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CGD in the News

November 28, 2018

Indo-Pacific nations wavering under weight of China's 'One Belt One Road' (The Mainichi)

By Satoshi Matsui 

From the article: 

MALE, Maldives/HAMBANTOTA, Sri Lanka/NEW DELHI -- As China expands its economic sphere of influence over the Indo-Pacific region under President Xi Jinping's "One Belt One Road" policy, countries receiving financial support to build new infrastructure and other projects hold some expectations. Yet they also harbor apprehension over mounting debts and worries over the transparency and sustainability of these projects. 

According to a March 2018 report released by the non-profit American-based think tank Center for Global Development, 23 of the 68 countries along China's "New Silk Road" are at high risk of defaulting on their debts to Beijing. The report warned that there are grave concerns that eight countries, including Pakistan, the Maldives and Djibouti, may find it particularly difficult to pay back the price of being part of One Belt One Road. 

Read the full article here

 

November 28, 2018

Risks bubbling beneath Djibouti’s foreign bases (Asia Times)

By Bertil Lintner 

From the article: 

The Republic of Djibouti is on any measure one of the most stable countries in eastern Africa. There are no known Islamic radicals here and, unlike its immediate neighbor Somalia and Yemen across the Bab el-Mandeb Strait, it is not plagued by a vicious civil war.

The 1998-2018 war between Ethiopia and Eritrea, two other next door countries, significantly did not spill over into Djibouti. 

... 

According to a March 2018 report by Center for Global Development, a US-based think tank, Djibouti has borrowed more money from China to pay for infrastructure projects than it can analysts doubt it can afford. 

Read the full article here

 

November 23, 2018

One African Nation Put the Brakes on Chinese Debt. But Not for Long. (The New York Times)

By Dionne Searcey and Jaime Yaya Berry 

From the article: 

DAKAR, Senegal — The new international airport in Sierra Leone was supposed to be a shiny welcome center for travelers — a symbol showing that after a devastating civil war and an Ebola epidemic, the nation was finally open for business.

But last month, the government decided that the multimillion-dollar price tag was too high, so it canceled the financing that made construction possible: a more than $300 million loan from China that Sierra Leone might have struggled to repay. 

... 

The monetary fund has flagged Djibouti, site of a large Chinese military base with live-fire exercises in the desert, as having potential problems with mounting debt, most of which is owed to the Chinese government’s Export-Import Bank, according to a report this year from the Center for Global Development. Yet Djibouti shows no signs of limiting new borrowing for projects, and it’s unclear whether these will earn enough revenue to pay off their debts. 

Read the full article here.

November 22, 2018

Maldives’ FM to renegotiate debt issue with China (China Knowledge)

By China Knowledge 

From the article: 

Maldivian President Ibrahim Mohamed Solih has called for a review of Chinese-bankrolled projects initiated under the ex-president Abudlla Yameen, after he assumed office earlier on Saturday. The Maldivian Foreign Minister has announced his plan to visit China before the end of this year, after holding talks with the Chinese ambassador in Male, on Monday. He intends to renegotiate the bilateral debt issue.

According to Washington D.C. based think tank, Center for Global Development, China's loans to the Maldives currently stand at USD 1.3 billion, which is more than 25% of the country’s annual gross domestic product (GDP). Critics have argued that free-trade agreement (FTA) negotiated by Yameen was one-sided with no concrete benefits bought in for Male.

Chinese foreign office spokesperson, Geng Shuang, has said that China remains determined to deepen cooperation and maintain a sound development momentum of its relations is Maldives. He believes that the bilateral FTA will bring mutual benefits for both nations. 

Read the full article here.

 

November 21, 2018

Belt and Road helps global development (South China Morning Post)

By Alex Lo 

From the article: 

Does China practise stealth imperialism by saddling developing countries with loans they can’t afford with its “Belt and Road Initiative” (BRI) and compromising their sovereignty? 

United States Vice-President Mike Pence made that controversial claim at the Asia-Pacific Economic Cooperation (Apec) summit in Papua New Guinea.

“Know that the US offers a better option,” he told Apec. “We don’t drown our partners in a sea of debt, we don’t coerce, compromise your independence. We do not offer constricting belt or a one-way road.”

Actually, his claim that the US doesn’t “coerce, compromise your independence” is demonstrably false, given the long history of American invasions, CIA-sponsored coups, assassinations, sanctions and subversion around the world. And there is a rich economic literature on the failures of Western aid in the third world. But let’s skip all that, since we are talking China. 

... 

So who’s right? Actually, both are being disingenuous, but Pence has vastly exaggerated his claim. Fortunately, there are independent bodies that study these things. A recent study by a Washington-based think tank, the Centre for Global Development, studied the likelihood of debt problems in 68 countries identified as potential BRI borrowers. The centre’s board is headed by Lawrence Summers, the former US treasury secretary. 

Its study concludes that only eight countries are at particular risk of debt distress: Djibouti, Kyrgyzstan, Laos, the Maldives, Mongolia, Montenegro, Pakistan, and Tajikistan. Surveying the whole range of borrowing countries in China’s sprawling infrastructure-financing programme, it concludes that the risk of widespread debt distress is unlikely.

“The majority of BRI countries will likely avoid problems of debt distress due to BRI projects,” it concluded. 

Read the full article here.

