786 31 11MB
English Pages [353] Year 2021
“As a framework for a fundamentally new form of cooperation between radically different economies, polities and societies, the Belt and Road Initiative would seek to recast the political-economic geography of the twenty- first century. The essays of this volume take the reader through the vast diversity of perspectives on this ideal. It is a provocatively informative read.” Ross King, author of Seoul and Kuala Lumpur and Putrajaya “Using a bottom-up approach, this book is undoubtedly an encyclopaedic masterpiece about the Belt and Road Initiative, which is rich in basic information and perspectives, written by specialist experts of specific countries. This book offers an in-depth interpretation of the re-globalisation, the role of China and recipient nations, the world’s geopolitical economy, and the driving forces of future world development.” Chaolin Gu, Tsinghua University “The latest book on the global ‘new Silk Road’ constitutes a stimulating and timely effort. The multi-disciplinary assessment studies provide amazing insights from twelve countries. The key words of mutual benefits, cooperation and peace are balanced against the notion of Chinese neo-colonialism. China’s ‘mapping of globalization’ has not reached a period of full impact on the entire world yet, but future studies might show whether it is ultimately as beneficial as the authors and editors expect in this remarkable new book.” H. Detlef Kammeier, Professor of Urban and Regional Planning, Asian Institute of Technology, Bangkok “China’s Belt and Road Initiative (BRI) is a major force for political and economic change, both in South-East Asia and beyond. Some view it as wholly beneficial, others as deeply worrying. This book provides a valuable balanced, critical, bottom-up approach which examines the impact and reactions to the BRI in a variety of countries.” Chris Hamnett, FAcSS FRSA FKC
International Perspectives on the Belt and Road Initiative
International Perspectives on the Belt and Road Initiative investigates the most significant global-scale international trade expansion and capital investment programme since the Second World War. This book focusses on the multi-national perspectives of the Belt and Road Initiative (BRI) in order to interrogate the Chinese government’s representation of it as a symbol of “peace, cooperation, development and mutual benefit.” With specific focus on the interrelationship between geopolitics, infrastructure investments and urban regional development, the book ref lects on 12 countries’ experiences in depth, including those of Iran, Pakistan, Brazil, Thailand, Indonesia, Japan and Ethiopia, specificly to their economic development levels, political systems, power dynamics and socio-environmental issues. The book clarifies and contributes new knowledge on the nature of BRI concerning its relationship to globalism, neo-colonialism, the notion of developed vs developing countries and their institutions and macro-micro benefits and impacts. In doing so, the book offers a balanced account of the antagonistic geo-political narrative of socio-political conf lict and the collaborative framework of real socio-economic f lows and development. The book will appeal to academics, researchers and policy-makers with an interest in the BRI and its impacts on politico-economic development and urban, regional and spatial systems in the Indo-Pacific and beyond. Sidh Sintusingha is Senior Lecturer in Landscape Architecture and coordinator of its postgraduate programme in the Faculty of Architecture, Building and Planning at the University of Melbourne, Australia. Hao Wu is Senior Lecturer in Property in the Faculty of Architecture, Building and Planning at the University of Melbourne, Australia. Wenqi Lin is Associate Professor of Urban Planning and Design in the School of Architecture and Chief Planner of Urban Planning and Design Institute at Tsinghua University, China. Sun Sheng Han is Professor of Urban Planning in the Faculty of Architecture, Building and Planning at the University of Melbourne, Australia. Bo Qin is Professor of Urban Planning and Management in the School of Public Administration and Policy, Renmin University of China.
Planning, Heritage and Sustainability Series Editors: Paolo Ceccarelli and Giulio Verdini
The speed of growth of Global South’s emerging countries has quickly imposed, in recent years, new priorities in the urban agenda of this part of the world. In particular, the controversial relationship between the loss of local/ regional identity and the modernisation is increasingly becoming a matter of great concern especially in Asia, Africa and Latin America. In these contexts the modernisation implies an unprecedented wave of urbanisation that is seriously threatening, in some cases, the survival as such of the traces of the past, especially the urban or rural heritage, or broadly speaking, the tangible and intangible dimensions of local cultures. Notwithstanding that western countries are facing similar disruptive forces the Global South requires different analytical frameworks and approaches to sustainability. Titles in the series: Heritage Sites in Contemporary China Cultural Policies and Management Practices Luca Zan, Bing Yu, Haiming Yan, Janli Yu Japanese Machizukuri and Community Engagement History, Method and Practice Shigeru Satoh International Perspectives on the Belt and Road Initiative A Bottom-Up Approach Edited by Sidh Sintusingha, Hao Wu, Wenqi Lin, Sun Sheng Han and Bo Qin Culture and Rural-Urban Revitalization in South Africa Indigenous Knowledge, Policies and Planning Edited by Mziwoxolo Sirayi, Modimowabarwa Kanyane and Giulio Verdini For more information about the series, please visit: https://www.routledge. com/Planning-Heritage-and-Sustainability/book-series/PHS
International Perspectives on the Belt and Road Initiative A Bottom-Up Approach
Edited by Sidh Sintusingha, Hao Wu, Wenqi Lin, Sun Sheng Han and Bo Qin
First published 2021 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 605 Third Avenue, New York, NY 10158 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2021 selection and editorial matter, Sidh Sintusingha, Hao Wu, Wenqi Lin, Sun Sheng Han and Bo Qin; individual chapters, the contributors The right of Sidh Sintusingha, Hao Wu, Wenqi Lin, Sun Sheng Han and Bo Qin to be identified as the authors of the editorial material, and of the authors for their individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Names: Sintusingha, Sidh, editor. | Wu, Hao (Researcher on commercial real estate), editor. | Lin, Wenqi (Researcher in urban ecology), editor. | Han, Sun Sheng, editor. | Qin, Bo (Professor of urban planning and management), editor. Title: International perspectives on the Belt and Road Initiative : a bottom-up approach / edited by Sidh Sintusingha, Hao Wu, Wenqi Lin, Sun Sheng Han and Bo Qin. Description: New York : Routledge, 2021. | Identifiers: LCCN 2020050915 (print) | LCCN 2020050916 (ebook) | ISBN 9780367427320 (hardback) | ISBN 9780367854645 (ebook) Subjects: LCSH: Yi dai yi lu (Initiative : China) | Economic development—International cooperation. | Globalization. | China—Foreign economic relations. Classification: LCC HF1604 .I585 2021 (print) | LCC HF1604 (ebook) | DDC 382/.30951—dc23 LC record available at https://lccn.loc.gov/2020050915 LC ebook record available at https://lccn.loc.gov/2020050916 ISBN: 978-0-367-42732-0 (hbk) ISBN: 978-0-367-76181-3 (pbk) ISBN: 978-0-367-85464-5 (ebk) Typeset in Bembo by codeMantra
Contents
List of boxes List of figures List of tables List of contributors Preface
ix xi xiii xv xix
SECTION I
Background
1
1 Re-imagining the Silk Road for the 21st century
3
S I D H S I N T U S I N G H A A N D H AO W U
2 The BRI from within China: vision, rationale and the “corridors”
23
W ENQI LIN, SH UO GONG, M ENGH E W U A N D H U I Y I
3 The BRI from within China: mechanisms, institutions and media representations
52
B O Q I N , W E I L I U A N D YA N Z H A N G
SECTION II
International context, analysis and outcome
79
4 Urban development challenges under the China-Pakistan Economic Corridor (CPEC)
81
M U H A M M A D I M R A N , M U R A D A L I A N D M U H A M M A D S A L E E M J A N J UA
5 Inter-continental transport networks and Asian Economic Corridor for the Korean Peninsula H Y U NG MIN K I M
100
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6 Establishing the BRI in Thailand: contrasting “desire lines” in the delivery of two high-speed rail projects
119
SI DH SIN T USINGH A
7 Malaysia: chinese participation in infrastructure from contractor to conspirator?
137
T O O N G K H UA N C H A N
8 China’s Belt and Road Initiative (BRI) in Cambodia
164
SU N SH ENG H A N A N D YM ENG LIM
9 The production of megaprojects in Java: colonialism, nationalism, development centralisation vs decentralisation
191
EK A PER M A NASA R I A N D SI DH SIN T USINGH A
10 The Belt and Road Initiative in Iran: urban-regional dialogue in two corridors and three cities
207
M O RT E Z A M I RG H O L A M I
11 The critical need for urban planning around Port Vila’s BRI projects
226
J E N N I F E R DAY
12 Ethiopia: the Addis Ababa–Djibouti railway
245
K E L LY L E V I K E R
13 Strengthening Brazil’s food system: can China’s Belt and Road help?
263
A DR I A N H. H E A R N
14 Challenges and opportunities to port development with the BRI in Japan
278
Z H E N J I A N G S H E N A N D YA J I N G Z H A N G
SECTION III
Comparative perspectives: a bottom-up approach
297
15 International perspectives of the BRI: new, unfolding globalisation
299
S I D H S I N T U S I N G H A A N D H AO W U
Index
323
Boxes
7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8
2006 Second Penang Bridge 2013 Forest City Johor 2013 Kuantan Port and Malaysia-China Kuantan Industrial Park (MCKIP) 2014 Melaka Gateway 2015 EDRA Global Energy Bhd 2016 East Coast Rail Link (ECRL) 2016 Suria Strategic Energy Resources 2017 Proton Holdings
145 147 149 150 150 151 152 153
Figures
1.1 The six Belt and Road Initiative (BRI) economic corridors and the 21st Century Maritime Silk Road. Countries discussed in the book are highlighted (except for Brazil) 5 3.1 Framework diagram of administration institutions in China for the BRI 57 3.2 The distribution of Chinese reports on the BRI, 2013–17 64 3.3 Number of front-page stories on the BRI 67 3.4 Research publishing trend on the BRI 70 3.5 Number and investment size of AIIB projects by country 73 4.1 The China-Pakistan Economic Corridor (CPEC). Note the proximity to Kabul, capital of Afghanistan, and Chabahar, Gwadar’s competition in Iran 82 5.1 Major railways and key cities in 1944 102 5.2 South Korean outward investment links with China (by province) and Vietnam, accumulated amounts by 2017 107 5.3 Global cities in the Asian Economic Corridor 112 6.1 The China-Indochina Peninsula Economic Corridor (CIPEC). The Thai Government defined a BRI “spur line,” the Eastern Economic Corridor (EEC) high-speed rail (HSR), that connects Bangkok to Utapao Airport. The Bangkok-Chiang Mai HSR is a planned collaboration with Japan 120 7.1 Southern section of the China-Indochina Peninsula Economic Corridor (CIPEC) to be linked by high-speed rail (red lines), and location of some Chinese investment projects discussed in this chapter 138 7.2 Debt of federal government (MYR million) from year 1990 to 2017 (Ministry of Finance, 2018a) 139 7.3 Comparison of revenues and expenditure (MYR billion) (Ministry of Finance, 2018a) 140 7.4 Trade statistics – exports, imports and trade balance (MYR) (Bank Negara Malaysia, 2018) 141
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7.5 Gross exports (left), gross imports (right) (Bank Negara Malaysia, 2018) 141 7.6 FDI from China to Malaysia (credit, debit and net) 142 8.1 (a) Cambodia, its neighbours (with indicative KunmingSingapore eastern route) and (b) its provincial-level administrative units 166 8.2 Roles of MME and EAC in power sector in Cambodia 175 8.3 Foreign direct investments in Cambodia 180 8.4 Top ten international arrivals in Cambodia in 2016 and 2017 181 9.1 Planned rail infrastructure investment and upgrade in Jakarta, Jabodetabek, and Java. Note the scale of the Garuda Seawall to Jakarta administrative area 191 10.1 Iran’s vision for future transportation corridors and the location of three case studies 211 11.1 Vanuatu and Etafe island, where the capital Port Vila is located 227 12.1 Context map of the region including the Addis Ababa–Djibouti railway 250 12.2 The Dire Dawa station under construction 251 14.1 The distribution of Japan’s main ports 286 14.2 The industrial chain structure of Japan’s ports 287 14.3 The Port Cargo throughput of Japan 293
Tables
2.1 Countries involved in six economic corridors 2.2 GDP and per capita GDP in 2018 of countries along the China-Mongolia-Russia Economic Corridor (in USD billion) 2.3 The trade partners within the CMREC 2.4 Trade volume of goods and services of CMREC countries 2.5 The projects along New Eurasia Land Bridge Economic Corridor 2.6 GDP and per capita GDP in 2018 of countries along the New Eurasian Land Bridge (in USD billion) 2.7 The trade partners within the New Eurasian Land Bridge 2.8 Trade volume of goods and services of New Eurasian Land Bridge countries 2.9 GDP (2018) of countries along the China-Central Asia-West Asia Economic Corridor (in USD billion) 2.10 The trade partners within China-Central Asia-West Asia Economic Corridor 2.11 Trade volume of goods and services in the China-Central Asia-West Asia Economic Corridor 2.12 The projects along China-Pakistan Corridor 2.13 GDP and per capita GDP in 2018 of Countries along the China-Pakistan Economic Corridor (in USD billion) 2.14 The trade partners within the China-Pakistan Economic Corridor 2.15 Trade volume of goods and services of China-Pakistan Economic Corridor countries 2.16 GDP (2018) of countries along the BCIMEC (in USD billion) 2.17 The trade partners within China-Pakistan Economic Corridor 2.18 Trade volume of goods and services of BCIMEC countries 2.19 The projects along South-East Asian Corridor 2.20 GDP (2018) of countries along the CIPEC (in USD billion) 2.21 Trade partners within China-Indochina Peninsula Economic Corridor 2.22 Trade volume of goods and services of CIPEC countries
29 32 32 33 35 35 36 36 39 39 40 41 42 42 42 43 45 45 47 48 48 48
xiv Tables
3.1 3.2 3.3 3.4 3.5 3.6 3.7 7.1 8.1 8.2 8.3 8.4 10.1 10.2
The beneficial role of the six major corridors in the regions of China The number of projects in different sectors since the establishment of the AIIB Project investment (by sector) since the establishment of the AIIB The TV news subjects of the BRI The core issues of the BRI construction and development results The most frequently used keywords in the BRI reports in CCTV news The headline information in the Belt and Road Portal List of major Chinese investments in Malaysia since 2006 Population and economic indicators of Cambodia during 2007–17 Planning hierarchy and planning types in Cambodia The share of investment capital in Cambodia from top three countries (2012–16) Cambodia’s hydropower projects invested by Chinese enterprises Iran’s developmental levels, population growth and economic outputs (collated from UN, World Bank, Worldometer and tradingeconomics.com websites) Comparison of major infrastructure projects in the three case cities
56 61 61 65 65 66 68 145 168 169 174 176 209 222
Contributors
Editors/Authors Sun Sheng Han is Professor of Urban Planning, Faculty of Architecture Building and Planning, the University of Melbourne. His research focusses on urban and regional development in Pacific-Asia. Wenqi Lin is Associate Professor of Architecture and Planning at Tsinghua University and the Chief Planner and Director of Innovation Center for Technology of Beijing Tsinghua Tongheng Urban Planning and Design Institute. He has extensive forefront academic and practical experience in urban planning and regional studies in China. Bo Qin is a Professor at the School of Public Administration and Policy, Renmin University of China. His research interests include urbanisation and urban spatial transformation in transitional China. Sidh Sintusingha is Senior Lecturer in Landscape Architecture, Faculty of Architecture Building and Planning, the University of Melbourne. His research focusses on socio-economic, cultural and environmental impacts of urbanisation in South-East Asian cities. Hao Wu is Senior Lecturer in Property at the University of Melbourne. He is an expert in real estate markets and valuation, property rights and land (re) development issues in China, Australia and the Asia-Pacific region.
Authors Murad Ali is Assistant Professor of Political Science at the University of Malakand. His research expertise lies in the political economy of aid and development effectiveness in South Asia, including CPEC and BRI in the context of South-South cooperation. Toong Khuan Chan is Senior Lecturer of Construction Management at the University of Melbourne. His research has been focussed on the structure
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and operations of construction companies, and has contributed to the development of construction industry strategies in Malaysia. Jennifer Day is Senior Lecturer of Urban Planning at the University of Melbourne. She has worked on forced displacement and economic development across the Asia-Pacific region. Shuo Gong is Urban Planner at the Beijing Tsinghua Tongheng Urban Planning and Design Institute, China. She has participated in many urban planning projects and specialises in regional planning and policy analysis. Adrian H. Hearn is Professor of Latin American Studies at the University of Melbourne. His work examines the ecological and social implications of Latin America’s relations with China. Muhammad Imran is Associate Professor in Resource and Environmental Planning at Massey University. His research contributes to sustainable urban development and infrastructure policies in developing Asian countries. Muhammad Saleem Janjua is a former Executive Director of China-Pakistan Economic Corridor (CPEC). He is currently the Country Coordinator (GEB) at United Nations Development Programme (UNDP) in Pakistan. During his tenure at CPEC, Saleem received the “CPEC Communication Award” from the Government of China. Hyung Min Kim is Senior Lecturer in Urban Planning, Faculty of Architecture Building and Planning, the University of Melbourne. His research focusses on international planning/development and land use policy. Kelly Leviker has a background in cultural studies, languages and landscape architecture. In Ethiopia, she worked as a landscape architect and lectured and conducted research at Addis Ababa University (EiABC), where she partook in the development, launching and lecturing of the first landscape architecture degree in Ethiopia. Ymeng Lim is Deputy Director, Inter-Sectoral Division, Battambang Provincial Hall, Cambodia. His role focusses on provincial-level coordination of spatial planning and development, economic and social affairs, laws and public safety, and construction. Wei Liu is an Associate Professor at the School of Public Administration and Policy, Renmin University of China. Her research focusses on public policy theories and international policy diffusion. Morteza Mirgholami is Associate Professor of Urban Design at Tabriz Islamic Art University. He has studied global impacts on local places, place identity and indigenous modernity and everyday life in developing countries, including Iran.
Contributors
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Eka Permanasari is Associate Professor of Architecture at Universitas Pembangunan Jaya. She has expertise in design and planning in Indonesia and has been involved in the master plan of the Giant Seawall, railway transportation and urban regeneration in Jakarta. Zhenjiang Shen is Professor of Urban Planning at Kanazawa University. He has extensive experience in Japanese urban and regional planning policy and design practices. Menghe Wu is Consultant on Industry Development Strategy at the Beijing Tsinghua Tongheng Urban Planning and Design Institute, China. She specialises in regional economic development based on innovative methods and a big-data approach. Hui Yi works for Beijing Tsinghua Tongheng Urban Planning and Design Institute, China. She has made contributions to the translation of this book. Yajing Zhang is a PhD candidate in the Division of Environmental Engineering Design at Kanazawa University. She specialises in spatial planning and mainly focusses on the comparison study between China and Japan. Yan Zhang is a postgraduate student at the School of Public Administration and Policy, Renmin University of China. She is interested in the urban development pattern along the Belt and Road.
Preface
Ideas for a research project on the Belt and Road Initiative (BRI) begun with the editorial team’s participation in the third and fourth International Symposium of Australia-China Research Network on Planning Global City Regions in 2018 (Melbourne, Australia) and 2019 (Xi’an, China), respectively. The symposiums were co-organised by Professor Sun Sheng Han and took participating academics between the urban spaces of Australia and China. It was through these journeys that we exchanged formal and informal stories of the BRI’s implementation while witnessing first-hand China’s growth and increasing economic inf luence both from within and outside of the country. We observed that China’s infrastructure-driven urban and regional development strategy to catalyse economic growth is being exported with the proposed BRI’s economic corridors. It is through these discussions and experiences that we began to speculate and establish links between the developments and understand the drivers of the BRI. In particular, it is the desires for and shared characteristics of “development” in China and other developing countries which we have been researching that captured our attention. The idea for an edited book that focussed on recipient countries’ experiences took shape, and we expanded our network of contributors to academic colleagues working in specific countries, inviting them to share their observations and research, leading to this collection of essays. We would like to express our gratitude to Grace Harrison and Julia Pollocco, who have provided support and guidance to us from the book proposal phase to the submission of the manuscript. We also thank Sean Speers, who worked with us through to the book’s publication, Richard Bajraszewski, who reviewed the first proof and Karthikeyan S, who oversaw the book’s production. Iris Fong assisted us in the creation of maps to complement the chapter contents. The production of the maps was kindly funded by Professor Han. Finally – and most importantly, we would like to thank the contributors, whose country-based accounts significantly enriched and literally scaled up our knowledge of this significant global initiative. They’ve generously endured the multiple reviews and discussions – and as we are merely at the start of the long BRI roll-out, we certainly expect to continue collaborating and researching on the topic. We eagerly welcome comments and feedback on the book. The Editorial Team (Sidh Sintusingha, Hao Wu, Sun Sheng Han, Wenqi Lin and Bo Qin)
Section I
Background
1
Re-imagining the Silk Road for the 21st century Sidh Sintusingha and Hao Wu
General background: China’s master plan for the ‘Asia-Pacific Century’? The China-led Belt and Road Initiative (BRI) has been arguably the most significant global-scale infrastructure investment since the post-Second World War reconstruction of war-ravaged Europe and Asia. Formally launched in 2013, it commenced in a time when the USA has reigned as the world’s sole superpower for over two decades after the fall of the Soviet Union and the Communist Bloc, marking the ‘coming of age’ in the rise of Chinese economic power. Hence, the representation of the project internationally is often framed and dominated by the lenses of geopolitics, and China is viewed as ‘challenging’ US global hegemony. This view has been formally ref lected in President Obama’s policies to ‘contain’ China such as the ‘Pivot to Asia’ and the Trans-Pacific Partnership (TPP). These reinforce the military reality where major US bases already surround China to the east and west, coupled with a strong presence of the US Pacific f leet ‘policing’ some of the world’s busiest and fastest growing trade routes catalysed by China’s rising prosperity. Driven by an isolationist ‘America First’ policy, President Trump pulled the USA out of the TPP trade deal and initiated and escalated trade wars with China. Further compounded by the COVID-19 pandemic, this has contributed to an emergent narrative of ‘decoupling’ economic relationships and even a ‘New Cold War.’ The Director of the Federal Bureau of Investigation (FBI), Christopher Wray, bluntly accused China of engaging “in a whole-ofstate effort to become the world’s only superpower by any means necessary” (BBC, 2020). This phenomenon further sheds light on a historical European colonial legacy where trade and military power are projected hand-in-hand – and that one, military superiority, enforces the other, economic control and dominance. It is through these precedents and practices that the Chinese infrastructure projects – especially major ports and transportation infrastructure investments in South-East Asia, South Asia and Africa – are viewed with suspicion – at least in the West – and are built to meet military strategic objectives.
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Sidh Sintusingha and Hao Wu
In contrast, the Chinese government formally presents the BRI as a grand global plan for economic prosperity with its partners – naturally with China as the major hub with radials of trade routes and modernised infrastructure emanating from the centre (refer to Chapters 2 and 3, and see Figure 1.1). China evokes and presents this as a ‘New Silk Route’ of a previous era, encompassing many centuries, when the East and the West were linked by trade and cultural exchanges (less military domination) with China as a major trade centre. This highlights a strong state-driven developmental agenda, structured by – like its historical namesake – physical corridors linking established urban economic nodes and creating new ones along the way. In contrast to increased American withdrawal from international obligations, the BRI represents China’s intent to assume responsibility for leadership at least in the economic globalisation arena. This is explicitly expressed in the ‘five links’ or the five international and transnational networks that underpin the BRI’s implementation. These are policy coordination, people-to-people, facilities, transnational trade and financial networks. Critically, these are important symbolic images and narratives for both international and Chinese domestic consumption to justify and legitimise the Communist Party leadership that forcefully and confidently operates at a global scale, discussed in more detail in Chapter 3. The BRI has become a major legacy project tied to the current Chinese political leadership – arguably one contributing factor to an important 2018 amendment in the country’s constitution that allowed unlimited terms for the incumbent party Secretary-General.1 It is surmised that this will allow political and policy continuity in an important transformation period in the country’s modernisation. The BRI is a diversification strategy for China’s challenging politico-institutional changes and the Communist Party’s survival. While desiring increased integration with the global economy, it has emerged as a model that diverges from, and perceived to threaten, the Western mainstream liberal democratic and market economy model (Luk and Preston, 2016, p. 173) or what Francis Fukuyama famously defined as ‘the end of history.’ Inescapably, the BRI is viewed as posing competition to an existing hierarchy of global cities, re-orienting the centre of economic activities from the USA and Europe towards East Asia. Moreover, driven by the decades-old drive to develop the poorer western provinces (Markey, 2020, pp. 16–18), the BRI creates new centralities in China outside the major centres of Beijing, Shanghai and Shenzhen-Hong Kong. According to Mayer the BRI is “…a continuation of the opening and reform policy started first by Deng Xiaoping after 1978, it will lead to yet another rescaling of China’s administrative and economic spatiality” (2018, p. 26). China attempts to project its rise and sell the BRI project as growing the ‘economic pie’ through market expansion and a growth process driven by industrialisation and urbanisation – a ‘win-win’ scenario for all participating nations (interrogated in Chapter 4 onwards) and the world economy at large. These issues are further elaborated in Chapters 2 and 3.
Figure 1.1 The six Belt and Road Initiative (BRI) economic corridors and the 21st Century Maritime Silk Road. Countries discussed in the book are highlighted (except for Brazil). (Map credit: Iris Fong)
Re-imagining Silk Road for 21st century 5
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Sidh Sintusingha and Hao Wu
The USA, however, sees this as a competing agenda against its projected narrative (with the reality being complicated) post-Second World War of a world made in its image of ‘liberal democracies.’ The rise of China represents a potential new Cold War rivalry with a different, competing political ideology akin to the previous one with Soviet Communism, but this time with China’s one-party dictatorship. Yet the world today is far more interconnected than in the Cold War period – and the major ‘rivals,’ the USA and China, happen to also be each other’s largest trading and investment partners.2 This is in contrast to broadly mutually exclusive economic systems between the USA and the former Soviet Union and their spheres of inf luence. In fact, US and European corporate foreign direct investments (FDIs) have been a key contributing factor that catalysed China’s unprecedented rise. The West’s neoliberalism economic practices, ironically it may sound, laid the foundation for the rapid growth of China’s state-led capitalism (Lin, 2010) and, subsequently, its extensive outbound public and private investments (Harvey, 2005). These have contributed to significant economic activity and growth in recipient countries (regardless of developmental levels), yet they also raise a lot of concerns. Some are valid – in the cases of increased reliance on Chinese investments and supply-chains in developed economies and ‘debt traps’ in developing economies that can ill-afford the megainfrastructure developments. Yet the tensions are also a result of perceptions of trade deficits, aggressive investments and corruption, as represented by local media and politicians. These broad-brush narratives are quite well known and will be revisited in Chapters 2 and 3 and discussed in detail in chapters on participant countries. It is precisely the complex inter-connectedness that provides the contexts for the main focus of the book – on China’s ‘partners,’ especially those within China’s ‘sphere of inf luence.’ Many of the countries are either former European colonies and/or current US ‘client states.’ Due to these factors, they often find themselves negotiating between the two superpowers – and powers such as Japan and other European countries. However, precisely due to this in-betweenness, they also create neutral spaces for collaboration, actual and potential, between the competing interests. A key concern is whether these competitions will benefit the recipient countries. Hence, with focus put on how BRI projects are represented locally, there are three dimensions the chapters in the book broadly interrogate: first, the respective country’s position in the geopolitical rivalry and the relative status of the BRI in their countries; second, how local politics exploit the BRI; and third, the relevance of BRI projects for recipient country’s infrastructure demand and how the media perceive the BRI’s socio-economic benefits. The book is focussed on a balanced evaluation that highlights the ‘context-dependent’ nature of BRI implementation. The first point depends on at least two factors: China’s own BRI strategy and priority, and the partner country’s receptiveness and capacity. Critically it also depends on whether the specific projects are bilateral – such as in the cases
Re-imagining Silk Road for 21st century 7
of Pakistan (Chapter 4), Indonesia (Chapter 9) or Sri Lanka – or multilateral – such as in the case of high-speed rail (HSR) linking China to South-East Asia that must establish collaboration and coordination between China (Chapters 2 and 3), Laos, Thailand (Chapter 6), Malaysia (Chapter 7) and Singapore to guarantee its successful implementation and operation. For bilateral projects, the BRI should involve two-way strategic interactions of China and recipient countries. Multilateral projects often incur a more substantial bargaining cost and therefore higher project risk and uncertainty. Regardless of the nature of collaborations, the impacts are regional, ref lecting China’s broad strategic objectives and power relations between China and each of the countries and regions involved in the shaping of the BRI. Relative to the first point, the second point focusses on political agency and how the corresponding nation’s political leadership utilises the BRI to serve its agenda. This ranges from championing BRI legacy projects – e.g. Thailand (Chapter 6) and Indonesia (Chapter 9) to campaigning against the project – e.g. Pakistan (Chapter 4) and Malaysia (Chapter 7), especially in countries with democratic political systems – often replicating issues contested internationally, ref lecting contemporary digital connectivity and the 24-hour news cycle. This perspective of the diverse types of domestic interest – not necessarily aligned with China’s – is clearly demonstrated and elaborated in the country-specific cases in this book. Reinforcing the context dependency approach, the last point focusses on how the specific project has been represented and, hence, perceived by the local media and the internal debates on the project’s viability and benefits. This varies by political systems, affiliations and the varying degrees of press freedom. Each country-specific chapter also provides a concise review of its background context, the country’s planning policy and practices – and a synthesis of the two, a broad assessment of BRI project’s relevance, as top-down regional infrastructure ‘supply,’ in the respective country’s infrastructure demands and urban development. The book is significant in that it documents the preliminary implementation phase of an unprecedentedly ambitious global undertaking in the 21st century that will define and have significant inf luence on global geopolitics, development and urbanisation trajectory.3 The research aggregates the country-specific episodes, a bottom-up perspective, to more sharply reveal the ‘big picture’ of the BRI and clarify the broader contested geopolitical and developmental narratives. It also reveals the difficulties, complexities and challenges of the very long-term nature of international infrastructure investments and operations – crucial to a more distributed economic growth and development – that need to meet both local- and global-scale demands.
Globalisation history: the decline and rise of China narrative While the ancient Silk Road and the Maritime Silk Road inspired the BRI and share similar motives for cross-border and continental trade, their geneses
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are significantly different. The ancient Silk Road emerged and formed more organically across centuries through multiple polities (history) spanning Asia and Europe. However, the BRI began as a synthesis of China’s internal drive to rebalance the economy and the increasingly significant international investments and productivity into a coherent vision and blueprint for global economic development. The vision is based on the building of technology-driven infrastructure linkages as a new strategy of global knowledge ‘spill over’ from Asia. This is essentially an exportation of its model of infrastructure-catalysed growth through state-led economic development and rapid urbanisation that have been ‘successfully’ trialled domestically since the post-Culture Revolution economic reform (Lin, 2010). It is China’s unilateral plan for the world, ref lecting its new confidence as an emerging player in the global capital market. Important modern precedents are US-backed and -facilitated international investment and development projects like the Marshall Plan for the reconstruction of post-War Europe and formations of international institutions to aid development, such as the United Nations (UN), the International Monetary Fund (IMF) and the World Bank (WB), or regional entities, such as the Asian Developmental Bank (ADB) and the Bank of International Settlement (BIS). Pre-BRI, China began to utilise its economic power and domestic surplus to increase its political clout in poorer developing countries in Asia-Pacific, Africa and the Americas through the balance of trade as the world’s factory. These began to coalesce into major developmental programmes and mega-projects for Africa and other regions to extract raw materials to feed China’s industrialisation and urbanisation, as well as to stimulate recipient country’s economic activity and growth. A critical question is whether these will lead to physical and institutional infrastructure upgrade and increased local capacity. From the Chinese perspective, another significant historic context is the 19th century colonisation through trade and war and the industrial revolution. China’s leadership considered this a time when the Empire lost its status as a world power and was subjected to humiliation by European powers, culminating in the Opium Wars and its aftermaths of domestic revolutions and wars4 – becoming the ‘Sick Man of the East.’ In the mid-20th century, its subsequent attempt at modernisation through the imported model of socialism and communism failed to bridge the developmental gap and the Chinese felt further ‘left behind’ in the competition for economic wealth and political power. A major turning point is the post-Mao reform period from 1978, when the state experimented with its gradualist economic transition and integration by opening up its economy to private ownership, market resource allocation and international trade (Garnaut et al., 2018; Han and Pannell, 1999; Hayter and Han, 1998). Since then China, driven by the availability of cheap labour, turned into the world’s ‘factory,’ generating substantial revenues for the government through highly favourable trade balances. The surplus has been invested in soft and hard infrastructure, such as road, rail and telecommunications to
Re-imagining Silk Road for 21st century 9
catalyse consumption and urbanisation, first on key coastal economic centres and eventually on second- and third-tier cities (Han and Yan, 1999). This practice has become a policy template that favours urbanisation and the urban economy. Moreover, it has proven to be a great success creating the historically unprecedented virtuous circle of economic growth that has lifted hundreds of millions into the new middle class which then fed back to the demand for an enormous range of goods and services. This helped rebalance the economy away from export dependence towards domestic consumption and investment. It is these developmental approaches that China is apparently exporting through the BRI. Yet, apart from infrastructure-led developments, these practices are far from being an ‘established’ international model as it has been tested at national, regional and local levels within China to facilitate its production, development, coordination and management. Crucially, the BRI has historic and institution roots linking back to world economic development and connectivity, documented in the vast literature on globalisation. Cheng (2018, p. 1) noted that Western scholars “believe that economic globalization originated in the United Kingdom, stating that, essentially, the British capitalist model of production is a globalized method and economic globalization and the capitalist model of production are synchronous.” Interestingly, the rapidly increasing literature on China’s BRI suggests it is becoming ‘synonymous’ with globalisation (Berlie, 2020) – from being the ‘loser’ in 19th and 20th century globalisation. How is this wave of globalisation ‘new’ compared to past cycles? A key divergence from past practices of globalisation is that the BRI focusses on public hard infrastructure (Grimsey and Lewis, 2017). The BRI extends China’s infrastructure-led development model through predominantly state-led investment projects. State entrepreneurism is mainly associated with supply-side policy – the focus on market creation and expansion – and has been applied by the ‘Four Asian Tigers,’ following Japan’s model ( Johnson, 1982; Wade, 1992). The Chinese government practiced state entrepreneurism in the country’s poorer regions as a development issue and the idea of ‘effective market creation’ has clear relevance to the developing countries and regions. Hence, another key divergence with past globalisation practice is BRI’s orientation towards developing countries. An emergent question of novelty is whether state entrepreneurism and developmental state will catalyse a globalscale creative destruction and be a threat to the global order or create a new phase of the ‘globalisation’ as part of the BRI’s rollout. Here the BRI addresses a fundamental conundrum: how can developing countries – often characterised by the lack of large-scale private business capacity, ‘weak state capacity’ and ‘peripheral in the global order’ – undertake development of vital infrastructure? The government has to or has to learn to (such as through the BRI) undertake this role in the first instance. That is the model of governance and state policies. Here the BRI may have to adopt aid and mentoring approaches from government agencies, such as the Japan International Cooperation Agency ( JICA), and international institutions, such
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as the IMF, the WB and the ADB (Stiglitz, 2002). Through focussing on specific projects, the book takes into account BRI-related soft infrastructure development. Here, hard infrastructure is durable physical capital and soft infrastructure is durable human capital such as knowledge and institution (Lin, 2010; North, 1990). Financial capital is utilised to control and connect hard and soft capital. The manifold challenge for the BRI is to create, transform and upgrade the hard, soft and financial capital to allow them to efficiently and sustainably operate in a highly diverse range of geographic contexts. For such an expansive undertaking, the BRI has implications on a very wide theme/field of studies. These include global governance (Berlie, 2020; Carrai et al., 2020; Cheng, 2018; Joshua, 2019a, 2019b; Zhang et al., 2018); international relation (Arduino and Gong, 2018; Ehteshami and Horesh, 2018); and global legal-political institution, practice and integration (Cayol et al., 2020; Shan et al., 2018; Sooksripaisarnkit and Garimella, 2018; Wang et al., 2020; Zhao, 2018). Many have studied the historic perspective of the BRI, i.e. what it is about and its main concerns (Islam, 2019; Lim et al., 2016, p. 8; Shang, 2019) as well as business, politics, history and geography (Chan et al., 2020; Zhang et al., 2018). Applying an interdisciplinary approach, Cheng (2018) examines historical premise, economic logic, values/goals and implementation of the BRI, focussing on process. Other studies look at geopolitics, geo-economics and institutions (Ali, 2020; Ehteshami and Horesh, 2018; Luk and Preston, 2016), and are geographically specific, such as the EU-Eurasia and North Atlantic-Asia-Pacific narrative of complementary connectivity (Leandro and Duarte, 2020). Others investigated economic development and financing ( Joshua, 2019a, 2019b), infrastructure such as on the high-speed rail technology (Grimsey and Lewis, 2017; Xu, 2018), business supply-chain (Chan and Gunasekaran, 2020; Syed and Ying, 2019) and education perspective of the BRI (Huang et al., 2020). This book focusses on the built environment disciplines, adopting a case- or project-specific approach.
Hybrid theory: Keynesian and Neoliberal competing entrepreneurial states, regions and cities We observe that the BRI’s multi-faceted nature (discussed in Chapter 2) is underpinned by a wide range of ideas, strategies and theories which correspond with the findings identified and analysed through the bottom-up approach and empirical observations adopted in this book. Below we provide a brief theoretical overview of the forces and incentives that are useful to develop a better understanding of the BRI phenomena. Given the vast diversity of theoretical approaches, we selected several perspectives that are directly relevant to the BRI phenomenon. Further analysis relating to these perspectives is integrated into the country-specific chapters. After more than three decades’ economic reform, China’s domestic wealth accumulation reached a level that there are strong demands for capital to seek higher returns from global opportunities (Piketty, 2014). Naturally,
Re-imagining Silk Road for 21st century 11
substantial Chinese investments f lowed into the Western economies as private capital favours more mature growing markets for their perceived security and/or risk-adjusted returns. Moreover, China’s combination of increasing wealth creation and the large population base create demands for price competitive products, innovations and employment opportunities – leading to the expansion of existing and creation of new markets. The vast rural region has felt the pressure of such an expansion and begun to receive more attention from both the state and the private sectors (Han and Lin, 2019). As domestic capital progressively contributed to the robust growth and development in urban areas, the established domestic state-owned and private elite capital started to shift their investments into peri-urban and rural regions (Hong and Sun, 2020; Liu et al., 2016; Wu and Liu, 2018). These areas are characterised by higher social sensitivity due to rural land tenure reforms, wealth disparity and spatial transformation, which is further compounded by the hukou system as a regulatory constraint to the domestic population mobility.5 However, the Chinese central government behaved and operated similar to a sovereign wealth fund, adopted by many wealthy nations, and accumulated substantial foreign assets as mitigating long-term international investment to sustain their strategic national interests. The corresponding rapid growth in the Chinese state-owned capital and enterprise created strong motive for its global expansion and so the government began making strategic investments into both domestic and overseas public infrastructures and asset holdings. The objective is to establish, reinforce and extend connectivity and business networks to consolidate, expand or create new markets, consistent with practices advocated by classical economic theory. In other words, the increasingly integrated global markets and the demands for capital, accumulated from within the Chinese society, require a symmetrically improved interaction and incorporation of cultural norms, international standards and spatially driven integration. These are determined by the changing structure or ‘institutional dynamics’ at a global scale. Moreover, the powerful engagement and intervention of the state in China’s domestic and international economic affairs bears the hallmarks of the Keynesian theory that takes into account human psychology, system uncertainty and asset liquidity demand for money supply in shaping the country’s monetary, fiscal and investment policies (Davidson, 2007; Keynes, 1936; Olson, 1965, 1982). BRI-induced globalisation ref lects the power of trade and scale which leads to increasing returns and economic growth. The efficiency of international trade relates to technological diffusion which is consistent with the BRI’s focus on rail infrastructure investments for regional and international connectivity and integration. Classic international trade theory provides an explanation of why nations trade and gain benefits through division of labour based on specialisation for local trade and comparative advantage for international trade (Ricardo, 1817; Smith, 1776). Accordingly, an organisation or a country’s comparative advantage lies in its relative capacity to specialise or its division of labour to achieve resource allocation efficiency between nations.
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In the trade between nations, a balance of payment is demanded for system equilibrium so that the gain from trade is optimised (Keynes, 1936). The essence of international trade is also about gaining from the economy of scale, the extent of the market, as the market size and its expansion raise volume of trade and values being created through the Smithian ‘division of labour.’ The Chinese state views its role to improve and maintain social productivity. The Keynesian framework and the ‘supply-side’ ideas have been intensely discussed and debated in the context of China’s recent economic policy adjustments (Garnaut et al., 2018; Zhang et al., 2018). The BRI as a state-initiated domestic and international investment programme, across urban-rural regions, is at the forefront of this theoretical construct. Keynesian macroeconomic theory of trade and state policy intervention recognises government’s ability to provide aggregate economic welfare and politicoeconomic stability at domestic and international levels. The theory explains and argues for the state’s direct and indirect interventions and its involvement in economic affairs which directly informs the Chinese experience. China’s post-market reform growth is arguably led by the central and local governments’ facilitation to mobilise state-owned assets to boost their productivity. The neoclassical theory describes the role of the state as a distributive function to provide public goods such as defence and formal institutions to regulate a nation (North, 1981). The Keynesian approach to the role of government involves the state in infrastructure investment, direct and indirect government consumption, fiscal and monetary policies, and all other policy tools to sustain asset liquidity in support for effective demand being met. The government’s ability to make, change and enforce rules so to create, alter and adjust social and economic order is another essential role of the state. The BRI involves a large number of international locations and regions. A traditional geographic approach is useful to apprehend the patterns and distributional effect in the BRI participating countries, regions and projects. There is a vast economic geography literature and discourse on the movement, mobility as well as associated policies of international capital and labour. In particular, the new trade and new economic geography theories emerged since the 1980s represent an economic approach that highlights the role of location and endogenous growth in explaining regional and international trade. The new economic geography emphasises economic activities’ spatial and regional dynamics in relation to increasing returns to scale to expand the size of markets (Fujita et al., 1999; Krugman, 1991). It compares and challenges the urban hierarchy framework through forces that create dynamic, non-linear spatial effect, with an objective of creating positive externality such as innovations as the source of net social benefit to support urban-regional economic growth. At least in the initial stage of the BRI programme, with China being the sole initiator and main source of capital, labour and monetary outputs in a wide range of diverse countries and regions, the new economic geography thinking is relevant for the evaluation of urban-regional changes through agglomeration and core-periphery patterns.
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The prominent Chinese agriculture and institutional economist Justin Lin (2012) proposed the structuralism approach to address the issue of economic expansion and urbanisation. Following the work of Murphy et al.’s (1989) ‘big-push’ theory, Lin forcefully argues that modern economic growth since the 19th century has been strongly catalysed by industrialisation and the associated urbanisation through institutional reform and infrastructure upgrade. These, in turn, led to global scale human, physical and knowledge capital expansion, by way of intensification of trade and the politico-economic colonisation of others. At the heart of his theory is that similar structural forces of strategic state-led transformation and growth-driven mechanisms explain contemporary China’s increased economic prosperity and expansion, forming an important guiding principle for its growth strategy. This provides a partial explanation to the narratives of colonisation hurled at the BRI in its implementation in many countries. In these senses, the Chinese government is playing a significant role in reinforcing the Neoliberalism perspective and the notion of competing entrepreneurial states in the 21st century global capitalism (Harvey, 2005; Piketty, 2014). Global cities and regions perspectives form a main focus of this book to clarify region-specific perspectives of the BRI, its internal logic and the interactive regional effects. The power interactions perspective for urban and regional (re)development, similar to Li et al.’s (2019), is also explored in this book.6 Space production, urbanisation and regional development perspectives form an important theoretical basis of a large volume of literature on urban planning and public administration. Lefebvre’s social production of space (1974) assists in our understanding of spatial change and social link formation within a specific urban and regional socio-economic context. Consistent with Lefebvre’s theory, local and external (endogenous and extraneous) forces contribute to spatial dynamics. At the broadest level, social production of space can be used to understand the dynamics of cities and regions, operating at local and global scales (Nasongkhla and Sintusingha, 2013). BRI infrastructure projects will benefit from the continuous accumulation of knowledge and experience gained through the implementation of international projects in the developing world. Here the firm production and industrial economics perspectives assist in understanding the forces behind the BRI projects. International collaborations on infrastructure projects can be analysed from a supply-chain and international strategic contracting perspective. The supply-chain and vertical integration framework emphasises aspects such as project production, logistic and infrastructure connectivity. International firms’ strategic actions and performances are directly related to their relative integration capacity of resource assembly and risk resilience. This also depends on their collaboration experience and position in the hierarchy for efficiency and growth, and competitive advantage and entry barriers from market and government instruments (Porter, 1990). Firm integration at a global scale and FDI activities are increasingly important components of the
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international capital market phenomena, where wealth formation and redistribution have become increasingly global in the 21st century (Piketty, 2014). The historic-institutional perspective leads to an important dimension of culture diversity, whether in China’s own internal evolution implied above and, significantly, through the multi- and cross-cultural nature of the BRI and the notion of colonisation. Here Homi Bhaba’s (1994) concepts, such as cultural difference, ambivalence, hybridity and third spaces, provide a particularly useful framework for the bottom-up analyses from the perspectives of various BRI partner countries. Here the chapters provide views from the cultural interstices, where different cultures clash and negotiate, and new forms and practices – institutions – emerge in the process. Overall, this section offers a broad theoretical framework to help read and analyse the country-specific stories in Chapters 4–14, which leads to clearer insights on the BRI that are further elaborated in Chapter 15.
BRI and new, emergent institutions and organisations China’s institutional and structural changes have been one of the most interesting in recent history and have strongly inf luenced and affected major programmes such as the BRI. The importance of how institution quality and adaptive capacity affect nations’ economic performance has been argued in both historic, e.g. colonial (Acemoglu et al., 2001; North, 1990), and contemporary (North, 1981; Olson, 1982) contexts. Depending on the incentive structure, institutions and their innovation may work for or against economic efficiency, affecting the performance of the society and its welfare. Institutions also inf luence human behaviour and, hence, the strategic decision or policy prescription of a nation. The BRI represents a grand and complex process of international infrastructure investment, development and trade f low that is occurring under diverse international institutional settings. The process involves equally diverse ranges of organisations largely due to the combined inf luences of the home and overseas markets, industries and political structures. Hence, in addition to the culturally specific multinational perspectives, one further contribution the book makes is the identification and evaluation of emerged and emerging institutions and organisations (e.g. Chapter 3), including the multinational enterprises. We follow North’s (1990) conceptual split of institution and organisation and between the formal rules such as laws and informal norms such as culture. This includes (1) project cases that ref lect contractual arrangements (Chapters 4, 6, 12) and semi-formal consents (Chapters 10, 11, 13) of the BRI process; (2) the trade perspective that engages international f lows of capital and labour (Chapters 5, 7, 8, 13); (3) organisations that emerge as state-owned enterprise, private enterprise and joint-venture firm, and international governing organisation such as the Asian Infrastructure Investment Bank; and (4) participating nations’ policies, joint policy and the evolving collective understanding of the BRI process, e.g. emerging international convention.
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This is broadly consistent with Mayer’s (2018) three theoretical lens to analyse the BRI: namely power dynamics, geoeconomic-institutional regional transformation and identity-affected knowledge (Chapters 12–14). Moreover, since at least the 1970s (Caves, 1971), the lens of industrial economics of foreign investment has been used to analyse international corporations which have substantially altered, for good or for bad, the existing global order (Stiglitz, 2002). These lenses are useful in comparing with and evaluating country- and context-specific BRI projects. Moreover, the BRI initiative demonstrates the dual and mutual roles of the f low of information and real capital in the era of the communicative technology revolution. Global economy and institutional and organisational networks demand both the exchange of information and the ‘real f low’ of capital to circulate efficiently and concurrently. New information technology has been revolutionary in transforming the way nations create, store and share knowledge for international collaborations. Both transportation and communication technologies are transforming how capital and information are circulated, connected and communicated.7
Focus and book structure The rationale of the BRI as an economic and political strategy for China’s growth and stability in the 21st century appears to take a comprehensive, balanced and integrated consideration of a wide range of theoretical and contextual perspectives. According to Carrai et al. (2020, pp. 2–3), the BRI’s main ‘benefits and intentions’ encompass regional cooperation; economic integration; industrial upgrade; connectivity; economic development, including domestic regional economic development; (markets) outlet for Chinese products; services; and overseas investments, allowing for the development of China’s western regions, diversification of its sizable foreign exchange reserves and capital, and internationalisation of the RMB. Therefore, in its global implementation, the BRI needs to be viewed with the ‘balance of trade’ principle in mind. This is significant as the sense of (or lack of ) distributive fairness at global scale is often a major trigger of geopolitical conf lict with counteracting effects. Global and local political, media and/or other actors often cite the inequity and/or injustice to justify opposition to, rejection of collaborative activities.8 They are the major challenges for China to acknowledge and respond to, and for it to learn from the global history of colonisation to navigate and achieve progress at international scales on multiple fronts. Moreover, the BRI is being challenged to achieve global trade and cooperation with lower environmental impacts than past programmes. The BRI can be considered a hybrid development strategy and foreign policy. While Deepak (2018) sees the BRI as a global rebalancing, Markey (2020, p. 25) describes it as “China’s new toolkit for economic statecraft.” Carrai et al. (2020) define the BRI as China’s developmental strategy on global trade and market creation and expansion. The BRI facilitates the
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development and upgrade of the global infrastructure network, mainly of the developing nations. In these aspects, the BRI is unique and historically significant. Compared to Chan and Gunasekaran (2020), the book adopts a global outlook (Arduino and Gong, 2018; Mayer, 2018) within specific contexts, offering a regional perspective of urban development. Chapters 2 and 3 provide a framework of China’s BRI agenda, internal drivers, institutions and corridor rationale and details. The ensuing chapters then focus on recipient nation’s experiences through contributions from built environment experts who are based in these countries, revealing a heterogeneity of BRI urban and infrastructure development perspectives. Hence, the country chapters are focussed less on corridors (refer to Figure 1.1) and more on specific BRI projects in the respective countries. Of the six corridors, three are represented in specific chapters: namely the 3,000 km Pakistan corridor (Chapter 4) or China-Pakistan Economic Corridor (CPEC – with plans to link on to Iran and the Middle East); Thailand (Chapter 6), Malaysia (Chapter 7) and Cambodia (Chapter 8) in the China-Indochina Peninsula Economic Corridor (CIPEC); and Iran (Chapter 10) represents the China-Central Asia-West Asia Economic Corridor (CAAEC) that has been directly hampered by the superpowers’ geopolitical contestations. The BRI in Cambodia, Ethiopia (Chapter 12), Iran, Indonesia (Chapter 9), Malaysia and Pakistan either encompasses or is linked to port projects that are associated with the Maritime Silk Route. The CPEC and CIPEC – in particular the high-speed rail (HSR) project connecting Southwest China through Laos, Thailand, Malaysia and Singapore – represent ‘bilateral’ and ‘multilateral’ arrangements, respectively.9 While the South-East Asian Corridor has essentially been implemented through bilateral negotiations and agreements between each respective country and China, the project is multilateral by nature – at least to ensure effective connectivity and success in the longer term. At the time of writing, substantial investments have been made on the Pakistan corridor where many projects have been completed, while only the Laos leg of the HSR has made significant progress in South-East Asia. Thailand has begun construction on its Bangkok to Nakorn Ratchasima, a satellite city 250 km towards the north-east, to eventually link with the Laos capital Vientiane, while Malaysia has cancelled its Chinese infrastructure projects with the change in government in 2018, citing high debt levels – to later restart again. In this case where BRI spans multiple countries, the projects are required to be concurrently justifiable as individual, separated phases as well as part of a much longer-term vision. The book also focusses on factors such as the experience of countries that share borders with or are within close proximity of China from the ‘allweather friendship’ with Pakistan to the complexities and potentials of the Korean Peninsula (Chapter 5). As they encompass a very wide range/disparity of economic size and wealth, development and political cultures, the book provides insights on how these factors inf luenced their varied experiences
Re-imagining Silk Road for 21st century 17
especially the local, domestic interests. The book includes a chapter on Ethiopia, a major recipient of Chinese investment and aid, to offer a representation of the African experience. Cambodia and Vanuatu (Chapter 11 – representing the Pacific island countries) provide accounts of relatively small economies that have come under strong Chinese inf luence. Representing South America, Brazil (Chapter 13) is part of the BRICS (Brazil, Russia, India, China and South Africa) that has acutely felt the impact of China’s rise on its land uses and urbanisation. While their context-dependent experiences are highly diverse, the countries share the desire to link to pre-existing global networks and to each other to boost domestic economic development.
Distinction and contribution The BRI is one of the emerging themes of global significance and could potentially become a new metanarrative of globalisation and economic development. The research is distinctive and significant given it is one of the first attempts to focus the BRI on an urban-regional infrastructure development and investment context. Empirical, strategic studies have begun to reveal the BRI’s impacts such as de Soyres et al. (2018) that used GIS to conduct a before-after analysis to find significant trade cost reduction from BRI transport infrastructure investment. Chen and Lin (2018) investigated FDI activities in BRI countries that reveal positive yet diverse patterns and economic effects relating to source and destination countries. They used bilateral trade data (1995–2015) to evidence closer trade relation and policy discussions between the BRI regions and China. Johns et al. (2018) investigated the effect of trade facilitation reforms in the BRI corridors. Complementing these growing bodies of research, the country-specific ‘bottom-up’ approach provides unique perspectives, locally grounded BRI experiences and narratives. The BRI represents a policy attempt that is reshaping international collaboration and catalysing economic opportunities, development and growth but could also lead to new economic risks, competitions, conf licts and instability. Insights from this research provide lessons for and potentially lead to models of international collaboration in urban and infrastructure development and inform future evolution of the BRI. It offers insights of actual interactions between political institutions and the agents that emerged to manage the new BRI network. This book empirically traces the ‘real f low’ of infrastructure network formation and upgrade, and the related and emerging institutions. It assists in understanding new concepts like the BRI through collecting, evaluating and interpreting multiple experiences, which are further developed into theoretical propositions and principles. They form new knowledge to guide future practices. At the time of writing since early 2020, the BRI has been challenged by a countervailing global public health and economic crisis triggered by the COVID-19. This had most significant impact and posed new obstacles upon the trend and push for increased global connectivity, for which the BRI has
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been at the front and centre. Jia et al. (2020) and Kraemer et al. (2020) pose questions on the role of population movement that lead to significant global contagion and consequences and the effects of drastic intervention. The pandemic has precipitated a geopolitical blowback against connecting and engaging with China, reinforcing the narrative of decoupling and questioning the overreliance on the global supply-chain. This brings up the question: to what extent might this alter the core arguments of the BRI? In the longer term, this remains to be seen but we note that the Keynesian remedy for economic crisis and depressions favours the BRI’s state-led infrastructure investment and building approach. This chapter brings up the book’s focus on BRI challenges noting that obstacles to global governance and opportunities for global development coexist. In implementation, the BRI interacts with the existing multilateral systems, regionalism, nationalism and conf licts – to which, it is observed, ‘institution building’ is crucial to facilitate south-south and south-north trades (Cheng, 2018; Mayer, 2018). The chapter discussed critical elements and insights to the broader question of the BRI’s profound historic, geographic, and cultural roles. The following chapters delve into individual country’s experiences, beginning with China, the BRI instigator.
Notes 1 The amendment took effect on 11 March 2018 at the first session of the 13th National People’s Congress of the People’s Republic of China. 2 For a concise account of this complex relationship, refer to https://yaleglobal. yale.edu/content/10-quick-facts-us-trade. 3 With economic, political, ideological, technological dimensions concerning capital (wealth) accumulation, power distribution and new knowledge (e.g. new information) formation. 4 Other major disruptions in the ensuing period are the 1911 Revolution that resulted in the founding of the Republic of China, and the nationalism period (1911–1949), the Second World War and Chinese Civil War that led to the founding of the People’s Republic of China. 5 The ‘hukou’ system is a residential permit system to formally prevent rural-urban migration. Practically, it may not prevent population movement but may worsen inequality. Without available and formalised legal rights, the rural migrants often find themselves being further disadvantaged (Chan, 2009; Cheng and Selden, 1994; Han, 2004; Song, 2014). 6 Specifically, in an infrastructure and regional development context, these theoretical perspectives ultimately link to concerns on capital formation, replacement, redistributive justice and power interactions. Moreover, it is conducted by spatial change, production and distribution of political conf licts. What is missing is a perspective of social transformation at local levels (in different BRI nations) as real-life event, corresponding to the theoretical abstraction. This implies economic development that is linked to the infrastructure projects. 7 This is known as the ‘internet of things’ or the network of real things. 8 This small episode in Kenya, magnified by social media and a leading US media company, provides a case in point: https://www.nytimes.com/2018/10/15/ world/africa/kenya-china-racism.html?action=click&module=Trending& pgtype=Article®ion=Footer&contentCollection=Trending.
Re-imagining Silk Road for 21st century 19 9 There’s also the ‘Information Silk Road’ to link all of ASEAN’s information economy sector with China, see https://www.youtube.com/watch?v= Kw6SLjeywtI (from 39.45).
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Garnaut, R., Song, L., and Fang, C. (2018, eds). China’s 40 Years of Reform and Development 1978–2018. Australian National University Press, Canberra. Grimsey, D. and Lewis, M. K. (2017). Global Developments in Public Infrastructure Procurement: Evaluating Public-Private Partnerships and Other Procurement Options. Elgar, London. Han, S. (2004). Agricultural surplus labor transfer, in C.-M. Hsieh and M. Lu (eds.), Changing China: A Geographical Appraisal, Chapter 5, pp. 65–81. Taylor and Francis, London. Han, S. and Lin, W. (2019). Transforming rural housing land to farmland in Chongqing, China: The land coupon approach and farmers’ complaints. Land Use Policy, 83(2019), 370–8. Han, S. and Pannell, C. W. (1999). The geography of privatization in China, 1978– 1996. Economic Geography, 75(3), 272–96. Han, S. and Yan, Z. (1999). China’s coastal cities: Development, planning and challenges. Habitat International, 23(2), 217–29. Harvey, D. (2005). A Brief History of Neoliberalism. Oxford University Press, Oxford. Hayter, R. and Han, S. (1998). Ref lection on China’s open policy towards foreign direct investment. Regional Studies, 32(1), 1–16. Hong, Z. and Sun, Y. (2020). Power, capital, and the poverty of farmers’ land rights in China. Land Use Policy, 92(10447), 1–8. Huang, R., Liu, D., Tlili, A., Gao, Y., and Koper, R. (2020, eds). Current State of Open Educational Resources in the “Belt and Road” Countries. Springer, London. Islam, M. N. (2019 ed). Silk Road to Belt Road: Reinvesting the Past and Shaping the Future. Springer, London. Jia, J., Lu., X., Yuan, Y., Xu, G., Jia, J., and Christakis, N. (2020). Population f low drives spatio-temporal distribution of COVID-19 in China. Nature. doi:10.1038/241586-020-2284-y (29/04/2020). Johns, M. B., Clarke, J. L., Kerswell, C., and McLinden, G. (2018). Trade facilitation challenges and reform priorities for maximising the impact of the belt and road initiative. Discussion paper MTI Global Practice, 4, World Bank Group. Johnson, C. (1982). MITI and the Japanese Miracle. Stanford University Press, Stanford. Keynes, J. (1936). The General Theory of Employment, Interest, and Money. Prometheus Books, New York. Kraemer, M., Yang, C., and Gutierrez, B., et al. (2020). The effect of human mobility and control measures on the COVID-19 epidemic in China. Science, 368, 493–7. Krugman, P. (1991). Geography and Trade. MIT Press, Cambridge. Joshua, J. (2019a). The Belt and Road Initiative and the Global Economy, v1, Trade and Economic Development. Palgrave Macmillan, New York. Joshua, J. (2019b). The Belt and Road Initiative and the Global Economy, v2, the Changing International Financial System and Implications. Palgrave Macmillan, New York. Leandro, F. and Duarte, P. (2020, eds). The Belt and Road Initiative: An Old Archetype of a New Development Model. Palgrave Macmillan, London. Lefebvre, H. (1974). The Production of Space. Blackwell Publishing, London. Li, X., Han, S., and Wu, H. (2019). Urban consolidation, power relations, and dilapidated residential redevelopment in Mutoulong, Shenzhen, China. Urban Studies, 56(13), 2802–19. Lim, T. W., Chan, H., Tseng, K. H., and Lim, W. X. (2016, eds). China’s One Belt One Road Initiative. Imperial College Press, River Edge, NJ.
Re-imagining Silk Road for 21st century 21 Lin, J. Y. (2010). New structural economics – a framework for rethinking development. Policy Research Working Paper (5197), pp. 1–38, February 2010, the World Bank, New York. Lin, J. Y. (2012). New Structural Economics: A Framework for Rethinking Development and Policy. The World Bank, Washington, DC. Liu, W., Dunford, M., Song, Z., and Chen, M. (2016). Urban-rural integration drives regional economic growth in Chongqing, Western China. Area Development and Policy, 1(1), 132–54. Luk, C. Y. and Preston, P. W. (2016). Logic of Chinese Politics. Elgar, New York. Markey, D. S. (2020). China’s Western Horizon: Beijing and the New Geopolitics of Eurasia. Oxford University Press, New York. Mayer, M. (2018, ed). Rethinking the Silk Road: China’s Belt and Road Initiative and Emerging Eurasian Relations. Palgrave Macmillan, London. Murphy, K., Shleifer, A., and Vishny, R. (1989). Industrialisation and the big push. Journal of Political Economy, 97(5), 1003–26. Nasongkhla, S. and Sintusingha, S. (2013). Social production of space in Johor Bahru. Urban Studies, 50(9), 1836–53. North, D. (1981). Structure and Change in Economic History. Norton, New York. North, D. (1990). Institution, Institutional Change, and Economic Performance. Cambridge University Press, Cambridge. Olson, M. (1965). The Logic of Collective Actions. Harvard University Press, Cambridge, MA. Olson, M. (1982). The Rise and Decline of Nations: Economic Growth, Stag flation and Social Rigidity. Yale University Press, New York. Piketty, T. (2014). Capitalism in the Twenty-first Century. Harvard University Press, Cambridge, MA. Porter, M. E. (1990). The Competitive Advantage of Nations. The Free Press, New York. Ricardo, D. (1817). The Principles of Political Economy and Taxation. Dover, London. Shan, W., Nuotio, K., and Zhang, K. (2018, eds). Normative Readings of the Belt and Road Initiative. Springer International Publishing, London. Shang, H. (2019). The Belt and Road Initiative: Key Concepts. Springer and Peking University Press, Beijing. Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations. Penguin, London. Song, Y. (2014). What should economists know about the current Chinese hukou system? China Economic Review, 29, 200–12. Sooksripaisarnkit, P. and Garimella, S. R. (2018, eds). China’s One Belt One Road Initiative and Private International Law. Routledge, London. Stiglitz, J. (2002). Globalisation and Its Discontents. W.W. Norton & Company, New York. Syed, J. and Ying, Y. (2019, eds). China’s Belt and Road Initiative in a Global Context, v1, a Business and Management Perspective. Palgrave, New York. Wade, R. (1992). Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization. Princeton University Press, Princeton. Wang, G., Lee, Y., and Leung, M. (2020). Dispute Resolution Mechanism for the Belt and Road Initiative. Springer and Zhejiang University Press, Hangzhou. Wu, H. and Liu, X. (2018). Centrally located urban village and economic performance, in S. Han and W. Lin (eds.), Healthy Future Cities, Chapter 18, pp. 474–85. China Architecture Industry Press, Beijing.
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Xu, F. (2018). The Belt and Road: The Global Strategy of China High-Speed Railway. Springer, London. Zhang, W., Alon, I., and Lattemann, C. (2018, eds). China’s Belt and Road Initiative: Changing the Rules of Globalization. Palgrave, New York. Zhang, Y., Nie, R., Shi, R., and Zhang, M. (2018). Measuring the capacity utilization of the coal sector and its decoupling with economic growth in China’s supply-side reform. Resources, Conservation and Recycling, 129, 314–25. Zhao, Y. (2018, ed). International Governance in China under the Belt and Road Initiative. Cambridge University Press, Cambridge.
2 The BRI from within China Vision, rationale and the “corridors” Wenqi Lin, Shuo Gong, Menghe Wu and Hui Yi
China’s BRI vision: history and geography The initiative and its historical root The initiative was formally proposed by the Chinese President Xi Jinping during his visit in Central Asia and South-East Asia in September 2013, as a jointly built ‘Silk Road Economic Belt’ and a ‘21st Century Maritime Silk Road,’ which have together come to be known as the ‘Belt and Road Initiative’ (BRI). He argued that countries along the Belt and Road regions are complementary by their resources and economic capacities, suggesting strong cooperation potential. The Initiatives aim to meet the challenges faced by the global economic downturn under the principles of mutual respect, international cooperation and win-win collaboration. It aims to create new opportunities for economic development so as to realise mutual benefit. The inf luence of the BRI is rapidly rising across international organisations, attracting extensive attention of the international community, as the idea and initiative get translated into action, which may make real impacts to the region and the world.1 The BRI has a long cultural history, tracing back more than two millennia as a continental trade route. The Silk Road took shape in ancient China, connecting Asia, Africa and Europe. Its initial aim was to transport goods such as silk and porcelain produced in ancient China, and it gradually became an important inter-continental communication channel for economic, political and cultural exchanges. The Silk Road can be divided into the Continental Silk Road and the Maritime Silk Road by their transportation modes. Historically, the Continental Silk Road is associated with the routes established during the Western Han Dynasty (202 BC–AD 8) when Emperor Hanwu dispatched Zhang Qian on a diplomatic mission in the western regions of China. The route started from the capital city Chang’an (now Xi’an, Shaanxi Province), connected with the Mediterranean Sea via Liangzhou, Jiuquan, Guazhou, Dunhuang, Central Asia (what is now Afghanistan, Iran, Iraq and Syria), and ended in Rome with a total journey of 6,440 kilometres. The Silk Road is considered the linkage between the ancient eastern and
24 Wenqi Lin et al.
western civilisations of the Eurasian continent. The Maritime Silk Road, dating back to the Qin (221 BC–203 BC) and Han dynasties, generally stands for the maritime passage for economic and cultural exchanges between ancient China and the rest of the world. It started from the Chinese coastal cities of Guangzhou, Quanzhou, Ningbo and Yangzhou, via the South China Sea to the Arabian Sea, reached as far as to the east coast of Africa. With the passage of time, the Silk Road has become a symbolic term for political, economic and cultural exchanges between ancient China and kingdoms, empires and cultures to the West.2 Rather than a geographical concept, the Chinese official and academic discourse projects the BRI as an abstract cultural symbol (Liu, 2015). There were trade routes for commodity trade such as silk between ancient China and Eurasia since the Han Dynasty that coined the ‘Silk Road’ concept. However, its specific routes and spatial features have constantly changed by geographical environment, economic development status, and political and religious contexts. The concept is associated with peacetime with its role in promoting goods and culture exchange brought about prosperity and development. Throughout its history, this was interrupted by wars and regional instability. Consistent with the historic symbolic connotations, the Chinese government intends to apply and convey the cultural symbol to economic development based on the principles of ‘peace, cooperation, development and mutual benefit.’ The BRI vision and goals The BRI vision is clearly stated in the 2015 document, Vision and Actions on Jointly Building the Silk Road Economic Belt and the 21st-Century Maritime Silk Road: It (BRI) is aimed at promoting orderly and free f low of economic factors, highly efficient allocation of resources and deep integration of markets; encouraging the countries along the Belt and Road to achieve economic policy coordination and carry out broader and more in-depth regional cooperation of higher standards; and jointly creating an open, inclusive and balanced regional economic cooperation architecture that benefits all.3 The vision reveals China’s intent of a deeper integration into the global economic system by playing a more active role in leading world economic development and conforming mechanism and trends. Diverging from the historic tendency of countries that emerged as hegemons, the Chinese government expressed the BRI as a strategy to promote global peace and cooperation, openness and inclusiveness, mutual learning and mutual benefit. While motivated by the common ideals pursued by human societies, it is a positive endeavour to seek new models of international cooperation and global
Vision, rationale and the “corridors” 25
governance. It shows China’s willingness to assume more responsibilities and obligations, within its capacity, to contribute to the peace and development of the global community (Dang, 2018). The core of the BRI’s vision is to promote cooperative practices in all participating countries and regions, to promote community-based common interests and to develop shared value and responsibility, and it features mutual trust, market integration and cultural inclusiveness. It prioritises the ‘five links’ – emphasising the development and enhancement of global connectivity through policies, infrastructure, trade, finance and people. In the area of policy coordination, the BRI promotes intergovernmental cooperation towards multilevel intergovernmental policy exchange and communication mechanism. Regarding infrastructure connectivity, the BRI will improve connectivity between countries along the corridors through infrastructure construction plans and technical standard systems; the construction of international trunk passageways; and the formation of infrastructure network connecting subregions of Asia, Europe and Africa. As for unimpeded trade, the BRI will create special economic zones and negotiation of free trade agreements among the BRI countries to promote free as well as fair trade. On financial integration, the BRI envisions deepened financial cooperation for stable regional currency, investment and financing, and credit information system. As for people-to-people bonds, the BRI aims to foster the historic Silk Road spirit of friendship and cooperation through close cultural and personnel exchanges (including youth programmes), media cooperation and volunteer services so to gain public support of the deepening bilateral and multilateral cooperation.
The rationales of the BRI Responses to the global politico-economic structural change Since the 2008 global financial crisis, the global industrial structure has undergone profound readjustment. Global supply chain is shifting to emerging markets with potential capacity. This has heightened competition and has generated structural imbalance in global trade. With slowing economic growth, developed economies have recalled their outbound investment for domestic capital capacity causing sharp decline of cross-border capital f low that has intensified capital market turbulence in global capital markets. The changes also created obstacles to the growth of world trade where export in many countries has deteriorated. The structure of world trade for goods and services demands readjustment. It is within this context that China adjusted its long-term growth and global trade strategies from being developed countries oriented. With high growth potential, China’s neighbouring countries are resource rich representing an opportunity and alternative for economic development through transnational regional cooperation and trade.
26 Wenqi Lin et al.
Responding to the global structural change, advanced economies, represented by the United States, have launched a new wave of regional trade cooperation such as the Trans-Pacific Partnership Agreement (TPP) and Transatlantic Trade and Investment Partnership (TTIP). It is challenging for developing or emerging Eurasian market economies to join high-level regional economic cooperation due to their geographic, infrastructure and development constraints. These countries are keen to participate in regional economic cooperation to activate their internal capacity to drive their own development. The BRI serves as a platform for these countries to strengthen their economic cooperation and simultaneously creates opportunities for economic development. Globalisation promotes transnational corporations and specialisation, which allows global allocation of resources and breeds new patterns of global manufacturing that generally move from developed countries to developing countries. To some extent, this transfer has reduced employment opportunities and caused income inequality in developed countries (Gu et al., 2017). Benefiting from the shift in manufacturing, the rise of emerging markets such as China has impacted the position of Western countries in global trade and international economic geography. The 2008 crisis and, more recently, the 2020 COVID-19 pandemic further amplified this tension brought by globalisation. Being the initiators and leaders of neoliberalism and globalisation, advanced economies like the United States have shifted policies, launching a wave of de-globalisation and trade protectionism, increasing entry barrier and capital control (Dan, 2017). The United Kingdom and some other European countries appear to be withdrawing from global governance. Britain’s decision to leave the European Union and large-scale demonstrations that broke out in some Western European countries raise the concern of anti-globalisation that has parallels in the United States under the Trump administration. This process has substantially raised China’s international trading costs. Also due to the impact of the changing domestic demographic and urban structure, China’s population or labour dividend is fading, which indicates that industrial structure upgrade is urgent. The BRI expands China’s foreign markets and international trade, allows domestic industries to upgrade and transform, while encouraging developing countries along the routes to benefit from global trade and enhanced capacity for continuous economic development. In this context of global dynamics, Zhang Jun, head of the Department of International Economic Affairs in China’s Ministry of Foreign Affairs, has noted in 2017 that if Western nations withdraw, a rising power like China could be forced to step in: “If China is required to play that leadership role, then China will assume its responsibilities.”4 Western observers have made similar comments. For example, Louis Kuijs, head of Asia Economics at Oxford Economics in Hong Kong, has stated that “it is very likely and understandable that China … will try to fill those gaps with this initiative, and that
Vision, rationale and the “corridors” 27 5
is very logical.” From the Chinese government’s perspective, the country’s more active role in the global governance, including through the BRI, should be welcomed. However, global security is a complex issue with high-level uncertainty. As early as the late 19th century, Kaiser Wilhelm II of Germany put forward the so-called ‘Yellow Peril Theory.’ By the time the People’s Republic of China was founded, the United States had hyped up the ‘Red Threat.’ During the period of China-Russia political tension, the Soviet Union created the ‘China Threat Theory,’ which since the Cold War has persisted and transformed in global political sphere.6 After the Cold War, with China’s stunning economic development in a relatively short time, the China threat debate continues. Until now, with the initiation of the BRI, the international community’s view on it was highly mixed. Although many countries within the BRI region welcome China’s effort to promote regional cooperation and development, questions and suspicions were also raised. Some compare China’s BRI to America’s Marshall Plan after the Second World War.7 Some believe that China, with its rising economic inf luence, would reshape the current Western-led global economic order intentionally and further replace it with the Chinese way.8 Some criticise China’s involvement and investment in developing countries, especially African countries, as ‘new-colonialism.’9 To dispel doubts entrenched through the many versions of ‘China Threat’ the Chinese government continued its communication and devised constructive actions to persuade and provide evidences of the peaceful rise of China with highly significant global interest. Responses to domestic politico-economic structural change One basic rationale for the BRI is China’s market potentials. According to the National Bureau of Statistics, China implemented a non-financial outward direct investment of USD102.89 billion in 2014, close to the amount of China’s actual use of foreign capital of USD119.56 billion (not including data from banking, securities and insurance). This suggests China is turning into a net capital exporter, hence its demand for international capital markets. The BRI will deepen the cooperation of China and developing countries through existing industrial chain, industrial upgrade by China’s exporters, and technical and financial inputs by these countries. A further rationale for the BRI is China’s declining domestic energy security. Since 1996, China has been increasingly dependent on crude oil import where the main sources of import have become concentrated. According to customs data,10 China’s crude oil imports have increased from 91 million tonnes in 2003 to 200 million tonnes in 2009 and then to 282 million tonnes in 2013, with a foreign dependence rate of 58%. Import sources of crude oil are mainly concentrated in the Middle East and Africa. About 80% of crude oil imports to China is transported through the Malacca Strait.
28 Wenqi Lin et al.
The international crude oil market is deeply political, affecting stability of crude oil supply. Diversifying crude oil suppliers, opening new, safer transportation pipelines for crude oil imports have become critical strategic issues of urgency to economic development. One important rationale is for the need to balance domestic regional economic development. In an article published on 1 May 2014, the Chinese premier Li Keqiang pointed out issues on deepening the economic restructuring, noting that, for the past 30 years, China’s opening-up had been mainly in the coastal regions, with the inland and border regions lagging behind – a regional inequality of development. The unbalanced regional economic development persists despite major policy efforts such as the Rise of Central China Plan and the Western Development Strategy. The combined GDP of Ningxia, Qinghai, Gansu, Guizhou, Xinjiang, Yunnan and Chongqing in 2013 was less than that of Shandong province. The BRI aims to transform the central and western Chinese regions from their inland to a frontier position for trade so to activate their development potential and expand international trade regions to create opportunities. As the Midwest China realises sustained growth, China may regain a balanced domestic regional economic development so to broaden and diversify its growth capacity. An alternative developmental path Many outside observers and governments are concerned that China is using the BRI to promote an alternative developmental path to liberal democracy. Indeed, few would dispute that the BRI helps to amplify the country’s inf luence and voice worldwide, but the Chinese government maintains that the initiative does not aim to change the global economic order but is, instead, fundamentally designed to give developing countries access to additional resources, best practices and expertise. The Chinese government believes it has more than three decades of experience to share with the international community. These experiences are related to incremental reform, market development, incentive creation, policy experimentation, export-led growth, state capitalism and authoritarianism – and its unique experiences and institutions contributed to the country’s economic boom. China has gained confidence and desires to share its development experiences as it invests in overseas projects and to spread its institutional and cultural inf luence. The BRI may act as a catalyst. In 1994, the Chinese Ministry of Commerce began to train government officials from developing countries. Since the BRI was launched, this training programme has been integrated into the BRI strategy. In 2015, China established the Belt and Road Initiative Scholarship, attracting students from BRI countries who want to pursue professional and academic degrees in China. The Chinese government hopes that these indirectly visible efforts will have at least an equivalent, if not greater, impact on foreign views of China.
Vision, rationale and the “corridors” 29
The geographic strategy of BRI: the six corridors The geographic drivers and patterns of the BRI strategy can be described by the six economic corridors (see Figure 1.1). The patterns provide clear guidance for participating countries’ BRI cooperation strategies. The six corridors comprise China-Mongolia-Russia, the New Eurasian Land Bridge, China-Central Asia-West Asia, China-Pakistan, Bangladesh-ChinaIndia-Myanmar and the China-Indochina Peninsula Economic Corridor. As geographic manifestation of the BRI, developing the six corridors involves a dynamic process of trade development and investment to form industrial clusters of regional production networks for economic and infrastructure integration (Wang, 2017). The China-Mongolia-Russia Economic Corridor During the China-Russia-Mongolia Summit on 11 September 2014, the Chinese President Xi Jinping proposed connecting the Silk Road Economic Belt to the Eurasian Economic Union Initiative and Mongolia’s Grassland Road to develop the China-Mongolia-Russia Economic Corridor. On 9 July 2015, Xi hosted a second heads of state meeting in Ufa with the Russian President Vladimir Putin and the Mongolian President Tsakhiagiin Elbegdorj that resulted in the medium-term roadmap for the tripartite cooperation with the signing of a memorandum of understanding on the compilation of the ‘Outline for Construction of the China-Mongolia-Russia Economic Corridor.’ The joint preparation of the Outline includes agreements to establish convenient conditions for promoting trade and development, and developing cooperation framework for building China-Russia-Mongolia border ports. On 23 June 2016, President Xi Jinping hosted the third tri-nations meeting which led to the three nations’ signing the Outline and the Table 2.1 Countries involved in six economic corridors Economic Corridors
Countries
New Eurasian Land Bridge
China, Kazakhstan, Russia, Belarus, Poland China, Mongolia, Russia
China-Mongolia-Russia Economic Corridor China-Central Asia-West Asia Economic Corridor China-Pakistan Economic Corridor Bangladesh-China-India-Myanmar Economic Corridor China-Indochina Peninsula Economic Corridor
China, Kazakhstan, Uzbekistan, Tajikistan, Kyrgyzstan, Turkmenistan, Iran, Turkey China, Pakistan China, Bangladesh, India, Myanmar China, Thailand, Vietnam, Malaysia, Cambodia, Laos
Belt and Road Portal. Refer to https://eng.yidaiyilu.gov.cn/.
30 Wenqi Lin et al.
Agreement of the General Administration of Customs of the People’s Republic of China, the General Administration of Customs and Taxation of Mongolia and the Customs Administration of the Russian Federation on Mutual Recognition of Customs Supervision Results for Specific Commodities. These formal agreements guide and promote the development of transportation infrastructure to improve connectivity, strengthening port construction and customs, supervising inspection and quarantine, strengthening production and investment capacity and deepening economic cooperation as well as cultural exchange. On 13 September 2016, the China National Development and Reform Commission (CNDRC) officially launched the Outline for Construction of the China-Mongolia-Russia Economic Corridor as the first BRI multilateral cooperation plan. The CNDRC defines the economic corridor into two lines: one from Beijing, Tianjin and Hebei in Northern China to Hohhot, then to Mongolia and Russia; the other from Dalian, Shenyang, Changchun and Harbin in North-East China to Manchuria and Chita in Russia. These two lines interact to form a new open region for economic development, collectively known as China-Mongolia-Russia Economic Corridor (CMREC). The geopolitical environments of China, Mongolia and Russia suggest complementarity of the three countries by economic structure, national strategy and high political trust. The BRI is effectively connecting Mongolia’s Grassland Road Plan and Russia’s Eurasia Economic Union Initiative to create a broader regional economic development environment.11 The core ideas for developing the CMREC are to (1) link the Chinese Silk Road Economic Belt to the Russian Trans-Eurasian Railway and Mongolia’s Steppe Road programme; (2) strengthen regional interconnection by railway and highway construction; (3) promote customs clearance while promoting cross-border transportation; and (4) commit to the construction of three-party cross- border transmission networks to cooperate in the fields of tourism, knowledge exchange, media, environmental protection, disaster control and relief. The major cities along CMREC include Tianjin, Beijing, Zhangjiakou, Datong, Jining, Ceke, Erlianhaote, Zamiin-Uud, Joyle, Ulan Bator, UlanUde, Choibalsan, etc. These cities act as major nodes and give great significance on the development of CMREC. For instance, Tianjin Port, as China’s main cargo port, will become a seaport for foreign trade in the Russian Far East and Mongolia, which will greatly benefit Mongolia-Russia’s trade with China’s coastal areas and other countries in the world (Zheng, 2016). China and the partner nations have devoted lots of effort to promote the cooperation. The three nations have agreed on principles and plans such as ‘Outline for Construction of the China-Mongolia-Russia Economic Corridor,’ ‘China-Russia-Mongolia Trilateral Cooperation Roadmap for Development’ and ‘Ceke Port Master Plan.’ They have also reached the agreements on ‘Memorandum of Understanding on Compiling the Outline for the
Vision, rationale and the “corridors” 31
Construction of the China-Mongolia-Russia Economic Corridor,’ ‘Agreement on Mutual Recognition of Customs Supervision Results of Specific Commodities,’ ‘Capacity Cooperation and Cooperation Documents on the Construction of Cross-border Economic Cooperation Zones’ and ‘Intergovernmental Agreement on International Road Transport Along the Asian Highway Network.’ In the aspect of finance, the three countries built the China-Mongolia Mining Finance and Service Trade Center, have made currency swap agreements and cooperate in cross-border banking supervision. Provinces and cities within China also put large effort into the promotion of CMREC. For instance, Inner Mongolia province has high potential to be involved in CMREC due to its direct shared border with Mongolia and its geographical characteristics of a large north-south span and a narrow east-west range. The government of Inner Mongolia actively promotes platform development and lays the foundation for cooperation. In addition, the government invests about USD43 million every year for the construction of the China and Mongolia Erlianhot-Zamen Ude Cross-border Economic Cooperation Zone. The exhibitions are also held with great support by relevant national ministries. China-Mongolia Expo planned by Inner Mongolia was successfully held in Hohhot, 6 China-Mongolia-Russia Economic and Trade Cooperation Fairs as well as 11 China-Mongolia-Russia Economic and Trade Cooperation Fairs were held respectively in Erenhot and Hailar, and 12 China North International Science and Technology Expos were successfully held in Manzhouli (BRI Research Group, 2018). According to the ‘Outline for Construction of the China-MongoliaRussia Economic Corridor,’ the cooperation area includes transportation infrastructure development, port construction, customs, production capacity and investment cooperation, economic and trade cooperation, cultural exchange, ecological and environmental protection, and border cooperation.12 The cross-border railway channel project at Ceke Port is steadily advancing. This railway construction adopts Chinese standard gauge, and it is the first standard railway to go abroad after the implementation of BRI. The project officially started construction in May 2016, and the railway is progressing well. This project marks that the economic exchanges between China and Mongolia will become increasingly frequent. More importantly, after the project is completed, it will be connected not only with domestic railways but also with the Beijing-Moscow railway to the east and the Central Siberian European railway to the north, which has become the western wing of the CMREC, providing a wider space for economic development. Connecting three countries, the CMREC boasts an economic aggregate of USD15,278.715 billion, which is 17.81% of the global economic output. The economic aggregate, proportion and per capita GDP of countries within the corridor are shown in Table 2.2. The three countries are highly interdependent on foreign trade. China is Russia’s second-largest export partner and largest import partner. Mongolia’s trade volume with Russia and China ranks top three in its foreign trade.
32 Wenqi Lin et al. Table 2.2 GDP and per capita GDP in 2018 of countries along the ChinaMongolia-Russia Economic Corridor (in USD billion) Country
China Mongolia Russia
GDP
Per Capita GDP
Figure
Proportion (%)
Figure
Ranking
13,608.15 13.01 1,657.55
15.86 0.02 1.93
9,770.85 4,103.70 11,288.87
81 141 72
The World Bank. Refer to https://www.worldbank.org/.
Table 2.3 The trade partners within the CMREC Exporting China United States, Hong Kong, Japan Mongolia China, United Kingdom, Russia Russia China, Netherlands
Importing Korea, Japan China, Russian Federation, Japan China, Germany, United States
United Nations Statistics Division (UNSD). Refer to https://unstats.un.org/.
The total trade volume among the three countries in 2018 was USD544.4586 billion. Imports and exports were USD277.2452 and USD267.2133 billion respectively, or 50.9% and 49.1% of the total. China is a net importer while Mongolia and Russia are net exporters. The amount of Mongolia’s foreign trade being 99.1% of its GDP shows extremely high dependence on foreign trade (Table 2.4). The New Eurasian Land Bridge The New Eurasian Land Bridge Economic Corridor (NELBEC) is an international railway transportation line running from Lianyungang in Jiangsu Province to the Port of Rotterdam in the Netherlands. It composes of the Longhai and the Lanxin railways in China, passes through seven provinces and autonomous regions of China ( Jiangsu, Anhui, Henan, Shanxi, Gansu, Qinghai and Xinjiang), and goes through the pass of Alataw on the ChinaKazakhstan border. After leaving China, there are three routes to reach the Port of Rotterdam. The central line is connected to the Russian Railway Friendship Station via the Russian railway network linking Smolensk, Brest, Warsaw and Berlin to reach Rotterdam with a total length of 10,900 km, connecting 30 countries and regions. The Eurasian Continental Bridge project builds on the existing network, and since 1 December, 1992 the major railway channel across Asia and Europe has started operation. Since then, a number of channels were opened for containers to enter and exit through the Alataw pass to Kashgar, Horgos, Almaty, etc., starting from Lianyungang. In the wake of the BRI proposal, the core ideas for the further development of the NELBEC were advanced into new and updated strategic plans.13
Vision, rationale and the “corridors” 33 Table 2.4 Trade volume of goods and services of CMREC countries Country
Trade
Import
Export
Current in US % of Dollars (billion) GDP
Current in US % of Dollars (billion) GDP
Current in US % of Dollars (billion) GDP
2,528.43 5.88 238.15
2,215.16 7.012 449.96
China 4,743.58 Mongolia 12.89 Russia 688.11
34.90 99.10 41.50
18.60 45.20 14.40
16.30 53.90 27.10
United Nations Statistics Division (UNSD). Refer to https://unstats.un.org/. Wind. Refer to https://www.wind.com.cn.
The major cities along NELBEC include Lianyungang, Xi’an, Zhengzhou, Urumchi, Akdoia, Brest, Warsaw, Berlin, etc. These cities act as major nodes and give great significance on the development of NELBEC. For instance, Lianyungang, at the corridor’s eastern end, has undertaken more than 50% of the NELBEC transportation business in China. It has become an important estuary and international trade platform for China’s coastal regions and Central Asian countries – the primary ‘node city’ of the NELBEC. Horgos port, at the Kazakhstan-China border, is also an important gateway to western China. It integrates commerce, tourism, and import and export as one, and it has sound infrastructure for external connections. It is an international channel and bridgehead for economic and cultural exchanges between China and Central Asian countries such as Kazakhstan. It plays an important role in promoting regional economic cooperation and cultural exchanges between China and Central Asian countries. China and partnering nations have made extensive efforts to promote economic cooperation. For instance, China and Kazakhstan have jointly formulated the ‘Silk Road Economic Belt construction and Bright Road new economic policy cooperation plan.’ China has also made the ‘China-Europe Train Development Plan (2016–2020).’ The counties along NELBEC have signed off the “Cooperation agreements on Silk Road Economic Belt and Eurasian Economic Union,” “Belt and Road Memorandum of Cooperation” and “Agreements on Deepening China-Europe Train Cooperation.” In the aspect of finance, China and the partner nations have made currency swap agreements and established cross-border banking regulatory cooperation. There have been substantial efforts made by provinces and cities within China to promote NELBEC. For instance, as an important node city of the BRI, Xi’an released a BRI action plan in 2016. Located in the geographic centre of China, Xi’an is a provincial capital city that has outstanding logistical advantages. The Xi’an Municipal Government strives to improve freight transportation capability, established a ‘Central Asia Chang’an Industrial Park,’ supports energy and high-end equipment manufacturing enterprises to go abroad and supports Central Asia’s agricultural and energy products to expand their markets in China. Bilateral economic cooperation and complementary resources will benefit and strengthen Xi’an’s economy.
34 Wenqi Lin et al.
The cooperation area of NELBEC includes international logistics, modern trade, bilateral investment cooperation, business travel and cultural exchanges.14 The China-Kazakhstan Horgos International Frontier Cooperation Centre is the first cross-border economic and trade cooperation zone established between China and another country. Its construction started in 2006, and it was officially opened in April 2012. China and Kazakhstan each operate one entrance and exit, where citizens of the two countries, of third countries, stateless citizens, vehicles and materials enter and leave the common area with valid certificates. Since 2012, the number of people entering and leaving the zone has reached 16.36 million. The leaders of China and Kazakhstan have reached consensus on the function of the cooperation centre by developing it into a highly open and comprehensive international trade centre in the region of Central Asia, integrating regional processing and manufacturing, regional transit, procurement, financial services and tourism. This project is of great significance for China’s opening to the West and the development of regional economic cooperation in Central Asia. Similar to the ancient Silk Road, the New Eurasia Land Bridge has a strategically important role in trade communication and industrial cooperation between Europe and Asia (BRI Research Group, 2018). Relying on modern and international logistics systems, integrating China Rail Express, the BRI corridor has prioritised cooperation in trade and capacity. It expands the cooperation space for transfers of energy and resources, building open and efficient regional markets. The corridor region is relatively resource rich in metal, mineral, petroleum, coal and natural gas, so the potential for industrial cooperation is high. The region is also a vital production base for agriculture and animal husbandry. Today, petrochemical, non-ferrous metal, mechanical, electronics, aerospace, textiles, medical and food industries supported by transportation, postal and telecommunications services have emerged. The industries are highly interdependent and complementary with encouraging prospects for further mutually beneficial cooperation (BRI Construction Leading Group, 2017). Economic and trade cooperation along the corridor has substantially increased, and since 2011 the China-Eurasia Expo at Urumqi has been successfully held four times. Up until 2018, the signing of inline projects amounted to RMB900 billion and the total foreign trade volume reached USD30 billion. China established 23 overseas economic and trade cooperation zones in five Eurasian countries and signed bilateral agreements on currency swaps with seven Eurasian countries totalling RMB210.7 billion (BRI Research Group, 2018). The AIIB investment data indicate that the Bank’s primarily investment in Tajikistan focussed on energy and transportation projects (Table 2.5). The BRI Research Group (2018) also argued that the economic corridor should actively promote cooperation with priority on infrastructure investment and cultural exchanges. They argue it is imperative to continue consolidating energy trade, increase China’s oil, natural gas and coal imports from Central Asia, and strengthen trade cooperation in minerals and agricultural products to promote products’ diversification
Vision, rationale and the “corridors” 35 Table 2.5 The projects along New Eurasia Land Bridge Economic Corridor Country
Project Name
Project Sector
Investment by AIIB (USD million)
Total Investment (USD million)
Tajikistan
Nurek Hydropower Rehabilitation Project, Phase Inurek Dushanbe-Uzbekistan Border Road Improvement Project
Energy
60
350
Transport
27.5
105.9
Tajikistan
Asian Infrastructure Investment Bank. Refer to https://www.aiib.org/en/index.html.
