Jan 01, 2019 News
In 2018 alone, China acquired over 20 deep water and air ports from several countries around the world.
China was able to do so by lending those countries massive amounts of money they can never repay.
The country is accused of leveraging massive loans it holds over small states worldwide to snatch assets and increase its military footprint.
Developing countries from Pakistan to Djibouti, the Maldives to Fiji, all owe huge amounts to China. Already there are examples of defaulters being pressured into surrendering control of assets or allowing military bases on their land.
Some are calling it “debt-trap diplomacy” or “debt colonialism” – offering enticing loans to countries unable to repay, and then demanding concessions when they default.
Many of these projects are linked to the “Belt and Road” initiative – a bold project to create trade route. The initiative is being pushed by China as a grand plan to connect Asia with other parts of the world through massive infrastructural projects. Under the initiative, over 70 countries appear to benefit from multimillion-dollar soft loans from China for the construction of roads, bridges, airports, deep water ports and other infrastructure.
So far, the Belt and Road Initiative has left a trail of failed projects, which furthers nations’ dependence on China. Cambodia joins nations like Malaysia, Sri Lanka and Pakistan.
Yet, the Government of Guyana recently signed a Memorandum of Understanding, (MOU) with the People’s Republic of China to join the Initiative.
Now, China has ports in Africa, Latin America, Asia and the Middle East.
Dialogo, a military magazine, recently stated that Latin America seems to be an easy target for China as the region is hungry for infrastructural development and most countries do not have the money to invest.
Dialogo said, “…China is slowly taking over the region’s strategic trade and defense points. The tactic is clear, and China uses it in other parts of the world: money for ports in exchange for power.”
The magazine highlighted Panamá, a country with two of the most important ports in the region—Colón and Balboa. Panama is one of the nations in China’s line of sight.
The Dialogo stated, “The Chinese company—Landbridge Group—is building the Panamá Colón Container Port, a terminal for neo-Panama ships, with an investment of more than US$1 billion. In addition, China’s Harbour Engineering Company Ltd. is building a port station for cruises in the Amador area.”
The magazine pointed out that closer to Guyana, in Brazil, state-owned Chinese company Merchants Port controls the Paranaguá Port, the second largest in the country surpassed only by the Santos Port.
To gain control of the terminal, the Asian company bought Brazilian company Terminal de Contêineres Paranaguá, which managed the port, for $935 million in 2017.
In 2017, the Chinese company, China Construction, showed interest in developing and funding infrastructure in Mexico’s most important port, Manzanillo. Many Chinese business people are also interested in investing in the special economic zone Mexico seeks to develop around Lázaro Cárdenas Port, in Michoacán state.
The initiative needs an initial investment of US$90 million, and focuses on promoting metallurgic and steel industries near the port.
Further, Dialogo reported that in Peru, the Chinese company—Cosco Shipping—will develop Chancay Port with an investment of about US$2 billion. The governments of Colombia and China signed a memorandum of understanding in 2016, enabling the Asian nation to develop a series of projects near Buenaventura Port. China promised an investment of US$16 million in the area.
The magazine also noted that in Uruguay, Chinese company Shangdong Baoma Fishery propelled in 2016 the development of a fishing port requiring US$200 million. Apart from the terminal, the plan includes building a plant to store fishing equipment and manufacture fishmeal.
Last year, struggling to pay its debt to Chinese firms, Sri Lanka formally handed over the strategic port of Hambantota to China on a 99-year lease last week, in a deal that government critics have said threatens the country’s sovereignty.
In recent years, China shored up its presence in the Indian Ocean, investing billions of dollars to build port facilities and plan maritime trade routes as part of its “One Belt, One Road” initiative to help increase its market reach.
Along the way, smaller countries like Sri Lanka have found themselves owing debts they cannot pay. Sri Lanka owes more than $8 billion to state-controlled Chinese firms, officials say.
Sri Lankan politicians said the Hambantota deal, valued at $1.1 billion, was necessary to chip away at the debt, but analysts warned of the consequences of signing away too much control to China.
“The price being paid for reducing the China debt could prove more costly than the debt burden Sri Lanka seeks to reduce,” said N. Sathiya Moorthy, a senior fellow specialising in Sri Lanka at the New Delhi-based Observer Research Foundation.
