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BRI leads to common prosperity and development

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The rejuvenation initiative of Silk Road Economic Belt was first unveiled at Nazarbayev University, Kazakhstan on September 07, 2013 by Chinese President Xi Jinping. Later, the idea of constructing a 21st Century Maritime Silk Road was announced by President Xi Jinping in the same year on October 03, during his state visit to Indonesia. These two concepts, hereinafter referred to as the “One Belt, One Road (OBOR) Initiative” or the “Belt and Road Initiative (BRI)”, envision the formation of a highly integrated, cooperative, and mutually beneficial maritime and land-based economic corridors along the Belt and Road countries.

China-proposed BRI has already attained acceptability and popularity across the world.  To date, 126 countries and 29 international organizations have signed 174 cooperation agreements with China under the initiative framework.

Following the conformity with 2030 Agenda for Sustainable Development, most particularly, the vision of financing the Sustainable Development Goals (SDGs), the United Nations (UN) has warmly acknowledged BRI agreed to incorporate BRI into its resolution in 2016 calling for all parties to participate in the mega project.

Most significantly, the United Nations Development Programme (UNDP) was the first international organization that signed a Memorandum of Understanding (MOU) in September 2016 and a concrete Action Plan in May 2017 with China as a part of strategic partnership with BRI.

BRI has successfully proven its vision of building infrastructure of connectivity, policy coordination, unimpeded trade facilitation, financial integration, and people-to-people ties adhering to the principle of common prosperity and development. Though some critical views on so-called “debt trap” were raised on few media reports, the world has soon come to know that BRI is endowed with coherent set of principles where “win-win” situation, rather than “win-lose” or “zero-sum,” through “all-round connectivity” gets the ultimate priority. Chinese State Councilor and Foreign Minister, Wang Yi, has reiterated, “The China-proposed Belt and Road Initiative is not a geopolitical tool or a debt trap for participating countries, but a platform for cooperation”.

As for example, China-Pakistan Economic Corridor (CPEC), a flagship project of BRI, has made remarkable progress and successfully been demonstrated as a “debt reliever” rather than “debt trap” for Pakistan. Simultaneously, it has also been elucidated that the so-called “debt trap” related to Sri Lankan Hambantota port with Chinese loans as a part of BRI is a myth. The crisis of Sri Lanka’s debt repayment is mostly related to its total foreign debt, while Chinese loans account for only about 10 percent with concessional terms.

The Silk Road Economic Belt and the 21st Century Maritime Silk Road envisage China’s commitment to invest heavily for the infrastructure and transport development in order to strengthen the economic capacity and connectivity among the nations within the Belt and Road. The project is largely expected to facilitate economic growth and development in many developing countries through the potential use of enhanced overland and maritime connectivity across the world.

With the vision of common growth and shared benefits, the Belt and Road construction projects have almost resulted $460 billion worth of investments since the inception of BRI in 2013, while China’s direct investment in Belt and Road countries surpassed $90 billion.

The world has already witnessing China’s expanding trade and investment ties with countries along the Belt and Road over the past five years. According to National Development and Reform Commission (NDRC), the total trade volume between China and countries involved in BRI has exceeded $6 trillion. BRI is also expected to add $117 billion to global trade in 2019 through higher trade volumes. The World Bank reports that BRI may reduce the costs of global trade by 1.1 to 2.2 percent and can contribute at least 0.1 percent of global growth in 2019.

BRI has also largely bolstering bilateral ties between China with her partners across the Belt and Road with shared interests and mutual benefits. The enhanced ties between China and Pakistan under the CPEC can be exemplified in this regard. Both China and Pakistan have pledged to jointly promote the construction of the CPEC and foster their bilateral ties. The tangible benefits under CPEC have intensified the relations between the two countries into a new height.

Chinese President Xi Jinping’s announcement on BRI has also paved a new dimension in Bangladesh-China relations, whereas Bangladesh stands as an important partner in both the Silk Road Economic Belt and the 21st Century Maritime Silk Road. Bangladesh formally joins BRI during Chinese President Xi Jinping’s visit to Dhaka in October 2016. The country perceives BRI as an enormous opportunity of becoming a middle-income country by 2021 and a developed country by 2041.

