It’s Corrupt Democracies That Are The Source Of Belt & Road Debt Problems, Not China Per Se
Op/Ed by Chris Devonshire-Ellis
A recent major issue that has been flagged up as criticism of China’s Belt & Road initiative is the huge amount of debt that China appears to be loading onto an increasing number of countries.
Concerns over Sri Lanka’s debt, and of projects being renegotiated or canceled in Pakistan, Malaysia and elsewhere have all made headlines, while the newly elected government for the Maldives has just announced its debt to China, for the building of various infrastructure and property projects, was more than US$3 billion against an initially stated US$1.5billion. US$3 billion is more than the Maldives government raises in two years.
Initial claims seem to exclusively point fingers at China, leading to accusations of Beijing acquiring land and sovereign assets as nations default. The Maldives has given up seven islands to a variety of Chinese companies, while Sri Lanka’s Colombo Port has been leased to China for 99 years.
However, the reason for this situation needs to be looked at more carefully. While it may well be the case that China takes advantage of the opportunity, it is also the case that the democratic system itself is flawed in many countries, including those in Europe. There has long been a tendency for career politicians to use their election as a means to pilfer state coffers – and with just a three-four year timeframe -or less – to do that before the next elections take place, are keen to enter into quick deals that while are trumpeted as benefiting the nation, also significantly line the pockets of politicans concerned.
A case in point are allegations against the then Sri Lankan President Rajapaksa’s Government,who negotiated a loan from China at a higher repayment rate than China had actually asked for. This was accommodated; with the national level bank originally earmarked for providing the capital at 2% interest moved out of the way, to be replaced by a more obscure Provincial level bank who provided the loan instead at 6%. One can imagine where the 4% balance ended up.
Despite the IMF international fraud team being brought in, and denials by Rajapaksa that the allegations were all down to political smears from his opponents, no charges were bought. Voted out of office though in a subsequent election, he has made a political comeback and is now Prime Minister.
Malaysian Predisent Najib Razak also signed off Belt & Road deals with China, only to be deposed earlier this year and is now incarcerated following a scandal involving the countries sovereign fund. Over US$10 million belonging to Malaysia’s wealth fund manager was found in his personal account, while jewelry worth an astonishing US$273 million was found in his apartment. His replacement as elected President, Mohamad Mathathir, is currently in the process of renegotiating Belt & Road projects previously signed off by Razak.
It is a similar tale in several other nations – democratically elected politicians then seize their time in power to cash in. These are people who support “democratic values” then use them to steal. My view on the matter is that while democracy is not an especially good political system, it is the best of a bad bunch. However for it to work, countries need checks and balances in place. If they have not, then international assistance is available from global institutions to help them initiate these. It would also be a good idea if stealing while in public office be made into a treasonable offense. The problem is that in many countries, that four year elected window is seen as a golden opportunity to grab as much as one can.
China takes advantage of this, that is for sure. But is it really the protagonist? A global look at the actual health of the worlds democracies and their corruption tendencies would be very much in order. Fixing the problem will stop countries such as China taking advantage of the situation.
Silk Road Briefing is produced by Dezan Shira & Associates. Chris Devonshire-Ellis is the practice Chairman. The firm has 26 years of China operations with offices throughout China, Asia and Europe. Please refer to our Belt & Road desk or visit our website at www.dezshira.com for further information.