Sunday, July 25, 2021

Debt-Trap Diplomacy

23-9-6 Xina's Four Economic Problems - Attempted Thought > .
22-9-24 Xina's and Australia’s power plays in the Pacific - Caspian > .
22-1-18 China's debt-burden acquisition of Sri Lankan port of Hambantota - Focus > .
2015 Why China Will Not Become the Dominant Power in Asia - ANU > .
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21-8-20 Protests in Pakistan erupt against China’s Belt and Road plan: Demonstrations shut down Gwadar, where Chinese are blamed for lack of water and electricity and threat to local fishing [Inevitable, it appears.]

CPEC - 2020 China-Pakistan Economic Corridor’s Return to the Shadows .

Debt-trap diplomacy
is a theory to describe a powerful lending country or institution seeking to saddle a borrowing nation with enormous debt so as to increase its leverage over it. Debt-trap diplomacy has been referred to by several other terms, including "debt-book diplomacy". The term 'debt-trap diplomacy' was introduced by Indian academic Brahma Chellaney in early 2017 and has been widely used in recent years to accuse China of Machiavellian lending policies. Within 12 months the term had quickly spread through the media, intelligence circles, and western governments. It has since expanded to include other parts of the world and was further defined and expanded upon in the context of Chinese geostrategic interests in a 2018 Harvard University report.

The Belt and Road Initiative (BRI) is a multi-billion-dollar expansion project of China, to expand its power through lending to countries to spur their economic growth. The BRI project was launched in 2013 by Chinese leader Xi Jinping to improve the infrastructure of countries in Europe, Africa, and Asia in exchange for global trade opportunities and economic advantage.

The Belt and Road Initiative (BRI, or B&R), known in Chinese and formerly in English as One Belt One Road (OBOR), is a global infrastructure development strategy adopted by the Chinese government in 2013 to invest in nearly 70 countries and international organizations. It is considered a centerpiece of Communist Party of China (CPC) general secretary and Chinese leader Xi Jinping's foreign policy, who originally announced the strategy as the "Silk Road Economic Belt" during an official visit to Kazakhstan in September 2013.

"Belt" is short for the "Silk Road Economic Belt," referring to the proposed overland routes for road and rail transportation through landlocked Central Asia along the famed historical trade routes of the Western Regions; whereas "road" is short for the "21st Century Maritime Silk Road", referring to the Indo-Pacific sea routes through Southeast Asia to South Asia, the Middle East and Africa. Examples of Belt and Road Initiative infrastructure investments include ports, skyscrapers, railroads, roads, airports, dams, and railroad tunnels.

The initiative was incorporated into the Constitution of China in 2017. The Chinese government calls the initiative "a bid to enhance regional connectivity and embrace a brighter future." The project has a target completion date of 2049, which will coincide with the centennial anniversary of the People's Republic of China (PRC)'s founding. Some observers and skeptics, mainly from non-participant countries, including the United States, interpret it as a plan for a sinocentric international trade network. In response the United States, Japan and Australia had formed a counter initiative, the Blue Dot Network in 2019Australia announced on 21 April 2021 via Foreign Minister Marise Payne that Australia would be pulling out of the "Belt and Road" initiative completely. 

The Blue Dot Network (BDN) is a multi-stakeholder initiative formed by the United States, Japan, and Australia to provide assessment and certification of infrastructure development projects worldwide on measures of financial transparency, environmental sustainability, and impact on economic development, with the goal of mobilizing private capital to invest abroad.

It was formally announced on 4 November 2019 at the Indo-Pacific Business Forum in Bangkok, Thailand on the sidelines of the 35th ASEAN Summit. It is led by the U.S. International Development Finance Corporation, Japan Bank for International Cooperation, and Department of Foreign Affairs and Trade of Australia.

The Blue Dot Network is expected to serve as a global evaluation and certification system for roads, ports and bridges with a focus on the Indo-Pacific region. It has been considered as a counter-initiative to China's Belt and Road Initiative.

The theory of debt-trap diplomacy is that the creditor country intentionally extends excessive credit to a debtor country, thereby inducing the debtor into a debt trap. This is done with the intention of extracting economic or political concessions from the debtor country when it becomes unable to meet its debt repayment obligations. The conditions of the loans are often not made public, and the borrowed money commonly pays contractors from the creditor country. Although the term has been applied to the lending practices of many countries and the International Monetary Fund (IMF), it is most commonly alleged towards the People's Republic of China (PRC). Bilateral agreements made as part of China's Belt and Road Initiative have particularly furthered this association, specifically with regard to Chinese infrastructure loans to developing nations and the consequent leveraging of accumulated debt to achieve Beijing's strategic aims.

Proponents of ‘debt-trap diplomacy’ theory have claimed that China's geostrategic interests are served when its partners struggle with debt. The resulting economic crises supposedly would allow Beijing to exploit and seize assets and helps its political influence. But according to a TRT article, the evidence so far contradicts the theory. Far from expanding China's global power, case studies have instead shown that heavily indebted recipients of Chinese loans were a large liability for China. An example would be Pakistan. China has had to slow down its flagship CPEC initiative and provide emergency financing to fend off an economic catastrophe. Pakistan was later forced to approach the IMF for another bailout, which exposed China's loans and investments to global scrutiny and increasing Washington's leverage over Pakistan (given that the US is a majority shareholder in the IMF). This was no political gain for Beijing when Pakistan had struggled to pay back loans.

The validity of allegations against China has been criticized by multiple academic institutions including Rhodium Group, Chatham House and Princeton University, which have denied the narrative of debt-trap diplomacy in the context of Chinese investments.

Princeton University published an article disputing the term and quoted a March 2018 report released by the Center for Global Development, that contradicts the theory as the paper concludes that between 2001 and 2017, China had restructured or waived loans for 51 debtor nations, the majority of BRI participants, without seizing state assets.

BRI - Belt & Road Initiative ..




21-12-22 Sri Lanka plans to pay off Iran oil debt with tea

Sri Lanka plans to settle a debt for past oil imports from Iran by paying it off in tea, a government minister said. Ramesh Pathirana said his country hoped to send $5m (£3.8m) worth of tea to Iran each month to clear a $251m debt. Pathirana said the method of payment would not violate United Nations or American sanctions, because tea was categorised as a food item on humanitarian grounds, and no black-listed Iranian banks would be involved.

Sri Lanka is experiencing a severe debt and foreign exchange crisis, which has been made worse by the loss of tourist income during the coronavirus pandemic. A member of the country's tea board said it was the first time tea had been bartered to settle foreign debt.

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