus, bureaucrats will only back multinational integration if its advantages are much more attractive than their current means of acquiring profits. The modern understanding of multinational integration in most countries, including Russia, relies primarily on studying the successful experience of the European Union. The initial stage of economic and political integration of national subjects in the European Union is the lowering or cancellation of customs duties for imported commodities (thus creating free trade zones). Subsequently a ‘customs union’ is created, and all limitations for mutual trade are removed for its members, while for external subjects a common trade policy is introduced. Then, all limitations on the free movement of capital and labour should be abolished – a stage known as the ‘common economic space’ – and the final step is the creation of a ‘currency union’ (Suzdaltsev, 2010). From an economic point of view, the essence of integration is the voluntary sacrifice of a part of national sovereignty in exchange for access to the markets and resources of other integrated countries. Without this readiness to sacrifice sovereignty and the promise of renouncing protectionism, any movement towards integration is senseless. This readiness is typically based on the understanding of the competitiveness of certain economic spheres, which helps to generate profits for a country’s economy and people. This leads to several key questions regarding the deepening of integration. Are the states ready to sacrifice their sovereignty in exchange for advantages that can be gained only in competition? Or, in political anthropology terms, are the bureaucracies’ representatives ready to renounce parts of their functions in exchange for the advantages of developing their countries through market competition with other participants in the integration? As this chapter will show, these advantages do not seem obvious in post-Soviet Central Asian countries because of the objective difference in the level of economic development between them and the initiators of the integration processes (whether Russia or China), and an understandable fear of losing this free market competition. Thus, for the representatives of local bureaucracies, the dilemma is more specific: they can preserve their functions and access to material benefits at the cost of halting integration, or they can enjoy the future advantages of integration at the cost of appreciable damage to their interests, and those of society, in the present. Thus, this dilemma leads these representatives (and most of a country’s elites) to regard integration as a risk rather than an opportunity, even though there is a clear commitment to the integration process by post-Soviet leaders.

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The main contribution of this research lies in both explaining and supporting the following hypothesis: under the conditions of less developed political institutions and non-competitive economies, there should always be an ‘inverse process’ (also referred to as a ‘counterstroke’) against further integration, which includes recovering national sovereignty driven by local bureaucrats who strive to preserve their positions and access to material profits, including those gained through illegal practices. The ‘façade’ of integration may be able to co-exist with this ‘anti-integration’ trend as long as it matches a discourse that is attractive to leaders and national elites and has no real consequences. The achievements of partial integration lead to the creation or further development of various shadow economic practices, driven primarily by bureaucrats who have become accustomed to seeing their positions as a means of enrichment. Finally, I must clarify what I mean by shadow-economy practices/activities – used interchangeably with terms such as underground economy practices, informal economy practices, and hidden economy practices, as they have practically the same meaning. Previous studies have focused on the market nature of the shadow economies. For example, Philippe Smith considers them as the ‘market-based production of goods and services, whether legal or illegal, that escapes detection in the official estimates of GDP’ (cited by Schneider and Enste, 2000: 78). Others have focused on their unofficial nature, as transactions in the underground economy should be considered illegal either because the good or service being traded is itself illegal, or because a transaction does not comply with government reporting requirements. However, according to Schneider and Enste, ‘a precise definition seems quite difficult, if not impossible, as the shadow economy develops all the time according to the “principle of running water”’ (2000: 79), and the difference between ‘illegal activities’ and ‘licit practices’ is extremely flexible because those involved view them as not lawful (hence illegal) but nonetheless not forbidden (Roitman, 2006: 249). In this chapter, I use the term shadow-economy practices to mean all economic activities including illegal (contraband, bribes) and informal payments for certain services that are not registered by the state and not declared for tax. Shadow-economy activities form networks that often involve those who participate in formal economic activities, or even those who control illegal economic practices (authorities). These networks are also the basis for economic redistribution, and the practices conducted in them are viewed by local people as rational or reasonable behaviour (Roitman, 2006: 249). In what follows, I examine how the activities of these networks were influenced by the process of integration in post-Soviet Central Asia.

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Dynamics of the cross-border flow of commodities in postSoviet Central Asia: The case of Chinese goods moving via EAEU countries The Eurasian Customs Union was established in 2010, and in 2011 the customs borders between Russia and Kazakhstan and between Russia and Belarus were removed (while migration and border controls are still in force between countries of the Eurasian Economic Union). This created profitable opportunities for cargo shippers, who sent their commodities to the European market via only two customs checkpoints on their path from China to Europe, instead of the previous four. Now only the China-EAEU (the Kazakhstan part of the border) and the EAEU-EU (the Belarus-Poland border) customs checkpoints remain. Kazakhstan has become a key corridor for transcontinental traffic, because of its geographical location and its commitment to developing logistical infrastructure. Unlike Moscow, Astana has invested in its logistics sector, and worked hard to attract transit traffic. Thus, the amount of transit traffic from Asia to Europe via Kazakhstan has already exceeded the traffic from the Russian Far East (Zuenko and Zuban, 2016). The existence of a transport corridor via Western China and Kazakhstan has also become essential for transporting Chinese goods to the Russian market. The clear trend is that the previous movement of Chinese goods through the borders of Eastern Russia has now shifted to the preferential border checkpoints to the west, on the border between China and Kazakhstan. This has become possible within the framework of the EAEU: cargo shippers now only need to follow customs procedures once when the cargo enters EAEU territory, and the shipper needs only to specify the country of destination. Customs duties accrued as a result of these customs clearance should be directed to the ‘consolidated budget’ of EAEU income, after which it is dispersed to the members according to the calculated proportion of activity (Eurasian Economic Commission, 2014). However, because the EAEU does not possess a centralized customs body, the customs are cleared by the services of individual EAEUmember states. Thus, for those shipping Chinese cargos towards European and Russian markets, there is an opportunity to choose not only the route for shipment, either via western China and Kazakhstan or via the Sino-Russian border and then on the Trans-Siberian Railway, but also to ‘choose’ the customs service of Russia or Central Asia, i.e., Kazakhstani or Kyrgyzstani. To assess the changes that have occurred under these conditions, we researched the customs statistics of Russia, China, Kazakhstan, and to an extent Kyrgyzstan for the period 2008 to 2016 (see also Zuenko and Zuban, 2017). We concluded that after the customs border between Russia and

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Kazakhstan was removed, the volume of imports of Chinese goods into Kazakhstan mainly increased. Notably, increase of this volume exceeded that of Chinese goods imported into Russia (see Table 9.1) and into Kazakhstan from other non-EAEU countries (see Table 9.2). Table 9.1 Imports from China to Kazakhstan and Russia, 2008-2016 (USD million) To

2008

2009

2010

2011

2012

2013

2014

2015

2016

Kazakhstan 4,600 3,600 4,000 4,900 7,400 8,400 7,400 5,100 3,700 Russia 34,700 22,800 39,000 48,300 51,800 53,200 50,900 34,900 38,100 Total 39,300 26,400 42,900 53,200 59,200 61,600 58,200 40,000 41,800 Sources: Federal Customs Service, Russia (various years); State Revenue Committee of the Ministry of Finance, Kazakhstan (various years)

Table 9.2 Imports to Kazakhstan from China, EU and other non-EAEU countries, 2008-2016 (USD million) From:

2008

2009

2010

2011

2012

2013

2014

2015

2016

EU China Other non-EAEU

8,600 4,600 7,200

7,800 3,600 5,000

7,300 4,000 5,000

7,300 4,900 5,800

8,000 7,400 7,500

9,100 8,400 8,700

8,600 7,400 7,800

6,900 5,100 5,500

5,700 3,700 6,100

Sources: State Revenue Committee of the Ministry of Finance, Kazakhstan (various years)

As the figures show, from 2011 to 2013, when the highest volumes of trade on record occurred, the total volume of imports from China to Kazakhstan increased by 69.7 per cent, while for Russia the increase was only 10.2 per cent. In addition, Kazakhstan’s trade statistics appeared to be dependent on Russia’s economic fortunes. By the end of 2014, the devaluation of the Russian rouble had led to a decrease in market purchasing power, and a subsequent decrease in the imports of Chinese goods via Russian customs. Although the Kazakhstani tenge decreased in value by 30 per cent in August 2015, and during the previous half-year the Kazakhstani market purchasing power was steady, the volume of imports from China to Kazakhstan’s market (according to official customs figures) decreased in addition to Russia’s. As Table 9.3 shows, during the first half of 2015 Kazakhstan’s economic figures generally exceeded Russia’s, except for imports of Chinese goods (particularly goods with a high tax ratio). Thus, the increase of imports from China to Kazakhstan surpassed the needs of local market conditions. The current volume of imports of Chinese clothing and footwear to the

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Table 9.3 Trends in economic activities, mid-2015 (%)  

GDP index Population incomes Wholesale turnover Retail turnover (nonfoods only) Cargo turnover Currency exchange rate (to USD) Imports (total) Imports from China (total) Imports from China (clothing and footwear only)

Year-to-date mid-2014 Russia

Kazakhstan

-2.8% -1.9% -9.9% -7.1% -1.6% -43.8% -37.5% -29.4% -36.2%

1.2% 1.2% 2.9% 5.5% -2.3% -7.8% -15.2% -13.7% -33.1%

Sources: Federal Service of State Statistics, Russia (various years); Federal Treasury, Russia (various years); National Bank of Kazakhstan (various years); Ministry of Economic Development, Kazakhstan (various years)

two Central Asian countries, Kazakhstan and Kyrgyzstan, with a total population of 23.5 million people, is similar to the volume of those entering Russia, which has a population of 146 million people. For example, in 2016, China exported to Kazakhstan and Kyrgyzstan clothing and footwear to the value of more than US$7 billion (of which US$3.8 billion to Kyrgyzstan and US$3.3 billion to Kazakhstan) while to Russia US$6.7 billion (General Administration of Customs, various years). In 2015, Kyrgyzstan, along with Armenia, joined the EAEU, which opened another ‘window’ for Chinese goods moving to the Russian market. Kyrgyzstan has a low level of development in terms of its political institutions and a high level of corruption. Thus, it can be viewed as a ‘comfort country’ by shippers of Chinese cargos, and the situation that existed before the creation in 2011 of the Eurasian Customs Union, when Kyrgyzstan (primarily Dordoy Bazaar in Bishkek) was the main transit hub for the export of Chinese consumer goods into the Commonwealth of Independent States, could again be exploited. As Table 9.4 shows, in 2015, there was a huge decrease in the volume of imports of Chinese goods with high tax ratios to Russia and Kazakhstan, but for Kyrgyzstan the decrease was not as significant. Thus, Kyrgyzstan’s total share of the volume of EAEU trade increased. A report by Forbes Kazakhstan also illustrates the transfer of Chinese cargo traffic to Kyrgyzstan-China checkpoints, documenting that 40,500 tons arrived in the first half of 2016, compared with 780 tons in the first half of 2015 when Kyrgyzstan was not a member of the EAEU, which is a 52-fold increase (Vorotilov and Shagiev, 2016).

222 Ivan Zuenko Table 9.4 Export of Chinese clothing, footwear and leather goods according to Chinese statistics, 2014-2016 (USD million) To Russia Kazakhstan Kyrgyzstan

2014

2015

2016

12,567.5 5,636.6 2,966.9

7,835.8 2,887.8 2,370.1

6,743.7 3,267.2 3,756.9

Sources: General Administration of Customs (various years)

The figures in Table 9.4 are from Chinese statistics, and comparisons with the customs statistics of four EAEU countries (Russia, Kazakhstan, Kyrgyzstan, and China) show an obvious difference. According to the Chinese figures, China exports a greater volume of cargo to Kazakhstan and Kyrgyzstan than they import, with the main divergence being in Kyrgyzstan, which is unexpected. According to 2016 statistics, only 26 per cent of ‘cargo for Kyrgyzstan’ as recorded by Chinese customs is off icially registered by Kyrgyzstani customs, and thus 74 per cent of cargo ‘disappears’ (see Fig. 9.1). The cargo does not, of course, disappear at the border. But when it enters the territories of Central Asia EAEU members, it goes through various illegal, semi-legal or informal schemes. We can conclude that the cargo is destined for the Russian market. Thus, one of the consequences of integration for the EAEU is the transferring of the flow of Chinese goods for Russian (and to some extent European) markets from the border between China and Russia to that between China and Central Asian EAEU members. This transferring, in addition to the divergence in the customs statistics of China and its EAEU trade partners, can be explained by the active use of various of what the Russians call ‘black’ and ‘grey schemes’ during the process of border-crossing.

‘Imitative integration’: The rebirth of shadow-economy practices ‘Black schemes’ refers to smuggling. Commodities can enter the country without customs clearance and charges paid, and customs service officers accept bribes for turning a blind eye. But ‘grey schemes’ is the more widespread practice where commodities with a high tax ratio (for example, clothing, footwear, and leather goods) get customs clearance as cheap commodities. This reduces the expenses of cargo shippers, and officials get their bribes for forging the clearance, resulting in an underpayment into the national budget.

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Figure 9.1 Divergence in customs statistics of China and its trade partners, 2016 120% 100%

100

102

100

100

80% 60% 44

40%

26 20% 0%

37.8 bln USD

38.1 bln USD

Russia

8.3 bln USD

3.7 bln USD

Kazakhstan

5.6 bln USD

1.5 bln USD

Kyrgyzstan

Many informal practices for moving cargo via the border are conducted, which help cargo shippers avoid customs duties. For example, the so-called shuttle traders are people hired specifically to move commercial cargo across the border under the pretence of carrying personal belongings. In Russian, these people are called pomogai (helpers) or kemely (from the English word camels) or kirpichi (bricks) at various border crossings between Russianspeaking post-Soviet spaces and China. Their practices are described in detail in the works of Ryzhova (2008) and Holzlehner (2015), whose research focuses on the anthropology of shadow economies. The involvement of state representatives in these practices is indefensible, but their power to combat it is minimal due to officials’ lack of leverage if no specific law is broken. Pomogai business is based on shuttle trade, in which people living on the borderlands regularly travel to the nearest foreign town to buy cheaper things (often for themselves in addition to buying them to trade), which the state cannot ban. However, the state could potentially tighten regulations for moving cargo across the state border. The free trade zone Khorgos, for example, is presently the most active shuttle trade hub using these informal practices on the border between the EAEU and China. It is situated on the Sino-Kazakhstani border, and visitors from both countries enjoy unprecedented privileges when visiting the zone. For example, Chinese and Kazakhstani citizens do not require a visa or even a passport to enter the zone – only a form of identity card is needed; those from other third countries require only a passport. In addition, the limit for the duty-free movement of goods from abroad to China for Chinese citizens is RMB8000 per day per person, which is significantly more than the maximum for ordinary visits

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to a foreign country. All shops in the zone have a duty-free arrangement, so Chinese tourists visit the zone to purchase duty-free foreign goods. They can buy not only European and American goods, which are cheaper than in China, but also products from EAEU countries, which are still rare in the Chinese market. However, the main buyers are Kazakhstani citizens, who take advantage of the zone for their shuttle trade. Kazakhstani officials face an increase in the commercial cargo moving into the country by pomogais from border regions, and have thus attempted to limit the scale of the shuttle trade by imposing several restrictions regarding the size and quantity of permissible cargo, for example, more than one fur coat per month via the border is prohibited (JSC Khorgos, 2015). However, Kazakhstan’s efforts to restrict shuttle trade have been very limited, particularly because this trade accrues substantial profits for the local economy. Kazakhstan had the courage to set up this kind of free trade zone and has since profited from it, while Russia and Kyrgyzstan’s hesitation in developing similar cross-border projects has understandably led to disappointment about the missed opportunities, despite the numerous initiatives on the part of China (see Zuenko and Chubarov, 2019). Khorgos is another window through which Chinese goods can be delivered via the use of informal practices, but the profits it generates only benefit one EAEU member, as the others have no similar mechanisms on their borders with China. Thus, the liberalization envisioned by Beijing in the framework of OBOR is still far from becoming a reality. But while Khorgos is a good example of successful integration, we should assume that local people engaged in the shuttle trade business may not be willing to further integrate with China or to liberalize cross-border procedures, because this will make their practices unnecessary and they will lose their livelihoods, which are unstable in this less-developed region. State representatives may share the same motive. For example, local officials who are responsible for the regulation of the cross-border flow of commodities find integration useful for them because they gain new sources of administrative rent. In Russian anthropological research, this term originally refers to excessive state regulations as a tool for corruption.2 Here, I mean bribes and other shadow profits gained by officials through using their status, and the situation in which excessive state regulations 2 The term was introduced by Russia’s former Prime Minister and famous economist Yegor Gaidar in 1995 in his speech on the conference ‘Reforms in Russia’: ‘Corruption is always linked with administrative rent, with artificial existence of state regulations. I am sure that when one initiates new restrictions, quotas etc., people know who will get the money from it’ (Skoblikov, 2015).

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‘cover’ the illegal and informal practices of businessmen and others. Further progression towards inter-state integration and cross-border liberalization can lead to officials losing their advantage of influential status, and thus losing their administrative rent. Thus, an official in Kazakhstan or Kyrgyzstan understands that the integration of his country into the EAEU is good for him, because the flow of Chinese commodities for the lucrative Russian market is now passing through his office, and he can thus gain both legal and illegal incomes. However, he also understands that the removal of the border, customs clearance, and other state regulations will make him redundant and he will thus lose his illegal income. This dualism of interests makes the position of the states in post-Soviet Central Asia two-sided; they support integration within the framework of the EAEU and welcome the efforts of China to promote integration within the Silk Road Economic Belt, but the practical measures they take may contradict this. A typical example is the actions of Kazakhstan and Kyrgyzstan soon after the removal of the customs border between them. In the first few months, the worst fears of both Bishkek and Astana were confirmed, as higher import tariffs inflated the prices of imported goods in Kyrgyzstan (primarily Chinese clothes and fabrics for local sewing businesses), which had been actively discussed before the enlargement of the EAEU in 2015. In addition, despite Bishkek’s hopes, the number of visitors at the Dordoy Bazaar failed to increase due to the economic crisis in Russia and Kazakhstan. After Kazakhstan’s currency was devalued in the middle of 2015, residents of Kyrgyzstan’s border regions flocked to the neighbouring country to buy food and fuel, but the Kyrgyz treasury received none of the customs payments it would formerly have collected. As mentioned, Kazakhstan lost a substantial volume of the Chinese goods (primarily clothes and footwear) that previously passed through its border, as they are now transported through Kyrgyzstan. To minimize losses from the free flow of goods into each other’s markets, both countries adopted additional regulations and strengthened control over the cargo that is crossing their borders. Kazakhstan and Kyrgyzstan essentially entered into a trade war against each other under the guise of protectionist slogans. They have imposed limits on individuals transporting goods, implemented additional customs bureaucracy, and put together truck caravans whose movement within Kazakhstan is monitored from the Kyrgyzstani to the Russian borders. The mutual dissatisfaction of the two countries deepened during a diplomatic scandal that occurred just before the presidential election in

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Kyrgyzstan in autumn 2017. Kazakhstani officials reminded Bishkek of their financial assistance of US$100 million for Kyrgyzstan, which was to coincide with EAEU technical regulations and the aim of fixing the Kyrgyzstani share of the EAEU consolidated budget at 1.9 per cent (Zuenko, 2017). The Kyrgyzstani expert Kubatbek Rakhimov stated that when Kazakhstan joined the World Trade Organization (WTO) in 2015 under its specific conditions, which differed from EAEU regulations, it dealt a blow to the common interests of all EAEU members. He added that without common market rules ‘parallel import’ structures would emerge (a proportion of the imports into Kazakhstan are subject to higher EAEU tariffs, while some are subject to lower WTO tariffs), which is clearly against the interests of forming a common market space (Zuenko, 2017). All of these steps make sense from a local perspective, but they undermine the very idea of the free flow of goods, which is the basis of any integration process, and therefore cast doubt upon the further development of the EAEU. Although EAEU partners continue to discuss Eurasian integration, they are, in fact, often attempting to preserve their regulatory powers in various spheres that essentially provide them with administrative rent, primarily in the form of trade, and resist giving this up to a supra-national body in addition to resisting further liberalization. Accepting the EAEU Customs Code in 2017 did not successfully end these efforts to preserve local regulatory functions, primarily because of a natural divergence in the level of political development among various EAEU members. Thus, we can expect the further development of shadow-economy practices based on ‘covering’ various illegal and informal schemes by officials, particularly when the Union is further enlarged by accepting Tajikistan and Uzbekistan. Post-Soviet integration is still mainly focused on geopolitical and ideological motivations and is driven primarily by Russia’s attempt to satisfy its nostalgia for the former Soviet Union and preserve its influence in the area through the domination of the Russian language and post-Soviet culture. Post-Soviet integration still lacks an economic background, and rarely matches the interests of local elites and bureaucrats, which are mainly focused on gaining administrative rent, even at the cost of the failure of integration. Taking into account the varying levels of political institution development in EAEU countries, along with their notable differences in social standards of living,3 officials in less developed countries are very likely to 3 Those of Russia and Kazakhstan are higher than in Kyrgyzstan, Armenia, and potential newcomers Tajikistan and Uzbekistan.

