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SECURING
THE BELT AND ROAD
INITIATIVE
Risk Assessment, Private Security and Special Insurances
Along the New Wave of Chinese Outbound Investments
EDITED BY ALESSANDRO ARDUINO AND XUE GONG

Securing the Belt and Road Initiative

Alessandro Arduino • Xue Gong
Editors
Securing the Belt and
Road Initiative
Risk Assessment, Private Security and Special
Insurances Along the New Wave of Chinese
Outbound Investments

ISBN 978-981-10-7115-7 ISBN 978-981-10-7116-4 (eBook) https://doi.org/10.1007/978-981-10-7116-4
Librar y of Congress Control Number: 2017961565
© The Editor(s) (if applicable) and The Author(s) 2018 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed.The use of general descriptive names, registered names, trademarks, ser vice marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use.The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Cover Image: MYALA88 / Alamy Stock Photo
Printed on acid-free paper
This Palgrave imprint is published by Springer Nature The registered company is Springer Nature Singapore Pte Ltd.The registered company address is: 152 Beach Road, #21- 01/04 Gateway East, Singapore 189721, Singapore
Editors Alessandro ArduinoShanghai Academy of Social Sciences Security & Crisis Management ProgramShanghai, China
Xue GongS. Rajaratnam School of International Studies (RSIS)Nanyang Technological UniversitySingapore, Singapore

v
The core chapters of this volume are based on the draft papers presented
during the ‘Securing the Belt and Road Initiative: Risk Assessment, Private
Security and Special Insurances along the New Wave of Chinese FDI’ (28
October 2016) workshop co-organized in Singapore by the China
Programme of the S. Rajaratnam School of International Studies (RSIS) at
Nanyang Technological University (NTU) and the Shanghai Academy of
Social Sciences–University of Turin (SASS–UNITO) Joint Security and
Crisis Management Program.
The editors desire to acknowledge the intellectual contribution of all the
workshop discussants and the support given during the editing of the vol -
ume by all the chapters’ authors and the understanding editor Mr. Jacob
Dreyer. The workshop and the volume are fortunate to benefit from the
insights and extensive experience of Dr. Cindy Smith, director of the United
Nations Interregional Crime and Justice Research Institute (UNICRI).
Deepest thanks go to all the supportive staff from RSIS, the Communi -
cations Department at SASS and the Chinese Studies Department and
International Relations Office at UNITO.
Last but not least, the editors would like to express their gratitude to
Professor Gianmaria Ajani, Rector of UNITO; Professor Li Yihai, Secretar y
General of the Think Tank Foundation at SASS; and Professor Li Mingjiang,
Director of the China Programme at the Institute of Defence and Strategic
Studies (IDSS) at RSIS for their continuous support and strategic vision.
A cknoyledgments

vii
c ontents
Part I Introduction 1
1 Introduction 3
Alessandro Ar duino and Xue Gong
Part II The Belt and Road Security Blueprint 15
2 The Uneven Regulation of Private Security in ASEAN
Member States 17
Sebastian Booth and Cindy J. Smith
3 China’s Belt and Road Security: The Increasing Role
of Insurance and Private Security Companies 39
Alessandro Ar duino
Part III Maritime Political and Security Risks 61
4 Singapore’s Role in the Belt and Road Initiative 63
Sarah Y. T ong and Tuan Yuen Kong

viii
CONTENTS
5 Resolving the Malacca Dilemma: Malaysia’s Role
in the Belt and Road Initiative
81
Guanie Lim
6 The PRC’s Maritime Silk Road Initiative, Southeast Asia,
and the United States
101
Ker

r y Brown
Part IV



Corporate Social Responsibilities and Insurance
Perfor

mance of Chinese Investments
119
7 China Power Investment Corporation in Myanmar


121
Xue Gong
8 CSR as a Tool to Mitigate Risk for the B&R Initiative:
The Case of Thailand
147
Zhimin T

ang
9 China, Securing “Belt and Road Initiative”: Risk
Management
163
HaoMing Zhou
Par

t V


Risk Forecasting and Crisis Mitigation
along the Eurasian Landmass and Middle East



179
10 One Belt, One Road in Central Asia:
Progress, Challenges, and Implications
181
Farkhod T

olipov
11 Securing CPEC: Challenges, Responses and Outcomes 197
Khuram Iqbal
12 Uyghur Militant Activity in Southeast
Asia and Its Security Implications
215
Pinjie Sun

ix CONTENTS
13 Chinese Investments in the Arab Maelstrom 235
James M. Dorsey
Par
t VI
The European Union: The Belt and Road Ter
minus


255
14 Beyond Ports and T

ransport Infrastructure:
The Geo-Economic Impact of the BRI
on the European Union
257
Alessia A. Amighini
15 China’s Belt and Road Initiative and the 16+1
Platfor

m: The Case of the Czech Republic
275
Alica Kizeková
Index 299

xi
Alessia  A.  Amighini is Co-Head of the Asia Research Programme and
Senior Associate Research Fellow at Istituto Per Gli Studi Di Politica
Internazionale (ISPI) in Italy. She is also Associate Professor of Economic
Policy at the University of Piemonte Orientale and Catholic University of
Milan, and a Senior Fellow at SDA Bocconi China Lab. Professor Amighini
was previously Associate Economist at the United Nations Conference on
Trade and Development (UNCTAD). She holds a PhD in Development
Economics at the University of Florence, a Master in Economics and a BA
in Economics from Bocconi University. She is editor and author, with Alex
Berkofsky, of Xi’s Policy Gambles: The Bumpy Road Ahead (2015), China
Dream: Still Coming True? (2016) and Belt and Road: A Game Changer?
(2017), all for ISPI. She is also author of more than 60 scientific articles in
top international peer-reviewed journals including China Economic Review ,
World Development , The World Economy , International Economics , China
and the World Economy , European Journal of Comparative Economics ,
Regional Studies , Seoul Journal of Economics , Frontiers of Economics in
China and chapters in books by Edward Elgar, Har vard University Press,
Oxford University Press, Palgrave and Routledge.
Professor Amighini is the scientific coordinator of research projects on
EU-China economic and trade relations for the European Parliament,
Italian Ministr y of Foreign Affairs and International Cooperation and
Italy-China Business Forum. She is a senior expert for the Council on
Global Problem-Solving (Kiel), the International Centre for Trade and
Sustainable Development (Geneva) and the Italy–China Foundation.
l kst of c ontrkbutors

xii LIST OF CONTRIBUTORS
Alessandro  Arduino is the co-director of the Security & Crisis
Management program at the Shanghai Academy of Social Sciences (SASS-
UNITO) and external affiliate at the Lau China Institute, King’s College
London. Dr. Arduino’s two decades of experience in China encompass
security analysis and crisis management. His main research interests
include China’s political economy, Sino-Central Asia relations, Sovereign
Wealth Funds, Private Militar y Security Corporations and China’s energy
security and foreign policy. He is the author of several books and has pub -
lished papers and commentaries in various journals in Italian, English and
Chinese. His most recent book is China’s Private Army. Protecting the
New Silk Road (2017). He was appointed Knight of the Order of the
Italian Star by the president of the Italian Republic.
Sebastian  Booth is a PhD Candidate at the University of York. His
current research focuses on the post-crisis regulation of the UK private
security industr y.
Kerr y  Brown is Professor of Chinese Studies and Director of the Lau
China Institute at King’s College, London. From 2012 to 2015, he was
Professor of Chinese Politics and Director of the China Studies Centre at
the University of Sydney, Australia. Prior to this, he worked at Chatham
House from 2006 to 2012 as Senior Fellow and then Head of the Asia
Programme. From 1998 to 2005, he worked at the British Foreign and
Commonwealth Office, as First Secretar y at the British Embassy in Beijing,
and then as Head of the Indonesia, Philippine and East Timor Section. He
lived in the Inner Mongolia region of China from 1994 to 1996. He has a
Master of Arts from Cambridge University, a postgraduate diploma in
Mandarin Chinese (Distinction) from Thames Valley University, London
and a PhD in Chinese politics and language from Leeds University.
Professor Brown directed the Europe China Research and Advice Network
(ECRAN), giving policy advice to the European External Action Ser vice
between 2011 and 2014. He is the author of more than ten books on mod -
ern Chinese politics, histor y and language, the most recent of which are
The New Emperors: Power and the Princelings in China (2014), What’s
Wrong with Diplomacy: The Case of the UK and China (2015) and the
Berkshire Dictionary of Chinese Biography (in four volumes; 2014–2015).
His CEO China: The Rise of Xi Jinping was published in 2016 and was an
Economist book of the year. China’s World will be published in late 2017.

xiii LIST OF CONTRIBUTORS
James  M.  Dorsey is a Senior Fellow at the S.  Rajaratnam School of
International Studies and co-director of the University of Würzburg’s
Institute for Fan Culture. An award-winning journalist and political ana -
lyst, Dr. Dorsey is the author of the acclaimed The Turbulent World of
Middle East Soccer blog as well as a syndicated column and several books.
Xue Gong is a Research Fellow with the China Programme at S. Rajaratnam
School of International Studies (RSIS), Nanyang Technological University
(NTU) of Singapore. She received her PhD from NTU in 2017. Her main
research interests include China’s economic diplomacy, the Belt and Road
Initiative, China’s economic relations with Southeast Asia, China’s state-
owned-enterprises (SOEs) reforms and corporate social responsibility. She
has contributed to one peer-reviewed journal article in Har vard Asia
Quarterly and one book chapter to China’s Economic Statecraft: Co-optation,
Cooperation, and Coercion (2017). She has also contributed to other op-ed
articles.
Khuram Iqbal is a distinguished authority on terrorism in Pakistan and
author of The Making of Pakistani Human Bombs and co-author of
Pakistan Terrorism Ground Zero and Negotiating the Siege of Red Mosque .
After receiving a doctorate degree in Policing, Intelligence and Counter-
Terrorism from Macquarie University (Australia) he joined the National
Defence University of Pakistan as an Assistant Professor of Counter-
Terrorism and created Pakistan’s first university-based centre of excellence
on counter-extremism. Previously, he ser ved as Research Coordinator at
Pak Institute for Peace Studies (Islamabad), where he planned and exe -
cuted a number of research projects on radicalization and terrorism in
Pakistan. A graduate in Strategic Studies from the S. Rajaratnam School of
International Studies (RSIS), Singapore, Dr. Iqbal has also worked as
Senior Analyst at the International Centre for Political Violence and
Terrorism Research (ICPVTR), Singapore. He is a member of the Council
for Asian Transnational Threats Research (CATR), an international body
of leading Asian experts on counter-terrorism and transnational crimes.
Alica Kizeková is a Senior Researcher at the Institute of International
Relations Prague, the Czech Republic. She lectures at Mendel University
in Brno, the Czech Republic. She holds an Honorar y Adjunct Research
Fellowship at the Center for East-West Cultural & Economic Studies at
Bond University, Queensland, Australia. Previously she worked as Adviser
to the Speaker of the Chamber of Deputies at the Parliament of the Czech
Republic, Head of Department of Asian Studies at Metropolitan University

xiv LIST OF CONTRIBUTORS
Prague, a Teaching Fellow at Bond University and she was a National
contact point for the Slovak Republic in the European Union communitary
program—IDABC (Interoperable Deliver y of European eGovernment
Ser vices to Public Administrations, Businesses and Citizens). Her research
interests include Shanghai Cooperation Organization, Russian and
Chinese regional politics, regionalism and great power relations in Greater
Central Asia and the Asia Pacific, Track One-and-a-Half and Track Two
Diplomacy, security and soft balancing.
Tuan  Yuen  Kong received his PhD in Industrial Economics from the
National Central University, Taiwan. He had taken part in Taiwan’s eco -
nomic research projects during his postdoctoral fellowship at the Research
Centre for Taiwan Economic Development, and joined Epson in turn, a
Japanese multinational enterprise in Malaysia, to conduct business man -
agement and financial analysis. During his ser vice with Epson, he was sent
to Japan to investigate on Toyota’s production system and manufacturing
automation. His current research interests include China’s industr y devel -
opment, especially strategic emerging industries, and China-ASEAN rela -
tions. He has published his works in Review of Global Politics , Applied
Econometrics and International Development , Journal of Overseas Chinese
and Southeast Asian Studies and Energy Sources . He also frequently con -
tributes commentaries to Singapore’s Lianhe Zaobao and MediaCorps’s
Capital 95.8FM radio station.
Guanie Lim is a Postdoctoral Fellow at Singapore’s Nanyang Centre for
Public Administration, Nanyang Technological University. He received
his PhD in Geography from the National University of Singapore in 2016.
His research interests include value chain analysis, transnational corpora -
tions in Southeast Asia and the political economy of China’s engagement
with Southeast Asia.
Cindy  J.  Smith became Director of the United Nations Interregional
Crime and Justice Research Institute (UNICRI) in 2015. At the time of
her appointment, she was Senior Coordinator for International Programs
in the Office to Monitor and Combat Trafficking in Persons at the US
Department of State. Prior to this, she ser ved as a Lead Foreign Affairs
Officer (Criminal Justice Programs) in the Bureau of International Narcotics
and Law Enforcement Affairs and as Assistant Director of Corrections for
the Civilian Response Corps. From 2006 to 2008, she was Chief of the
International Center of the National Institute of Justice in the US Department
of Justice, and was the department’s representative to the United Nations
Crime Prevention and Criminal Justice Programme Network of the

xv LIST OF CONTRIBUTORS
Commission on Crime Prevention and Criminal Justice. In this same
period, she was research consultant to the UN Office on Drugs and Crime
for the countr y assessment of human trafficking in Lebanon. She ser ved as
an expert in the development of the UN Rules for the Treatment of
Women Prisoners and Non-custodial Measures for Women Offenders
(the Bangkok Rules). From 2005 to 2006, Dr. Smith was a Fulbright Senior
Researcher in Turkey, conducting research and training at the National
Police Academy. In the early 1990s, she was involved for five years in a juve -
nile detention and commitment facility. Dr. Smith was Associate Professor
in Criminology and Criminal Justice at the University of Baltimore and the
University of Illinois-Springfield. She was Director of the Masters in the
Criminal Justice Program in Baltimore. Throughout her career, she con -
ducted extensive research on policing, courts and corrections, adult and
juvenile drug treatment, human trafficking, terrorism, juvenile sex offend -
ers, gender issues and strategic planning and program development. She
holds a Doctorate of Philosophy in Social Ecology from the University of
California Ir vine, a Master’s of Science in Education Administration from
the National University, Ir vine and a Master’s of Science in Justice from the
American University in Washington, DC.
Pinjie  Sun is a lecturer at Shanghai University of Political Science and
Law, School of International Relations and Public Administration. After
receiving his PhD from the Department of Sociology at Shanghai
University, he has been working on the issue of social identity. His area of
study particularly focuses on the identity formations among ethnic groups
in China. He intends to draw on the geographical, cultural and political
implications of these groups and study their impact on extremism. In
terms of international relations, his study focuses on international security
cooperation in cyberspace. He has a strong interest in studying the mecha -
nisms of cooperation and trust building across countries in terms of fight -
ing against cyberterrorism and associated problems in the “real” world.
Zhimin  Tang received his PhD from Cambridge University, UK.  He is
currently Dean of International College and Director of China ASEAN
Studies in Panyapiwat Institute of Management, Thailand. The academic
and professional career of Professor Dr. Tang in the past 20 years spanned
across Europe, Australia, South East Asia, India and Great China. His
recent research interests include market entr y strategy in China and
ASEAN Economic Community, Chinese Overseas Direct Investment and
Multinational Corporations in Thailand, and internationalization of
Renminbi.

xvi LIST OF CONTRIBUTORS
Farkhod  Tolipov graduated from Tashkent State University. From 1994
to 2005, he taught at the University of World Economy and Diplomacy in
Tashkent, from which he received a PhD in Political Science. From 1998 to
2002, he was a chief consultant for the Presidential Apparatus of Uzbekistan.
From 2005 to 2010, Dr. Tolipov taught at the National University of
Uzbekistan. His courses included World Politics, and International Security.
Currently, he is a director of the non-governmental research institution
Bilim Kar voni (Caravan of Knowledge) in Tashkent. Dr. Tolipov specializes
in geopolitics, regional security and regional integration in Central Asia,
nationalism and democratization in Central Asian countries. In 2003–2004
Dr. Tolipov was a National Professional at the OSCE Center in Tashkent.
He was a Fellow at the NATO Defense College (Rome) in 1997 and 2013;
a Fellow at Har vard University (USA) in 1999; a Visiting Professor at the
University of Georgia (USA) in 2004; a Visiting Professor at the Middle
East Technical University in 2015 (Ankara, Turkey); Visiting Researcher at
the Atilim University in 2016 (Ankara, Turkey); a lecturer at the George
Marshall European Center for Security Studies (2004, 2005), and Geneva
Center for Security Policy (2008, 2009, 2010, 2011); and a lecturer at the
OSCE Academy in Bishkek (2004, 2009, 2012). Dr. Tolipov extensively
publishes his articles on Central Asian topics in several international scien -
tific journals. He is an author of the monograph “Grand Strategy of
Uzbekistan in the Context of Geopolitical and ideological Transformation
of Central Asia.” Dr. Tolipov is a member of the international editorial
board of the journal Central Asia and Caucasus . He is also a member of the
senior advisors board of the China-Eurasia Forum and Central Eurasian
Studies Society. Dr. Tolipov is also a member of the expert group of the
journal Security Index of the PIR-Center (Russia). He speaks English,
Russian, French, Turkish and Uzbek (native) languages.
Sarah  Y  Tong is Senior Research Fellow at the East Asian Institute. She
obtained her PhD in Economics from the University of California at San
Diego and held an academic position at the University of Hong Kong
before joining National University of Singapore (NUS). Her research inter -
ests include international trade, foreign direct investment, economic reforms
and industrial restructuring. Her publications have appeared in journals
such as China: An International Journal , China and the World Economy ,
China Economic Review , Global Economic Review , Journal of International
Economics and Review of Development Economics . In addition to contribut -
ing more than dozens of book chapters, Dr. Tong co- edited several book

xvii LIST OF CONTRIBUTORS
volumes including China’s Great Urbanization (2017), China’s Evolving
Industrial Policy (2014) and China’s Economy in Transformation under the
New Normal (2017). She ser ved as editor for Globalization, Development,
and Security in Asia , Vol. 2 of Trade, Investment and Economic Integration .
HaoMing  Zhou leads Asia Construction Practice and Project Risk
Management for Brit, a market-leading global specialty (re)insurer. Dr.
Zhou began his career as an engineer in China in 1982 and holds a PhD in
Civil Engineering from Delft University of Technology of the Netherlands.
He has taken senior under writing management roles with some world lead -
ing (re)insurers including RSA, Swiss Reinsurance Company. He was CEO
of Aon in China, a global leading risk management company. He has
worked in (re)insurance markets in Singapore, Sydney, Hong Kong and
China, and his geographic coverage includes Asia, Pacific and Middle East
and Asia Interest Worldwide. He was Chartered Insurer of Chartered
Insurance Institute in the United Kingdom. The combination of his tech -
nical knowledge and experience and his international perspective has made
him an expert for project insurance and project risk management under the
Belt and Road Initiative.

xix
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xxi
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PART I
Introduction

3 © The Author(s) 2018
A. Arduino, X. Gong (eds.), Securing the Belt and Road Initiative ,
https://doi.org/10.1007/978-981-10-7116-4_1
CHAPTER 1
Introduction
Alessandro Arduino and Xue Gong
The Belt and Road Initiative (BRI), formerly known as One Belt, One
Road, is a signature foreign policy priority of Chinese President Xi Jinping.
BRI consists of two aspects: the Silk Road Economic Belt, a land route
starting in western China that goes through Central Asia and on to the
Middle East (SREB) ending in the European Union; and the 21st Centur y
Maritime Silk Road, a maritime route that connects Southeast Asia, the
Persian Gulf and the Horn of Africa (MSR) also ending in the EU. It out -
lines five major goals of the BRI: policy coordination, facilities connectiv -
ity, unimpeded trade, financial integration and people- to-people bonding.
All in all, it includes more than two thirds of world population and more
than one third of global economic output, and could involve Chinese
investments that total up to $4 trillion. 1
On 14–15 May 2017, China held a grand forum to burnish its interna -
tional leadership credentials under the well-known but little-understood
BRI. The Forum has provided Chinese leader Xi Jinping a stage to dem -
onstrate China’s role in connecting with the world, while much of the
A. Arduino ( *)
Security & Crisis Management Program, Shanghai Academy of Social Sciences
(SASS-UNITO), Shanghai, China
X. Gong
S. Rajaratnam School of International Studies (RSIS), Nanyang Technological
University, Singapore, Singapore

4
West is looking inward, especially with United States President Donald
Trump withdrawing from the Trans-Pacific Partnership and announcing
his ‘America First’ posture to the rest of the world, and the European
Union progressively reducing international reach. The Forum also reaf -
firmed China’s and the participating countries’ commitment to an open
economy, inclusive trade and opposition to all forms of protectionism.
One lasting implication of the Forum would be the economic power and
influence accruing to China when the BRI’s objectives are fully realized.
The Forum has clearly shown that the BRI, which had begun under Xi’s
predecessors’ ‘March Westward’ (Wang) development of the Xinjiang
Uyghur Autonomous region, can ser ve as an integrative platform for
global connectivity (Gong 2017b ).
In general, BRI is designed to meet Chinese objectives both at home
and abroad. Domestically, Chinese leadership hope BRI will help ease
industr y overcapacity and spur growth in its underdeveloped border
regions, especially the West. As the labour costs of China rise, BRI is
expected to move its labour-intensive and low value-added manufacturing
facilities overseas. Nevertheless, the promise of increasing efficiency and
interconnectivity with low-volume, high-value good shipments by the
BRI railway connections, from the Chinese western cities of Xi’an and
Chongqing to the European dr y ports of Duisburg and Lodz, still have to
be fulfilled. Further promises of sustainable development and cooperation
in infrastructure building are facing reality checks.
BRI is also one of the economic diplomatic tools through which China
can wield its economic power to advance diplomatic and strategic objec -
tives (Li 2015 ; Blanchard and Flint 2017 ; Blanchard 2017 ). Such consid -
erations fan existing fears in the region that BRI will help China accrue
influence and leverage on these countries. In this logic, China is expected
to exploit economic power for political objectives at the cost of autonomy
of other countries. For countries that are suspicious of China’s BRI, such
as India, Japan and the United States, BRI is considered as a threat to their
regional interests (Palit 2017 ). Although China has intended to downplay
the strategic dimensions of this initiative, many scholars, including Chinese
scholars suggest that the plan is indeed a response to the US strategic
rebalance to Asia. It is a reflection on the ‘Look Westward’ proposal made
by some foreign policy elites in China a few years ago (Li 2015 ).
The Chinese leadership have paid close attention to how the initiative
itself is marketed and perceived in the region and have adjusted their
A. ARDUINO AND X. GONG

5
approach accordingly. In the Forum, Xi reiterated that ‘BRI would not
repeat the old geopolitical competition game but open the new approach
for win-win cooperation’. 2 However, implementing BRI will not be easy
and the geopolitical challenges will be the biggest hurdle in the region.
For example, along the SREB route, Central Asia as a regional grouping
in political and security terms remains widely divided with serious internal
conflicts caused by unresolved boundar y, water and energy disputes,
regional rivalr y, deep mistrust and differences in political, diplomatic and
security policies (Zhang 2015 ). In MSR, China finds it more difficult to
implement projects as geopolitical concern is more serious, particularly
reactions of Southeast Asian countries towards China on the disputed
South China Sea.
For most countries participating in BRI, they are motivated more by a
practical recognition of its relevance for advancing their own economic
and development goals. It is especially so in promoting foreign investment
or improving infrastructure in their own countr y. Following the financial
and economic crisis that has forced the European Union and the United
States to look more inward, China is among only a few countries that are
able to provide financing without many requirements.
Security challenge S
Dgspitg chinas aspirations to providg an opgn gconomy and tradg systgm,
thgrg arg numgrous challgnggs ahgad. Whilg thg chingsg Statg-owngd
entgrprisgs (Soes) arg gxpanding thgir intgrnational rgach capabilitigs,
thgy still do not havg thg capacity to assurg adgquatg sgcurity along thg
bglt and road. as countrigs along thg routg arg githgr unstablg or hraught
with gthnic and rgligious tgnsions, and thgrg is a lack oh lggal protgction
hor invgstors to uncgrtaintigs rggarding local rggulations, chingsg inhra -
structurg and pgrsonngl could bg subjgct to political risks and criminal
violgncg. Whilg thg thrgat rglatgd to thg usg oh violgncg is not common
ovgr all thg bri, sgvgral othgr crisgs may arisg, such as social conhronta -
tion, gnvironmgntal dggradation and an ovgrall lack oh corporatg social
rgsponsibilitigs. thg risg oh ngw modgls oh risk assgssmgnts, prgvgntion and
mitigation, corporatg Social rgsponsibility (cSr), privatg sgcurity corpo -
rations and big data analysis providg a widg rangg oh capabilitigs that can
bgngt thg ovgrall bris sgcurity.
introDuction

6
riSkS challenge S
economic rgturns and control oh risks arg ggngrally two aspgcts oh out -
bound invgstmgnt activitigs. thg sgcurity gnvironmgnt is gvolving globally
and morg attgntion is givgn hor othgr than militar y thrgats. thgy arg a
major concgrn rglatgd to intgrnal and gxtgrnal sgcurity oh any countr y as
such risks arg gvolving across national bordgrs.
Sincg china launchgd thg going out invgstmgnt policy, its fDi has
sprgad all ovgr thg world. in tgrms oh inhrastructurg and gngrgy invgst -
mgnts, thg chingsg outbound gconomic hootprint larggly concgntratgs on
thg dgvgloping countrigs such as thg ahrican ongs. as a latgcomgr, china
usually invgsts in countrigs with rgligious tgnsions and militant groups
whgrg Wgstgrn companigs arg absgnt. thgrghorg, insurggnts, rgbgls and
militants arg alrgady targgting thg massivg chingsg inhrastructurg invgst -
mgnts altoggthgr with thg inux oh chingsg pgrsonngl. thg concgpt oh
ong bglt, ong road is vulngrablg hor attacks along thg land and sga.
thgrghorg, non-traditional sgcurity thrgats arg posgd to curb thg progrgss
oh rggional gconomigs and social dgvglopmgnt (arduino 2015 ).
Many countrigs along thg bri arg hacing sgcurity thrgats hrom gxtrgm -
ism and tgrrorism, such as thg sglh-proclaimgd islamic Statg. china has
rgmaingd vgr y cautious oh ggtting involvgd in thg complgxitigs oh politics
and conict oh othgr countrigs. but as chingsg citizgns and propgrtigs arg
thrgatgngd, thg chingsg lgadgrship rgalizgs thg ngcgssity oh incrgasing its
capability oh protgcting ovgrsgas invgstmgnts and pgrsonngl. thg Xinjiang
uyghur autonomous rggion as thg link oh cgntral asia and thg mainland
oh china is a placg vulngrablg to islamic gxtrgmists and disruptivg horcgs.
Morgovgr, thg china-pakistan economic corridor (cpec) prgsgnts
gxtrgmg risks as thg political gnvironmgnt in pakistan has provgn unstablg
and tgrrorist attacks arg thg norm.
in addition to political risks, somg oh thg projgcts chingsg companigs
havg bggn undgrtaking arg gxposgd to danggrs that arg basgd on unsus -
tainablg dgbt or lax social and gnvironmgntal standards. Such projgcts arg
vulngrablg to thg gconomic situation and public pgrcgptions. indggd, a
numbgr oh bri projgcts havg alrgady gxpgrigncgd social protgst, such as
thg suspgnsion oh thg Sri lankan port oh hambantota.
thg bri has to dgal with risks challgnggs whgrg a shargd undgrstand -
ing on sgcurity, and thg rolg oh china in sgcurity is nggdgd. thg qugstion
is to what gxtgnt thg outsidg world will hggl comhortablg with chinas
a. arDuino anD X. gong

7
participation in protecting its overseas investments. After all, China’s role
in security challenges is largely dependent on how other countries view
China’s intention and the purposes of the BRI.
corporate Social reSpon Sibilitie S challenge S
chinas ghhorts in cultivating closg gconomic tigs with dgvgloping coun -
trigs, particularly its ngighbouring countrigs, havg bggn a kgy glgmgnt in its
rggional stratggy. thg chingsg govgrnmgnt has launchgd strong support -
ing policigs in gncouraging chingsg companigs to makg ovgrsgas invgst -
mgnts, hrom going out to bri. china has wigldgd its gconomic clout
via a sovgrgign wgalth hund, statg-owngd invgstmgnt banks and hugg
amounts oh horgign rgsgr vgs to sggk invgstmgnts in gngrgy, tgchnology,
nancg and inhrastructurg in both dgvglopgd and dgvgloping gconomigs.
howgvgr, chinas growing prgsgncg in thg intgrnational invgstmgnt
markgts has rgsultgd in mixgd rgsponsgs. on thg ong hand, chingsg invgst -
mgnt brings bgngts to thg host countr y as a ngw sourcg oh invgstmgnt
whilg capitals hrom traditional dgvglopgd countrigs dr y up. on thg othgr
hand, chingsg ovgrsgas busingss activitigs hacgd a numbgr oh govgrnancg
problgms that rgsultgd in rgsistancg in host countrigs: claims oh ngo-
colonial motivgs in thg dgvgloping world; irrgsponsiblg opgrations in thg
invgstmgnt dgstination; dgancg against labour rights and so on. chinas
pgrcgivgd poor rgcords in thg gnvironmgnt and corporatg govgrnancg havg
trigggrgd hurthgr concgrns. thg appgal oh chinas statg-lgd busingss modgl
to thg dgvgloping countrigs is bgligvgd in thg Wgst to undgrming intgrna -
tional attgmpts to promotg govgrnancg and transpargncy. at thg samg
timg, othgr countrigs may nd thg capitalism with chingsg charactgris -
tics a viablg modgl ahtgr thg 2008 nancial mgltdown.
chinas gconomic statgcraht is also inconsistgnt. Dgspitg its dgclaration
oh bgcoming a rgsponsiblg global playgr, it continugs to collaboratg with
pariah statgs in pursuit oh its own gconomic intgrgsts. Such contradictor y
bghaviour undgrmings its horgign policy goal oh bgcoming a morg rgspon -
siblg powgr (canning 2007 ). this has lgd somg to qugstion chinas capac -
ity hor corporatg govgrnancg and its intgntion oh bgcoming a rgsponsiblg
playgr in promoting sustainablg dgvglopmgnt. Sgvgral valuablg dgals havg
gong awr y, rgsulting in hugg loss oh prots, criticism and rgsistancg hrom
many targgt countrigs in ahrica, europg, latin amgrica and Southgast asia
hor various rgasons (gong 2017a ).
introDuction