Table 2.6 GDP and per capita GDP in 2018 of countries along the New Eurasian Land Bridge (in USD billion) Country
GDP Figure
China Germany Russia Netherlands Poland Kazakhstan Belarus
13,608.15 3,996.76 1,657.55 913.66 585.78 170.54 59.66
Per Capita GDP (USD) Proportion (%) 15.86 4.66 1.93 1.06 0.68 0.20 0.07
Figure 9,770.85 48,195.58 11,288.87 53,024.06 15,424.05 9,331.05 6,289.94
Ranking 81 18 72 14 64 84 115
The World Bank. Refer to https://www.worldbank.org/.
in Central Asia. On infrastructure, they suggest China upgrades the trunk railway network between Asia and Europe, the regional railway along the corridor to gradually improve its transportation capability. The development of major nodes in Eurasia should be promoted, while major ports should upgrade their infrastructure to create open, convenient, stable and efficient channels of international trade around the economic corridor (BRI Research Group, 2018). Consisting of seven countries, the NELBEC boasts an economic aggregate of USD20,992.108 billion, or 24.5% of global economic output. It is the bellwether of the six economic corridors under the BRI. The economic aggregate, proportion and per capita GDP of countries within the corridor are shown in Table 2.6. The countries within the Corridor are close trade partners. Germany is the largest import partner of Russia, the Netherlands and Poland, and the third-largest import partner of Kazakhstan and Belarus. Russia is Belarus’s most important import and export partner and one of the top three import partners of Poland and Kazakhstan. China is one of the top three import partners of the countries within the corridor, and the main trade exporter to Germany, Russia and Kazakhstan.
36 Wenqi Lin et al. Table 2.7 The trade partners within the New Eurasian Land Bridge
China Germany Russia Netherlands Poland Kazakhstan Belarus
Exporting
Importing
United States, Hong Kong, Japan United States, France, China China, Netherlands Germany, Belgium, United Kingdom Germany, United Kingdom, Czech Republic Italy, China, Netherlands
Korea, Japan China, Netherlands, France China, Germany, United States Germany, Belgium, China
Russian Federation, Ukraine, United Kingdom
Germany, China, Russian Federation Russian Federation, China, Germany Russian Federation, China, Germany
United Nations Statistics Division (UNSD). Refer to https://unstats.un.org/.
Table 2.8 Trade volume of goods and services of New Eurasian Land Bridge countries Country
Trade Current in USD (billion)
China 4,743.58 Germany 2,730.08 Russia 688.11 Netherlands 1,099.42 Poland 529.52 Kazakhstan 93.49 Belarus 71.66
Import % of GDP
Current in USD (billion)
34.90 2,528.42 68.30 1,250.90 41.50 238.15 120.30 522.85 90.40 267.70 54.80 32.53 120.10 38.20
Export % of Current in GDP USD (billion)
% of GDP
18.60 2,215.16 31.30 1,479.19 14.40 449.96 57.20 576.57 45.70 261.82 19.10 60.95 64.00 33.46
16.30 37.00 27.10 63.10 44.70 35.70 56.10
United Nations Statistics Division (UNSD). Refer to https://unstats.un.org/. Wind. Refer to https://www.wind.com.cn.
The total trade volume of the countries within the NELBEC is USD9,955.865 billion in which the amount of imports and exports was USD4,878.753 and USD5,077.111 billion, which is 49% and 51% of the total volume, respectively. Among them, China, Poland and Belarus are net importers, Germany, Russia, the Netherlands and Kazakhstan are net exporters, and the Netherlands and Belarus are relatively highly dependent on foreign trade. The China-Central Asia-West Asia Economic Corridor The China-Central Asia-West Asia Economic Corridor (CAAEC) is an important part of the BRI. The economic corridor starts from Xinjiang and reaches the Persian Gulf and the Mediterranean coast. The core ideas of the CAAEC are to promote comprehensive linkages between the BRI strategy,
Vision, rationale and the “corridors” 37
Kazakhstan’s ‘Bright Road’ initiative and other development strategies. This involves signing bilateral cooperation agreements with Kazakhstan, Tajikistan, Kyrgyzstan, Uzbekistan and other countries related to the construction of the BRI. On 5 June 2014, at the sixth ministerial conference of the ChinaArab States Cooperation Forum, Xi Jinping proposed what is known as a ‘China-Arab 1+2+3 cooperation pattern,’ in which energy cooperation is the main priority, followed by infrastructure and trade/investment facilitation. The three high-tech fields for cooperation include nuclear energy, aerospace and alternative energy. During the G20 Hangzhou Summit in 2016, the heads of state of China and Kazakhstan officially signed the cooperation plan on the BRI, which involves cooperation with Tajikistan, Kyrgyzstan and Uzbekistan, and memoranda of cooperation with Turkey, Iran, Saudi Arabia, Qatar and Kuwait. China and Turkey reached a consensus to cooperate on Turkey’s east-west high-speed railway project. Restricted by political situations and physical conditions of Central Asia and West Asia, the CAAEC is growing relatively slowly. Based on a long-term development perspective, the BRI Research Group argues that more measures should be taken simultaneously. Furthermore, they claim that it is important to seize key areas and crucial links of economic corridor construction, to strengthen the physical connectivity of infrastructure and to improve the institutional connectivity of policy and planning (BRI Research Group, 2018). The major cities along CAAEC, including Ashgabat, Dushanbe, Tashkent, Bishkek, Almaty, Baghdad, Tehran, Urumqi, etc., act as major nodes and give great significance to CAAEC’s development. For instance, Turkmenistan’s Head Port is the largest port on the east coast of the Caspian Sea. It can dock 7,000-ton large-scale freighters and is the main export channel for Turkmenistan’s crude oil, refined oil, polypropylene and other commodities. The port is not only the gateway to other coastal countries, but also a trade hub for Central Asia and Iran. The cargo can pass the Caspian Sea route between Turkmenistan and Russia, enter the Volga river channel from Astrakhan port (Russia), and then exit the Azov Sea via the Volga-Don channel to reach the Black Sea port. What’s more, after passing the ferry to the port of Baku Port on the opposite side of the Caspian Sea, the Head Port can go directly to the Transcaucasian railway network which links to Poti port (Georgia) on the Black Sea. With abundant raw materials and mineral resources, especially non-ferrous metals, the chemical and metallurgical industries along the CAAEC have unmatched advantages, accounting for 68% of all chemical projects on six economic corridors. China invests in the metallurgical industries of Kyrgyzstan, Kazakhstan, Iran and other countries to meet its growing domestic demand. China’s cement industry takes on the advantage of high infrastructure demand in Central Asia-West Asia and relatively low labour cost to actively invest abroad and transfer excess capacity. However, many parts of the CAAEC are affected by national, partisan, ethnic and religious conf licts as well as by local wars, political instability,
38 Wenqi Lin et al.
poor policy stability, rampant terrorist activities and high risk of project investment and construction. Countries such as Syria and Yemen are in political turmoil and war. Disputes between Israel and Palestinian territories frequently occur. Cracks have appeared in relations between Arab countries such as Qatar and Saudi Arabia, the United Arab Emirates and other countries. Under this circumstance, the cost of infrastructure construction and economic and trade cooperation has further increased, and commercial profitability has deteriorated, exacerbating financing and development difficulties in these regions (Luo, 2019). China and partner nations devoted efforts to promote cooperation. For instance, China and five Central Asian countries (Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Turkmenistan) make plans, such as ‘Central Asia Regional Transport and Trade Facilitation Strategy (2020).’ The countries along CAAEC also reached consensus on the ‘China-Kazakhstan-Russia International Road Temporary Transit Goods Transport Agreement’ and ‘Agreement on Facilitation of International Road Transport among the Member States of the Shanghai Cooperation Organization.’ In the aspect of finance, China and the partner nations have made a currency swap agreement, established cross-border banking regulatory cooperation and RMB clearing and overseas financial institutions. The cooperation area includes international logistics, transportation infrastructure construction, energy infrastructure construction, modern trade, bilateral investment cooperation, business travel and cultural exchanges.15 The China-Central Asia Natural Gas Pipeline is an essential project because Central Asia is one of the main sources of China’s natural gas. The pipeline originates from the border of Turkmenistan and Uzbekistan on the right bank of the Amu Darya and enters China from Horgos via southern Kazakhstan. The total length of the pipeline is about 10,000 km, including 188 km in Turkmenistan, 530 km in Uzbekistan, 1,300 km in Kazakhstan and the remaining 8,000 km in China. As of December 2016, lines A, B and C have been ventilated and put into production, and line D is being laid. Consumption of natural gas in China is projected to reach 40–240 billion m 3 in 2020. This pipeline can meet more than 20% of domestic natural gas demand. Connecting eight countries, the CAAEC boasts an economic aggregate of USD14,652.077 billion (17.08% of total economic output) with major trading and economic collaborations between the countries. For instance, China is a key import and export partner of Kazakhstan, Uzbekistan, Tajikistan and Turkmenistan, and Kazakhstan plays a similar role for Tajikistan and Kyrgyzstan and is the most important import partner of Uzbekistan. Turkey is an important trade partner of both Tajikistan and Turkmenistan. The trade volume of countries within the CAAEC was USD5,438.673 billion, of which the amount of imports and exports was USD2,862.543 (52.6%) and USD2,576.13 (47.4%) billion, respectively. The majority within the corridor are net importers such as China, Uzbekistan, Tajikistan, Kyrgyzstan and Turkey; several are net exporters, notably Kazakhstan, Turkmenistan and
Vision, rationale and the “corridors” 39 Table 2.9 GDP (2018) of countries along the China-Central Asia-West Asia Economic Corridor (in USD billion) Country
China Kazakhstan Uzbekistan Tajikistan Kyrgyzstan Turkmenistan Turkey
GDP
Per Capita GDP
Figure
Proportion (%)
Figure
Ranking
13,608.15 170.54 50.50 7.52 8.09 40.76 766.51
15.86 0.20 0.06 0.01 0.01 0.05 0.89
9,770.8471 9,331.0469 1,532.3716 826.62153 1,281.3637 6,966.6354 9,311.3661
81 84 188 211 198 108 85
The World Bank. Refer to https://www.worldbank.org/.
Table 2.10 The trade partners within China-Central Asia-West Asia Economic Corridor
China Kazakhstan Uzbekistan
Exporting
Importing
United States, Hong Kong, Japan Italy, China, Netherlands
Korea, Japan
Turkmenistan
Switzerland, China, Russian Federation Kazakhstan, Switzerland, Turkey United Kingdom, Russian Federation, Kazakhstan China, Afghanistan, Turkey
Iran
China
Turkey
Germany, United Kingdom, Czechia
Tajikistan Kyrgyzstan
Russian Federation, China, Germany Russian Federation, China, Kazakhstan China, Russian Federation, Kazakhstan Kazakhstan, Russian Federation, Russian Federation Turkey, Russian Federation, Germany China, United Arab Emirates, Rep. of Korea China, Germany, Russian Federation
United Nations Statistics Division (UNSD). Refer to https://unstats.un.org/.
Iran. Most countries within the corridor have some dependence on foreign trade with Kyrgyzstan having a high degree of dependence. The China-Pakistan Economic Corridor The 3,000 km China-Pakistan Economic Corridor (CPEC) starts in Kashgar, Xinjiang, and ends at Gwadar Port, Pakistan, connecting the ‘Silk Road Economic Belt’ (Eurasia Land Bridge) to the north and the ‘21st Century Maritime Silk Road’ to the south (see Figure 4-1). It is a strategically important trade region of roads, railways, oil and gas and optical cable channels. The CPEC is a f lagship project of the BRI. China’s Minister of Foreign
40 Wenqi Lin et al. Table 2.11 Trade volume of goods and services in the China-Central Asia-West Asia Economic Corridor Country
China Kazakhstan Uzbekistan Tajikistan Kyrgyzstan Turkmenistan Iran Turkey
Trade
Import
Export
Current in % of US Dollars GDP (billion)
Current in % of US Dollars GDP (billion)
Current in % of US Dollars GDP (billion)
4,743.58 93.49 28.52 3.63 6.52 12.5 159.36
2,528.43 32.53 17.31 2.45 4.83 2.50 51.46
2,215.16 60.95 11.22 1.19 1.69 10.00 107.90
391.06
34.9 54.8 56.5 48.3 80.6 30.7 Missing GDP data 51.0
223.04
18.6 19.1 34.3 32.5 59.7 6.1 Missing GDP data 29.1
168.023
16.3 35.7 22.2 15.8 20.9 24.5 Missing GDP data 21.9
United Nations Statistics Division (UNSD). Refer to https://unstats.un.org/. Wind. Refer to https://www.wind.com.cn.
Affairs, Wang Yi, said in a public speech in 2017 that “If the Belt and Road is a symphony that benefits many countries, the China Pakistan Economic Corridor is its sweet opening song.” President Xi Jinping’s visit to Pakistan in April 2015 elevated the China-Pakistan relations to an ‘all-weather strategic partnership,’ under which the two countries share political mutual trust and cooperation in various areas concerning their respective core interests. The project places corridor development at the centre with ports, energy, infrastructure construction and industrial cooperation as key ingredients to form a ‘one plus four’ pattern of cooperation.16 The CPEC comprises a series of large-scale projects aimed at deepening connectivity and joint development and has extraordinary significance to the strategic unfolding to promote the BRI. The CPEC is the only economic corridor of China that is of bilateral nature. It is mainly due to the strong strategic relationship and economic complementarity of China and Pakistan since their officially established diplomatic ties in 1951. Pakistan is rich in human resources with labour force accounting for a high proportion of its total population. Since the gradual retreat of China’s urban-rural dividend and rising labour costs, Pakistan has become a prime partner for China’s economic transformation, especially its manufacturing industry upgrade. The partnership also promotes the transformation of the Pakistani manufacturing industry and its upgrading (BRI Research Group, 2018). The AIIB investment data shows that Pakistan has a relatively high proportion of its projects in BRI-related investment, focussing on energy, transportation and water (Table 2.12). The projects will bring substantial changes for the local people, in particular in health, electricity and energy. In order to benefit the Pakistani society, the scientific and rational planning and layout of
Vision, rationale and the “corridors” 41 Table 2.12 The projects along China-Pakistan Corridor Year
Country
Project Name
Project Sector
Investment by Total AIIB (USD Investment million) (USD million)
2016 Pakistan Tarbela 5 Hydropower Energy 300 Extension Project 2016 Pakistan National Motorway Transport 100 M-4 Project 2019 Pakistan Karachi Water and Water 160 Sewerage Services Improvement Project
824 273 400
Asian Infrastructure Investment Bank. Refer to https://www.aiib.org/en/index.html.
the CPEC take all areas of Pakistan into account. As the f lagship project and model project of the BRI, the CPEC has attracted high global attention. To some extent, the CPEC projects have inf luenced the implementation of the BRI strategy (Chen and Zhang, 2016). The major cities along CPEC, including Kashgar, Khunjerab, Islamabad, Lahore, Dl Khan, Queffa, Gwadar, Karachi, etc., act as major nodes and give great significance to CPEC’s development. For instance, Gwadar Port, located in the Balochistan Province in south-western Pakistan, is the third-largest port in Pakistan and is the terminus and an important estuary of the CPEC. Its location is particularly important. It is 460 km west of Pakistan’s largest city and port Karachi, and is adjacent to the border between Pakistan and Iran. It is north of the Arabian Sea, and is next to the world’s main oil shipping channel coming out of the Strait of Hormuz, 400 km to the west. Crude oil from the Persian Gulf can be transported to the south-east coast of China through the Gwadar Port, the Indian Ocean and the Malacca Strait. In the future, goods will pass through the Gwadar Port and along CPEC to reach Kashgar and Xinjiang in China. Gwadar Port is an important node and will become a bridge and an important hub connecting the ‘Silk Road Economic Belt’ and the ‘21st Century Maritime Silk Road’ (Chen and Zhang, 2016). China and Pakistan have both invested major efforts to promote the cooperation in CPEC. For instance, China and Pakistan make plans such as ‘Vision Plan for China-Pakistan Economic Corridor’ and have reached agreements on ‘BRI Cooperation agreements and memoranda.’ On the finance front, China and Pakistan have made a currency swap agreement and established cross-border banking regulatory cooperation. The construction of the CPEC has already yielded considerable results. Relying on the location advantage close to the Persian Gulf, Gwadar Port will add new channels for China’s oil transportation. China and Pakistan have cooperated to build a large number of energy projects, such as the Thar coal-fired integrated power project and the Hubu coal-fired power station project, which were completed in July and August 2019, respectively, significantly reducing power generation costs and greatly alleviating Pakistan’s
42 Wenqi Lin et al. Table 2.13 GDP and per capita GDP in 2018 of Countries along the China-Pakistan Economic Corridor (in USD billion) Country
China Pakistan
GDP
Per Capita GDP
Figure
Proportion (%)
Figure
Ranking
13,608.15 312.57
15.86 0.36
9,770.85 1,472.89
81 192
The World Bank. Refer to https://www.worldbank.org/.
Table 2.14 The trade partners within the China-Pakistan Economic Corridor
China Pakistan
Exporting
Importing
United States, Hong Kong, Japan United States, China, United Kingdom
Korea, Japan China, United Arab Emirates, Saudi Arabia
United Nations Statistics Division (UNSD). Refer to https://unstats.un.org/.
Table 2.15 Trade volume of goods and services of China-Pakistan Economic Corridor countries Country
China Pakistan
Trade
Import
Export
Current in USD (billion)
% of GDP
Current USD (billion)
% of GDP
Current in USD (billion)
% of GDP
4,743.58 83.79
34.9 26.8
2,528.43 60.16
18.6 19.2
2,215.16 23.63
16.3 7.6
United Nations Statistics Division (UNSD). Refer to https://unstats.un.org/. Wind. Refer to https://www.wind.com.cn.
energy shortage problem, and meeting the electricity demand of ordinary people. At the same time, a number of primary schools and China-Pakistan medical centres were established in the corridor, improving the education and health of the local population. By late 2018, 19 projects were launched or completed under the CPEC, with a total investment of nearly USD20 billion.17 Among them, seven projects were in the energy field, with a total installed capacity of 3.4 million kilowatts, which meets the electricity demand of 8.6 million households. Three projects – the second phase of the Karakoram Highway Provincial Road Reconstruction, the Expressway from Karachi to Peshawar and the Lahore Orange Line – were launched and steadily advanced. The CPEC boasts an economic aggregate of USD13,920.761 billion, which is 16.23% of global total economic output. China is Pakistan’s second
Vision, rationale and the “corridors” 43
largest commodity exporter and largest commodity importer (Table 2.14). In terms of foreign trade, their total trade volume was USD4,827.378 billion, of which imports and exports were USD2,588.589 (53.6%) and USD2,238.789 (46.4%) billion, respectively. Both China and Pakistan are net importers. Their dependence on foreign trade is fairly low. The Bangladesh-China-India-Myanmar Economic Corridor The Bangladesh-China-India-Myanmar Economic Corridor (BCIMEC) links the three subregions of East Asia, South Asia and South-East Asia, connecting the Pacific and the Indian Ocean regions. Project progress in the BCIMEC has been slow as an official collaboration mechanism has not yet been established. There were notable negative responses from India. The short-term cooperation focusses on economic development and trade. To date, the joint BCIMEC working group has held three meetings. Due to the challenge of multilateral cooperation, working progress in this larger corridor has focussed on the bilateral cooperation of the China-Myanmar Economic Corridor which has achieved remarkable results. The first meeting of the BCIMEC joint working group was held in December 2013 in Kunming, China. The involved nations signed a joint investigation programme on the BCIMEC in December 2014 which officially promotes cooperation among the four countries. The participating governments considered prospects, priorities and development goals of the BCIMEC to connect countries across South Asia, South-East Asia and East Asia towards deeper and broader regional integration. The BCIMEC is densely populated and resource rich, with sizeable markets of significant growth potential. It is thought that the joint development of the four countries will be realised upon policy coordination in foreign affairs, finance and other aspects; the opening-up of neighbouring regions; improvement in infrastructure and trade facilitation; and strengthening of complementary advantages (BRI Research Group, 2018). The BCIMEC boasts an economic aggregate of USD16,679.714 billion, or 19.44% of the world’s economic output. The global proportion and per capita GDP of countries within the corridor are shown in Table 2.16. Table 2.16 GDP (2018) of countries along the BCIMEC (in USD billion) Country
China Bangladesh India Myanmar
GDP
Per Capita GDP
Figure
Proportion (%)
Figure
Ranking
13,608.15 274.02 2,726.32 71.21
15.86 0.32 3.18 0.08
9,770.8471 1,698.2628 2,015.5905 1,325.9529
81 181 174 196
The World Bank. Refer to https://www.worldbank.org/.
44 Wenqi Lin et al.
The major cities along BCIMEC, including Kunming, Mandalay, Dhaka, Chittagong, Kolkata, etc., act as major nodes and give great significance on the development of BCIMEC. For instance, Kunming is the centre of the ‘Asian 5-Hour Aviation Circle’ and ‘Southeast Asia 3-Hour Aviation Circle.’ It is also one of China’s closest capitals to South and South-East Asia. Yunnan Province, Kunming City, South Asia and South-East Asia are geographically close to each other and have close relationships. Kunming aims to become the centre of economic and trade, science and technology innovation, financial service and cultural exchange that are open to South Asia and South-East Asia. The city is highly significant for the economic and social development along the BCIMEC. China and partner nations have devoted much effort to promote the cooperation and have reached the agreements on ‘Belt and Road Memorandum of Cooperation.’ In the aspect of finance, China and Myanmar use RMB as settlement currency for international payments, while China and India have made the cross-border banking regulatory cooperation. Provinces and cities within China also make a large effort to promote BCIMEC. For instance, as the main participant in the BCIMEC Forum, Yunnan promoted the China-South Asia Business Forum, Kunming and Kolkata International Academic Conference, China-South Asia Expo and China-Myanmar Cooperation Forum. In addition, Yunnan Province and West Bengal, Kunming and Kolkata, and North Myanmar have also established and improved cooperation mechanisms in the region, with richer content and forms. The cooperation area along BCIMEC includes international transportation, energy, commerce and logistics, industrial cooperation and cultural exchanges.18 The China-Myanmar oil and gas pipeline project is conducive to diversifying oil transportation channels, ensuring the security of China’s energy supply, alleviating China’s dependence on the Malacca Strait and reducing the risk of importing crude oil at sea. The project will not only fill a gap in the production of refined oil products in Yunnan but also have a huge pulling effect on the chemical, light and textile industries in the Yunnan Province. The pipeline project has great significance for the regional economic and social progress for the Yunnan Province. At the same time, the China-Myanmar oil and gas pipeline project can drive the development of Myanmar’s petrochemical industry, meet Myanmar’s domestic demand for energy, drive economic development along the pipeline and stimulate Myanmar’s overall economic development, bringing more benefits to the people of Myanmar. The trade pattern between countries within the corridor is mainly unilateral. China is one of the most important trading partners of Bangladesh, India and Myanmar; the largest importer to the three countries; and the third- largest commodity exporter for India and the largest for Myanmar. The four countries have few major trade partners within the corridor, and India is the second-largest import partner of Bangladesh (Table 2.17). In terms of foreign
Vision, rationale and the “corridors” 45 Table 2.17 The trade partners within China-Pakistan Economic Corridor Major Trading Partner
China Bangladesh India Myanmar
Exporting
Importing
United States, Hong Kong, Japan Germany, United States, United Kingdom United States, United Arab Emirates, China, Hong Kong China, Thailand, Japan
Korea, Japan China, India, Singapore China, United States, United Arab Emirates China, Singapore, Thailand
United Nations Statistics Division (UNSD). Refer to https://unstats.un.org/.
Table 2.18 Trade volume of goods and services of BCIMEC countries Country
China Bangladesh India Myanmar
Trade
Import
Export
Current in US Dollars (billion)
% of GDP
Current in US Dollars (billion)
% of GDP
Current in US Dollars (billion)
% of GDP
4,743.58 99.97 838.19 36.02
34.9 36.5 30.7 50.6
2,528.426 61.50 513.15 19.35
18.6 22.4 18.8 27.2
2,215.16 38.47 325.05 16.67
16.3 14.0 11.9 23.4
United Nations Statistics Division (UNSD). Refer to https://unstats.un.org/. Wind. Refer to https://www.wind.com.cn.
trade, the total trade volume within the BCIMEC was USD5,717.766 billion, of which the amount of imports and exports was USD3,122.419 (54.6%) and USD2,595.35 (45.4%) respectively. All BCIMEC countries are net importers, where Myanmar has high dependence on foreign trade (Table 2.18). The China-Indochina Peninsula Economic Corridor The China-Indochina Peninsula Economic Corridor (CIPEC) starts in Nanning and Kunming in China, and ends in Singapore, connecting Vietnam, Laos, Cambodia, Thailand, Myanmar and Malaysia. It is a continental bridge connecting China and the Indochina Peninsula, and is a transnational economic corridor of China and ASEAN countries. South-East Asia is geographically connected to China with the Bay of Bengal to the west and the South China Sea to the east. The CIPEC has a relatively stable political environment – a sound foundation for economic development and market potential. Production capacity is the focus of cooperation for the CIPEC (Zhu and Chen, 2019).
46 Wenqi Lin et al.
On 26 May 2016 at the ninth Southeast Asian Economic Cooperation Forum, the idea of CIPEC was proposed and China signed memorandums of cooperation with Laos, Cambodia and other countries on joint development to start forming the bilateral cooperation programme. The CIPEC aims to promote economic and trade cooperation to build a demonstration zone for international industrial cooperation and agricultural modernisation. It has been designed as a pilot zone for multilateral free trade, a platform for cultural exchanges in South-East Asia, and a community of shared future between China and South-East Asia. Given complementary strengths, cooperation is aimed at actual demand of the countries to strengthen their capacities. The international economic collaboration by scale and coverage will be expanded according to market demand and relative industrial advantage. China may focus on industries with comparative advantages – including construction material, chemical, vehicle, steel, non-ferrous metal, agriculture – and infrastructure development in transportation, energy and communication to assist South-East Asian countries’ manufacturing capacity building and to expand the range of their capacity cooperation (BRI Research Group, 2018). The major cities along CIPEC, including Nanning, Vientiane, Hanoi, Phnom Penh, Bangkok, Kuala Lumpur, Singapore, etc., act as major nodes and give great significance to CIPEC’s development. For instance, Guangxi is the only province in China that is connected by sea to ASEAN, being located at the intersection of the Pearl River Delta economic circle and the ASEAN economic circle. It has become one of the most advantageous regions for the development of geo-economics between China and ASEAN countries. After the construction of the China-ASEAN Free Trade Area, Nanning, Qinzhou, Fangchenggang and Beihai – as important cities in Guangxi – have become increasingly important as two-way channels for China’s inland entry into ASEAN countries and vice versa. China and partnering nations have devoted much effort to promote the cooperation. For instance, China and five ASEAN countries (Cambodia, Vietnam, Laos, Myanmar, Thailand) developed strategic plans such as ‘Strategic Plan for Transport Development in the Greater Mekong Subregion (2006–2015).’ The countries along CIPEC have also reached consensuses on the ‘Agreement on Facilitating Cross-border Transportation of Goods and People in the Greater Mekong Subregion’ and ‘China-Indochina Peninsula Economic Corridor Proposal.’ In the aspect of finance, China and the partner nations have made currency swap agreements and established cross-border banking regulatory cooperation. The AIIB investment data shows that Myanmar, Laos and Cambodia are in their early stage of industrialisation. The AIIB mainly invests in energy, transportation and digital infrastructure (Table 2.19). China has injected substantial aid into South-East Asia by technical assistance, preferential loans and construction projects. It is predicted that China and the South-East Asian countries will increase their cooperation in anti-poverty effort, technological advancement, environmental and water governance, and marine development. The critical period of China’s economic transformation and structural upgrading also offers
Vision, rationale and the “corridors” 47 Table 2.19 The projects along South-East Asian Corridor Year
Country
Project Name
Project Sector
Investment by Total AIIB (USD Investment million) (USD million)
2016 Myanmar Myingyan Power Energy 20 Plant Project 2019 Laos National Road 13 Transport 40 Improvement and Maintenance Project 2019 Cambodia Fiber Optic Digital 75 Communication Infrastructure Network
304 128
75
Asian Infrastructure Investment Bank. Refer to https://www.aiib.org/en/index.html.
opportunities for countries in South-East Asia to stabilise external demand by exporting to China’s domestic markets. Against the increasing complexity and uncertainty in geopolitics, it is also argued that accelerating CIPEC implementation through market integration is critical for maintaining political and economic stability in the region (BRI Research Group, 2018). The idea of the CIPEC is to connect major cities along the corridor. Through the construction of railways and highways to facilitate f low of people, goods, capital and information, the CIPEC aims to create a regional economic community featuring complementary capacities of member countries by promoting regional division of labour, joint development and co-development opportunities.19 The construction of the CIPEC not only allows cities in China such as Nanning and Kunming to establish closer ties with other countries but also has a huge driving effect on the countries and regions along the corridor. In recent years, the Yunnan Province is vigorously promoting modern railways connecting ASEAN countries. The network construction exits from the three ports of Yunnan River, Estuary, Moao and Ruili, leading to Vietnam, Laos and Myanmar. After converging in Bangkok, Thailand, it leads directly to Singapore. The corridor consists not only of railways and highways but also of waterways and air connections. It connects Singapore, the most dynamic economy at the southern end of the corridor, with Guangxi and Yunnan in southern China, promoting tourism development in both provinces. Taking Laos as an example, the corridor turned Laos into a connected country and an important transhipment hub in the region. Through building transportation infrastructure, it increases international trade, creates local communities and employment opportunities, increases income and improves people’s living standards. The CIPEC boasts an economic aggregate of USD15,000.092 billion, which is 17.48% of the global economic output of seven countries. The trade partnership between China, Thailand and other countries within the corridor is mainly unilateral trade. China is one of the three major import and
48 Wenqi Lin et al. Table 2.20 GDP (2018) of countries along the CIPEC (in USD billion) Country
China Thailand Vietnam Malaysia Cambodia Laos
GDP
Per Capita GDP
Figure
Proportion (%)
Figure
Ranking
13,608.15 504.99 244.95 354.35 24.57 18.13
15.86 0.59 0.29 0.41 0.03 0.02
9,770.8471 7,273.5632 2,563.8207 11,238.957 1,512.1267 2,567.5432
81 104 162 73 191 161
The World Bank. Refer to https://www.worldbank.org/.
Table 2.21 Trade partners within China-Indochina Peninsula Economic Corridor
Thailand Vietnam Malaysia Cambodia Laos
Exporting
Importing
United States, China, Japan United States, China, Japan Singapore, China, United States United States, United Kingdom China, Thailand, Vietnam
Korea, Japan China, Japan, Singapore China, Republic of Korea, Japan China, Singapore, United States China, Thailand, Vietnam
United Nations Statistics Division (UNSD). Refer to https://unstats.un.org/.
Table 2.22 Trade volume of goods and services of CIPEC countries Country
China Thailand Vietnam Malaysia Cambodia Laos
Trade
Import
Export
Current in % of USD (billion) GDP
Current in % of USD (billion) GDP
Current in % of USD (billion) GDP
4,743.58 501.66 164.98 465.43 36.00 7.79
2,528.43 249.17 95.24 218.76 17.32 6.18
2,215.16 252.49 69.73 246.67 18.68 1.61
34.9 99.3 67.4 131.3 146.5 43.0
18.6 49.3 38.9 61.7 70.5 34.1
16.3 50.0 28.5 69.6 76.0 8.9
United Nations Statistics Division (UNSD). Refer to https://unstats.un.org/. Wind. Refer to https://www.wind.com.cn.
export partners of countries within the corridor, and Thailand is Cambodia’s most important import trade partner and an important export trade partner of Laos (Table 2.21). The CIPEC generates a total trade volume of USD5,919.439 billion, with USD3,115.099 billion (52.6%) imports and USD2,804.34 billion (47.4%) exports. China, Vietnam and Laos are net importers, while Thailand, Malaysia and Cambodia are net exporters, of which the latter exporting countries have a high dependence on foreign trade.
Vision, rationale and the “corridors” 49
Summary In general, the BRI put forward by China has exerted an important inf luence on a global scale. It has not only accelerated the rapid economic development of countries along the Silk Road, but also promoted higher levels of international social and economic cooperation. The construction of six economic corridors is an important support for the implementation of the BRI (BRI Research Group, 2018). The construction of the six economic corridors has progressed steadily, but also faces many challenges. First of all, the world economic order and the path of the global economy are being reshaped. After the international financial crisis in 2008, the recovery of the world economy has been difficult with global issues becoming increasingly serious, and hence it has become highly critical to balance all aspects of international relationships. At the same time, the political situation of some countries along the corridors changes frequently, and political instability is an important factor that restricts the economic corridor’s sustainability. Political instability results in negative impacts on the strategy and plan making, weak continuity of laws and policies, increased commercial risks, higher financing costs for infrastructure construction projects and lower feasibility. China has taken into account the situations of each economic corridor to formulate specific strategies (Luo, 2019). Since the implementation of the BRI, China has adopted the ‘one country, one strategy’ approach to cater for the different levels of development among countries across regions. The progress of the BRI projects among countries also varies. In addition, countries participating in active development are bound to develop faster than countries that take a wait and see approach. Therefore, with the advancement of the BRI, development gaps will occur in some countries to some extent in the short term. In the long run, with further advancement of the BRI, the higher connectivity of infrastructure and the more extension of the industrial chain, the regional disparities and imbalances will gradually be eliminated. With the rapid development of the BRI, China has carried out in-depth and effective cooperation with countries along the corridors in various sectors, including trade, culture and infrastructure construction, which evokes and revives the legacy and significance of the ancient Silk Road. Here, C hina’s active promotion and interactive development of the Belt and Road have strongly enhanced the connectivity and cooperation among many countries along the Silk Road. This will undoubtedly play an effective role in solving the current global development problems and easing the economic contradictions between developed and developing countries. As a member of the global community with a developing-country status, China’s interest are to play a positive and constructive role in the steady development of Asia and the world. With a broad mind, Chinese leaders will actively form an interconnected unity in the world and promote the construction of a community of shared future between China and other actors through the Belt and Road Initiative (Peng and Lei, 2019).
50 Wenqi Lin et al.
Notes 1 The progress of Belt and Road Initiative: contribution and prospect. Refer to http://www.xinhuanet.com//2019-04/22/c_1124400071.htm. 2 The Silk Road of Chinese culture. Refer to http://www.sohu.com/a /259398462_706135. 3 Refer to the section ‘Background’ in the ‘Vision and actions on jointly building Belt Silk Road Economic Belt and 21st-Century Maritime Silk Road,’ authorised by the State Council of China, www.china.org.cn/chinese/2015-09/15/ content_36591064.htm. 4 Refer to https://uk.reuters.com/article/uk-china-usa-politics-idUKKBN1570YW. 5 Refer to https://knowledge.wharton.upenn.edu/article/can-chinas-one-beltone-road-initiative-match-the-hype/. 6 So far the theory has experienced four waves. The first was 1992–3, when Professor Huntington of Harvard University asserted in one of his articles and then the book The Clash of Civilizations and the Remaking of World Order that the combination of Confucianism and Islam would be the natural enemy of Western civilization. The second wave was 1995–6 when Li Denghui visited the United States strained cross-straits relations. There was a military confrontation between China and the United States over the Taiwan issue. The third wave was 1998–9, where China’s economic rise against the backdrop of the Asian economic crisis led to rapid expansion of its economic inf luence. The fourth wave has persisted since the start of the 21st century on expanded issues such as food security, environmental, military, financial, internet security and geopolitical threats. 7 https://thediplomat.com/2014/11/chinas-marshall-plan-is-much-more/. 8 https://www.forbes.com/sites/realspin/2013/09/05/china-is-increasingly-seenas-the-1-power-and-thats-a-problem-for-china/#4a86764a4121. 9 https://www.nytimes.com/2017/05/02/magazine/is-china-the-worlds-newcolonial-power.html. 10 China Customs Statistical Yearbook, 2018. 11 CMREC. Refer to http://www.ndrc.gov.cn/zcfb/zcfbghwb/201609/t20160912_ 818326.html. 12 The major projects in the CMREC are listed in https://www.sohu.com/ a/140105375_463913. 13 With aims to (1) implement preferential policies in relevant areas of the territory, and continue to set up various development zones and bonded zones, including experimenting with resource-based development zones; (2) establish new resources and resource-processing enterprises as part of promoting industrialization and urbanization along the New Eurasian Land Bridge regions of international standards; (3) seek foreign capital for the Western China Agricultural Cooperative Development Zone and the Asia Europe Agricultural Products Wholesale Trading Center; (4) establish economic development zones along the region, along the line of the International Economic and Trade Cooperation Zone centred at Rizhao. 14 The major projects in the NELBEC are listed in https://www.sohu.com/a/ 140105375_463913. 15 The major projects in the CAAEC are listed in https://www.sohu.com/a/ 140105375_463913. 16 Refer to http://world.people.com.cn/n1/2017/0113/c1002-29022097.html. 17 The major projects in the CPEC are listed in https://www.sohu.com/a/ 140105375_463913. 18 The major projects in the BCIMEC are listed in https://www.sohu.com/a/ 140105375_463913. 19 The major projects in the CIPEC are listed in https://www.sohu.com/a/ 140105375_463913.
Vision, rationale and the “corridors” 51
References BRI Construction Leading Group. (2017). Jointly building “One Belt And One Road”: Concept, practice and China’s contribution. Nonferrous Metallurgy Energy Saving, 33(4), 1–9, 15. 国家推进一带一路建设工作领导小组. (2017). 《共建“一带 一路”:理念、实践与中国的贡献》. BRI Research Group. (2018). Belt and Road Initiative Economic Corridor: Unimpeded and Prosperous. BRI Research Group in Development Research Center of the State Council. China Development Press, Beijing. 国务院发展研究中心“一带一路课题 组.” “一带一路”经济走廊:畅通与繁荣[M].中国发展出版社. Chen, J., and Zhang, J. (2016). Position of china Pakistan corridor in the construction of Belt and Road Initiative. Journal of Xin Jiang Normal University (Philosophy and Social Sciences Edition), 37(4), 125–33. 陈继东, 张建全.中巴经济走廊在“一 带一路”建设中的定位[ J].新疆师范大学学报(哲学社会科学版), 37(4), 125–33. Dang, C. (2018). Promoting the construction of Belt and Road Initiative to accelerate the realization of Chinese dream. Special Zone Practice and Theory, 2018(6), 109–14. 党朝胜.推进“一带一路”建设 加速中国梦实现进程[ J].特区实践与理论, 2018(6), 109–14. Liu, W. (2015). Scientific understanding of the Belt and Road Initiative of China and related research themes. Progress in Geography, 34(5):538–44. 刘卫东. “一带一路” 战略的科学内涵与科学问题[ J]. 地理科学进展, 34(5):538–44. Luo, Y. (2019). Overall promotion of the construction of six economic corridors. Opening Guide, 2019(1), 17–22. 罗雨泽.统筹推进六大经济走廊建设[ J].开放导报, 2019(1):17–22. Peng, X., and Lei, Y. (2019). World significance of Belt and Road Initiative. Modern Economic Information, 2019(15), 3–4, 6. 彭欣, 雷永超.“一带一路”倡议的世界意义 [ J].现代经济信息, 2019(15):3–4, 6. Shenzu, G., Qinqin, W., and Jianrun, W. (2017). Research on new mode of globalization and the Belt and Road Initiative cooperation. Studies of International Finance, 2017(8), 26–34. 辜胜阻,吴沁沁,王建润.新型全球化与“一带一路”国际合作研究 [ J].国际金融研究, 2017(8), 24–32. Wang, J. (2017). From corridor to regional economic integration: The formation mechanism and function evolution of Belt and Road Initiative economic corridor. International Economic Cooperation, 2017(2), 9–15. 王金波.从走廊到区域经济一体 化:“一带一路”经济走廊的形成机理与功能演进[ J].国际经济合作, 2017(2):9–15. Zheng W. (2016). Path choices for constructing China-Mongolia-Russia Economic Corridor under the Belt and Road Initiative. Journal of Beijing Technology and Business University (Social Science Edition), 31 (5): 31–8. 郑伟. “一带一路”倡议下构建 中蒙俄经济走廊的路径选择[ J]. 北京工商大学学报(社会科学版), 31(5):31–8. Zhu, C., and Chen, P. (2019). China-Indochina peninsula economic corridor construction: Potential, challenges and countermeasures. Southeast Asia, 2019(2), 38–47. 朱翠萍, 陈富豪.中国—中南半岛经济走廊建设:潜力、挑战与对策[ J].东南 亚纵横, 2019(2):38–47.
3
The BRI from within China Mechanisms, institutions and media representations Bo Qin, Wei Liu and Yan Zhang
The collaborative mechanisms underpinning the BRI The mechanisms connecting the countries The mechanisms connecting the countries along the Belt and Road include both official channels run by the states (e.g. summits, forums, conferences, exhibitions) and bottom-up market mechanisms (tourism, cultural industries, etc.). It is interesting to note that the Central Government of China has taken a different approach to facilitate the international collaboration of the BRI, compared with its relatively low-profile and indirect approach in the past. The Chinese leadership now directly engages other countries’ leadership in various international forums and platforms newly built up and led by China, specifying the positive externalities of the BRI and potential mutually beneficial actions (Vines, 2016). For instance, the first and the second Belt and Road Forums (BRFs) for International Cooperation were convened in 2017 and 2019, respectively, in Beijing to foster a synergy for national and regional development strategies and practical cooperation of the countries along the Belt and Road. President Xi delivered keynote speeches and chaired the roundtable summit in both the BRFs. On multiple occasions, he emphasised and re-emphasised the principles of “extensive consultation, joint contribution, and shared benefits”1 for the international collaboration of the BRI. The intensive and friendly face-to-face dialogues between leaders of the countries were of help to reach concrete actions for the BRI. In total, more than 550 project agreements were signed at the two BRI forums. For the second BRF in the 25–27 April of 2019, 39 heads of national governments, delegates from 150 countries, 92 international organisations and over 6,000 foreign guests participated. During the preparatory process and face-to-face meetings in the forum, 283 agreements of various collaborative projects across countries were signed. Besides the high-end leadership forum and summit, exhibitions and business forums have been organised for international traders and manufacturers. The first and second China International Import Expo (CIIE) were held
Institutions and media representations
53
in November 2018 and 2019, respectively. The 2018 CIIE was the world’s first major national exhibition on imports, rather than on exports. Seventyseven countries and international organisations participated in 2019, of which 30 countries were associated with the BRI. The second CIIE was held in Shanghai, from November 5 to 10, 2019. The Expo has become an important international cooperation platform attended by around 180 countries and international organisations and over 3,800 enterprises. Various types of agreements with total trade value of USD71.13 billion were signed – a rise of 23% from the first Expo in 2018. While the above-mentioned mechanisms were established and developed mainly by the Chinese government, the cooperation of BRI countries has been promoted based on the existing global network. China benefited substantially from the extant global economic system; thus, it has no intention to reform the system. The Chinese government has been engaged in substantive coordination for BRI cooperative activities with participating countries, by fully utilising extant multilateral collaborative mechanisms, including international institutions such as the Group of Twenty (G20), Asia-Pacific Economic Cooperation (APEC), Shanghai Cooperation Organization (SCO), Asia-Europe Meeting, Asia Cooperation Dialogue, Conference on Interaction and Confidence-Building Measures in Asia, China-ASEAN (10+1) Cooperation Mechanism, Lancang-Mekong Cooperation Mechanism, Greater Mekong Subregion Economic Cooperation, Greater Tumen Initiative, Central Asia Regional Economic Cooperation, Forum on China-Africa Cooperation, China-Arab States Cooperation Forum, China-CELAC Forum, China-Central and Eastern European Countries (CEEC) ‘16+1 Cooperation,’ China-Pacific Island Countries Economic Development and Cooperation Forum, World Economic Forum and Boao Forum for Asia. The BRI’s cooperation and collaboration built upon and proceeded from these existing institutional infrastructures. Furthermore, the national leadership of China has directly and effectively facilitated project cooperation on various bilateral diplomatic occasions. President Xi Jinping and Premier Li Keqiang met with leaders of potential partnering countries on bilateral relationship and regional development. They used these opportunities to explain the rich content and positive implications of the BRI. Their efforts, as the state-level leaders’ face-to-face communications, brought about a certain level of consensus on the Initiative. These coordinating efforts resulted in signed MOUs of cooperation on the joint development of the BRI, and on regional cooperation and medium- to long-term economic development plans. With these efforts, as Chapter 2 has shown, countries launched collaborative projects to enhance infrastructure connectivity, industrial investment, resource development, economic and trade cooperation, financial cooperation, cultural exchanges, ecological protection and maritime cooperation. For instance, Pakistan signed a currency swap agreement with China which had significant implication for the internationalisation of renminbi (RMB).
54 Bo Qin et al.
Since the first leadership of the People’s Republic of China e.g. the Premier Zhou Enlai, the Central Government of China firmly upholds the principle of ‘non-interference’. China has made significant diplomatic successes upon the principle. These successful experiences have let the country stick to the ‘non-interference’ principles up to now. Continuing this principle, BRI Chinese investment and business opportunities are always presented as being free of political conditions, except perhaps one that is to support the ‘One China’ principle. The investment and collaborations are limited within economic domain, without interfering others’ domestic politics. Beyond the formal official mechanisms built and developed by governments and international organisations, informal mechanisms are playing an increasingly larger role. Bottom-up transnational cultural and sport activities, such as culture and education exchanges, tourism and sport events, form bridges connecting the countries as well. For instance, in recent years, film industries have been seen as an important force for cultural exchange and integration. Audiences in both China and Central Eastern Europe have found action and comedy genres favourable. It is therefore suggested that China could expand its international efforts from the countries with similar historical and cultural inf luences, such as Singapore and Malaysia, to countries along the Belt and Road with distinctive cultural backgrounds (Hao et al., 2018). The mechanisms linking the BRI and China’s domestic development Besides the mechanisms facilitating international cooperation, there are mechanisms that connect the BRI’s development and China’s domestic socioeconomic development in terms of financial benefit, energy supply and food security, and balanced regional growth (Cheng, 2015). For China, advancing BRI is to “fully leverage the comparative advantages of its various regions, adopt a proactive strategy of further opening-up, strengthen interaction and cooperation among the eastern, western and central regions, and comprehensively improve the openness of the Chinese economy” (BRI Construction Leading Group, 2017). In terms of financial benefits, the BRI has enabled China to optimise and utilise its huge foreign exchange reserve, for accelerating the internationalisation of Chinese renminbi. China boasts nearly USD4 trillion of foreign exchange reserves, of which 60% is in US government bonds. The return of US government bonds is relatively low, which combined with the depreciation of renminbi has resulted in shrinking foreign exchange reserves for China. Therefore, rather than investing solely in US government bonds, China has started to invest its foreign exchange reserves in fixed capital such as infrastructure and productive industries in countries along the BRI corridors. The BRI allows China not only to obtain investment returns but also to enhance its political ties with countries of strategic importance. In addition to signing bilateral investment agreements, China has established two multilateral
Institutions and media representations
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financial institutions: the Asian Infrastructure Investment Bank (AIIB) and the BRICS New Development Bank (NDB). The AIIB possesses an initial capital of USD100 billion and is headquartered in Beijing. The NDB has an initial capital of USD50 billion and is headquartered in Shanghai. China has established the Silk Road Fund (SRF) and has begun to discuss financing arrangements of the Shanghai Cooperation Organization (SCO). While the SRF will be introduced in the next section, the SCO is worth mentioning here. The SCO was established as a political, economic and security alliance involving China and several Central Asian countries. Later it extended to the South Asia and Asia-Pacific region, focussing more on political and security issues. Recently, SCO began to focus more on comprehensive issues of development and rebranded itself a multi-profile institution pursing “favourable environment for trade and investment… to gradually achieve free f low of goods, capital, services and technologies,” as stipulated in the organisation’s Charter.2 In terms of energy and food securities, the implementation of the BRI helps China diversify its energy and food suppliers and transportation routes. At present, 80% of China’s imported oil is transported by ship through the Strait of Malacca, which is potentially problematic when considering the country’s growing domestic demand. A mega-project, the passage via the new Gwadar Port in Pakistan, was thus proposed, which could reduce journeys between China and Europe, the Middle East and Africa by 85%. The Gwadar Port is an important BRI project located in the China-Pakistan Economic Corridor (CPEC). The port’s strategic location reinforces China’s presence in the region and facilitates the country’s oil supplies from the Persian Gulf and Africa. China and Pakistan signed a USD46 billion investment agreement with the aim to directly connect and increase China and Pakistan’s cooperation through infrastructure investment in railways, highways, oil pipelines and optical cables.3 According to the Xinhua News Agency,4 China will invest in the Thai Canal (also known as the Kra Canal) project, aiming to save 48 hours’ worth of shipping journeys between Europe and Asia, as an alternative route to the Strait of Malacca. In terms of achieving a more balanced regional development, the implementation of the BRI could boost the development of the port cities, border areas, and regions in western China, where economic growth is lagging that of eastern China. The BRI strategy of developing “six major corridors for international economic cooperation” explicitly puts forward the goal of a balanced regional development through international passages with the support of major cities within the corridors as well as ‘industrial parks’ as key platforms. Chen et al. (2016) pointed out that the urbanisation of China’s mid-west regions and cities along the six corridors would be facilitated by the development of BRI’s ‘six corridors,’ as shown in Table 3.1. Most of the regions are not in the most developed area of China, i.e. the eastern coastal region. To achieve the Grand Development of the West (xibu dakaifa) in China, it is necessary to ensure that the ‘harmony and the stability’ in Xinjiang and
56 Bo Qin et al. Table 3.1 The beneficial role of the six major corridors in the regions of China Six Major Corridors
The Benefited Areas in China
New Eurasian Land Bridge China-Mongolia-Russia Economic Corridor China-Central Asia-West Asia Economic Corridor China-Indochina Peninsula Economic Corridor China-Pakistan Economic Corridor Bangladesh-China-India-Myanmar Economic Corridor
Central and North-west regions North and North-east regions North-west region South-west region Xinjiang, China South-west region
Source: Chen et al. (2016).
Tibet are not jeopardised by the “extremism, terrorism and other hostile external forces.” For the purpose, some Chinese scholars proposed to take the advantages of BRI to build up a ‘buffer zone’ in Central Asia (Clarke, 2016). BRI facilitates a balanced regional development in two ways. The first is that the BRI creates substantial development opportunities in port cities and regions. The development of national/regional border trade markets and transnational regional commercial nodes would encourage the global division of labour and export, thereby accelerating national and regional development. The second is that the implementation of the BRI accelerates infrastructure developments and/or upgrades in Chinese cities along the six corridors, especially the mid-western regions. It is expected to encourage intra-regional migration and promote urbanisation and regional development in the mid-western and border regions.
The emerging actors within the BRI: institutions, funding agencies and project operators Institutions to coordinate the BRI development in China Any shift of major policy initiative or investment strategy often leads to organisational change (Wu and Qin, 2018). However, it is stressed that, by examining government documents and policy reports, the Chinese government displays no interest to establish a brand new international economic system and institutions. In the past decades, China probably benefited the most from globalisation and would like to maintain it for a further integrated global production network and a more open international economic system. Most Chinese scholars attribute the country’s economic progress to gradually opening-up and moving to the market economy (Wu, 2004). Thus, the WTO, the World Bank, the IMF, the Asian Development Bank and other world organisations are never excluded in the BRI. This section identifies
Institutions and media representations
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and explains the newly established and emerged organisations and institutions to fund, manage, facilitate and deliver the BRI projects. The section addresses questions such as who coordinates the BRI projects at domestic and international levels, how does the coordination work, and are bilateral and multilateral projects handled differently? In China, the central government has set up a high-level team to promote the BRI from within China and guides official policies regarding the BRI. Han Zheng, a member of the Standing Committee of the Political Bureau of the CPC Central Committee and vice premier of the State Council, has been serving as the team leader since 2018.5 The daily work of the high-level team to promote the BRI is mainly undertaken by the Office of the Leading Group for Promoting the Belt and Road Initiative, which is based in the National Development and Reform Commission, one of the most important ministries within the Chinese Central Government. Similar structures are also established in other ministries, commissions, provinces and autonomous regions for promoting the BRI. Figure 3.1 shows the administration structure of the BRI promotion organisations. By early 2019, the BRI promotion teams held at least nine meetings to sort out practical issues such as necessary project supervision and investment coordination. Funding organisations for the BRI According to The Belt and Road Initiative Progress, Contributions and Prospects issued by the Office of the Leading Team for Promoting the Belt and Road Initiative in 2019, there are five different types of funding organisations that are associated with BRI. The first funding organisation is participating countries’ sovereign wealth funds (SWFs) and public investment funds (PIFs), which play a big part in BRI. As mentioned in ‘The mechanisms linking BRI and China’s domestic development,’ the Silk Road Fund (SRF), established in 2014, supports
Figure 3.1 Framework diagram of administration institutions in China for the BRI. Source: Adapted from the website of www.yidaiyilu.gov.cn.
58 Bo Qin et al.
investment and finance of trade, economic cooperation and infrastructure connectivity of the BRI. The Fund has a total capital of USD40 billion and RMB100 billion. The State Administration of Foreign Exchange holds 65% of the Fund through Buttonwood Investment Holding Company Ltd. The remaining 35% are held by China Investment Corporation6 (15%) through Seres Investment Co. Ltd, China Development Bank (CDB)7 (5%) through China Development Bank Capital Co. Ltd and Export-Import Bank of China (15%). Both China Development Bank and Export-Import Bank of China are state-funded and state-owned policy banks with the status of an independent legal entity. The former is mainly responsible for raising funds for large-scale infrastructure projects, while the latter is dedicated to supporting China’s international trade, investment and economic cooperation. More recently, other SWFs such as the Abu Dhabi Investment Authority of the UAE have increased their investment in major emerging economies participating in the BRI. The SRF injected EUR500 million capital into the China-EU Joint Investment Fund (formed in July 2018) that is also backed by the European Investment Fund to engage with the BRI Investment Plan in Europe. Since its formation, the SRF is a market-oriented, professional international investment institution, actively seeking investment opportunity and exploring creative investment models to support the BRI. The Fund is mainly invested in infrastructure, energy development, industrial cooperation and financial cooperation, in particular, to focus on domestic high-end technology and quality production of ‘going out.’ The fund also promotes the realisation of the common and shared development of China and the countries and regions along the BRI regions. Different from foreign exchange reserves and investment funds that buy stocks and bonds, the SRF focusses on investing in the project developments associated with the BRI, by investing in the companies directly or providing loan, equipment, logistics and other services. The second funding organisation includes the banks of China’s joint financing programmes, like the International Finance Corporation under the World Bank Group, the Inter-American Development Bank, the African Development Bank and the European Bank for Reconstruction and Development. These joint efforts are guided by the Guiding Principles on Financing the Development of the Belt and Road and the principles endorsed by China’s Ministry of Finance and its counterparts from 27 countries. By late 2018 they have invested in over 100 programmes in more than 70 countries and regions. In November 2017 the China-Central and Eastern European Countries (China-CEEC) Bank Consortium was established that includes 14 financial institutions from China, Hungary, the Czech Republic, Slovakia, Croatia, and nine of the Central and Eastern European countries. In the same year Premier Li Keqiang attended the sixth China-CEEC Leaders Meeting in Budapest and announced formal establishment of the China-CEEC Bank Consortium. He promised that the China Development Bank will provide EUR2 billion worth of development financial cooperation loan. The second
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phase of the China-CEEC investment cooperation fund has been set up, raising USD1 billion to invest in Central and Eastern Europe.8 The China-Arab States Bank Consortium was founded in July 2018. In the first board meeting in Beijing in July 2018, member banks signed The Declaration of the Establishment of the China-Arab Interbank Association (CAIA) to formally establish the organisation. To strengthen the China-Arab cooperation, the China Development Bank promised USD3 billion special loan for China-Arab financial cooperation and USD10 billion loan for reconstruction and industrial upgrade. The CAIA provides financing support and financial services for major China-Arab BRI projects. In September 2018, the ChinaAfrica Financial Cooperation Consortium was officially established to support African BRI projects. Besides China-CEEC Bank Consortium, CAIA, etc., the Asian Infrastructure Investment Bank (AIIB) and the BRICS New Development Bank (NDB) were established to financially aid less-developed countries, to supplement the existing international financial organisations such as the World Bank and the International Monetary Funds. There are differences between the AIIB and the NDB. The AIIB is mainly led and dominated by China, while the NDB is jointly led by Brazil, Russia, India, China and South Africa, the BRICS countries, with 20% equal share from each country. The AIIB focusses on the Asia-Pacific region, while the NDB operations concentrate mainly on the BRICS nations. The AIIB begun its operation in January 2016. Headquartered in Beijing, it has grown to have 100 members worldwide – spread across five continents. It is a multilateral development bank with the mission to improve social and economic conditions in Asia. The AIIB offers sovereign and non-sovereign funds for sound and sustainable projects in energy and power, transportation and telecommunications, rural infrastructure and agricultural development, water supply and sanitation, environmental protection, and urban development and logistics. By late 2018, it has approved USD7.5 billion in loans and leveraged other investments totalling about USD40 billion. Its 35 approved projects are distributed over 13 countries including Indonesia, Pakistan, Tajikistan, Azerbaijan, Oman, Turkey and Egypt. In March 2015, the UK was the first major Western country to join the AIIB. The UK’s role in an international financial system helps to promote the development of the AIIB. The USA has not joined the AIIB due to concerns on the rise of China as a perceived threat to its global interests (Hong, 2017). The aim of the AIIB aligns with the BRI, which is to improve infrastructure and economic connectivity throughout Asia and the world. When the AIIB was first initiated in October 2013, it was generally perceived by the Chinese government to be the funding arm of many countries’ new international infrastructure building forays and was going to be a competitor to the already-established multilateral development banks, such as the World Bank or Asian Development Bank. However, the function of AIIB, as well as the SRF, goes beyond that. Infrastructure construction needs large investments
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and it is estimated that Asia’s infrastructure needs, by 2030, will be around USD26 trillion, which is a climate-adjusted estimate.9 Although the World Bank and the ADB are active in Asia, their investment capacity is far below this demand. Moreover, in the long term, these expensive infrastructure development projects are often too costly and risky for the private sector or any single government to take on. There is indeed a desperate need for such a funding organisation. Laurel Ostfield, head of communications for the AIIB, once proclaimed that ‘The bank was inspired by China, but it was really created for all of Asia.’ Although China wields the largest weighted voting power in the AIIB, this does not mean that the bank is inherently Chinese controlled. The establishment of the AIIB is a ‘collective activity,’ aiming for enhanced economic connectivity and common prosperity. While there are overlaps of the customer base of the World Bank, the ADB and the AIIB, their business priorities vary (Yu, 2016). The ADB focusses on regional development to reduce poverty and to promote economic development in Asia, while the AIIB supports and strengthens connectivity among the BRI countries, and focusses on their infrastructure development. Since its inception in 2015, the number of AIIB-invested projects rose to 49, mostly in the transport, infrastructure finance and energy sectors (Table 3.2). The level of investment has also increased, reaching a total of USD9.56 billion (Table 3.3). Insurance corporations are the third type of funding organisations. A case in point is the China Export & Credit Insurance Corporation (also known as SINOSURE). SINOSURE is a state-funded policy-oriented insurance company that offers insurance service for Chinese BRI enterprises to promote China’s foreign economic and trade development and cooperation. Its products and services include insurances for medium- to long-term export credit, overseas investment and short-term export credit. By late 2018, the SINOSURE has endorsed USD600 billion funds to BRI projects in participating countries. On 13 June 2019, the BRI working promotion meeting of SINOSURE was held in Shenzhen, Guangdong province. In the meeting, China Export & Credit Insurance Corporation proposed that it would give preferential support to BRI-related financial institutions, support the wide distribution of made-in-China products and Chinese brands, and contribute to the high-quality construction of the BRI. Jing Ao Solar was the first photovoltaic power equipment production company to receive such support from the SINOSURE. One representative of Jing Ao Solar said: our private company is deeply involved in the joint development of third markets in Latin America and China. This cooperation combines the strengths of Chinese companies in terms of production capacity and the advanced experience of Italian companies, bringing together the strengths of Chinese and European financial institutions. In the cooperation the credit insurance support from the SINOSURE is critical.10
1
1
1
2016 2017 2018 2019
Total
1
1
Telecommunications
4
2 1 1
Multi Sector
10
3 3 2 2
Transport
217
75
75
2016 2017 2018 2019
Total
239
239
Telecommunications
973
225 248 500
Multi Sector
2,303
390 778 595 540
Transport
Source: Adapted from the official website of AIIB, https://www.aiib.org/en/index.html.
417
200
Urban
Investment Digital (USD million) Infrastructure
Table 3.3 Project investment (by sector) since the establishment of the AIIB
Source: Adapted from the official website of AIIB, https://www.aiib.org/en/index.html.
2
1
Urban
The Project Digital Number Infrastructure
1,275
300 800 175
Finance
8
2 3 3
Finance
Table 3.2 The number of projects in different sectors since the establishment of the AIIB
2,704
1,085 649 660 310
Energy
15
4 6 2 3
Energy
1,518
208 1,050 260
Water
7
1 4 2
Water
1
1
80
80
Other
Other
9,583
1,691 2,399 3,353 2,140
Total
49
8 15 12 14
Total
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International exchanges are the fourth type of funding organisations established to advance equity stock and support business and technical cooperation for securities and futures. For instance, the China Europe International Exchange (CEINEX) was jointly founded by the Shanghai Stock Exchange (40%), Deutsche Börse Group (40%) and China Financial Futures Exchange (20%) in 2015. The CEINEX’s vision is to build a centralised marketplace for trading, risk management and asset allocation for China-related or RMBdenominated financial products in Europe. One of its missions is to provide financial services for the BRI infrastructure projects. Witnessed by German Chancellor Angela Merkel and Chinese Premier Li Keqiang, CEINEX stakeholders signed a joint venture agreement in Beijing in October 2015, as a China-Germany strategic project. In addition, the Shanghai Stock Exchange and the Astana International Financial Center Authority of Kazakhstan (AIFC) signed an agreement to co-invest in the Astana International Exchange (AIX), which is a modern trading platform that implements the privatisation of Kazakh state-owned enterprises, and issues and trades government and corporate bonds. Inf luential business publication ASIAMONEY named AIFC the 2019 BRI best practice award. According to the AIFC, from 25 September 2014 to 5 August 2019, a total of 3,214 RMB transactions valued at RMB675.7 million were completed. The fifth type of funding organisations is China-funded financial organisations that have built institutions in BRI countries. Eleven China-funded banks have set up 76 first-rate institutions in 28 BRI countries, and 50 banks from 22 BRI countries have opened 7 corporate banks, 19 branches and 34 representative offices in China. Two Chinese-funded securities firms established joint ventures in Singapore and Laos. China has made bilateral currency swap arrangements with more than 20 BRI countries, RMB clearing arrangements with 7 BRI countries, and has signed cooperation agreements with the financial supervision authorities of 35 BRI countries. These strengthen RMB’s currency functions for international payment, trade and reserves. The Cross-Border Interbank Payment System (CIPS) covers 60 countries and regions involved in the BRI.11 Major project operators When China proposed the BRI strategy, its state-owned enterprises (SOEs) were, by default, the operator of BRI-related projects. Data from the Stateowned Assets Supervision and Administration Commission of the State Council suggest that, in early 2019, central SOEs took up 50% of the infrastructure projects either already underway or in the pipeline, with over 70% of contract value, spreading across more than 3,200 projects. According to the figures, central government-controlled SOEs had 10,791 overseas units in 185 countries and regions in 2019, and its foreign assets totalled more than RMB7 trillion (USD1 trillion) in the same period, with annual
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operating revenue and profit reaching RMB4.7 trillion and RMB106.4 billion, respectively. In China, SOEs are legal entities that undertake commercial activities on behalf of the government. Their legal status varies from being a part of government to stock companies with a state entity as a regular or dominant stockholder. In China, different levels of government may ‘own’ their ‘enterprises.’ The Central Government actually ‘owns’ 95 large enterprises, which are under the State-owned Assets Supervision and Administration Commission of the State Council. Although the SOEs are independent market actors and can make their own decisions regarding market environment, crucial and major decisions are approved by the State-owned Assets Supervision and Administration Commission. Also, the appointment of the head of SOEs is determined by the Commission. In addition to the central government, all the provincial-level governments have their SOEs. Similarly, these provinciallevel SOEs are under the provincial State-owned Assets Supervision and Administration Commission. Even though China has gradually transformed to a market economy and some SOEs have been privatised in the last decades, the remaining SOEs have played important roles in the Chinese economy. First, the SOE, while part of the public sector, is profit-seeking. Most of its profits will be submitted to their owners, that is, central or provincial governments and become part of revenue. Second, the SOEs operate at upper sectors of the supply chain such as energy, telecommunication, finance, power, etc. This monopoly gains them pillar status of China’s whole economy. Being owned by the state/government does not preclude SOEs from competing. Even in areas where central SOEs dominate, such as petroleum and petrochemicals, telecom services, airlines and financial services, competition among SOEs is intense. Traditional view believes that SOEs are highly over-leveraged and structurally less efficient than their private peers. This provided warning for decision-makers and strategies have been especially devised to intensify the inter-SOEs competition. For example, in the field of telecommunication, the licenses of CDMA and WCDMA were distributed to two different SOEs, China Telecom and China Unicom. Also, the state-owned banks and airlines are widely known to be competing against each other in most of their business areas. So here SOEs, although owned by governments, operate like individual entities. However, over-competition among SOEs does also occur. For example, competition between the China North Rail (CNR) and China South Rail (CSR) resulted in China losing business in Argentina. These two SOEs were later on required to merge. In sum, SOEs are the backbones of BRI projects. With their large funding and strong policy supports and their relatively high level of risk-avoidance, they have been undertaking major infrastructure projects in most BRI regions.
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Representation of the BRI in Chinese media and academia This section addresses questions such as how the BRI projects are represented to the Chinese society and people in the public media and academia? How are projects represented to the local community and people affected by the developments? The progress of the BRI has been reported to the public in China mainly through official media such as China Daily and CCTV news reports or local TV stations. Since 2014, China’s media reporting on BRI has rapidly increased. Most reported on project achievements and leaders’ visits to BRI sites or meetings. Geographically, the media paid more attention to China’s economic and trade cooperation with South-East and Central Asian countries than to South Asia and Central and Eastern Europe. China Central Television and local TV stations The China Central Television (CCTV) news, operated by the Central Government of China, is also known as the ‘Chinese political barometer.’ According to Sun and Fu’s (2018) calculation, during 2013–17, CCTV news broadcast four series, ‘the Belt and Road, all the Way to Build Prosperity,’ ‘International Community with Shared Interests,’ ‘The BRI, Win-Win Cooperation,’ and ‘The Road to Revival’ with a total of 65 reports and 108 regular reports. Figure 3.2 shows changes in media intensity over time. Local TV stations also produced and broadcast BRI news. For instance, in 2016, Beijing TV launched the first season of the 108 episodes ‘Everyone Faraway Enjoys the Same Moment.’ In 2017 Shaanxi TV launched and broadcast 41 episodes of ‘New Vision of the Silk Road.’ Guangdong TV launched a series on ‘Guangdong Enterprises Overseas’ in 2017 that had 24 episodes as of 28 February 2018. 30000
24500
25000 20000
14000
15000
12000
10000 5000 0
0 2013
1000 2014
2015
2016
2017
Figure 3.2 The distribution of Chinese reports on the BRI, 2013–17. Source: Compiled from Sun and Fu (2018).
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Some scholars argue that media reports highlight the benefits brought by the BRI to countries along the routes, but barely mention the benefits that China gains. Sun and Fu’s (2018) study of the content of 245 selected news reports from 2013 to 2017, taken from CCTV and local TV channels, led to some noteworthy findings. Table 3.4 shows the TV news by subjects of the BRI. The main topic was the outcome of the BRI with the reports typically focussed on the benefits brought to countries along the Belt and Road corridors. For example, in the series ‘Everyone Faraway Enjoys the Same Moment’ by Beijing TV, the theme is ‘sharing the story of the Silk Road and witnessing the moment of benefit,’ in which the word ‘benefit’ underpins the keyword of the report. BRI achievements are the most frequently reported in media. Table 3.5 shows that economic and trade exchanges are the most frequently mentioned issues in relation to achievement, followed by infrastructure construction. When reporting on trade and economic matters, the media pays more attention to China’s cooperation with South-East Asian and central Asian countries and less to South Asia or Central and Eastern Europe. On the topic of infrastructure construction, railway connectivity, road, maritime and other transport facilities of the BRI countries have been frequently mentioned Table 3.4 The TV news subjects of the BRI Order Subject
Number
1 2 3 4 5
176 29 20 16 4
The outcome of the BRI State leaders’ attending BRI-related events Activities and news Media evaluation The interpretation of the BRI
Source: Compiled from Sun and Fu (2018).
Table 3.5 The core issues of the BRI construction and development results Core issue
Number Example
Economic and trade
96
Infrastructure construction Cultural and educational exchanges Energy cooperation Financial integration
55 16 5 4
China-Pakistan Economic Corridor; Made in China; Marseille international trade city built in the cooperation between China and France China Railway Express; Addis Ababa-Djibouti Railway; Hungarian-Serbian Railway Line Chinese cultural diplomacy in Bangladesh; ChinaMongolia Friendship and Exchange Year; actions to treat conjunctival disease Central Asian gas; China and Myanmar’s oil and gas Asian Infrastructure Investment Bank; Silk Road Fund
Source: Compiled from Sun and Fu (2018).
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Table 3.6 The most frequently used keywords in the BRI reports in CCTV news Figure
Behaviour
We Cooperation Xi Jinping Construction Investment Trade Joint Development
Attitude
Location
Event
Common Open Win-Win Interf low Community
China Internal World Central Asia Kazakhstan Along the line Economic belt Maritime field
The BRI Economic The Silk Road The Belt and Road Forum Initiative Project Facilities Strategic Meeting USD Silk Road Results Finance Railway
Source: Compiled from Sun and Fu (2018).
by media. Projects such as the China Railway Express, the Addis AbabaDjibouti Railway and the Hungarian-Serbian Railway Lines have drawn global media attention. Analysing word frequency of 173 BRI news reports in CCTV News, 35 keywords were identified. The keywords are classified into five categories by character, attitude, location and event. Table 3.6 shows that the most used words are ‘we’ and ‘Xi Jinping.’ ‘Cooperation’ is the most used word to describe attitude, which purposely respond to the concerns associated with BRI, i.e. how it is realised through international cooperation. The words and attitude have positive tone like ‘common,’ ‘open,’ ‘win-win,’ ‘interf low’ and ‘community.’ The geographical focus of CCTV BRI reports is Asia, with ‘China,’ ‘Central Asia’ and ‘Kazakhstan’ among the most frequently appeared. The People’s Daily The People’s Daily is one of the mainstream Chinese newspapers, being regarded as the most official and reliable source of information in the public domain on policies and strategies. It has a specific online portal for BRI news. Jia (2019) examined BRI-related news that have appeared on front page of the People’s Daily from 3 September 2013 to 31 December 2018 ( Jia, 2019) and found that the number of the BRI initiatives on the front page of the People’s Daily initially reached a peak of 61 times in 2017 (Figure 3.3). An analysis of the types of BRI-related news from China Daily online found that the updates and brief BRI-related news accounted for the largest proportion, which differs from other sections in the newspaper. Providing
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67
61
60 50 40
40 28
30
24
20 10 0
0 2013
3 2014
2015
2016
2017
2018
Figure 3.3 Number of front-page stories on the BRI. Source: Adapted from Jia (2019).
brief narration of key events, they are short in length, concentrated in content and highly time sensitive. For example, the news of Zhang Dejiang’s12 attendance in the BRI forum and visit to Hong Kong (11 May 2016) contained only 82 words. The reports related to experts and celebrities in the BRI news are diverse, including political leaders, representatives of Chinese and foreign BRI enterprises, and professional experts. Using the keywords ‘the BRI’ to retrieve related reports between 1 March and 31 September 2017, the subject themes were identified as official governmental events (63.08%), corporate representative activities (26.2%), expert opinion (9.8%) and local people’s stories (0.9%) (China Daily Online Research Institute 2018). News of official activities focus on leaders’ visit, meeting and official opinion, including the Belt and Road Forum for International Cooperation, provincial plans concerning the BRI, government speeches and exclusive interviews with leaders. President Xi Jinping’s speech, visit, meeting and other official activities are located at prominent positions such as the website homepage and smart phone applications. There are reports from the enterprises’ perspective on risks and challenges for BRI participation, individual project experiences, and expert interpretation and analysis. In April 2017, China Daily Online cooperated with think tanks such as the Center for China and Globalization, the Charhar Institute (an important think tank in China) and the Pangoal Think Tank to open a new column, ‘Everyone talks about the BRI,’ that approaches the BRI from multiple perspectives, such as global governance, investment and enterprise participation. On 13 October 2018,
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China Daily Online launched a video news segment reporting the social conditions and changes of people who are directly associated with BRI projects and countries. The Belt and Road Portal This section provides a media analysis, focussing on publicity and marketing and other functions of the official BRI site. The Belt and Road Portal is the official website13 set up by the Chinese government to transmit and update on latest progress, regulations, policies and authoritative information of the BRI. The website was launched on 21 March 2017 in six of the UN official languages – Mandarin, English, Russian, French, Spanish and Arabic. The home page information of the Portal is visually designed to highlight and clearly present the key message of the BRI policy and activities. For example, Table 3.7 shows the six headline messages on 18 November 2019, with specific and focussed titles and types, promoting BRI’s profile. Regarding news type, the headline information mainly concerned project progress, as well as a round-up of the latest achievements and the diplomatic activities of President Xi Jinping. Among the six headline articles there was a digital inventory (statistical summary) of the progress of the BRI, a report on President Xi Jinping’s visits at the BRICS Brasilia Summit and a discussion of four specific projects’ features. These features were mainly in the form of pictures or infographics with simple captions that outlined details of the project. For example, one headline report stated that by November 2019 China had signed 197 BRI cooperation documents with 137 countries and 30 international organisations. It notes that between January and September 2019, China’s total import and export to BRI countries was USD950 billion, and USD10 billion non-financial direct investment. Table 3.7 The headline information in the Belt and Road Portal Date
Report
Type
2019.11.16
China has signed 197 cooperation documents with 137 countries and 30 international organisations Xi attends the plenary session of the BRICS Brasilia Summit The rehabilitation and upgrading of N6 Road in central Mozambique by a Chinese construction company is completed Doria from Russia: I do business in Manchuria
Results inventory Chairman’s visit News features
2019.11.14 2019.11.17 2019.11.12 2019.11.12 2019.11.11
China’s experience contributes to the rapid development of e-commerce in Africa. Chinese companies invest in the construction of Nigeria’s first railway vehicle assembly plant
Source: Compiled by the author.
News features News features News features
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There was a first page image of Xi’s and an article describing his schedule at the meeting and his speech entitled ‘Together for a New Chapter in BRICS Cooperation’ in the plenary session of the BRICS Brasilia Summit. It was reported that President Xi Jinping argued that a new round of technological and industrial transformation is emerging with opportunities from the rise of emerging markets and developing countries, which is injecting strong impetus to global geo-political transformation and governance. The Belt and Road Portal reported many achievements and stories in the countries along the Belt and Road as well. For instance, a photo from a news item on the Portal featured the BRI’s experience in Nigeria, namely Chinese companies investing in the construction of Nigeria’s first railway vehicle assembly plant. It shows the scene of local people watching the opening ceremony in the town of Kagura in Nigeria’s Ogun state. The reports on the event in Chinese media imply that the response from local people and government officials was overwhelmingly positive.14 An article featured an aerial photo from the Portal, taken on 14 November 2019, showing the newly built cloverleaf interchange in Inchope, Mozambique. It is one of the images in the news article on the repair and upgrade of the N6 Road in central Mozambique by a Chinese construction company. This road is a main east-west transportation line in the central region, an economic artery as well as an international channel to access the coast for Zimbabwe, Zambia and other ‘landlocked’ nations. Interestingly the news article itself lacked an introduction to the road project. It only showed several drone photos and a note that the Mozambican president attended its completion ceremony. BRI representation in scholarly work The introduction and progression of the BRI has drawn increasing scholarly interest within China and internationally. In China’s academic community, the disciplinary backgrounds of the scholars who study the BRI are primarily in economics and management. Social sciences, philosophy and humanities came second. The research is diverse, including economic implications of the BRI, geographic ramifications and ecological environment impacts of the BRI, geo-political changes caused by the BRI, international trade and economic development pattern’s reorganisation related to the BRI, and technological cooperation and development strategy along BRI countries and regions. Figure 3.4 shows that the BRI-related publications increased by nearly 30,000 in 2018. Given its multiple-level spatial implications and the vast scale, the BRI essentially represents one of the most important national development strategies, that is, upgrading the ‘opening-up’ of China to the next stage, a more global-oriented and export-import balanced policies (Liu, 2015). On geography topics, researchers approach the BRI focussing on geographical, natural resources and ecological environmental conditions of the
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Bo Qin et al. 35000 30000 25000 20000 15000 10000 5000 0 2013
2014
2015
2016
2017
2018
Figure 3.4 Research publishing trend on the BRI. Source: Authors.
regions associated with the BRI. They analysed and evaluated its associated risks to natural and geographic resources and explored sustainable development models. Some topics of the published studies include analyses on resource environments of BRI (Dong et al., 2015), geographic development pattern analyses (Wu et al., 2019), ecological environment and development strategy analysis (NRSC,15 2015; Xu et al., 2016), natural disaster risk and adaptation/mitigation research (Cui, 2017; Li et al., 2014; Tian, 2017), so on. On geo-political reorganisation topics, researchers approach the BRI through examining the national security risks and international collaboration strategies associated with the BRI. Considering the possible geo-political and economic cooperation, Song et al. (2018) proposed a new approach ‘geoenvironmental system’ and employed it to investigate the BRI as a complex, nonlinear system with multiple-layer and interactive dynamics. Methods such as multiple layer simulation, agent-based modelling and scenario experiments are adopted to study specific geo-political problems. Information technology, e.g. big data, becomes popular for geo-political research. Heterogeneous data mining, machine learning and high-performance computing are used as analytical tools for solving geo-environmental problems (Ge et al., 2017). On economic development and international trade topics, researchers approach the BRI through conducting economic feasibility analyses of the BRI and investigated the changing characteristics of the international cooperation and global trade network associated with the BRI. For example, combining data from the World Trade Organization and customs data across countries, Zou et al. (2015) examined the international trade interdependence and the contributions of export to economic development across provinces in China. Attention has also been paid to the changes in the global production network. A social network approach was employed, particularly its indicators such as centrality, division and structural entropy, to understand the spatial pattern and evolving characteristics of global trade networks, primarily China’s role in the BRI networks and its geostrategic implications ( Jiang and Wang, 2018).
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On urban and regional development in China, researchers focus on the impact of the BRI including the inf luence on urbanisation process, the spatial patterns of urban growth, land development, etc. For example, through analysing impacts of the BRI on urbanisation pattern, it is suggested that the BRI could help China achieve its target to promote high-level urbanisation and modernisation (Chen et al., 2016; Zhao and Gong, 2018). The existing literature examined spatial pattern of the six corridors to describe how the cities in different regions are integrated into the urban system within the BRI framework. Some studies analyse how the BRI has and will affect land development patterns through identifying potential problems and opportunities brought by the BRI (Liu et al., 2015). Other researchers make substantial contribution to common goods and services such as establishing an open mapping geographic and spatial information database, which has laid foundation to ensure information efficiency and security. Hu et al. (2015) put forward BRI corridor-building research programme, while Guo and Xiao (2016) proposed the BRI ‘digital’ development research scheme for developing a digital ‘BRI’ infrastructures. The ‘digital’ scheme aims to make breakthrough in data, models and services technology for services such as real-time intelligent positioning, comprehensive disaster prevention, environmental security, urban-rural integration planning and various types of public policy decision-making in the BRI countries (Zhang and Zhang, 2018).
The ‘Five links’ practical achievements and risks of the BRI After the years of BRI implementation, significant achievements have been made in a range of fields – from infrastructure to community development, from commercial cooperation to cultural exchange. The impacts of BRI are global where its contributions from the perspectives of the ‘five links’ are remarkable. The so-called ‘five links’ are the five international and transnational networks: namely policy coordination network, people-to-people network, facilities network, transnational trade network and financial network. Overall, the ‘five links’ is tailored for the BRI regional characteristics, which is also an embodiment of the cooperative principle of co-consultation, co-contribution and co-benefit. Policy communication and people-to-people networks embody the principle of co-consultation. Facilities and financial networks ref lect the principle of co-contribution. A transnational trade network embodies the principle of co-benefits (Li, 2018). The ‘five links’ principle has played a decisive role in the implementation of the BRI. It is China’s contribution to global governance with the potential for global community building for a shared future of humankind. On policy coordination and cooperation, by August 2019, the Chinese government had signed 195 inter-governmental agreements with 136 countries and 30 international organisations, ranging from Eurasian regions to specific countries in Africa, Latin America, the South Pacific and Western
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Europe. In April 2019, 38 heads of state and delegates presented at the Belt and Road Forum for International Cooperation, with more than 6,000 foreign guests attending the forum. During the forum, 283 substantial agreements in six key areas were formulated, namely government policy cooperation initiatives, bilateral and multilateral governments agreements, multilateral official platforms, investment and financing project agreements, and governmententerprise cooperation agreements.16 The projects and initiatives have benefited the people along the Belt and Road corridors, while a people-to-people network has been continually strengthened through ever-increasing cultural and educational exchanges. Various countries have held cultural events, arts festivals, film festivals, TV weeks and book fairs. Their media corporations have cooperated on the production and translation of fine films, radio programmes and TV programmes, and even initiated an international federation of scientific organisations. Since the initial Belt and Road Forum, China has provided participating developing countries with RMB2 billion emergency food aid, and implemented 100 Happy Home Projects, 100 Anti-Poverty Projects and 100 Health Recovery Projects, among other initiatives. Student mobility, cultural exchanges and tourism development have been promoted. In the facilities network, the main framework, consisting of six corridors and six connectivity routes involving multiple countries and ports, has been put in place. Substantial progress has been made in a number of landmark projects – for example, a number of major railways, seaports, airports and energy projects are progressing smoothly. By July 2019, the China Railway Express along the Belt and Road countries has reached nearly 17,000 journeys, which connects 62 cities in China and 53 cities in 16 other countries. Transportation infrastructure connects companies to each other and to workers and consumers. More and faster connectivity would contribute to the integration of production networks and to human mobility, leading to higher level international socioeconomic collaboration. In regard to transnational trade network, the BRI investment and trade cooperation continue to expand. Since the BRI has been put forward, the trade value of goods between China and the countries along the Belt and Road exceeds USD6 trillion. From 2013 to 2018 the direct investment from China to the countries along the corridors exceeded USD90 billion. Moreover, the proportion of China’s total foreign trade with countries along the Belt and Road has increased year by year, from 25% in 2013 to 27.4% in 2018. In regard to financial network, the establishment of the Asian Infrastructure Investment Bank (AIIB) discussed earlier has been crucial to BRI. By the end of the year, the AIIB had more than 100 members covering five continents, with expected authorised capital of RMB100 billion. As a multilateral development institution, the AIIB focusses on infrastructure development in BRI countries. The objective of the AIIB is to foster sustainable economic development for wealth creation and infrastructure connectivity improvement by investing in infrastructure and other productive sectors to promote regional cooperation and partnership through close collaborations
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Figure 3.5 Number and investment size of AIIB projects by country. Source: Adapted from the official website of AIIB, https://www.aiib.org/en/index.html.
with other multilateral and bilateral development institutions (Zhao, 2019). The AIIB has invested mostly in India, Bangladesh, Indonesia, Turkey and Pakistan. India ranks first in terms of both project number and investment scale (Figure 3.5).17 There are BRI-associated risks, such as managing geo-political conf lict and the financial sustainability of cross-country projects. Geo-political conf licts bring huge impacts to various investment projects. A case in point is the construction of gas pipelines in the Middle East. The TurkmenistanAfghanistan-India gas pipeline was supported by the USA and the EU, and thus had a fairly good progress. In comparison, the Iran-Pakistan-India gas pipeline has made no progress due to Iran’s nuclear programme and conf licts with the USA and the EU (Shaikh et al., 2016). BRI projects may also experience issues such as mal-investment and poor resource allocation efficiency where mal-investment might occur in mega-projects, which are often associated with large SOEs (Morch and Yeung, 2016). In 2015, Chinese firms made a direct investment of around USD15 billion in the countries along the Belt and Road corridors. However most of the projects are not profitable yet. Investing and running projects in different political and cultural contexts have been challenging for the Chinese government and SOEs (Huang, 2016).
Summary and conclusion Overall, the BRI has exerted an important inf luence at a global scale. It has made significant achievements in the policy coordination network, the people-to-people network, the facilities network, the transnational trade network and the financial network. The ‘five links’ principle has sped up the development of the participant countries’ productivity which has opened up the channel for planning and coordinated development along the corridors (Li, 2018). The implementation of the six economic corridors has produced notable achievements. Each corridor is important for BRI’s implementation
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as both a supporting framework to promote the BRI and, crucially, the main carrier of regional policy. Collectively, the efforts lay a solid foundation for the benefit, responsibility and destined community goals put forward in the initial statement of the BRI (BRI Research Group, 2018). It is understandable that the attitudes of existing and potential partnering countries towards China’s BRI strategy are mixed and nuanced. Some argued that the BRI is the Chinese version of the Marshall Plan, selling a ‘Beijing consensus’ to the globe, while others regarded it as a new platform for international economic development. The BRI may lead to new trade and business interactions, which bring competitive pressure to local companies, and it may induce corruption associated with speculative investors. Thus, the institutions, funding organisations and project operators should bear more social responsibility and enhance the transparency levels of state and corporate governances. In the future, the BRI should evolve to achieve a better balance between China’s developmental interests and the participating countries’ desires. As the BRI projects are progressing, China has carried out in-depth and effective cooperation with partnering countries in various sectors, including trade, culture and infrastructure construction, all of which makes the spirit of the ancient Silk Road come alive again. Similarly, it paves an obvious area of growth for the 21st-century global economy. In this case, China’s active promotion and the interactive development of the BRI have greatly improved connectivity and cooperation among many countries along the Belt and Road corridors. This will undoubtedly play an effective role in resolving some global development problems and easing economic disparities between the developed and developing countries. China is an inf luential member of today’s world system. Through the BRI, it plays a positive and constructive role in the steady development of the Asian and global economy. With an open and constructive mind, Chinese leaders intend to actively promote interconnected unity in the world and aim to build a community of shared interests and common future among China and other BRI participants (BRI Construction Leading Group, 2019). It is hoped that, through increasing interactions at individual and local levels, people, especially younger generations, will demonstrate stronger interests in knowing and understanding China and the BRI. The jury is still out on whether and in what way the BRI will play a role in global transformation. It is a little too early to judge. However, if successful, the BRI has the potential to significantly improve living standards of 64% of the planet’s population (Huang, 2016).
Acknowledgement This chapter is sponsored by the Fundamental Research Funds for the Central Universities and the Research Funds of Renmin University of China (20XNA003). The authors wish to thank Hao Wu and Sidh Sintusingha for their constructive comments and editorial help.
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Notes 1 Refer to the ‘Vision and actions on jointly building Belt Silk Road Economic Belt and 21st-Century Maritime Silk Road,’ authorised by the State Council of China, www.china.org.cn/chinese/2015-09/15/content_36591064.htm. 2 For more detailed information of the SCO, refer to its official website http://eng. sectsco.org/. 3 It is equivalent to one-seventh of Pakistan’s annual GDP in 2018 and ten times of the US’s average annual investment to Pakistan. 4 Reported in Xinhuanet, 17 April 2015 article http://news.xinhuanet.com/ fortune/2015-04/17/c_127702808.html that has since been removed. It is cited in Lam, P. (2018). Thailand’s Kra Canal Proposal and China’s Maritime Silk Road: Between Fantasy and Reality? Asian Affairs: An American Review, 45(1), 1–17. 5 The other team members include Yang Jiechi, director of the Office of the Central Foreign Affairs Commission, Hu Chunhua, vice premier of the State Council, Xiao Jie, state councillor, and He Lifeng, director of the National Development and Reform Commission. 6 China’s sovereign wealth fund. 7 Administered by the State Council, the CDB is the nation’s development finance institution and “… the world’s largest development finance institution, and the largest Chinese bank for financing cooperation, long-term lending and bond issuance.” http://www.cdb.com.cn/English/gykh_512/khjj/. 8 Belt and Road Portal, https://eng.yidaiyilu.gov.cn/. 9 From ADB’s report ‘Meeting Asia’s Infrastructure Needs’ in http://dx.doi. org/10.22617/FLS168388-2 (accessed 1 August 2020). 10 From a report from the SOLARBE website, news.solarbe.com/201702 (accessed 4 August 2020). 11 From a report, ‘BRI: from Chinese Initiative to Global Consensus,’ in the newspaper Economic Daily (经济日报in Chinese), 27 September 2019. 12 Member of the Standing Committee of the Political Bureau of the CPC Central Committee and a deputy to the National People’s Congress. 13 The website address is www.yidaiyilu.gov.cn. 14 Xinhuanet.com (accessed 19 November 2019). 15 The National Remote Sensing Centre, Ministry of Science and Technology of the People’s Republic of China. 16 See ‘One Belt and One Road’ initiative six years transcript: https://www. yidaiyilu.gov.cn/xwzx/gnxw/102792.htm. 17 Approved Projects. Refer to https://www.aiib.org/en/projects/approved/index. html.
