Image Source: India Today
Preparing for the September 2023 G20 summit in Delhi, Indian Prime Minister Narendra Modi staked his leadership reputation on a successful event, marketing his government as a ‘Voice of the Global South’ and gaining the African Union’s inclusion into the conference. Despite the notable lack of Chinese and Russian heads of state, the event demonstrated India’s growing geopolitical role and forged key successes for multilateral collaboration. In particular, pledges of support for the India-Middle East-Europe Economic Corridor (IMEC) and the Trans-African Corridor (TAC) reflect new bridges between often-opposing governments, potentially shifting the balance of soft power competition in southwestern Asia and Africa. These projects represent the West’s emphatic and concrete response to China’s Belt and Road Initiative (BRI), a powerful global investment and trade strategy from Beijing. While IMEC and TAC face significant headwinds in implementation, strategists should draw lessons from a historical analysis of the BRI to design sustainable, profitable development programs beneficial to the West and its initiative partners. A framework of Chinese proverbs may facilitate such analysis.
当局者迷，旁观者清 – The Player is Lost, The Watcher is Lucid
Launched in 2013, China’s BRI aims to connect domestic industries with emerging markets across the globe through a vast network of physical and digital infrastructure projects. Outwardly economic in form, the strategy also enables Chinese soft power projection with the establishment of spheres of influence in regions as distant as Latin America and Sub-Saharan Africa. Interpretations of the initiative vary from necessary and welcome assistance to the developing world to “debt-trap diplomacy” designed for economic coercion.
Purpose aside, a recent refocus of efforts on lower-risk projects, fewer participants at BRI conferences, and growing criticism of the initiative suggest the strategy may not have met China’s expectations. Historical analysis offers several key takeaways.
Notably, large loans supporting ambitious construction projects burdened many partner nations with unsustainable debt, pushing several participants into sovereign default crises. Poor risk assessment in loan selection, lower-than-expected payoffs on some completed projects, and global economic turbulence from COVID-19 and Russia’s invasion of Ukraine have slowed repayments and heightened debt distress abroad while also worsening China’s domestic debt crisis.
In addition, harmful environmental effects plague many construction projects due to inadequate or incomplete impact assessments. The use of fossil fuel power plants to power construction sites has worsened air pollution in host nations, and industrial impacts on local climates have threatened biodiversity and destroyed habitats necessary for local economies.
Furthermore, China’s habitual use of its domestic labor force rather than employing local talent has drawn criticism and protest from host countries, even spurring violent attacks on Chinese nationals near some project sites. Employing Chinese workers on foreign projects may allow companies to cut costs, but it also limits the positive impact on local economies by reducing long-term skills transfer.
Despite the strategy’s flaws, BRI’s economic benefits appear significant. Data suggest total financing to developing markets exceeds $331 billion between 2013 and 2021, and a separate World Bank assessment projects the infrastructure initiatives will increase global real income by 0.7 to 2.9%. More broadly, BRI’s emphasis on infrastructure funding has spurred an associated increase in development projects from other states and international organizations through competitive pressures, indirectly boosting net global development spending.
While President Xi’s keynote address at the third Belt and Road Forum in October 2023 trumpeted the initiative’s successes, the diminished event attendance and shifting discussion topics suggest a changed focus, dubbed by some analysts as BRI 2.0. Its three high-level meetings focused on connectivity, green development, and the digital economy, indicating a clear departure from the concrete and steel construction projects that defined much of the BRI’s first decade.
机不可失，失不再来 – Opportunity Knocks But Once
Representatives from the United States and the EU took advantage of China’s G20 absence to announce two key infrastructure projects within the broader Partnership for Global Infrastructure Investment (PGII) strategy to rival BRI’s global reach. First, the broader IMEC aims to stimulate “economic development through enhanced connectivity and economic integration between Asia, the Arabian Gulf, and Europe.” Plans for the multilateral project envision two corridors, one connecting India to the Arabian Gulf and another connecting Gulf ports to Europe, reducing transport times between India and Europe by 40 percent. Accompanying both routes, planners envision running cables for electricity and digital connectivity and pipelines to route Indian hydrogen to European customers seeking alternative energy sources.
Western allies also reaffirmed support for the Trans-African Corridor, a railway system connecting the Angolan Port of Lobito with landlocked regions in the Democratic Republic of the Congo (DRC) and Zambia. While the African governments will retain leadership of the development project, U.S. and EU leaders offered financing and technical assistance, along with critical infrastructure development support along the rail line. The interior African regions produce much of the world’s cobalt and copper – key minerals in renewable energy technologies – and a successful project could loosen China’s grip on the green energy value chain.
万事开头难 – All Things are Difficult at the Start
Undoubtedly, the IMEC and TAC projects face enormous challenges. Most immediately, planners must identify the financial sources required for such ambitious infrastructure projects. Each initiative envisions greater private sector involvement, and the risk and longevity of large-scale foreign investments compounded by clear evidence of BRI debt burdens may deter potential financiers. Infrastructure development projects also historically suffer high rates of corruption, potentially further reducing net profits and disincentivizing private sector support. Furthermore, the legal fees and customs negotiation expenses between state representatives on cross-border construction projects may discourage additional investors.