No wonder to mention that BRI represents an opportunity to build a new type of international relations based on the principle of multipolarism, open economy, common prosperity, mutual development, and community with a shared future for mankind.

Sultana Yesmin is a PhD Candidate at the School of Politics and International Studies (SPIS), Central China Normal University (CCNU), Hubei, China. She was a Visiting Research Fellow at the Yunnan Academy of Social Sciences (YASS) in China in 2015. She holds BSS and MSS in International Relations from the University of Dhaka, Bangladesh. Her research interests are broadly in China Affairs, regional and sub-regional cooperation, security studies, South Asian and East Asian affairs. Email: sultanayesmindu[at]gmail.com.

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Is It Possible to Lift Sanctions Against Russia? — No

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Every conflict sooner or later ends in peace. Such is the conventional wisdom that can often be heard from those who, amid the current situation of the sanctions tsunami and confrontation with the West, are trying to find hope for a return to “normality”. The logic of such wisdom is simple. At some point, the parties will cease fire and sit down at the negotiating table. The end of hostilities will lead to a gradual reduction in sanctions pressure on Russia, and our businesses will be able to return to work with Western partners.

We have to disappoint those who believe in such a prospect. Sanctions against Russia, for the most part, will not be lifted even in the event of a ceasefire in Ukraine and a peace agreement. There will be no return to “pre-February normality”. Instead of remembering a lost past, we will have to focus on creating a new future in which Western sanctions remain a constant variable.

Why is the lifting of Western sanctions on Russia extremely unlikely? There are several reasons.

The first reason is the complexity of the conflict between Ukraine and Russia. It has every chance of being prolonged for a long time. There may be pauses in active hostilities. The parties may conclude temporary truces. However, such truces are unlikely to remove the political contradictions that gave rise to the conflict. Currently, there are no parameters for a political compromise that would suit all parties. Even if an agreement between Moscow and Kiev is reached, its sustainability and feasibility are not guaranteed. The experience of Minsk-2 shows that the mere appearance of agreements does not automatically resolve political problems and does not lead to the lifting or easing of sanctions. The Ukrainian problem can smoulder and flare up again for decades, partly because both sides are limited in the possibilities of a decisive military victory and complete surrender of the enemy. Relations between Russia and Ukraine are at risk of entering the ranks of long-term conflicts, similar to relations between India and Pakistan, or North and South Korea. The complexity and longevity of the conflict guarantee Western sanctions for the long term.

The second reason is the stable nature of the contradictions between Russia and the West. The conflict in Ukraine is part of a larger Euro-Atlantic security palette. An unstable system of asymmetric bipolarity has formed in Europe, in which the security of Russia and NATO can hardly be indivisible. Russia has no way to crush the West without doing unacceptable damage to itself. However, the West, despite its colossal superiority, cannot crush Russia without incurring unacceptable losses. Containing Russia is the best strategy for the West. Ukraine is doomed to remain one of the areas of containment. For Russia, the strategy of asymmetric balancing of Western superiority remains optimal. It is possible that part of such a strategy will be a course towards a radical territorial redistribution of Ukraine, tearing away from it the eastern and southern parts. But in itself, such a redistribution will not remove the problems of Western sanctions.

The third reason is the institutional features of the sanctions policy of the initiating countries. Experience shows that sanctions are relatively easy to impose but very difficult to lift. Thus, with regard to Iran, a whole “web of laws” has formed in the United States, which significantly limits the administration’s ability to lift sanctions. Even if the sanctions are not enshrined in law, their cancellation or mitigation still requires political capital, which not every politician is ready to spend. In the US, such steps will cause criticism or even opposition in Congress, and in the EU – disagreements among member states. Of course, individual restrictions are lifted or relaxed in the interests of the initiating countries themselves. The experience of sanctions pressure on the Republic of Belarus shows the existence of the “sanction remissions” when restrictions are eased. However, the legal mechanisms of sanctions themselves remain and can be used at any time.

