Will COVID-19 Force a Rethink of China's Belt And Road Projects? | Insight | Full Episode

it's seen as one of china's most ambitious projects to date launched in 2013 the belt and road initiative also known as the new silk road is a colossal investment program that aims to link economies of countries in asia europe and africa into a china centered trading network until recently the project was well on track to become the most successful cross-border investment and economic integration program that was until the covet-19 pandemic unleashed a global health emergency and halted its unrelenting progress china probably need to scale back certain of the projects the impact of the coronal virus on china's project is still unfolding pakistan and china are taking all relevant measures which will help find completion covert 19 has laid bare the frailty and vulnerability of the china-backed program worth trillions of dollars and pakistan is by far the most financially exposed country due to its heavy reliance on china's economic capital what will become of china's belt and road initiative across asia and beyond [Music] it's china's flagship program a massive investment infrastructure financing program that involves more than 100 countries or around two-thirds of the world population once completed the belt and road initiative would usher in a new era of growth for economies in asia and the rest of the world but it wasn't until 2013 that a number of economic projects began to flourish roads railways and ports are among those projects that make up china's early investments in the country the economic corridor would start in pakistan's mountainous north it would then continue all the way to the town of gwadar in the south creating a route that would splice through the country it's a massive infrastructure network unlike anything it has ever seen before the project is in line with chinese president xi jinping's vision of creating a vast network of railways energy pipelines highways and border crossings linked to china and the rest of the world these transportation networks will expand westward through the mountainous regions of former soviet republics of central asia such as kazakhstan kyrgyzstan and tajikistan central asia is one of the key priorities for china's push for the bi because the central asia is a strategic located and also the resource-rich region because central asia country also border with china's xinjiang province one of the most troubled regions in china so the primary inches for china china so-called china's engagement with the central asian countries under the bi is strategy oriented yeah so central asia is very important from central asia the wide transportation network will expand southward into pakistan india and the rest of southeast asia the past one year china pakistan economic corridor has been progressing successfully and we are now moving into a new phase focusing on industrial agriculture and socio-economic cooperation that will undoubtedly usher in an era of growth and prosperity while promoting innovation and new technologies so that cpac becomes an enviable model for regional development so for many years pakistan has suffered from so-called poor and background the backwater infrastructure condition trying to understand right if you want to boost the economic growth right and also the speed of so-called industrialization you need to have so-called the infrastructure is ready when the infrastructure is good and then the pakistan can have a good foundation to unleash and the so-called economic potential and from asia china plans to invest important development along the indian ocean all the way to east africa and parts of europe to help accommodate the growing maritime trade traffic through its land and sea corridors china hopes to open up new markets while expanding its economic and political influence at a time when trade relations with its global competitor the united states are at an all-time low so belt road initiative is a chinese alternative and a counter move to conduct its business and transaction to create an alternative for it through the land routes on which the americans and the westerns cannot interfere with the conducting of the chinese business relationship mercantile relationship in pakistan this assumes a very important position in the belgrade perhaps pakistan is the single most important country because every other country in the periphery of china whether it's vietnam or whether it's thailand or whether it's sri lanka can be easily muscled by the american influence and pressure but pakistan is one state that the chinese hope and the west realizes is not easy to go down china is facing so-called push-back in the vets right and also you know the amid so-called the china and u.s power rivalry and also you know the shrinking uh the export demand from the west so the uh what i'm saying is that create a new market assess the new market is crucial for china's domestic industry and the manufacturing industry right so that in in that sense right that pakistan will be uh it serves as a potential important market for the china's industry right in the consumption market [Music] one of the key projects that has been realized under the belt and road initiative is the gwadar port project situated in the balochistan province of pakistan the port is the world's deepest seaport on the arabian sea the port is also regarded as strategically