8
Stated in the Forum, China has been putting efforts to stress the open,
inclusive and collaborative nature of the BRI.  It also intends to address
questions regarding standards and transparency, which have been under
criticism for decades. China has made incremental progress in accordance
with international norms on environmental and social impact assessment
for financing. The birth of the Asian Infrastructure Investment Bank
(AIIB) along with other funding sources like the Silk Road Fund and the
New Development Bank, which encourage the source of financing from a
third party and apply international standard for funding the projects, dem -
onstrates China’s determination of improvement. However, it always
comes to the question of its capability of implementation and the enforc -
ing degree that Beijing can assert on the SOEs operating abroad.
Although the connectivity goal of ‘people-to-people bonding’ was
emphasized before the Forum, it was less visible in its actual implementa -
tion. Owing to the fact that people from several of the BRI countries are
generally war y about the negative impact of massive Chinese investments,
the Forum also included people-to-people and think-tank exchanges to
improve interpersonal interaction along the Belt and Road route.
Nonetheless, it remains to be seen how the Chinese companies, managers
and workers engage with the local communities where the BRI projects
touch. After all, it is not the government but the business actors who will
be implementing the Belt and Road projects.
There are different questions about BRI with so many security and
governance issues along the routes. Would an initiative like BRI ever
enable states to act in a more shared way, despite different interpretation
and expectations from BRI? How China can be involved and how it is able
to engage other countries in these security and governance issues? Despite
different expectations, could BRI ever lead to a better consensus between
China and others on security issues? This is an important question, espe -
cially because the security trust between China and other countries is lack -
ing, for example, in the South China Sea. At the moment, despite the
common threats that many BRI participants’ nations face, there seems to
lack signs of cooperation in the security area.
To address these questions, it needs shared understanding of what secu -
rity and governance involve and what they aim to achieve. As security,
economics and governance are inextricable, this book aims to provide a
holistic perspective on China’s BRI.  This book consists of three sections
that analyze the BRI challenges moving from China to the European
Union across the land and sea new silk roads.
A. ARDUINO AND X. GONG

9
Sebastian Booth and Cindy J. Smith provide an over view of legisla -
tive and regulator y frameworks in ASEAN member states. It is underpinned
by the assertion that the Belt and Road Initiative will increasingly rely on
domestic private security ser vices, whose quality and effectiveness are
improved by the existence of statutor y frameworks. It has demonstrated
that these frameworks amount to an uneven patchwork of regulator y
requirements and restrictions across the region. While it appears that pri -
vate security is receiving increasing media and governmental attention,
significant limitations and problems still exist. Authors of this chapter
explain regulator y loopholes across Southeast Asia, which raises concerns
of the safety of Belt and Road projects that cross jurisdictions. They fur -
ther suggest greater economic and political integration require the harmo -
nization of regulator y frameworks and strengthening of institutional
capacities across the regions.
Alessandro Arduino argues that Chinese corporations just started to
acknowledge that the risks associated with outbound foreign direct invest -
ments carries a higher failure rate due to intertwined factors such as: eco -
nomic crises, conflict, civil unrest, assets nationalisation and currency
devaluation, just to name a few. In several cases, the Chinese SOE’s infra-
structural projects macro size and breakneck implementation speed cata -
lyze crisis in already unstable socio-political environments. The solution to
political and criminal violence’s spillovers along the BRI requests a broader
involvement that also encompasses the Chinese insurance and private
security sectors.
Along the Maritime Silk Road, Sarah Y Tong and Kong Tuan Yuen
discuss how Singapore could have an indispensable role in the develop -
ment of BRI, especially in MSR. Singapore could facilitate the closer
China-ASEAN economic ties by advocating free trade, widening and
deepening regional economic integration. It could also collaborate with
partner countries in developing various types of joint projects, given
Singapore’s experience and competitive advantage in fields of finance,
logistics and business management, as well as help strengthen mutual
understanding and trust by providing dialogue platforms. However,
Singapore also needs to be mindful of the complexities in the region’s
geopolitical dynamics. For example, given the sensitive nature of the South
China Sea issue, Singapore has to tr y its best to preser ve its neutrality and
to safeguard ASEAN unity and centrality. Meanwhile, Singapore is also
facing growing challenges. On one hand, global trade is decelerating, cast -
ing a significant negative shock to Asian countries, especially those that
INTRODUCTION

10
depend heavily on trade. Meanwhile, China is catching up fast in high
added-value manufacturing, putting great competitive pressure on more
advanced Asian countries and on bilateral economic cooperation.
Moreover, Singapore and China may also run into direct competition in
third countries as China enhances investment efforts in BRI.
Guanie Lim focuses on the East Coast Rail Link (ECRL), one of
China’s most prominent construction projects in Malaysia since the incep -
tion of the BRI. His chapter offers a balanced perspective on the ECRL by
presenting its pros and cons as well as analyzing on-the-ground imple -
mentation issues. Despite its promise to alleviate the proverbial ‘Malacca
Dilemma’ and to generate a win-win outcome for both Malaysia and
China, the ECRL is hampered by several critical implementation issues,
heightening its business and political risks, especially for the Malaysians.
There remain significant hurdles to surmount before this undertaking
transforms into the ‘game changer’ that resolves China’s over-reliance on
the narrow Strait of Malacca and uplifts the living standards of the
Malaysians.
Also along the Maritime Silk Road, Kerr y Brown considers the inter -
action among China, ASEAN and the United States, and how the issue of
regional trust affects Beijing’s core strategic interests. The New Silk Road
maritime version opened up fresh areas of economic and strategic space
around China. It spelled out clearly to the countr y’s maritime neighbours
the opportunities and benefits of engaging more with Chinese investment,
Chinese trade and Chinese growth just as the land Silk Road had done for
the Central Asian partners. In this complex political and diplomatic con -
text, the regional response to BRI has been a mixture of applause and
excitement alongside caution.
In the section of Corporate Social Responsibilities (CSR), Xue Gong
argues that as a centralized state, China is believed to have a strong politi -
cal and bureaucratic power over CSR implementation, particularly over
the SOEs that received enormous national support for overseas invest -
ment. However, in recent years, Chinese overseas investments have
encountered local resistance and criticism for their non-compliance of
local laws and poor implementation of CSR, prominently in Myanmar.
This chapter aims to contribute to the understanding of China’s political
economy in Myanmar’s hydropower sector by assessing an often-neglected
segment, which regards the evolving roles of the business actors and the
externalities of business activities on the state-to-state relations. China’s
initiative of One Belt, One Road makes the study of Chinese CSR mean -
A. ARDUINO AND X. GONG

11
ingful as it also aims to identify common problems facing Chinese invest -
ments and CSR infrastructure development levels of individual host
countries. Tang Zhimin concludes the CSR section analyzing the effects
of Chinese corporate social responsibilities in Thailand. The focus is on
why and how CSR can be a tool to mitigate risks for Chinese firms involved
in the BRI. CSR is relevant to the BRI risk because the mismanagement of
a Chinese firm’s responsibility towards environment and society of the
Belt and Road countries may directly or indirectly evoke threats to the
firm in local political, economic, social and technological systems through
its interactions with its stakeholders and local governments. Therefore,
CSR programs may give a Chinese firm the local community’s acceptance
or approval of a company’s project or ongoing presence in an area.
From the insurance standpoint, HaoMing Zhou underlines the spe -
cific importance of the sector in addressing the BRI’s challenges. The
emphasis on projects construction draws the attention over the Chinese
economic international expansion, project contracting and direct invest -
ment’s requirement for sophisticated risk management tools. The BRI’s
risk landscape includes countries that are still in the political, social and
economic transition phase. The uncertainty in security, inadequate politi -
cal governance and development direction is commonly prevailing and
many multinational risk professionals are reasonably well equipped with
knowledge and skills to support Beijing.
Over the Central Asian land mass, Farkhod Tolipov argues that the
effect of the BRI in Central Asia has economic, transport, geopolitical,
cultural, historical and security dimensions and encompasses such vast
swaths of Eurasian continent and oceans that it created an impression of
global ambitions of China. Central Asia—the epicentre of the ancient
Great Silk Road—is once again acquiring a higher profile in the Eurasian
and world order, and the five Central Asian countries are facing Chinese
‘authoritative and persuasive’ presence in the region.
The security of the BRI flagship project in Pakistan, the China–Pakistan
Economic Corridor (CPEC) is discussed by Khuram Iqbal and Pinjie
Sun analyzing respectively the CPEC geostrategic implications and the
terrorist threat landscape from Xinjiang to Gwadar. Iqbal argues that
CPEC is one of the key pillars of the BRI. The peculiar attribute of CEPC
is its intersection between over sea 21st Centur y Maritime Silk Route
(MSR) and land-based Economic Silk Road Belt. Its total length is approx -
imately 3000  km spanning from Pakistan’s Gwadar port to Kashgar,
northwestern China’s Xinjiang Uygur Autonomous Region. The macro
INTRODUCTION

12
projects consist of the railway lines, roads, fibre optics, energy pipelines
and industrial development zones. Albeit the promises of sustainable
development, since the announcement of the CPEC and its ratification the
route designated under the Corridor triggered much debate and contro -
versy. The major contentions regard the distribution of economic develop -
ment and infrastructure projects of this mega venture within the provinces.
Besides violent extremism and terrorism, ethno nationalist groups are
another daunting challenge for the economic corridor. Also, Sun argues
that Southeast Asia constitutes an important transshipment hub for illegal
Uyghur migration, some of whom joined local and transnational jihadist
extremism. Sun looks at the scope and dimensions of illicit Uyghur move -
ment through Southeast Asia, the implications it holds for local terrorism
in this part of the world and the overall effects on the BRI.
James Dorsey’ s chapter on China’s investments in the Arab maelstrom
discusses the pitfalls and diverging interests in China’s daunting task of
promoting investments while avoiding getting entangled in local disputes.
China’s increasingly significant economic and security interests in the
Middle East have several impacts. They affect its energy security but also
its regional posture, relations with regional powers as well as the United
States and efforts to pacify nationalist and Islamist Uighurs in its north -
western region of Xinjiang. Protecting its mushrooming interests is forc -
ing China to realign its policies and relationships in the region.
Being the terminus of both the overland and the maritime routes envi -
sioned, the European Union faces significant geo-political, economic and
geo-strategic consequences from the BRI starting with the China-EU
bilateral relation.
Alessia Amighini and Alica Kizekova argue the BRI’s challenges and
opportunities in the European Union, with emphasis on the role of logis -
tics, economic integration and the 16+1. Amighini reviews the state of the
art in the scholarly and policy debates as well as in the policy actions and
activities taken so far by the European Union as a response to the BRI. The
literature has extensively analyzed the determinants of individual coun -
tries’ access to international markets and bilateral trade flows, and has
found support for the hypothesis that trade and infrastructure costs are
important, but not the choice of transport modes, let alone the efficiency
of the global network of trade routes. While the Chinese way to regional
integration tends to be less rule-based and more coalition-based along
countr y-specific interests, the BRI is facing Europe’s multilateralism
against closed and competing initiatives towards regionalism. Kizekova
A. ARDUINO AND X. GONG

13
examines China’s activities in Central and Eastern European countries
with a specific reference to the 16+1 platform. While in Europe this
initiative has been looked upon with suspicion, some countries did not
hide their enthusiasm for forging closer partnerships with China and
embracing the BRI. The Czech Republic is a case in point, however, it still
questions the benefits of opening up to China and what the real outcomes
of promised investments domestically and in the wider region are. In
response to the criticisms, the Chinese leadership has reassured the
Europeans that it’s acting peacefully under a win-win premise for all par -
ties involved and that the activities within the 16+1 take into consideration
the existing projects, such as China-EU cooperation and the EU infra -
structure projects.
The threats to Chinese enterprises and Chinese workers based on for -
eign soil are poised to increase and there is an urgent need to develop new
guidelines for risk assessment, special insurance and crisis management. To
face threats, an international cooperation of involved countries must cre -
ate opportunities to counter all illegal acts. As pointed out by Xi Jinping
in the Forum, China is expected to further internationalize the Chinese
currency and improve financing channels. China will also turn to syndi -
cated loans coming from international pension funds, insurance compa -
nies, sovereign wealth funds, private equity funds and others. Creating the
vision for global connectivity requires evidence of concrete accomplish -
ments as people interpret achievements in different ways. Xi’s signature
economic diplomacy for the BRI has officially taken off. What remains to
be done is for China to overcome the hard reality of operational
inefficiencies.
note S
1. Dashuju kanrgdian, yidaiyilu, gongtong fanrong Xinyinqin (looking at
hotspot through big Data, bglt and road, ngw enging hor Mutual
prospgrity and Dgvglopmgnt), pgoplgs Daily, March 11, 2015, https://
www.yidaiyilu.gov.cn/jcsj/dsjkydyl/1813.htm .
2. Xi Jinping Zai yidaiyilu guoji hgzuo gaohgng luntan kaimushi Shang dg
yanjiang (Spggch by Xi Jinping in bglt and road forum for intgrnational
coopgration), May 14 2017, http://www.bgltandroadhorum.org/n100/
2017/0514/c24-407.html .
introDuction

14
reference S
arduino, algssandro. bglt and road initiativg chinas engrgy Sgcurity: rgality
roadblock in ethiopia. commgntar y, Singaporg: rajaratnam School oh
intgrnational Studigs, 2015.
blanchard, Jgan-Marc f. probing chinas twgnty-first-cgntur y Maritimg Silk
road initiativg (MSri): an examination oh MSri narrativgs. ggopolitics 22,
no. 2 (2017): 246268.
blanchard, Jgan-Marc f., and colin flint . thg ggopolitics oh chinas Maritimg
Silk road initiativg. ggopolitics 22, no. 2 (2017): 223245.
canning, c. pursuit oh thg pariah: iran, Sudan and Myanmar in chinas engrgy
Sgcurity Stratggy. Sgcurity challgnggs. Sgcurity challgnggs 4, no. 1 (fgbruar y
2007).
gong, Xug. a talg oh two Statgs: explaining corporatg Social rgsponsibility
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School oh intgrnational Studigs, Singaporg: nanyang tgchnological univgrsity,
2017a.
gong, Xug. bglt and road initiativg chinas bglt and road forum: What now?
commgntar y, Singaporg: rajaratnam School oh intgrnational Studigs, May
2017b.
li, Mingjiang. chinas ong bglt, ong road initiativg: ngw round oh opgning
up? commgtar y, rajaratnam School oh intgrnational Studigs, rSiS, 11 March
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palit, amitgndu. indias economic and Stratggic pgrcgptions oh chinas Maritimg
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Wang Jisi), huanqiu Shibao (global timgs, bgijing), 26 octobgr 2012.
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in cgntral asia. policy rgport, Singaporg: rajaratnam School oh intgrnational
Studigs, May 2015.
a. arDuino anD X. gong

PART II
The Belt and Road Security Blueprint

17 © The Author(s) 2018
A. Arduino, X. Gong (eds.), Securing the Belt and Road Initiative ,
https://doi.org/10.1007/978-981-10-7116-4_2
CHAPTER 2
The Uneven Regulation of Private Security
in ASEAN Member States
Sebastian Booth and Cindy J. Smith
Introduct Ion
The enormity of the Belt and Road initiative means that its security
requirements have the potential to exceed the capacities of both Chinese
and partner-state militar y, security and policing forces (Arduino 2015 ).
Accordingly, the success of the Belt and Road initiative will rely to a large
extent on the capabilities of the global private security industr y. But whilst
these ser vices—ranging from site, property and personal protection to sur -
veillance, cash transportation and associated technologies—can enhance
the security of Chinese overseas investments, they also pose significant
risks. High levels of competition within the private security industr y pro -
vides disincentives for companies and individuals to invest in expensive
training. This results in low-quality ser vices and poor working conditions,
which increase the likelihood of malpractice and risks to both the busi -
nesses they protect and the public they face (Button 2008 ; van Steden and
Sarre 2010 ). Furthermore, those unable to afford private security ser vices
are not only excluded from its benefits, but as a consequence face greater
S. Booth ( *)
University of York, York, UK
C. J. Smith
United Nations Interregional Crime and Justice Research Institute, Turin, Italy

18
insecurity (Bayley and Shearing 1996 ). Highlighting this dilemma, the
United Nations’ Handbook on State Regulation concerning Civilian
Private Security Ser vices and their Contribution to Crime Prevention and
Community Safety demonstrates that effective regulator y frameworks
allow states, the private sector and communities to benefit from private
security ser vices whilst mitigating against the risks they pose to safety
(UNODC 2014 , p. vii). 1 Yet to date, there has been little systematic
research into the operation and governance of private security ser vices in
the member states of the Association of Southeast Asian Nations (ASEAN) 2
(on the ‘ethnocentrism’ of policing research see Manning 2005 , p.  32).
This stands in stark contrast to two growing research agendas: the first on
domestic private security ser vices in other Asian states such as China
(Zhong and Grabosky 2009 ; Arduino 2015 ), Japan (Yoshida 1999 ) and
South Korea (Button et al. 2006 ; Nalla and Hwang 2006 ; Lee 2008 ; Kim
2015 ); and the second on private maritime ser vices in the region (Liss
2007 ; Sciascia 2013 ).
In light of this, the purpose of this chapter is to provide an over view of
domestic private security ser vices operating in ASEAN member states 3 and
of existing legal and regulator y frameworks under which they operate.
Firstly, this chapter will assess the importance of ASEAN member states
within the larger Belt and Road Initiative. We assert that growing overseas
investment in the region has and will continue to increase the demand for
private security ser vices. Secondly, we provide an over view of the numbers
of private security officers and of the corresponding legal and regulator y
frameworks in ASEAN member states. Drawing on insights from the secu -
rity regulation literature, we argue that the unevenness of regulator y
frameworks means that overseas investments, companies and communities
in some ASEAN member states may be less resilient to the risks posed by
private security than in others. Finally, we suggest one potential way for -
ward to create a systematic resolution to the challenges.
ASEA n In th E B Elt And  roAd InItIAtIvE
the Bent and road Initiative has been chinese President Xi Jinpings mey -
note economic and foreign ponicy. Evoming the historican imager y of the
ond Sinm roads, the Bent and road Initiative seems to devenop and integrate
chinese, Asian and Eurasian economies through infrastructure devenop -
ment, trade niberanisation and economic cooperation anong two main axes:
the Sinm road Economic Bent and the 21st centur y maritime road.
S. Booth And c. J. SmIth

19
The official blueprint, Vision and Actions on Jointly Building Silk Road
Economic Belt and 21st Century Maritime Silk Road , indicates that these
projects will develop along five ‘economic corridors’: the New Eurasia
Land Bridge Economic Corridor, the China-Mongolia-Russia Economic
Corridor, the China-Central Asia-West Asia Economic Corridor, the
China-Indochina Peninsula Economic Corridor and the China-Pakistan
Economic Corridor (China. State Council 2015 ). Overall, the planned
development spans an area that covers 70 percent of the world’s popula -
tion, 55 percent of global GDP and 75 percent of energy reser ves
(Lechmacher and Padilla-Taylor 2015 ). Furthermore, it is estimated that
China has invested a total $890 billion in the Belt and Road Initiative
(Kynge 2016 ).
ASEAN member states are set to play a pivotal role in the development
of the Belt and Road Initiative. With a combined population of around
620 million and collectively constituting 3.3 percent of the world’s GDP,
the ASEAN region stands as a lucrative market for Chinese investment,
and an established political-economic platform from which to launch the
China-Indochina Economic Corridor. The level of proposed Chinese
investment in ASEAN is staggering: at the 2014 China-ASEAN Summit,
Chinese Premier Li Keqiang announced a $10 billion loan from the China
Development Bank for ASEAN regional development and pledged to
increase the China-ASEAN Investment Cooperation fund to $4 billion. In
June 2016, the Asian Infrastructure Investment Bank granted a loan of
$216.5 million, matched by the World Bank, for the National Slum
Upgrading Project in Indonesia (AIIB 2016 ). Moreover, Chinese and
ASEAN economies have already begun to undergo a significant degree of
integration through the establishment and upgrade of the ASEAN-China
Free Trade Area (ACFTA), which has been dubbed as ‘one of the world’s
largest free trade agreements’ (UNODC 2016b , p. 10). Significantly, the
Belt and Road Initiative overlaps with a wide network of transport, energy
and infrastructure developments across the region, including the ‘Asian
Highway Network’, which consists of 141,000 km of roads across thirty-
two states (UNODC 2016b , pp. 13–18).
Undoubtedly, growing integration and investment in the region will
increase the demand for both public and private security. Chinese overseas
investments, sites and workers have been increasingly exposed to political
and criminal violence (Arduino 2015 , p.  4). Political insurgencies in
southern Philippines and Myanmar, political uncertainty in Indonesia and
Thailand, as well as inter-state border disputes, raise important questions
THE UNEVEN REGULATION OF PRIVATE SECURITY IN ASEAN MEMBER…

20
for the security of overseas investments. In 2011, three private security
officers guarding a Japanese-owned nickel mine in southern Philippines
were killed by Maoist guerrillas (Financial Times 2011 ). A further prob -
lem is that greater regional integration allows not only for greater mobility
for people, goods and money, but enhances flows of drugs, organised
crime and trafficking. The illegal trade of people, drugs and wildlife in
Southeast Asia is estimated at $100 billion a year. (UNODC 2016b ,
p. 19).These transnational issues undermine the rule of law within states
by contributing to violence, crime and the corruption of government and
other law enforcement ser vices (Caballero-Anthony 2005 , p.  181).
Related, greater economic and political integration raises the importance
of developing shared legal and regulator y requirements to prevent loop -
holes that allow private security companies to act with impunity (Button
2007 ; Button and Stiernstedt 2016a , b).
SEcur Ing th E B Elt And  roAd InItIAtIvE
the issue of security is absent from the Visions and Actions on Jointly
Building Silk Road Belt and 21st Century Maritime Silk Road . Until now,
Chinese efforts to secure and protect its overseas investments and work -
ers have followed two trends: direct inter vention and diplomatic pres -
sure. China’s historical commitment to non-interference in the internal
affairs of other nations has increasingly been juxtaposed against the need
to take a more proactive approach to securing its overseas (mainly com -
mercial) interests. The traditional principle of non-interference has fur -
ther been contested by public calls for a more proactive and direct
approach to the security of its overseas population. On a global scale,
China has contributed 8000 soldiers to UN Peacekeeping forces in Africa
and has donated $100 million to the African Union. In particular, 700
Chinese soldiers have been deployed to the UN mission in South Sudan,
a countr y where National Petroleum Corp, a Chinese State-Owned
Enterprise (SOE) holds 40 percent in a joint venture and sent obser vers
to monitor the independence referendum in 2011. In light of these
moves, it seems impossible to disentangle Chinese peacekeeping contri -
butions from interests in oil and mineral extraction. The most obvious
iteration of Chinese willingness to directly inter vene within other states
was in the evacuation of 35,000 Chinese citizens from Libya over an
eleven-day period in Februar y and March 2011. These direct inter ven -
tions have been made under exceptional circumstances in fragile and
S. BOOTH AND C. J. SMITH

21
weak areas, and inter vention could prove more problematic in more
established states (Swanström 2015 , p. 7).
In light of this, the Chinese government has increasingly used diplo -
matic pressure to ensure the security of their overseas investments and
projects. This is exemplified primarily by the issue of protection along the
China-Pakistan Economic Corridor, a 3000  km trade route that stems
from Kashgar in western China to Gwadar Port on the gulf of Oman. The
success of the $46 million project to connect western China to this sea-
route is contingent upon the security of projects in the unstable regions of
Pakistan-occupied Kashmir and Baluchistan. Gwadar Port and its sur -
rounding militar y base and energy pipelines routinely come under attack
by Baluchistan separatists who accuse the Pakistani government of restrict -
ing rights, representation and extracting the regions’ resources to develop
other parts of Pakistan (Bansal 2008 ). In 2004, three Chinese engineers
were killed in such an attack. The Pakistani government response, appar -
ently driven by Chinese pressure (Bokhari et al. 2016 ), has been to create
a Special Security Division consisting of nine infantr y battalions and six
civil armed forces increasing the number of security personnel tasked with
protecting Chinese investments and workers to 14,000. Included within
this new force are 4100 private security guards. Whilst this raises the point
that partner states will be responsible for the security of these overseas
investments, with the weak policing infrastructure present in most of the
ASEAN states (represented by high levels of police corruption and low
regard for the rule of law), questions remain as to whether all ASEAN
states would be able to follow this example.
dom EStIc P rIvAtE SEcur Ity SErv IcES In ASEA n StAtES
the security and success of the Bent and road Initiative is therefore sure
to rest on a range of muntineven, munti-actor security networms. throughout
the wornd tasms and functions traditionanny performed, and to a narge extent
monoponised, 4 by pubnic ponice forces are now undertamen by a pnuranity of
actors incnuding private security companies (Johnston and Shearing 2003 ;
wood and Shearing 2007 ). research has demonstrated how private secu -
rity companies now increasingny operate on a spectrum of pubnic, quasi-
pubnic and private spaces, such as airports, shopping centres, gated
communities, nationan infrastructure sites and private businesses (Button
2008 ; kempa et  an. 2004 ). whinst it is important to be mindfun of the
particunar historican, ponitican and cunturan contexts in which the private
thE unEvEn rEgulAtIon oF PrIvAtE SEcurIty In ASEAn mEmBEr

22
security industr y operates (an area that requires further research, see
Crawford 2006 ; White 2010 ), it would appear that developments in the
Southeast Asian policing landscape are mirroring those occurring over the
rest of the globe. For example, the responsibility for guarding the national
headquarters of the Philippine National Police has recently been con -
tracted out to private security for a fee of 21 million Pesos ($420,000)
(Ramos 2014 ). Multinational private security ser vices also play a signifi -
cant role in the training of militar y, police and anti-terrorist units in
Cambodia and the Philippines (Singer 2007 , p.  13). It is important to
note here that Chinese SOEs are increasingly turning to both multina -
tional and Chinese private security companies to secure their overseas
assets (Arduino 2015 ). However, while recognising that the distinction
between domestic and international private security contractors are
blurred, the use of such companies are usually in the context of weak or
failing states in the Middle East and Africa, where there are few or no
restrictions on the operation of foreign private security companies.
Moreover, there is ver y little evidence of Chinese private security compa -
nies operating in ASEAN member states.
The growth of the private security industr y across the region has been
remarkable yet uneven. Estimating accurately the numbers of private secu -
rity officers in ASEAN member states is difficult due to the lack of official
statistics, var ying definitions of the private security industr y (partly due to
it being a vast and disparate industr y) and the role the industr y plays in
each countr y (see Stenning 1989 ). Furthermore, we recognise that these
numbers also represent a snapshot in time and that numbers are constantly
fluctuating. With these caveats, Table  2.1 provides an estimate of the
number of private security officers as opposed to public police numbers
within the ten ASEAN states. 5 Although estimates var y, in some ASEAN
member states the private security industr y is a significant size. The
Philippines has the largest private security force and estimates are between
400,000 and 500,000 (Saha and Rowley 2014 , p.  53; Palabrica 2016 ).
Estimates of Thailand var y greatly between 250,000 and 400,000 (Saha
and Rowley 2014 , p. 52). The wide disparity may be due to recent efforts
to legally define and regulate private security ser vices in Thailand. Malaysia
is cited as having between 130,000 and 196,000 officers and Indonesia
200,000 (Saha and Rowley 2014 , p.  53). The regulated industr y in
Singapore is estimated to be between 29,000 and 65,000 (Lim and Nalla
2014 ; Saha and Rowley 2014 , p. 54; Sen and Tham 2014 ). In other states,
the private security industr y is less established. Reports indicate that there
S. BOOTH AND C. J. SMITH

