Belt and Road

  • Article: "Our Bulldozers - Our Rules  

    The article looks at China’s plan to build a new “Silk Road” connecting Europe to Asia overland and to southeast Asia and east Africa by sea. The official policy is known as “OBOR” for “One Belt, One Road” (confusingly the Belt refers to the overland part and the Road refers to the ocean-going part). China is committing itself to $4 trillion in infrastructure projects in OBOR (over an indefinite time frame). But right now, officials say there are 900 deals underway worth $900 billion.

    OBOR matters because it is a challenge to the United States and its traditional way of thinking about world trade. In that view, there are two main trading blocs, the trans-Atlantic one and the trans-Pacific one, with Europe in the first, Asia in the second and America the focal point of each. Two proposed regional trade deals, the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership, embody this approach. But OBOR treats Asia and Europe as a single space, and China, not the United States, is its focal point.”

  • Source - Economist, July 1, 2017: "Steppe change"     

    Kazakhstan and its capital, Astana are at the crossroads of both geography and history. Geographically, it is sandwiched between Russia, China and the Middle East, astride once and future trade routes. The president, Nursultan Nazarbayev, is eager to turn this location to Kazakhstan’s advantage, by joining China’s “Belt and Road” program of new transport links between Asia, Europe and Africa. Over the past two years Chinese cash has created a massive freight-rail hub at Khorgos, spanning the border between the two countries. The other crossroads is historical. Kazakhstan has a choice: open up or stagnate. This is not easy, given how much the country has suffered from foreign domination in the past. The Soviets forced nomadic Kazakhs into collective farms at gunpoint, wiping out a quarter of the population. They used Kazakh territory both as a gulag and a nuclear testing ground, deliberately exposing children to radiation to measure its effects. Kazakhstan is relatively wealthy thanks to oil, which accounted for 58% of exports last year.

    Kazakhstan’s government is authoritarian. Dissident media are crushed, criticism of the president is taboo and President Nazarbayev was re-elected with 98% of the vote in 2015. He has no clear successor. Last year he appointed his daughter to the Senate, prompting speculation that he is grooming her for the top job. The rule of law is also much in doubt. Bribery has been endemic. Kazakhstan scores as badly as Russia on Transparency International’s corruption league table. Oligarchs will labour mightily to block reforms that harm their interests. Foreign investors may not believe assurances about the rule of law, since this “depends on the word of one man”, as a local analyst puts it. Another problem is that, for most Kazakhs, free enterprise is a novel concept. No one can remember a time when the state did not dominate the economy.

    Reforms are in the making. Some have already occurred - between 2016 and 2017 Kazakhstan jumped from 51st to 35th place on the World Bank’s ease of doing business rankings, with big improvements in how straightforward it is to get construction permits or electricity. A digital portal for basic interactions with the state has curbed low-level corruption. The government says it will switch from Cyrillic to the pro-business English alphabet by 2025. In the capital, they are now building the Astana International Financial Centre, a regional stockmarket and financial hub. Firms operating there will be subject to rules based on English common law, enforced by independent courts.

  • Source - Economist, July 21, 2018: "Ports in the Horn"     

    The northeast coast of Africa is underserved by existing port facilities. The UAE, China and private firms are all competing to build bigger ports, driven by the needs of 100+ million Ethiopians for access to international trade. 

    Horn of Africa Detail

    DP World - one of the world's largest shipping companies - is based in the United Arab Emirates (UAE). From their offices in the busy port of Jebel Ali (just outside of Dubai) they oversee their African ports, including Doraleh in the former French colony of Djibouti. Doraleh is Djibouti's biggest employer and handles 800,000 containers a year. Most of the business is Ethiopian - there are 105 million people in that relatively prosperous but landlocked country and 95% of all Ethiopian trade flows through Djibouti. China built the railroad (Belt and Road initiative) that connects Ethiopia to Doraleh. 

    The monopoly Djibouti enjoys over Ethiopian trade maybe ending. DP World is building a large port in Berbera in territory claimed by Somaliland, a breakaway province of Somalia not recognized by any other government. The Berbera port is projected to handle 1.25 million containers per year - and is being partly financed by Ethiopia. The new competition could cost the government of Djibouti millions in taxes and transit fees.

    China is heavily invested in Djibouti, lending the small country $1.4 billion over the last two years, more than 75% of Djibouti's GDP. China also owns 82% of Djibouti's external debt. China wants to build a large free trade zone in Djibouti and then use the port in Doraleh as a primary "staging post" on the Belt and Road. To do that, China needs to end DP World control over the port. And to that end, Djibouti seized the port from DP World in February of 2018, claiming DP Word had broken promises to expand. Now (perhaps) Djibouti can discharge some of its debt by turning over the port to China. A similar thing happened in Sri Lanka in 2017 when the Sri Lankan government handed over a port to China.