Sri Lanka has long been in India’s orbit, but its relationship with China has strengthened in recent years. As Western nations accused Mahinda Rajapaksa, the country’s former president, of grievous human rights abuses during the final stages of Sri Lanka’s nearly 26-year civil war, China extended billions of dollars of loans to Mr. Rajapaksa’s government for new infrastructure projects.
In July, the state-controlled China Merchants Port Holdings Company signed a deal with the Sri Lanka Ports Authority to control a 70 percent stake in the Hambantota port, which lies on the southern coast of the country.
All the countries that have signed onto tot eh Belt and Road Initiative thus far have something that China wants.
For Pakistan, it’s a route to heighten China’s trade activities.
China has a US$62B plan in the making for Pakistan and has already pumped several billion dollars into the country through loans over the past three years.
But, with all this money floating around, the people of Pakistan are crying out as they are no better off. In fact, the Wall Street Journal recently reported that Pakistanis are complaining about the shortage of jobs and even basic essentials like drinking water.
Relations between China and Pakistan on this initiative have been described as opaque, corrupt and set only to benefit China and Pakistan’s ruling politicians.
Imran Khan, Pakistan’s recently elected Prime Minister, quoted, “The real reason for building these loss-making megaprojects has always been massive kickbacks.”
On July 22, last, the Wall Street Journal reported that Pakistan’s first metro, the Orange Line, was meant to be an early triumph in China’s quest to supplant U.S. influence and redraw the world’s geopolitical map.
The Journal reported, “Financed and built by Chinese state-run companies, the soon-to-be-finished overhead railway through Lahore City is among the first projects in China’s $62 billion plan for Pakistan.”
According to the Journal, China hoped the $2B air-conditioned metro “would help make Pakistan a showcase for its global infrastructure-building spree. Instead, it has become a (symbol) of the troubles that are throwing China’s modern-day Silk Road initiative off course.”
However, it was reported that three years into China’s programme there, Pakistan is heading for a debt crisis, caused in part by a surge in Chinese loans and imports for projects like the Orange Line, which Pakistani officials say will require public subsidies to operate.
Some ministers in the recently replaced government said in interviews that they should have negotiated better terms with China, and been more open about details.
Pakistan is now one of several countries grappling with the financial and political fallout of taking on so much Chinese debt. All these loans given thus far have been contingent on using Chinese contractors.
U.S. officials have called China’s Belt and Road Project, “debt-trap diplomacy.”
The European Union and Indian officials also have stepped up criticisms of the Belt and Road initiative, saying it lacks transparency and sustainability and is designed to expand China’s strategic influence.
With the U.S. freezing all security aid and winding down economic support this year, Pakistani officials now say its financial future lies in emulating China’s emergence as a low-cost manufacturing hub.
Some diplomats believe China will keep throwing money at Pakistan, regardless of the returns. China and Pakistan have had close ties since the 1950s, when each saw the other as a counterweight to India.
Many Pakistani and Chinese business leaders are skeptical about Pakistan’s potential as a trade route, especially if railway upgrades are cancelled.
The only land route across the border into western China is a two-lane road over the 16,000-foot Khunjerab Pass. It is closed four months of the year by snow, and passes through a region claimed by India. Last year, the old Prime Minister, Nawaz Sharif, was dismissed as prime minister and in July, was sentenced to 10 years in jail for corruption.
An international airport, a State-owned Electricity Company, a National Broadcasting Network and a major roadway in Zambia, have all been taken over by China.
In fact, the takeover of the South African country has reached such “commanding heights” that some observers are asking the question, “Is Zambia the first African country to become a full Chinese colony?”
Zambia’s reported ‘colonization’ is due to its government’s failure to repay a US$8B debt to China for infrastructural projects undertaken by the Chinese under programmes like the ”Belt and Road” initiative.
Given the appalling proportions of the debt, it was no surprise that Zambia’s plight was recently highlighted on “The Dr. Mumbi show” —a widely viewed online/TV programme in Africa.