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76 Bo Qin et al. Chen, M., Liu, W., and Yeerken, W., et al. (2016). The impact of the belt and road initiative on the pattern of the development of urbanization in China. Mountain Research, 34(5): 637–44. (in Chinese) 陈明星, 刘卫东, 叶尔肯·吾扎提等 (2016) “ 一带一路”对我国城镇化发展格局的影响. 山地学报, 34(5). Cheng, S. (2015). China’s new Silk Road: What does it mean for America? Bridges News, 2015(5), 20–5. China Daily Online Research Institute. (2018). Research on the characteristics and problems of BRI report on People’s Daily online. Retrieved October 15, 2019, at http://media.people.com.cn/n1/2018/0205/c416774-29806408.htm. (in Chinese) 中国日报网络研究院(2018)人民日报一带一路网络报道的特征与问题研究 Clarke, M. (2016). “One Belt, One Road” and China’s emerging Afghanistan dilemma. Australian Journal of International Affairs, 70(5): 563–79. Cui, P. (2017). The BRI International Research Program on Natural Disaster Risk and Integrated Disaster Reduction. Bulletin of Chinese Academy of Sciences, 32(Z2): 26–8. (in Chinese) 崔鹏.“一带一路”自然灾害风险与综合减灾国际研究计划. 中 国科学院院刊, 32(Z2). Dong, S., Li, Z., and Li, Y., et al. (2015). Resources, environment and economic patterns and sustainable development modes of the Silk Road Economic Belt. Journal of Resources and Ecology, 6(2): 65–72. Ge Q., Jiang D., and Lu, F., et al. (2017). Spatio-temporal simulation of the geopolitical environment system. Journal of Geographical Sciences, 72(3): 371–81. (in Chinese) 葛全胜, 江东, 陆锋, 等. 地缘环境系统模拟研究探讨. 地理学报, 72(3). Guo, H. and Xiao, H. (2016). Earth observation for the Belt-Road and Digital BeltRoad Initiative. Bulletin of Chinese Academy of Sciences, 31(5): 535–41. (in Chinese) 郭华东, 肖函.“ 一带一路”的空间观测与“数字丝路”构建.中国科学院院刊, 31(5). Hu, W., Liu, Z., and Deng, C. (2015). A study on the ‘One Belt and One Road’ spatial information corridor. Industrial Economy Review, 2015(5):125–33. (in Chinese) 胡伟, 刘壮, 邓超.“一带一路”空间信息走廊建设的思考.工业经济论坛, 2015(5). Hao, Y., Lu, B., and Starkey, G. (2018). Economic and cultural implications of China’s One Belt One Road Initiative for the film industry: Cultural distance and taste preference. Australian Economic Papers. doi: 10.1111/1467-8454.12116 Hong, Y. (2017). Motivation behind China’s “One Belt, One Road” initiatives and establishment of the Asian Infrastructure Investment Bank. Journal of Contemporary China, 26(105): 353–68. Huang, Y. (2016). Understanding China’s Belt & Road Initiative: Motivation, framework and assessment. China Economic Review, 40: 314–21. Jia, Z. (2019). A study of “One Belt and One Rode” report from the perspective of Framework Theory Taking the front page report of People’s Daily as an example (Doctoral dissertation). Hebei University. Jiang, X. and Wang, S. (2018). Spatial and temporal patterns of evolution of global trade networks during 1985–2015 and its enlightenment to China’s geostrategy. Geographical Research, 37(3): 495–511. (in Chinese) 蒋小荣, 汪胜兰. 1985–2015 年全球贸易网络格局的时空演化及对中国地缘战略的启示. 地理研究, 37(3). Liu, W. (2015). Scientific understanding of the Belt and Road Initiative of China and related research themes. Progress in Geography, 34(5):538–44. (in Chinese) 刘卫 东. “一带一路”战略的科学内涵与科学问题. 地理科学进展, 34(5). Li, Z., Wang, J., and Zhao, Z., et al. (2014). Eco-environment patterns and ecological civilization modes in the Silk Road Economic Zone. Resources Science, 36(12):
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Section II
International context, analysis and outcome
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Urban development challenges under the China-Pakistan Economic Corridor (CPEC) Muhammad Imran, Murad Ali and Muhammad Saleem Janjua
From a geo-political relationship to a geo-economic relationship This chapter explores the policies and projects prepared and implemented in Pakistan under the Chinese Belt and Road Initiative (BRI), locally called the China-Pakistan Economic Corridor (CPEC). The chapter critically reviews the most inf luential urban development projects under the CPEC: Pakistan’s first ever metro train project in Lahore and the development of the new port city of Gwadar. The chapter identifies economic, financial, social, environmental and institutional sustainability of the CPEC from the local perspective. Pakistan is undoubtedly the first country in the world to warmly welcome the BRI to transform existing geo-political relationships into geo-economic relationships with China. Pakistan and China have been enjoying warm bilateral ties for decades, despite the fact that the two countries have never been treaty allies (Small, 2015, p. 3). They have invested a lot of time and effort into building a relationship and the two sides have built up an unusual level of mutual trust. The two countries have a number of converging interests, including security apprehensions vis-à-vis a rising India, geographical nearness, Pakistan’s support for China’s seat in the UN, the role played by Islamabad in breaking the isolation of China in the 1960s and working as a bridge between China and the Muslim world, as well as supporting China’s stance on matters such as Taiwan, Tibet, Xinjiang and human rights abuses (Ali, 2017). However, China has supported Pakistan in the advancement of its military and nuclear warheads and the Kashmir issue, and in dealing with pressure from Western nations. It is fair to say that Pakistan and China have been enjoying geo-political ties for over six and a half decades that have been described as ‘time-tested,’ an ’all-weather friendship,’ ‘higher than the Himalayas and deeper than the Indian Ocean” and “sweeter than honey’ (Hameed, 2017). In the context of this long-lasting geo-political relationship, Pakistan warmly embraced the BRI. During President Xi’s historic visit to Islamabad on 21–20 April 2015, the two countries signed 51 Memorandums of Understanding related to the CPEC (Figure 4.1). China agreed to invest over
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Figure 4.1 The China-Pakistan Economic Corridor (CPEC). Note the proximity to Kabul, capital of Afghanistan, and Chabahar, Gwadar’s competition in Iran. (Map credit: Iris Fong)
USD46 billion (now raised to USD60 billion) in various sectors. Pakistan urgently needed external investments, as the country had suffered huge human and financial costs incurred by the protracted and deadly ‘War on Terror’ at the domestic front. The relentless conf lict started since 9/11 has cost the country over USD126 billion, as it has affected the country’s exports, prevented inf lows of foreign direct investment (FDI), led to additional security spending, affected the tourism industry, damaged physical infrastructure and resulted in the displacement of thousands of people from conf lict-affected areas (Government of Pakistan, 2018). In addition to the huge economic costs,
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the prolonged conf lict has resulted in the loss of over 63,000 lives in Pakistan, including the lives of more than 7,000 security personnel (Ali, 2019a). Although the USA has also provided more than USD30 billion in economic and military aid to Pakistan in the last two decades, it is overshadowed by the staggering financial and human losses that Pakistan incurred after it agreed to play the role of a frontline US ally in this war. Furthermore, because of mutual suspicions and a lack of trust pertaining to the ongoing Afghan War and unabated US demands that Pakistan must do more in the ‘War on Terror,’ US-Pakistan bilateral ties have deteriorated considerably, particularly after the killing of Osama bin Laden in Pakistan in May 2011 and the subsequent reduction and suspension of US security assistance to Pakistan (Ali, 2019a). In these circumstances, Pakistan not only needed economic assistance to revive its economy but also needed political support in the international forums to not become isolated after its alliance with the USA had run its course. It was in this context that Pakistan eagerly welcomed the CPEC in the hope of resolving some of the key barriers hindering its economic development, such as energy deficiencies, poor transport infrastructure and low industrial capacity. Pakistan is a geo-politically and geographically crucial part of China’s BRI master plan. Small (2016, p. 69) argued that the CPEC is considered the f lagship project of the BRI because it conforms with various objectives of China including “the outsourcing of industrial capacity, the search for growth drivers in the Chinese interior, the push to build up new markets for Chinese exports, efforts to stabilize China’s western periphery” vital to addressing the threat of Islamic extremism and the plans to explore alternative and viable transportation routes linking China with the Indian Ocean and beyond. Thus, through this corridor, China aims to utilise Pakistan’s advantageous geographical location effectively to achieve its geo-economic and strategic objectives in the region (Ali, 2019b). Therefore, a one-country corridor in the form of the CPEC in a geographically important country has significant geo-strategic, economic and security benefits for both China and Pakistan.
The CPEC: an overview of selected urban development projects The CPEC is a collection of numerous projects aimed at building inter-city and intra-city transport infrastructure and power plants (energy projects), and developing the port city of Gwadar and Special Economic Zones (SEZs) during 2015–30. Details of some of these projects are as follows. Under the CPEC, more than 3,000 km of road construction and upgrades are being planned to strengthen inter-city connectivity in Pakistan. The CPEC Eastern route, the Peshawar-Karachi Motorway, is a 1,700-km high-speed, limited access motorway that will connect Karachi and Peshawar through Islamabad, Lahore, Multan, Sukkur and Hyderabad. The 296-km stretch between Sukkur and Hyderabad is the last missing link, which will be completed in 2024. It is expected that this motorway will be extended
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from Peshawar to Kabul (265 km) to assist Afghanistan to join the BRI. The CPEC Western Route, the Islamabad-Gwadar Highway, is a 1,900km high-quality highway that will connect Islamabad and Gwadar through Quetta. Different sections of this route are under construction. Moreover, the Karakoram Highway between Islamabad and the Chinese border will be completely reconstructed and overhauled under the CPEC. The primary aim of this investment is to establish high-speed road connectivity between Kashghar (Xinjiang Province) and the ports of Karachi and Gwadar to enhance trade. Karachi is the largest city of Pakistan, with a population of 20 million. The Karachi Circular Railway (KCR) was introduced in 1964 to provide a mass transit system in the city. However, the KCR was shut down in 1990s as a result of financial losses, and poor infrastructure and services. Under the CPEC, 43.2 km of the KCR will be revived to make it a part of the mass transit system in the city. A feasibility study of the KCR was completed in March 2017, though other phases of the project have been delayed. In contrast to Karachi, Lahore, the second-largest city in Pakistan, planned and built Pakistan’s first ever metro train, the Orange Line, under the CPEC. Currently, 27 km of the Orange Line are under construction, and the line is expected to be completed in 2021. The details of this project will be described later. The port city of Gwadar and nine SEZs and industrial cities are planned across the country under the CPEC. The reason for the establishment of a port city and the SEZs is to boost exports, provide a substitute route for imports, capitalise on technological transformation and promote trade. The SEZs will be governed by an update to the Special Economic Zones Act (Amendment) 2016. It is expected that Chinese companies will move their industries to the SEZs and operate the port in Gwadar. This chapter primarily focusses on urban development projects under the CPEC. The selection of two case studies – Lahore Metro Train and Gwadar (a new port city) for detailed investigation – is based on their cutting-edge roles in the CPEC portfolio, their advanced stage of implementation and great political interest. Both case studies have the ability to show the complexity of urban development projects in Pakistan, and, therefore, insightful knowledge of these cases will be helpful for projects that are in the planning stages. Lahore’s metro train (the Orange Line) Under the CPEC, the Punjab provincial government initiated Pakistan’s first metro train (the Orange Line) project in Lahore. The Orange Line was first proposed in the Lahore Rapid Mass Transit System study in 2007 which was completed with Asian Development Bank funding. The study recommended strategic corridors (the Green, Orange, Blue and Purple Lines) to develop a rapid transit network in Lahore. In 2013, the top priority Green Line was built as a Bus Rapid Transit route, while the feasibility of the Orange Line
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was completed by MVA Asia Ltd and NESPAK. The Punjab Mass Transit Authority was established for future planning, construction and operation of a mass transit system. The CPEC provides the opportunity to the Punjab Mass Transit Authority and Lahore Development Authority (LDA) to get funding for the 27-km ready-to-be-built Orange Line. The total cost of the project is estimated at over PKR163 billion, 100% financed by a soft loan from China’s Exim Bank under the CPEC. The Prime Minister of China, Li Keqiang, called this project a gift of the Chinese government and people to Pakistan. The funding for the Orange Line was conditional on using Chinese enterprises and Chinese equipment during the implementation of the project. Consequently, a China-based contractor, CRNORINCO, received the main contract for the design and construction work, China’s CRRC Zhuzhou Locomotive got the contract for providing trains, and a joint venture of China Railway and NORINCO received a contract for operating the train services for the first five years of its operation. Later, CRNORINCO involved local Pakistani construction companies for civil works. The 27-km-long Orange Line comprises 25.3 km of elevated track and 1.7 km of underground sections. It was estimated that the cost of Orange Line (USD60 million per km) would be quite similar to train projects in Indian cities (Mumbai, Pune and Jaipur) and well below a metro train project in Jakarta. The Chief Minister of Punjab claimed that the Lahore Orange Line was the first of its kind in the country and would revolutionise the transport sector by bringing new culture, modern transport facilities and affordable mobility in Pakistan. He called the project the common man’s ride, which would provide safe, swift and pollution-free transport in Lahore. He aimed to complete this project with high-quality engineering works and rapid speed, and transform it into a masterpiece of architecture. The Orange Line project has been opposed by political and civil society actors, who have voiced concerns about the dislocation of people, which might result in greater homelessness and poverty. Questions have also been raised about the transparency of land acquisition and compensation, the lack of civic engagement, privacy issues and the threat of terrorism inherent in the elevated sections. The loudest opposition has come from civil society actors, who have reservations about the design of the project (rather than the project itself ), which might affect the important heritage sites of Mughal and British architecture. In the wake of the media hype, UNESCO joined the protest against the potential destruction and disturbance of historical monuments, especially the Choburji and Shalimar Gardens. Similarly, the UN Human Rights Commission raised concerns about the government’s forced evacuation of residents from their properties without a clear resettlement plan. The UN Human Rights Commission argued that “the [Orange Line] project will not only destroy physical sites but the ways of life that have been developed there, that people cherish and through which they express their dignity and identity” (Dawn, 2016).
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Meanwhile, the Chief Minister and his government have refuted these allegations. According to the Director General of the Lahore Development Authority (LDA), the alignment of Lahore Orange Line metro train project is not affecting the heritage buildings which are along the metro train alignment. Special care has been taken by the designers in keeping away from the monuments by making curves were necessary in the given limitations so that heritage sites are protected besides minimising acquisition of private properties in the vicinity. (Shehbaz Sharif, 2015) The Chief Minister himself disproved these allegations, saying, I am seeing a lot of rumours [sic] circulating about proposed demolishing of some historical places for Orange Line Metro Train … I would officially like to declare such rumours as baseless and part of propaganda; otherwise metro trains are passing through historic city of Berlin, Rome and Kuala Lumpur. (Shehbaz Sharif, 2015) He further mentioned that technical expertise was being used to save historical buildings from vibrations from the Orange Line, as per the legal requirements. In response to public criticism, the provincial government also organised public hearings and public seminars, and set up a helpline for women to address criticism and win support from professionals and the public for this project (The Express Tribune, 2015). Moreover, the government set up a one-window operation (bringing all relevant organisations into one office) to provide compensation for those affected as per the market rate, along with additional funds to mitigate their business relocation and resettlement costs. Therefore, it is argued that poor people whose businesses and workplaces were affected by the construction of the project did not find it tempting to protest against the Orange Line, given that they would receive reasonable compensation. The government also organised a painting competition to decorate the blank walls of the city and prepared YouTube clips displaying images of the Orange Line to the general public. Despite different levels of protest and the media trial, the Orange Line project was moving forward at full speed during 2015–16 to achieve the completion deadline of 2017. Because of the controversies, the project has been challenged in the Lahore High Court. Initially, the Lahore High Court halted the construction of the project, which was resumed by the Supreme Court. The Supreme Court ordered the provincial government to form a technical committee who reported back to the court about heritage allegations. The Supreme Court case
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took nearly one year to hear the governmental and civil society arguments but then allowed the government in December 2017 to complete the project by imposing some conditions. These conditions are mainly related to ensuring the protection of heritage sites by speed, vibration and noise control measures. The court cases delayed the project, and it was still incomplete before the general election in July 2018. In the election, the ruling party, who championed the Orange Line, lost the election while the party who challenged the project in the court came into government. Today, the government has not taken a keen interest in completing this project, regardless of the progress made and the order by the Supreme Court to complete the project as soon as possible. The government stopped releasing funding for the project. Initially, it was expected that this project would have been completed in June 2019 (CPEC Authority, 2020b) but now the new date for the opening of the project is given as March 2021. In summary, a lack of communication, a lack of trust and mismanagement in construction (the absence of a traffic plan and resettlement issues) created confusion among residents, businesses and professionals about the Orange Line project. However, political leadership, political will and political controversy played an important role in the implementation and ongoing obstruction of this project. The Orange Line project was a f lagship project of the Chief Minister, Shehbaz Sharif. In 2015, when the Orange Line project was announced, criticism and doubts began emerging on its feasibility and implementation potential. It was primarily argued that the Orange Line passed through horizontally dense urban areas in the old town and it would cause mass dislocation of people and businesses. It was also considered politically sensitive to the Chief Minister’s own electoral constituency. However, arrangements were made to ensure that market-rate compensation was provided to the people and businesses affected. Although people who did not legally own the affected properties made occasional complaints about lower or no compensation, such noise proved considerably less than expected in the beginning. Surprisingly, there have been no complaints regarding the loss of social networks and everyday activities by the people affected. The Chief Minister defended this project on all platforms and congratulated people after winning the legal case in the Supreme Court. The Chief Minister’s political capital (as his brother was serving as a Prime Minister) and his social and personal networking skills allowed him to build a good relationship with the Chinese government and companies. These skills provided him with a strong grip on city administration, which motivated the young and energetic bureaucrats and technocrats who were responsible for implementing his urban development vision on a day-to-day basis. Similarly, the Chief Minister exercised his inf luence on the legislators of the Punjab Assembly to fast-track the Act creating the Punjab Mass Transit Authority for operating the Orange Line. However, after the new government took power, political championship and support vanished, and the project has been delayed since 2018.
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The Orange Line passes through densely populated but low-rise parts of the city. The route provides the opportunity to regenerate the city based on transit-oriented development principles. Under the Prime Minister’s 5 Million Housing Programme, Chinese companies are invited to invest in high-rise housing developments throughout the country, as well as alongside the Orange Line. Subsequently, the Lahore Development Authority changed its height zoning rule to make the high-rise housing development possible. Originally, it was estimated that approximately 250,000 people would be able to travel every day on this train. The high-rise housing and commercial development will attract more people on the train and make it financially viable. In summary, the Orange Line provides a unique opportunity to Pakistan to modernise its public transport system while it gives business to Chinese transport and housing companies beyond its border. Gwadar – a new port city Gwadar was a remote fishing hub in Pakistan’s least developed south-western province of Balochistan. According to the most recent reports, the total population of Gwadar District (region) is 0.3 million and the coastline is 600 km long. The development of Gwadar as an international port city is the most important project of the CPEC. As mentioned earlier, the development of Gwadar provides a feasible alternate land and sea route for Pakistan, as well as for the western regions of China. At present, international commerce and trade from this part of China is dependent on the country’s main ports, which are about 4,500–5,000 km away, and trade with Asian, European and African countries is conducted via a 10,000-km sea route. It is expected that following the completion of the CPEC, international trade from the western parts of China could be carried out through Gwadar, which is about 2,000 km away from Kashgar, one of China’s westernmost cities, bordering Pakistan. Hence, the CPEC is likely to bring significant dividends for China in terms of reducing the distance for shipments and thus markedly reducing both the cost and time for transportation (Fingar, 2016, p. 45). The Government of Pakistan (2014, p. 89) asserts that the CPEC “offers a unique opportunity to Pakistan to integrate with regional developments and become a hub for trade and manufacturing with Gwadar port developed as an international free port.” The Chinese government has committed over USD1 billion to fund several infrastructure projects in the city. The Guangzhou-based company China Communications Construction Company-Fourth Harbour Design Institute Engineering Co. Ltd (CCCCFHDI) prepared the Gwadar Master Plan (2017–50), aiming to develop a 30-year road map for the development of Gwadar (Figure 4.1). The Master Plan envisages Gwadar becoming the main port in Western Pakistan and acting as a gateway servicing China and the five Central Asian countries. It is predicted that the city will grow from 0.3 million to 2 million in the next
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30 years; the economy will grow from USD0.6 billion to USD30 billion annually while employment will rise from 0.1 million jobs to 1.1 million jobs. This growth will become possible through the development of a port, which will transform Gwadar into a hub for commercial activities and international trade. The Gwadar Port is located close to the international oil trade and sea shipping lanes at the mouth of the Persian Gulf, just outside the Strait of Hormuz, and has unique geo-strategic and geo-economic importance. The port has the potential to provide a shorter and inexpensive route for shipping oil and gas from the Middle East and minerals from Africa to Pakistan and western China. China’s Overseas Port Holdings Company would be behind infrastructure projects worth $2 billion, including increasing the port’s cargo capacity by building an export processing zone. Gwadar’s East Bay Expressway includes the construction of a high-speed road, which will function as the main artery of the Gwadar Port. The groundbreaking ceremony of the project took place on November 2017. Currently, the construction is underway, with an estimated completion date in 2021. The financing for the project is being provided through interest-free loans from the Chinese government (CPEC Authority, 2020a). The CPEC also includes the construction of the New Gwadar International Airport, which will have the capacity to handle domestic and international f lights. The groundbreaking ceremony of the project took place in March 2019, and the project has an estimated cost of USD230 million under a grant financing modality. It is expected that these projects will make Gwadar one of the most successful cities, as described by the International Atlantic Magazine’s editor, Kaplan (2009): “If we can think of great placenames of the past—Carthage, Thebes, Troy, Samarkand, Angkor Wat—and of the present—Dubai, Singapore, Tehran, Beijing, Washington—then Gwadar should qualify as a great place-name of the future.” Besides two major projects, other projects under implementation in Gwadar include a 300-MW coal-based power plant, a technical and vocational institute, the Pak-China Friendship Hospital and a freshwater treatment plant. The updated version of the Gwadar Smart Port City Master Plan was prepared by the China Communications Building Firms in 2020. The Plan shows how Gwadar will be changed into a commercial and financial hub with a GDP per capita of USD15,000 by 2050, which will be ten times Pakistan’s GDP per capita. The Plan proposed Pakistan’s first man-made island, an amusement park, an art gallery and a traditional museum, a high-grade theatre, a worldwide expo centre, hotels and resorts to provide 1.2 million jobs that will be created in the long term. Besides Chinese investment, it is expected that the Saudi company Aramco will invest USD10 billion to set up an oil refinery in Gwadar. The development of soft infrastructure in Gwadar is fundamental for the success of the CPEC (Iftikhar et al., 2019). For the development of the institutional structure, a number of organisations have been created along with existing organisations. However, like other parts of the country, Gwadar
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District currently has a top-down vertical administrative structure. The administrative departments of Gwadar are divided into three categories: departments under the federal government, departments under the provincial government and departments under the local government. Among these departments, the key ones that have the most inf luence on the development of Gwadar are the CPEC Authority, the Gwadar Port Authority (GPA) and the Gwadar Development Authority (GDA). The CPEC Authority under the federal government was established in October 2019 before the visit of Prime Minister Imran Khan to China. The CPEC Authority was established to please the Chinese Government, which complained about delays in the implementation of CPEC projects. The CPEC Authority provides the highest autonomy and power to execute CPEC projects in a timely manner, including the development of Gwadar. The CPEC Authority aims to “accelerate the pace of CPEC-related activities, find new drives of growth, unlock the potential of the interlinked production network and global value chains through regional and global connectivity” (Dawn, 2019). It will reduce some of the bureaucratic hurdles and facilitate coordination among various ministries and departments at federal, provincial and local government levels, paving the way for smooth execution of CPEC projects. A retired army general was appointed first Chairman of the CPEC Authority; hiring of the CEO and Executive Directors is currently underway. Immediately after the CPEC Authority was established, it granted tax concessions to Gwadar Port and its free zone. In future, it will look after income tax, sales tax and customs duties related to Gwadar Port. A CPEC Business Council will also be set up under the CPEC Authority. The GPA is responsible for the management of the port and the free port zone, leased to China Overseas Port Holding Company (COPHL). The GPA was created in 2002 for the construction, operation, management and maintenance of Gwadar Deep Water Port. The authority has been a part of the planning and appraisal processes of the CPEC programme. The GPA is a federal agency reporting directly to the Ministry of Maritime Affairs. It is agreed that COPHCL will share 9% of the gross revenues of port operations and marine services, and 15% of the gross revenues of the free port zone with the GPA (Iftikhar et al., 2019). The GDA is responsible for planning and managing growth in the city. It acts as a regulatory authority to oversee and regulate land use and implement plans. The GDA is a statutory body, with the Chief Minister of Balochistan as the Chairman of the Governing Body of the GDA. The local government in Gwadar was formed under the Local Government Act of 2015. The Balochistan Coastal Development Authority is responsible for master planning of the coast, including the development of tourist resorts in the province. The local government in Gwadar has the mandate to perform tasks related to the provision of municipal services. The private sector has been involved in the provision of private housing schemes; the establishment of shipping
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agencies and goods transportation services; and the establishment of freezing and packing, warehousing and export-oriented industries. The development of Gwadar is also important for China; therefore, a number of Chinese companies are providing technical and professional support for development activities. The GDA and the Chinese International Economic Cooperation Bureau of the Ministry of Commerce are joint proprietors of the new Gwadar Smart Port City Master Plan. The CCCC-FHDI is the project’s implementation body. The researchers are sceptical about the success of the Gwadar Master Plan, which will be elaborated in the next section. They argued that the port is not properly functional because of technical deficiencies and because road connectivity to the rest of the country is limited. The lack of hard and soft infrastructure may hinder the real benefits of the port. Moreover, the Gwadar Master Plan allocated over 40% of land for housing and multi-use development, without reforming the land management system, development control and related rules. They considered the Gwadar Master Plan as an aspirational document.
Sustainability in implementing the CPEC Pakistan is considered one of the most important countries in the BRI that has embraced the concept and started implementing projects. According to Small (2015), “Pakistan lies at the heart of Beijing’s plans for a network of ports, pipelines, roads and railways connecting the oil and gas fields of the Middle East to the mega-cities of East Asia” (p. 1). However, Chinese investment under the CPEC has had a significant impact on economic, financial, social, environmental and institutional sustainability, which will be discussed in the following sections. Economic and financial sustainability The mission, vision and key objectives of the CPEC are poverty alleviation, economic prosperity, enhanced regional connectivity, and increased trade and investment opportunities. The Pakistani government estimates that massive CPEC investments “will spur economic activity and create around 2 million direct and indirect new jobs” once several SEZs are established (Government of Pakistan, 2016, p. 51). Pakistan Vision 2025 asserts that the CPEC “offers a unique opportunity to Pakistan to integrate with regional developments and become a hub for trade and manufacturing with Gwadar port developed as an international free port” (Government of Pakistan, 2014, p. 89). A World Bank study (2019) estimated that Pakistan’s GDP will increase by 6.43% until 2030 as a result of CPEC infrastructure investment. It will lift 1.1 million people out of the extreme poverty trap. During the first phase, Pakistan ranked 134th on the Human Capital Index among 157 countries and therefore lacks quality human capital. It is therefore expected
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that 75,000 jobs in the first phase will employ working-class people living in extreme poverty. Although there is a dominant consensus in Pakistan that the CPEC is expected to contribute to economic growth and productivity, there is also a perception that Pakistan could be in serious financial trouble when it comes to the outf low of loan payments along with interest payable and profit remittances to Chinese companies. Regarding long-term financial obligations on the part of Pakistan, it is feared that the CPEC could become a debt trap for the country in the long run. The financing mechanism of most projects under the CPEC is FDI, with a debt-to-equity ratio of around 80:20 or, in some cases, 75:25; in the majority of cases, return on equity is guaranteed at 17% (Husain, 2017). This has generated debate concerning whether most of the projects being implemented under the CPEC are commercially viable and sustainable or not. With debt service outf lows accompanied by payment of returns on equity in US dollars as well as the outward movement of remittances totalling about USD2–3 billion annually in the medium term, this school of thought argues that Pakistan would be in a serious financial situation, as such a big outward payment would put immense pressure on Pakistan’s foreign reserves once the repayment period begins (Ahmad, 2017; Husain, 2017; Isran, 2017; Saleem, 2017). Some critics have even gone to the extreme of stating that the CPEC (naming it the East India Company) debt trap is the colonisation of Pakistan by China, as it is a Chinese project, for Chinese interests; Pakistan just happens to be part of the geographical terrain (Khan and Hyder, 2017; Zaidi, 2017). However, officials in the Ministry of Planning, Development and Reform argue that the repayment of loans and the outward f low of FDI and remittances would not pose a big financial challenge, as the overall interest rate on concessional loans is 2%. They explained that the CPEC would generate significant revenue, as it would result in modernised transport infrastructure and uninterrupted electricity and power for industries, which, in return, would lead to enhanced exports as well as the creation of jobs. If 30% of Chinese trade is diverted to the CPEC route, which is considerably shorter than the sea lane presently used, Pakistan could end up generating up to USD4.8 billion annually from toll income (Khawar, 2017). Hurley et al. (2018) argue that government borrowing should be accompanied by economic growth and revenue generation. Otherwise, it can generate a downward spiral that inevitably ends in the debt trap. Therefore, the financial sustainability of CPEC will depend on the productivity of the CPEC projects themselves. There is no doubt that infrastructure investment in roads, railway and the port has the potential to address economic growth and eliminate poverty, as historically advocated by the World Bank and Asian Development Bank. However, “there is also considerable evidence indicating significant negative impacts on countries and their people when governments incur too much debt” (p. 3). It is even more severe, as China does not disclose the terms of their loans. Although it is widely propagated that CPEC projects
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received an interest-free concessional loan from China’s Exim Bank, some scholars believe the interest rates are as high as 5%, which is close to commercial rates (Naviwala, 2017). Therefore, there is a potential of risk, especially if the projects’ benefits are overstated and the country is considered to be in the ‘high risk’ category of debt distress. It is expected that CPEC repayments will be deferred for a few years because of the COVID-19 pandemic, which may give Pakistan some relief during economic crisis. In view of these two divergent perceptions and arguments, it can be concluded that on the one hand, the CPEC offers an opportunity to Pakistan to overcome the chronic problem of underinvestment in key productive sectors and resolve issues related to an acute energy crisis, poor transport infrastructure and low industrial development. On the other hand, if Pakistan continues to depend too much on foreign loans and does not adopt concrete policy measures to improve governance and increase domestic resource mobilisation and revenue generation, it will find it hard to smoothly fulfil its future financial obligations resulting from the CPEC. Social sustainability The construction of the CPEC projects is perceived to have a negative impact on the local people, regardless of job creation. For example, the former Chief Minister, Prevaiz Elahi, called the Orange Line project anti-employment, as the train drivers were rumoured to be hired from China. Chinese companies were criticised for using their own labour, even when working in the poorest region of Pakistan. The 600 workers involved in the construction of Gwadar during the initial phase of the project comprised only a small fraction of workers from Balochistan (Grare, 2016). The sense of alienation is increasing with the arrival of Chinese nationals and the presence of heightened security mechanisms for them. A resident of Gwadar ref lected that In my own country, my own town and on my very own land, I am being welcomed as an outsider by someone who is actually the outsider. They smiled warmly, shook our hands and asked us how they can help us since we were their guests! How would you feel, tell me? (Ijaz, 2018) According to Baloch nationalists “around 70–80 per cent of the locals are dependent on fishing and at the moment they fear being crushed under the weight of the CPEC f lagship project of Gwadar.” The Balochistan Fishermens’ Network and social activists have also raised questions about the development of initiatives that restrict their fishing activities in the name of development. The government acquired land in Gwadar under the 1894 Land Acquisition Act, which compels people to sell their land to the state for the public interest. However, there is a danger that acquired land will be used for
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speculation purposes by pushing the price of property out of reach of the local people (Crisis Group, 2018). This acquisition is based on the fact that the Land Acquisition Act 1894 is commonly misused in other parts of the country. In an article published in a respected investigative magazine based in Karachi, with the title of ‘The Great Land Robbery,’ it was alleged that the Gwadar project had “led to one of the biggest land scams in Pakistan’s history,” shutting the doors for the poor and illiterate population in the future prosperity of Gwadar (Kaplan, 2009). Jamali (2014) argued that “Gwadar is the microcosm of the abusive and violent relationship between [the] Pakistani state and its poor Baloch residents” (p. 233). Not even a token consultation was conducted during acquisition of the land and preparing the Gwadar Master Plan. There has been lack of dialogue in the country related to the preservation of the rights of the indigenous population of Gwadar in terms of access to land, new economic opportunities and urban amenities (Iftikhar et al., 2019). There is a fear of a demographic shift in Gwadar. It is estimated that 2 million people will move into the city when the port becomes operational. Details have been emerging about the granting of ‘no objection’ certificates by the Gwadar authorities to two Chinese companies for the purposes of constructing a housing project that would accommodate about 500,000 Chinese nationals (Mustikhan, 2017). According to the Federation of Pakistan Chambers of Commerce and Industry, the current rate of Chinese inf lux may result in Chinese nationals outnumbering locals in the least populated province of Balochistan by 2048. According to their report, “this trend has sparked fear of marginalization among Baloch citizens, who are unsure of how the unskilled people of the province will maintain their lives without land ownership which is their only asset.” The report further goes on to state that this demographic alteration “establishes a complementary hypothesis (apprehension) that native residents of Balochistan will not get their due share in the development of Balochistan.” The report documents a vast number of areas that would accrue minimal or no benefit from the CPEC and maintains that the “inf low of Chinese investment and business enterprises will adversely impact the interests of the business community in Pakistan” (Federation of Pakistan Chambers of Commerce and Industry, 2016). In spite of these concerns, CPEC projects in Gwadar include projects related to building a hospital, a vocational institute and freshwater treatment projects for the locals. The Pakistan Army has recently started operating a civil hospital and has provided medical treatment to local people. Environmental sustainability According to the Global Climate Risk Index of 2017, Pakistan is among the ten countries most affected by climate change. The CPEC project has been praised and criticised on environmental grounds. Lahore’s Orange Line was justified on an environmental basis because it has the potential to shift car traffic into public transport. Similarly, the rehabilitation and upgrade of the
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Karachi to Peshawar Railway track (approx. 1,900 km) in the second phase of CPEC are justified on environmental grounds. It was estimated that this project costs USD8.2 billion and moves passengers and freight on a highspeed rail network. In contrast, the CPEC’s road infrastructure stretches from highly mountainous regions in the north to the farthest region in the south, penetrating through mainland agricultural areas. This would definitely have significant environmental repercussions, as trees, farms and glaciers would need to be removed for construction and later operation of the highways. For instance, a media report revealed that about 50,000–70,000 mature trees would be felled in the Khyber Pakhtunkhwa province alone to make way for the construction of the CPEC expressway (Sadaqat, 2017). However, the provincial Forest Department stated that the authorities plan to plant up to 100,000 plants on both sides of the 39-km road going through Abbottabad District (Sadaqat, 2017). The report further added that according to government officials, 100 million saplings of different species have been planted in the area during the last three years. Regardless of these facts, there is no doubt that the construction of the corridor would have enormous environmental implications and remedial measures are vital to mitigate the long-term negative impacts on the environment. The majority of energy projects under the CPEC will make use of coal. Pakistani and Chinese officials stated in various interviews that they have committed to adopting clean coal combustion technologies conforming to international standards. The Chinese Deputy Chief of Mission in Pakistan stated that they are bringing the latest supercritical technology to Pakistan, which is used elsewhere in coal plants in the USA and Europe. However, a number of academics and civil society representatives in Pakistan are concerned that coal-based power plants could have serious environmental implications for the country. They argued that coal-fired power plants will definitely prove harmful for the environment in the long run, particularly in Punjab, as the province is the agricultural hub of the country. To address this criticism, the CPEC included renewable energy projects in its long-term phase, starting in 2030. Institutional sustainability Governance and political challenges are intertwined with the planning and execution of the CPEC. For example, Gwadar is being administered by multiple public sector organisations with three different tiers of government. The GDA is a provincial organisation reporting to the Government of Balochistan. However, the newly established CPEC Authority and the GPA are federal organisations, reporting directly to the federal government. The port comes under the jurisdiction of the GPA, with a portion of the free zone coming under the control of the Balochistan Development Authority. However, for the purposes of any construction work, approval and licences have to be acquired from the GDA. There are several housing schemes, which get approval
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from the Deputy Commissioner under the District Management role. The local government set up in 2015 is working separately for providing municipal services. Adding to the complex web of administrative agencies, a number of other federal and provincial organisations play a fundamental role in Gwadar. At the provincial level, these organisations include the Planning and Development Department, Balochistan Coastal Development Authority, the Department of Fisheries and the Department of Public Health Engineering. Similarly, the Planning Commission and the Board of Investment are playing a role at the federal government level. The Planning Commission advertised the terms of reference for contracting a consultancy for preparing the Gwadar Master Plan, which is the sole duty of the GDA. The CPEC Authority idea was f loated in 2016. However, the then prime minister, Nawaz Sharif, rejected this idea because of opposition from a joint parliamentary committee as the government handed over a lot of its functions to provincial governments after 18 amendments to the constitution. By setting up the CPEC Authority, provincial and local government organisations have had to compromise their roles. Iftikhar et al. (2019, p. 11) described the institutional structure in Gwadar as ‘hotchpotch,’ not only deterring the work at the local level but also affecting the relationship with China. Moreover, there is an inevitable clash between the Chinese and Pakistani speed of operations and work ethic. The Pakistani system of administration is based on the British Colonial structure, marred by bureaucratic red tape, with a number of different agencies from which approval has to be obtained. Irritation caused by delays in the execution of various projects has resulted in Chinese companies requesting a single focal authority for matters related to the CPEC (Iftikhar et al., 2019). Pakistan lacks effective and sound public financial management institutions, and the prevalence of corruption and bad governance have hindered not only the inf lux of FDI but also the overall process of socio-economic development. Pakistan has ranked very high in the Corruption Perceptions Index and has scored 40 or less out of 100 on this index over the last five years. The report states that Pakistan performs poorly because of factors comprising unaccountable governments, a lack of oversight, insecurity and high-profile corruption scandals, as well as everyday corruption issues, which continue to undermine public trust in the government. Despite various reform initiatives by the government from time to time by enacting various laws against corruption, there have not been any marked improvements. In this context, there is a perception that the CPEC projects are a source of corruption for the elite. Besides institutional complexity, the political will to support the CPEC project has f luctuated over time. The CPEC was the f lagship project for the last government. They facilitated Chinese companies to build the motorway infrastructure, the Orange Line and projects in Gwadar at high speed. Many rules and regulations were relaxed for Chinese companies to enable the fast execution of these projects. However, the current government, which took office in August 2018, slowed these projects by taking longer time for
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approval and realising funds. One example is the Orange Line in Lahore, which has been delayed by more than two years, regardless of the fact that 90% of the construction work has been completed and the trains arrived during the last government tenure. The cost of the Orange Line project has increased substantially because of the lack of political commitment. Political commitment also depends on geo-political relationships with the USA and China. From the inception of CPEC, the USA showed its concerns mainly out of suspicion that China would establish a naval base in Gwadar and the lack of transparency and debt caused by these projects. However, Pakistan’s existing geo-political relationship with China, the lack of support from the USA and international development organisations for energy and infrastructure projects, and the positive sentiment of people towards China compelled the government to show solid commitment to the CPEC. Pakistan views the CPEC as a symbol of its relationship with China and thus it has become a national priority beyond political governments, regardless of delays in a few projects.
Conclusion The main aim of this chapter is to explore the policies and projects prepared and implemented in Pakistan under the CPEC. Accordingly, the development of Lahore’s Orange Line and Gwadar has been investigated to show the opportunities and challenges that CPEC projects create for sustainable development. The discussion shows that there are high hopes associated with the huge investments into the CPEC in Pakistan. However, there are enormous financial, social, environmental and institutional challenges that the CPEC has brought to Pakistan, and measures to address these challenges and reap the fruit of the CPEC are vital for both Pakistan and China. The Gwadar Port is the f lagship project of the CPEC. It has the potential to transform the town into one of the leading ports in the Indo-Pacific region. However, this can never come into fruition unless the development projects aimed at improving the infrastructure of the port as well as the city take the concerns of the local population into account, as well as extensive institutional reforms. The creation of a new organisation without developing the institutional capacity of the existing organisations has not provided a robust mechanism. Only political will, extensive governance reforms and a clear policy, coupled with adequate, effective and robust implementation at the inter-state, federal, provincial and local level, can result in relieving the development woes of Gwadar and the Orange Line, converting them into real-time success stories of the CPEC.
Acknowledgement We would like to acknowledge the research assistantship of Muhammad Waqar Anwar on Gwadar section of this chapter.
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References Ahmad, S. I. (2017, 03 September). “CPEC is not a game-changer, it’s game over.” The News International. Retrieved from https://www.thenews.com.pk/tns/ detail/563925-cpec-game-changer-game. Ali, G. (2017). China-Pakistan Relations: A Historical Analysis. Karachi: Oxford University Press. Ali, M. (2019a). The Politics of US Aid to Pakistan: Aid Allocation and Delivery from Truman to Trump. London and New York: Routledge. Ali, M. (2019b). China-Pakistan Economic Corridor: Prospects and challenges. Contemporary South Asia, 28(1), pp. 100–12. CPEC Authority. (2020a). Gwadar East-Bay Expressway. Retrieved from http:// cpec.gov.pk/project-details/32. CPEC Authority. (2020b). Orange-Line Lahore. Retrieved from http://cpec.gov. pk/project-details/46. Crisis Group. (2018, 25 October). China-Pakistan Economic Corridor: Opportunities and risks. Retrieved from https://www.crisisgroup.org/asia/south-asia/ pakistan/297-china-pakistan-economic-corridor-opportunities-and-risks. Dawn. (2016, 23 January). UN experts for halting Orange Line work. Retrieved from https://www.dawn.com/news/1234821/un-experts-for-haltingorange-line-work. Dawn. (2019, 8 October). President Alvi promulgates ordinance for establishment of CPEC Authority. Retrieved from https://www.dawn.com/news/1509705. Fingar, T. (2016). China’s goals in South Asia. In Thomas Fingar (Eds.), The New Great Game: China and South and Central Asia in the Era of Reform. Stanford, CA: Stanford University Press, pp. 29–52. FPCCI. (2016). FPCCI’s Stance on China Pakistan Economic Corridor. Retrieved from http://fpcci.org.pk/Products/Content/Document/CPECReport_716.pdf. Government of Pakistan. (2014). Pakistan 2025: One Nation One Vision. Islamabad: Ministry of Planning, Development and Reform. Government of Pakistan. (2016). Annual Plan 2016–17. Islamabad: Ministry of Planning, Development and Reform. Government of Pakistan. (2018). Pakistan Economic Survey 2017–18. Islamabad: Ministry of Finance. Grare, F. (2016, January). Baluchistan: Pakistan’s internal war. Retrieved from https://carnegieendowment.org/files/CP65.Grare.FINAL.pdf. Hameed, R. (2017). Pakistan and China: Partnership, prospects and the course ahead. Policy Perspectives, 14(1), pp. 3–22. Hurley, J., Morris, S., and Portelance, G. (2018). Examining the Debt Implications of the Belt and Road Initiative from a Policy Perspective. Washington, DC: Center for Global Development. Retrieved from https://www.cgdev.org/publication/ examining-debt-implications-belt-and-roadinitiative-policy-perspective. Husain, I. (2017, 11 February). Financing burden of CPEC. Dawn. Retrieved from https://www.dawn.com/news/1313992. Iftikhar, M. N., Shakeel, K., Xie, L., Jamali, S., Cheema, K. H., and Shahid, M. (2019). The institutional and urban design of Gwadar City (C-37422-PAK-1). Retrieved from https://www.theigc.org/project/institutional-urban-design-gwadar-city/. Ijaz, M. (2018, 29 June). How Gwadar’s CPEC development might leave its people behind. Retrieved from https://www.dawn.com/news/1416647.
Urban development challenges under CPEC 99 Isran, M. A. (2017, 27 January 27). Six concerns PML-N government must address about CPEC. The Express Tribune. Retrieved from https://new.tribune.com.pk/ story/1308699/six-concerns-pml-n-government-must-address-cpec. Jamali, H. (2014). A tempest in my harbour. In Tahir, M., Memon, Q., and Prashad, V. (Eds.), Dispatches from Pakistan. Minneapolis: University of Minnesota Press, pp. 168–84. Khan, M., and Hyder, D. (2017, 11 January). CPEC: The devil is not in the details. Herald. Retrieved from https://herald.dawn.com/news/1153597/cpec-the-devilis-not-in-the-details. Khawar, H. (2017, 26 October). CPEC toll income—Myth and reality. The Express Tribune. Retrieved from https://tribune.com.pk/story/1541404/6-cpec-tollincome-myth-reality/. Kaplan, R. D. (2009, May). Pakistan’s Fatal Shore. Retrieved from https://www. theatlantic.com/magazine/archive/2009/05/pakistans-fatal-shore/307385/. Mustikhan, A. (2017, 30 October). Half million Chinese to take Gwadar by 2023: Report. Retrieved from https://timesofindia.indiatimes.com/blogs/ balochistan-insight/half-million-chinese-to-take-gwadar-by-2023-report/. Naviwala, N. (2017). Pakistan’s $100B deal with China: What does it amount to?” Devex. August 24, 2017. Retrieved from https://www.devex.com/news/ pakistan-s-100b-deal-with-china-what-does-it-amount-to-90872. Small, A. (2015). The China-Pakistan Axis: Asia’s New Geopolitics. New York: Oxford University Press. Small, A. (2016). Beyond India-Centricity—China and Pakistan Look West. Seattle, WA: The National Bureau of Asian Research. Sadaqat, M. (2017, 04 May). Cutting down trees for CPEC. Dawn News. Retrieved from https://herald.dawn.com/news/1153738. Saleem, F. (2017, 19 February). CPEC. The News International. Retrieved from https://www.thenews.com.pk/print/187350-Capital-suggestion. Shehbaz Sharif. (2015, 2 November). Facebook posting. Retrieved from https:// w w w.f acebook.com /Shehba z Sha r i f /photos/a.272545346117412 .61816. 272107646161182/999928493379090/?type=3&theater. The Express Tribune. (2015, 13 November). Heritage vs Development: DG removed over Metro NoC. Retrieved from https://tribune.com.pk/story/990421/ heritage-vs-development-dg-removed-over-metro-noc-say-activists/. World Bank. (2019). Belt and Road Economics: Opportunities and Risks of Transport Corridors. Washington, DC: World Bank. Zaidi, S. A. (2017, 18 June). Has China taken over Pakistan? The News on Sunday. Retrieved from https://www.thenews.com.pk/tns/detail/563509-chinataken-pakistan-cpec.
5
Inter-continental transport networks and Asian Economic Corridor for the Korean Peninsula Hyung Min Kim
Introduction Historically, the geopolitical position of the Korean Peninsula has resulted in never-ending conf licts and collaborations with neighbouring countries. It is surrounded by China, Russia and Japan that are economically, demographically and/or spatially large countries playing powerful roles in the world economy and politics. Within the Korean Peninsula, the two Koreas have undertaken very different development processes since the end of the Second World War. While North Korea (officially the Democratic People’s Republic of Korea) adopted socialism that has led to a Soviet-style urban development pattern without being integrated with the global marketised economy, South Korea (officially the Republic of Korea) adopted a developmental state model in which the state has led, driven and guided the economy through national planning (Cumings, 1997). Geographically, access to South Korea has been limited via in-land transport such as railways and roads due to restrictions over North Korean territories. Recent political efforts to denuclearise North Korea and secure peaceful relations, as seen in Inter-Korean summits between the South Korean President Moon Jae-In and the North Korean’s Supreme Leader Kim Jung-Un, and the North Korea-US summit in 2018, have raised new agendas to build transport networks across the Korean Peninsula. The potential opening of North Korea means not only the global integration of North Korea’s economy but also the possible enhancement of in-land transport networks of South Korea via North Korean territory. While China’s Belt and Road Initiative (BRI) has not explicitly addressed North Korea, there is a high potential for new railways to connect the Korean Peninsula, catalysed and strengthened by the BRI. In fact, South Korea is one of the counter-partners in BRI negotiations. Due to the nature of required cross-border activities, inter-continental railway networks will need negotiations with neighbouring countries. However, South Korean public opinions about the BRI are contested and political views towards North Korea are highly divided. This chapter broadens the understanding of spatial structure in the Korean Peninsula to analyse the potential and/or the impacts of the extended in-land and maritime transport
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infrastructure networks rather than paying attention to the contested political perspectives on the BRI. The focus of this chapter is to address spatial, economic, logistic and infrastructure networks connecting the Korean Peninsula. In this chapter, the inter-continental transport networks do not necessarily mean the BRI – due to BRI’s aspiration for geopolitical hegemony in the global economy – although these two expressions largely refer to similar projects. The next section illustrates the historical contexts of transport networks in the Korean Peninsula and the geopolitical contexts of the two Koreas. Then, the current status of global interactions will be analysed. By reviewing current trade, Foreign Direct Investment (FDI) and transport networks of the two Koreas, the Asia Economic Corridor (AEC) is identified. These findings lead to discussions and conclusions on the implications of the intercontinental transport networks for the Korean Peninsula.
The contexts of the Korean Peninsula Historic contexts of transport networks in the Korean Peninsula Towards the end of the Joseon Dynasty (1392–1897), the Korean Peninsula went through political and military turbulence and imperialistic powers conf licted in the Korean Peninsula. The First Sino-Japanese War (1894–5) and the Russo-Japanese War (1904–5) were fought across the Korean Peninsula and Manchuria primarily for control over the Korean Peninsula. Victorious in both wars, Japan begun colonial rule over the Korean Peninsula from 1910. In this chaotic circumstance, modern transport facilities were introduced. The first railway in the Korean Peninsula was constructed in 1899 linking Seoul (Norangjin) to Incheon. Then, the construction of the Seoul-Busan railway (431.7 km) began in 1901 and was completed in 1905 by approximately 4.3 million Korean workers (Lee, 2011). The most important North-South railway network was built in the period 1904–6, from Seoul (Yongsan), via Kaesong and Pyeongyang, to Sinuiju, a north-western port city located in the Amnokgang (or the Yalu River) delta, neighbouring Dandong in Liaoning Province, China (see Figure 5.1). The construction of this Seoul-Sinuiju railway network was facilitated and driven by Japanese imperialism, in particular, to support the Russo-Japanese War. In fact, the construction right of the line was transferred to Japan immediately after the breakout of the Russo-Japanese War. In 1906, the total length of the Seoul-Sinuiju line was 527.8 km and was extended to 716 km by 1945 (Lee, 2011). Between 1905 and 1911, the line was upgraded with the construction of tunnels and bridges and improved railway engineering. From 1910 to 1945, extensive cross-regional railways were constructed. During this period, investment in railways accounted for approximately 19% of the total public expenditure (Lee, 2011). In 1911, the Seoul-Sinuiju line was linked to Manchuria via the newly constructed Amnokgang bridge. In
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Figure 5.1 Major railways and key cities in 1944. (Credit: Author based on information from Lee (2011) and OSS (1945))
1927, Asia and Europe were connected via Siberia through railways and, in 1940, train timetables showed the operation of the long-distance routes from Tokyo to Paris via Busan, Seoul, Pyeongyang, Dandong, Shenyang, Changchun, Harbin and Moscow (Lee, 2011). The route was connected to Tokyo via ferry over the East Sea (or the Sea of Japan) between Busan and Shimonoseki, Japan’s westernmost city. Travel from Tokyo to Paris took 15 days over 13,735 km. In 1934, the Busan-Changchun direct line was open, and in 1939 the Busan-Beijing express direct line began to operate (Lee, 2011). In 1943, double-track railways were constructed between Pyeongyang and Sinuiju for further active exploitation of resources. In the eastern side of the Korean Peninsula, the construction of the 222.7 km Seoul (Yongsan)-Wonsan line began in 1910 and completed in 1914 by Japan after the expressions of
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interest by the French company, Fives-Lille, and a German corporation were rejected (Korean National Railroad Agency, 1974). Wonsan, the third-largest North Korean city in the 1940s, was in a strategic location with a port on the westernmost part of the East Sea ( Jo and Adler, 2002). The Seoul-Wonsan line supported mining industries transporting natural resources, but the volume of passengers was low due to mountainous natural environments. Although modern transport networks were built primarily to exploit resources and to promote Japan’s imperialistic ambition, these facilities inevitably catalysed the modernisation and urbanisation of Korean cities supporting f lows of passengers and freights between key cities (Kim and Han, 2012). By 1945, the Korean Peninsula formed radial railway networks with an X-shape revolving around Seoul (Figure 5.1). Following the independence from the Japanese colonial rule and the political division in 1945, these peninsula-wide and cross-regional railway networks have become disconnected between North and South Koreas. The 38th parallel north defined the border of North and South Koreas. The Korean War (1950–3) destroyed the Korean Peninsula and firmly established the new boundary, Military Demarcation Line (MDL), that has since kept the two Koreas divided. Since the division, there has been a shift of transport policy prioritising road networks over railway networks. After independence, the total length of Korean railways did not increase significantly, from 6,407 km in 1945 to 8,604 km in 2010 (Lee, 2011). In 1940 railways served 63.7% of passengers and 90.1% of freight, but in South Korea in 2008 railways supported 7.8% of passengers and 6.5% of freight (Lee, 2011). South Korea’s geopolitical position as a geographically isolated state Due to North Korea’s presence, South Korea has been geographically isolated. While international maritime and air transport networks have been established, there is no cross-border in-land transport network via North Korea. Within South Korean territory, transport development was seen as a driver for economic growth since the early 1960s when the South Korean developmental state began (Amsden, 1989). After the Korean War, South Korea had “no capitalists, no Protestants, no merchants, no money, no market, no resources, no get-up-and-go, let alone no discernible history of commerce, foreign trade, or industrial development” (Cumings, 1997: p. 305). To tackle the desperate economic conditions, the South Korean developmental state, borne of military coup d’état carried out by Park Chung Hee in 1961, drove economic growth by promoting export and investing in regional transport projects such as the Seoul-Busan highway (Kim and Han, 2012). With support from international aid, transport infrastructure played a fundamental role in import and export, and investment in regional transport projects generated jobs and facilitated the growth of non-agricultural industries. South Korean investment in transport infrastructure has been dominated by road construction among which the Seoul-Busan highway was notable
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at the beginning of industrialisation. Planned railways were converted to highways or regional road networks (Lee, 2011). Instead, major railway investment was made in high-speed trains, the Korea Train Express (KTX). Since the KTX was first opened in 2004, the number of passengers and the total length of KTS have increased. By 2014, there were 92 KTX lines with a network of 3,590 km that shortened travel time and facilitated regional integration within South Korea. North Korea’s geopolitical status as a closed state North Korea adopted a Soviet-style model to control and manage the economy and regional development (Hwang, 2016). It pursued socialist ideals by promoting balanced regional development spreading factories and business enterprises all over the North Korean territory ( Jo and Adler, 2002). Postwar reconstruction was heavily assisted by other socialist countries such as the Soviet Union and East Germany, as seen in Hamhung’s reconstruction by East German planners (Kim and Jung, 2017; Sin, 2017). Not stressing economic efficiency, in-land regional road networks have been under-developed due to military concerns. Therefore, while only 18% of raw materials have been carried by road, railways played an important role in logistics, transporting 74% of raw materials (Tsuji, 2004). In fact, in 1948, the length of North Korean railways (3,719 km) was higher than the South Korean total railway length (2,641 km) (Lee, 2011). In 2007 the total length of North Korean railways reached 5,242 km, while South Korean railways extended to 7,950 km (Ministry of Unification). North Korea stressed industrial development, becoming the most dynamic East Asian economy after Japan in the 1960s and the 1970s (Ducruet et al., 2009). In fact, North Korea’s per capita GDP was higher than that of South Korea in 1950 and per capita GDP in two Koreas was similar by the mid1970s (Angus, 2001). Despite socialist ideals, urban primacy and unequal regional development appeared along the Pyeongyang (top-tier city) to the Nampo (port city) corridor, which is outstanding over other eastern cities and regions as observed in night-time lights (Ducruet et al., 2009; Lee, 2018). More infrastructure investments were made in Pyeongyang and its surrounding regions as its population grew to over 3 million by 2018 (North Korea Statistics). North Korea experienced rapid urbanisation from 17.7% urban population in 1953 to 47.5% in 1965 and 60.9% in 1993 ( Jo and Adler, 2002). Following practices in neighbouring China, the socialist regime introduced Special Economic Zones (SEZs) to allow foreign investment and new industrial production. The Rajin-Seonbong Economic Zone (RSEZ), established in 1991 neighbouring Russia and China, and the Kaesong Industrial Zone (KIZ), opened in 2002, are notable examples. A port and railways strengthened the RSEZ’s function designed to encourage trade with China and Russia ( Jo and Ducruet, 2007). The KIZ was created just across the demilitarised zone (DMZ) to facilitate South Korean investment. In 2010, there
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were approximately 120 medium-sized South Korean manufacturing firms that employed over 47,000 North Korean labourers (Nanto and Manyin, 2011). As experienced in other former socialist countries, the North Korean economy was stagnant due to inefficiency in resource allocation mechanisms. As former trade partner socialist countries such as Eastern European countries, China and the Soviet Union shifted to a market economy, North Korea became isolated and its economic conditions deteriorated ( Jo and Adler, 2002). Compounded by disastrous f loods and droughts, the 1990s saw famine and economic crises. North Korean nuclear tests (evidently in 2017) provoked surrounding countries and raised military tensions, further isolating North Korea politically and economically. However, all of a sudden in 2018 the Supreme Leader Kim Jung-un declared denuclearisation to embrace peace, which led to inter-Korean summits and the North Korea-US summit in the same year. However, although there was the second summit in Hanoi in 2019 between North Korea and the USA, no agreement was reached and the declaration has not come into practice to date. The adoption of a transitional economy could accelerate urbanisation, industrialisation and even globalisation in the ways that former socialist countries, such as China and Vietnam, have undertaken. However, there is high uncertainty when and how political stability and the peace agreement will be guaranteed. If these happen, the inter-continental transport networks will play a very significant role in facilitating trade, logistics and human/freight mobility across the Korean Peninsula, Eurasia and even up to Africa.
Current trade and investment links and cross-border transport networks This section analyses the current economic interactions of the two Koreas with neighbouring countries with respect to trade, investment and transport networks. South Korea Trade The South Korean economy has been integrated with the global economy as seen in the volume of trade, FDI, freight and human f lows. South Korea was the sixth-largest export country and ninth-largest import country and trade accounted for 40.7% of the GDP in 2017 (World Trade Organisation, 2017). The top destinations were China (24.8%), the USA (12.0%), the EU (9.5%), Vietnam (8.3%) and Hong Kong (6.8%), which, with the exception of the USA, can all be connected via in-land railways. Manufactured products were key export items (89.7%) and major transport modes were by sea (73.0%) and by air transport (25.5%). The use of railways for trade has been very limited as
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discussed. The growth of trade links with Asia is noteworthy with the share of export to Asian countries being the highest, increasing from 47% in the early 2000s up to 59% in 2017 (Korea Customs Service). North America has seen a major decline in the share of South Korean export from 23.3% in 2000 to 12.8% in 2017. Foreign direct investment FDI transfers ‘a package of assets’ including capital, management and organisational skills, technology, entrepreneurship and access to global markets (Dunning, 1993). The inf lux of FDI is a key driver for urban transformation creating new spatiality in cities and regions (Kim and Han, 2014). A body of literature has confirmed that the recipient cities build tight links with donor countries, enlarging and strengthening capital f lows, human mobility, trade, production networks and transport networks. For instance, Korean FDI activities have been tied up with the formation of Korean communities in recipient cities such as Suzhou, China, and Hanoi, Vietnam (Kim, 2020, In Press). In the period 1980–2018, more than 70% of Korean outward FDI have been to the USA, China, Hong Kong, the Cayman Island (a tax haven), Vietnam, Australia, the UK, Canada, the Netherlands and Indonesia (The Export-Import Bank of Korea). The USA has been the top destination of Korean outward FDI due to outstanding political, cultural, military, migration and missionary links in modern South Korean history. In particular, the 2010s saw an exponential increase due to growing interest in finance/ insurance, real estate and retail/wholesale. The rise of the Cayman Islands over the recent decade was attributable to investment in South America. In fact, the Cayman Island was the second largest after the USA in the period 2015–18. China has been favoured by Korean (mostly manufacturing) investors since 1992 when South Korea and China established a diplomatic relationship. The scale of investment in Hong Kong grew after 1997 when it was returned to China and the Asian Financial Crisis occurred. Investment started with retail/wholesale and manufacturing, which has remained dominant, and the growth in the 2010s has been attributable primarily to finance and insurance. With a moderate decline in manufacturing investment in China, Vietnamese cities have emerged as favourable production sites, led by giant conglomerates such as Samsung since the mid-2000s. Korean firms have become the largest investor in Vietnam (Kim, 2020, In Press). Among Vietnamese cities, Hanoi and its surrounding regions have been favoured by Korean investors (O’Connor et al., 2020). Figure 5.2 shows accumulated amounts of Korean FDI up to 2017 in China and Vietnam and the three largest destinations in China are Jiangsu Province, Shandong Province and Beijing. By the 1990s Shandong Province was the largest destination of Korean FDI in China. There was a shift of the focus of Korean FDI to east coastal regions among which Jiangsu Province was
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Figure 5.2 South Korean outward investment links with China (by province) and Vietnam, accumulatedamountsby2017.(Credit:AuthorbasedoninformationfromtheExport-Import Bank of Korea)
notable. Jiangsu Province attracted high-tech manufacturing firms strengthened by FDI-favoured institutional supports expressed in development zones such as the Suzhou Industrial Park that attracted giant lead firms and their suppliers (Kim, 2015; Kim and O’Connor, 2019). Shandong Province attracted attention possibly due to the proximity to the Korean Peninsula via maritime links with Korean manufacturers drawn to Qingdao and Yantai in Shandong Provinces (Kim and Zhang, 2008). The provinces neighbouring or near the Korean Peninsula, Three North-Eastern Provinces (TNEPs) (i.e. Liaoning, Heilongjiang, and Jilin), accounted only for 9.3% of South Korean outward FDI by 2017 while the nine provinces along the eastern corridor (i.e. Hebei, Beijing, Tianjin, Shandong, Jiangsu, Shanghai, Zhejiang, Fujian, and Guangdong) accounted for 78.2%. Outside the TNEPs and the eastern corridor, only Shaanxi Province attracted Korean FDI over USD1 billion associated with recent Samsung’s large-scale investment in high-tech manufacturing in Xian (Kim and O’Connor, 2019). Global mobility South Korea has emerged into one of the favoured destinations among Asian countries as can be seen in the growth of the number of visitors. In 1984, the
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number of visitors was 1.3 million, but it reached record highs at 17.2 million in 2016, over a 13-fold increase (Korea Tourism Organisation). Except for the USA (5.0%), in 2016 most visitors were from Asia (85.0%) with visitor origins from China (46.8%), Japan (13.3%), Taiwan (4.8%), Hong Kong (3.8%), the Philippines (3.2%), Thailand (2.7%), Malaysia (1.8%), Indonesia (1.7%) and Vietnam (1.5%). The number of annual Korean outbound visitors has drastically increased from 1.6 million in 1990 to 26.5 million in 2017, which is almost a 17-fold increase. Since 2012 the number of outbound Korean visitors has reached record highs every year (until the outbreak of COVID-19). The most popular destinations were also Asian countries such as Japan (5.1 million), China (4.7 million), Vietnam (1.5 million), the Philippines (1.5 million), Thailand (1.5 million) and Hong Kong (1.4 million). Outside Asia, the USA was outstanding with 2 million Korean visitors in 2016 (Korea Tourism Organisation). Transport networks The links of these interactions are expressed in cross-border traffic volumes via transport networks. For South Korea, these networks appeared in freight and passenger volumes. Through the Incheon International Airport, the largest airport in South Korea, 688,000 f lights, carrying 94,500 tonnes of regular freights, operated in 2017 (National Logistics Information Center, 2017). The top three busiest routes in terms of air freight volumes were Seoul to Guangzhou (13.4%), Hong Kong (6.3%) and Shanghai (5.0%) demonstrating economic links with Chinese top-tier cities. Three additional cities were listed among the top 20 busiest routes from the Incheon international airport: namely Shenyang and Yantai in the TNEPs and Beijing (National Logistics Information Center, 2017). South Korean top three highest capacity trade ports were the Busan Port (354 million tonnes), the Gwangyang Port (188 million tonnes) and the Incheon Port (137 million tonnes) in 2017 (Ministry of Oceans and Fisheries). Container handling volume was the highest in the Busan Port and the Incheon Port. Handling almost three quarters of South Korean container cargo, the Busan Ports have played a fundamental role in implementing export-oriented economic growth strategies. The Seoul-Busan highway was constructed in the late 1960s as an outcome of the developmental state’s f lagship investment (Kim and Han, 2012). Due to the proximity to Japan, the Busan Port was developed during the Japanese colonial rule and it was further expanded and grown to the sixth-busiest container port in the world after Shanghai, Singapore, Shenzhen, Ningbo and Hong Kong in 2017 (UNCTAD, 2017). In 2017, regular maritime routes from the Busan Port reached record highs at 536 (Busan Port Authority, 2017) with five key counter partner countries of China, the USA, Japan, Canada and Vietnam taking up more than 60% of the total container volume through the port. At a port level, the Tianjin Port (1.1 million TEU), the Qingdao Port (1.0 million TEU), the Shanghai Port
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(0.9 million TEU), the Long Beach Port in California (0.6 million TEU) and the Dalian Port (0.6 million TEU) have strong ties with the Busan Port. All Chinese major counter-partner ports were located in either TNEPs or east coastal regions. Container ship via the Incheon Port served primarily China (59.6%) and recently Vietnam (9.0%) in 2016 (Incheon Port Authority, 2017). In 2016, the Incheon Port was well connected to Shanghai (0.3 million TEU), Qingdao (0.3 million TEU), Yantai (or the Weihai Port) (0.14 million TEU) and Shenzhen (or the Shekou Port) (0.14 million TEU). In Vietnam, Haiphong (0.12 million TEU) and Ho Chi Minh City (0.09 million TEU) were the two largest ports that had strong ties with the Incheon Port. North Korea Trade North Korean trade has gradually increased in volume from USD2.3 billion in the 1990s to USD2.8 billion in the 2000s and further to USD6.3 billion per annum in the period 2011–17. Although North Korea’s trade volume is still very low, less than 1% of South Korea’s trade volume (North Korea Statistics), the growth of trade volume demonstrates North Korean effort to interact with neighbouring countries. China is North Korea’s largest trade partner, accounting for almost 70% of North Korea’s trade volume, with increases from USD408 million in 1998 to USD6.4 billion in 2014 (Bae and Youn, 2015). Geographically TNEPs have played a pivotal role in trade with North Korea. The share of the TNEPs in trade reached record highs at 78.7% in 2002, although their share decreased to 65% in 2010 and further down to 62% in 2012 (Bae and Youn, 2015). This decrease was attributable to the import of natural resources (such as coal minerals) by non-TNEPs along the east coast such as Shandong Province and Jiangsu Province. In fact, exclusive of coal, the share of TNEPs has been high reaching at over 70–80% since 1998. In TNEPs, Jilin Province is noteworthy in two aspects. First, it is home to Korean ethnic people, called Joseonjok (or the Joseon). Many Koreans left the Korean Peninsula during the Japanese colonial rule and stayed in neighbouring regions among which Jilin Province was favoured (Kim, 2017). Within Jilin Province, Yanbian is a key cluster for ethnic Koreans, as a Korean autonomous prefecture. Since Chinese visits to South Korea were allowed in 1988, many Korean ethnic people moved to South Korea in search of high paying jobs (Kim, 2017), establishing strong migration connections with South Korea. Second, investment and trade between Jilin Province and North Korea have been outstanding with, in 2014, trade worth USD756 million followed by Japan (USD660 million), Russia (USD541 million), surprisingly the USA (USD486 million) and South Korea (USD484 million) (Bae and Youn, 2015). Back in 2002, Jilin’s largest trade partner country used to be South Korea but the Jilin-North Korea trade link has become more and more significant. Jilin’s outward FDI in North Korea has been increasingly
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growing over the other two TNEPs, revolving around key cities such as Hunchun, Yanji, Changchun and Tumen. South Korea is the second-largest trade partner of North Korea after China. However, trade has been vulnerable to an inter-state political relation. The 1990s was a beginning stage of inter-Korean trade with an annual average trade volume of USD0.2 billion (North Korea Statistics). Along with the first inter-Korean summit in 2000 and the second summit in 2007, the trade volume increased up to USD1.1 billion per annum in the 2010s. The KIZ played a pivotal role in facilitating trade between the two Koreas. However, military threats via nuclear tests halted inter-Korean trade and the South Korean conservative government (Park Geun-Hye administration) responded to North Korea by declaring a sudden halt of the operation of South Korean firms in the KIZ in 2016, which led to a drop of inter-Korean trade back to the volume of the 1990s. Furthermore, North Korea destroyed the inter-Korean liaison office with explosives in the KIZ in June 2020, signifying ongoing political tensions between the two Koreas. Foreign direct investment Although North Korea has been isolated from the world economy, there has been limited economic reform that allowed foreign investment in controlled economic zones. In 2002, North Korea introduced policies to legitimise market activities and more reform measures, which led to increases in the formation of joint ventures between foreign investors and North Korean entities (Open Source Center, 2014). Open Source Centre (2014) identified 351 such joint ventures in the period 2004–11 with the aggregated amounts of investment of more than USD2.32 billion of which approximately half was in mining. Other ventures include light industry, consumer goods, heavy industry and construction. 206 joint ventures (or 76%) were with Chinese firms, in TNEPs. Shandong Province, Beijing and Tianjin were major origin Chinese cities/regions. Japan (15 joint ventures) and South Korea (10 joint ventures) were also active in investment in North Korea. Some European countries, such as the UK, the Netherlands and Germany, invested in finance and technology. Interestingly, in this socialist country, spatial concentration appeared in the location of headquarters with at least 120 joint ventures choosing the primate city, Pyeongyang, for their headquarters. Even within the city, the central district was favoured. Transport networks From 2018 onwards, the Beijing-Pyeongyang passenger train route operated four times a week (K27 and K28). The travel distance is 1,400 km taking approximately 24–25 hours, via Tianjin (China), Shenyang (China), Dandong (China) and Sinuiju (North Korea). In addition to these regular services,
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new train lines for tourists have been in operation from Jilin Province to Pyeongyang. There are nearly 40 airports in North Korea, most serving military purposes with about 10 serving passenger travel. Of these only the Pyeongyang Sunan International Airport, constructed in 1955 located at 14 km distance from Pyeongyang, offers international f lights (Lee, 2009). Its international connections are limited to only a few selected cities, mostly in former socialist countries. The Pyeongyang-Moscow route was opened in 1983 and the route extended to East Berlin in 1989 but these direct routes were closed in 2002 (Lee, 2009). In 2019, regular direct f lights were operational from Pyeongyang to Beijing (seven f lights a week by Air Koryo and Air China), to Shenyang (three f lights a week by Air Koryo), to Vladivostok (two f light a week by Air Koryo) and to Shanghai (two f lights a week by Air Koryo since 2018). These air networks express economic and political ties with the two powerful (post) socialist countries. Um (2009) identified 8 ports, apart from approximately 30 fish ports, in North Korea. In 2007, the total cargo handling capacity of North Korea was 36.8 million tonnes – approximately 5% of the South Korean capacity. The largest ports were Nampo (10.7 million tonnes), a gateway to Pyeongyang and Chongjin (8.0 million tonnes) along the East Sea in terms of cargo handling capacity. The Chongjin Port, as an ice-free port, is a gateway city linking Harbin and Tumen in China to the North Korean east coast. With the borders of China and Russia within 100 km from Chongjin, the port is connected to both countries via roads and railways. Since 1983 the port serves China’s trade with Japan (Um, 2009). Around the Chongjin Port, there are steel manufacturing and shipbuilding factories having the potential to further strengthen the port’s role as a trade hub.
Implications Asian Economic Corridor The BRI aims to build cross-continental railway networks across Asia, Europe, and Africa and develop maritime networks. The Korean Peninsula is located at almost the easternmost end of BRI’s possible in-land railway networks. As Choe (2005) claimed, an Asian transnational economic corridor has emerged from Tokyo to Beijing via Seoul. Cross-continental railways will further strengthen the Asian Economic Corridor (AEC), further extension of Choe’s (2005) claim, by connecting key Asian cities with high command-and-control functions (Figure 5.3). Although the AEC has not been explored empirically in the literature to date, what is proposed here is the growing economic and geopolitical significance along this corridor. Key Asian cities line the eastern to the south-east coast of the continent, including Seoul, Beijing, Shanghai, Hangzhou, Hong Kong, Shenzhen, Guangzhou,
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Figure 5.3 Global cities in the Asian Economic Corridor. (Credit: Author. For global cities see GaWC (2018))
Hanoi, Ho Chi Minh City, Bangkok, Kuala Lumpur and Singapore. These cities are listed as a global city by the Globalisation and World Cities (GaWC) Research Network with Hong Kong, Beijing, Shanghai and Singapore listed as Alpha+ global cities and Seoul, Bangkok, Kuala Lumpur and Guangzhou as Alpha global cities (GaWC, 2018). Almost all highly significant Asian global cities are located along this long and thin corridor that can be connected by in-land transport networks (with exceptions of Japanese and Taiwanese cities due to their island geography). The mentioned Chinese and Vietnamese cities and their regions are favoured destinations for South Korean investments. Inter-continental railway networks will strengthen trade, investment and tourism links across the AEC (Figure 5.3). While air networks play a pivotal role in linking through the AEC, railway networks will undoubtedly fuel and intensify interactions between the cities in the corridor. With the growing significance of these cities strengthened by inter-continental transport networks, spatial inequality within the nation will likely emerge as a national-level planning issue. The Korean Peninsula will be one of the evident beneficiaries within this AEC owing to enhanced cross-continental accessibility. In-land railway networks from the Korean Peninsula to Eurasia, and Africa via North China and/or Russia, which was connected in the early 20th century, will be important for the movement of freight and people. The AEC will be a significant economic
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belt for investment, human mobility and knowledge transfers which have been a focus in globalised economies. Spatial networks of the Korean Peninsula and border cities South Korean cities will play a significant role in the AEC. In particular, Seoul is expected to gain more political and economic significance as a hub city in South Korea and beyond as new transport networks will enhance the city’s global and national accessibility. The second-largest Korean city, Busan, will be further integrated with the global economic links with its port functions buttressing the city’s economic vitality. In the same way, Incheon will serve as a gateway city particularly to Asian countries via both the port and the airport. There is a possibility to operate express trains from Seoul via Dandong and Shenyang to Beijing of which the pre-condition is the Dandong-Shenyang high-speed railway. With the train speed as high as what is currently operational in China and South Korea, the travel time between Beijing and Seoul is approximately six hours (approximately 1,500 km), while the trip from Busan to Beijing will take approximately nine hours. This transport link will be powerful for (human) mobility, increasing visitors in both destinations and partially replace plane travel. Indeed, the Busan-Beijing trains were already in operation in the early 20th century. However, beyond Beijing, express trains might be unlikely to compete with air networks due to long travel time. The Seoul-Shenyang-Beijing-Shanghai train line extends approximately 2,800 km, with an expected travel time of approximately 11 hours, while the Seoul-Shenyang-Beijing-Xian is almost the same in length (2,700 km). Once the Seoul-Beijing high-speed trains are in operation, interactions between the three countries are expected to grow. North Korean cities, such as Pyeongyang, can benefit if it employs a strategy towards global integration away from political and economic isolation. This will result in the enhanced primacy of Pyeongyang in North Korea with regional cities being connected to this top-tier city. As Incheon serves as a second-tier port city for Seoul, Nampo in North Korea has a high potential to grow due to its port function and proximity to Pyeongyang. One of the plausible spatial outcomes would be a transition in border cities. Chinese TNEPs are directly relevant to China’s railway networks to North Korea. More trade and investment activities will take place in core cities in Northern North Korea and Chinese TNEPs, such as Sinuiju (North Korea), Dandong, Hunchun, Changchun and Harbin. The presence of ethnic Koreans concentrated in the Yanbian Korean Autonomous Prefecture will serve as important human resources, playing the role as an intermediator thanks to their bilingual skills. As discussed, TNEPs are major origins for investment in North Korea. Formal and informal (e.g. North Korean defectors) human interactions of North Koreans have taken place in TNEPs due to geographical proximity (Lankov, 2004).
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Conclusion The Korean Peninsula has undertaken different development pathways since 1945 when both Koreas were economically, politically or geographically disconnected from other countries. This chapter reviewed past and current economic/transport links of two Koreas with surrounding Asian countries. However, economic rationales have been scrapped by political and military actions in the Korean Peninsula. There must be fair political steps to start interactions between the two Koreas and between North Korea and the world economy. Declaring an opening-up policy does not necessarily mean interactions are allowed without any hurdles. Political stability and safety away from military actions are the most important pre-conditions for economic engagement with the world economy. The response of North Korean political leadership to rapidly changing geopolitics seems the key to the intercontinental railway networks. Given China’s keen interest to promote the BRI and its competitive relationship against the USA, the cross-continental transport networks will need considerate pacing to minimise potential geopolitical conf licts. Transport networks are of significance as they strengthen cultural interactions beyond the f low of people and products, although it is highly uncertain how South Korean politics will respond to the China-led inter-continent transport infrastructure investment initiatives. The rigorous investigation is required in a wide range of issues including land ownership, public funding mechanisms and planning governance. Clear land use rights are necessary to secure land for infrastructure. Private land ownership is prohibited under the current socialist regime, but the openingup policy embracing an alternative mechanism could change land policy as China and Vietnam have undertaken via the transfer of land use rights (Labbé and Musil, 2014; Yeh and Wu, 1999). A clear public funding mechanism will be an enabler to secure costs for infrastructure. Although the precise fiscal capacity of North Korea is unknown, it is highly likely that North Korea will need funds for infrastructure. It cannot be assumed that internationally and peninsula-wide funded aids can cover all new cross-continental transport infrastructure costs. As other former socialist countries demonstrated, state-owned land might be the greatest resource for public revenue; however, hasty privatisation of land will generate new issues in the control and management of land use. Transport infrastructure within the state such as regional and intra-urban road and railway networks is a priority of North Korean cities, while South Korean cities are keen to be connected by land to the Asian continent via North Korea. Given the lack of proper tax systems in North Korea, the establishment of infrastructure funding mechanisms at national and local levels will play a pivotal role in constructing transport infrastructure. In former socialist countries, urban planning was either absent or favoured engineering technical aspects (Kim and Kent, 2019; Li and Wu, 2012; Zhang, 2002). Planning transport networks needs a solid understanding of how transport
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infrastructure is associated with land use changes and economic development. The selection of railway stations will transform the function of the cities locally, nationally and globally due to the significance of cross-continental transport networks. The role of planning agencies, local authorities, states and private sectors (if active) should be defined, and these stakeholders should be coordinated within efficient planning governance. This equally applies to South Korean planning systems as cross-continental railways have not been implemented in South Korea yet. Special Economic Zones (SEZs) are mechanisms to progress the reform. For instance, the first Chinese SEZ was in Shenzhen that attracted FDI and led economic growth. The cross-continental railways via North Korea will need to be integrated with current or new SEZs to magnify its impacts. These SEZs are and will be economic growth nodes offering de-regulatory, business-friendly environments, supported by industrial and transport infrastructure. In modern history, the two Koreas never cooperated for large-scale shared public infrastructure. The inter-Korean collaborative process will face critical challenges whether the pace of implementation is gradual or radical. The consensus among top-level political leadership will be essential for interKorean interactions. Since 2019, the two Koreas have been investigating selected railways in North Korea to link to the South Korean railway system. Collaborative approaches by China, Russia and the two Koreas will be fundamental to progress the cross-continental transport networks. Whether enhanced transport networks of the Korean Peninsula linked to China will bring mutual benefits or ‘a winner takes all’ will need further rigorous research. China as a country is gigantic in demographic and economic size, but at city or city-region scales, the Korean top-tier city, Seoul, has a high potential to compete against and/or collaborate with Chinese top-tier cities at future city-to-city battles for economic prosperity and ‘urban development leadership’ (Kim et al., 2021).
Acknowledgements I would like to give thanks to Dr Kyong-Seok Jang for his valuable comments. Any remaining error is the responsibility of the author.
References Amsden, A. H. (1989). Asia’s next giant: South Korea and late industrialization. New York: Oxford University Press. Angus, M. (2001). The world economy: A millennial perspective. Paris: Organisation for Economic Cooperation and Development. Bae, C. R. and Youn, S. H. (2015). Analysis of the Jilin Province’s economic cooperation with North Korea: Focusing on investment in North Korea. Seoul: Korea Institute for National Unification. Busan Port Authority. (2017). Port of Busan container statistics. Busan: Busan Port Authority.
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Choe, S. C. (2005). The impacts of globalization on the urban spatial-economic system in Korea. Berlin: Springer. Cumings, B. (1997). Korea’s place in the sun: A modern history. New York: W.W. Norton & Company. Ducruet, C., Roussin, S. and Jo, J. C. (2009). Going west? Spatial polarization of the North Korean port system. Journal of Transport Geography, 17, 357–68. Dunning, J. H. (1993). Multinational enterprises and the global economy. Wokingham; Reading, MA: Addison-Wesley. GAWC. (2018). The world according to GaWC 2018. 13 November 2018 ed.: Globalisation and World Cities Research Network. Hwang, K. M. (2016). A history of Korea. New York: Palgrave Macmillan. Incheon Port Authority. (2017). Incheon port statistics. Incheon: Incheon Port Authority. Jo, J. C. and Adler, S. (2002). North Korean planning: Urban changes and regional balance. Cities, 19, 205–15. Jo, J. C. and Ducruet, C. (2007). Rajin-Seonbong, new gateway of Northeast Asia. The Annals of Regional Science, 41, 927–50. Kim, H. M. (2015). The role of foreign firms in China’s urban transformation: A case study of Suzhou. In: Wong, T.-C., Han, S. S. and Zhang, H. (eds.) Population Mobility, Urban Planning and Management in China. London: Springer, 127–143. Kim, H. M. (2017). Ethnic connections, foreign housing investment, and locality: A case study of Seoul. International Journal of Housing Policy, 17, 120–44. Kim, H. M. (2020). International real estate investment and urban development: An analysis of Korean activities in Hanoi, Vietnam. Land Use Policy, 94, 104486. Kim, H. M. (in Press). Foreign direct investment, enclaves and liveability: A case study of Korean activities in Hanoi. Vietnam: International Development Planning Review. Kim, H. M. and Han, S. S. (2012). Seoul. Cities, 29, 142–54. Kim, H. M. and Han, S. S. (2014). Inward foreign direct investment in Korea: Location patterns and local impacts. Habitat International, 44, 146–57. Kim, H. M. and Kent, A. (2019). The emergence of international urban planning and design firms in China from an OLI perspective. Journal of Regional and City Planning, 30, 123–39. Kim, H. M., Miao, J. and Phelps, N. (2021). International urban development leadership: Singapore, China and South Korea compared. In: Park, S. H., Shin, H. B. and Kang, H. S. (eds.) Exporting Urban Korea? Reconsidering the Korean Urban Development Experience. Oxon; New York: Routledge, 131–146. Kim, H. M. and O’Connor, K. (2019). Foreign direct investment f lows and urban dynamics in a developing country: A case study of Korean activities in Suzhou, China. International Planning Studies, 24, 125–39. Kim, J. Y. and Zhang, L.-Y. (2008). Formation of foreign direct investment clustering - A new path to local economic development? The case of Qingdao. Regional Studies, 22, 265–80. Kim, M. and Jung, I. (2017). The planning of microdistricts in post-war North Korea: Space, power, and everyday life. Planning Perspectives, 32, 199–223. Korea Tourism Organisation. Departure and arrival statistics by country, 1975–2019, http://kto.visitkorea.or.kr/kor/notice/data/statis/prof it/board/view.kto?id= 379522&isNotice=true&instanceId=294&rnum=0, viewed on 9 Feb 2021 Korean National Railroad Agency. (1974). Korean railways history 2. Seoul: Korean National Railroad Agency (in Korean).
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Labbé, D. and Musil, C. (2014). Periurban land redevelopment in Vietnam under market socialism. Urban Studies, 51, 1146–61. Lankov, A. (2004). North Korean refugees in northeast China. Asian Survey, 44, 856–73. Lee, G. J. (2009). North Korean airports and strategies for interactions. In: Korean Society of Civil Engineers (ed.) North Korean Cities and Regional Development. Seoul: Bosunggak (in Korean), 187–218. Lee, Y. S. (ed.) (2011). The history and development of Korean railways I. Seoul: Book Gallery (in Korean). Lee, Y. S. (2018). International isolation and regional inequality: Evidence from sanctions on North Korea. Journal of Urban Economics, 103, 34–51. Li, Y. and Wu, F. (2012). The transformation of regional governance in China: The rescaling of statehood. Progress in Planning, 78, 55–99. Ministry of Oceans and Fisheries Port cargo handling capacity. Ministry of Oceans and Fisheries. http://kosis.kr/statHtml/statHtml.do?orgId=146&tblId=DT_MLTM_ 1340&conn_path=I3 viewed on 9 Feb 2021 Ministry of Unification North Korea Information Portal. http://nkinfo.unikorea. go.kr/nkp/main/portalMain.do, viewed on 9 Feb 2021 Nanto, D. K. and Manyin, M. E. (2011). The Kaesong North-South Korean industrial complex. Congressional research service: Issue brief. US Congressional Research Service. National Logistics Information Center. (2017). Transport Records by international routes. Incheon: Incheon International Airport Corporation. North Korea Statistics. Trade Volume. 1990–2017. Statistics Korea. http://kosis.kr/ bukhan/index.jsp, viewed on 9 Feb 2021. O’Connor, K., Fuellhart, K. and Kim, H. M. (2020). Economic inf luences on air transport in Vietnam 2006–2019. Journal of Transport Geography, 86, 102764. Open Source Center. (2014). North Korea: Characteristics of joint ventures with foreign partners, 2004–2011. Central Intelligence Agency. https://publicintelligence.net/ osc-north-korea-joint-ventures-2004-2011/, viewed on 9 Feb 2021. OSS. (1945). Korea 1945. United States: Office of Strategic Services. Research and Analysis Branch. https://collections.lib.uwm.edu/digital/collection/agdm/ id/698/rec/18, viewed on 9 Feb 2021 Sin, D. S. (2017). Die Planung des Wiederauf baus der Städte Hamhung und Hungnam in Nordkorea durch die DAG-Städtebaubrigade der DDR von 1955–1962-eine städtebaugeschichtliche Abhandlung aus der Sicht eines Zeitzeugen. https://repos. hcu-hamburg.de/handle/hcu/449, viewed on 9 Feb 2021. The Export-Import Bank of Korea Outward Foreign Direct Investment. The Export-Import Bank of Korea. http://211.171.208.92/odisas.html, viewed on 9 Feb 2021. Tsuji, H. (2004). Perspectives on linking the trans-Siberian and trans-Korean railways. ERINA Report, 56, 33–41. Um, G. C. (2009). North Korean ports and outlook. In: Korean Society of Civil Engineers (ed.) North Korean Cities and Regional Development. Seoul: Bosunggak (in Korean). UNCTAD. (2017). Review of Maritime Transport 2017. New York and Geneva: United Nations Conference on Trade and Development. https://unctad.org/webf lyer/ review-maritime-transport-2017, viewed on 9 Feb 2021.
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WTO. (2017). Trade profiles. Geneva: World Trade Organisation. https://www.wto. org/english/res_e/statis_e/trade_profiles_list_e.htm, viewed on 9 Feb 2021. Yeh, A. G. O. and Wu, F. (1999). The transformation of the urban planning system in China from a centrally-planned to transitional economy. Progress in Planning, 51, 165–252. Zhang, T. (2002). Urban development and a socialist pro-growth coalition in Shanghai. Urban Affairs Review, 37, 475–99.
6 Establishing the BRI in Thailand Contrasting “desire lines” in the delivery of two high-speed rail projects Sidh Sintusingha Introduction Chapter 6 interrogates the BRI in the case of Thailand as a mid-sized, higher middle-income country – a ‘regional power’ in the context of mainland South-East Asia. The chapter focusses on the BRI in Thailand as a conceived major hub of the Kunming-Singapore Rail Networks.1 Since 2013 after many false dawns and delays over two governments, one democratically elected and one military junta, the high-speed rail (HSR) Thai leg of the ‘central route’ finally commenced construction in 2017 under the Thai military-bureaucracy-dominated government. The result is a delivery that is relatively unique in the BRI in that the project, while utilising Chinese design consultants, is being funded by the Thai Government and opened to local contractors. However, the project has been proceeding at a slow pace and can be observed to be a case of local priorities not matching Chinese global-regional ambitions. With the aim of escaping the ‘middle-income trap,’ the Thai junta government is embarking on a nationwide infrastructure building and investment at an unprecedented scale and priorities lay with other projects. In terms of the HSR, the east-west-oriented Eastern Economic Corridor’s (EEC) HSR to link the central regions’ three major international airports is privileged as it builds upon the Eastern Seaboard, the country’s major industrial region established in the 1980s. In the longer term, this route could potentially become a major east-west link for mainland South-East Asia, maintaining Thailand’s centrality in the region. Moreover, the route – if extended through Vietnam – could become part of the ‘eastern route’ of the Kunming-Singapore Rail Network. Crucially, due to the overlapping geographic and economic interests, the EEC HSR project is also an example of collaborations, both explicitly and implicitly, between regional competing nations China and Japan in a third country. Importantly, it is observed that, as a fellow developmental state,2 the Thai Government’s development practice is an emulation of Chinese rail infrastructure-catalysed urban-regional development model at a time that the country has suspended democratic rule. The proposed nationwide rail network (HSR, double-tracking of existing network, new routes) is to
Figure 6.1 The China-Indochina Peninsula Economic Corridor (CIPEC). The Thai Government defined a BRI “spur line,” the Eastern Economic Corridor (EEC) high-speed rail (HSR), that connects Bangkok to Utapao Airport. The Bangkok-Chiang Mai HSR is a planned collaboration with Japan. (Map credit: Iris Fong)
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decentralise economic development from Bangkok’s primacy and catalyse urbanisation around stations, and to reduce the country’s logistics overhead by increasing the proportion of freight transportation by rail. These have been the de facto role of roads, under prior hegemonic American development model and tutelage, to the extent that the country, before the commencement of rail construction in 2017, had 4,000 km of rail network (mostly single track built in the late 19th to early 20th centuries to geographically integrate a nascent nation-state) compared to 390,000 km of highways.
Geopolitical dimension: Thai pivot to China? Post-Second World War, the USA has been Thailand’s most important security ally and highly inf luential in the politics and economic development of the country. This began with US intervention that helped Thailand avoid being saddled with war reparation debt that the UK and France demanded 3 for collusion with the Japanese occupation4 and reclamation of territories from the colonisers. Subsequently, the country served as an important base in Indo-China in the US policy to contain communism, whether supported by the Soviet Union or China. During this time (1950s–1970s), the USA tacitly supported military dominated/inf luenced governments often with some democratic veneer that operated under American economic tutelage. There was a political shift with the fall of Saigon in 1975 and US military retreat from South-East Asia, and many predicted Thailand to eventually fall to communism based on President Eisenhower’s ‘domino theory.’ Exploiting rifts in the Sino-Soviet relationships, Thai political elites5 saw it was necessary to reach out to the Communist leaders in China to help end its support to the Thai Communist party and insurgency and temper Vietnamese activities near Thai borders. The new formal relationships coincided with China’s economic reform period under Deng Xiaoping, beginning in 1978, and saw the establishment of business relations, led by Sino-Thai overseas investors, that is sustained and inf luential to this day. Thai Charoen Pokphand Group (CP ‘Zhèng Dà’ 正 大) was the first foreign investor in the Shenzhen Special Economic Zone after the economic reform (Chearavanont, 2016) and pioneered agri-business in China. These initiatives, along with a government amnesty in 1980, helped neutralise the Communism threat and provided political stability that allowed, from the end of the Indo-China War, the country to benefit from Japan’s economic expansion, becoming a major overseas base for Japanese manufacturers.6 These political economic relationships form the basis to understand Thailand’s present national infrastructure and development policies. At the turn of the 21st century, the Thai political pattern of alternate civilian and military rule became more antagonistic and intensified with street protests and the 2006 coup that dislodged the government of telecommunications tycoon, Thaksin Shinawatra, accused of conf licts of interest and corruption. Since then political power alternated between governments
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run by Thaksin’s proxies and those by his opponents with backing from the military-bureaucracy and monarchy. After almost nine months of street protests, the military again took power in a coup in May 2014 against the Yingluk (Thaksin’s sister) government. In the post-Cold War context where Thai ideological conf licts between capitalism and communism have transformed into a ‘democracy versus dictatorship’ narrative championed by now exiled Thaksin, who employed the ‘Thailand under siege’ strategy to portray the country as an international pariah for diverging from the (Western) prescribed democratic norms to pressure the military government. In the new geopolitical contestation, this has led to what many considered to be a ‘pivot’ to China that at least formally maintains a more non-interventionist stance on the domestic politics of its strategic partners. Interestingly, with a lot of economic interests at stake, Japan did not join with Western governments in pressuring the Thai junta (Chachavalpongpun, 2017). Evidence cited to support the pivot is the highest level government-togovernment collaborations such as the Thai procurement of Chinese arms and the formal agreements and commencement on the Bangkok-Nongkai HSR – the critical link in the South-East Asian corridor that symbolises Thailand’s sanctioning of the BRI. However, the actual progress on the ground has been far slower, hindered by the many rounds of negotiations7 that led to the eventual Thai Cabinet decision in July 2017 to self-fund and build the project (unless China can provide competitive loans interest rates) with requests for technology transfer, an unprecedented move in China’s BRI HSR projects. Crucially, it was reported that “Although China was only providing technology for the project, the progress gave Beijing a boost at a time when its blueprint for a network of high-speed rail links throughout SouthEast Asia faced hurdles, experts said” (Zhen, 2017). The delayed pace is in contrast to another key project, the EEC HSR, which intends to link Bangkok’s main international airports of Donmuang and Suvanabhumi to Utapao8 in Rayong Province as part of the government’s aspiration to turn Thailand into a regional aviation hub. While not directly associated with a BRI corridor, it forms part of the potential ‘Eastern link’ via Cambodia and Vietnam to China. The Thai Junta placed priority on the project that will be delivered as a public-private partnership (PPP Net Cost 50 years) under the government’s ‘pracharat’ model where the public sector optimises private capability and financial capacity. In December 2018, the aforementioned Charoen Pokphand (CP)-led international consortium9 won the bid to build the high-speed train against a group led by Bangkok Transit System Group Holdings Public Company Limited or BTSG.10 This is the first time a private corporation will deliver a major national level infrastructure, with development rights over key public land holdings along the route for a period of 50 years. In turn, BTSG, as part of a wholly Thai consortium, BBS Joint Venture, won the bid against a CP-led group and signed a THB290 billion (or ~USD9.35 billion11) deal to build the Eastern Airport City Project at Utapao in June 19, 2020. Crucially, the EEC builds upon the
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previous phase of Thai industrialisation in the 1980s, the Eastern Seaboard project that led to the country’s emergence as a Newly Industrialised Country (NIC) and, hence, is seen as a project that will yield more economic benefits to the country compared to the BRI HSR. Yet the pivot to China, seen in the international trade and investment perspective, is consistent with trends that see China’s increased inf luence in trade and diplomatic engagement worldwide. In fact, Thailand actually lags behind in Chinese foreign direct investment to almost all its South-East Asian colleagues12 – where only in tourism has the country taken the lion’s share of the lucrative Chinese outbound tourist market. Hence the ‘pivot’ can be viewed as part of the antagonistic geopolitical narrative that most countries face in the context of big power competition between the USA and China. The reality on the ground is far more complex and nuanced and, in fact in 2018 (when the country was still under the junta), …Chinese applications to Thailand’s BOI [Board of Investment] were dwarfed by those from the U.S. Japan, which remains by far the largest overseas investor in Thailand on a net basis, committed 143 billion baht last year compared with China’s 20 billion baht. (Green, 2019) A critical observation is that Thailand views the rise of China as a developmental model of infrastructure-driven economic growth and, to a far lesser extent, a political model as, under US tutelage, ‘democracy’ became the default system to aspire and revert/transition back to after periods of coup governments. As the country’s industrialisation in the 1980s and 1990s has been mainly under Japanese tutelage (a state-led model of economic development), Japan is a key stakeholder and competitor to China.13 In fact, the Asian Development Bank had, since 1992, long assisted in the development framework for infrastructure-led economic corridors in mainland South-East Asia known as the Greater Mekong Subregion (GMS) Economic Cooperation Program. To balance these competing interests, the Thai Government has offered the northern Bangkok-Chiang Mai HSR route to Japan even if there are compatibility issues between the Chinese and Japanese technologies in the overlapping northern entry into Bangkok. However, these relationships afford opportunities to explore East Asian collaboration between traditional competitors. In fact, due to its global reach and corporate network, Charoen Pokphand’s EEC HSR projects involve both Chinese and Japanese partners, a sign of consensus and agreement in project collaboration.