The fourth reason is the quick reversibility of the sanctions. Often, their abolition is accompanied by political demands, the implementation of which is a complicated process. For example, the Iranian nuclear deal required several years of complex negotiations and significant technological decisions. However, the return of sanctions can be carried out overnight. There is an asymmetry in the fulfilment of obligations. Fulfilling the requirements of the initiators requires significant changes, while the return of sanctions requires only a political decision. Rapid reversibility breeds distrust among target countries. It is easier for them to continue to live under sanctions than to make extensive concessions and risk receiving new sanctions. Historical experience shows that the initiators of sanctions tend to play the game of “finishing” the opponent. After the concessions come new, more radical political demands and the threat of new sanctions. The “Pompeo 13 Points” – a list of US demands on Iran beyond the limits of fulfilling the terms of the nuclear deal – have already become a textbook example. The Iranian lesson, apparently, was well learned in Moscow. Iran itself is actively working to achieve its goals in the field of nuclear arms. Ultimately, this shows the ineffectiveness of sanctions in terms of influencing the political course of the target country. But questionable effectiveness does not negate the fact that sanctions continue to be applied and enforced.

The fifth reason is the ability to adapt. Without a doubt, Russia will suffer enormous damage from the restrictive measures which have been introduced. However, the possibility of it adapting to the sanctions regime remains high. Russia has the chance, first, to partially make up for the shortfall in supplies from abroad with the help of its own industry, although this will require political will and the concentration of resources. Second, it has access to non-Western markets, as well as alternative sources of goods, services and technology. The key conditions for solving this problem will be the creation of reliable channels for financial transactions that are not related to the US dollar, the Euro, or Western financial institutions. Such a task is feasible both technically and politically, although it will also require time and political will. Iran’s experience shows that sanctions have seriously hit the country’s development opportunities. However, they did not interfere with the development of agriculture, industry and technology. The modernisation of the Soviet Union also proceeded under severe Western sanctions. The ability to adapt reduces the motivation for concessions to the demands of the initiating countries, especially given the risk of playing for “finishing”.

These reasons make the prospect of lifting or significantly reducing sanctions pressure on Russia extremely unlikely. The US, EU and other initiators have already introduced the most severe restrictions on Moscow. But the upward wave of sanctions escalation has not yet been exhausted. In addition, the achievement of the ceiling of the applied measures is unlikely to mean the abolition of those already introduced. However, the sanctions also do not mean the “end of history” of the Russian economy. It found itself in new conditions that will require adaptation and the search for new opportunities for development and growth.

From our partner RIAC

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The Policy of Sanctions and the Golden Horde Legacy

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The modern policy of sanctions resembles, to some extent, the management practices of the Mongol Golden Horde. One of its elements was a system of labels (jarligs), orders, or permissions that were issued by the khan to his vassals. We remember well from history textbooks about the jarligs which were issued to rulers, that is, the permission the khan granted to the Russian princes to own this or that land. Jarligs were also issued to the clergy, freeing them from taxes or giving them other privileges. The jarlig was an instrument of imperial policy, fixing the decisions of the khan in relation to rulers or institutions dependent on him. It had a transboundary character, that is, it was a tool for managing a subordinate, but at the same time alien territory. On the one hand, it was the property of the khan. But on the other hand, it was a separate state unit. Historians have traced the subsequent influence of the Horde’s legacy on the formation of a centralised Moscow state. 

For example, the historian Georgy Vernadsky underscored such an influence. It would seem that it makes sense to discuss Horde practices in relation to Russia, pointing to the “Asian” nature of its political power, its despotism and excessive concentration of power. A similar narrative, in one form or another, has been developing for centuries among Russia’s Western neighbours. However, some imperial practices appear to be universal. Today they can be observed in US policy and, to some extent, in the policy of the European Union. Russia itself has largely lost its imperial heritage, becoming a nation-state even to a greater extent than its Western rivals. Which, of course, does not preclude a transition to an imperial organisation in the future under certain circumstances.

The characterisation of the modern US and EU as empires gives rise to two risks at once. There is an intellectual risk, associated with the obvious differences between the empires of the past and modern political entities. In many respects, they are simply incomparable. The comparison of modern industrialised mass democracies with the despotic and economically primitive empire of the Mongols is sure to prompt indignation among some and a condescending smile from others. The Americans and Europeans themselves created the idea of regulatory risk. For all the differences between them, the Western states are defined by their belief in the free organisation of their political institutions, which precludes violence or coercion. Their political communities are organised voluntarily, unlike the empires of the past, which were organised on the basis of violence and coercion. 