During her show, Dr. Mumbi Seraki noted that China has been given unrestrained control over Zambian resources owing to over-borrowing and the unfiltered immigration of Chinese into the country. It was also highlighted that the Chinese have taken over African neighbourhoods, marketplaces, and major business sectors such as mining and real estate.
Dr. Mumbi noted that the situation is causing conflict between the Chinese immigrants and the locals. But there is nothing that could be done by the Government of Zambia. Their hands are tied.
“If the Zambians complain about something which is done illegally, the Chinese government steps in and says don’t touch my people and the Zambian Government backs down.”
As if that is not enough, Dr. Mumbi said that China has also been grabbing up major State assets.
A few months ago, the state-owned TV and radio news channel, ZNBC, and the Lusaka International Airport were taken over by the Chinese. Even the State’s electricity company, ZESCO, is poised for takeover by the Chinese government owning their loan default, Mumbi stressed. But the government has been denying the reports.
“They (the Government) have been trying to play cool like everything is ok but they have actually been in secret talks over how their national electricity company will be taken over by China,” the African talk-show host revealed.
In addition to all this, the Chinese have closed off a road on the central point of Zambia’s capital, Lusaka.
The same fate that befell countries like Sri Lanka, Pakistan and Zambia is now looming in Kenya. That African country is at risk of losing its main port to China. Kenya will lose its lucrative Mombasa port to China should the country fail to repay huge loans advanced by Chinese lenders.
The loans have been granted for the development of the Standard Gauge Railway (SGR). Also at stake is the Inland Container Depot in Nairobi, which receives and dispatches freight hauled on the new cargo trains from the sea port.
Implications of a takeover would be grave, including the thousands of port workers who would be forced to work under the Chinese lenders. Management changes would immediately follow the port seizure since the Chinese would naturally want to secure their interests.
Further, revenues from the port would be directly sent to China for the servicing of an estimated Sh500 billion lent for the construction of the two sections of the SGR.
Now, only two years after opening, thousands of cracks are splintering the dam’s machinery. Its reservoir is clogged with silt, sand and trees. And the only time engineers tried to throttle up the facility completely, it shook violently and shorted out the national electricity grid.
This giant dam in the jungle, financed and built by China, was supposed to christen Ecuador’s vast ambitions, solve its energy needs and help lift the small South American country out of poverty.
Instead, it has become part of a national scandal engulfing the country in corruption, perilous amounts of debt — and a future tethered to China.
Nearly every top Ecuadorean official involved in the dam’s construction is either imprisoned or sentenced on bribery charges. That includes a former vice president, a former electricity minister and even the former anti-corruption official monitoring the project, who was caught on tape talking about Chinese bribes.
Then there is the price tag: around $19 billion in Chinese loans, not only for this dam, known as Coca Codo Sinclair, but also for bridges, highways, irrigation, schools, health clinics and a half dozen other dams the government is scrambling to pay for.
It doesn’t matter whether Ecuador can afford them.
China gets paid either way.
To settle the bill, China gets to keep 80 percent of Ecuador’s most valuable export — oil — because many of the contracts are repaid in petroleum, not dollars. In fact, China gets the oil at a discount, then sells it for an additional profit.
Pumping enough oil to repay China has become such an imperative for Ecuador that it is drilling deeper in the Amazon, threatening more deforestation.
Djibouti, a small East African nation, that has accepted massive loans under China‘s Belt and Road Initiative was warned by the USA to beware.
The nation is basically a desert wasteland with little or nothing to offer in terms of human capital or natural resources.
While on the surface investing in Djibouti makes no sense, the nation’s strategic location near some of the world’s busiest shipping lanes makes it a valuable economic trade link.
Djibouti serves as a strategic location for various foreign military bases, including the United States’ only permanent naval base in Africa, Camp Lemonier.
Given its military operations at Camp Lemonier Djibouti, the United States has growing concerns over China‘s operations there.
Djibouti is a constant recipient of concessionary Chinese loans under the Belt and Road Initiative. As a result, international stakeholders like the United States fear Djibouti has fallen prey to China‘s subtle debt trap.
According to reports in the Asia Times under the loan-thirsty leadership veteran dictator, Ismail Omar Guelleh, Djibouti’s government has in the past two years accepted some US$1.4bn, more than 75% of its GDP, from China. This debt is already more than Djibouti can support.
