Pearls and Irritations

The feverish opposition to the Victorian government’s MoU over the Belt and Road Initiative is nonsensical and shows a worrying lack of understanding from those who should know better. If we are to avoid drifting into a global backwater, we have to find ways to integrate our economy into these new developments.

Two facts become clear when observing the increasing criticism of Victoria’s memorandum of understanding with China over the Belt and Road Initiative. The critics do not understand the nature and content of the MoU, nor do they understand the BRI.

The MoU is a general non-binding document that commits Victoria to no specific project. It merely provides a framework for Victorian firms to participate in BRI projects. If projects were to involve Chinese investment in Australia, they would require Foreign Investment Review Board consideration and federal government approval.

Given that the federal government has never indicated outright opposition to the BRI – the Prime Minister himself has expressed a neutral position – and has indeed welcomed Australian companies’ involvement in it, the feverish opposition to the MoU from media commentators, academics and some MPs because they believe it undermines Australia’s national security and foreign policy is nonsensical.

Even if under the proposed new Foreign Relations Bill, Victoria’s MoU were to be “abolished”, there would still be no constraints on the Victorian government and companies from participating in BRI projects. In other words, the MoU has symbolic, but no practical, importance.

Furthermore, many critics of the BRI either do not know, or choose not to know, what the BRI is and how it came to evolve. To hear the head of the Australian Strategic Policy Institute last week simplistically describe the BRI as a “Chinese Communist Party con job” is both risible and worrying, given that ASPI, a so-called “independent” think tank in Canberra, presumably has some influence on policy thinking on China.

The BRI is, in fact, an extension of China’s western development strategy that originated in the 1990s to promote economic activity in China’s western regions. The BRI, which was first announced by Xi Jinping in Kazakhstan and Indonesia in 2013, began as a kind of badging exercise linking existing infrastructure projects in western China and beyond. It has since evolved and grown, although it is still a vague concept. Significantly, no central government agency was set up to manage BRI, and the participating agencies were mostly economic ones, with fairly limited involvement from the foreign ministry or national security agencies.

In fact, the aim of BRI was based on the needs of China’s domestic economy, in particular to integrate it into the global economy. A key part was to move excess industrial capacity into China’s western regions and across its borders through central Asia and Asia Minor, and on to Europe (the “belt”). The maritime component, through the South China Sea and the Indian Ocean, was the “road” and it included Australia.

BRI is a massive and potentially transformative infrastructure program. It remains, however, a work in progress that is too big for even a country with China’s resources to manage easily. It is to be expected that such a concept would face many valid criticisms, including within China itself. Implementation of projects involving risk-averse provincial governments with their own agendas, and whose active participation is essential, has been problematic.

The main criticism in Australia, however, has been that China, through the BRI, is implementing a vast geostrategic plan to dominate much of the globe, including by taking over key strategic assets by debt-entrapment of poorer countries. As the BRI concept has developed, China has become much more attuned to the potential geostrategic benefits (and risks). This should not surprise anyone. How could an infrastructure program of this scale not have such implications? Just as the post-World War II Marshall Plan for the reconstruction of Europe (to which BRI has sometimes been likened) had both economic and political ramifications, so too does BRI.

But these need to be seen in perspective. Much of the debt-entrapment criticism has been debunked. For example, the Hambantota port project in Sri Lanka, in which the port has been leased to a Chinese company, has been shown to be much more complex than critics initially thought. There was no debt-equity swap and the loans to Sri Lanka have not been cancelled. The Sri Lankan government retains ownership of the port.

A plan to integrate east Asia, central Asia, the Indian sub-continent, through the Middle East to Europe, with physical and digital communications and transport infrastructure, is indeed ambitious – and one that will undoubtedly happen over time. China will certainly be critical to this and play a prominent, but not necessarily dominant, role. There are numerous sovereign independent countries along the way, all with their own interests and agendas. No one country will dominate this and while China will be an extremely influential partner, it will not have things all its own way. One way or another, BRI, or concepts similar to it, will develop, and the Eurasian land mass will, in time, become a massive economic powerhouse.

For a geographic outlier such as Australia this poses challenges. If we are to avoid drifting into a global backwater, we will have to find ways to integrate our economy into these prospective new developments. Supplying our traditional resources and energy products probably won’t be the major part of this – we will have to develop knowledge-based skills, of which we have many, to supply to the region. Rather than turning our backs on BRI at this early but important stage, we should be looking for positive ways to work with China. Turning our backs on BRI is a poor option.”

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