The American and European identity is grounded in the idea of the superiority of the political governance they created. It seems to be the most fair from the point of view of the equality of people in their rights, as well as the freedom of citizens within the limits of the social contract. The “significant others” for such an identity are both the despotisms of the past and some modern states that rely on autocracies. First and foremost, these include Russia and China. The superiority of capitalism and the market is also part of the Western identity. It is opposed to non-free economies, in which the state plays a key and directive role. From a normative point of view, calling the US and the EU empires would be almost tantamount to a political provocation.

Nevertheless, such a thought experiment seems justified, especially since it reflects certain intellectual developments. Among others, we can recall, for example, “Empire” by Michael Hardt and Antonio Negri. This experiment posits two assumptions. The first is that in modern international relations, inequality and hierarchy are preserved, and are determined by differences in power, economic and human potentials. The second is that the voluntary nature of an organisation does not exclude coercion and domination. The softness of politics in comparison with the empires of the past hardly indicates the absence of coercion and domination as such. In addition, the democratic structure of individual states does not exclude coercive relations between them, not to mention relations with other states.

In the 20th century, the United States was indeed able to create a unique international community that could be called a “soft empire”. At its core, no doubt, was an instrument of force and coercion. It took shape as a result of the Second World War, in which the United States, together with its allies, defeated and then occupied a number of large states (Italy, Germany, Japan). Much more important, however, was the economic, technological, and financial superiority of the United States. America became the most important source of reconstruction of post-war Europe and Japan, which later became major economic players. The United States not only did not interfere with their development, but also benefited from it. During the Cold War with the USSR, a Euro-Atlantic community system was formed, in which the United States dominated both militarily and economically, avoiding excessive control and coercion. Such control, however, was characteristic of the USSR’s relations with its allies in Eastern Europe, despite the fact that the Soviet economic base turned out to be noticeably smaller than that of the United States and its European allies. The differences between the Western and Eastern blocs in terms of the level of coercion employed during the Cold War, made it possible at the ideological level to underestimate its presence in the ranks of the former and exaggerate in the ranks of the latter. 

The movie epic Star Wars in the late 1980s became a kind of archetype for mass consumption, illustrating the differences between the two systems. The victory in the Cold War and the collapse of the Soviet bloc can be considered the pinnacle of the development of the American “soft empire”, and globalisation, which gained momentum in the late 20th and early 21st centuries, when it peaked.

Europe, in turn has developed its own “soft empire”, fundamentally different from the United States, but at the same time closely connected with it. It was never based on military-political coercion. The European Union, which was established to facilitate economic integration, created its “universe” through the establishment of common standards and rules of the game, which were accepted by its members voluntarily. However, over time, the European project acquired a growing political component. So far, it has been insignificant as a military-political player, remaining a junior partner of NATO. However, through the strength of its standards, rules and bureaucracy, the EU has established a relationship of power and coercion with its member states and in the orbit of its economic influence that is no less effective than the use of force.

The financial and economic power of the US and the EU is one of the factors that allows their “empires” to remain “soft”. The United States retains its role as a global and financial leader. The American dollar is a convenient and efficient instrument for international settlements. The EU is a large market, and the euro has also taken on a prominent role in international finance. Of course, the humanism and “softness” of Western “empires” have had their limits. Whenever the use of force was relatively unhindered and technically possible, it was employed quite harshly. This was evident in the defeat of Yugoslavia and Iraq. Against Iran, however, the possible use of force ran into the prospect of much larger losses. The use of economic measures made sense as a cheaper, but at the same time devastating alternative technique for using power.

Economic sanctions can be considered the key technology of the modern “soft empires”. The US is far ahead of the rest of the world in their application, although the EU is also using them to a growing extent, and the UK has incorporated them into its independent foreign policy post-Brexit. The global nature of dollar settlements allows the US financial authorities to track transactions around the world, restricting them where they conflict with political interests. In a global economy with a US-centric financial system, blocking US sanctions is likely to result in extensive losses or even spell ruin for any large company with an international presence. The use of blocking sanctions to target strategic exporters can cause enormous economic damage to the economies of individual countries; this has been aptly demonstrated in the use of sanctions against Iran, Venezuela and Russia. The use of secondary sanctions, as well as fines and criminal prosecution for violating US regulations, has led to businesses being disciplined, regardless of their country of origin. For example, the Chinese authorities condemn the US sanctions, but Chinese companies have been forced to take them into account and generally avoid violating them, fearing financial losses and the loss of the US market. Until February 2022, Russian big business also attempted to avoid violating the US sanctions regimes, even though Moscow officially condemned their use, and Russia itself had been hit by a number of restrictive measures. European businesses have also been hit hard by US fines and are complying with US regulations despite Brussels’ grumblings. The European Union itself is actively developing its own tools and restrictive measures.