important to china sixty percent of china's energy needs come from the persian gulf you know built that route and we wanted to build the transit we wanted to be china's gateway to the world so that vision we were talking about and this is still one of the flagship projects that we will have that route functioning weather will become a rival port to some of the middle eastern ports like dubai and you know various places and that there will be a major port for pakistan as well and it will be port for china over the years the emphasis of china pakistan economic corridor or cpec has grown from investments in road rail and port into power generation and fiber optics for example eight out of the ten biggest power projects are found in pakistan that includes this one the saiwal coal power project in punjab and they fall within the cpec managing director of pakistan's energy board mr shah jahan mirza regards electricity as the basic engine of growth for the economy the country's economic expansion programs he feels will be severely impeded if there's not enough electricity being generated to power the economy but it can be achieved without the injection of capital from china one other reason for the chinese was that because they are they are willing to invest in a big way because these are huge capital intensive project one the last one which you might have seen that we have signed agreements that is eleven hundred twenty megawatt kohala hydropower projects and it is about two point billion dollar investment alone one of the largest investment in any ipp in pakistan so gradually we started with the smaller projects now we we have started going to the bigger scale and as i said then now we we are reaching the 1124 megawatt which will be the biggest hydro in the in the private sector so on the other hand cpex motorway projects they have created almost 50 000 jobs so this testifies that the cpac's contribution to strengthen our economic landscape has been real and substantial the next phase of cpac will focus on industrial innovation and agricultural and technological advancement three out of nine special economic zones uh are already completed and they are open for foreign direct investment it was estimated that the 62 billion cpec projects in pakistan would generate a revenue of 1.5 to 1.9 billion us dollars annually that amount is expected to rise to 3.5 billion by the year 2022 through cpec china could gain a route that allows for trade to move from the arabian sea through pakistan and into western china opening these trade routes to the middle east africa and europe will also provide economic growth to china's resource-staffed western interior and help stabilize the situation in pakistan we know that pakistan is a world-type region they suffer from so-called terrorist attack there right because they believe that if that the china's investment can help to improve the local infrastructure and help to boost economic growth help and help to improve the people's living standards there right it will help to reduce the tension help to stabilize the you know that situation there and the greatest stability right that will be surf china's interest right this is the karakoram highway it is also referred to as the china-pakistan friendship highway it extends 1300 kilometers from the chinese border to the outskirts of islamabad the road is china's key entry point into pakistan in 2010 a large earthquake rocked the region triggering a massive landslide it not only destroyed sections of the road but also damned the hunza river resulting in the formation of the atabat lake portions of the karakoram highway were submerged by the rising waters cutting off vital links to china the area is now popular in summer months with tourists flocking to enjoy the cool weather and the scenery asujan operates a small boat business on atabat lake the business has been running since 2011. he started it soon after the major landslide which damaged and destroyed the road completely the boats were the only way to transport goods and people through the region downstream in 2012 work began to construct a series of tunnels and bridges which would help reconnect this vital silk road route with china's help over a three-year period thousands of chinese workers cut through the mountains to create a sleek modern highway it's estimated that the project cost at least 275 million us dollars you can see patches of it in nagar and some other places it was a very not a very pathetic road but a single road as our roads are and it took us eight hours i remember correctly if i remember correctly from here to source but now you can do that in three hours so the road was really very not very good actually before this new friendship road was built we did not start these projects before chinese because we were lacking in finance and this is the big finances required to build big dams so the chinese stepped in as finances and we now we are on it annual trade between china and pakistan has increased from less than 2 billion in 2002 to more than 15 billion us dollars today but both countries are hungry for more ultimate goal is to cut across the country to gain access to pakistan's deep water harbor at gwadar the gwadar port itself in balochistan this has been very sick it's been touted to be very significant both for pakistan and china for china it allows china to have access to the arabian sea for pakistan it gives