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use their status to get rich, regulating the flow of commodities for other (more developed) economies. This may signify a rebirth of shadow economic practices under the new conditions of living in an integrated association, which is possible due to bureaucratic activities and the will to preserve access to administrative rent. When regarding authorities as part of ‘bureaucracies’, we must acknowledge that their interests do not precisely match those of society but will always match those of their own social group. An analysis of the customs statistics regarding the flow of Chinese goods to the markets of EAEU can illustrate this. As previously noted, after the removal of customs borders between Russia and Kazakhstan, and then between Kazakhstan and Kyrgyzstan, much of the trade flow occurred as smuggling or various grey schemes. Cargo shippers and local authorities benefitted from these changes, but the interests of the national budget suffered. In 2016, which was a problematic year for the economies of all EAEU countries due to the economic crisis, the consolidated budget of the EAEU was down by US$770 million. The lion’s share of this fell to Russia, about US$650 million or 85.32 per cent,4 but the budgets of Kazakhstan and Kyrgyzstan also suffered from this shortfall. Another worrisome aspect is the risk of moving unsafe or harmful products to EAEU markets. As a large quantity of commodities enter EAEU markets without sufficient customs clearance, there is no guarantee that corrupt officials will block a shipment containing unsafe products, particularly if containers typically pass through in exchange for a bribe. Finally, we must note that shadow economies are influenced not only by the flow of commodities but also by the flow of labour force and capital. Although this is not the focus of the present chapter, it is worthy of separate research. The liberalization of the labour force resulting in cross-border flow as a consequence of regional integration has attracted much more attention from the media, ordinary people, and the authorities than the problem of smuggling. This problem is not as acute on the Sino-Russian border as it was during the 1990s, partly because Chinese workers are unwilling to move to Russia due to its low salaries and the recent demonization of the so-called 4 Estimates were calculated on the basis of the divergence of customs statistics between Chinese f igures regarding its exports to Kazakhstan and Kyrgyzstan, and the f igures of the customs services of these two countries of imports from China. This divergence in 2016 was about US$6.3 billion, according to the statistics. This sum was multiplied and thus the mean rate of customs import duties in the EAEU was 12.14 per cent. This sets the total sum of underpaid duties at US$770 million, 85.32 per cent of which, according to EAEU regulations should be moved to Russia (US$650 million).

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gastarbeiters (migrant workers), particularly those from Central Asia. Here, I touch upon this topic only briefly to draw preliminary conclusions about bureaucrats’ positions in terms of the effect of integration. Representative academic papers, media material, and my own experiences of living in Russia suggest that there are strong alarmist sentiments towards workers from Central Asia, not only from Tajikistan and Uzbekistan, but also those from Kyrgyzstan, which, as a member of EAEU, enjoys privileges for its workers. These reactions are based not only on the protectionist idea of prioritizing local workers, but also, and more often, on social concerns about radical Islam and terrorist activities, which have become associated with people from the poor Muslim countries of Central Asia (Okladnikova, 2015). For example, the suspected perpetrator of the 2017 Saint Petersburg metro bombing was named as an ethnic Uzbek born in Kyrgyzstan who obtained Russian citizenship via a state programme in 2011. The prospect of further liberalization is thus unpopular in society, even though political leaders in the Kremlin support the development of postSoviet integration. Opposition politicians actively make reference to ‘migrant phobia’ when criticizing current Russian politics and call for a freeze on the access of Central Asian workers into the Russian labour market. This would not only contradict the EAEU agreements, but also cancel out all the achievements of post-Soviet integration. As for the bureaucrats within the society, and thus immersed in its sentiments and phobias, they do not want to liberalize the regulations partially because of their alarmist view of the situation, but also because they do not want to lose their positions of control over migrant workers and thus access to administrative rent. Faced with the necessity to match the leadership’s integration rhetoric and protect their own interests and beliefs, post-Soviet bureaucrats in EAEU countries (particularly in Central Asia) appear to act in a unique way. They do not want further liberalization of their economic processes, or the removal of their functions on the supra-national level, because, as noted, this could revoke their status and their incomes from various shadow practices. In addition, the side effects of integration that are visible and unpopular amongst local societies force bureaucrats to remain passive regarding further integration, on the principle of ‘words without deals’. This has led to a phenomenon I refer to as ‘imitative integration’. This is an attitude to foreign policy when integration rhetoric (due to the three reasons I set out at the beginning of the chapter) co-exists with a conservative agenda of strengthening protectionism and national security, along with the willingness of bureaucrats to continue their shadow-economy practices to ensure their access to administrative rent. In practice, this means that both central and local

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officials, experts, and the media continue to espouse integration rhetoric, but this does not lead to any real action in terms of the liberalization of cross-border activities. It contradicts classical expectations of the process of integration as based on the experience of the European Union, but paradoxically it appears to be the optimal choice for post-Soviet countries, in that their desire to integrate is based on political rather than economic reasons.

Conclusion Returning to the questions raised at the beginning of this chapter, I conclude that real integration is impossible when the process involves countries with different levels of social, economic, and institutional development, and when integration rhetoric co-exists with calls for strengthening protectionism and border regulations. The framework of the EAEU has constructed mechanisms of integration, but the outlook of national elites and local bureaucrats towards its effects contradict the concept itself. The examples of Kazakhstani and Kyrgyzstani actions after EAEU enlargement demonstrate how governments have introduced additional limitations and opposed the transfer of sovereign functions to the supra-national level. The same scenario has occurred on the border checkpoints of Russia and Belarus. Together with the profits generated by integration for the EAEU economies, we can observe various negative results, including the loss of the consolidated EAEU budget because of the corruption on the borders of less developed countries in the Union, and the underpayment of customs duties. When the flow of commodities to the vast markets of Russia and Europe are transferred from more traditional routes – via eastern Russia and marine routes which are still much more popular for cargo shippers, with about 97-98 per cent of the total volume of cargo – to transport corridors formed through post-Soviet Central Asia, we can see that the market capacity is much lower than that of the final destinations of these commodities. This process inevitably involves state representatives who are responsible for controlling these commodity flows, and who have established various illegal and informal practices in the cross-border shipment of cargo. A whole industry oriented around implementing these practices (cargo companies and borderlands residents who participate in them, etc.) is then created. This is a key step in developing shadow economies and is based on the activities of corrupt authorities. The social, economic, and moral effects of these practices are generally considered negative by scholars and

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experts. Consequently, integration involving countries at different levels of institutional development, and with different aims, leads to outcomes that contradict the aims of integration. Local bureaucrats who profit from economic commodity flows towards the post-Soviet Central Asian states are interested in preserving the current state, and are not interested in further integration, which would make crossborder activities more liberalized. For example, if a free trade zone with China were created, it would be totally inaccessible to them, even under the framework of the ‘conjugation’ of the EAEU and the SREB. Thus, under different levels of political institutions and economies, an integration process that can be characterized as ‘artificial’ and that has solely geopolitical purposes will lead to an ‘inverse process’ directed towards the restoration of governments’ sovereign functions, and thus resistance to the development of integration. This inverse process occurs through the actions of representatives of local bureaucrats who do not want to lose their positions and their access to administrative rent. The populist ‘integration façade’ can co-exist with this anti-integration inverse process if it continues to match the dominant discourse of the elites and expert communities. It will not, however, result in any real integration measures from Russia or other post-Soviet countries. This conclusion is of critical importance for assessing the future of OBOR, particularly in its north-western area of development, which includes postSoviet countries. The identified anti-integration inverse process mechanisms may contribute to concerns about China’s expansion, and to its partners’ unpreparedness in terms of competing with China’s far more developed economic strategies. Thus, we cannot expect a ‘quantum leap’ in terms of multinational cooperation under OBOR concept, despite Beijing’s rhetoric and its partners’ ‘imitative integration’ response. China’s partners will be more likely to take a passive wait-and-see approach. They will support integration and profit from it but will only agree to mutual projects that offer far more benefits than possible risks, as before the declaration of OBOR. Only in countries with low incomes and extremely low levels of infrastructural development (such as Kyrgyzstan and Tajikistan) can we expect large flows of Chinese investment, but at the price of sliding deeper into debt. In practice, even in such poor countries China meets difficulties in realizing its internal projects. A good example is the long-awaited Trans-Kyrgyzstani railroad, which should be part of the prominent transcontinental route linking Kashgar (China) via Kyrgyzstan and Uzbekistan to Turkmenistan and further via Iran and Turkey to Europe but still cannot be confirmed by Bishkek for fear of unmanageable debt pit for Kyrgyzstan.

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Learning from the experiences of such countries, along with the absence of any significant results in the cooperation projects of more developed countries, primarily Russia, will gradually change the perceptions held by elites, bureaucrats, and intellectual communities of OBOR, and they will become increasingly more sceptical. This, in turn, will influence political decisions and even ‘imitative integration’ may change to more protectionist and even isolationist policies. Thus, when assessing the future of OBOR realization in the post-Soviet space we can assume that China will face many challenges and obstacles when promoting its strategy to its neighbours. Regional security issues and political instability play a part in this, but more importantly China’s neighbours are nervous of risking their positions and are uncertain about the mutual profitability that can result from cooperation with China.

Bibliography Ashin, Gennadiy. 2003. Kurs Istorii Elitologii [Course on History of Elitology]. Moscow: Moscow State University of International Relations Press. Baunov, Alexander. 2017. ‘Tramp v kontekste. Pochemy vyigryvayut novye pravye [Trump in Context. Why ‘New Rightists’ Win]’. Carnegie Moscow Center, 20 January, http://carnegie.ru/commentary/?fa=67741, accessed 3 February 2018. Beetham, Joseph. 1987. Bureaucracy. Minneapolis, MN: University of Minnesota Press. Eurasian Economic Commission. 2014. Eurasian Economic Integration: Facts and Figures. http://www.eurasiancommission.org/en/Documents/broshura26_ ENGL_2014.pdf, accessed 13 February 2018. Eurasian Economic Commission. Various years. ‘Foreign trade statistics’, http:// www.eurasiancommission.org/ru/act/integr_i_makroec/dep_stat/tradestat/ tables/extra/Pages/default.aspx, accessed 13 February 2018. Federal Customs Service, Russia. Various years. ‘Foreign trade customs statistics’, http://www.stat.customs.ru, accessed 13 February 2018. Federal Customs Service, Russia. Various years. ‘Statistics’, http://www.customs. ru/index.php?option=com_content&view=article&id=13858&Itemid=2095, accessed 13 February 2018. Federal Service of State Statistics, Russia. Various years. ‘Statistics’, http://www. gks.ru/wps/wcm/connect/rosstat_main/rosstat/ru/statistics/accounts, accessed 13 February 2018. Federal Treasury, Russia. Various years. ‘Statistics’, http://www.roskazna.ru/ ispolnenie-byudzhetov/federalnyj-byudzhet, accessed 13 February 2018.

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General Administration of Customs, China. Various years. ‘Trade statistics’, http:// www.haiguan.info/onlinesearch/TradeStat/StatCOMSub.aspx?TID=1, accessed 13 February 2018. Holzlehner, Tobias. 2015. Shadow Networks: Border Economies, Informal Markets and Organized Crime in the Russian Far East. Halle: Max Planck Institute for Social Anthropology. JSC Khorgos (JSC The Khorgos International Centre of Boundary Cooperation). 2015. ‘Order of the Ministry of Finance of Republic of Kazakhstan N250’, 31 March. http://mcps-khorgos.kz/page/prikaz-ministra-f inansov-rk-ot31032015-%E2%84%96-250, accessed 2 May 2017. Mann, Michael. 1984. ‘The Autonomous Power of the State: Its Origins, Mechanisms and Results’. European Journal of Sociology 25: 185-213. Ministry of Economic Development, Kazakhstan. Various years. ‘Statistics’, http:// stat.gov.kz/faces/wcnav_externalId/homeNationalAccountIntegrated, accessed 13 February 2018. Moore, Sally Falk. 1973. ‘Law and Social Change: The Semi-autonomous Social Field as an Appropriate Subject of Study’. Law & Society Review 7(4): 719-746. National Bank of Kazakhstan. Various years. ‘Statistics’, http://nationalbank. kz/?docid=1580&switch=russian, accessed 13 February 2018. Obydenkova, Anastasia. 2011. ‘Comparative Regionalism: Eurasian Cooperation and European Integration. The Case for Neofunctionalism?’ Journal of Eurasian Studies 2: 87-102. Okladnikova, Elena. 2015. Trudovaya Migratsiya v Narrativah Zhiteley SanktPeterburga: Etnofobii, Konflikty, Tehnologii Tolerantnosti [Labor Migration in Narratives of Saint Petersburg Dwellers: Ethnophobias, Conflicts and Tolerance Technologies]. Moscow and Berlin: Direct Media. Roitman, Janet. 2006. ‘The Ethics of Illegality in Chad Basin’. In Jean Comaroff and John L. Comaroff (eds), Law and Disorder in the Postcolony, pp. 247-72. Chicago, IL: The University of Chicago Press. Ryzhova, Natalia. 2008. ‘Informal Economy of Translocations. The Case of the Twin City of Blagoveshensk-Heihe’. Inner Asia 10: 323-351. Schneider, Friedrich, and Dominik H. Enste. 2000. ‘Shadow Economies: Size, causes, and Consequences’. Journal of Economic Literature 38(1): 77-114. Skoblikov, Pyotr. 2015. ‘Rossijskaja korrupcija: neformal’naja enciklopedija [Russian Corruption: Informal Encyclopedia]’, https://www.litres.ru/petr-skoblikov/rossiyskaya-korrupciya-neformalnaya-enciklopediya, accessed 03 December 2019. State Customs Service, Kyrgyzstan. Various years. ‘Statistics’, http://www.customs. kg/index.php/kg/custstat, accessed 13 February 2018. State Revenue Committee of the Ministry of Finance, Kazakhstan. Various years. ‘Statistics’, http://kgd.gov.kz, accessed 13 February 2018.

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Suzdaltsev, Andrei. 2010. ‘Politika vperedi ekonomiki: riski i perspektivy [Politics before economics: risks and perspectives]’. Russia in Global Affairs, 20 June, http://www.globalaffairs.ru/number/n_14564, accessed 13 February 2018. Vorotilov, Alexandr, and Aydyn Shagiev. 2016. ‘Kto stoit za peredelom tranzita gruzov iz KNR obyomom okolo 1.2 mlrd dollarov [Who Is Responsible for Transfer of Cargo Transit with Volumes of About US$1.2 billion]’. Forbes Kazakhstan, 20 September, https://forbes.kz/process/probing/kto_stoit_za_peredelom_tranzita_gruzov_iz_knr_obyemom_okolo_12_mlrd, accessed 13 February 2018. Weber, Max. 1922 [2016]. Khozyaistvo i Obschestvo. Tom 1. Sociologiya [Economy and Society. Vol. 1. Sociology], trans. by L. Ionin. Moscow: Higher School of Economics Press. White, Steven. 2010. ‘Soviet Nostalgia and Russian Politics’. Journal of Eurasian Studies 1: 1-9. Zuenko, Ivan. 2017. ‘Skandal v blagorodnom soyuze. Kak konflikt Kazakhstana I Kirgizii proveryaet na prochnost EAES [Scandal Between Kazakhstan and Kyrgyzstan Tests to Destruct EAEU]’. Carnegie Moscow Center, 20 October, http://carnegie.ru/commentary/73384, accessed 13 February 2018. Zuenko, Ivan, and Ilya Chubarov. 2019. ‘Vozmozhnaya urbanizatsiya periferiynykh territoriy (na primere rossiysko-kitayskoy granitsy) [Possible Integration of Periphery Territories (On the Case of Sino-Russian Border)]’, Aziya i Afrika segodnya 3: 10-17. Zuenko, Ivan, and Semyon Zuban. 2016. ‘Transkontinentalnyi transit Aziya-Evropa [Asia-Europe Trans-Continental Transit].’ World Economy and International Relations 60(7): 70-76. Zuenko, Ivan, and Semyon Zuban. 2017. ‘Kitay i EAES. Dinamika transgranichnogo dvizheniya tovarov i budushchee evraziyskoy integratsii [China and EAEU: Dynamics of Cross-border Movement of Commodities and the Future of Eurasian Integration]’. Customs Policy in Russian Far East 79(2): 5-24.

About the author Ivan Zuenko is a Research Fellow at the Department of Chinese Studies, Institute of History, Archaeology and Ethnology, Russian Academy of Sciences, Far Eastern Branch. His research interests include China in Central Asia policy, multinational integration, central-local relations, cross-border exchanges, and shadow economy.

10 In the shadow of constructed borderlands China’s One Belt One Road and European economic governance Susann Handke

Abstract In Europe, China’s One Belt One Road (OBOR) initiative primarily interacts with the institutional and physical landscape of the ‘shared neighbourhood’ between Russia and the European Union (EU). Norms and institutions in these ‘borderland’ states reflect an institutional ambiguity between the Eurasian and EU brands of market integration. In this chapter, the structures of economic governance in this region and their interaction with OBOR are examined from institutional and infrastructural perspectives. It is argued that OBOR is incompatible with current trends of European economic governance. In Ukraine and the 16+1 states, the interplay between Chinese state-controlled entities and oligarchic elites deconstructs formal norms and institutions and reinforces informal structures. Instability in the borderlands increases, while infrastructure investments extend the shadowy character of OBOR-induced practices into the future. Keywords: regional market integration, European integration, 16+1 format, Ukraine, Eurasian Economic Union, infrastructure

Introduction The south-eastern flank of the European Union (EU) is in disarray, both politically and economically. Since the early 1990s, country-specific processes to leave the Communist past behind have shaped the region. Over the years,

Hung, Eva P.W., and Tak-Wing Ngo (eds), Shadow Exchanges along the New Silk Roads. Amsterdam, Amsterdam University Press 2020 doi: 10.5117/9789462988934_ch10

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the EU and the Russian Federation (Russia) have offered different visions of regional economic governance to guide these processes. Today, two regional market integration projects – the EU and the Eurasian Economic Union (EAEU) – seek to expand into the region. The states of south-eastern Europe, specifically Ukraine and Moldova, could potentially reap the benefits of cooperating within one of these blocs. However, the premises that guide the economic governance of the blocs are mutually incompatible, and EU-Russia relations have been deteriorating for more than a decade. Nevertheless, the states in the ‘shared neighbourhood’ depend on good relations with both centres of integration efforts. Given the unstable political situation in these states in recent years, allegiances have been in flux; and the states only partially maintain the norms and institutions that derive from either bloc, mainly because volatile domestic politics and incomplete reforms have left them in an in-between state. Thus, attempts to introduce diverging concepts of economic governance have resulted in instability and ambivalence towards institutional designs. With the announcement of China’s New Silk Road, or One Belt One Road (OBOR)1 initiative, in 2013 and Russia’s military actions in 2014, the region, and particularly Ukraine, briefly moved to the centre stage of world politics. The vast region between the Baltic and Black Seas that links Central Asia with the EU emerged as the lynchpin of OBOR’s overland route and a vital hub for seaborne transportation, despite this region’s fragile security situation and Russia’s reluctance to embrace China’s initiative. OBOR attempts to interconnect the entire Eurasian mega-continent by offering a distinct Chinese vision of infrastructure-driven economic development, so examining how this initiative relates to modes of regional governance in Europe,2 both institutionally and physically, is of interest. The laws and procedures in host countries are often neglected in the design of China’s OBOR initiative. Its elite-focused approach draws on the experience of Chinese state-owned enterprises that have been active in resource-rich African states since the late 1990s.3 China’s state-owned banks provide loans to Chinese state-owned enterprises that build extraction and 1 The Chinese name for the New Silk Road initiative is yi dai yi lu; the phrase ‘One Belt One Road’ is the literal translation of this expression. 2 The term ‘Europe’ is used to point to the physical space that in the east is delineated by the Ural Mountains, Ural River, and Caucasus; it thus includes the post-Soviet states of the ‘shared neighbourhood’ and the European part of the Russian Federation. 3 The investment model was initially explored in the cooperation with oil-rich developing states, such as Sudan and Angola. China began its oil cooperation with Sudan during the 1990s. See Patey (2014) for a detailed account.