The modern policy of sanctions also gives rise to the reincarnation of the practice of issuing “jarligs”. By imposing restrictions in a particular area, the US Treasury can, for example, issue a general license that allows certain transactions. Similar permissions are possible in the policy of the European Union. Two recent examples illustrate the use of “jarligs” vis-à-vis Russia.

The first example is the situation with food exports from Russia. Formally, the United States did not impose an embargo on the export of Russian grain, fertilizers or agricultural products. However, a number of Russian agribusiness assets have been hit by blocking sanctions. Fearing secondary sanctions and fines amid large-scale financial and economic sanctions against Russia in the wake of the outbreak of the military conflict in Ukraine, foreign banks have refused to conduct transactions involving export deals for Russian suppliers. For similar reasons, shipping companies have refused to ship Russian products. Combined with the difficulties affecting Ukrainian food exports due to hostilities, rising food prices, droughts and other factors, restrictions on Russian supplies have threatened to have serious global consequences. The answer was the “jarlig” of the US Treasury in the form of a general license for transactions involving Russian food.

The second example is that of Lithuanian attempts to partly block Russian transit to the Kaliningrad region. EU sanctions prohibit the import, transportation and transfer of a number of Russian goods. Under this pretext, their transit through Lithuania was blocked. In this case, the “jarlig” had already been issued by Brussels, which specified that the sanctions do not apply to the transit of these goods by rail.

In the context of the sanctions tsunami, Russia will have to face the good old practice of bans and “jarligs”, recalling the experience of the Horde. The “jarlig” will be issued where the interests of the initiators of the sanctions so require. They can also be given out as rewards for “behavior change”. Ultimately, in the modern doctrine of sanctions policy, “behavioral change” is one of the main goals. Accordingly, Russia can either continue to rely on “jarligs” or create conditions under which foreign restrictions can be circumvented. In relation to the aforementioned example with food exports, we could talk about a system of financial settlements with consumers of Russian exports independent of the control of Western authorities and an accelerated build-up of our own merchant fleet. With regard to Kaliningrad transit, this means the development of maritime transport to the Russian exclave. Such measures will require investment and political will. The alternative is dependence on “jarligs” that can be issued today and revoked tomorrow.

The experience of the Golden Horde, like many other empires, is that “jarligs” lose their meaning when the mass of players who ignore them becomes critical. Western “soft empires” continue to retain a large margin of safety. However, the resistance of major players like Russia may gradually undermine their dominance. Involving China in the process will pose an even more serious challenge to the “soft empires”. China’s policy will be extremely cautious, but the experience of an economic attack on China during the presidency of Donald Trump in the United States has already forced Beijing to take measures to ensure its economic sovereignty and develop insurance mechanisms for use in the event of inevitable exacerbations. So far, China puts up with “jarligs” for its large companies. However, the question is, how long will such humility last?

From our partner RIAC

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Another Sri Lanka?: Pakistan’s Economic Crisis

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Pakistan’s Finance Minister, Miftah Ismail warned of “bad days” ahead as he highlighted the looming economic crisis that the nation finds itself in. Addressing a ceremony at the Pakistan Stock Exchange, the Finance Minister blamed the economic policies taken by the erstwhile Tehreek-e-Insaf government for the dire economic state of the country.

A Nation in Crisis

Pakistan’s foreign-exchange reserves have shrunk by more than half in the past year, to just over $9 billion, or about six weeks’ worth of imports. In 2022, the Pakistani rupee has lost about 30 percent of its value against the US dollar. Furthermore, a rise in inflation and unemployment coupled with political instability has only made matters worse. The three major global rating agencies, Moody’s, Fitch, and S&P Global have downgraded Pakistan’s long-term rating from stable to negative, citing the country’s deteriorating economic position.

