Millennium Post

For the fear of debt trap

Chinese President Xi Jinping's ambitious Belt and Road Initiative (BRI) project, which envisages developing modern trade infrastructures like highways, ports, and rail links in more than 70 countries across continents, has been rebuffed by a number of countries in its neighbourhood. Apart from BRI projects, China has also entered into bilateral trade deals with these countries and signed a slew of MoUs for new projects with the help of loans from the Chinese government and banks. In a recent visit to China, Malaysian Prime Minister Mahathir Mohamad made headlines for his strong rebuff to BRI projects. Mahathir has cancelled a key BRI project, the East Coast Rail Link as well as two gas pipeline projects implemented by China. Explaining the rationale behind the cancellation of these projects, the Malaysian premier in a press conference said, "I believe China itself does not want to see Malaysia a bankrupt country." Earlier, Myanmar drastically scaled down a deep-water project being developed by China as part of the BRI. The newly-elected government in Pakistan also has scaled down a major railway project being executed by China. Similarly, leaders of the opposition alliance that won the recently concluded election in the Maldives have vowed to review all the Chinese projects for which MoUs have been signed. Earlier, Sri Lanka had proposed to hand over an airport that was developed by China but could not run it successfully as there were not enough number of passengers using the airport and the Sri Lankan government was facing difficulty in repaying the loans taken for these projects.

In all these countries where the government is reconsidering Chinese projects, there has been a change in the regime where the people voted against the government that leaned too close to China. Former Sri Lankan President Mahinda Rajapaksha who oversaw massive Chinese investments in the country including in a deep-water strategic seaport was defeated in the 2015 presidential election by Maithripala Sirisena, the current president. The new government has not only put a brake on the growing influence of China in the island country but also began reviewing all the projects implemented and funded by China. Sirisena had talked about the folly of Chinese investments as they lead to the debt trap for the country during his election campaigns.

In Pakistan, the PML-N government of Prime Minister Nawaz Sharif, which approved the $60 billion China Pakistan Economic Corridor (CPEC), was ousted by Pakistan Tehreek-e-Insaf (PTI) in the recent election and the PTI chief, Imran Khan, has become the Prime Minister of the country. Despite being a close friend of China, the new Pakistan government has begun reviewing current and future Chinese projects. Wary of the Chinese debt trap, Pakistan is said to have started looking for new investors for CPEC projects while scaling down an important rail-link project worth US$ 4 billion to US$ 6 billion.

In Malaysia too, the Najib Razak government which favoured Chinese projects has been ousted from power by the voters in May, this year. "The projects will not go on. At the moment, the priority is reducing our debt. it will be deferred until such time when we can afford, then maybe we will reduce the cost. If we have to pay compensation, we have to pay. This is the stupidity of the negotiations before. We must find a way to exit these projects," Mahathir is quoted to have said in the report.

In the strategically located island nation Maldives, the Abdulla Yameen government which favoured Chinese investments has been defeated by a recent election in the country and the opposition alliance that vowed to review all the ongoing Chinese projects and those in the pipelines has won. The influence of China in the Indian Ocean archipelago nation can be gauged from the fact that China accounts for 70 per cent of Maldives' external debt. Besides MoUs to develop most of the road, bridge, and airport projects in the country, China is said to have bought some atolls from the Maldives, which it intends to use as a military base.

A major reason why these countries are wary of increasing Chinese investments is the fear of a debt trap. It is believed that the terms and conditions associated with projects implemented by China in foreign countries are harsh and unfair on host countries. In the name of bringing heavy investments and developing prestigious projects, China gets the host countries to sign unfair deals, deriving maximum benefits from them while the host countries are trapped in huge loans on high rates. The Malaysian Prime Minister says, "You don't want a situation where there's a new version of colonialism happening because poor countries are unable to compete with rich countries in terms of just open, free trade," he added.

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