JAKARTA (TheInsiderStories) – World leaders are gathering in Beijing from Thursday for a summit on China’s Belt and Road Initiative (BRI) amid growing criticism of the project. The sweeping infrastructure project aims to expand global trade links.
The initiative has funded trains, roads, and ports in many countries, but has left some saddled with debt. Some see it a bold bid for geopolitical influence, with the United States (US) particularly critical of China’ so-called “debt diplomacy”.
At the first day of the forum in Beijing, Chinese President Xi Jinping said the Belt and Road is an initiative for economic cooperation, instead of a geopolitical alliance or military league, and it is an open and inclusive process rather than an exclusive bloc or China club. While Chinese Finance Minister Liu Kun added China aims to make the BRI sustainable and to prevent debt risks.
This was welcomed by the International Monetary Fund (IMF) Managing Director Christine Lagarde. In her opening remarks, Lagarde emphasized the BRI project must enabling capital to flow more freely and increase financial inclusion.
She said, allowing the capital to flow across borders can help support inclusive growth. By enhancing investments in infrastructure, manufacturing, and even health care, she said.
Lagarde noted, right now, foreign direct investment is only 1.9 percent of GDP in developing countries. Before the global financial crisis, it was at 2.5 percent.
Making progress on major infrastructure needs will require capital flows to rise again and to be managed safely. Greater openness to capital flows can also bring down the cost of finance, improve the efficiency of the financial sector, and allow capital to support productive investments and new jobs.
Leaders from 37 countries and dozens of officials are due to attend the three-day summit, including Russian President Vladimir Putin and Italian Prime Minister Giuseppe Conte. Italy recently became the first developed economy to sign up to China’ Belt and Road programme, raising concerns among its allies.
Western governments, and particularly the US, are increasingly wary of China’ growing influence. The America, which has fought a trade war with China over the past year, has been particularly critical of the project. Vice President Mike Pence said in a speech last year China was using “debt diplomacy” to expand its influence around the world.
Other countries that are set to benefit from the project also seem to be growing more cautious. Sri Lanka, Malaysia, and Pakistan have all expressed concerns about the programme. Recipient countries worry about debt accumulation and increased Chinese influence at home.
Sri Lanka has been particularly affected – it had to hand over control over of a port to China in 2017 to help repay foreign loans. While, Indonesia involved in this project must be careful.
So far, China has prepared a draft Framework Agreement to work together in Kuala Tanjung, North Sumatra as the first phase of the project. There are reported 28 cooperation projects between Indonesia and China within the framework, the value of which is US$ 91 billion.
Executive Director of the Institute for Development of Economics and Finance, Enny Sri Hartati, said that Indonesia had not mistakenly supported BRI’s development because it would accelerate economic growth if the country responded appropriately.
She emphasized that Indonesia must be able to weigh economic factors obtained from BRI’ cooperation such as increasing production and investment and sorting out those that are in accordance with national interests.
According to her, Indonesia must prepare mitigation before cooperation is carried out. For example, preparing special trading ports for incoming foreign goods. These ports function as filter rooms or guest rooms to sort out which ones are in accordance with national interests and which ones do not.
Written by Lexy Nantu, Email: firstname.lastname@example.org