The current Pakistani government has blamed former Prime Minister Imran Khan for much of its economic woes. These accusations are not entirely unfounded. While he promised to rid Pakistan of its economic troubles, Mr. Khan failed to deliver. His regime saw an increased rate of inflation and widespread economic mismanagement. By March 2022, the country’s total external debt and liabilities reached $128 billion. Unemployment also surged with Pakistan Institute of Development Economics (PIDE) reporting 31% of the youth to be unemployed. The sudden dissolution of his government added fat to the fire, leading to political instability amid grave economic troubles. However, with a tenure of less than five years, blaming Imran Khan for all of Pakistan’s economic troubles seems far-fetched. Undoubtedly, the economy suffered under the Khan administration but this crisis stems from a much larger flawed system.

Economic Fault Lines

There are various structural flaws that can be located in the Pakistani economy that have time and again led to its unmaking.

The Khan administration is not solely responsible for the ongoing debt crisis. The IMF has provided loans to Pakistan on twenty-two occasions since 1958, imposing 13 Structural Adjustment Programmes (SAP). The focus of these programmes has been to stabilise the economy while sacrificing growth in the short term. However, Pakistan’s growth rate has consistently remained the lowest in South Asia since the introduction of the first SAP in 1988. The sustainability and feasibility of these IMF bailouts have also been brought into question considering the frequent visits Pakistan makes to the IMF requesting for bailouts. For instance, the last bailout Pakistan requested was in May 2019, just three years before the current crisis. Furthermore, the China–Pakistan Economic Corridor (CPEC) created a debt of $64 billion for Islamabad which was originally valued at $47 billion in 2014. The excessive borrowing to resolve short term issues has majorly contributed to Pakistan’s economic troubles.

Another major issue with the Pakistani economy is the huge trade deficit that the country incurs. Pakistan’s trade deficit currently stands at $48.66 billion, a record high. This enormous trade deficit has resulted from lack of exports in the face of steadily growing imports. As the industries fail to meet the requirements of the domestic market, Pakistan has to rely on imports for bridging the gap. Similarly, the exports suffer due to low productivity of agriculture and industries. According to the International Labour Organisation (ILO), Pakistan is ranked 143 out of 185 countries on labour productivity, having its GDP per hour worked at a measly $6.3.

Poor fiscal management and failure of the private sector to adapt to innovations has further shackled the Pakistani economy. All of these issues have contributed to the ensuing political instability.

Another Sri Lanka?

The past few months have witnessed the collapse of Sri Lanka from one of the top performing economies in South Asia to its descent into anarchy. With Pakistan in a similar crisis, it is widely argued that the country might be on its way to follow the island nation into a harrowing economic collapse. With the fate of Sri Lanka at display, it is also feared that escalating political instability might lead to an eventual military rule, as has been the norm in Pakistan.

While the situation is bad and might worsen in the coming days, Pakistan is unlikely to follow the Sri Lankan trajectory. The revival of a 2019 bailout with the IMF on July 13, clearing the way for about $1.2 billion, comes as a relief for Pakistan. This much needed help will allow the country to look for alternative channels to bridge the financing gap. The Pakistani military has also been playing an active role in stabilising the situation, with Army Chief Qamar Bajwa seeking financial help from friendly countries including UAE and Saudi Arabia. The involvement of such external lenders should discourage major creditors like China from requesting immediate repayments, easing the pressure on Islamabad. However, this requires the Pakistani government to keep a check on the steadily increasing imports.

While the present measures are likely to provide respite for now, even in the unlikely scenario of a Sri Lanka-like complete economic collapse, the military would not let the political situation in Pakistan slide into anarchy and is likely to take over by dissolving the government in the worst case.

The Way Ahead

Even though Pakistan might just evade the crisis through IMF involvement and bettering the trade deficit by curbing imports into the country, these are measures that tend to serve short term purposes and are no guarantee against another similar crisis in the coming years. The only sustainable answer would be initiating structural reforms. A self-sufficient economy must be at the heart of a rebuilding project. Increased productivity will facilitate an increase in exports while decreasing the imports on basic commodities like food and medicines. Finding economic stability is also detrimental to which path Pakistan’s politics will take in the future as the shadow of military rule looms large on the dwindling democratic set up which has managed to keep it in the barracks since 2008.

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