The urban city-region agenda: infrastructure-led development to breach the ‘middle-income trap’ Developing South-East Asian countries have observed the rapid Chinese economic development driven by urbanisation ( Johnson, 2013) and have sought
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to emulate with large infrastructure planning and programmes. Thailand is one of those countries – but one with many years ‘head-start’ of capitalist economic development relative to its mainland South-East Asian neighbours – and has developed institutional capability, and government and private sector capacities to plan and deliver mega-infrastructure projects. This is in contrast to countries like Laos or Cambodia where recent infrastructure projects have been planned, funded and built by Chinese interests (see Chapter 8). Thai infrastructure-building efforts have been concentrated, since the 1950s under US tutelage, on road building14 (Sintusingha, 2009) that links different parts of the country together and was conceived as a distributive strategy to bridge the urban-rural divide and reduce inequity (that is ref lected in and affects its electoral politics). Since the 1990s these result in the decentralisation of economic development that sees the emergence of new industrial bases and secondary urban centres throughout the country. Today the country has a relatively well-established road-based infrastructure, as well as airports – many built during the Indo-China wars. However, the primacy of Bangkok remains a challenge and the nationwide rail infrastructure projects are meant to further redress this. HSR, extension and double-tracking of existing single-track rail routes, and urban mass-transit rail are conceived as the next phase to further speed up the geographic and economic integration and the two HSR projects form part of these plans, mainly in the expansion of Bangkok’s urban regions with HSR linking and enhancing major urban satellites. They form part of the Ministry of Transport planned development of four HSR routes linking Bangkok to the country’s four regions, which includes the BRI and EEC HSR projects, as part of the junta government’s Thailand 4.0 policy to upgrade and transition the economy into higher value manufacturing and services. The formal establishment of the Department of Rail Transport on 15 April 2019, the eighth department in the Ministry of Transport, ref lects the country’s new development priorities and strategic direction. The Chinese ‘desire line’ BRI Thailand Phase 1: creating Bangkok’s north-east city-region Bangkok-Nongkhai HSR forms a critical section in the BRI South-East Asian corridor (see Figure 6.1). It is one that China prioritises in light of its close to complete Laos HSR (from Vientiane, opposite Nongkhai on the Mekong River, to Mohan-Boten at the Laos-Chinese border) that will link Bangkok directly with China. However, it is a route that, according to many transport experts,15 will not be profitable in the short to medium term. This is not surprising as the route links to one of the smallest and poorest countries in South-East Asia and also the poorest region of Thailand, the north-eastern region. Without substantial subsidy, the ticket price will not be affordable to a huge proportion of the population and the connecting infrastructure, to maximise HSR’s benefits, is relatively less developed (Pravinvongvuth in
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Thongnoi, 2019). Yet, precisely because of these factors, the route potentially redresses the spatial inequities more directly, compared to the EEC HSR that runs through one of the most economically developed regions of the country. These factors help explain the apparent reluctance and wariness that successive Thai governments have pursued the project and the absence of private sector participation. While publicly touting the regional and global benefits of the BRI plan through promotional videos that links Bangkok directly to Europe, but having observed precedents of BRI implementation in other countries (SpringNews, 2018), the Thai Government also resisted “… heavy pressure from China for more financial, commercial and operational control of the project” (Thongnoi, 2019). Yet in 2017, the Junta exercised the (autocratic) Article 44 of the interim constitution to allow special exemptions from Thai professional licensing, procurement and construction regulations to facilitate and speed the project. Due to the differing priorities, agendas and limited funding, the Thai Government divided the 606.4 km Bangkok-Nongkhai route into two phases: first, 253.3 km Bangkok-Nakorn Ratchasima, the major gateway city to the north-eastern region, and second, 354.1 km Nakorn Ratchasima-Nongkhai. The Government commenced construction on the first phase in December 2017 on the 3.5 km section at Klangdong-Pangasok, in effect practically prioritising the local urban-regional agenda. The THB179 billion (~USD5.77 billion) investment is further subdivided into 14 contracts with planned completion in 2025 (with the completion date shifted several times). In this phase, Thailand is responsible for project investments and civil work construction, and China is responsible for detailed design of civil works and construction management, design and installation of rail systems, electrical systems, machinery and train control systems, and procurement of HSR. This makes the project more feasible and financially more viable and, in effect, will turn Nakorn Ratchasima firmly into a satellite city of Bangkok.16 The route alignment runs through five provinces – Bangkok, Pathum Thani, Phra Nakhon Si Ayutthaya, Saraburi and Nakorn Ratchasima – and consists of 190 km of elevated railway and 54.5 km of at-grade railway and 7.8 km of tunnels. This includes six stations: Bang Sue Grand Station (Bangkok’s new rail hub, a separate project), Don Mueang (Bangkok’s second airport), Ayutthaya, Saraburi, Pak Chong and Nakorn Ratchasima. The project adopts China’s electric multiple unit (EMU) HSR that can accommodate 594 passengers per train per direction at a speed of 250 km/h. At 1.5 hours for the trip, the HSR will be faster than current comparable modes of 5 hours for double-track rail, 3.5–4 hours for cars– noting that both modes are currently being upgraded and will decrease HSR’s speed advantage. Ticket prices will range between 107 and 534 baht (~USD3.45–17.23) (SRT, 2018). The bids were open to local contractors that could form consortiums with foreign partners (Poonsuwan, 2019) – apart from the first 3.5 km section (contract 1) built by Highway Department, that was finally completed in September 2020. The lengthy construction time for the relatively short section is due
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to the requisite knowledge transfer process from Chinese engineers and partners to their local counterparts – a critical divergence from previous BRI rail projects. The Highway Department then acted as an instructor for contractors in the ensuing rail contracts. The 11 km THB3.115 billion (~USD100.48 million) contract 2-1 (Srikew-Kudjik) that commenced construction on 30 April was won by Civil Engineering Ltd, a Thai infrastructure specialist. The 23 km THB13.293 billion (~USD428.81 million) contract 4-3 (NawanakornBaanPho bid) was won by a Chinese company (China State Construction Engineering Corporation) and two medium-sized Thai construction companies, Nawarat Pattana Ltd and A.S. Associate Engineering (1964), at THB11 billion (~USD354.84 million). The 21.8 km THB10.917 billion (~USD352.16 million) contract 4-2 (Donmuang-Nawanakorn bid) was won by a Chinese company (Sinohydro) partnered with two ‘medium-sized’ Thai construction companies, Sahavisavakorn Ltd and Thipakorn Ltd, at THB8.6 billion (~USD277.42 million) (Prachachat, 2020b; Railway Channel TH, 2019a). Three contracts opened bidding on 14 May 2019 for the 99.26 km THB33.958 billion (~USD1.09 billion) section. From six applicants, including a few large local players in partnership with Chinese firms, the 30.21 km THB11.064 billion (~USD356.90 million) contract 3-1 (Kangkoy- Klangdong and Pangasok-Bandaima) (with 20.03 km raised above ground) was originally won by BPNP, a partnership between Malaysia’s BINA Puri Sdn Bhd and Thailand’s NPA Construction Co. Ltd at THB9.33 billion (~USD300.97 million). From six bidders, the 37.45 km THB11.656 billion (~USD376 million) contract 3-4 (Lumtakong-Sikew and Kudjik-Kokgrud) (with 23.33 km raised) was won by Italian-Thai Development PLC THB9.848 billion (~USD317.68 million – contract signed). From eight bidders, the 31.60 km THB11.24 billion (~USD362.58 million) contract 4-6 (Phrakaew-Saraburi) (24.58 km raised above ground) was won by Unique Engineering and Construction at THB9.429 billion (~USD304.16 million). By April 2020, 13 contracts have completed bidding with several waiting for environment impact assessment (EIA) approval before contract signing. The last contract 4-1 between Bansue and Donmuang has to wait for details of the EEC HSR project due to the line overlap between the projects in this section (Prachachat, 2020b; Railway Channel TH, 2019a). The important contract 2.3 is for rail and system work, rolling-stock procurement by Chinese partners, China Railway International Ltd. and China Railway Design Corp. The price was negotiated down from THB51 to 50.6 billion (~USD1.63 billion). While this exceeds the THB38.558 billion (~USD1.24 billion) originally approved by the Thai cabinet, the updated contract includes civil works and an upgrade to a more advanced train model (Railway Channel TH, 2019b). The contract utilises Chinese loan with 80% payment in US dollars and 20% in Thai baht and was signed on 28 October 2020, witnessed by the Thai Prime Minister (Prachachat, 2020a). It is observed that many of the contracts were won by local medium-sized firms, some with Chinese partners and one with a Malaysian partner. Very
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large and well-connected Thai firms, such as Sino Thai Engineering and Construction PCL (STEC) and Italian-Thai Development PLC, bid for these contracts but have been less dominant than normal – suggesting a relatively above-board process that utilised online auctions (e-auction). Interestingly, the winners all came in 15–16% below the tender estimates. Notably, there’s transparency in the procurement process relative to many BRI projects in the more democratic South-East Asian region delivered with loans from China by Chinese firms – arguably as a result of the Thai Government’s investment in the project. Working with China’s State Railway Group Co. Ltd, for the second phase, the first sum of the design budget was approved by the Thai Cabinet in July 2019, with the design process expected to take a year to complete (Carlisle, 2019). The Thai desire line Eastern Economic Corridor (EEC): creating Bangkok’s south-east urban-region Approved in June 2016, the EEC is the junta government’s f lagship policy with the prime objective of spatially and economically integrating Bangkok with the country’s main industrial and port base of the Eastern provinces. The EEC is supported by law and regulations, namely the Eastern Special Development Zone Act B.E. 2561 (2018), the National Competitiveness Enhancement for Target Industries Act B.E. 2560 (2017) and a development master plan (2019). According to Kanit Saengsupan, Secretary of EEC (MCOT, 2019b), EEC is a completion, full-realisation of the 1980s Eastern Seaboard vision, likening its relation to Bangkok to Tokyo-Yokohama. The project aims to exploit the high GDP growth CMLV region (in 2015, 7% Myanmar, Laos and Cambodia and 6.7% Vietnam). The EEC encompasses three main provinces – Chachoengsao, Chonburi and Rayong – with five main facilitating projects costing Baht 1.5 trillion (~USD47 billion): (1) HSR linking three airports, (2) Utapao Airport City Development project, (3) the Maintenance, Repair and Overhaul Complex (MRO) project at UTapao, (4) PPP Baht80 billion (~USD2.58 billion) Lam Chabang Port Phase 3 to expand the port’s capacity to 15 million TEU (15th in world), and (5) Map Ta Phut Port Phase 3 (Free Trade Zones (FTZs)) gas facility (THB55 billion).17 Each project involves multiple partners: for instance the PPP THB200 billion (~USD2.58 billion of which THB10 billion or ~USD322.58 million public funded) Utapao Airport is a Royal Thai Navy and EEC collaboration (the Navy owns the 1,040 hectares land). With the construction of new terminals and second runway, the number of annual passengers is expected to increase from 2 million to 60–70 million (Sibunruang, 2018). In effect Utapao is to function as Bangkok’s third airport and aerotropolis with a cargo and aircraft maintenance, and service for eight aircraft, in partnership with Airbus on 32 hectares land to be completed at the same time as the HSR. Within five years, investments in ten new hi-tech industries are to be accommodated in the current private industrial estates (3,200 hectares)
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which is expected to generate 700,000 new jobs. However, it was noted that local education institutions can only meet half of the skilled-worker demand, many with skills not consistent with industry demand (MCOT, 2019b), implying the importation of skilled workers from neighbouring CLMV countries drawn by higher pay (a regional labour mobility effect). The HSR serves as EEC’s major transportation spine that links Bangkok’s two international airports, Don Muang and Suvarnabhumi, with Utapao Airport (nine stations in total along route). At 250 km/h, the 200 km route is expected to take 45 min from Utapao to Bangkok which is comparable to Narita-Tokyo and Incheon-Seoul HSR links. To calculate ridership, the current Airport Rail Link between downtown Bangkok and Suvarnabhumi (that will be integrated as part of the HSR route) has 50,000–60,000 passengers per day (with real demand in the 100 ks but limited by lack of carriages). Additionally, 400,000 people drive to EEC from Bangkok daily and it is hoped that the HSR will absorb 10% of this traffic at the start of operations. The ticket price is expected to be THB300+ (~USD9.68+). The CP-led consortium builds and government pays after completion. Key drawcards for CP are the development rights of the public-owned land around stations, in particular the prime 150 rai State Railway of Thailand (SRT) land at Makkasan with CP renting at market costs of 50 billion baht with profit-sharing with the government. CP takes over the loss-making airport link (operating at a deficit of THB200 million per year) to cost THB10 billion within the first two years of contract signing. Construction was to originally start at the end of 2019 for operation in 2023 (MCOT, 2019a). However, a year after CP won the bid through net-cost bidding, amid sometimes acrimonious negotiations and transition into a more democratic government, the EEC HSR contract was finally signed with SRT on 24 October 2019. Key sticking points were the state land transfer for construction in the heavily developed inner Bangkok districts and technical issues that delayed the related Utapao Airport development bidding, in which CP was also involved in, and a project integral to the HSR’s success. As of 30 January 2020, the Utapao project was won by the competing BBS Joint Venture that includes Bangkok Airways (45% stake), BTSG (35%) and Sino-Thai Engineering and Construction (20%) over a CPled consortium.18 The HSR is conceived to develop EEC as an extension of Bangkok in four ways. First, it opens the urban centres of Chachoengsao, Chonburi and Rayong for development through the five stations connected via transportation linkages and parking. Second, ‘In the near future’ the HSR will be extended eastwards into Rayong, Chantaburi and Trad provinces (by Cambodia’s borders). Third, the EEC expects a return on investment of THB700 billion (~USD22.58 billion) based on the full utilisation of Utapao. This does not include other benefits such as reducing Bangkok’s congestion and saving energy and time. Finally, the HSR will improve economic opportunities along the route, increase employment opportunities and increase the government’s tax base. After 50 years there’s another projected THB300 billion (~USD9.68
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billion) economic benefit from the assets appreciation when the HSR returns to government ownership (Charoen Pokphand, 2019). While these seem like optimistic projections to rationalise the project, they are considered feasible, evidenced by the willingness of Thai-led private consortiums to compete for the mega-infrastructure projects. EEC HSR has its own oversight committee involving representatives from both private and public stakeholders to manage ridership fees. CP will develop the SRT’s 4 hectares landholding at Sriracha in order to make it a station and train maintenance centre. The project will use Thai engineers to be trained by a local institution, CP-owned Panyapiwat Institute of Management (PIM) in association with Beijing Jiaotong University (BJTU) (Xinhua, 2019b), and local components (Charoen Pokphand, 2019). Moreover, CP’s subsidiaries, in partnership with China’s Guangxi Construction Engineering Group, have invested in a ~491 hectares industrial estate 35 km from the Utapao HSR station in the Rayong Province (Bangkokbiznews, 2020). The company also has substantial landholdings near the future Chachoengsao Station that it plans to develop into a new city. Crucially, while not explicitly stated, the EEC HSR potentially forms the eastern route of the South-East Asia corridor to China that, in the future, would run through Cambodia and Vietnam. The planned extension to the Trat Province on the border with Cambodia will only be viable with SouthEast Asian regional connectivity. Significantly, some early Thai maps show a link between the BRI and EEC routes that is consistent with the BRI’s aspirations to link south-western China and Laos to a major commercial seaport – noting that the Thai side maintains a passenger focus for HSR, allocating freight transport functions to the renewed double-track rail system. In fact, China’s official state-run press agency Xinhua (2019b) has noted that “The rail project has set a precedent for a regional economic strategy to link China’s Belt and Road Initiative (BRI) with EEC.”
Mainland South-East Asia economic integration: China and Japan Currently, a Chinese high-speed railway under the Belt and Road Initiative is under construction. It will be the kingdom’s first high-speed railway that will link Thailand with Laos and Kunming in China’s southern Yunnan Province, while Thailand’s second high-speed train will link Bangkok with the EEC, a project noted by Thai officials that would contribute to the integration of the EEC with the China-proposed Belt and Road Initiative. (Xinhua, 2019a) The strategy’s success is contingent on Thailand securing foreign investment for its $45-billion Eastern Economic Corridor development plan,
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which Prayuth has positioned as the fulcrum of the nation’s future economic growth. “Once the BRI is complete, it will allow great connectivity into Thailand, and the EEC, [which] will be a core economic and industrial part of Thailand, so prosperity will spread across the country and across ASEAN,” said Prayuth in an interview with Chinese stateowned news channel CGTN on the sidelines of the forum. (Green, 2019) In fact, the Thai Government’s strategy – and a critical diversion from previous Chinese top-down BRI practices – is to integrate its own developmental agenda into the BRI, and hence achieve an unprecedented defining of a BRI corridor on its terms. While China seeks global centrality through BRI, within this vision Thailand also aspires to maintain and enhance its role as an important economic hub for the South-East Asian mainland, with its central geographic location (also roughly mid-way between China and India, Asia’s other awakening giant) and more advanced economic development ref lected in its relatively developed infrastructure. Broadly speaking, China’s BRI vision complements Thailand’s aspirations and also the Laotian Government’s desired connection to the seaport and market access to more advanced economies. With a lot of investments in South-East Asia, Japan is also a major stakeholder and the BRI complements its economic holdings in Myanmar (Dawei Port), central Thailand and the EEC. This is ref lected in the Greater Mekong Subregion plan19 and its expressed interest in the two central east-west corridors across mainland South-East Asia that links the Indian Ocean with the Pacific Ocean, circumventing China. The two east-west corridors run from Danang in Vietnam to Khonkaen, Pitsanulok, Tak and Malamang in Myanmar, and from HCMC in Vietnam, Phnom Penh, Poipet, SaKieow, Bangkok and Kanchanaburi to Tawai (Dawei). However, this is not Thailand’s immediate priority. In these scenarios, the competition to develop infrastructure is not necessarily a zero-sum game with ‘winners’ and ‘losers’ and both Chinese and Japanese interests most likely recognise this. Regardless of whoever funds, designs and builds the infrastructure, Chinese, Japanese and other countries’ businesses will be drawn in to invest and benefit from it. However, the Japanese Government has decided not to invest on the Bangkok-Chiangmai HSR route having a high investment cost of THB400 billion (~USD12.9 billion). The Japan Transport Minister informally noted that the HSR is a national asset, so the Thai Government should invest in it (as it has in the BRI HSR route), and Japan has offered low-interest loans. The real reason for this may be the Japan International Cooperation Agency’s revision of daily projected passengers from 30,000 to 10,000 (Hongtong, 2019). Moreover, the THB1200 (~USD38.71) ticket price is comparable to that of low-cost airlines so it is not financially viable. Chalermpong (One31, 2018)20 noted that the route would only be viable if it links to neighbouring countries towards the north which geographically favours China and is consistent with
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the Chinese agenda. This could turn out to be a politically sensitive issue for the Thai Government to navigate. Citing the case of the USA, which is linked by air travel, analysts question whether HSR is worth the investment, noting that the 252.3 km Bangkok-Nakorn Ratchasima HSR costs THB179 billion compared to the first phase of the government’s 993 km double-track rail costing THB126.5835 billion. The HSR ticket for the route is THB500 which is considered too pricey (One31, 2018). Furthermore, Lam (2019) f lags the duplication of Bangkok-Nongkhai HSR with a double-track rail project and HSR’s very likely financial loss as details “… that are publicly available yet often overlooked” that compromise the project. Like many rail projects, the Thai Government seems to be focussed on the broader economic and social benefits, global merits, vouched by both the International Monetary Fund and the World Bank, over the financial loss – especially when weighted against benefits of connectivity with south-western China and the EEC via the second HSR project.
Conclusion: fertile grounds for collaboration 6. We continue to recognize the crucial role of regional cooperation and integration and support the principles of open regionalism, including exploring and tapping synergies between GMS and the ASEAN Economic Community (AEC) and other regional initiatives, in particular the Belt and Road Initiative. We support the concrete steps being taken toward the full realization of AEC and the outcomes of the recent Belt and Road Forum for International Cooperation that enhance regional connectivity. (The multilateral vision of the Greater Mekong Subregion Economic Cooperation Program 22nd Ministerial Conference Joint Ministerial Statement endorsed in Ha Noi, Vietnam on September 20, 2017) Broadly, the Thai case ref lects a potential shift and f lexibility in China’s BRI implementation. This manifests twofold and could represent a move from the top-down planning and delivery to one that is accommodating of local agendas and stakeholders’ interests. The second factor is the novelty of Thailand’s success in convincing China in its redefinition of the BRI. It ref lects one of the first instances where the local agents, in a public-private partnership, redefine the BRI desire lines. Moreover, the Thai case demonstrates how to make the BRI more economically viable without venturing into the risks of ‘debt-traps’ by ensuring the BRI project benefits and fits in with the country’s priorities in alignment and delivery. This requires having a planning strategy and culture, which Thailand has particularly for mega-infrastructure and transportation. Both BRI and EEC HSRs may contribute to the realisation of long-held plans for Bangkok (since its first official 1999 Master plan) to become a polycentric
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city (Sintusingha, 2011). The challenge has been delivering the vision and the BRI offers spatial, technological, financial and political avenues and options to realise the projects. Critically it is the top-down, technocrat-led nature of the Thai junta government that kick-started and enabled the infrastructure projects – many conceptualised and planned decades ago. Yet it must be stressed that the EEC and HSR deliberations have been relatively transparent compared to ‘more democratic’ regional neighbours with a clear land-use master plan (that has been challenged by civil groups22), public hearings and online bidding processes for contracts. Significantly, HSR is conceived as part of a broader rail master plan. According to Worawut Mala, Acting-Head SRT, to complement HSR which mainly serves businesses, the government is addressing spatial inequity and access for low-income groups through the double-tracking and upgrading of rail routes with services running at 130–140 km/h. Commencing construction in 2017, the first phase will serve catchments 300–400 km from Bangkok – up to Nakhon Sawan in the north, Khonkaen in the north-east and Chumporn in the south and is expected to be completed in 2023. New double-track routes will be built to link cities in the north (Chiangrai and Phayao) and north-east (BaanPai, Mukdahan, Nakorn Phanom passing Mahasarakam and Roied) (Railway Channel TH, 2019c). On that note, what happens to the developmental plans as the country transitions towards more democratic practices remains to be seen.23 The past antagonistic contestations between local political players with different project interests may not bode well for efficient delivery.24 In fact, in the post-March 2019 election negotiations to form a coalition government, the junta-backed party has had to hand over the ‘grade A’ Ministry of Transportation to a coalition partner, who happens to be a part of the competing consortium to CP’s HSR and Utapao Airport bids.25 Major corporate players are also making their inf luences felt. For instance, Italian Thai Development PLC-China Railway Engineering Corporation (ITD-CREC No. 10 Joint Venture) muscled in to challenge the contract to build the 30.21 km Kangkoy-Klangdong and Pangasok-Bandaima section of the BRI HSR (Thansettakij, 2020). The case has gone to Administrative Court of Thailand. Finally, the significant role of the Thai private corporation CP in leveraging and facilitating the political, business and cultural networks that enabled the EEC HSR is worth noting. It played an important part in China’s reform period in the late 1970s in its economic transformation and is now facilitating the tried and tested Chinese developmental practices in Thailand.
Notes 1 A network conceptualised since the 19th century with British and French ambitions to link their Southeast Asia colonial holdings to exploit China’s resources. The network was then proposed again in the 1980s by Malaysia’s Prime Minister, Mahathir Mohammed.
Establishing BRI in Thailand 133 2 The World Bank noted Thailand’s success in reducing the proportion of people living in poverty from more than 65% in 1988 to less than 10% in 2018. See https://www.worldbank.org/en/news/press-release/2020/03/03/ thailands-poverty-on-the-rise-amid-slowing-economic-growth. 3 With parallels to how the French avoided being on the losing side of the Second World War. The Free Thai movement (SeriThai) playing a comparable role to the French Resistance. 4 The event also forms a foundation of deep-rooted Thai-Japanese relationships. 5 Beginning with Kukrit Pramoj, prime minister 1975–6, and a member of the Thai nobility, who visited Mao Tse-Tung in 30 June 1975, ref lecting practical over ideological nature of the transactions. 6 A relationship cultivated since the Japanese occupation during the Second World War under pro-Japan military dictator Plaek Phibunsongkhram. 7 Almost 30 rounds as of April 2019. https://www.bangkokpost.com/opinion/ opinion/1665560. 8 Originally built as a US Air Force base to serve the Vietnam War effort. 9 At the time of bidding, the consortium consists of Charoen Pokphand Holding, a subsidiary of CP, China Railway Construction Corporation Limited, Bangkok Expressway and Metro Plc, Italian-Thai Development, CH. Karnchang Plc, Japan Overseas Infrastructure Investment Corporation for Transport and Urban Development, CITIC Group Corporation, China Resources (Holdings) Company Limited, Siemens, Hyundai, Ferrovie dello Stato Italiane, CRRC-Sifang and Japan Bank for International Cooperation ( JBIC). 10 That specialises in building and operating mass-transit lines in Bangkok, including the first skytrain line. BTS partnered local firms Sino-Thai Engineering and Construction Plc (STECON) and Ratchaburi Electricity Generating Holding Plc. 11 The Thai baht (THB) traded at ~31 to USD1 in July–August 2020. 12 Samphantharak (2011) noted that during the initial investment period it was the other way round with Southeast Asian overseas Chinese businesses dominating investments to China due to geographic proximity and ethnic connections – consistent with Thailand’s CP Group. 13 To the point that Japan is still the only country in the Group of Seven industrial nations to roll out the red carpet for the Thai junta. The need to protect its interests and to compete with China explains Japan’s active policy vis-a-vis Thailand. Up to 2015, Japan was Thailand’s second-largest importer and third-largest exporter. (Chachavalpongpun, 2017) 14 That precipitated Thailand’s car industry that has grown to become one of the world’s important manufacturing base. 15 Experts such as Democrat MP and former Bangkok Deputy Governor Samart Ratchapolsitte told in his Facebook post on 7 July 2016 that the route will operate at a THB5 billion (~USD169 million) loss per year on opening. See https:// th-th.facebook.com/Dr.Samart/posts/846904472121124/. 16 A Light Rail System (LRT) to complement the HSR is in the planning process for the city. See https://www.mrta.co.th/th/projectelectrictrain/regional-majorcities/nakhonratchasima/#head2. 17 See https://www.kobkid.com/เรื่องน่ารู้/คบคิดพาดู-mega-project-2019-chapter-2aviationmarine and Sibunruang (2018) for plans of the projects. 18 See https://www.nationthailand.com/news/30381356. The contract with Eastern Economic Corridor Office (EEC) was signed on 19 June 2020.
134 Sidh Sintusingha 19 See https://greatermekong.org/content/economic-corridors-in-the-greatermekong-subregion. 20 Saksidh Chalermpong, Deputy Director of the Transportation Institute of Chulalongkorn University. 21 It also has designs for Chiangmai, a popular city for Chinese tourists and expatriates. 22 Especially the increase of zoned industrial land (purple) from 3% to 5% that will encroach on productive lands (green) in the three provinces. The other issue is that civil groups claim that the participative process is not meaningful as espoused in both the master plan and the 2017 Constitution (Manager Online, 2019). 23 The junta leader, Prayuth Chan-ocha extended his tenure as prime minister after the March 2019 general elections. He has proven to be adaptive to the compromise and partisanship of electoral politics (Chan-ocha, 2019). 24 In fact, the Yingluk government (2011–2014) prioritised the northern HSR route to Chiang Mai (SCB, 2013), their political stronghold – making assumptions, at the time, that the Chinese will fund and deliver the north-eastern route to Nongkhai. The conf licts also played out in priorities placed on Bangkok’s mass-transit projects and management. 25 The leader of Bhumjai Thai Party, Anutin Charnvirakul’s family founded and owns stakes in Sino-Thai Engineering and Construction PCL (STECON), a major construction company in Thailand.
References Bangkokbiznews. (2020). ‘ซีพีจีซี’ เร่งนิคมฯเฟส 1 หวังดึงลงทุน 6 หมื่นล้าน. Bangkokbiznews. Published on February 8, 2020 in https://www.bangkokbiznews.com/ news/detail/864989?utm_source=bangkokbiznews&utm_medium=relate_solr Carlisle, P. (2019). Thai cabinet sets second high-speed rail phase rolling, from Nakhon Ratchasima to Nong Khai. Bangkok Post. Published on July 8, 2019 in https://www.bangkokpost.com/thailand/general/1705870/cabinet-sets-secondhigh-speed-rail-phase-rolling Chachavalpongpun, P. (2017) China’s shadow looms large in Japan-Thailand relations. Japan Times. Published on March 3, 2017 in https://www.japantimes. co.jp/opinion/2017/03/03/commentary/japan-commentary/chinas-shadowlooms-large-japan-thailand-relations/#.XQnBwrgRWUk Chan-ocha, P. (2019). On democratic transition (~8min) live. นายกรัฐมนตรี เป็นประธานการประชุมชี้แจงนโยบายรัฐบาลต่อผู้บริหารระดับสูง ไทยคู่ฟ้า ทําเนียบรัฐบาล. Streamed live on August 8, 2019 in https://www.youtube.com/watch?v= e2dL5K7dB3o Charoen Pokphand (2019). ซีพีจัดให้!! รถไฟความเร็วสูงเชื่อม 3 สนามบิน ดอนเมืองสุวรรณภูมิ-อู่ตะเภาEEC HST video. Published by Railway Channel TH 2019 on April 8, 2019 in https://www.youtube.com/watch?v=45xSLZ0sAyY& list=PL5DV-rhsbzxqlzSj0bq7qb-rE9FfwTD0V Chearavanont, D. (2016). Dhanin Chearavanont (18): Company 0001, the first foreign company in Shenzhen. Nikkei. Published on September 18, 2016 in https://asia. nikkei.com/Spotlight/My-Personal-History/Dhanin-Chearavanont/DhaninChearavanont-18-Company-0001-the-first-foreign-company-in-Shenzhen2 Green, D. (2019) Thailand pushes China’s Belt and Road despite differing visions. Nikkei. Published on May 2, 2019 in https://asia.nikkei.com/Spotlight/Belt-and-Road/ Thailand-pushes-China-s-Belt-and-Road-despite-differing-visions
Establishing BRI in Thailand 135 Hongtong, T. (2019). Govt mulls end of fast train plan. Bangkok Post. Published on September 27, 2019 in https://www.bangkokpost.com/business/1759399/ govt-mulls-end-of-fast-train-plan Johnson, I. (2013). China’s great uprooting: Moving 250 million into cities. New York Times. Published on June 15, 2013 in https://www.nytimes.com/2013/06/16/ world/asia/chinas-great-uprooting-moving-250-million-into-cities.html Lam, P.D. (2019). Will Thailand’s Chinese high-speed railway be worth it? The Diplomat. Published on March 6, 2019 in https://thediplomat.com/2019/03/ will-thailands-china-built-railway-be-worth-it/ Poonsuwan, W. (2019). High speed rail: Notarization and legalization critical to foreign participation. Matichon. Published on July 29, 2019 in https://www.matichon. co.th/international/news_1603117 Thansettakij. (2020). ‘ซีพีจีซี’ เร่งนิคมฯเฟส 1 หวังดึงลงทุน 6 หมื่นล้าน. Thansettakij. Published on November 10, 2020 in https://www.thansettakij.com/content/ columnist/456301 Thongnoi, J. (2019). China wants to fund Thailand’s US$12 billion high-speed railway – But is the kingdom on track for more debt than it can handle? SCMP. Published on April 24, 2019 in https://www.scmp.com/week-asia/geopolitics/ article/3007551/china-wants-fund-thailands-us12-billion-high-speed-railway Manager Online. (2019). “ศรีสุวรรณ” จ่อนําชาวบ้าน 3 จังหวัดตะวันออกร้องนายกฯ สอบเอาผิดเลขาฯ EEC. Manager Online. Published on August 7, 2019 in https:// mgronline.com/local/detail/9620000074986 MCOT. (2019a). คืบหน้ารถไฟความเร็วสูงเชื่อม 3 สนามบิน (15พ.ค.62) ฟังหูไว้หู | 9 MCOT HD. Published on May 15, 2019 in https://www.youtube.com/ watch?v=wLaf VjusYaM MCOT. (2019b). อัพเดท โครงการเร่งด่วน อีอีซี คนไทยได้อะไร (20พ.ค.62) ฟังหูไว้หู | 9 MCOT HD. Published on May 20, 2019 in https://www.youtube.com/ watch?v=f BNHFKAmmd4 Prachachat. (2020a). รถไฟไทย-จีน “ประยุทธ์” ปิดดีลชื่นมื่นเซ็นซื้อระบบ 5 หมื่นล้าน. Prachachat Online. Published on October 28, 2020 in https://www.prachachat.net/ property/news-545809 Prachachat. (2020b). รถไฟไทย-จีนเคลียร์ปมไม่จบ ราคาที่ดิน 3 จังหวัด พุ่งดักหน้า 22%. Prachachat Online. Published on November 25, 2020 in https://www.prachachat. net/property/news-562157 One31. (2018). สร้างรถไฟเชื่อมเพื่อนบ้านถึงจะคุ้มค่า | จั๊ด ซัดทุกความจริง | ข่าวช่องวัน. Published on October 24, 2018 in https://www.youtube.com/watch?v= ox8KhDRqgVs Railway Channel TH. (2019a). รับเหมาจีนผนึกรายกลาง ปาดหน้าขาใหญ่ ดัมพ์ราคา 13–20%ปักหมุดพื้นที่ “ดอนเมือง-นวนคร-บ้านโพ.” Published on May 19, 2019 in https://www.youtube.com/watch?v=zKf UQLykmg0 Railway Channel TH. (2019b). รับเหมาไทยกินเรียบ!! 3 สัญญา รถไฟความเร็วสูง ไทย จีน “กรุงเทพ – นครรราชสีมา. Published on June 15, 2019 in https://www.youtube. com/watch?v=zKf UQLykmg0 Railway Channel TH. (2019c). ศาสตร์พระราชา: Kick Off รถไฟความเร็วสูงเชื่อม 3 สนามบิน เชื่อมโยงการลงทุนไทย!! Published on July 8, 2019 in https://www. youtube.com/watch?v=zKf UQLykmg0 Samphantharak, K. (2011). The rise of China and Foreign direct investment from Southeast Asia. Journal of Current Southeast Asian Affairs 30(2), 65–75.
136 Sidh Sintusingha Siam Commercial Bank (SCB). (2013). วีดิทัศน์รถไฟความเร็วสูง กรุงเทพ - เชียงใหม่ ระยะที่ 1 ประกอบสัมมนาครั้งที่ 3. Published on December 3, 2013 in https://www.youtube. com/watch?v=4iw90l5C_aM Sibunruang, M. (2018). Thailand’s Eastern Economic Corridor (EEC) “Excellent hub for aircraft manufacturing and maintenance.” Published on January, 2018 in https://www.boi.go.th/upload/content/Aviation_BOI%20roadshow_Full%20 version_5ab4f81a06c70.pdf Sintusingha, S. (2009). The cultural challenge for sustainable cities: Coping with Sprawl in Bangkok and Melbourne. In Radovic, D. (Ed.), Eco-Urbanity: Towards Well-Mannered Built Environments (pp. 112–24). Abingdon: Routledge. Sintusingha, S. (2011). Bangkok’s urban evolution: Challenges and opportunities for urban sustainability. In Sorensen, A. and Okata, J. (Eds.), Managing Megacity: Towards Sustainable Urban Form (pp. 133–61). Tokyo: Springer. SpringNews. (2018). ลาวเพิ่งรู้! ได้แค่เศษเนื้อรถไฟจีน. Published on December 13, 2018 in https://www.youtube.com/watch?v=7A64CJ---CY State Railway of Thailand (SRT). (2018). วีดิทัศน์โครงการรถไฟความเร็วสูง กทม.นครราชสีมา (ไทย-จีน). Published on September 4, 2018 in https://www.youtube. com/watch?v=WO2LMWV-VkI&t=23s Xinhua. (2019a) Thailand strives to connect Belt and Road Initiative with its Eastern Economic Corridor in China Daily. Published on January 22, 2019 in http:// www.chinadaily.com.cn/a/201901/22/WS5c46dfa1a3106c65c34e5dfe.html Xinhua. (2019b). Thai high-speed rail builder eyes academics from Beijing’s university to teach students in Xinhua. Published on December 3, 2019 in http://www. xinhuanet.com/english/2019-12/03/c_138602416.htm Zhen, L. (2017). Thailand approves long-delayed US$5.2b rail link to China in SCMP. Published on 11 July, 2017 in https://www.scmp.com/news/asia/southeast-asia/ article/2102217/thailand-approves-long-delayed-us52bn-rail-link-china
7
Malaysia Chinese participation in infrastructure from contractor to conspirator? Toong Khuan Chan
An introduction to Malaysia’s economy and development strategies Malaysia has enjoyed one of the best economic growth records in Asia over the last five decades despite a multitude of challenges and economic shocks. The economy achieved a stable real GDP growth of 6.2% per annum since 1970, successfully transforming from a predominantly agriculture-based economy in the 1970s, to manufacturing in the mid-1980s, and to modern services in the 1990s (EPU, 2015). Its national income per capita expanded from USD402 in 1970 to USD10,796 in 2014 and was on track to surpass the USD15,000 threshold of a high-income economy by 2020. This was government’s objective to achieve a high-income and developed nation status by 2020, aptly named Vision 2020 when proposed by the then Prime Minister Mahathir Mohamad (Mohamad, 1991). After the 2008 global financial crisis (GFC), Malaysia could no longer depend on a low-cost structure to remain competitive internationally as the global economic landscape has changed significantly. Globalisation, liberalisation and the emergence of countries such as China, India, Brazil, the Middle East and countries in the region have intensified the competition for trade and investment (EPU, 2010). Back in 2010, the government was cognisant of the fact that maintaining a GDP growth target of 6% required a significant leap in investment activities led by a more dynamic private sector. This was achieved partly through a public-private partnership (PPP) approach to infrastructure investments ensuring equitable sharing of risks and returns. By 2015 the global economy remained challenging with continued uncertainties and the prospect of low prices for crude oil and other major commodities, and the risk of a slowdown in the economies of major trading partners. On the domestic front, the government focussed on greater efforts to boost productivity to drive economic growth and strengthen the fiscal position while ensuring adequate public funding to support continued economic expansion. The risk of being stuck in a middle-income trap was high if the government does not take steps to transition to a higher productivity and innovative economy, strengthen its integration into the global economy and improve its institutional and physical infrastructure (BNM, 2016).
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Figure 7.1 Southern section of the China-Indochina Peninsula Economic Corridor (CIPEC) to be linked by high-speed rail (red lines), and location of some Chinese investment projects discussed in this chapter. (Map credit: Iris Fong).
In order to maintain its development path towards a high-income nation, the government adopted a Keynesian approach to national development and has persistently reported a fiscal deficit since 1998, in the aftermath of the Asian financial crisis. Federal government debt, which remained at a relatively low level of MYR100 billion1 before 1998, ballooned to close to MYR700
Malaysia 139 1,000,000
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Figure 7.2 Debt of federal government (MYR million) from year 1990 to 2017 (Ministry of Finance, 2018a).
billion in 2017 as shown in Figure 7.2 (MOF, 2018a). This was further exacerbated by the abrupt fall of petroleum crude prices towards the end of 2014 and remained depressed for the next three years at approximately USD40–50 per barrel of Brent crude leading to lower revenues from state oil company Petronas. Figure 7.3 shows that operating expenditures increase more rapidly to nearly 100% of revenues from 2008 onwards leaving little surplus for development expenditure. Smaller-than-anticipated taxes and revenues led to larger budget deficits.
China-Malaysia trade When Malaysia’s second Prime Minister Abdul Razak Hussein met Chairman Mao Zedong in Beijing on 29 May 1974, he was the first leader from the Association of South-East Asian Nations (ASEAN) to seek to establish diplomatic ties with communist China. The visit established explicitly that China would no longer support the armed struggle by the Communist Party of Malaya (CPM) to overthrow the Malaysian government and that the Malaysian government in return would recognise the Peoples’ Republic of China as the only legal Government of China. This event more than 40 years ago has fostered Malaysia-China relations, leading to strong bilateral interactions coupled with deepening economic collaborations. In 2009, China overtook Singapore to become Malaysia’s largest trading partner, with MYR67.4 billion of exports and MYR61.0 billion of imports
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Figure 7.3 Comparison of revenues and expenditure (MYR billion) (Ministry of Finance, 2018a).
(average USD:MYR exchange rate between 2009 and 2014 was USD1.00 = MYR3.22). These trade figures rose to MYR126.2 billion in exports and MYR164.5 billion in imports in 2017, resulting in a trade deficit of MYR38.3 billion. The deficit first occurred in 2012 with a value of MYR3.1 billion but has increased more than ten-fold within a period of five years as illustrated in Figure 7.4. This increased trade with China is a result of a consequent reduction in Malaysia’s trade with North America and the European Union which halved during the period between 2004 and 2017, as shown in Figures 7.5a and b. From a net foreign direct investment (FDI) perspective, Hong Kong, China and Singapore were the top three contributors with MYR7.5 billion, MYR6.9 billion and MYR6.1 billion, respectively, to Malaysia in 2017. Although inward FDI from the United States has remained consistent in the last decade, the repatriation of investments had f luctuated wildly, with a large outf low, immediately after the GFC, of more than MYR11.5 billion in 2009 and further debits in 2012, 2014 and 2017. In contrast, FDI f lows from China started off low between MYR1 billion and 2 billion from 2008 to 2013 combined with debit f lows of similar magnitudes resulting in very small net investments (see Figure 7.6). By 2014, net FDI increased three-fold to nearly MYR1 billion and increased exponentially to MYR6.9 billion in 2017 (average USD:MYR exchange rate between 2015 and 2018 was USD1.00 = MYR4.09).
Malaysia 141 200 b 164,495 Gross exports
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Figure 7.4 Trade statistics – exports, imports and trade balance (MYR) (Bank Negara Malaysia, 2018).
100.0%
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Figure 7.5 Gross exports (left), gross imports (right) (Bank Negara Malaysia, 2018).
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Toong Khuan Chan
200 b 164,495 Gross exports
150 b
Gross imports
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Trade balance
Trade (MYR)
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0b
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2005
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2013
2014
2015
2016
2017
-6,988
-50 b
-38,345
-100 b
Figure 7.6 FDI from China to Malaysia (credit, debit and net).
Malaysia in China’s Belt and Road Initiative The reaction in Malaysia to Chinese President Xi Jinping’s launch of the ‘One Belt, One Road’ (OBOR) initiative in 2013 ranged from scepticism that the strategy facilitates Chinese economic and strategic domination of the countries along these routes to newfound enthusiasm that these infrastructure investments will bring about extended economic growth to the region. The OBOR is now more commonly known as the Belt and Road Initiative (BRI) referring to the Silk Road Economic Belt and the 21st Century Maritime Silk Road. Malaysia was hoping to reap significant benefits from investments to support shipping links along the Straits of Malacca (part of the Road) through which a large portion of China’s trade is shipped. There were also commentators who were suspicious of neo-colonialist implications that these investments bring along with their promise of infrastructure and economic development. The initial focus of the BRI had been infrastructure investment, education, construction materials, railway and highway, automobile, real estate, power grid, and iron and steel. Deloitte China (2018) estimated that China was committing as much as USD900 billion of investments to fund this initiative although there is little agreement on the actual amount. There has been considerable debate in the media and academic literature on the classification of projects that were parts of the BRI or regular FDIs. Malaysia was considered as a key investment destination for Chinese companies especially in light of the BRI and also in response to various incentives offered by the Malaysian government to attract investments into its f lagging economy. One of the first projects that made headlines in 2013 was
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the MYR450 billion development of Forest City, which will rise from the Johor Straits. A joint venture between China’s Country Garden Holdings and Johor state-owned Kumpulan Prasarana Rakyat Johor (KPRJ), the project will comprise four artificial islands totalling 14 km 2 of mixed development including a transport hub, commercial buildings, luxury hotels, apartments, houses and schools (Forest City Johor, 2018). In a November 2016 visit to China, the then Malaysian Prime Minister Najib Razak signed 14 agreements worth MYR144 billion, bringing trade relations to a new high. These include agreements for East Coast Rail Link (ECRL), Melaka Gateway Project, Bandar Malaysia development, a steel plant in Sarawak, a banking licence for China Construction Bank and numerous other trade deals (The Star, 2016). At this point, only the ECRL project was classified as an investment under the BRI. Six months later, two additional projects were included in the initiative: the Malaysia-China Kuantan Industrial Park (MCKIP) and Xiamen University Malaysia (MalayMail, 2017). During the same period, the government was in talks with China’s carmaker Geely to revitalise its loss-making national car project. Incidentally, the purchase of a 49.9% stake in national car maker Proton Holdings Bhd in June 2017 by Zhejiang Geely Holdings Group Co. Ltd (Geely) was perceived largely as a strategic partnership (Nikkei Asian Review, 2017). The slew of Chinese-led investments in infrastructure and real estate projects led to concerns that Prime Minister Najib Razak had sold out Malaysia’s interest, providing incentives that were far too lucrative and pandering to China’s rising economic might. Others argued that the inf lux of Chinese investments is transforming the manufacturing and construction sectors – becoming the world’s third-largest solar cell manufacturer, building commercial towers at an astonishing rate of one f loor every three days at the Tun Razak Exchange, providing employment opportunities and, more importantly, sustaining a higher rate of economic growth. With the Chinese government supporting the Ringgit by buying Malaysian government bonds and providing soft loans for many of these large projects, it is hard to not view these investments and China’s intentions favourably.
Aims and objectives Six years have passed since the introduction of the BRI. In ref lecting on the impact of these investments in Malaysia and what such an impact might mean for future projects involving China’s companies and financial resources, this chapter examines the motivations for China’s investments in Malaysia and evaluates the potential of these projects in bringing about development, commercial benefits and alignment to the strategic priorities of both China and Malaysia. The objectives of this study are to (a) identify the projects that were linked to the BRI, (b) examine the model for collaboration between Malaysian entities and their Chinese counterparts in establishing these joint ventures, and (c) establish the extent to which commercial interests and political
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considerations affect the implementation of these projects. Many of these agreements were negotiated behind closed doors and contracts shrouded in secrecy, ostensibly because of the sensitive nature of these commercial arrangements. Without access to these contracts and agreements, project information will be adduced from companies’ annual reports and mandatory filings to stock exchanges, project websites, government press statements and media reports. Additional data obtained from secondary sources such as surveys and research articles contribute to a broader understanding of project proponents’ intentions and public perception of these Chinese investments.
Projects and investments by Chinese companies The decision to invest in Malaysia by foreign investors fundamentally depends on the return on investment that these investors hope to achieve. Investors will prefer to invest in countries where input cost, operation cost and hidden costs are low, ensuring higher profits. Countries with abundant cheap and skilled labour, access to energy and natural resources, and competent infrastructure are certainly attractive. Market-seeking foreign investors prefer to invest in countries with large domestic markets and in countries that are growing at a fast rate. It is also likely that foreign investors export a portion of their product to other countries besides selling in the host economy. Countries that are well linked and open to the global market through international trade might significantly determine the inf low of FDI (Mottaleb and Kalirajan, 2010). In the case of China’s BRI, these investments into infrastructure are coupled with a broader strategic effort to expand China’s inf luence overseas. Chinese participation in projects before the launch of the BRI in 2013 was predominantly as contractors building large complex public infrastructure such as the Bakun Hydroelectric Dam in 2002 and the Second Penang Bridge that commenced construction in 2006. A group of local companies led by Sime Engineering Bhd in a 70:30 joint venture with Chinese contractor SinoHydro Corp was awarded the civil works contract of MYR1.78 billion in 2002 to build the Bakun Dam. In 2006, China Harbour Engineering Company (CHEC) was awarded Package 1 of the Second Penang Bridge project valued at MYR2.2 billion (see Box 7.1). The involvement of Chinese contractors was viewed as complementing the capacity of local contractors in delivering large-scale or complex infrastructure rather than investments in Malaysia. A list of representative projects with Chinese involvement is shown in Table 7.1 – note that this list is not comprehensive nor exhaustive as the definition of BRI projects was never made explicit. Post-2013, China’s involvement in Malaysia ramped up to the acquisition of equity in ports, manufacturing facilities, industrial parks and land development, in line with the broader objectives of the Maritime Silk Road that extends southwards from China through the South China Sea towards the Straits of Malacca. Leading these acquisitions were China’s state-owned enterprises and public-listed firms.
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BOX 7.1 2006 SECOND PENANG BRIDGE The Second Penang Bridge project was designed and constructed by China Harbour Engineering Company (CHEC). CHEC was responsible for the design and construction of the main navigation span, and sub-structure and foundation works for the approach spans (Package 1: MYR2.2 billion). A major local construction firm, UEM Builders Bhd, undertook the design and construction of the super-structure works for the approach spans (Package 2: MYR1.55 billion) while several other local construction companies were involved in the conventional construction contracts in Package 3 – toll plazas and interchanges. The construction work on packages 1 and 2 covered the same length of bridge with CHEC providing piling and sub-structures and UEM Builders then constructing the work above this. This split of responsibility was a result of significant financial, political and programming constraints early in the project (Collings, 2015). The length of the bridge was 16.9 km over water, with a three-span cable-stayed arrangement. Total project cost was MYR4.5 billion, funded through China’s Export-Import Bank provision of a MYR2.7 billion loan in July 2007, to be paid over 20 years with an interest rate of 3% per annum. The remaining cost of the project was funded by the Malaysian government. Disagreement over project apportionment and other contractual issues between the project partners CHEC and UEM Builders led to the Malaysian government establishing a wholly owned company Jambatan Kedua Sdn Bhd (JKSB) as concessionaire for the project in August 2008 with CHEC and UEM Builders now working directly for JKSB. Table 7.1 List of major Chinese investments in Malaysia since 2006 Year Launched
Project
2006
Penang Second Bridge
====== 2013
Participants
Value (MYR)
Concession: Jambatan Kedua Sdn MYR4.5 billion Bhd (MY) Ex-Im Bank loan Contractor: China Harbour of MYR2.7 Engineering Company (CHEC) billion for 20 (Package 1 MYR 2.2 billion) years at 3% interest Launch of One Belt One Road (OBOR) by ====== Xi Jinping on September 2013 Forest City Developer: Country Garden MYR450 billion Pacific View Sdn Bhd (CGPV) GDV, MYR1.5 = joint-venture company billion MTN between Country Garden 66% issued on 30 with Esplanade Danga 88 Sdn December 2015 Bhd 34% (Continued)
146 Toong Khuan Chan Year Launched
Project
Participants
Kuantan Port Concession: Kuantan Port Consortium Sdn Bhd is 60% Expansion IJM Corporation and 40% Guangxi Beibu. IJM sold 40% stake in Kuantan Port Consortium Sdn Bhd to China’s Guangxi Beibu Gulf International Port Group Co. Ltd 2013 MalaysiaDeveloper: MCKIP Sdn Bhd – China 51% Malaysian consortium (IJM Kuantan Land Bhd, Sime Darby Property Industrial Bhd and Pahang Government) Park and 49% Chinese consortium (MCKIP) (Guangxi Beibu and Qinzhou Investment Development Co Ltd) Developer: KAJ Development Sdn 2014 Melaka Bhd Gateway Power China (investor), Shenzhen Yantian Port Rizhao Port, both involved in the construction work November Edra Global Investor: China General Nuclear 2015 Energy Power Corporation (CGN) Bhd Sale and purchase of energy assets 2013
2016
East Coast Rail Link
2016
Suria Strategic Energy Resources Pipelines
2017
Proton Holdings
Value (MYR) MYR334 million
MYR19-20 billion (Phase 1), MYR15 billion (Ph.2), MYR6-7 billion (Ph.3) MYR12.5 billion, TAG Marine Sdn Bhd (funding from Chinese investors) MYR9.83 billion equity, but also assumes debts of MYR7 billion MYR55 billion (85% loan Ex-Im Bank of China, remaining 15% from sukuk bonds)
Owner: Malaysia Rail Link Sdn Bhd (wholly owned by the Government of Malaysia) Operator: 50:50 joint venture to operate and maintain will be established upon completion. China Communications Construction Company (M) Sdn Bhd (CCCCM) as EPCC contractor Owner: Suria Strategic Energy MYR9.41 billion Resources Sdn Bhd (SSER) (85% loan (a body under the Ministry of Ex-Im Bank Finance) established on 19 May of China, 15% 2016 to undertake MPP and from sukuk TSGP. bonds) China Petroleum Pipeline Bureau (CPP) is EPCC contractor Geely buys 49.9% of Proton USD235 million Holdings and 51% of Lotus investment for USD235 million. Geely from Geely pumps USD40 million into Proton, invests USD68 million manufacturing platform for SUV and USD127 million into Lotus
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Strategic analysis of Chinese investments in Malaysia Pre-BRI projects were often carried out on a commercial basis with Chinese contractor brought in to provide expertise or capacity that was not available domestically. An example was the Second Penang Bridge project, where the design and construction of the sub-structure and the main navigation span was awarded to CHEC at a cost of MYR2.2 billion. Local construction firms carried out the remaining portions of the work that were technically less demanding. The additional provision of MYR2.7 billion soft loan from China Ex-Im Bank helped CHEC clinch the deal. Forest City was an example of Chinese private sector’s foray into property development in Malaysia with a gross development value of MYR450 billion. Country Garden Holdings (CGH) entered into an equity joint venture with a local company that was majority owned by Sultan Ibrahim Ismail, the Sultan of Johor, the state in which the project is located (MalaysiaKini, 2014). Four man-made islands will be reclaimed in the Johor Straits, creating a model sustainable smart city adjacent to Singapore (see Box 7.2). Having the Sultan as a project partner ensured that the reclamation of the man-made islands in the waters of the Johor Straits went ahead without any problems. In fact, land reclamation commenced in 2014 without the submission of a Detailed Environmental Impact Assessment (DEIA) or approval from the Department of Environment, a federal agency. Although construction work was temporarily stopped in June 2014 in response to a request for a DEIA, the project resumed in mid-March 2015 (Malaysian Reserve, 2017) demonstrating the inf luence of the local project partners in matters pertaining to approvals for land use. CGH reported in their Annual Reports (CGH, 2016, 2017, 2018) that the profit margins to be realised in Forest City will be higher than those carried out by the Group’s other projects. These reports also indicate that the land reclaimed for Forest City will be freehold but this was denied by the state authorities when concerns arose that this massive satellite town will turn into an enclave for Chinese expatriates, potentially to the exclusion of local residents.
BOX 7.2 2013 FOREST CITY JOHOR The Forest City project in Johor by Chinese developer Country Garden is described in its glossy brochures as South-East Asia’s largest mixed-use green development and a prime model of a future city. Covering more than 10 km 2 reclaimed from the Straits of Johor, 5 km from the Second Link to Singapore, Forest City was marketed as a sustainable smart city with an effective public transportation system for its 100,000 residents. Applying a multi-layered urban planning concept, lush greenery surrounds all the commercial and residential developments with traffic and parking relegated into underground spaces achieving true separation of pedestrians and vehicles. Constructed on
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four man-made islands, the Forest City project will include apartments, villas, schools, hospitals, an exhibition centre and a financial special administrative region. The project developer, Country Garden Pacific View Sdn Bhd, is 66% owned by China’s Country Garden Holdings (CGH) through its Malaysian subsidiaries. The remaining equity is held by a consortium led by the Johor State government but was later revealed to be majority owned by Sultan Ibrahim Ismail, the Sultan of Johor (MalaysiaKini, 2014). CGH, in its filing to the Hong Kong Stock Exchange, reported that Forest City was a freehold project supported by a favourable policy package. As part of Malaysia’s Special Economic Development Zone in Iskandar Malaysia, Forest City enjoys beneficial policies including preferential tax rates (CGH, 2017). Country Garden commenced construction of high-rise condominium units and coastal residences released for sale in Malaysia, China and Singapore. Other facilities include a hotel, a fitness club and a swimming pool for residents and tourists. Dedicated entry points to the development such as light rail and ferry services linking it to Johor Bahru and Singapore were planned. It soon became clear that the project was marketed primarily to Chinese residents as a holiday home or to obtain temporary residence visas in Malaysia. From a Maritime Silk Road perspective of sponsoring infrastructure investments, facilitating economic development and promoting cooperation, China’s involvement in ports and railway projects includes equity investments in both Kuantan Port and Melaka Gateway deep-water port (see Boxes 7.3 and 7.4, respectively). Guangxi Beibu’s purchase of a 40% stake in Kuantan Port from Malaysian company IJM enabled it to be involved in the port expansion and the construction of a deep-water terminal. Similarly, Chinese energy giant PowerChina International formed a joint venture with Malaysian company KAJ Development to reclaim three islands off Melaka’s coast to build a deep-sea port, acquiring a strategic port in the Straits of Malacca. Furthering China’s aim of facilitating economic development, Guangxi Beibu took on a 49% equity stake to jointly develop the Malaysia-China Kuantan Industrial Park (MCKIP), and industrial zone earmarked for Chinese manufacturing companies. China General Nuclear Power Corporation’s (CGN) takeover of Edra Global Energy Bhd in 2015 brought significant FDI into Malaysia. The completion of the sale of 13 power plants across five countries immediately allowed China to further expand its investments into Malaysia, Egypt, Bangladesh, Pakistan and the UAE in a single deal (see Box 7.5). This was followed immediately by China’s involvement in the ECRL with the design and construction of an electrified single-track railway line built of double-track formation and
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BOX 7.3 2013 KUANTAN PORT AND MALAYSIA-CHINA KUANTAN INDUSTRIAL PARK (MCKIP) China’s Guangxi Beibu International Port Group Co. Ltd (GBIPG) involvement in the Kuantan Port commenced in 2013 when it purchased a 40% stake in Kuantan Port Consortium Sdn Bhd (KPC) for MYR334.42 million from IJM Corp Bhd (IJM) (The Star, 2013). KPC has a 30-year concession since 1998 to manage, operate and develop Kuantan Port. Its partnership with GBIPG will enhance capacity utilisation of Kuantan Port and jointly develop a new deep-water terminal. GBIPG will play an active role in attracting FDI from China to invest in the East Coast Corridor, which would contribute to the volume of cargo handled by the port. GBIPG currently operates four ports in Southern China – Fangchenghang, Qinzhou, Tieshan and Beihai ports. Kuantan Port is strategically located facing China on the South China Sea. KPC entered into a new agreement with the government on 1 June 2015 for a new deep-water terminal with an operating concession for 30 years until 2045. The MYR4 billion investment to expand the port allows berthing of vessels up to 200,000 deadweight tonnes (DWT). With this new deep-water terminal, KPC is targeting the transhipment business from China and beyond. KPC reported healthy profits of MYR86 million in FY2018 and an average profit margin of more than 40% for the last five years (The Star, 2018). IJM Corp., together with other Malaysian entities, is also a jointventure partner with GBIPG in Malaysia-China Kuantan Industrial Park (MCKIP), a 1,214-hectare industrial zone in neighbouring district of Gebeng. GBIPG has committed MYR78.5 billion of investments to the park (New Straits Times, 2016). A corresponding sister park, the China-Malaysia Qinzhou Industrial Park (CMQIP), is wholly owned by GBIPG (95%) and Qinzhou Investment Development Co Ltd (5%). The bilateral Malaysia-China government-to-government collaboration in MCKIP targets heavy and high technology industries. Alliance Steel (M) Sdn Bhd, a subsidiary of Guangxi Beibu Gulf Iron and Steel Co Ltd from China, has invested MYR4.2 billion to build a modern integrated steel plant at the MCKIP. Commencing operations in 2017, the steel plant produces high-carbon steel and H-shaped steel with an annual production capacity of 3.5 million tonnes. Investments in the MCKIP attract a corporate tax exemption of 100% for 15 years; an income tax of 15% for knowledge workers; and import duty and sales tax exemption for materials, plant and machinery, and equipment. With a plant in MCKIP, Alliance Steel gains access to the entire ASEAN freetrade area and other international markets at a lower tariff compared to exporting from their home base.
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BOX 7.4 2014 MELAKA GATEWAY The Melaka Gateway waterfront development comprised three reclaimed islands and one natural island, totalling 1,366 acres in the Straits of Malacca. This ambitious mixed-development project intends to develop these four islands into a tourist haven: cruise terminal, marina, entertainment, shopping, commercial and property development on island 1; a free-trade economic zone on island 2; a deep-sea port, container and bulk terminal on island 3; and a maritime industrial park on island 4 – totalling an estimated MYR40 billion in gross development value. KAJ Development Sdn Bhd, the Malaysian developer of the project, signed an agreement with China’s state-owned Powerchina International Group (PCIG) Ltd, a subsidiary of Power Construction Corporation of China, on 1 September 2016 for investment, development and construction of the Melaka Gateway. The agreement signed by both parties was valued at MYR30 billion over a period of two years from the date of the agreement (MIDA, 2016). The fourth island, which has been designated as a container and bulk terminal, shipbuilding and repair services, and a maritime industrial park, will be developed with another Chinese investor. the supply of 11 eight-car trainsets by China Communications Construction Co Ltd (CCCC) for MYR55 billion (see Box 7.6). In the same year, China Petroleum Pipeline Bureau (CPPB) undertook to construct a multi-product pipeline in Peninsular Malaysia and the gas pipeline in Sabah for a total of MYR9.41 billion (see Box 7.7). The latter two construction projects were largely funded by borrowings; i.e. soft loans from China’s Ex-Im Bank. The justification for the award of these projects to Chinese engineering firms was based on their capacity to complete these projects more rapidly compared to contractors from other countries. CCCC was also required to award at least 30% of the ECRL project value to local construction firms generating more than MYR16 billion of construction revenues to the domestic market.
BOX 7.5 2015 EDRA GLOBAL ENERGY BHD Malaysia’s 1MBD has agreed to sell 100% of Edra Global Energy Bhd (EGE) to China General Nuclear Power Corporation (CGN) for MYR9.83 billion as part of the state investment fund’s drive to reduce its debts. CGN will assume all the debts of EGE, estimated at MYR8 billion, and its subsidiaries – Edra Solar Sdn Bhd, Edra Energy Sdn Bhd, Powertek Energy Sdn Bhd, Jimah Teknik Sdn Bhd, Jimah O&M sdn
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Bhd, Mastika Lagenda Sdn Bhd and Tiara Tanah Sdn Bhd. This purchase by CGN brings a significant FDI commitment to Malaysia. Edra has successfully integrated 13 power plants across five countries as a key independent power producer (IPP) in Malaysia, Egypt, Bangladesh, Pakistan and the UAE (Straits Times, 2015). EGE, with five power plants in Malaysia and a capacity of 3,112 MW, is the second-largest independent power producer. Between 2012 and 2013, 1MDB spent over MYR12 billion to purchase coal- and gas-fired plants in Malaysia, Egypt, Pakistan, the UAE and Bangladesh. 1MDB initially targeted a listing of the business in early 2015 but allegations of money laundering and highly leveraged purchases of these assets put paid to this effort (Thomson Reuters, 2017).
BOX 7.6 2016 EAST COAST RAIL LINK (ECRL) The ECRL involves the construction of a rail link from Wakaf Bahru in Kelantan to the Integrated Transport Terminal (ITT) in Gombak, Selangor. The ECRL traverses the states of Kelantan, Terengganu, Pahang and Selangor, and is expected to stimulate growth and help bridge the economic gap between the east and west coasts of Peninsular Malaysia. The ECRL will shorten the journey from Kuala Lumpur to Wakaf Bharu to 4 hours, much faster than 15 hours on the existing route via Gemas. The ECRL will also increase freight transport capacity and trans-shipment between inland areas and Kuantan Port, enabling economic development in the hinterland. Upon completion in 2024, there will be seven daily passenger train services from Gombak with projected ridership of 4.49 million passenger journeys yearly in 2025 increasing to 8.13 million in 2040 (MRL, 2017). The project owner is Malaysia Rail Link Sdn Bhd (MRL), a special-purpose vehicle wholly owned by the Ministry of Finance. It awarded an EPCC contract to China Communications Construction Co Ltd (CCCC), which then appointed its local subsidiary China Communications Construction Company (M) Sdn Bhd (CCCCM) to carry out the works. CCCC reported that the ECRL was the largest single project under BRI (CCCC, 2018). Phase 1 of the ECRL consists of 600 km of track from Gombak, Selangor to Wakaf Baru, Kelantan at a cost of MYR46 billion. In May 2017, an additional Phase 2 was agreed to, which consists of 88 km of track from Gombak to Port Klang, and from Wakaf Baru to Pengkalan Kubor completing the rail connection from the South China Sea on the east coast to Port Klang on the Straits of Malacca. The addition of Phase 2 brought the total cost
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of the ECRL to MYR55 billion. Funding for the project was reported by a soft loan of 85% of the project cost from China’s Ex-Im Bank at an interest rate of 3.25% and the remaining 15% to be financed from sukuk bonds (an Islamic financial certificate, similar to a bond, that complies with Islamic religious law) raised locally. The government starts paying for the project after the seventh year over a 13-year period. In an interview with the local press, China’s Ambassador to Malaysia Huang Huikang clarified that the Chinese contractors can complete the entire railway project in seven years, much quicker compared to projects of similar scale internationally. CCCC was also required to award at least 30% of the project value to local players, generating approximately MYR16.5 billion of construction revenues to the domestic market.
BOX 7.7 2016 SURIA STRATEGIC ENERGY RESOURCES The Malaysian government established Suria Strategic Energy Resources Sdn Bhd (SSER) as a wholly owned subsidiary of the government in 2016 with the specific intent to undertake the construction of the Multi-Product Pipeline (MPP) in Peninsular Malaysia and the Trans-Sabah Gas Pipeline in the state of Sabah in East Malaysia. The government signed an agreement with China Petroleum Pipeline Bureau (CPPB), a subsidiary of China Petroleum Pipeline Engineering Corporation, in May 2017 to construct these pipelines for a total of MYR9.41 billion. The MPP involved a 600 km multi-product petroleum pipeline connecting oil and gas industry cluster in Melaka and Port Dickson to Jitra, costing MYR5.35 billion. The Trans-Sabah Gas Pipeline (TSGP) involved building a 662 km gas pipeline from Kimanis Gas Terminal to Sandakan and Tawau, costing MYR 4.06 billion. The China Exim Bank financed 85% of the project cost while the remaining 15% were to be raised domestically via an Islamic bond issuance. Both the Exim Bank borrowings and bonds were secured with Federal Government guarantees (MOF, 2018b). In June 2018, weeks after taking over the reins of the Ministry of Finance, the new Finance Minister revealed that payment amounting to MYR8.25 billion was made even though only 13% of the works have been completed. Actual reported process of the MPP and the TSGP were only 14.5% and 11.4% completed respectively, as at the end of March 2018. The press release further stated that an additional MYR1.0 billion was awarded to companies from China for consultancy services and maintenance services.
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Geely’s investment in Malaysia’s national car company Proton in 2015 marked the end of a long search for a foreign strategic partner to revitalise the loss-making company. As Malaysia is a member of the free-trade ASEAN bloc, this would also allow Geely to export Proton assembled cars tax free to Brunei, Singapore, Indonesia, the Philippines, Thailand, Laos, Cambodia and Vietnam (see Box 7.8).
BOX 7.8 2017 PROTON HOLDINGS Malaysia’s national car company, Proton, reported sales of only 72,290 for 2017, which was down 30% from 102,174 units in 2015. Its present majority shareholder, automotive group DRB-Hicom Bhd, was seeking a foreign strategic partner that can help Proton with new model development, transfer of technology and revitalisation of the brand. In June 2017, Chinese automaker Zhejiang Geely Holding Group agreed to purchase 49.9% stake in Proton Holdings of Malaysia and 51% in Lotus of the UK from DRB-Hicom for a total of USD235 million (Nikkei Asian Review, 2017). Under the deal, Geely will present Proton a cash injection of MYR170.3 million (USD40 million) and licence Proton to manufacture, sell, market and distribute the Boyue SUV, an undertaking worth MYR290 million (USD68 million). Although the acquisition was touted as a collaboration to develop the ailing Proton brand, Geely will use Proton’s under-utilised manufacturing facility in Tanjung Malim to produce a rebadged Boyue SUV while retaining the Proton brand name. Proton which originally owned two manufacturing plants in Shah Alam and Tanjung Malim will sell its plant in Shah Alam and consolidate operations in Tanjung Malim. Proton uses only a third of its annual capacity of 350,000 cars due to decline in sales, and its remaining market share was 12.5% in 2016. Geely was described by former Prime Minister Najib Razak as a partner with the ability, expertise and ambition to take Proton to new levels of success – an undertaking that was viewed as a ‘rescue.’ The Malaysian government was committed to pay Proton an additional MYR1.1 billion for expenses spent on R&D and release the remaining MYR250 million of an MYR1.5 billion soft loan to repay bank loans and payments owed to vendors so that the company can restart debt-free under Geely (DRB-HICOM, 2017). From a Chinese perspective, these projects and numerous other investments in Malaysia clearly represent China’s ambitious expansion of state-led capitalism into the surrounding region, bringing infrastructure investments and economic development, and promoting cooperation between the peoples and the government of both nations. A shrinking construction market
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meant that surplus production capacity was building up in China (HSBC, 2015). While many developing countries in Asia demand infrastructure investments, China has the capital, expertise and excess capacity to fulfil these needs. By investing in Asia, China is also directly supporting its domestic economy at home. From Malaysia’s perspective, these Chinese investments into infrastructure, either via loans or via equity investments, are to facilitate economic development that would not otherwise be possible. Economic growth has slowed since the 2008 GFC and the Malaysian government was eager to spur economic growth by adopting a China-funded fiscal stimulus. It soon became obvious to many observers that money was borrowed from China in order to pay Chinese companies to build these infrastructure projects, and after a number of years, these loans plus interest need to be paid back to China. One local commentator succinctly summarised the situation by pointing out that “we shoulder all the risk while China gets guaranteed profit” (Wan Jan, 2017).
Increasing concerns with Chinese investments in Malaysia As soon as planeloads of potential Chinese buyers were f lown into Forest City, concerns were raised that this mixed-use green development will become an enclave for rich mainland Chinese with apartments priced beyond the reach of local buyers and cut off from the rest of the country. Forest City also offered to front the application fee for a long-term resident visa for buyers and guarantees a 99% success rate for applicants (Forbes Asia, 2017). The tenure of land at Forest City was also disputed. Initial announcements that land tenure was freehold led to allegations that parts of Malaysia were being sold off to the Chinese, threatening the sovereignty of the country. A review of the reclaimed islands at the Melaka Gateway project after the change in government in May 2018 led to a reclassification to 99-year leasehold. Allegations that Chinese builders and contractors were bringing in workers from China to work on these projects abound. Local politicians were aghast that a 3 m high wall was built around the Alliance Steel Plant in MCKIP apparently to prevent unauthorised entry but was suspected to avert the media from viewing the thousands of Chinese workers building the plant (MalaysiaKini, 2017). Numerous concerns were raised by politicians and gained resonance with a public that was growing increasingly suspicious about China’s ambition in funding these megaprojects – especially the ECRL rail project. These include a general lack of transparency in the award of contracts to Chinese contractors, rumours of cost inf lation to channel funds towards paying for other government debts and hidden land acquisition costs that would have to be borne by the federal government. Malaysia Rail Link (2017) reported that a total of 8,699 lots of land (or parts of it) will be affected by the ECRL – of which 54% are state land and the remaining 46% are private land. Despite having the financing agreement signed between the parties in November 2016 and
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a groundbreaking ceremony in August 2017, there have been no reports of land acquisition nor any costs reported for this exercise. This process is further complicated by the fact that land matters are under the purview of each respective state and the ECRL runs through four different states. Taking on a regional perspective, a Singaporean observer has in 2016 suggested that China’s investments in Malaysian ports and railways have a stronger strategic element of naval dominance of these waterways than just economic presence (Straits Times, 2016). Their investments in two deepwater ports in Kuantan and Melaka, plus a railway link between Port Klang and the East Coast, have the potential to circumvent the passage of goods through the Port of Singapore. This was echoed by Embong et al. (2017) who suggested that China’s investments in these two ports – one along the coast on the South China Sea and another midway up the Straits of Malacca – together with China Communications Construction Co Ltd’s (CCCC) appointment as EPCC contractor to build a railway line from Port Klang to Wakaf Baru through the Kuantan Port, will allow Chinese shippers to avoid using Singapore.
May 2018 general elections and change of government In the year leading up to the General Elections in Malaysia in 2018, numerous allegations of monetary kickbacks and laundering were linked to some of the larger BRI projects. Information regarding the actual costs, payment terms and contractual arrangements was rarely made public and could only be gleaned from news websites hosted outside the country. The first insight into the financial shenanigans came about after investigations by the US Department of Justice into the financial dealings of 1Malaysia Development Berhad (1MDB), a Malaysian sovereign wealth fund, revealed that more than USD4.5 billion in funds were allegedly misappropriated by high-level officials (USDOJ, 2016, 2017). It was later suggested in other media reports that money was laundered through large BRI projects in Malaysia to repay some of the debts in 1MDB. These allegations were highlighted in the campaign leading up to the 9 May 2018 general elections that resulted in the loss of Prime Minister Najib Razak’s coalition, the Barisan Nasional (BN), to another coalition, the Pakatan Harapan (PH) led by former Prime Minister Mahathir Mohamed. Upon taking over the reins of government, the Prime Minister Mahathir quickly set out to review all the contracts signed with the Chinese in view of the allegations (i) of money laundering, (ii) of lopsided contracts that favoured Chinese partners (iii) and that some of these contracts allowed foreigners unfettered access to own land and operate polluting industries in Malaysia. The Malaysian public were concerned about the increasing presence of Chinese foreign workers and expatriates in the country, the crowding out of local SMEs and the relatively high economic risks of megaprojects (Tham, 2018). These investigations by the PH government and the improved
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transparency in public financial reporting post-election provide an opportunity to examine these Malaysia-China joint ventures, their financing structure and other contentious contractual terms in an open manner. Suspicions that the contract for the ECRL was inf lated to pay off 1MDB debts and to purchase certain companies in Malaysia emerged. A local newspaper, The Edge Markets (2018), reported that the MYR60 billion contract sum comprised three components: (i) CCCC’s actual cost of MYR27 billion plus profits of MYR2.73 billion, (ii) the takeover of 1MDB’s assets and liabilities totalling MYR19.1 billion and (iii) the purchase of stakes in two local companies linked to 1MDB proponents for MYR1.3 billion. It was also revealed by the Minister of Finance in July 2018 that 87% of the payment or MYR3.54 billion for the two pipelines has been made to China Petroleum Pipeline Bureau (CPPB) whereas the work completed was only 14.5% on the MPP and 11.4% on the TSGP in March 2018 (MOF, 2018b). The SSER has failed to secure any rights from Petronas, the state-owned petroleum company, as required by law to lay pipes for the MPP, and also failed to acquire the necessary land in Sabah for the TSGP. The Malaysian government on 3 July 2018 ordered a halt on all engineering, procurement, construction and commissioning (EPCC) work on the 688 km ECRL railway project and two pipeline projects (Reuters, 2018). Nine months later, after several rounds of renegotiations between the companies involved as well as the governments of Malaysia and China, the construction costs of Phases 1 and 2 of the ECRL were reduced to MYR44 billion. The total distance of the double-tracked railway was reduced by 40 km from the original 688 km, and the cost per kilometre reduced from MYR98 million to MYR68 million. Local contractors’ participation has been increased from 30% to 40% of the civil works in the new agreement. The status of the projects listed in Table 7.1 at the time of writing is as follows: (i) Forest City – total investments have grown to MYR17 billion with an additional 20,000 residential units to be handed over in 2019. Sales from international investors have been affected by the change of government and the loss of automatic residency (SCMP, 2019); (ii) Kuantan Port – the new deep-water terminal started operations during the third quarter of 2018; (iii) MCKIP – a total of 11 manufacturing plants operating as of May 2019 with the largest, Alliance Steel, bringing in a total investment of MYR12 billion (MalayMail, 2019b); (iv) the Melaka Gateway project is substantially scaled down with the cancellation of the deep-water port by the state government (New Straits Times, 2018); (v) Edra Global Energy remains with China Nuclear Power Corp; (vi) SSER – the government is in negotiations with SSER and the Chinese contractors for the return of monies paid for the two pipelines (MalayMail, 2019a); and (vii) Proton launched a rebadged Geely SUV, the X70, in December 2018 with very strong initial sales (Straits Times, 2019).
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Discussion Considering China’s investment strategies in Malaysia and recent developments in Malaysia’s political system, there are now adequate examples of project intents, financing and ownership structures, and preliminary project outcomes to assess if the BRI presents a favourable economic engagement opportunity between Malaysia and China. China’s former ambassador to Malaysia, Huang Huikang, constantly reminded his host country of the deepening economic links between Malaysia and China, and that Malaysia was gaining in economic growth, employment opportunities, and opportunities to upgrade and transform its industries and economy as a result of these large Chinese investments. In 2016, China continued to be Malaysia’s largest trading partner for the eighth year in a row. China also came out top in the FDI country list and was the largest investor in Malaysia’s real estate. It continued to be one of the largest foreign contractors with involvements in many huge infrastructure projects. China ranked third in terms of visitor arrivals to Malaysia, with 2.2 million tourist arrivals, contributing about MYR11 billion to the local economy (The Star, 2017). According to Ambassador Huang, Chinese corporations are undertaking megaprojects that local firms are not capable of doing, as they need worldclass technical requirement. There is no doubt that these Chinese investments either in loans or in equity have delivered on projects that would otherwise not be possible. FDI from China or elsewhere is generally less susceptible to volatility compared to portfolio f lows, and if carefully managed it could help sustain Malaysia’s foreign reserves (China Daily, 2017). These Chinese companies were also contributing to the advancement of Islamic finance in Malaysia with Country Garden’s first issuance of MYR1.5 billion sukuk bonds in 2015, and Beijing Enterprises Water Group local subsidiary’s MYR400 million Islamic Term Note in 2017. Given the magnitude of some of these proposed development projects, concerns were voiced regarding over-supply in the residential property market especially in areas adjacent to Forest City in Johor. Projects involving resorts, retail space and residential property were also viewed with caution. Infrastructure projects driven more by political considerations than by commercial needs are inherently risky. With the vast amounts of capital available for BRI investments, it is likely that the projects being funded suffer from optimism bias or carry higher risks. A more cautious approach should be adopted by China’s state-owned enterprises and financial institutions together with more stringent government scrutiny. A report by Deloitte China (2018) suggested that these investments in BRI countries are fraught with political and financial risks. While operational risks have fallen on China’s state-owned enterprises, China’s policy banks have shouldered the financial risks. Indeed, after the inability of the Sri Lankan government to repay the loan for the Hambantota Port, China has issued instructions to increase due
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diligence and assessment of project feasibility with a view to protect its reputation overseas. The situation in Malaysia is further confounded by a cap on public debt at 55% of GDP imposed by the legislative assembly. Public debt has indeed been inching closer to this limit over the last ten years putting further pressure on the government to depend on off-balance sheet financing for infrastructure projects. The offer from China’s Ex-Im bank for soft loans on long repayment terms for the ECRL was particularly enticing especially when these loans are considered as ‘contingent liabilities’ despite being guaranteed by the government. The reliance on these loans from China remains disconcerting, and downright suspicious, when Malaysia’s sovereign rating by Standard and Poor remains at A – indicating that it is still able to borrow from the money market at competitive rates. This review has highlighted a long list of issues from just a small sample of projects involving companies from China in Malaysia. The Malaysian government is still calculating the costs of some of these investments which were highly favourable to the Chinese partners or contained lop-sided clauses. The multitude of issues fuels suspicion and criticism among Malaysians of job losses, crowding out of the market and costly infrastructure projects that locks them so deep in debt to the Chinese that fears of political dominion will follow. A survey of the Malaysian business community by SERC (2017) indicated that many were keen to engage with Chinese business partners in property, trading, infrastructure and services industries. The most important motivation for engaging with Chinese companies was to gain market access followed by obtaining competitive pricing for raw materials from China. Chinese investments in Malaysia were perceived as important contributors of economic and industrial development, especially its ability to generate positive economic multiplier effects on the domestic economy, and enhance transportation links, and leading to more trade and demand for services. However, half the respondents were concerned that Chinese investments will pose a threat to local businesses by raising the bar on competition and a crowding out of local players, especially in the construction sector. The advantage obtained by Chinese companies from the financial support from China’s Ex-Im Bank or state-owned enterprises was singled out as potentially unfair by Todd and Slattery (2018). There was evidence to suggest that the value of new construction contracts created as a result of increased Chinese investment is primarily accruing to Chinese companies, and with these companies favouring Chinese labour and subcontractors, it confirms the earlier suggestion by Wan Jan that Malaysia shoulders all the risks while China gets all the profits. China must address these local concerns to ensure that training and technology transfer initiatives are in place. Embong et al. (2017) likened China’s strategy in South East Asia to the East India Company acting out British imperial policy of establishing colonial outposts in Gibratar, Malta, Suez, Colombo, Malacca, Singapore and Hong
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Kong. They postulated that this historical precedent will be repeated, given the striking similarities of the Maritime Silk Road to the British securing a sea route from Britain to China. At the moment, despite the declared aim of only economic prosperity and peaceful intentions, the risk of the loss of sovereignty, loss of economic and political independence, seems to have been averted by change of government in Malaysia and the realisation that a debtfuelled infrastructure development is not necessarily advantageous. If the allegations of project cost inf lation to siphon money elsewhere are true, then the Chinese government must also ensure that the BRI investments are carried out to the highest ethical standards. Tougher scrutiny of prospective deals, and restrictions about how these project funds can be utilised should translate into lower default or failure risks. Deloitte China (2018) has suggested that the involvement of multilateral agencies in funding or overseeing BRI projects ought to alleviate some of the suspicions held by the recipients of these BRI investments.
Concluding remarks The recent pause in Chinese BRI investments in Malaysia has provided an opportunity to review and reassess the viability and benefits of these projects for both China and Malaysia. This review has identified four important points in furthering our understanding of Chinese investments in Malaysia. First, there is clear evidence that Chinese companies with their advanced engineering and technical capabilities are well positioned to deliver these infrastructure projects in Malaysia. This is particularly apparent in the areas of rail, port, bridges, pipelines and property development, where Chinese companies have developed and honed their expertise during the rapid development process in China and are now able to offer these services and products overseas. Second, there is certainly unwavering support from the Chinese government in these infrastructure projects. Many of these projects in Malaysia are carried out by state-owned enterprises and funded by China’s Ex-Im Bank. Signing of the major project contracts was witnessed by Chinese President Xi Jinping and government ministers were often seen to be present at groundbreaking and opening ceremonies giving both explicit and tacit support to these ambitious projects. Third, market-driven projects or investments such as the expansion of Kuantan Port and the take-over of Proton Holdings were regarded favourably as viable commercial joint ventures. Kuantan Port has reported an average profit margin of more than 40% for the last five years (The Star, 2018). However, investments that were more speculative, often labelled ‘strategic,’ were viewed with suspicion especially when the projected demand for these property, rail and port services was far too favourable. Considering that these projects were to be funded through long-term loans from China, there were concerns that these will turn into debt traps when the projected revenues were not achieved.
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Fourth, China’s willingness to collude with kleptocratic or corrupt government officials to further their BRI aims was exposed as the result of the change of government in 2018. Back-room deals where the costs of Chinabacked projects were inf lated to allegedly bail out troubled state funds or to provide kick-backs to political parties were revealed and probed by the Ministry of Finance. Notwithstanding numerous allegations of financial fraud, some of the largest infrastructure projects were viewed as ‘political in nature’ to use a term by The Wall Street Journal (2019) in its reporting on China’s infrastructure activities in Malaysia. The lack of clear financial justifications for these investments has led to Malaysians voicing their concern that these contracts are only benefiting the Chinese contractors and leaving it to the Malaysian public to shoulder all the risks. Although there is broad support among the business community for the BRI initiative, the Malaysian public is not yet convinced that China’s intentions are not driven by geostrategic purposes. At the Second BRI Forum in Beijing in April 2019, Chinese President Xi Jinping assured participants that future projects will be better suited to the recipient country’s debt sustainability, will be more transparent and will have a zero tolerance for corruption (Engineering News Record, 2019). In the 45 years since the formalisation of ties, the Malaysia-China relationship has evolved from trade to joint investments to growing economic interdependence. The hiccup in recent investments and projects may be the silver lining that refocusses the relationship to forge strong long-term economic ties that benefit both parties rather than to achieve quick gains.
Note 1 USD1 is equal to MYR4.2 in July–August 2020.
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Malaysia 161 DRB-HICOM Berhad (2018) Proposed share subscription in Proton Holdings Berhad by Zhejiang Geely Holding Group Co., Ltd. and Proposed divestment in Lotus Advance Technologies Sdn Bhd to Geely and Etika Automotive Sdn Bhd, Announcement to Bursa Malaysia, 23 June 2017. Economic Planning Unit (2010) Tenth Malaysia Plan 2011–2015, Prime Minister’s Department, Putrajaya, 10 Jun 2010. Economic Planning Unit (2015) Eleventh Malaysia Plan 2016–2020: Anchoring Growth on People, Prime Minister’s Department, Putrajaya. Embong, A. R., Evers, H. D., and Ramli, R. (2017) One Belt One Road (OBOR) and Malaysia: A long-term geopolitical perspective. Institute of Malaysian and International Studies, University Kebangsaan Malaysia, May 2017. Engineering News Record (2019) President Xi Signals Course Change at Belt and Road Forum in Beijing, 26 April 2019. Forbes Asia (2017) Malaysia Wrestles with Beijing’s One Belt One Road Bonanza, available from https://www.forbes.com/sites/forbesasia/2017/11/29/malaysiamy-second-home/#6cd702037bda accessed on 28 August 2018 Forest City Johor (2018) Forest City Johor by Country Garden Pacific View (CGPV) in Iskandar Malaysia, available from http://www.forestcityjohor.com accessed on 10 October 2018. HSBC Bank Malaysia Bhd (2015) Malaysia to play a strategic role in China’s “One Belt, One Road,” News release, Kuala Lumpur, 23 June 2015. MalayMail (2017) Three projects under One Belt One Road initiative signed in Beijing, 13 May 2017, available from https://www.malaymail.com/s/1376061/ three-projects-under-one-belt-one-road-initiative-signed-in-beijing accessed on 28 August 2018. MalayMail (2019a) Finance Ministry: Putrajaya negotiating compensation for cancelled RM9.4b pipeline project, 25 May 2019, available from https://www. malaymail.com/news/malaysia/2019/05/25/f inance-m inistr y-putrajayanegotiating-compensation-for-cancelled-rm9.4b-pi/1756324 accessed on 1 November 2019. MalayMail (2019b) Malaysia-China Kuantan Industrial Park a boost for exports of Malaysian brands, 20 May 2019, available from https://www.malaymail.com/ news/mala-ysia/2019/05/20/malaysia-china-kuantan-industrial-park-a-boostfor-export-of-malaysian-bran/1754725 accessed on 1 November 2019. MalaysiaKini (2014) The case of Forest City and the Johor Sultan, 14 July 2014, available from https://www.malaysiakini.com/news/268649 accessed on 3 September 2018. MalaysiaKini (2017) The mystery behind Kuantan’s ‘Great Wall of China,’ available from https://www.malaysiakini.com/news/397677 accessed on 23 November 2018. Malaysia Rail Link Sdn Bhd (2017) East Coast Rail Link Project – Environmental Impact Assessment Report – Volume 1: Executive Summary, March 2017. Malaysian Investment Development Authority (2016) KAJ development Sdn Bhd signs RM30 billion agreement with Powerchina International for investment, development and construction of Melaka Gateway, Media Release 1 September 2016, available from http://www.mida.gov.my/home/3272/news/kaj-developmentsdn-bhd-signs-rm30-billion-agreement-with-powerchina-international-forinvestment-developmentconstruction-of-melaka-gateway/ accessed on 16 October 2018.
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Malaysian Reserve (2017) Country Garden open to funding proposals, sukuk, 3 April 2017, available from https://themalaysianreserve.com/2017/04/03/countrygarden-open-to-funding-proposals-sukuk/ accessed on 10 October 2018. Ministry of Finance (2018a) Economic and Fiscal Data, available from http://www. treasury.gov.my/index.php/fiskal-ekonomi/data-ekonomi.html accessed on 13 November 2018. Ministry of Finance (2018b) Suria Strategic Energy Resources Sdn Bhd, Media Release 5 June 2018. Mohamad, M. (1991) Malaysia: The way forward (Vision 2020), available from www.wawasan2020.com/vision accessed on 13 November 2018. Mottaleb, K. A. and Kalirajan, K. (2010) Determinants of foreign direct investment in developing countries: A comparative analysis. Margin: The Journal of Applied Economic Research, 4(4), 369–404. New Straits Times (2016) IJM: Kuantan Port upgrade crucial, available from https:// www.nst.com.my/news/2016/04/137613/ijm-kuantan-port-upgrade-crucial accessed on 3 September 2018. New Straits Times (2018) Fulfilling promises one at a time, 30 May 2018, available from https://www.pressreader.com/malaysia/new-straits-times/20180530/ 2814878670-25623 accessed on 1 November 2019. Nikkei Asian Review (2017) China’s Geely buys big stakes in Proton, Lotus for discounted price of $235m, 23 June 2017, available from https://asia.nikkei.com/ Business/China-s-Geely-buys-big-stakes-in-Proton-Lotus-for-discounted-priceof-235m accessed on 10 October 2018. Reuters (2018) Malaysia suspends construction of major Belt and Road rail project, available from https://www.reuters.com/article/malaysia-politics-projects/malaysiasuspends-construction-of-major-belt-and-road-rail-project-idUSL4N1U03O6 accessed on 10 October 2018. Socio-Economic Research Centre (2017) China’s investment in Malaysia: Perceptions, Issues and Prescriptions. SERC, Kuala Lumpur. South China Morning Post (2019) Malaysia’s Forest City to hand over more than 20,000 residential units this year as it unveils new golf course, 9 September 2019, available from https://www.scmp.com/business/article/3026354/malaysias-forestcity-handover-more-20000-residential-units-year-it accessed on 1 November 2019. Straits Times (2015) Malaysia’s 1MDB agrees sale of power assets to China firm for $3b, available from https://www.straitstimes.com/asia/se-asia/malaysias-1mdbagrees-sale-of-power-assets-to-china-firm-for-3b accessed on 16 October 2018. Straits Times (2016) Malacca harbour plan raises questions about China’s strategic aims, available from https://www.straitstimes.com/asia/se-asia/malaccaharbour-plan-raises-questions-about-chinas-strategic-aims accessed on 10 October 2018. Straits Times (2019) Malaysia’s Proton revs up revival with hot-selling SUV, 12 March 2019, available from https://www.straitstimes.com/asia/se-asia/malaysiasproton-revs-up-revival-with-hot-selling-suv accessed on 1 November 2019. Tham, S. Y. (2018) Chinese Investment in Malaysia: Five Years into the BRI. ISEAS Perspective, 2018(11). ISEAS – Yusof Ishak Institute, Singapore. The Edge Markets (2018) Mahathir says the ECRL project contract is strange, available from http://www.theedgemarkets.com/article/mahathir-says-ecrl-projectcontract-strange accessed on 31 August 2018.