it a new new body a new stage upon infrastructure while the chinese investments have been rapidly increasing it begs the question who will ultimately pay for these mega projects the bigger question is can they afford to pay for it and what will happen if they can't will a country like pakistan face the danger of falling under the so-called china's debt trap [Music] china's new silk road has been touted as one of the most ambitious infrastructure projects ever conceived one that would dramatically change the landscape of global trade since its launch in 2013 chinese financial institutions have poured in hundreds of billions of dollars in loans into finance-starved countries but seven years on these china-funded projects have left many countries with a mountain of debt in 2010 during the leadership of former sri lankan president mahinda rajapaksa china established a partnership to build a series of mega projects in hambantota on the southern coast of the country among others the plan was to transform a small fishing town into a major shipping hub the port was open amid much fanfare in 2010 but two years later it was struggling to attract ships to birth while construction costs were rising in the end the projects left colombo with 5.5 billion us dollars of debt unable to repay the loans china then took over 70 percent share of the deep sea port for 99 years for 1.12 billion dollars from a beacon of hope the hambantota project turned out to be a huge financial burden for the sri lankan government some of the infrastructure projects that mr rajapaks undertook were done without proper planning and analysis no proper business case was developed before the hambantota port was built these were almost individual decisions of the rajapaksa to spend that money and it's coming to billions of dollars some of the money we borrowed at very high rates but bulk of it we have borrowed that what are called quasi commercial or just about concessionary uh rates around two two and a half percent uh as opposed to some other loans at six point three percent that's not correct because uh the transactions were viable they made financial sense but what happened was during the election campaign in 2015 the united national party said that they would do away with all these projects they viciously attacked china we questioned the deals that were done in regard to the harbor and the airport we felt that we were the losers in the deal in regard to hambantota and the airport we told the chinese the companies and the governments we are not in a position to honor this agreement which is flawed and finally we came to an agreement that we would have public private partnerships the chinese government made a request we give the first options to chinese companies in the case of the harbor china merchant was a good offer we accepted it another country that was in dire need of capital is pakistan the country has been facing a serious economic and financial crisis it borrowed huge sums of money from china saudi arabia the uae and the imf exports have stagnated its economy has been in shambles for decades the pakistani currency the rupee has faltered it has depreciated by 7.3 percent to the u.s dollar while foreign reserves stood at 13.2 billion us dollars just enough to cover three and a half months of imports [Music] for 60 years pakistan accumulated roughly 40 billion dollar of debt and in the last 10 years we have accumulated 55 billion dollar reserve of debt and the from 2013 to 2018 the previous regime we accumulated 35 billion dollar of debt so you can see that how recklessly the country borrowed and it in in drowned the country under debt every time whenever we face problem instead of taking that as a challenge and addressing that is issues with the homemade homegrown reform program and policies we just go to the imf we get resources and we relax and then once the imf program is over after two years or over years we come back to the same problem because we are not addressing the problem so imf going to the imf is a temporary solution just in july last year the imf approved a six billion dollar loan to pakistan to help resuscitate its alien economy in recent years when loans from the imf and the world bank had dried up pakistan turned to its old ally china for much needed investments to help prop up the economy pakistan certainly has worries about debt not just to uh not just to china but to um to a number of other countries as well but it's estimated and and you know and i'm i'm always i always quote figures with somewhat with some trepidation when it comes to cpac issues because we go on estimates we don't in many cases we don't have official numbers on this issue itself but estimates are that pakistan's external debt one-fifth of it is to china and last year on account of cpac as well so it is it is a very real issue given the amount of debt that pakistan has with china there's a real danger that pakistan may fall under the china's debt trap it now has 60 billion dollars in loans for the china pakistan economic corridor or cpec [Music] still there are many pakistanis who reject the view that the belt and road initiative is a dead trap the saiwal coal power plant has started operations in july 2017 it's able to generate 1320 megawatts of power this is one of 20 completed power projects under the cpeg banner managing director of pakistan's private power and infrastructure board shah jahan