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transport infrastructure. Subsequently, the host state must repay the loans. The relationship is bilateral and intergovernmental. Local authorities are often reluctant or unwilling to enforce existing legislation properly, as it may inhibit China from making inroads into the host state’s economy. Hence, contrary to its stated neutrality, OBOR affects institutional arrangements in host states. In this chapter, the interplay between OBOR’s infrastructure projects and European economic governance is considered. This massive Chineseled infrastructure scheme does not align itself with any rules or norms of regional market integration or multilateral agreements. Instead, it promotes a Chinese brand of economic governance attached to its infrastructure projects, undermining principles of good governance and internationally agreed standards (Fontaine and Kliman, 2018). Thus, practices associated with China’s domestic infrastructure development are introduced to Europe and interact with rules that govern integrated regional markets. In general, large network infrastructure re-shapes economic geographies. In fact, such constructs form the nexus between normative and material market integration. Infrastructure construction and operation have a lasting effect on how economic activity can evolve, mainly because it changes the physical landscape and often necessitates the creation of specific regimes to reduce the risks and vulnerabilities that these projects create. Therefore, it matters how OBOR projects are implemented and how contractual schemes relate to existing governance structures. A disconnect between infrastructure development and overall economic policies has profound consequences. Natural gas transportation in Europe is a case in point. The European Commission is still untangling the normative structures in which gas flows from Siberia to western Europe are embedded. With the collapse of the Soviet Union, previous informal practices shifted to murky arrangements, causing legal disputes and supply disruptions. These experiences inform the analysis in this chapter in two ways. First, the transnational gas pipelines illustrate the relationship between infrastructure and market governance. The dynamics of this interaction is a critical factor in the political economy of the borderlands. Second, OBOR enters Europe against the backdrop of an ongoing struggle to introduce and strengthen rule-based market governance in eastern EU member states and neighbouring states. Ukraine, which forms a pivotal link in OBOR’s geography, is deeply affected by competing concepts of economic governance. The insufficient reform of the gas sector is the main reason for its incomplete post-socialist transformation. The chapter demonstrates that it is likely that OBOR will remain an external phenomenon in European economic governance and that it can

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be viewed as another factor of instability in south-eastern Europe, mainly because its infrastructure projects are creating a breeding ground for, or extending existing, informal and even illegal activities in the region. The analysis is organized as follows. The next section presents the methodology for assessing the institutional interaction between China’s OBOR and European economic governance. Section three indicates the geographic focus and summarises how varying structures of economic governance developed in Europe after the end of the Cold War. Section four explains the interplay between transboundary infrastructure and institutions of market integration, both in EU-Russia gas relations and Ukraine. Section five discusses how OBOR’s implementation affects Ukraine and other states in eastern and south-eastern Europe. It also considers why OBOR will remain in the shadow of the formal structures of European economic governance. Section six offers some concluding thoughts.

Conceptual framework and methodology In eastern and south-eastern Europe, OBOR faces a complex political and economic environment. After the end of the Cold War, variations of the idea of market integration in Western Europe and Russia created borderlands where the implementation of OBOR is currently unfolding. The analysis in this chapter uses these interrelated elements as a framework to assess OBOR’s interaction with existing structures of economic governance in Europe. Infrastructure is the feature that links all three elements. The analysis is based on constructivist theories. It compares the ideational concepts that have influenced economic governance in Europe and explains how vulnerabilities related to infrastructure arise. Market integration and infrastructure States form common markets to achieve two objectives. First, market integration helps to reduce transaction costs; and second, by pooling decision-making small economies can improve their position vis-à-vis larger players in the global economy. Thus, participation in a regional economic bloc facilitates its member states’ interactions with the world economy. Various forms of regional market integration have developed. Their workings and regional focus underline the fact that the territorial space for economic development plays an important role for states that pursue market integration in the current phase of globalization (Rivarola

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Puntigliano, 2017). Hence, understanding the coalescence of governance structures and physical features that embed integration, such as networked infrastructure, is essential. Since normative aspects of market integration and the establishment of network infrastructure are closely related, infrastructure research can help to assess OBOR’s spatial impact on Europe. Infrastructure scholars identify two paradoxes associated with large network infrastructure. First, the same infrastructure can simultaneously increase connectivity and fragment regional links. Thus, the construction of networks creates new or entrenches ‘slow geographies’, i.e., regions that are avoided in infrastructure planning (Johnson and Derrick, 2012: 496; Van der Vleuten et al., 2013: 9). Second, infrastructure promises reliability, but its users are also vulnerable to disruptions of the services that it facilitates (Van der Vleuten et al., 2013: 10). Both paradoxes are relevant to the implementation of OBOR in the context of European economic governance, as any analysis of OBOR projects must consider the obduracy of networked infrastructure and forms of ‘hidden integration’ (Misa and Schot, 2005), i.e., emerging networks outside the reach of formal political processes. The obduracy of infrastructure and hidden integration make it difficult to adjust outdated or informal infrastructurerelated practices to norms of economic governance after the fact. Gas transportation between the EU and Russia illustrates the relationship between infrastructure and market integration in three ways. First, the presence of infrastructure has implications for the enforcement of economic laws and the perception of the underlying trade relations. In a recent antitrust investigation, the European Commission considered both market structures and the increased vulnerabilities that result from the dependence on Russian gas and related infrastructure. Second, the issue of obduracy is highly visible in eastern Europe. Third, Ukraine’s management of transnational gas transit shows that if badly governed, infrastructure can support a wide range of shadowy behaviour and informal practices in the economy. Shared understandings and shadow economy Establishing and maintaining a sophisticated organization of regional market integration require a shared understanding (idea) among the elites of all participating states, i.e., the understanding that they gain from this form of cooperation. Constructivist theories about the international political economy provide a basis for considering structures of economic governance as outcomes of a shared understanding (idea).

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Emphasizing the centrality of market integration as an economic idea in the analysis of how economic governance structures in Europe evolved and interact with OBOR has two advantages. First, this approach is compatible with infrastructure scholarship that evaluates the interaction of physical features with society and the political economy, such as perceptions of reliability and vulnerability. Second, drawing attention to economic ideas helps to avoid realist or liberal approaches to international relations, as constructivist thinking highlights ideational aspects instead of focusing on the pursuit of (material) interests and gains. Constructivists hold that the material environment conditions an actor’s choice but does not solely determine it (Blyth, 2007: 776). Yet, constructivists do not deny the relevance of material power in ongoing economic transformations. Realist constructivism, in particular, acknowledges the role of power, but its conceptualization of power goes beyond a state’s material assets and capabilities (Barkin, 2010). Hence, power contributes to the realization of economic ideas, among other factors. Mark Blyth demonstrates that changes in governance structures are based on ideas about economic wealth and development that actors share (Blyth, 2002). The dynamics between actors’ shared understanding and their identities enable the social construction of transformations that result from interactions between these actors and institutions. Ideas about structuring economic activity are particularly relevant during economic crises when doubts arise about future policies. The emergence of a shared understanding reduces uncertainty, as it facilitates collective action and coalition building. Thus, ‘ideas that inform agents’ responses to moments of uncertainty and crisis’ eventually cause institutional change (Blyth, 2002: 251-257). The economic idea of market integration is a response to uncertainty and crisis. For decades an ever more interdependent global economy has presented a serious challenge to states and their ability to design economic policies. Decision-makers in many states have subsequently resorted to regional market integration and re-imagined the position of their countries’ national economies as part of regional economic blocs. Thus, the idea of regional market integration lessens fears of losing control of economic policy making in times of increasing economic globalization. Attempts at building coalitions to enable collective action and integrate national economies generally result in the establishment of an international organization and the enactment of common economic legislation. The application of a common customs tariff in a customs union is usually an initial step. Further cooperation leads to a harmonization of economic and administrative legislation to reduce barriers to cross-border economic

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activity. This creates a legal order that regulates economic affairs internally and interacts as one entity with the rest of the world. The perceived benefits of market integration have led to a wider trend in the international political economy, as states increasingly accept collective economic governance and engage in regional policy making. The conceptualization of OBOR as a scheme that interlinks the entire Eurasian mega-continent deliberately disrupts regional frameworks. This chapter correlates OBOR with the institutions that result from the process of regional market integration. OBOR-induced economic activities can be described as ‘shadowy’ behaviour in an institutional sense, although the initiative aims to establish highly visible, large-scale networked infrastructure, based on intergovernmental agreements. This choice is reasonable, as the term ‘shadow economy’ is understood in a broad sense, pointing to economic activity that bypasses legal institutions, which make up the framework in which this activity should legitimately take place (Schneider and Williams, 2013: 19). Thus, shadowy economic activities are concealed from public authorities that are tasked with enforcing existing laws and regulations (Schneider and Williams, 2013: 25). In the case of regional economic organizations, such activities are negotiated at the level of national administrations, which to a large degree are no longer competent. Focusing on the centrality of ideational concepts, the following sections examine how ideas of market integration influence existing structures of economic governance in Europe, and highlight how these structures interact with the gas infrastructure that continues to connect EU- and Russian-led modes of governance. Emerging predicaments that arise both from the incompatibility of these governance modes and incomplete post-communist transitions particularly affect the borderlands in eastern Europe, where weak institutions can hardly cope with the implementation of OBOR.

Economic governance in post-Cold War Europe By the mid-2010s, three modes of economic governance co-existed in Europe. First, the EU had shifted its borders eastwards. Second, Russia, Belarus, and Kazakhstan established the EAEU in 2015. Third, states in the shared neighbourhood participated in EU-led cooperation regimes. The institutional development of these states was far from straightforward, as elites’ preferences and domestic economic circumstances resulted in distinct paths to post-socialist transformation, which institutionally oscillated between EU- and Russian-led forms of integration.

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EU enlargement and shifting borderlands The establishment of a single market is the main goal of EU economic policy. Coordinated by the European Commission, member states pool their sovereignty to design common economic policies. As the Union’s executive body, the European Commission initiates binding economic legislation and represents the EU in international trade negotiations, albeit under increasing scrutiny by the democratically elected European Parliament and with the participation of the member states’ governments. The EU has become a supranational entity that is not comparable to any other international organization. In many aspects, it is more akin to a state, although it shares some characteristics with international organizations (Leuffen, Rittberger, and Schimmelfennig, 2013: 1). The EU’s realm of governance can be described as a ‘system of differentiated integration’, mainly because EU integration clusters around ‘an organizational and member state core’, while levels of centralization and the territorial extension of policy integration vary by function (Leuffen, Rittberger, and Schimmelfennig, 2013: 10). Thus, there is no single geographical or legal space that can capture the entirety of EU-led integration. It constitutes a multi-layered and multifaceted process that stretches far beyond the Union’s territorial borders. Consequently, the application of EU legislation is not necessarily delineated by the organization’s actual external borders. Some initiatives are only implemented in the core states. The euro as a common currency is a case in point. However, some EU regimes also include non-members. The Schengen Agreement is an example of a complex scheme that exceeds the borders of the EU, while some EU member states opted out of it. In the context of energy cooperation, non-EU parties to the Energy Community Treaty4 have agreed to apply EU energy legislation and are restructuring their energy sectors accordingly. After the collapse of socialism in Europe, there was little support for the creation of new institutions. Western European and transatlantic institutions such as the EU and NATO filled the void. Europe’s security architecture changed dramatically when most of the former socialist states acceded to NATO during the late 1990s (NATO, 2019). This step provided a basis for future allegiances in economic affairs. Given their socio-economic situations, it took years before these states were able to join the EU. Following a 4 Parties to the Treaty establishing the Energy Community that are non-EU member states Ukraine, Moldova and Georgia and all West Balkan states (Energy Community, n.d.).

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preparatory period, the former socialist states were accepted as EU member states between 2004 and 2013. Far-reaching and painful economic, institutional, and legal reforms were necessary, which were supported by EU funding (European Commission, n.d.). The post-socialist states embraced this specific brand of regional integration, mainly because it promised economic modernization. Generally, market integration requires the establishment of rules for cooperation among the participating states and adjustments in national legislation to create a common market. This alters the political economy of an entire region, not only with respect to the states that participate in the project but also for neighbouring states that remain outside (Voeten, 2016). Thus, member states of a regional organization have to deal with both internal challenges related to the realization of the integration project, and external conflicts and disruptions that result from the creation of new borders of economic governance. After the EU’s geographical expansion to the southeast of Europe, EU institutions and member states were unable to fully consider the political and economic developments in the region. The 2008 global financial crisis, the subsequent euro crisis, and the influx of migrants posed severe challenges to the ability of the Union to maintain unity on core political issues. EU Council meetings mainly addressed aspects of internal EU governance. Thus, cooperation with the Union’s neighbours to the east developed in a piecemeal fashion. Institutionalizing cooperation in Eurasia From 2013 onwards, Russia pushed for a fast-track implementation of its Eurasian integration project. Geographically, this integration project covers Russia, large portions of eastern Europe, and parts of Central Asia and the Caucasus.5 It seeks to promote economic cooperation in the postSoviet space. David Lane explains that initially the EAEU was a response to globalization and was designed to create a governance structure that is complementary to the EU. The project further emerged as an attempt to counter (perceived) Western economic hegemony. Today, the main aim of this institutional framework is to facilitate the interaction of EAEU member states with the international economic system in a way that helps to preserve their national economic interests (Lane, 2015: 9, 20-21). 5 By the time of writing, the Russian Federation, Kazakhstan, Belarus, Kyrgyzstan, and Armenia were members of the EAEU.

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Eurasian integration has been an important theme of President Vladimir V. Putin’s foreign policy since 2000 (Duncan, 2015). This project evolved gradually, starting with the establishment of the Eurasian Economic Community in October 2000.6 By signing the Treaty on the Eurasian European Union on 29 May 2014, the presidents of Russia, Belarus, and Kazakhstan committed their states to a highly institutionalized project of regional integration that is based on a supranational, multi-layered legal design. The Treaty went into effect on 1 January 2015. Eurasian integration mainly relies on Soviet-trained elites and alludes to a common Russian legal-technical vocabulary, and despite its references to the rules of the World Trade Organization the historical legacy of Russian-led integration in this region primarily inspires cooperation among EAEU members (Malmyuk, 2014: 629-630). Through its customs union, the EAEU has more influence on domestic economic governance in its member states than any other previous post-Soviet regime (Dragneva and Wolczuk, 2015: 148). The organization’s institutional structure models itself on the EU.7 President Putin acknowledged that the establishment of the organization takes into account the experiences of the EU, by considering its ‘strengths and weaknesses’ in global governance (Buckley, 2011; Putin, 2011). Constructing post-Cold War borderlands The 2007 EU enlargement (Bulgaria and Romania) and the establishment of the EAEU significantly altered the institutional landscape in south-eastern Europe. States in the shared neighbourhood became borderlands. The EU created specific policy instruments: the 2004 European Neighbourhood Policy (ENP)8 and the 2008 Eastern Partnership (EaP) (EEAS, 2016), which was the ENP’s ‘eastern dimension’ designed to foster relations with states in south-eastern Europe (European Commission, 2008: 2). 6 The next steps in the integration process were the creation of the Eurasian Customs Union in 2010 and the establishment of the Common Economic Space in 2012. 7 The Supreme Eurasian Economic Council, consisting of the heads of state, forms the highest authority of the EAEU. The Eurasian Economic Commission is a permanent supranational regulatory body and functions as the EAEU’s executive body. The Court of the EAEU ensures the uniform application of the Treaty on the EAEU and other treaties by EAEU bodies and the member states. The prime ministers meet in the Intergovernmental Council. No parliament has yet been established. 8 States in the post-Soviet space that are part of the ENP are Armenia, Azerbaijan, Belarus, Georgia, Republic of Moldova, and Ukraine.

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The ENP was intended to ‘share the benefits of the EU’s 2004 enlargement with neighbouring countries in strengthening stability, security and wellbeing for all concerned’ and should ‘prevent the emergence of new dividing lines between the enlarged EU and its neighbours’. These states should therefore have ‘the chance to participate in various EU activities, through greater political, security, economic and cultural co-operation’ (European Commission 2004: 3). The EaP went a step further, as it sought to carry ‘a lasting political message of EU solidarity’ and support for democratic and market-oriented reforms in the states, along with the consolidation of their statehood and territorial integrity (European Commission, 2008: 1-2). The EaP became the main policy instrument for promoting cooperation with the eastern neighbours and encouraging the sector-specific harmonization of legislation to link the region to the EU. The European Commission launched the EaP during the Prague Eastern Partnership Summit between the EU and the state leaders of Ukraine, Belarus, Moldova, Georgia, Armenia, and Azerbaijan in May 2009. Paragraph 11 of the 2009 Joint Declaration9 identifies four main platforms for cooperation: democracy, good governance and stability, economic integration and convergence with EU sectoral policies, energy security, and contacts between people. The EaP aims ‘to create the necessary conditions to accelerate political association and further integration between the European Union and interested partner countries’ (para. 2). This formulation shows that the EU willingly introduced a certain degree of ambivalence into its relationship with the states in the shared neighbourhood. Nevertheless, for the most part economic cooperation with EaP states is currently governed by EU policies and sectoral legislation. Two aspects of the ENP and EaP are important to note. First, both instruments entail far-reaching policy harmonization, which should bring the neighbouring states closer to the EU (European Commission, 2004: 3). Second, they emphasise the notion of ‘joint ownership’, as the EU had made an offer to its partners ‘to which they have responded with considerable interest and engagement’. Cooperation has to develop by recognizing ‘mutual interests in addressing a set of priority issues’ (European Commission, 2004: 8, 2008: 3). The EaP states share the responsibility for implementing the policies that aim to strengthen cooperation. Hence, the commitment of elites in the EaP states is vital to introducing and maintaining norms and institutions of economic governance. The EaP’s most far-reaching and comprehensive component is the conclusion of association agreements (para. 5 of the Joint Declaration). The 9

For the full text see Council of the European Union (2009).

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three post-Soviet states of Ukraine, Moldova, and Georgia signed so-called Association Agreements, including Deep and Comprehensive Free Trade Areas.10 By doing so, they have become part of the broader EU-centred legal space, although these states will not join the EU any time soon. Given the EaP countries’ economic and administrative situations, even an association process takes years. Economic governance in the borderlands remains inconclusive. These states have an interest in maintaining good relations with both the EU and Russia and depend on the beneficial coexistence of the two blocs. However, by 2014 the European continent faced renewed division. Diverging conceptualizations of market integration had resulted in two projects that could barely coexist. Economic governance followed the premises of either Western-style market economies and constitutional democracies or the Russian-inspired authoritarian path to political decision-making and state-led economic development.

Governing networked infrastructure across borderlands Transnational gas transport in Europe illustrates the interaction of networked infrastructure with economic governance. The European Commission’s antitrust investigation into Gazprom’s activities in eastern EU member states specifies this interaction, while Ukraine’s political economy is an example of the longevity of the informal practices and governance structures that surround the country’s gas infrastructure. Governing EU-Russia gas relations Distinct governance structures From 2012, the European Commission off icially investigated whether Gazprom’s actions in eastern EU member states infringed EU law. Gazprom’s management of its relations with these customers and its attitude to transit states had increased vulnerabilities, particularly for those states that solely rely on the company’s gas supplies. In May 2018, the European Commission took a legally binding decision (European Commission, 2018a) that corrected the disruptive effects related to Gazprom’s control of natural gas pipelines 10 The Association Agreements, including Deep and Comprehensive Free Trade Areas between the EU and Ukraine, the Republic of Moldova, and Georgia were signed in 2014. For an analysis of the differences between the three association agreements, see Van der Loo (2017).

