In a move to promote economic development and inter-regional connectivity across the world, China launched the ambitious ‘Belt and Road Initiative’ in 2013. The expansion of the initiative includes a number of large-scale development projects in many developing countries especially in Asia. To go ahead with many of these projects, the countries involved sought loans from China which most of them are unable to pay today due to high interest rates and economic crises. On top of that, the mega projects constructed on funds received by China have failed to give the host nation any benefits. No better illustration of China’s plans in this regard are needed than to only look at Colombo’s skyline where Chinese loans have aided the construction of the Lotus Tower, a 1,100 feet lotus like structure that is the tallest building in South Asia. This tower today stands in silence testifying to the grand projects that China initiated leaving Sri Lanka in ruins.
The Lotus Tower in Colombo was financed with almost US$100 million in loans from China, but it is empty today though it was declared open several years ago. The Mattala Rajapaksa International Airport built at a cost of US$190 million meant to serve the country as a second airport hasn’t had a scheduled flight since 2018. In Hambantota, where this airport was built, a harbour was also constructed from loans obtained from China. Five loans were obtained from 2007 to 2014 to construct the Hambantota Port. Although the port was leased to China Merchants Port Holdings Company Limited (CM Port) for 99 years for USD 1.12 billion for 99 years, there was no cancellation of debt obtained from China. Today, Sri Lanka is going through its worst economic crisis due to lack of revenue and foreign reserves and unable to settle all these loans.
Meanwhile, Sri Lanka has sought a bailout from the International Monetary Fund (IMF). However, the IMF said Sri Lanka should kick off debt restructuring talks with its bilateral lender China. "China is a big creditor, and Sri Lanka has to engage proactively with it on a debt restructuring," Krishna Srinivasan, director of the IMF's Asia and Pacific Department, has told Reuters in an interview.
Sri Lanka is not the only country to face such a situation. Across the Indian sub-continent, several such instances can be adduced to practically illustrate Chinese perfidy.
Pakistan’s Gwadar Port touted to be the end point of the China-Pakistan Economic Corridor (CPEC) from Xinjiang to the Arabian Sea, but "one-dozen projects costing nearly US$ 2 billion remain unfinished including water supply and electricity provision”. The money for these projects is there, but the willingness to undertake them is just not there, given the poor shape of Pakistan’s economy. The challenge is really for nations to be able to absorb the infrastructure being built by China and ensure that the associated structures are completed in a reasonable time frame. Pakistan, China’s closest ally, is also experiencing the effects of the economic crisis. Pakistan has negotiated with the IMF to give it loans to avoid going into financial default. The CPEC, an infrastructure initiative that was once hailed as a game-changer for Islamabad, is now seen as a Chinese effort to establish a foothold along the Arabian Sea coast and nearby Gulf States that produce oil, while the reality is that it has made Pakistan a ‘client’ state of China.
On the eastern flank, we have Myanmar. Following democratisation in 2010, Myanmar suspended two China-funded projects, the Myitsone hydropower project in 2011 and the Letpadaung copper mine in 2013. Among its many investments in Myanmar, the 800-kilometer-long oil and natural gas twin pipelines that run from Myanmar to China are of strategic importance. The crude oil pipeline transports 22 million tons annually, while the natural gas pipeline carries 12 billion cubic meters of gas. While the project is functional, its security remains a matter of concern to China as became evident in February 2021 when Chinese officials held an emergency meeting with Myanmar officials and urged the military-led government to tighten security in the wake of Chinese industries being attacked and burnt in the capital Naypyitaw. Meanwhile, Chinese energy companies contracted to build power plants in Myanmar have had their projects put on hold, and some are considering exiting the country. Projects taken up by Chinese state-backed liquefied natural gas and solar energy companies would have been difficult to implement even before the 1 February 2021 military takeover.
That is not all, in 2014, the rail project planned to link China’s Yunnan province to the Indian Ocean from Kyaukphyu to Kunming was allowed to expire, when the deal signed between China Railway Engineering Corporation (CREC) and Myanmar Railway Ministry failed to commence construction within the three- year stipulated time-frame agreed. Reports indicate that Myanmar’s concerns over social opposition, financial feasibility, distribution of gains and national security were key reasons for halting the railway project. Recent research conducted by the College of William & Mary’s Aid Data found that 35 per cent of the BRI infrastructure projects were confronted with major implementation problems, corruption, labour violations, environmental degradation and protests. Not only are countries plagued with BRI debt, but in many instances, the projects remain unfinished. This shows the larger picture but provides the underpinnings of what is happening in South Asia.
West of Myanmar in Bangladesh, China withdrew from financing three infrastructure projects after allegations of embezzlement of funds, increasing project costs emerged in June 2021. These projects in the railway sector included building a mixed gauge double line from Joydebpur in Gazipur to Ishwardi in Pabna near the capital Dhaka. The Chinese had also stated that it will not work on the project of converting the meter gauge line from Akhaura to Sylhet. Nepal, sandwiched between China and India, had initially shown an inclination to join the BRI. In February 2018, Prime Minister K.P. Sharma Oli visited China and read out 35 different projects Nepal wanted to build under the BRI during his meeting with Chinese Premier Li Keqiang. Over time however, Nepal decided that if it was going to be a part of the BRI, China would have to give grants or soft loans to enable Nepal to undertake such projects. Unable to pay for all the Chinese projects Nepal trimmed the number of projects from 35 to 9.
Chinese-funded projects are white elephants, whose costs particularly maintenance are disproportionately higher than their economic returns have thus been burdening South Asia. Two years ago, the Maldives experienced a severe economic crisis brought on by Chinese lending. Nepal, which borrowed money from China as well for infrastructure projects is currently experiencing balance of payments issues. There is, therefore, much to learn by looking at the vast amount of infrastructure built by China and that much of this lies unused.
Eight years into the program, the BRI is littered with half-built bridges, unfinished projects, over-budget railways, roads to nowhere, significant debt, and angry people.