South Asia’s Last Resort: Is China’s One Belt-One Road Initiative the Only Road to Prosperity?

 

by Anthony Howell     6 August 2020

China has made no secret of its want for economic expansion. It has patiently and painstakingly marched towards this end goal by establishing both transnational land and sea trade routes, mimicking the historical “Silk Roads” used centuries ago, connecting China to the Middle East, Africa, and Europe; christening this economic initiative as the Belt and Road Initiative (BRI) or the One Belt-One Road Initiative (OBOR), as it is called by Western scholars. The concept of the OBOR was first introduced by China’s President, Xi Jinping in 2013. It was to be an infrastructure project consisting of highways and railways connecting China to Europe.[i] He later expanded on this by including a “Maritime Silk Road” to compliment the land routes.[ii] The latter route would link China’s eastern ports to Europe, via Southeast Asia, traversing alongside the Indian continent through the Bay of Bengal before continuing on to Africa.[iii]

China’s modus operandi has been questioned, as its reach becomes ever larger and its influence ever greater. There are those who remain skeptical of China’s motives, some critics fearing that the OBOR, being solely conceptualized by China, may use its economic power to increase its geopolitical leverage.[iv] However, there is one region that stems to benefit from China’s economic policies: South Asia.

For decades, this region has largely been neglected within the larger sphere of global matters, and apart from India, has been largely marginalized. However, currently, South Asia has been juxtaposed between two competing ethnocentric financial ideals: One based on the Eurocentric practice of refusing to provide financial funding to desperate nations based on idiosyncratic needs while the other is Asiacentric based, rooted in offering financial support to gain prestige and influence. The OBOR presents an opportunity for South Asian nations to reap the benefits of China’s financial offerings, which the West has been reluctant to provide. This article endeavors to explore China’s and South Asia’s relationship and to determine if China’s OBOR is the only path left for South Asia to choose.

The financial issues for South Asia, which would prompt them to rely on China’s economic ‘benevolence’, are numerous. The heterogeneous demographic of South Asia makes cooperation within the region difficult, being comprised of eight countries: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka; a collective known as SAARC (South Asian Association for Regional Cooperation).[v] Together, these countries account for nearly one-fourth of the world’s population, containing over 1.6 billion people.[vi] At one-sixth of the earth’s total land surface, this region is one of the most densely populated areas in the world.[vii] Due to its vast population size, it is comprised of many ethnic and religious groups, including one-third of the world’s practicing Muslims.[viii] Unfortunately, South Asia also accounts for some of the highest levels of poverty.

Studies conducted have shown that the region is considered one of the poorest in the world, with a disproportionate amount of its people subsisting on funds below the accepted poverty line. Although the region contains nearly a quarter of the world’s population, it only accounts for 2 percent of the Global GDP and 1.3 percent of world trade and accounts for 44 percent of the poverty-stricken segment of the world, just marginally higher than Sub-Saharan Africa, which consists of 46 percent.[ix] Nearly 85 percent of the regional population subsists off of less than US$ 2 per day.[x] This is due to a disproportionate sector of the economy being derived from agriculture, such as in the nations of Bhutan, Maldives, and Pakistan.[xi] This is primarily due to the after-effects of decolonization and globalization, which have resulted in extraordinary poverty levels and economic underdevelopment, which threaten social and political stability.[xii]

This instability has resulted in South Asia being most notable for its notorious association and struggle with homegrown terrorism, jihadism, and religious extremism, becoming a conduit for terrorist organizations. South Asia became the focal point for the Global War on Terror (GWOT), an American doctrine established in response to the terrorist attacks on the US on September 11, 2001, where al-Qaeda, acting under the direction of Osama bin Laden, attacked the US, and pledged a Jihad against the West.[xiii]

Aside from these security issues, South Asia’s relevance has been largely relegated to the global periphery, except for India. Due to their underdeveloped economies and internal strife, the smaller nations of South Asia have had issues establishing regional power in a part of the world where competition is fierce, again, except for India and possibly Pakistan. This has left many of these nations in weakened bargaining positions when trying to secure financing from international monetary institutions to better their economies, resulting in the inability to provide better opportunities to its citizens.