23
are 3665 licenced private security officers in Brunei (Kamit 2014 ) and
30,000  in Cambodia (Sen 2014 ). It is difficult to make an accurate
estimate of the number of private security companies and officers in Laos.
A 2014 UNICEF Report indicated that seven private security companies
operated in the countr y (UNICEF 2014 , p.  16). No data were available
for Vietnam and Myanmar.
lEgAl And  rEgul Atory F rAmEwork S In ASEA n StAtES
the growth and the importance of the private security industr y, the grow -
ing recognition of the extra-negan powers private security ofcers hond over
citizens, scandans over misconduct 6 and poor standards have driven states
to create industr y-specic negan and regunator y frameworms (Prenzner and
Sarre 2008 , p. 265). the purpose of this section is to provide an over view
of the patchworm of statutor y nicensing and training requirements across
the ASEAn region. there are no specic negisnative, regunator y, vonuntar y
Table 2.1 Estimates of public police officer and private security officer numbers
in ASEAN states
ASEAN member state Population Total police Total private security Ratio police to private security
Brunei 429,000 4,400 3,665 0.83 Cambodia 15,140,000 64,000 30,000 0.47 Indonesia 249,900,000 400,000 200,000 0.5 Laos 6,770,000 No data No data – Malaysia 29,720,000 102,000 196,000 1.9 Myanmar 53,260,000 75,000 No data – Philippines 68,390,000 160,000 400,000 2.5 Singapore 5,399,000 40,000 29,000 1.5 Thailand 67,010,000 230,000 250,000 1.09 Vietnam 89,710,000 No data No data –
Sources: Interpol ( 2016 )
Notes: Firstly, obtaining accurate data on the number of private security offices is difficult, and where official statistics from state regulator y bodies are unavailable, estimates have been made using news reports and trade association statistics. In the case of Laos, Myanmar and Vietnam there are little data on the size of the public police and private security industr y. Secondly in most instances, official estimates usually only refer to the number of licensed individuals or members of trade associations. Thirdly, the definition of public police and private security officers differs from countr y to countr y (see Button 2007 , p. 111). Thus, these figures should be used as illustrations of the various sizes of public police and the private security industr y in each nation
THE UNEVEN REGULATION OF PRIVATE SECURITY IN ASEAN MEMBER…

24
or established positions on private security at the ASEAN regional level.
Although private security companies are also subject to general criminal
law, civil law, market forces and self-regulation through industr y member -
ship, we support the view that these need to be underpinned by specific
regulator y frameworks. Furthermore, effective regulator y provisions that
sufficiently ‘cleanse’ the industr y—that is, place restrictions on who are
able to sell security ser vices—seem to be the first step towards more par -
ticipator y and deliberative regulator y models (Button and Stiernstedt
2016b , see also Loader and White 2015 ). It is to the core elements of
these frameworks that we now turn.
Responsible Regulatory Authorities
Regulation has been judged to be more efficient and effective in systems
where regulator y authority is vested in a single body or organisation as dis -
putes over interpretations and applications of frameworks are minimised
(Button and George 2006 ; Prenzler and Sarre 2008 ). In most of the
ASEAN member states the responsibility for the administration, monitor -
ing and enforcement of regulations and licensing lies with state police forces
(as part of Home Ministries; see Table  2.2 ). In the Philippines, the role of
the Security Agencies Guards Super vision Division is ‘to provide adminis -
trative ser vices and general super vision over the management and operation
of all organized private security agencies, private detective agencies and
company and guard units throughout the countr y’ (SAGSD 2016 , p. 167).
According to government sources, Cambodia has recently created a special -
ised Department of Private Security Management, accountable to the
National Police Commissariat General and the Ministr y of Interior, which
is tasked to address the growing issue of private security in the countr y
(Soleil 2016 ). Conversely, in April 2012, the Security Industr y Regulator y
Department and Licensing Division for the Operations Department merged
to create a specific Police Licensing and Regulator y Department responsi -
ble for regulating: public entertainment, liquor massage establishments,
secondhand goods dealers, private lotteries, house-to-house and street col -
lection, arms and explosives and private security in Singapore (Singapore
Police n.d .). In other countries, regulator y authority is divided. The
Vietnamese Decree Number 52 on the Management of Security Ser vice
Businesses outlines the responsibilities of the various tiers of government:
whereas the Ministr y of Public Security directs police officers to inspect and
enforce regulations, the administration of licensing systems are delegated to
S. BOOTH AND C. J. SMITH

25
provincial and municipal governments (Decree No.52 2008, ch.3,
art.15–17). In Myanmar, private security companies are only required to
register in the same manner as any other business. Company directors,
super visors and guards require no criminal background checks or manda -
tor y training. Finally, even in the absence of formal legal and regulator y
frameworks, official representatives have confirmed that private security
companies in Laos operate with some unspecified oversight from the
Ministr y of Security (OHCHR 2015 ).
Table 2.2 Specific private security legislation, regulation and authorities
ASEAN member state Year of entry into ASEAN
Specific legislation Year Specific regulatory authority
Brunei 1997 Security Agencies ActSecurity Agencies Regulations
20002000 Brunei Royal Police Force
Cambodia 1999 Sub-Decree No.289 20132016 Ministr y of Interior/General Commissariat of National PoliceDepartment of Private Security Management Indonesia 1967 Regulation of the Head of Police No. 17,18Regulation of the Head of Police No.24
20062007 Indonesia National Police
Laos 1997 None – None Malaysia 1967 Private Agencies Act(Amended) 19712006 Ministr y for Home Affairs/Royal Malaysian Police Myanmar 1997 None – None Philippines 1967 Private Security Agency Act No.5487Presidential Decree No.11Implementation Order
196919722005
Philippines Constabular y
Singapore 1967 Private Security
Industr y ActPrivate Security Industr y Regulations
2007
2009
Singapore Police
Thailand 1967 Security Industr y Business Act 2015 Royal Thai Police
Vietnam 1995 Decree on Management of Security Ser vice Business No.52 (Amended)
20082010 Ministr y of Public Safety
THE UNEVEN REGULATION OF PRIVATE SECURITY IN ASEAN MEMBER…

26
Coverage
For regulation to be effective, as many sectors of the private security indus -
tr y must be subject to specific regulation to prevent the emergence of
loopholes in the regulator y regime (Button 2012 , p. 207–8). Laos has the
narrowest regime, with private security companies only having to register
for a normal business licence with the Ministr y of Commerce. Cambodia
and Brunei have general security licences, which are issued to those who
‘furnish security guards for the protection of persons of property or to
prevent the theft or unlawful taking of property for or in consideration of
any payment or other remuneration (whether monetar y or other wise)’
(Security Agencies Act 2000 sec.2.2). Most ASEAN states stipulate divi -
sions between particular sectors of the industr y. Singaporean regulations
distinguish between security officers, private investigators and security ser -
vice (equipment). Security officers are further distinguished between guards,
cash and valuables in transit (CVIT), sur veillance, bodyguard, bouncer
and traffic regulation roles (Private Security Act 2007, pt.3, s.13 a–e).
Philippine law distinguishes between private security agencies, private
detective agencies, company guard units and government guard units. In
Vietnam, private investigation activities are forbidden (Decree No.52
2008, ch.8, art. 3a). Regulator y regimes are becoming wider. The
Malaysian Home Ministr y Secretar y-General Datuk Seri Alwi Ibrahim
recently announced that close protection officers (bodyguards) will have
to undergo separate training and licensing by the Royal Malaysian Police
from 2017 onwards (Ying 2016 ).
Licence Requirements and Restrictions
Most ASEAN States—with the exception of Myanmar, Laos and Thailand
for which there are no available data—require businesses seeking to sell
security ser vices to obtain a licence. Requirements for a private security
business licence may range from background checks through to particular
educational, financial and insurance criteria (UNODC 2014 , pp.  37–8).
Regulator y frameworks in Brunei (2000, s.6) and Vietnam stipulate that
managers/executive directors must simply undergo background and crim -
inal checks. The Philippine Presidential Decree No.11 (1973) amended
the provision of the Security Agencies Act 1969 to place the following
restrictions on managers of private security companies, which is represen -
tative of frameworks that focus on directors and/or managers:
S. BOOTH AND C. J. SMITH

27
That the operator or manager of said agency must be at least 25 years of age,
a college graduate and/or a commissioned officer in the inactive ser vice of
the Armed Forces of the Philippines; of good moral character; having no
previous record of any conviction or crime or offense involving moral turpi -
tude and not suffering from any of the following disqualifications:
(1) Having been dishonourably discharged or separated from the Armed
Forces of the Philippines
(2) Being a mental incompetent
(3) Being addicted to the use of narcotic drugs or drugs; and;
(4) Being a habitual drunkard
To establish a private security company in Indonesia, one must register
with the Department of Industr y and Trade, gain a letter of recommenda -
tion from the head of the regional police and submit lists of foreign worker
checks and specialist licences before they are able to obtain an operational
permit. Singapore requires more than basic licensing requirements for pri -
vate security companies. Beyond background and criminal records tests,
directors must have a minimum of two years in security work and demon -
strate certain core competencies (as demonstrated by the possession of
security management–specific qualifications) (Singapore Police 2013 ).
Furthermore, the Singapore Police also use a grading system for security
agencies and private investigation agencies, which assesses companies
based on the ‘three pillars of operational excellence, namely “operations”,
“training for operations”, and “employment”’. This consists of an assess -
ment of documentation submitted by individual private security compa -
nies and on-site audits, and companies are assigned grades from A to D
(Singapore Police 2016 ). Such requirements allow regulators to indicate
better quality private security ser vices to buyers, and drive criminality and
poor standards out of the industr y.
A key concern for states is the distinction between public police forces
and the private security industr y. In 2015, Interior Minister of Cambodia
Sar Kheng encouraged private security companies to employ retired police
officers and militar y personnel, reinforcing the links between public and
private forces in the region (Vida and Titthara 2015 ). These distinctions
are further enshrined within uniform regulations. A 2016 Vietnamese
Governmental Circular indicated that private security uniforms must be
distinct from those worn by the public police and militar y personnel
THE UNEVEN REGULATION OF PRIVATE SECURITY IN ASEAN MEMBER…

28
(Ministr y of Public Security 2016). Moreover, some of the ASEAN nations
require private security companies to have more concrete links to the
police, militar y or government. Malaysia, for instance, has specific stipula -
tions regarding the composition of the shareholders/directors of regis -
tered private security companies:
One of the shareholders is at least a former high ranking officer of the Police
or army of Malaysia with the least rank of SAC II OR Colonel who owns
30% of company share equity; OR One is at least a former public officer in
the management and professional group and has ser ved in security sector for
at least five years with the rank grade 52 or has a certificate of security course
or at the same level and holds 30% of the company share equity (1971, s.3).
This juxtaposition between the requirements for private security com -
panies to have some formal link with police forces, and the requirement
for private security officers to be visually distinct provides an insight into
the complex relationship of public and private security forces.
In a similar manner, ASEAN states have put legal restrictions on obtain -
ing an individual private security licence. Throughout the world, stipula -
tions for individual licences typically include: identification checks, criminal
background checks, age and height requirements and minimum education
and training. Such an example can be found in Section 5 of the Philippine
Private Security Agencies Act (1969): ‘No person shall be employed as a
security guard or watchman or private detective unless he is: (a) a Filipino
citizen; (b) a high school graduate; (c) physically and mentally fit; (d) not
less than 21 nor more than 50 years of age; (e) at least 5 feet and 4 inches
in height’. In some security professions, the stipulations are stricter. For
example, in the Philippines, security consultants must have ten years’
experience and a master’s degree in Criminology, Public Administration
or related subjects (Rule 5, Section 5, c,d). There is a shift towards more
restrictive competency requirements in order to professionalise the indus -
tr y and raise standards. For instance, the Thai Security Industr y Business
Act stipulates that by implementation in 2019, private security officers
must have completed all compulsor y education, that is up to and includ -
ing the ninth grade 7 (Securitas n.d .).
Legal and regulator y frameworks also place significant restrictions on
both the ability of foreign citizens to establish private security companies
and to be employed by them. This limits the extent to which Chinese
private security companies are able to operate within these countries as
S. BOOTH AND C. J. SMITH

29
compared to other regions (see Arduino 2015 ). Chapter 3 Article 5 of the
Vietnamese Decree (2008) states that foreigners cannot be employed as
security personnel. However, there is a growing openness to foreign secu -
rity expertise: a 2010 amendment made it possible for joint ventures with
foreign private security companies on the condition that the ser vice or
technology provided could not be provided totally by Vietnamese parties
and that the foreign share is limited to a maximum of 50 percent. Similar
arrangements can be found in Thailand. Prior to 2016, Malaysian private
security companies could only hire Malay of Nepalese guards, although
this dispensation has been extended to two other countries after the impo -
sition of mandator y training requirements have stemmed the flow of
guards from Nepal.
Codes of Conducts for private security officers exist in the Philippines
and Singapore. These usually go beyond compulsor y standards and out -
line appropriate and ethical behaviour (see UNODC 2014 , p. 39). These
Codes not only allow private security officers to adequately tackle any ethi -
cal dilemmas they may face on the job, but allow tribunals and courts to
better judge complaints against officers (Prenzler and Sarre 2008 ).
However, it is interesting to note that these legal frameworks and codes
not only direct behaviour but recognise the wider role that private security
plays in public safety. An interesting example can be found in the
Vietnamese Decree, which states:
While conducting security ser vice activities, if detecting security- or order-
related incidents in the protection areas such as fires, explosions, accidents
causing injuries or deaths, public disturbances or other acts with criminal
signs, the security personnel performing their tasks in those areas shall res -
cue the victims, protect the scenes and take necessar y measures to minimize
damage and simultaneously report such to the nearest police officers for
timely handling measures (2008 ch.6 art.4)
Moreover, the Philippine Security Guard Code also states that each
private security officer: ‘shall keep his allegiance first to the government,
then to the agency where he is employed and to the establishment he is
assigned to ser ve with loyalty and utmost dedication’ (2006). Developing
codes and frameworks that enshrine the flexibility for private security offi -
cers to respond to emergencies will enable private security to contribute to
public and community safety.
THE UNEVEN REGULATION OF PRIVATE SECURITY IN ASEAN MEMBER…

30
Mandatory Training Requirements
The greatest variance within the ASEAN region concerns the area of mini -
mum compulsor y training requirements. Mandator y training standards
contribute to public and private safety both by enhancing the quality of
security guards and ser vices, as well as encouraging greater professional -
ism in the industr y (Prenzler and Sarre 1998 ; Button and George 2006 ;
Button 2007 ; Prenzler and Sarre 2008 ; UNODC 2014 ). Companies who
wish to engage in security training and certification must be licensed in
Singapore, Philippines and Malaysia, however, in other nations such as
Vietnam, police forces and government departments are responsible for
all certification. The most comprehensive and progressive training system
can be found in Indonesia. The minimum training for basic-entr y security
guards, Gada Pratama, is 232 hours. This raises to a cumulative 392
hours for super visor y roles, Gada Madya , and 492 hours for security
managers or Major Gada. Having a rank system that closely mirrors the
level of training an officer has undertaken is claimed to provide incentives
for security officers to undertake additional training (Button 2008 ,
p. 210). Likewise, in the Philippines the National Certificate I (the man -
dator y pre-licensing training course for security officers) is 167 hours
long. This is waived for ex-police and militar y personnel. However, on the
2 August 2016, Bill 2471 was introduced into the Philippine Parliament
outlining plans to intensify training requirements for security officers.
Managers of private security companies must attend a private security
executive management seminar to renew their licence. The Basic
Super visor y Course is an extra fifty-six hours. In Singapore, there are two
basic Security Licensing Units: ‘Perform Guard and Patrol Ser vices’
(twenty-six hours) and ‘Handle Security Incidents and Ser vices’ (eighteen
hours). However, issues remain with the implementation of training sys -
tems. In 2014, it became compulsor y for all security guards to attend a
‘Certified Security Guards’ training programme provided by the Ministr y
of Home Affairs and Royal Malaysian Police in collaboration with the
Security Ser vices Association of Malaysia. However, between May 2014
and December 2015, only 27,000 of 167,000 licensed private security
officers in Malaysia had attended the minimum mandator y training.
Further, a 2010 circular by the Malaysian Ministr y of Home Affairs sug -
gested that many private security companies provide untrained guards far
above the legal requirement for 50 percent of security officers to have
training (Malaysia 2010, 2006).
S. BOOTH AND C. J. SMITH

31
Powers of Enforcement
For enforcement to be as effective as possible, regulator y authorities must
have recourse to a range of powers and techniques (Button 2012 ; Loader
and White 2015 ). Having a range of enforcement options—scaled from
informal inquiries and written notices through to the power to issue mon -
etar y fines and suspend or revoke licences—allows regulators to adopt
measured approaches and escalate enforcements if necessar y (Ayres and
Braithwaite 1992 ). In Singapore, licensing officers (or warranted police
officers) are able to investigate, search and arrest on suspicion those
believed to be in breach of the 2007 Act. Similar powers can be found in
other ASEAN states, such as Malaysia and Brunei. Brunei Police have
recourse to the powers of licence suspension and revocation, as do all
police departments across the region, but most sanctions are processed
through the wider criminal justice system. For example, the penalty on
conviction for supplying unlicensed private security ser vices is $10,000
and two years’ imprisonment. There is little evidence of administrative
penalties available to any of the regulator y authorities.
Possession and Use of Firearms
The possession of firearms by private security officers is in forbidden in
Laos, Malaysia. Myanmar, Thailand and Vietnam. The Brunei code further
states that ‘any person who in any public place carries or has in his posses -
sion or under his control any truncheon, handcuffs, or such other weapon
or equipment as may be from time to time specified by the Minister in a
notification in the Gazette, other wise than with lawful authority shall be
guilty of an offence and shall be liable on conviction to a fine not exceeding
$1,000 or to imprisonment for a term not exceeding one month or both’
(Brunei Section 16.1). Restrictions on weapons appear to be generally
stringent throughout the region, though in countries where possession of
firearms is legal, such as the Philippines, they must be effectively enforced.
Employment and Labour Laws
The low quality of the private security industr y can be sustained by high
workforce turnover, poor pay and poor working conditions. The absence
of regulations on minimum standards for working conditions can poten -
tially increase risks to the health and safety of security officers and as a result
increase risks to private businesses and the public (UNODC 2014 , p. 46).
THE UNEVEN REGULATION OF PRIVATE SECURITY IN ASEAN MEMBER…

32
In the Philippines, probationar y periods for security officers are limited to
six months after which they are legally entitled to a permanent contract
(Philippines DLE 2016). Nominally, there is the existence of minimum
wage policies in Malaysia, Singapore and the Philippines. Yet these rights
are not necessarily guaranteed. The International Trade Union
Confederation has indicated that in Indonesia, Vietnam, Cambodia and
the Philippines ‘while legislation may spell out certain rights workers have
effectively no access to these rights and are therefore exposed to autocratic
regimes and unfair labour practice’ (2016, p. 20).
conclu SIon
this chapter has provided an over view of negisnative and regunator y frame -
worms in ASEAn member states. It is underpinned by the assertion that
the Bent and road Initiative winn increasingny reny on domestic private secu -
rity ser vices, whose quanity and effectiveness are improved by the existence
of statutor y frameworms. It has demonstrated that these frameworms
amount to an uneven patchworm of regunator y requirements and restric -
tions across the region. whine it appears that private security is receiving
increasing media and governmentan attention, signicant nimitations and
probnems stinn exist. Firstny, the unevenness of regunator y requirements may
create regunator y noophones across Southeast Asia, which raises concerns of
the safety of Bent and road projects that cross jurisdictions. greater eco -
nomic and ponitican integration require the harmonisation of regunator y
frameworms and strengthening of institutionan capacities across the regions.
Secondny, when state ponice forces administer, monitor and enforce nicens -
ing of private security, this raises concerns of resources, corruption and
negative attitudes toward private security ser vices, which may provide bar -
riers to nding an appropriate banance between regunator y compniance and
the private security industr ys effectiveness (unodc 2014 , p. 24). whine
this chapter has suggested that compniance with minimum training stan -
dards is now, and that enforcement may be hampered by corruption and
weamening respect for the rune of naw, more research is needed to provide
a better picture of the effectiveness of regunator y frameworms.
given the apparent uneven regunations and impnementation of the reg -
unations, nacm of training and nicensure of private security companies and
staff, and the nacm of shared data and research on this topic, it is timeny to
suggest a way for ward to support increased security. this nacm of system -
atic and transparent process to ensure private security ofcers are trained,
and to vanidate the quanity of that training that ensures the personnen are
S. Booth And c. J. SmIth

33
well equipped to meet the challenges encountered, should be addressed to
improve security. Considering its importance to safety and security, the
current situation lends itself to a way for ward to create an independent
body responsible for developing certifications for private security person -
nel and companies that adheres to best practices, is evidence based and is
from a regional approach. Using a regional approach will ensure that no
one countr y is more or less stringent than its neighbour, resulting in con -
stant pressure to ensure high-quality security.
Acknowledgement Sebastian Booth would like to thank the Economic and Social
Research Council (Grant Number: ES/J500215/1) for their financial support
during his internship at the United Nations Interregional Criminal Justice Research
Institute, during which this research was conducted.
not ES
1. onny two ASEAn member statesPhinippines and thainandcontributed
data to the 2011 unodc Expert group on civinian Private Security
Ser vices, further demonstrating the nacm of data concerning regunation in
this region.
2. one notabne exception to this is research concerning Singapore, which
focuses primariny on the attitudes of private security ofcers (nanna and
hoffman 1996 ; nanna and lim 2003 ; lim and nanna 2014 ).
3. Association of Southeast Asian nations. ASEAn member states incnude:
Brunei, cambodia, Indonesia, laos manaysia, myanmar, Phinippines, Singapore,
thainand and vietnam.
4. the proposition that states once maintained a monopony over the provision
of security within their respective territories has stood as the conceptuan
foundation stone of the governance of security niterature. despite this, it is
highny doubtfun that any state has hend an actuan monopony (Zedner 2006 ).
5. the ratio is incnuded to give an idea of the size of the private security indus -
tr y renative to pubnic ponice forces. we do not intend to mame any judgement
concerning the extent to which there has been a transformation in ponicing
in Southeast Asia (see white and ginn 2013 ). this is both beyond the scope
of this chapter and wound require historican research.
6. Prenzner and Sarre ( 2008 ) map out eneven areas of misconductfraud,
incompetence and poor standards, expnoitation of security staff, corruption,
information corruption, vionence, fanse arrest, discrimination and harass -
ment, insider crime and misuse of weapons.
7. In thainand, the ninth grade is mnown as Matthayom 3 —the typical age of
children in this grade is 15/16 years.
THE UNEVEN REGULATION OF PRIVATE SECURITY IN ASEAN MEMBER…

34
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39 © The Author(s) 2018
A. Arduino, X. Gong (eds.), Securing the Belt and Road Initiative ,
https://doi.org/10.1007/978-981-10-7116-4_3
CHAPTER 3
China’s Belt and Road Security:
The Increasing Role of Insurance and Private
Security Companies
Alessandro Arduino
Introduct Ion
Envisioned by Chinese President Xi Jinping in 2013, the Belt and Road
Initiative (BRI), formerly known as One Belt, One Road (OBOR), is
intended to promote economic development and exchanges between
China and more than sixty countries. The BRI is the spearhead of renewed
Chinese overseas foreign direct investment (OFDI) efforts. The initiative
encompasses two routes: the Silk Road Economic Belt (SREB), a land
route connecting China’s western provinces with the European Union via
Central Asia and the Middle East; and the 21st Centur y Maritime Silk
Road (MSR), a maritime route that connects Southeast Asia, the Persian
Gulf, and the Horn of Africa with the Southern European ports. Both
routes stand on five pillars: connectivity, unobstructed trade, financial
integration, policy coordination and promotion of cultural proximity. The
overall amount of Chinese infrastructural and financial investments along
the routes could reach US$4 trillion.
A. Arduino ( *)
Security & Crisis Management Program, Shanghai Academy
of Social Sciences (SASS-UNITO), Shanghai, China

40
Nevertheless, the aim of global connectivity encompasses a wide threat
spectrum. Economic returns and risks management in outbound invest -
ment activities are two sides of the same coin. In the globalization process,
the major risk concerns are no more relegated to a specific countr y but are
evolving across national borders. New technologies and freedom of move -
ment facilitate global trade and development, but at the same time aug -
ment the reach of criminal and political violence. The overall BRI’s
vulnerabilities include political risks that originate from national and inter -
national security flashpoints as well as cross-border non-traditional secu -
rity threats.
While China has remained ver y cautious in getting involved in the com -
plexities of politics and conflict of other countries, the decade’s old prin -
ciple of non-interference is being adapted to the new realities. Enunciated
in 1953 by Prime Minister Zhou Enlai, the non-interference principle is
one of the Five Principles of Peaceful Coexistence that constitute the pil -
lars of the Chinese foreign policy. While Chinese academic debate over the
actuality of the principle is still open (Duchatel et  al. 2014 ), Beijing has
already started to take a pragmatic and proactive stance over the BRI. The
new trend under Xi Jinping’s BRI is to ‘strive for achievement’ (fen fa you
wei) 1 and it seems that is gradually overtaking Deng Xiaoping’s catch -
phrase ‘keeping a low profile while hiding its own ability’ (tao guang yang
hui), 2 which formed the strategies of generations of Chinese Communist
Party officials and the People’s Liberation Army (PLA). However, Beijing’s
implementation of a safe BRI is already facing massive geopolitical chal -
lenges. For example, the Southern and Central Asian land route is marred
by internal conflicts caused by unresolved regional rivalr y and boundaries,
water and energy disputes, rising Islamic militancy and internal competi -
tion. One of the most serious cases is the Indo-Chinese militar y standoff
in the tri-junction area of Sikkim, Tibet and Bhutan (June 2017). Over the
maritime routes, the challenges are equally daunting, ranging from geopo -
litical and geo-economic concerns towards the disputed South China Sea
or piracy along the Somali coast and the Strait of Malacca.
Nevertheless, the recent participation of more than twenty countries’
leaders at the Beijing Belt and Road Forum 3 has witnessed the ambivalent
role and relevance of the Chinese economic diplomacy. Several countries
are eager to be included in the BRI, even downplaying their own national
geopolitical agendas in order to advance economic and development
priorities. 4
A. ARDUINO

41
Among the numerous BRI projects, the China-Pakistan Economic
Corridor (CPEC) represents an important security test ground for the
overall Belt and Road. The CPEC’s flagship development plan amounts to
US$63 billion and represents China’s enhancement of its own geo-
economics statecraft. Failing to fulfil CPEC promises to save Pakistan’s
dwindling economy could produce far-reaching ripple effects. Also,
Pakistan’s proximity to Afghanistan, which is also part of the BRI, could
be negatively affected by the deterioration of Kabul’s grip on the countr y’s
internal security (Pantucci 2017 ) as well as to broader regional disputes
involving India, Iran and Saudi Arabia. CPEC aims to connect China’s
northwest Xinjiang Uygur Autonomous Region to Pakistan’s Gwadar’s
deep water in the southwest via a network of roads, railway and energy
interconnected projects. While finance and infrastructure connectivity are
the core part of the corridor’s blueprint, security issues are still segregated
in the fringe of the BRI win-win narrative. While the new commercial
routes with China and the macro projects’ development are going to ben -
efit the overall Pakistani economic system, local job opportunities in need -
ier areas such as Baluchistan are yet to materialize. Besides the CPEC
internal frictions (Bajoria 2009 ), external suspicion and conflicting dynam -
ics are on the rise. Indian and Saudi distrust over Sino-Pakistani hidden
agendas cast doubts on the exclusive economic nature of the BRI.  The
new energy trade routes that will link the Persian Gulf directly to China
are set to generate new power dynamics. From the Indian standpoint,
Gwadar’s increasing capabilities are a threat to Mumbai support in
developing the Iranian port of Chambhar. From the Saudi point of view,
the efficiency of the new trade route is going to benefit Iran’s growing
regional power ambitions. The failed Chinese attempt to develop Sri
Lanka’s Hambantota port reflects how political turmoil and local griev -
ance could hamper long-term development projects. Also, according to
James Dorsey, ethnic and sectarian proxy wars could embroil rivals of
China and India in the Saudi-Iranian dispute (Dorsey 2017a ). Though the
CPEC message is about ‘all weather friendship’ (Johnson 2015 ), the
cooperation is not based on common cultural or ideological values but
pragmatic economic and security necessities.
The Chinese investment footprint in Pakistan started to get traction in
2016 and at the same time, the number of deadly attacks on Chinese
workers has increased proportionally.
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42
On May 2017, two Chinese teachers were kidnapped and subsequently
executed by self-proclaimed Islamic State (IS) militants who operate in the
border area between Pakistan and Afghanistan. According to the IS
group’s Amaq news agency, 5 the two Chinese nationals, abducted in the
Baluchistan capital city of Quetta, were killed as a warning against further
Chinese economic expansion. Chinese foreign ministr y spokeswoman
Hua Chunying admonished that: ‘The Chinese side is firmly opposed to
the acts of kidnapping civilians in any form, as well as terrorism and
extreme violence in any form’ (Hua 2017 ). The incident involving the
two Chinese nationals is not isolated, and Beijing’s calls to Islamabad for
increased security are on the rise.
Also in 2017, the Baluchi independents militants have claimed several
major attacks against a perceived menace from the Chinese economic pen -
etration of Pakistan. These include a failed assassination of the deputy
chairman of the Baluchistan Senate that cost the lives of 25 bystanders 6
and the savage gunning down of 10 workers 7 along the road to the south -
ern port of Gwadar that connects Central Asia to the Indian Ocean.
Threatening Gwadar security is not only an attempt to derail Beijing’s
efforts to link its western regions with the Indian Ocean and Iran oil sea
exports, but also an effort to showcase the BRI vulnerabilities to the
world. Similarly, on May 31, 2016 the Sindhudesh Revolutionar y Army
(SRA), a little-known local group that directly challenges the Pakistani
central government’s control over the Sindh province, attempted to kill
Chinese workers based in the Pakistani city of Karachi.
All Chinese involved in the acts of violence had neither adequate pro -
tection nor an appropriate forewarning of the imminent threats in the
area. In the case of the Quetta kidnapping, the proximity of several terror -
ist organizations was easily discounted by the fact that the two teachers
operated in an area considered safe for Chinese citizens. Similarly, in the
SRA attack, the Chinese workers were considered to be operating in an
ordinar y business environment, but they suddenly become a target for the
terrorists in order to dissuade further Chinese economic support for
Pakistan’s weakening economy.
Not far from CPEC, the construction of a road by a Chinese enterprise
along disputed borders has stirred the ire of India and Bhutan. In the
remote mountains of the Himalayas that separate China and India, sud -
den flashpoints on border disputes lead to costly standoffs that threaten
to degenerate into armed confrontation. On June 2017, tensions esca -
lated over a longstanding but mostly overlooked border dispute in the
A. ARDUINO

