-By Akash Khemka
Now here’s an intertwisted Chinese puzzle. When is a belt not a belt and when is a road not a road? It isn’t a sixty-four-thousand-dollar question. It runs to hundreds of billions. And the answers are making knots into knots. We are in an era of globalization. International cooperation plays a role in almost every country’s development. Among the many existing cooperation platforms, a China proposed initiative has emerged to the forefront. More than 150 countries and world organization have joined it, and the United Nation has put it in its resolutions. It’s called Belt and Road initiative ( BRI ) actually known as One Belt and One Road.
Strangely the road is a sea route from China to Africa in the Mediterranean and the belt is a series of overland corridors connecting China with Europe via Central Asia and the Middle East encompassing around 60 countries which are two- thirds of the world’s population. If we just think back before the rail road age, commodities were actually transported by bullocks and they could only go for 30kms a day. Once the railroad was built, they could travel for 600kms a day. This had huge implications for development. For example, the MIT economist Dave Donaldson has looked at the development of railroads in India and he found that the network of rail-road of around 67,000kms built in the late 19th and early 20th century really affected connectivity, trade, and investments in those areas leading to 20% boost in welfare.
Let’s just stop for a while and think about why you want to have a coordinated effort to improve connectivity? For any country building, a road has some value but it also has value for the counties around it that the government of any individual country may not internalize. So there is a spillover that wouldn’t be taken into account if each country just decides on its own how they do infrastructure. There is also a timing issue that for any country it really matters that what other countries are doing and so for this coordination really matters, how you coordinate all these infrastructures so that it comes at the same time and connects with rail. So for these reasons, it’s really important to have a coordinated plan rather than just individual plans.
So there are a lot of opportunities like improved infrastructure, more trade, more investment, higher growth, bringing in lagging regions, etc. But there are challenges as well. What if you build a wrong infrastructure and it gets stranded. You have to coordinate all these infrastructure investments as well. There is an environmental and social risk. There are issues to deal with public procurement and also sustaining public debt can become an issue because these projects are too expensive. So we have some opportunities and some challenges but keep in mind that these are the opportunities and challenges that would come with any large infrastructure project. They might be more intense to some extent in this case because of the governance in some of the countries but these are the concerns that would come in any such project.
China is already a major trade partner to many nations in Asia and even Europe but with belt and road, Beijing is enhancing those business ties by extending favorable financial terms through its financial institution. Chinese policymakers hope that these international and commercial ties will grant China greater access to the Asian and European landmass in the coming decades. And Beijing soft power is already showing signs of success in some areas for instance due to their growing economic ties to China. Member states of the Association of South East Asian nations find it increasingly difficult to maintain a unified policy in the South China Sea. The political behavior of the Philippines is a good example of the success of China’s soft power policy, moreover, the increasing presence of Chinese firms in the region adds to the Beijing territorial claims.
So now here is a question. Why can’t India use the BRI so that New Delhi can reach out to the markets that India has never explored? After all, globalization is a new reality but China is unlikely to help its economic rival India to explore healthy markets. From investment to consumption based economy to the energy needs, India and China are in direct competition. So what should India do? India should play the waiting game. India should see how the BRI enfolds. Jumping into it at this point is not a wise decision. Remember this is a country that has hurt India’s domestic industries by distorting the market from steel to rubber to smartphones. The Chinese have come and made an entry to every segment beside there are whispers of China’s attempt to influence government in all the countries where they are operating. Sri Lanka, New Zealand, Canada, Australia, Italy are all the countries China have made the intervention. So let’s see how this infrastructure plan goes in future in an attempt to increase development in every part of the world.