The loan mainly represents funds for China‘s Belt and Road projects like the US$590 million Doraleh Multi-purpose Port project, and the US$599 million for the Hassan Gouled Aptidon international airport.
“Cumulatively, the two projects are worth a cool billion in US dollars or well more than half of Djibouti’s gross domestic product in 2015,” the Asia Times reported.
In addition, last July Djibouti opened the first phase of the Djibouti International Free Trade Zone (DIFTZ), a US$3.5 billion project under the “Belt and Road” initiative.
China’s growing presence in Djibouti affects not only the US but also its allies and the international territories it has overseen since the end of World War II.
Global experts have warned that while Djibouti is seeking to capitalize on its strategic position as one of the world’s busiest trade routes, should the projects fail to yield the expected economic activity and growth, the country might find itself handing full control of key assets over to China.
The Asia Times reported by handing such prized asset off to China, Djibouti may well deal a blow not only to the United States’ strategic interests but also to the international order.
For more than a decade, Djibouti has been perfect naval-base material for United States, France and Japan.
“China joined the fleet, last year when Beijing opened its first permanent overseas naval base only a few kilometres from the United States Camp Lemonier.”
The Maldives government signed a free trade agreement with China during a visit to Beijing by its leader, Abdulla Yameen, it said on Friday, despite criticism from the opposition over the speed at which the deal was concluded.
Under the deal – a document of more than 1,000 pages that the Maldives parliament signed off on last week after less than an hour of discussion – China and the archipelago nation will impose no tariffs on imports from each other.
Fisheries are the main export from the Maldives, an Indian Ocean country of 400,000 that also relies heavily on tourism.
“The free trade agreement between China and Maldives signed during the visit was a milestone in the development of China-Maldives economic and trade relations,” Yameen’s official website said in a joint communique.
The Maldives government also endorsed China’s proposed Maritime Silk Road business development project, part of its vast Belt and Road infrastructure project.
China’s state-run Xinhua news agency quoted Chinese President Xi Jinping as telling Yameen that the Belt and Road programme matched up with the Maldives’ development strategies.
President Yameen’s government has had good relations with China since taking power in 2013. China has been striking deals with countries in Asia and Africa to improve its imports of key commodities and boost its diplomatic clout.
Slideshow (4 Images)
The main opposition Maldivian Democratic Party (MDP) said in a statement that the FTA contained technical details that should have been thoroughly reviewed and called for its implementation to be suspended until an independent feasibility study is conducted.
The government says the FTA will help diversify the $3.6 billion (£2.7 billion) economy and boost fisheries exports, crucial since the European Union declined in 2014 to renew a tax concession on them. Fisheries account for 5 percent of Maldives’ economic output and earned the country $140 million in 2016.
The EU declined to extend the tax exemptions because the country has failed to comply with international conventions on freedom of religion, European diplomats in Colombo say.
Maldives law prohibits the practice by citizens of any religion other than Islam, while non-Muslims are barred from voting, gaining citizenship or holding public office.
China is ‘buying up our lands, buying up our key infrastructure and buying up our sovereignty’
The exiled former leader of the Maldives said yesterday that this year’s presidential election could be the last chance to extricate his country from increasing Chinese influence, which he described as a land grab in the guise of investments in island development.
Mohamed Nasheed told reporters in Sri Lanka’s capital that current President Yameen Abdul Gayoom has opened the doors to Chinese investment without any regard for procedure or transparency.
“A large emerging power is busy buying up the Maldives,” Nasheed said, explaining that he was referring to China.
China is “buying up our lands, buying up our key infrastructure and effectively buying up our sovereignty,” he said.
China considers Maldives to be key cog in the Indian Ocean in its “Belt & Road” project along ancient trade routes through the Indian Ocean and Central Asia. The initiative is Chinese President Xi Jinping’s signature project and envisages building ports, railways and roads to expand trade in a vast arc of countries across Asia, Africa and Europe.
Reuters reported that Myanmar down-scaled plans for a Chinese-backed Kyauk Pyu Port on its western coast, sharply reducing the cost of the project. Quoting a Myanmar Government Official, Reuters said that the decision was made based on concerns that the project could leave Myanmar heavily indebted.