43
tri- junction area of Sikkim, Tibet and Bhutan. Thousands of troops were
summoned after the BRI infrastructure road project raised unexpected
antagonisms. To quote the South China Morning Post : ‘China’s building
of a road in the Donglang area, also known as Doka La, so quickly turned
into the biggest militar y stand-off between the two armies in years’. 8
While border disputes and the Indian perceived build-up of the Chinese
maritime ‘string of pearls’ attempt at encirclement in the Indian Ocean is
a constant hindrance to better bilateral ties; the remote area that is crossed
by the new Chinese road was considered a zone ‘ready for business’.
Reality differs and underlines how the BRI narrative of total inclusiveness
is still far from adhering to local realities. In several areas, the Chinese
narrative of win-win cooperation is perceived as ‘China is going to win
twice’. The militar y standoff highlights once more how the political value
that is attached to the BRI’s infrastructure development is not to be dis -
counted too easily. The border incident occurred just a few days ahead of
the meeting between India President Modi and his American counterpart
President Trump. As is already happening from Djibouti to Central Asian
countries, the small kingdom of Bhutan, entwined between China and
India, is forced to learn the art of multi-vector diplomacy. The Bhutan
Ministr y of Foreign Affairs issued a démarche to China’s diplomatic mis -
sion in New Delhi on June 20, 2017, protesting China’s intrusive request
to ‘refrain from unilaterally altering the status quo on the ground’ with
the excuse of infrastructure building in contested areas. India’s deep-
rooted suspicion about China’s rise and the lack of strategist trust in the
development of the BRI exclusive economic interests are going to define
the relations in the region for the years to come.
Similarly, in other areas, suspicion and local grievances could derail the
overall BRI blueprint. Besides the acts of political violence, the overall BRI
footprint has also witnessed several incidents due to a lack of Corporate
Social Responsibilities (CSRs), as well as the absence of policies devoted to
avoiding environmental degradation, work-related accidents and corrup -
tion. These kinds of incidents have fomented tensions that resulted in
confrontation between Chinese and local workers. Until 2016, financial
risk was the only perceived challenge to the BRI, while criminal and politi -
cal violence were overlooked. Oversight and management structures need
to be set in place. In addition, lessons drawn by the United States from the
use of private security companies (PSCs) could be adapted to the Chinese
circumstances in order to avoid costly miscalculations.
CHINA’S BELT AND ROAD SECURITY: THE INCREASING ROLE…

44
Belt and  road InItIat Ive requ Irements : spec Ial
Insurances and  prIvate secur Ity
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duting thg 2016 anf 2017 attacku, thg gnqban tgach qf thg BrI gncqun -
tgtgf nqcan rtqbngou that wgtg nqt givgn uufcignt attgntiqn futing thg
rtqjgct’u gcqnqoic anf ugcutity ioract ananyuiu. au an gxaorng, in thg
sinfhufguh anf Banuchi rtqvincgu, thg ugcutity thtgatu auuguuognt qf thg
nqcan cqoounitigu anf thg qrrquitiqn tq thg BrI havg bggn oiuuing ftqo
thg bgginning. futthgtoqtg, oqut qf thg soeu anf thg qvgtann chingug
uoann anf ogfiuo-uizgf gntgtrtiugu (smeu) atg unawatg qf thg oqut cqo -
oqn thtgatu tq intgnniggncg anf ctiuiu oanaggognt rtacticgu, which atg
cqooqnny tggatfgf by chingug buuinguuogn au a cqutny qvgthgaf.
In qtfgt tq cqrg with thg rtqbngo, china’u BrI rubnic firnqoacy, uti -
nizing thg ngw sink rqaf’u ogtarhqt qf gnqban cqnngctivity anf uuutain -
abng fgvgnqrognt, hau attgortgf tq oanagg qt oitigatg anxigty qvgt what
iu chatactgtizgf au ‘china’u tiug’. at thg uaog tiog, intgtnatiqnan anf binat -
gtan agtggogntu havg ravgf thg way tq an qvgtann accgrtatiqn qf thg
BrI. unfqttunatgny, thg nqcan rqrunatiqn that atg fitgctny affgctgf by thg
oactq rtqjgctu atg nqt anwayu incnufgf in a rtqrgt utakghqnfgt ananyuiu.
Juut aftgt thg bqobing qf thg chingug eobauuy in thg Kytgyz caritan qf
Biuhkgk, fqtgign miniutt y urqkgurgtuqn hua chunying tgutatgf hqw thg
uafgty qf rgtuqnngn abtqaf iu qf rataoqunt iorqttancg, anf that thg
miniutt y qf fqtgign affaitu (mfa) iu taking rtgcautiqnu tq gnuutg thg
wgnn-bging qf thg chingug rgtuqnngn qvgtugau. thgug tut qrgn bnqwu tq
thg BrI utggf Bgijing tq tgcqnuifgt if thg cqunttigu that hqut chingug
invgutogntu atg abng tq guatantgg chingug natiqnanu’ uafgty.
whing thg ugcutity rtqbngo hau nqt gqng unnqticgf in Bgijing, thg uqnu -
tiqnu cqunf bg fqunf gnugwhgtg, naogny in intgtnatiqnan cqoranigu that
rtqvifg: urgcian tiuk auuguuognt, inuutancg, rtivatg ugcutity anf rgtharu
oqut iorqttantny, ctiuiu oitigatiqn.
a. arduIno

45
Since 2013, the security imperatives of the Chinese BRI opened a new
market for PSCs. The shift from a Western-centred market for force to an
Asian one has already started. PSCs with ‘Chinese characteristics’ and
Russian Chastnye Voennie Companiy (ChVC) are filling the gaps that US
or UK counterparts are not able to cover due to the lack of political prox -
imity with the Chinese companies.
While Beijing economic might is without discussion, its own influence
in the market for force is just starting to be perceived. Nevertheless, the
Chinese insurance sector is realizing the importance of this business niche.
Traditional static security, counterterrorism as well as kidnapping for ran -
som are going to provide important contracts along the BRI.  Recently,
Chinese insurance experts began to acknowledge the role of prevention in
this line of business. Chinese insurance companies that are entering the
special insurance market are aware of the need to improve their opera -
tional capabilities to levels consistent with international best practices.
Special insurance is a lesser-known niche market, but due to the expansion
of Chinese OFDI, this is already proving to be a highly profitable sector.
Leading Chinese insurance companies such as Ping An and China Taiping
groups are already extending feelers that seek cooperation with British
insurance experts. With a rising Chinese presence and an increased percep -
tion of the Chinese as wealthy individuals, kidnapping for ransom (K&R), 9
is not only an increasing concern but also a new market opportunity.
In this respect, Chinese requirements for private security call for a more
complex set of solutions. Chinese SOEs require a set of integrated ser vices
in which armed personnel are just one component and not even the most
prominent.
Since the ‘Going Out’ policy, the Chinese government has been encour -
aging Chinese companies’ investment overseas. Thanks to a vast amount
of foreign value reser ves, Beijing via China Investment Corporation
(CIC)—China’s sovereign wealth fund—and the state-owned investment
banks have penetrated the energy, technology, finance and infrastructure
sectors. Chinese preferential loans have found fertile ground in both
developed and developing economies.
As the scope and size of Chinese OFDI has been increasing over the
years, SOEs have started to acknowledge that the risks associated with out -
bound investments in emerging economies as well as in developing coun -
tries carries a higher failure rate due to intertwined factors such as: economic
crises, conflict, civil unrest, assets nationalization and currency devaluation,
just to name a few. At the same time, the Chinese SOEs, due to their public
CHINA’S BELT AND ROAD SECURITY: THE INCREASING ROLE…

46
nature with commercial capacity, have the tendency to blur the lines
between commercial and political factors. Consequently, they tend to rely
too optimistically on Beijing’s support in case of a crisis. This kind of pat -
tern is well exemplified by decades of Chinese SOEs’ investments in Africa
that ended with mixed results. Now the narrative is changed.
The Chinese companies, from SOEs to SMEs, that are engaged in over -
seas contracting, particularly those involved in heavy industr y and con -
struction, are first in line to gain from the New Silk Road promises of
global connectivity. While the Chinese economy has been slowing down
towards a ‘new normal’, 10 the most hard-hit sectors since 2011 are the ones
that are now receiving a lifeblood transfusion with the BRI construction
contracts. Beijing’s new plans for the BRI are not only going to fuel the
recover y for the Chinese heavy industrial sectors, but are already increasing
investor confidence in the overall construction sector, ranging from steel
mills to concrete factories. After more than five years of falling commodity
prices and industrial overcapacity, 11 confidence in the business has returned
and the SOEs that are building along the BRI are starting to invest again.
For the first time since 2011, there is an increase in heavy machiner y sales
due to the international, government-led investments. Unfortunately, up
to the beginning of 2017 there was not much interest in the overall SOEs’
security apparatus upgrade. 12 The SOEs’ risk perception as well as willing -
ness to pay for professional security ser vices is still low. Thus, more than
half of the BRI projects are related to infrastructure building and several
Chinese SMEs that are SOE subcontractors run their businesses on limited
profit margins that do not allow for high security expenses.
The BRI encompasses more than 60 countries, differentiating broadly
in local conditions. In this respect, the tasks of Chinese corporations that
operate along the BRI share only one commonality: high complexity.
Each project from the Sino-Pakistan Economic Corridor (US$63 bil -
lion) to the Poly-GCL natural gas pipeline in Ethiopia (US$5 billion) or
the Mes Aynak copper mine in Afghanistan (US$3 billion) includes several
layers of complexity ranging from financial, technical, operational, politi -
cal and physical security risks. Greater complexity entails greater risks.
While the energy sector has reached a certain degree of maturity in risk
management and mitigation, the majority of the Chinese SOEs and pri -
vate corporations that are interested in becoming active stakeholders along
the BRI are still unaware of the complexity of the task. Moreover, the BRI
approach to crisis management is rooted in the government-to- government
(G2G) agreements. This bilateral approach provides a risk assessment that
A. ARDUINO

47
is legally binding between China and the countries involved in the
BRI.  Nevertheless, the G2G approach is encumbered by several limita -
tions. The most obvious is the separatist’s antagonism towards their cen -
tral government. Other limitations include weak links between central and
provincial governments, cultural and religious barriers as well as histori -
cally rooted unresolved disputes. Due to these challenges, the ability of
Chinese private security companies to provide accurate, on-going security
assessments, scenario planning, crisis prevention and mitigation is going
to be a key requirement for success in a long-term international economic
cooperation and sustainable development that is at the core of the BRI.
As already mentioned, the security threats to the Chinese workers in
Pakistan are increasingly known in Beijing. 13 Islamabad has pledged to
deploy a considerable militar y force to protect Chinese nationals in that
region and promised 15,000 uniformed personnel in support of the
CPEC. The previous attack in Karachi against Chinese workers and the
recent violence in the coastal city of Gwadar 14 reflects the lack of a com -
prehensive, on-going risk assessment as the projects rolled out. While an
initial risk analysis is mandator y during the pre-project assessment by the
National Development Research Commission (NDRC), it is also impera -
tive to monitor how the on-going project is affecting local communities.
Security is dynamic and the Chinese infrastructural projects’ size and speed
of implementation add stress to already unstable socio-political environ -
ments. Understanding and managing this stress is a challenge that cannot
be ignored if the benefits of these projects are to be realized. 15 Furthermore,
CPEC’s internal problems are augmented by a complex web of international
friction points that involve ethnic and sectarian proxy wars. Abundant
examples range from the Indo-Pakistan to the Saudi-Iranian disputes that
could entangle Chinese economic assertiveness into undesirable political
confrontations (Dorsey 2017b ).
Separatism and insurgency are primar y variables in the risk assessment
equation, not only in Pakistan but also over several countries that are con -
nected by the BRI. More often than not, their value is overestimated with -
out taking into account local problems that are ignited by the influx of
Chinese capital and workers. The impact of Chinese infrastructure proj -
ects in  local communities disrupts the internal dynamics of power and
wealth, creating a new breed of winners and losers as well as provoking the
danger of anti-Chinese sentiments. Several cases, from Central Asia (Putz
2015 ) to Africa and from Vietnam to Indonesia, have already showcased
how changes stimulated in  local communities by Chinese investments
have ended in violent confrontations.
CHINA’S BELT AND ROAD SECURITY: THE INCREASING ROLE…

48
prIvate secur Ity corporat Ions wIth  ‘chInese
character Ist Ics ’
thg rqutcqnf wat ugcutity vacuuo iu chatactgtizgf by an inctgauing
fgoanf fqt rtivatg oinitat y anf ugcutity ugt vicgu. cuttgntny, thg tiug qf
thg BrI in 2013, urgathgafgf by thg chingug soeu, infucgu nqvgn
fgoanfu fqt a ngw oatkgt fqt fqtcg. ngw actqtu incnufg a urgcttuo qf
cqnttactqtu that tangg ftqo intgtnatiqnan pscu with a cqtrqtatg uttuc -
tutg, oqtg uioinat tq a ountinatiqnan cqtrqtatiqn than tq thg rtivatg oini -
tatigu bgfqtg thg 1990u, anf an inctgauing nuobgt qf chingug pscu with
gnqban aobitiqnu. thg gtqwth qf thg chingug pscu tguqnatgu with thg
cqnttqvgtuian tqng rnaygf by intgtnatiqnan pscu in us-ngf cqnictu.
cqoratgf tq thg unitgf statgu, china iu nqt gngaggf in natgg-ucang cqn -
ictu anf fqgu nqt havg at rtgugnt a ngcguuity tq qutuqutcg nqgiutican anf
inftauttuctutan ugt vicgu in wat zqngu. 16 ngvgtthgnguu, thg ngcguuity fqt
ugcutity rtqtgctiqn anf gogtggncy gvacuatiqn in fiffgtgnt atgau qf thg
gnqbg iu ftiving Bgijing tq fqtoanny rtivatizg vatiquu ugcutity tqngu
(atfuinq 2017 ).
sgvgtan chingug pscu gogtggf qntq thg intgtnatiqnan atgna, gornqying
a oix qf nqcan anf fqtgign tguqutcgu. thg oix changgu with tgurgct tq gach
urgcic tgquitgognt anf fgrgnfu hgaviny qn fqtgign gxrgttiug in tiuk
auuguuognt anf thg uug qf atogf rgtuqnngn. chingug pscuwith uqog
tatg gxcgrtiqnu tgnatgf tq oatitiog ugcutityatg battgf by thg mfa tq
gornqy chingug atogf cqnttactqtu. 17
ngvgtthgnguu, qng kgy rqint iu antgafy cngat. whing chingug gqvgtnognt
qfcianu atg utinn fgbating thg uug qf chingug pscu, thg buuinguu qrrqttu -
nity fqt tgaring high rtqtu iu antgafy bging rgtcgivgf by a tiuing nuobgt
qf nqcan ugcutity ugt vicg rtqvifgtu. anuq, thg gtqwing nggf fqt rtqtgctivg
ugt vicgu by chingug gntgtrtiugu hau atttactgf a natgg nuobgt qf intgtna -
tiqnan rnaygtu nqqking fqt cqqrgtatiqn with thg gogtggnt nqcan pscu
(atfuinq 2015 ).
sincg thg 2010 18 aognfognt qf thg qbuqngtg 1993 naw that tggunatgu
thg chingug pscu, ugvgtan chingug tou havg gvqnvgf thgit buuinguu oqfgn
ftqo a nqcan ugcutity rtqvifgtuq-canngf bqfyguatfu fqt wganthy cnigntu
tq intgtnatiqnan qrgtatiqnu with niaiuqn qfcgu in Bgijing. thg nuobgt qf
nqcan chingug ugcutity cqtrqtatiqnu that qffgt cnqug rgtuqnngn rtqtgctiqn
anf unatogf guatfu tqtan oqtg than 5000 tggiutgtgf gntitigu that accqunt
a. arduIno

49
for roughly three million security officers. Among these companies, less
than a dozen have the capabilities and the experience to provide stand-
alone international ser vices. At the same time, the growing need for pro -
tective ser vices by Chinese enterprises has attracted a large number of
international players looking for cooperation with the emergent local
PSCs. (e.g., Control Risks, G4S, FSG).
Among the international cooperation, the presence of Frontier Ser vice
Group HK 19 Company in Beijing attracted most of the media attention
due to the fact that the FSG chairman is Eric Prince, founder of the US
private militar y corporation Blackwater. In stark contrast to Western per -
ceptions, due to the killing of innocent civilians in Iraq (Schaill 2007 ), a
significant section of the Chinese security apparatus and PSCs’ manage -
ment perceive the Blackwater model as efficient. 20 Prince’s sales pitch for
his former company Blackwater, which was ‘no client died during
Backwater’s watch’ (Prince 2013 ), has found fertile ground in China.
Blackwater’s aggressive tactics have earned critique and scorn; yet at the
same time have been praised by the government officers and civilians they
were escorting. At the same time, several Chinese academics in Beijing’s
security circles are already underlining the incompatibility of the previous
Blackwater model with China’s security needs. 21
Thus, the Chinese PSC capabilities in providing overseas security ser -
vices are not comparable to those provided by their top foreign counter -
parts. Chinese SOEs, however, still prefer to employ Chinese contractors.
The cooperation with international PSCs is deemed a ‘necessar y evil’ until
the Chinese PSCs acquire the skillsets required to reach high-level opera -
tional capabilities. The desire to employ only Chinese PSCs is rooted not
only in the required language and cultural sensitivity, but also in the opin -
ion that only Chinese security corporations will be able to preser ve the
SOEs’ confidential information. PSCs with ‘Chinese characteristics’
employ former PLA personnel, People’s Armed Police (PAP) or Chinese
security officers with links to the national security apparatus. Hence, the
perception that only local PSCs are able to protect the integrity of the
SOEs’ business data. Also, local PSCs like RWY are well known in the
civilian and militar y circles in Beijing as their increasing recruitment
absorbs most of the militar y personnel that has been dismissed since the
restructuring of the armed forces.
CHINA’S BELT AND ROAD SECURITY: THE INCREASING ROLE…

50
According to the research published by the Chinese think tank Phoenix
(Phoenix 2017 ) in cooperation with Qinghua University in Beijing, the
ranking of the top 10 Chinese security firms is as follows:
1. G4S 2. Control Risks3. Beijing DeWe Security Ser vices Co., Ltd.4. Zhongguo Anbao China Security Industr y Co., Ltd.5. Hua Xin Zhong An (Beijing) Security Ser vice Co., Ltd.6. Shanghai Zhongchenwei Security Ser vice Group Co., Ltd.7. Beijing Dingtai Anyuan Guard & Technology Research Institute8. Shengzhen Zhongzhou Tewei Security Consultant Co., Ltd.9. Beijing Guanan Security & Technology Co., Ltd.10. Shandong Huawei Security Group Co., Ltd.
The ser vice provided by these companies comprises the protection of the
workers’ compound during large-scale energy and infrastructure projects,
the security of the Chinese shipping companies’ vessels and logistic hubs as
well as the safety of corporate officials and high-value individuals travelling
abroad. The ample spectrum of ser vices is summarized as follows:
• Risk assessment, providing security reports in order to allow the
company business feasibility study and mandator y government secu -
rity assessment
• Risk management, monitoring the evolution of the Chinese foot -
print and the reaction of the local stakeholders, adapting with the
daily risks and threats
• Risk mitigation, coping with ongoing crisis, providing medical
extraction for injured personnel and evacuation of Chinese nationals
in cooperation with the Chinese MFA
• Risk transfer, supporting the insurance companies to find suitable
partners to share the risk burdens
• Security compliance audit reports on the Chinese company overseas
offices
• Training security personnel and company officials
Whereas the PLA’s local involvement in the Chinese business environ -
ment has been tamed in the last decade, the role of SOEs in shaping for -
eign policies has been increasing. With the latest purge of corrupted
officials in the PLA (The Economist 2015 ), President Xi Jinping has
A. ARDUINO

51
accomplished a long-standing reform to detach the PLA (Grossman and
Chase 2016 ) from the entrepreneurial side of the Chinese development.
At the same time, the privatization reform of the state assets has been
hijacked towards the more efficient public sector where the SOEs still
benefit from government support and a favourable line of credit from the
state’s banks.
At the same time, the PSCs’ new role is poised to foster innovation and
adaptation of new technologies in the field (Strachan 2013 ). Drone recog -
nizance capabilities, matched with satellite data gathering provided by
specialized PSCs, could foster the SOEs’ risk assessments and strategy
building. In addition, it is going to provide affordable specialized ser vices
to other PSCs that do not have the need to train and maintain dedicated
hardware and personnel. Additionally, Chinese PSCs providing this kind
of specialized support to Chinese enterprises do not need to overcome the
language and cultural barriers where ‘lost in translation’ could compro -
mise an entire operation. In this respect, individual Singaporean citizens
with previous militar y or police backgrounds are employed by Chinese
PSCs mainly for their Chinese languages skills. 22 Along the overall BRI,
several mergers and acquisitions will oblige the Chinese SOEs to share
their IT network, which is going to generate cyber security risks. In the
energy sector, for example, the acquisition of local power grid companies
by their Chinese counterparts is forcing cyber security compromises that
could affect the SOEs’ reliance on their closed and almost ‘air gap’ IT
networks in the mainland. In this respect, President Xi himself called for a
closer public-private sectors partnership in shaping an efficient, modern
and competitive national security sector. The newly formed Central
Commission for Integrated Militar y and Civilian Development is not only
in charge of promoting the integration of the public Militar y Industr y
Complex with the private one but also overseeing the PSCs’ training func -
tions and integration with the public security apparatus. 23
Belt and  road secur Ity : w ho Is In charge ?
ong qf thg ugvgtan rgtcgrtiqn garu that affgct thg BrI iu a cngat utatgognt
qf whq iu in chatgg qf thg qvgtann initiativg. If, in thg nancian ugctqt, thg
nack qf cngat unfgtutanfing qf thg fgciuiqn ogchaniuo can rtqfucg ingf -
cigncigu anf oiuugf qrrqttunitigu, thgn, in thg ugcutity ugctqt, a natg
tgrny qt thg nack qf cqqtfinatiqn futing a ctiuiu cqunf gnf in ttaggfy. thg
mfa anf thg miniutt y qf dgfgnug (mod) atg bqth cqooittgf tq thg
chIna’s Belt and road securIty: the IncreasIng role

52
BRI.  Also, the Chinese NDRC defines in detail the conditions for over -
seas investment in the document, ‘Interim Authorization Criteria for
Overseas Investments’, but the security threats that the Chinese SOEs are
going to face outside Mainland China are still discounted. Beijing exer -
cises super visor y rights over the SOEs through the State-owned Assets
Super vision and Administration Commission of the State Council
(SASAC), which in 2011 produced new risk control measures. 24 Although
the SASAC maintains a super visor y role, most of the decision-making
power it is still vested in the SOEs’ internal structure and several layers of
byzantine bureaucracy, shielding the management from an effective
super vision by the government’s controlling bodies. Therefore, the SOEs
are able to develop independent overseas investment strategies with the
only requirement being to include a summar y in their annual investment
plans. The mandator y regulator y approvals include not only the NDRC
but also the Ministr y of Commerce (MOFCOM); there is increasing
uncertainty about which is the leading controlling government body. All
these government bodies have a say on the matter, but none has definitive
veto power.
The contemporar y role of PSCs with ‘Chinese characteristics’ is entirely
different from the role played by private militar y security companies
(PMSCs) that were employed during the two Iraqi conflicts and the
Afghan stabilization campaign. Nevertheless, Chinese SOEs that employ
private security still struggle with several perception gaps with regard to
present security threats as well as how best to utilize security contractors.
The methods and information in producing the type of risk assessment
and threat intelligence required for contemporar y Chinese SOE opera -
tions abroad include the following. First, there is the need to understand
the impact of a project in the region where the SOEs will operate. This
assessment is a critical part of the overall countr y risk scenario. Most of the
time, disease, local disputes and car crashes generate more victims than the
average terrorist attack. The root of the problem is not only related to the
lack of security and risk managers inside the SOEs but also to the different
risk perceptions that Chinese companies have compared to their Western
counterparts. The political risk and the possible social media fallout that a
kidnapped or killed Chinese citizen can generate back home are finally
increasing the level of awareness.
The first characteristic related to Chinese OFDI is that most of the time
it is of a greater scale compared to the other projects run in the host coun -
tr y. Chinese SOEs are prone to move swiftly from one project to the next,
A. ARDUINO

53
engaging in a steep learning cur ve each time as they attempt to adapt to
local necessities and habits. At the same time, sole reliance on Chinese
workers who are segregated in gated compounds near to the work site
produces anti-Chinese sentiment. The perception of local jobs loss or the
suspicion of environmental degradation is common. Typically, the small
segment of the local community that provides goods and ser vice to the
Chinese companies increases the bitterness in the other part of the com -
munity that is cut out from the sudden influx of yuan.
Most of the time, the Chinese management, which is duly focused on
project deliver y while preparing to jump into the next financing opportu -
nity, fails to read the local community before and during the project imple -
mentation. The managers typically rely heavily on the illusion that the
central government of the host countr y will preser ve their safety and inter -
vene to protect their businesses.
Regarding human resource management, the Chinese security sectors
are still promoting a culture of a ‘race to the bottom’ in order to cut costs
and improve profitability relying on competition that focuses on the low -
est price. 25 A business culture of high-level ser vice provision must be sub-
stituted for the current approach that tends to favour the lower bidder.
The role of training and nurturing of qualified and well-paid security offi -
cials must replace human resource procedures that up to now have failed
miserably to attract talent.
The Chinese central government, which is the driving force to develop
China PSCs’ efficiency and accountability, is in the process of promoting
changes not only in the overseas deployment but also in the local security
arena. Present dangers to the Chinese workers and infrastructures have
demonstrated to Beijing that just ‘throwing money at the problem’ is not
always the most viable solution.
Albeit the market for force renaissance in China and abroad, the role of
PSCs is in dire need of clarification. The lack of checks and balances allows
the PSCs to operate in a grey area easily exploited. Also, the market for
force benefits is constrained by ineffective oversight and control.
In search of  a safe chInese dream
thg gffgct qf china’u activitigu qn thg intgtnatiqnan uyutgo iu antgafy infuc -
ing changgu anf tgactiqnu ftqo thg cuttgnt tungu-baugf utatuu quq. thg
gxiuting tungu oafg anf gnfqtcgf by cqnugt vativg rqwgtu atg fwinfning
ftqo incnufing china au tung-oakgt anf qrrquing thg chingug tiug.
chIna’s Belt and road securIty: the IncreasIng role

54
Nevertheless, the BRI has the potential to challenge the patterns of the
world’s most important sea and land routes trade channel. Beside the mer -
cantilist narrative of the New Silk Road the BRI could also become a chan -
nel for the distribution of ideas that could challenge US-European cultural
predominance. Several of the markets that will receive the impulse from
the BRI investment and new infrastructures are going to create new mar -
kets that are geographically out of the US-European reach. The initiative,
if successful, is going to provide to China a solid platform in maintaining
the status quo as an economic superpower. Therefore, the question of the
creation of a RMB zone, that will rival the US dollar ‘is not an if but a
when’. As soon as the People’s Bank of China shifts from yuan- denominated
credit swaps to a full convertibility of the yuan expanding the money sup -
ply, the BRI is going to reach its peak. At the same time, Beijing actions in
protecting Chinese national and investments abroad are already affecting
local and international security equilibriums. If Beijing is successful in
establishing the BRI, it is creating an infrastructure with no equivalent
whose primar y purpose is to transfer natural resources to China. In addi -
tion, Beijing is creating a platform for broader security agreements and
cooperation that is not linked to ideology but is deeply entangled in eco -
nomic interests. While the US administration under President Trump’s
leadership is showing interest in withdrawing from a rules-based interna -
tional order, China’s BRI could fill that vacuum.
A first glance at today’s private security market, as compared to the
involvement of PSCs in the Iraq and Afghanistan conflicts (Singer 2003 ),
could lead one to believe a scaling back in quality and quantity of private
security ser vices is in order; however, this is not the case. The BRI ‘global’
need for security in today’s global marketplace will supply lucrative con -
tracts, and demand sophisticated insurance groups and PSCs capable of
intelligence acquisition, risk analysis and crisis management across several
countries. PSCs with Chinese characteristics are not at the forefront of the
next battlefield, but will rather occupy a niche market between state provi -
sion of security and the preser vation of Chinese economic interests over -
seas. The contemporar y market for force’s main driver, as in all business,
is profit, and Chinese PSCs are well aware of the potential.
Chinese SOEs without the proper security market knowledge and eco -
nomical evaluation of risk are prone to choose the cheapest available
option. The asymmetr y in the pricing information is a problem that most
of the Chinese SOEs are still unable to appreciate. Focusing solely on the
price of security ser vices and not on the quality of the output is still a com -
A. ARDUINO