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in eight eastern EU member states (Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, and Slovakia). This decision reaffirmed EU rules on gas market governance. The European Commission concluded that Gazprom, based on its infrastructure assets and contractual arrangements, had abused its dominant position in the region and hindered the completion of the common EU gas market. Gazprom accepted commitments that would considerably change its behaviour in the region To end the investigation, Gazprom addressed four concerns that the European Commission had raised. First, the eight eastern EU member states were allowed to re-sell gas across borders. Second, they were able to freely choose the delivery points for contracted Russian gas supplies. Third, importing companies supplying states that can only receive Russian gas should have the right to request price changes based on the rates at liquid hubs in Western European markets. Fourth, the European Commission will monitor future gas contracts and determine whether they include unrelated undertakings by importing states. This decision highlights an important facet of the interaction between market rules and infrastructure. Whereas parts of the infrastructure hamper the effectiveness of EU market integration, as the isolation of eastern EU members shows, regulatory measures can adjust the legal context of the infrastructure and reduce its exclusionary effects. The European Commission’s Gazprom decision is a first step in this regard. However, its impact will depend on further monitoring and rule enforcement. The Commission decided this antitrust case more than six years after the first documents were seized. The commitments concern Gazprom’s future behaviour; and for any violation the company would face a fine of up to ten per cent of its annual worldwide turnover. Hence, reconciling networked infrastructure with common market rules requires both enforcement capabilities and political will. In the EU context, only the European Commission as a supranational body has adequate sway in this regard. Obduracy of hidden integration through infrastructure Infrastructure connects people and enables flows of goods and resources. Through its specif ic technology, geography, and social and regulatory qualities, networked infrastructure shapes territory via ‘socio-technological assemblages’ that reconstitute organizational and territorial relations. As they hover on the intersection of governance and territory, energy flows create ‘intricate and precarious’ socio-technical landscapes (Bouzarovski, Bradshaw, and Wochnik, 2015: 218, 220). Thus, infrastructure is more than technological and physical links. It carries institutional arrangements that

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evolve as a legacy, closely linked with the existence of its physical features. Obduracy is a significant feature of networked infrastructure, particularly in terms of energy systems (Johnson, 2017). Mismatches can occur when changing structures of governance are politically legitimate but do not suit the physical reality. The points that the Commission’s Gazprom decision addressed highlight the characteristics of gas infrastructure in the former socialist states that are now members of the EU. Their gas sector manifests a socio-technical legacy of their Soviet or socialist past. This infrastructure was built during the 1980s and helped to Sovietize the economy of the USSR’s western parts and brought the socialist satellite states closer to Moscow. In addition, these states were not allowed to consider alternative supplies. During the 1990s, existing gas infrastructure was extended, and imported volumes of Russian natural gas kept growing. Vulnerabilities on the part of gas importing states increased accordingly (Högselius, Åberg, and Kaijser, 2013: 41; Pongas, Todorova, and Gambini, 2014; Bouzarovski, Bradshaw, and Wochnik, 2015: 220). The issue of diversifying gas supplies was in fact discussed prior to the eastern European states’ EU membership. However, this would have required investments on a scale that these states could not afford; neither would such efforts be commercially viable for external investors (Stern and Yafimava, 2017: 25). As the entire region was dependent on the Russian gas infrastructure, this socio-technical landscape remained in place for almost two decades, together with its characteristic governance structure of long-term contracts and a bilateral approach to negotiations. Other sectors of the regional economy increasingly aligned themselves with their EU counterparts, but the gas sector retained close links with the Russian economy. The eastern European states’ EU membership, and particularly the 2009 Third Energy Package,11 i.e., EU legislation aimed at liberalizing and regulating the gas and electricity sectors, subsequently changed the legal context of this socio-technical landscape. The integration of the gas sector created new landscapes of geographical inclusion and exclusion, depending on the enforcement of the relevant legislation (Bouzarovski, Bradshaw, and Wochnik, 2015: 224). 11 This package includes two directives and two regulations to further liberalize electricity and natural gas markets and to unbundle vertical integrated utilities. An additional regulation created the Agency for the Cooperation of Energy Regulators. The most problematic aspect from the Russian perspective was the requirement that transport infrastructure cannot be owned by a company that sells electricity or gas.

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The European Commission’s Gazprom decision eventually rectif ied an ambiguous situation, which over the last 25 years has led to EU energy legislation and the organization of Russia’s state-controlled gas sector increasingly going in separate directions. It clearly applies EU norms to Gazprom’s activities within the Union. Thus, by helping to overcome physical barriers to EU gas market integration and ending the legacy of governance arrangements that belong to a previous age, the decision reaffirms the eastern EU member states’ presence in the realm of EU economic governance and limits the exclusionary effects of the region’s gas infrastructure. Vulnerability and incomplete geographies of market integration Transborder connections are particularly prone to vulnerabilities. In eastern Europe, most of these vulnerabilities had already emerged before the EU could influence the situation, mainly because EU market integration and EU membership of the states in question commenced after the construction of the pipelines (Van der Vleuten et al., 2013: 7). The socio-technical legacy of the transnational gas infrastructure in Europe goes back to the 1970s,12 when the gas trade was crucial for economic prosperity in Europe. After the end of the Cold War, cooperation was considerably extended; and thousands of kilometres of new gas pipelines were built. Imports from Russia increased steadily, particularly to post-socialist states.13 Creating a common legal framework to guide this aspect of EU-Russia relations was a logical and vital next step. It could have reduced the vulnerability and uncertainty on both sides. During the 1990s, multilateral and bilateral efforts were made to coordinate EU-Russia energy relations. In 1994, the Energy Charter Treaty was signed. Its approach to energy governance was based on a competitive market-led model of energy production, transport, and trade. In addition, the EU-Russia Energy Dialogue was initiated in 2000 (European Commission, 2014). Further progress was hampered by Russia’s economic woes and the government’s decision to re-establish state control of the energy sector, which began in the early 2000s. In the absence of a framework that could mediate between the EU’s market-based regulatory approach and Russia’s state-controlled gas sector, Russia’s policy reversal resulted in increasing 12 See Högselius (2013) for an overview of the history of the natural gas relations between western and central European states and the Soviet Union and its subsequent development. 13 By the mid-2010s, Russia had become the EU’s main source of natural gas; and states that use much gas depended for 49% of total imports on Russia gas (Pongas, Todorova, and Gambini, 2014).

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tensions with the EU. Energy legislation in both constituencies became more and more incompatible, while the political relationship deteriorated during the 2010s. Exchange among technocrats in forums and frameworks for cooperation on energy, such as the EU-Russia Gas Advisory Council, the EU-Russia Energy Dialogue, and the Partnership and Cooperation Agreement, could neither resolve frictions nor prevent legal disputes. The mismatch between governance and infrastructure became problematic when former socialist states joined the Union in 2004 and 2007. There was growing unease about energy security issues related to Gazprom’s role in the EU gas sector, particularly over the overdependence of central and eastern EU member states on this gas supplier. EU gas market regulation and Gazprom’s business model, including its proximity to the Russian state, had by then become irreconcilable.14 After the adoption of the 2009 Third Energy Package, energy relations between Russia and the EU worsened. In the same year, Russia suspended the provisional application of the Energy Charter Treaty (Rusnák and Konoplyanik, 2015). The issue of access to and ownership of the Russianowned pipelines were the main point of contention with respect to both the Third Energy Package and the Transit Protocol to the Energy Charter Treaty.15 Russia was not willing to adjust the position of its state-controlled companies. The EU proceeded to complete the common gas market, while concerns about vulnerabilities along the Union’s eastern borders remained. Gas transit and Ukraine’s hesitant elites Ukraine’s weak institutions and the lack of enforceable laws to facilitate gas transport affect the economic resilience of the broader region. The practices related to gas transit through the country are essential to the understanding of Ukraine’s political economy and its predicament since its independence. Agreements that were achieved with the EU during the 1990s were not sufficient to accomplish domestic reforms. During the winter months of 2006 and 2009, flaws in the murky arrangements that governed the gas relations between Ukraine and Russia caused major gas supply disruptions. An EU-led 14 At the same time, the EU acquis communautaire in the f ield of energy with its focus on liberalization and competition gradually emerged. After the adoption of the Third Energy Package in 2009, the EU energy aquis went far beyond the Energy Charter Treaty’s scope of market-based energy relations. 15 The Transit Protocol to the Energy Charter Treaty was the major unresolved issue that was increasingly politicized in the debate. Russia did not ratify the Energy Charter Treaty, mainly because it opposed the Transit Protocol. It applied the Energy Charter Treaty only provisionally.

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governance response that could address the changing politico-economic context in which vital infrastructure operated seemed inevitable. The situation of Ukraine exemplifies the various hazards of hosting large-scale network infrastructure. During the struggle for independence, the issue of gas transit was not considered by the elites. During the 1990s, privatization schemes allowed them to obtain stakes in the gas sector, while the government failed to introduce legislation to manage it. Once the emerging Ukrainian and Russian oligarchic elites had gained sufficient political influence, they thwarted any attempt to regulate the gas sector in a way that would hinder their business activities. They allowed the privatization of state assets but inhibited any correction of market distortions (Puglisi, 2003: 103; Pleines, 2016: 112). Informal and illicit practices have marred the gas sector for years. Huge rents from managing gas transit and purchase transactions gave rise to large-scale corruption (Åslund, 2014: 64-66; Wolczuk, 2016: 114-115), which in turn determined the country’s post-independence political and economic development. In the first decade after its independence, Ukraine failed to both restructure its energy sector and minimize the effects of being an energy importer. Instead, Ukrainian elites pursued the contradictory approaches of stronger economic ties with Russia, based on cheap energy supplies, while seeking closer integration with the EU to help ameliorate the consequences of dependence on Russian energy. This shaped Ukraine’s political and economic trajectories from independence onwards (Wolczuk, 2016: 114, 116). After the 2009 gas supply disruption, which had direct effects in the EU, attempts were made to address the governance issues of Ukraine’s gas sector. In 2011, Ukraine joined the Energy Community and reluctantly began to implement EU energy legislation. The EU-Ukraine Association Agreement also includes provisions on energy cooperation and commitments to energy sector reform. An independent regulator, energy efficiency, and reversed gas flows are essential measures in freeing the economy from the impact of Russiancentred gas supply infrastructure. However, the Ukrainian oligarchic elites and their political proxies still attempt to interfere with these efforts; and thus, the reform of the energy sector proceeds very slowly. International lenders and partners, such as the IMF and EU, have repeatedly called for legislative changes and a restructuring of Naftogaz, Ukraine’s oil and gas company (Wolczuk, 2016: 114-115; Zachmann, 2016: 4-5). Thus, Ukraine’s situation demonstrates the vulnerability of an economy to asymmetric trade relations that rely on network infrastructure, both with respect to sectorial governance and the emergence of political elites and their informal practices.

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OBOR, the borderlands, and European economic governance The previous sections introduced the modes of economic governance in Europe and their interactions with salient network infrastructure that have been shaping the political economy in eastern and south-eastern Europe for decades. The natural gas trade that began during the final years of the Soviet Union still shapes the region’s political economy. The obduracy of gas infrastructure and its embedded practices impair efforts to reform and stabilize economic governance in the region, both within the EU and in states that have binding commitments to cooperate with the Union. This section explores how OBOR interacts with European economic governance in eastern and south-eastern Europe. Deconstructing European economic governance Targeting Ukraine From 2010 onwards, Russia heavily promoted the EAEU as an alternative form of market integration for those post-Soviet states that maintain strong economic relations with Russia. Belarus16 and particularly Ukraine were reluctant to join this project. This undecided situation left an opening for various futures. The political struggle to win over Ukraine to either seek closer ties with the EU or join Russia’s Eurasian project eventually coincided with the launch of OBOR, which offered yet another option for promoting economic development. Ukraine is the largest state in the shared neighbourhood. Its geography is vital for any efforts to build infrastructure linking the Eurasian mega-continent. In its relations with Ukraine, China has interfered with all three modes of European economic governance, as OBOR has affected Eurasian integration efforts, EU-led regimes, and the implementation of EaP measures. Indeed, when OBOR first entered Ukraine in 2013, the intended projects impacted Russia’s Eurasian integration project. During the late 2010s, OBOR’s elitedriven approach hampered the progress of economic reforms, which were commitments included in the EU-Ukraine Association Agreement. These OBOR projects focused on port infrastructure, but also concerned the construction of railways, bridges, urban transport facilities, and energy infrastructure. Many investments aimed to enhance Ukraine’s grain export capability (Brooke, 2018). 16 Belarus eventually joined the Eurasian economic integration project but remains alert to any signs that suggest that Russia would use the EAEU for its political ends or infringe on the member states’ sovereignty (Astapenia, 2015).

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This rationale was also the basis of plans announced in late 2013. A Chinese company proposed a US$10 billion project (Bloomberg, 2013) that included the establishment of a deep-water port on Crimea. The port was intended to be a hub for imports from China and goods from Ukraine and neighbouring countries. It was the first major announcement that supported the OBOR narrative of transcontinental interconnection in this region. The Crimean port project was one of several major deals with Chinese investors announced in early December 2013, after President Victor F. Yanukovych had returned from his visit to Beijing. Yanukovych had attempted to secure Chinese investment to free his regime from the deadlock that resulted from his manoeuvring between closer economic and institutional ties with the EU and Russia’s persistent attempts to attract Ukraine to the EAEU. China’s deals with Yanukovych came at a difficult moment in Ukraine’s history. Its citizens were protesting against the regime’s corrupt practices, and they had high hopes of the association agreement with the EU, mainly because they saw closer ties with the Union as a means to address widespread corruption (Åslund, 2014: 73). Russia simultaneously tried to accelerate Eurasian integration, which both Ukrainian oligarchic elites and most of the population resisted. In the wake of countrywide protests, that continued throughout the winter months, the Ukrainian parliament voted Yanukovych out of office. After losing the support of the security forces, Yanukovych fled his country on 22 February 2014 (Taylor, 2014). A few weeks later, the annexation of Crimea by Russia wrecked China’s plans for the construction of a port on the peninsula. These plans had been controversial from the outset. The deep-water port would have been located close to the port of Sevastopol where the Russian Black Sea Fleet is stationed. Although Russia and Ukraine had already agreed in the 2010 Kharkiv Pact that Russia could lease these port facilities until 2042, Russian media described Yanukovych’s Chinese deal as the ‘sale of Crimea’ (Orlov, 2013) and feared the inclusion of the peninsula into China’s ‘sphere of influence’ (Snytkova, 2013). Residents also criticized the plans, mainly because the construction of the port would have affected beaches at Saki and Yevpatoria, which are important for Crimea’s health tourism industry (Izmirli, 2014). Thus, the Chinese infrastructure developers’ initial attempt to gain a foothold in Ukraine was unsuccessful. The main outcome of this dramatic episode was the signing of the ‘Joint Statement of the People’s Republic of China and the Russian Federation on Linking Up the Establishment of the Silk Road Economic Belt with that of the Eurasian Economic Union’ on 8 May 2015 (Xinhua, 2015), when President Xi Jinping visited Moscow to celebrate the 70th anniversary of the Soviet

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Union’s victory in World War II. The first paragraph of the joint statement calls on China to ‘start negotiations with the EAEU about the conclusion of an agreement on trade and economic cooperation’. The second paragraph summarizes the steps required to coordinate the establishment of the EAEU with the implementation of the OBOR initiative. The most significant aspect of this joint statement is not the future intentions for cooperation, but the clear delineation of Russia’s sphere of interest and the communication to China that OBOR must take into account Russia’s plans for the integration of post-Soviet economies. After this experience, Chinese companies were reluctant to propose new projects and cooperate with Ukraine. In late 2017, however, a Chinese delegation led by Ma Kai proposed new projects. China’s re-entry into Ukraine coincided with yet another crucial phase in the country’s development. In 2014, the EU-Ukraine Association Agreement had been signed. The government made binding commitments to implement economic reforms and harmonize norms and institutions with EU law. The provisions of the Energy Community Treaty also oblige the government to harmonize legislation in the energy sector with EU law, including the restructuring of the gas sector and the establishment of independent regulators. By 2018, Ukraine’s economic elites were increasingly attempting to thwart these reforms. China’s offer to provide loans for various economic activities threatened to revitalize old patterns of elite interference with the reform process. In the past, Russia’s promise to supply energy resources at reduced prices reduced the pressure to implement far-reaching economic reforms. Today, China’s loan offers have the same effect (Laurenson, 2018). Thus, Ukraine was once again gradually drifting away from EU-led economic governance. Inventing the 16+1 format In the former socialist states in eastern and south-eastern Europe, OBORrelated activities inhibit the enforcement of EU law and EU-led international agreements. They constitute a major challenge to the EU, mainly because the implementation of the projects lacks transparency, their finances are opaque, and the concessions to allow Chinese companies to conduct the construction work threaten the competitiveness of European companies (Casarini, 2015: 9). By promoting the 16+1 format,17 China shakes the Union to its foundations. This format is the most sophisticated quasi-multilateral platform that China 17 In 2019, Greece, a EU member state, joined the format, increasing the number of European states that regularly meet with China to 17.

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has established in recent years (Jakóbowski, 2018: 660). The structure of the 16+1 format is very similar to the Forum on China-Africa Cooperation (FOCAC), which facilitates China’s cooperation with African states. China is convinced that the 16+1 states have become the economic backwater of the EU, and thus its approach to the post-socialist states is framed as South-South cooperation (Kowalski, 2017: 5-6). The idea of a sub-regional forum was first discussed during Vice President Xi Jinping’s visit to Poland in 2009. Subsequently, China has bundled together eleven EU member states, i.e., Estonia, Latvia, Lithuania, Poland, the Czech Republic, Slovakia, Hungary, Romania, Bulgaria, Slovenia, Croatia, with the five Balkan states of Serbia, Bosnia and Herzegovina, Montenegro, Macedonia, and Albania. These are not members of the EU but have close ties to the organization, as they are either already conducting accession negotiations, have applied for membership, and/or are NATO members. China institutionalized the 16+1 format in 2012 to promote ties with these states through annual summits and various forms of sectorial cooperation. In April 2019, Greece joined the cooperation format, essentially acknowledging China’s increasing influence on its economy. The first major OBOR-related infrastructure project in the region immediately caught the attention of the European Commission. A high-speed railway to connect Belgrade and Budapest was proposed, financed by Chinese bank loans and executed by Chinese companies based on undisclosed intergovernmental agreements. In early 2017, the website of the State Council, China’s government, called the modernization of the Budapest-Belgrade railway a ‘flagship project’ and expected it ‘to achieve substantial progress’ in the course of that year. However, the European Commission had already started an investigation to assess the financial viability of the US$2.89 billion project and a possible violation of EU procurement law that prescribes public tenders for large transport projects (Kynge, Beesley, and Byrne, 2017). Thus, OBOR’s general approach in EU member states is prone to contravening laws and regulations that govern economic affairs. However, some leaders in the 16+1 region even welcome the notion that OBOR is incompatible with EU legislation, as they pride themselves on an investigation by the European Commission and use it to gain traction with their nationalist bases (Hala, 2018: 86). The increased Chinese presence in the region and the annual summits of the 16+1 format have had a considerable ideational effect on attitudes towards EU-led market integration. In the 16+1 region, China alludes to the states’ socialist past and reinterprets choices made after 1989, particularly in terms of the superiority of state capitalism with selective market mechanisms (Hala, 2018: 86; Vangeli,

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2018: 681). China therefore contributes to ongoing ideational shifts among elites in the region and reinforces divisions inside the EU and with neighbouring states that nominally aspire to join the Union. Indeed, the rollout of OBOR coincides with a multiple identity crisis, which overshadows the idea of ‘copying the West’ that in the past dominated the political discourse in the post-socialist states of eastern and south-eastern Europe (Krastev, 2018; Vangeli, 2018: 682). In fact, China has only realized a small amount of the announced investments but gained enormous geopolitical influence and prestige, while politicizing the economies of the 16+1 states (Heydarian, 2017; Hala, 2018: 86; Vangeli, 2018: 686). Chinese leaders have been able to achieve this through China’s symbolic power, which consists of the country’s accumulated prestige and the attention that its economic achievements attracted (Vangeli, 2018: 663). Hence, China’s activities have renegotiated Europe’s recent history. By enhancing emerging divisions within the EU, these activities have influenced EU decision-making, limited the effectiveness of the EU’s posture as one bloc in external (economic) affairs, and complicated relations with the Union’s direct neighbours. Building infrastructure in Europe OBOR’s infrastructure component changes the spatial outlook of the continent and redefines its vulnerabilities. Numerous projects have been proposed to governments in south-eastern Europe. The project that has received by far the most attention is the above-mentioned high-speed railway to connect Belgrade and Budapest, which is part of the Land-Sea Express Route from Piraeus, a Greek port near Athens, to the Danube region in central Europe. This railway connection traverses Macedonia and Serbia. In early 2017, the first shipments arrived in Budapest. The Chinese-led rail corridor from Greece to central Europe illustrates vulnerabilities and a potential hidden integration that could result from China’s rail diplomacy in Europe. China’s route via Macedonia and Serbia directly competes with the European Commission’s Priority Project 22, a railway axis that links Athens with Germany. This project includes the modernization and construction of railways in Bulgaria, Romania, Hungary, and the Czech Republic. Thus, the Chinese rail corridor runs parallel with the EU railway axis that connects the eastern Mediterranean with central Europe. From an infrastructural perspective, the significance of the Chinese project cannot be overestimated. It essentially disrupts priority projects of the European Commission, which are implemented under the transport

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component of the Trans-European Networks Programme (TEN-T). Initiated in the 1990s, this programme seeks to build and maintain vital transport and energy infrastructure. The role of the European Commission in planning transport infrastructure has been increasing over the past decades. In 2006, it established the TEN-T Executive Agency (since 2014 the Innovation and Network Executive Agency) to manage all projects on its behalf. The railway axis from Athens to Germany (Priority Project 22) belonged to the 2007-2013 funding scheme under TEN-T. For this period, the total budget for its 30 projects was Euro32.647 billion. For the period from 2014 to 2020, the Connecting Europe Facility, the key EU funding instrument for infrastructure investment, earmarked Euro24.05 billion for EU-level transport projects. Subsequently, Priority Project 22 became part of the Orient/East-Med Core Network Corridor, a multimodal infrastructure scheme that includes rail, road, and waterways (European Commission, 2018b). Thus, the European Commission increasingly takes a comprehensive approach to the funding and management of transborder infrastructure projects. Comparable with EU energy policy, the Commission’s room for manoeuvring in suggesting and implementing policies has increased (Marshall 2014). TEN-T has become a vital tool for EU integration, mainly because the establishment and maintenance of transport infrastructure is an essential component of market integration. The Innovation and Network Executive Agency coordinates the implementation of priority projects at the EU level. It applies relevant EU legislation, especially environmental legislation, and considers other EU policies. The Chinese railway corridor is an OBOR infrastructure project that does not consider infrastructure-related aspects of EU integration. It is mainly implemented in states that have applied for EU membership and will increasingly have to coordinate their policies with the EU and apply EU law. Indeed, China’s investments among the 16+1 states increasingly focus on the format’s non-EU member states (Peel, Kynge, and Hornby, 2018). China’s investments have the greatest impact in these states, relative to the size of their economies. Although the magnitude of the Chinese railway corridor is on a different scale, its development results in a form of hidden integration, comparable with the case of gas transportation in eastern Europe. Eventually, the EU will be forced to correct illegal practices that are embedded in Chineseled projects. Technical and environmental standards will also have to be adjusted in accordance with EU law; and EU rules will have to be applied to the infrastructure management and operation, which is a costly and time-consuming process.

