"One Belt One Road" Initiative

LAMS, ATIQ AHMED

One Belt One Road

“One Belt One Road” is China’s roadmap for building infrastructure and trade ties. It consists of a land route from Beijing to The Netherlands, and a sea route from Quanzhou to both Antwerp and Australia.

This initiative is being led by large, G2G infrastructure projects with initial financing support from the Asian Infrastructure Investment Bank. Private companies are also being actively encouraged to invest along the Belt and Road.

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Strategic agreements

There are compelling geopolitical reasons, such as energy security, for China to push forward with its One Belt, One Road plans at a time when its trading partners are potentially excluding it from strategic agreements.   

The Transatlantic Trade and Investment Partnership and the EU-Japan agreement show comprehensive liberalization agendas, but do not include China and have the potential to increase trading costs.  

In response, China plans to negotiate free-trade agreements with 65 countries along the OBOR. Until now China has signed 12 free-trade agreements including Singapore, Pakistan, Chile, Peru, Costa Rica, Iceland, Switzerland, Hong Kong and Taiwan and a further eight are under negotiation with Japan, Korea, Australia, Sri Lanka, Norway, the Regional Comprehensive Economic Partnership, Asian and the Gulf Cooperation Council.

China General Nuclear Power purchases 13 clean energy projects in 5 OBOR countries

China General Nuclear Power Corporation (CGN) announced today that it has acquired 13 clean energy projects from Malaysia's Edra Global Energy Bhd which is a leading electricity generator in South East Asia. The targets of this acquisition are clean electricity projects located in five countries along the route of the One Belt, One Road Initiative; namely Malaysia, Egypt, Bangladesh, the UAE, and Pakistan.

Ambassadors to China are of the view that the “One Belt, One Road” initiative will benefit their country

During the NPC and CPPCC sessions held in March 2016, the Chinese government unveiled its Thirteenth Five-year Plan for National Economic and Social Development and called for greater cooperation with the “One Belt, One Road” countries. Ambassadors from many a countries proclaimed that the “One Belt, One Road” Initiative is very important and will bring benefits to their respective countries. Ever since Chinese President Xi Jinping proposed the Initiative in 2013, more than 70 countries and international organizations have expressed their intention to cooperate with China under the Initiative, whilst more than 30 countries have signed cooperation agreement to promote the Initiative.

Chinese media outlets in HK, Macau & SE Asia focus on OBOR Initiative

The "Silk Road Economic Belt" (SREB) and oceangoing "Maritime Silk Road" (MSR) strategies have placed Yunnan at the forefront of cooperation with Southeast Asia. The two sides could start with cultural exchanges and expand their cooperation to all sectors.

The much-hyped initiative involves massive use of concrete, steel, chemicals, and base metals. Hundreds of thousands of workers and huge use of transport will be also needed to build new power stations, mines, energy projects, roads, railways, airports and container ports. 

World’s Largest Solar Power Plant to be Integrated into Centralized Power Grid

On 6 September 2015, the first 50mw photovoltaic power plant in Pakistan’s Punjab state was fully integrated with the country’s national power grid. With total investment surpassing USD 1.5bn, this project is one of the priority infrastructure projects under the Sino-Pakistan Economic Corridor, which aims to install 900mw worth of solar power systems. The power systems will be installed in three stages and are expected to be fully operational by 2017. Once integrated into Pakistan’s power grid, it is anticipated they will generate 1271 million kWh of electricity per year.

Silk Road Fund: Four Areas of Focus

China’s Silk Road Fund has invested in two infrastructure projects to date, the first being a Pakistani hydropower plant project, the fund’s next move will be to focus its efforts on overseas investments and direct equity investments in the infrastructure, energy, equipment manufacturing and financial sectors. The Silk Road Fund will seek to promote the global visibility Chinese enterprises and will take into account the growth strategies of the countries along the Belt and Road routes.

Chinese Airlines Open New Routes to Support the “One Belt, One Road” Initiative

In an effort to support the “One Belt, One Road” Initiative, Chinese airline companies have begun opening new routes to cover the cities and regions along the route of the Initiative, which has accelerated economic growth in these regions. Statistics show that for Jan-May 2015, Chinese airlines carried 2.4 million passengers to and from the regions covered by the Initiative, representing year-on-year growth of 30%. 