55
mon mistake among SOE managers that are already fighting narrow profit
margins. This situation is also encouraged by a current lack of detailed
regulations and a performance monitoring system. While the role of pri -
vate security could have improved the chances of the Chinese victims in
Quetta and Karachi, it is not foreseeable that a private force could have
avoided a militar y impasse by the tri-junction area of Sikkim, Tibet and
Bhutan border dispute.
Private soldiering in the new millennium has left unanswered centuries-
old questions on how the use of force by non-state actors is appropriate.
The BRI security narrative will experience the same problems when the
increase of violent threats to Chinese assets is going to blur the line
between defensive security and pre-emptive strikes. At the same time, the
various stakeholders that are involved in the BRI could deviate or cause
deviations from Beijing’s blueprint. SOEs with different agendas and
Chinese PSCs not aligned with the central government’s long-term strat -
egy could ignite unexpected crisis. The lack of transparency, accountability
and separation from the established chain of command structure is a cur -
rent fixture of the private market for force. While it is not a question
whether Chinese PSCs will have a foreign policy of their own, their undis -
puted allegiance to Beijing should not be taken for granted.
The never-ending stor y over the legitimacy of the PSCs is not going to
end with the involvement of China. Nevertheless, the debate over the
market for force must strive to impose a strict regulator y and auditing
framework that includes multilateral cooperation and enforcement mecha -
nisms. The Chinese ‘socialist market’ model could promote a top-down
approach fostering efficiency and effectiveness in the provision of security
through a rule-based PSCs’ code of conduct. Therefore, Beijing efforts
along the BRI need to be focused on the creation of a ‘one-stop shop’ able
to attract and lead all the security stakeholders, enforcing at the same time
a proper monitoring and control system.
notes
1. fgn fa yqu wgi: ‘thg kgy fiffgtgncg bgtwggn thg Klp anf thg sfa iu that
thg fqtogt fqcuugu qn gcqnqoic gainu anf thg nattgt uggku tq uttgngthgn
rqnitican uurrqtt’. yan Xugtqng ‘ftqo Kggring a lqw ptqng tq sttiving
fqt achigvgognt’ thg chingug Jqutnan qf Intgtnatiqnan pqniticu 2014.
2. taq guang yang hui: ‘Xiaqring’u rtqrquan, which hg tgafu au oganing
qbugt vg canony, ugcutg qut rquitiqn, cqrg with affaitu canony, hifg qut
chIna’s Belt and road securIty: the IncreasIng role

56
capacities and bide our time, be good at maintaining a low profile, and
never claim leadership.” Global Times June 15, 2011 http://www.
globaltimes.cn/content/661734.shtml .
3. China Daily ‘Xi vows Belt, Road support’, May 15, 2017 http://www.
chinadaily.com.cn/china/2017-05/15/content_29343505.htm .
4. China Daily ‘List of Deliverables of the Belt and Road Forum for
International Cooperation’, May 16, 2017 http://www.chinadaily.com.
cn/china/2017-05/16/content_29359377.htm .
5. Reuters ‘Islamic State says it killed two Chinese teachers kid -
napped in Pakistan’, June 8, 2017 http://www.reuters.com/article/
us-pakistan-china-islamic-state-idUSKBN18Z20O .
6. Aljazeera ‘Bomb attack kills at least 25 in Pakistan’s Balochistan’ May 13,
2017 http://www.aljazeera.com/news/2017/05/blast-kills-pakistan-
balochistan-170512095736342.html .
7. Pakistan For ward B’aloch Liberation Army guns down 10 construction
workers in Gwadar’ May 15, 2017 http://pakistan.asia-news.com/en_
GB/articles/cnmi_pf/newsbriefs/2017/05/15/newsbrief-02.
8. South China Morning Post ‘China, India border dispute bubbles over once
more, but no one is quite sure why. Experts unsure why Chinese road
construction project at tri-junction with Bhutan sparks huge militar y
stand-off, but incident shows tensions remain high’, July 3, 2017 http://
www.scmp.com/news/china/diplomacy-defence/article/2100871/
china-india-border-dispute-bubbles-over-once-more-no .
9. ‘K&R… a market worth about $250m in 2006 doubled in size by 2011…’
from The Economist ; Schumpeter Business and Management ‘Kidnap and
Ransom Insurance. I’m a client … get me out of here.’ June 27, 2013
http://www.economist.com/blogs/schumpeter/2013/06/
kidnap-and-ransom-insurance?fsrc=rss .
10. China’s ‘New Normal’ defines the transition from accelerated economic
development of two-digit GDP increase in the last three decades and a
slower but steady economic development focused on 6–7% GDP growth
per year.
11. After 54 consecutive months of year-on-year falls, the producer price index
(PPI) rose 0.1% year-on-year in the month, according to the National
Bureau of Statistics (NBS) October 14, 2016.
12. Author inter view with the Chinese Contractors Association managers,
Beijing September 2016.
13. China Daily ‘Key part of Pakistan economic corridor opens up’ November
15, 2016.
14. ‘Soon we’ll start hiring 700–800 police to be part of a separate security
unit dedicated to Chinese security, and at a later stage a new security divi -
sion would be formed’, Jafer Khan, regional police officer in Gwadar told
Reuters.
A. ARDUINO

57
Syed Raza Hassan ‘To protect Chinese investment, Pakistan militar y
leaves little to chance’ Reuters Januar y 26, 2016 http://www.reuters.
com/article/pakistan-china-security-gwadar-idUSKCN0VH06F.
15. Inter view with Control Risks Partner Michael Humphreys, November
2016 Shanghai.
16. United States Central Command reported in Januar y 2015 that 54,700
private contractors worked for the Defense Department in its areas of
responsibility. http://www.acq.osd.mil/log/PS/reports/CENTCOM%20
Census%20Reports/5A_Januar y2015.pdf .
17. Regulation on the Administration of Use of Guns by Full-time Guards and
Escorts Decree adopted in 2002 via No.356 of the State Council of the
People’s Republic of China, English translation http://www.lawinfochina.
com/Display.aspx?lib=law&Cgid=40814 .
18. Regulation on the Administration of Security and Guarding Ser vices,
adopted in 2009 via State Council Order No. 564, Article 1. English trans -
lation http://www.lawinfochina.com/display.aspx?lib=law&id=7779 .
19. Frontier Ser vices Group Limited, previously known as DVN (Holdings)
Limited (HKSE: 00500), China investment bank CITIC Group is one of
the major shareholders. ‘Security and logistics ser vices in frontier markets.
We help businesses operating in frontier markets overcome complex secu -
rity, logistics and operational challenges. From Asia to Africa, FSG delivers
reliable, bespoke and fully integrated project logistics solutions that cover
air, sea and ground transport.’
20. Author inter view with Chinese PSC managers in Beijing during the prepa -
ration of ‘Security Privatisation with Chinese Characteristics: The Role of
Chinese Private Security Corporations in Protecting Chinese Outbound
Investments and Citizens’ IDSS/RSIS China Programme 30 June 2015
https://www.rsis.edu.sg/rsis-publication/idss/security-privatisation/#.
WRZrXBOGNAY .
21. Inter view with Dr. Jianming Mei, Director Research Center for
Counterterrorism, People’s Public Security University of China in Beijing,
Februar y 2017.
22. Author’s inter views with retired Singapore Militar y attaché and former
Singapore police force expert in K&R.
23. China Daily ‘Xi: Integrate militar y and civil sectors’ June 21, 2017 http://
www.chinadaily.com.cn/china/2017-06/21/content_29822602.htm .
24. Circular n16 (2006) Circular n225 (2008), Circular n16 ‘ Interim measures
for the super vision and administration of overseas State-owned assets of cen -
tral State-owned Enterprises ’ (2011).
25. Author’s inter view with Western security companies top management in
Shanghai and Singapore.
CHINA’S BELT AND ROAD SECURITY: THE INCREASING ROLE…

58
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attack. china sttqngny cqnfgonu thg hqttic tgttqtiut attack againut thg
chingug eobauuy in Kytgyzutan. tgttqtiuo Iu thg cqooqn engoy fqt thg
Intgtnatiqnan cqoounity, pquing thg gtavgut thtgat qn rggiqnan cqunttigu.
china anuq fannu victio tq tgttqtiuo. wg winn sttgngthgn anti-tgttqtiuo
cqqrgtatiqn with rggiqnan cqunttigu Incnufing Kytgyzutan unfgt Binatgtan
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chingug Inutitutiqnu anf pgqrng in rgngvant cqunttigu anf urhqnf rggiqnan
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Unsung Heroes of the War on Terror’ Penguin 18 November 2013
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More, But No One Is Quite Sure Why. Experts Unsure Why Chinese Road
Construction Project at Tri-junction with Bhutan Sparks Huge Militar y Stand-
Off, But Incident Shows Tensions Remain High’ July 3, 2017 http://www.
scmp.com/news/china/diplomacy-defence/article/2100871/
china-india-border-dispute-bubbles-over-once-more-no
Strachan Hew (2013) The Direction of War. Contemporar y Strategy in Historical
Perspective. Cambridge University Press
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31 July 2015 http://www.economist.com/news/china/21660257-china-nets-
its-most-senior-army-general-yet-xi-jinpings-fight-against-corruption-militar y
Yan Xuetong (2014) Fen Fa You Wei: “The Key Difference Between the KLP and
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CHINA’S BELT AND ROAD SECURITY: THE INCREASING ROLE…

PART III
Maritime Political and Security Risks

63 © The Author(s) 2018
A. Arduino, X. Gong (eds.), Securing the Belt and Road Initiative ,
https://doi.org/10.1007/978-981-10-7116-4_4
CHAPTER 4
Singapore’s Role in the Belt and Road
Initiative
Sarah Y. Tong and Tuan Yuen Kong
Introduct Ion : the  B elt and  road InItIat Ive and  Its
sIgn IfIcance
Promulgated by China’s President Xi Jinping, the Belt and Road Initiative
(BRI) has two arms, one over land and the other maritime. The one over
land, the Silk Road Economic Belt (SREB), links China with the countries
to its west such as Kazakhstan, Uzbekistan and Turkey located along the
original Silk Road. The other, the 21st Centur y Maritime Silk Road
(MSR), includes countries along the South China Sea, Pacific Ocean,
Indian Ocean and Mediterranean Sea. In 2013, Chinese President Xi
Jinping gave an address at Kazakhstan’s Nazarbayev University to pro -
mote the idea of SREB for strengthening the countries’ connectivity along
the old Silk Road. In October of the same year, Chinese leaders intro -
duced a similar idea in Indonesia’s parliament to cover the countries along
the maritime routes by the concept of MSR.
S. Y. Tong ( *) • T. Y. Kong
East Asian Institute, National University, Singapore, Singapore
Sarah Y. TONG is senior research fellow at East Asian Institute of National
University of Singapore. KONG Tuan Yuen is visiting research fellow at same
institute.

64
The BRI will likely prove to be an important, development-oriented
initiative. Started by China, the world’s most populous countr y and the
second largest economy, BRI involves many partner countries and broad
coverage with ambitious goals. BRI to date covers about sixty countries
with more than 50% of the world’s population, 75% of the energy resources
and 40% of gross domestic product (GDP) around the world. 1 Most sig -
nificantly, it aims to promote economic ties among partner countries by
shortening the transporting distance between China and other countries
along the Belt Road through building up transportation infrastructure
such as high-speed railway and port construction. It not only broadens the
scope of trade among these countries, but also reduces the transportation
cost compared to the current route. For example, China has launched the
China-United Kingdom route, which connects sixteen cities in China with
fifteen cities in Europe that cross through Kazakhstan, Belarus and the
European Union. This route is one of the constructive developments of
the China Railway Express to Europe, which is targeted to spread all over
major European cities in 2020.
Moreover, the routes of the MSR, which firstly linked to most of the
countries in the Association of Southeast Asian Nations (ASEAN), are
apparently more promising and fruitful to China. First, the growing
ASEAN-China economic relations have been simultaneously developed
when China become the ‘world factor y’. The role of ASEAN countries in
the global supply chain for the products of final assembly in China is sig -
nificant. Second, most of the ASEAN countries are developing countries
that need to implement the infrastructure improvement that China is
pushing up the project through BRI.  Third, ASEAN as a whole is geo -
graphically closer to China with strong historical linkages and close eco -
nomic collaborations. Within the broad BRI framework, China has
proposed projects in the Southeast Asia region, such as the construction
of the Kunming-Singapore railway. It will cross through mainland
Southeast Asia countries in Southeast Asia and help strengthen regional
cooperation among maritime countries in Southeast Asia along the South
China Sea and Strait of Malacca.
The implementation of the BRI is significant to obser ving and under -
standing China’s outward behaviour especially toward neighbour coun -
tries by deepening economic collaboration, but it may face many
challenges. The rising anti-globalization tendencies worldwide make the
future of free trade increasingly uncertain. The United States President
Donald Trump and his ‘Buy American, Hire American’ policies pose risks
S. Y. TONG AND T. Y. KONG

65
to the existing global trading system. Potential geopolitical confrontation
is another concern that will impact and determine the scope and scale of
countries’ willingness to participate in BRI, particularly in the sovereignty
issue of the South China Sea.
Singapore could ser ve an indispensable role in the development of BRI,
especially in MSR. Singapore could facilitate closer China-ASEAN eco -
nomic ties by advocating free trade, widening and deepening regional eco -
nomic integration. It could also collaborate with partner countries in
developing various types of joint projects, given Singapore’s experience
and competitive advantage in the fields of finance, logistics and business
management, as well as help strengthen mutual understanding and trust
by providing dialogue platforms.
However, Singapore also needs to be mindful of the complexities in the
region’s geopolitical dynamics. For example, given the sensitive nature of
the South China Sea issue, Singapore has to tr y its best to preser ve its
neutrality and to safeguard ASEAN unity and centrality. Meanwhile,
Singapore is also facing growing challenges. On one hand, global trade is
decelerating, casting a significant negative shock to Asian countries espe -
cially those that depend heavily on trade. Meanwhile, China is catching up
quickly in high added-value manufacturing, putting great competitive
pressure on more advanced Asian countries and on bilateral economic
cooperation. Moreover, Singapore and China may also run into direct
competition in third countries as China enhances investment efforts in
BRI.
rat Ionale B eh Ind chIna ’s B rI
thg BrI may havg muntipng unfgtnying conuifgtationu. fitut, it counf uup -
pott china’u motg ptomingnt outwatf utancg. sgconf, it hgnpu to cuntivatg
cnougt tigu with a natgg numbgt of fgvgnoping counttigu. anf thitf, it iu a
uugfun toon to ptomotg china’u fomgutic gconomic tgbanancing. Infggf,
china hau bgcomg inctgauingny inugntian tggionanny anf gnobanny, fug to
itu tgmatmabng gconomic gtowth anf intggtation with thg wotnf gconomy.
thg countt y hau now bgcomg a majot ttafing pattngt anf mgy invgutot
with mout of counttigu in thg wotnf, gupgcianny thg southgaut anf eaut
auian counttigu. thg BrI winn hgnp gnhancg china’u uttong gconomic tigu
with itu pattngt counttigu. In affition, chingug companigu counf ptovifg
a not of cout-compgtitivg inftauttuctutg uonutionu to fgvgnoping counttigu
sIngapore’s role In the Belt and road InItIatIve

66
for construction, such as power stations and highways, creating a win-win
outcome.
From China’s official narratives, the key principles of BRI are promot -
ing joint development among countries along the routes, advocating open
and cooperative models, establishing harmonious and inclusive regional
relationships, enhancing market-oriented policies, and providing mutual
benefit to participants in the BRI. In particular, Chinese government has
set up five targets of connectivity in terms of policy communication, infra -
structure connectivity, trade link, capital flow and understanding among
peoples through bilateral and multilateral cooperation as well as regional
and sub-regional coordination.
For more than the last three decades, China’s development has been
highly associated with economic liberalization and opening up to the out -
side world. Since the mid-1990s, China has been the largest recipient of
foreign direct investment (FDI) among developing countries. According
to China’s Ministr y of Commerce, China received US$489.42 billion in
foreign capital from 2013 to 2016. In particular, FDI in high-tech indus-
tries increased by 11.7% year-on-year on average during this period. 2 Since
the early 2000s, China has also been encouraging outward FDI by Chinese
firms, including both State-Owned Enterprises (SOEs) and non-state
firms. In the 2000s, Chinese government encouraged SOEs to invest
abroad to explore international markets through its Going Out campaign.
The Chinese outward FDI has tremendously increased from US$2.9 bil -
lion in 2003 to US$170.1 billion in 2016. 3 The BRI is another step to
enhance the countr y’s outreach. Chinese government took the opportu -
nities to introduce the BRI so as to create more room for the growth of
outward FDI.
Through BRI, China also aims to intensify economic ties with its neigh -
bours, rekindle its historical linkages, and strengthen relations with devel -
oping countries. One part of BRI—the Silk Road Economic Belt—made
a clear reference to the historical route on which China sent delegations
from Changan to Central Asia and Persia for trading ties in 200 BC of the
Han Dynasty. Chinese businessmen mainly sell silk and potter y to the
people along the route to trade back Arabian glassware, Persian carpet,
Indian spices and so on. Another part of BRI—the 21st Centur y Maritime
Silk Road—always recalled the histor y of the seven expeditions of Zheng
He in 14th centur y AD of the Ming Dynasty to visit Southeast Asia and
trade back local ivor y, bird nests, spices and so on. Moreover, the BRI not
only includes the neighbour countries that China has historically
S. Y. TONG AND T. Y. KONG

67
established economic relations with along the routes, but Chinese govern -
ment also expanded it to developing countries located in the proximity
and keen on taking part in the connectivity.
With a strong focus on trade and investment, the BRI complements
several domestic development objectives for China, such as reducing
excessive production capacity in certain sectors and developing China’s
inland regions. In the last decade, cutting down industrial overcapacity,
for example, to eliminate Zombie companies, has become an important
objective for the Chinese government. In the countr y’s 13th Five-Year
Plan (2016–2020), the Chinese central government highlighted that the
problem of excessive production capacity could hinder economic restruc -
turing and urged local authorities to come up with solutions. Some policy
makers had already proposed to shift the industries with production over -
capacity, such as iron and steel, to certain neighbouring countries for their
industrial upgrading.
For the Xi Jinping leadership, the BRI also ser ves to signify China’s rise,
with a stronger external posture and perceived favourable image. Chinese
government has promised to build China into a moderately prosperous
society and a strong manufacturing power by 2020. To reach the destina -
tion, China has to sustain medium to high levels of economic growth in
the next few years. Meanwhile, as a large countr y, China should maintain
good relations with the outside world as it aspires to a peaceful rise. This
is especially important with respect to its neighbouring countries, to allevi -
ate their anxieties from both political and security considerations.
the B rI h as sIgn IfIcant Impl Icat Ions
for  southeast  asIa
Binatgtan gconomic tgnationu bgtwggn china anf asean havg fgvgnopgf
uttongny uincg thg gatny 2000u anf continugf to uttgngthgn aftgt 2008. In
patticunat, ttafg anf thg typg of invgutmgnt havg vatigf uignicantny. BrI
iu an auxiniat y fotcg to afvancg china’u gconomic tgnationu with asean
mgmbgt utatgu thtough patticunat anf uubutantivg pnanu.
au china’u cnoug ngighbout anf mgy gconomic pattngt, asean utanfu
to gain ftom thg BrI thtough gtgatgt ttafg anf invgutmgnt owu, infta -
uttuctutg conuttuction, anf infuuttian patmu anf othgt joint fgvgnopmgnt
ptojgctu. china iu antgafy thg natggut ot ugconf natggut ttafg pattngt fot
asean counttigu anf hau bgcomg an inctgauingny impottant invgutot in
sIngapore’s role In the Belt and road InItIatIve

68
Southeast Asia. Besides, most ASEAN countries are looking for infrastruc -
ture investment funding that could help to drive their domestic industrial
upgrading and economic growth. Chinese investment under the BRI has
a strong focus on infrastructure and thus provides more opportunities for
both China-ASEAN closer economic cooperation and ASEAN countries’
future development.
Therefore, ASEAN’s involvement in BRI is based primarily on their
economic rationale, such as the size of the economy, the level of industrial
development and the current economic relation with China. Nonetheless,
it is apparent that infrastructure investment is the most attractive for most
ASEAN countries, even though the BRI has a much broader coverage.
China has proposed to build the Kunming-Singapore railway system to
facilitate economic exchange among the countries in the Indochina region.
Three planned routes start from Kunming in China’s Yunnan province via
Myanmar, Laos and Vietnam respectively, which then join together in
Bangkok, Thailand and across Malaysia, and finally reach Singapore. At
present, only parts of the second route (via Laos) have been launched for
construction. Chinese companies had successfully obtained the construc -
tion contract of the China-Laos section and the Laos-Thailand section,
although the latter was suspended because the Thailand government
requested redrafting of the contract. China has also been active in bidding
for the Kuala Lumpur-Singapore High Speed Railway—the Malaysia-
Singapore section—and will compete with Japanese companies again for
the potential Bangkok-Kuala Lumpur section. Apart from the Kunming-
Singapore railway project, China has also taken part in a joint venture
agreement on October 2015 to build the Jakarta-Bandung High Speed
Railway in Indonesia.
In addition to exploring infrastructure collaboration in railway con -
struction projects in ASEAN, China also developed other cooperative
engineering projects such as the construction of dams and ports. For dam
building, China had help in the Bakun Dam project in Malaysia, Myitsone
Dam project in Myanmar, and Kamchay Dam project in Cambodia. For
port construction, Chinese-invested port projects in ASEAN included the
expansion of Kuantan Port and Malacca gateway in Malaysia, Tanjung
Sauh Port on Batam Island in Indonesia, and deep-sea port on Madae
Island in Myanmar. In 2017, China signed an agreement with the
Philippines government to provide assistance for 40 infrastructure proj -
ects, including 15 for financing and 25 for feasibility studies. 4 Among
them, the Subic-Clark Railway project, Davao Coastline and Port
S. Y. TONG AND T. Y. KONG

69
Development project, Cebu International and Bulk Terminal project, and
the bus rapid transit system for the Philippines’ NAIA Airport project
received the most attention.
China also promoted industrial capacity cooperation with ASEAN
countries. Among ASEAN member states, Myanmar, Cambodia, and
Laos have greater need to improve infrastructure. At present, their col -
laborations with China are mainly in agricultural and light manufacturing
industries. Vietnam has deeper industrial capacity cooperation with
China, such as in the export processing industr y, after Vietnam initiated
economic reforms in the late 1980s. In comparison, Malaysia, Thailand,
the Philippines and Indonesia have broader industrial coordination.
China- Malaysia even mutually set up ‘Two Countries, Twin Parks’ to
develop complementar y industries. Indonesia invited Chinese companies
to invest in natural resources industries and Thailand welcomes Chinese
SOEs to set up factories of automobile manufacturing and green-energy
production.
However, the future of free trade is unclear when the sound of anti-
globalization is gradually amplified. US President Donald Trump, with -
drew from the Trans-Pacific Partnership (TPP) Agreement on his first day
in office and vows to renegotiate the North American Free Trade
Agreement (NAFTA). It signals that the United States is reviewing the
implication of globalization and free trade to its domestically political and
economic development. The Trump administration indicated its prefer -
ence for bilateral economic agreement rather than multilateral trade packs.
Protectionism and an anti-globalization sentiment have proliferated in
other regions, such as the European Union. These new developments
place serious constraints on the future of global trade and economic devel -
opment, especially to trade-dependent regions such as East and Southeast
Asia.
Territorial disputes in the region may also obstruct the participation
and cooperation of countries in the BRI, such as those involved in the
South China Sea issue. Even though bilateral relations between the
Philippines and between Vietnam and China have improved significantly,
the issue remains a thorny one and there is no easy solution. In addition,
other factors will also affect the regional geopolitical dynamics, such as the
repeated assertion for freedom of navigation by the United States. Thus,
bilateral economic ties between China and ASEAN have to operate under
a more complex and dynamic trilateral China-US-ASEAN relationship.
SINGAPORE’S ROLE IN THE BELT AND ROAD INITIATIVE

70
sIngapore can play an  Important role
among asean mgmbgt utatgu, singapotg counf pnay a uignicant tong in
facinitating cnougt china-asean gconomic tigu thtough thg BrI.  Whgn
china’u fotgign miniutgt Wang yi mgt with singapotg’u fotgign miniutgt
vivian Banamtiuhnan in fgbtuat y 2017, it wau gxpgctgf that singapotg
wounf pnay a uubutantivgny cootfinativg tong to uttgngthgn china-asean
tgnationu fot tggionan gconomic fgvgnopmgnt. dgupitg singapotg’u umann
popunation, it iu thg mout afvancgf anf opgn gconomy with thg highgut
gdp pgt capita (us$53 thouuanf in 2016) in asean.
motg impottantny, singapotg’u invgutmgnt in itu asean ngighboutu
hau bggn uubutantian anf itu uhatg in asean’u totan toug futthgt in tgcgnt
ygatu ftom 17% in 2012 to 27% anf 25% in 2014 anf 2015, tgupgctivgny
(fig.  4.1 ). thiu uugggutu that singapotg hau fggpgngf itu intggtation into
asean gconomic coopgtation in tgcgnt ygatu. accotfing to asean’u
ofcian utatiuticu, thg top thtgg gconomic ugctotu that singapotg invgutgf in
in thg tggionu incnufg manufactuting (us$3.8 binnion), agticuntutg, fot -
gutt y, anf uhing (us$3.6 binnion) anf nancg anf inuutancg (us$2.8
binnion) in 2015. 5 mganwhing, thg thtgg ugctotu that uaw thg fautgut gtowth
in invgutmgnt ftom singapotg in asean bgtwggn 2012 anf 2015 atg
agticuntutg, fotgutt y, anf uhing (56.6% a ygat), infotmation anf
42. 03 5.04 6.95 1.24 0.34 4.6
8.9
12.7
9.8 13.3
15.2 14.9
17.5%
26.7%
17.3%
20.6 %
27.4% 25.0%
2%
6%
10%
14%
18%
22%
26%
30%
0
10
20
30
40
50
60
70
2010 2011 2012 2013 2014 2015
From ROW From Singapore %Singapore
Fig. 4.1 Inward FDI to ASEAN (excluding Singapore): from Singapore and the
rest of the world (US$ billion and %). Source: ASEANStats
S. Y. TONG AND T. Y. KONG

71
communication (46.4% a year), and wholesale and retail trade (44.2% a
year) (Table  4.1 ). It is apparent that Singapore not only has rich experi -
ence investing in ASEAN in traditional industries such as manufacturing
and agricultural, but has also expanded investment into various modern
ser vice sectors.
Singapore’s economic success is highly correlated with its opening-up
strategy. As free trade is a fundamental policy in Singapore for develop -
ment, the countr y naturally strongly supports the establishment of the
ASEAN Economic Community (AEC). It is also keen on signing up free
trade agreements (FTAs) with its trading partners, both bilateral and mul -
tilateral. As shown in Table  4.2 , Singapore has an extensive network of 20
effective FTAs, including the China-ASEAN Free Trade Agreement
(CAFTA), as well as a number that are still under negotiation. 6 It demon -
strates Singapore’s inclination to promote bilateral, regional and multilat -
eral trade deals, including, for example, the TPP and the Regional
Comprehensive Economic Partnership (RCEP). Despite the recent change
in the US government’s stance on free trade in general and on TPP in
particular, Singapore continues to advocate free trade and deeper regional
economic integration, which largely coincides with China’s policies.
Besides, Singapore has been a key investor in China since the 1980s,
and since 2013, it has been China’s largest foreign investor. In particular,
the two governments have cooperated closely to carr y out Government-
to- Government (G2G) projects with China, including the Suzhou
Industrial Park (SIP), the Tianjin Eco-city (TEC) and the Chongqing
Connectivity Initiative (CCI). The SIP started more than 20 years ago and
has become an important pillar for growth and industrial upgrading in
Suzhou. The TEC started in 2007, focusing mainly on ecological develop -
ment in terms of energy-saving and environmentally friendly projects.
Table 4.1 Singapore’s investment to other ASEAN states by sectors, 2015 (US$
million)
Sectors 2012 2015 Average annual growth (%)
Manufacturing 2,514 3,784 14.6 Agriculture, forestr y and fishing 929 3,565 56.6 Finance and insurance 3,521 2,799 −7.4 Wholesale and retail trade 453 1,359 44.2 Information and communication 269 844 46.4
Source: ASEANstats
SINGAPORE’S ROLE IN THE BELT AND ROAD INITIATIVE