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The parallel construction and operation of the Chinese corridor and the EU axis from Athens to Germany not only diverts resources and attention but also creates new forms of exclusion and vulnerabilities. The Chinese corridor excludes Bulgaria and Romania, while Macedonia and Serbia become vulnerable and dependent on China’s willingness and ability to maintain the corridor in the context of OBOR. The Chinese corridor changes the spatial geography and political economy of railway transportation in south-eastern Europe, without consulting the European Commission. Hence, China’s activities in the EU have a significant impact on material elements of market integration and avoid the application of EU norms and public scrutiny. Remaining in the shadow of European governance OBOR is based on China’s mode of autocratic economic development. It thus communicates an economic idea that competes with both the EU and EAEU. Constructivist theories help to examine OBOR’s impact beyond economic numbers. From an ideational perspective, OBOR constitutes the very challenge that regional market integration should address: a powerful outside actor that small states can only deal with as a united bloc. In the post-Soviet space, the presentation of OBOR outmatches Russian-led integration, which promises inexpensive energy supplies and the protection of ruling autocratic elites, mainly because Chinese leaders offer large sums for infrastructure construction and economic development. OBOR imposes a Chinese blueprint of economic modernization on the post-Soviet space, at the expense of Russia’s influence. Infrastructure that is built to facilitate the transport of Chinese goods to European markets will lock in a connectivity that assumes China to be the main driving force of economic development in Eurasia and treats the post-Soviet states as one large transit zone. In addition, the inclusion of less powerful states into OBOR and the announcement of big investments deals generally induce the political elites of host states to make far-reaching geopolitical concessions (Heydarian, 2018). Thus, the interference of China as a powerful outside actor disrupts Russia’s efforts to integrate parts of the post-Soviet space. With respect to EU-led market integration, it is doubtful whether a shared understanding will emerge among European elites that could institutionally align EU market integration with OBOR’s premises. However, in some EU member states and at the Union’s periphery ‘illiberal’ leaders support OBOR mainly because it promises fast-track investments and economic development. These leaders are reluctant to acknowledge any legal constraints

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that OBOR projects may face, and attempt to ignore the fact that increasing public debt to realize the projects is not compatible with EU macroeconomic policies. The European Commission keeps a watchful eye on OBOR projects and will enforce EU law if necessary. It is unlikely that the EU as a whole will embrace OBOR. The prospect of being reduced to ‘a mere peninsula at the end of the Asian continent,’ dependent on China’s economic policies (Rolland, 2015: 3), is hardly consistent with the idea of European market integration. By introducing the ideational concept of OBOR as an alternative to more institutionalized forms of economic cooperation, China has imposed itself on the European debate. Public support from European politicians for this ideational concept implicitly throws the commitment to EU market integration into question. OBOR-induced economic advances provoke political disunity within the EU and further destabilize the EaP region. Decision-makers in Europe are increasingly aware of this effect. If OBOR proceeds in its present form, it may produce a few white elephants in the shadow of European economic governance, while the initiative’s core ideas are shunned by most political actors.

Conclusion This chapter examines the compatibility of OBOR’s implementation with ideas of market integration in Europe, by considering the EU and EAEU and analysing the specific situation of the borderlands in the shared neighbourhood. OBOR’s infrastructure projects mainly target the eastern and southeastern part of the continent. The chapter highlights two important issues that complicate China’s presence in this region. First, OBOR’s approach to economic cooperation proves irreconcilable with current trends of market integration in Europe, in terms of both EU-led and Eurasian integration. Second, through its infrastructure development China’s OBOR-related cooperation with states in eastern and south-eastern Europe could lead to hidden forms of integration, prolong informal practices that surround these projects and consequently hamper these states’ cooperation either within the EU or with EU-led regimes. OBOR’s role in Europe has severe consequences for both the EU and the EAEU. The case of Ukraine demonstrates how Chinese advances interfered with Russia’s attempts to lure the country into the EAEU in 2013. In 2018, Chinese deal-making efforts hindered the establishment of institutions that Ukraine committed to by signing the association agreement with the EU.

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Furthermore, by creating and fostering the 16+1 format China deconstructs the institutional and spatial realities around the EU’s eastern and south-eastern periphery. To grasp the significance of these developments, China’s presence in Ukraine must be examined together with the development of the 16+1 format. In this broader region, Chinese-led infrastructure projects point to different forms of shadowy behaviour, which pose three challenges to structures of economic governance that have been evolving under EU guidance. First, the initiation and implementation of OBOR projects infringe EU law. Second, China’s elite-focused approach strengthens corrupt and rent-seeking behaviour in host countries. This affects the rule of law and further weakens institutions and norms in these states. In Ukraine and the 16+1 states, China’s practices threaten to reverse recent trends in economic rule enforcement. Third, the construction of infrastructure is geared towards China’s grand scheme of interlinking the entire Eurasian mega-continent. It establishes infrastructure that is directly linked with and dependent on China’s economic development strategy. This creates new vulnerabilities in eastern and south-eastern Europe. The obduracy of network infrastructure and related practices will extend the influence of related practices for years to come. This facet of OBOR will hamper the potential membership and the integration process of yet unaligned states when they join any of Europe’s integration projects in the future. Hence, OBOR will have a persistent and disruptive impact on the structures of economic governance in eastern and south-eastern Europe. The European Commission and several EU member states are alarmed by China’s growing presence in the region. The growing unease at the evolution of OBOR in eastern Europe is a direct consequence of China’s communications about this grand scheme. Luo Jianbo points to the ambiguity about OBOR’s intention in the Chinese discourse. Chinese officials present it as an initiative to foster economic cooperation, but Chinese academics and media describe it either as a geopolitical blueprint, solidifying China’s rise, or, more vaguely, as a platform to alter global governance (Luo, 2018). Following this confusing communication, the international community has been struggling to understand the precise meaning of this transcontinental scheme. In Europe, OBOR is conceived as an aspect of globalization, posing rather unexpected geopolitical and geo-economic challenges. Accordingly, states that have integrated their markets and formed blocs to act together in the global economy will use this market and institutional power to respond to these challenges. The idea of market integration and its benefits is socially constructed. The same is true for vulnerability to infrastructure operation. Thus, another

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outcome of promoting OBOR in Europe could be the (partial) dissolution of the EU and EAEU. Subsequently, the states would merge into OBOR and align their economic policies with the Chinese Five-Year Plan. However, to achieve this OBOR would have to present an economic idea that European elites could embrace, and thus reduce uncertainty about current global economic developments. Collective action would then re-create OBOR as a coalition or alliance of states. However, OBOR’s current China-centred approach and incoherent conceptualization is unlikely to give rise to such a sequence of events any time soon. Hence, OBOR will remain in the shadow of European economic governance, while China’s actions increase institutional ambiguity, volatility, and insecurity on the EU’s south-eastern flank.

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About the author Susann Handke has a background in Sinology and international and EU law. She publishes on the international political economy of energy, the role of infrastructure projects, and the rule of law. At the time of writing, she was finishing her dissertation on the interaction of the UN climate regime and national energy legislation.

11

High-end globalization and low-end globalization African traders across Afro-Asia Gordon Mathews

Abstract This chapter describes low-end globalization – the informal economy; the shadow economy – as practised by African entrepreneurs in Guangzhou, China. It shows how low-end and high-end globalization are ideal types, with individual entrepreneurs weaving between them in terms of sending copies or original goods, paying bribes or not, and numerous other areas. The chapter addresses these types of globalization in terms of contracts vs. reputation, legality vs. illegality, bureaucratic procedures vs. personal linkages, and universalism vs. particularism. It examines how these idealtype dichotomies play out in entrepreneurs’ actual practices and choices in a variety of complex and carefully calculated ways. The geopolitics of high- and low-end globalization as they are practised and developed by individual entrepreneurs within global trade are also examined. Keywords: Low-end globalization, high-end globalization, African entrepreneurs in China, contracts, copies, bribes

Introduction Globalization in the developed world is typically characterized by the goods and services of multinational corporations, such as McDonald’s, Coca-Cola, Apple, Samsung, Sony, Starbucks, Facebook, and Google. This is what I term ‘high-end globalization’, which is typically practised by vast organizations with billion-dollar budgets, global advertising campaigns, and battalions of lawyers. However, there is another type: ‘low-end globalization’, which I

Hung, Eva P.W., and Tak-Wing Ngo (eds), Shadow Exchanges along the New Silk Roads. Amsterdam, Amsterdam University Press 2020 doi: 10.5117/9789462988934_ch11

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define as ‘the transnational flow of people and goods involving relatively small amounts of capital and informal, sometimes semi-legal or illegal transactions, commonly associated with “the developing world”’ but, in fact, is apparent across the globe (Mathews, 2011: 19-20). This is globalization as experienced by most of the world’s people, as practised by traders with a few friends or family members, who buy a relatively small quantity of goods, often knock-offs or copies, and who use bribery to get them through customs. These goods are typically sold by street vendors or on sidewalk stalls rather than in malls or department stores.1 Low-end globalization has been analysed by various scholars in recent years, including Hart (1973), Portes, Castells, and Benton (1989), Hansen and Vaa (2004), and Neuwirth (2011), and is often referred to as the ‘informal economy’. This relates to the formal economy as low-end globalization does to high-end globalization. I suggest that the latter terms are more appropriate than the former, because the world is becoming increasingly linked, and national economies cannot be seen as separate entities. Low-end globalization can be found across the globe – chapters in Mathews, Ribeiro, and Alba Vega (2012) portray its processes in cities such as São Paulo, Kolkata, Ciudad del Este, Cairo, Mexico City, and Washington DC, and in Guangzhou and Hong Kong – but it is most readily apparent in the developing world.2 These distinctions come into play when we examine the burgeoning trade between African and Asian countries and China. These trade relations consist of three different logics, as this book’s introduction has discussed. There is the logic of market-based neoliberalism, as spearheaded by the United States for a number of decades There is also state-led regionalism as characterized by the One Belt One Road (OBOR) initiative, as discussed in different ways throughout this book, but particularly in this book’s introductory chapter. This huge economic and diplomatic effort by China aims to provide a platform for collaboration across much of Asia and into Europe and Africa, an initiative involving several trillion dollars of Chinese investment (McKinsey & Company, 2016). There is also low-end globalization, or the shadow silk road, the shadow economy, or the informal connectivity 1 While the arguments made in this chapter are new, much of the ethnographic data come from Mathews, Lin, and Yang (2017), particularly its chapter on low-end globalization (see pp. 81-113). The research for this chapter was conducted with the aid of a grant from the Research Grants Council, Hong Kong (project no. CUHK403-HSS-13). 2 ‘Low-end globalization’ is also referred to as ‘globalization from below’ by various authors, including in a book I co-edited. I use the term ‘low-end globalization’ because ‘globalization from below’ has been sometimes used to refer to political activists, which is not what I mean here. However, the label is less important than the phenomenon, whatever it is called.

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described in the introductory chapter and in virtually all the chapters of this book: these terms are synonymous. This is at the individual level, typically involving entrepreneurs seeking their fortunes without large amounts of money and with no direct state backing. French (2014) described the vast numbers of individual Chinese entrepreneurs who have streamed into Africa over the past decade, just as many more have moved into various regions of Asia (see all chapters in this volume, but particularly that of Jelena Gledić ethnographically discussing informal Chinese trade in the Balkans, which mirrors what is discussed in this chapter in Guangzhou.). They will continue to do so on a huge scale as the OBOR Initiative progresses. In general, the OBOR Initiative, as implemented by the Chinese state, is at the level of high-end globalization, although some of its particular deals, such as those between China and less developed countries, may involve some aspects of low-end globalization, as was the case with the earlier market-led neoliberalism offered by the United States and Western European societies. However, the cross-cultural business dealings at the individual level along what the editors of this volume call the ‘new silk roads’ are typically those of low-end globalization.3 The new silk road is developing throughout Asia, Africa, and elsewhere in the world and pre-dates the OBOR Initiative in terms of development. Pliez specifically describes the new Silk Road in terms of Yiwu and Cairo and their links (2012), while Mathews, Lin, and Yang portray nodes of this new Silk Road from Guangzhou to Bangkok, Dubai, Istanbul, Nairobi, and Accra (2017: 105-113). China is the supplier for this low-end form of globalization (Mathews and Vega, 2012: 11-13; Aguiar, 2012), as without Chinese manufacturing, particularly of counterfeit and knock-off goods,4 low-end globalization may not have become the dominant economic practice in the developing world that it is today, as this book’s chapters discuss in a variety of Asian and European contexts, However, the designations of high-end and low-end globalization are more complicated than my descriptions suggest thus far. Formality and informality, globalization from above and from below, high-end and low-end 3 This designation becomes confusing in that numerous commentators have labelled the OBOR Initiative as the ‘New Silk Road’. However, this chapter’s and this book’s usage of these designations places them in contrast. 4 Copy goods are exact replicas of the original products, including brand names; knock-off goods are replicas of the design of the original products without the brand names. I have estimated that while only 15-20 per cent of the goods African traders in Guangzhou buy from Chinese suppliers are copies, most of the electronic and apparel goods are knock-offs. As Chinese manufacturing becomes more sophisticated, the number of copies and knockoffs produced by Chinese manufacturers, even for developing-world markets, will no doubt decline.

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globalization, are not absolute distinctions but opposing ideal types (see Weber, 1978: 19-22). The focus of this chapter is primarily on f ieldwork conducted among sub-Saharan African and Arab traders in Guangzhou, China and also in Dubai and Eastleigh, Nairobi, between 2012 and 2015.5 I first examine the major opposing features of these two forms of globalization, and then demonstrate how they are indeed ideal types, with businesses and entrepreneurs strategically weaving between their ideal-typical poles depending on their circumstances and strategies.

Contrasting features of high-end and low-end globalization From my observations in Guangzhou and elsewhere, I have determined four notable differences between high-end and low-end globalization, as follows. Contracts vs. reputation In high-end globalization, the contract is key, and a businessperson who breaks contractual agreements will be subject to sanctions and lawsuits. In low-end globalization, contracts may mean little and courts are often seen as useless. What is key is reputation; agreements may be made through a handshake or a text message. As an East African entrepreneur6 in Guangzhou told me, ‘If I cheated [one of my Kenyan customers], they couldn’t go to the courts anywhere. But they could call my brother or my father back [in Kenya] and tell them that I cheated; they could tell everyone I know back home, “You know that guy in China? He cheated me; he’s a crook. Watch out!” And my reputation would be ruined’ (quoted in Mathews, Lin, and Yang, 2017: 83). The Chinese courts may indeed be effective. An American 5 I focus on sub-Saharan African traders because they are the largest and most conspicuously foreign group of entrepreneurs involved in low-end globalization. The term ‘African’ is misleading: not only are North African Arabs also African, but beyond this, Somalis and Nigerian Igbo are as different from one another as Pakistanis and Japanese are. The blanket term ‘African’ is just as misleading as the blanket term ‘Asian’ or ‘European’. Wherever possible, I identify the particular region where a trader is from rather than using this blanket term, although sometimes I must use it. To protect the identities of traders, I often do not designate the country they are from if it is small, but identify them by region instead. 6 I use the terms ‘entrepreneur’, ‘trader’, and ‘logistics agent’ to label the Africans I know in Guangzhou. A trader, in my designation, is one who buys goods from Chinese suppliers and sends or carries them back to Africa. An entrepreneur is one who trades but who also serves as a middleman between other African traders and Chinese suppliers. A logistics agent is one who ships goods back to Africa for traders and entrepreneurs; many logistics agents are also entrepreneurs.

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entrepreneur I know regularly sues Chinese companies that violate his contracts or copy the goods he manufactures in south China, and he often wins in court (although his court victories do not begin to compensate for the economic losses he suffers due to his goods being copied). However, low-end entrepreneurs, with less capital and less trust in institutions and who also may be sending counterfeit goods, do not typically do this: they feel that reputation and trust are all that they can rely on. Legality vs. illegality In high-end globalization, the main goal is typically to follow the law; in low-end globalization, the law, particularly as defined by the developed world, is largely irrelevant. One common form of illegality among African traders in Guangzhou is the sending of copied goods (see Lin, 2011; Mathews, 2015, 2016, 2017).7 These copies are sent for the simple reason that their customers back home want them (typically knowing that they are copies, but desiring the brand-name label). Chinese manufacturers make them and logistics agents ship them. Copies can be confiscated by Chinese customs agents, although not if bribes have been properly paid for their passage beyond China, which, in 2014, was usually at a rate of US$150 per three cubic metres in a container. I brought together an East African logistics agent, Adnan, who ran his own company and was experienced in low-end globalization, and a Japanese tax accountant, Suzuki, who worked for an internationally known investment company and was thus experienced in the techniques of high-end globalization, for dinner one night in Guangzhou. Both men were surprised to find that they had to treat their clients exceedingly well, and in similar ways. However, their differences, particularly in terms of their relation to the law, were more profound. Suzuki said, ‘I basically help my clients avoid paying taxes without breaking the law’ (quoted in Mathews, Lin, and Yang, 2017: 84). This was his job, but if he broke the law and was discovered, he would definitely be fired. Adnan said that he regularly broke the law in sending copies because his customers demanded it, and if he didn’t, he would go out of business. Suzuki and Adnan were both simply trying to satisfy their customers, but Suzuki could not break the law, whereas Adnan had to. Adnan made it abundantly clear that he felt he was a deeply moral 7 Copies are illegal and are confiscated by customs agents if discovered; knock-offs, however, can be the subject of prosecution only by civil suits in court. Some Chinese companies have tried to split this difference, selling phones made by ‘Nokla’ or ‘Appel’, trusting that this will protect them in court, as it apparently often does.

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person in his business behaviour, saying ‘I would never cheat a customer! Never!’ Suzuki similarly made it clear that following legal rules was not necessarily a matter of morality, but simply what he was required to do in his job. Nonetheless, the games these two men played were quite different, and reflect the difference in ethos of low-end and high-end globalization. Bureaucratic procedures vs. personal linkages Most of those engaged in high-end globalization work within large organizations with clearly defined rules and roles. The low-end entrepreneurs I know, however, either work alone or with small groups of friends or family members, with everyone knowing each other; there is neither the inclination nor the money available to create larger bureaucratic structures, and everything is done on the basis of personal connections. Even when small African groups in Guangzhou hire Chinese, typically young female secretaries, to some extent they become de facto family members. This attitude extends to customers. A Somali logistics office in Guangzhou that I frequent provides tea for its customers, in addition to comfy chairs and couches, and broadcasts home-country news. The customers come for hours at a time to socialize and exchange information. This logistics agent tells me that his job essentially is to ‘meet and greet’, something that he needs to do to keep his customers coming back. The continual reaffirmation of personal connections is how he sustains their ongoing business. The high-end logistics agents I know, however, who may typically ship not 20 containers a month but 200 or more, as a rule do not engage in such services for their clients. For them, their office is not a social forum but a place strictly for business: their customers sign the requisite forms to have their goods shipped, pay, and leave. The high-end agents say that if their office were more welcoming, customers’ socializing would interfere with their business. Businesses engaged in high-end globalization advertise themselves with conspicuous signs. Those in low-end globalization do not advertise, as their business comes through word of mouth, and sometimes they do not even have a sign on their door, as all of their customers know who they are. For high-end businesses, if a new customer walks in with money, a passport, and an order, generally, few questions will be asked. In contrast, those at the low end typically conduct their business with those of the same ethnicity or nationality who can be vouched for, and if a customer of a different nationality or ethnicity enters, they may be refused. As the Nigerian Igbo owner of one such business told me, ‘Why would such a person come here? There must be something fishy going on’.