CPEC one of greatest projects in region

CPEC can yield benefits far above $46 billion from 2025, if Pakistan succeeds in implementing the initial plan. In China, many industries will be in surplus and investors would be looking opportunities for investments in other countries. Pakistan can tap this opportunity given deep friendship between the two countries. “Every region in Pakistan will eventually benefit. As cooperation increases between two sides, there will be more projects. Despite state-to-state sovereign guarantees, still many in China have concerns over security issues in Pakistan. Some Chinese officials explicitly expressed them during an informal chat.

At its core, the CPEC is a large-scale initiative to build energy, highway, and port infrastructure to deepen economic connections between China and Pakistan. This initiative has been well-received in both countries, although it is not without its problems.1 Nevertheless, China and Pakistan regard the CPEC as a new source of potential synergy between their respective national development strategies, which may help the two countries translate their close political cooperation into multifaceted economic cooperation, attain mutual benefits, and achieve win-win outcomes.

More broadly, the CPEC has to be understood in the context of China’s strategic interests in East Asia and the way the United States has challenged them. Faced with such difficulties, China hopes it can expand its strategic space by heading west. Pakistan serves as a crucial bridge between China and Central Asia, South Asia, and the Middle East. Security and stability in Pakistan will make it possible for China to exercise greater influence in these regions and to ensure security at home. This is why China is willing to pour vast amounts of resources into the economic corridor—based on the logic of improving security through economic development. 

Likewise, Pakistan has realized that no other country places such high strategic importance in its economic relationship with Pakistan as China does. Pakistan also greatly values the economic corridor and views it as mutually beneficial in terms of politics and economic development. According to Pakistan 2025—a blueprint for economic development published in 2014 by Pakistan’s Ministry of Planning, Development, and Reform—Pakistan aims to advance from being a lower-middle-income nation to an upper-middle-income nation by 2025.6 To achieve this goal, Pakistan hopes to attract increasing amounts of foreign investment. The country is working to improve its overall economy by constructing energy projects and other forms of infrastructure, to create employment opportunities for its populace, and to improve its governance.

The logic behind this strategy is that fundamentally improving Pakistan’s economy will help alleviate the challenges posed by political extremists, radicals, and jihadists. China and Pakistan share the belief that economic development can help stabilize Pakistan and improve its domestic security situation. However, China also recognizes that the security, political, and cultural risks and uncertainties facing the economic corridor cannot be overlooked. Yet the CPEC will not only serve as a roadway that simply connects point A to point B—the initiative is designed to do more. The corridor also aims to facilitate multisectoral economic cooperation in finance, trade, energy, and industry.

These measures are already starting to take effect. The country’s GDP is growing at a stronger rate, and the economy is improving.13 For the time being, however, it will still remain unclear whether these economic advances can actually alleviate Pakistan’s serious security and stability problems.

Investment in Sino-Pakistan Economic Corridor 

Speaking in Davos at this year’s World Economic Forum, National Development & Reform Commission (NDRC) Director Xu Shaoshi stated that total investment into the Chinese-led Sino-Pakistan Economic Corridor has reached USD 30bn. China has also promoted trade cooperation in steel, metallurgy, building materials, ship building, railway and electricity in a number of other regions. Senior Chinese officials have conducted a survey and selected 15 countries as potential partners for cooperation in Asia, Africa, Latin America and Europe. 

GWADAR DEEP SEA PORT - The first phase was completed by public sector with the Chinese assistance at a revised cost of $298 million. It included three multipurpose berths (602m quay length), one service berth (100m length), 4.35km navigable channel (11.6/12.5m deep), roads, plinths and transit shed, operational craft and equipment including navigational aids and shore-based port buildings and allied facilities. The phase-2 would be executed by private sector to accommodate 50,000 DWT container ships, 100,000 DWT dry bulk carriers and up to 200,000 DWT oil tankers, three container terminals (2010m quay length), one bulk cargo terminal (305m length), one grain handling terminal (305m length), one twin pier oil terminal (688m length), breakwater (600m length), approach channel (16./20m deep), back up areas, craft and equipment and building etc.