Myanmar is a Southeast Asian nation of more than 100 ethnic groups, bordering India, Bangladesh, China, Laos and Thailand.
The Kyauk Pyu port is a key part of China’s ambitious Belt and Road Initiative, aimed at expanding trade links across the world. While China says Belt and Road is mutually beneficial to both partners, questions have been raised about countries taking on excessive debt to build projects.
Reuters reported the Myanmar government saying that the initial $7.3 billion price tag on the Kyauk Pyu deepwater port, on the western tip of Myanmar’s conflict-torn Rakhine state, set off alarm bells due to reports of troubled Chinese-backed projects in Sri Lanka, Pakistan and Malaysia.
The revised cost would be around $1.3B, “something that’s much more plausible for Myanmar’s use”, said Sean Turnell, economic advisor to Myanmar’s civilian leader, Aung San Suu Kyi.
However, China’s state-run CITIC Group, the main developer of the project, was quoted as saying that negotiations were ongoing and that the $1.3 billion was to be spent on the “initial phase” of the port, adding the project was divided into four phases. But, it did not elaborate on cost or plans for subsequent stages.
Myanmar is increasingly reliant on diplomatic support from China.
Construction of the Myanmar port, and an accompanying special economic zone, which together were supposed to cost up to $10B, were expected to start this year. A 4,200-acre industrial park worth $2.3B was also planned to attract textile and oil refining industries.
But Myanmar officials said the experience of Sri Lanka, where the government signed over to China the lease on a strategic port to pay off Chinese-backed loans used to finance it, had raised concerns the country could be walking into a debt trap.
The new deal “reduces the financial risk dramatically” and shows that “concerns about indebtedness and sovereignty have been and can be addressed”, said Turnell, an Australian economist. He said too that “this really could become a constructive model for countries that don’t have much leverage over a giant like China.”
The final nail in the proverbial coffin’ is what China’s Belt and Road Initiative (BRI) represents for one of the poorest nations in Southeast Asia—Cambodia.
Chinese President Xi Jinping with Cambodian Prime Minister Hun Sen at the Peace Palace in Phnom Penh, October 13, 2016.
China has long held a presence in Cambodia. However, the Chinese have become unwanted guests in recent years. The more help Cambodia gets from China, the greater the influx of Chinese. And, along with them, came their rules and way of life.
But, being a country suffering from basic power and sanitation issues, Cambodia welcomed the hefty cheques, soft loans and infrastructural plans from China with open arms. Between 2013 and 2017, China “invested” US$5.3B in the country – that’s more money than the Cambodian government did.
While these and other initiatives were said to be geared to better the lives of Cambodians, the reality could not have been further away from this dream.
Even before the Belt and Road Initiative, China secured a foothold in Cambodia that allowed it to exude a certain influence over the country. However, international onlookers have said that Cambodia sealed its fate as being fully dependent on China when it signed the Belt and Road Initiative.
For Cambodia, the Belt and Road Initiative serves as a continuation of what began many years ago. In fact, some of the projects that existed before are now linked to the Belt and Road Initiative.
At present, China is at work building a deep water port, airport and virtual city on 45,000 hectares of Cambodian land. The work is being done under the supervision of solely Chinese contractors. The projects brought no jobs for locals.
While the work started before Road and Belt Initiative, the projects now have direct links to the initiative.
Back in 2008, China’s Tianjin Union Development Group (UDG) was granted a 99-year lease to around 20% of the country’s total coastline at the modest price of US$30 per hectare.
Cambodia’s Constructors Association has estimated the so-called “Pilot Zone” project’s total cost at US$3.8 billion.
The amount of land leased is more than three times the legal limit under Cambodian land law, which caps land concessions at 10,000 hectares.
The concession also includes land that was previously protected from development within the Botum Sakor National Park, but was made available for private purchase by a royal decree.
Last June, Asia Times reported that Cambodian villagers and environmental activists were in frequent disputes with the Chinese company, claiming UDG has made use of Cambodian military police to enforce its claim.
Some locals say they have been violently forced off their land by security forces, with homes dismantled and burned to the ground, according to a report by Licadho, a local human rights group.
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