On 18 October 2023, President Xi Jinping’s landmark speech at the 3rd Belt and Road (BRI) Forum for International Cooperation outlined eight key areas for high-quality cooperation, ranging from building a comprehensive BRI connectivity network to promoting green development and advancing scientific and technological innovation.
The overall thrust of President Xi’s speech seems directed at bolstering growth in a so-called polycrisis world economy which is slowing with increasing divergences among countries. The IMF in its October 2023 World Economic Outlook forecasts that the world economy could slow to 2.9% in 2024 from an expected 3.0% in 2023, hit by the geopolitical tensions in Ukraine and the Middle East. Sub-Saharan Africa does better than the world economy and is expected to grow at 4.0% in 2024, up from an expected 3.3% in 2023. Meanwhile, developing Asia (including China and India) slows to 4.8% in 2024 down from an expected 5.2% in 2023.
In terms of President Xi’s eight areas for the reset BRI, perhaps three of them matter more than others particularly for Africa’s growth and economic development in the future. The green transition is very important given the existential problem of climate change and disasters that are afflicting much of Africa but indeed other parts of the developing world. Then there is the area of new technology that he also talks about particularly building exchanges between researchers and scientific labs as well as governance of Artificial Intelligence that is vital for African countries in attempting to leapfrog technology into the 21st century. The final important area is integrity. Some BRI projects in Africa have been criticised in the past for lacking elements of integrity, and the new framework he proposes seems timely for strengthening intuitions.
The important takeaway from the BRI over the past decade is that it sought to provide an alternative source of development finance for countries including poor countries in Africa. This financing attempted to fill the large infrastructure investment gap in African countries and came with very few conditions. In other words, unlike financing from the World Bank or the African Development Bank which can be slow and entail conditionality, large scale BRI financing was provided to African countries and projects were built on a turnkey basis built by Chinese contractors.
Not surprisingly, there was a gold rush in Africa. BRI agreements have been signed in most of Africa (perhaps some 52 countries) and there is impressive geographical spread of projects. Some projects are concentrated in countries like Ethiopia, Kenya and Nigeria that have abundant commodities and are also export platforms, perhaps somewhat leaving out the smaller ones.
Of course, within the BRI African portfolio, there are ‘good’ projects and ‘bad’ projects too. The good projects include the Djibouti port investment of $350 million which is now being managed by China Merchant Ports, one of China’s leading conglomerates in the global port and logistics sector, and may transform Djibouti into a key trans-shipment and manufacturing and port centre. But perhaps less impressive is the light railway connecting Addis Ababa to Djibouti which was launched in 2015. Project implementation has been slow, and the railway has been beset by maintenance issues and low traffic flows.
Rising African debt sustainability linked to BRI commercial loans has also come into the spotlight with Zambia becoming the first African country to default on payments for its Eurobond bonds in 2021. With the IMF identifying over 20 African countries in 2023 as debt distressed, there have been renewed claims that Africa is caught in a Chinese ‘debt trap’ due to high interest, low return projects.
So, the old BRI has been a mixed picture, but with some successes and going forward, the new eight areas that President Xi has laid out could make an impact on the BRI. This can come on stream very quickly through China’s policy banks (e.g. the China Development Bank and the China EXIM Bank) and turnkey consultants that may be involved in project implementation.
Africa and indeed the world economy is at a crucial juncture. In a likely era of slow growth with increasing geopolitical tensions, there is a dire need for infrastructure finance, that is of higher quality and also with integrity and environmental sustainability and technological progress built in. This is what President Xi’s new vision purports to offer, and it is appropriate that ten years after BRI, a reset is done. Capacity-building and integrity are particularly important in Africa and others in the developing world going forward.
It is necessary to emphasise a cost-benefit analysis of projects in the BRI reset, so that the net benefits of BRI projects are transparent while considering the cost properly, and that these are factored into borrowing calculations in developing countries. China is a recognised world leader in cost-benefit analysis and infrastructure master planning. It should share its experience from projects done in China itself and also in Southeast Asia, so African countries can understand what it takes to build infrastructure on scale.
Dr. Ganeshan Wignaraja is Professorial Fellow for Economics and Trade at Gateway House.
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