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Far from a ‘debt trap’, China’s belt and road allows countries like Myanmar to leapfrog poverty

Andre Wheeler says Western critics overlook the holistic and long-term benefits that China’s multilateral infrastructure investment programme brings to countries like Myanmar. What’s more, they aren’t offering any alternatives

A plethora of articles have discussed the risks associated with China’s Belt and Road Initiative. The discussion is often portrayed within a “winners versus losers” framework, focusing on the divisive nature of the project.

On Myanmar, for example, commentary has become increasingly vitriolic about security and sovereignty threats. This is evident in the concerns raised by the recently announced China-Myanmar economic corridor.

Criticism includes claims that China is deliberately destabilising the northern parts of the country marred by civil unrest. More cynically, some say Beijing is manipulating the Rohingya crisis to secure the Kyauk Phyu special economic zone precinct. Similar comments have been made about North Korea, with claims that China is trying to derail any progress in talks there; but these claims unravel when evidence is sought.

Such claims also undermine any meaningful debate around the risks associated with allowing China to build and participate in essential infrastructure development within Myanmar and other belt and road participants. And it could be argued that the initiative should be viewed as a win-win.

Infrastructure projects bring sustainable growth. The belt and road incorporates important objectives to ensure the infrastructure projects are sustainable. It has integrated development plans, just as nations do, but on a larger scale. This was clearly articulated in the 2017 Belt and Road summit.

Much of the scepticism is driven by views of sustainable development in general. Fundamentally, the West adopts a more mercantilist approach, and measures success in terms of a commercial return within three to five years. China has an extended time frame, measured by a four-tier return on investment.

Financial returns are balanced with community, environmental and heritage values as measures of success. Ironically, these same measures are used by development banks to evaluate responsible investment, yet they question China’s 10- to 20-year time frame, which is arguably a better determinant for sustainable development.

In the early stages of delivering the “Chinese dream”, the nation’s pattern of growth was characterised by investing in local capability and capacity. However, the speed at which the middle class and a consumer-based economy grew has led to excess capacity within the economy.

Commentators point to this development to argue that the belt and road is merely a means to redeploy this excess capacity through the construction of infrastructure.

If, however, we take the view that China is sharing its expertise and knowledge, surely it benefits the recipient country. Myanmar, for example, is emerging from decades of isolation and its development path will require less investment time and cost with China’s help. This leapfrog approach should ensure faster development. The West continually strives to “eliminate poverty”, yet appears at ease when putting hurdles in front of countries like Myanmar.

There is heated debate around the claims that the belt and road is a debt trap. Due to Myanmar’s current geopolitical position, it arguably has a low sovereign credit rating, casting doubt on its capacity to service the debt and playing into the narrative that China is manipulating economic conditions to gain control over crucial assets.

In particular, this is directed at the Myitsone dam hydro power and Kyuak Phyu deep water port projects. As proof, commentators point to Pakistan and Sri Lanka’s high debt as the basis for relinquishing control. Lately, Moody’s has pointed to African countries with high debt to GDP levels. This “debt trap” narrative has been the rationale for Malaysia to suspend and review US$20 billion in belt and road projects.

The debt debate reveals a lack of understanding of the long-term investment approach and an inability to address the development/finance balance; that is, no finance means no development.

China’s foreign minister, Wang Yi, is correct when he points out that those pushing the debt trap argument are unable to offer tangible help to developing countries. Consider this in light of the ongoing calls by the United States and United Nations for sanctions against Myanmar.

The debt-for-assets swap should be seen as an effective means for a country to lift its citizens out of poverty by creating employment and boosting the economy. An example is Myanmar’s need for base load electrical power. The debate around energy and power has to some extent distorted the energy market in the country, with funding limited to “green energy” sources.

Myanmar can join the global transition from fossil fuels to renewable energy sources, but could benefit more from China, which has been a leader in green and alternative energy technologies.

By adopting a wider definition of “green financing”, the belt and road recognises the importance of electricity in achieving sustainable development by acknowledging power generation as a central component.

Unlike Western institutions, China includes clean coal technology and funding for high-efficiency transport fuel production. This approach enables a country like Myanmar, with a large rural population, to create a sustainable development platform.

Applying first-world and Western-centric standards to financing would have probably meant that the Myitsone dam would not have received funding or potentially low-cost, high-efficiency coal-powered generation. Moreover, increased electrification will reduce the high rates of lung disease associated with wood-based energy sources used in Myanmar.

It makes sense for Myanmar and other developing countries to see the belt and road project as a sustainable development opportunity. Each country needs to play to its strengths and harness help to address shortcomings. In Myanmar’s case, these need to be articulated and reinforced in the upcoming memorandum of understanding discussions on the joint economic corridor.

Source: South China Morning Post

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