Stumbling blocks on China’s Belt and Road through Central Asia

May 2017

Central Asia is China’s first port of call if its Belt and Road initiative is to reach the global breadths and heights that its architects asserted at the recent Belt and Road Summit in Beijing. To be a success in Central Asia, China will have to overcome some significant operational and security barriers, and make sure that its projects serve as a stimulus for sustainable economic growth.

Twenty-nine heads of state and dozens of foreign officials met in Beijing on 14 and 15 May for the Chinese government’s Belt and Road Summit. China’s Belt and Road foresees the creation of a network of land and sea trade routes into Europe (the overland “belt”) and Africa (the maritime “road”) covering 65 countries, thanks to a projected USD 900bn of Chinese investment that will build roads, ports, railways and telecoms.

The first stop in the overland Silk Road Economic Belt is former-Soviet Central Asia. Goods making their way from China to Europe will need to pass through at least some of these countries, which include Kazakhstan, Kyrgyzstan and Tajikistan, Turkmenistan and Uzbekistan. Some major Chinese investment in the region predates the official announcement of the Belt and Road programme in September 2013, but activity has gathered pace in the past four years. Current projects include the development of the Khorgos dry port and free trade zone on the Kazakh-Chinese border, and the construction of major new roads in Tajikistan and Kyrgyzstan.

At first view, Central Asia looks like fertile ground for the initiative. In many Central Asian countries, economies are reliant on single revenue sources and Soviet-era infrastructure is in dire need of renovation and investment. Central Asian governments are also unlikely to show the concerns over procurement transparency and environmental standards that some of the Belt and Road’s European partners have done.

However, stumbling blocks for the ambitious Belt initiative are numerous: political regimes with uncertain futures, disputed borders, a growing Islamist radicalisation problem accompanied by deficient security apparatuses, insufficient manpower and inadequate skill sets to maintain and service such vast projects, not to mention endemic corruption and government interference in strategic investment.

Among the most enthusiastic heads of state in Beijing this weekend was Shavkat Mirziyoyev, Uzbekistan’s president since December last year. There is no doubt that Mirziyoyev is a man on a mission to improve his country’s historically tense neighbourly relations and expand its economy. Mirziyoyev during his five-day visit to Beijing signed deals worth a total of USD 20bn across energy, technology, agriculture and many other sectors. But if there is any example of a country in which doing business on the ground does not match rhetorical commitment at the top, it is Uzbekistan. Mirziyoyev is less than six months into his presidency, but pledges that he has made so far to improve the regulatory environment – such as through improving access to foreign currency and improving the visa regime from a number of Western countries – have not been realised. Reform has proceeded in stops and starts, probably as a result of elite struggles for power and vested interests. This encapsulates some of the broader problems facing Chinese investment in its immediate backyard.

Chinese companies to date report few problems in Central Asia but large infrastructure projects have a habit of creating challenges as they grow and start to compete for scarce resources such as power, water, road space and labour. Projects also tend to create winners and losers in local communities depending on levels of employment and the distribution of benefits. Reactions may range from labour disputes to violence. Regulatory push back is also a likely outcome as host country governments come under pressure to distribute benefits or perceived benefits.

A Chinese mega-project

The ambitious Belt and Road initiative is part of President Xi Jinping’s grand strategy to answer some of China’s most domestic pressing challenges: an entrenched economic slowdown at home coupled with severe overcapacity issues in many of its industrial sectors, especially in steel, coal and cement.

At the same time, China is hoping to use the initiative as a form of ‘soft power’ to grow its influence as a global power vis-à-vis the US, trying to frame itself as a defender of a more inclusive globalisation. The Belt and Road initiative is one among a suite of other multilateral initiatives China has promoted in recent years, such as the Asian Infrastructure Investment Bank (AIIB) and a Free Trade Area of the Asia Pacific (FTAAP), to prove its global leadership.

The project is vast in ambition, but still relatively low on specifics. In the final communique released by the Summit on the evening of Monday 15 May, participants committed to promoting a rules-based, open and multilateral trading system, opposed to all forms of protectionism. However, media reports coming out of the summit suggest that there remain significant concerns among some European participants – few of whom sent heads of state to the Summit – about the transparency, procurement, social and environmental standards in some of the tenders and calls for co-operation. There is also persistent suspicion among some countries over Chinese political influence coming hand in hand with commercial activity. India is one prominent player who has chosen not to participate, probably stemming from mistrust about China’s intentions in the region.

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