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This difference in organization is related to numerous other business practices. High-end businesses typically require bank drafts or money orders or other means of transferring money via banks and formal institutions, while those at the low end typically require cash, and are often engaged in informal money-transferring practices such as the hawala used by Somalis and some Kenyans, whereby a name and an identity conf irmation are sufficient to transfer money by phone from China to East Africa or in the reverse direction. In terms of technology, high-end businesses rely primarily on emails sent via computers. Low-end businesses typically rely on the text-messaging of smartphones, as they are easier, more informal, and more temporary. Low-end businesses generally run a higher risk of losing money than high-end businesses, reflecting the conditions under which they must function, which is why they emphasize personal trust so much. However, personal trust, too, may be betrayed, a situation that most African traders in Guangzhou have at some point experienced. Sometimes this consists of being overtly cheated – ‘I thought that my partner back in Nigeria was my friend, but he took all the money I’d sent him and vanished: I never heard from him again’ – and sometimes of more subtle familial misunderstanding: ‘I sent money home, but my brother [thinks I’m rich and so he] ate all the money: “You’re overseas, better than us. Any money that comes back here becomes our own”’ (quoted in Mathews, Lin, and Yang, 2017L 135). In poorer societies where institutional frameworks cannot be fully trusted, personal relationships are essential, but they too may give way. Universalism vs. particularism Much of the above is linked to the values of universalism vs. particularism, as described by scholars of cross-cultural business, such as Hofstede (1994) and Trompenaars (1993). In Trompenaars’s survey, with results divided by respondents’ countries, the following question was asked: ‘if you are riding in a speeding car driven by a close friend who hits a pedestrian, would you try to protect him from police inquiries by minimizing his speed, or tell the police the truth: “he was speeding”?’ (1993: 35). Protecting your friend is particularism, in which individual human relations are paramount, while telling the truth is universalism, in which all people must be treated the same in accordance with abstract objective principles. Trompenaars’s survey results, which show 26 per cent of South Korean and 48 per cent of Chinese respondents opting for universalism, as opposed to 72 per cent of Nigerians, 91 per cent of West Germans, and 95 per cent of Americans, need not much concern us here. What is important is that overwhelmingly,

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low-end globalization corresponds to particularism in its valuations, while high-end globalization corresponds to universalism. A contract is seen as universal: has the contract been honoured or has it not? Reputation is particular: how do those whose opinions matter to you view what you have done? Legality varies from society to society, but sending copies essentially means satisfying customers’ particular desires, whereas following the law means following putative universal norms (even if they are first-world norms foisted upon the developing world, which is a view held by some of the traders I spoke with). Bureaucratic organization has become universal, as scholars from Weber (Gerth and Mills, 1946: 196-244) to Graeber (2015) have suggested, and as a basic general principle involves ‘treating people according to the rules’, as opposed to the personal nature of particularistic relationships. This is not so simple, however. Many business dealings within highend globalization involve particularistic relationships, such as the ‘crony capitalism’ decried by The Economist (2016), but also much more. Reijiro Aoyama, a Japanese scholar in Hong Kong, explained to me that high-end Japanese small businesses are more particularistic than low-end businesses. Most people expect to be served in a Japanese restaurant simply by walking in and sitting down, but at some high-end restaurants or drinking establishments, if you do not have personal contacts you will be turned away. This is not simply ‘East vs. West’, although many Asian societies are indeed more particularistic than the United States, for example, as the use of guanxi (Kipnis, 1997) in Chinese bureaucracies illustrates, and as Trompenaars’s survey data also reveal. Many American celebrities live in a particularistic world, where any democratic universalism is trumped by personal recognition of their celebrityhood, giving them continual ‘special treatment’. This is the particularism of low-end globalization turned on its head: it is a high-end particularism as opposed to a low-end universalism. How the practices of low-end and high-end globalization are mixed My aim in this chapter, however, is to make a more specific point. Although low- and high-end globalization are ideal types, which to some extent are mixed in the principles of business the world over, they are also mixed in the very particular dealings of the African entrepreneurs I have come to know in Guangzhou. If low-end globalization practices are adhered to, then entrepreneurs run a higher risk of losing their money, either through the confiscation of goods by governments if there is no proper paper trail, or because they may deal with people who know they can cheat them without being ensnared by the law, as the business itself may be illegal. If, however, high-end globalization

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practices are followed, then entrepreneurs may lose the trust of their business compatriots, who may wonder why the entrepreneur no longer trusts them to do business on the basis of a handshake and a text message but demands greater formality. The smart entrepreneur thus modulates between these poles, calculating for any given business scenario how to best navigate them. All four of the above-mentioned distinctions may be assessed in these terms. Contract vs. reputation Most of the African entrepreneurs I know are flexible in their insistence on contracts. When conducting business deals from their home countries, they generally make informal arrangements unless they have large orders from their governments. When they are involved in deals with Chinese suppliers, generally the larger the business deal the more necessary a contract is. However, contracts are in Chinese, often without translations provided. Larger entrepreneurs have Chinese staff to explain the contract, but many traders simply sign blindly. As one West African trader said: Yes, I always sign contracts that I don’t understand. I could ask for an English version or a French version, but it means the factory has to spend extra money to find a translator. The factory will think ‘this guy is so mafan’ [Mandarin: troublesome, annoying] […] If they provide an English contract, they are very kind; if not, I just sign the Chinese contract (quoted in Mathews, Lin, and Yang, 2017: 88-89).

The savvier African entrepreneurs I know do indeed seek contracts from the Europeans they occasionally deal with, but not in most deals at home in Africa, as a more informal relationship is assumed and preferred. However, with Chinese entrepreneurs this is more ambiguous. The ideal, I am often told, is a Chinese supplier whom they can trust, for whom a handshake and text message would be sufficient; however, the possibility remains of being cheated even by a long-term friend or acquaintance. Both Africans and Chinese report being cheated on occasion. Chinese suppliers say that African entrepreneurs they have known for years may on occasion abscond with a container given on credit, and African entrepreneurs say that their Chinese suppliers at times provide them with substandard goods, saying that ‘the factory [or warehouse] made a mistake. Sorry!’ Indeed, virtually all of the African traders I have met in Guangzhou report that they have been cheated by Chinese suppliers and manufacturers at least once or twice. Sometimes these are matters of linguistic misunderstanding,

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and sometimes they arise from cultural misunderstanding about the nature of business negotiations. The African buyer bargains the Chinese manufacturer down to an extremely low price; the Chinese supplier accedes to this low price rather than setting a bottom line, and then makes extremely low quality goods to fit the price being offered. The African buyer then claims to have been cheated, but the Chinese supplier may respond, ‘with the price you’ve given, what else could I have made for you?’ A business contract in a language both sides understand could be one way of avoiding such misunderstandings, with the price and product specifications clearly stated; but many African entrepreneurs view this as only a minimal safeguard against being cheated, as they view contracts too as unreliable. One West African entrepreneur said, ‘For the Chinese […] contracts are like toilet tissue’ (quoted in Mathews, Lin, and Yang, 2017: 6), partly because he lacked the means to go to court for a drawn-out trial and he believed he could not win in a Chinese court. The African traders and entrepreneurs I know generally prefer a handshake and text message over a contract in most business dealings, but are willing to do either, depending on the circumstances of their dealings and their calculation of which is the optimal strategy, given the relationship (the closer the human linkage, the less a contract is felt to be required) and the size of the order (the larger the order, the more necessary a contract appears to be). Legality vs. illegality Some African traders do not understand the illegality of copies. One Kenyan entrepreneur told me, One guy bought a bottle of Clear [Unilever] Shampoo and asked a Chinese factory to make him six thousand bottles to sell in Somalia; he didn’t understand that he couldn’t do that. He never knew about the concept of trademark. His goods were confiscated in the Hong Kong port. He called me with his problem, and I told him that he had to disappear, otherwise he’d definitely be going to jail (quoted in Mathews, Lin, and Yang, 2017: 88).

However, most traders and entrepreneurs are well aware of the distinction and play it to their advantage, buying and sending copies when their customers desire them, with minimal consequences except for possible financial loss. As a Central African entrepreneur told me, Around the world, things like drugs – if they catch you, they kill you. But with copy goods, all that can happen is that they’ll take your goods […]

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I have had goods confiscated more than five times. Once it was mobile phones. Another time it was ladies’ bags […] Another time it was televisions […] No, they won’t charge me with anything – they just check the goods and take them if they’re fake goods. If they catch the seller of fake goods, those people are in trouble. But I’m not the seller – I’m just the buyer. I don’t know if it’s a copy! So, you’re safe, except that the goods may be confiscated (quoted in Mathews, Lin, and Yang, 2017: 93).

This man had sent goods to the United States and Europe and knew full well not to send copies to those places, or at least to send them only in small quantities. However, in China, the rewards of sending copies to one’s home country in Africa, South Asia, the Middle East, or Latin America far outweigh the risks.8 Receiving bribes to allow copies to pass through is one of the few illegalities widely practiced by Chinese customs, which otherwise are mainly law-abiding. African countries widely vary in the degree to which their customs uphold the law, according to the traders I have spoken with. For example, Tanzania and Ethiopia apparently impose much stricter limitations on copies entering the country than the Congo, Kenya, and Nigeria, where bribes may be much less dangerous to offer and much more effective. Many African governments have attempted to improve their customs regimes, but sometimes to little avail. In 2015, Kenya began a large-scale campaign against copies, but Kenyan logistics agents in Guangzhou merely shrugged it off: ‘It’s just one more added expense, one more official to pay off’ (as quoted in Mathews, Lin, and Yang, 2017: 100). The more experienced of the African entrepreneurs I have spoken with in Guangzhou know full well when it is in their best interests to be legal and when to be illegal; this is a constant calculation they make as part of their business. If they make a serious mistake, they may wind up bankrupt or in jail, but most can quickly assess when to choose one option or the other, and carefully weigh the potential risks and rewards of each in their conduct of business. 8 The issue for the African logistics agents I know is not whether to send copies or not, which for almost all is a given, but rather whether to let their Chinese facilitator – generally a former customs agent – know in advance that they are sending copies and pay him a small fee, or to try to slip them through without informing him, at which they are usually successful but if caught must pay a large fine and have their container delayed for a month or more. In effect, the former practice is somewhat closer to high-end globalization, as it at least pays obeisance to a formal structure in all its loopholes (loopholes that are so large and pervasive that I suspect they are known to higher levels of Chinese government), while the latter seeks to circumvent formal structures.

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Bureaucratic organization vs. personal ties Guangzhou’s African entrepreneurs typically know how to navigate bureaucracies effectively, such as those of the Chinese immigration or customs services, but they do not want their own businesses to become bureaucracies. One such entrepreneur changed the structure of his business and moved from an African area of Guangzhou to a skyscraper where his business could indeed become high-end (he was educated in the UK), and where he could redesign his business in an efficient bureaucratic way rather than following the more personal practices in his previous office (‘There were always customers hanging out in my office back there, and I couldn’t get any work done’, he told me. ‘That doesn’t happen now’). He, however, was an exception, and the other African entrepreneurs I met did not express the intention to change, except when joking, as the interpersonal linkages in their work sustained them. As one East African logistics agent said, ‘If I wore a suit and tie, my clients would think I was becoming too fancy for them. I wear a suit and tie when I have to, but I would never dress that way to go to my office! If I did that, think of the comments I’d get!’ Again, savvy entrepreneurs are aware of how they must shift their business practices according to the circumstances. One West African entrepreneur spent several hundred thousand US dollars on a consignment of gems sent from Cameroon to China; the shipment went through Europe and was stopped by Belgian customs who were concerned that it might be funding terrorist groups such as Boko Haram. As my friend proudly related to me, ‘I knew that this might happen, so I did all contractual arrangements on my computer, through e-mail, rather than using phone calls and text messaging’. He retained records of all his business transactions on his computer, so he was able to demonstrate that the deal was legitimate, which he could not have done if he had been using more informal means of communication. The Belgian customs duly released his goods. Other entrepreneurs I know similarly modulate their business practices. A Kenyan trader lamented Kenya’s tightening customs controls: Businesspeople [like me] will do anything to lessen payment […] Earlier, we were paying just 300,000 Kenyan shillings [US$2910 at current exchange rates] per container. We were supposed to pay 1.8 million. Now, I must pay 1 million-something. If an agent offered to let my container in for 800,000 Kenyan shillings, would I do it? Well – I couldn’t trust him, because now there are other checkpoints as well. Now it’s too dangerous to even try (quoted in Mathews, Lin, and Yang, 2017: 101-102).

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This trader calculates what he can get away with between bribery and official payment, and if he miscalculates, he either pays too much or could go to jail. His business success very much depends on his ability to astutely read the situation.9 Many of the traders I interviewed deliberately used whatever techniques seemed the most suitable, ranging between the personal relations of low-end globalization and the bureaucratic formalities of high-end globalization, to attain maximum short-term and long-term success, and to properly balance between these two prospects. Particularism vs. universalism The above distinctions are linked, again, to particularism vs. universalism. Almost all of the African entrepreneurs I spoke with preferred particularism in their endeavours if it benefited them, which it typically did. However, on occasion, they invoked a universalistic rhetoric. In a Nigerian Igbo entrepreneur’s words, ‘I found out that my supplier was charging me a higher price than she was charging Chinese for the same product. She should know that business is business. You have to treat people the same!’ This entrepreneur, however, later admitted that he did the same thing and treated customers differently depending on how well he knew them. A major problem facing these African traders and entrepreneurs is that the particularistic mode of business they engaged in back home does not work well in crossing cultural boundaries and thus in dealing with Chinese suppliers many thousands of miles from home. The Chinese suppliers also practice their own kind of particularism, but this may not extend to their African customers, who often remain strangers and foreigners even after years of association. This is partly a matter of simple cross-cultural difference. An East African Muslim trader said, I can’t get into Chinese business deeply because Chinese will invite you for seafood, then take you for drinks, then take you for a massage, and then there will be a ‘happy ending’ – they’ll ask you to go with a girl. If 9 This trader was speaking at our first meeting; unlike the other interviewees quoted here, he and I never met again. It is possible that not trusting who I said I was (a professor), as for all he knew I might really have been an American agent investigating the sending of copies, he was lying about not engaging in bribery at Kenyan customs. I do not know, but in any case this too may reveal an astute calculation on his part between low-end and high-end globalization, and how to strategically tackle between them in what one says and does. This is not only a matter of trading practices but more, a matter of what you say to whom in your daily life.

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you tell them, ‘I don’t drink, and I don’t want to go with a girl’, they will think, ‘This guy’s hiding something’. I am sure that if I were drinking and womanizing, I could do better business with the Chinese (quoted in Mathews, Lin, and Yang, 2017: 61-62).

Of course, many African and Arab Muslim men drink and womanize, just as many Chinese men do not; but there are clear cultural differences, in addition to the language barrier between African traders who do business primarily in English or perhaps French with very few speaking Chinese, and Chinese suppliers who may speak minimal English at most. Beyond this, however, there is a difference of universalism and particularism, not least in the extent to which Chinese businesspeople treat African traders as they treat their fellow Chinese. A Kenyan logistics agent, suspicious of the Chinese he employed in his office, used a secret recording device in his pen to record their conversations. As he recounted, I used to have staff, when you quarrel with a Chinese supplier, she would turn the other way, help the supplier instead of helping me. They start talking in Chinese – but I have this pen recorder that they don’t know about. I ask a friend who knows good Chinese to translate later: he tells me they were saying, ‘This guy is black and this isn’t his country. Keep his money!’ You can’t have a person like that in your off ice! But the Chinese I work with now – I recorded them, and took it back and was told, ‘Oh, these people are fighting for you!’ (quoted in Mathews, Lin, and Yang, 2017: 61).

This is a matter of particularistic racism and nationalism versus universalistic capitalism: are you most loyal to your racial and national compatriot or to your employer, regardless of ethnicity and nationality? Virtually all of the African traders with whom I have spoken are particularistic when it comes to their own relationships with their compatriots, but seek universalistic values when it comes to their Chinese suppliers. Nonetheless, they all understand the practical differences between universalism and particularism and are well aware of when and how to use one discourse as opposed to, or in conjunction with, the other. Some of the African businesspeople train their fellow citizens from back home in universalism. One East African logistics agent took his customer to the Chinese immigration off ice to extend his visa. ‘He felt that the staff there were rude, but I told him that no, he was rude – he asked a staff member to come and help him while she was attending

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to somebody else. He tapped her on the shoulder – he can’t do that: he should have waited his turn’ (quoted in Mathews, Lin, and Yang, 2017: 156). This agent was training his fellow countryman in how to behave in a bureaucratic setting, where people are treated equally, and everyone must wait until their number is called. Although he himself was heavily involved in his own particularistic mode of business, he knew that his customers engaging in trade in China would have to deal with both particularism and universalism, and took it upon himself to train them, as in this instance. Astute traders need to know how to use both, just as practically although not theoretically they need to know all the different principles of low-end and high-end globalization, so they can prof itably work between them.

The geopolitics of low-end vs. high-end globalization I have described the differences between low-end and high-end globalization in Guangzhou, a major focus and terminus of the new silk roads, and have discussed how the African entrepreneurs I know in Guangzhou may weave between these two ideal types in their business dealings. Chapters throughout this book describe these weavings, albeit, given that most of these chapters are not ethnographic, they are implicit rather than explicit. In this chapter, I have made these weavings explicit. Let me now place this discussion within a larger global context. The differences between low-end and high-end globalization are often between business relations in the developing as opposed to the developed world, but this is not always the case. Low-end globalization – the informal economy; the shadow economy – is practiced in the US and elsewhere, wherever the informal economy flourishes in transnational form (see, for example, Shepherd, 2012, for an account of low-end globalization in a Washington DC flea market; MacGaffey and Bazenguissa-Ganga, 2000, and Stoller, 2002, portray African entrepreneurs in New York and in Paris engaging in low-end globalization, but it is engaged in by every nationality and ethnicity in the world, and in every city in the world), as all the chapters of this book discuss. In many African capitals, there are stores selling original Samsung and Apple phones and other fashionable goods, whose retail business practices are not much different from those in New York, Paris, or Seoul. However, not far from these stores will likely be their low-end counterparts, selling copy or knock-off goods for a fraction of the price to many more people.

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China, through its OBOR Initiative, is focused on high-end globalization, but undoubtedly some of the features described as low-end globalization remain. Who can guess how many tens of thousands of bribes may be paid in the years to come under the rubric of OBOR? This is not necessarily meant as a condemnation. American entrepreneurs have complained about the Foreign Corrupt Practices Act in the US, which, by preventing them from paying bribes, they say, puts them at a disadvantage relative to their foreign entrepreneurial counterparts in promoting beneficial American products in developing countries. As I have discussed, entrepreneurs who bribe are required to pay less at customs, which may benef it both the entrepreneurs and the eventual consumers of the product. Bribery clearly has a profound moral downside, as it diverts money meant for a country’s coffers into the pockets of officials, but bribery, along with copies (Mathews, 2016), may have significantly enabled low-end globalization in the developing world. However, China, in its small-business practices, is moving in fits and starts from low-end to high-end globalization: the economic structures of many of its businesses are becoming less like those of Nigeria and Kenya and more those of Japan and the US. China, not just in terms of bribery but in its small business practices in general, is becoming more regulated every year. One West African middleman I met described his astonishment when he contacted a Chinese factory that refused to sell him copies: There’s one factory that I’m so impressed by. We have an order for a charcoal burner. I’d told the prospective customer, ‘Of course I can get it for you. This is China!’ But when I asked the factory, I was told, ‘I’m not supposed to be selling this to you’. I said to the factory lady that I wanted forty containers. She said no, because they produce these only under license. She wouldn’t budge! I have no idea if she can stay in business in China when she follows the legal rules! (Quoted in Mathews, Lin, and Yang, 2017: 163)

Whether the aforementioned woman can stay in business in China’s current low-end globalization remains an open question, but it seems likely that the number of Chinese entrepreneurs and employees like her will increase as China gradually transforms itself.10 10 This assumes that China does not run into an economic wall. As economists often assert, it is far easier for a country to go from low to medium per capita income levels than from medium to high (see The Economist, 2011). If China’s economy continues to grow at a rapid rate, trade such

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This, along with factors such as rising prices and less favourable exchange rates, prompted some of the traders I interviewed to say that they will leave China within a few years, and go to Vietnam, Bangladesh, or one of the other numerous places that continue to practise low-end globalization. However, the move from low-end to high-end globalization in China’s business practices is a gradual process, particularly among the businesses dealing with African traders. These practices will remain for some time both in China and in many other countries included in ‘the New Silk Road’. In any case, low-end globalization will continue as long as global inequality remains, although the countries in which it is practiced may change with time. The ongoing problem of low-end globalization is that it works most effectively among people who can trust each other. When it involves people of different ethnicities and cultural backgrounds, conflict may occur, because interpersonal trust is in short supply, and the legal framework and institutional safeguards that characterize high-end globalization are lacking. The original Silk Road was no doubt like this, where people of different ethnicities and cultural background would meet and, because they might not meet again, could not fully trust each other. Similarly, in more recent eras, places such as Hangchow (Hangzhou today) were regarded in 1400 as excellent locations for global traders to begin their dealings (see Robbins, 2002: 62-65), but where cross-cultural dealings undoubtedly bore a degree of risk, which is similar to the situation faced by African traders and entrepreneurs today in their dealings with Chinese merchants in Guangzhou. The dilemma is that while cross-cultural low-end globalization is often dangerous, rendering these traders and entrepreneurs particularly susceptible to being cheated, China does not yet fully have the institutional structures to enable high-end globalization. Indeed, this is what leads African traders to China, as copy and knock-off goods can be obtained easily and cheaply, and because they feel the need to physically inspect the goods they buy rather than merely ordering off the internet, where they might well be cheated. These traders and entrepreneurs are stuck in the middle between two forms of globalization, shifting between them in their efforts to make a living and a profit. Those who are savvier, like the individuals profiled in this chapter, can make profits and, albeit very rarely, fortunes. The less savvy, who cannot nimbly adjust between these different forms of globalization, often lose their money and go home. as that described in this chapter will not continue beyond a decade or two. If China’s economy hits a wall, then the trade may continue indefinitely.