Malaysia 163 The Star (2013) IJM sells 40% stake in Kuantan Port to China’s Guangxi Beibu for RM334 mil, 10 September 2013, available from https://www.thestar.com.my/ business/business-news/2013/09/10/ijm-sells-40-stake-in-kuantan-port-chinasguangxi-beibu-buys-the-equity-interest-for-rm334mil/ accessed on 3 September 2018. The Star (2016) Malaysian, Chinese firms sign agreements worth RM144 bil, 1 November 2016, available from https://www.thestar.com.my/business/ business-news/2016/11/01/malaysian-and-chinese-firms-sign-14-agreementsworth-rm144bil/ accessed on 29 August 2018. The Star (2017) China investments transforming Malaysia, 10 September 2017, available from https://www.thestar.com.my/news/nation/2017/09/10/chinainvestments-transforming-msia-although-the-inf lux-of-chinese-investments-isonly-a-recent-phen accessed on 28 August 2018. The Star (2018) Trade war adds FDI lure to Kuantan, 30 September 2018, available from https://www.thestar.com.my/news/nation/2018/09/30/trade-war-adds-fdilure-to-kuantan-kuantans-mckip-industrial-park-and-new-deepened-port-haveattract/ accessed on 16 October 2018. Thomson Reuters (2017) Dirty fumes, 19 July 2017, available from https://www. breakingviews.com/considered-view/malaysia-power-ipo-will-test-1mdb-stain/ accessed on 20 November 2018. Todd, L. and Slattery, M. (2018) Impact of investment from China in Malaysia on the local economy, Policy Ideas, No.54, Institute of Democracy and Economic Affairs, Kuala Lumpur, United States Department of Justice (2017) United States seeks to recover more than $1 billion obtained from corruption involving Malaysian sovereign wealth fund, Press Release 16–839, Office of Public Affairs, July 20, 2016. United States Department of Justice (2017) U.S. seeks to recover approximately $540 million obtained from corruption involving Malaysian sovereign wealth fund, Press Release 17–655, Office of Public Affairs, June 15, 2017. Wall Street Journal (2019) WSJ investigation: China offered to bail out troubled Malaysian Fund in return for deals, 7 January 2019, available from https://www. wsj.com/articles/how-china-f lexes-its-political-muscle-to-expand-poweroverseas-11546890449 accessed on 13 January 2019. Wan Jan, W. S. (2017) Is China a good investor? Institute for democracy and economic affairs: Opinion, 28 March 2017, available from http://www.ideas.org.my/ china-good-investor/ accessed 28 August 2018.
8 China’s Belt and Road Initiative (BRI) in Cambodia Sun Sheng Han and Ymeng Lim
Introduction China’s Belt and Road Initiative (BRI) in Cambodia contributes to an already very strong bilateral relationship between the two countries. This strong relationship is marked by many symbolic events that signify their importance to each other. For example, Cambodia was one of the first three non-communist countries (along with Ceylon and Nepal) towards which China targeted its aid programme in the 1950s, when China itself was poor and a recipient of aid from the former Soviet Union (Marsot, 1969). During the COVID-19 outbreak in 2020, Cambodian Prime Minister Hun Sen was the first foreign leader to visit China in March, showing great support that was much needed at the time, and Cambodia was the first country that received medical equipment from China in April for fighting against the novel coronavirus (Styllis, 2020). Nevertheless, the seven decades of continuous bilateral relationship have not been without interruptions. The world has changed dramatically, the Cold War-era political blocs have long gone and both countries have witnessed a significant resetting of their political and economic systems over the years. In Cambodia, the governments under the leadership of Sihanouk, Lon Nol, Pol Pot and Hun Sen represented different ideological and developmental directions with varied relationships with China and the West. In China, nationwide policy changes during the Great Leap Forward, Cultural Revolution and Economic Reform led to very different outcomes in social and economic well-being that ultimately affected China’s ability to aid and invest in other countries. As international observers note, neither friendship nor antagonism is permanent between countries (Bong, 2019), and this applies well to the effect of domestic changes on the China-Cambodia relationship. To Prime Minister Hun Sen, China was once “the root of everything that is evil” in Cambodia in 1988, but 12 years later in 2000, the same Prime Minister proudly proclaimed that China was Cambodia’s “most trustworthy friend” (Hutt, 2016). Against the backdrop of changing political and economic climate both internationally and within China and Cambodia, this chapter explores the
China’s BRI in Cambodia 165
continuity and change in China’s aid and investment in Cambodia under the BRI. It is argued that neither the donor’s considerations of market, prestige and inf luence (Marsot, 1969) nor the bilateral win-win economic expectation (Zhou, 2019) presents a full picture of Chinese aid and investment in Cambodia. Instead, aid and investment programmes have been instruments, for both donors and recipients, for achieving strategic goals. This is a longterm pursuit that is non-monetary in nature, its importance determined by broad geopolitical considerations that shape the fortunes of nations. Aid and investment programmes serve these long-term goals and vary according to short-term situations. The chapter has six sections. ‘Cambodia in brief ’ presents a brief summary of the geography, history, population and economy of Cambodia, which lays a foundation for the chapter. ‘Chinese aid and investment in Cambodia 1956–2013’ outlines Chinese aid and investment in Cambodia prior the BRI period. ‘China’s aid and investment under the BRI’ then provides a more recent account of Chinese aid and investment under the BRI. ‘The impact and concerns’ examines impacts and concerns that arise from the BRI programme. The Conclusion concludes.
Cambodia in brief Geography and history Cambodia is a small country situated in the Indochina Peninsula in SouthEast Asia, bordering Vietnam, Laos and Thailand (Figure 8.1a). Its total land area is 181,035 km² – the third smallest among the Association of South East Asian Nations (ASEAN) after Singapore and Brunei. In terms of population, Cambodia is the fourth smallest in ASEAN – larger than Laos, Singapore and Brunei (worldpopulationreview.com) – with 16.7 million people in 2019. Its two larger neighbours, namely Vietnam and Thailand, had 97 million and 70 million people respectively (Shi, 2019). Cambodia’s central location in South-East Asia also makes it a member of the six Greater Mekong Subregion (GMS) countries, which comprise Cambodia, China, Laos, Myanmar, Thailand and Vietnam. Historically, Cambodia was on one of the trading routes from India to South-East and East Asia with human activity recorded in Chinese annals as early as the 2nd century. The Khmer Empire from the 9th century to the 15th century saw Cambodia at its peak strength, controlling a large territory covering large portions of Vietnam in its east, Thailand in its west and its land extending south into the Malay Peninsula. When the Khmer Empire collapsed, Cambodia was encroached by its powerful neighbours, losing territories to Thailand and Vietnam, until the French arrived in the 19th century. French colonisation in Indochina helped Cambodia to retain its identity instead of being annexed by its neighbours. Some Western observers believe that history taught the Cambodian leaders a lesson – that Cambodia
Figure 8.1 (a) Cambodia, its neighbours (with indicative Kunming-Singapore eastern route) and (b) its provincial-level administrative units. (Map credit: Iris Fong)
China’s BRI in Cambodia 167
needed to negotiate a position of compromise between superpowers which could provide a counterbalance against expansive ambitions of Thailand and Vietnam (Marsot, 1969; Sullivan, 2011). So, upon its independence from the French in 1953, Prince Sihanouk contacted two candidate countries – China and the USA – for their support. Foreign aid started to f low into Cambodia from both China and the West from the mid-1950s. Population and economy Within Cambodia there are four regions, namely the Central Plain, Tonle Sap, Coast and Sea, and Plateau and Mountains. These regions are organised into 25 provinces (Figure 8.1b), including the capital city Phnom Penh. The Cambodian population is mainly concentrated on the Central Plain, where fertile river valleys and f lood plains are located (Tep, 2016). In 2019, Phnom Penh had the highest population of 2.13 million, followed by the neighbouring Kandal province with 1.19 million and Prey Veng province with 1.05 million. Kep had the smallest population of 41,798 (Shi, 2019). Table 8.1 shows that the population increased continuously at 1.6% per year for the ten years between 2007 and 2017 – from 13.68 million to 16.01 million. The annual growth of Cambodia’s GDP has maintained a rate of about 7% for the period 2007–17, except in 2009 and 2010 when its economy was impacted by the 2007–8 global financial crisis. During the same period, Cambodia’s GDP per capita more than doubled from $632 to $1,384. Though the GDP per capita is much lower than most of its ASEAN peers, its increase indicated some success across economic sectors, especially in construction. Cambodia’s current economy is largely dependent on the service sector which has maintained a large share of the GDP (about 40% in 2017). The industrial sector combining construction and manufacturing accounted for the largest share of the GDP (about 47% in 2017), though manufacturing was weak (about 16% in 2017). The construction sector contributed 31% to GDP in 2017, representing a remarkable increase from 25% ten years previously. In contrast, the agriculture sector became less important as measured by its contribution to GDP, dropping its share from about 29% to 23% (Table 8.1). These data show that a construction boom was probably the main driver of the rapid growth of Cambodia’s GDP, and the decline of agriculture was not caused by industrialisation. Rather, manufacturing remained only a small economic sector in Cambodia. Today’s development in Cambodia is guided by two types of plans which focus on spatial and socioeconomic matters respectively (Table 8.2). These plans transform the development ambitions set by the “Political Platform of the Royal Government of the Sixth Legislature of the National Assembly,”1 especially those goals spelt out in the “Rectangular Strategy – Phase 4”2 (Royal Government of Cambodia, 2018). The socioeconomic development plan is mandated by law, so each elected council has to formulate one for its administrative jurisdiction. However, spatial development plans are optional
Source: World Bank (2018b).
Share of GDP Services, value added (% of GDP) 38.51 Industry (mainly construction), 24.94 value added (% of GDP) Agriculture, forestry and fishing, 29.7 value added (% of GDP) Manufacturing, value added (% 17.33 of GDP) 38.79 21.66 33.49 14.42
38.84 22.37 32.75 15.35
0.09 10.40 738 2,418
Developmental levels measured by GDP approaches GDP growth (annual %) 10.21 6.69 GDP (current US$ in billion) 8.64 10.35 GDP per capita (current US$) 632 746 GDP per capita, PPP (constant 2,333 2,452 2011 international $)
2009 14.09 1.50
13.68 1.49
Population, total (in million) Population growth (annual %)
2008 13.88 1.48
2007
Indicators
14.69
33.88
38.30 21.87
5.96 11.24 786 2,523
14.31 1.54
2010
15.17
34.56
37.50 22.14
7.07 12.83 882 2,659
14.54 1.59
2011
Table 8.1 Population and economic indicators of Cambodia during 2007–17
15.09
33.52
37.77 22.98
7.31 14.05 951 2,807
14.78 1.63
2012
15.49
31.6
38.51 24.07
7.36 15.23 1,014 2,964
15.02 1.65
2013
15.40
28.87
39.7 25.61
7.14 16.70 1,094 3,124
15.27 1.64
2014
16.01
26.58
39.83 27.68
7.04 18.05 1,163 3,291
15.52 1.60
2015
16.00
24.74
39.89 29.45
6.95 20.02 1,270 3,465
15.76 1.56
2016
16.20
23.38
39.67 30.88
6.81 22.16 1,384 3,645
16.01 1.53
2017
168 Sun Sheng Han and Ymeng Lim
China’s BRI in Cambodia 169 Table 8.2 Planning hierarchy and planning types in Cambodia Types of Plan
Spatial Plan
Socioeconomic Development Plan
National level
National Policy on Spatial Planning National Spatial Planning
Rectangular Strategy (now phase 4, 2018–23) National Strategic Development Plan (2019–23)
Broader regional Regional Spatial Planning Circular on Cambodia Coastal level Area Management (February 2012) Capital/ Capital Land Use Planning and Five-year development provincial Master Plan (Phnom Penh plan, three-year rolling level Strategic Orientation 2035 plan and one-year was approved in principle in development plan December 2015 – 15 years (project execution base vision) on national budget) Provincial Spatial Plan (Spatial Plans of Battambang and Sihanoukville Province approved in June 2018) Municipal/ Municipal Land Use Master Five-year development district/khan Plan (Battambang Land Use plan, three-year rolling level Master Plan has been approved plan and one-year in December 2015 – 15 years development plan vision) (project execution base District/Khan Land Use Master on national budget) Plan Commune/ Commune/Sangkat Land Use Five-year development Sangkat level Planning plan, three-year rolling plan and one-year development plan (project execution base on national budget) Source: Adapted from Tep (2016).
due to a lack of planning resources. As a result, every administrative division has socioeconomic development plans (five-year development plan, threeyear rolling plan and one-year action plan) at capital/provincial, municipal/ district/khan and sangkat/commune levels, while only a few have spatial plans (Han and Lim, 2019). On paper, plan formulation and implementation involve collective efforts because both plan types need the participation of sectoral departments and offices. In terms of technical support, the Ministry of Land Management, Urban Planning and Construction (MLMUPC), the Ministry of Planning (MoP) and their local-level offices take the major responsibility while the Provincial Administrations and their local-level offices play an indispensable role in
170 Sun Sheng Han and Ymeng Lim
leading and coordinating these efforts. However, in practice some large-scale investment projects come as a seemingly unplanned surprise. According to Pichamon (2015), the Cambodian Ministry of Public Works and Transport did not know what Chinese developers planned to do with the proposed Preah Vihear-Koh Kong railway even six months before the project was due to start because the project had been driven by Prime Minister Hun Sen.
Chinese aid and investment in Cambodia 1956–2013 It is widely acknowledged that systematic data about Chinese aid and investment in Cambodia are unavailable due to the lack of transparency of Chinese aid operations – there are neither consistent reports on the total amount committed nor details of aid categories to differentiate grants from commercial loans or foreign direct investment (Burgos and Ear, 2010; Sullivan, 2011). This section is based on anecdotal evidence found in the literature, to present a broad-brush picture about Chinese aid to Cambodia. The key features of the aid before 2013 can be seen in three varied waves. The first occurred in 1956–61 when Chinese aid helped Cambodia to industrialise. The second was a set of smaller waves seen in 1962–92 when China supported the Khmer Rouge and the government in exile. The third is a present wave continuously building up from 1993 that includes the BRI era. Chinese aid in its first wave Zhou (2019) has offered an account of China’s first economic assistance to Cambodia. During Prince Norodom Sihanouk’s visit to China in February 1956, the Red Cross Society of China donated ¥80,000 to Cambodia as a disaster relief fund on the occasion of f looding in Phnom Penh. In June 1956, China and Cambodia signed an agreement for economic assistance involving £8 million to provide commodities and projects. This was equivalent to $10 million using the exchange rate at 1960. This amount was only one part of the total aid committed – according to Marsot (1969), the June 1956 aid agreement involved two instalments: the first an outright grant worth $22.4 million, the second another $11.2 million added in 1961. By 1962, Chinese aid to Cambodia totalled $33.6 million. These funds were used in different sectors (namely industries and agriculture) and projects. One of the focusses of aid was to construct factories. The initial four comprised a textile factory, a plywood factory, a paper mill, and a cement factory. Construction of two additional factories was attempted using the second instalment, but these failed and were abandoned due to the lack of adequate preparations. Two substitute factories were built instead, namely a textile factory at Battambang and a glass factory at Stung Meanchey. These factories contributed to the industrialisation of Cambodia by creating about 5,000 industrial jobs and producing manufactured goods for Cambodia’s domestic market. The textile outputs met one-third of the domestic demand,
China’s BRI in Cambodia 171
but the plywood factory faced difficulties to sell its products because of poor product quality. As a result, the Cambodian government became the main buyer of those inferior products (Marsot, 1969). Western observers believe that China’s aid to Cambodia was driven by China’s global strategy (Burgos and Ear 2010; Sullivan 2011). The aid to industrialisation was in particular to boost its inf luence by creating proletariats (Marsot, 1969). The technical aid involving Chinese engineers and technicians whose living situation was the same as local standards, and the fact that China gave aid when it itself was poor, created a good impression of China among Cambodians. This was further enhanced by the fact that Chinese aid to industrialise Cambodia actually deprived the export of Chinese manufactured goods of a market that could otherwise have been filled by Chinese exports. The scale of Chinese aid in this first wave was small. Over the period 1953–7, China’s total aid to all of its recipients was approximately $647 million and in 1958–9 an additional $369 million was committed (Marsot, 1969). China’s neighbouring Communist countries, i.e. North Korea and Vietnam, “enjoyed the lion’s share … in the form of equipment, factories, raw materials, manufactured goods, and technical assistance” (ibid., p. 189). Indonesia received the largest aid amount in absolute value among the non-communist recipients. However, Cambodia was ranked at the top according to per capita aid received from China. Yet, in comparison to American aid to Cambodia, Chinese aid was only about 10% of what the USA gave ($340 million) in the period 1955–63. Chinese aid in the second waves The period 1962–92 saw a set of smaller waves that disbursed aid from China to Cambodia in 1964, 1968, 1972–3 and 1975–8. In between the waves were political and/or economic interruptions to the aid programmes. The first interruption occurred in 1962 and 1963, when China was facing difficulties after its failure of the Great Leap Forward. This was followed by resumed military aid in 1964, with unknown quantities. Another disruption occurred when the Cultural Revolution began. The eager attitude of the Red Guards towards exporting communist ideology to the ethnic Chinese in Cambodia, along with other reasons, such as Western diplomats visiting Cambodia (Marsot, 1969), cooled off the Sino-Cambodia relations. The military aid resumed again in 1968, with unknown quantities but reports revealing that the aid included jet fighters, transport planes, training aircraft, guns, medical equipment and coastal patrol boats. A coup led by General Lon Nol, who sided with the USA, overthrew King Sihanouk in 1970. China’s aid to the Cambodian government then stopped. Instead, China supported the government in exile – the Royal Government of National Union of Kampuchea which received $30 million in aid in two instalments in 1972 and 1973 (Bartke, 1975). From 1975 to the 1980s, China
172 Sun Sheng Han and Ymeng Lim
supported the Khmer Rouge, which was in power between 1975 and 1979 and then, after the Vietnamese invasion, waged guerrilla war until the late 1980s. In the period 1975–9, China offered an aid package of $1 billion to Cambodia in the form of military assistance and advisors (Chanda, 2002). The second waves diminished in the period 1979–90, when Cambodia received no aid from China or the West. The former Soviet Union became the main donor of Cambodia through the Council for Mutual Economic Assistance. About $100 million in trade credit and grant aid were given by Moscow per year (Hiebert, 1991). This aid arrangement continued until 1989 when the Vietnamese pulled out of Cambodia and the Soviet Union collapsed. However, it was after signing the Paris Peace Accords in 1991 that both China and the West resumed their aid operations in Cambodia. Chinese aid in its third wave China was one of the signatories of the Paris Peace Accords in 1991 along with 18 other parties and was a part of the peacekeeping forces in Cambodia in 1992 and 1993. The 1993 election produced a joint government in which Hun Sen was the second prime minister. China’s aid and investment programmes resumed in 1992, with a total value of slightly less than $1 million (Zhou, 2019). According to data from the Cambodian Rehabilitation and Development Board (2010), China’s aid in the period 1992–2003 f luctuated but never stopped. In the period 1992–2010, China was the third-largest donor country, contributing to 5% of the total aid that Cambodia received, after Japan (19%) and the USA (7%). However, it must be noted that China’s high rank among donor countries was because of a significant jump in 2003 and 2004, when the aid total increased from $5.5 million to $32.5 million. Zhou (2019) attributed this remarkable increase to the overall economic success in China. However, the mixture of ‘aid’ with commercial bank loans, investment and export credits also contributed to the total (Brautigam, 2010). On the basis of these numbers, China overtook the USA as a donor country in 2006 and was expected to overtake Japan in 2009 (ibid.). A high increased rate was maintained until 2012 when the total annual aid value was recorded at $347.1 million. Before the significant increase in 2003/2004, China also stood out from the donor countries in 1997/1998, when Hun Sen became the only prime minister. Then China’s aid not only continued but increased from $9.5 million to $14.3 million. In the year 2013, when the BRI launched, China’s aid to Cambodia was $257.3 million (Zhou, 2019). In this new wave, China’s aid concentrated in transport infrastructure, energy and resources, and agriculture. Other beneficiary areas include infrastructure projects, goods and materials, technical cooperation, human resource development, medical teams, emergency humanitarian aid, in-country volunteer programmes and debt relief (Zhou, 2019). These efforts contribute
China’s BRI in Cambodia 173
directly to Cambodia’s Rectangular Strategy, which “focuses on building infrastructure such as roads, water, electricity, and human capital” in order to achieve four strategic objectives, “namely ensuring an average annual economic growth rate of 7 percent, creating jobs, reducing poverty, and strengthening institutional capacity and governance” (Chheang, 2017a). In comparison to the first-wave Chinese aid, the focus was no longer on industrialisation, the range of the receiving economic sectors was broadened and the aid agreements included profit-driven investment projects.
China’s aid and investment under the BRI The BRI together with a good diplomatic relationship between the two nations, Cambodia’s low labour costs, abundant natural resources, political stability and strategic location in mainland South-East Asia brought a significant recent inf low of Chinese capital to Cambodia. These funds contributed to substantial changes in various aspects of Cambodia and in particular the improvement of its physical infrastructure. The Minister of Public Works and Transport, Sun Chanthol, said that “cooperation between Cambodia and China in infrastructure sector is excellent, as most of the national roads in Cambodia have been built under concessional loans and grant aid from China” (Pengfei and Sovan, 2018). BRI as an enabler for Cambodian infrastructure development BRI has enabled Cambodia to further access badly needed funds by promoting Chinese investment. Under the BRI framework, Cambodia has access to Chinese government aid and loans provided by Chinese or China-led financial institutions such as the China Development Bank, the Export-Import Bank of China, the Silk Road Fund and the Asian Infrastructure Investment Bank (Heng and Po, 2017; Lin, 2018). This is a golden opportunity for Cambodia. Mr Sun Chanthol, Minister of the Ministry of Commerce in 2013–16, quoted that “we have been blamed for always going to China, but it is because we need infrastructure fast and quick, nothing more than that” (WASHPOST, 2015). According to the Ministry of Economy and Finance (2018), by the end of 2017 Cambodia used $6.3 billion worth of bilateral loans, of which $4.0 billion was from China – the largest creditor of Cambodia. In 2016, Cambodia received an aid package of about $600 million from China immediately after a strong commitment to support China’s maritime claims on the South China Sea was cemented (Lin, 2018). Another $180 million was provided for a two-days state visit of China’s President Xi Jinping (Manet, 2016). Moreover, China cancelled approximately $89 million in Cambodian debt while massive soft loans continued to f low into Cambodia (McDonald, 2017). Investment projects from China add to the inf low capital to Cambodia. By 2016, Chinese investment in Cambodia reached $14.7 billion. These
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Sun Sheng Han and Ymeng Lim
Table 8.3 The share of investment capital in Cambodia from top three countries (2012–16) Year
2013
2014
2015
2016
Total $2.9 Billion
$4.9 Billion
$3.9 Billion
$4.6 Billion
$3.6 Billion
Rank Country %
Country %
Country %
Country %
Country %
Cambo- 64 dia China 24.44
Cambo- 69.28 dia China 18.62
China
2
Cambo- 42.08 Cambo- 66.8 dia dia China 20.69 China 15.68
3
Korea
Malaysia
U.K
1
2012
9.89 Vietnam
6.1
2.18
3
29.92
Cambo- 27.55 dia Japan 22.78
Source: Council for the Development of Cambodia (2017b).
investments focus on four main areas – physical infrastructure, industry, agriculture and agro-industry, and services and tourism (Vannarith, 2017). According to the Council for the Development of Cambodia (2017b), Chinese investment contributed 20.69% to the total in 2012 and 29.92% in 2016. This made China the largest investor in Cambodia (Table 8.3). Among the investors, China’s state-owned enterprises focussed on hydropower plants and natural resources while the private firms concentrated on the garment industry and tourism (Vannarith, 2017). All four coastal provinces in Cambodia, namely Sihanoukville, Koh Kong, Kampot and Kep, were the focus of China’s BRI investment f low. Electricity generation Cambodia’s electricity infrastructure has experienced an extreme imbalance between demand and supply. In 2013, only about 43% of the total population had access to electricity; in the rural areas 70% of the population did not have access to electricity (World Bank, 2018a). Private electricity dealers charged high rates, which caused not only massive protests from households (Chakrya, 2010; Seangly, 2014) but also high production costs in Cambodia’s manufacturing sector (Reuy, 2012). This provided local investors an opportunity to generate electricity that they could sell at a high price. The governance of electricity in Cambodia is managed by two arms of the power sector: namely, the Electricity Authority of Cambodia (EAC) and the Ministry of Mines and Energy (MME) (Electricity Authority of Cambodia, 2016). The EAC is responsible for matters related to electric power users, including licences, tariff, and penalties, while the MME deals with policies, strategies and plans for energy and electricity supplies, through its offices in all the provinces (Figure 8.2). According to the World Bank (2018a), nearly 50% of Cambodia’s total population had access to electricity by 2016 – a sharp increase from 43% in 2013; and the MME reported that over 60% of Cambodia’s total households were connected to electricity by 2017 (Bo, 2017). China has played an important
China’s BRI in Cambodia 175
Royal Government of Cambodia
Ministry of Mines and Energy
Electricity Authority of Cambodia
Energy Policies Electricity Strategies Power Development Plans Technical, Safety, Env Standards Other Administrative Duties
Regulations Licensing Price Review and Tariff Dispute Resolution Penalties
Electricity Suppliers
Electricity Users
Figure 8.2 Roles of MME and EAC in power sector in Cambodia. Source: Prepared by authors on the basis of Electricity Authority of Cambodia (2016, p. 7).
role in this positive trend by investing in seven dam projects worth about $7.9 billion, making China the largest foreign investor in this sector (Vannarith, 2017). These projects have generated 1,733 megawatts, contributing 84% of Cambodia’s total power capacity in 2017 (Council for the Development of Cambodia, 2017a). Most of the Chinese projects in Cambodia’s energy sector are concessional contracts using the build-operate-transfer (BOT) approach (Table 8.4). There are more projects (e.g., the Sambor Hydro Power Plant) proposed by the Chinese investors despite criticisms on the potential damages to biodiversity and the ecosystem. Transport networks According to the transport minister, China has funded approximately 70% of the investment in roads and bridges in Cambodia (Retka, 2017). These roads and bridges play an important role in promoting regional collaboration and national economic growth. For example, National Road #57 connects Battambang, the regional centre of Cambodia in the north-west, to the Cambodian-Thai border through Pailin Province. There are eight major bridges constructed with loans from China. The eighth Cambodia-China Friendship Bridge across the Mekong River linking two provinces in the south-east is being constructed by the Shanghai Construction Group, estimated to complete in early 2021. Under a BOT contract with Chinese
176 Sun Sheng Han and Ymeng Lim Table 8.4 Cambodia’s hydropower projects invested by Chinese enterprises No. Chinese Projects on Cambodia’s Energy Sector
Power (MG)
Types of Contracts
Year of Operation
Sources
1
193
44-year BOT 30-year BOT 35-year BOT
2011
AidData (2017)
2013
Hydro World (2012) Kunmakara (2014)
2 3 4 5
6 7
Kamchay Hydro Power Plant Stung Atay Hydro Power Plant Lower Stung Russey Chhrum Hydro Power Plant Stung Tatay Hydro Power Plant Stung Chhay Areng Hydro Power Plant Lower Sesan II Hydropower Plant Sambor Hydro Power Plant
120 338 246 108
400 450
2013
37-year BOT –
2014
AidData (2017)
2017
45-year BOT –
2018
Council for the Development of Cambodia (2017a) Bo (2017)
2019
Council for the Development of Cambodia (2017a)
Source: Compiled by authors on the basis of multiple sources.
investors, the construction of the 190-km expressway linking the capital Phnom Penh to the coastal Sihanoukville is also in progress. Under the framework of the BRI, Cambodia plans to expand railway lines, including the Preah Vihear-Koh Kong railway, crossing the southern provinces of Kampong Thom, Kampong Chhang and Kampong Speu; the Phnom Penh-Snoul railway; and Snoul-Stung Treng railway crossing Kratie Province (Heng and Po, 2017). Two lines, namely Phnom Penh-Snoul and Phnom Penh-Poi Pet, are parts of the proposed Singapore-Kunming Railway Link announced in 1995 at the fifth ASEAN summit (Clark, 2016). The Preah Vihear-Koh Kong line is mainly driven by the motivation of two Chinese owned-companies that foresee potentials of iron and steel production in the Preah Vihear province (Kunmakara, 2017). Most sections of this line are proposed in Cambodia’ s long-term railway network master plan (IRITWG, 2015). By using Chinese funds, almost all major ports in Cambodia have been significantly upgraded if not newly constructed. A parcel of 45,000 hectares of Cambodia’s coastal land was leased to China’s Tianjin Union Development Group (UDG) for 99 years at the modest price at $30 per hectare; the investor initiated the development of the Koh Kong port on this land block (Nachemson, 2018). This port is large enough to accommodate most of China’s navy facilities if required and would play a strategic role if the proposed Thai Canal (or Kra Canal, see Figure 6.1), which links the Gulf of Thailand and the Andaman Sea, is built.
China’s BRI in Cambodia 177
In addition, recently there was a cooperation agreement between a local businessman and a Chinese company to conduct a feasibility study on the construction of a deep-sea port in the Kampot Province, and this new port will be an important element of the BRI according to Prime Minister Hun Sen (Kunmakara, 2018a). The Chinese Government also provided a concessional loan of $28.2 million to the Cambodian Government to build a new terminal of the state-owned Phnom Penh Autonomous Port (PPAP). The director-general of PPAP thought that “China’s financial aid to the port is very important to handle the growing f low of goods” (Yi, 2018). All of the three international airports in Cambodia, namely Phnom Penh, Siem Reap and Sihanoukville airports, are operated by a French company under a 45-year concession from 1995 (Kunmakara, 2018b). These airports have no space to expand further and therefore are incapable of serving a sharp increase in the number of passengers in the near future. Prime Minister Hun Sen announced that through the BRI, two new airports will be built in Siem Reap and Phnom Penh. The new airport in Siem Reap is contracted with China-owned Yunnan Investment Holding Ltd under a 55-year BOT concession while the new Phnom Penh airport will be constructed by a joint venture between a local conglomerate and the state – more than two-thirds of the construction cost will be paid by loans from the China Development Bank (Kunmakara, 2018b). A third new airport using Chinese funds is the Koh Kong airport to be built on land leased to China’s Tianjin UDG for 99 years (Nachemson, 2018). Mega-projects There are four mega Chinese projects in Cambodia, namely the Golden Silver Gulf (GSG), the Dara Sakor (DS), the City Gate and the Sugar. GSG is developed by Union Development Group on a 3,300-hectare 99-year concession land block inside Preah Sihanouk’s Ream National Park, aiming at becoming the second tourist destination after Angkor Wat (Pye and Titthara, 2014). This project will cost $5 billion, encompassing villas, five-star hotels, an exhibition centre and duty-free shopping and health facilities (Kotoski and Chandara, 2016). Similarly, the DS Project aims at becoming a luxury city in the Koh Kong Province; it is being developed by China’s Tianjin UDG on a 45,000-hectare 99-year concession land block inside the Botum Sakor National Park. It is estimated that $3.8 billion will be invested for this development, covering a port, airport, casino, golf course, five-star hotels, bungalows, apartments, office buildings, trade centres and entertainment complexes (Chan, 2018; Kimsay, 2018). The City Gate Project is a collaboration between the Cambodian Government and a Chinese investor, to be developed on a 9-hectare land block along the Tonle Sap River owned by the Phnom Penh Autonomous Port (PPAP) (Construction & Property, 2018). The land is leased to the Chinese real estate
178 Sun Sheng Han and Ymeng Lim
developer for 50 years for $16.5 million plus additional contributions by building public infrastructure worth $30 million as well as facilities for PPAP worth $41 million. The area will be transformed into a mixed commercial complex including office buildings, a f loating market, technology offices, the Phnom Penh smart centre, a five-star hotel and spaces for other activities. Further, a Chinese agro-industry firm, the Rui Feng (Cambodia) International Company, has been working on the Sugar Project. Rui Feng has operated a sugar production factory on a 43,422-hectare concession land area in the Preah Vihear Province and has an ambitious vision to transform the province into the largest sugar provider in Asia (Xinhua, 2016). This giant factory employs over 7,000 people, with an expected capacity to produce nearly 2,000 tonnes of refined sugar per day for markets in the EU, China and India (Sokhorng, 2017). Many of the grand projects financed by Chinese investors were seen as unlawful because they develop in protected areas or exceed the limit on parcel size (Kynge et al., 2016). For instance, GSG and DS are located in national parks preserved for the public. Although GSG is assisted by a special committee for its implementation, this does not change the fact that there is no legal basis for its existence (Kynge et al., 2016; Pye and Titthara, 2014). On top of that, the land size granted to DS far exceeded the 10,000-hectare limit defined by Article 59 of the 2001 Land Law (MLMUPC, 2002). By 2015, Cambodia granted over 2 million hectares of concession land to 275 companies, about 17% of which were Chinese, and 18 of these companies develop on land blocks bigger than the legal size limit (Ath and Pilorge, 2015). Sihanoukville Special Economic Zone (SSEZ) SSEZ was established before the launch of BRI in 2008 on a 1,113-hectare block, about 12 km away from the Sihanoukville international deep-water port. The project was initiated by a cooperation between a China-based conglomerate and the Cambodia International Investment Development Group Co Ltd (CIIDG), and has since become a landmark project of the BRI (McGrath, 2017). In 2017, there were 109 enterprises in SSEZ, of which 94 were Chinese companies. It is the largest industrial park in Cambodia, providing more than 16,000 jobs (McGrath, 2017). SSEZ is planned to be the ‘Shenzhen’ of Cambodia, eventually accommodating 300 companies. Strategically, this project will help Cambodia to achieve its industrial development goals, and also to upgrade the deep-water port for handling an increasing f low of goods. Sihanoukville is now a massive construction site that has transformed a sleepy coastal town to a land that feels foreign to Cambodians (Ellis-Petersen, 2018b). There are large and an ever increasing number of casinos (somewhere between 62 and 88) constructed and owned by Chinese companies (Massola, 2019). Among the 156 hotels, 150 are Chinese. 95% of the restaurants and 92% of the tourists are Chinese. Indeed, Sihanoukville airport serves 35
China’s BRI in Cambodia 179
destinations in China, but only two in Thailand, one in Malaysia and one in Vietnam. Locals are attracted by the casino jobs, which offer a monthly pay of $300–$400, which is much higher than the average wage of $182, but they complain about the high cost of living and high crime rate in SSEZ. Local businesses find it hard to survive because the Chinese tourists prefer to spend in shops and on services operated by Chinese investors. These issues are compounded by the displacement of local residents, which has caused further resentment against Chinese. Cement, garments and mining Cambodia has four cement plants, two of which are operated by Chinese enterprises. The first plant – the Queen Kossamak-Liu Shaoqi Cement Factory – was constructed in 1964 in the Kampot Province using Chinese aid; in 2014, a Chinese company invested $100 million for a major upgrading (Kawase, 2018). The Siam Cement Group (SCG) from Thailand built two plants in the same province in 2008 and 2015. As output capacities of the three plants could not meet the demand, the fourth cement plant was built in 2017 by a joint venture between the China-based Conch International Holding and a Cambodian businessman. The fourth plant sits on a 100-hectare land block in the Battambang Province. Its construction costs $230 million and the plant is expected to supply 1.8 million tonnes of cement per year for the north-west region of Cambodia (Vannak, 2017). In addition, Chinese companies have invested in the mining industry for minerals such as iron ore and gold. Ten of the twenty-three mining companies are operated by Chinese investors (Chheang, 2017b). Chinese companies have also invested in the garment industry, most of which are concentrated in Phnom Penh. These investment projects have created over half a million jobs for Cambodia and have promoted the upgrading of the Cambodian labour force’s technical skills (Chheang, 2017b).
The impact and concerns Regional and international interactions The impacts of building transport networks, electricity and logistic infrastructure, and entertainment and tourism facilities have increased connectivity between places and interactions on various scales. First, the mobility of local people is increased within the country and between neighbouring countries through better transport networks. For example, the travel time from the Battambang town in north-west Cambodia to the Prey Veng town in the south-east was 12 hours by car before a bridge and roads were built by Chinese funds. Now it takes a maximum of only six hours. Together with the provision of a reliable electricity network, Chinese
180 Sun Sheng Han and Ymeng Lim
investment has helped to reduce production costs, and has thus promoted local economic development. Second, the development of logistic infrastructure such as special economic zones and ports in different regions of the country has promoted local investments and trade linkages not only with China but also with other Asian countries. According to the World Bank Group (2018), FDI in Cambodia significantly increased from nearly $1,698 million in 2012 to over $2,164 million in 2016 (Figure 8.3), and the estimated FDI amount would be about $2,664 million in 2018. There was a slight drop in 2014 and 2015, ref lecting the effect of political tension after the 2013 election; this was then followed by a sharp jump driven by Chinese investment (Figure 8.3). Third, Chinese investments in large-scale entertainment and tourism facilities, such as casinos and beach resorts, have helped to increase the number of international tourists, especially those from China. The number of Chinese arrivals increased by almost 46% between 2016 and 2017 (Figure 8.4), and about 78% in the first five months in 2018 compared to that in 2017 (Xinhua, 2018). The inf lux of Chinese visitors has brought about both opportunities and challenges. While the increasing number of tourists generates more service-based businesses such as accommodation and restaurants, it challenges local enterprises by demanding practices that are more Chinese, e.g. using Chinese language, serving Chinese food and being aware of Chinese culture. In the Sihanoukville City, local enterprises worry about being not competent compared with businesses run by the Chinese as the latter are more attractive to Chinese visitors. 2164.4
2,200.0 2,100.0
USD Million
2,000.0 1,900.0
1826.1
1,800.0 1,700.0
1697.9
1676.9
1668.8
2014
2015
1,600.0 1,500.0
2012
2013
Years
Figure 8.3 Foreign direct investments in Cambodia. Source: World Bank Group (2016, 2018).
2016
China’s BRI in Cambodia 181 1,350,000 1,200,000 1,050,000 900,000 750,000 600,000 450,000 300,000 150,000 0
Figure 8.4 Top ten international arrivals in Cambodia in 2016 and 2017. Source: Ministry of Tourism (2017).
Social and environmental issues under the BRI framework Though an extraordinary amount of Chinese investment is allowed in Cambodia due to the close and long bilateral relationship and the relative lack of loan-conditions (Kynge et al., 2016), it is often reported that projects backed by Chinese funds have a lack of transparency. This is one of the key features of Cambodia’s National Program for Sub-National Democratic Development (NP-SNDD) for 2010–19. Tan-Mullins et al. (2017) pointed out that the first large hydropower dam in Cambodia, the Kamchay Dam, which was financed by the China Exim Bank and was strongly supported by Prime Minister Hun Sen, was constructed without an environmental impact assessment (EIA) or public consultation. An EIA report was prepared afterwards only for filing purposes because an EIA is required under Cambodian law for dam projects. Similarly, Pichamon (2015) reported that the proposed Preah Vihear-Koh Kong railway passes through ethnic communities, protected forests and national parks without an EIA. For many large-scale development projects with regional or national significance, the majority of local residents were usually kept in dark until they saw technical equipment or construction in their area. The lack of transparency, public consent and impact assessment cause economic, social and environmental concerns to local communities. The construction of the Lower Sesan II Dam, which would provide a capacity of 400 megawatts, was subject to protest by about 120 households who refused to relocate because of low compensation and cultural attachment to the land (Maza and Seangly, 2017), and they were thus exposed to f looding risks. WASHPOST (2015) reported that the dam project gave no
182 Sun Sheng Han and Ymeng Lim
careful thought to its impacts on local communities. In fact, there have been speculations about the impact, such as damage to fishing which might lead to malnutrition of some Cambodians because for a large proportion of the locals fish is their main source of protein (Baird, 2009). Likewise, villagers who were negatively impacted by the DS Project in the Koh Kong Province made complaints to the provincial administration because their fruit trees and crops were bulldozed by a Chinese company (Channyda, 2018). This occurred because of the murky process of land acquisition. Some foreign investors in Cambodia, including the Chinese, have demonstrated aggressive behaviour in land clearance soon after they secured an agreement from the local authority for their investment project. They often began site clearance as soon as possible even before reaching an agreement with the landowners about the compensation package in the hope that site clearance would add pressure on landowners and thus speed up the negotiation process. Indeed, a rush to clear the site was used as a tactic in land acquisitions in 1970s Singapore (Han, 2005) and has more recently been observed in other Asian countries (e.g. Mutoulong in Shenzhen, see Li et al., 2019). Given the soaring land price in the short period from project perception to construction, however, landowners – many of whom are speculators – expect dramatically higher value than existed before the project’s inception. This leads to a huge gap between the amount of compensation that the landowners ask for and the amount that the investor offers. For example, a landowner in the project area who owned a large land block without disclosing the parcel size requested a compensation of up to $100,000 for their impacted property while the company offered only $30,000 plus 2 hectares of land outside the project area. This situation is no different from other neighbouring countries. In Vietnam, the Van Tri Marsh Golf Course project in Hanoi saw landowners reoccupying the construction site as they fought for higher compensation even long after the agreement was signed and the landowners had been resettled (Han and Vu, 2008). Many local communities in the Sihanoukville City, an iconic place of the BRI, also suffered from the fast pace of Chinese investments. The development has created jobs for both the locals and Chinese workers. The concentration of Chinese, estimated at 20% of the city’s population, led to an increase in hostility among the local residents (Ellis-Petersen, 2018a). Land prices have increased sharply, and real estate development has been targeted at Cambodian elite and Chinese businessmen, leading to unaffordable housing for the ordinary people (Heng, 2018). Many local enterprises have been compelled to move out due to increasing operation costs. Many Cambodians say that “the Chinese chase out the Khmers and the Khmers chase out the ghosts,” meaning that when Chinese investments come to urban areas, Khmer people and in particular low-income families move out to undeveloped areas (where the ghosts would live). For many locals who have recently visited Sihanoukville, the feeling is that they are foreigners or
China’s BRI in Cambodia 183
belong to a minority group because the majority of the town’s population is now Chinese. On top of the social issues, many environmental activists, NGOs and local communities have also complained about environmental degradation caused by Chinese investment. Cement is in high demand for urban development and construction associated with the BRI (Liljas, 2018). In response to the construction boom, two more cement factories in Cambodia were built in the last three years. They dig into the hills and change the environment. For example, Phnom Kampong Trach and Phnom La’ang, which have hilly areas long associated with local communities, are disappearing due to cement extraction. Sand dredging from the riverbeds has caused riverbank erosion. For instance, some spots along the Bassac River fell into the water. Interviewed by the Post Magazine, Sok Cham said that “my wife has lived here all her life and she never had these problems. Everyone knows that dredging caused the erosion” while a government inspector told the villagers that the erosion happened naturally (Liljas, 2018). Other environmental concerns include building in national parks or protected areas, and blocking river courses. For example, the DS and GSG projects are developed on sites totalling 48,300 hectares, most of which are within national parks. The implementation of these projects will inevitably encroach on the forest, thus affecting the ecosystem, wildlife and water courses. Similarly, building dams will result in significant changes to the ecosystem and biodiversity. Public consultation, project transparency and EIAs would be useful tools to address these potential concerns, yet they have not been seriously considered. The development of dams in the Cambodian context remains a viable strategy because dams are needed for electricity generation and economic growth but opaque processes and rushed projects cause problems. Although construction on some proposed dams, such as Stung Chhay Areng Hydro Power Plant, has paused due to heated controversies (AidData, 2017), no single dam has been completely stopped by protestors. Cambodia’s diplomatic allies and politics Since independence in 1953, Cambodia has chosen to be a neutral country rather than to side with any superpower. History has already shown that when neutrality was maintained there was stability in government, and vice versa. Balancing between the superpowers seems the most important principle for Cambodia to survive and develop. BRI has provided an opportunity to further consolidate the already strong win-win relationship between China and Cambodia (Zhou, 2019). From the perspective of China, this win-win relationship is based on Cambodia’s need for aid and investment that China is capable of providing, while as a member of the United Nations and ASEAN Cambodia is capable of supporting China in international politics, grand strategic initiatives and economic development (Heng, 2012). In addition, the strategic location of Cambodia supports
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China in its pursuit of geopolitical goals including the implementation of BRI. The long-term nature of China’s infrastructure-driven aid and investment projects means that China needs a strong and stable bilateral relationship in order to harvest the benefits. From the perspective of Cambodia, embracing China’s BRI benefits Cambodia in three aspects. First, a strong relationship with China is much needed politically for Cambodia to protect its sovereignty and territorial integrity; conf licts with its neighbours – Thailand in 2011, Vietnam in 2015 and Laos in 2017 – prove this need (Kunthiny, 2018). China poses no threat to Cambodian territory because there is no common border between the two. In addition, because China is a permanent member of the United Nations Security Council (UNSC), Cambodia may expect China’s support in the international arena. Second, the BRI will enable Cambodia to access enormous investment capital for the construction of required infrastructure and facilities. This will be coupled with more employment opportunities, economic prosperity and improvement in connectivity. Third, Cambodia’s foreign policy towards economic development needs to maintain a certain degree of alignment with China’s because China is a primary economic power both regionally and across the globe. The question is whether a strong Sino-Cambodia relationship is at the expense of the relationship between Cambodia and the West. There is already criticism describing Cambodia as a Chinese vassal state (Dunst, 2020). Cambodia was criticised for blocking a strongly worded ASEAN statement on the South China Sea dispute in 2012 when it was the chair of ASEAN, and again in 2016 (Baliga and Sokheng, 2016), and it stood out from its neighbours in lending full support to the BRI when both Thailand and Vietnam were sceptical of the initiative (Ellis-Petersen, 2018b). Prime Minister Hun Sen’s COVID-19 visit to China was described as an attempt to earn a credit for future payoff (Styllis, 2020). The strong presence of China’s aid and investment in Cambodia, especially with the huge inf low of capital that comes without strings attached, has caused outcry from Western donors for undermining their reform efforts (Sullivan, 2011). This leads to the ultimate question of how far this win-win situation and even the sitting Cambodian government can last. Prince Norodom Sirivudh claimed that “without good governance – which includes transparency and accountability – the BRI projects will fail” (Chheang, 2017a). The same statement may apply to the Hun Sen government. Risks of Chinese debt trap and beyond In addition to possibly falling into the Beijing political camp, Cambodia may fall into the Chinese debt trap. Sri Lanka presents a warning case as its state properties, such as seaport and airport, have been leased to China for 99 years in order to pay off the debt (Heng and Po, 2017). The worry is that because Chinese investors own many large businesses in Sri Lanka, many
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locals will work in Chinese-run enterprises and thus be assimilated socially and culturally. Based on discussions of the DS Project, the GSG project and the Sihanoukville City project, Cambodia is currently walking down a path similar to Sri Lanka. Although Chinese investors cannot take any physical assets such as a port or a five-star hotel back to China or somewhere else after the 99-year leases has ended, such a long period of operation and control will allow China to establish social networks that may dominate Cambodia’s economy. This is a great challenge for the next generations of Cambodians to prepare for, to fight against or to steer towards clearer mutual benefits.
Conclusion BRI in Cambodia has built upon the long-term strategic mutual interests of developing and maintaining a strong Sino-Cambodian relationship. China’s aid and investment under BRI continue the third wave of aid that has been building up since the 1990s. This new stage of aid and investment is significantly different from the past two waves in terms of the massive capital committed, its infrastructure-driven disbursement and the economic winwin expectations. Industrialisation is no longer the aid and investment focus, nor China’s self less nature in economic returns that was observed during the first wave. Military aid which dominated the second wave is also no longer a key part of the aid programmes, if it is included at all. Nevertheless, Chinese aid and investment continue to operate in a competitive environment and its effects have been felt not only by the recipient country but also by Western donors. China’s BRI has brought Cambodia both opportunities and challenges. It helps Cambodia to access a large amount of funds for the provision of largescale facilities and infrastructure which are badly needed. This enables Cambodia to better connect with ASEAN members and other regions through improved transport and logistics networks. Infrastructure development supported by Chinese investment has already stimulated business interactions in domestic and international contexts, and FDI activities have been increasing in Cambodia. More Chinese investment in Cambodia simply means more Chinese support for not only economic growth but also national security. However, some Chinese investments pose legal, social and environmental concerns. On top of that, Cambodia may fall into the Chinese debt trap and China’s sphere of inf luence if the relationships with the West and ASEAN members become strained, and thus the challenge is real for Cambodia to maintain its ability to independently decide on its foreign policies. Nevertheless, Cambodia currently needs Chinese funds with a no-strings attached policy in order to develop its infrastructure and economy, and to stay af loat given economic competition. Though there is a risk of falling into a powerful nation’s sphere of inf luence, that risk is faced by all small states and can be managed with wisdom.
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Acknowledgement The authors are grateful to Professors Detlef Kammeier, Ross King and Kevin O’Connor for their helpful comments in finalising the chapter. Jerome Han helped proofread the manuscript. Iris Fong helped produce Figure 8.1. All the remaining errors are the authors.’
Notes 1 The Political Platform sets out strategic goals, prioritised policies, sectoral development policies and specific measures to be implemented from 2019 onwards to guide the activities of the Royal Government of Cambodia in its service to the nation and the people in the sixth legislature. 2 The Rectangular Strategy – Phase 4 is the ‘Socio-Economic Policy Agenda’ of the Political Platform, serving as the blueprint to guide the activities of all development stakeholders to ensure the efficiency and effectiveness of the public institutions, and sustainable resource management.
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9 The production of megaprojects in Java Colonialism, nationalism, development centralisation vs decentralisation Eka Permanasari and Sidh Sintusingha Introduction Chapter 9 investigates the BRI and other mega-infrastructure projects in Indonesia through the framework of postcolonial modernisation and development associated with foreign and local governments’ agendas. In particular, the chapter discusses Jakarta’s emergent mass-transit rail system, the BRI Jakarta-Bandung High-Speed Rail (HSR) and the Garuda Seawall (see Figure 9.1) – a major f lood-mitigation project. The megaprojects ref lect the
Figure 9.1 Planned rail infrastructure investment and upgrade in Jakarta, Jabodetabek, and Java. Note the scale of the Garuda Seawall to Jakarta administrative area. (Map credit: Iris Fong)
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aspirations of the Indonesian government and politicians, in light of the rapid rise of the middle class – especially for Indonesia’s modernisation and integration with the global economy and Jakarta as a modern metropolis that can compete with other South-East Asian urban hubs. They provide a sense of Jakarta’s and the country’s ‘infrastructure deficit’ and the context for the involvement of and investments from various foreign governments and consultants. This includes the Dutch, former colonial rulers, on the Garuda Seawall project and the Japanese, who provided a lot of planning and development expertise via Japan International Cooperation Agency ( JICA), and the more recent and increasing inf luence of China in their wide-ranging infrastructure projects across the archipelago. Significantly, the competition for the Jakarta-Bandung HSR between the Japanese and Chinese governments is consistent with geopolitical and economic contests elsewhere in the planning and implementation of the BRI. At a regional scale, the metropolitan Jakarta mass-transit project supports urban integration with West Java and its capital, Bandung – and is consistent with development ambitions manifest in the master plans and political visions. Finally, the chapter interrogates whether the Chinese BRI in Indonesia is comparable/has parallels to Japanese, past colonial Dutch and present Dutch government involvement in major infrastructure development in Indonesia that sustained the ‘colonial gaze’ upon the country.
Global and national complementarity: Joko Widodo’s infrastructure-building agenda and the BRI Since independence from the Dutch, successive Indonesian governments inherited the challenges of uneven development that has mainly focussed on Java and tying geographically dispersed and diverse cultures and polities together as a national entity. This is ref lected in Indonesia’s national foundation philosophy ‘Pancasila’ proclaimed at independence in 1945 which includes Persatuan Indonesia (the unity of Indonesia) and Keadilan Sosial bagi seluruh Rakyat Indonesia (social justice for all the people of Indonesia). The Indonesian government under President Joko Widodo can be seen to strategically employ the BRI to redress this as part of preparations for Indonesia’s readiness for a more integrated global economy. Indonesia does not have a well-integrated plan for international trade and the country’s view towards the BRI is as both a regional threat and an opportunity to redress its infrastructural deficit. While export is considered good for the economy, the potential inf lux of cheaper imports can be detrimental for the local economy. Complementary to the BRI’s international orientation, the country is embarking on a large infrastructure construction effort spanning from Sumatra island to Papua, with the highest concentration of development in Jakarta. Joko Widodo divides infrastructure projects into three main categories: 37 National Priority Projects, 245 National Strategic Projects and the National Middle-term Development Plan in providing infrastructure outlined in book II (KPPIP, 2018). Within the top 37 National Priority Projects, Joko Widodo
Production of megaprojects in Java 193
focusses on building roads, bridges, oil and gas production plants, power stations, ports, water treatment plants, urban transportation systems, highspeed and regular railways as well as information technology infrastructure. The 245 National Strategic Projects focus on delivering infrastructures across Indonesia to ease the transport and logistics problem in the country that consists of many islands. Having facilitated Indonesia’s independence during the Second World War and through JICA, successive Japanese governments have aided Indonesia’s development agenda over many decades, but the past decade saw a significant increase in China’s involvement countrywide. Outside of Java, projects associated with the BRI include three international ports in the northern parts of Sumatra, Borneo and Sulawesi. In north Sumatra, the Indonesian government plan to build Kuala Tanjung Port, Sei Mengke and a new road from Medan to Sibolga (Pernando, 2018). As one of the 37 National Priority Projects, the development of Kuala Tanjung Port as an international hub is in line with the Silk Maritime Route. Here, the plan is to increase the container volume into 12.4 million TEUs by 2039 (KPPIP, 2018), enabling Indonesia to compete with Singapore and Malaysia. At the same time, the port will serve the needs of Sei Mangkei Special Economic Zone (SEZ) and Belawan Port. Here, the area will be developed as a fish processing factory as well as a cruise ship harbour. In north Borneo, the collaboration is to build a new power plant and energy infrastructure in the industrial zone at Tanah Kuning. In north Sulawesi, there are plans to develop the Bitung-ManadoGorontalo train line as well as new ports and airports to connect these three cities with Bitung to be developed as an industrial zone. Significantly in 2012 representatives of the Indonesian and Japanese cabinets have agreed upon the Master Plan for Metropolitan Priority Area (MPA) developed by JICA for Jakarta to comprehensively address Jakarta’s infrastructure deficit through PPP developments from both countries ( JICA, 2012a). The Jakarta-Bandung HSR was part of the priority project in the MPA; however, in 2015 the Indonesian government awarded the project to a Chinese-led consortium (China Railway International Co. Ltd) over the Japanese proposal. The consortium is in collaboration with four state-owned companies (PT Wijaya Karya Tbk, PT Jasa Marga Tbk, PT KAI and PT Perkebunan Nusantara VIII), forming a new company – PT KCIC (Kereta Cepat Indonesia China) with 60% share owned by the state-owned companies and 40% share owned by the Chinese-led consortium (Kerata Cepat, 2019). Following the BRI Conference in 2017, in May 2017, the consortium of Indonesian and Chinese companies signed a USD4.5 billion loan agreement with China Development Bank (Li and Ramadhan, 2018; Perwanto, 2017) to build Indonesia’s first HSR with the bank releasing USD1 billion of funding to initiate the project (Idris, 2017). The loan did not require the Indonesian government funding nor guarantee, which is a major factor in China’s success in the bid (Salim and Negara, 2016, p. 7). The 148 km HSR will connect Jakarta and Bandung, the country’s third-largest city and the capital of West Java province.
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Jabodetabek integration towards urban-regional competitiveness under Japanese tutelage While Jakarta Metropolitan Area leads the economic growth of the entire country, the poor quality and lack of infrastructure have become the main barrier for development. Jakarta Metropolitan Area or Jabodetabek1 faces a host of challenges with the city’s infrastructure overwhelmed by the rapid growing economy. The metropolitan area had a population of 28 million in 2010 which increased to 31.6 million by 2015, one of the largest urban agglomerations in the world, where “…60 percent of national export originates and is the location where 80 percent of economic decisions are made” ( JICA, 2011). The population spread varies with the city of Jakarta housing the highest proportion at 34%, followed by the population in Depok and Bogor of 27% ( JICA, 2012a). The Mori Global Power City Index’s criteria on economy, research and development, cultural interaction, liveability, environment and accessibility placed Jakarta at the bottom four among cities across Europe, America and Asia (The Mori Memorial, 2017). The report, which evaluates and ranks cities’ comprehensive power to attract people, capital and enterprises highlighted that Jakarta’s density at 14,532 people per km 2 is among the highest in Asia 2 that significantly impacts its surrounding cities (The Mori Memorial Foundation, 2018). People live in the Jabodetabek but work in Jakarta causing significant traffic burden. The growth rate of the city’s population from 2010 to 2015 is above replacement levels of 2.1 (The Mori Memorial, 2017) and as the need for housing increases, land availability decreases which pushes up land prices. In 2015 the cheapest residential land price in Jakarta was IDR480,0003 per m 2 (Elmanisa, 2017), considerably too expensive for the productive age group (30–34 years old) that dominates the population. With the average salary of around USD300–500 per month, a house in Jakarta with the minimum price of USD60,000 is not affordable. This makes housing developments in Bogor, Depok, Bekasi and Tangerang more attractive as they cost less than in Jakarta (Han and Basuki, 2001), inevitably leading to urban sprawl. Hence, integration is also needed for Jakarta’s accessibility and connectivity. The high density impacts Jakarta and the social and natural resources of its greater metropolitan areas. UN-Habitat’s urban goals for 2030 include enhancing inclusive and sustainable urbanisation and capacity for participatory, integrated and sustainable human settlement planning and management. The goals are highly relevant for Jakarta and its satellite cities, which are dependent on each other and need to be further integrated to ensure land-use efficiency for natural and social objectives. These pose challenges for both government and private sectors to create a more sustainable living urban area. According to Mori Global Power City Index’s 2018 report, Jakarta ranks the lowest in terms of accessibility (ranking 43) (The Mori Memorial Foundation, 2018). This is not surprising because Jakarta experiences traffic congestion and the lack of public transport accessibility for many decades with
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private cars being the most comfortable and convenient travel mode to reach Jakarta. With many new real estate developments at Jakarta’s satellites, the numbers of commuters have increased every year. Until the mid-1970s, Jakarta practically grew and developed without proper planning. Many city streets have been widened and repaired. Satellite cities in the southern part of Jakarta are transformed into edge cities as urbanisation expands southwards (inland). In 1978 the first toll road, the Jagorawi Toll Road, begun operation connecting Jakarta and Bogor and was very profitable for its managers, catalysing the growth of housing around it. With reference to data on toll roads and real estate in Jakarta (offices and housing), a clear pattern of interaction between transportation and land use can be observed (Firman, 2009). The economic benefits led the government to invest in building other toll roads, namely Jakarta-Tangerang-Merak, Jakarta-Bekasi-Cikampek and toll roads in the city, and conduct studies focussed on the plan to construct the Jakarta Ring Road. Further studies on infrastructure development for public transportation were then conducted on broader, multi-modal transportation needs (Dinas Perhubungan, 2018). The development of infrastructure in Jakarta Metropolitan Area is in response to the population growth and the rise of middle class in Indonesia. Based on the World Bank report, the monthly expenditure of Indonesian people has significantly increased, in particular the middle-class group (World Bank, 2012) which appreciates the national buying power. One of the steadily growing businesses is the automotive industry with a minimum of 10% rise in vehicle production every year broadly in line with the population growth. In contrast to the high private vehicle numbers, road development ratio is only 0.01% per year in Jakarta ( JICA, 2015). As a result, the number of cars on the road rises significantly, compounding traffic jams. Jakarta suffers at least IDR67 billion in losses per year due to the traffic as people waste fuel and time (Aziza, 2017b). Public transport is heavily utilised on the inner-city KRL Commuter train lines and 12 Bus Rapid Transit (BRT) corridors.4 These simply do not meet the requirement to serve the city’s dynamic population of 13 million during the day and 10 million during the night (Badan Pusat Statistik, 2017), a result of commutes from the greater metropolitan areas (Bogor, Depok, Bekasi, and Tangerang) to Jakarta during the working hours. Furthermore, based on the study by the Jabodetabek Urban Transportation Policy Integration ( JUTPI, 2015), in 2010, the transportation mode choice in Jabodetabek is primarily motorcycle (53%), followed by car (20%) and public transport (31%). In fact, it projects that by 2030, the car share will increase to 31% with reduction in public transport use to 20%. Despite the long-delayed plans, the Jakarta government has been attempting to address the congestion and commenced planning on the Mass Rapid Transit (MRT) project since 2008. JICA’s JABODETABEK Metropolitan Priority Area (MPA) master plan identified the two MRT lines in the list of fast track projects ( JICA, 2012a). Furthermore, JICA identified several critical issues that need to be resolved: public safety and social condition,
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underdeveloped infrastructure, the implementation of the law and finally the human resources ( JICA, 2012a). Consequently, implementing Jakarta’s public transportation developments5 is an opportunity for the development of satellite cities, responding to the trend of increased public transportation use to mitigate traffic congestion and create efficient land use. Funded by a soft loan from JICA, the 20.1 km MRT first phase commenced construction in 2013 and opened in March 20196 – with planned transit-oriented development (TOD) projects to complement it. This northsouth MRT line connects the southern and central parts of Jakarta and serves the Lebak Bulus-Bundaran HI route. Phase 2 construction spanning 6 km will serve the Bundaran HI-Kota. The construction has commenced in March 2020 and is estimated to finish by December 2024. While MRT project is progressing, Joko Widodo also pushed the development of Light Rail Transit (LRT) project. The LRT has been chosen to compliment the rail-based mass transportation system in Jakarta due to its f lexibility in utilising the available city space and its lower investment cost. In line with his national development plan 2015–19, the Indonesian government proposed seven LRT corridors7 to serve the commuters within the Jakarta as well as the Jabodetabek lines,8 linking Jakarta to Bogor, Depok and Bekasi. The first 6 km corridor LRT connects the Velodrome Stadium (a new cycling sports stadium in Jakarta) and Kelapa Gading (originally targeted to serve visitors to the 2018 Asian Games event). An important LRT line to serve the east-west commute across the city is the Pulogadung-Kebayoran Lama Corridor (20 km) which is expected to be in operation by mid-2022. Following on Joko Widodo’s initiative in 2019, the Jakarta government led by his former protégé Governor Anies Baswedan embarked on building Jakarta’s integrated rail-based transportation system – part of the Jakarta Urban Regeneration ( JUR) megaproject which proposed 20 new projects throughout the city. New lines are planned for the coming decades comprising of the Jakarta Loop Line, LRT Systems and MRT expansion totalling around 400 km. Employing TODs, the urban renewal in Jakarta targets the development of surrounding pockets around public transport hubs implemented by private developers. The JUR aims to showcase the city as sustainable, modern, compact and integrated, representing a modernised national identity. For instance, four TOD developments are proposed for the MRT and have been given specific themes. The Fatmawati area is branded as ‘dynamic,’ Lebak bulus area is portrayed as ‘gateway,’ Dukuh Atas area is depicted as ‘movement collaboration’, and Blok M is depicted as ‘Garden city.’
Jabodetabek integration: BRI HSR Pan-Asian competition and the Chinese gaze? The HSR network was originally planned to span Java Island, linking the three largest cities, Jakarta, Bandung and Surabaya together (refer to Figure 9.1). The project was divided into two phases: Phase 01 Jakarta-Bandung
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(150 km) and Phase 02 Bandung-Surabaya (730 km). In fact, Japan has been pushing this project since 2008 and JICA has conducted an exhaustive study ( JICA, 2012b, 2013). With the launch of the BRI, China submitted a counterbid for the Phase 01 route against Japan (Rondonuwu, 2015). Ultimately, the project was given to China due to a far more favourable financial offer.9 The HSR will reduce the travel time between Jakarta and Bandung to 35 minutes from the former 2 hours 20 minutes to 3 hours 30 minutes by toll road or 4 hours by train – purposefully integrating Bandung into Jabodetabek. The politicians and media touted a three-year construction period with the HSR to be operable by 2019 (Railway Pro, 2016) – which was highly optimistic. The year 2019 was a significant year as it was when the presidential election was due, and Joko Widodo would like the HSR to be part of his re-election bid. On 21 January 2016, Jokowi attended the high-speed rail project’s groundbreaking ceremony in Walini, West Java province with China Railway Corp manager Sheng Guangzu, yet Mcbeth (2017b) commented that “There was a ground-breaking ceremony in January, but it has yet to get off the ground, battered by everything from financial, environmental and land issues to the project’s viability.” Moreover, rail experts say that the proposed train’s speed of 350 km/h and four planned stops make little sense over the relatively short 143 km distance. The HSR project consists of eight stations, five of which are planned to be TODs as the rail alignment and station is located away from population centres (see Figure 9.1). The major JKT-BDG HSR Transit-Oriented Development Strategic Plan is to create themed TODs at the key HSR stations of Halim Capital New Gate, Karawang Industrial Town, Walini Agrotourism and Education centre, and Tegalluar Technopolis City (see images in Skyscrapercity, 2017). International consultant Atkins was hired to master plan the TOD. This is a practice consistent with Chinese development precedents – to ascend the development ladder through urbanisation, in this case, the building of new cities. The terminuses at Jakarta and Bandung are in the exurbs of both cities and need to be linked via LRT to the city centres. The LRT link is under construction in Jakarta and is experiencing much delay, while it is still in the planning stage in Bandung (Achdiat, 2018). In fact, the TODs of Tegalluar, Walini and Rebana have been touted as possible alternative sites for the relocation of the capital of West Java (Bramasta, 2019). Facing multiple barriers of land acquisition, finance and security issues, the project10 was significantly delayed – Atimes noted that “President Joko Widodo’s signature infrastructure project has stalled for a host of familiar reasons, including resistance from the powerful military.” It is also observed that Indonesia’s private sector has been hesitant to be involved and invest in the associated developments. This may not be surprising due to the novelty of the project and, hence, the perceived risk associated with it. How long it takes to resolve all the outstanding issues plaguing the Jakarta-Bandung venture is anyone’s guess, but it is almost certainly one
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item Widodo can cross off his list of first-term successes when he runs for re-election in 2019. (Mcbeth, 2017b) Initially, China Development Bank (CDB) pledged to provide 75% of the total cost, with the rest coming from state-run construction company PT Wijaya Karya, state railway firm PT Kereta Api, state toll-road outfit PT Jasa Marga and plantation company Perkebunan Nusantara. But the CDB has refused to disburse the funds, offering instead a bridging loan until the Indonesian government has resolved the many land issues that still stand in the way of the project getting off the ground. (Mcbeth, 2017b) Moreover, since the initial assessment of this project the Indonesian government decided not to fund the Jakarta-Bandung fast train project and only provide oversight on policy consistency in the development of HSR. This is in accordance with Perpres No. 107/2015 concerning the Acceleration of the Implementation of Infrastructure and Facilities of the Fast Train between Jakarta and Bandung. The project received a major push when PT KCIC and CDB signed a loan agreement amounting to USD4.5 billion in Beijing on 14 May 2017, witnessed by the presidents of both countries (Li and Ramadhan, 2018). In other words, the project has endorsement from the very top, with Xi stating that “I proposed the 21st Century Maritime Silk Road for the first time when I delivered a speech in Indonesia in October 2013. The alignment of the proposal with Indonesia’s Global Maritime Fulcrum has enriched bilateral ties”11 (Hu, 2017). China already released USD1 billion of funding to initiate the project (Idris, 2017). The contractor is China Railway Group Limited known as CREC, one of the world’s largest construction firm, with the Chinese Government as the major shareholder. Reports show that the development of the fast train has been slow, facing challenges in implementing the programme. With the train due to operate in 2021, the high-speed railway has made only 7.6% progress by the end of June 2018. PT Wijaya Karya (the local company) is confident that the project will be delivered on time (Pitoko, 2018). Not meeting the 2019 election cycle timeline, Widodo was disappointed with the progress and concentrates more on other infrastructure projects in Indonesia (Idris, 2017). To balance competing interests between China and Japan, the Indonesian government offered the second phase 685 km Jakarta-Surabaya ‘medium-fast rail link’ to Japan – but the project is dogged by similar issues, including the USD25 billion price tag. This suggests that while there’s a transportation ‘master plan,’ individual projects are up for competition but may not be coordinated or compatible with each other. However, due to high costs, Jakarta
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is seeking project bidders for the Jakarta-Surabaya project. This, according to Nikkei, is seen as a “… snub to Japan” (Suzuki, 2017).
Symbolic centrality imposed on the postcolonial nation: the Dutch designed Garuda Seawall in Jakarta Apart from the megaprojects to integrate the transportation systems, a large sea wall was proposed as a f lood mitigation measure and as a new image to symbolise the identity of Jakarta and Indonesia. As the city sits on a delta of 13 rivers discharging to the Jakarta Bay and with nearly 40% of the northern part of the city below the sea level, during the rainy season, the city is f looded by the rising sea and upstream water (Ministry of Public Works, 2011a). This is compounded by land subsidence due to the massive extraction of ground water and, every year, the city is sinking approximately 0.5–15 cm, in fact reaching up to 17 cm in some areas (Ministry of Public Works, 2011b). The f loods often paralysed the city with electricity blackouts, roads blocked and the economy disrupted for days. In addition, the f lood itself often results in many casualties (Supratiwi, 2013). In response, the 43 km Giant Seawall project was initiated through cooperation between the Indonesian and the Dutch governments. Under the Ministry of National Development Planning (Bappenas), both parties issued the Jakarta Coastal Defense Strategy ( JCDS) report that advocates for long-term solutions to save Jakarta from sinking. Based on the study, previous Jakarta Governor Fauzi Bowo (2007–12) deployed a team to independently study and design the Giant Seawall and explore the opportunity to expand the city through land reclamation project.12 The project was taken over by the Indonesian government, and continuing collaborations with the Netherlands, the consortium issued a master plan, the National Capital Integrated Coastal Development (NCICD), that proposed three sea walls’ scenarios integrated with 17 reclamation land plots, established under Suharto era through presidential decree no. 52, 13 July 1995 (Aziza, 2017a). In the first scenario, the seawall lines the Jakarta bay to reduce land subsidence, while the second scenario the wall runs along the edge of the reclamation land. In the most ambitious third scenario, the Giant Seawall is built on the deep-sea water located 6 km away from the bay’s edge, creating an estuary dam for the city with access provided to Indonesia’s main port Tanjung Priok. The plan was combined into the Jakarta 2010–30 master plan that proposes three layers of seawalls, spanning from Tangerang to Bekasi, with the outer layer functioning as a dam and a wave breaker. By the end of 2011, Governor Bowo deployed a multidisciplinary team under PT Pembangunan Jaya ( Jakarta provincially owned enterprise) to further design the seawall. Jakarta was rebranded as a self-sustained city with abundance of water and energy sources. Pre-empting future developments, the new master plan allows the city to become a new centre for business and government service. The difference between this master plan and the Jakarta
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2030 plan is that the outer seawall spans only within Jakarta’s administrative area to reduce the potential risks from political conf licts and tension between the three provinces – suggesting barriers to Jabodetabek integration. The seawall is to be well connected to the existing Jakarta transportation network via a toll road and MRT line. In 2014 Bowo’s master plan was further developed by another consortium led by Dutch firm Witteven+Bos and Grontmij with KuiperCompagnions, Deltares, Ecorys and Triple A as sub-consultants. Unlike the previous design by PT Pembangunan Jaya, the Giant Seawall was designed as a Great Garuda with its wings spreading from Tangerang to Bekasi. The Garuda bird, the Indonesian national symbol, is seen as a nation saviour, a bold and brave figure that brings prosperity for Indonesia (Kemenkoekuin, 2014). The Garuda-shaped land reclamation is to play a major role as a welcoming gesture and the new icon for the city as it will be the first image for foreigners and Indonesian expats when landing at the airport. The Garuda functions as a new central business district (CBD) for the high-end mixed-used urban development, offices and civic amenities such as schools, hospitals and governmental functions (Kementrian Koordinator Bidang Perekonomian Republik Indonesia, 2014). From the seawall access is planned via a high-speed train which connects west-east across Java island from Cilegon and Banyuwangi. Unsurprisingly the Great Garuda master plan garnered public (and international) media attention and the Indonesian government quickly endorsed the Dutch version of Giant Seawall design over the local consultant (Bowo’s). In the plan, the body and the head of Garuda serve as the CBD including the new government buildings, while the tail is for the residential, mixed-used sport, leisure and entertainment (see outline of plan in Figure 9.1). The wing is dedicated for the maritime communities, fishing port and fishermen community. Initially the Dutch counterparts designed the Garuda to span from the Tangerang to Bekasi; however, this plan was later revised and resized due to the massive land reclamation required. In this conception, Jakarta is presented as a new waterfront city, a centre for business and leisure as well as politics and the new ‘world-class’ beacon for South-East Asia (Sintusingha, 2008). This intense relationship between the former coloniser (Dutch) and the colonised (Indonesia) displays the condition of postcoloniality (Maddison, 2012). The adoption of the Garuda symbol by Dutch planners, a sensitive and symbol of pride for Indonesians, can be seen as a way to win the local’s attention and approval. Despite the progress of the Giant Seawall planning process, the project has been postponed due to the costs and reclamation issues. The initial idea of saving Jakarta from sinking has been politicised which resulted in the never-ending debate as whether to proceed or stop the development. In fact, at the time of writing, there are proposals to escape the troubles of Jakarta and build a new capital in Borneo altogether.13
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Desired economic modernity and political legitimation negotiated with foreign agents and interests The mega-infrastructure developments discussed in this chapter ref lect the concept of Capital and Capitol. Political elites use architectural forms, and by extension infrastructure, to establish and legitimise specific regimes (Sintusingha and King, 2021; Vale, 1992). As Vale (1992) points out, “government buildings … serve as symbols of the state.” These series of government buildings, the capitol complex and mega-infrastructure are mostly located and/or centralised in the capital city. Each colonial; postcolonial; and, by extension, foreign entities discussed in this chapter uses architecture, urban form and infrastructure to legitimise the regime and establish authority, inf luences displayed on a certain locus of power (Capitol). The projects discussed ref lect attempts to forge a new, modern identity by the Indonesian state and to build political and economic capital for the public and private interests of Japan, China and the Netherlands – particularly as Indonesia is expected to develop into one of the world’s largest and most vibrant economies. For the case of the Garuda Seawall, the proposed city is conceived to be the new symbol for Jakarta which is full of layered symbolism from the colonial Dutch rulers and postcolonial Indonesian Presidents (Kusno, 2000; Permanasari, 2010). Through the Garuda Seawall master plan project, the postcolonial government seized the opportunity to legitimise its power and reinforce nationalism and modernity even though it was framed by (former) colonial eyes and to impress foreign gazes. The practices of politics and urban forms are combined and displayed in the new forms that manifest the transformation of meaning and use of the postcolonial city. However, at the time of writing, the Garuda Seawall is not going ahead ref lecting Europe’s diminishing inf luences while the BRI high-speed rail is under construction pushed by China’s significant financial power. By supporting infrastructure development projects, especially one of such prominence as HSR, China challenges Japan in assisting Indonesia in developing its economy and physical infrastructure. Although the project was first proposed by JICA, which conducted much of the background research and study, the Chinese government moved very quickly to invest in the project. Having South-East Asia’s first HSR is a potential source of pride for Indonesians in the context of the region’s competitive development. More broadly, the BRI-developed infrastructure sustains the urbanisation agenda across the archipelago where the proportion of people living in cities is projected to increase from 53% in 2012 to 71% in 2030 and the share of GDP from the urban sector to increase from 74% to 86% (McKinsey, 2012). Even though the Chinese government emphasised that the BRI programme comes without any political strings, Chinese investments – as with Japan’s and the Netherland’s – have political and economic implications. China establishes alliances through serving greater market access and funding through its infrastructure-driven investment model tied to its BRI global vision.
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Yet the loan is translated into infrastructure projects that often favour and involve Chinese companies and workers.14 As Indonesia suffers from underinvestment in infrastructure, the HSR project has been eagerly embraced by the politicians. Moreover, they align and complement President Joko Widodo’s ambitious infrastructure development plans, particularly projects related to energy, transport hubs, toll roads, airports and new ports. Through Bappenas, Indonesia took part in the BRI to speed up industrialisation and globalisation in the urban region. Critically, as South-East Asia’s largest economy, Indonesia does not fall into the ‘debt trap’ category as most of the infrastructure projects are funded by international or local investors. In fact, Indonesia benefits from the geopolitical rivalry between Asia’s economic superpowers for inf luence in the country. Jakarta’s first MRT line was funded by highly favourable soft loan from JICA. Moreover, the Indonesian government has not had to fund the HSR nor provide official guarantee for the loan. Indonesia is exploiting the external competition to meet its infrastructure demands to address the needs of a potential 135 million strong consuming class in 2030 up from 45 million in 2012 (Mckinsey, 2012, p. 2). Ironically, the HSR project in integrating Bandung with Jakarta and enhancing Bandung’s centrality may have achieved the Dutch colonial vision of a century ago in shifting the colonial capital to Bandung. Bandung is already a popular destination for well-heeled Jakartans and, with the convenience of HSR, the city may provide a high-end alternative from the problems of Jakarta as a place to live and work. The HSR represents significant steps towards the integration of Jabodetabek region and, with planned extensions to Surabaya and other centres, the whole Java Island. In doing so, it concurrently decentralises development from Jakarta which contrasts with Jakarta’s mass-transit plans and the Garuda Seawall which arguably entrenches Jakarta’s symbolic and economic centrality. However, the proposed move of the capital to Kalimantan represents the strongest intent to, at least symbolically, further devolve power and development beyond Java to the rest of the Indonesian archipelago. This redresses the broader colonial legacy that has led to the formation of a geographically sparse and culturally diverse nation-state and that attempts to unite and integrate it as a national entity while redressing economic and development inequities that manifest in the mega-infrastructure projects discussed in this chapter.
Notes 1 An acronym of Jakarta-Bogor-Depok-Tangerang-Bekasi ( Jakarta and its satellite cities) which later became Jabodetabekpunjur based on the presidential article No. 54, 2008. 2 More broadly the island of Java has one of the world’s highest density. For comparison, the islands of Java and Japan have similar population but Java is almost three times smaller in area. 3 In 2017, 1USD traded for ~13,300 Indonesia rupiah (IDR).
Production of megaprojects in Java 203 4 With origins in the colonial era, the KRL Commuter has a network of 430 km and the BRT, developed since 2004, 230 km – the longest in the world. 5 This includes the f light industry that was transformed with low-cost carrier providers that rapidly emerged and enabled people to f ly across the archipelago with more ease. These infrastructure networks are facing the biggest challenge in the shift of new emergent lifestyles. 6 With another nine MRT lines planned for a total of 240 km. 7 The seven LRT corridors within Jakarta are (1) Kebayoran Lama-Pulo Gadung, (2) Tanah Abang-Pulo Gadung, (3) Joglo-Tanah Abang, (4) Puri Kembangan-Kemayoran, (5) Pesing-Kelapa Gading, (6) Extention KemayoranAncol and (7) Bandara Soeta-PIK-Pluit-Kemayoran-Cempaka Putih. 8 The six corridors of LRT Jabodetabek are (1) Cawang-Cibubur, (2) CawangKuningan-Dukuh Atas, (3) Cawang-Bekasi Timur, (4) Dukuh Atas-PalmerahSenayan, (5) Palmerah-Grogol and (6) Cibubur-Bogor. 9 This despite some questionable record of previous Chinese-led consortiums that built coal power station as part of Indonesia’s ambitious electricity expansion (Mcbeth, 2017a). 10 As with most of the National Priority and National Strategic projects (Rachman, 2018). 11 At the meeting, Joko Widodo and Xi Jinping witnessed the signing of three agreements between the two countries – first on implementation of comprehensive strategic partnership between the two countries in 2017–21 signed by Foreign Minister Retno Marsudi and her Chinese counterpart Wang Yi, second on economic and technical cooperation signed by Minister for National Development Planning Bambang Brodjonegoro and his Chinese Trade Minister Zhong Shan, and the third on cooperation in facility of Jakarta-Bandung HSR signed by Chief Executive of PT KCIC Hanggoro and Chief Executive China National Development Bank Hu Huaibang with cooperation commitment of USD4.498 billion. 12 Even though the project was initiated by the central government, Fauzi was eager to contribute as the project is in his territory. 13 See https://www.theguardian.com/world/2019/aug/27/why-is-indonesia-movingits-capital-city-everything-you-need-to-know. 14 “There was an open tender process, but the playing field was tilted sharply in favour of the Chinese companies, which eventually won contracts for nine out of the 10 plants to be built across Java. Japanese, South Korean and European consortiums couldn’t compete with Chinese willingness to build the 600MW plants at the indicative price of USD700,000 per megawatt – about 30 per cent lower than the normal price – and finish the jobs in three years” (Mcbeth, 2017a).
References Achdiat, I. (2018). Kereta Cepat Susuri Bandara Kertajati dan Bandara Soetta (in Bahasa). Airmagz. Published on January 09, 2018 in https://www.airmagz. com/19087/kereta-cepat-susuri-bandara-kertajati-dan-bandara-soetta.html Aziza, K.S. (2017a). NCICD dan Reklamasi Teluk Jakarta Berbeda, Ini Penjelasan Bappenas [NCICD and Jakarta’s Bay reclamation difference, explanation from Bappenas]. Kompas. Published on May 11, 2017 in https://sains.kompas. com/read/2017/05/11/113300426/ncicd.dan.reklamasi.teluk.jakarta.berbeda.ini. penjelasan.bappenas
204 Eka Permanasari and Sidh Sintusingha Aziza, K.S. (2017b). Bappenas: Kerugian akibat Macet Jakarta Rp 67 Triliun Per Tahun [Bappenas: Losses due to traffic jams in Jakarta are IDR 67 trillion per year]. Kompas. Published on October 10, 2017 in https://ekonomi. kompas.com/read/2017/10/06/054007626/bappenas-kerugian-akibat-macetjakarta-rp-670-triliun-per-tahun Badan Pusat Statistik. (2017). Statistik Indonesia 2017 [Statistical Yearbook of Indonesia 2017]. https://www.bps.go.id/publication/2017/07/26/b598fa587f5112432533a656/ statistik-indonesia-2017.html Bramasta, D.B. (2019). Mengenal Tegalluar, Walini, dan Rebana, Calon Ibu Kota Baru Jawa Barat. Kompas. Published on August 30, 2019 in https://www. kompas.com/tren/read/2019/08/31/080732165/mengenal-tegalluar-walinidan-rebana-calon-ibu-kota-baru-jawa-barat?page=all Elmanisa, A.M. (2017). Land price mapping of JABODETABEK, Indonesia. Geoplanning Journal of Geomatics and Planning, 4(1), 53–62. https://ejournal.undip.ac.id/ index.php/geoplanning/article/view/12182 Firman, T. (2009). The continuity and change in mega-urbanization in Indonesia: A survey of Jakarta–Bandung Region ( JBR) development. Habitat International, 33(4), 327–39. https://www.sciencedirect.com/science/article/abs/pii/ S0197397508000489 Han S.S. and Basuki, A. (2001). Spatial pattern of land value in Jakarta. Urban Studies, 38(10), 1841–57. Hu, S. (2017). China, Indonesia agree to step up Belt and Road cooperation. CGNT. Published on May 14, 2017 in https://news.cgtn.com/news/3d49544e33677a4d/ share_p.html Idris, M. (2017). Ini Progres Kereta Cepat Jakarta-Bandung yang Bikin Jokowi Kesal. Detikfinance. Published on May 23, 2017 in https://finance.detik.com/ berita-ekonomi-bisnis/d-3509700/ini-progres-kereta-cepat-jakarta-bandungyang-bikin-jokowi-kesal Jakarta Dinas Perhubungan. (2018). Railway Masterplan in Jakarta. Jakarta: Dinas Perhubungan Provinsi DKI Jakarta. http://djka.dephub.go.id/uploads/201908/ KP_2128_TAHUN_2018.pdf JICA. (2011). Joint Press Release on the First Steering Committee of the Metropolitan Priority Areas for Investment and Industry. Published on March 17, 2011 in https://www.mofa.go.jp/region/asia-paci/indonesia/jpr_mpa01.html JICA. (2012a). Jabodetabek MPA Strategic Plan. Jakarta: JICA. http://open_ jicareport. jica.go.jp/pdf/12083945_01.pdf JICA. (2012b). Study on the High Speed Railway Project ( Jakarta-Bandung Section), Republic of Indonesia. https://www.jetro.go.jp/jetro/activities/contribution/oda/ model_study/infra_system/pdf/h23_result03_en.pdf JICA. (2013). JICA「インドネシア ジャワ高速鉄道開発事業準備調査(フェーズⅠ)」 の受注・ 契約について (in Japanese). http://www.jictransport.co.jp/admin/news/ pdf/201312JICA_%20Indonesia%20_HSR.pdf JICA. (2015). Republic of Indonesia Preparatory Survey on Intelligent Transport System Project to mitigate Traffic Congestion in Jakarta (PPP Infrastructure Project) Final Report. https://www.jetro.go.jp/jetro/activities/contribution/oda/ model_study/infra_system/pdf/h23_result03_en.pdf JUTPI. (2015). Outline of Revised Transport Master Plan by JUTPI. Project for the Study on Jabodetabek Public Transportation Policy Implementation Strategy. Jakarta: JICA. http://open_ jicareport.jica.go.jp/pdf/12078994_02.pdf
Production of megaprojects in Java 205 Kemenkoekuin and National Capital Integrated Coastal Development. (2014). Master Plan National Capital Integrated Coastal Development. Jakarta: Government of Indonesia and Government of Netherlands. https://www.bureauanl.nl/files/MPfinal-NCICD-LR.pdf Kerata Cepat. (2019). On Jakarta-Bandung HSR project updates. https://twitter. com/keretacepatid KPPIP. (2018). Komisi Penyesuaian Percepatan Infrastruktur Prioritas (KPPIP Commission of Adjusting, Accelerating Priority Infrastructure). Published on October 12 in www.kppip.go.id Kusno, A. (2000). Architecture, Urban Space, and Political Cultures in Indonesia. London and New York: Routledge. Li, D., and Ramadhan, F.I. (2018). Indonesia poised to benefit as China’s Belt and Road turns green. The Jakarta Post. Published on June 22, 2018 in https://www. thejakartapost.com/academia/2018/06/22/indonesia-poised-to-benef it-aschinas-belt-and-road-turns-green.html Maddison, S. (2012). Postcolonial guilt and national identity: Historical injustice and the Australian settler state. Social Identities, 18(6), 695–709. Mcbeth, J. (2017a). Why does Indonesia cling to its plagued Chinese infrastructure projects? SCMP. Published on December 11, 2016 in http://www. scmp.com/week-asia/geopol itics/ar ticle/2053395/why-does-indonesiacling-its-plagued-chinese-infrastructure Mcbeth, J. (2017b). Indonesia high-speed train, backed by China, comes untracked. Asia Times. Published on March 28, 2016 in https://www.asiatimes.com/2017/03/ article/indonesia-high-speed-train-backed-china-comes-untracked/ McKinsey Global Institute and McKinsey & Company. (2012). The archipelago economy: Unleashing Indonesia’s potential, September 2012. Retrieved from https:// www.mckinsey.com/featured-insights/asia-pacific/the-archipelago-economy# Ministry of Public Works. (2011a). Jakarta Coastal Defence Strategy: Agenda. Jakarta: Ministry of Public Works. file:///D:/Downloads/S438_Our%20Sinking%20 Cities.pdf Ministry of Public Works. (2011b). Jakarta Coastal Strategy: ATLAS. Jakarta: Ministry of Public Works. https://www.scribd.com/doc/72755643/ATLAS-JakartaCoastal-Defense-Strategy The Mori Memorial Foundation. (2017). Global Power City Index. Japan: Institute for Urban Strategies. http://mori-m-foundation.or.jp/english/ius2/gpci2/index.shtml The Mori Memorial Foundation. (2018). Global Power City Index. http:// mori-m-foundation.or.jp/english/ius2/gpci2/index.shtml Permanasari, E. (2010). Constructing and Deconstructing the Nation: Sukarno’s Monuments and Public Places in Jakarta. Germany: LAP Lambert Publishing. Pernando, A. (2018). Pemerintah Berharap Proyek OBOR Segera Jalan. Bisnis Indonesia. Published on April 17, 2018 in https://ekonomi.bisnis.com/ read/20180417/257/785497/pemerintah-berharap-proyek-obor-segera-jalan Perwanto, H. (2017). Jokowi, Jinping witness signing of three agreements. Antara News. Published on May 15, 2017 in https://en.antaranews.com/news/110909/ jokowi-jinping-witness-signing-of-three-agreements 15th May 2017 Pitoko, R. (2018). Progres Proyek Kereta Cepat Jakarta-Bandung Baru 7,6 Persen. Kompas. Published on August 28, 2018 in https://ekonomi.kompas.com/ read/2018/08/28/054814626/progres-proyek-kereta-cepat-jakarta-bandungbaru-76-persen
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Rachman, F. (2018). Ini Momok Proyek Infrastruktur Jokowi. Detikfinance. Published on October 11, 2018 in https://finance.detik.com/infrastruktur/d-4251982/ ini-momok-proyek-infrastruktur-jokowi Railway Pro. (2016). Jakarta – Bandung HSR project could be completed within three years. Railway Pro. Published on August 25, 2016 in https://www.railwaypro. com/wp/jakarta-bandung-hsr-project-could-be-completed-within-three-years/ Rondonuwu, O. (2015). China, Japan battle to build Indonesia’s first bullet train. AFP. Published on August 26, 2015 in https://www.yahoo.com/news/chinajapan-battle-build-indonesias-first-bullet-train-045027265.html Salim, W. and Negara, S., (2016). Why is the high-speed rail project so important to Indonesia. Perspective, 16, 1–10. Sintusingha, S. (2008). Sustainable world-class cities and Glocal Sprawl in Southeast Asian Metropolitans. In Jenks, M., D. Kozak and P. Takkanon (Eds.), ‘World Cities’ and Urban Form: Fragmented, Polycentric, Sustainable? (pp. 145–60). Abingdon: Routledge. Sintusingha, S. and King, R. (2021). Nationalism and urban design: The parliament houses of Canberra and Bangkok, Journal of Urban Design, DOI: 10.1080/13574809.2021.1874239 Skyscrapercity. (2017). JKT-BDG HSR transit-oriented development strategic plan. http://www.skyscrapercity.com/showthread.php?t=1859378&page=7 Supratiwi, F. (2013). Korban jiwa akibat banjir Jakarta 19 orang. Antara News. Published on January 30, 2013 in https://www.antaranews.com/berita/354079/ korban-jiwa-akibat-banjir-jakarta-19-orang Suzuki, J. (2017). Jakarta’s plan to seek rail project bidders is snub to Japan. Nikkei. Published on July 20, 2017 in https://asia.nikkei.com/Politics/ Jakarta-s-plan-to-seek-rail-project-bidders-is-snub-to-Japan Vale, L. (1992). Architecture, Power and National Identity. London: Yale University Press. World Bank. (2012). Indonesia Economic Quarterly: Rising to present and future challenges. https://openknowledge.worldbank.org/bitstream/handle/10986/26665/ 709460REVISED00glish0revised0230712.pdf?sequence=1&isAllowed=y
10 The Belt and Road Initiative in Iran Urban-regional dialogue in two corridors and three cities Morteza Mirgholami Introduction Iran is a historically important crossroad between East and West and many cities in Iran such as Neishaboor, Ray and Tabriz were important nodes along the ancient Silk Road. The Silk Road (also known as Shahi Road in Iran), shaped since the Han Dynasty in 130 B.C. and before, left its imprints on the structure of these cities and their urban elements such as gates, caravansaries, bazaars, etc. enriching their commerce, culture, art and history via connecting them to the wider world. While the Ottoman Empire boycotted and closed the historical Silk Road in 1453 A.D., President Xi Jinping revived and announced the idea of the new Silk Road and an economic belt, later termed the Belt and Road Initiative (BRI), in 2013 at Nazarbayof University in Kazakhstan. While 65 different countries or 60% of the world population are considered members of this new Chinese strategy, it can be considered as a non-Western alternative globalisation for Iran. Iran’s position as one of the main energy producers (oil and gas) of the region and its strategic location at the crossroad of both east-west and north-south transit corridors make it an important player in this initiative. However, the process of integration to the broader global economic system brings about new local conditions and emergence of infrastructure and projects including new transit routes and stations (railways, freeways and ports), pipelines, refineries, etc. that have both pros and cons and is transformative in terms of economic and socio-environmental impacts. This process is inf luenced by global conditions and planning strategies at national and regional levels (ministries, parliament, planning and budget organisation, state governors) and local and urban scale stakeholders such as citizens, NGOs or municipalities. This chapter discusses these conditions using three Iranian cities as nodes in potential BRI corridors, i.e. Chabahar, Tabriz and Mashhad, as case studies.
