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China’s One Belt, One Road Initiative And Asia Is A Crucial Trade Route Starting Point, Part 1, Azerbaijan, Bangladesh, Bhutan, Brunei and Cambodia

ArmchairTechInvestor, May 28, 2018, by Brad Peery

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Below are summaries of the OBOR initiatives in the countries covered in the Asia Part 1 Region.

Azerbaijan

*”Azerbaijan is one of the most convenient routes from Northeast Europe to Central Asia and the Middle East. Situated on the shores of the Caspian Sea in Southwestern Asia, it shares borders with Russia, Georgia, Armenia, Turkey and Iran. It has the biggest port on the Caspian Sea (Baku International Sea Trade Port), Azerbaijan is a logistics hub for the Caspian region”.
*The Belt and Road Initiative: Country Profiles, Hong Kong Trade Development Council, May 17, 2018

**Azerbaijan is ideally situated to be an important part of China’s OBOR Initiative. It has a modern port at Baku and is an ideal partner for a land route through the North that goes through Barda its capital in the old days. The shortest way to approach West Asia from China is via Baku, the current capital of Azerbaijan. China is the manufacturer of the world’s fastest and most luxurious trains. A railroad track is already operational from Aktau and Turkmenbashi, transporting goods to the New Baku International Sea Trade Port and then westward to Turkey and Europe.

Barda, about 150 miles west of Baku, was a trading hub on the ancient overland Silk Road. The China-Central Asia-West Asia Economic Corridor is a land-based substitute for these two traditional routes.

“Azerbaijan is an ideal partner for construction of the Belt for three reasons:
• The Azerbaijan-located Caspian rim area is becoming a new joint zone of East Asian, European and Russian economic interest;
• Azerbaijan is the forerunner in the rejuvenation of the ancient Silk Road in terms of re-development multiple large-scale transnational transport systems; and
• Azerbaijan bears similarities with China, which contribute to mutually beneficial cooperation.”

Azerbaijan and China need to identify specific areas of cooperation.
**Azerbaijan forms a key link in the Silk Road chain, By Malik Ayub Sumbal, China Daily Europe January 20, 2017

***“Azerbaijan is a major supporter of the Transport Corridor Europe-Caucasus-Asia project, initiated by the EU and considered the backbone of the Silk Road.
The Baku-Tbilisi-Kars railway has been dubbed the Iron Silk Road.

China has initiated the Silk Road Fund, for which the Asian Infrastructure Investment Bank will allocate very large sums for the construction of these international corridors. “According to estimates, the trans-Caspian route could be transporting around 300,000-400,000 containers by 2020, bringing in hundreds of millions of dollars.”
***Relations between China and Azerbaijan are growing fast and Azerbaijan has great potential to become a valuable partner in the Silk Road project – one of the great initiatives of the 21th century.
Malik Ayub Sumbal is the Editor in Chief of Eurasia Media Network and The Caspian Times., China Daily European Weekly, January 20, 2017

Bangladesh

1. *“Bangladesh is the third most-populated country in South Asia (after India and Pakistan). It shares borders with India to the north, west and east, and overlooks the Bay of Bengal to the south. It has two existing major ports, the Port of Chittagong and the Port of Payra, but should be converted to a deep sea port by 2025.

****“China intends to set up an economic corridors in alliance with other countries – with one covering Bangladesh, India and Myanmar (i.e. the BCIM Economic Corridor). The Corridor will link India’s Kolkata with China’s Kunming, with Myanmar’s Mandalay and Bangladesh’s Dhaka among the key points.” The Port of Dhaka is a major river port on the Buriganga River. The Chinese government has pledged to finance multi-billion infrastructure projects in Bangladesh.

Bangladesh and China have formed a joint venture, Bangladesh-China Power Company Limited, to invest US$1.56 billion to build a coal-fired electricity plant near the proposed sea port south of Dhaka.

During Chinese President Xi Jinping’s visit to Bangladesh in October 2016, the first of its kind in 30 years, he elevated the two countries’ partnership to the strategic level and committed to fully integrating Bangladesh into the OBOR Initiative.
****Xi Jinping’s infrastructure initiative will help power-starved South Asian nation fire up more manufacturing capacity, South China Morning Post, April 10, 2017, Sidney Leng

Bhutan

*”Bhutan, with the smallest population in South Asia, is a small, landlocked Himalayan kingdom set in between China to the north and India to the south. Bhutan has forged a close relationship with India, with its robust GDP growth driven primarily by selling hydropower to India in recent years. Indeed, about 90% of Bhutan’s exports go to India, which mainly composed of hydropower and base metals. As to imports, about 80% are sourced from India, including fuel and machinery. Other import sources include France, Japan, Singapore and China.

Bhutan has a weak relationship with China, and is being bypassed by China’s OBOR Initiative.

Brunei

Brunei is located on the north coast of the island of Borneo, facing the South China Sea and surrounded by East Malaysia. Its economy is heavily resource-dependent, with the oil and gas sector accounting for some 60% of GDP and more than 90% of its export and fiscal receipts. Despite having the smallest population in ASEAN, Brunei’s per-capita income is the second highest in ASEAN after Singapore.

