The Government of Guyana has signed a Memorandum of Understanding (MoU) with the Government of China within the framework of the latter’s “Belt and Road Initiative” (BBI) which was conceptualised by President Xi Jinping back in 2013, echoing the ancient “Silk Road” trade routes between Europe and China. It is probably an irony of history that Guyana, as a part of the “New World” discovered by Europeans seeking an alternative to the Silk Road, is the first country in the Americas to sign on to the project.
But what exactly is the BBI? It was first launched as the “One Belt and One Road Initiative (OBOR)”, but in 2016 was abbreviated to remove the seeming confirmation by the word “one” of a Chinese drive to dominate world trade. Up to the beginning of this year, the thrust of Chinese plans to finance and build infrastructure was in several concentric circles, with corridors spreading outwards from its centre and culminating in Eastern Europe and East Africa, and the East Indies and Australia in the east and south.
One major corridor is the China/Mongolia/ Russia Corridor to the north; then there is the China/India/Bangladesh Corridor, south; the new Eurasian Landbridge westwards; and the China/Central Asia/West Asia Corridor southwest. The latter has extensions via sea routes to East Africa, where, for instance, a new railroad has just been completed linking Mombassa with Nairobi in Kenya. In each of the other corridors, there have been massive infrastructural projects initiated using Chinese Government financing with construction by Chinese-owned companies.
Whatever might be the new name, the BBI echoes the old colonial focus of building infrastructure in colonies, not necessarily to develop them, but to transport primary products from their interior to the coasts, to be shipped to the metropoles. But there is a modern twist. In the present, the developing economies themselves are crying out for infrastructure, and while China may also desire primary products, it also wants to be able to ship its manufactured products directly into these countries, bypassing the western marketing outlets.
In January of this year, a China-CELAC Ministerial meeting in Santiago, Chile endorsed the Silk Road BBI development model. Both sides said they are willing to promote cooperation under what had been dubbed the “1+3+6” framework. As explained, “In July 2014, Xi Jinping laid out the “1+3+6” cooperation framework in his keynote speech at a China-Latin American and the Caribbean (LAC) summit held in Brasilia, Brazil.
“The “1” refers to the China-LAC Countries Cooperation Plan 2015-2019 to guide specific cooperation projects. The “3” identifies three driving forces for cooperation’ namely trade, investment and finance. The “6” prioritises six fields of cooperation: energy and resources; infrastructure construction; agriculture; manufacturing; scientific and technological innovation; and information technology.”
What has been the experience of those countries with the BBI efforts, so that Guyanese might make informed choices? We quote extensively from one European source: “The reality of Beijing’s investment in Central and Eastern European countries falls short of the rhetoric at the summits. Numbers on Chinese investment connected to the Belt and Road Initiative tend to be inflated and misleading. Only a fraction of the reported sums is connected to actual infrastructure projects on the ground. And most of the projects that are underway are financed by Chinese loans, exposing debt-ridden governments to additional risks.”
As with Belt and Road projects elsewhere in the world, loans made by Beijing to CEE countries create potential for financial instability. Smaller countries, which might lack the institutional capacity to assess agreements (such as risks associated with currency fluctuation), are particularly vulnerable.
The Bar-Boljare motorway in Montenegro illustrates this point. It is being built by the China Road and Bridge Corporation (CRBC) with an 809 million EUR loan from Exim Bank. The IMF claims that without construction of the highway, Montenegro’s debt would have declined to 59% of GDP, rather than risen to 78% of GDP in 2019. It warns that continued construction of the highway “would again endanger debt sustainability.”
Forewarned is forearmed.