72
In line with the development of the BRI, the CCI project was announced
in 2016 and has been considered a prominent demonstration under the
BRI, China’s ‘Go West’ development strategy and the Yangtze River
Economic Belt strategies. 7 According to the latest meeting of the
Singapore-China Joint Council of Bilateral Cooperation (JCBC), held in
Beijing on 27 Februar y 2017, both countries have committed to broaden
cooperation through existing G2G projects in the fields of biomedical
industries, logistics, property development and certain high-tech indus -
tries. The Singapore-China G2G projects have not only strengthened
bilateral countries’ economic ties, but also ser ve as examples for how gov -
ernments could work jointly to promote local development, such as estab -
lishing industrial parks, export-processing zones and so on.
Beyond the three G2G projects, China and Singapore have also devel -
oped strong economic ties through non-government projects, not only in
China but also in other parts of Asia. For example, the Singapore-based
Ascendas-Singbridge Group has set up the Knowledge City in Guangzhou,
Table 4.2 Singapore’s free trade agreements
Bilateral FTAs Regional/multilateral FTAs
Implemented FTAs China ASEAN-Australia-New Zealand India ASEAN-China Japan ASEAN-India Korea ASEAN-Japan New-Zealand ASEAN-Korea Panama ASEAN Free Trade Area Peru EFTA-Singapore Australia GCC-Singapore Costa Rica Trans-Pacific Strategic Economic Partnership Jordan United States Concluded/signed FTAs European Union Trans-Pacific Partnership Turkey FTAs undergoing negotiation Canada ASEAN-India (Ser vice and Investment) Mexico ASEAN-India (Ser vice and Investment) Pakistan Regional Comprehensive Economic Partnership Ukraine
Source: IE Singapore
S. Y. TONG AND T. Y. KONG

73
the IT Park in Dalian, and the Science and Technology Park in Hangzhou.
The company also cooperated with a Chinese company, the China
Machiner y Engineering Corporation, to build up other industrial parks in
other Asian countries. 8 Such Business-to-Business (B2B) cooperation
could also play a significant role in the development of BRI in ASEAN
member countries.
Indeed, there have already many joint efforts between Chinese and
Singapore businesses to extend their business interests regionally and
globally. Another example is Pacific Shipping Lines (PSI) Ltd. In addition
to entering a joint venture agreement with Singapore’s PSA International
(PSA) and China’s Guangxi Beibu Gulf International Port Group to oper -
ate a new container terminal in China’s Qinzhou City, PIL also has a
project with the China Shipping Container Lines (CSCL) to extend ship -
ping ser vices in order to enhance Singapore-China-Africa networks. Such
B2B joint efforts toward third countries will likely be a key focus of future
development for Singapore-China bilateral economic cooperation through
the BRI. This is particularly true in areas where Singapore has strong com -
petitive advantages such as logistics and modern ser vices.
Singapore has the potential to be a key logistical hub to facilitate the
BRI.  According to SPRING Singapore, Singapore was ranked second in
the World Bank Logistic Performance Index 2010, the best among Asian
countries. 9 Its seaport is connected to 600 ports of 123 countries by 200
shipping lines and its airport has 4500 linkages with 200 cities of 60 coun -
tries. Also, the Quality of Living sur vey of 2017 ranked Singapore the best
place to live in Asia for expatriates. 10 Singapore has a well-developed logis -
tics industr y with an innovative supply-chain management system, highly
skilled personnel, niche capabilities and customized solutions and an
international- standard legal system. The countr y’s strong legal and regu -
lator y framework, especially in intellectual property right (IPR) protec -
tion, and rich experience in corporate social responsibility implementation,
also makes it highly attractive to multinational companies for setting up
regional or global headquarters.
The rapid advancement of various modern ser vice sectors in Singapore
enables the countr y to play an essential role in helping to facilitate the BRI
in many aspects. Singapore could utilize its advanced and well-regulated
financial sector to promote bilateral investment, to develop an offshore
RMB centre, to provide direct financing through its capital market, and to
facilitate cooperation among Singapore and Chinese banking institutions
for infrastructure investment financing. Already, the International
SINGAPORE’S ROLE IN THE BELT AND ROAD INITIATIVE

74
Enterprise (IE) Singapore has respectively signed memorandums of under -
standing (MOUs) with the Industrial and Commercial Bank of China
(ICBC), the China Construction Bank (CCB) and the Bank of China to
provide assistance in commodities trading, financing and related profes -
sional financial ser vices to Singapore companies in infrastructure projects
under the BRI.  In addition, the Bank of China also launched the global
energy commodity business centre and global commodity repo centre in
Singapore in November 2015. 11
It is worth noting that, according to the latest sur vey report by the
Startup Genome project, a US-based organization, Singapore ranked
number one in the world for start-up talent in 2017, overtaking Silicon
Valley. 12 The report highlighted that Singapore’s innovative policies have
been essential to the attractiveness of its start-up ecosystem. It remarked
that there are about 1600–2400 tech start-ups in Singapore receiving gov -
ernment subsidies, such as the US$13.2 billion research and development
initiative, and schemes of early-stage venture capital funds. In addition,
Singapore’s geographical location, with easy access to the world market
and relative cost of hiring engineers, attracts start-ups to set up companies
in Singapore. Accordingly, the average salar y of a software engineer in
Singapore is around US$35 thousand, still much lower than the global
average (US$49 thousand). Such an outstanding performance of Singapore
in recruiting talented persons could not only strengthen Singapore-China
economic relations in advancing industrial specialization and product cus -
tomization, but also boost the People-to-People (P2P) exchange between
the two in sharing patents, knowledge, and start-up management.
Alongside bilateral economic cooperation, Singapore could play an
important role to enhance mutual understanding and trust between China
and countries in Southeast Asia by providing dialogue platforms and facili -
tating direct and indirect communications. As of now, multiple platforms
already exist for bilateral dialogue between China and ASEAN countries
for various issues, including the ASEAN Regional Forum (ARF), the
ASEAN Plus Three (APT) Summit, the East Asia Summit (EAS) and the
ASEAN Defence Ministers Meeting (ADMM-Plus). Non-traditional secu -
rity issues such as international economic crime are also discussed in these
dialogues.
Singapore has already had to be active in initiating the various discus -
sion platforms. In addition, it has also provided numerous unofficial chan -
nels to coordinate among countries that have various geopolitical concerns
in the region. For example, the Singapore Institute of International Affairs
S. Y. TONG AND T. Y. KONG

75
(SIIA) hosts ASEAN and Asia Forum (AAF) ever y year to gather political
and security perspectives from experts, leaders, business professionals,
government officials and academia. To enhance mutual trust, the
Shangri-La Dialogue, held in Singapore, ser ves as another important
venue for defence professionals to exchange views and understanding on
regional security issues from countries in the Asia-Pacific region. Recently,
it has become an outstanding platform for China, the United States and
Southeast Asia to express their views on the sovereignty issue of the South
China Sea.
There are various MOUs between ASEAN and China, including those
for Information and Communication Technologies (ICT); Transport;
Sanitar y and Phytosanitar y Cooperation Standards; Technical Regulations
and Conformity Assessment (TBT); Health Cooperation; Science and
Technology Partnership (STEP) Programme; and Disaster Management
Cooperation. As an advanced economy, Singapore could help others in
the region by sharing its experiences not only in economic growth, but
also in promoting socio-cultural development. It could lead others extend -
ing these MOUs toward deeper cooperation. By expanding and deepen -
ing connectivity and integration between China and ASEAN, and among
ASEAN countries, such broad and comprehensive cooperation will pro -
vide a stronger foundation for the development of BRI.  Indeed, such
broad-based cooperation underlines the general concept of connectivity,
which was highlighted in the BRI and reaffirmed as fundamental in pro -
moting ASEAN connectivity at the 15th ASEAN-China Summit in 2012. 13
challenges lIe ahead
thgtg atg numgtouu channgnggu to imptoving sino-singapotg tgnationu,
which winn anuo affgct singapotg’u tong in thg BrI. ong concgtnu thg ggo -
ponitican tgnuion atiuing ftom thg south china sga fiuputgu. sincg 2016,
miupgtcgptionu towatf gach othgt on thg iuuug uggm to havg gtofgf mutuan
ttuut anf hinfgtgf thg fgvgnopmgnt of binatgtan tgnationu. ftom singapotg’u
utanfpoint, it maintainu that thg fiuputgu bg tguonvgf baugf on intgtna -
tionan naw anf pgacgfun ugttngmgnt. singapotg anuo tgitgtatgf that ftggfom
of navigation in thg south china sga anf a unitgf asean atg thg coun -
tt y’u nationan intgtgut. ftom china’u pgtupgctivg, anthough chingug gov -
gtnmgnt fif not tguponf fitgctny to singapotg’u auugttion, cgttain incifgntu
hintgf at itu fiupngauutg towatf singapotg. ong gxampng iu thg ugizutg of
ning of singapotg’u tgttgx Infantt y cattigt vghicngu (Icvu) at thg pott of
sIngapore’s role In the Belt and road InItIatIve

76
Hong Kong in November 2016 that were held for more than two months.
Meanwhile, the 2016 annual meeting of the JCBC was delayed, and later
held in Januar y 2017. Although the two cases were eventually resolved
without being proliferated into other areas, these may have a lasting impact
by arousing a real sense of hurt between the people and by deepening
distrust between the governments.
The second challenge comes from the global economic slowdown and
China’s economic restructuring. As global economic growth decelerated,
protectionist sentiment strengthened and growth in world trade slowed
down sharply. Asia suffered more, having been a highly trade-dependent
region. In 2014 and 2015, world merchandise exports grew by 2.7% and
3.0% in volume, only slightly higher than those in world GDP, at 2.5% and
2.4%, respectively. Meanwhile, Asia’s contribution to global trade growth
declined, from about two percentage points in 2011 to about one per -
centage point for export and less than half a percentage point for import
in 2015 (Fig.  4.2 ). Difficulties in trade development globally and region -
ally will inevitably pose challenges to export-oriented countries such as
China and Singapore, to both their bilateral trade and their trade relations
with other economies.
In addition to merchandise trade, trade in ser vices has also suffered
setbacks in recent years. In 2015, world export in commercial ser vices
declined by 6%, most seriously in transport, which contracted by nearly
2011North America EuropeOther regions
South and Central AmericaAsiaWorld
North AmericaEuropeOther regions
South and Central AmericaAsiaWorld
–1
0
1
2
3
4
5
6 Exports Imports
–1
0
1
2
3
4
5
6
2012 2013 2014 2015 2011 2012 2013 2014 2015
Fig. 4.2 Contributions to growth in world merchandise trade in volume, by
regions, 2011–2015 (Annual % change). Source: WTO Secretariat
S. Y. TONG AND T. Y. KONG

77
10% (Fig.  4.3 ). This dealt a serious blow to Singapore, having strong com -
parative advantages in the sector and ranked the world’s tenth largest
exporter in commercial ser vices in 2015. At the same time, it also high -
lights the importance of bilateral cooperation. China was the world’s sec -
ond largest importer in commercial ser vices in 2015, following the United
States, accounting for more than 10% of the world total.
On the other hand, China’s efforts to restructure its economy and to
upgrade its industr y will also have important implications for bilateral eco -
nomic relations. By introducing the Made in China 2025 strategy, China
aims to move its industries upward along the value chain, through the
promotion of high added-value and high-tech industries. Such restructur -
ing efforts will likely narrow technology gaps between Chinese and
Singapore businesses and intensify competition, reducing room for busi -
ness cooperation.
The third challenge arises from Chinese investment in third countries.
In recent years, for example, China has made a tremendous amount of
investment in Malaysia. The latest projects, including China-funded ports
and the East Coast Rail Line (ECRL), were launched in late 2016 and
expected to be completed in five to 10 years. The ECRL, which connects
the Klang Port on the west coast of Peninsular Malaysia with the Kuantan
Port in its east coast could have a significant impact on Singapore’s busi -
ness interest, as shipping through the Pacific Ocean to the Indian Ocean
Fig. 4.3 Value growth of commercial ser vices exports by categor y, 2013–2015 (%).
Source: WTO Secretariat
SINGAPORE’S ROLE IN THE BELT AND ROAD INITIATIVE

78
or vice versa could then bypass the port of Singapore via ECRL. Similarly,
in the previous decade, China had reached an agreement with the authori -
ties of Myanmar to build a pipeline across the countr y to the southwest
region of China. This pipeline could provide about 260 thousand barrels-
per- day refiner y capacity from the port of Kyauk Pyu in Myanmar to
China’s Yunnan province 770 kilometres away, 14 an alternative and per -
haps eminent oil trading route from the Middle East to China, signifi -
cantly weakening the strategic importance of the Port of Singapore. Such
potentially damaging impacts on Singapore’s business interest from
Chinese investment may also include that from the Gwadar Port of
Pakistan, which provides China with a much shorter maritime access to
Europe, Africa and the Middle East, diminishing the importance of the
Strait of the Malacca and the Port of Singapore.
Finally, the diversity and diverging interests among ASEAN countries
could be another serious challenge for Singapore to play an important role
in the development of the BRI.  Since the early 2000s, China’s influence
on the global economy has grown stronger. In ASEAN, in particular,
China has become the region’s most important economic partner in trade,
investment, tourism and personnel exchange. The increasingly direct and
deep linkages between China and ASEAN member states have gradually
but considerably weakened Singapore’s role as a coordinator between the
two. More essentially, the fragility and vulnerability of ASEAN unity also
makes it difficult for ASEAN, and for Singapore in particular, to maintain
a coherent and consistent policy framework in working with China.
Stronger commitment for cooperation among ASEAN members will be
essential to further enhance Sino-ASEAN ties for the development of the
BRI and for the joint prosperity of the region.
conclud Ing remarks
thg BrI that combingu gconomic ptomiugu with ponitican accompniuh -
mgntu iu guugntianny impottant to china anf to Xi Jinping. It iu ong mgy
initiativg to fgnibgtatgny puuh china into a mofgtatgny ptoupgtouu uocigty
by 2020 anf to tightgn thg binatgtan anf muntinatgtan tgnationu with itu
pattngt counttigu, gupgcianny asean, an impottant ngighbout. thg BrI
ptomiugu to bgngt asean gtgatny, gupgcianny in inftauttuctutg anf fgvgn -
opmgnt funfing, but channgnggu abounf. riuing anti-gnobanization tgn -
fgncigu anf potgntian uovgtgignty conict concgtning thg south china sga
s. y. tong and t. y. kong

79
are two of the major stumbling blocks for advancing ASEAN-China rela -
tions through BRI.
Although there has been much political rhetoric, there is a greater need
for the Chinese government to better articulate its plans and approaches
to enhance cooperation with ASEAN via BRI. Meanwhile, there is a sig -
nificant role for Singapore to play in BRI for closer regional economic ties
and integration and joint project implementation between ASEAN and
China. Anyhow, greater mutual trust and stronger bilateral relations would
be essential for developing BRI. In particular, the changing geopolitics in
the South China Sea may lead to irrational quarrels among ASEAN coun -
tries due to divisiveness and the misperception among countries in the
region, including those between Singapore and China. More efforts are
needed from both sides to enhance mutual understanding and coopera -
tion for their long-term interest. In seeking long-term growth opportuni -
ties, Singapore also has to monitor closely Chinese industrial development
and investment activities both domestically and in third countries so as to
identify key areas of cooperation and avoid direct competition.
notes
1. china’u ong bgnt, ong toaf pnan covgtu motg than hanf of thg popunation,
75% of gngtgy tguoutcgu anf 40% of wotnf’u gdp’. South China Morning
Post , 21 June 2016. http://www.scmp.com/business/china-business/
article/1978396/chinas-one-belt-one-road-plan-covers-more-half-
population-75 (accessed on 15 March 2017).
2. ‘FDI to get boost, new commerce chief vows’, The China Post , 1 March
2017.
3. ‘China outbound investment retreats as capital controls bite’, The Strait
Times , 16 Februar y 2017. http://www.straitstimes.com/business/
economy/china-outbound-investment-retreats-as-capital-controls-bite
(accessed on 18 Februar y 2017); the statistics is from Ministr y of Commerce
of People’s Republic of China http://fec.mofcom.gov.cn/article/tjsj/
tjgb/ (accessed on 18 Februar y 2017).
4. Recto Mercene, ‘Manila, Beijing to sign more investment deals’, Business
Mirror, 15 Mar 2017. http://www.businessmirror.com.ph/manila-
beijing-to-sign-more-investment-deals/ (accessed on 16 March 2017).
5. ASEANstats Database: http://data.aseanstats.org/ (accessed on 15 March
2017).
6. ‘Singapore Free Trade Agreements’, IE Singapore , https://www.iesingapore.
gov.sg/Trade-From-Singapore/International-Agreements/free-trade-
agreements/Singapore-FTA (accessed on 20 March 2017).
SINGAPORE’S ROLE IN THE BELT AND ROAD INITIATIVE

80
7. ‘Singapore has consistently abided by “One China policy”: DPM Teo’,
Channel NewsAsia , 26 Feb, 2017. http://www.channelnewsasia.com/
news/singapore/singapore-has-consistently-abided-by-one-china-policy-
dpm-teo/3551408.html (accessed on 9 March 2017).
8. ‘Why China’s plan to build a new Silk Road runs through Singapore’,
Today , 15 Aug, 2016. http://www.todayonline.com/chinaindia/china/
why-chinas-plan-build-new-silk-road-runs-through-singapore (accessed
on 10 March 2017).
9. ‘Singapore -The Global Logistic Hub’, the Industrial Brochure of Logistics ,
SPRING Singapore. https://www.spring.gov.sg/Developing-Industries/
LOG/Documents/Industr y_Brochures_Logistics.pdf (accessed on 14
March 2017).
10. ‘Singapore ranked best place to live in Asia for expats: Mercer’s sur vey’,
Channel NewsAsia , 14 March 2017. http://www.channelnewsasia.com/
news/singapore/singapore-ranked-best-place-to-live-in-asia-for-expats-
mercer-s/3593172.html?cid=fbcna (accessed on 14 March 2017).
11. IE Singapore’s website: MOUs with China https://www.iesingapore.gov.
sg/Venture-Overseas/Browse-By-Market/Asia-Pacific/China/MOUs
(accessed on 12 March 2017).
12. ‘Singapore overtakes tech mecca Silicon Valley as No. 1 for global start-up
talent’, The Strait Times , 21 March 2017. http://www.straitstimes.com/
business/economy/singapore-overtakes-tech-mecca-silicon-valley-as-no-
1-for-global-startup-talent (accessed on 22 March 2017).
13. ‘Over view of ASEAN-China Dialogue Relations’, Association of South -
east Asian Nations. http://asean.org/?static_post=over view-asean-china-
dialogue-relations (accessed on 21 Februar y 2017).
14. ‘Beset by delays, Myanmar-China oil pipeline nears start-up’, Reuters , 21
March 2017.
S. Y. TONG AND T. Y. KONG

81 © The Author(s) 2018
A. Arduino, X. Gong (eds.), Securing the Belt and Road Initiative ,
https://doi.org/10.1007/978-981-10-7116-4_5
CHAPTER 5
Resolving the Malacca Dilemma: Malaysia’s
Role in the Belt and Road Initiative
Guanie Lim
Introduct Ion
Since its 2013 announcement by Chinese President Xi Jinping, the Belt
and Road Initiative (BRI) has become arguably China’s most crucial
engagement tool with the rest of the world. While there are numerous
interpretations on how the BRI is to be realized, scholars generally agree
that infrastructure investment is one of the most prominent vehicles
undergirding Chinese expansion (Arase 2015 ; Ferdinand 2016 ; Summers
2016 ). For China, the construction of land- and ocean-based infrastruc -
ture networks is crucial to promote its trade and investment linkages with
other foreign markets. Securing infrastructure projects is also crucial for
China’s infrastructure and engineering firms, many of which are suffering
from overcapacity and a stuttering domestic business environment as a
result of the recent deceleration of the Chinese economy following years
of rapid growth.
China’s spending spree, like most other initiatives of similar stature, is
bound to have a profound impact on the recipient countries, especially
those deemed strategic in the context of the BRI.  Take Pakistan for
instance; its stature as a staunch Chinese ally in South Asia and proximity
to China’s occasionally restive westernmost province of Xinjiang has
G. Lim ( *)
Nanyang Technological University, Singapore, Singapore

82
allowed it to attract considerable political and economic support from
Beijing. To this end, Chinese funding has been the major impetus fuelling
the construction of large-scale infrastructure projects such as the economic
corridor interlinking Pakistan’s Gwadar Port and Xinjiang (see Brewster
2014 ; Mackerras 2015 ). Over in Southeast Asia, Malaysia, a major regional
economy as well as China’s largest trading partner in this subcontinent,
has tapped into the longstanding China-Malaysia bilateral relationship and
resilient ethnic Chinese business networks that straddle both countries to
advance its ambitions. It has been tipped to benefit greatly from the influx
of Chinese capital associated with the BRI, particularly by Malaysia’s polit -
ical and business elites (e.g., Free Malaysia Today 2016a ; Malay Mail
Online 2015 ; The Star 2017 ; Zhang and Zhao 2016 ). One of the primar y
reasons undergirding their optimism is solid Chinese support in the con -
struction of big-ticket public projects such as the East Coast Rail Link
(ECRL) (Straits Times 2016 ; TODAY 2016 ). Touted as a ‘game changer’
that could alter existing trade routes, which currently ply between the
busy Strait of Malacca and the South China Sea via Singapore, the ECRL
is one of the largest public projects enthusiastically endorsed by Prime
Minister Najib Razak during his week-long visit to Beijing in November
2016 (Lopez 2016 ). With state-owned China Communications
Construction Company (CCCC) as the main contractor, it is poised to
connect Kuala Lumpur, the countr y’s commercial capital, to the states on
the east coast of Peninsular Malaysia, namely Pahang, Terengganu, and
Kelantan. The ECRL is broadly expected to benefit both Malaysia and
China, as the next two sections will explain.
Notwithstanding such optimism, one must take into account on-the-
ground implementation and state-society relations. This chapter attempts
to address this issue, presenting a more balanced perspective on the ECRL.
It is hoped that a clearer reading of such a pivotal Chinese project can
bolster our understanding on how the BRI actually takes shape in Malaysia.
It unearths the ECRL by analyzing its pros and cons, shedding light on
some issues not commonly covered by mainstream analysts. The chapter
ultimately argues that the ECRL, while appearing grandiose, is likely to
add little to the growth of Malaysia. There remain significant hurdles to
surmount before one can claim that this undertaking is truly beneficial to
Malaysia.
This chapter begins with an examination on the political economy of
Malaysia. In particular, it links the bottleneck facing Malaysia in its drive
to become a high-income nation with the growing importance of Chinese
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83
inward foreign direct investment (FDI). It also illustrates some of the
more prominent Chinese projects in recent years, highlighting the busi -
ness and political risk that have hitherto limited their impact. The subse -
quent section details the ECRL. It focuses first on the project’s background
information before three key points of contention are discussed. The
chapter concludes with a summar y of the main arguments and research
findings, along with an analysis of their policy implications.
chIna ’s E mErg Ent rol E In th E m alays Ian E conomy
since itu independence in 1957, manayuia hau maintained a faitny nibetan
utance towatdu intetnationan ttade and capitan to dtive itu economy. thiu
outwatd-otiented uttategy hau yiended uome degtee of uucceuu au the
southeaut auian countt y became patt of a uecond tiet of newny induuttian -
izing economieu (nIEu), fonnowing cnoue on the heenu of the tut-tiet nIEu
(i.e., kotea, taiwan, singapote, and hong kong) (fenmet 2009 ; hinn et an.
2012 ; lim 2016b ; suehito 2008 ; Wong and cheong 2014 ). yet, manayuia’u
uttategy iu ptedicated on the abinity to continuanny upnift itu ptoductive
capabinity and uecute foteign capitan and matmetu. Both avenueu have been
ueveteny cuttained uince the 1997 auian financian ctiuiu (afc). the ctiuiu
unveined that fdI mainny enteted the non-ptoductive economic uectotu
uuch au tean eutate and upecunative nance (uee Jomo 2003 ; sheng 2009 ).
anthough manayuia hau ttied to teditect fdI to the mote ptoductive eco -
nomic uectotu, uuch au manufactuting, uince the afc, the countt y’u tech -
nonogican capabinity temainu tenativeny modeut (e.g., Btoomet 2013 ; lim
2014 ; van gtunuven and hutchinuon 2016 ; Wad 2009 ). fot the nattet,
menon ( 2014 ) uhowu that manayuia hau not uucceeded in tegaining the
condence of intetnationan inveutotu in the yeatu fonnowing the afc,
anthough it hau maintained an edge in intetnationan ttade (eupecianny in
agticuntutan commoditieu). 1 It hau anuo been channenged by a newet gtoup
of nIEu (e.g., laou and kenya) who offet companieu nowet buuineuu coutu.
Put togethet, weamneuueu on both ftontu have bogged the countt y down
in a middne-income ttap (hutchinuon 2015 ). It now uttuggneu to ttanui -
tion towatdu highet vanue-added activitieu that tequite incteauingny mote
uophiuticated technonogieu and highet-quanity human capitan. It iu anuo
wotth mentioning that Ptime miniutet najib hau devoted uignicant atten -
tion to nifting the countt y out of the middne-income ttap uince auuuming
ofce in 2009 (uee Ptime miniutet’u depattment 2015 ). In the intetna -
tionan devenopment citcne, thete iu juut au much teueatch conducted on thiu
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84
topic (see Flaaen et  al. 2013 ; Hasanov and Cherif 2015 ; Larson et  al.
2016 ; Yusuf and Nabeshima 2009 ).
The path dependence of the above strategy, coupled with the need to
break out of the middle-income trap, has forced the Malaysian leadership
to target FDI providers outside its ‘traditional’ group (i.e., Western Bloc,
Singapore, and Japan). In other words, ‘non-traditional’ FDI providers
such as China and Saudi Arabia are becoming attractive economic part -
ners. In the case of China, it has emerged as an attractive FDI contributor,
particularly since the formulation of the BRI (Kong 2016 ). According to
the Malaysian Investment Development Authority, China became
Malaysia’s largest investor in 2016, contributing an investment totalling
USD 1.6 billion (MYR 4.8 billion; equivalent to 17.5% of total FDI
inflow) (MIDA 2016 ). Chinese FDI has eclipsed those from the
Netherlands (USD 1.1 billion; MYR 3.2 billion; 11.7%), Germany (USD
860.9 million; MYR 2.6 billion; 9.5%), United Kingdom (USD 860.9
million; MYR 2.6 billion; 9.5%), Korea (USD 728.5 million; MYR 2.2
billion; 8.0%), and Singapore (USD 695.4 million; MYR 2.1 billion;
7.7%). Despite its increasing importance to the Malaysian economy,
Chinese investment has not always fulfilled its oft-touted potential. More
specifically, such investment does not exist in a vacuum and is influenced
by business and political risks, many of which are not easily grasped by the
Chinese firms. For the Chinese firms that only recently internationalized,
the risk inherent in a distant, emerging market like Malaysia can prove
particularly challenging.
One needs only to look at some of the more prominent Chinese proj -
ects in the countr y. Officially launched in 2013, the Malaysia-China
Kuantan Industrial Park (MCKIP) in the state of Pahang was born out of
the suggestion of Prime Minister Najib. It is also the sister park of China-
Malaysia Qinzhou Industrial Park (CMQIP) in Guangxi province. Both
industrial parks are critical for they are often earmarked as flagship BRI
projects in the region and more generally, the ideal demonstrative case
studies for other Southeast Asian countries (Kong 2016 ). While the
CMQIP is moving full steam ahead, the MCKIP has been hampered by a
series of niggling issues, ranging from poor land conditions, withdrawal of
key investors, and disagreement between the federal government and the
Pahang state government (Nanyang Siang Pau 2014 ). It is only in recent
years that the MCKIP has seemingly turned the corner following a series
of restructuring and negotiation between key stakeholders. According to
the chairman of its new master developer, it secured a total investment of
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85
USD 1.9 billion (MYR 5.6 billion) in 2016 and is aiming to garner another
USD 3.3 billion (MYR 10.0 billion) in 2017 (Rafee 2017 ).
In the automotive industr y, low-cost carmaker Cher y Group has coop -
erated with Alado Corporation (a Malaysian ethnic Chinese firm) to both
assemble completely-knocked-down (CKD) automobile kits into
completely- built-up (CBU) units and to distribute the latter in the domes -
tic market (Lim 2015 ). In assembling the CKD kits, Alado Corporation
has entered into an agreement with an independent contract assembler,
meaning that Cher y does not need to expend resources to set up its own
manufacturing facility in Malaysia. For the distribution of the CBU units,
Alado Corporation has established a trilateral joint venture between itself,
Cher y, and the Lembaga Tabung Angkatan Tentera (LTAT) (or the
Armed Forces Fund Board). The strong local knowledge of Alado
Corporation and the LTAT makes them worthy allies of Cher y in its aim
to penetrate the Malaysian market. Nevertheless, Cher y’s market share
remains marginal. According to multiyear statistics published by the
Malaysian Automotive Association (MAA), a trade and lobby group rep -
resenting the interest of the automotive firms in the countr y, Cher y has
not been able to garner more than 1% (per annum basis) of the domestic
market share from 2008 to 2016 (MAA 2011 , 2013 , 2017 ). Cher y’s strat -
egy of producing vehicles for the masses has not yielded much success as
this market has traditionally been held captive by Proton and Perodua,
two domestic firms that were already in business since the 1980s and early
1990s respectively. More crucially, Cher y is not able to market cheaper
vehicles to compete against Proton and Perodua chiefly because the latter
enjoy a more favourable duty and tax regime (see Lim 2017b ). To over -
come such bottlenecks, Cher y has devoted significant efforts to re-
strategize its business plan in the domestic market. For a time, a partnership
with Proton was mulled. However, in May 2017 this avenue was closed
when the Geely Automotive Holding Group, another Chinese carmaker,
announced that it had agreed to acquire a 49.9% stake in Proton (Zhang
et al. 2017 ).
These two examples reflect the difficulties involved in the internation -
alization of Chinese firms. The Chinese firms often are impacted by regu -
lator y and non-regulator y barriers as well as political economic factors not
commonly experienced in China. Even in the event that they have faced
such challenges in China, the means to solve them are usually rather dif -
ferent in a foreign market like Malaysia. The broader implication of the
cases of MCKIP and Cher y suggest that Chinese investors need to be war y
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86
of the different commercial setting of Malaysia (at least in relation to
China) and devise better mechanisms to manage the risk involved in their
ventures into Malaysia. If handled inappropriately, their ventures could get
bogged down for a relatively long period, depressing returns to the
stakeholders.
u nd Erstand Ing th E E ast coast raIl lInk
In hiu novembet 2016 viuit to Beijing, Ptime miniutet najib decnated that
the Ecrl, anong with uevetan govetnment-ned initiativeu, wound tame
china-manayuia tieu to new heightu’ (sttaitu timeu 2016 ). In othet wotdu,
one iu to expect a win-win uonution out of the Ecrl.  fot manayuia, the
Ecrl iu patticunatny henpfun to boout itu economy. fitutny, the ptoject iu
expected to bettet connect the tenativeny bacmwatd eaut coaut (Pahang,
tetengganu, and kenantan) to the mote ptoupetouu weut coaut (ptimatiny
senangot and kuana lumput). the 600  mm mega ptoject iu ucheduned to
connect pauuengetu and fteight ftom Pott knang in senangot to tumpat in
kenantan, uttinging anong umannet townu uuch au mentamab (Pahang) and
dungun (tetengganu). accotding to tee ( 2017 ), the Ecrl winn cut
ttaven time ftom 12 houtu (by toad) to about fout houtu. the imptoved
connectivity iu expected to btidge the nongutanding economic divide
between the eaut and weut coautu of Peninuunat manayuia. accotding to the
ptime miniutet, the economy of Pahang, tetengganu, and kenantan wound
expetience an additionan annuan gtowth of 1.5% when the Ecrl iu
compneted au high vanue-added economic activitieu in uectotu uuch au agti -
cuntute and toutium ate utimunated (Janin 2017 ; new sttaitu timeu 2016 ).
It winn anuo bteathe new nife into the tenativeny mote matginan kuantan Pott
by ninming it via tainway to the buutning Pott knang, an iuuue futthet
expnoted in the uubuequent patagtaphu.
secondny, the Ecrl winn ptovide a majot boout and a new uoutce of
conttactu fot the nocan conuttuction uectot, eupecianny au uubconttactotu to
cccc (tee 2017 ). Vanued at a gigantic uum of usd 18.2 binnion (myr
55.0 binnion), it tepteuentu one of manayuia’u naut puuh’ pubnic ptojectu in
otdet to eucape the middne-income ttap and gtaduate into a high-income
countt y by 2020. Indeed, it hau been faut-ttacmed by the govetnment to
commence conuttuction in Juny 2017 tathet than in nate 2017 au initianny
expected (tee 2017 ). thiu iu a uignicant devenopment au pubnic ptojectu
of thiu mind uuuanny invonve a tenativeny nong petiod of buteauctatic denib -
etation and technican evanuation.
g. lIm