merza for one only has positive things to say about china's active participation in pakistan's overall development china they are basically the trusted and tried friend and brother so they have helped us all and as i said earlier the chinese chinese companies and chinese government have worked tremendously hard they have set actually the word world record in completion of these projects this iwall power project was completed in 28 months that this is the world record for a two into six sixty megawatt power play direct to the completed similarly port custom coal power projects was also also completed in the record time i think it's it's been a bit exhausted fear that it's going to be have a huge burden on on pakistan um if you look at the sea bags contribute only the six or seven percent of the the depth on pakistan rest as we owned by the imf and other international uh financial institutions even uh the bilateral arrangement we have many of the middle eastern nations so this is not going to have impact even this is a long term loans and for the economy what one thing we have to be to be understand when the cpac was came pakistan economy was under stress and pakistan political profile in international context was also uh facing a lot of challenges uh and cpac somehow has not only the the boost the the confidence of the investor local confidence uh confidence of local investors but also attracted the foreign investments here in the country and also pakistan also came again in the political arena in a way pakistan is betting that once its economy grows it would be able to repay the bri loans a sufficient and stable power supply is a key factor in this equation when we build the dam we generate electricity then we sell electricity to survey we cover the revenue and it is our expectation that as i said earlier that as these projects repay their loan and initial investment the tariff will be lower there have been lot of discussion about the debt issue um which in case of uh like you know china pakistan economic corridor is quite displaced the public debt relating to cpac projects in pakistan is less than 10 of our total debt and furthermore this debt is has been obtained from china and has a maturity period of 20 years and the interest rate is only two point three four percent so if grants are included the interest value slides down to only two percent so pakistan takes uh you know its financial obligations very very uh seriously pakistan's already fragile economy had only just been moving towards stability and the china-pakistan economic corridor is regarded as the harbinger of the much awaited economic prosperity for the country it however still has a long way to go to become a successful economy but to make matters worse a health crisis struck the culvert 19 pandemic has dealt a severe blow to the country's ability to generate sufficient revenue and service its debts will the pandemics economic fallout considerably derailed the country's recovery process and adversely disrupt its china-pakistan economic corridor projects [Music] the coronavirus outbreak has hit the global economy much harder than expected it has severely disrupted and slowed a global comet to a crawl the covert 19 pandemic has also pushed china's economy to the brink gdp for the first three months of the year fell 6.8 percent although is expected to post a positive growth of over one percent this year following its success in combating the pandemic it's a dramatic drop from the 6.1 percent growth it achieved the year before it has also been reported that some 460 000 chinese firms have shut down operations permanently in the first quarter of the year due to the mounting economic stress the world economy has taken a big hit and some of the unfortunate trends in the global economy uh the growing protectionism uh the geopolitical tensions between the u.s china these clearly have been uh deepened by the pandemic and that i think is going to create problems for the world economy as well as for china and that will also include projects under the belt and road initiative according to china's economic affairs department up to 20 of these projects have now been scaled back because of the pandemic it has also caused tremendous difficulties for bri participating nations to meet the debt obligations the bri was facing some headwinds even before the pandemic there were question marks about the rising debt levels that some countries were burdened by there were question marks about the viability of the projects and the way it was funded and the speed with which everything was being done so fast together that it was leading to problems like current account imbalances since some countries the impact of the coronavirus pandemic on pakistan has also been equally severe the country has over 285 000 infections and more than 6 000 fatalities gdp growth has also fallen it currently stands at 0.98 compared to 5.8 percent when prime minister imran khan first took power two years ago and that impact has also been keenly felt by 61 year old fruit seller shirula baik shirula hails from the hunza valley the mountainous valley is popular among tourists because of its serene landscape and natural beauty it also lies along the new silk road but it's all quiet around this time of the year since the pandemic began to wreak havoc around the globe and that has severely affected his business foreign the same story of economic