Tuesday, May 15, 2018

China's Debt-Trap Diplomacy

PM Mahathir Mohamad had already highlighted the need to review “unfavourable contracts” and especially, “ones that don’t benefit Malaysians” – a stark reference to election campaign criticism of mega investments from China, more so in relation to jumbo infrastructure projects. 

[Kindly check out highlights of these said ventures @ http://helpvictor.blogspot.my/2017/01/malaysias-china-deals.html]. 

Lim Guan Eng said the same thing too – just last Saturday. 

In managing the Asian behemoth and rising world power, we should rightly, keep an open mind about China but at the same time, we must also exercise caution. 

Brahma Chellaney, a Professor of Strategic Studies at the New Delhi-based Center for Policy Research and a Fellow at the Robert Bosch Academy in Berlin had written an intriguing article “Sri Lanka the latest victim of China’s debt-trap diplomacy” published December 24, 2017 in Asia Times that warned of China’s debt-trap diplomacy. 

In fact, he described it as being akin to the colonial-era gunboat diplomacy. 

“Just as European imperial powers employed gunboat diplomacy to open new markets and colonial outposts, China uses sovereign debt to bend other states to its will, without having to fire a single shot. Like the opium the British exported to China, the easy loans China offers are addictive. And, because China chooses its projects according to their long-term strategic value, they may yield short-term returns that are insufficient for countries to repay their debts. This gives China added leverage, which it can use, say, to force borrowers to swap debt for equity, thereby expanding China’s global footprint by trapping a growing number of countries in debt servitude”. 

[Note: Unlike International Monetary Fund and World Bank lending, Chinese loans are collateralized by strategically important natural assets with high long-term value – even if they lack short-term commercial viability. 

Hambantota, for example, straddles Indian Ocean trade routes linking Europe, Africa, and the Middle East to Asia. In exchange for financing and building the infrastructure that poorer countries need, China demands favorable access to their natural assets, from mineral resources to ports]. 

The writer cited the example of how Sri Lanka, unable to pay the onerous debt to China it has accumulated, handed over its strategically located Hambantota port to the Asian giant in December 2017. 

It was a major acquisition for China’s Belt and Road Initiative – which China President Xi Jinping (left) calls the “project of the century” – and proof of just how effective China’s debt-trap diplomacy can be, he had written. 

Similarly, after lending billions of dollars to heavily indebted Djibouti, China established its first overseas military base last year in that tiny but strategic country, just a few miles from a US naval base – the only permanent American military facility in Africa. 

Trapped in a debt crisis, Djibouti had no choice but to lease land to China for $20 million per year. 

China has also used its leverage over Turkmenistan to secure natural gas via a pipeline largely on Chinese terms. 

Other countries, from Argentina to Namibia to Laos, have been ensnared in a Chinese debt trap, forcing them to confront agonizing choices in order to stave off default. 

Kenya’s crushing debt to China now threatens to turn its busy port of Mombasa – the gateway to East Africa – into another Hambantota. 

The writer went on to claim that the BRI is essentially an ‘imperial project that aims to bring to fruition the mythical Middle Kingdom’. States caught in debt bondage to China risk losing both their most valuable natural assets and their very sovereignty. 

The imperial giant’s velvet glove cloaks an iron fist – one with the strength to squeeze the vitality out of vulnerable countries. That explains why China’s COSCO acquired a controlling stake in the port of Piraeus in 2016 for $436 million from cash-strapped Greece. 

This was the culmination of more than a decade of preparation and prior part ownership, and it represents an important piece in the complex jigsaw of China’s One Belt One Road internationalization strategy linking Europe with Eurasia. 

(For background, see ‘How a Greek port became a “dragon head”’ by Andreea Brinza, The Diplomat, April 25, 2016). 

Now don’t get me wrong – I don’t see these China moves as being menacing – other than to expand the country’s economic, political and military clout which any aspiring world power would want to do. 

I see the global chessboard that had long been dominated by just two players, the US of A and Russia, now being emphatically challenged by a confident China. 

We can expect to see the rise of a superpower triumvirate and China will share leadership with America and Russia. And this will surely include building their own spheres of influence. 

The above helps clarify why we should be rightfully concerned about China's investments in this country. Like it or not, this has impact on our sovereignty.

The PH government is duty-bound to ensure that the country’s interests are properly safeguarded. Therefore, a careful scrutiny of these China deals can do much to assuage Malaysians' disquiet about Zhongguo (中國/中国) and its involvement in big-ticket projects in our country. 

Aberdeen became the first Scottish team to inflict a home defeat on Brendan Rodgers' Celtic as the Dons secured second place in the Scottish Premiership – thanks to Andrew Considine's forty-seventh minute strike on Sunday. 

Celtic, of course, are the champs, having already secured 82 points from 38 matches.

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