There have also been attempts made by member nations to collectively work together to strengthen their economic situations to reduce their dependency on such institutions. However, these previous attempts to establish multilateral trade agreements to offset this economic imbalance have proven inefficacious, leaving South Asia as one of the least economically integrated regions in the world, with SAARC, the South Asian Preferential Trading Agreement, and the South Asia Free Trade Agreement having all failed to break the trade barriers.[xiv]

The inability to secure financial backing from outside entities, and the lack of cooperation amongst themselves, have left the South Asian nations in a precarious predicament of lacking financial viability to engage in national development to raise itself out of destitution. However, with help from China, South Asia has been given a reprieve, due largely to China’s economic stimulus and assistance through the OBOR. China’s assistance to countries in South Asia is not surprising, as the region is strategically important to China.

China has, for many decades, maintained a presence in South Asia, mostly through its involvement regarding border disputes with India and its close relationship with Pakistan.[xv] Although China has extended its influence across the globe to South America, the Middle East, and Africa, these regions are at the outer limit of China’s ability to project power, and therefore are a lower priority than South Asia.[xvi] Previously, China’s focus on South Asia had been mostly limited to a relationship with Pakistan.[xvii] However, recently, China has initiated economic development schemes to help develop the infrastructure and economy of the rest of South Asia through trade, aid, and investments.[xviii] The sudden strategic importance of South Asia is due to its location, sitting in the crossroads between China and the link to Europe, the Middle East, and Africa. The importance of trade through both the land and sea corridors from China to other parts of the world is important for China’s continued development and growth.

The OBOR, however, does not merely consist of tangible trade routes. It is a tool to facilitate China’s growth through other nations; merely one component of an economic development plan used to invest in numerous nations that, will, in turn, continue to fuel China’s rapid global rise. This is done through predominantly Chinese financial institutions, such as the China Development Bank, and the Silk Road Fund, along with China-led multilateral development banks, such as the Export-Import Bank of China and the Asian Infrastructure Investment Bank (AIIB), which funds the OBOR.[xix] These institutions are similar to the Western financial institutions, such as the World Bank and International Monetary Fund, especially, in the spirit of the tenet that “economic development depends on the construction of capital-intensive infrastructure”.[xx] This is an important tenet, as, without the development of certain infrastructures, economic prosperity would be out of reach for a nation. This was most evident at the conclusion of World War II when financial institutions were established to help finance the repair of war-torn Europe. However, small undervalued and underdeveloped countries, like those in South Asia, find it difficult to obtain financial backing to develop certain infrastructure. It is in these parts of the world that “commercial banks will not fund development projects because of excessive time frames and low yields”.[xxi]

This has been a serious concern for the nations in South Asia who have been vocal about the World Bank’s changes to loan conditions that negatively impact their ability to receive loans for infrastructure projects and development, going so far as to form the South Asia Alliance of Poverty Eradication (SAAPE) coalition in protest.[xxii] There has also been a concentrated effort in the region to challenge market fundamentalists forces.[xxiii] There is a consensus that the eradication of poverty has been hampered by Westernized standards of poverty being applied to South Asia. with Sriyananda of the Open University of Sri Lanka, stating that South Asia was not poor, but rather it was the West which imposed it’s on the notion of normality on them to remind them that they are poor.[xxiv] Research has suggested that this was probable, as it was determined in the 1970s that, although Sri Lanka had a low per capita income, the people enjoyed a high-quality life in comparison to richer countries.[xxv] However, today, it is one of the poorest countries, with high external debt.[xxvi]

This debt was a result of decolonization and then the subsequent governments “surrendering before the architects of the global restructuring plan and inviting imperialism again as if it were different from the earlier spell of colonization”.[xxvii] This financial co-dependency has resulted in the accusation that South Asia is being exploited again by transnational corporations, content on monopolizing resources for their own benefit, without regard for the impact of the people, nor the eradication of poverty in the region.[xxviii] The inability to access further funds to alter this paradigm has left South Asia with very few options. It was the inadequacy and rigidness of the various western monetary institutions which have driven South Asia into the arms of China, which has now stepped in to fill the void the World Bank vacated. This has created an opportunity for China to expand its influence even further while simultaneously aiding South Asia through its economic expansion via the OBOR.