hardship is also being shared by scores of other farmers in pakistan who rely on the sale of their crops to sustain their livelihood many like 28 year old farmer gulam hussein feels that the pandemic has only caused problems and misery for him and his family adding to the misery the inflation rate has soared it has increased to 9.3 percent in july this year from 4.45 the year before with pakistan's economy shrinking unemployment is also rising according to a recent survey by golob the jobless rate is expected to hit 6.65 million compared to 5.8 million in the last financial year and all these developments will pose a negative impact on pakistan's financial standing and its ability to meet its debt obligations as of march this year its external debt stood at around 112 billion u.s dollars it's another bump in the road of many long drawn starts and stop starts and stops now pakistan's economy is taking a beating which economy isn't at the moment but given the backdrop that pakistan finds itself in terms of its current account deficit this is this is particularly harsh for pakistan at the moment and on the other hand pakistan doesn't want to go down with to go down the route of taking more loans because the debt price is that it's looming as well in april this year the government asked for a debt relief of its 30 billion dollars of loans to china for its cpec projects the approval to its request will give pakistan breathing room to meet its loan commitments but will pakistan run the risk of falling into the so-called china debt trap if these loan commitments are not met we don't have a growth strategy the biggest problem is we don't have growth strategy as you well know if your income is growing then your debt will be manageable the rule for managing your data is that your income must grow faster than your debt then you can service your debt but here unfortunately our income is not growing that's because we don't have a growth strategy of our own because we've not figured out how to get growth you need to put this in context there have certainly been in some cases where the debt issue became really a big problem and you know a lot of people talk about sri lanka and hambantota and so on and again i think there's been a learning and apart from those issu those particular incidents i don't think there's been a huge um issue about a dead track um nevertheless i think it is important for china and the recipient countries to uh look at the sequencing of these projects so that you don't get a bunching together of these projects which then means that you take on uh debt and financing loads in a very short period of time that can be destabilizing but overall i don't think the debt trap issue is as uh as negative as it has been made out to be still some observers agreed that the covet 19 pandemic has hit china's economy hard but so too are its cash-strapped allies many beneficiaries of the belton road initiative in asia and africa are now feeling the impact of the pandemic on their economies and that has affected the ability of these debtor nations to repay loans from china [Music] obviously a lot of these countries have a genuine problem with debt repayment and they do need that relief and i think in some cases the debt taken on was actually not sustainable china has made some of these commitments we will temporarily suspend that payment for the 77 countries we don't know the detail but i think that's a good gesture but in the long term if all the countries are along the berendo especially for the poor and underdeveloped countries if they all ask for the debt relief it will cause huge debt burden uh for china so china has nearly to make so-called australian right balance china has extended massive loans worth billions of dollars to many participating nations under the belt and road initiative and that includes fragile states which have little chance of meeting their debt obligations and is now under great pressure to provide debt relief or even write them off during the current tough economic environment will the pandemic force a major rethink of the belt and road projects will they survive the challenges in the post-pandemic world [Music] life has gone from bad to worse for 41 year old cherry farmer hussein ali since the pandemic began he's not been able to attract crowds to buy his produce in the open market because of the major movement and travel restrictions the buying power of the locals have also been significantly reduced tourists who used to visit his fruit store are almost non-existent and that has made it much harder for him to earn a living transportation so foreign [Music] [Music] clearly the pandemic has dealt a severe blow to pakistan's economy exports are down many orders have also been cancelled the pandemic has affected businesses across a variety of industries that was also what happened to memo to ahmad mehmed runs a manufacturing business in lahore among others his company manufactures all types of hospital furniture equipment including beds and side tables business was humming along smoothly until the pandemic hit that has ruined everything he has built over many years however he's fortunate that he can still rely on demand from local hospitals to help make up for his losses foreign [Music] the reality is the lack of demand and the disruptions to economic activities have greatly affected the government's ability to generate revenue international