87
Thirdly, in terms of financing, 85% of the project is to be financed with
soft loans from Beijing, a boon to Malaysia’s increasingly strained public
coffers (see Lopez 2016 ). Like many of China’s major overseas infrastruc -
ture projects, the state-owned Export-Import Bank of China plays the role
of financier while another state-owned enterprise (SOE) (i.e., CCCC)
comes in as the project’s main contractor, handling engineering, procure -
ment, construction, and commissioning (EPCC) matters (Straits Times
2016 ). According to the Malaysian Ministr y of Finance, China’s financing
terms are favourable as the interest rate is lower than what the ministr y can
obtain from the international markets. Furthermore, the repayment period
of 20 years is relatively generous, helping Malaysia spread its financial out -
lay over a longer than usually permissible period (Channel NewsAsia 2016 ).
For China, the ECRL represents another landmark BRI project with a
key Southeast Asian partner. The project highlights Malaysia’s special rela -
tionship with China when, under Prime Minister Tun Abdul Razak, it
became the first Southeast Asian countr y to establish diplomatic ties with
the Chinese in 1974. The bilateral tie has blossomed under successive
Prime Ministers, especially under the leadership of Prime Minister Najib
(the son of Tun Abdul Razak) (Free Malaysia Today 2016a ; Ngeow 2017 ).
Moreover, the ECRL has a geopolitical dimension for it connects the
aforementioned Kuantan Port (jointly owned by a Malaysian conglomer -
ate and a Chinese SOE) on the east coast of Peninsular Malaysia to Port
Klang on the west coast (Lopez 2016 ). This potential land bridge could
provide a ‘significant resolution’ to China’s over-reliance on the Strait of
Malacca, what it calls the ‘Malacca Dilemma’. About 80% of current
Chinese energy needs pass through this narrow water way. This new net -
work will create alternative trade routes, but with significant Chinese
involvement as China, through its SOEs, now has a direct interest in both
the Kuantan Port and the ECRL itself (see Fig.  5.1 ). While a combined
sea and land route via Kuantan Port and the ECRL is estimated to cost
more (in bulk cargo per tonne) than the existing sea route via Singapore,
the travel time can be shortened by a sizeable 30 hours (18% reduction
from current levels). The shorter travel time is useful for the movement of
time-sensitive goods such as exotic food and biomedical products.
However, these new routes, if they come to fruition, could bypass
Singapore (Southeast Asia’s de facto shipping and commercial hub) and
offer exporters new options to reach markets in wealthy Northeast Asia.
Likewise, exports from Northeast Asia could also get to the Strait of
Malacca without going through Singapore.
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look Ing B Eyond grand strat Egy and  grEat V IsIon
notwithutanding the hype uuttounding the Ecrl, thete ate uevetan uncet -
taintieu that cound juut au wenn undetmine it. fitutny, it iu not eupecianny tene -
vant to the needu of the manayuian economy. to thiu end, one needu to
catefunny conuidet the oppottunity cout of the much touted usd 18.2 binnion
(myr 55.0 binnion). Whine usd 18.2 binnion (myr 55.0 binnion)toughny
equivanent to the gtouu domeutic ptoduct (gdP) of Petam (a mid-uized
Fig. 5.1 Potential trade routes opened up by the East Coast Rail Link. Source:
Lopez 2016 ; Note: *Cost estimates for bulk cargo per tonne
G. LIM

89
Malaysian state)—represents a huge stimulus, it can arguably be disbursed in
a manner that better fits the current and future needs of the economy. As
illustrated in the earlier sections, one of the main causes behind Malaysia’s
middle-income trap is its inability to transition towards higher value-added
activities that require increasingly more sophisticated technologies and bet -
ter-quality human capital. According to international development experts,
the most immediate forms of government action to rectify this issue involve
deepening Malaysia’s domestic industrial and innovation capabilities
(Hasanov and Cherif 2015 ; Yusuf and Nabeshima 2009 ), expanding techni -
cal and vocational education and training, and attracting highly productive
foreign firms to locate production in Malaysia (Flaaen et  al. 2013 ). All of
these policy measures require sustained public funding and the Malaysian
government would do well to allocate and disburse resources for them.
While it is unfair (and even counterfactual) to suggest that the Malaysian
government could secure an amount equivalent to USD 18.2 billion (MYR
55.0 billion) to fund these three broad policies, the crux of the matter is that
such policies are more meaningful to the Malaysian economy than a big-
ticket public project stretching mostly through a remote part of Peninsular
Malaysia. The conduct of some contemporar y Chinese-led projects in
Malaysia has also weakened the thesis that projects of this nature help in
providing business and employment opportunities to the locals. Indeed, the
Forest City project (driven by Countr y Garden of Guangdong province) in
the southern state of Johor has drawn the ire of Mahathir Mohamad,
Malaysia’s longest- ser ving Prime Minister (1981 to 2003). He particularly
harps on two interrelated issues: the outflow of capital and jobs to Chinese
firms and the influx of Chinese immigrants. In his widely read blog, Mahathir
(2017 ) had claimed that: ‘[W]e cannot allow thousands of acres to be
owned, developed and settled by foreigners. If we do that literally they would
become foreign enclaves… We are going to see large chunks of Malaysia
being developed by the foreign buyers and being occupied by them’.
In addition, there seems to be some confusion regarding the nature in
which China has chosen to finance the ECRL. To this end, some media
outlets have mistakenly classified the ECRL as part of a larger state-led
investment package announced during Prime Minister Najib’s high- profile
visit to China in November 2016 (see Free Malaysia Today 2016b ; Malay
Mail Online 2016a ; The Star 2016 ). For instance, The Star ( 2016 ) wrote:
‘Najib… witnessed the exchange of 14 business arrangements with
proposed investments [emphasis added] estimated at RM143.64bil held at
the Malaysia-China Business Forum…’ (). Yet, the reality about the ECRL
is that, as illustrated in the previous section, it is essentially a loan provided
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by a Chinese bank (in this case, the state-owned Export-Import Bank of
China) to a Chinese main contractor (in this case, it is CCCC), which in
turn carries out most of the construction. There is no investment in the
form of a controlling ownership in a business in the recipient countr y (in
this case, Malaysia) by an entity based in another countr y (in this case,
CCCC), directly contrasting the conventional definitions of FDI. Put
another way, CCCC is only contractually obligated to carr y out all EPCC
matters before turning it over to the Malaysians upon its completion. This
is also the norm in most of the BRI projects across the word as the Chinese
construction firms (such as CCCC) have no long-term interest in the proj -
ects, apart from the usual legal responsibilities related to the performance
and safety of the end product. In summar y, the eventual owners of the
ECRL are the Malaysians, either through a SOE or a private firm. In any
case, the Malaysian citizenr y will be the ultimate payers for it. More pro -
saically, the ECRL can be interpreted as primarily a China-China transac -
tion, with Malaysia capturing a relatively small share of the benefit.
Secondly, there are concerns that the cost of the ECRL is too steep,
which is likely to reduce its sustainability. While no two railway projects are
ever the same because the exact costing depends on factors as varied as
terrain, train technology, length of rail, and financing conditions, it is still
possible to draw on the experience of recent developments to gain a
broader perspective. To this end, Table  5.1 provides a comparison of rela -
tively recent prominent railway projects both in Malaysia and abroad.
Overall, the ECRL is more expensive, almost exclusively to a significant
degree, compared to the projects listed in Table  5.1 .
On the domestic front, the 179  km Gemas-Johor Bahru route costs
only USD 2.4 billion. This translates to a cost of USD 13.2 million per
Table 5.1 A comparison of the East Coast Rail Link against recent railway
projects
Railway projects Construction cost (USD) Parameters
East Coast Rail Link (Malaysia) 18.2 billion; 30.4 million per km 600 km Gemas-Johor Bahru (Malaysia) 2.4 billion; 13.2 million per km 179 km Padma Railway (Bangladesh) 4.9 billion; 22.5 million per km 215 km Phase 2A of Mombasa to Malaba (Kenya) 2.4 billion; 20.3 million per km 120 km
Source: Yeo ( 2017 ), Barrock ( 2016 ), Kable ( 2017 )
Note: USD 1: MYR 3.02
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91
km, less than half the equivalent cost of the ECRL. An interesting note is
that this project’s main contractor is another Chinese SOE, China Railway
Engineering Corporation (CREC). Moreover, an initial study conducted
in 2009 by HSS Integrated Sdn Bhd priced a railway project that broadly
utilizes the same route as the ECRL (but with a shorter railway of 545 km)
at USD 9.6 billion (MYR 29.0 billion). 2 This translates to an average cost
of about USD 17.6 million (MYR 53.2 million) per km, slightly more
than half the price of the ECRL’s price of USD 30.4 (MYR 91.7 million)
per km. It is rather puzzling why a 10% increase in length to 600 km can
result in such a drastic hike in construction cost. An executive from a con -
struction firm concurs and was quoted as saying: ‘It could be the most
expensive rail infrastructure project in the world in its class … It’s a good
project but not at this ridiculous price’ (Barrock 2016 ). The executive
estimates the construction cost of the railway at only USD 11.9 billion
(MYR 35.9 billion). He further claims that his construction industr y col -
league, who is from a European outfit, believes that the figure should be
about USD 10.6 billion (MYR 32.0 billion) for the entire stretch. Both
estimates provision the need to tunnel through the Titiwangsa mountain
range, a major cost component of the ECRL. If their analysis is proven
correct, then they represent a substantial overpricing of USD 6.3 billion
(MYR 19.1 billion) to USD 7.6 billion (MYR 23.0 billion).
Comparing the ECRL to other recent international projects, one
obser ves a similar tendency of potential overpricing of the former. In
Bangladesh, China Railway Construction Corporation (CRCC), a Chinese
SOE, signed a USD 4.9 billion (MYR 14.7 billion) contract in August
2016 to build the 215 km Padma railway linking Dhaka to Jessore, which
includes the construction of 66 major bridges, 244 minor bridges, 14 new
stations and the procurement of 100 passenger coaches. This project
works out to USD 22.5 million (MYR 68.1 million) per km, a 26% dis -
count vis-à-vis the ECRL. In Kenya, the government in October 2016
launched the construction of the 120  km Phase 2A (of the 489  km
standard- gauge railway line) that will link Mombasa to the Ugandan bor -
der at a cost of USD 2.4 billion (MYR 7.3 billion). On a per km basis, this
Kenyan project will cost about USD 20.3 million (MYR 61.4 million).
While there is no indication of the number of bridges that will be built or
if there will be any tunnelling works involved, this project’s cost of USD
20.3 million (MYR 61.4 million per km) is still cheaper than the ECRL by
a noticeable 33%. More interestingly, this project has been awarded to
CCCC, the same main contractor involved in the ECRL.
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The viability of the ECRL takes on a more negative tone if one also
considers the operating cost. While transporting a container by rail can be
20 times less expensive than by air, it is still more costly than shipping by
sea. In the case of the ECRL, moving bulk cargo via the combined sea and
land route of Port Klang, the ECRL, and the Kuantan Port is about USD
6 per tonne more expensive than the existing sea route via the Strait of
Malacca (Woo 2017 ). In addition, the purported shorter transit time of
the ECRL of 135 hours (compared to 165 hours via Singapore and the
Strait of Malacca; an 18% reduction of the travelling time) is only advanta -
geous for the movement of high-value and/or time-sensitive goods (see
Lopez 2016 ). Shippers of general merchandise goods are not usually
interested in paying more (in the form of multiple port and rail handling
fees instead of a singular shipping fee) for the combined sea and land route
opened up by the ECRL. There is also the issue of practicality as mer -
chants generally want to minimize the parties handling their goods. After
hypothetically unloading sea freight at Port Klang and transferring them
onto train carriages, one still has to haul the freight over to Kuantan Port
before eventually loading them to another merchant ship. Even account -
ing for the advantages opened up by the shorter travel time, this represents
an increase in handling parties (public seminar, Singapore, 20 March
2017). While this chapter recognizes that shipping technology might yet
evolve in the future to facilitate the utility of the ECRL, it must be stated
that contemporar y business practice does not promote this kind of freight
movement. More prosaically, moving freight by block trains is not a per -
fect substitute for container vessels because of the limited capacity that
block trains offer. According to Woo ( 2017 ), the latest crop of London-
bound trains departing from China can only carr y about 200 20-foot
equivalent units (TEUs) of goods, while a large container vessel can carr y
as many as 20,000 TEUs.
Thirdly, the ECRL is hampered by its lack of clarity and transparency.
According to Yeo Bee Yin, an opposition lawmaker, the project has been
awarded to CCCC without an open tender. Without an open tender, there
is a high possibility that the project will be overpriced and/or even overde -
signed as there is a lack of competition (see Yeo 2017 ). More generally,
the opposition bloc has long argued for the need to open up the tender
process for public procurement to make the bidding process more com -
petitive and to ensure better value-for-money. It also helps to reduce rent-
seeking, a longstanding issue plaguing public projects in Malaysia (see Pua
2011 ). In addition, the federal government has not made available the
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93
ECRL’s feasibility study to the public. When queried on the subject in
November 2016, Transport Minister Liow Tiong Lai promised that the
feasibility study on the ECRL will be released once it is finalized. However,
no specific date was given by Liow (Malay Mail Online 2016b ). As of June
2017 (a month before the construction of the ECRL is scheduled to kick
off in July 2017), the feasibility study has still not been realized by the
transport minister. Without publicly releasing a detailed engineering and
economic feasibility study, both the practicality and cost of the ECRL will
always be in doubt. The Malaysian public stands to lose even more if the
ECRL does not generate enough passenger and freight volume, leading to
underutilization and an exorbitant undertaking, a point raised in the ear -
lier paragraphs.
There also appears to be a lack of information on the last stretch of
railway (at least 60 km) linking Gombak to Port Klang. Unlike the rest of
the railway, this ‘missing link’ has been omitted from public display, lead -
ing to some confusion. To complicate matters further, this last stretch of
railway is situated in Selangor, a key opposition state. Moreover, the pas -
sage between Gombak to Port Klang cuts through dense urban areas,
which makes acquisition of land and its redevelopment even more
expensive than a comparable passage in the relatively sparse east coast. Yeo
(2017 ) questions whether this omission is a ploy from the federal govern -
ment to exclude the opposition Selangor state government from the
ECRL’s decision-making process. As of April 2017, the federal govern -
ment only had one meeting with the Selangor state government regarding
the ECRL (Yeo 2017 ). In view of the ECRL’s importance to the national
economy and the decision to fast-track it from late 2017 to July 2017,
Yeo’s scepticism is understandable.
conclus Ion
thiu chaptet hau innuuttated china’u incteauing inuence in manayuia. It hau
anuo uhown how the Ecrl iu a manifeutation of the BrI.  au one of
manayuia’u mout ambitiouu govetnment-to-govetnment inftauttuctute ptoj -
ectu in tecent yeatu, it hau the potentian of imptoving both the wenfate of
manayuia au wenn au extending the geoponitican goanu of china. In patticunat,
the new touteu opened up by the Ecrl not onny anneviate china’u ovet-
teniance on the sttait of manacca, but anuo foutet cnouet ttade connectivity
with othet economieu. In addition, mauuive and nong-tetm foteign ptojectu
uuch au the Ecrl can henp eat up china’u ovetcapacity and teduce unem -
rEsolVIng thE malacca dIlEmma: malaysIa’s rolE In thE BElt

94
ployment within the countr y, two of the more pressing concerns occupying
the thoughts of Chinese policymakers. Malaysia, as a recipient state on the
other side of the BRI, stands to benefit too if it manages to secure enough
Chinese support in bridging its developmental gaps, especially those related
to infrastructure provision. Nevertheless, the ECRL raises several points of
concern. To this end, its lack of relevance to Malaysia’s broader industrial -
ization goals, exorbitant cost, and informational gap have cast doubt on the
ECRL. All of these are business risks that cannot be ignored if the project
is to come into fruition. While the Malaysians, as the eventual ‘owners’ of
the ECRL, have to be mindful of such issues, CCCC and the Chinese gov -
ernment need to understand that projects that do not add value to the
recipient state (in this case, Malaysia) are bound to reinforce the perception
that Chinese-led initiatives are self- ser ving in nature. Coupled with other
broader geopolitical issues such as the ongoing dispute between China and
several Southeast Asian countries on the demarcation of the South China
Sea, lopsided projects such as the ECRL could jeopardize China’s reputa -
tion, undermining the intended goals of the BRI.
More broadly, the ECRL’s implementation thus far offers some useful
lessons to both China and other smaller countries involved in the
BRI.  Firstly, Chinese-funded projects have to match the needs of the
recipient countries as much as possible. It is self-defeating if one were to
carr y out exorbitant public sector projects that are only marginally benefi -
cial to the local populace. Therefore, it is advisable to seek the advice of
stakeholders representing the interest of the local community rather than
relying solely on government-to-government dealings. By roping in more
stakeholders, the projects should more closely reflect on-the-ground real -
ity, generating goodwill for the Chinese. The lack of goodwill at the level
of the citizenr y has complicated similar Chinese projects, judging from
recent events in Vietnam, a regional economy that also relies heavily on
Chinese investment and trade. In 2014, a series of anti-China protests
occurred in Vietnam, but they soon evolved into violent riots across major
industrial hubs in the countr y. While the event was triggered by China’s
deployment of an oil rig in a disputed region of the South China Sea, the
rapid escalation from largely peaceful protests in isolated locations to the
rest of Vietnam suggests that there is an already significant level of unhap -
piness towards the Chinese amongst the domestic populace.
Secondly, the construction cost and feasibility of projects such as the
ECRL must be revealed to the public. This is to prevent project overde -
signing as well as overcharging, a perception that unfortunately has
plagued the ECRL. While Chinese engineering firms (such as CCCC) are
G. LIM

95
renowned for their value-for-money and fast turnaround, these benefits
are unlikely to trickle down to the local populace if there are leakages sur -
rounding big-ticket purchases such as railway networks. Moreover, one
also has to take into consideration the operating cost of public projects. As
far as the ECRL is concerned, the operating cost is a worrisome issue for
it does not seem capable of surmounting the technical and commercial
limits of the existing period. While it might still bear fruit in the long run,
the ECRL risks becoming a ‘white elephant’ project if such limits are not
overcome soon enough.
Thirdly, and related to the previous point, the recipient states them -
selves have to practice good governance standards. In the case of the
ECRL, it appears that some of the issues raised in the previous section can
be prevented, or at least softened, had the Malaysian government taken
more robust measures to enforce positive spillover for its citizenr y. While
a detailed list of policy prescription goes beyond the remit of this chapter,
one of the simplest measures available to the BRI recipient states is to
make open as much as possible information on the projects. A more trans -
parent approach will not only minimize incidences of misunderstanding,
but also allow better feedback from the bottom up.
not Es
1. Exacetbating the inabinity to nute foteign inveutotu iu the gtowing ttend of
manayuian tmu inveuting abtoad. some of the teauonu incnude diminiuhing
tetutnu in the domeutic matmetpnace au wenn au potentianny bettet oppottuni -
tieu (petceived ot othet wiue) outuide of the countt y (uee lim 2016a , 2017a ;
sim and Pandian 2007 ; tham et an. 2015 ).
2. thiu utudy wau commiuuioned by the Eaut coaut Economic region
devenopment councin in decembet 2009 fot a ptopoued 545  mm toute
ftom kuana lumput to tumpat, pauuing thtough mentamab, kuantan, kuana
tetengganu, and kota Bhatu. Btoadny upeaming, thiu toute mittotu that of
the Ecrl (manay main onnine 2016b ).
rEfErEnc Es
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101 © The Author(s) 2018
A. Arduino, X. Gong (eds.), Securing the Belt and Road Initiative ,
https://doi.org/10.1007/978-981-10-7116-4_6
CHAPTER 6
The PRC’s Maritime Silk Road Initiative,
Southeast Asia, and the United States
Kerry Brown
This chapter considers the interaction among China, the Association of
Southeast Asian Nations (ASEAN), and the United States and how the
issue of regional trust affects Beijing’s core strategic interests. The New
Silk Road maritime version opened up fresh areas of economic and strate -
gic space around China. It spelled out clearly to the countr y’s maritime
neighbours the opportunities and benefits of engaging more with Chinese
investment, Chinese trade, and Chinese growth just as the land Silk Road
had done for the Central Asian partners. In this complex political and
diplomatic context, the regional response to the Belt and Road Initiative
(BRI) has been a mixture of applause and excitement alongside caution.
PRC: A H isto R{ As A L And P owe R And  its imPL iCA tions
fo R sout H eAst A siA
tŠ‡ Š‹•t‘” y ‘ˆ tŠ‡ P‡‘’Ž‡’• R‡’u„Ž‹… ‘ˆ CŠ‹ƒ (PRC) ”‡‰ƒ”†‹‰ ‹t•‡Žˆ ƒ• ƒ
•‡ƒ ’‘w‡” ƒ• ‘’’‘•‡† t‘ ƒ Žƒ† ‘‡ ‹• ”‡Žƒt‹v‡Žy •Š‘”t. A……‘”†‹‰ t‘ •…Š‘Ž -
ƒ”• Ž‹‡ R‘„‡”t s. R‘••, tŠ‡ †‡ˆƒuŽt ‘ˆ •tƒt‡• ’”‡…‡†‹‰ tŠ‡ PRC Šƒ• „‡‡ t‘
v‹‡w tŠ‡•‡Žv‡• ƒŽ‘•t wŠ‘ŽŽy ƒ• Žƒ† ’‘w‡”••‘‡tŠ‹‰ tŠƒt ’”‡vƒ‹Ž‡†
k. B”‘w ( *)
King’s College, London, UK

102
in the first two decades after the creation of the PRC in 1949. This is
understandable. It is predominantly from Chinese land borders, wherever
they have been in recent centuries, that problems have come. In Ross’s
words: ‘Two thousand years of continental expansion and threats from
land powers have created a Chinese bias towards the development of land
power, just as secure land borders and extensive oceanic frontiers have
fostered an American “insular perspective” on international politics’. 1 Sea
security only figured from the nineteenth centur y and the era of British
adventurism. Before this, the Ming and Qing needed to secure borders to
the west and north against hostile neighbouring powers.
Even in the Maoist era, from 1949, there seemed little role for a mod -
ernised navy. The People’s Liberation Army (PLA), and the PRC’s ballis -
tics and nuclear ambitions, all figured as part of the great project to
reconstruct the nation. Perhaps the dominant motif for the sea in the eyes
of Chinese leadership up to the 1980s was a place useful for logistics and
trade. It did not seem to figure as one that carried a profound security
dimension. That only started in the first decade of the post-1978 reform
era under Deng Xiaoping and his colleagues when the concept of mod -
ernising and building better naval capacity reared its head.
The construction of decent naval capacity also went hand in hand with
renewed interest in the issue of maritime borders and the sovereignty of
the South China Sea constellation of islands and island features. 2 The
PRC’s naval strategy also seemed to create for the countr y a whole new set
of ambitions and interests that it had never had before. Since the 1980s,
these have intensified, creating the capacity to take a view on interests
thousands of kilometres from its land shores. The PRC now has at least
one aircraft carrier (against 10 for the United States). But its list of ser vice -
able smaller vessels seems to increase each year. As of 2015, there were
496 ships listed in the assets of PLAN. These included nuclear and con -
ventions submarines, amphibious war ships, frigates, destroyers, and cor -
vettes. 3 Despite the huge expansion, while, in gross numbers this now
amounts to more than the US figure, the quality, capacity, and technologi -
cal capacity of Chinese ships is still far behind that of the American ones.
What is not in dispute is that the PRC is now far closer to being able to
credibly defend its interests in the seas around its coasts than ever before.
All of this has created a new set of geopolitical issues for China’s closest
maritime neighbours, who until the 1980s, and particularly in the last
decade, have had to shift from handling a China that was more inward
looking and confined to its own territorial space both economically and
diplomatically from 1949 to the 1980s, to a China now that in almost
K. BROWN

103
ever y dimension, from naval power to direct investment, is an active and
increasingly important player in the region, and one that frequently offers
a counter-narrative to regional development to that provided by the
United States and it alliance system and Asian presence.
stAking o ut  A B enign nARRA tive : tHe m AR itime
siLk R oAd
it ‹• ‹ tŠ‡ ‹†•t ‘ˆ tŠ‹• …‘’Ž‡x, ‡w ”‡‰‹‘ƒŽ •‹tuƒt‹‘ tŠƒt tŠ‡ …‘…‡’t
‘ˆ ƒ mƒ”‹t‹‡ s‹Ž R‘ƒ† i‹t‹ƒt‹v‡ ‡‡†• t‘ „‡ ’”‹ƒ”‹Žy u†‡”•t‘‘†, ˆ‘”
tŠ‡ B‡Žt R‘ƒ† i‹t‹ƒt‹v‡ (BRi) (wŠ‹…Š tŠ‡ mƒ”‹t‹‡ s‹Ž R‘ƒ† ‹• ƒ ’ƒ”t ‘ˆ)
‹• ’”‡†‘‹ƒtŽy ƒ regional initiative, despite its wide, global dimensions.
It is widely appreciated that the PRC is now articulating grand, unilateral
diplomatic ideas and that is a striking development. But under President
Xi Jinping and the leaders around him, there has been an attempt to ‘tell
the China stor y’ as he reportedly asked Politburo colleagues to do in the
early part of his tenure. Part of this is to move away from the almost silent
posture under the Hu Jintao leadership from 2002 to 2012 of keeping
tight-lipped about ever ything, and attempting to speak more clearly to the
outside world about the countr y’s intentions—most of which were,
according to domestic discourse, benign. And of course, the most imme -
diate impact of a China stor y with greater ambition and reach will be felt
directly in China’s own region. China’s Asian stor y, therefore, what was
called at the Boao Regional Forum in 2015 a stor y of ‘common Asian
destiny’, will be of immediate and intimate interest to China’s Southeast
Asian neighbours. The question is whether the region shares these ideas of
a common destiny, and if not, where the points of disagreement and dis -
sent are.
Xi Jinping’s original idea issued in 2013 when he was touring Central
Asia of a new Silk Road of course fits the narrative outlined previously of
China as a land power, interested in reenergising and reinvigorating its
western border theatre of interest in order to gain benefits for its west
region domestically. Investment and trade figures from the PRC into this
region had rocketed in the previous few years giving a natural backbone to
this idea. 4 Soon after the New Silk Road Initiative was announced, how -
ever, a maritime version appeared. This too opened up fresh areas of eco -
nomic and strategic space around the PRC, completing the circle. It
spelled out clearly to the countr y’s maritime neighbours the opportunities
and benefits of engaging more with Chinese investment, Chinese trade,
THE PRC’S MARITIME SILK ROAD INITIATIVE, SOUTHEAST ASIA…