TRANSPORTATION OF CRUDE OIL - Pakistan is studying the prospects of transporting crude oil to China from Gwadar Port, across Baluchistan and NWFP, and through the mountainous regions of the Northern Areas, over the Khunjerab Pass to northwestern China. Pakistan has suggested building a railway as one option. Another option suggested by Pakistan is to use an upgraded Karakoram Highway to transport the oil in tanker Lorries.

AIRPORT - The Civil Aviation Authority of Pakistan has earmarked 3000 acres (12 km2) of land for Gwadar International Airport, which 

will be built 26 km away to the northeast of the existing airport towards Pasni and is likely to cost between $200-250 million. In the meantime there are plans to improve facilities at the existing airport.

TRANSPORT - This includes the 700 km Makran Coastal Highway, which is now complete. The road links Karachi with several ports along the coast including Ormara, Pasni, Gwadar and will be extended to the Iranian border in the future.

SAINDAK COPPER GOLD - The Saindak Copper Gold project will have capacity to produce over 12500 tons 'raw copper' daily. MRDL, a Chinese company, is doing the whole work. To ensure successful implementation of the mega project modern machinery, including rushers, smelters and other plants have been installed in addition to a 50 MW powerhouse.

GWADAR INDUSTRIAL ESTATE - The Balochistan government has provided 3,000 acres for Gwadar Industrial Estate. First phase of Gwadar Industrial estate has been completed. There will be approximately 2,000 industrial units in the Gwadar Industrial Estate providing employment to 30,000 workers. The federal government is urgently providing special Rs700 million funding to Balochistan to help meet 15 year water demand of the Gwadar Industrial Estate (GIE) through the installation of a foreign assembled desalination plant.

POWER GENERATION - A number of electric power generation projects are also being carried out in Gwadar and in its surroundings. The Quetta electric supply Company (QESCO), a subsidiary of the Wapda has geared up the work for building the power transmission line. It is expected to be completed soon.

RAILWAYS - Railway Minister Sheikh Rashid Ahmad has said “The government is focusing on laying the Havelian-Kashghar (China) and

Quetta Qandhar (Afghanistan) railway tracks. In 2006, Ministry of railways announced that Gwadar will be connected to Pakistan railways network at an expected cost of $ 1.25 billion (Rs. 75-billion).

DRY PORT - China wants to set up a dry port near the Pakistan-China border, so that western China could also benefit from the Gwadar seaport and it will create a ribbon of economic activity and hundreds of new jobs along the proposed highway linking Gwadar with the Karakoram highway in the north.

GWADAR COAST CENTRE (GCC) - The Baluchistan Govt. and a UAE firm HRC signed an agreement under which Gwadar Coast Centre (GCC) would be established for the development of the port city. The mega project would be established at 2000 acres of land that would generate over 10,000 jobs. GCC would invest $3.2 billion. Three coast centres were already working in Norway and one in U.S.A. The project would be completed by 2014. The project would help making Gwadar a big international port city.

Who Benefits from China’s “One Belt, One Road” Initiative?

Under its Silk Road Economic Belt and the 21st-Century Maritime Silk Road (commonly known as the “One Belt, One Road” initiative) China has sought to build a network of infrastructure projects across Eurasia to encourage trade. At first glance, it seems that all those involved should benefit. Chinese loans would kick start the construction of the infrastructure projects. Developing countries, in which the projects are built, would profit as transshipment points and from the development of new industries that could plug into international supply chains. Revenues from the resultant economic growth would then repay the Chinese loans, with interest.

That all sounds rosy. That is, if the new infrastructure network is used. The mere existence of roads and ports does not ensure that trade will flourish. Certainly economic growth at either end of the network would help. But at the moment the economies of both China and Europe are slowing. Indeed, global economic activity is slowing. If there is not enough trade to make the new infrastructure profitable, then the benefits from the “One Belt, One Road” initiative only flows in one direction: China.

The operative word in the “One Belt, One Road” initiative’s financing is “loans.” Chinese loans may have laxer requirements and carry a lower interest rate than those of commercial banks. But they are loans. China expects them to be repaid. Plus, Chinese loans for infrastructure projects are often made with the understanding that the developing countries award construction contracts to Chinese companies. In short, China benefits from both the financing and construction of infrastructure projects, while developing countries must bear all of the financial risk. When trade is booming, that may not matter much. But when it is not, that should be a concern.