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Iranian BRI hopes and dreams The BRI has an important impact on South and Central Asian, South Caucasus and MENA countries (Middle East and North Africa) as main oil and gas producer countries, i.e. Saudi Arabia, Iraq, Iran, UIA, Turkmenistan, etc. as well as two major world economies and energy consumers – China and India. Through the BRI China pursues different objectives such as finding new markets for its commodities and firms struggling with overcapacity at home, developments of its western provinces, reducing the cost of commodity transition, provision of energy security, exporting the Chinese model of development to the new countries and playing the leading role in this region (Maleki and Ra’oufi, 2016). The initiative also provides opportunities for the participants and the World Bank study has identified three major opportunities: development opportunities and welfare improvement, commercial and economic integration, and reduction of time and cost for commodity transition (Mehr News Agency, 2018). At the same time, China faces challenges in the realisation of the BRI as the multiple countries along the network have different economic, political, institutional and infrastructural conditions and agendas. Different tariff and import-export regulations, and political tensions between some of the regions such as Jammu and Kashmir in India and Pakistan can challenge the security and movement of energy and commodities along the routes. In Central Asian countries, the commodity clearance takes 50 days while in G-7 countries this will only take 10 days. Local reaction to BRI investments and projects sees it as foreign dominance that decreases job opportunities for local firms, and creates environmental crisis that may affect biological diversity (Maleki and Ra’oufi, 2016).
BRI strategy and the role of Iran as a transit crossroad and energy hub Located at one of the strategic parts of the region, Iran’s economy is characterised by the hydrocarbon sector, agriculture and services sectors, and a noticeable state presence in manufacturing and financial services. Iran ranks second in the world in natural gas reserves and fourth in proven crude oil reserves. Economic activity and government revenues depend largely on oil revenues and therefore remain volatile. Hosting 1% of the world population, Iran has 7% of mining resources, 11% of oil and 17% of world gas resources. Due to the distance to its southern gas fields, Iran imports more than 90% of its gas from Turkmenistan to its northern provinces and exports to Turkey. Iran is also one of the major oil producers of the world but its production experienced considerable reduction since 2012 and its second position was reduced to the fourth after Saudi Arabia, Iraq and the UAE in 2013. It needs USD145 billion investment in pipes and gas refinery infrastructures (Maleki and Ra’oufi, 2016; World Bank Report, 2018).
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Table 10.1 Iran’s developmental levels, population growth and economic outputs (collated from UN, World Bank, Worldometer and tradingeconomics. com websites)
Population GDP (million current USD) GDP per capita (PPP) USD GDP growth rate (annual %, const. 2010 prices) GDP per capita (current USD) Economy: agriculture (% of gross value added (GVA)) Economy: industry (% of GVA) Economy: services and other activity (% of GVA) International trade: exports (million current USD) International trade: imports (million current USD)
2005
2010
2018
69.7 million 68.2 % urban 226,452
73.7 million 71.4 % urban 491,099
82 million 75.1 % urban 425,403
15,763.0
18,138.0
21,000.0
3.2
5.8
13.4
3,216.0
6,586.0
5,299.0
6.2
6.4
9.8
47.7
43.4
34.3
46.1
50.2
55.9
60,012
83,785
33,103
38,869
54,697
29,519
China is the biggest trade partner with Iran in terms of both imports and exports. According to the OEC website (2019), the top destinations of Iranian exports are China (USD16.9 billion, 31%), India (USD10.2 billion, 19%), South Korea (USD7.22 billion, 13%), Italy (USD3.48 billion, 6.5%) and Japan (USD3.23 billion, 6%). The top import origins are China (USD18.4 billion, 37%), South Korea (USD4.02 billion, 8.1%), Germany (USD3.22 billion, 6.5%), Turkey (USD3.15 billion, 6.3%) and India (USD2.58 billion, 5.2%). China and Iran have deep historical connections with one another. The Silk Road, named by the German Geographer Ferdinand Von Richthofen in 1877, has had an undeniable role in Sino-Persian connection and transition of commodities, ideas and culture. China appears in Iranian literature such as in the work of important poets Saadi, Roumi and Hafiz. The Persian painting school was inf luenced by Chinese painting style known as miniature. In the modern time, the relationship between Iran and China has been characterised as friendly and constructive both before and after the 1979 Islamic Revolution. With the collapse of the Soviet Union and the new world
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order announced by the USA, China has been playing the role of an ally for Iran that could counterbalance the hegemony of the USA in the Middle East as Iran, as a stable country in the region, is one of China’s energy producers as well as consumers of its products and services. With the lifting of the sanctions in 2016 there has been much hope for Iran’s integration into the world economy and the BRI but the withdrawal of USA from the nuclear agreement left the future of this deal less promising. Nevertheless, regarding the BRI, Iran has some competitors in the region especially in Central Asia and South Caucasus. Some provide considerable energy reserves and can provide alternative networks for connecting China to Europe, which leaves the future of infrastructure development in Iran and the three case cities reviewed in this chapter in question. While many countries are recipient of Chinese investment through their BRI projects, the only project reported for Iran is Lorestan hydropower dam (Yamada, 2018), inaugurated by Energy Minister in 2017 with 15% national investment and 85% from the Chinese partner (China Gezhouba Group Corporation).
Iran’s advantageous location in alternative BRI corridors The potential BRI routes and connections in Iran are: 1 2 3 4
Through connection of the maritime route from China to Chabahar Port and then to Europe, Central Asia and the Caucasus China-Kazakstan, Kyrgyzstan, Uzbekistan, Afghanistan, Iran, Turkey and Europe China, Kyrgyzstan, Uzbekistan, Afghanistan, Iran, Turkey and Europe China, Kyrgyzstan, Tajikistan, Afghanistan, Iran, Turkey and Europe
Iran’s geographic location and its connection to Caspian Sea in the North and Persian Gulf in the South have made it a geostrategic partner in the BRI (MRUD news, 2018). China has planned investments of USD180 billion to renew Iran’s decayed energy infrastructure and promised to increase the commercial exchange up to USD60 billion until 2020. The negotiated highspeed rail network between Tehran and Mashhad will reduce the 3,200 km distance between Shanghai and Tehran from a 30-day to a 12-day journey (Irna News Agency, 2018). Despite the promising potentials to integrate Iran into the BRI, there are some pessimistic views that believe Iran has been very slow in providing the necessary infrastructures and removing the institutional barriers compared to some of its northern neighbours due to both internal issues and international sanctions (Iras News, 2016). The opening of Turkmenbashi international seaport in Turkmenistan with 1,358,000 m 2 area and 26 million tonnes capacity for commodity transfer is seen as a threat and an alternative route to connecting China to Central Asia, Turkey and Europe that bypasses Iran. Afghanistan is also investing in a Lajavard corridor to connect itself to this port,
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Figure 10.1 Iran’s vision for future transportation corridors and the location of three case studies. (Map credit: Author).
then the Caucasus and Turkey (Euronews, 2018). The 4,766 km Trans-Caspian International Transport Route (TITR) that connects China to Europe via Kazakhstan, Azerbaijan and Georgia may threaten Iran’s potential integral role in the BRI. The withdrawal from the Iran Nuclear Agreement by the USA is considered as an obstacle to the realisation of the BRI but there are opportunities for China to develop its plans with Iran and should use the initiative to stabilise the region and promote inter-regional dialogue (OBOReurope website, 2018). Iran hoped to achieve its previous historical position via the Silk Road with the removal of sanctions and has planned to add nearly 2,000 km of railway every year for the next five years. Iran aspires to become a transit hub leveraging its location at the crossroads of the North-South Transport Corridor, which runs from Moscow to Mumbai, and new east-west connections
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with its neighbours, Iraq and Afghanistan. To facilitate trade and transport with Central Asia, Iran has joined the Ashgabat Agreement (CSISa Report, 2018). Currently Iran is carrying out improvement and expansion on its three main railway routes that connect Tehran to Mashhad, Tabriz and Isfahan. Major corridors and nodes in Iran under the BRI Based on Islamic Republic of Iran Customs Administration’s (IRICA) report, with the realisation of the BRI, Iran can transit more than 12 million tonnes of commodity annually compared to the current 9 million tonnes per year. The new Silk Road, with freeways and railroads, can start from Serakhs north-east of the country (near Mashhad) towards Bazargan in north-west (passing Tabriz). With opening of the Incheboron railway that connects Iran to its northern neighbourhoods (Turkmenistan and Kazakhstan), a major transit route between China and Europe via Iran will be possible. Garmsar-Incheboron railway route According to Russian Railway authorities, Incheboron connection to the Iran Railway system (495 km railroad from Turkmenistan to Garmsar near Tehran) with an investment of EUR1.2 billion can increase the transit capacity to 10 million tonnes per year. This project involves the construction of 95 tunnels and 31 stations and includes electrifying the Garmsar-Incheboron railways. Tehran-Mashhad railroad electrification The proposed 3,200-km BRI rail link would begin in Urumqi, the capital of China’s western Xinjiang Province, and end in the Iranian capital. It connects Kazakhstan, Kyrgyzstan, Uzbekistan and Turkmenistan along the way, according to China’s state-owned paper China Daily (Tianyang, 2019). According to the Deputy of Iran railways, the electrification of 926 km railroad between Tehran and Mashhad in north-east and a religious tourism hub is part of this BRI link ( Jalili, 2017). The electrification project will be carried out by China National Machinery Import and Export Corporation – otherwise known as CMC. The project is expected to take up to 48 months and will raise the speed limit of the line from the current 160 km/h to 200 km/h (Financial Tribute Online Magazine, 2017). Five Nations Railway Corridor Project (FNRC) The Afghanistan-China-Kyrgyzstan-Tajikistan-Iran Rail Road Project, or FNRC, is a 2,100 km railway that will connect China with the Iranian ports of Chabahar and Bandar Abbas. In April 2017, China and Afghanistan signed
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a memorandum of understanding (MOU) to integrate the project into the BRI. The estimated value of the project exceeds USD2 billion, and the institutional partners are the five partner countries, the Bank of China, the Asia Development Bank, the World Bank and the USA (Caspian Policy Centre, 2018). Chabahar Port Chabahar Port is an important maritime node in the North-South corridor that connects Central Asian and South Caucasus countries to international waters via Iran railways. Even though China has invested more in Gwadar Port in Pakistan to connect to the maritime route, Chabahar’s safer railway connection to other destinations makes it an alternative and good bargain for other countries, especially India that has invested in its construction. According to the CSIS (CSISb Report, 2018), “India is developing Chabahar Port in Iran as a counterweight to China’s investment in Gwadar Port and CPEC, though Iran has asserted that Chabahar will not be in competition with Pakistan’s Gwadar.” Furthermore, according to the World Bank PPI project snapshot, this project was financed by a “Build, Rehabilitate, Operate and Transfer” brownfield Public-Private Partnership in which the Islamic Republic of Iran gave India Ports Global concession to the port for a period of 10 years. Financing for this project was 100% private, with no fees due to the government. To finance the construction of the port terminal, India Ports Global took a loan of USD150 million from the EXIM Bank of India. The project’s financing has a 64:36 debt to equity ratio for India Ports Global. When built, the port should have a throughput of 250 thousand TEUs per year. Most of the aforementioned projects have faced the problem of slow realisation. Apart from the geopolitical issues, there are multiple local agents and institutions and decision makers at the national level for approval, investment, execution and management of these infrastructures. These include the Ports and Maritime Organization Railway Organization and the Road Maintenance and Transportation Organization – both under the Ministry of Road and Urban Development (MRUD), Traffic Police, Customs Administration (IRICA), the Supreme Council of Iran’s Free Trade, Industrial & Specific Economic Zones, Headquarter for Combating Smuggling of Goods and Currencies, etc. While the bureaucratic obstacle at the national level makes the strategic planning regarding the BRI slow and difficult, the lack of negotiation between national and regional-local planning scales in Iran makes local citizens potential players in the success of infrastructure developments either indifferent or reluctant to participate. This issue is discussed in more detail in the next section and the case studies.
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Infrastructure development, governance and planning system in Iran Iran has a hierarchical planning system that can be categorised into four levels – national, regional or provincial, sub-regional or county and local level. Each level consists of a number of plans where the downstream plans must follow and comply with the national plans. The second and the third levels of planning comprise the subsection of national plans for each province and county. For instance, the province’s 20-year vision is prepared to correspond with the country’s 20-year vision as the regional spatial plan is to be consistent with the national spatial plan. However, the time lag in planning for each level results in the lack of coherence between the levels that has led to the neglect of the second and the third levels in local planning efforts (Rasoolimanesh et al., 2013). In practice, planning f lows down from the central government and its ministries to each state or province governors to city governor and other organisations such as Cultural Heritage Organization, universities, water and gas organisations, etc. at province or city level (under different ministries). Municipalities in each city work as independent and non-governmental bodies, coordinating with governmental organisations such as Road and Urban Development Organization, state governor or Heritage Organization. Approval of infrastructure development in Iran is inf luenced by the hierarchical and centralised system of planning. Parliament representatives and Imam Jome (representatives of the Supreme leader) of each city are also inf luential figures in this process among others. Annually, the government provides budget proposals for state employee salaries and infrastructure development of several organisations, including ministries, i.e. MRUD, Ministry of Interior, Ministry of Science Research and Technology, etc. to the parliament. Each plan or development proposal needs to be approved at Planning and Budget Organization before this stage. During the Ahmadinejad presidency (2005–13), this organisation was disbanded and the president used provincial visits to sidestep the hierarchical system and directly interact with provinces and local counties for a more equitable approval and budgeting for necessary projects. Municipalities (local government) have a small share of the central budget and due to the central government’s 1990s self-sufficiency policy, they have to generate their own income for urban and infrastructure development. These other sources of income include general charges, charges on surplus density often from changes of urban land use in comprehensive plans to commercial uses. The changes are sponsored by private sectors, banks, gover-vate1 bodies, etc. and result in unsustainable, rapid growth and development of most urban areas in Iran. However, some infrastructure projects such as the metro system have separate budgets from the central government. Overall, municipalities in Iran are not independent or participatory and most urban developments utilise a profitdriven approach to be self-sufficient and be able to pay their staff salaries.
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2
In Iran, comprehensive planning has been the dominant paradigm to prepare urban development plans. Preparing comprehensive plans for cities with a population of over 25,000 started since 1974 in the country’s Fifth Development Plan (1974–8). The post-revolutionary atmosphere after 1979 resulted in several changes on the comprehensive planning approach affecting content and process of planning, but not resulting in significant change in the outcomes of the plans. Since 1999, most of the 304 comprehensive plans applied to cities in Iran have encountered problems and conf licts particularly in the implementation stages. This is partially due to the hierarchical planning system where each level has a different focus and contains various elements of development. Moreover, the comprehensive plans are mostly focussed on the physical development rather than the social, cultural and economic development and are inf lexible, despite the strategic plans. One of the major critiques highlighted a lack of communication and inconsistency between the national level and the local level as the regional and sub-regional levels cannot mediate between these two levels. In other words, these four levels do not work as a system and a significant gap emerged between national plans and urban plans in terms of plan formulation and implementation (Kamrava, 2012). In this planning context, decision-making on BRI-related infrastructures depends on their nature and often involved national and regional levels. For instance, power stations and dams are subject to the Ministry of Energy approval, while railways and ports developments are overseen by the Ministry of Road and Urban Development. Nevertheless, other organisations such as Khatam-al-Anbiya, a construction enterprise under the Iranian Revolutionary Guard Corps (IRGC), play an effective role in materialising most of national and urban scale projects and infrastructures such as ports, roads and metro stations. With many stakeholders, there is a lack of communication between local and national levels and, hence, the integration of local aspects into the broader national and international strategies for infrastructure developments.
BRI as a globalising opportunity and its potential impacts on local urban environments in three Iranian cities Iran’s antagonistic approach to Western powers and their neoliberal policies stems from its cultural and value system that has roots in the Islamic worldview and its historical interferences in the country. This includes both World Wars; the coup of 1953; war with West-backed Iraq; and post-war hostility and unfair sanctions against Iran that have resulted in the country’s sceptical approach to foreign investment, which works as an obstacle to the country’s globalisation. The public reactions to Hanachi’s, the mayor of Tehran (from 2018), hiring of foreign managers to assist Tehran’s development ref lects the historical scepticism, and negative perception towards global and foreign interference is well alive.
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However, China has a different position in this political geography as it is perceived as historically civilised and an ally to Iran and supporter of the country against the West. A famous hadith of the Prophet Muhammad advised Muslims to seek knowledge even if it’s in China (a far country in that period). Therefore, the BRI offers a great opportunity for Iran to integrate itself to the global economy and play a more active role as regional superpower without being concerned about cultural and political invasion. Nevertheless, it should be mentioned that due to China’s low investment in cultural globalisation and soft power (the only CCTV channel to build a more positive image of China in the Middle East mainly addresses Arab audiences and not Iranians), the perception of China in Iran is inf luenced by Western media via satellite channels. Moreover, the combined effect of Chinese monopoly of low-price commodities in local markets and the economic recession in Iran due to US sanctions puts many small industries out of business. This creates a sense of economic and job insecurity for people which provokes the negative image of China. Therefore, the BRI projects and investments can potentially redress this distrust if the initiative establishes a mutual relationship between Iran and China that shapes new opportunities in terms of local job creation and cultural interaction, as well as respect to environmental issues of the host regions. Therefore, an important question to raise is: How infrastructure development such as ports, railways, pipelines, etc. under the BRI umbrella at national and international level can affect urban areas in Iran at the local level and how this global integration will influence the local condition of cities? To address this question and explore the impacts of BRI on Iranian cities, three cities along the major railway corridors of the country have been selected: Chabahar, a small but important port city in the southernmost and deprived Sistan and Balochistan province; Mashhad, a main pilgrimage destination and metropolis located at the north-east of Iran and along the eastwest rail corridor; and Tabriz, the historical gate of Iran to Europe at the north-west of the country. Not only are Chabahar, Mashhad and Tabriz gateways or transit hubs for energy and commodities they are also social and cultural hubs that can be enriched and promoted both locally and globally through the BRI initiative. They vary in terms of their potential gain from the BRI infrastructure provision, as for instance Mashhad hosts over 30 million tourists annually while Chabahar is relatively poor and unknown destination despite its rich and attractive environment. According to Joharchi (2016) due to economic sanctions and limited trade with the foreign countries, Iran’s economic growth has been held back. Aminmansour (2007) observed that The state can be separated into two camps, those that urbanize with development and those that urbanize without it. The result is the lack of a clear middle level urban center to bridge the gap between underdeveloped
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cities such as Hormozgan and Kerman, with major cities such as Tabriz and Tehran. Chabahar and India’s competition to BRI Chabahar is a small city in Sistan and Balochistan Province with a population of 110,000 mostly Sunni Muslims and has the highest ratio of informal settlers. The city was historically an active commercial port that was destroyed by the Mongols. Modern Chabahar dates back to around 1970, when it was declared a municipality and large port projects have been started by the order of Mohammad Reza Pahlavi. A modern naval and air base was established as part of the Shah’s policy of making Iran into a dominant power in the Indian Ocean. At that time, these and other development projects in and around Chabahar involved the extensive participation of foreign companies, especially from the USA. After the 1979 revolution the foreign companies left the projects and Iranian public companies linked to the Ministry of Jahad-e Sazandegi (or jihad for construction) took over. The Iran-Iraq War gave Chabahar logistical and strategic importance. The war brought insecurity to the Strait of Hormuz and ships were unable to enter Persian Gulf. Since then Chabahar became a major port. In the 1980s the Iranian government developed the Eastern Axis Development (EAD) Scheme to use Chabahar’s geographical position for regional development to stimulate economic growth in the eastern provinces. This resulted in the establishment of the Chabahar Free Trade-Industrial Zone (CFTIZ)3 in 1992 to bring development and encouraged immigration from other parts of the country to Chabahar. During the presidency of Mahmud Ahmadinejad, a multibillion-dollar railway project ‘Iran’s eastern corridor’ was started and construction began in December 2010. The corridor connects Chabahar Port to Central Asia, Afghanistan and Central Iran. The project has three branches including ChabaharIranshahr Fahraj County, Chabahar-Iranshahr-Zahedan-Mashhad and Chabahar-Iranshahr-Zahedan-Milak but the project had only 25% progress by 2017. As a potential investor, India proposed a plan to construct a 900 km railway line to connect Chabahar Port to the mineral-rich Hajigak region of Afghanistan. Doing so, the port will become a major alternative, a potential competitor of Gwadar Port in the Balochistan Province of Pakistan, 120 km to the east. Gwadar is part of the major BRI project to connect China to the Indian Ocean that circumvents India as one of its major political competitors. Moreover, Chabahar Port rail connection with Turkey is only 3,380 km transit, which is much shorter and safer than the Chinese alternative for the Euro-Export corridor (China-Pakistan-Afghanistan-TurkmenistanAzerbayjan) that includes the expensive Caspian Sea transshipments. Moreover, the materialisation of the ITA corridor (Islamabad-Tehran-Istanbul) can provide a safer and more economical alternative for China compared to the impassable routes through Afghanistan.
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Another related transport infrastructure project is the Chinese investment in Chabahar Port. For a long time, upgrading this port has come under the purview of India’s foreign policy. With US pressure, Iranian and Indian negotiations stumbled and Chinese officials began to express interest. However, since the nuclear deal, India and Iran reconfirmed their joint commitment to developing the port by signing a new MOU and by India’s approval to provide Iran with a corresponding line of credit. Henceforth, China’s room for manoeuvre has been restricted. Overall, China’s investments in Iran’s transport infrastructure, particularly in railways, seem to be on sounder footing than cooperation in the oil sector. A number of projects such as Sadegieh, Tehran Metro (lines one and two), and Tehran-Qom-Isfahan high-speed rail are making good progress, while only a couple projects remain far from realisation (Scott, 2016). Nevertheless, questions remain as to how these investments and infrastructure development benefit Chabahar’s local population. A study by Shahraki (2017) reveals how migration from other cities in the province and rural areas to Chabahar and the lack of a strategic plan for the CFTIZ have resulted in the formation of unauthorised neighbourhoods in Chabahar. After the Islamic Revolution, due to new policies such as the revocation of population control, more people moved to Chabahar. The migrants ignored municipality standards and established unauthorised districts. Moreover, climatic changes, drought and poor living condition in rural areas forced many farmers and rural residents to migrate to urban areas in search of better living condition. These groups moved to Chabahar and rapidly started building informal settlements on their traditional owned lands that the government does not recognise. The unauthorised zone now occupies a bigger area, with a larger population (60,000 residents) than the legal urban districts in Chabahar. The phenomenon clearly threatens the sustainability of the city (Rahmati Kamel and Tarighi Akbar, 2018). Larimian and Abdolah (2012) evaluated the tourism potentials in the development of the CFTIZ. They identified the existing employment context and tourist attractions are the main opportunity and strength of the area. However, the multiplicity of decision makers, poor management, inadequate infrastructure and marketing are among the main weaknesses of this region. According to interviews with tradesmen and small investors who settled in Chabahar, the port and the transition of cargos and commodities could not provide the touted potential for life improvement and sustainability of the city. Moreover, respondents said many migrants live in poverty in slums while the city suffers from the lack of good public transport and infrastructure and local businesses are adversely affected by the monopoly of Chinese cheap commodities (Ilna News, 2017). At the national and international scale, the link from the Chabahar Port to Zahedan and Mashhad via railway corridor can have tremendous impacts on the development and ease of transportation of commodities and cargos in this area. However, the inf lexibility of city comprehensive plans and uneven
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urban development and rapid rural-urban migration are major challenges that urban authorities and managers in the local level have to deal with in their future strategic plans and projects. A more holistic integration of several layers of planning from national to local levels is necessary. This is termed ‘Value Planning’ by the High Council for Architecture and Urbanism, which helps guarantee the provision of a healthy environment for migrants; training facilities for potential labours; and their integration into the urban environment, which is absent from the comprehensive plans (Laws and Regulations Portal of Iran, 2019). Reviving historic Silk Road tourism in Tabriz A city of 1.8 million people, Tabriz is the capital of East-Azarbayjan Province in the north-west of Iran. Historically, Tabriz was part of the Silk Road as an important trading hub and a crossroad between Ottomans, Iraq, the Caucasus and Iran. The footprints of the Silk Road are evident in its urban routes, gates and in some of the modern urban developments such as Atiq Regeneration Project. Tabriz was the capital of Iran during the Ilkhanid Period and an international hub for commerce, art and knowledge. In this period Khaje Rashid-al-din built Rab’e Rashidi, an international university town near Tabriz, which ref lects the importance of this city and its global connection during the Mongol’s rule of the country. In the modern time, Tabriz is a major heavy industries hub for automobiles, machine tools, refineries, petrochemicals, textiles and cement production industries. The city is famous for its handicrafts, including hand-woven rugs and jewellery. However, the importance and the role of this city in the national economic scene declined with the emergence of new commercial routes, especially the north-south corridors that connect the southern ports of Chabahar and Bandar-Abbas to Tehran. The BRI East-West corridor between Turkey-Europe and China that pass-through Tabriz can revive its historical significance and the city. Alternative railway routes, such as BakuTbilisi-Kars connection that links Azerbaijan to Turkey through Georgia, threaten the role of Tabriz in BRI railway networks. Tabriz’s nomination as the Islamic countries’ capital of tourism in 2018 is one of the potentials to consider in future BRI infrastructure developments for the city. The Grand Tabriz historical bazaar and other heritage monuments are some of the local attractions and values that can draw many cultural tourists via the BRI network through upgrading the city’s transit infrastructure and tourism facilities (Isna News Agency, 2018). In the second meeting of Economic Cooperation Organization (ECO)4 tourism ministers in Antalya (Turkey), Iran’s proposal for reviving Silk Road tourism cooperation was approved by member states to encourage the exchange of tourists among ECO members. Iran proposed the establishment of ECO tourism news agency and holding global annual Nowruz ceremony that celebrates the beginning of spring. The ministers planned ECO
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tourism convention and organised ECO sports competition in Iran in 2020 (ibid, 2018). The increasing presence of Chinese companies in Tabriz has led to the expansion of international investment in the city, and one of the most important investment potentials for Chinese companies in Tabriz is the Tabriz-Bostanabad-Mianeh railway. Upon completion of this 204 km route, the travel distance between Tabriz and Tehran will be reduced by 100 km and the travel duration reduced by four hours, compared to the existing route through Maragheh (CDTIC News, 2019). The electrification of Tehran-Tabriz railroad is one of the major projects that potentially highlights and revives the historical position of Tabriz in the East-West corridor and the new Silk Road Initiative. Negotiations with Chinese and other potential investors, such as German and Indian companies, continue at the state level; however the real foreign investment has been less successful (Financian Trubute News Agency, 2016). In 2014, the China International Trust and Investment Corporation (CITIC) signed an MOU with the municipality of Tabriz for the construction of a tramway, but no progress reports have been made since. Historically, cooperation between CITIC and Norinco with the Tehran Urban and Suburban Railway for the construction of Tehran Metro lines one and two was the f lagship of Sino-Iranian relations in the late 1990s and 2000s (Scott, 2016). The municipality of Tabriz has also signed MOUs with European countries such as Italy in 2018, in areas such as intelligent city planning, recreational facilities, smart cities, construction, tourism, petrochemicals and more (Tabriz Municipality, 2018). Mashhad, the East-West corridor gateway Mashhad, Iran’s second most populous city best known as a Shia pilgrimage destination, is located at the centre of Khorasan-e-Razavi Province in northeast Iran. It is a gateway for the East-West railway corridor connecting Turkmenistan to Tehran, Tabriz and Turkey. The city attracts a large number of visitors (30 million per year), earning substantial tourism revenue. The public transportation, green spaces and quality of life in this urban hub are acceptable, even though it has one of the largest informal settlements in the country. One of the major BRI projects in this city is the electrification of the Tehran-Mashhad railway. According to the managing director of the Iranian Railway Company (RAJA), electrifying Tehran-Mashhad line (USD2.6 billion), which stretches some 900 km, would allow for faster trains, save energy and increase the number of passengers to 32 million per year. Once completed, the rail route could accommodate electric trains running at 200 km/h, travelling between the two cities in six hours. The contract had been finalised during Chinese President Xi Jinping’s visit to Iran in January 2016 but had not been signed due to various problems (Mashhad Municipality Website, 2019). A recent report claimed that the Iranian share (15%) of the
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train electrification project was approved but because of the withdrawal of the Chinese side (due to US sanctions), the budget was spent on other items (Tejarat News, 2019). Due to its large number of tourists and pilgrims, Mashhad has huge potential for Chinese investment into its tourism services industry and urban railway infrastructure. One of the main urban development projects with over USD1 billion local and national investments during the last two decades is the ‘urban regeneration plan of the area adjacent to the holy shrine of Imam Reza. Unfortunately, due to the authoritarian approach that prioritised economic-physical dimension over social and cultural aspects of the area and the regional-international image as the Shia capital over its local/urban one, the result has been less successful leading to destruction of the historical fabric and a disordered cityscape (Alinam et al., 2014). Nevertheless, the BRI has had no impact on this urban development project.
Conclusion: the BRI in Iran as mechanism for economic growth and stability While the idea of the BRI seems promising in terms of reducing the hegemony of the USA on the world economy by creating a new geography of commerce and international relationships, the US-Iran political tensions have rendered the future of Sino-Iranian relationships ambiguous and uncertain. The promised increase of bilateral trade between China and Iran to USD400 billion (split between USD280 billion in the development of Iran’s energy sector and USD120 billion for infrastructure projects) within a five-year period was put on hold due to the Western sanctions and pressure. However, due to the economic recession and shortage of budget for investment in infrastructure development at national, regional and local levels, the central Government, state governors, and municipalities had to consider alternative sources of finance from foreign investors. Tabriz Municipality’s reports about visits of investors from China, Italy and India to Tabriz and East Azerbaijan Province, for example, reveal the authorities’ interests at different levels for financial sources for infrastructure development. However, the weak interaction between planning levels and the time lags for approval of different plans such as the comprehensive plans or railway routes makes the decision-making and implementation of projects ineffective and problematic. The long duration for approval of some cities’ new comprehensive plans by the Ministry of Road and Development makes some of the land use proposals or projects outdated by the time the plan is approved. In addition, the physical and inf lexible nature of city comprehensive plans make them inefficient in terms of considering the new conditions, opportunities and/ or threats that may emerge due to new infrastructure developments. This is in comparison to city-level mass-rapid transit system which has been more successful in major cities like Tehran, Mashhad or Tabriz. Therefore, an alternative planning system such as City Development Strategy (CDS)5 and
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Table 10.2 Comparison of major infrastructure projects in the three case cities Projects
Responsible Figures and Institutions
Potential Investors Progress (USD)
TehranMinister of MRUD USD1.7 billion China withdrew Mashhad Head of Iran loan total from the project railway Railway USD1.5 billion after US new electrification Organization Exim Bank of sanctions Sanat-o-Madan China Bank China General Central Bank of Technology Iran Group, CMC USD200 million Sanat-o-Madan Bank of Iran Tehran-Tabriz Head of Iran railway Railway electrification Organization State governor of East Azerbaijan Head of Budget and Planning Organization Ministry of Road and Urban Development Tabriz and BostanAbad Parliament Representatives Chabahar Port Iran Ministry of and Chabahar Roads and Urban Zahedan Development Railway Khatam Al-Anbia Construction
China Mianeh-BostanIndian Investors abad 132 German km railway Companies completed, such as funded by Siemens national budget Bostan-abad Tabriz connection 80% Progress
India Ports Global USD85 million EXIM Bank of India USD150 million Chabahar China to Parliamentary USD450 representative million Minister of MRUD Indian 1389–1400 IRCON Khatam Al-Anbia Construction
Features 925 km route Increasing the train speed up to 200–250 km/ha Increasing the number of passengers from 13 to 35 million per year 4 years construction Increases the speed up to 160–200 km/h for passengers and 120 km/h for CARGO
Completed 2016–2017
USD235 million total spent
30–40% railway completed USD70 million spent USD380 million needed
628 km total route of ChabaharZahedan China seems to take priority to Indian for this project
a The electrification of the Tehran-Tabriz train line increases the train speed up to 250 and even up to 350 based on some reports. There is not a clear decision on which standard or system has been approved.
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more participatory planning would be helpful to connect global, national and local levels together. The study of the major projects in the three cities, including the electrification of railways in Mashhad and Tabriz and the establishment of the CFTIZ district in Chabahar Port city, reveals that these projects are mainly regional and national in nature. Despite the importance and potentials of the BRI for the selected cities, its various aspects have not been analysed and discussed adequately by urban managers and local authorities and there have been little if any public dialogue and discussion about their contribution to the cities. As Table 10.2 demonstrates, the key figures and institutions in all BRI projects have been from national and regional levels rather than from urban and local levels. Despite the initial interests of China to invest in these projects, their cooperation has become less forthcoming especially after the withdrawal of USA from the nuclear deal. This can be interpreted as signs of China’s conservative approach and calculation of pros and cons in dealing with Iran in comparison to other trade partners. While alternative investors such as India, Japan and Italy have appeared on the scene for infrastructure developments in Iran, the geopolitical location of Iran, its safe and stable environment compared to some other countries in the region, and cultural and trade relationships with China will make it a strong and reliable partner in the future of the BRI, hopefully within a more peaceful Middle East.
Notes 1 Gover-vate is a term that can be used for hybrid organisations that are neither government nor private. 2 The plan contains the land use map; sectors such as residential, commercial, administrative and industrial zoning; the road networks; facilities and public services; rules and regulation for construction of private and public buildings; as well as the criteria for preservation of historical districts. 3 https://www.cfzo.ir. 4 Member states include Iran, Afghanistan, Pakistan, Turkey, Tajikistan, Azerbaijan, Kazakhstan, Turkmenistan, Kyrgyzstan and Uzbekistan. 5 See http://city-development.org/intro/.
References Alinam, Z., Mirgholami, M. and Moghaddasian, M. (2014). Evaluating the Impact of Urban Developments on Mashhad’s Identity during the Last Decade. National Conference on Architecture and Sustainable Urban Landscape, Mashhad, Iran. Aminmansour, M. (2007). Uneven Urbanization in Iran/Globalization. http:// www.scoop.co.nz/stories/HL0712/S00104/uneven-urbanization-in-iranglobalization.htm
224 Morteza Mirgholami Caspian Policy Centre. (2018). Caspian Region in the Silk Road Economic Belt (SREB): A Chinese Perspective. https://www.caspianpolicy.org/caspian-regionin-the-silk-road-economic-belt-sreb-a-chinese-perspective CDTIC News. (2019). Mianeh-Bostan Abad Railway Project. https://www.cdtic.ir, https://bit.ly/2WWD5bP CSISa Report. (2018). Competing Visions. https://reconnectingasia.csis.org/ analysis/competing-visions/ CSISb Report. (2018). Shahid Beheshti Port at Chabahar. https://reconnectingasia. csis.org/database/projects/chabahar-port-project-phase-i/5310c524-8394-413694be-fa5373de6b0c/ Euronews. (2018). Turkmanbashi Port, Alarms for Iran to Be Out of New Chinese Economic High Way. https://fa.euronews.com/2018/05/07/silk-roadturkmanbashi-port-risk-for-iran-to-be-out-of-new-chinis-economic-high-way Financial Tribute Online Magazine. (2016). Plan to Electrify Tehran-Tabriz Railroad. https://f inancialtribune.com/articles/economy-business-and-markets/55172/ plan-to-electrify-tehran-tabriz-railroad Financial Tribute Online Magazine. (2017). $1.7b Chinese LOC for Iranian Rail Project. https://financialtribune.com/articles/economy-business-and-markets/ 77994/17b-chinese-loc-for-iranian-rail-project Ilna News. (2017). Chabahar from Rags to Riches, the People of Sistan and Baluchistan in Hope of a Miracle. https://bit.ly/2WUzDOW Iras News Agency. (2016). The Role of Iran in the MegaProject of Belt and Road. https://bit.ly/2WaOKnz Irna News Agency. (2018). The New Silk Road, the Linking Road between China and Iran. http://www.irna.ir/fa/News/83028325 Isna News Agency. (2018). What Happened in Tabriz 2008? https://bit.ly/3bbyWYB Jalili, S. (2017). Iran, China Team Up on New Silk Road Project. Financial Tribune. https://financialtribune.com/articles/domestic-economy/66450/iran-chinateam-up-on-new-silk-road-project Joharchi, S. (2016). China’s One Belt and one Road Initiative: Iranian Perspectives on the New Silk Road Strategy. The Journal of China and the World. http://irep.ntu. ac.uk/id/eprint/29715/ Kamrava, A. (2012). Contemporary Town Planning in Iran. Tehran: Tehran University Press. Larimian, T. and Abdolah, B. (2012). Evaluating the Role of Tourism Potentials in the Development of Chabahar Free Zone. 1st International Conference on Urban Change in Iran, University College London. Laws and Regulations Portal of Iran. (2019). Supreme Council of Urbanism and Architecture’s Act on Chabahar City. https://dotic.ir/news/5766 Maleki, A. and Ra’oufi, M. (2016). The New Silk Road; One Belt, One Road; the Chinese Theory for Emancipation from Strategic Limitations. Abrar Cultural Institute Press. Mehr News Agency. (2018). One Belt, One Road, Opportunities and Threats of the New Silk Road. https://bit.ly/2K1Qqux MRUD news. (2018). The New Silk Road, One Belt, One Road and One Iran. https://bit.ly/2WTjucA Mashhad Municipality Website. (2019). https://eco.mashhad.ir, https://bit.ly/ 2WSSuKg OBOREurope. (2018). The New Silk Road and Iran. https://www.oboreurope. com/en/new-silk-road-iran
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OEC Website. (2019). Iran’s Profile. https://oec.world/en/profile/country/irn/ Rahmati Kamel, F. and Tarighi Akbar, S. (2018). The Status of Free-Zone in the Economic and Cultural Conditions of the Native People of Chabahar. https:// landscaper.ir Rasoolimanesh, S.M., Mastura, J. and Badarulzaman, N. (2013). Urban Planning and Management System in Iran: A Review and Assessment. Middle East Journal of Scientific Research, 18(2), 220–9. https://www.researchgate. net/publication/262852102_Urban_Planning_and_Management_System_in_ Iran_A_Review_and_Assessment Scott, E. (2016). Defying Expectations: China’s Iran Trade and Investments. https://www. mei.edu/publications/defying-expectations-chinas-iran-trade-and-investments Shahraki, A. (2017). Urban Planning and Design in Unauthorized Neighbourhoods Using Case Studies. International Journal of Sustainable Built Environment, 6(2), 273–84. Tabriz Municipality. (2018). Tabriz Municipality Signs Smart City Initiative with Foreign Firms. https://bit.ly/2W9ytzn Tejarat News. (2019). The Withdrawal of China from Tehran-Mashhad Railway Electrification Project. https://tejaratnews.com, https://bit.ly/2NNHnye Tianyang, L. (2019). Belt & Road Initiative Expands China-Iran Cooperation. http:// www.chinadaily.com.cn/a/201901/25/WS5c4aa81da3106c65c34e6912.html World Bank Report. (2018). Islamic Republic of Iran. https://www.worldbank.org/ en/country/iran/overview Yamada, G. (2018). Is China’s Belt and Road Working? A Progress Report from Eight Countries. https://asia.nikkei.com/Features/Cover-story/Is-China-sBelt-and-Road-working-A-progress-report-from-eight-countries
11 The critical need for urban planning around Port Vila’s BRI projects Jennifer Day
Introduction This chapter argues that the Chinese foreign aid programme, along with other infrastructure donors, is currently conducting urban development in a Pacific capital city without the guidance of an urban strategic plan. For a country with capacity as significant as that of China, and in a place that is receptive to planning, this is an unnecessary omission on the part of donors. My goal is to articulate the critical need for urban planning in a Pacific capital city by demonstrating what has happened without it. My hope is that the city builders – in this case, the national government and various aid donors – will understand that aid contributions are creating urban fabric. Right now, this urban fabric is the incidental product of unplanned processes. In the future, a consultative urban plan could shape this growing city for its residents. It is not only China that is facilitating the construction of roads and ports in Port Vila, Vanuatu, without a clear vision of how the city will grow and change around the new or improved infrastructure. The Australian aid programme is also active in Port Vila, as are other donors, such as the Japanese aid programme, the Japanese International Cooperation Agency ( JICA). In critical ways, Chinese infrastructure initiatives in the Pacific are mirroring those funded by Australia, which have been put in place without significant town planning. Port Vila is the capital city of this Pacific island nation of around 283,000 people. Comprising 25% of the national population and growing rapidly, the city does not have a town plan (Cullwick, 2017). This is not necessarily because the Government of Vanuatu (GoV) resists planning. In early discussions on BRI projects in Vanuatu, the GoV asked for assistance in urban planning – for instance, during a state visit to Beijing in May 2017 (Vanuatu Daily Post, 2017). In recent press, the Australian Minister for International Development and the Pacific, Senator Concetta Fierravanti-Wells, accused China of funding ‘roads that go nowhere’ (McGarry, 2018). Though her critique was meant to highlight the China-centric model of development that structures the BRI, the statement also highlights a point that I make elsewhere: that aid and
Figure 11.1 Vanuatu and Etafe island, where the capital Port Vila is located. (Map credit: Iris Fong)
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development actors often do not acknowledge the role that they play in shaping cities (Calogero et al., 2019). As McGarry (2018) points out, those infrastructure do not go nowhere: they go to people’s homes and communities. Infrastructure ‘planners’ should know where those roads are going, and the people they affect should be active participants in the process of deciding how the city should grow. Those roads actually do go somewhere, and one place they go is to the peri-urban fringes of this capital city.
Methods and approach This essay is a product of a review of documentary evidence and my fieldwork in Port Vila, which has been ongoing since April 2015. Since then, I have interviewed more than 200 people across a dozen communities and four research projects, all focussed on peri-urban communities. Most recently, I have ongoing interviews in Elang Etas, a peri-urban settlement of Port Vila that I describe here in some detail. I have interviewed women and men in urban communities that have faced dislocation in the recent past, or who fear that they will face displacement in the future. I have interviewed people at the beginning of their displacement, who have (at least for the time being) arrived at the end of a displacement journey, and who are still in the process of seeking a durable1 solution within the city. In all of these communities, I have conducted interviews based on a storytelling method. In this method, participants are asked broad questions such as ‘Why did you move from Destination?’ and ‘Why did you move to Etas?’ These questions are designed to get people talking about the experience of resettlement in a way that is not driven by any particular hypothesis, e.g. that gender played a significant role in the dislocation process. I also draw on my previous work on forced dislocation (Day, 2013; Day and Cervero, 2010), housing policy (Cheung et al., 2019; Tiwari et al., 2016) and land disputes (Li et al., 2015) in Chinese cities. My work follows Cernea (1999), who calls for collaboration across the social sciences to understand the lived experience of forced resettlement and consider a wider scope of consequences than those that are easily translated into economic transactions. I also take issue with what appears to be a fundamental presumption of academic literature, Vanuatu’s policy and international guidance on forced resettlement: that urban internal displacement is a rural-to-urban journey, e.g. Landau (2014). In this urban century, I argue, forced displacements originating and ending within the same city have economic and social consequences that warrant attention. As my proficiency in Bislama, a local language, grows, I have become less reliant on my research assistant for translation and interpretation. Still, I have always relied on a native Bislama speaker and known member of the community I am visiting, to help me to make sense of the interview data. I have worked closely with a number of research assistants, and with one in particular, whose names I intentionally withhold here for their privacy.
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Efate’s one road to many growing communities Vanuatu is an island nation in the Southwest Pacific Ocean, situated to the west of Fiji and to the east of New Caledonia. Part of Melanesia, it is a nation of 82 islands and 283,000 people (WorldOMeters, 2018). Depending on the estimate and year, roughly 16–25% of the population lives in the capital city, Port Vila ( Jones and Sanderson, 2017; Rey et al., 2017; Vanuatu National Statistics Office, 2017). Most data on urban and peri-urban settlements in Vanuatu and the Pacific are based on estimates. Vanuatu has not conducted a full national Census since 2009, though it conducted a ‘mini-Census’ in 2016 to assist recovery from Tropical Cyclone Pam. The mini-Census estimated the national population at 279,459 (Vanuatu National Statistics Office, 2017). The capital city, Port Vila, sits at the southern edge of the island of Efate, which is encircled by a single two-lane road. One hundred and thirty kilometres in circumference, the Round Island road meets the urban road network of Port Vila in the north-west and south-east corners of the city. From those points of contact with the Port Vila, a bead on a bracelet, the road arcs and meanders around the island, a rough parallelogram. Dotted along the way, more densely at first and more sparsely with distance, peri-urban communities that are outside the municipal boundary straddle the road: Manples (Man-Place), Blacksands, Tagabe, Bladinieres, Mele and Mele-Mat to the north-west, and Beverly Hills, Erakor, Mont Martre, Eratap, Etas and Teouma to the south-east. The paved Efate Ring Road connecting these communities to town was sealed in 2011 with assistance from the New Zealand Aid Program, NZAP (Asian Development Bank, 2011). Peri-urban settlements are connected to the Efate Ring Road by dirt tracks of quality that varies with season and maintenance budgets. The quality of the road matters to peri-urban people. The difference in travel time to town commonly varies between 15 and 40 minutes in a private bus, depending on the magnitude and frequency of potholes and unannounced construction detours – not to mention accidents, school traffic and disabled vehicles. This road is of critical importance to the peri-urban settlements. In 2019, construction was substantively completed in tandem sections by aid actors whose minimal support of urban planning suggests that they may not understand the impacts of a lack of it on communities. One community facing an existential threat demonstrates the power of strategic planning and an active civil society in the Pacific. Formed in March 2018 in Etas, the Elang Etas Community Association (EECA) is pretty clear about what it wants for this peri-urban settlement: stronger land rights, water, sanitation, pavement, street lights and security. Those everyday problems are emblematic of urbanisation in this capital city. The EECA’s story is only just beginning to unfold. To understand the significance of EECA, it is first necessary to explain the geopolitical situation of Vanuatu as a country, the governance of peri-urban lands around the capital and the evolving ‘land grab’ that underpins people’s investment in their homes and communities.
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The geopolitics of Vanuatu Vanuatu gained independence in 1980, prior to which is was governed under a colonial condominium with France and the United Kingdom. In this system, duplicate governance structures were implemented, including separate French and English schools, courts and prisons. Even the road system itself was divided – practically if not physically – with the French driving on the right and the English on the left. ‘One road, two systems,’ then, is not a new concept in Vanuatu. During colonialism, the colonial governments and private individuals took possession of most of the land that was customarily owned by ni-Vanuatu (indigenous people of Vanuatu). The Constitution of the Republic of Vanuatu returned all lands to indigenous, customary owners and their descendants (Article 73), and declared that only customary owners can own land in perpetuity. This method of land ownership and land transfer is critical in the case of Etas and other peri-urban settlements, as I will demonstrate in forthcoming sections. The Australian and New Zealand aid programmes are the incumbent donors in Vanuatu. Australia is the largest bilateral donor, providing an estimated AUD62.3 million in aid to the country in 2018–19 (Department of Foreign Affairs and Trade, 2018), and significant support for past development projects and humanitarian responses such as the 2017 and 2018 evacuation of 11,000 residents of Ambae island in advance of a potential, catastrophic volcanic eruption there. In March 2015, the Category 5 Tropical Cyclone Pam (TCP) devastated the infrastructure in Vanuatu, including extensive damage to roads (including town roads and the Efate Ring Road), footpaths, the waterfront and the port in Port Vila. The aftermath of Cyclone Pam was an international jostle. In the weeks after the storm, aid arrived from the USA, New Zealand, Australia, Russia, and China. I know this because I was there, working both with the local Save the Children office and with the Shelter Cluster out of the National Disaster Management Office (NDMO), and also because my pilot husband reported to me on the various planes that landed with humanitarian workers and supplies. My work with the Shelter Cluster kept me apprised of the movement of various shelter supplies, including tarpaulins and tents, that were arriving in the country. One shipment of Chinese tents was rejected for housing by the international humanitarian community, then assisting government with shelter relief, because of their low quality and inappropriateness: the humanitarians were adamant that only tarpaulins were appropriate for temporary shelter construction and repair. Since TCP, the Chinese Aid programme has made a strong effort to fund national-building and development projects. In Port Vila, this has included a convention centre; a sporting facility to host the 2017 Pacific Mini Games; and, most recently, the repair of the road leaving the city from the southeast, heading towards Etas. These efforts continue alongside reconstruction projects funded by other donors, such as Australia and Japan. In the case of
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the road to Etas, China-funded construction begins where Australian-funded construction ceased. The Chinese government has not been transparent about the funds that have come into Vanuatu or the costs of various road projects (Lowy Institute, Not dated). Australia’s Lowy Institute (Wroe, 2018b) lists a ‘45 km road upgrade’ as costing AUD74 million, though this will likely include roads on other islands and further from Port Vila. Ms Fierravanti-Wells’s statement underscores a tension about aid in the Pacific, which persists (Pacific Beat, 2018). Aid cuts of AUD11 billion from the Australian Aid programme are diminishing Australia’s inf luence in the region (Dziedzic, 2018), both in actuality and in the hearts and minds of people in Vanuatu. Traffic in the capital and delays in completing the 11 km of roads funded by Australian aid contribute to people’s frustration with Australia’s assistance. The tone in news reporting, opinion (McGarry, 2018) and political conversation (Rasou, 2017) has taken on a China-versus-Australia tone. At the same time that there is frustration with the older donors, the newcomer Chinese are also met with scepticism. There is worry about sovereignty under the BRI programme, especially with major infrastructure in nearby countries coming under Chinese control – like the Hambantota Port in Sri Lanka (Abi-Habib, 2018). The country’s debt to China now exceeds its debt to Japan, the Asian Development Bank and the World Bank (Wroe, 2018a). Recent rumours of a Chinese intention to place a military base in Vanuatu have been denied by both China and the GoV, but have nonetheless raised concern in Australia and the USA (Hillman, 2018; Wroe, 2018a). Vanuatu has supported China’s claim to some islands in the South China Sea. All of these elements of the relationship between Vanuatu and China are being actively discussed in this capital city. The purpose of this paper is to describe unplanned urban growth and its relationship to various infrastructure donors. The foregoing review of the situation of Vanuatu among its donors is not meant to be exhaustive – but rather indicative of the relationships currently unfolding around the road network, which is closely tied to urbanisation. The road network in Vanuatu is perhaps an example of a project where the unity imagined in the BRI project is not yet realised. This is because, at present, there are two major players in infrastructure development in Vanuatu. This one-place, two-donors system echoes Vanuatu’s colonial legacy. The next section describes the dynamics at play at the edges of cities, and the following section describes the current state of urban planning in Port Vila. This sets the stage for a description of how Chinese aid projects have followed in the practice of more-established donors, without supporting improvements to planning.
The customary edges of Pacific cities Urban populations are also difficult to estimate for many Pacific countries, including Vanuatu, because of the configuration of urban and peri-urban
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lands. In Pacific countries, including Vanuatu, customary and introduced land systems exist side-by-side by virtue of their constitutions. The current municipal boundary of Port Vila (and another town, Luganville, on the island of Santo) was established in 1981 in Land Reform Order No. 26. This Order declared these lands to be public, effectively owned by the state. Virtually all lands outside of these boundaries were returned to customary ownership. Thus, the metropolitan area that comprises Port Vila consists of municipal land that is owned by the state, and also of peri-urban lands that are under customary ownership. The communities studied in this paper, Etas and Destination, sit on customary lands. This is an important feature of their stories – and of the stories of many other peri-urban communities – for a number of reasons. First, land is a cultural link to the past and future. People in Vanuatu are attuned to having a place where they belong – a man ples (man place) (Bonnemaison, 1985). This makes land governance and tenure a contentious political issue, as it is across the Pacific. Violent conf licts over land and displacement have happened elsewhere in Melanesia (Foukona and Allen, 2017). Second, the types of lease arrangements available to customary landowners under Vanuatu’s hybrid legal system create grey areas in tenure. On the one hand, customary landowners may enter into formal long-term lease arrangements for periods of up to 75 or 99 years. These leases are a product of introduced land laws based on the pre-independence colonial models of Britain and France. Most major construction on peri-urban lands, such as for resorts and hotels, is on land leased to foreign investors under these leases. Individuals – both ni-Vanuatu and expatriate – and groups can also have formal leaseholds. On the other hand, a wide range of informal arrangements is available to customary landowners. These informal arrangements are much more common than formal leaseholds in Vanuatu and other Pacific island countries that maintain a system of customary land ownership. The arrangements can range in formality from oral permission with no financial exchange to historical arrangements with ancestors and exchange of non-monetary products, such as garden produce, or monetary exchange. A significant drawback of these informal arrangements is that their features and indeed their very existence can be difficult to prove in legal proceedings when a dispute over land ownership arises. Third, surrounded by customary land, the cities are not designed to grow. This means that urban expansion must either become more dense – a difficult task in a place with no building codes or town plan (Cullwick, 2017) – or expand into the customary peri-urban lands. At present, there are discussions in the Ministry of Lands to acquire land to expand urban areas in Port Vila, Sola, Luganville and Lakatoro. However, none of these lands are annexed into the cities and towns, despite fast-growing peri-urban settlements. Pacific cities are growing at breakneck speed of around 4%, with growth in peri-urban settlements in the double digits ( Jones and Sanderson, 2017), but governments around the Pacific continue to pay disproportionate attention to rural development.
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A plan-less city Even with the aforementioned history of infrastructure planning by Australia and Japan, urban planning capacity in Vanuatu is minimal. In April 2015, the then Director of Local Authorities, Cherol Ala, told an assembled group of which I was a part that there was no government department with urban planning as part of its portfolio. There is no building code in effect, and Port Vila does not have a town plan (Cullwick, 2017). The current Town Planning Act only governs land uses within the municipal boundaries, stating that the Port Vila Municipality must approve development permits (Vanuatu Daily Post, 2016). Lack of capacity for planning is an ongoing problem (Asian Development Bank, No date provided). The act does not provide for strategic planning or participatory processes to ensure that people who live in the city and the peri-urban areas are able to contribute to shaping the city. Nor is significant capacity emerging for planning. The University of the South Pacific branch located in Port Vila does not have an urban planning course of study. This is not for lack of interest in government. In 2017, in BRI discussions in China, Vanuatu’s Finance Minister asked specifically for guidance in urban planning (Vanuatu Daily Post, 2017). Inside the municipal boundary, there are some efforts to improve urban infrastructure, but these are happening outside of a plan to guide city development. The Port Vila Urban Development Project (PVUDP) is a joint effort between the GoV and the Australian aid programme that, when complete, will provide 7 km of drainage and 11 km of improved roads within the municipal boundary. Financing agreements were signed in 2012, and construction contracts were signed in 2016. The bulk of the funds come from an AUD31 million grant from the Australian government, followed by USD5 million in loans from the Asian Development Bank and USD3.1 million in contributions from the GoV (Vanuatu Project Management Unit, Not dated). In progress since 2012, the PVUDP has improved urban management to some degree. Even in the centre of town, before the PVUDP, there were incomplete records of street names, no pedestrian and traffic counts, and lack of cadastral and building data (Government of Vanuatu, 2018a). The GoV acknowledges that the Port Vila Urban Development Plan was developed with “scant regard for proper town planning from the beginning” (Government of Vanuatu, 2018c). Other land-management mechanisms are emerging outside of policy and statute. A recent World Bank project seeks to identify how municipal lands are used in order to prevent displacement (personal communication with World Bank consultant, October 2017). A UN-HABITAT project called the Participatory Slum Upgrading Program (PSUP) was already underway at the time of Cyclone Pam, and sought to upgrade slums according to participatory principles (personal communication with UN-Habitat staff, April 2015). That programme sought to produce a ‘central urban coordination agency’ in Vanuatu, but reports no such formation in government (UN-HABITAT, Not dated).
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Outside of the city, the peri-urban settlements are being set down without even these kinds of projects, resulting in de facto planning by aid agencies, the national government and communities themselves. In Elang Etas, land sub-divisions have been occurring since at least 1994, according to my interviews with long-time community residents. One member of the Elang Etas committee has been working as a full-time community planner since about 2009, when he had a dream of providing affordable land on small plots to people renting in Port Vila. He saw a need where people living in crowded areas of town need ground to build and settle permanently. Based on his dream, he approached the then leaseholder to this land, and they cleared the jungle and sub-divided the first 1-hectare plot into 30 smaller plots, which they then offered to a community. Over the next eight years, he worked continuously, clearing and sub-dividing hectare after hectare with small, dirt roads separating the rows of 15. He estimates that 300 households now live in Etas. As we have argued elsewhere (Calogero et al., 2019), in the absence of formal planning, other actors step up and create de facto plans. This is happening with aid actors in Port Vila, including with Chinese aid. Town planning is more than just a layout of new programmes like PSUP and PVUDP. It is a strategic vision for how a city will grow and change, the priorities for infrastructure, development and location of population growth. In the absence of that plan and consultation, what’s happening is being driven by aid actors and national politicians. In her 1994 book, The City Builders, Fainstein (1994) describes the forces that created the New York and London property booms in the 1980s. Vanuatu’s city builders are, right now, producing urbanisation that is increasing the value of land, expanding the city and forcing people to live in impoverished conditions at the marginal urban edges (Day and Wewerinke-Singh, 2019). Without a clear strategy, Vanuatu cannot learn from these lessons of the past, and it is urban people who lose the most.
The road to Etas Heading out of Port Vila to the south-east, a few kilometres out of town, one cuts a sharp left and heads up an uneven, unpaved road to Etas. The story of Etas starts when the road to the Bouffa landfill was cut through the jungle in the early 1990s. The landfill road is unpaved, but that has not prevented more than 300 people settling into the area and making it home. They have come from all around Vanuatu – including from other areas of Port Vila. Some have formal titles, though those have recently been called into question. Some are informal settlers. Some are people who were displaced from other communities in Port Vila. Virtually all of the houses in Etas are one-day houses – shanties built in a day to provide basic shelter, with dirt f loors, roofs and walls made of corrugated metal. Hot in the sun and leaky in the rain, the homes are also crowded.
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Three or four small houses can be built on a 1/30-hectare sub-divided plot, in addition to a toilet and a kitchen. When the plots were first divided by Etas’ first planner, they were meant to be temporary accommodation. I have interviewed representatives from more than a dozen households in Etas since October 2017. Most of the earlier residents – those who moved in from 1994 to around 2012 – describe their intentions as temporary. That is, they were seeking a semi-permanent home where they could live without the high rental costs and crowding of town. Those residents who moved in after 2012 had more permanent motivations, seeking longer-term solutions. Mary – a mother seeking a man ples for her young son – was one of ten families in Etas that credit then Lands Minister, Ralph Regenvanu, with assisting the community to resettle and make a down payment on their parcels in this peri-urban settlement ( Joshua, 2014). This place provided what Mary thought would be a secure, formal lease and a future home for son and future generations. Even with security, there are other struggles. The area lacks access to water for drinking, cooking and washing, and because of this, the families struggle to grow food. They remember the fruit trees and plentiful water at her previous community in town, from which she and her family were evicted overnight in a horrific and locally well-known story from the community of Destination (Radio New Zealand, 2014). Most of Mary’s husband’s salary goes to pay for the mortgage on their land. Even though her husband has a good job, she has struggled to pay primary school fees for her youngest daughter. Marlie has only recently returned to school with the help of friends but had not attended between 2014 and early 2017. Mary would like to work, but the distance to town and the cost of travel from the settlement make doing so impossible. Security is also a concern. At night, she is afraid of walking along the road. Groups of young men under the inf luence of alcohol have been known to rob and rape women, so she is a virtual prisoner inside her fence after dark. When friends and family come to visit, she always sends them back to town before dark. Regardless of the motivation to move to Elang Etas, all but one of the households I interviewed have not built anything more than a one-day house. Ongoing fear of displacement appears to be the main motivation – a fear borne out by recent events.
The Elang Etas Community Association The EECA is a grassroots community-development initiative, started by members of the Etas community when their community was again threatened by a conf lict between claimants to this customary land. When I attended the launch of EECA’s constitution on 19 October 2018, there were signs of renewed energy for rebuilding by some former members of the Destination community. The EECA then Chairman, for instance, spoke excitedly to the assembled crowd of about 200 community residents about the government’s plans to
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pave the road and provide piped water, sanitation and street lighting. Mary underscored his message, saying that she and her family would start to construct their strong house when all of these amenities were in place. Just a year ago, Mary felt hopeless and isolated from town, forgotten by the government, and despairing about living a life in Elang Etas. Now, with the promise of infrastructure, Mary is hopeful and excited about her community. Accessibility improvements can solve one problem and bring others. EECA was not borne of a harmonious community development process. It was, rather, a product of necessity. In his speech on 19 October 2018, the EECA Chairman described the origins of this association. On 4 March 2018, several of Elang Etas’ 12 zones were threatened with an eviction order – first, the entire community, and then a targeted threat at the seven members of the EECA Committee and their households. Mary’s family was one of those affected households. She and her husband had already paid more than half of their agreed land payments to the customary landowner, Chief Harriman Kalsong, who was also declared to be the rightful customary owner of the land in a ceremony presided over by the previous Lands Minister ( Joshua, 2014). The constitution of Vanuatu, however, is answerable to the rightful owners of the land – not to the Lands Minister. This was made clear to me in a conversation I had with an officer from the Customary Lands Office, which manages land transactions and dispute on customary lands. On the matter of Elang Etas, no legal proceedings have yet occurred, and so no documentation exists to corroborate community rumours. I will, therefore, not describe here the explanations I have heard for the current conf lict. I will instead argue that this story illustrates what can happen as soon as land becomes valuable and revenue-generating – partly prompted by new infrastructure. In this case, a hectare of land in Etas is generating around 1.6 million Vatu (AUD 13,280) in land rent. The recent installation of a new water-treatment facility at Bouffa and the road and services upgrades announced have created a market for this land. With new infrastructure and rapid urbanisation, the customary owner of the land on which Etas sits stands to generate much more in the near future.
Displacement in Port Vila As this case illustrates, displacement around infrastructure and economic development is an under-recognised and serious problem in Port Vila – but it is a problem that members of communities like Destination and Elang Etas understand too well. Communities are learning from the experience and developing protection mechanisms even in the absence of government action. For now, EECA has managed to become recognised by government as a registered civil-society organisation, but Mary and her family have not yet been directed to resume land payments to Chief Kalsong’s descendants (Chief Kalsong has since passed away). The problem of displacement is not new in Port Vila. Earlier in 2018, for instance, the community of Bladiniere was evicted (Cullwick, 2018a, 2018b;
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Vanuatu Daily Post, 2018). Destination, then, is not the only urban community that has experienced forced resettlement due to development-induced displacement. Perhaps the only silver lining of these evictions is that they provide opportunities for learning and improvement of the policy, so as to prevent similar evictions and associated suffering in the future. In September 2018, GoV adopted a national policy on forced displacement, the National Policy on Climate Change and Disaster-Induced Displacement (Government of Vanuatu, 2018b). I and a co-author argue elsewhere that this first national policy on forced displacement pays far too little attention to cities (Day and Wewerinke-Singh, 2019; Day et al., 2020). The most striking finding of this research is the lack of consultation of urban communities impacted by displacement. Our analysis of the policy shows that the policy, while indeed making provision for urban people, does so incompletely. We argue that a first step towards an inclusive policy is to initiate a national discussion on displacement that includes urban people who have suffered displacement. We argue that the GoV got many things right in this policy – but that more specific guidance to prevent displacement in urban areas and ensure the protection of the rights of urban people who are forcibly displaced is important for future iterations of the policy and associated implementation guides (Day and Wewerinke-Singh, 2019; Day et al., 2020). In short, managing urban displacements is – like much urban planning – a work in progress in Vanuatu.
The value of strategic planning Vanuatu’s customary land laws and minimal capacity to manage these problems of urbanisation make the problem much more complicated than can be corrected by developing a strategic urban plan. Clearly, there are still many problems that must be rectified in the granting of leases on customary lands, in order to slow dislocations and build strong communities. Still, consultative, comprehensive strategic planning would be a good first step in producing an urban area that is safe, sustainable, and enfranchises its citizens. The GoV has already signalled to the Chinese government that it is interested in assistance with urban planning. Both current and future infrastructure projects would contribute to a nation-building and city-building agenda if they were identified as part of a set of strategic priorities codified in a strategic plan. A major concern of this paper is in whether there is a sufficient connection between displacement and planning that we might expect good strategic planning to prevent displacements. This relationship would be indirect, but could be effective. Port Vila itself sits on customary land that is leased in perpetuity from the customary landowners. This negotiation occurred in the years immediately after independence, and effectively means that all lands within the municipal boundary are managed by the state. Strategic planning that identifies future areas for growth around Port Vila could enable government to
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focus future annexations or negotiations with customary owners so that there is more clarity on who has the right to live on those lands. Strategic planning would help government to identify, in the first instance, where to target these efforts. A good strategic plan could also: •
• •
•
Enfranchise peri-urban dwellers. During my interviews in some dislocated communities, one common finding was that nobody from the government had ever inquired after their well-being following the resettlement. Consultative urban planning could help people to feel considered and trust that government initiatives are working for them and their city. Improve housing quality. My interviewees at Etas almost universally said that they had failed to build anything more than a one-day house because of their insecure tenure status. Guide population growth. Urban population growth in Vanuatu is currently unplanned, with people moving into and around Port Vila (and other towns). Strategic planning coupled with targeted investment in infrastructure to draw populations to certain communities by providing services in those places and not others. Decide on strategic investments. Voters around Port Vila disagree with the way that government has opted to allocate infrastructure money. A beautiful new waterfront and extensive network of footpaths are secondary, some say, to water, sanitation and pavement in the peri- urban settlements. Consultative strategic planning could be instructive for government to make decisions about infrastructure provision.
The value of donor expertise I have argued above that Chinese aid money has arrived in Vanuatu without assistance to build capacity in strategic planning. I have also argued that this is not only a problem with Chinese aid – initiatives funded by other donors have similarly failed to produce capacity in government, or plans. Perhaps Vanuatu can benefit from being at the conf luence of two systems: China’s strong legacy of comprehensive planning and strong vision for urban settlements, plus the consultative turn of Australian planning. The Chinese experience has some parallels with the land situation in Vanuatu. Like Vanuatu, Chinese cities are governed differently than their hinterlands, with government owning all urban lands and village collectives owning rural lands. This has created governance and growth problems at the edges of Chinese cities that have been partially solved by strategic planning that reclassifies large areas around cities and urban lands (Tiwari et al., 2016; Yang et al., 2015). Chinese city planners have decades-long experience at integrating ‘urban villages’ into urban fabric through comprehensive strategic spatial planning (Can and Zheng, 2017; Wong et al., 2006). At the same time that Chinese strategic planning solves ownership problems, it has also long been criticised for being neither consultative nor inclusive (Wong
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et al., 2006; Zhao, 2015). Vanuatu’s current ‘land grabbing’ (McDonnell, 2017, p. 283) has some parallels with the ‘growth machine’ arguments that identify property development as a primary driver of urban expansion. A notable parallel is that Chinese cities rely on new land sales rather than ongoing land revenues like property taxes to provide operating budgets for local municipalities (Zhang and Fang, 2004). I have argued elsewhere that China’s urban strategic planning processes can sometimes neglect to acknowledge certain types of urban fabric, such as that produced by urbanising villages at the edges of its cities (Yang et al., 2015). Still, the Chinese track record of strategic planning is strong and continues to accommodate new urban forms (Han, 2015), with a long-evolving history with forced resettlement that dates to the early 1980s (Tiwari et al., 2016). However, there are significant differences between the Chinese model and the ‘land grabbing’ that is currently taking place in Port Vila. China – the world’s oldest bureaucratic system – has little tolerance for the blatant corruption and disorganisation that appears to allow social and political elites to make individual claims to customary land in Vanuatu (Filer et al., 2017, pp. 4, 10, 13, 20, 24). China’s orderly and modernist planning system may prove to be appealing to Port Vila’s governors when they begin to seek anti-corruption strategies applied to urban management. While enticing, Port Vila’s planners may want to consider that China’s planning processes are sometimes critiqued consistently with my criticism of their consideration of road planning in Port Vila: unfolding “…as discrete projects without a broader consideration for city planning or long-term sustainability” (Yi et al., 2017). Does Vanuatu want China’s model of planning, with its focus on vision at the expense of consultation? I would propose that Vanuatu may look to Australian cities as a model of consultative urban planning for guidance on building a vision for cities where people feel invested. The Australian model is still very much imperfect, as evidenced by recent works citing problematic consultation in road planning in Melbourne (Dodson et al., 2014; Legacy et al., 2012; Sturup, 2015, 2018). Still, Australia is a major aid partner and near neighbour with some of the world’s most liveable cities, including three in the Economist Intelligence Unit’s Top 10, and Melbourne at number two after a seven-year run at the top spot (Economist Intelligence Unit, 2018).
Conclusion As with much writing on the Pacific, this paper has been longer on description and shorter on analysis. This is out of both necessity and design. There is much that a reader must understand about the basic structure of ni-Vanuatu society before my arguments about strategic planning, infrastructure and dislocation can be understood. Also, as an outsider, I am not qualified to make presumptions about the needs of urban residents in Port Vila, especially as those needs relate to customary lands. Neither, too, are the donors qualified to make these kinds of judgements. Yet, I have argued, this is precisely what projects like BRI infrastructure and PVUDP do: they do de facto urban
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planning and are, resultantly, at present one of the primary enablers of the unguided urbanisation that is happening in Vanuatu at breakneck speed. Strategic planning is a process that enables communities to coordinate with government and to imagine the city they want. The Elang Etas Community Association is a good indication that people in Port Vila are ready for consultative urban planning. This community group seeks to engage with policy makers to avoid an existential threat to their community. They are hoping to be heard as members of the urban community. Chinese and Australian aid projects should continue in this poor country with a critical need for infrastructure. However, the Government of Vanuatu should insist that all new investments align behind a strategic plan. This paper also describes one way that infrastructure and development induce displacement in the capital city of Vanuatu, using one community as a lens. Chinese BRI infrastructure projects are not the cause of this displacement, but because of the specific structure of Pacific cities, this BRI project will be a cause of future displacements. The BRI is one link in a chain of projects that is yet unfinished, and where each link comes from a different source: the Australian aid and the Asian Development Bank, Chinese aid and JICA – all in collaboration with the national Government of Vanuatu. All of these agencies are building this Pacific city in the absence of a town plan. In this chapter, I make no judgement about how planning should occur around customary lands. This is a decision that must be deliberated by the people of Vanuatu. I simply assert that inclusive strategic planning could be an important part of the process of enfranchising and empowering urban constituents.
Note 1 According to the Government of Vanuatu, a durable solution is one in which people have fully recovered from displacement and enjoy their human rights without effect or discrimination resulting from the displacement (Government of Vanuatu, 2018b).
References Abi-Habib, M. (2018, 25 June). How China got Sri Lanka to cough up a Port. The New York Times. Retrieved from https://www.nytimes.com/2018/06/25/world/ asia/china-sri-lanka-port.html Asian Development Bank. (2011). Development coordination, Port Vila Urban Development Project, Reports and recommendations of the president | November 2011. Retrieved from https://www.adb.org/projects/documents/port-vilaurban-development-project-rrp; https://www.adb.org/sites/default/files/linkeddocuments/42391-013-van-dc.pdf Asian Development Bank. (No date provided). Port Vila Urban Development Project Sector Assessment (Summary). Retrieved from https://www.adb.org/sites/ default/files/linked-documents/42391-013-van-ssa.pdf Bonnemaison, J. (1985). The tree and the canoe: Roots and mobility in Vanuatu societies. Pacific Viewpoint, 26(1), 30–62.
Port Vila’s BRI projects 241 Cao, K., and Zheng, L. (2017). Urban strategic spatial planning in China: A tworound development since the late 1990s. In: Albrechts, L., Balducci, A., and Hillier, J. (eds.), Situated Practices of Strategic Planning: An International Perspective. London and New York: Routledge, pp. 84–100. Calogero, P., Day, J., and Dangol, N. (2019). How urban regimes produce and manage informality: Insights from three cases of informal housing. In Moos, M. (ed.), A Research Agenda for Housing. Cheltenham; Northampton, MA: Edward Elgar Publishing, pp. 84–99. Cernea, M. M. (1999). Why economic analysis is essential to resettlement: A sociologist’s view. Economic and Political Weekly, 34(31), 2149–58. Cheung, K. L., Day, J., Wu, H., et al. (2019). One policy, two paths: The development of a Chinese national housing policy and its implementation in Chongqing and Shenzhen. In Moos, M. (ed.), A Research Agenda for Housing. Cheltenham; Northampton, MA: Edward Elgar Publishing, pp. 100–115. Cullwick, J. (2017, 23 January). Port Vila has no town plan: Town planner. Vanuatu Daily Post. Cullwick, J. (2018a, 27 April). Mass eviction. Vanuatu Daily Post. Retrieved from http://dailypost.vu/news/mass-eviction/article_1248eb25-0fa6-5998-9613c6218b37110e.html Cullwick, J. (2018b). Port Vila, mass eviction. Melanesia News. Retrieved from http:// melanesia.news/2018/04/27/1212.html/ Day, J. (2013). Effects of involuntary residential relocation on household satisfaction in Shanghai, China. Urban Policy and Research, 31(1), 93–117. Day, J., and Cervero, R. (2010). Effects of residential relocation on household and commuting expenditures in Shanghai, China. International Journal of Urban and Regional Research, 34(4), 762–88. Day, J., and Wewerinke-Singh, M. (2019). Learning from the urban experience of development-induced displacement: Toward more-inclusive displacement policy in Vanuatu and the South Pacific. Retrieved from Geneva. Day, J., Wewerinke-Singh, M., and Price, S. (2020). Eviction is not a disaster. Development Policy Review, Published online 30 July 2019, https://doi.org/10.1111/ dpr.12460. Print publication forthcoming. Department of Foreign Affairs and Trade. (2018). Vanuatu aid fact sheet: October 2018. Retrieved from http://webcache.googleusercontent.com/search?q=cache: jpTw5taDJbIJ:dfat.gov.au/about-us/publications/Documents/aid-fact-sheetvanuatu.pdf+&cd=2&hl=en&ct=clnk&gl=vu Dodson, J., Low, N., Odgers, J., Hayward, D., Taylor, R., Stone, J., … Sturup, S. (2014). Tunnel vision or world class public transport?: How cancelling the east west link can fund better transport alternatives for Melbourne. Retrieved 10 February 2021 from http://www.transportformelbourne.org/wp-content/ uploads/2016/08/Tunnel-Vision-or-Better-Public-Transport-FINAL-6.pdf Dziedzic, S. (2018, 11 January). Beijing complains about Australia’s ‘irresponsible’ attack on China’s Pacific aid program. ABC News. Retrieved from https:// w w w.abc.net.au/news/2018 - 01-11/beijing-complains-about-attack-onpacific-aid-programs/9319594 Economist Intelligence Unit. (2018). Vienna overtakes Melbourne as the world’s most liveable city. The Economist (14 August 2018). Retrieved from https://www.economist.com/graphic-detail/2018/08/14/vienna-overtakesmelbourne-as-the-worlds-most-liveable-city
242 Jennifer Day Fainstein, S. S. (1994). The City Builders: Property, Politics, and Planning in London and New York. Oxford: Blackwell. Filer, C., McDonnell, S., and Allen, M. G. (2017). Powers of exclusion in Melanesia. In Filer, C., McDonnell, S., and Allen, M. G. (eds.), Kastom, Property and Ideology: Land Transformations in Melanesia. Canberra: ANU Press, pp. 1–56. Foukona, J., and Allen, M. G. (2017). Urban land in Solomon Islands: Powers of exclusion and counter-exclusion. In Filer, C., McDonnell, S., and Allen, M. G. (eds.), Kastom, Property and Ideology: Land Transformations in Melanesia. Canberra: ANU Press, pp. 85–110. Government of Vanuatu. (2018a). Challenges and the unknowns. Retrieved from https://vpmu.gov.vu/images/PVUDP/inaccuracies/challenges_unknowns.pdf Government of Vanuatu. (2018b). National policy on climate change and disasterinduced displacement. Retrieved 10 February 2021 from https://www.refworld. org/pdfid/5b44ce864.pdf Government of Vanuatu. (2018c). PVUDP - More gains than losses. Vanuatu Project Management Unit, Prime Minister’s Office. Retrieved from https://vpmu.gov. vu/index.php/news/161-pvudp-more-gains-than-loss Han, S. S. (2015). The giant city-regions in China’s new urbanization. In Wong, T.C., Han, S. S., and Zhang, H. (eds.), Population Mobility, Urban Planning and Management in China. Cham; Heidelberg; New York; Dordrecht; London: Springer, pp. 145–169. Hillman, J. (2018, 17 May). Clouds gathering around China’s Belt and Road. The Vanuatu Independent. Retrieved from https://vanuatuindependent.com/2018/05/17/ clouds-gathering-around-chinas-belt-road/ Jones, P., and Sanderson, D. (2017). Urban resilience: Informal and squatter settlements in the Pacific Region. Development Bulletin, 78, 11–15. Joshua, J. (2014, 23 October). 1 hectare of Etas land for evicted families: Regenvanu. Vanuatu Daily Post. Retrieved from http://dailypost.vu/news/hectare-of-etasland-for-evicted-fam ilies-regenvanu/ar ticle_ f1a9ea5b-b801-5177-8b7a- c097e43bcffe.html Landau, L. B. (2014). Urban refugees and IDPs. In Fiddian-Qasmiyeh, E., Loescher, G., Long, K., et al. (eds.), The Oxford Handbook of Refugee and Forced Migration Studies. Oxford: Oxford University Press, pp. 139–150. Legacy, C., Curtis, C., and Sturup, S. (2012). Is there a good governance model for the delivery of contemporary transport policy and practice? An examination of Melbourne and Perth. Transport Policy, 19(1), 8–16. Li, C., Wang, M. Y., and Day, J. (2015). Dealing with different types of Chinese “nail households”: How housing demolition-induced disputes were settled in urban China. Geography Research Forum, 15, 62–86. Lowy Institute. (Not dated). Chinese aid in the pacific. Retrieved from https:// chineseaidmap.lowyinstitute.org/ McDonnell, S. (2017). Urban land grabbing by political elites: Exploring the political economy of land and the challenges of regulation. In Filer, C., McDonnell, S., and Allen, M. G. (eds.), Kastom, Property and Ideology: Land Transformations in Melanesia. Canberra: ANU Press, pp. 283–304. McGarry, D. (2018, January 11). Postcard from the ‘road to nowhere.’ Vanuatu Daily Post. Retrieved from http://dailypost.vu/news/postcard-from-the-road-tonowhere/article_b269f52c-0a35-5196-8598-bdd9ef4e2c11.html
Port Vila’s BRI projects 243 Pacific Beat. (2018, 10 April). Chinese military base in Pacific would be of ‘great concern,’ Turnbull tells Vanuatu. ABC News. Retrieved from https:// w w w.abc.net.au /new s/2 018 - 0 4 -10/ch i n a -m i l it a r y- ba se -i n -va nu at ureport-of-concern-turnbull-says/9635742 Radio New Zealand. (2014, 20 October). Squatters evicted from Vanuatu airport area. Radio New Zealand. Rasou, J. K. (2017). China’s diplomacy in the pacific. Retrieved from https://www. gov.vu/en/public-information/196-china-s-diplomacy-in-the-pacific Rey, T., Le De, L., Leone, F., and Gilbert, D. (2017). An integrative approach to understand vulnerability and resilience post-disaster: The 2015 cyclone Pam in urban Vanuatu as case study. Disaster Prevention and Management: An International Journal, 26(3), 259–75. Sturup, S. (2016). The problem/solution nexus and its effect on public consultation. In Leshinsky, R., and Legacy, C. (eds.), Instruments of Planning: Tension and Challenges for more Equitable and Sustainable Cities. New York; Milton Park: Routledge, pp. 45–57. Sturup, S. (2018). Infrastructure misadventures. In Spiller, M., and Tomlinson, R. (eds.), Australia’s Metropolitan Imperative: An Agenda for Governance Reform. Clayton South: CSIRO Publishing, pp. 45–58. Tiwari, P., Rao, J., and Day, J. (2016). Development Perspectives on Urban Housing and Basic Services in BRICS Countries. Hampshire: Palgrave. UN-HABITAT. (Not dated). Participatory Slum Upgrading Programme (PSUP) in Vanuatu. Retrieved from http://www.fukuoka.unhabitat.org/projects/vanuatu/ detail01_en.html Vanuatu Daily Post. (2016, 02 November). Town planning concerned over development without Council’s approval. Vanuatu Daily Post. Retrieved from http:// dailypost.vu/news/town-planning-concerned-over-development-without- council-s-approval/article_b1239538-29d3-5230-bfc4-b4753ea622e1.html Vanuatu Daily Post. (2017, 01 June). Finance Minister attends China’s Belt and Road initiative. Vanuatu Daily Post. Retrieved from http://dailypost.vu/news/ f inance-minister-attends-china-s-belt-and-road-initiative/article_0d23e8a39090-56b4-82d3-f1e66eb04170.html Vanuatu Daily Post. (2018, 28 February). Bladiniere evictions. Vanuatu Daily Post. Retrieved from http://dailypost.vu/news/bladiniere-evictions/article_f522863e0bcc-5b62-80e0-a65129beed3c.html Vanuatu National Statistics Office. (2017). 2016 Post-TC Pam mini-census report, Vol. 1, basic tables. Retrieved 10 February 2021 from https://pacificdata.org/data/ dataset/oai-www-spc-int-0608e051-cd19-4fe7-97b5-ef696c99b0b5. Vanuatu Project Management Unit. (Not dated). PVUDP - More gains than losses. Port Vila Retrieved from https://vpmu.gov.vu/index.php/news/161-pvudp-moregains-than-loss Wong, S.-W., Tang, B.-s., and van Horen, B. (2006). Strategic urban management in China: A case study of Guangzhou Development District. Habitat International, 30(3), 645–67. WorldOMeters. (2018). Vanuatu population. Retrieved from http://www.world ometers.info/world-population/vanuatu-population/. Retrieved 15 September 2018 http://www.worldometers.info/world-population/vanuatu-population/ Wroe, D. (2018a, 09 April). China eyes Vanuatu military base in plan with global ramifications. The Sydney Morning Herald. Retrieved from https://www.smh.
244 Jennifer Day com.au/politics/federal/china-eyes-vanuatu-military-base-in-plan-with-global- ramifications-20180409-p4z8j9.html Wroe, D. (2018b, 10 April). On the ground in Vanuatu, monuments to China’s growing inf luence are everywhere. The Sydney Morning Herald. Retrieved from https:// www.smh.com.au/politics/federal/on-the-ground-in-vanuatu-monuments-tochina-s-growing-inf luence-are-everywhere-20180410-p4z8t0.html Yang, X., Day, J., and Han, S. S. (2015). Urban peripheries as growth and conf lict spaces: The development of new towns in China. In Wong, T.-C., Han, S. S., and Zhang, H. (eds.), Population Mobility, Urban Planning and Management in China. Cham; Heidelberg; New York; Dordrecht; London: Springer, pp. 95–112. Yi, Z., Liu, G., Lang, W., Shrestha, A., and Martek, I. (2017). Strategic approaches to sustainable urban renewal in developing countries: A case study of Shenzhen, China. Sustainability, 9(8), 1460. Zhang, Y., and Fang, K. (2004). Is history repeating itself? From urban renewal in the United States to inner-city redevelopment in China. Journal of Planning Education and Research, 23(3), 286–98. Zhao, P. (2015). The evolution of the urban planning system in contemporary China: An institutional approach. International Development Planning Review, 37(3), 269–87.
12 Ethiopia The Addis Ababa–Djibouti railway Kelly Leviker
General background The 751.7 km Addis Ababa–Djibouti railway is Africa’s first transboundary, fully electrified railway. It was designed together with industrialising infrastructure, such as special economic zones (SEZs) and industrial parks, as a means to catalyse industrial development and to serve as a direct connection between spaces of production within a land-locked country and international markets. This investment-heavy industrial corridor is the linchpin of the ‘grand renaissance’ vision of the Ethiopian People’s Revolutionary Democratic Front (EPRDF) and is meant to spearhead the country to lowermiddle-income status by 2025. The party’s vision shifted around the mid-2000s coinciding with increased engagement with Chinese state-owned enterprises (SOEs), banks and entrepreneurs. Industrialisation is expected to diversify the economy, provide jobs and make Ethiopia the manufacturing hub of Africa. Ethiopia is one of the least urbanised countries in the world with an estimated urbanised population of 21.2% (CIA, 2019). It was ranked 137, out of 149 countries, for prosperity (The Legatum Prosperity Index, 2018)1 and 173, out of 189 countries, on the UN’s Human Development Index (UNDP, 2018). In 2017, Ethiopia’s real GDP growth was 10.9% (CIA, 2019). As of December 2017, external debt was estimated at USD26.05 billion (ibid.) and since 2000, Chinese creditors have lent at least USD12.1 billion to Ethiopia (Benabdallah et al., 2018). Interestingly, it has the lowest level of income inequality in Africa (CIA, 2019). This chapter ref lects on the railway as a microcosm of Ethiopia’s engagements with China, specifically with the maritime portion of the Belt and Road Initiative (BRI). Though China is Ethiopia’s largest trading partner, it has not been limited to working solely with China. There have been significant engagements – including infrastructural engagements – with other countries, including Japan, the United Arab Emirates, Turkey, the United States, the European Union, India, Singapore, Saudi Arabia, among others. In addition, while the Addis Ababa-Djibouti railway inherently concerns Djibouti, this chapter focusses exclusively on Ethiopia. Efforts have been made in this research to triangulate sources and types of data. News reports
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were used to understand a media narrative; interviews with key government experts were conducted between October and November 2018 and used to understand project details and the official narrative; blog posts were reviewed to understand how the project is being understood locally, and scientific articles were used as background information for expert opinion. The result was filtered and supplemented and/or challenged by personal observations. Information transparency has occasionally been a hindrance. Further quantitative and qualitative research needs to be completed to fully understand the effects of the railway, particularly on its effect on various pastoralist communities, urban growth and design, and governance issues.