trade has been severely affected in may this year exports fell by more than 50 percent to below one billion us dollars imports have also dropped significantly it will have a significant dent in the sense that pakistan's economic problem is primarily linked to the lack of exports in pakistan so it has a current account deficit so he needs to increase his revenue generation within but he also needs to increase the amount of exports from pakistan so in this sense we're going to hit pakistan in that way but then one could ask that if there's if there's an economic slowdown then is this export trade actually going to take off itself while some believe that the current economic slump would force a major rethink of china's belt and road initiative pakistan is backing the trend the pakistani government has recently approved among others a project to upgrade its railway lines worth some 6.8 billion dollars as part of the multi-billion dollar china-pakistan economic corridor project or cpec pakistani and china actually inked the 11 billion dollar deal to develop further projects and what is significant and i bring this up here because what is significant in this 11 billion deal for new projects two of the projects that are included are dams that are going to be built in what is known as pakistan occupied kashmir itself which um highlights not only the economic and infrastructural needs of pakistan but also geopolitical concerns that are interspersed in cpac itself other important thing about cpac is for the chinese it is the poster child of the bri project so they are willing to pump in more money to to demonstrate to other countries apart from pakistan that china stands with them at this point of time we don't have any such worry both pakistan and china are firmly committed to the timely completion of the project pakistan has completed 19 projects under cpec while 28 are under implementation and another 41 uh the primary motivation uh dreaming china's approach for the bi is not just about economic consideration also the 3d consideration so china plan for that you know game the seeking to gain the long-term strategy uh benefit right benefit that's long-term right so trying to never care about the short-term the economy or you know the commercial uh the benefit either now is a loss or you know make profit right so try not plan for the long term tushar jahan especially in spite of china's long-term economic and strategic goals he sees china as a friend who helps pakistan during its hour of need and helped the country achieves its economic vision projects was also completed in a record time so that's where i would say that the chinese chinese has helped pakistan looking at that the scenario of huge and long long load shedding so they have created this kind of examples and the other thing which i have seen in the chinese companies only probably there will be very few examples in the world that the chinese companies have started construction before achieving financial close for these projects in the eye of the china uh the pakistan is a great threat it's a most trusted uh airline right so i think that the to the pakistani side right many pakistani right the view china is also the most trusted airline and also they view right the cpap china pakistan economic corridor will be a game changer for pakistan there's no doubt that the pandemic has weakened china's economy and brought it disruptions to its manufacturing as well as supply chain activities it has also forced china to cut spending on many of his overseas projects in other words the pandemic has hurt china's dream but president xi jinping is not about to abandon his dream of building the new silk road that connects china and the world the belt and road initiative is the pet project of president xi jinping as part of china's strategy to achieve its economic and political aspirations abroad it's a massive but ambitious project that's considered a road map to achieving the china dream it also clearly signaled that china remains open for business capital account for instance but in a gradual manner and it seemed to show an understanding that china just couldn't be you know go back to being inward looking like the past so i think it's a balanced review of chinese strategy coming out of this it's a mega connectivity project that is going to change the destiny of more than three billion people in in south asia in central asia and in africa alone so all these countries where this this bri project is scheduled to pass through all these countries are committed and they have opened their doors and the projects are being built constructed and implemented despite the external both the external and internal challenges china is determined to push for the bi because they serve for china's long-term interest right because you know that power rivalry and also you know the changing geopolitical environment and as well as know that the impact of the kobe 19 the pandemic on the global economy i think that from the chinese perspective the vr will be also even more important to accommodate china the rights of china and also that engagement with the world [Applause] uh

Channel: CNA Insider

Views: 40,080

Rating: 4.6331096 out of 5

Keywords: Insight, China, Belt and Road, New Silk Road, Economy, Pandemic, infrastructure, Projects, highways, seaports, railways

Id: NuclowWRwRU

Length: 48min 23sec (2903 seconds)

Published: Wed Aug 19 2020