Dr Ashwani Mahajan
China is now going to occupy Kenya’s immensely profitable ‘Mombasa’ port. This reminds of Chinese capturing Sri Lanka’s ‘Hambantota’ port in the year 2016. Significantly, China had lent huge amount for the development of Kenya’s railway network, which Kenya is not in position to repay. China is going to take this action (of capturing Mombasa port) soon. Not only this, the inland container depot in Nairobi is also under threat of takeover by China.
We must remember that the modus operandi is the same as was with Sri Lanka , when Sri Lanka had to hand over the port of ‘Hambantota’ to China on a 99-year lease due to non-payment of Chinese borrowings. Mombasa port of Kenya is also going to be occupied by China, almost on the lines of Hambantota. It is worth mentioning that China had lent 550 billion Kenyan shillings for construction of Kenya’s railway project SGR and since the project is not fetching enough revenue and it has lost 10 billion Kenyan shillings in the first year itself. China is going to acquire not only that project but also its Mombasa port to make up for the deficit in that project. The Auditor General of Kenya says that a one sided agreement was reached with the Exim Bank of China, and even the arbitration of this agreement can only take place in China. Significantly, all the SGR receipts still go to the escrow account as per the unequal agreement favouring China.
The most dangerous clause in this agreement is that the Kenyan government has guaranteed a minimum occupation in the railway project to China. Thus, this dangerous agreement with China is now leading to a situation of Kenya losing possession of its important public assets.
In fact if we see carefully, the whole Belt Road Scheme, which was rolled out by China, is actually proving to be a debt trap scheme or ‘debt trap diplomacy’.
Significantly, BRI was being called a major infrastructure initiative, according to which, by developing roads, railways and sea routes; movement between different countries of the world would improve, which in turn would promote international trade. This proposal is being linked to the concept of ‘historical silk road’, which China claims to be the route of Chinese trade with other parts of Asia and Europe. It is being claimed that the completion of this scheme will improve the connectivity of road, rail and waterways between different countries, which will not only make the movement of goods easier and cheaper, will save time as well.
China is trying to make the world embrace the argument that the BRI initiative will prove useful to developing countries in enhancing mutual trade, economic relations and connectivity. While explaining the benefits of BRI, efforts are being made in public discourse to hide its political, economic and geopolitical implications and threats.
The success of any scheme depends on its financing. This applies even more to infrastructure projects. When the Belt Road Project was launched, all funding came from Chinese government, the China-led Asian Infrastructure Investment Bank and other institutions from China.
In most of these cases funding was at exorbitant rate of interest or funding was made for non viable projects or both. Sri Lanka became a startling example in this regard. Looking at the situation in Sri Lanka, many countries have started shying away from China’s infrastructure proposals. Significantly, two years ago Sri Lanka had to lose one of its ports due to unbearable burden of debt of one billion dollars. Similarly, another port in Djibouti, which has been the main military base of the US in Africa, is now on the verge of being taken over by Chinese company due to heavy debt. Opposition to BRI is also increasing due to the increasing debt burden or in other words debt trap of countries. In the last two years, not only opposition parties in BRI partner countries, but also social organizations are strongly opposing BRI.
China-Pakistan Economic Corridor (CPEC) is said to be the first project of BRI. Pakistan’s experience should be considered as a guide for the future. Four years ago, the then Prime Minister of Pakistan Nawaz Sharif had said that CPEC would prove to be a ‘game changer’ for Pakistan and South Asia. But the way Pakistan has sunk into debt after four years, the government revenue is not increasing and the growth there has come down from 5.8 percent in 2017-18 to 3.4 percent in 2018-19 and 2.7 percent in 2019-20; with worsening of economic condition of Pakistan, nobody in Pakistan is saying that CPEC is a ‘game changer’.
Due to the high cost of infrastructure projects being built by China in Pakistan, the debt burden is increasing to unbearable levels and so is the repayment pressure on Pakistan, but the benefits from these infrastructure projects is very meager and uncertain. Therefore, Pakistan is not very optimistic about the CPEC project any more.
It has to be understood that the World Bank also has many apprehensions about the BRI scheme. This has been discussed in detail in several World Bank reports, but so far there is a lack of concerted efforts by international financial institutions to take over the BRI project. All kinds of contradictions of China and clear expansionist policy of China can become an obstacle in solving these problems. The time to come will tell whether China will come out of its own ‘monopolist’ policy and make elaborate efforts to push BRI through the global forums, or staying in the same narrow mindset, mitigating the expressed fears. If China doesn’t mend its ways, it will create obstacles in its own plan. But whatever be the case may be, the fact is today, at least ten countries are virtually caught into China’s debt trap diplomacy through BRI.
(The author is Associate Professor, Department of Economics, P.G.D.A.V. College (University of Delhi)
Dr Ashwani Mahajan