OBOR’s success is attributed to the China Development Bank’s policy of issuing funding based on national strategic interest rather than income gained.[xxix] Its ability to remain independent allows it to be more flexible and as of 2014, it had very few bad loans on its books and over US $1.6 trillion in assets, making it one of the largest financial institutions in the world.[xxx] This has been an asset to South Asia, as it has been beneficial to those countries who cannot receive financial assistance from international monetary agencies, such as the World Bank, and this successful financial coordination for infrastructure development has raised the strategic importance of South Asia several-fold. This is furthered by China’s “genuineness” to help countries create wealth and reduce poverty; a goal that it itself accomplished, and now wishes to share.[xxxi]

Those who will greatly benefit are the smaller nations in South Asia, which lack significant development in infrastructure. For example, Bangladesh has signed on to China’s OBOR initiative under the terms that China will invest in its energy sector and other industries through the Export-Import Bank of China.[xxxii] Sri Lanka is also being heavily invested in by China, which has funded the construction of a new port in Hambantota and a deep-water container terminal in Colombo.[xxxiii] This illustrates China’s growing influence in South Asia, with China agreeing to a “strategic cooperative partnership” with Sri Lanka back in 2013.[xxxiv] Aside from the smaller states, China also assists in the development of larger countries, such as Pakistan. China utilizes the OBOR to promote connectivity between South Asia, using Pakistan as a juncture via the China-Pakistan Economic Corridor (CPEC) producing the US $16 billion in trade.[xxxv] The CPEC consists of large infrastructural projects aimed at connecting the Chinese province of Xinjiang to Pakistan’s Gwadar port, giving China access to markets via the Arabian Sea.[xxxvi]

However, China’s economic expansion is not without drawbacks. There has been animosity concerning the OBOR brought forward by India, which views China’s encroachment into its own sphere of influence with skepticism. Although China has assured it that the OBOR is a project to promote harmonious co-existence, India still has not joined on, being the only South Asian nation to do so. India’s Prime Minister, Modi, has acknowledged that “connectivity itself cannot override or undermine the sovereignty of other nations.” It has also been suggested that China’s investments in underperforming infrastructure in small nations, such as the Mattala International Airport in Sri Lanka, will give China unprecedented economic leverage over desperate nations who lack other alternatives to receive funding.[xxxvii]

China’s development in Pakistan has also faced challenges, specifically from jihadists and religious extremists, who are prevalent throughout South Asia, causing economic impacts to ripple through the region. Although the causality between terrorism and impairment on economic activity is complex, it clearly does exist.[xxxviii] According to Meierrieks and Gries, “Terrorism may impair economic activity directly by destroying an economy’s human and physical capital stock through destruction and indirectly as markets and economic agents react to it.”[xxxix]

China has become a key target, having invested more than the US $62 billion in China-Pakistan infrastructure projects.[xl] Terrorist groups have labeled the Chinese as “oppressors of Muslims, similar to Israel, India, and the US.”[xli] They have targeted them to do their ill-treatment of the ethnic Chinese Muslims, the Uyghurs.[xlii] This consequential threat is used by China as leverage to coerce Pakistan to engage against terrorists. It has even been inferred by Pakistan Intelligence that intelligence agents from India are responsible for providing support to militant groups.[xliii] This shows the precarious power balance that must be treaded carefully by China if they wish to continue to expand the OBOR without instigating mass conflicts. Despite these obstacles, China continues to strengthen its cooperation with Pakistan and the rest of South Asia, pushing its economic agenda.

South Asia’s struggle to gain momentum in securing financing to help to reorganize its infrastructure and raise itself out of poverty has left the member nations with very few options. Dependency on outside forces for most of these nations is a must, due to a myriad of issues, including lacking internal mechanisms to accomplish this feat on their own. However, stonewalled by the Western-backed financial institutions, South Asia has only now started to develop economically stronger because of China’s own initiative, with the OBOR filling the financial void, despite any concerns that may be raised. Desperate to better their own economic output and exhausting all other means to do so, there seemed to be no other alternative for South Asia but to accept China’s assistance, and thus, it appears that China’s One Belt Road was truly the only road remaining for them.

[i] Murphy, David. “One Belt One Road: International Development Finance with Chinese Characteristics.” In Pollution, edited by Davies Gloria, Goldkorn Jeremy, and Tomba Luigi, 245. Australia: ANU Press, 2016.

[ii] Murphy, “One Belt One Road”, 245-246.

[iii] Ibid., 246.

