Policy Slippage Of One Belt, One Road

There is considerable rethinking underway on the operationalisation of One Belt, One Road (OBOR) initiative, a regional economic integration vision, mooted by China’s President Xi Jinping in 2013.

Economically, OBOR remains as an important priority for opportunities to facilitate economic growth and development. For international development, it provides a platform to realise the United Nation sustainable development goals (UN SDGs).

As some countries that are situated along OBOR, are under-developed, it is in their interest to encourage China’s investment in the development of overland and maritime infrastructures.

Many of the fundamentals are already in place:

1) Establishment of the Asian Investment Infrastructure Bank (AIIB) and Silk Road Fund, with US$100 billion (RM428.30 billion) and US$40 billion respectively, to finance the initiatives.

2) Population of 4.4 billion (70%) of the world population situated in a geographical area that generates about 55% of the global gross national product with approximately 75% of known energy reserves.

3) Memorandum of understanding signed between the government of China and United Nations Development Programme signifies OBOR’s commitment to achieve the UN SDGs.

Challenges

Nevertheless, there are challenges that OBOR initiative faces to bring about equitable sustainable development growth and shared prosperity. They are:

a) China’s New Normal. With China’s growth drop about 6% as a result of slower growth and greater emphasis on domestic market, it can also mean a sharp slowdown in trade. This decline can have a wide ranging impact on China’s investment in the countries situated along the Belt and Road initiatives. To which extent can China continue to invest in mega projects? Can AIIB be sustainable?

b) Countries with diverse development conditions. Potentially covering 65 countries, each country has its own set of difficult security, economy, political and social challenges. Not all countries have the institutional capacity to absorb assistance.

In countries like Myanmar, Cambodia and Laos, the European Parliament studies found that a series of Chinese projects have halted in the past. Economic immaturity of markets, limited market size, corruption, low administrative efficiency and security concerns may lead to low or zero return of projects.

Rules of Games

Assistance in infrastructure development comes with conditions attached, for gaining a loan from China. In his analysis, Felix Chang, a senior fellow at the Foreign Policy Research Institute said the operative of OBOR initiative financing is loans.

“China expects loans to be repaid. Plus, Chinese loans for infrastructure projects are often made with the understanding that the developing countries award construction contracts to Chinese companies.In short, China benefits from both the financing and construction of infrastructure projects, while developing countries must bear all of the financial risk if there is not enough trade to make the new infrastructure profitable.

Then, the benefits from the OBOR initiative only flows in one direction: China.”

High debt could hold back recipient countries from new investments and delayed investments in the provision of basic services such as education and health, and thus, affecting the people who are the most vulnerable.

Development Induced Displacement

A problem as a result of infrastructure development is displacement of communities. Jason Stanley, an expert on displacement issue, for example, discussed how communities are at risk of being physically ousted from legally acquired land, in order to make way for a infrastructure development planned project, ignoring those living in the vicinity of or downstream from the project, whose livelihoods and socio-cultural milieu might be adversely affected by the project.

Lack of Social Protection

While OBOR aims at increasing employment in the transportation, construction and trade sectors, it is also important to understand that these sectors are often linked with vulnerable working conditions and informal economy.

Presently, there is minimal to non-existent focus of adoption and implementation of internationally recognised labour standards.

Gender Blind

Policymakers responsible for negotiating trades strategies and policies appear to work with oversimplified gender blind perceptions.

There is overt focus on the positive impacts of job creation as a result of trade facilitation, facilities connectivity and deepening of financial integration.

It suffers from a lack of analysis on how specific economic impact of trade agreement could affect women’s rights. A study by UN Conference on Trade and Development shows how trade openings can affect women’s access to employment, livelihood and income.

Solutions

There are measures that policymakers, both from the public and private sectors can adapt from the European Union, to mitigate the negative impact of those challenges.

i) Develop and update key laws for general investments, with a specific focus on integrating the Convention on the Elimination of all Forms of Discrimination against Women into its trade policy as part of a wider framework of OBOR.

ii) Incorporate ILO (International Labour Standards) core labour standards and its Decent Work Agenda. This is aimed at protecting labour rights through fully enforcing national legislation on labour standards, and promoting decent working conditions.

iii) Develop a trade and investment sustainable impact analysis to identify human rights areas that will be affected by trade agreements, and how the negotiated agreements could change the human rights situation in a respective country.

iv) Business councils to contextually operationalise the UN Guiding Principles on Business and Human Rights — “Protect, Respect and Remedy” Framework in their business investment plans and trade agreements.

v) Develop a common tool and framework to identify vulnerable employments as a share of the additional jobs gained from OBOR; change in employment by sectors; projected occupations with highest and lowest demand under OBOR initiatives to understand how female and male workers are affected by trade agreements.

This article was published on The Malaysian Reserve.