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Bibliography Aguiar, Jose Carlos G. 2012. ‘“They Come from China”: Pirate CDs in Mexico in Transnational Perspective’. In Gordon Mathews, Gustavo Lins Ribeiro, and Carlos Alba Vega (eds), Globalization from Below: The World’s Other Economy, pp. 36-53. London and New York: Routledge. The Economist. 2011. ‘China’s Economy: The Middle-Income Trap’, 5 April, https:// www.economist.com/free-exchange/2011/04/05/the-middle-income-trap, accessed 26 September 2019. The Economist. 2016. ‘Comparing Crony Capitalism Around the World’, 5 May, https:// www.economist.com/graphic-detail/2016/05/05/comparing-crony-capitalismaround-the-world, accessed 26 September 2019. French, Howard W. 2014. China’s Second Continent: How A Million Migrants Are Building an Empire in Asia. New York: Vintage Books. Gerth, Hans Heinrich, and C. Wright Mills. 1946. From Max Weber: Essays in Sociology. Oxford: Oxford University Press. Graeber, David. 2015. The Utopia of Rules: On Technology, Stupidity, and the Secret Joys of Bureaucracy. Brooklyn, NY: Melville House. Hansen, Karen Tranberg, and Mariken Vaa (eds). 2004. Reconsidering Informality: Perspectives from Urban Africa. Uppsala: Nordiska Afrikainstitutet. Hart, Keith. 1973. ‘Informal Income Opportunities and Urban Employment in Ghana’. Journal of Modern African Studies 11(1): 61-87. Hofstede, Geert. 1994. Cultures and Organizations: Intercultural Cooperation and its Importance for Survival. London: HarperCollins. Kipnis, Andrew. 1997. Producing Guanxi: Sentiment, Self and Subculture in a South China Village. Durham, NC: Duke University Press. Lin, Yi-Chieh Jessica. 2011. Fake Stuff: China and the Rise of Counterfeit Goods. London: Routledge. MacGaffey, Janet, and Remy Bazenguissa-Ganga. 2000. Congo-Paris: Transnational Traders on the Margins of the Law. Bloomington, IN: Indiana University Press. Mathews, Gordon. 2011. Ghetto at the Center of the World: Chungking Mansions, Hong Kong. Chicago, IL: University of Chicago Press. Mathews, Gordon. 2015. ‘Taking Copies from China Past Customs: Routines, Risks, and the Possibility of Catastrophe’. Journal of Borderland Studies 30(3): 423-435. Mathews, Gordon. 2016. ‘The Flipside of Counterfeit Goods’. Sapiens, 15 July. Mathews, Gordon, with Linessa Dan Lin and Yang Yang. 2017. The World in Guangzhou: Africans and Other Foreigners in South China’s Global Marketplace. Chicago, IL: University of Chicago Press.

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Mathews, Gordon, and Carlos Alba Vega. 2012. ‘Introduction: What Is Globalization from Below?’ In Gordon Mathews, Gustavo Lins Ribeiro, and Carlos Alba Vega (eds), Globalization from Below: The World’s Other Economy, pp. 1-15. London and New York: Routledge. Mathews, Gordon, Gustavo Lins Ribeiro, and Carlos Alba Vega (eds). 2012. Globalization from Below: The World’s Other Economy. London and New York: Routledge. McKinsey & Company. 2016. ‘China’s One Belt, One Road: Will It Reshape Global Trade?’ McKinsey Podcast, July. Neuwirth, Robert. 2011. Stealth of Nations: The Global Rise of the Informal Economy. New York: Pantheon. Pliez, Oliver. 2012. ‘Following the New Silk Road Between Yiwu and Cairo’. In Gordon Mathews, Gustavo Lins Ribeiro, and Carlos Alba Vega (eds), Globalization from Below: The World’s Other Economy, pp. 19-35. London and New York: Routledge. Portes, Alejandro, Manuel Castells, and Lauren Benton (eds). 1989. The Informal Economy: Studies in Advanced and Less Developed Countries. Baltimore, MD: Johns Hopkins University Press. Robbins, Richard H. 2002. Global Problems and the Culture of Capitalism. Second edition. Boston, MA: Allyn and Bacon. Shepherd, Robert. 2012. ‘Localism Meets Globalization in an American Street Market’. In Gordon Mathews, Gustavo Lins Ribeiro, and Carlos Alba Vega (eds), Globalization from Below: The World’s Other Economy, pp. 186-202. London and New York: Routledge. Stoller, Paul. 2002. Money Has No Smell: The Africanization of New York City. Chicago, IL: University of Chicago Press. Trompenaars, Fons. 1993. Riding the Waves of Culture: Understanding Cultural Diversity in Business. London: Nicholas Brealey. Weber, Max. 1978. Economy and Society. Translated and edited by Guenther Roth and Claus Wittich. Berkeley, CA: University of California Press.

About the author Gordon Mathews has written Ghetto at the Center of the World: Chungking Mansions, Hong Kong (2011), and The World in Guangzhou: Africans and Other Foreigners in South China’s Global Marketplace (with Linessa Dan Lin and Yang Yang, 2017). He is a professor in the Department of Anthropology at the Chinese University of Hong Kong.

Index 16+1 format 254, 255, 260 Accra 21, 269 Afghanistan 45, 48, 79, 88-90, 92, 126, 141, 187 Afiyatabad 76, 77, 79, 86-88, 90, 91 Africa 16, 17, 22, 30, 79, 268-270, 275, 277 East Africa 273 Northeast Africa 38 sub-Saharan Africa 270 Africans in China 270, 271, 279, 280, 282 African entrepreneurs in China 269-271, 273-281, 283 language barriers 275, 280 Agreement on Confidence-Building in the Military Field along the Border Areas 198 Aheytubiek 195 Aisagaliyeva, Sofiya 204 Aksai Chin 45 Aksai Kazakh Autonomous County 197 Alakol Lake 198 Alashankou 194, 195 Albania 165-171, 255 Ali, Mohammed 80 Almaty 21, 194, 196, 200, 201 Amritsar 137 Andaman Sea 99, 102, 112, 113 Arabian Sea 39, 43, 77, 84, 102, 105 Arakan 97, 99, 101, 102, 104-107, 115-118 Arkankergen 200 Armenia 215, 221, 226, 243-245 Arunachal Pradesh 45, 101 Asia 16, 20, 37, 38, 41, 43, 55, 77-79, 89, 90, 92, 102, 114, 170, 219, 268, 269 East Asia 38, 43, 48 South Asia 17, 30, 38, 48, 76, 80, 82, 126, 135, 277 Southeast Asia 17, 30, 38, 46, 48, 105 West Asia 17, 38, 39, 76 Asian Highway 1 46, 47, 50, 51 Asian Infrastructure Investment Bank 17, 38 Assam 101-105, 107, 108, 117 Astana 194, 202, 219, 225 Athens 256-258 Australia 148, 149 Austria 148 Ava 104 Azerbaijan 244, 245 Azó (Hajo) 103 Babusar 82 Bakhty 198 Balkans 17, 166, 269 Balkan peninsula 165 Western Balkans 31, 165-169, 171, 172, 175-179

Baltic Sea 236 Baltiyul 127 Baluchistan 62, 77 Bangkok 21, 117, 269 Bangladesh 17, 30, 43-48, 50, 52, 53, 57, 58, 97, 98, 100-102, 111-114, 126, 148, 149, 283 Bangladesh-Bhutan-India-Nepal Motor Vehicles Agreement 48 Bangladesh-China-India-Myanmar (BCIM) Economic Corridor 17, 18, 39, 43, 45, 46, 52, 56, 62, 63, 76 Bar, Montenegro 175 Bay of Bengal 39, 45, 46, 97, 98, 100, 102, 104, 108, 110, 154 Northern Bay of Bengal (NBB) 30, 62, 99-103, 105-110, 112, 114, 117-119 Beijing 55, 80, 81, 142, 155, 170, 172, 194, 214, 224, 230, 253 Belarus, Republic of 19, 200, 215, 219, 229, 241, 243-245, 252 Belgium 148 Belgrade 167, 170, 172, 173, 255, 256 Belt and Road Initiative (BRI) 37, 77, 157, 164; see also One Belt One Road (OBOR) initiative Bengal 43, 100-107, 109, 110, 114-118 Bengal Eastern Frontier Regulation 105 Bhamo 107 Bhatt, Munshi Aziz 130 Bhutan 45, 47, 48, 101, 103, 126 Bhutto, Zulfiqar Ali 80 Bihar 101, 104 biopower 40 Bishkek 221, 225, 226, 230 black economy 41; see also hidden economy; informal economy; non-recorded economy; shadow exchanges; underground economy Black Sea 253 borders 16, 21, 24, 25, 29, 30, 43-45, 47, 48, 51-53, 56-58, 60, 64, 75-79, 81, 83-86, 88-93, 97-99, 105-108, 111, 113, 116-118, 126, 127, 129131, 133, 137, 139-141, 155, 157, 171, 178, 183-195, 197, 198, 200-207, 215, 219, 222-225, 227, 229, 241-243, 247, 250; see also cross-border; transborder border crossing 23, 47, 49, 52, 75, 92, 184, 185, 187, 194, 195, 198, 201, 202, 205, 222, 223 border pass 45, 200 border regions 21, 45, 117, 207, 224, 225 borderlands 23, 32, 43, 56, 79, 155, 174, 223, 229, 237, 238, 241, 242, 244, 246, 252, 259 formalized border 190 Bosnia and Herzegovina 165, 167-171, 175, 255 Brahmaputra 100, 101, 103, 104

288 

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bribes 25, 153, 205, 218, 222, 224, 227, 271, 277, 282 bribery 201, 268, 279, 282 BRICs states 17; see also Brazil; China; India; Russia Budapest 170, 172, 174, 255, 256 Bulgaria 165, 166, 244, 247, 255, 256, 258 bureaucracy 93, 156, 216, 217, 225, 227, 274, 278 bureaucratic organization 274, 278 bureaucratic procedures 272 Burma 30, 38, 42-50, 52-54, 57-61, 97-99, 103, 105, 110-113, 116-118; see also Myanmar Upper Burma 104, 107 Cachar 104, 105, 107, 117 Cairo 21, 28, 268, 269 Calcutta 107, 116; see also Kolkata Cambodia 21, 112 Cameroon 278 Canada 148, 149 Cape das Palmas 115 capitalism 15, 26, 32 crony capitalism 274 global capitalism 16, 27-29 state capitalism 255 universalistic capitalism 280 Caravans Connect system 136, 137 Caucasus 17, 236, 243 Celestial Empire 129 Central Asia 17, 21, 30, 31, 38, 39, 45, 55, 56, 86, 89, 90, 126, 129, 133, 134, 135, 137, 140-142, 185-194, 196, 200-202, 204, 206, 207, 214, 216, 218, 219, 222, 225, 228, 229, 236, 243 Central Treaty Organization 81 Ceylon 110, 115; see also Sri Lanka Chakaria 111 Chandernagor 107 Chandraketugarh 133 Changthang 127, 130, 134, 137 checkpoints 23-25, 47, 48, 50, 139, 155, 157, 203, 219, 221, 229, 278; see also gateway Chengdu 155 Chin 45, 101 China, People’s Republic of 16-22, 28, 31, 32, 37-39, 42-50, 53-56, 59, 61, 62, 75-86, 88-92, 126-130, 132, 133, 136, 137, 140-142, 145-150, 154, 155, 157, 164, 166-179, 184-202, 204-207, 214-217, 219-225, 227, 230, 231, 236-238, 252-261, 268-271, 273, 277, 278, 281-283 Chinese government 15, 16, 48, 82, 188, 190, 255, 277 Five-Year Plan 261 People’s Liberation Army (PLA) 86, 203 State Council 38, 189, 195, 196, 255 China-CEEC Summit 170, 171 China-Pakistan Economic Corridor (CPEC) 30, 39, 43, 45, 60, 76, 77, 79, 90, 91; see also Belt and Road Initiative (BRI); One Belt One Road (OBOR) initiative Chinatown 31, 173

Chinese manufacturers 269, 271, 275, 276 Chinese traders 174-176 Chittagong 45, 47, 48, 98-100, 102, 104-108, 111, 115, 116 Chongqing 28 Chuguchak 198 Chushul 128, 133, 137, 139, 140 Ciudad del Este 268 commodity crossings 137, 139 Commonwealth of Independent States 221 Congo 277 Conjugation of the SREB and the EAEU 215 Connecting Europe Facility 257 connectivity 15-20, 22, 23, 25-27, 29, 30, 33, 38, 39, 44-46, 48, 49, 52, 61, 62, 76, 77, 83, 84, 86, 89, 90, 92, 157, 164, 177, 239, 258; see also informal connectivity; cross-border connectivity overland connectivity 34, 44, 46 state-sponsored connectivity 56, 60 Conservation Assessment and Management Plan 153 contracts 19, 24, 26, 29, 32, 171, 247, 248, 270, 271, 274-276 Convention on International Trade in Endangered Species of Wild Fauna and Flora 153 copied/counterfeit goods 271; see also knock-off goods corridor 30, 39, 42-48, 50-53, 56, 60, 61, 76-79, 89-91, 99, 100, 117, 119, 154, 169-171, 185, 207, 219, 229, 256-258 Cossimbazar 106 Cox’s Bazar 97, 98, 100, 107, 111, 113, 114 Crimea 253 Croatia 165, 167-169, 175, 255 cross-border see also border; transborder cross-border activities 185, 187-188, 214, 229, 240-241 cross-border areas/region 131, 207; see also border regions cross-border connections/connectivity/ interactions/relations/ties 23, 45, 64, 183, 184, 186, 188, 193, 196, 204, 206 cross-border collaboration/cooperation 186, 191, 194, 200, 206 cross-border cooperation zone 200 cross-border development/liberalization 185, 225 cross-border ethnic groups 194 cross-border exchanges/flows 16, 21-23, 37, 50, 78, 183, 185, 204, 215, 216, 219-222, 224, 227 cross-border investment 76, 90 cross-border mobility 44, 47, 48 cross-border shadow exchange 21, 22, 185; see also shadow exchanges cross-border shoppers 56 cross-border trade 30, 31, 44, 79, 85, 86, 139, 140, 198

Index

currency union 217 customs 21, 22, 89, 131, 139, 151, 157, 200-202, 207, 215-217, 219, 220, 222, 225, 240, 244, 268, 277-279, 282 customs checks/clearance/controls/ processes 47, 56, 155, 198, 200, 207, 219, 225, 227, 278; see also checkpoints customs duties/fees/tax/tariff 25, 87, 88, 151, 223, 225, 229, 240 customs agents/officials 25, 32, 130, 153, 175, 201, 205, 271 Customs Union see Eurasian Economic Union Czech Republic 148, 247, 255, 256 Dalai Lama 128 Danube 170, 256 Delhi 102, 133 Demchok 127, 128, 137, 139 Deng, Xiaoping 86 Develop the West (xibu da kaifa) initiative 188 Dhaka 52, 106 Diogo d’Almeida 129 distrust 37, 44-46, 48, 52; see also trust dongbei 185 Dordoi/Dordoy Bazaar 21, 221, 225 Dostyk 194 dry port 56, 87-89, 200 Dubai 21, 269, 270 Duisburg 28 East Coast Rail Link 19 Eastern Turkistan Republic 191 Eastleigh 270 Egypt 28, 38, 103 empire-by-infrastructure 39 Energy Charter Treaty 249, 250 Transit Protocol 250 Energy Community 242, 251 Energy Community Treaty 242, 254 e-Silk Road 38; see also Belt and Road Initiative (BRI); One Belt One Road (OBOR) initiative Estonia 247, 255 Ethiopia 277 Ethnic Theory and Policy Research Department of State Ethnic Affairs Commission, China 189 ethnicity 91, 188, 190, 191, 194, 205, 272, 280, 281, 283 Eurasia 16, 18, 20, 38, 42, 44, 55, 61-64, 90, 214, 243, 258 Central Eurasia 214 Greater Eurasia 215 Eurasian Economic Union (EAEU) 31, 200, 215, 216, 219, 221-230, 236, 241, 243, 244, 252-254, 258, 259, 261 Customs Code 226 Treaty on the Eurasian Economic Union 244

289 Europe 17, 28, 38, 41, 55, 135, 150, 165, 170-172, 177, 184, 200, 202, 219, 229, 230, 236-242, 246, 249, 252, 256, 257, 259-261, 268, 277, 278 Central Europe 256 Eastern Europe 174, 178, 239, 241, 243, 249, 257, 260 southeastern Europe 30, 31, 165, 166, 170, 236, 238, 243, 244, 252, 254, 256, 258-260 Western Europe 17, 39, 170, 175, 177, 237, 238 European Union (EU) 32, 41, 62, 164, 166-168, 170, 171, 174, 178, 215, 217, 219, 220, 229, 235-239, 241-261 Association Agreements, including Deep and Comprehensive Free Trade Areas 246 EU-Russia Energy Dialogue 249, 250 EU-Russia Gas Advisory Council 250 EU-Ukraine Association Agreement 251, 254 European Commission 237, 239, 242, 245-247, 249, 255-260 European Parliament 242 Partnership and Cooperation Agreement 250 Eastern Partnership (EaP) 244-246, 252, 259 European Neighbourhood Policy (ENP) 244, 245 Ferghana valley 190 Finland 148 Foreign Corrupt Practices Act 282 formal economy 151, 268; see also informal economy formality 152, 269, 275, 279; see also informality Forum for International Cooperation 172 Forum on China-Africa Cooperation (FOCAC) 255 four-pronged approach 189 fragmented sovereignty 44, 49, 50, 52, 64 France 148, 149 Frankfurt 27 frontier 30, 82, 92, 106, 107, 115, 117, 118, 154, 155, 165, 184-186, 189, 190, 192, 206; see also borders Galles 115 Gandhi 135 Ganga 133, 136 Ganga-Meghna-Brahmaputra delta 100, 103, 104 gateway 76, 92, 104, 107, 138, 139, 188, 196, 200, 206, 207; see also checkpoints politics of gateway 138, 139 Gazprom 246-250 Geng, Biao 83 Georgia 242, 244-246

290 

Shadow Exchanges along the New Silk Roads

Germany 28, 148, 149, 256-258 Gilgit-Baltistan 76, 85-87, 90 Home Department 85 National Congress 141 global global capital flows/market/trade 77, 126, 145, 148, 157, 267 global capitalist production/expansion 15, 22, 26, 28 global commodity/value chain 19, 23, 26-30, 33 global connectivity 76 global economic growth/developments/ networks/order/power 18, 30, 92, 261 global financial crisis 243 global neoliberalism 28 global political economy 33 global governance 244, 260 globalization 18, 20, 22, 25-27, 32, 33, 125, 185, 213, 214, 238, 243, 260, 267, 268, 270, 283 economic globalization 15, 20, 27, 240 neoliberal model 19, 214 globalization from below 20, 22, 62, 268, 269 high-end globalization 19, 20, 28, 267-272, 274, 277, 279, 281-283 low-end globalization 20, 23, 26, 27, 32, 267-272, 274, 279, 281-283 Goa 115 Gobi Desert 133 going out policy (zouchuqu zhanlue) 188 Golden Crescent 88-89 governance 15, 29, 132, 236, 241-244, 247, 249-251, 258, 260 economic governance 236-241, 243-246, 249, 252, 254, 260, 261 good governance 237, 245 governance structures 31, 32, 237, 239, 240, 243, 246, 248 market governance 237, 247 see also global governance Grand Trunk Road 102 Great Game 62 Great Stone Industrial Park 19 Greece 19, 165, 166, 175, 254-256 Guangzhou 21, 32, 80, 155, 268-275, 277, 278, 281, 283 guanxi 274 Gwadar 45, 77 Gwadar Port 19 Gyilong 155 Hainan Island 199 Hangzhou (Hangchow) 283 hawala 22, 273 hidden economy 31, 41, 146, 147, 156, 218; see also informality; non-recorded economy; shadow economy; underground economy Himachal 128, 129, 137, 138