November 20, 2018

How China’s Belt and Road Initiative became a huge geopolitical controversy (The Independent)

By Kim Sengupta 

From the article: 

An international conference took place last week in Gwadar, a dusty Pakistani town perched on the edge of the Indian Ocean – an unlikely place, one would have thought, for Imran Khan’s government to invite dignitaries from 26 countries. But the real aim was to display a vision of the future – a mighty port city and commercial centre for the region which would put Dubai and Bahrain in the shade.

Not everything went according to plan. While the delegates were being shown around the site of this projected mega city, gunmen on motorcycles shot dead three workers and injured five others constructing homes in the suburbs for future residents. It was the fourth fatal shooting in the area in recent months; more than three dozen builders had died in a series of attacks, with the Baloch Liberation Front, a group seeking an independent Balochistan, being held responsible. 

... 

It has now been almost a decade since China overtook the US as Africa’s biggest trading partner. Nine countries have signed Belt and Road agreements with Beijing and 20 others are engaged in talks to do so. The Chinese government pledged $60bn in preferential loans and investments at an economic forum for Africa three years ago.

African countries, so far, have been readily receptive to the Chinese loans which have been pouring in. But concerns have been raised too, with the Centre for Global Development finding, for instance, that Djibouti, where the Chinese now have a military base, has seen its foreign debt swell from 50 per cent to 85 per cent of GDP with the largest amount by far owed to China. The Chinese company CMPort, the same one which built Hambantota in Sri Lanka, now under Chinese control, is building a port in the country at Doraleh. 

Read the full article here.

 

November 18, 2018

Maldives has a new president. Here’s the 5 big issues he faces (Al Jazeera)

By Zaheena Rasheed

From the article: 

Cannons blasted the balmy air of Male with a 21-gun salute on Saturday, just moments after Ibrahim Mohamed Solih finished taking the oath of office as the seventh president of the Maldives.

It was a momentous occasion, one that capped a tense, months-long presidential contest, and a subsequent period of post-election uncertainty following years of political turmoil in the small Indian Ocean island nation. 

... 

Chinese Debt 

In his speech, Solih said the Maldives was “in a precarious financial situation” owing to “reckless development projects”, and appealed for help from foreign countries and international organisations to stabilise the economy.

Under Yameen, Beijing had loaned an estimated $1.5bn to the Maldives to fund an upgrade of the country’s main international airport – a bridge linking it to Male – as well as massive housing projects in a new population centre.

The debt figure is more than a quarter of the country’s annual gross domestic product.

In March, the US-based Centre for Global Development in March identified the Maldives as one of eight countries subject to high debt distress because of investments from China. 

Read the full article here

 

November 18, 2018

Japan seeks G-20 push for transparency on emerging-country debt (Nikkei Asian Review)

By Tatsuya Goto 

From the article: 

TOKYO -- Japan will push both lenders and borrowers to disclose more information regarding debt in emerging economies as the country chairs the Group of 20 next year, hoping to prevent such nations from falling into a debt trap.

Emerging economies in Asia and Africa have been developing their infrastructure in recent years with backing from China's Belt and Road Initiative. Beijing poured a total of $20.1 billion into 64 countries along historic Silk Road trade routes in 2017, up 32% from the year before. Eight of those nations, including the Maldives and Laos, will face growing debt risks as a result, according to the Center for Global Development, a nonprofit think tank based in the U.S. 

Read the full article here

 

November 15, 2018

The fight for Doraleh: the legal battle over Djibouti’s port (Ship Technology)

By Elliot Gardner 

From the article: 

A convoluted legal battle is taking place over the Port of Doraleh in Djibouti. The country has illegally seized control of the port from operator DP World and reneged on its contract. And now a special report on the arms trade in the Horn of Africa has warned that the port could potentially be used as an illegal weapons hub. Elliot Gardner untangles the story behind the fight for control over the disputed port. 

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The China factor: Djibouti’s imposing creditor

It’s been hypothesised that the reason behind the port seizure is Djibouti’s significant public debt to China. According to US-based think tank the Center for Global Development, Djibouti’s debt is projected to soon reach 88% of its $1.72bn GDP and by the end of 2016, 82% of this debt was owned by China. It has been floated that the Government of Djibouti’s actions may be a veiled attempt at appeasing its East Asian creditor. 

Read the full article here

 

November 12, 2018

China’s Belt and Road Initiative needs upgrades to help heavily indebted partners, Standard Chartered says (South China Morning Post)

By Eric Ng 

From the article: 

Debt relief by China can prevent financial crises in developing nations included in Beijing’s “Belt and Road Initiative”, but greater project transparency and better debt management are needed to boost the ambitious programme’s sustainability, according to Standard Chartered. 

“China’s ability, and apparent willingness, to provide bilateral debt relief suggests a low risk of systemic debt fallout,” said Kelvin Lau Kin-heng, the Greater China senior economist at the bank, which derived about 41 per cent of its pre-tax underlying profit from Southeast and South Asia, the Middle East and Africa – the key markets of the initiative – in the year’s first half. 

... 

Eight belt and road nations – Djibouti, the Kyrgyz Republic, Laos, the Maldives, Mongolia, Montenegro, Pakistan and Tajikistan – are highly vulnerable to debt distress, with their debt owed to China making up 44 to 91 per cent of their total public and public-guaranteed external debt, according to the Washington-based non-profit think tank Center for Global Development.

Read the full article here
 

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