Brunei is a member of the ASEAN Economic Community (AEC), Brunei has entered free trade agreements (FTAs) with China, Korea, India, Australia and New Zealand under the ASEAN context. A bilateral FTA with Japan was also entered into. Also, Brunei has participated in the negotiation of the Regional Comprehensive Economic Partnership (RCEP), and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

On a tiny island of Muara Besar, off Brunei’s northern tip on the South China Sea, thousands of Chinese workers are building a refinery and petrochemical complex, along with a bridge connecting it to the capital, Bandar Seri Begawan. It is a $3.4 billion complex, and is run by China’s Hengyi Group. When completed, it will be Brunei’s largest-ever foreign investment project, and comes at a time when the oil-dependent country badly needs it. The Muara Besar project is expected to provide over 10,000 jobs, but claims that thousands of Chinese workers have been shipped in to build the complex has angered some local residents.

“Brunei is an important country along the 21st century Maritime Silk Road,” China’s Ambassador to Brunei Yang Jian said at the opening ceremony in February 2017 for a joint venture, running Brunei’s largest container terminal.
*****As Western banks leave, China adds Brunei to new silk road, Reuters, By Praveen Menon, March 4, 2018

Cambodia

*Cambodia is part of the China-ASEAN Free Trade Area (CAFTA).
Foreign direct investment in Cambodia reached US$16.7 billion in 2016, with projects mainly in the sectors of banking and finance, manufacturing, real estate, agriculture, tourism, energy, transport and telecom.

*****“Cambodia has been an enthusiastic supporter of China’s Belt and Road Initiative (BRI) and has made significant in-roads linking its own development to Chinese expansion; however, with the influx of Chinese capital, Cambodia will find itself drawn further into the sphere of China’s economic and strategic influence.”

Cambodia has become an attractive country for Chinese foreign direct investment. It offers political stability, low labor costs, easy market access, and a strategic location in Southeast Asia that have all led to a very large increase in Chinese money.

“During Xi Jinping’s 2016 visit, China signed 31 economic agreements, including $237 million in soft loan deals with Cambodia. Xi also pledged to push for Chinese investment in Cambodian infrastructure and cancelled roughly $89 million in Cambodian debt.”

Despite having a rapidly growing economy, Cambodia has infrastructure problems that include:
• Electricity;
• Rural road transport; and,
• Water sanitation.

With few other financial alternatives sizeable enough to cover Cambodia’s infrastructure needs, the promise of a large, no-strings-attached loan makes China’s OBOR proposal difficult to resist.

“Participation in the OBOR Initiative, brings with it access to the enormous infrastructure funding of Chinese-led financial institutions, such as the Asian Infrastructure Investment Bank, the Export-Import Bank of China, the China Development Bank, and the Silk Road Fund.”

China is the largest foreign investor in Cambodia’s energy sector, with more than $7.5 billion of total investments in hydropower plants. Cambodia and China have agreed on several hydropower dam projects. Kemchay Dam was constructed with Chinese assistance and possesses an electrical capacity of 194 megawatts, enough to cover a very large area of the country.

“The biggest hydropower dam, Lower Sesan II Hydropower Plant, will generate up to 400 megawatts per hour once operational, providing enough power to radically transform Cambodia’s energy infrastructure.”

China also offers developmental assistance on Cambodia’s transportation infrastructure, including bridges, highways, railways, and ports.

China has also helped Cambodia to upgrade its deep water Sihanouk Autonomous Port, which could contribute to expand China’s growing influence and expansion in the Indian Ocean.

The Chinese investments involve economic and strategic risk to Cambodia. With an increasing number of plants to generate electricity, Some of China’s projects do not meet international standards, which has resulted in adverse impacts on local livelihoods and the ecosystem.

“Nearly 5,000 families are likely to be evicted from their villages when the dam’s reservoir fills, and the dam may block key fish migration routes, which would threaten loss of most of the fisheries resource that many people depend on. Deals between China and Cambodia have met with additional criticism over major land concessions, the disregard of human rights, and the extent of control over Cambodian development given to Chinese contractors.”

China is Cambodia’s largest creditor. As their debt grows, it may increase beyond their ability to pay it, and Cambodia may find itself in a similar scenario to Sri Lanka in which state property is used as equity to pay their Chinese creditors.

The China relationship may have the following negative effects:
• Lock this small state securely under China’s growing strategic sphere of influence;
• Cause Cambodian foreign policy to prioritize short-term benefits in a way that privileges Chinese political and diplomatic interests at the expense of ASEAN counterparts and other regional powers;
• Prejudice negatively Cambodia and their partners territorial claims on the South China Sea; and
• Cause concerns that China’s growing political and economic leverage over Cambodia will bring a future of Cambodian foreign policy as no more than an extension of Chinese regional influence.
*****Money talks: China’s belt and road initiative in Cambodia, Global Risk Insights, by Qi Lin, January 7, 2018

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