BRI Projects: Case Studies from Nepal, Sri Lanka and Thailand

Abstract

<p>The Belt and Road Initiative has proved controversial amongst some members of the international development consultant community. Whilst the concerns are no doubt genuinely held, the questions that need to be answered are: What are the issues of concern? Are they unique to the BRI, or do they apply to all International Financial Institutions (IFIs)? How might they be ameliorated? Should the concept of caveat emptor apply, or should the lender have a higher level of responsibility? Developing countries desperately need funds to achieve the 17 Sustainable Development Goals. Currently, they are largely dependent on International Financial Institutions (IFIs) such as the World Bank Group, Asian Development Bank, European Bank for Reconstruction and Development, Asian Infrastructure Investment Bank. In addition, grants and loans can be provided by individual donor countries. Despite the number of IFIs, funds are limited, especially for major projects such as ports and airports. The Belt and Road Initiative has a role in providing additional funds. The borrower must never forget that the loans are at "commercial" rates and need to be repaid in most cases. Examples from Nepal, Sri Lanka, and Thailand are provided to discuss the issues surrounding BRI projects in these jurisdictions. In Nepal, the government provided a long list of projects to the Chinese government, which asked the Nepali government to reconsider. At the same time, the Nepali government is split over signing a contract for a grant from the Millennium Challenge Corporation. In the case of Sri Lanka, there has been some international comment about how Sri Lanka overcommitted itself in loans. Thailand agreed to be part of the BRI by participating in the high-speed rail project, eventually connecting Portugal with Singapore. Thailand decided to commit to using Chinese designs and technology, but unlike Lao PDR, they would operate the high-speed rail within Thailand. The paper will then identify issues of concern from the examples cited above. It will be shown that many of the issues are common to all IFIs, including the BRI. The lending conditions of the IFIs are generally more favourable than those of the BRI, with least developed countries obtaining loans at very low-interest rates. To obtain the most beneficial outcome for its country, the government must ensure that the terms of the loan must be able to be met, including the potential exchange rate fluctuations. The borrower should ensure that its social and environmental requirements will be met. The most benefits to the country will come with the maximum level of involvement of all levels of society in the project. Nonetheless, China has made some miss-steps along the way. China may not have been as prudent as it might in its lending policies, leading some countries to over-commit. At times China, like the United States with the Millenium Challenge Corporation, have tried to interfere in the politics of the potential recipient (e.g. Nepal). In Australia, China negotiated membership of the BRI with a state government, thereby bypassing the national government where the Constitutional power for negotiating treaties rested.</p>