Background on Ethiopia and its relationship with China Except for a brief period of Italian occupation (1935–41), Ethiopia has never been colonised. It uniquely held a strong central government led by a long-standing, indigenous monarchy until 1974, when there was a coup d’état and a group known as the Derg assumed power and established a communist government. Diplomatic relations with China first began in 1970 (Cabestan and Jayaram, 2012),2 but under the Derg there were few significant engagements with China, besides a USD15 million loan to design and construct a national stadium and ring road in Addis Ababa in 1988 (Adem, 2012). In 1991, the Derg was overthrown and the Ethiopian People’s Revolutionary Democratic Front (EPRDF), a coalition of ethnic-based parties, came into power. In 1995, the former Prime Minister Meles Zenawi visited China and encouraged Chinese investors to visit Ethiopia (ibid.). EPRDF, sceptical of Western neoliberal policies (Cheru, 2016), began its rule with an agriculturalled industrialisation (ADLI) framework, which focussed on small-scale, agricultural development partially to prevent rural-to-urban migration. Little attention was given to the development of cities during this period, and over time Ethiopia’s limited resources were stretched and urbanised areas went into decline. In 2005, arguably the most democratic election in Ethiopia’s history threatened the position of the ruling party. Opposition took 172 out of 547 seats; it previously held 12 (Arriola and Lyons, 2016). EPRDF then looked to consolidate its rule and initiated measures to prevent future threats. Reacting to the clampdown, donors such as the United States and the European Union suspended and attached conditions to aid (Cabestan and Jayaram, 2012). Meanwhile EPRDF started to reconsider ADLI and initiated different measures, now with the aim to make Ethiopia a lower-middle-income country through industrial transformation. There was an uptick in monumental physical infrastructure projects and engagements with Chinese actors. Focus shifted from rural localities into cities, and the political model shifted from democratisation to developmentalism. By 2015, there were no seats held by members outside of EPRDF or EPRDF’s allies (Arriola and Lyons, 2016). The Ethiopian government increasingly looked to China, and other East Asian countries,
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as role models to emulate. While there have been lessons drawn from many countries, China held a particularly esteemed position. Fourie (2015) speculates that partially the attraction between Ethiopia and China is a ‘historical and social psychological similarity’ between the two countries in their feudal and communist paths. “Both parties describe themselves as ‘vanguard’ (revolutionary) parties (CPC, 2007; EPRDF, 2017) that solve their internal differences through regular sessions of self-criticism, both came to power through rural-based revolutions, and both preside over mixed (but formerly socialist) economies” (Fourie, 2015, p. 300). The policy shift set the path for sub-Saharan Africa’s first light rail system, mass housing schemes, hydro-electric dams, updated and expanded power plants, increased electrification, sugar plantations, cement factories, industrial zones, dry ports, new roads and new railway lines. This period has had rapid state-driven, economic growth, often exceeding double digits, and high industrial growth, ranking 13th globally (CIA, 2019). The timing of China’s ‘going out’ and later its BRI perfectly coincided with the Ethiopian government’s own development ambitions. Since about 2004, Ethiopia’s growth rate has been impressive, but social unrest simmered and finally burst when a master plan was made by the Addis Ababa and the Surrounding Oromiya Special Zone Integrated Development Plan Project Office. It was believed that this master plan extended the capital’s boundaries into the neighbouring region of Oromia, which led to protests regarding this issue among others, particularly in the Oromia Region and later into the Amhara Region. These protests gained momentum through a general feeling of dissatisfaction with the government. To curb the protests, the government implemented two State of Emergencies which limited group gatherings and established a ‘command post’ and intermittently cut the internet for days or for weeks at a time. Hundreds of people were then killed by the government which exacerbated general dissatisfaction and eventually led to an internal power struggle within the coalition party and forced the appointment of a new Prime Minister, Dr Abiy Ahmed. This period saw top-down city and national planning, with little community consultation, nor transparency with the public. Kloosterboer (2019) believes that a new city is basically being built on top of the remains of the old city. It was estimated that 80% of the inner city, the four innermost sub-cities (Arada, Addis Ketema, Lideta, Kirkos), could be defined as ‘slum’ (UN-Habitat, 2011). A massive urban renewal scheme was developed in response, where 245,000 condominium units have been built around Ethiopia with local financing between 2006 and 2015 under an ambitious project named the ‘Integrated Housing Development Program’ (IHDP) (Keller and Mukudi-Omwami, 2017). This likewise led to the demolition of 23,151 houses and the expropriation of 392 hectares in Addis Ababa alone, which equals roughly 10.5% of the innermost city (UN-Habitat, 2017, pp. 54–5). In addition, 4,000 hectares (of roughly 10,000 hectares of Addis Ababa) has been
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slated for renewal, i.e. demolition (Kloosterboer, 2019). While the majority of the residents of these areas have been relocated, most of them have been moved to the periphery of the city, away from their places of employment and livelihood. The land use of these intercity locations has predominately changed from residential to commercial. Dr Abiy Ahmed has enacted a suite of liberalising measures domestically and helped to broker peace internationally. He lifted the state of emergency, freed political prisoners, unbanned opposition groups, reclaimed land which was not being developed by investors, imprisoned corrupt officials, said people would no longer be displaced through redevelopment projects and started selling state-owned enterprises (SOEs), among other significant actions. Internationally, he made peace with neighbouring Eritrea and helped broker internal peace within South Sudan. In 2019, Dr Abiy Ahmed won the Nobel Peace Prize. Meanwhile, revitalisation and reorganisation of democratic institutions such as the Electoral Board, and draconian laws are undergoing revision. These actions seem to be a reengagement with democratisation and, with the opening to foreign investment, a slight departure from developmentalism. Simultaneously, liberalisation is also giving space to long-simmering ethnic tensions; a significant number of people have been displaced and killed which threatens the future stability of Ethiopia. In the 2018 OECD States of Fragility report, Ethiopia was categorised as extremely fragile and ranked as the tenth most fragile country in the world. A 2017 McKinsey & Company report classified the relationships held between China and various African countries into four archetypes. While not all African countries were classified, only Ethiopia and South Africa were classified as ‘robust partners,’ the maximum archetype. This means Ethiopia has “a clear strategic posture toward China, along with a high degree of economic engagement in the form of investment, trade, loans, and aid” (p. 12). The report indicates that Ethiopia has paired specific strategic economic development initiatives with China and their relationship extends beyond China’s megacities into its provinces. In addition, the bilateral relationship has been classified as a ‘comprehensive strategic cooperative partnership’ by the Chinese government (Embassy of the PRC in the FDRE, 2018). Not all indicators between the two countries are positive, though. Wang Wen, the head of China’s state export credit insurer Sinosure, said at a BRI financing forum in Hong Kong in October 2018 that the planning behind many infrastructure projects has been ‘downright inadequate’ (Ng, 2018). He used the Addis Ababa–Djibouti railway as an example, where he says Sinosure has lost nearly a billion US dollars, due to Ethiopia’s debt being restructured because of underuse caused by power shortages (ibid.). He continued with, “Ethiopia’s planning capabilities are lacking, but even with the help of Sinosure and the lending Chinese bank, it was still insufficient.” However, despite the project not being completed, the Ethiopian Railway Corporation began repaying its debt as required starting in 2016 (Tarrosy and Vörös, 2018). At the Forum on China-Africa Cooperation (FOCAC) in 2018, the
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debt accrued from the railway was restructured from a 10-year repayment to a 30-year repayment, but the conditions are unknown (Olingo, 2018). Then, before the second Belt and Road Forum for International Cooperation, in April 2019, Dr Abiy Ahmed met with President Xi. Debt for all interest-free loans matured by the end of 2018 was written off and both countries expressed desires for renewed cooperation. China has been Ethiopia’s largest trading partner since 2009 (World Integrated Trade Solution, 2016), though this relationship has been asymmetrical. While China is one of the main export destinations for Ethiopia, the amount of Chinese imports to Ethiopia far surpasses that of Ethiopian exports to China. Trade with Ethiopia can be appealing because of Ethiopia’s large market (being the second most populated country in Africa), oil seeds,3 potential for oil and gas,4 an emerging manufacturing sector, potential intercontinental connectivity and small amounts of mining.5 However, Adem (2012) argues that China is interested in Ethiopia for mostly ‘diplomatic considerations.’ As Ethiopia is the only non-colonised nation in Africa, it holds a symbolic power among Africans. In addition, Addis Ababa hosts the headquarters of the African Union and the United Nations Economic Commission for Africa. Thus, when Ethiopia, the country synonymous with African independence, openly promotes China, soft power for China emerges and counters Western narratives of Chinese neo-colonialism (Adem, 2012).6 In addition, Ethiopia is a geographic ‘gateway to Africa’ from where economic engagements could expand (Cheru, 2016). Cabstan and Jayaram (2012, p. 56) argue that “Ethiopia’s relationship with China is similar to other countries’ relationships with more powerful countries who also have large populations, but few resources in that the relationship dynamics are asymmetrical and in China’s favor.” Officials at the Ethiopian Railway Corporation worry that Ethiopia’s trade deficit is being exacerbated by the railway and could hurt domestic manufacturing in the future. Thus, until the industrial zone surrounding the railway is fully functional, the railway essentially serves as importing infrastructure, which is a cause of dissatisfaction among officials.
The railway The Addis Ababa–Djibouti railway was inaugurated in October 2016 and after a trial period started passenger and freight service on 1 January 2018. It caters to both passengers and freight, uses the secondary electrified railway standard of China and is powered predominately by renewable hydropower. It was designed for a speed of 120 km/h. A high-ranking staff member of the Ethiopian Railway Cooperation (ERC) estimated the cost of the railway to be between USD3.5 and 4.2 billion,7 and added that the cost will increase with interest rates and the additional works yet to be completed. Roughly 30%, USD1.5 billion (Africa Manager, 2014), of the funding for the railway came from the Ethiopian government, while the remainder was given as a loan from China’s Export–Import Bank (Exim Bank). The China
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Figure 12.1 Context map of the region including the Addis Ababa–Djibouti railway. (Map credit: Author).
Railway Group (CREC) constructed the Addis Ababa–Miesso section of the railway and the China Civil Engineering Construction company (CCECC) constructed the Miesso–Djibouti section; these companies will also manage railway operations until 2030.8 Asiamoney named it the best individual BRI project in the Middle East and African region in 2018 (Euromoney, 2018). The railway starts just outside of the cool and semi-moist, densely populated, highland capital of Addis Ababa (Figure 12.1). The main station Lebu is located precisely on the city’s boundary with Oromia Regional State, which is also the location of Ethiopia’s first Export Processing Zone (EPZ), for which initial funding was provided by the Chinese company Huajian Group (Cheru, 2016). From here, it descends into the fertile farmlands of the Oromia region, passing through the increasingly industrial towns of Dukem, Bishoftu and Adama. This landscape fades into the semi-arid lands of agro-pastoralists. It passes through Awash National Park, which includes a narrow strip of warm moist lowlands, before it passes through the town of Metahara, where a sugar factory has recently been constructed. It then passes through Dire Dawa (Figure 12.2), a city which grew expeditiously with the former railway, and where a SEZ and free-trade area have been earmarked
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Figure 12.2 The Dire Dawa station under construction. (Image credit: Author).
and industrial parks and a dry port are already being constructed. The arid land fades into a mosaic of agro-pastoralism and pastoralism until it reaches the capital of Djibouti on the Gulf of Aden. For the majority of the train’s route, the surrounding landscape is rural, arid and semi-arid lands (ASALs), consisting of lowland plains, and sparsely inhabited by pastoralist communities which mostly practice transhumance pastoralism, where part of any household and livestock migrate and part of the household lives in a permanent or semi-permanent setting (McPeak et al., 2011). The ASALs of the Horn of Africa are particularly vulnerable to drought, which will likely be further exacerbated by the effects of climate change. Between 2015 and 2016, El Niño severely hampered agricultural productivity, especially in pastoralist areas, and necessitated food aid for more than 10 million people (IPCC, 2019). While climate change projections for the area vary in details, all seem to indicate increased unpredictability within an already marginalised sector of the Ethiopian society (Funk et al., 2008; Funk and Williams, 2011; IPCC, 2019). Studies, in addition, have shown that drought pushes pastoralists out of pastoralism (Headey et al., 2014, p. 203). As one of the least formally educated areas of Ethiopia, due mostly to the difficulty of reaching mobile populations, there are few options beyond pastoralism open to these communities currently. Ethiopia has created two, five-year Growth and Transformation Plans (GTPs), which resemble China’s five-year, economic-development initiatives. The railway is directly aligned with both plans, spanning between 2010 and 2020, which aim to expand railways and further industrialisation (Government of Ethiopia, 2010, 2016). At least 90% of Ethiopian trade passes through Djiboutian ports9 (Africa Research Bulletin, 2017); an estimated 1,000–1,500 trucks used the road between Djibouti and Ethiopia every day in 2015, and this was expected to rise to 8,000 by 2020 (Africa Research Bulletin, 2015). The construction boom within Ethiopia, coupled with a dependency on imported materials, has meant that the vast majority of goods from Djibouti have been passing along a single road which hosted Ethiopia’s largest dry port of Mojo, which has been handling around 80% of goods imported to
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Ethiopia (Xinhua, 2017).10 The railway improves efficiency by reducing the amount of time required to import goods to central Ethiopia from three days to half a day and reduces additional transportation-associated costs incurred by the additional time. Efficiency will be further facilitated by the eight other railway lines which are to be built. A 60 km ‘industrial belt’ of SEZs, industries, dry ports and private depots has been planned to shadow the train’s route with the aim of facilitating industrialisation through a condensation of the space between production and global markets. Djibouti has a locational advantage being positioned at the Bab el-Mandeb, the bottleneck between the Red Sea and the Indian Ocean, and one of the world’s busiest shipping routes. Improved linkages to this route improve both the resiliency and potential of Ethiopian trade. Industries can directly connect to the railway by spur lines – track extensions – that diverge from the main line and extend into industrial properties. These are physical and conceptual links between infrastructure and industrialisation. While the hard infrastructure of the railway was completed and financed by Chinese SOEs, the industrial zone will include investments from private investors. According to a 2017 McKinsey & Company report, there are 689 Chinese firms estimated to be operating in Ethiopia (p. 28), a figure higher than what both countries officially report through their ministries. The railway is aligned with other national and regional objectives. Ethiopia’s Climate Resilient Green Economy (CRGE) aims for Ethiopia to have a carbon-neutral, lower middle-income status by 2025 through a ‘green’ economic development model. The railway’s industrialisation agenda promotes economic growth, and by being hydropowered, it is ‘green.’ The African Union’s Agenda 2063, Aspiration 2 looks to have a ‘world class, integrative infrastructure that criss-crosses the continent’ (African Union Commission, 2015) and its ‘Solemn Declaration’ looks to implement continental free-trade and local and regional market integration (African Union, 2013). The Addis Ababa–Djibouti railway is envisioned to form part of a larger railway network connecting to Tanzania via Kenya, to Southern Sudan through LAPSETT (Lamu Port and Southern Sudan–Ethiopia Transport Corridor) (Anthony, 2013), and even potentially to Eritrea and a transcontinental line which would extend to West Africa. If implemented as planned, alternative transportation routes would be beneficial and regional trade and connectivity would be enhanced. The Addis Ababa–Djibouti standard-gauge railway, like other BRI railway projects in Africa, roughly follows the tracks of a former meter-gauged railway, which was inaugurated in 1917 and stopped full service in 2008.11 The Ethiopian portion of the railway differed from other African railways by being owned by its own government and not by a colonial power.12 One traveller remarked, it contrasted starkly from other colonial railways in that there was no segregation between riders of different skin colours (Pankhurst n.d.). As various colonial powers used different rail gauges and most of the railways have fallen into disrepair, it would be complicated to restore and
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connect them now. Using a standard gauge for all the new railways, such as the one in Ethiopia, Kenya, Tanzania, Nigeria, makes the goal of ‘integrative infrastructure’ more feasible.
Analysis At the time of writing, passenger trains were running every other day stopping in Addis Ababa, Dire Dawa and Djibouti City, while freight trains ran daily from Mojo to Nagad in Djibouti City. Though the railway is operational, the project is not complete. Several railway stations have yet to be built. However, the industrial belt is still mostly at a conceptual/early design stage, though enabling trade from industrial zones and the railway’s freight capacity are arguably what makes this project viable. In addition, how the train will run for the first six years was not stipulated in the contract between the operating companies and the Ethiopian Railway Corporation. It is, therefore, believed that the train is not running at full capacity to not take risks,13 which potentially hinders its profitability. The recently built, also Chinese funded, light rail in Addis Ababa was conceptualised to connect to the new main train station, which is about 11 km from the centrally located former railway station, but Vice Mayor, Doctor Solomon Kidane, said at the Developing Urban Futures conference that all light rail extension projects have been indefinitely halted. The electricity that powers the train, furthermore, is not consistent, which often prohibits the train from running on schedule, though this is improving.14 Also, as the train passes predominately through pastoralist areas, it commonly kills livestock. It would be inappropriate to entirely fence the railway and hinder mobility, but fencing is being considered in some areas. Meanwhile, the train is running at around half of its designed speed also as a partial mitigation tactic.15 Transportation infrastructure moulds urban development. The stations of the older railway were not always planned in town centres, but rather additional planning and economic activity caused a gravitation towards the railway and provoked development. These stations eventually became activity nodes within towns such as Dire Dawa and Addis Ababa. In the early 1900s, the main centre of trade in eastern Ethiopia was in the town of Harar, but due to its geographical position in the mountains, the Franco-Ethiopian railway bypassed the city. It instead stopped in a small settlement which later became known as Dire Dawa. This station was placed centrally within the first planned grid system in Ethiopia, which was also built by the railway company for its mostly foreign employees16 (Tarekegn, 2016). The city thrived off the trade that accompanied the train, and over time Dire Dawa became the second-largest city in Ethiopia. The train was central to this growth and served as urban infrastructure whose role went beyond ‘nuts and bolts’ to acquire social, historical and cultural meaning. Addis Ababa, however, urbanised in a polycentric manner, where growth nodes were concentrated around centres of power, such as around the gebbi (the emperor’s home), and
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around the homes of other titled families, who often chose hill tops for their homes (Gérard and Giorghis, 2007). This proclivity for height did not coalesce with the railway’s needs. Therefore, the main station for Addis Ababa was built on f lat land below the gebbi. The railway pulled the development of the city southwards and created another node around its station, La Gare. The development of the neighbouring areas thrived upon the trade generated through the railway. The La Gare neighbourhood is now within the four innermost sub-cities. Both in Addis Ababa and in Dire Dawa the railway was a catalyst for walkable, human-scaled urbanisation, an urban typology that could not have occurred from the development of a road, which usually brings lineal development, as seen throughout the many roadside towns in Ethiopia. When the railway fell into disrepair, people’s livelihoods suffered both in Addis Ababa and in Dire Dawa (Gardner, 2018a). Awash will sit at the crossroads of two railway lines and the ERC expects the town to benefit similarly to how other towns benefited from the former railway. The stations have been built on the outskirts of towns for several reasons. One is a response to the national policy of industrialisation. The spaces surrounding each station fall within the planned industrial belt which focusses on large-scale developments, such as Special Economic Zones (SEZs), industrial parks, national and private depots and dry ports, all of which require sufficient space. The coupling of railway and industrial space enhances the f low of goods from the point of production to distribution. Construction is also expedited when fewer negotiations for land and compensation need to be made. Such station placement is also meant to guide the direction of urbanisation towards the new stations. For example, in Dire Dawa the station has been placed to the west of the city, which corresponds with the city’s master plan to direct urbanisation away from areas where urbanisation has caused erosion and left the city vulnerable to catastrophic f loods (Erena and Worku, 2018). As Rode (2018) noted, Addis Ababa’s and Dire Dawa’s stations are located on the cusp between the city administration and the surrounding regions. While such placement could herald a sharing of benefits between municipalities and the regions, as has been done on the Pearl River Delta Region of China (Li et al., 2013), it also raises questions about the government’s commitment to ethnic federalism (Rode, 2018). The railway’s implementation was expedited by federal bureaucracies, as is within its constitutional mandate to develop, administer and regulate rail linking two or more states (Constitution of the FDRE, n.d.). Nonetheless, it was also constitutionally required to advance the process vis-à-vis intricate negotiations between regions and cities (Rode, 2018), as regional states have an autonomous relationship to the federal government. The details of how power was shared and how the railway will be managed between cities and regions need further research. The combination of intentionally directing urbanisation and placing railway nodes on borders inevitably means Addis Ababa and Dire Dawa will expand into the surrounding regions, which eerily echoes one of the causes
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that sparked unrest in the country a few years previously. This situation could potentially be aided by Transit Oriented Development (TOD) around the stations, which has been planned, but not yet implemented, if the benefits of increased land values are shared between municipalities and regions, and with farmers and pastoralists. Land became state-owned during the Derg, and can now generally be leased for a lump sum value, which does not capture additional revenue from value added to the land or through buildings.17 According to UN-Habitat (2017), 99% of non-tax municipal revenue came from urban land leases. There are also nominal ‘roof and city house taxes’ which equate to property taxes, but in Addis Ababa these taxes accounted for only 0.1% of the city’s total revenue (Goodfellow, 2017a). These taxes are predominately based upon perceived rent values, which are generally undervalued and most properties built within the past 20 years, including commercial properties, have not been registered and, thus, do not pay these taxes (ibid.). This taxation system does not supply municipalities with a sufficient stream of income, promotes real estate speculation and encourages municipalities to continually release land in attempt to generate further income from leases. ‘Property tax reform’ is being piloted in Dire Dawa, but the results are still unknown (Goodfellow, 2017a). In addition, it is unclear how large-scale industrial developments and human-scaled TOD will coalesce. In the Pearl River Delta Region of China, land within 800 m of intercity railway stations falls within a specially designated zone, which needs development approval by the provincial government, who will ensure that this zone uses TOD to increase ridership to enhance a project’s financial feasibility (Li et al., 2013). In Ethiopia, regional governments were only nominally involved in the railway’s implementation, and the continual leasing of land creates a tension between municipalities and the surrounding localities, which are often under-compensated for their land (Rode, 2018). The incentive to lease, likewise, has contributed to the displacement of poorer communities within cities to the peripheries, like in Addis Ababa (Goodfellow, 2017a). The railway has created ‘pockets of very high-value land’ and real estate development (Gardner, 2018a). Real estate is lucrative compared to other sectors within Ethiopia and leads to real estate speculation. In Addis Ababa, housing is urgently needed, but new, often commercial, constructions are underused (Goodfellow, 2017b). This disjuncture between societal needs and actual building is facilitated by the needed tax revenue derived from urban land leases. TOD could exacerbate real estate speculation, but a shared value-added tax system could help mitigate potential issues around municipalities encroaching into the regions (Gardner, 2018a). Pastoralists have held the largest physical demonstrations against the railway saying it hinders mobility with inconvenient and far-apart crossings (Economist, 2018). In retaliation, they have dismantled sections of fencing meant to prevent animal crossings (ibid.). When their livestock has been hit, arms have been used to prevent trains from proceeding – sometimes overnight – until compensation is paid.18 A leading pastoralist expert believes
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that the management of the older railway was relatively better, as it employed local chiefs in its management.19 The same expert said, at the 16th Ethiopian Pastoralist Day, pastoralists asked for additional stations, but this was deemed economically infeasible and rejected. ERC stated that pastoralist mobility patterns did not need to be studied, as the railway runs near the old railway. However, mobility patterns could have changed since the former railway’s disuse. The railway could have some effect on access to grazing land, water and minerals for livestock, and it could also have affected access to sacred sites, in the case of the Issa,20 but this should be studied further. ERC believes that pastoralists will benefit from the jobs created by the extension of industrial zones into their land, which would inevitably have a ‘villagisation’ effect. This could enhance access to health and education facilities, but would compromise traditional pastoralist existence. The head of the EthioDjibouti Railways hopes pastoralists will see the railway as a national resource (Economist, 2018), which will likely only happen if there are visible benefits. Local media is overwhelmingly positive, mostly portraying the railway as a symbol of modernisation, with only minor criticisms of animal crossings. There have been extensive discussions of the progress of the railway and its politics since its inception on the blog Skyscrapercity. Overall, the Addis Ababa–Djibouti railway is viewed favourably, but when criticisms are cited they are generally directed towards the project being a symbol of EPRDF and as a means for its legitimacy. Conversely, Western news outlets hint to some criticisms through interviews with farmers and locals who state that they were unfairly compensated for their land, the railway is not providing the expected number of jobs, land prices are sky-rocketing and mobility hindrances (Economist, 2018; Gardner, 2018b; Kaiman, 2017). During the construction of the railway about 2,000 jobs were created for Ethiopians, but these have since decreased to around 1,600.21 It is believed that jobs will increase as the railway’s capacity increases and management is transferred.22 Western rhetoric often claims that Chinese engagements in Africa are really neo-colonial schemes for resources. Both European colonialism and Chinese engagements have included infrastructure which could presumably be used for resource extraction. In addition, both European colonialism and recent Chinese engagements have been spearheaded by chartered companies or SOEs, which effectively act as arms of the state (Anthony, 2013). However, regarding the Addis Ababa–Djibouti railway, the ERC is more afraid of the railway functioning unidirectionally to only import goods, rather than both importing and exporting. In addition, while some locals question the quality of Chinese engagements, for this project, there seems to be more enthusiasm for the project’s modernity and criticisms are more related to broader issues communities have with the Ethiopian political system than with the infrastructure emanating from a so-called ‘colonial force.’ Critics also claim that Chinese infrastructure projects create technological dependency. Currently the maintenance handbook seems to only be available in Chinese, and the trains and some parts will presumably require Chinese replacements at some point. However, concerning skill transfer, Ethiopians are being trained on
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railways operations both in Ethiopia and in China in preparation for Ethiopian management. Finally, critics say that such projects involve predatory loans. To objectively assess this the loan arrangement and interest rates would need to be known. However, the restructuring of the loan for this railway and the forgiveness of some debt show at least some good will. Ethiopia with its limited fiscal means is ambitiously making huge investments in infrastructure which has aided its economic growth and made the country one of the fasting growing economies in Africa. This project is promising and represents a relatively successful BRI project. Its planning seems, however, to have been completed to fulfil macro-economic factors and less detailed consideration has been afforded to the direct effect of the project on the surrounding communities or how the urban design around stations will navigate TOD and industrial facilities. Feasibility studies and other social and environmental studies are not accessible, due to a nondisclosure agreement between the Ethiopian government and Exim Bank.23 In addition, there seems to be a lack of detailed knowledge of what analyses were done before construction by high-ranking ERC staff as these were completed by the Chinese companies, which indicates a lack of direction from ERC. This project was designed and implemented during rather politically turbulent times and like other public projects at the time, it lacked transparency in both its planning and execution. Information regarding the type and extent of community consultation, issues of compensation, project costs, the loan arrangement and interest rates, and whether and what kind of environmental and feasibility studies have been done are important inputs for an objective analysis, but none have been made public, nor are they accessible. This lack of transparency impedes accountability. My personal experience with the ERC has been after the major political shift in the country and cooperation has been thorough, when possible. The economic liberalisation of SOEs could potentially herald a new chapter for the railway and competition for Chinese actors. This project would have benefited from more localised cross-sectoral and small-scale planning. Enhanced community consultation could have shaped railway infrastructure and potentially won the support of the pastoralists. If the people whose land was expropriated could benefit in the leasing schemes for industrial facilities, their support could potentially further be garnered. In addition, more jobs and domestic capacity could have been enhanced if Ethiopian architects and planners would have been employed for site and station design. As Brautigam (2015, p. 161) argues, “Chinese companies have not generally accepted that corporate responsibility requires more than unquestionably accepting a local government’s word that the land they have been allocated is ‘owned by the state’ or that it is unencumbered.” While these large-scale developments will likely help Ethiopia reach its macro-economic goals, it is unclear the extent to which the benefits can really trickle down to the majority of the population, as few people would have access to the capital needed to take part in one of the industrial projects, which only leaves basic factory work employment for the vast majority.
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Notes 1 This ranking measures economic quality, business environment, governance, education, health, safety and security, personal freedom, social capital and natural environment. 2 China’s first engagement with railway building in Africa was the Tazara (Tan-Zam) Railway, which runs for nearly 2,000 km from copper mines in Zambia to the coast of Tanzania and was completed in 1975. Funding for the project was rejected from multiply sources, including the World Bank, but China offered to fund the project in 1967 with an interest-free loan (Brautigam, 2011). In recent years, a soft loan was granted by the Chinese (Anthony, 2013) and final discussions between the three nations regarding financing its restoration have been held (Xinhua, 2019b). 3 Ethiopia is the third-largest international exporter of sesame seeds (16% of global export) and China is the world’s largest importer of raw sesame seeds, including Ethiopian sesame seeds accounting for more than 50% of Ethiopia’s exports (UNCTAD, 2018). 4 There are Chinese companies that are exploring for oil and gas in the Somali Region (Anthony, 2013) and a Chinese company is building an Ethiopia–Djibouti gas pipeline (Xinhua, 2019a). 5 In 2008, China Geo-engineering Corporation (CGC) signed a deal with the Ministry of Mines and Energy to mine silica sand (Adem, 2012). 6 In 2012, symbolism and soft power became tangible as China constructed a new headquarters for the African Union (AU) in Addis Ababa as a ‘gift.’ An institution which once symbolized African independence is now imbued with a Chinese layer. 7 Personal communication in November 2018. 8 Ibid. 9 Djibouti has served as a de facto port for Ethiopia since a border disagreement between Ethiopia and Eritrea in 2002. In June 2018, Ethiopia announced it would honour a UN-backed border agreement and the relationship has started to normalise. 10 Five more dry ports have been planned, or are currently under construction, all situated near the Addis Ababa–Djibouti railway or the other lines under construction. 11 A portion of the railway still runs, because of a European Union-funded restoration project, from Dire Dawa to the town of Guelile in Djibouti, but only services freight. 12 There were numerous attempts to usurp ownership by colonial powers during the railway’s construction. King Menelik became aware of these plans and fought to thwart such attempts (Pankhurst n.d.). 13 Personal communication with employee of the Ethiopian Railway Corporation in November 2018. 14 Ibid. 15 Ibid. 16 The indigenous population lived across Dechatou river in Megalla (ibid.). 17 Land leasing started after EPRDF went on several ‘study visits,’ including China (Goodfellow, 2017a). 18 Personal communication with railway employee in October 2018. 19 Personal communication with leading expert at the Pastoralist Forum Ethiopia in October 2018. 20 Ibid. 21 Personal communication with employee of the Ethiopian Railway Corporation in November 2018.
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22 Ibid. 23 Ibid.
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262 Kelly Leviker Skyscraper City, ‘Ethio-Djibouti Railway’, Skyscraper City, Available at: https:// www.skyscrapercity.com/showthread.php?t=2057509 [Accessed on 7 November 2019]. Tarekegn M 2016, ‘Heritage Management and Development in Dire Dawa City: Touristic Values in Focus’, International Journal of Scientific and Research Publications, vol. 6, no. 22, pp. 249–56. Tarrosy, I and Vörös, Z 2018, ‘China and Ethiopia, Part 2: The Addis Ababa— Djibouti Railway’, The Diplomat, February 22, Available at: https://thediplomat. com/2018/02/china-and-ethiopia-part-2-the-addis-ababa-djibouti-railway/ [Accessed on 4 November 2019]. UNCTAD 2018, National Green Export Review of Ethiopia: Leather and Sesame Seeds, United Nations Conference on Trade and Development, Addis Ababa. UNDP 2018, ‘Human Development Reports: 2018 Statistical Update’, United Nations Development Program, Available at: http://hdr.undp.org/en/2018-update [Accessed on 8 November 2019]. UN-HABITAT 2011, Condominium Housing in Ethiopia: The Integrated Housing Development Programme, United Nations Human Settlements Programme, Nairobi. UN-HABITAT 2017, The State of Addis Ababa 2017: The Addis Ababa We Want, United Nations Human Settlements Programme, Nairobi. World Integrated Trade Solution 2016, ‘Ethiopia: 2016’, World Bank, Available at: https://wits.worldbank.org/CountryProfile/en/Country/ETH/Year/2016/ TradeFlow/EXPIMP# [Accessed on 8 November 2019]. Xinhua 2017, ‘Ethiopia Eyes 5 Dry Ports to Ease Logistics Flow’, Xinhua, October 6, Available at: http://www.xinhuanet.com/english/2017-06/10/c_136355678. htm [Accessed on 1 November 2019]. Xinhua 2019a, ‘Chinese Firm to Construct Ethiopia-Djibouti Natural Gas Pipeline’, Xinhua, February 17, Available at: http://www.xinhuanet.com/ english/2019-02/17/c_137829025.htm [Accessed on 30 October 2019]. Xinhua 2019b, ‘Tanzania, Zambia Resolve to Finance Recapitalization of Chinese-built Railway’, Xinhua, October 14. Available at: http://www. xinhuanet.com/english/africa/2019-10/15/c_138471606.htm [Accessed on 22 October 2019].
13 Strengthening Brazil’s food system Can China’s Belt and Road help? Adrian H. Hearn
Introduction The slowdown of the global mining boom has seen agriculture become more prominent in Latin America’s trade and investment relations with China, with implications for land use in both countries. For Brazil, the sustained growth of exports to China (from USD1 billion in 2000 to USD64 billion in 2018) has come to rely on the expansion of soybean production (UNCOMTRADE, 2019). The demand for Brazilian soy correlates with the implementation of China’s New-Type Urbanization Plan, which has increased the nation’s urban population to approximately 850 million people. This figure represents 60% of China’s total population, and by 2030 the urban population is projected to reach 70% (Cheshmehzangi, 2016, p. 147). This process has unleashed middle-class consumption of pork and beef sustained by soybased animal feed. A new wave of industrialisation is thus transforming geographies of production and consumption in both countries, generating new challenges for urban food systems in the process. This chapter considers how the Belt and Road Initiative (hereafter BRI) could be harnessed to address some of these challenges by stimulating local food production alongside export agribusiness. Around the world public concerns about the territorial, environmental and health implications of mass-produced food have stimulated efforts to develop local alternatives. Among these is urban and peri-urban agriculture (UPA), which the United Nations Food and Agriculture Organization (FAO) links with a broader sustainability agenda: “UPA is a key component of robust and resilient urban food systems… [it is] helping to build the greener, more resilient and sustainable cities of the future” (2014, p. i). Chinese cities are among those experimenting with alternative production practices, stimulated in part by recent food safety scandals including milk powder and animal feed found to contain the plastic compound melamine in 2008, pork laced with the muscle growth steroid clenbuterol in 2011, and spoilt beef imported from Brazil laden with preservatives in 2017 (Barboza, 2008; Condon, 2017; Qiao et al., 2012; Smart and Smart, 2016, p. 99). Consumer sales of organic food in China have expanded rapidly, reaching $3.7 billion nationwide in 2017 (Global Organic, 2018).
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The organic market is also booming in Brazil as citizens grow suspicious of production practices reliant on ‘agro-toxic’ pesticides and as activists seek to protect food-producing peri-urban green belts from the inward invasion of soybean plantations and the outward sprawl of real estate. According to Brazil’s Ministry of Economy and Employment (2015), the national organic sector has grown by 20–30% per year to a current annual value of approximately $700 million. The expansion of rural agribusiness has thus stimulated a backlash of demand for organic food, blurring the boundaries between cities and their surrounds. Chinese state-owned enterprises and financial institutions, which together conduct the vast majority of Chinese trade and investment transactions in Brazil, are well placed to support small-scale sustainable food production in Brazil’s peri-urban zones. Drawing on Chinese and Brazilian experiences of localised organic food production, this would provide much-welcomed balance to the large industrial operations of Chinese, US, European and domestic firms in soy sector. As discussed below, the evolution of the BRI to promote environmentally responsible infrastructure provides Chinese firms with an opportunity to engage in such projects. Investing in the sustainability and diversity of food systems would generate long-term benefits for Chinese and Brazilian producers and consumers. This would improve the image of Chinese firms overseas and help to substantiate the “community of shared future for China and Latin America” articulated by Chinese foreign minister Wang Yi (2017).
The context: China-Latin America agriculture relations By 2050 more than 6 billion people will live in the world’s cities, generating unprecedented challenges for sustainable food production and distribution. Technical and economic studies of urban food security conducted by the FAO (2014) and UN-Habitat (2012) show that outcomes are inf luenced by the degree of consensus among producers, consumers and local governments. How to overcome differences and achieve this consensus, though, is less well understood. As Brendan Gleeson writes, urbanisation is a “socio-ecological” process in which food systems play a critical but under-researched role (2013, p. 311). Distinct pathways to growth in China and Brazil have produced structural complementarities: China is Brazil’s largest trade partner largely because of its thirst for Brazilian iron ore and soybeans, while Brazil is China’s largest Latin American trade partner largely because of its consumption of Chinese manufactured goods. This complementarity produced USD99 billion in bilateral trade in 2018 (UN-COMTRADE, 2019), but also tensions as Brazilian analysts warn of growing pressure on national manufacturers and a tendency towards ‘deindustrialisation’ as Chinese enterprises allegedly seek to dominate supply chains. Researchers of Sino-Brazilian (and Sino-Latin American) relations have explored these concerns for more than a decade (e.g. Hearn and Manríquez, 2011; Myers and Wise, 2016; Strauss and Armony, 2012), finding
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that rising primary exports have not led to Chinese domination. As Thomas Narins writes, “The interests, activities, and actions typically associated with control and ownership of Latin American industrial sectors are more often associated with US, EU, and Brazilian actors than those originating in China” (2016, p. 35). Agriculture demonstrates the range of consequences brought by Chinese demand: the privatisation associated with reliance on unprocessed commodity exports has been accompanied by increasing industrialisation of food systems. While this has generated macro-economic benefits for Brazilian and other regional exporters, it has also incurred micro-level costs, including the replacement of family farms by soybean plantations, contamination of crops and groundwater with toxic pesticides, and displacement of young people from rural communities to cities. The BRI aims to integrate the interests of Chinese enterprises with those of their international suppliers, and therefore represents both challenges and opportunities for Brazil and its neighbours. Latin America’s soy cultivation is concentrated in the Southern Cone, where it now accounts for 45 million hectares, 90% of which are in Brazil and Argentina. The expansion of soy agribusiness has encroached on the peri-urban land previously used for fresh food production and accelerated urban-rural migration as land management becomes concentrated in fewer hands. For Brazil, 59% of the area cultivated with soybeans is managed by only 5% of producers, while in Bolivia 52% of the area is managed by only 2% of producers. By 2010, soybeans genetically modified for resistance to the herbicide glyphosate accounted for an average of 85% of the total produced in Argentina, Bolivia and Brazil. “A clear outcome,” concludes a multilateral task force, “is the externalization of the ecological, social and public health costs deriving from soybean production” (Catacora-Vargas et al., 2012). As Latin America’s second-largest soybean producer after Brazil, Argentina approved the cultivation of genetically modified soybeans in 1996. By 2014, the country’s annual soybean production had quadrupled from 12.4 million to more than 50 million tonnes, and the harvested area increased from 6 million to 20 million hectares (FAO, 2014, p. 84). Soy plantations have engulfed wheat and sunf lower farms while displacing milk, fruit and vegetable production for the domestic market, provoking an exodus of family farmers into the cities they previously supplied. In Rosario, a city of 1.35 million people, rural-urban migrants have brought their horticultural expertise with them and found an ally in Rosario’s progressive city government, which is constructing a ‘green circuit’ to promote family and community gardens, commercial vegetable production and slum upgrading. The city of Córdoba has also become increasingly surrounded by soybeans, increasing the ‘food miles’ required to transport fresh produce to the city centre as reliance grows on productive hubs like La Plata (766 km away by road) and Misiones (1,440 km) (Giobellina, 2017, p. 15). The destruction of peri-urban family farms is intensifying in South America, but is not a new phenomenon. In Brazil’s (and the region’s) largest city,
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São Paulo (population 21 million), land at the municipal boundary has been turned increasingly to export-oriented agribusiness since the 1960s, stimulated initially by a federal industrialisation policy and more recently by Chinese demand (Pereira et al., 2012). Local production of the city’s fresh food has dwindled to a few remaining small holdings and waterways, which together constitute the last remnants of São Paulo’s green belt. Although this area has been protected since 2003 as the Biosphere Reserve of the Atlantic Forest, it is under constant pressure owing to rising taxes, land speculation, illegal settlements, air and water pollution, and highways that permeate ostensibly preserved areas. Fruits and vegetables cultivated in this zone must travel 50–80 km to reach the city’s supply hubs, and as in Córdoba, the ‘food miles’ are growing. In 2016, Mayor Fernando Haddad (2013–16) of the Workers’ Party won the USD5 million Bloomberg Mayor’s Challenge for a project called Join the Dots. The project envisions an online platform and logistical infrastructure to connect family farmers on the city’s outskirts with inner-city restaurants, supermarkets, fresh food stores, public schools and hospitals. The goal is to enable the retention of peri-urban farms, but Haddad’s replacement by corporate magnate João Doria in 2017 – and Doria’s subsequent replacement by conservative ally Bruno Covas to allow Doria to run for Governor of São Paulo – is likely to subordinate this objective to the further expansion of agribusiness and real estate development. Balancing the state with the market has been a longstanding point of contention among Brazilian food security advisors. Many lament the continuing legacies of colonisation by Portugal and later relations with the United States, which entrenched a disadvantageous pattern of cheap commodity exports – most recently soybeans – in return for expensive manufactured imports. The need to escape from this value-eroding predicament was the thrust of Raúl Prebisch’s (1950) seminal book The Economic Development of Latin America and Its Principal Problems, which encouraged Brazil and its neighbours to pursue import-substitution industrialisation from the 1950s until the 1980s. The continuing inf luence of dependency theory on governance in Brazil has underpinned longstanding academic and executive consensus that the state should be entrusted with the management of key aspects of economic development (e.g. Cardoso, 2001; Cardoso and Faletto, 1979; Oliveira, 2006). The 2017 impeachment of President Dilma Rousseff and her replacement by conservatives Michel Temer and subsequently Jair Bolsonaro broke with this tradition, raising questions about the government’s financial and management capacities, not least in food and agriculture. A case in point was the 2017 lifting of a moratorium on deforestation to permit cattle ranching and soy cultivation in an Amazonian region the size of Denmark (Gro Intelligence, 2017). Bolsonaro’s neoliberal agenda was evident in his March 2019 visit to the United States, where he and his counterpart Donald Trump committed to strengthening the United States-Brazil Commission on Economic and Trade
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Relations. Desperate to secure US endorsement for Brazil’s accession to the OECD and to resume beef exports to the United States, which were halted after a 2017 meat processing safety scandal, Bolsonaro agreed to significant concessions. These include capping import tariffs on US wheat and permitting 750 tonnes to enter at zero rate, and commencing the phytosanitary approval process for importing US pork. A further Brazilian commitment came in the Technology Safeguards Agreement, which tightens bilateral security and military cooperation, particularly in the development of military and space technologies. Naming Brazil as a ‘Major non-NATO Ally,’ Trump and Bolsonaro signalled an emerging strategic alliance between the two nations, which may slow Chinese integration with Brazil’s high technology sector. A report from the Woodrow Wilson Center (2019) predicts that China will consequently need to adjust its strategy in Brazil: The symbolic approximation between Brazil and the U.S. also sends a message to China that they will have to either review part of their approach and strategy towards Brazil or their current status will start to drain away like sand in the hand. The BRI is the Chinese government’s favoured platform for revitalising relations with Brazil. Just two months after Bolsonaro’s visit to the White House, Brazilian Vice President Hamilton Mourao met with Xi Jinping in Beijing. Encouraged to join the BRI, Mourao reportedly expressed hope that Brazil’s development plans will ‘connect’ with the initiative (Bai, 2019). Trade friction between the United States and China was intensifying at the time, enabling Brazilian soybean farmers to further displace US competitors and consolidate their leading position in the Chinese market. To the extent that the BRI could stimulate investment in Brazil’s agricultural infrastructure, port facilities and logistics, it will deepen the nation’s economic and political affinities with China. As Brazilian political scientist Adriana Erthal Abdenur writes, “the BRI further erodes United States hegemony and reconfigures, both politically and spatially, the dynamics of power” (2019, p. 164). Understanding the significance of this process for Brazil, she argues, requires a perspective that embeds bilateral relations with China in the broader context of the BRI’s global reach. This wider point of view illuminates the myriad opportunities that the BRI could create for Brazilian construction, energy and infrastructure companies in Africa, Asia and particularly Greater Eurasia. As the Brazilian government assesses the BRI’s economic and strategic potentials, it must simultaneously address the more immediate challenges of domestic development and inequality. Brazil is among the world’s most unequal countries, with a GINI coefficient of 0.53, while Rio is on par with Brasília as the country’s most unequal city, with a GINI of 0.63. According to Wen Tiejun of Renmin University of China, the inequalities that plague Brazilian cities can provide insights for China’s urbanisation programme, which must avoid the negative aspects of ‘Latinamericanisation.’ Brazil’s sprawling
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favela slums, writes Wen, have engendered marginalisation, poverty and delinquency, which if replicated in China would slow economic growth and threaten political stability (Wen, 2005). Brazil exhibits a clear correlation of low income with poor nutrition and rising obesity, diabetes and related cardiovascular complications (European Society of Cardiology, 2016; Governo do Brasil, 2017). A similar phenomenon is emerging in China, where heavily processed diets, fast food and limited access to fresh produce have generated health risks that are attracting the attention of medical advisors and community associations (Cheng, 2011; Liu, 2017; World Health Organization, 2016). Wen believes that a solution to this and other structural problems is a more localised and socialised food system, as predominated in China in the 1920s and 1930s (interview with author, 19 July 2016). Examples from China and Brazil show that creative solutions are emerging to improve nutritional health in underserved communities while servicing growing demand for organic food. Cases from both countries demonstrate that productive forms of state support for localised food strategies are enabled by – and, in turn, enable – relationships between producers, consumers and municipal governments. Chinese firms that do business in Brazil can support this process, especially if they are interested in improving human and environmental outcomes. Any attempt to achieve a ‘community of shared future for China and Latin America,’ as articulated by Wang Yi, will require BRI projects to adopt this comprehensive approach.
Feeding the masses in Beijing The BRI’s focus on foreign infrastructure ref lects China’s growing demand for natural resources, evident in Beijing’s need for food. With a metropolitan population of 21.5 million, Beijing shows how China’s New-Type Urbanisation Plan is transforming the nation’s demographic profile. Unveiled in March 2014, when 53.7% of the population lived in cities, the plan aims to increase this figure to 60% (approximately 858 million people) by 2020 (Xinhua, 2014). The Chinese government’s attempt to shift the economy away from agriculture, through industrial manufacturing, and towards the services sector has seen Beijing’s population grow by 6 million over the past decade (CPDRC, 2008). In the context of diminishing arable land (only 105 million hectares, or 11%, of China’s surface area is cultivable), food bottlenecks have stimulated a policy of large-scale commodity imports. In 2018 China purchased 66 million tonnes (worth more than USD27 billion) of soybeans from Brazil, largely for processing into animal feed to service the annual consumption of 40 million tonnes of pork in the nation’s expanding cities (UN-COMTRADE, 2019). Beijing’s growing demand for food poses challenges not only for quantity but also for quality. The farm villages that surround the city, which have traditionally supplied the urban centre, have experienced an exodus of young
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people and diminishing capacity to safely produce fresh food. Those who remain in rural livelihoods, typically older than 60 years and burdened with growing workloads, are neither equipped nor trained to enforce quality control procedures. Consumer concerns about the safety of domestic produce, stoked by the scandals noted above, have provoked a surge of imported processed and canned products from Hong Kong, Australia and elsewhere. Greater reliance on processed food has brought its own problems. A study by the Chinese Center for Disease Control and Prevention has found that 33% of Beijing citizens are overweight (with a body mass index between 25 and 30) and 26% are obese (body mass index above 30) (Liu, 2017). Across China, over-consumption of sugar and fat, compounded by physical inactivity, is fuelling a previously unseen rise in diabetes to nearly 10% of the population, or 110 million people (World Health Organization, 2016). Type 2 diabetes, which comprises 90% of these cases, is directly linked to dietary health. Thirteen percent of China’s medical expenditures are now incurred by treatment for diabetes, costing the national health system USD25 billion per year, while illnesses related to diabetes generate further costs and stresses to families and companies (Cheng, 2011). Concerns about food safety and dietary health have stimulated the rise of urban and peri-urban agriculture in Beijing as residents seek out chemicalfree fruits, vegetables and meat. The city has over 1,300 ‘agro-parks’ that benefit from government-subsidised organic pesticides under the government’s 2-2-1 Initiative. The first ‘2’ of the Initiative aims to expand capacity and market size; the second ‘2’ commits to improving technology and investment; and the ‘1’ seeks to establish a unified information-sharing system for production, exchange and marketing of organic produce. Consumers are demanding a closer level of detail about how and where their food is produced. Organic farms have responded to this emerging market, providing corn, eggplants, tomatoes, potatoes, peppers, mushrooms, chicken and pork directly to customers’ doors and to retail outlets. Such initiatives build trust between producers and consumers, and, as discussed below, could provide a basis for the BRI to pioneer ecologically and socially engaged projects in collaboration with partners in Latin America.
Finding nutrition in Brazil Chinese demand has ensured that agriculture remains a pillar of Brazil’s economy well into the 21st century. The 2008 financial crisis was a turning point in the composition of Brazilian imports from China, marked that year by the growing presence of machinery and capital goods (70% of total imports) and a decline in the share of consumer products (8%). By 2012, Brazilian imports of Chinese locomotives and agricultural equipment were growing faster than any other product class (1,126% and 88%, respectively). At the same time, Brazilian exports to China of iron ore and oil fell by 20% and 18%, respectively, while soybean exports to China increased by 45%.
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By 2016 soybeans had become Brazil’s largest export (worth USD19.6 billion), indicating not only growing Chinese consumption but also active Chinese input into the expansion and logistics of Brazil’s soy industry (WTE, 2017). The industrialisation of soybean agribusiness is evident in territorial expansion to approximately 25 million hectares and increased use of chemical inputs to maximise yields. The unrelenting growth of soy cultivation has made Brazil the world’s largest consumer of pesticides, amounting to 914,000 tonnes in 2014–15 at a cost of USD9.6 billion (ABRASCO, 2016). Exportoriented soybean, livestock and sugar estates have long characterised the states of Matto Grosso, Goiás and Minas Gerais, but they now encroach on peri-urban land previously used to feed cities across Brazil. The resulting exodus of young people from rural towns into cities is a national phenomenon, which in Rio has accelerated the city’s outward growth to almost completely destroy traditional family farms – and the fresh food they produced – in the western and north-western zones. A recent New York Times exposé clarifies the link between agribusiness expansion and dietary health in Brazil and other developing countries: “As multinational companies push deeper into the developing world, they are transforming local agriculture, spurring farmers to abandon subsistence crops in favour of cash commodities like sugar cane, corn and soybeans — the building blocks for many industrial food products” ( Jacobs and Richtel, 2017). The report notes that in 2014 food companies donated USD158 million to members of Brazil’s National Congress, led by meat giant JBS, CocaCola and McDonalds. The consequences of increasingly processed diets are evident in Rio, where a recent study of 5,000 children found that obesity rose from 6% to 18% between 1986 and 2016, and overweight rates from 17% to 32% (European Society of Cardiology, 2016). These figures ref lect the Brazilian Ministry of Health’s findings that between 2006 and 2016 national obesity levels rose by 60%, from 11.8% to 18.9% of the population (Governo do Brasil, 2017). Land use transformations and demographic shifts associated with an increasingly industrialised food system have thus exacerbated dietary health complications, particularly in vulnerable sectors, while doing little to create jobs. In the 1960s Brazil was still an agrarian nation with an urbanisation level of 45%, but by the early 2000s this figure had almost doubled to 84% (O’Reilly, 2014). The transformation exemplifies UN-Habitat’s (2012) observation that urbanisation in Latin America is ‘virtually completed’: 80% of the region’s population (around 500 million people) lives in cities. With a metropolitan population of 12 million, Rio is one of Latin America’s many sprawling and densely populated cities. It is also one of Brazil’s most unequal, where the need to improve access to basic food and employment is contributing to the expansion of urban agriculture. An experimental policy developed by the federal government and implemented by the Rio municipal council has given rise to large-scale fruit and
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vegetable production to improve nutrition and generate income for some of Brazil’s most disadvantaged communities. A wide range of studies from around the world have found that extreme socio-economic inequality does not favour cooperation across racial, class and geographic lines ( Jordahl, 2007; Uslaner and Brown, 2005). Nevertheless, the common ground generated by the pursuit of sustainable organic farming has forged some unlikely alliances in Rio. The Rio Municipal government’s Hortas Cariocas project, for instance, has brought together state subsidies, community activism and support from upper-middle-class consumers to transform living conditions in some of the city’s most marginalised neighbourhoods (see case studies in O’Reilly, 2014; Rekow, 2015, 2016). The insights gained from this experience reveal how localised food production can accompany industrial agriculture, inviting ref lection on the capacity of foreign investment, including through the BRI, to support such initiatives.
The BRI and a ‘community of shared values’ The demand for metals, energy and food generated by China’s growing cities has sustained South America through the global economic turbulence of the past two decades. Brazilian agribusiness in particular has attracted the interest of governments around the world interested in deepening their trade with China, but it is also generating problems on both sides of the Pacific not seen with mining, gas, oil and other extractive activities (Hearn, 2013). Supplyside objections to the loss of crop diversity in rural and peri-urban zones, intensification of chemical inputs and associated environmental impacts are intertwined with demand-side suspicion of safety standards, unhealthy processed foods and personal disconnection with the productive process (Altieri, 2009; Baptista da Costa et al., 2017). Brazil is not the only Latin American nation – and agriculture is not the only sector – to witness the environmental impacts of deepening trade and investment relations with China. A recent study of Chinese infrastructure projects in the region finds that Chinese firms “do not usually seek the highest labour, safety, and environmental standards” (Armony et al., 2018, p. x). In Ecuador, Chinese investors are backing six major energy production projects but only one of these, a wind project, representing just 1.2% of total Chinese financing for national energy projects (Garzón, 2014). The agriculture sector is equally contentious, with China identified in an Argentine study as “the only major export destination for which emissions intensity is growing…as Chinese demand continues to grow in the soy and energy sectors, Argentine authorities will need to strengthen efforts to maximize the benefits and mitigate the environmental risk” (Donaubauer et al., 2015, pp. 1, 2). There is no single pathway for Chinese enterprises to establish themselves as environmentally responsible actors in Latin America, but the BRI provides an opportunity ( Jiang and Mallimaci, 2018). The Special Declaration on the BRI produced by the second CELAC-China Forum states that “Latin
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American and Caribbean countries are part of the natural extension of the Maritime Silk Route and are indispensable participants in international cooperation of the Belt and Road” (CELAC, 2018). Foreign Minister Wang Yi has framed BRI’s expansion to the region in terms of “The new conception of establishing a community of common destiny for China and Latin America put forward by President Xi Jinping” (Ministry of Foreign Affairs, 2017). The BRI will likely engage with a wide range of infrastructure projects in the region, not least agriculture, which the Economic Commission for Latin America and the Caribbean (ECLAC) views as an opportunity for environmentally responsible Chinese investment in Brazil (Xinhua, 2018). The BRI’s statement of “Vision and Proposed Actions” commits to “conserving eco-environment, protecting biodiversity, and tackling climate change” (China Daily, 2015). An important step in doing so will be to develop guidelines for investors, potentially drawing on the Ministry of Commerce and Ministry of Environment 2013 joint declaration on the responsibilities of Chinese enterprises overseas (Ministry of Commerce, 2013). The Environment and Social Framework developed by the Asian Infrastructure Investment Bank (AIIB) to assist partner countries fulfil their commitments under the Paris Agreement provides further precedent. Uncertainty about BRI’s environmental impact will persist until such guidelines are formulated and become evident on the ground. As the subtitle of a recent article in China Dialogue asks, “Will the Belt and Road Initiative bring environmental devastation or a new era of Chinese global resource stewardship?” (Pike, 2017). Seventy countries have signed Belt and Road Cooperation Agreements, four of which are in Latin America. Brazil is yet to sign such an agreement, but it is well placed to design strategies for environmental engagement with the BRI given its prior collaboration with Chinese environmental initiatives and its leadership of the 1992 Earth Summit, the resulting Agenda 21 action plan, and Rio+20. The China-Brazil Earth Resources Satellite (CBERS) project to monitor Amazonian deforestation was financed 30% by Brazil and 70% by China. Similarly, the China-Brazil Center for Climate Change and Energy Technology Innovation has focussed on wind turbine and biofuel sectors. Brazilian agriculture is a focus of both projects and provides a platform for deeper cooperation on food systems sustainability. Chinese vertical greenhouse technology, developed by the Centre for Protected Agriculture and Environmental Engineering, and the Liuzhou Forest City initiative are good examples of smart infrastructure innovations relevant to Brazil. To integrate these and other projects into the BRI would require Chinese enterprises to build relationships not only with Latin American national governments, but also with partners at the provincial and municipal levels. Sub-national actors are generally more attune to local environmental concerns, and working with them could help Chinese enterprises to stay abreast of public preferences and opinions. Food system innovations in organic production, waste reduction, employment, land protection and ecological sustainability are typically led by divisions within local governments. Rio’s municipal government, for instance,
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has overseen the installation of more than 40 organic food gardens since 2006 in some of the city’s most marginalised neighbourhoods through the Hortas Cariocas programme. Such projects would benefit from linkages with China’s expanding organic food movement, in which protagonists like the Shared Harvest project in Beijing are establishing international networks (Gottlieb and Ng, 2017). Facilitating technical exchange to improve the operational dynamics of such projects could extend these networks to Brazil and build the BRI’s reputation as an environmentally and socially engaged actor in Latin America.
Conclusion Although Brazil maintains an enviable annual trade surplus with China – USD29 billion in 2018 according to UN-COMTRADE (2019) – the growth of export-oriented agribusiness has incurred environmental and social consequences. These consequences, also evident among Brazil’s soy-exporting neighbours, include deforestation, contamination of waterways with pesticides, loss of peri-urban family farms, unsustainable rural-urban migration and an increasingly industrialised food system whose health impacts are becoming evident. BRI’s focus on foreign infrastructure, including rail and logistical projects, could deepen these problems or help to alleviate them. At a time when industrial food production and consumption are generating distrust in agriculture and, consequently, pressure to balance the effects of commodity farming, the opportunity exists for the BRI to engage this issue. While the soybean industry clearly has a role to play in feeding the world’s growing cities, particularly as pork consumption increases among China’s emerging middle class, it raises the challenge of ensuring crop diversity and safeguarding human health. Macro-economic growth requires international trade, but frameworks are needed to protect small- and medium-sized farms that produce fresh food for local consumption. International partnerships and the knowledge and resources they bring are critical for small farmers in their efforts to promote organic production and ensure local food security. From the disappearance of peri-urban fresh food farms to public anxiety about toxic pesticides, the side effects of industrial food are biting home. Urban farming innovations can diminish these consequences, but systemic improvements will require agriculture trade and investment policies that are more responsive to local concerns. The BRI could pave the way to more sustainable infrastructure collaboration between China, Brazil and Latin America broadly. As a 2016 report from the Chinese Academy of Social Sciences concludes, China can use the BRI to assist developing countries to build their environmental protection capacities (CASS, 2016). This will require the design and implementation of clear guidelines for BRI investors, and a disposition to cooperate not only with national governments but also with the municipal and community actors most affected by resulting projects.
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References Abdenur, A. E. (2019). Navigating the Ripple Effects: Brazil-China Relations in Light of the Belt and Road Initiative (BRI). Vestnik of St Petersburg University, International Relations 12(2), 153–68. ABRASCO (Associação Brasileira de Saúde Coletiva). (2016). Nova ferramenta de dados sobre agrotóxicos no Brasil reforça produção científica no tema. www.abrasco.org.br/site/noticias/saude-da-populacao/nova-ferramenta-demonitoramento-de-dados-sobre-agrotoxicos-no-brasil-reforca-producaocientifica-no-tema/20159/ Altieri, M. A. (2009). Agroecology, Small Farms, and Food Sovereignty. Monthly Review 61(3). https://monthlyreview.org/2009/07/01/agroecology-small-farmsand-food-sovereignty/ Armony, A. C., Dussel Peters, E., and Cui, S. (2018). Introduction. In Ariel C. Armony, Enrique Dussel Peters, and Shoujun Cui (eds) Building Development for a New Era: China’s Infrastructure Projects in Latin America and the Caribbean, 9–11. Pittsburgh: University of Pittsburgh Center for Asian Studies and Center for International Studies. Bai, Y. (2019). Brazil Eyes Connecting to BRI, Says VP in Beijing. Global Times. 24th May. http://www.globaltimes.cn/content/1151460.shtml Baptista da Costa, M. B., Souza, M., Müller Júnior, V., Comin, J. J., and Lovato, P. E. (2017). Agroecology Development in Brazil between 1970 and 2015. Agroecology and Sustainable Food Systems 41(3–4), 276–95. Barboza, D. (2008). Chinese Destroy 3,600 Tons of Tainted Feed: Officials Destroy Tons of Melamine-laced Feed for Livestock. New York Times, 3 November. Cardoso, F. (2001). Charting a New Course: The Politics of Globalization and Social Transformation. Lanham: Rowman & Littlefield. Cardoso, F., and Faletto, E. (1979). Dependency and Development in Latin America. Berkeley: University of California Press. CASS (Chinese Academy of Social Sciences) (2016). 环境安全成一带一路可持续发 展内. 2nd February. news.ifeng.com/a/20160202/47327628_0.shtml Catacora-Vargas, G., Galeano, P., Agapito, S. Z., Aranda, D., Palau, T., and Nodari, R O. (2012). Soybean Production in the Southern Cone of the Americas: Update on Land and Pesticide Use. Cochabamba: Virmegraf. CELAC. (2018). Special Declaration of Santiago of the II Ministerial Meeting of the CELAC-China Forum on the Belt and Road Initiative. Santiago de Chile: CELAC. Cheng, T. O. (2011). Diabetes Epidemic in China and Its Economic Impact. International Journal of Cardiology 149(1), 1–3. Cheshmehzangi, A. (2016). China’s New-Type Urbanisation Plan (NUP) and the Foreseeing Challenges for Decarbonization of Cities: A Review. Energy Procedia 104, 146–52. China Daily. (2015). One Belt One Road Plan. http://language.chinadaily.com. cn/2015-03/30/content_19950951.htm China Population and Development Research Center (CPDRC). (2008). 2006 China’s Urban and Rural Population by Region. https://web.archive.org/ web/20090310163630/http://www.chinapop.gov.cn/wxzl/rkgk/200806/ t20080629_157020.htm
Strengthening Brazil’s food system 275 Condon, J. (2017). China Slaps Ban on Brazilian Exports over Processing ‘Scandal.’ Beef Central. 20th March. www.beefcentral.com/news/china-slaps-ban-onbrazilian-exports-over-processing-scandal/ Donaubauer, J., López, A., and Ramos, D. (2015). FDI and Trade: Is China Relevant for the Future of Our Environment? The Case of Argentina. Discussion Paper 2015-1. Boston University: Global Economic Governance Initiative. European Society of Cardiology. (2016). Obesity Trebles in Brazil Schoolchildren over 30 Years. Press release, 23rd September. www.escardio.org/The-ESC/Press-Office/ Press-releases/obesity-trebles-in-brazil-schoolchildren-over-30-years FAO (United Nations Food and Agriculture Organization). (2014). Growing Greener Cities in Latin America and the Caribbean. Rome: FAO. Garzón, P. (2014). El sueño chino: ¿pesadilla ecuatoriana? Plan V, 21 December. www. planv.com.ec/investigacion/investigacion/el-sueno-chino-pesadilla-ecuatoriana Giobellina, B. (2017). El Cinturón Verde de Córdoba. Córdoba: INTA. Gleeson, B. (2013). A New Harvest of the Suburbs. In Quentin Farmar-Bowers, Vaughan Higgins, and Joanne Millar (eds) Food Security in Australia: Challenges and Prospects for the Future, 311–24. New York: Springer. Global Organic. (2018). Trade Guide: China. https://globalorganictrade.com/ country/china Gottlieb, R., and Ng, S. (2017). Shared Harvest and China’s CSA Alliance. Global Cities. https://globalcitiesbook.com/2017/10/03/shared-harvest-and-chinas-csaalliance/ Governo do Brasil. (2017). Obesidade cresce 60% em dez anos no Brasil. 17th April. www.brasil.gov.br/saude/2017/04/obesidade-cresce-60-em-dez-anos-no-brasil Gro Intelligence. (2017). Brazilian Soybeans and the Amazon Rainforest. 6th September. https://gro-intelligence.com/insights/brazil-soybeans-amazon-rainforest Hearn, A. H. (2013). China and Brazil: Searching for Sustainable Complementarity. The European Commission - Europe China Research and Advice Network policy paper series, paper #72, London: ECRAN. Hearn, A. H., and Manríquez, J. L. L., eds. (2011). China Engages Latin America: Tracing the Trajectory. Boulder: Lynne Rienner Publishers. Jacobs, A., and Richtel, M. (2017). How Big Business Got Brazil Hooked on Junk Food. The New York Times, 16th September. www.nytimes.com/interactive/ 2017/09/16/health/brazil-obesity-nestle.html Jiang, S., and Mallimaci, F., eds. (2018). La franja y la ruta: iniciativa china de cooperación con América Latina y Caribe. Ushuaia: Ediciones UNTDF. Jordahl, H. (2007). Inequality and Trust. IFN Working Paper No.715. Stockholm: Research Institute of Industrial Economics. Liu, D. (2017). Tipping the Scale: Beijing Leads in Obesity Rate. The China Daily. 28th June. www.chinadaily.com.cn/china/2017-06/28/content_29921273.htm Ministry of Commerce. (2013). MOFCOM and MEP Jointly Issued Guidance on Environmental Protection in Foreign Investment and Cooperation. http://english. mofcom.gov.cn/article/newsrelease/significantnews/201303/20130300043146. shtml Ministry of Economy and Employment. (2015). Agricultura orgânica deve movimentar R$ 2,5 bi em 2016. 1st October. www.brasil.gov.br/economia-e-emprego/2015/10/ agricultura-organica-deve-movimentar-r-2-5-bi-em-2016
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Ministry of Foreign Affairs. (2017). Wang Yi Meets with Quartet of CELAC Foreign Ministers. 22nd September. www.fmprc.gov.cn/mfa_eng/zxxx_662805/ t1496940.shtml Myers, M., and Wise, C., eds. (2016). The Political Economy of China–Latin America Relations in the New Millennium: Brave New World. New York: Routledge. Narins, T. P. (2016). Are Chinese Economic Actors Poised to Dominate Latin American Economies?: A View from Bolivia and Chile. The Global Studies Journal 9(4), 19–39. Oliveira, F. (2006). Lula in the Labyrinth. New Left Review 42, 5–22. O’Reilly, Érika de Mattos. 2014. “Agricultura Urbana – Um Estudo de Caso do Projeto Hortas Cariocas em Manguinhos, Rio de Janeiro.” Academic thesis. Rio de Janeiro: Universidad Federal do Rio de Janeiro. Pereira, P., Martha, G. B., Santana, C. A., and Alves, E. (2012). The Development of Brazilian Agriculture: Future Technological Challenges and Opportunities. Agriculture & Food Security 1(4), doi:10.1186/2048-7010-1-4. Pike, L. (2017). Explainer: Will China’s New Silk Road Be Green. 11th June. www. chinadialogue.net/blog/9775-Explainer-Will-China-s-new-Silk-Road-begreen-/en Prebisch, R. (1950). The Economic Development of Latin America and Its Principal Problems. New York: United Nations. Qiao, G., Guo, T., and Klein, K. (2012). Melamine and Other Food Safety and Health Scares in China: Comparing Households with and without Young Children. Food Control 26, 378–86. Rekow, L. (2015). Fighting Insecurity: Experiments in Urban Agriculture in the Favelas of Rio de Janeiro. Field Actions Science Reports 8, 1–8. Rekow, L. (2016). On Unstable Ground: Issues Involved in Greening Space in the Rocinha Favela of Rio De Janeiro. Journal of Human Security 12(1), 52–73. Smart, A., and Smart, J. (2016). China, Food Security, and the Trans-Pacific Partnership. In Adrian H. Hearn and Margaret Myers (eds) China and the Future of Trans-Pacific Integration, 99–113. Boulder: Lynnne Rienner Publishers. Strauss, J. C., and Armony, A. C. eds. (2012). From the Great Wall to the New World: China and Latin America in the 21st Century. Cambridge: Cambridge University Press. UN-COMTRADE. (2019). United Nations Commodity Trade Statistics Database. http://comtrade.un.org UN-Habitat (United Nations Human Settlements Program). (2012). The State of Latin American and Caribbean Cities. Nairobi: UN-Habitat. Uslaner, E. M., and Brown, M. (2005). Inequality, Trust, and Civic Engagement. American Policy Research 33(6), 868–94. Wang, Y. (2017). Wang Yi: The Belt and Road Initiative Becomes New Opportunity for China-Latin America Cooperation. Ministry of Foreign Affairs of the PRC. 18 September. www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1494844.shtml Wen, T. (2005). The Relationship between China’s Strategic Changes and Its Industrialization and Capitalization. In Tian Cao (ed.) The Chinese Model of Development, 54–87. New York: Routledge. Woodrow Wilson Center. (2019). The Aftermath of President Bolsonaro’s Visit to Washington and Prospects for Economic Reform. Summary of the Event “Brazil-US Relations.” www.wilsoncenter.org/event/the-aftermath-presidentbolsonaros-visit-to-washington-and-prospects-for-economic-reform
Strengthening Brazil’s food system 277 World Health Organization. (2016). Rate of Diabetes in China ‘Explosive.’ WHO Representative Office-China, news release, 6th April. www.wpro.who.int/china/ mediacentre/releases/2016/20160406/en/ World’s Top Exports (WTE). (2017). Brazil’s Top 10 Exports. www. worldstopexports.com/brazils-top-10-exports/ Xinhua. (2014). China Unveils Landmark Urbanization Plan. Xinhua, 17th March. www.chinadaily.com.cn/business/2014-03/17/content_17350744_2.htm Xinhua. (2018). Interview: UN Official Urges LatAm to Make Most of China’s Belt and Road Initiative. 21st January. www.xinhuanet.com/english/ 2018-01/21/c_136912522.htm
14 Challenges and opportunities to port development with the BRI in Japan Zhenjiang Shen and Yajing Zhang
Japan’s attitude towards China’s Belt and Road Initiative In the emerging Asian region, where infrastructure investment needs are high, China’s Belt and Road Initiative (BRI) has drawn attention. In the meantime, Japan has so far promoted infrastructure investment in emerging Asian countries directly through bilateral institutions, such as the Japan International Cooperation Agency ( JICA) and the Japan Bank for International Cooperation ( JBIC), or indirectly through multilateral institutions, such as the Asian Development Bank (ADB)and the World Bank. Since 2015, Japan has launched a stance that emphasises ‘quality’ infrastructure investment and is deepening cooperation with the USA and Australia under the concept of ‘free and open Indo-Pacific.’ From the political perspective, the Abe administration launched the ‘free and open Indo-Pacific’ strategy in 2016. It captures the dynamism created by the intersection of the ‘two continents’ of Asia and Africa and the ‘two oceans’ of the Pacific Ocean and the Indian Ocean, and maintains and strengthens a free and open maritime order based on the rule of law. It is said to be a strategy. Specifically, from East Asia to South Asia, the Middle East and Africa, it will promote infrastructure development and connectivity, revitalise trade and investment, improve the business environment and develop human resources, and it is said that the country is built with respect for ownership. The Japanese Government says that the ‘free and open Indo-Pacific’ strategy does not exclude China, but rather embraces it (庄司智孝, 2020). From the business and corporate perspective, it has already been seven years since the concept of BRI was launched. Perceptions and attitudes of Japanese companies towards the BRI have changed along with changes in Japanese politics and public opinion. Following the holding of the BRI Summit in Beijing in May 2017, the attitude of the Japanese Government began to change, and Japan announced that it would join the China-led BRI conditionally. In December 2017, the Japanese Government established the ‘Guidelines for Private Economic Cooperation’ and allowed Japanese companies to participate in the BRI business in the three fields of energy conservation/environmental cooperation, industrial sophistication and utilisation
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of logistics. When Prime Minister Li Keqiang of China visited Japan in May 2018, Japan’s Ministry of Economy, Trade and Foreign Affairs, and China’s National Development and Reform Commission/Commercial Affairs Department signed a memorandum of understanding regarding Japan-China third-country market cooperation to support Japan-China business cooperation related to the BRI. Furthermore, in October 2018, the ‘Japan-China Third Country Market Cooperation Forum’ was held in Beijing when Prime Minister Abe visited China. Promoting Sino-Japan cooperation in third-country markets has become a primary policy stance on the Belt and Road of the Japanese Government. From the perspective of Japan, China is located in a very dynamic AsiaPacific region with abundant mineral resources, agriculture, culture and other resources. China believes that international economies have mutually complementary relations, and good cooperation can achieve new cooperative development and common prosperity (江原規由, 2014). The relaxation of the Japanese Government’s attitude towards the BRI has directly affected the attitudes of Japanese companies, and the active cooperation between companies has further promoted the cooperation between Japan and China. Although Japan is not currently a country along the BRI routes, it is strategically a part of China’s promotion of the BRI. China and Japan have a stable and close economic and trade relationship. Whether in infrastructure, energy, trade, or financial and monetary fields, China and Japan can use the BRI platform to establish a solid foundation for their long-term cooperation. With this precondition, China and Japan are always looking for the best channel for trade cooperation. In the world, marine transportation has always been the main way for countries to conduct trade. About 80% of the world trade is based on maritime transportation, and a large part of them are transported by container ships. Since 2000, the expansion of the international production network has led to the development of new supply chains, triggered by China’s accession to the WTO and the progress of regional integration centring on ASEAN. As a result, ocean-based international transportation centred on container transportation has grown substantially. Japanese Maritime Center researcher Hiroko Honzu analysed the impact of the BRI on the world shipping market and China’s shipping industry (本図宏子, 2016). She pointed out that China has the third-largest commercial shipping scale in the world and has a huge impact on the world shipping market. The impact of the BRI, especially the 21st-Century Maritime Silk Road on the global maritime market, is to increase trade volume, promote the growth of transportation demand and build a maritime logistics network to promote the maritime market. The impact of the BRI on China’s shipping industry is to promote the cooperation, mergers and reorganisation of domestic shipping companies, and to promote Chinese companies’ investment, including acquisition and financing of their interest in overseas ports (本図宏子, 2016).
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The BRI mainly focusses on infrastructure development such as ports, roads, railways and airports, but Japan is also actively promoting infrastructure exports as a national policy. Chinese construction companies are backed by a substantial domestic market, and their management scale is rapidly growing. Not only does it lower price levels, but its quality has also grown in recent years. This makes it an emerging competitor to Japan in the medium to long term. However, the construction of Japanese overseas ports is steadily advancing. Given the massive demand for new infrastructure in Asia, Japan has many business opportunities. In particular, the port and shipping industry has strong internationality and strong international ties between companies. The port development is not only about the port, and there are many cases of comprehensive development of the industrial area and urban development in the hinterland of the port, so the port construction creates more business opportunities for both Japan and China. At the domestic level, Japan currently has a resource background that can serve long-term maritime trade development, and already has the conditions to join the BRI. In terms of port construction and port city development, Japan has formed a unique development model due to its distinct geographical environment and resource. The content of this chapter will focus on the unique model of the construction of Japanese ports and port cities to ref lect the domestic response of Japan to future Sino-Japan trade cooperation.
The background of Japan’s port trade development With economic globalisation, the development of manufacturing industries in emerging countries such as the BRIC countries continues to affect the world industrial pattern. Since the 1990s, with the economic development of China, South Korea, Singapore and other countries, the trade pattern in the coastal areas of Japan has correspondingly changed. As gateways in international trade, ports have always played a crucial role in the development of the continental countries of Europe and Asia. Hence, building ports and airports is part of the trade strategies. In this process, Japan gradually lost its advantage in foreign trade, which significantly changed the development of Japanese port cities as well as the trade pattern of East Asia. Since the 1950s, the planning and construction strategy of the Japanese port trade area has gradually changed. It has evolved into a development model based on its regional industrial development. With the economic miracle in the post-Second World War era, the Japanese Government established four representative industrial zones: the Keihin Industrial region (Tokyo), the Chukyo Industrial Zone (Aichi), the Osaka-Kobe port Industrial Zone (Osaka) and the Kitakyushu Industrial Zone (Fukuoka). These industrial regions integrated industrial and port trade resources of existing urban areas, and rapidly formed into new port economic development regions, which contributed greatly to Japan’s economic development. Since the 1970s, the
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industrial structure of Japan has changed from basic industrial manufacturing to a tertiary industry dominated by finance and services. With the acceleration of globalisation, competition between port areas became more intense, and Japan lost its original advantages in international trade competition (Lv and Zhang, 2006). At the end of the 20th century, in order to improve the international competitiveness of the national ports, the Japanese Government began to adopt a series of targeted strategies to integrate existing port resources to improve the shortage of port infrastructure and reduce inefficient competition. At the same time, the Japanese Government implemented a targeted National Strategic Special Zones policy to strengthen the scale of coastal port cluster construction and transform from simply developing industrial manufacturing to developing modern service industries and hightech industries (Yang, 2009). The port represents local industry and infrastructures of urban life, which is an important factor in the international competitiveness of a place or a city. Taking Hokkaido Port as an example, in the course of historical development, a series of policies such as the opening of Hakodate port and the establishment of shipping bases have had an important impact on the development of the region. At the same time, Hokkaido is located on the East Asia–North America route, surrounded by Sakhalin and Tumen River regional development and other economic projects. The superior geographical location laid the foundation for the implementation of the port development plan from a global perspective (Sakai, 2004). In terms of the geographical environment, Japan’s urban-port relationship is different from land-locked countries. Maritime transportation connected the port area and the domestic transport system and promoted the development of the region. However, the rapid development of internationalisation and containerisation has changed the function of international logistics ports in Japan. The China-Japan-Korea Circulation and Logistics Joint Report (2006) summarises the overseas transfer of Japanese manufacturing industries and the distribution of domestic transportation methods and their evolutionary process. The system of an efficient logistics network through maritime transportation has been built to support the efficient international division of labour with East Asia, and improve the overall transhipment function of the terminal by improving the transhipment efficiency of small-volume cargo in some international ports. Compared with the changes in container transportation in neighbouring countries, it is apparent that the port developments of Asian countries relate to the export of their own products which also involves the import efficiency of goods from other countries, with an intention to promote large-scale construction and transhipment goods preparation. However, the limitations of the Japanese port administration have made it impossible to effectively grasp the international situation and to f lexibly respond to changes (Kondo, 2010). In terms of port administration, Japan has for a long time implemented local decentralisation and citizen co-construction policies in port construction.
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This practice made it difficult to respond to changes in the international situation and has produced many single-function port facilities. The Keihin Port Shared Vision (2009) identifies a diversified supply and demand chain management concept based on globalisation and consumer demand, discusses the new trends of logistics and transportation reform in Keihin Port area, and clarifies the main functions of major urban ports such as passenger transportation, sightseeing, disaster prevention and urban public service. This programme played an important role in the reform of Japanese port administration agencies. Moreover, Japan’s port policy has been constantly changing according to the development of the post-war economy. Based on changes in the pattern of foreign trade, many policies and laws have been promulgated to adjust the relationship between the development of Japanese ports and the ports of Asian countries (Shibata, 2008/2009). With this development and transition, the Government of Japan has been exploring new port city construction models based on the original port advantage economy to develop coastal superior industries and the combination of inland production resources, extend existing industrial chains and form new industrial clusters to promote the development of regional economies. This relatively mature industrial chain and the scale economy innovation model developed in the port area continue to bring new possibilities to Japan’s economic construction. The research on Japan’s port cities recognises the fundamental patterns of port cities development and their evolution, to establish accurate knowledge of international logistics port constructions in Asia. These existing development experiences are used as a reference to provide theoretical support for the practice of port construction for China’s BRI.
The BRI and the development strategy of overseas port cooperation Since his inauguration at the end of 2012, China’s President Xi Jinping has been promoting the establishment of an economically stronger Asian community, bringing in the historical and cultural ties between the countries along the ancient Silk Road and investing in major infrastructure projects in the region. With this background, the ‘Belt and Road Initiative’ (BRI) was promoted (Bi, 2015). The BRI involves 65 countries and regions, with a total population of 4.5 billion or 62.5% of the world’s total, accounting for 28.6% of the world’s total economic output. The strategic concept of this initiative emphasises the ‘community of interests’ of mutual benefit for all countries. Studies have shown that the higher the number of international cooperative cities, the faster the development and the higher level of openness in urban economy development (Liu and Tang, 2006). China’s Ministry of Foreign Affairs and the Ministry of Commerce jointly issued the ‘Vision and proposed actions outlined on jointly building Silk
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Road Economic Belt and 21st-Century Maritime Silk Road,’ which proposed strengthening the construction of coastal cities such as Shanghai, Tianjin and Ningbo.1 This roadmap focussed on improving the competitiveness of the 15 coastal port cities, which is of great significance to the effective implementation of the BRI strategic decision and the development of China’s economy. It is expected that the 15 port cities play a decisive role in the speed of regional development. As the key node in the development of shipping, logistics, trade and other industries, coastal ports are an important infrastructure for a country or region to integrate into the process of economic globalisation and integrate regional and even global economic resources. To meet those criteria, the implementation process of the BRI must ensure the full potential of the strategic fulcrum of China’s coastal ports, optimise the port’s development planning, expand the port’s comprehensive functions and strengthen its interconnection with other ports, land transportation hubs and logistics systems along the route. The proposed ‘21st-Century Maritime Silk Road’ initiative consists of two main sea passages leading to the Indian and the Pacific oceans. The Western route starts from the Chinese coastal port to the South China Sea to the Indian Ocean, and extends to Europe. The route connects between and supports the Chinese coastal economic belt, the China-Indochina Economic Corridor, the China-Brazil trade, Bangladesh-China-India-Myanmar Economic Corridor, and forms the China-Indian Ocean-Africa-Mediterranean blue economic channel. The southern route starts from the Chinese coastal port through the South China Sea to Oceania and the South Pacific island countries, forming the China-Oceania-South Pacific blue economic channel. According to the development status of the ports along the BRI corridors during 2007–18, the construction of the two routes is rapidly advancing. At the same time, the two new channels have also been proposed. The first is the Maritime Silk Road that starts from China and extends through the Pacific Ocean to Latin American. And the second is the Silk Road on the ice which crosses the Arctic. The construction of the west and south routes, which serve as the main axes of ‘the Maritime Silk Road,’ takes priority with the ice and the China-Latin America Pacific routes to complete the vision. The decisive status of BRI port cities and the trade links between them have raised several new topics on port city development, and the strategies and policies of Japan’s port cities can provide valuable experience for it.
The trade infrastructure in Japan Japan is a country with relatively small land mass, large population and constrained resources. However, Japan achieved miraculous economic development and became a global economic power that is closely related to the excellent natural conditions of its port areas which have significantly contributed to the development of its maritime industries. Dependent on this
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condition, Japan became a foreign trade-based country with an established export-oriented economy in which raw materials are imported to overcome domestic resource shortage. Trade dependence of Japan A country’s trade dependence involves many factors, particularly economic scale and geographical attributes (Harris and Nef, 2008). While Japan changed from a small economy to a world power, the country’s trade dependence has not changed much, especially when its neighbours have made great economic progress in total trade volume. Generally speaking, both the developed and the developing countries adopted export-oriented development strategies to promote the development of the local economy. Diverging from these traditional development patterns, Japan adopted measures to protect its domestic enterprises instead of promoting foreign capital inf lux. Although foreign investment restrictions are being gradually relaxed in recent years, non-economic systems and customs, as well as higher corporate tax rates, still limit the scale and role of foreign capital in industrialisation. The transformation from air to maritime transportation In the 1960s and 1980s, air transportation was the fastest of Japan’s delivery channels but also with the highest cost. After the 1990s, with the increase of routes and economic growth, air transportation costs decreased while sea transportation speed increased. Compared with pure air transportation, the new mixed transportation method that combined sea and air transportation eliminated the cost disadvantage with improved speed. In 2004, with the increase in the volume of goods shipped to the USA from Asia, the logistics throughput of the two major ports in the West Coast of the United States exceeded the port load, resulting in some conversion from maritime logistics to aviation logistics. From the perspective of logistics practitioners, the demand side applied a series of measures responding to changes in production environment and efficiency of logistics (Li, 2014). While it is important to maintain the competitiveness of commodity prices, at the same time taking measures to reduce logistics costs is also necessary. Enterprises adjust the emphasis of logistics and supply chain management according to logistics efficiency and take measures to curb aviation transportation in consideration of cost reduction. The policy preference for maritime transportation also increases the utilisation rate of maritime transportation. While from the perspective of the supplier side, the use of maritime transportation has accelerated transportation speed, shortened the duration of preparation for ordering and delivery, and significantly improved the timeliness. At the same time, with the increase of shipping frequency and the increase of routes, the transport capacity has been expanded and the logistics
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network systems are being continuously improved. As the maritime transport time has shortened, it further reduced the advantages of air transportation in the offshore Asian routes. The declining international competitiveness of Japanese port Since the 1990s, the competitiveness of Japan’s major trading ports has begun to show varying signs of decline. Measured by the number of port container freight changes, compared to international major trading ports, the container throughput of Japanese ports is losing its advantage in quantity. In terms of container throughput of major overseas ports, from 2012 to 2016, Shanghai, Singapore, Shenzhen, Ningbo-Zhoushan and Busan are the top five container freight ports in the world.2 Among them, the Shanghai Port reached 36.54 million TEU and 37.13 million TEU in 2015 and 2016, respectively, with growth potential. In contrast, the port with the largest throughput in Japan, the Tokyo Port, has not reached 5 million TEU in total and dropped in its international ranking to 30 in 2013; this downward trend continues. The container freight throughput of other major ports in Japan also showed varying degrees of decline. As for the main reasons for the decline in the competitiveness of Japanese port trade, some studies observe that, in the process of development, due to monopoly management, price protection, port approval, customs clearance process and other reasons, the utilisation cost of Japanese ports remains high, compared with international ports of similar type. Second, the economic growth and consumption increase of other emerging countries in Asia have inf luenced the adjustment of Japan’s domestic industrial structure ( Japan Industrial Research Institute, 2002).
Japan’s new port strategy To answer to the rise of Asian competitors pre and post the commencement of BRI, Japan has been exploring new port strategies on both trade policies and port city construction. These explorations lead to complete industrial chains and regional economy connections, which can be a reference for the BRI about developing economically vibrant ports. The trade policies of Japanese ports Faced with the dilemma of the declining international trade competitiveness, the Japanese Government began to seek new development paths and possible breakthroughs for the port area. At the end of the 20th century, to promote the development of regional industries and trade, and to cope with the increasingly significant unemployment problems, the Japanese Government established the Naha Free Trade Zone in 1988 and the Midtown Bay Newport Special Free Trade Zone in 1999, collectively known as Okinawa
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Freedom. This trade zone is the only free-trade zone in Japan. In order to attract capital and enterprises to enter the Okinawa Free Trade Zone, the Okinawa County Government has adopted a number of preferential measures in the implementation of the tax policies for the industry, established the bonded area system and carried out targeted taxation and financial incentives for enterprises. Taking the bonded area system as an example, products for export can be stored, processed, produced and displayed in bonded places without duties and consumption tax. Meanwhile, imported foreign products are stored, quality inspected, reprocessed and classified under the tax-free policy, and enter the domestic distribution networks following the market. In terms of trade port management policies, according to the statistics published by Japan Ministry of Land, Infrastructure, Transportation and Tourism, Japan has 994 ports by 1 April 2017, including five international strategic ports, 18 international base ports, 102 important ports, and 808 local ports and 61 regular ports (Figure 14.1). Accordingly, Japan’s national airports are divided into basic airports, local airports, regular airports and shared airports. The grading system improves the operation and management efficiency, which is also conducive to the cooperation between the airport and the maritime port. Thus, a complete logistics and transportation system combining aviation and shipping has emerged in Japan since 2010.3 The location of the port is highly relevant to the domestic public transportation network. The international strategic port is mainly located in densely located areas of railways and highways, and the international base port is located by the main structural road network. The perfect transportation system provides a good foundation for the development of port trade and the extension of the industrial chain.
Figure 14.1 The distribution of Japan’s main ports (data source: Ministry of Land, Infrastructure, Transportation and Tourism). (Image credit: Author)
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The construction of Japanese ports In order to strengthen the pivotal role of Japan’s major ports in international trade network, and further redress the problems of few free-trade zones, complicated restrictions, complex bonded relationships and cumbersome procedures, the Japanese Government simplified the process of transhipment from ports to the inland airport and established an online platform to manage port transportation since 2010.4 In order to improve the continuity of land transport routes, the international ports are located at the place with more geographical advantages in terms of distances difference between Japan and South Korea. At the same time, the Kansai International Airport is used to realise the composite transportation system consisting of aviation, shipping and land. As Figure 14.2 shows, the areas that have been selected as the representative ports include (a) the Shizuoka Port, which is the neighbouring economic supporting prefecture, (b) the Keihin Port, which is the international container strategic port, (c) the Kushiro Port and (d) the Shibushi Port, as the international strategic ports, and (e) the Ohamacho Port, as the international coal transporting port. The port of Shizuoka Prefecture Shizuoka Prefecture is located in the central part of Japan, with a 519 km coastline (data from the Japan Ports Authority of the Transport Ministry). It has had many important ports since ancient times. So far, Shizuoka
Figure 14.2 The industrial chain structure of Japan’s ports (data source: Ministry of Land, Infrastructure, Transportation and Tourism). (Image credit: Author)
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Prefecture has 12 local ports; a newly built international port, ‘Shimizu Port’; and two important ports ‘Tagonoura Port” and “Omaezaki Port.’ Industrial raw materials from North America, South America and other parts of Japan are imported through Tagonoura Port and transported to Shizuoka Prefecture, and surrounding areas, such as Nagano Prefecture and Yamanashi Prefecture, to provide more affordable raw materials for local manufacturing. The Shizuoka Government established some primary production bases in the vicinity of the port area. These facilities reduce transportation costs and thus improve production efficiency. After primary processing, the raw materials are transported to the secondary production bases around Shimizu Port and Omaezaki Port for further processing and packaging. Afterwards, the products are transported to domestic market or exported to North America, Europe and other regions. Based on this process, some complete industrial chains and industrial clusters have been established in the port area of Shizuoka Prefecture. The major industries in the western region are automobile manufacturing, bicycles and musical instruments. The central part is occupied mainly by electrical machinery, furniture and food. To the east, papermaking, machinery and chemicals are the most dominant (Figure 14.2). The Keihin Port Keihin Port is the largest centre for foreign container cargo trade in Japan and the largest automobile business centre in eastern Japan. It is a comprehensive international strategic port in eastern Japan which provides strengthened support for the residents’ life, industry and energy supply in the metropolitan area. As the ranking of Japanese ports in international container shipping volume has been decreasing in recent years, the Keihin Port, as a major trading nodal station in East Asia, adopted a series of measures to reorganise and strengthen regional functions since 2011.5 In the meantime, these measures strengthen the competitiveness of inland navigation, rail and road transportation, expand suppliers’ benefits and increase North American based routes. Building on existing routes to North America, Japan expands Asian routes and enhances transportation capacity to strengthen the port functions.6 The Kushiro Port In 2011, in order to achieve the low-cost and stable transportation of goods essential to the citizens’ quality of life, the Ministry of Land, Infrastructure, Transportation and Tourism of Japan positioned ten ports in Japan, including Kushiro Port, as cargo import bases and international bulk cargo port. Public investment combined with private investment promoted the expansion of warehouses and the construction of feed stuff factories. As the second mainstay of the western port area’s development, based on the large-scale ship maritime transportation, the Kushiro Port is expected to achieve an annual
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throughput of more than 1.3 million tonnes and a 10% cost reduction within five years. As a major node of the inland industrial chain in Hokkaidō, Kushiro Port is closely integrated with the regional traffic network (Figure 14.2). With its superior natural resource conditions, the western part of Hokkaidō has established a feed stuff production area which mainly serves the eastern livestock industry. Meanwhile, livestock industry clusters formed in eastern area including Rokuwa, Nemuro and Tokachi. At the same time, the feed stuff products from the western region are transported to and support the eastern livestock production area. After further processing, the downstream products are transported to various regions or exported through Kushiro Port and thus a complete industrial chain is established. The Shibushi Port Shibushi Port is the port with the largest crop input volume in Kyushu. At present, there are three storage companies and six feed stuff factories behind the public wall of the port buoy berth, forming the largest feed industry terminal in Kyushu (Figure 14.2). In order to achieve stronger international competitiveness for the local feed stuff products, Shibushi Port adopted a series of policies to promote the cooperation between private and public investments since 1998.7 The Ohamacho Port The Ohamacho Port promotes joint transportation of large vessels following the international bulk cargo strategic port policy. This measure reduced the cost of maritime transportation by 40%. At the same time, the soil sediment produced by the mooring site is used for the land-reclamation project in the eastern port area. As the core node of the Fukushima Prefecture’s thermal power generation industry, the Ohamacho Port imports coal to support the energy production of a number of thermal power plants in the port area and inland areas. Therefore, the Fukushima Prefecture established a production centre for thermal power generation industry in the Kantō area. The Mizushima Port The cargo throughput of Mizushima Port ranks fifth in Japan. The steel, petroleum refining, petrochemical, automobile and feed stuff industries are distributed around the port. The volume of export-oriented manufacture is about JPY4.4 trillion (2008). The related industries are located as a centralised layout pattern in the port area. The production and processing of raw materials provides support for the downstream manufacturing industry, reduces logistics costs and improves regional production efficiency.
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The construction of Japan’s major trade ports The Tokyo Bay area Tokyo Bay is located on the Pacific coast of central Honshu. The east and west sides of Tokyo Bay are the Boso Peninsula (Chiba Prefecture) and the Miura Peninsula (Kanagawa Prefecture) respectively. The two peninsulas are enclosed and form an 80 km coastline in the Tokyo Bay area. Tokyo Bay promoted the development of the Tokyo metropolitan area to form the pattern of ‘One Capital, Three Prefectures,’ which include Tokyo, Saitama, Chiba and Kanagawa. The total area was 13,562 km 2 and the total GDP was about JPY15,482 billion in 2018. Tokyo Bay has a dense port group, and the six internal ports have a clear division of labour. According to the overall planning, Tokyo Port is an import port mainly focused on domestic trade; Yokohama Port is an international trading port that handles heavy industry products as the main export production; Chiba Port’s major industries are energy imports and industrial export; Kawasaki Port is a specialised port for industrial enterprises, which mainly undertakes raw material import and production export; Kisarazu Port is mainly engaged in tourism development, and Yokosuka Port is a Military port. This division of labour avoids unnecessary competition in the Tokyo Bay area and improves logistics and regional development. Data from the Tokyo Bay Airway Office indicates that the port cargo throughput in the Tokyo Bay area has reached 40% of Japan’s total import and export volume, and the import volume of crude oil reached 30% and LNG reached 50% of the total amount. Japan’s domestic production of oil, natural gas and other energy sources; industrial raw materials, such as ore; and crops, such as wheat and soybeans, are imported through the Tokyo Bay area. In the meantime, a strong development pattern of the industrial chain has been established with the export of automobiles and electronic products. The Tokyo Bay area has international trade advantages and sufficient hardware support for port capacity (Figure 14.1). Tokyo provides a strong development support as a regional centre city, and regional integration is also achieved through integrated development; these factors make the Tokyo Bay area an international shipping centre of the whole Japan and inf luence world trade pattern (Xu et al., 2016). Osaka-Kobe international port area The Osaka-Kobe Port, which consists of Osaka and Kobe ports, is an international container strategic port that has kept pace with Tokyo Port. In terms of total trade volume and scope of inf luence, Osaka-Kobe Port’s container import and export throughput reached 4.22 million TEU in 2014. The radiation range includes Toyama Prefecture, Gifu Prefecture, Aichi Prefecture
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and the entire western Japan region. Therefore, it is the second-largest centre of Japan’s economic and industrial activities. The transportation infrastructure of the Osaka-Kobe Port is well developed. The road transport centres on the bay area in a circular pattern. There are two coastal trunk lines, the Osaka Bay Beltway and the Osaka City Reproduction Beltway, which connect with Kobe and Osaka ports, and formed a road transportation network that radiates through the entire area and becomes an important anchor point for the Japanese national road traffic network. In terms of rail transit, the density of the Osaka area railway station reached 1.12 per km 2, which exceeded the average level of Tokyo metropolitan area, providing an excellent rail transit foundation for the entire port area. At the same time, the Osaka-Kobe Port area contains a number of international air transport bases including Kobe Airport, Kansai Airport, Yao International Airport and Osaka International Airport, providing sufficient support for the port’s trading environment. The Osaka-Kobe Port has formed a function of import and export trade base on this transportation system. Meanwhile, it has effectively connected major cities in Japan and has gradually become one of Japan’s main trading ports (Figure 14.1).
