What is One Belt, One Road (OBOR) initiative or BRI?

INTRODUCTION TO ONE BELT, ONE ROAD (OBOR) INITIATIVE (AlSO KNOWN AS BELT AND ROAD INITIATIVE (BRI)

One belt one road, also known as the Belt and Road Initiative (BRI) is a project initiated by Chinese President Xi Jinping. Its objective is to build trade routes between China and the countries in Central Asia, Europe, and Indo-Pacific littoral countries. (Littoral countries means situated on the shore of Indian and the Pacific Ocean).

OBOR/ BRI is a network of roads, railways, oil pipelines, power grids, ports, airports, dams and other infrastructural projects meant to connect China to the world.

It was announced in the year 2013 with an objective to rejuvenate the ancient trade routes connecting Asia to Europe. (known as the Silk Road or the Silk Route). The project’s target year of completion is 2049.

The OBOR initiative has been bifurcated into two parts:

1. The ‘belt’ refers to the ‘Silk Road Economic Belt‘ which is land-based. It will connect China with Central Asia, Eastern, and Western Europe. (see image above)
2. The ‘road’ refers to the ‘21st Century Maritime Silk Road’ which is sea-based. It will connect China to South-East Asia, Africa, and Central Asia.

Six economic corridors and one maritime route have been proposed under the OBOR:

1. New Eurasian Land Bridge (connect Western China to Western Russia)

2. China – Mongolia – Russia Corridor (North China to Eastern Russia via Mongolia)

3. China – Central Asia – West Asia Corridor (Western China to Turkey via Central and West Asia

4. China – Indochina Peninsula Corridor (Southern China to Singapore via Indo-China)

5. China – Pakistan Corridor (South-Western China to and through Pakistan)

6. Bangladesh – China – India – Myanmar Corridor (Southern China to India via Bangladesh and Myanmar)

7. Maritime Silk Road connecting Coastal China to the Mediterranean via Singapore-Malaysia, the Indian Ocean, the Arabian Sea, and the Strait of Hormuz.

As we can see, OBOR is an ambitious project and it encompasses almost 78 countries. It is the world’s largest infrastructure project. China has planned around $1 trillion of investment in various projects by providing loans to the countries involved at a low cost.

OBJECTIVES OF CHINA BEHIND THIS INITIATIVE

1. China wants to develop international clout by expanding its influence. It feels isolated as it is not a part of G7 countries. Hence, OBOR will enable China to exert greater regional influence.
2. The GDP of China has slowed down in recent years. China expects the OBOR initiative to boost its GDP by boosting trade. China will find new markets for its product.
3. The Chinese model of growth had been investment-led. It has led to excess capacity. This excess capacity will be channelised effectively if China ventures into newer markets for its export.
4. It will boost Yuan’s usage amongst the countries and strengthen the role of Yuan as an international reserve currency.  (Further readings: //www.caixinglobal.com/2017-06-08/101099268.html)
5. It will fix regional disparities in China. The Eastern and Southern regions of China have lagged behind in terms of growth. These regions will be now better connected to the world.

[You may also read- IMF adds Renminbi in the SDR basket]

CHALLENGES FACED BY CHINA

1. Some of the countries involved have a very low sovereign credit rating. These countries with low credit-worthiness might not be able to service their debt. This would affect China financially.
2. Countries in middle-east are unstable and possess a risk to the OBOR initiative.
3. There might be a political backlash in poor countries if they feel they are being exploited by China. This backlash has already occurred in countries like Srilanka, Myanmar, Africa, when they could not service their debt. The investment made by China in these countries did not generate enough profits. Hence, there might be a problem of poor countries left laden with massive debt. [Srilanka had to hand over its Hambantota port and 15000 acres of nearby land to China on a 99 year lease as it could not repay the Chinese loans]

BENEFITS FOR THE OTHER COUNTRIES INVOLVED

• It could bridge the infrastructural deficit  in developing countries like Afghanistan and Pakistan
• These countries could see a boost in their GDP with increased investment and increased trade.
• As per a new report, China’s OBOR/ BRI initiative will lead to a boost in Global GDP by over $7 trillion per annum. It will directly and indirectly benefit a lot of countries

But, as already mentioned, Chinese investments had led to political backlashes in the past. Charges of environmental degradation and labour exploitation were leveled against them. 

Also, the loans might be cheap but they come with riders. The countries have to source material from China which results in an increase in the cost of borrowing.

Lastly, it is not sure whether the poor countries will be able to benefit from greater trade as they already run a huge trade deficit with China.

INDIA’S POSITION

India has boycotted the OBOR initiative due to the following reasons:

• China-Pak Economic Corridor(CPEC) passes through the Indian territory (Pak-occupied Kashmir). It trespasses India’s sovereignty and territorial integrity.
• India has a dominance in the Indian Ocean and is worried about the Chinese investment in the Maritime route through the Indian Ocean.
• The OBOR initiative lacks transparency.

CONCLUSION

India has much to lose out in terms of economic boost through greater integration with other countries.  India also risks isolation as all its neighboring countries (apart from Bhutan) are a part of this initiative. To mitigate the damage, it should build ties with other countries and increase its spending on infrastructure.

[You may also read- The trade war between the US and China explained]

Updated on 27/07/2020:

China has certainly had some successes with Belt and Road. The World Bank estimates about $575 billion worth of energy plants, railways, roads, ports and other projects have been built or are in the works across the globe. More recently, though, its progress has slowed...

Myanmar scaled back a port deal, while Malaysia with a new government renegotiated a rail project last year. Pakistan did the same with its railway effort signed last month….

Source: Bloomberg

Now, China and Pakistan have been working together since last month (June 2020) to revive the BRI/ OBOR project. They have signed deals for two hydro-power generation projects costing $3.9 billion in the Pakistan Occupied Kashmir (PoK), and another to revamp the railways for $7.2 billion

Lastly, even Australia announced the cancellation of the two Belt and Road Initiative-related agreements on 21st April 2021.

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