Rail and seaport construction projects, and the industries they serve, may also worsen economic, social, and environmental conditions for residents in host nations. As observed from several BRI sites, environmental impacts from port construction could damage sea life habitats and worsen air quality, so any project supported by U.S. development financing can and should be slowed to facilitate comprehensive environmental assessments and impact mitigation measures. Worse, labor conditions at the DRC’s cobalt mines, key targets for the TAC railway, notoriously lag international standards, with high death and injury rates and child labor practices. Though a Western-backed railway could enable greater trade of key minerals for the DRC and Zambia, U.S. and EU leaders must ensure any funding does not support exploitative labor practices.
Geopolitical tensions further complicate collaborative projects in the region. Certainly, G20 representatives declared support for the IMEC and TAC during a period of relative peace in the Middle East. Three years earlier, the Abraham Accords established a foundation for economic and diplomatic ties between Israel and neighboring Arab countries, and Saudi Arabia indicated a willingness to normalize relations with Israel as it diversifies its foreign policy portfolio. However, formal bilateral agreements require significant negotiation on the treatment of Palestinians in Gaza and the West Bank, Israel’s relationship with Jordan remains fraught, and the war in Yemen has driven a wedge between the UAE and Saudi Arabia. Worse, not a month after the initiatives’ announcement, Hamas’s deadly attacks on Israel and the subsequent retaliatory action in Gaza upended regional stability. Western diplomatic efforts in the region now focus on the return of civilians captured by Hamas and the restoration of peace in Gaza. While Israel never intended to be an initial partner to the trade corridor, conversations on intercontinental infrastructure projects in the region have and should take a back seat to safety and security issues.
一步一个脚印 – Every Step Makes a Footprint
Despite these economic, social, and political challenges, the need for an alternative to China’s BRI necessitates near-term planning for both the IMEC and TAC. The United States should work with partner nations now to set the groundwork for a successful large-scale international development project.
First, governments should build upon existing private-sector incentives developed through the G7’s PGII, prioritizing efforts to reduce risk and ease barriers to entry for business abroad. Frameworks created through the G7-led effort should be amplified with federal aid funding to leverage the power of private capital while minimizing debt hazards to foreign or domestic economies.
Next, diplomats and policymakers should collaborate to codify standards for high-quality infrastructure development along the proposed corridors. Such standards should necessitate quality assurance and reliability requirements, fair and equitable labor practices employing partner nation residents, environmental impact mitigation procedures and limitations, and accompanying training centers to ensure host nations can operate and replicate the Western-backed projects. Practices should also ensure that supported projects adhere to Extractive Industries Transparency Initiative principles to promote equitable and accountable value chains in resource-oriented industries. Effective frameworks should facilitate the power of macroeconomic growth while minimizing negative externalities such as those driven by irresponsible BRI development lending.
Critically, both IMEC and TAC should prioritize investments in digital infrastructure. Global internet connectivity continues to improve, but the developing world still faces a digital access gap. Just 51% of the Middle East and North African population has access to mobile connectivity compared to 85% in North America. China’s leaders intend to meet this need, with greater investments in telecommunications and cloud computing through the Digital Silk Road (DSR), but such investments could advance digital infrastructures counter to democratic values with significant security and privacy vulnerabilities inherent in Chinese technologies. A Western-coordinated digital drive could promote an alternative to DSR, allowing the United States and its allies to set the standards of the digital economy and lead in digital governance. G20 leaders can establish foundations for open and secure internet systems to support free markets and intellectual property rights, defending against the malign usage of emerging technologies and halting the spread of digital authoritarianism.
Through investments in digital infrastructure along each corridor, the United States and its allies should also develop the foundation for an international emerging technology coalition. Several key nations along the IMEC, including Saudi Arabia and Israel, envision artificial intelligence (AI) as cornerstones of their future economies and others have begun seeking technology partnerships with Chinese leaders. Connectivity with advanced European partners would accelerate cooperative data-sharing agreements, promote interoperability and software development, cultivate global talent and technology literacy, and facilitate the creation and operationalization of democratic AI standards and norms. Spearheading such efforts would strengthen U.S. leadership in emerging technologies and support their safe usage in support of human rights and inclusive growth.
Most importantly, the IMEC and TAC should be viewed as development baselines for the rest of the Global South. Successful implementation in current partner nations should demonstrate the beneficial impact of investment in physical and digital infrastructure, so the project’s architecture should be prepared for expansion to new markets along the route. In particular, an expansion of African rail lines could connect landlocked markets, and additional digital expansion across India and Southeast Asia could leverage the power of the region’s digital economy to improve global connectivity.
水滴石穿，绳锯木断 – Water Drops Cut Stone, Rope Saws Cut Wood
Launching an ambitious intercontinental infrastructure project will require years of planning, deep financial support, and careful diplomatic negotiations, only complicated by continued conflict in Ukraine and Gaza. However, the IMEC and TAC announcements land at a pivotal moment, as emerging nations jockey for influence and traditional alliances face uncertainty. Successful economic corridors linking partners across three continents could offer necessary assistance and welcome stability for emerging economies while codifying favorable partnerships for Western allies.