Japan’s domestic transportation system for port cities As a mountainous island nation, Japan’s geographical conditions call for an efficient domestic transportation system. The well-developed railway and road transportation system of Japan empowers the development of port cities and regional economies, and eventually plays a supportive and supplementary role for international trade. During the development of the port cities along the BRI, this kind of transportation infrastructure connecting the inland should also be valued. Railway transportation in Japan Japan’s railway began at the end of the Edo Period. The first railway was built in 1872 and various forms of railway system have been established across the landlocked area in Japan while the urban railway transport system was still in its embryonic stage (Nakamura, 2003). Since the end of the Second World War in 1945, Japan’s railway industry has entered a new period of development. The Shinkansen, which was launched in the 1960s, made the development of Japanese railways one of the most superior railway systems in the world. The Japanese railway system includes four types: Shinkansen, JR line, subway and train. Subway and train are operated by local governments (Lin et al., 2012). After the innovation of privatisation in 1987, the operator in charge of daily management and operation was transferred from Japan National Railways ( JNR) to Japan Freight Railway Company.8
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Before the 1950s, railway transportation, with a history of more than 140 years, was the main mode of inland logistics transportation in Japan (Liu, 2013). In 1950, the total volume of rail freight in Japan took 52.2% of the total volume of logistics and transportation, which has shrunk under the competition of road transportation. Nowadays, the inland areas mainly rely on railway transportation to support the oil-based energy imports. The total oil volume transported by railway in Japan in 2008 was 711 tonnes, of which the traffic volume of Nagano, Gunma and Tochigi accounted for 60% of the total railway oil in 1950 (Ministry of Land, Infrastructure, Transportation and Tourism, 2013). At the same time, agricultural products, livestock husbandry and manufacturing products from domestic regions are transported by the railway system and shipped to ports for export. According to the structure of Japan’s railway network, the main railway axis that runs through the inland area bears a large proportion of the railway transportation with routes radiating from the main axis to the surrounding area, forming a series of spur lines. Road transportation in Japan Japan’s road network mainly consists of highways, and national and local roads (Wu et al., 2008) with road transport beginning in the 1950s. Before that, the main transportation carrier in Japan was the railway. After the Second World War, Japan’s economic recovery brought the rapid development of the automobile industry and related manufacturing industries, and the scale and volume of road transportation continued to grow. Since the 1960s, the economy entered a period of high-speed growth. With the increasing production and the consumption, the production structure undergone modernisation reforms. At the same time, the storage sector has been greatly reduced, due to the demand for more timeliness. As an important supporting foundation for road transportation, road system directly affects the development of regional logistics and transportation industry. In the early stages in development, the progress of road system construction is not sufficient to satisfy the growing demand for road transport. In 1956, only 23% of the national roads in Japan were completed. In 1966, Japan promoted the plan to build a 7,600 km national highway system. Under this plan, highways parallel to the coastline are preferentially built than routes that cross the inland mountains. In 1987, the plan was revised to target a road length of 14,000 km and the total length of the completed construction has reached 8,730 km by March 2005. To solve the problems of inefficiency and fee imbalance caused by monopoly, in October 2005, reforms of corporatisation and privatisation were carried out on the Japan Road Corporation Company ( JR), the Capital Expressway, the Osaka-Kobe Expressway and the Honshu-Shikoku Bridge Expressway Company. According to the structural characteristics of the road network, the higher ranked six-lane road is mainly built around the Tokyo metropolitan and the Osaka-Kobe port areas, forming important nodes for road transportation.
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The other roads centred on the metropolitan area and presented a gridpattern layout, forming an integrated traffic road grid which radiates throughout the inland. By 1987, automobile transportation accounted for 90.8% of the total 3.5 billion tonnes of total domestic transportation, while railway transportation accounted for only 1.48%. The construction and development of these road systems provide an excellent development background for Japan’s regional industrial production and great conditions for Japan’s economic development.
Challenges and opportunities from the BRI As an export-oriented economy, international trade and the external environment are vital to the Japanese economy. After the global financial crisis of 2008, Japan’s total import and export trade was hit hard and shifted from a surplus to a deficit. Japan’s total imports recorded an all-time high of USD81.3 billion in 2012, and total exports recorded an all-time high of USD74.3 billion in 2011. At the same time, as Japan’s largest and second-largest trading partners, import and export trade with China and the USA experience a slow recovery. In 2018, Japan’s export to China totalled USD144 billion (19.51% share), while exports to the USA were worth USD141 billion (19.05%). Japan imports from China were USD174 billion (23.20%), and imports from the USA were USD84 billion.9 If focus on port trade, the situation is gloomy. Since the 2008 financial crisis, Japan’s overall port throughput has stagnated, while cargo throughput with China and the USA is slowly shrinking. Japan’s new models of port cities need strong external conditions to support its development (Figure 14.3). As an important economy that has not to join the BRI, such situation is both a challenge from Asian competitors and a great opportunity. The completed infrastructure construction and regional industrial chain in the port
Figure 14.3 The Port Cargo throughput of Japan (data source: Ministry of Finance 2019). (Image credit: Author)
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cities can serve as the basis of international port trade in response to the BRI. And the close economic and trade exchanges between Japan, China and other Asian countries are also possibilities to expand and develop future port city models.
Conclusions As the world’s third-largest economy and with the second-largest foreign exchange reserves, Japan has long historic operations and deep accumulations in the geographic areas along the BRI corridors and has a corresponding inf luence on regional affairs. As an important neighbouring country, it has naturally been an important potential BRI participant for the development of BRI markets. As an important pole in the world economic structure, Japan is currently going through a critical period in its economic development. As an important infrastructure to support the domestic industrial development, port areas play important roles in the urban construction. More than just a part of the transportation junction, the port areas serve as urban centres with independent policy system, consumption mode and construction mode, and undertake important transitional functions connecting production areas and trade zones. Nowadays, although the traditional manufacturing industry in Japan still maintains a certain level of competitive advantage, there are problems such as insufficient growth space. Therefore, from the overall industrial structure perspective, the role of the manufacturing industry for economic growth is gradually decreasing, and the development of new industries delayed (Li and Okamoto, 2007). Many ports in Japan can adopt diversified industrial patterns, not just logistics functions. In addition, for some ports that do not have the advantage of trade development in the location, they can make full use of coastal resources, develop innovative emerging industries, win competitive advantages through differentiated strategies and strive to create liveable cities suitable for the current stage of development. The following experiences can be learned from the development of the port cities in Japan. The construction of port area should be based on the development of the regional economy, by integrating existing infrastructure and establishing a complete industrial chain with unified operation that can improve production efficiency. The industrial structure and specialisation in the various port cities in Japan are quite different. In the process of development, unique regional pillar industries were formed. At the same time, pillar industries have brought new possibilities for regional economic development. There are also lessons of the port’s role of radiation in the economic development of the surrounding areas. Another important topic for the construction of port area is to focus on the formation of scale economies and industrial clusters, strengthen regional cooperation and regional advantages, establish a refined division of labour basing on the industrial chain, organise production resources with innovative
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models and formulate production complexity to improve regional competitiveness collectively. Regional industrial clusters include manufacturing and sales as a part of the complete industrial chain. The aggregation effect can also bring strong and sustained competitive advantages and promote regional industrial development. Industrial clusters can bring efficient supporting institutions to the region, which promote regional infrastructure provision, and so bring more development opportunities to the city. Japan is facing both challenges and opportunities brought by the BRI. The realisation of the BRI requires Japan’s accumulated port city development experience, and it is an opportunity for Japan to deeply engage with the Asian trade partners and to revitalise its port cities. Other ports in the region can learn from the Japanese experience in port area development in order to capture the opportunities raised by BRI.
Notes 1 Other cities include Zhoushan, Guangzhou, Shenzhen, Zhanjiang, Shantou, Qingdao, Yantai, Dalian, Fuzhou, Xiamen, Quanzhou, Haikou and Sanya. 2 ‘The Top 100 Ports of 2014 of Containerisation International’: 2015–2016, ‘The Top 100 Ports in 2016 of Lloyds List Containers’ Unit: TEU (Twenty-feet Equivalent Unit, international standard unit). 3 https://www.naccs.jp/e/aboutnaccs/aboutnaccs.html. 4 https://www.naccs.jp/e/aboutnaccs/aboutnaccs.html. 5 http://www.yokohamaport.co.jp.e.df.hp.transer.com/effort/strategy/. 6 Keihin Port offers routes to many North America cities like Seattle or Los Angele http://www.ocean-commerce.co.jp/fmi/xsl/yok/service.xsl. 7 http://www.pref.kagoshima.jp/ah09/infra/port/minato/shibushi/shibushi/ english-suishin.html. 8 https://en.wikipedia.org/wiki/Japan_Freight_Railway_Company. 9 https://wits.worldbank.org/countrysnapshot/en/JPN/textview.
References Bi, Y. (2015). Rising Mega RTA: China-Japan-Korea FTA under the New Trade Dynamism. Journal of East Asia and International Law, 8, 299. Harris, R. L., and Nef, J. (2008). Dependency, Underdevelopment, and Neoliberalism. in: Richard L. Harris, Jorge Nef (editors). Capital, Power, and Inequality in Latin America and the Caribbean. Series: Critical Currents in Latin American Perspective, 49–95. Lanham: Rowman & Littlefield Publishers. ISBN 9780742555235. Japan Industrial Research Institute. (2002). Report on the international competitiveness survey of domestic major port areas, 2002. http://www.meti.go.jp/kohosys/ press/0002695/index.html Kondo, T. (2010). View to a Problem--International Container Strategy Harbor of the Longitude and Latitude of the Harbor Policy and Future. Legislation and Investigation 310, 41–55. Li, X. (2014). Operations Management of Logistics and Supply Chain: Issues and Directions. Discrete Dynamics in Nature and Society, vol. 2014, Article ID 701938, 7 pages.
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Li, Q., and Okamoto, S. (2007). The Current Logistic Situation and Future Trend in Greater Tokyo. Journal of Transportation Systems Engineering and Information Technology 1, 132–36. Lin, H., Liu, J., Liu, W., and Li, W. (2012). The Status Quo and Enlightenment of Japan Railway Transport Organization. Railway Transport and Economy 34, 65–72. Liu, B. (2013). Development Status and Analysis of Railway Container Transportation in Japan. Railway Transport and Economy 31, 36–9. Liu, X., and Tang, N. (2006). Interest Risk of Commercial Bank: Immunization Strategies and Demonstration Analysis on the Basis of Duration Gap. Journal of Nanjing University of Aeronautics & Astronautics (Social Sciences), F293.1, 1671–2129 (2006)03-0049-04. Lv, R., and Zhang, Z. (2006). Japan’s Harbor Management Strategies and the Inspiration for China’s Development of Round-Bohai-Sea Harbors. Contemporary Economy of Japan 5, 61–4. Ministry of Economy, Trade and Industry. (2006). The China-Japan-Korea Circulation and Logistics Joint Report, 36–8. Ministry of Finance. (2019). Trade Statistics of Japan: Sea Container Cargo Commodity by Country. https://www.customs.go.jp/toukei/srch/index.htm?M=69&P=0 Ministry of Land, Infrastructure, Transportation and Tourism. (2013). Goods that JR Freight Carries All over the Country (Fiscal 2008 results) [EB/OL]. Nakamura, H. (2003). Japanese Railway Transport Reform and Its Social Economic Benefits. China Railway 8, 63–5. Sakai T. (2004). Development of the Ports in Hokkaido, Kushiro Ronshu. Journal of Hokkaido University of Education at Kushiro, 36, 49−56. Wu, X., Wang, H., and Zheng, X. (2008). Japan’s Road Freight Transport Industry - The Second Report of the 29th Logistics Training Seminar of the Ministry of Transport. Logistics and Cargo 9, 76–78+14. Xu, J., Fu, B., and Zhou, J. (2016). Japan’s Experience and Enlightenment to Promote Industrial Development. Macroeconomic Management 4, 86. Yang, S. (2009). Recent Development of Japanese Port Economy: Characteristics, Practices and Problems. Contemporary Economy of Japan, 01. 本図宏子 (2016). “「一帯一路構想」 下における中国海運業の動向.” 運輸政策研 究 19(3), 014–022. 江原規由 (2014). “中国の対外開放新戦略としての 21 世紀シルクロード FTA 建 設.” 国際貿易と投資 96. 庄司智孝 (2020). “「一帯一路」 と 「自由で開かれたインド太平洋」 の間で: 地域秩 序をめぐる競争と ASEAN の対応.” NIDS Journal of Defense Security 22(2), 21–46.
Section III
Comparative perspectives A bottom-up approach
15 International perspectives of the BRI New, unfolding globalisation Sidh Sintusingha and Hao Wu
The BRI, an unfolding multi-dimension phenomenon: globalism, colonialism, developed and developing countries This final chapter discusses the implications of findings from Chapters 2 and 3 on China’s global visions and internal dynamics that drive the BRI, and from Chapters 4–14 on recipient countries’ case-specific experiences of the BRI. As it is a long-term and ongoing initiative, the book offers snapshots of the socio-economic and political conditions at the BRI’s genesis and does not attempt conclusive assessments of its impacts. As the BRI’s vast global jigsaw gets incrementally implemented, its impacts and implications on many of these broader issues, background geopolitics (risks), propositions and debates unfold and will become clearer in the decades to come. The chapter discusses theories and frames debates on the BRI focussing on its internal logics, external drivers and controversies that inform the central propositions in this book raised in Chapter 1 where the case chapters provide empirical support. It delves into and speculates questions for the future of globalisation and global economic development catalysed by the BRI, neoliberalism and the developmental state. The chapter provides insights from the perspectives of developed and developing countries, observing that both convergence and divergence of ideas and interests co-exist, ref lecting the complexity in global trade, capital movement, income distribution and economic development. The following sections discuss emergent themes from the selected countries’ perspectives and include the notions of new globalisation (‘Remapping globalisation?’); neo-colonialism (‘The neo-colonialism, debt trap argument’); the Chinese developmental state as an emerging model (‘The Chinese developmental state model for the developing world?’); geopolitical inf luences in BRI countries (‘Geopolitical competition and countryspecific stories: a complex web of competition and collaboration’); BRI impacts, and the question of benefits (‘BRI macro- and micro-scale impacts’); BRI city-region formation and development (‘Forging city-region development: colonial era and emerging geographic centralities’); and a
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theoretical discussion (‘Theoretical consideration: developed vs developing nation dualism’). These themes also define future research directions on the BRI. A short conclusion follows in ‘Conclusion: globalisation as if developing countries mattered?’
Remapping globalisation? Since Stiglitz’s Globalization and Its Discontents (2002), globalisation became a controversial subject of speculation. In the current global order and restructuring, the topic is regaining its currency as some have expressed concern that the China-led globalisation resembles new imperialism, triggering political tensions (Gowan et al., 2001; Harvey, 2003). While the architects of the BRI drew inspiration from the historic Silk Road, the British global expansion in trade and colonisation from 1776 has been highly inf luential in the formation of the Commonwealth institutions leading to the ‘rise of the Western world’ that precipitated the current global order (North, 1981). Post-Second World War, the USA assumed global leadership and led investment and the establishment of international institutions in particular the Marshall Plan, the International Monetary Fund (IMF), the World Bank (WB), the Bank for International Settlements (BIS), etc. This historic evolution from colonialism towards globalism and modern globalisation provides the context for China’s emergence as a politico-economic powerhouse. On the neo-colonialism concern, the US post-war infrastructure investment was largely focussed on the rebuilding and upgrading of war-ravaged developed nations that asserted US hegemon in the capitalist Western bloc, while the colonies fought for independence and emerged as new developing nation-states that, in the ensuing decades, only garnered attention relative to their Cold War geopolitical significance and/or natural resources. This provides points of divergence for the BRI from the previous globalisation – in its focus on developing countries and adoption of a ‘one country, one strategy’ approach that is arguably a far more complex and costlier endeavour that demands deliberative bilateral negotiations and collaborations on the economic, political and environmental fronts. The BRI emerged in the broad global context where two forces are in conf lict. One is the developed world’s hegemon and history of Western society and the tendency to persist. The other is the developing nations’ demand for change, market expansion and share that challenges the existing ‘stable’ order (Lin, 2012; Murphy et al., 1989). The Western orthodoxy persistence has had a long history which has become dominated and represented by the neoclassical framework. On the contrary, the developing nations and their reformers prefer significant structural change to allow for f lexibility, growth and development (Alfaro et al., 2008; Grossman and Helpman, 1990; Lin, 2010; Lucas, 1990; Stiglitz, 2002) and reforms to build up and transform state capability and capacity (Hanson, 2014; Murtha and Lenway, 1994; Wade, 1992).
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China formalised its global investment and market expansion through the strategic BRI and its associated institutions and organisations such as the Asian Infrastructure Investment Bank (AIIB) formed in 2016. The central questions are: how does China’s human and financial capital accumulate and move? Will its increasing hard and soft powers bring progress in economic growth, human development and income distribution? If Marx is again right, capital will eventually f low to rich countries. The critical question is whether the BRI, in diverging some capital f low into developing countries, will result in development in and with benefits to (and within) poorer countries and regions. Here Stiglitz (2002) argued that the neoclassical (neoliberal) approach of efficient market to guide globalisation has failed. Hence, the critical question is whether the BRI represents viable options and strategies, given new technologies and power relations, to support economic development of poorer nations through knowledge transfer and/or by ‘trial and error’ policy experiments (Grossman and Helpman, 1990). As argued in Chapter 1, the BRI adopts the Keynesian policy that favours a capital-institution-led approach of structure economics and a critical question is whether the BRI favours recipient countries’ development (development aid perspective) or growth to China (investment and trade perspective), the focus on industrialisation and industry upgrade (Lin, 2012), or both, a winwin scenario claimed by BRI advocates. This brings to the fore the question of how to understand and interpret international trade and global order based on: (1) resource extraction as a concern of fair trade, ownership and investment; (2) market expansion measured by real f low, scale and networks; and (3) a mixed bag or diversity of conf licting and complementary motives and incentives of nations, regions and organisations. They are the concerns to assess the BRI’s impacts in the recipient countries once infrastructure projects are in operation. Chow’s (2015) insight on China’s economic transformation, and Garnaut’s et al. (2018) review of China’s post-cultural revolution reform and development point to the shared perspective on aligning co-existing interests to shape the global order. In the past three decades through global trade, China’s strategic advantage as a low-cost manufacturing base and as one of the biggest growing consumer markets precipitated its rise as an economic and political power. Unsurprisingly, it is China that holds fast to the existing practices of free trade as part of the attempt to breach the middle-income trap, an objective it shares with much of the developing world. With these particular expertise and promise, China promotes the BRI to the world, especially when the existing practices of globalisation and neoliberal capitalism are perceived to have exacerbated post-colonial developmental inequities. It is these very inequities, both between and within countries, that have catalysed a backlash against globalisation, even in the developed countries. It must be stressed that over the past century, developed countries have disproportionately benefited from the free f low of trade and investments due to the well-developed infrastructure and connectivity, maintained and built
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on from the colonial era. Whether the BRI has economic value suffice to motivate developed nations to collaborate is one critical concern of the future global redistribution.
The neo-colonialism, debt trap argument Crucially, China’s investment may contribute to the de-colonisation of developing countries’ economies away from the post-colonial network and hubs of globalisation. But are the countries, in the process, being ‘colonised’ by China (Larmer, 2017)? A rather complex picture emerges here as the chapters reveal that the BRI can also be demand-driven from the recipient countries. The oft-cited victim of China’s neo-colonialism and debt trap, Sri Lanka is pushing for a multi-lateral framework for investments from developed countries. Sri Lanka’s President Gotabaya Rajapaksa warned: I want to tell India, Japan, Singapore and Australia and other countries to also come and invest in us. They should tell their companies to invest in Sri Lanka and help us grow, because if they do not, then not only Sri Lanka, but countries all over Asia will have the same [problem]. The Chinese will take the Belt and Road Initiative all over unless other countries provide an alternative.1 Smaller poorer developing economies are particularly vulnerable and Cambodia’s (Chapter 8) experience is consistent with Sri Lanka’s as implied in Rajapaksa’s quotation above. Cambodia is heavily reliant on Chinese aid and investment to feed its rapid economic growth rate, significant infrastructure upgrade and industrialisation. As discussed in the chapter, the BRI serves China’s geostrategic objectives more than economic interests in Cambodia’s location and as a member of ASEAN. Cognisant of colonial history, Cambodia utilises the deepened relationship with China to counter the inf luence of its far larger neighbours – Thailand and Vietnam – and Cambodia is now firmly entrenched in the China camp, economically and geopolitically. However, the lack of transparency, projects that favour Chinese businesses and labour, local social and environmental impacts from evictions, land clearance and unlawful land concessions have been well documented, which reinforces allegations of neo-colonisation. Yet these issues also highlight the double standards of former colonial powers’ accusations of a Chinese ‘neo-colonisation.’ Historically European powers had supported infrastructure planning and development when they colonised Africa and Asia, extracted resources and controlled land around the ports and stations but have revealed little appetite to fund or invest since (Acemoglu et al., 2001, 2002; Acemoglu and Robinson, 2012). However, the story of how Japanese imperialism, war and conquest – and in particular rail building – catalysed modernisation in Korea provides parallels and lessons on (aspects of ) Western governments and media accusations of the BRI as Chinese imperialism.
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Regardless of the implementation means, the end will likely be an ushering of a new wave of modernisation. A critical concern will be how to ensure that meaningful benefits reach the locals in a sustainable way.
The Chinese developmental state model for the developing world? Building on Chapter 1, Justin Lin’s new structural economics (NSE) (2010, 2012) is utilised to discuss and understand the BRI – and the question of what are its emergent defining characteristics. NSE offers a new framework for economic development, which is one of the central concerns of the BRI. Crucially, from China’s perspective, the BRI is consistent with NSE’s objective of ‘growth and stability in China’ to facilitate industrialisation, regional development and industrial structure and infrastructure upgrading (Dodini and Fantini, 2006; Garnaut and Ma, 1993; Rodrik, 2011; Wagner and Deller, 1998). As Chapter 2 has raised, China’s concurrent statuses as a donor/investor country and, crucially, as a ‘developing’ country afford it a strategic position in its engagement with the developing world. Its developmental state-led capitalism drove the unprecedented rapid development underpinned by urbanisation catalysed by infrastructure investments. Through the BRI, China offers this alternative model and pathway for poorer countries to scale up the development ladder. A common theme that runs across the chapters is the strong desire and demand in all the developing countries – of varying sizes and income levels – for economic growth. The Chinese government, through the BRI, has been willing to fund the infrastructure where other developed countries – under the strong inf luence of neoliberalism – have been reluctant to, perceiving such investments in developing countries as risky and less profitable. This helps explain why developing countries are drawn to the BRI and China’s developmental state and state entrepreneurism model that provide the risk-taking incentive (Haggard, 2018; Lind, 1992; Wade, 1992), and, through the BRI, the capital supply – whether through aid, soft loans and/or FDI for recipient developing countries. Since developed Western countries adopted the neoliberalism of Margaret Thatcher and Ronald Reagan, they ceased to be practical economic models for developing countries – as the fundamental question of how countries without a large private sector are capable of undertaking development of vital infrastructure has been ignored. Governments are obliged to undertake this role in the first instance and the BRI may offer the mechanism to strengthen local institutional capacity, adapting lessons from China’s own state-owned enterprises (SOEs) and also Asian Development Bank’s (ADB) and Japan International Cooperation Agency’s ( JICA) aid and mentoring approaches. While this highlights another point of contention where the BRI projects have favoured Chinese SOEs over local and international private competition, it reinforces the integral role of
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developmental state practices as SOEs, backed by the Chinese government, are able to sustain investment and/or operational losses (Chapter 3) to accommodate strategic and developmental objectives of China and the recipient countries. Moreover, the BRI project mainly concerns nations, including China, at early phase of their institutional transformation. Many national governments discussed in the book have concern over international contracting particularly when encountering conf licting political interests. While China mainly adopts a non-intervention approach to foreign nation’s domestic affairs, this has to be balanced with its international image as an investing nation in regard to transparency, corruption, externality and global impact. These complexities can help better define the very meaning of ‘developing countries’ based on the maturity of legal framework and political system – an important area for future research. Hence, apart from the recipient nation’s balancing act, those of the investing nations such as China are critical for mitigating the high transaction cost due to imperfect bilateral or multi-lateral contracting, collaboration and conf lict resolution. Japan, in its more advanced stage of economic development and infrastructures, provides the original model of the developmental state that has been emulated in East and South-East Asia (Wade, 1992) – including China particularly through the BRI’s government-to-government approach. Japan’s development experience provides important lessons for the success and failure of contemporary and future BRI infrastructure projects discussed in the book. In particular, the Japan case (Chapter 14) demonstrates the practices in the logistics integration between the ports, airports and local public transportation system that underpins Japan’s developmental success.
Geopolitical competition and country-specific stories: a complex web of competition and collaboration Great-power competition Politicians and businesses in developed countries, in particular the USA under President Trump, see China’s ability to technologically scale up the value chain as a threat and begin to limit Chinese market and technology access that has had adverse effects on the world economy. In many instances, the threat has been further compounded with reversion, resort to ideological, identity and nationalism in national politics. While this ‘great-power competition’ manifests at the global scale, many diverse regional and local level power competitions and conf licts persist in the BRI’s implementation with multi-dimensional impacts, which also reveal collaborative opportunities. On the question of why developed countries have been resistant and reluctant to join and/or accommodate the BRI? The overt partisan geopolitical inf luences and competition is one clear reason. This manifests explicitly such as in the case of Vanuatu (Chapter 11) where the main incentive for Australia
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and Japan has been to counter-balance China’s expanding geopolitical and economic inf luences in the South Pacific Ocean. Inevitably China competes with Japan, the previous leader in foreign investment, aids and economic development assistance in many Asian countries. Moreover, wealthy countries have less incentive to formally join the BRI as they already have advanced infrastructure as well as financial and technical capacity. As noted in Chapter 10, it takes only 10 days for commodity clearance in G-7 countries while taking 50 days in central Asian countries. Often, such as in the case of Australia, many developed countries already invested heavily to facilitate mining, energy and other exports to China. As a result, combined with decades of investment and trade, many of these developed countries’ economies are far more integrated with China’s markets (Chow, 2015; Garnaut et al., 2018; Woo, 2009) than the developing economies of Asia, Africa and South America. Developing countries require new investments in typical transport infrastructure, such as rail, highway, land and marine ports, to facilitate the movement of goods and people; industrial parks for manufacturing and research and development (R&D); energy infrastructure, such as dams and power stations to support industrialisation; and upgrades of existing infrastructure. In a way, the BRI has the potential competitive edge that may alter (even reverse) the established linkage and distribution of global network. In times when the global economy slows down (such as in 2019, which is compounded by the pandemic in 2020), there could be further economic incentives for developed countries in search for recovery or new growth to join the BRI. In the immediate and medium terms, the COVID-19 pandemic may adversely compromise the BRI and narratives of the new Cold War, de-globalisation, de-urbanisation proliferate in public media and academic discourses. This remains to be seen in the longer term as economic decoupling is far more difficult in practice in a highly interconnected world – where, for instance, 60% of China’s USD4 trillion foreign exchange reserves is held in US government bonds (Neely, 2016).2 In this context, at the 2017 BRI Conference, the UK, France and Germany’s refusal to sign a trade statement citing unclear public procurement and social-environmental standard issues can be viewed as a constructive message. Apart from leadership, this requires more transparency and clarification on the roles of China’s SOEs – the ‘backbone’ of BRI projects3 – and private businesses. As discussed above, this may ref lect more fundamental divergent practices between the BRI’s state-led and neoliberal market-led approaches to global economic development. Iran (Chapter 10) with its geographic and historical centrality and desires for BRI participation has faced the major obstacle of the geopolitical contestations. With the second-largest natural gas and fourth in proven crude oil reserves, Iran would be able to fund its own projects if it hadn’t been for US sanctions that adversely affected its economy. This is further compounded by low oil demand and prices as a result of the COVID-19 pandemic. The threat
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of armed conf lict with the USA has reduced China’s incentive to implement BRI projects in Iran, being aware that strategic infrastructure is often an early target for military offensive. Despite Iran having an established planning system, with corridors already well defined, and with the cultural legacy of the historical Silk Route, it is not making much progress in BRI-related urban-regional economic development and fears being left behind. This is in contrast to its neighbour to the east, Pakistan, which maintains strategic economic, political and security relationships with both poles of power, an approach broadly adopted by countries in South-East Asia, especially the middle-income countries of Malaysia, Indonesia and Thailand. Whether this approach is viable in the context of intensifying super-power contestations remains to be seen – yet it is vital in sustaining non-belligerent relationships and overlapping interests. In fact, in the antagonistic atmosphere, Iran has been pushed firmly into China’s realm of inf luence with the 2020 announcement of USD400 billion economic and security pact (Fassihi and Myers, 2020). At a regional level, in the context of its competition with neighbours Pakistan and China, India has maintained strategic infrastructure interests in Iran. Moreover, due to these contestations, the BRI’s BCIMEC corridor had not made progress beyond the China-Myanmar Corridor. Arguably, evidence of Malaysia’s economic ‘pivot’ to China may have inf luenced the US Department of Justice’s investigation into the financial dealings of 1MDB. This intervention into Malaysian politics helped, in 2018, catalyse the first change in government since independence. The translucent 14 km 2 Forest City land reclamation developments off the coast of Johor and Singapore to attract Chinese property investors may resemble neo-colonisation,4 but it must be noted that 1MDB leverages the services of agents from both sides of the geopolitical divide with inf luential US investment bank Goldman Sachs featured prominently.5 The strategy to practically engage with both poles of power comes with many practical complications. Trust or enmity? Towards a multi-lateral model Arguably, the BRI proposes a rare infrastructural and investment mechanism for economic and spatial linkages in the context of geopolitical and economic splintering. It poses a big question for the decades ahead, will global resources be allocated towards building linkages between cities, nations and regions – evidences of trust and optimism – or will they be allocated towards security, ref lecting increasing distrust and enmity? At the time of writing, evidence thus far seems to weigh towards the latter,6 but the former is beginning to manifest and will depend on the successes of the BRI’s project implementation and operation. Since the initiation of the BRI in 2013, there have been increased buy-ins – even by advanced economies, such as Italy (that is involved in projects in Iran and Thailand), New Zealand and the State of Victoria (Australia), which practically favoured economic realism over antagonistic ideological narratives that manifests in the US-China trade war.7 As
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noted in Chapter 3, 181 countries and international organisations and over 3,800 enterprises attended the second China International Import Expo held in Shanghai in November 2019. They signed trade agreements worth a total of USD71.13 billion – a 23% rise from the first international cooperation platform conference. While Wagner (2020) argued countries don’t want to emulate the Chinese political system and that China has come into the global arena “…crippled by its ideology, but with a clear sense of its interests, capabilities and strategy. Ultimately, the US is better equipped to lead the world. It knows that, and so does much of the rest of the world.” Perhaps, in the post-pandemic ‘new normal,’ the world is in a transition, and while China certainly has designs for increased inf luence, does it have the means and appetite to take the global leadership mantle from the USA, especially on the hugely costly military footprint and coordination to police the world? Crucially, the BRI’s ‘five links’ global governance model suggests that China’s leadership aspirations are biased towards the area of economic development and trade as well as building up cultural and symbolic capital – to ‘transform geo-politic into geo-economic relationships’ (Chapter 4). The strategy forms part of the internal-external balancing act between a developmental state-led distributive economic growth and recognition as a superpower. Yet intricately related to the BRI’s corridors are economic and security imperatives. As can be seen in the BRI’s continental and maritime corridors planning (Figure 1-1), a key driver has been to define alternative strategic trade routes to the Strait of Malacca bottleneck – where, for instance, 80% of China’s crude oil import is shipped that renders it potentially vulnerable in times of geopolitical instability. This explains China’s comprehensive and huge investments in Pakistan and Malaysia, relative to other cases in the book. As highlighted in Chapter 2, China’s Central Asia neighbours are resource rich with high development potential and, through transnational collaborations, will aid in the economic development of China’s western regions. Ironically, in a single-party developmental state, the government can be held more accountable compared to democratic, neoliberalised societies where markets and/or an opposing political party can be blamed for economic downturns and policy failure. However, its downside is the lack of information transparency and open debate (black box) therefore is more susceptible to ‘rent-seeking.’ Moreover, evidence suggests that global political leadership, especially since President Trump’s increased US unilateralism, depends on various factors and is now more distributed across policy areas and geographic arenas. Future US presidents may again shift priorities while China’s is likely to remain consistent at least in the duration of Xi Jinping’s tenure. With parallels with the historic Silk Route, ultimately the uptake of the BRI by partner countries and its success will depend on how it functions as an infrastructure and symbol for ‘peace, cooperation, development and mutual benefit’ and can be threatened, delayed and even derailed by wars,
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conf licts and pandemics. From Chapter 2, the Silk Road Economic Belt project involves and requires cooperation with Tajikistan, Kyrgyzstan and Uzbekistan, and memoranda of cooperation with Turkey, Iran, Saudi Arabia, Qatar and Kuwait – many of the latter countries are traditional rivals in the Middle-Eastern region. In the climate of global uncertainty, a multi-lateral international framework becomes critical to mitigate the unilateral practices and inf luences of the superpowers. Multi-lateral approaches, such as ASEAN’s Regional Comprehensive Economic Partnership (RCEP)8 or the Greater Mekong Subregion Economic Cooperation Program (GMS), provide the apparatus to alleviate unequal deals that can lead to debt traps and ensure benefits are more equitably distributed through embedding a more collaborative framework. It is worth noting that the BRI, in shifting the focus away from political and territorial conf licts and competitions to economic development and collaborations, may have served as China’s strategy to mitigate political tension in the Taiwan Strait and the South China Sea territorial disputes that threatened to worsen when the World Court ruled in favour of the Philippines in 2016. However, competition between powerful nations to invest in tangible infrastructure in developing countries, such as China and Japan in South-East Asia – or even between fellow developing giants of China and India in Iran – will benefit recipient countries in one form or another by reducing regional monopoly – whether in better conception, planning, design, delivery to the terms of loans. In fact, if the competing international infrastructure-focussed schemes such as the US-led ‘Blue Dot Network’ come to fruition, they can be considered as part of the BRI legacy in orienting global development and aid to developing economies. It may assist in diverting global resources to more constructive and beneficial endeavours, and even translate the global excess liquidity as a result of quantitative easing, since the 2008 global financial crisis, into tangible international infrastructure. As discussed in Chapter 3, China has been investing and leveraging its massive foreign reserves, mostly held in US dollars, into aid or infrastructure development and as part of internationalising its currency the renminbi, another agenda of the BRI – that the USA also views as a threat to the dollar’s hegemony in the global financial market. On this collaborative promise, the Korean case (Chapter 5) speculates on the event of a ‘new thaw’ in geopolitical relations in the Korean Peninsula that affords the BRI a role as a pathway for mutual peace and economic cooperation. Through the BRI, there are opportunities to connect and transform the North Korean economy through adopting the South Korean and Chinese developmental state practices of urbanisation, industrialisation and globalisation. Since China’s economic reforms, North Korea has become a spatial, infrastructure and regional economic gap between a far more developed China and South Korea. The BRI provides a strategic means of redressing this gap through linking with the CMREC Corridor. Key to its success will be to establish the broader economic and social connectivity with the surrounding
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powers of China, Japan and Russia. The question remains on the agenda and ambitions of the different stakeholders, in particular, for China and South Korea – a formal ‘counter-partner’ of the BRI. The US’s global interest poses further complications on extensive engagements especially as “Political, cultural, military, migration and missionary links with the USA have been outstanding in modern South Korean history.” Yet, despite these political and ideological differences, the South Korean government has been keen to integrate with the Asian continent and, in 2019, “… unveiled the blueprint for a proposed railroad link that it hopes to pursue in partnership with North Korea, China, Russia, Mongolia, Japan, and the US.”9 This again highlights the crucial role of countries that maintain intricate political and economic relationships with both China and the USA. There are constructive and critical roles that they can play in orienting dialogue towards economic developmental goals rather than political conf licts as well as in diffusing potential freeze in the super-powers’ relationship. Historically Indonesia once played a prominent role as founder and leader of the NonAligned Movement that had a more political and an anti-colonialism focus. Many of the countries, such as Japan, South Korea, Thailand, Pakistan and Brazil, discussed in the book are US Major non-Nato allies (MNNAs) –with China as their largest trading partner. Crucially, since Prime Minister Shinzo Abe’s visit to Beijing in 2018, the Japanese government’s primary policy stance on the BRI is to promote SinoJapan cooperation in third-country markets with Thailand’s EEC (Chapter 6) noted as an example of such collaborations.10 The Japanese Government’s 2017 guideline for its private sector participation, in particular the focus on ‘energy conservation/environmental cooperation,’ may result in more sustainable BRI outcomes. Indonesian President Jokowi recent push for Japan to join the consortium to develop the Jakarta-Surabaya HSR seems consistent with the new collaborative spirit.11 Overseas Chinese entrepreneurs have played a crucial part in the reformation of China’s economy since the 1970s and have continued to facilitate business collaborations between China and South-East Asia (Chow, 2015; Garnaut et al., 2018). This prioritising of trade over geopolitical conf licts can be further bolstered by multi-lateral trade agreements.
BRI macro- and micro-scale impacts Aligned strategic objectives and the challenge of localising benefits The BRI has a strong developing world orientation with China’s objective of exploiting the potential mutual economic growth through infrastructure linkages; this has also led to local unease. While China represents the BRI in an altruistic manner and is welcomed and embraced by recipient national and/or local governments, its investments and projects do not necessarily translate to favourable local perceptions and/or the appreciation of its ‘soft
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power.’ This points to the issue of macro- and micro-scale implications explicitly raised in the Cambodia, Vanuatu, Ethiopia and Brazil cases where the BRI is seen to benefit large-scale government and business entities (a macroeconomic growth bias), but much less so to small and medium-sized enterprises (SMEs) and is often blind to localised social community, industry and environmental impacts. The BRI integrates important strategies such as market expansion, comparative advantage for specialisation, direct investment for production and liquidity of international capital f low. These are powerful forces and incentives that induce nations to undertake BRI projects even when they are perceived as not economically viable. Each country’s political leaders are balancing their country’s desire for development and the risk with overly relying on the BRI for investments and operations. In other words, China’s BRI agenda must be matched by local political and developmental interests for projects to hit the ground – an important finding of the book. Moreover, country-specific attributes and local interests inf luence the BRI process and outcomes due to the diverse socio-political and economic conditions and capacities of each nation in BRI infrastructure and trade collaboration. Pakistan’s experience places it at the opposite end from Iran’s, and, having severely suffered economically as a result of the US ‘War on Terror,’ it has eagerly embraced BRI investments. As a ‘one corridor’ country, it has received some of the highest investments and largest scale of development with a rapid rate of implementation and is considered a BRI ‘f lagship’ corridor. Its planning process and the planning agents have been Chinese-led to serve China’s geopolitical design for a presence in the Indian Ocean. Yet Pakistan stands to profit from the internal reform and upgrade of its industries as a result of BRI investments. It also stands to gain economically if Gwadar succeeds in becoming the main Indian Ocean port for Central Asia. Yet whether the benefits will reach local businesses and the population remains a huge concern. The practice of multiple objectives – geographic/security strategy, expansion of state-led capitalism model – of BRI projects manifests elsewhere, such as in Malaysia in the BRI East Coast Rail Link project and China’s acquiring access to ports in Kuantuan and Melaka. As noted, this provides China with alternatives to the strategic shipping lanes of the Strait of Malacca that allies well with Malaysia’s desire to increase its competitiveness as a regional trading hub. The discussion of Malaysia Development Berhad (1MDB) national master plan (Chapter 7) provides a framework and context on how the BRI fits in with Barisan Nasional’s (BN) own grand aspirations for the country such as being a ‘developed country’ by 2020 (which has not been achieved12). In fact, Chinese investments couldn’t come at a better time with the decrease in investment from Europe and the USA due to the 2008 financial crisis – but at a cost. Similarly, Indonesia (Chapter 9), South-East Asia’s largest economy, has the luxury of attracting and engaging with competing suitors of China and Japan to serve its development agendas. Yet the balancing act is not without its difficulties and drawbacks and, for instance, both Thailand and Indonesia may end up with incompatible Chinese and Japanese HSR systems for
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different routes. While the HSR projects struggled to get off the ground in both countries, this has been due to the local capacity to negotiate and reshape projects in greater details to ensure more local benefits. Diverging from BRI practices, the Thai government is funding the first phase of the Bangkok-Nongkai HSR, opening the bidding to local contractors, ensuring technology transfer and maintaining planning and land use control around train stations. The Thai military-bureaucracy took a step further by framing the BRI corridor to complement its industrial upgrading agenda as expressed in the Eastern Economic Corridor (EEC) master plan. In effect, the Thai Government created a BRI ‘spur line’ through its EEC HSR project that links between the Thai Central Region’s three international airports. Alongside the country’s double-track rail upgrades, it will provide China’s southwestern provinces and landlocked Laos, passenger and freight access to Thai seaports, reinforcing the country’s centrality in mainland South-East Asia. The Ethiopia case (Chapter 12) offers a case of a large, poor African country that experiences the multiple dimensions and multi-scalar implications of the BRI, including infrastructure and urban developments’ spatial impacts on people’s livelihoods and culture. Africa’s first trans-boundary, fully electrified 751.7 km Addis Ababa-Djibouti railway represents one of the recently completed BRI projects and, relative to other cases in the book, can be read as a ‘successful’ example of BRI implementation that builds upon the historical affiliation between the countries and ‘vanguard parties.’ China is using the Ethiopian case of infrastructure upgrade and development to counter accusations of ‘neo-colonisation’ and promote its soft power over purely economic interests. The project represents a much needed infrastructure, well justified to free the pre-existing bottleneck of a single road where 80% of Ethiopia’s trade passes through. Geographically, the port at Djibouti provides Ethiopia (and countries to the west and south) the opportunity for increased integration into the world’s busiest maritime trade route and, due to its strategic location, hosts military bases of USA, France, Italy, Japan and China’s first foreign naval base. Here an ‘industrialising infrastructure to promote economic growth’ has been implemented, adopting a Chinese developmental state practice. The BRI reads as relevant and integral to the aspirations of Ethiopia whether in the strategic objectives of becoming a middle-income country by 2025 and serves as the potential springboard for African economic growth and transformation. Consistent with the African Union’s Agenda 2063’s aspiration 2, this is particularly significant as the continent is projected to experience the highest population growth in the world in the coming decades. However, other criticisms are valid – and, in Ethiopia, the local authorities are more concerned with the highly uneven trade balance than neo-colonial extraction, further exacerbated by the Addis Ababa-Djibouti rail line. Yet there are also wicked problems such as political instability/conf licts and the exclusion of pastoralists who are expected to ‘disappear’ and the trains will eventually run at its planned 120 km/h speeding Ethiopia towards the aspired modernity. How the benefits reach the broader population (and not merely ‘trickle down’)
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are valid questions for BRI projects that demand contingency plans and longterm distributive socio-economic policies are put in place and applied. Social and environmental imperatives In Chapter 13 on Brazil’s experience, a crucial challenge is posed on whether the BRI can evolve to be a mechanism for good stewardship of globalism. Based on the precepts of ‘sustainability,’ there are opportunities for China to address and place more importance on the social and ecological dimensions of the BRI to balance with economic interests. Local participation in and benefits from the projects must be made explicit from the outset. This may be counterintuitive for China’s heavily top-down approaches, yet it is plausible and consistent with its practical over ideological inclinations, vast economic development and poverty-alleviation experiences that will be fundamental for the project’s legacy and success in the long term. Guidelines to mitigate environmental impacts for investors have been proposed but not formalised and this needs to be prioritised. Yet one cannot escape the fact that the BRI has a strong infrastructuredriven urbanising agenda along continental and maritime corridors whether of existing centres or new cities around ports and stations for transit-oriented developments (TODs) and special economic zones (SEZs). These, by nature, are ‘unsustainable’ especially when accessed against ecological sustainability. As raised in Chapter 2, many of the corridors go through very difficult terrain and hence cut through relatively pristine landscapes. This is one of the fundamental dilemmas of ‘development’ and, here, developing countries often accuse developed countries of hypocrisy in obstructing their developmental rights and desires for improved quality of life in the name of sustainable development or even climate change (Sintusingha, 2005). Yet the threat is real in BRI partnering countries such as Ethiopia as an arid drought-prone country (Leviker and Sintusingha, 2018). Pakistan is similarly experiencing water stress as a result of its colonial era irrigation practices further compounded by new demands for urbanisation and industrialisation. There is a major opportunity for participating BRI countries to take leadership, responsibility and initiative to address these wicked global problems. In fact, the Brazil case demonstrate that food security and related public health issues cut across and affect both urban Chinese and Brazilian consumers. In Chapter 2, it is noted that environment stewardship is written into the BRI plans. The question is on project implementation. The BRI’s collaborations on and compliance with the United Nations Sustainable Development Goals (SDGs) and the 2015 Paris Agreement in its implementation will be crucial to mitigating adverse social and environmental impacts. Institution building: contributing to recipient countries’ planning system Chapter 13 also proposed Chinese enterprises’ engagement in the lower tiers of government to ensure locally responsive developments. However, this can
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be a politically sensitive issue and must be carefully balanced against accusations of ‘foreign interference’ and neo-colonisation. For smaller countries, aid or assistance in local institution building and planning capacity, as advocated in the Vanuatu case (Chapter 11), may be a more viable approach. Vanuatu is another example of a small and poor country vulnerable to debt traps and neo-colonisation with a tradition of being recipient of aid infrastructure where any ‘planning’ is essentially improvised by the donors that results in laissez faire urbanisation. Adopting an advocacy tone, the chapter discusses how a displaced community of Etas negotiated their tenure rights and benefits from the proposed new infrastructure development – against being evicted again. This is read against the backdrop of colonial legacies and traditional land ownership and utilisation. The Vanuatu case is emblematic of what the BRI needs to engage with to ensure success – from the impacts of geopolitical contestations through to the highly localised issues. In the context of the non-existence of planning or planning by aid donors, there’s an opportunity to combine the strengths of planning models from major aid donors of Australia and China (via the BRI), namely China’s top-down vision-focussed practice – yet desiring a more consultative Australian approach. Crucially, this lesson has wide application, including to TODs, SEZs and ports discussed in the book whether in Gwadar, Sihanoukville, Chabahar or Addis Ababa. In Vanuatu, the Australia-China competition has not been helpful and the “…one-place, two-donors system echoes Vanuatu’s colonial legacy” and demands an urban strategic plan to coordinate aid infrastructure. This could form a basis for collaborative partnership and coordinated strategy among donors in international aid that meaningfully benefits Vanuatu’s economic development. However, drawing lessons from Japan’s port administration, Chapter 14 raised Japan’s “…local decentralization and citizen co-construction policies in port construction” but noting that “…this implementation model is difficult to respond to changes in the international situation, and has produced many single-function port facilities.” This contrasts with the approach often taken in other Asian countries and particularly with top-down BRI practices to date. This highlights the global vs local tensions at various scales and provides contrasting administrative models – one that accommodates global trade and competition, another more responsive to the locality – each with advantages and drawbacks. This can inform BRI practices through an emerging economic developmental model for regions and trades, which each recipient country must inevitably contend with.
Forging city-region development: colonial era and emerging geographic centralities Another reason that China’s development experiences resonates with developing economies is the economic and geographic disparities between the east coast urban centres and the mid-western parts of the country. The Chinese government has been trying to achieve a ‘balanced development’ to bridge the gap to redress the domestic regional economic development problem.
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In essence, as discussed in Chapters 2 and 3, the BRI has been conceptualised and planned from the inside-out to redress internal inequities via opening up its central and western regions to continental Asian and European trade. These experiences are clearly relevant to developing countries, such as Thailand and Brazil, with pronounced geographic inequities between urban centres and their peripheries, as discussed in the book. The Sri Lankan president’s statement above implies a reality that, with infrastructure building, future generations that benefit from it do not necessarily have the memory of the exploitation or place importance on how they were delivered. In fact, in many formerly colonised societies, there’s a rise in the ‘colonial nostalgia’ phenomenon, unsurprising as the historic colonial powers retain substantial wealth and soft power in international affairs13 that China has found difficult to challenge. Many former nodes of colonial trade sustained and maintained the advantageous regional and local relationships to the present, such as Singapore and Hong Kong – or Busan, Mumbai, Jakarta and Ho Chi Minh within their respective countries. The path dependency of historic and existing institutions operates as a counter force against the process of global power and developmental resource redistribution. In effect the BRI’s corridors enhance existing centralities – be it global ones like Singapore or regional ones like Bangkok, creates new and also revives many historic centres – some within the same country such as the north-south corridor (new) and east-west corridor (old) in Iran. In other regions it is catalysing new centralities that impact upon the global and local politics. This has been the case at Xinjiang province in China, itself part of the ancient Silk Route, that is integral to the NELBEC, CAAEC (AsiaEurope) and CPEC (Pakistan) corridors. Chapter 3 reported analyses of the BRI framework’s impacts on urbanisation pattern, which predicts high-level urbanisation, modernisation and spatial integration into the urban system along the six corridors (Chen et al., 2016; Zhao and Gong, 2018). As implied in Chapter 8, with deep-sea port investments in Cambodia, China has designs on the Kra Canal in Thailand that, if implemented, will potentially shift the maritime corridor north from the Straits of Malacca and, as a result, affect South-East Asian and Asia-Pacific geopolitics. While the BRI develops and enhances connectivity, it concurrently reinforces global competition between cities in the rise and formation of the city regions integrated via multiple transport infrastructures. This is apparent in the cases of Pakistan, Malaysia, Thailand and Indonesia where the highspeed rail (HSR) and port projects are expected to enhance the formation and integration of global cities and regions. Critically, precedents for these BRI strategies and practices can be found in earlier Japanese port-city region that catalyses synergies between specialised, manufacturing, services, trade and urban development – a model that has been adopted and adapted by China that it, in turn, is exporting via the BRI to developing economies. The urban port’s actual success, however, is also dependent on local conditions and
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capacity – whether at Chinese-driven Gwadar Port (associated with becoming a centre like ‘Singapore’) in Pakistan or India-backed Chabahar Port in Iran, only 170 km to Gwadar’s west. The Ethiopian case offers a historical account of how infrastructure has acted as catalyst for urban development and culture in Ethiopia, particularly at Addis Ababa and Dire Dawa. Dire Dawa, the country’s second-largest urban settlement, was a direct result of the original rail line and station built in 1917. Along with the Indonesian and Thai experiences, it provides a clear legacy for contemporary development strategy and in the placement of train stations to catalyse and direct urban developments through TODs and linkages to SEZs. Crucially, due to the lack of land use and project planning capability in Ethiopia, much of the planning was done from China which has been a hindrance to the project.
Theoretical consideration: developed vs developing nation dualism Nations and regions with large income gaps tend to have different infrastructure demands that require strategic state coordination (Lin, 2010; Wade, 1992). Developing nations’ speed of growth and capacity building, given their hard and soft infrastructures endowment, are critically linked to anticipated desirable outcomes. So what is the place of this theoretical discussion to the bottom-up approach? The top-down vs bottom-up perspectives can be approached with the dualism of developed vs developing nation perspectives. Industrialised nations, in the main, adopt neoliberalism while developing nations exhibit ambiguity, suggesting avenues for new possibilities. As the developing nations’ focus on the process with the anticipated outcome an emerging state, they manifest both a possibility (value) and a risk (cost) through their ‘transitional states.’ It is this group asymmetry between developed and developing nations that exhibits interesting analytic potential. Within the BRI initiation and implementation process, there is the asymmetry of China’s and recipient nations’ interests, with some aligning while others in parallel or even in conf lict. This requires effective and deliberative dialogues be prioritised to interrogate and ensure sensible strategy and policy for global collaboration (real f low) and trade (exchange of ownership) are achieved. As the book demonstrates, there is significant diversity among developing countries though, in signing up for the BRI, there is a common preference for growth and lifting people’s quality of life. However, less attention is paid on stability and distribution. Lin (2010, 2012) argues for the essential characteristics of structural change and (corollary) industrial (technology) upgrading which demands strategic management and organisation, leading to renewed debate on the role of the developmental state. Arguably, this economic development perspective legitimises the logical foundation of the BRI from a structuralism perspective (Li et al., 2019; Rodrik, 2011). The question
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is: does this complement the global demand for sustainable regional economic growth strategies and practices? Lin argues that industry structure mirrors a country’s economic development conditions by its corresponding hard (physical) and soft (knowledge) infrastructure to facilitate operations and transactions. The poor (developing) vs rich (developed) dichotomy does not ref lect the reality of nations’ wealth accumulation continuum (Smith, 1776). Though turning points such as the middle income trap or the Lewis turning point do exist in developing nations, as do business cycles of growth or decline, in general, the f low of capital (from-to) needs not be discrete choices over time. Lin further argues that developing nations’ industrial upgrading and infrastructure improvement need not be sourced solely from high-income nation groups. To a certain extent, the BRI’s move towards a more collaborative approach to economic development has notable potential because significant public goods could be generated at an international scale. Recognising the fundamental role of private (market) trade, Lin argues for the crucial role of entrepreneurially driven industrial upgrading with the corresponding state leadership in infrastructure and public good delivery through public finance and investment. He advocates for the government’s role in facilitating the upgrading that allows a Schumpeterian non-linear, ‘creative’ growth path. This direct and dynamic link between infrastructure upgrading and government’s role underpins the BRI practices. It is observed that institution quality and capital investment return affect agent’s decisions and project success, which feeds back to economic performance and adjustment for future policies and actions (Amis et al., 2018). This brings up the concern of institution and government quality to effectively control the cost of infrastructure investment and inf luence projects performance, which the book implicitly reviewed through the country-specific case studies. The BRI may well conclude like the previous globalisation debates. Given the role of the state can lead to both growth and decline (North, 1981; 1994; Williamson, 1975), a state-led infrastructure upgrading will not necessarily lead to improvement as this ultimately depends on institution quality or state-market capacity to leverage the infrastructure. The book reveals the diverse institutional and planning capacities of developing nations discussed. Of concern is how the NSE theory distinguishes from the Keynesian or the New-Keynesian theory of government intervention; for example, do they share similar behavioural assumption? The Keynesian economic theory is for diagnosing major crises such as the Great Depression and the Second World War in capitalist market economy and is not focussed on economic development and assumes stable institutional environment (Keynes, 1936). The theory is being updated with more realistic behavioural assumptions (Akerlof and Shiller, 2009). Stable institution persists in nations of advanced economy or poverty largely to do with its ‘extractive’ distributive function (Acemoglu and Robinson, 2012). In contrast, developing nations may experience rapid and substantial structural changes through reform and/or revolution.
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While similar concerns of group homogeneity apply to developed nations, there is diversity within the group. There is a preference for stability to maintain and further enhance people’s quality of life and the quality of growth such as sustainability, leisure, innovation as higher quality consciousness in life across societies. This top-down perspective is vividly criticised from economic (Stiglitz, 2002) and political (Harvey, 2005) perspectives. The question is: will the China-led BRI be any different from the model? What are its characteristics in the new wave of global interactions? Also, is the ‘public good’ nature of technology and knowledge creation through R&D (Grossman and Helpman, 1990) also applicable to structures in Lin’s sense? This touches on deeper concerns of the debate because power structure and technology may exhibit different levels of behavioural and communicative conditions. It is not only growth (which is private desire satisfaction) but also fairness (which is a sense of justice) that is important in post-industrial and post-colonial nations and city regions. The implications of the BRI on developed economies is an important area that deserves future research.
Conclusion: globalisation as if developing countries mattered? On a topic that is all-encompassing with dynamic, multiple moving parts like BRI, it is almost impossible to do it justice and it comes as no surprise that there’s a fast growing and wide-ranging literature on the BRI. The book focusses on selected key aspects, namely the interrelationship between geopolitics, infrastructure investments and urban-regional development. Based on the book’s collection of countries’ perspectives, themes that strongly emerged are globalism, neo-colonialism, developed vs developing countries, their institutions, macro-micro benefits and impacts. Many other issues are raised, discussed and/or implied in the chapters that require further interrogation. The COVID-19 global public health crisis puts questions on developmental theories such as the NSE (Lin, 2012), revealing the possibility that industries can break down even with the capacity of highlevel mobility and advanced communication. The nature of urbanisation, catalysed by infrastructure investments, is another – specifically whether there will be pre-emption through urban strategic plans and sufficient investments in mass-housing or the new developments will force poorer residents and migrants “…to live in impoverished conditions at the marginal urban edges,” as forewarned in the Vanuatu case (Chapter 11). A likely scenario will be a combination of planned housing and squatter settlements whether in Ethiopia – one of the least urbanised countries in the world – or in any of the case countries discussed in the book, reproducing new inequities. Another emergent issue related to institutions is the varying political leadership, will and ability/capacity to ensure localised benefits and the cyclic, f luctuations of democratic politics in many countries that can affect and even obstruct BRI implementation. This can be further compounded
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if geopolitical contestations manifest at local levels. Future US leadership may re-join the TPP to multi-laterally ‘contain’ China; however the partnership is exclusive to relatively more industrialised economies. Most developing countries that are part of the BRI have been left out. In this specific sense, China is merely building on the US globalisation legacy and utilising geo-economic means in the BRI’s provision of infrastructure with the main objective to extend and catalyse economic connectivity and development to and raise the quality of life in developing countries. China’s own economic rise can be credited to the US policy in the 1970s to integrate it into the US global order (as a counterweight to the Soviet Union) so it can be seen as ironic that the USA is taking an anti-globalisation position, even undermining the institutions it once created. Graham Allison (2015) attributes this to ‘the Thucydides Trap’ phenomenon when an established power resists the rise of an emergent power, which in most cases would result in war. It is hoped that military conf licts can be avoided, and as history and the case countries discussed demonstrate, “neither friendship nor antagonism is permanent between countries” (noted in Chapter 8, citing Bong, 2019). The accusations of neo-colonisation will continue to recur, whether valid or not. As noted in Chapters 4 and 7, some local commentators have even gone to the extreme of associating the BRI with the infamous East India Company (Embong et al., 2017; Khan and Hyder, 2017; Zaidi, 2017) – and the related narratives of debt traps, colonisation through projects driven by China’s economic and military interests. Hence, well-meaning words such as those from Cambodia’s former foreign minister, Prince Norodom Sirivudh, who advised that “without good governance – which includes transparency and accountability – the BRI projects will fail” (Chheang, 2017) must be heeded. Like previous globalisation, ultimately the BRI’s success will be measured in its ability to bridge between aspirational and strategic objectives. Neoliberal-driven globalisation has failed to address global inequity and environmental challenges whereas the BRI appears to be a divergent path that is driven by the developmental state values, channelling global capital to developing countries. This may go in some way to help redress inequity and perhaps even lead to a model of economic development and foreign aid based on a ‘new consensus’ between developed and developing countries (Kennedy, 2010). However, the environmental imperative – in particular the effects of climate change – remains insurmountable as is the distributive socio-economic benefits within societies. Engaging constructively and collaboratively with these issues is the most meaningful and effective way to counter accusations of neo-colonisation, ensuring transparent transactions that guarantees benefits of infrastructure and investments reach the locals and is sustainable.
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Notes 1 Interview with The Hindu 30 November 2019. See https://www.thehindu.com/ news/international/need-more-coordination-between-delhi-colombo-saysgotabaya-rajapaksa/article30125809.ece. 2 In July 2020, China’s foreign exchange reserves was around USD3.3 trillion (CSAFE, 2020). 3 Referring to Chapter 3, as of 2019, the Chinese central government-controlled SOEs have 10,791 overseas units in 185 countries and regions. Its foreign assets totalled more than RMB7 trillion (USD1 trillion). 4 Noting that these speculative megaproject practices long predate the BRI in Johor (see Nasongkhla and Sintusingha, 2013). 5 See https://www.nytimes.com/2018/11/01/business/goldman-sachs-malaysiainvestment-fund.htm l?action=click&module=Top%20Stor ies&pgt ype= Homepage. 6 Even more so with the advent of the coronavirus pandemic and domestic social unrest in developed nations in 2020. 7 Noting that important US allies in the Asia-Pacific, such as South Korea and Japan, which share liberal democratic values, are not immune from nationalistic trade wars. 8 MOU signed in Bangkok in November 2019 and ratified in Hanoi in November 2020. 9 See http://english.hani.co.kr/arti/PRINT/908598.html. 10 See https://www.jetro.go.jp/en/jetro/topics/2018/1810_topics11/. 11 See https://asia.nikkei.com/Business/Transportation/Indonesia-woos-Japan-asChina-led-high-speed-rail-project-stalls. 12 Testament to the rare occasions that the middle income trap is breached. 13 See Farish A. Noor in Shadows of Empires: Inventing Southeast Asia (CNA Insider): https://youtu.be/LbXXQ8u1p0I.
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Amis, J. M., Munir, K. M., Lawrence, T. B., Hirsch, P., and McGahan, A. (2018). Inequality, institutions and organisations. Organisation Studies, 39(9), 1131–52. Bong, C. (2019). Cambodia’s Disastrous Dependence on China: A History Lesson. The Diplomat. https://thediplomat.com/2019/12/cambodias-disastrousdependence-on-china-a-history-lesson/ Chen, M., Liu, W., Yeerken, W., and Gong, Y. (2016). The impact of the belt and road initiative on the pattern of the development of urbanization in China. Mountain Research, 34(5), 637–44. (in Chinese) 陈明星, 刘卫东, 叶尔肯·吾扎提等 (2016) “一带一路”对我国城镇化发展格局的影响. 山地学报, 34(5). Chheang, V. (2017). Cambodia embraces China’s belt and road initiative. Perspective, 2017(48), 1–7. Chow, G. (2015). China’s Economic Transformation. 3rd edition, Wiley Blackwell, London. CSAFE. (2020). Official Reserve Assets. China State Administration of Foreign Exchange. http://www.safe.gov.cn/safe/2020/0207/15340.html. Accessed 03 September 2020. Dodini, M., and Fantini, M. (2006). The EU neighbourhood policy: implications for economic growth and stability. Journal of Common Market Studies, 44(4), 507–32. Embong, A. R., Evers, H. D., and Ramli, R. (2017). One Belt One Road (OBOR) and Malaysia: A Long-term Geopolitical Perspective. Institute of Malaysian and International Studies, University Kebangsaan Malaysia, May 2017. Fassihi, F., and Myers, S. L. (2020). Defying U.S., China and Iran Near Trade and Military Partnership. In New York Times July 11, 2020 in https://www.nytimes. com/2020/07/11/world/asia/china-iran-trade-military-deal.html Garnaut, R., and Ma, G. (1993). Economic growth and stability in China. Journal of Asian Economics, 4(1), 5–24. Garnaut, R., Song, L., and Fang, C., eds. (2018). China’s 40 Years of Reform and Development: 1978–2018. Australian National University Press, Canberra. Gowan, P., Panitch, L., and Shaw, M. (2001). The state, globalisation and the new imperialism: a roundtable discussion. Historical Materialism, 9(1), 3–38. Grossman, G., and Helpman, E. (1990). Trade, innovation, and growth. The American Economic Review, 80(2), 86–91. Haggard, S. (2018). Developmental States. Cambridge University Press, Cambridge. Hanson, J. K. (2014). Forging then taming Leviathan: state capacity, constraints on rulers, and development. International Studies Quarterly, 58, 380–92. Harvey, D. (2003). The New Imperialism. Oxford University Press, Oxford. Harvey, D. (2005). A Brief History of Neoliberalism. Oxford University Press, Oxford. Kennedy, S. (2010). The myth of the Beijing Consensus. Journal of Contemporary China, 19(65), 461–77. Keynes, J. (1936). The General Theory of Employment, Interest, and Money. Prometheus Books, New York. Khan, M., and Hyder, D. (2017). CPEC: The Devil Is Not in the Details. In Herald January 11, 2017 in https://herald.dawn.com/news/1153597/ cpec-the-devil-is-not-in-the-details Larmer, B. (2017). Is China the World’s New Colonial Power? In New York Times May 2, 2017 in https://www.nytimes.com/2017/05/02/magazine/is-china-theworlds-new-colonial-power.html Leviker, K., and Sintusingha, S. (2018). Addis Abyssinia: modernization versus indigenous modernity in Addis Ababa, in Han, S. S., and Lin, W. (eds.), Healthy Future Cities, pp. 396–408. China Architecture & Building Press, Beijing.
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Index
Note: Bold page numbers refer to tables; italic page numbers refer to figures and page numbers followed by “n” denote endnotes. Abdolah, B. 218 Abe, Shinzo 279 Adem, S. 249 African Development Bank 58 Ahmadinejad, Mahmud 217 Ahmed,Abiy 247, 248, 249 Allison, G. 318 Aminmansour, M. 216 Asia Cooperation Dialogue 53 Asia-Europe Meeting 53 Asiamoney 62, 250 Asian Developmental Bank (ADB) 8, 10, 56, 278 Asian Economic Corridor (AEC) 101; contexts of Korean Peninsula (see Korean Peninsula); global cities 112; implications 111–13; North Korea 109–11; South Korea 105–9 Asian Infrastructure Investment Bank (AIIB) 55, 59–60, 61, 72–3, 73, 301 Asia-Pacific Economic Cooperation (APEC) 53 Association of South-East Asian Nations (ASEAN) 139, 165, 302; Regional Comprehensive Economic Partnership 308 Bangladesh-China-India-Myanmar Economic Corridor (BCIMEC): cooperation area 44; economic development and trade 43; GDP (2018) of countries 43; major cities 44; trade partners 44, 45; trade volume of goods and services 45 Bank for International Settlements (BIS) 8, 300
Baswedan, Anies 196 Beijing:‘Beijing consensus’ 74; feeding the masses in 268–9 Belt and Road Forums (BRFs) 52 Belt and Road Initiative (BRI): alternative developmental path 28; Chinese political leadership 4; collaborative mechanisms 52–6; defined 15, 23, 142; domestic politicoeconomic structural change 27–8; emerging actors 56–63;‘five links’ practical achievements and risks 71–3;‘geo-environmental system’ 70; geographic strategy, six corridors (see corridors, BRI economic); globalism, colonialism, developed and developing countries 299–300; global politicoeconomic structural change 25–7; infrastructure projects 13; local urban environments in Iranian cities 215–17; macro- and micro-scale impacts 309–12; new, emergent institutions and organisations 14–15; regional development 56; representation in media and academia 64–71; in scholarly work 69–71, 70; state-led capitalism model 310; unfolding multidimension phenomenon 299–300; vision and goals 24–5 Belt and Road Portal 68, 68–9 Bhaba, H.: bottom-up analyses 14 ‘big-push’ theory 13 Boao Forum for Asia 53 Bolsonaro, Jair 266 bottom-up approach 10, 17, 315 Bowo, Fauzi 199
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Brautigam, D. 257 Brazil’s food system: China-Brazil Earth Resources Satellite (CBERS) project 272; China-Latin America agriculture relations 264–8;‘community of shared values’ 271–3; expansion of soybean production 263; feeding masses in Beijing 268–9; finding nutrition 269– 71; Hortas Cariocas programme 273; improved nutritional health 268; São Paulo 266; trade partner, China 264–5; UN-COMTRADE (2019) 273; United States-Brazil Commission on Economic and Trade Relations 266–7; urban and peri-urban agriculture 263 BRICS (Brazil, Russia, India, China and South Africa) 17; Brasilia Summit 69; New Development Bank (NDB) 55, 59 Cabestan, J. 249 Cambodia: build-operate-transfer approach 175; cement, garments and mining 179; Chinese aid and investment 170–9; diplomatic allies and politics 183–4; Electricity Authority of Cambodia 174, 175; electricity generation 174–5; first wave, Chinese aid in 170–1; foreign direct investments 180; geography and history 165–7; hydropower projects 176; impact and concerns 179–85; infrastructure development 173–4; international arrivals 181; megaprojects 177–8; Ministry of Mines and Energy 174, 175; neighbours 166; planning hierarchy and types 169; population and economic indicators 2007–17, 168; population and economy 167–70; regional and international interactions 179–81; risks of Chinese debt trap and beyond 184–5; second waves, Chinese aid in 171–2; share of investment capital 174; Sihanoukville Special Economic Zone 178–9; social and environmental issues 181–3;‘Socio-Economic Policy Agenda’ of the Political Platform 186n2; third wave, Chinese aid in 172–3; transport networks 175–7 Carrai, M.A. 15 Central Asia Regional Economic Cooperation 53 Cernea, M. M. 228
Chabahar Port 213 Chan, M. H. 16 Cheng, D. 10 Chen, M. 55 Chen, X. 17 China: administration institutions 57; aid and investment in Cambodia (see Cambodia); BRI vision and goals 23–5; domestic wealth 10–11; infrastructure-led development model 9; initiative and historical root 23–4; master plan for ‘Asia-Pacific Century’ 3–7; narrative, decline and rise of 7–10; neoliberalism perspective and notion of competing entrepreneurial states 13;‘one country, one strategy’ approach 49; one-party dictatorship 6; post-cultural revolution 301;‘Sick Man of the East’ 8;‘sphere of influence’ 6; structuralism approach 13; trade balances 8–9, 11–12 ‘China-Arab 1+2+3 cooperation pattern’ 37 China-Arab States Bank Consortium 59 China-Arab States Cooperation Forum 53 China-ASEAN (10+1) Cooperation Mechanism 53 China-CELAC Forum 53 China-Central and Eastern European Countries (CEEC) ‘16+1 Cooperation’ 53 China-Central Asia-West Asia Economic Corridor (CAAEC) 16; Central Asia Regional Transport and Trade Facilitation Strategy (2020) 38; ChinaCentral Asia Natural Gas Pipeline 38; economic cooperation 37–8; GDP (2018) of countries 39; major cities 37; railway project 36–7; trade volume of countries 38–9, 39, 40 China Central Television (CCTV) 64, 64–6, 65, 66 China Development Bank (CDB) 58, 198 China Europe International Exchange (CEINEX) 62 China-Indochina Peninsula Economic Corridor (CIPEC) 16, 120, 138; AIIB investment data 46–7; construction of 47; economic and trade cooperation 45–6; GDP (2018) of countries 48; major cities 46; projects 47; Thailand
Index 325 120; trade partnership 47–8, 48; trade volume of goods and services 48 China International Import Expo (CIIE) 52–3 China-Mongolia-Russia Economic Corridor (CMREC): GDP and per capita GDP in 2018 32; ideas for development 30; major cities 30; principles and plans 30–1; trade partners 32; trade volume of goods and services 32, 33 China National Development and Reform Commission (CNDRC) 30 China-Pacific Island Countries Economic Development and Cooperation Forum 53 China-Pakistan Economic Corridor (CPEC) 16, 82; AIIB investment data 40–1; ‘all-weather strategic partnership’ 40; construction of 41–2; GDP and per capita GDP in 2018 42; from geo-political relationship to geoeconomic relationship 81–3; Gwadar – a new port city 88–91; Lahore’s metro train (the Orange Line) 84–8; major cities 41; projects 41; regulatory cooperation 41; sustainability (see sustainability, CPEC); trade partners 42; trade volume of goods and services 42, 42–3; urban development projects 83–91 ‘China Threat Theory’ 27 ‘Chinese political barometer’ 64 Choe, S. C. 111 Chow, G. 301 Chung Hee, Park 103 The City Builders (Fainstein) 234 collaborative mechanisms 52–6; connecting countries 52–4; linking domestic development 54–6 ‘colonial force’ 256 ‘colonial nostalgia’ phenomenon 314 common man’s ride see Lahore’s metro train (the Orange Line) Conference on Interaction and Confidence-Building Measures in Asia 53 Continental Silk Road 23; Western Han Dynasty 23 corridors and nodes, Iran 212–13; Chabahar Port 213; Five Nations Railway Corridor Project (FNRC) 212–13; Garmsar-Incheboron railway
route 212; Tehran-Mashhad railroad electrification 212 corridors, BRI economic 5, 29; Bangladesh-China-India-Myanmar Economic Corridor 43–5; beneficial role of 56; China-Central Asia-West Asia Economic Corridor 36–9; China-Indochina Peninsula Economic Corridor 45–8; China-MongoliaRussia Economic Corridor 29–32; China-Pakistan Economic Corridor 39–43; construction of 49; economic and security 307; New Eurasian Land Bridge Economic Corridor 32–6 country-specific stories 304–9 COVID-19 pandemic 2020 3, 17, 26, 93, 164, 306, 317 Cross-Border Interbank Payment System (CIPS) 62 Cultural Revolution 164 debt trap 6, 92, 131, 159, 184–5, 202, 299, 302–3, 308, 313, 318 Deepak, B. R. 15 de-globalisation 26 demilitarised zone (DMZ) 104 developing economy 6, 302, 305, 308, 313–14 developmental state: Chinese 299, 303–4, 307–8, 311; Korean 100, 103, 108; Thailand 119 development master plan (2019) 127 Dire Dawa 250–1, 251, 254, 315 domestic politico-economic structural change, responses to 27–8 Doria, J. 266 Eastern Special Development Zone Act B.E. 2561 (2018) 127 economic development: Asia 60, 72; BCIMEC 23–8, 30–1, 43–4; Brazil 266; Cambodia 167, 169, 180, 183–4; China 23–8, 30–1, 49, 54, 307–9, 312–13, 315–16, 318; CIPEC 45; Ethiopia 248, 251–2; globalisation and 9, 17; international trade and 69–70, 74; Iran 215; Japan 280, 283, 293–4, 304–5; Malaysia 142, 148, 153–4; Port Vila 236–7; Thailand 121, 123–4, 130 The Economic Development of Latin America and Its Principal Problems (Prebisch) 266 Economic Reform 164 Elahi, Prevaiz 93
326 Index Elbegdorj, Tsakhiagiin 29 Embong, A. R. 155, 158 emerging actors 56–63; funding organisations 57–62; institutions 56–7; major project operators 62–3 Enlai, Zhou (Premier) 54 Ethiopia: Addis Ababa–Djibouti railway 248, 249–50, 250, 254, 311, 315; agriculturalled industrialisation framework 246; analysis 253–7; background on Ethiopia and its relationship with China 246–9; China Geo-engineering Corporation 258n5; Climate Resilient Green Economy 252; Dire Dawa station 250–1, 251, 254, 315; engagements with China 245; Ethiopian People’s Revolutionary Democratic Front 245, 246; Forum on China-Africa Cooperation 248–9; general background 245–6; Growth and Transformation Plans 251; infrastructural engagements 245–6; ‘Integrated Housing Development Program’ 247; international exporter of sesame seeds 258n3; local media 256; pastoralists 255–6; population of 245; railway 249–53; Special Economic Zones 254; state-owned enterprises 248; trading partner, China 249; Transit Oriented Development 255, 257, 312; transportation infrastructure 253–4 EU-Eurasia 10 European Bank for Reconstruction and Development 58 Export-Import Bank of China 58 Fainstein, S. S.: The City Builders 234 First Sino-Japanese War 101 ‘five links’ principle, BRI: economic development and trade 307; facilities network 72; financial network 72–3; international and transnational networks 71; policy coordination and cooperation 71–2; projects and initiatives 72; transnational trade network 72 Five Nations Railway Corridor Project (FNRC) 212–13 foreign aid 167, 226, 318 foreign direct investment (FDI): Cambodia 180, 180, 185; Chinese 6, 17, 123, 140, 144, 170, 303; CPEC 92, 96; Hong Kong 140; Malaysia 142, 142, 148, 157; North Korea 109,
110; Singapore 140; South Korea 105, 106–7 Forum on China-Africa Cooperation 53 Fourie, E. 247 Free Thai movement (Seri Thai) 133n3 Fukuyama, F. 4 Fu, M. 64, 65 Garmsar-Incheboron railway route 212 Garnaut, R. 301 Garuda Seawall 191, 191, 199–200 geopolitical competition 299; greatpower competition 304–6; trust or enmity? towards a multi-lateral model 306–9 geopolitics 3, 7, 10, 47, 114, 299, 314, 317; North Korea 104–5; South Korea 103–4; Thailand 121–3; of Vanuatu 230–31 Gleeson, B. 264 globalisation: decline and rise of China narrative 7–10; developing countries 317–18; and economic development 9, 17; new globalisation 299; new imperialism 300; remapping globalisation 299, 300–2 Globalization and Its Discontents (Stiglitz) 300 global mobility, South Korea 107–8 global politico-economic structural change, responses to 25–7 Gover-vate 223n1 Greater Mekong Subregion (GMS) Economic Cooperation Program 53, 123, 308 Greater Tumen Initiative 53 Great Leap Forward 164 Group of Twenty (G20) 53 Gunasekaran, A. 16 Guo, H. 71 Gwadar: CPEC Authority 90; demographic shift in 94; development of 88; East Bay Expressway 89; Gwadar Development Authority 90–1; Gwadar Master Plan (2017–50) 88–9, 91; Gwadar Port Authority 90; Gwadar Smart Port City Master Plan 89, 91; infrastructure in 89–90; New Gwadar International Airport 89; port, development of 89 Haddad, F. 266 high-speed rail (HSR) 10; BRI JakartaBandung 191; connecting China
Index to South-East Asia 7; connecting Southwest China 16; Eastern Economic Corridor 119;Thailand 119 ‘hukou’ system 18n5 Hurley, J. 92 Hu, W. 71 hybrid theory: Keynesian and neoliberal competing entrepreneurial states, regions and cities 10–14 Ibrahim Ismail 147 Iftikhar, M. N. 96 Indonesia: and Chinese companies 193; Garuda bird, Indonesian national symbol 200; Great Garuda master plan 200; HSR projects 193, 201–2, 310, 314; independence during Second World War 193; Jakarta-Surabaya ‘medium-fast rail link’ to Japan 198; Java 192; Keadilan Sosial bagi seluruh Rakyat Indonesia (social justice for all the people of Indonesia) 192; ‘Pancasila’ 192; Persatuan Indonesia (the unity of Indonesia) 192; postcolonial modernisation and development 191; rise of middle class 192, 195 ‘Information Silk Road’ 19n9 infrastructure investment: BRI transport 17–18, 34; China and Pakistan’s cooperation 55; CPEC 91–2; international 14; Keynesian approach 12; Malaysia 142, 148, 153–4; North Korea 104; ports and transportation 3; public-private partnership (PPP) approach 137; rail 11 ‘Integrated Housing Development Program’ (IHDP) 247 Inter-American Development Bank 58 International Monetary Fund (IMF) 8, 10, 56, 300 international perspectives: aligned strategic objectives and localising benefits 309–12; BRI macro- and micro-scale impacts 309–13; Chinese developmental state model 303–4; colonial era and emerging geographic centralities 313–15; developed vs developing nation dualism 315–17; forging city-region development 313–15; geopolitical competition and country-specific stories 304–9; globalisation 317–18; globalism, colonialism, developed and developing countries 299–300; institution building
327
312–13; neo-colonialism, debt trap argument 302–3; new structural economics 303; recipient countries’ planning system 312–13; remapping globalisation 300–2; social and environmental imperatives 312 ‘internet of things’ or the network of real things 18n7 Iran: advantageous location in alternative BRI corridors 210–12; BRI hopes and dreams 208; BRI routes and connections 210; Chabahar and India’s competition 217–19; Chabahar Free Trade-Industrial Zone 217–18; City Development Strategy 221; developmental levels, population growth and economic outputs 209; Economic Cooperation Organization 219–20; electrification of TehranMashhad railway 220–1; globalising opportunity and potential impacts on local urban environments 215–17; infrastructure development, governance and planning system 214–15; major corridors and nodes under BRI (see corridors and nodes, Iran); major infrastructure projects 222, 223; Mashhad, the East-West corridor gateway 220–1; mechanism for economic growth and stability 221, 223; producers (oil and gas) 207; reviving historic Silk Road tourism in Tabriz 219–20; Silk Road (Shahi Road) 207; transit crossroad and energy hub 208–10; vision for future transportation corridors 211 Jabodetabek: BRI HSR Pan-Asian competition and Chinese gaze 196–9; HSR project 197; Jakarta Urban Regeneration megaproject 196; JICA’s JABODETABEK Metropolitan Priority Area master plan 195–6; Light Rail Transit project 196; Mass Rapid Transit project 195; towards urban-regional competitiveness under Japanese tutelage 194–6; transitoriented development projects 196 Jae-In, Moon 100 Jakarta: Garuda Seawall 191, 191, 199–200; Jakarta Metropolitan Area (see Jabodetabek); LRT corridors 203n7, 203n8 Jamali, H. 94
328
Index
Japan: attitude towards China’s BRI 278–80; BRI and development strategy of overseas port cooperation 282–3; challenges and opportunities 293–4; China-Japan-Korea Circulation and Logistics Joint Report 281; construction of 287–9; domestic transportation system for port cities 291–3; formation of scale economies and industrial clusters 294–5;‘free and open Indo-Pacific’ strategy 278;‘Guidelines for Private Economic Cooperation’ 278–9; industrial zones 280–1; infrastructure development 280; Japan Bank for International Cooperation 278; Japan International Cooperation Agency 9, 192, 278; Keihin Port Shared Vision (2009) 282; new port strategy (see ports (new) strategy, Japanese); port trade development 280–2; railway transportation 291–2; road transportation 292–3; 21st-Century Maritime Silk Road 279, 283; trade infrastructure 283–5; trade policies of Japanese ports 285–6; trade ports 290–1 Java, production of megaprojects in: economic modernity and political legitimation 201–2; Garuda Seawall in Jakarta, Dutch designed 199–200; global and national complementarity 192–3; Jabodetabek integration (see Jabodetabek); Joko Widodo’s infrastructure-building agenda 192–3; symbolic centrality imposed on postcolonial nation 199–200 Jayaram, N. 249 Jia, J. 18 Jia, Z. 66 Joharchi, S. 216 Johns, M. B. 17 Join the Dots, project 266 Kaesong Industrial Zone (KIZ) 104 Kaplan, R. D. 89 Keynesian framework: capital-institutionled approach of structure economics 301; macroeconomic theory of trade 12; and neoliberal competing entrepreneurial states, regions and cities 10–14; and ‘supply-side’ ideas 12 Khan, Imran 90
King, R. 186 Kloosterboer, M. 247 Korean Peninsula: North Korea 104–5; railways and key cities 1944 102; South Korea 103–4; spatial networks and border cities 113; transport networks 101–3 Kraemer, M. 18 Lahore’s metro train (the Orange Line): Chief Minister’s political capital 87; common man’s ride 85; construction of 86–7; cost of project 85; Lahore Development Authority 85–6; Lahore Rapid Mass Transit System study 84; oppositions 85; public criticism 86; Punjab Mass Transit Authority 85; transit-oriented development principles 88 Lam, P.D. 131 Lancang-Mekong Cooperation Mechanism 53 Land Acquisition Act 1894 93–4 Landau, L. B. 228 Larimian, T. 218 Lefebvre, H. 13; social production of space 13 ‘liberal democracies’ 6 Light Rail System (LRT) 133n16 Li Keqiang (Prime Minister) 28, 53, 85, 279 Lin, C. 17 Lin, J.Y. 13, 315 Local Government Act of 2015 90 Malaysia: aims and objectives 143–4; China-Malaysia trade 139–42; in China’s Belt and Road Initiative 142–3; Chinese investments, increasing concerns with 154–5, 159–60; comparison of revenues and expenditure 140; debt of federal government 139; development projects 157–8; discussion 157–9; East Coast Rail Link 2016 151–2; economy and development strategies 137–9; Edra Global Energy Bhd 2015 150–1; exports and imports 141; Forest City Johor 2013 147–8; global financial crisis 137; Kuantan Port 2013 149; major Chinese investments 145–6; Malaysia-china Kuantan Industrial Park 149; May 2018 general elections
Index 329 and change of government 155–6; Melaka Gateway 2014 150; ‘One Belt, One Road’ initiative 142; projects and investments by Chinese companies 144–6; Proton Holdings 2017 153; regular FDIs 142, 142; Second Penang Bridge 2006 145; strategic analysis of Chinese investments 147–54; Suria Strategic Energy Resources 2016 152; survey 158; trade statistics 141 Mao Zedong 139 Maritime Silk Road 23; Qin and Han dynasties 24 Markey, D. S. 15 Marshall Plan 8, 74, 300 Marsot, A.G. 170 Mayer, M. 4, 15 McGarry, D. 228 media and academia 64–71; Belt and Road Portal 68–9; China Central Television and local TV stations 64–6; People’s Daily 66–8; in scholarly work 69–71 Member states 223n4 MENA countries (Middle East and North Africa) 208 Mohamed, Mahathir (Prime Minister) 137, 155 Mourao, Hamilton 267 multilateralism 7, 16, 18, 25, 30, 43, 46, 53, 55, 57, 59, 72–3, 131, 159, 265, 278 Murphy, K. 13 National Competitiveness Enhancement for Target Industries Act B.E. 2560 (2017) 127 neo-colonialism 249, 299–300, 302–3, 317 neoliberalism 6, 13, 26, 299, 303, 315 ‘New Cold War’ 3 New Eurasian Land Bridge Economic Corridor (NELBEC): economic cooperation 33–4; GDP and per capita GDP in 2018 35; major cities 33; projects 35; railway channels 32; trade communication and industrial cooperation 34; trade partners 35, 36; trade volume of goods and services 36, 36 new globalisation 299 Nol, Lon 164, 171 ‘non-interference,’ principle of 54 North Atlantic-Asia-Pacific narrative 10
North Korea: foreign direct investment (FDI) 110; geopolitical status as a closed state 104–5; North Korea-US summit in 2018 100; socialism 100; trade 109–10; transport networks 110–11 Obama, Barack 3 Okinawa Freedom 285–6 ‘One China’ principle 54 Orange Line project anti-employment 93 organic food movement 273 Osama bin Laden 83 Pakistan: ‘all-weather friendship’ 16, 81; corridor 16; geo-political relationship 81–3; Global Climate Risk Index of 2017 94; internationalisation of renminbi 53; Karachi Circular Railway 84; Lahore Metro Train and Gwadar 84; Pakistan Vision 2025 91 Participatory Slum Upgrading Program (PSUP), UN-HABITAT project 233 People’s Daily 66–8, 67 People’s Republic of China 54 Pichamon,Y. 170, 181 policy: Cambodia’s foreign policy 184; China’s 157, 164; for collaboration and trade 315; coordination network 71–4; experimentation 28; of industrialisation 254, 266; Japan’s port 282; multilevel intergovernmental policy exchange and communication mechanism 25; SINOSURE 60; taxfree policy 286; ‘trial and error’ policy 301;Vanuatu’s 228 ports (new) strategy, Japanese 286, 287; declining international competitiveness of Japanese port 284; global trade and competition 313; Keihin Port 288; Kushiro Port 288–9; Mizushima Port 289; Ohamacho Port 289; OsakaKobe international port area 290–1; Port Cargo 293; port of Shizuoka Prefecture 287–8; Shibushi Port 289; Tokyo Bay area 290 Port Vila: aftermath of Cyclone Pam 230; Chinese model and ‘land grabbing’ 239; current municipal boundary, establishment of 232; customary edges of Pacific cities 231–2; displacement in Port Vila 236–7; donor expertise, value of
330 Index 238–9; Efate’s one road to many growing communities 229; Elang Etas Community Association 235–6; geopolitics of Vanuatu 230–31; Government of Vanuatu 226; Japanese International Cooperation Agency 226, 240; methods and approach 228; New Zealand Aid Program 229; Participatory Slum Upgrading Program 233, 234; plan-less city 233–4; Port Vila Urban Development Project 233, 234, 239; road to Etas 234–5; strategic planning, value of 237–8, 239; Vanuatu and Etafe island 227 Pot, Pol 164 Prebisch, R.: The Economic Development of Latin America and Its Principal Problems 266 Prophet Muhammad 216 public investment funds (PIFs) 57 Putin,Vladimir 29 Rajapaksa, Gotabaya 302 Rajin-Seonbong Economic Zone (RSEZ) 104 Razak Hussein, Abdul 139 Razak, Najib 155 Reagan, Ronald 303 Revolution 1911 18n4 Reza Pahlavi, Mohammad 217 Rise of Central China Plan 28 risks, BRI 73 Rode, P. 254 Rousseff, Dilma 266 Russo-Japanese War 101 Sen, Hun 164, 170, 177, 181 Shahraki, A. 218 Shanghai Cooperation Organization (SCO) 38, 53, 55 Sharif, Nawaz 96 Sihanouk (Prince) 167 Silk Road: BRI and new, emergent institutions and organisations 14–15; China’s master plan for ‘Asia-Pacific Century’ 3–7; decline and rise of China narrative 7–10; distinction and contribution 17–18; Keynesian and neoliberal competing entrepreneurial states, regions and cities 10–14; origin of 209 ‘Silk Road Economic Belt’ 23 Silk Road Fund (SRF) 55, 57, 58 SINOSURE 60
Slattery, M. 158 Small, A. 83, 91 Song, L. 70 South-East Asian Corridor 16 South Korea: developmental state model 100; foreign direct investment 106–7; geopolitical position as geographically isolated state 103–4; global mobility 107–8; investment links with China 107; trade 105–6; transport networks 108–9 sovereign wealth funds (SWFs) 57 de Soyre, F. 17 Special Economic Zones (SEZs) 83, 115 Sri Lanka: Chinese debt trap 184–5; colonial nostalgia phenomenon 314; Hambantota Port 231; HSR projects 7 state-owned enterprises (SOEs) 62–3 Stiglitz, J. 301; Globalization and Its Discontents 300 Sun, Z. 64, 65 sustainability, CPEC: economic and financial sustainability 91–3; environmental sustainability 94–5; institutional sustainability 95–7; social sustainability 93–4 Tehran-Mashhad railroad electrification 212 Temer, Michel 266 Thai Canal (Kra Canal) project 55, 120, 176 Thailand: Bangkok’s north-east cityregion 124–7; Bangkok’s south-east urban-region 127–9; China and Japan 129–31; China-Indochina Peninsula Economic Corridor 120; Chinese ‘desire line’ BRI Thailand Phase 1, 124–7; fertile grounds for collaboration 131–2; geopolitical dimension 121–3; mainland South-East Asia economic integration 129–31; Thai desire line Eastern Economic Corridor 127–9; Thai pivot to China 121–3; urban city-region agenda 123–9 Thatcher, Margaret 303 ‘the Thucydides Trap’ phenomenon 318 Todd, L. 158 Town Planning Act 233 trade: in China 8–9; dependence of Japan 284; infrastructure in Japan 284–5; North Korea 109–10; South Korea 105–6; transformation from air to maritime transportation 284–5
Index trade protectionism 26 Transatlantic Trade and Investment Partnership (TTIP) 26 Trans-Pacific Partnership (TPP) 3, 26 transport networks: in Korean Peninsula 101–3; North Korea 110–11; South Korea 108–9 Trump, Donald 3, 266, 307 21st Century Maritime Silk Road 5, 23 Um, G. C. 111 United Nations (UN) 8 United States: political and economic relationships 309;‘Red Threat’ 27; US-led ‘Blue Dot Network’ 308; US Major non-Nato allies 309;‘War on Terror’ 310 urban-regional development 119, 317 Vanuatu 17; debt traps and neocolonisation 313; and Etafe island 226; geopolitics of 229–31; Government of Vanuatu 227; urbanisation 317; see also Port Vila Vision 2020 137 Von Richthofen, F. 209
331
Wagner, D. 307 The Wall Street Journal (2019) 160 Wang Yi 40, 264, 268, 272 Wan Jan,W. S. 158 ‘War on Terror’ 82, 83 Wen, W. 248 Western Development Strategy 28 Widodo, Joko 196, 197, 202; infrastructure-building agenda and BRI 192–3 Wilhelm II, Kaiser 27 World Bank (WB) 8, 10, 56, 58, 133n2, 278, 300 World Economic Forum 53 World Trade Organization (WTO) 56, 70 Wray, Christopher 3 Xiao, H. 71 Xi Jinping 23, 29, 37, 40, 53, 66, 67, 68 ‘Yellow Peril Theory’ 27 Zenawi, Meles 246 Zheng, H. 57 Zhou,T. 170, 172 Zou, J. 70