China’s Belt and Road Initiative can be a game changer if developing countries in Asia use it to supplement infrastructure financing, said an expert on the ambitious project, who also warned of its risks.
According to Ganeshan Wignaraja, Executive Director of the Colombo-based Lakshman Kadirgamar Institute of International Relations and Strategic Studies, these risks entail debt sustainability, strains on countries’ financial systems, environmental degradation and more.
“One implication from this is if countries are taking any kind of infrastructure project from outside, they have to do their homework,” he told the Nikkei Asian Review in a recent interview.
Countries must examine their own domestic financing and infrastructure planning, as well as develop local skills, as the BRI projects are often managed and performed by Chinese, Wignaraja said.
Regarding the scope of BRI, which encompasses huge infrastructure investments to connect Asia with Europe and Africa, he said estimates vary, from $350 billion to $1 trillion. “Some people [forecast] a very narrow BRI just ports and railways while others include energy projects. It really depends on what you include in the basket.”
Anyway one looks at it, BRI is not enough to plug the infrastructure financing gap in South Asia, which is between $1.7 trillion and $2.5 trillion, Wignaraja said.
“BRI can be useful to fill some infrastructure gaps as an additional vehicle [and] can be a game changer like any other infrastructure program,” Wignaraja said, adding that the problem for South Asia is that the countries really want capital but not necessarily the labour.
“Chinese projects come with Chinese labour,” he said. Other downsides include the potential issue of environmental degradation and financing.
“Neither the countries nor the Chinese seem to provide terms of projects,” he said. “We know the length of time but we don’t know financial terms in details. Then debt issue is also potentially there, and of course there are geostrategic issues.”
Among the BRI projects currently underway in South Asia are the Hambantota port in Sri Lanka and Gwadar port in Pakistan, both of which have prompted concerns in neighbouring India over China’s infringement on its sovereignty and security.
Along with his post in Colombo, Wignaraja is a senior research associate at the ODI and lead author of the London-based institute’s September 2018 report entitled, “Asia in 2025: Development prospects and challenges for middle-income countries.”