[iv] Pant, Harsh V., and Ritika Passi. “India’s Response to China’s Belt and Road Initiative: A Policy in Motion.” Asia Policy, no. 24 (2017): 88.

[v] Dhungel, Dwarika. “South Asian Association for Regional Co-operation (SAARC): Prospects for Development.” The Pakistan Development Review 43, no. 4 (2004): 933.;

Velezinnee, Aishath. “Developing a Regional Human Rights Mechanism.” India International Centre Quarterly 41, no. 3/4 (2014): 204.

[vi] Haider, Zaglul. “Locating the Loopholes of South-South Cooperation in South Asia: Can SAARC Deter Hostilities and Promote Cooperation?” Journal of South Asian and Middle Eastern Studies 40, no. 3 (2017): 39.

[vii] Venkateswarlu, B., and E. Sudhakar. “The Post-Cold War International Order and South Asia.” The Indian Journal of Political Science 57, no. 1/4 (1996): 103-104.

[viii] Aafreedi, Navras Jaat. “Muslim Antisemitism and Anti-Zionism in South Asia: A Case Study of Lucknow.” In Anti-Zionism and Antisemitism: The Dynamics of Delegitimization, edited by Rosenfeld Alvin H., 454-455. Bloomington, Indiana: Indiana University Press, 2019.

[ix] Irfan, M. “Poverty in South Asia.” The Pakistan Development Review 39, no. 4 (2000): 1141.

[x] Irfan, “Poverty in South Asia”, 1141.

[xi] Shrivastava, Rashmi. “The Magnitude of Poverty in South Asia and Government’s Strategy-with Special Reference to India.” The Indian Journal of Political Science 64, no. 1/2 (2003): 6-7.

[xii] Shrivastava, “The Magnitude of Poverty”, 4.

[xiii] Strozier, Charles B. “The Global War on Terror, Sliced Four Ways.” World Policy Journal 24, no. 4 (2007): 90-91.

[xiv] Fraz, Ahmad, and Arshad Hassan. “Dragon’s Entry in South Asia and Its Impact on Financial Markets.” The Pakistan Development Review, 2016, 445.

[xv] Bindra, S. S. “Chinese Strategy in South Asia.” The Indian Journal of Political Science 70, no. 4 (2009): 1170.

[xvi] Garver, John W. “China and South Asia.” The Annals of the American Academy of Political and Social Science 519 (1992): 68.

[xvii] Fraz, “Dragon’s Entry”, 445.

[xviii] Ibid., 445-446.

[xix] Murphy, “One Belt One Road”, 246-247.

[xx] Ibid., 247.

[xxi] Ibid., 247.

[xxii] Chalam, K. S. “Politics, Power and Poverty in South Asia.” Economic and Political Weekly 38, no. 40 (2003): 4220.

[xxiii] Chalam, “Politics, Power”, 4220.

[xxiv] Ibid., 4220.

[xxv] Ibid., 4220.

[xxvi] Ibid., 4220.

[xxvii] Ibid., 4221.

[xxviii] Ibid., 4221.

[xxix] Murphy, “One Belt One Road”, 247.

[xxx] Ibid., 247.

[xxxi] Ibid., 249.

[xxxii] Gopalaswamy, Bharath, and Robert A. Manning. The Sino-Indian Clash and the New Geopolitics of the Indo-Pacific. Report. Atlantic Council, 2017. 8.

[xxxiii] Gopalaswamy, “The Sino-Indian Clash”, 8.

[xxxiv] Fraz, “Dragon’s Entry”, 446.

[xxxv] Ibid., 446.

[xxxvi] Gopalaswamy, “The Sino-Indian Clash”, 9.

[xxxvii] Ibid., 8-9.

[xxxviii] Meierrieks, Daniel, and Thomas Gries. “Causality between Terrorism and Economic Growth.” Journal of Peace Research 50, no. 1 (2013): 91.

[xxxix] Meierrieks, “Causality between Terrorism”, 92.

[xl] Basit, Abdul, Iftekharul Bashar, Mohammed Sinan Siyech, Sara Mahmood, and Amresh Gunasingham. “South Asia: Afghanistan, Bangladesh, India, Pakistan, Sri Lanka.” Counter Terrorist Trends and Analyses 11, no. 1 (2019): 56.

[xli] Basit, “South Asia”56.

[xlii] Ibid., 56.

[xliii] Ibid., 57.

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