Himalaya/Himalayas 43, 76, 126, 127, 133, 134, 137, 150, 154, 155 Himalayan mountains 76, 80 see also Tran-Himalayan Silk Road Himchari National Park 97 Hong Kong 21, 155, 268, 274, 276 Hooghly river 116 Hoshiarpur 140 human trafficking 112, 114, 115, 118, 119; see also slave trade Hungary 148, 172, 174, 247, 255, 256 Hunza 76, 78, 82, 83, 85, 91 Ili 191, 192 Ili Kazakh Autonomous Prefecture 191, 195, 200 illegality 271, 276, 277; see also legality illegal activities 41, 42, 168, 204, 218, 238; see also black economy; hidden economy; underground economy Imphal 50 implementation deficits 44, 46-49 India 20, 31, 43-54, 56-58, 62, 80-82, 89, 90, 92, 98, 100, 108, 109, 111, 112, 116-118, 126, 129, 132, 133, 137, 140-142, 145-150, 154, 157 British India 116 Constitution 116, 130, 194 Indian Army 137-139 Look East/Act East Policy 52 Union Territory 130 Indian Ocean 17, 39, 42, 43, 45, 48, 49, 99, 101, 105, 116 Indian peninsula 102, 103, 105 Indochina Peninsula 17, 39 Indo-Tibetan Border Police 139 Indus river 127 informality 23, 24, 30, 131, 140, 269; see also formality informal connectivity 20, 23-25, 28, 30, 33, 268 informal economy 16, 23, 218, 268, 281; see also formal economy; shadow economy informal trade 131, 138, 141, 151 organized informality 24 integration anti-integration 218, 230 economic integration 37, 46, 207, 216, 245, 252 hidden integration 239, 247, 256, 257 imitative integration 222, 228, 230, 231 integration façade 218, 230 integration rhetoric 214, 228, 289 market integration 236-241, 243, 246, 247, 249, 252, 255, 257-260 multinational integration 213, 214, 215, 217 inter-state/regional integration 214, 225, 227, 243, 244 International Union for Nature Conservation Red List 153

291

Index

inverse process 218, 230 Iran 17, 45, 88-90, 92, 230 Ireland 148 Irrawaddy 99, 106 Isle of Man 148 Israel 148 Istanbul 21, 46, 269 Italy 148, 149 Jammu 80, 81, 127, 129, 130, 137 Japan 20, 48, 135, 148, 149, 282 Partnership for Quality Infrastructure Programme 20 Jeminay 195 Jiang, Zemin 196 Joint Declaration on Further development and the Deepening of Friendly Relations between Kazakhstan and China 196 Joint Statement of the People’s Republic of China and the Russian Federation on Linking Up the Establishment of the Silk Road Economic Belt with that of the Eurasian Economic Union 253 Kachin 50, 101 Kaladan Multimodal Transit Project 20 Kalimpong 137 Karachi 21, 45, 84, 85, 88 Karakoram 76, 77-82, 91, 128, 133, 134 Karakoram Highway 75-77, 79, 82-87, 89 Karakoram Pass 127, 135, 136 Karakoram Range 76, 126 Karbuzov, K.K. 201 Karghalik 128 Kargil 128-130, 134-136, 139 Kargil-Drass region 127 Kashgar 21, 82, 86, 129, 133, 202, 230 Kashmir 43, 45, 62, 80, 81, 127-130, 134, 136, 137, 140, 141 Kathmandu 150, 152, 155, 157 Kazakh Soviet Socialist Republic 191 Kazakhstan, Republic of 28, 31, 39, 86, 184-188, 190-207, 215, 219-227, 241, 243, 244 Committee on Financial Monitoring 204 Customs Committee of the Ministry of Finance 201 Law on Countering Illegal Income Legalization (Money Laundering) and Terrorism Financing 204 Law on Special Economic Zones 199 Ministry of Finance 201, 204 National Security Committee 201 Strategy-Kazakhstan-2030 190 Strategy-Kazakhstan-2050 190 Kenya 19, 270, 277, 278, 282 Khaltse 130, 139 Khan, Ayub 80 Khan, Mir Ghazanfar Ali 89 Kharkiv Pact 253

Khasi 53 Khorgas/Khorgos 21, 28, 194, 195, 199-202, 223, 224 International Centre for Boundary Cooperation (ICBC) 198-200, 205, 207 Khorgos SEZ 199, 202 Special Decree on Establishing Free Economic Zone Khorgos-Eastern Gate 199 Khotan 133, 140 Khunjerab Pass 75 Khyber-Pakhtunkhwa 85, 87 knock-off goods 269, 281, 283; see also copied/ counterfeit goods Kokang 53 Kolkata 30, 45, 52, 268; see also Calcutta Kopar 175 Koriyakhali 111 Kosovo 165, 167, 168, 171 Kremlin 228 Kuanyshalin, Zhasaral 199 Kunlun range 127 Kunming 30, 47, 52, 155 Kunming Initiative 44, 52 Kurdistan 62 Kutupalong 97 Kyrgyzstan 21, 28, 31, 86, 126, 191, 198, 202, 215, 219, 221-228, 230, 243 Ladakh 31, 126-142 Ladakh route 133 Ladakh Wazarat 129 Lahore Metro 19 Lakhnauti 103 Land Code 205 Lanzhou 155 Laos 112 Latin America 277 Latvia 247, 255 legality 31, 118, 271, 274, 276; see also illegality legibility 40, 52, 75, 78, 79 Leh 127-129, 132-140 Lhasa 45, 128, 133, 134, 154, 155 Li, Keqiang 90, 188 Lithuania 247, 255 logistics agents 270-272, 277, 278, 280 London 27 Lopnor 133 Ma, Kai 254 Macedonia 165, 167-171, 175, 255, 256, 258 MacMahon Line 105 Magampura Mahinda Rajapaksa Port 19 Malaysia 19, 20, 97, 98, 112, 113, 148 ‘Malaysia airports’ 98, 112 Maldives islands 43, 101 Manali 137, 138 Manipur 50, 51, 58, 101, 104, 105, 117 Matarbhari 99 Mecca 86

292 

Shadow Exchanges along the New Silk Roads

medicinal and aromatic plants (MAPs) 31, 145-157 Mediterranean 39, 256 Mediterranean Sea 17, 108, 114 Meghalaya 53, 101 Mergui archipelago 99 Mexico City 268 Middle East 17, 44, 202, 203, 277 migration 42, 43, 56, 61, 97, 111, 112, 114, 116, 118, 119, 133, 141, 172, 177, 184, 186-188, 197, 219 Milošević, Slobodan 174 Mintaka 77, 82-84 Misgar 77, 78, 82, 83 Mizoram 53, 101 Mogherini, Federica 167 Moheshkhali 99 Moldova 236, 242-246 Mombasa-Nairobi Standard Gauge Railway 19 Mongolia 17, 18, 39, 76 Montenegro 165, 168-170, 175, 255 Moreh 47, 49, 50 Moscow 28, 215, 219, 248, 253 Mughal army 103 multinational corporations 267 Mumbai 137 Musharraf, Pervez 89, 90 Muzaffarabad 142 Muzart 142 Myanmar 17, 30, 42-50, 52-54, 57-61; see also Burma Naf river 97 Nagaland 101 Nairobi 19, 21, 269, 270 Nathu La 45 National Office for Cooperation with Russia and China 178 nation-states 41, 106, 116; see also sovereignty national identity/nationalism 194, 196, 280 national security 141, 187, 228 nationality 194, 196, 272, 280, 281 state-building 165, 192, 206 NATO 166, 167, 178, 242, 255 Nayapara 97 Nazarbaev, Nursultan 194, 196, 202, 215 neoliberalism 16, 18-20, 22, 23, 25, 26, 28, 29, 268, 269; see also capitalism; globalization Nepal 31, 45, 47, 48, 101, 126, 133, 136, 142, 146-148, 150, 152-157 Department of Forestry (DOF) 147, 151, 156, 157 District Development Committee 152 District Forest Office 150, 152, 153 Five-Year Forest Management Plan (Five Year Plan) 150 Gazette of the Government of Nepal 150 Trade and Export Promotion Centre (TEPC) 147, 151 Trade Integration Strategy 154

Netherlands, The 148 Netherlands Antilles 148 network/networked infrastructure 237, 239, 241, 246-248, 251, 252, 260 New Delhi 137, 142 New Development Bank 17 New Eurasian Land Bridge 17, 39, 56, 76 New Independent States 197 New York 27, 281 New Zealand 148 Ni, Vasily 205 Nigeria 273, 277, 282 Nile 103 non-recorded economy 41; see also black economy; hidden economy; shadow economy; underground economy North America 28, 186 North Odisha 101, 118 Nubra 127, 130, 133, 134 Nurly Zhol 184 Office of the Leading Group for the Western Region Development under the State Council’s National Development and Reform Commission (guojia fagai weixibu kaifa shi) 189 One Belt One Road (OBOR) 15-23, 25-30, 32, 37-40, 42-45, 50, 55, 56, 61-64, 76, 90, 100, 119, 164, 170-172, 178, 184, 202, 206, 207, 214-216, 224, 230, 231, 236-241, 252-261, 268, 282; see also Belt and Road Initiative (BRI) Maritime Silk Road 16, 30, 38, 39, 42, 117, 118 OBOR initiative 16-18, 20, 28-32, 38, 44, 46, 49-51, 55, 61-64, 77, 90, 169, 170, 172, 177-179, 202, 215, 236, 254, 269, 282 OBOR Special Fund 17 Silk Road Economic Belt (SREB) 16, 38, 202, 206, 215, 225, 253 Orient/East-Med Core Network Corridor 257 Osh 202 Pakistan 17-19, 21, 28, 30, 31, 43, 45, 48, 60, 75-92, 116, 126-130, 132, 136, 137, 140, 141, 148, 149 Pakistan Army 82 Panamik 128 Paris 281 particularism 273, 274, 279-281 Pathankot 137 Patharghata 99 Payra 100 Pegu 101, 103 peripherality 56 Persian Gulf 89, 102 personal linkages/networks/relationship/ ties 15, 24, 29, 33, 272-273, 278, 279 Peru 148 Phayre, A.P. 107 Piraeus 256 Piraeus Port 19, 170

Index

Poland 148, 219, 247, 255 Poonch 142 Prague Eastern Partnership Summit 245 Priority Project 22 256, 257 protectionism 217, 228, 229 Punjab 85, 87, 91, 136, 140 Puran 155 Putin, Vladimir V. 215, 244 Rahman, Mujibur 111 Rakhine 50, 52, 61 Rangoon 106 Rawalpindi 21, 82, 85, 137 Red Sea 17, 102 regional economic blocs 238, 240 Reju canal 97-99, 105 rents 25, 88, 251 administrative rent 224-228, 230 reputation 39, 116, 134, 270, 271, 275 Rio/Shigatse 155 Rohingya 50, 97, 98 Roman World 126 Romania 165, 166, 244, 255, 256, 258 Rome 38 royalty 150-153, 157 Rudok 128 Rupshu 127, 133 Russia 17, 18, 28, 39, 45, 62, 76, 129, 167, 178, 185, 189, 190, 192, 193, 195, 198, 200, 202, 214-217, 219-231, 236, 238, 239, 243, 244, 246, 249-254, 258, 259 Russian Far East 185, 206, 219 Russian Federation 236, 243, 253 Sagaing division 101 Saint Martin island 98 Saint Petersburg Economic Forum 215 Saki 253 Samarkand 129 San Thome 115 Sangju 128 São Paulo 268 Schengen Agreement 242 Semey (Semipalatinsk) 194 sensitive space 51, 63, 64 Seoul 281 separatism 184, 188, 196, 204 Serbia 165-175, 177, 178, 255, 256, 258 Sevastopol 253 shadow shadow activities 29, 31, 32, 164, 175, 179, 204, 218 shadow connectivity 25; see also informal connectivity shadow circulations 97, 108-111, 112, 117 shadow economy 16, 21, 30, 31, 41, 42, 88, 112, 114, 117, 118, 131, 163, 164, 168, 169, 174-176, 179, 216, 218, 222, 223, 226-229, 239-241, 268, 281; see also

293 hidden economy; informal economy; non-recorded economy; underground economy shadow exchanges 16, 20-22, 28, 30, 32, 33, 79; see also cross-border shadow exchanges; transborder informal exchanges shadow maritime silk road 101, 109 shadow networks 16, 21-22, 29, 32, 33, 105 shadow routes 31, 78, 125, 132, 140-142 shadow silk roads 16, 20-22, 24, 25, 28-30, 33, 93, 117, 268 shadow trade 23, 93, 130-132, 141 shadow traders 22-24, 30 Shakir, Eisa 86 Shan 50, 101 Shanghai 80 Shanghai Co-operation Organization 18 Shantou 200 Shwe gas field 46 Shenzhen 21, 200, 206 shuttle trade 195, 223, 224; see also suitcase trading; transborder flows Shyok river 128 Siberia 237 Sichuan 101, 189 Sikkim 45, 101, 142 Siliguri 137 Silk Road 32, 38, 41, 43, 44, 61, 62, 64, 77, 78, 83, 84, 86, 92, 101, 117, 125, 126, 132, 133, 138-142, 154, 184, 194, 202, 283 New Silk Road 37, 39, 41, 55, 62, 63, 132, 170, 171, 236, 269, 281, 283; see also Belt and Road Initiative (BRI); One Belt One Road (OBOR) Silk Road Fund 38 Silkroadism 55 Singapore 39, 43, 46, 148, 149 Sino-Serbian Friendship Bridge 170 Sittwe Special Economic Zone 20 Skardu 85, 128, 136 slave trade 102, 105, 112, 114-116, 119; see also human trafficking Slovakia 247, 255 Slovenia 165, 167-169, 255 slow geographies 239 Smederevo 170 socio-technological assemblages 247 Somalia 63, 276 Sonadia 48, 99, 100 Songkhla 113 Sost 21, 28, 76 Sost Dry Port 75-77, 87, 88 South China Sea 17 South Korea/Republic of Korea 148 Southeast Asian Treaty Organization 81 sovereignty 40, 43, 49-51, 62-64, 80, 184, 187, 206, 213, 216-218, 242, 252; see also nation-states

294 

Shadow Exchanges along the New Silk Roads

Soviet Union (USSR) 166, 185, 191-194, 214, 226, 237, 248, 249, 252 Spain 148 special economic zone (SEZ) 20, 195, 199, 201, 202, 205, 206 Spungar gap 133 Sravasti 133 Sri Lanka 19, 45, 48, 126; see also Ceylon Srinagar 82, 128, 136-138, 142 state-led regionalism/regionalization 25-27, 268; see also state-sponsored connectivity state-owned enterprises 19, 26, 236 Strait of Malacca 46, 62 Suhrawardy, Huseyn Shaheed 80 suitcase trading 21, 25; see also shuttle trade Sunda islands 102 Sunderbans 107, 111 sustainable development 153 Sutlej 136 Sweden 148 Sylhet 117 Tacheng 192, 195 Taiwan 148, 149, 167 Tajikistan 79, 126, 141, 191, 198, 215, 226, 228, 230 Taklamakan 133 Tanzania 277 Tarim Basin 38 Tashigang 128 Tashkurgan 21 Teknaf 105, 107 Teknaf Upazila 111 Tenasserim 99 Terai 150 terrorist groups 278 Thai Gulf 113 Thailand 45, 46, 56, 98, 99, 112-114, 148 Southern Thailand 62 Thai-Malay Archipelago 118 Thai-Malay peninsula 99 Thang 129 Third Energy Package 248, 250 Thyakshi 129 Tianshan mountains 193 Tibet 31, 43, 45, 56, 101, 103, 127-129, 133, 134, 136-140, 142, 154, 155, 157, 189 Tibetan Plateau 126, 133, 154 Tibet-Xinjiang Highway 154 Tito, Josip Broz 166 Tokyo 27, 46 transaction costs 141, 238 Trans-Asian Highway 46, 52 Trans-Asian Railway 52 transborder transborder communities 117-119 transborder collaboration/cooperation 31, 184, 187, 190, 193, 195, 200 transborder flows 19, 183-185 transborder exchanges 27, 193

transborder informal exchanges 15, 16 transborder connections/interactions/relations/ties 31, 196, 202, 206, 207, 249 Trans-European Networks Programme (TEN-T) 257 Innovation and Network Executive Agency 257 Trans-Himalayan Silk Road 154, 155; see also Silk Road Treaty of Peking 190 Trilateral Highway, India-Myanmar-Thailand 20 Trincomalee Port Project 20 trust 24, 29, 33, 55, 114, 271, 273, 275, 278, 283; see also distrust personal/inter-personal trust 26, 33, 273, 283 trust-building 198, 205 Turkey 17, 39, 45, 165, 166, 202, 230 Turkic separatism 196 Turkestan 129, 202 Turkmenistan 126, 230 Turtuk 129, 130, 137-139 Ukraine 148, 236-239, 242, 244-246, 250-254, 259, 260 Ukrainian parliament 253 underground economy 41, 218; see also hidden economy; non-recorded economy; shadow economy United Nations (UN) 46, 80, 112, 113, 141, 166, 174 United Nations High Commissioner for Refugees 97 United States (US) 16, 18, 48, 80, 81, 135, 141, 148, 170, 214, 268, 269, 274, 277, 281, 282 US State Department 80 universalism 273, 274, 279-281 Urumqi 28, 188 Uyghur question 190 Uzbekistan 126, 129, 204, 215, 226, 228, 230 Vietnam 21, 46, 148, 283 Warsaw 170 Warsaw Pact 166 Washington DC 141, 268, 281 West Bengal 133 World Trade Organization (WTO) 226, 244 World’s First Kazakh Kurultai (Congress) 196 Xi, Jinping 55, 76, 201, 206, 215, 253, 255 Xining 155 Xinjiang/Xinjiang Uyghur Autonomous Region (XUAR) 31, 75, 76, 82, 85, 86, 88, 126-128, 136, 140, 142, 184-188, 190-195, 199-201, 204, 206, 207 Border Protection Department of Public Security Bureau 203 Kazakh ethnic townships 194

295

Index

Managed Border Area Pass 203; see also border pass Notice of the State Council on Questions Concerning the Further Implementation of the Law on Regional National Autonomy 196 Regulations on Border Administration in XUAR 202 Xinjiang Production and Construction Corps 192 Xinjiang’s Commerce Bureau 199 Yabgo 129 Yang, Chieh 82 Yanukovych, Victor F. 253 Yarkand 127, 129, 133, 136, 140

Yellow River 43 Yevpatoria 253 Yiwu 21, 28, 269 Yugoslavia 165, 166, 169, 174, 177 Yunnan 42-44, 46, 52-54, 56, 59, 101, 104, 105, 118, 189 Zanskar 127, 134 Zhanaozen 204 Zhang, Hanhui 204 Zhejiang 173 Zhou, Enlai 81 Zia-ul-Haq, General 83 Živojinović, Bata 166 Zoji La 128, 137

Publications / Global Asia Matthias Maass (ed.): Foreign Policies and Diplomacies in Asia. Changes in Practice, Concepts, and Thinking in a Rising Region 2014, isbn 978 90 8964 540 1 Volker Gottowik (ed.): Dynamics of Religion in Southeast Asia. Magic and Modernity 2014, isbn 978 90 8964 424 4 Frédéric Bourdier, Maxime Boutry, Jacques Ivanoff, and Olivier Ferrari: From Padi States to Commercial States. Reflections on Identity and the Social Construction of Space in the Borderlands of Cambodia, Vietnam, Thailand and Myanmar 2015, isbn 978 90 8964 659 0 Michiel Baas (ed.): Transnational Migration and Asia. The Question of Return 2015, isbn 978 90 8964 658 3 Kees van Dijk: Pacific Strife. The Great Powers and Their Political and Economic Rivalries in Asia and the Western Pacific 1870-1914 2015, isbn 978 90 8964 420 6 Juliet Pietsch and Marshall Clark (eds): Migration and Integration in Europe, Southeast Asia, and Australia. A Comparative Perspective 2015, isbn 978 90 8964 538 8 Arndt Graf and Azirah Hashim (eds): African-Asian Encounters. New Cooperations and New Dependencies 2017, isbn 978 94 6298 428 8 Wendy Smith, Hirochika Nakamaki, Louella Matsunaga, and Tamasin Ramsay (eds): Globalizing Asian Religions. Management and Marketing 2018, isbn 978 94 6298 144 7 Ngok Ma and Edmund W. Cheng (eds): The Umbrella Movement. Civil Resistance and Contentious Space in Hong Kong 2019, isbn 978 94 6298 456 1 Emilia Roza Sulek: Trading Caterpillar Fungus in Tibet. When Economic Boom Hits Rural Area 2019, isbn 978 94 6298 526 1