104
and Chinese growth just as the land Silk Road had done for the Central
Asian partners.
Both sides of the initiative were, and remain, remorselessly economic at
least in their public face, as will be shown later. But underneath that objec -
tive there is a sense in which they also, in ver y different ways, aim to create
a zone of greater security commonality and interest. For the Central Asia
states, the predominant security issues are maintaining good resource and
energy routes, guarding against Islamic extremism and its impact in
China’s western Xinjiang autonomous region, and to some extent coun -
tering the involvement and influence of Russia. For the Southeast Asian
region, resource and supply routes are similarly important, but there is the
added complexity of dealing with America’s interests in this region. The
calculation for both land and sea routes is a simple one: a countr y with
deep trade and business links into the PRC is less likely to see any benefit
in antagonising and opposing it. Trade might not bring love—but it does
bring a certain level of pragmatic, albeit grudging loyalty. Even setting the
bar low, this was something the PRC had never had before.
The New Silk Road became, in 2014, the One Belt, One Road initia -
tive. This at least spelled out more clearly the maritime dimension—belt
for sea channels, road for the land ones. By 2016, this settled into the
current terminology—the Belt and Road Initiative, or BRI.
institution AL And  P oLiC{ fRA mewo Rk
o‡ tŠ‹‰ t‘ ‰‡t …Ž‡ƒ” ‹• tŠ‡ †‘‡•t‹… u†‡”•tƒ†‹‰ ‘ˆ tŠ‡ BRi’• ’ƒ”ƒ -
‡t‡”• ƒ• ‹t ‹• ’”‡•‡t‡† w‹tŠ‹ tŠ‡ PRC. tŠ‡”‡ ‹• •u”’”‹•‹‰Žy Ž‹ttŽ‡ ‘ˆ…‹ƒŽ
‰u‹†ƒ…‡ ‘ wŠƒt tŠ‡ BRi ƒ…tuƒŽŽy ‹•, ‡‹tŠ‡” ‹ ‹t• •‡ƒ ‘” Žƒ† ƒ‹ˆ‡•tƒ -
t‹‘. P‡”Šƒ’• tŠ‡ ‘•t u•‡ˆuŽ ‘utŽ‹‡ wƒ• ’”‘†u…‡† ‹ ‡ƒ”Žy 2015, wŠ‡
tŠ‡ nƒt‹‘ƒŽ d‡v‡Ž‘’‡t ƒ† R‡ˆ‘” C‘‹••‹‘ (ndRC) w‹tŠ tŠ‡
m‹‹•t” y ‘ˆ C‘‡”…‡, w‹tŠ tŠ‡ ƒutŠ‘”‹ty ‘ˆ tŠ‡ stƒt‡ C‘u…‹Ž, ‹••u‡ ƒ
‘ˆ…‹ƒŽ wŠ‹t‡ Pƒ’‡”, w‹tŠ tŠ‡ ‰”ƒ† t‹tŽ‡: ‘v‹•‹‘ ƒ† A…t‹‘• ‘ J‘‹tŽy
Bu‹Ž†‹‰ s‹Ž R‘ƒ† e…‘‘‹… B‡Žt ƒ† 21•t-C‡tu” y mƒ”‹t‹‡ s‹Ž R‘ƒ†’. 5
tŠ‡ ƒ‹ ‘ˆ BRi, ‹t •tƒt‡• ‹ tŠ‡ ’ƒ’‡”’• ’”‡ƒ„Ž‡ ‹•:
t‘ ’”‘‘t‡ tŠ‡ …‘‡…t‹v‹ty ‘ˆ A•‹ƒ, eu”‘’‡ƒ ƒ† Aˆ”‹…ƒ …‘t‹‡t•
ƒ† tŠ‡‹” ƒ†Œƒ…‡t •‡ƒ•, ‡•tƒ„Ž‹•Š ƒ† •t”‡‰tŠ‡ ’ƒ”t‡”•Š‹’• ƒ‘‰ tŠ‡
…‘ut”‹‡• ƒŽ‘‰ tŠ‡ B‡Žt ƒ† R‘ƒ†, •‡t u’ ƒŽŽ-†‹‡•‹‘ƒŽ, uŽt‹-t‹‡”‡† ƒ†
…‘’‘•‹t‡ …‘‡…t‹v‹ty ‡tw‘”•, ƒ† ”‡ƒŽ‹z‡ †‹v‡”•‹‡†, ‹†‡’‡†‡t, „ƒŽ -
ƒ…‡† ƒ† •u•tƒ‹ƒ„Ž‡ †‡v‡Ž‘’‡t ‹ tŠ‡•‡ …‘ut”‹‡•.
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This shows ambitious scope. For those looking for greater granularity
however, the paper offered little specifics. Repeating the mantra that the
aim was for ‘win-win co-operation’ and for civilisational contact and con -
nectivity (a word that is repeated several times in the paper), it lays out the
five broad objectives that the initiative needs to attend to:
1. Policy co-ordination: to ‘fully coordinate their economic develop -
ment strategies and policies, work out plans and measures for
regional cooperation, negotiate to solve cooperation-related issues,
and jointly provide policy support for the implementation of practi -
cal cooperation and large-scale projects’.
2. Facilities connectivity: to ‘improve the connectivity of their infra -
structure construction plans and technical standard systems, jointly
push for ward the construction of international trunk passageways,
and form an infrastructure network connecting all sub-regions in
Asia, and between Asia, Europe and Africa’. In terms of maritime
links, the aim was to ‘build smooth land-water transportation chan -
nels, and advance port cooperation; increase sea routes and the
number of voyages, and enhance information technology coopera -
tion in maritime logistics’. Connectivity also embraces energy infra -
structure such as oil and gas pipelines, and the construction of
cross-border optical cables and other communications trunk line
networks, creating what is called ‘an Information Silk Road’.
3. Unimpeded trade: for this area, the aim is to boost investment and
trade cooperation by removing investment and trade barriers,
enhancing customs cooperation, and working together on law
enforcement. In particular, what is labeled as ‘trade structure’ in the
paper is singled out for improvement, with e-commerce expanded,
promoting trade through investment, and balancing out trade lev -
els. For the marine road, cooperation in marine-product farming,
deep-sea fishing, aquatic product processing, seawater desalination,
marine biopharmacy, ocean engineering technology, environmental
protection industries, marine tourism, and other fields is referenced.
Attention will be paid to research and development and to building
up ser vice industries.
4. Financial integration: the 2015 paper states that ‘financial integra -
tion is an important underpinning for implementing the Belt and
Road Initiative’. This maps the PRC’s policy in the previous ten
years to incrementally, and in a controlled way internationalised,
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RMB.  So bilateral currency swap and settlement arrangements are
proposed, and the development of bond markets in Asia. ‘Chinese
financial institutions and companies are encouraged to issue bonds
in both RMB and foreign currencies outside China, and use the
funds thus collected in countries along the Belt and Road’, the paper
states.
5. People-to-people links: this involves the exchange of students, cul -
tural and soft power dialogue, and tourism.
6. This at least gives some idea of the Chinese understanding of what
the BRI is driving to achieve. The question is whether these are
ideas, and ambitions, shared by the Southeast Asian regional part -
ners. The rest of the chapter will offer examples, and then map them
against the five key objectives outlined previously to see how much
commonality there actually is.
tHe R Ation AL e B eHind  tHe m AR itime R oAd
in  tHe sout HeAst A siAn R egion
A• ƒŽ”‡ƒ†y •tƒt‡†, tŠ‡ s‘utŠ‡ƒ•t A•‹ƒ R‡‰‹‘, ƒ† ‹ ’ƒ”t‹…uŽƒ” tŠ‡ …‘u -
t”‹‡• w‹tŠ‹ tŠ‡ A••‘…‹ƒt‹‘ ‘ˆ s‘utŠ‡ƒ•t A•‹ƒ nƒt‹‘• (AseAn) tŠ”‘u‰Š
‰‡‘‰”ƒ’Š‹…ƒŽ ƒ† ‡…‘‘‹… ’”‘x‹‹ty t‘ CŠ‹ƒ ƒ”‡ tŠ‡ •‡t ‘ˆ …‘ut”‹‡•
Ž‹‡Žy t‘ „‡ ‘•t ƒˆˆ‡…t‡† „y tŠ‡ ƒ”‹t‹‡ ƒ•’‡…t• ‘ˆ tŠ‡ BRi, ƒ† tŠ‡ ‘‡•
tŠƒt ‰u”‡ ‘•t ‹ ‹t• ‹‹t‹ƒŽ •tƒ‰‡•. f‘” tŠ‡, tŠ‡ ‡‡† t‘ …‘…‡’tuƒŽ‹•‡ ‹t•
‘v‡”ƒŽŽ ’u”’‘•‡ ‹• ’‡”Šƒ’• ‘”‡ ’”‡••‹‰ tŠƒ ƒywŠ‡”‡ ‡Ž•‡. w‹tŠ tŠ‡
†‡‹•‡ ‘ˆ P”‡•‹†‡t o„ƒƒ’• t”ƒ•-Pƒ…‹… Pƒ”t‡”•Š‹’ (tPP) ƒˆt‡” tŠ‡
‡Ž‡…t‹‘ ‘ˆ Š‹• •u……‡••‘” d‘ƒŽ† t”u’ ‹ n‘v‡„‡” 2016, tŠ‡”‡ ‹• tŠ‡
’‘••‹„‹Ž‹ty tŠƒt tŠ‡ BRi w‹ŽŽ ƒ’ ‘ut ƒ ‡w ‹† ‘ˆ ƒŽt‡”ƒt‹v‡ t”ƒ†‡ z‘‡,
‰‡ƒ”‡† ‘”‡ t‘wƒ”†• CŠ‹‡•‡ ‹t‡”‡•t•.
BRi ‹ tŠ‡ s‘utŠ‡ƒ•t A•‹ƒ ”‡‰‹‘ †‘‡• Šƒv‡ ‘tŠ‡” †‹‡•‹‘• tŠ‘u‰Š,
•‘‡ ‘ˆ wŠ‹…Š …ƒ”” y ‘v‡”t ’‘Ž‹t‹…ƒŽ ‡ƒ‹‰•. o‡ ‹t‡”’”‡tƒt‹‘ ‘ˆ tŠ‡
‹†‡ƒ ‹• •‹’Žy tŠƒt wŠ‹Ž‡ ‹t …ƒ” v‡• ‘ut ƒ Žƒ”‰‡ ‡…‘‘‹… z‘‡ Ž‹‡† t‘ tŠ‡
PRC’• ‹t‡”‡•t• ƒ† …‡t”‡† ‘ ‹t ƒ…”‘•• A•‹ƒ, ‹t ‹• ƒŽ•‘ ƒ‹‡† ƒt …”‡ƒt‹‰
‘”‡ •t”ƒt‡‰‹… ƒ† †‹’Ž‘ƒt‹… •’ƒ…‡ ˆ‘” ‹t•‡Žˆ. A ‘”‡ †‘‹ƒt ”‘Ž‡ ‹
A•‹ƒ, …Ž‡ƒ”‹‰ tŠ‡ u‹t‡† stƒt‡• ‹ ’ƒ”t‹…uŽƒ” ˆ”‘ ‹t• z‘‡ ‘ˆ ‹u‡…‡ ƒ†
ƒŽŽ‘w‹‰ ‹t ‘”‡ ˆ”‡‡†‘ t‘ ƒ…t ‹• ƒ ƒtu”ƒŽ ‘„Œ‡…t‹v‡, ’ƒ”t‹…uŽƒ”Žy ƒ• CŠ‹ƒ
ƒ‹• t‘ ‹…”‡‡tƒŽŽy ”‡•‘Žv‡ tŠ‡ ‘ut•tƒ†‹‰ ƒ”‹t‹‡ „‘”†‡” ‹••u‡•, ƒ†
t‘ …‘t”‘Ž ƒ• u…Š ƒ• ‹t …ƒ, ‹ ˆƒ…t ‘” ƒt Ž‡ƒ•t „y •t‡ƒŽtŠ, ‘ˆ tŠ‡ ƒ”‡ƒ
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covered by the notorious Nine-Dash Line, the vast stretch of water reach -
ing down as far as the coast of Malaysia that the PRC lays claim to.
The value of China’s economy and trade strength as a means of incen -
tivising its neighbours and making them question their more traditional
alliances with the United States has been a feature of the last decade, and
has only intensified under President Jinping. The most recent example of
this has been the case of the Philippines, whose recently elected President
Dutarte, on a visit to Beijing in October 2016 stated that the United
States was no longer a key ally and that relations with China were more
important—a comment that he was subsequently to qualify. Attempting
to turn the region to a position more favourable to being acceptable to
China’s aims to be dominant and have greater strategic space through use
of its economic assets is unsurprising. The question is whether the BRI
will achieve this with its current core elements.
tHe issue of  R egion AL tRust tow AR ds  tHe PRC’ s
CoRe stRA tegi C inte Rests
wŠƒt tŠ‡ ƒ”‹t‹‡ †‘‡• ‡‡† t‘ †‘ ‹• ƒ††”‡•• tŠ‡ v‡” y …Ž‡ƒ” u†‡”…u””‡t
‘ˆ †‹•t”u•t ƒ† •u•’‹…‹‘ ƒ„‘ut PRC’• ‹t‡t‹‘• ƒ‘‰ •‘‡ ‘ˆ CŠ‹ƒ’•
‡‹‰Š„‘u”•. CŽ‘•‡ t‘ CŠ‹ƒ, tŠ‡y ƒ”‡ tŠ‡ ‘‡• wŠ‘ Šƒv‡ ‘•t ˆƒ‹Ž‹ƒ”‹ty
w‹tŠ ‹t• ƒ‹•, ƒ† ˆ‡‡Ž ‹t• ‹t‡t‹‘• ‘•t ‹t‡•‡Žy. R‡…‡t ‡v‹†‡…‡ ‘ˆ „ƒ†
ˆ‡‡Ž‹‰• ƒ† ”‡Žƒt‹‘• Šƒ• „‡‡ ’Ž‡t‹ˆuŽ. f‘” v‹‡tƒ, tŠ‡”‡ ‹• tŠ‡ ‹••u‡ ‘ˆ
tŠ‡ tw‘ …‘ut”‹‡• Šƒv‹‰ ƒ”‡† …‘‹…t ƒ• ”‡…‡tŽy ƒ• 1979. ov‡” 2014
ƒ† ‹t‘ 2015 ƒ ƒ••‹v‡ CŠ‹‡•‡ ‘‹Ž ’Žƒtˆ‘”, tŠ‡ Haiyang Shiyou 981,
which was accused of invasively going into disputed waters by the
Vietnamese, caused even further bad feelings. The PRC in turn accused
Vietnam of building permanent features to create island-like entities in the
South China Sea. Japanese relations with the PRC are even more complex,
with the continuation of profound bad feelings from the Second World
War referred to once more during the convening of a massive militar y
parade in Beijing to mark the seventieth anniversar y of the ending of the
war in September 2015. Unsurprisingly, Japanese Prime Minister Abe did
not attend. Nor, for that matter, has either he or President Jinping
exchanged high-level visits bilaterally, despite their ver y active global travel
schedules elsewhere in the world. The Philippines proved ner vous enough
of Chinese intentions in the maritime area to make the first moves in
going to the International Court of Arbitration, referred to previoulsy,
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even though since then President Dutarte has been far more conciliator y.
The mysterious disappearance of the Air Malaysia Flight MH370 in 2014
on the way from Kuala Lumpur to Beijing with many Chinese nationals on
board exacerbated an already strained relationship, with protests outside
the Malaysian embassy in Beijing over the handling of the incident and the
paucity of information being given about what was happening.
Alongside the issue of the South China sea claims with all their com -
plexity sits the unresolved issue of Taiwan island, something that could
have immense impact on the Southeast Asian region should it be mishan -
dled. Taiwan has enjoyed de facto independence from the PRC, and has
existed as the Republic of China on Taiwan from 1949. Despite having its
own currency, army, flag, and, most importantly, democratic political sys -
tem and identity, Taiwan is still regarded by Beijing as a province of the
mainland, and its 24 million citizens have to travel around a world where
they enjoy visa-free access to almost 150 countries, but where their ‘coun -
tr y’ only has diplomatic recognition from 22 states. Taiwan is clearly the
major strategic interest for the PRC.  Under Mao Zedong and Deng
Xiaoping, the attitude towards final reunification was pushed far into the
distance. As historian John Gar ver writes in a recent histor y of the PRC’s
diplomacy after 1949, the most opportune moment to have taken Taiwan
into its sovereign territor y was just after its victor y in the civil war in 1949.
The Korean War, however, provoked by North Korean leader Kim
Il-sung’s decision to invade the south caused the PRC to be distracted,
facing the United States directly in a conflict on its northeast border. As
Gar ver states, ‘Loss of a golden opportunity to secure Taiwan was the first
cost to the PRC of Mao’s green light to Kim Il-sung’s war’. 6
Under President Jinping, the focus on Taiwan has grown more intense.
Speaking to a visitor from Taiwan in late 2013, he reportedly stated that
‘increasing mutual political trust across the Taiwan Straits and jointly
building up political foundations are crucial for ensuring the peaceful
development of relations’. He went on to state somewhat ominously:
‘Looking further ahead, the issue of political disagreements that exist
between the two sides must reach a final resolution, step by step, and these
issues cannot be passed on from generation to generation’. 7 Momentum
seemed to be maintained during the twilight era of Taiwanese President
Ma Ying-jeou’s period in office, culminating in the remarkable meeting
between the two leaders in Singapore in November 2015. Despite this
revolutionar y diplomacy, however, the election of Tsai Ing-wen in Januar y
2016 from the opposition Democratic Progressive Party in Taiwan, with
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their harder line on cross-strait relations, meant that the PRC’s attitude
towards how it could best promote its reunification strategy once more
became unclear.
In many ways, the ver y clear strategic intent that Beijing has made
towards Taiwan over the last six decades, never relinquishing the use of
force to deal with the island, provides one of the great sources of instabil -
ity. It is a fundamental pillar of the regime’s legitimacy in Beijing to defend
Chinese territorial integrity. Unilateral declarations of independence by
the island would be ‘cassus belli’, with an anti-secession bill passed in
Beijing in 2005 to ensure this commitment to immediate militar y response
is enshrined in law. Even without a specific law, no Chinese leader is likely
to be able to tolerate this particularly with the ratcheting up of nationalism
in recent years, and the ways in which with falling GDP growth the regime
needs to seek legitimacy in other areas beyond the creation of material
prosperity. For Jinping’s China, the countr y does not want to just be
rich—it wants to feel rich, and see the impact of this wealth on its status
elsewhere in the world. Taiwan walking away from it would be a disaster
for national face and prestige. This is a quandar y the leadership has created
from themselves because, in many ways, Taiwan is not that important for
the PRC economically these days—and perhaps not that significant strate -
gically, as long as Taipei is less committed to its relations with the United
States. However, commitment to unification has now been embedded in
the whole narrative of the Party State and has become part of its identity.
There is a larger context within which to understand Taiwan’s meaning
for China, and one that directly links to its relations with other Southeast
Asian countries around it. When the PRC looks across the Pacific, it sees a
line of treaty alliances that link with America. This more than anything else
constricts its space. From Japan to South Korea, Philippines, Malaysia,
down to Australia and New Zealand—all these countries have longstand -
ing security links with the United States that commit each to self- protection
and mutual defence. An attack on one, under the treaties, is an attack on
the United States. The most problematic of these security deals is the
informal one with Taiwan, the 1979 Taiwan Relations Act. Established in
1979 when the United States shifted its formal diplomatic relations from
Taipei to Beijing, it acts as a guarantee of Washington’s continuing sup -
port for the Taiwanese. While subject to interpretation, the act does com -
mit the United States to consider supporting Taiwan in its quest for
security, largely through the sale of high-technology weapons systems.
Beijing always has to consider this when thinking through options on
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Taiwan. In effect, any direct move while this act is in place would be a
move against the United States. That places Taiwan policy within the net -
work of treaty alliances with the United States at their heart, which China
faces in its own region.
In some respects, the whole stor y of the PRC’s moves in the South and
East China Sea over the last decade or so can be interpreted as expanding
the area around its most significant outstanding claim and strategic inter -
est—Taiwan island. The Republic of China through its role as a signator y
of the Treaty of San Francisco signed between Japan and 48 other coun -
tries in 1951 to signal the resolution of outstanding issues from its defeat
in the Second World War is also a claimant on some of the islands and
territor y in the local seas. In that sense, its interests sometimes elide with
that of the PRC. Beijing has been able therefore to assert that it is defend -
ing all Chinese interests, not just its own, in the disputed area. The con -
troversial Nine-Dash Line, for instance, is inherited from the Republic of
China in the pre-1949 era. The PRC is insistent that it is asserting legiti -
mate ‘Chinese’ claims over the whole territor y being argued over. But this
also expands the scope of what is on one level simply a dispute over the
sovereignty of one island (Taiwan) and its limited number of satellites, to
the far larger one of the PRC’s strategic freedom in an immense territor y
stretching down to the coast of Indonesia and Malaysia. Unsurprisingly,
therefore, the larger claim gets more attention than the smaller one—even
though the smaller one is the most crucial and important for the PRC’s
core interests.
Region AL R esPonse to  BR i
i tŠ‹• …‘’Ž‡x ’‘Ž‹t‹…ƒŽ ƒ† †‹’Ž‘ƒt‹… …‘t‡xt, tŠ‡ ”‡‰‹‘ƒŽ ”‡•’‘•‡ t‘
BRi Šƒ• „‡‡ ƒ ‹xtu”‡ ‘ˆ ƒ’’Žƒu•‡ ƒ† ‡x…‹t‡‡t ƒŽ‘‰•‹†‡ …ƒut‹‘. A•
‘ˆ n‘v‡„‡” 2016, tŠ‡ BRi Šƒ• ”‡•uŽt‡† ‹ v‡” y ˆ‡w tƒ‰‹„Ž‡ ’”‘Œ‡…t• tŠƒt
…ƒ”” y ‹t• „ƒ†‰‡. s‘ tŠ‡”‡ ‹• v‡” y Ž‹ttŽ‡ ”‡…‘”† t‘ ‰‘ ˆ”‘. But tŠ‡”‡ Šƒ• „‡‡
”‹•‹‰ CŠ‹‡•‡ ‹t‡”‡•t ‹ ˆ‘”‡‹‰ †‹”‡…t ‹v‡•t‡t ƒ…”‘•• tŠ‡ A•‹ƒ ”‡‰‹‘,
wŠ‹…Š Šƒ• ‘Žy ‹t‡•‹‡† ‘v‡” tŠ‡ Žƒ•t †‡…ƒ†‡. tŠ‹• ‰‹v‡• ƒ ‡u ‘ˆ •‘‡
‘ˆ tŠ‡ ‘’’‘”tu‹t‹‡•, ƒ† tŠ‡ ‹••u‡•, tŠƒt tŠ‡ BRi w‹ŽŽ ‡‡† t‘ ‡„”ƒ…‡ t‘
„‡ •u……‡••ˆuŽ ƒ† Šƒv‡ w‹†‡” ‡ƒ‹‰.
o‡ ‘ˆ tŠ‡ ‘•t ‹’‘”tƒt ’‘t‡t‹ƒŽ ’ƒ”t‡”• ˆ‘” tŠ‡ BRi ‹• s‹‰ƒ’‘”‡.
tŠ‡ •‡v‡ ‹ŽŽ‹‘-•t”‘‰ …‹ty-•tƒt‡ Šƒ• ‘‡ ‘ˆ tŠ‡ Ž‘‰‡•t ”u‹‰ ‹v‡•t -
‡t ”‡Žƒt‹‘• w‹tŠ CŠ‹ƒ, †ƒt‹‰ „ƒ… t‘ tŠ‡ v‡” y •tƒ”t ‘ˆ tŠ‡ ”‡ˆ‘”
’”‘…‡•• ‹ tŠ‡ ‡ƒ”Žy 1980•. it ‹v‡•t‡†, …‘t‡t‹‘u•Žy (Žƒ”‰‡Žy „‡…ƒu•‡ tŠ‡
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local authorities set up a competing zone right next to it almost immedi -
ately after it was established), in the Suzhou Industrial Park, one of the
earliest such projects, in the China, and maintains an interest there to this
day. It also works with the Tianjin Ecological Park and the Chongqing
Science Park. These give it already extant intellectual and investment
exchange interlinks with China. Singapore carries other attractions for
China as it seeks a stronger role through BRI. It figures as a major finance
centre, with a RMB centre agreed in the early 2010s, and as a huge port
and logistics centre. It also has a strong legal system and robust rule of law.
So the opportunities of working with Singaporean companies and partners
gives China advantages in looking to work elsewhere in ASEAN
countries.
Singapore’s role as a facilitator of dialogue was underlined by its unique
ability to host former President of Taiwan Ma Ying-jeou and PRC
President Xi Jinping in November 2015 for the first ever summit between
the two leaders since 1949. In the BRI, therefore, Singapore continues to
see its role as a facilitator and partner for China with others in terms of
projects and investments. The main risks it faces, however, are the increased
competition that China will offer its own ser vices sector industries as it
continues to shift from a manufacturing and export based model to a high
value-added one. Singapore has to prepare perpetually for the day when
China shifts from being a partner to a direct competitor. Maintaining its
advantages will becoming increasingly hard in the face of the real prob -
lems of asymmetr y in size between the two.
For Indonesia, there are separate issues. Indonesia has already figured
as one of the potential recipients of a joint Asia Investment Infrastructure
Bank (AIIB) and World Bank grant. 8 Its critical need for infrastructure
means that it should be a natural partner for the BRI and the kind of co-
operation it outlines. Under President Joko Widodo, there have been con -
certed attempts to attract more PRC foreign direct investment. Even so,
Chinese investment, according to the Indonesia Investment Co-ordinating
Board, still ranks below that of the United Kingdom, Japan, and the
United States. Between 2008 and 2015, there were 2526 projects, with a
committed investment in 2015 of USD 2.4 billion. These created jobs for
an estimated 89,000 people—a figure far less than the 1.1 million associ -
ated with Singaporean investment.
The profile of investment from China into Indonesia too is striking—
with a fifth going into machiner y, a fifth into electricity and gas, and then
mining. The problems associated with this kind of investment are ones
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that the BRI, if it sees an uplift in co-operation, will need to address:
demands that, for Chinese investment, Chinese companies bring unskilled
labour into the countr y (a common feature of Chinese companies’
demands throughout the region), and the lack of experience that Chinese
investors have in the countr y. According to the Confederation of Indonesia
Trade Unions, Chinese direct investors often fail in their projects to com -
ply with wage, health, and retirement insurance regulations, and are poor
at corporate social responsibility. This is particularly the case in the mining
sector. The evidence from extant Chinese investments so far is mixed. For
one by Petrochina, the state-owned Chinese energy company, it has
invested in  local schools, and involved the local community where it is
active in job creation, and so on, but it has not been good at technology
sharing or environmental compliance—something shared by other rela -
tively large Chinese companies. This track record therefore needs to be
explicitly addressed in any future BRI opportunities.
The case of Vietnam is even more problematic. A countr y bordering
China with a long histor y of conflict and disagreement with China, it has
been one of the most aggressive contenders in the South China Sea issue.
Chinese FDI in Vietnam has increased in the last ten years, from 72 proj -
ects with a committed capital of USD 81.2 million in 2004 to 175 with
USD 175 million in 2015. More than 90 per cent of this is in manufactur -
ing and mining. But according to Vietnamese research, the Chinese invest -
ments have suffered from the same issues as those in Indonesia. The Tan
Nguyen Bauxite Mine, as an example, has been criticised for lack of com -
pliance with environmental regulations, insensitivity in dealing with local
communities, and failure to obser ve minimum wage requirements. A
hydropower project from China has been berated for poor occupational
safety regulations and work practices. On top of this, other Chinese invest -
ments have lacked technology transference, and have suffered from labour
issues. A China Railway project in Hanoi from 2014 has been associated
with a number of accidents leading to several fatalities.
In Thailand, once more, while Chinese investment has increased it
again only figures as 2.1 per cent of the overall figure for FDI. Once more,
it is in mining and resources, and construction. And once more, it has
been criticised for failure to transfer technology, lack of environmental
compliance, poor obser vance of local rules and regulations, and general
lack of cultural and local knowledge when dealing with staff and
communities.
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113
There are of course other countries in the region—from Cambodia to
Myanmar, to Laos and Malaysia—that also have deepened engagement
with China and figure in the BRI maritime concept. But for these, the set
of challenges and issues outlined in the case of Singapore, Indonesia,
Vietnam, and Thailand are similar.
tHe o PP oRtunit{ of  sHAR ing : BR i And  investment ,
fin AnCe And  P oLiti Cs
it ‹• …Ž‡ƒ” tŠƒt tŠ‡”‡ ‹• ƒ vƒ•t ’‘t‡t‹ƒŽ ˆ‘” ‹ˆ”ƒ•t”u…tu”‡ ’”‘v‹•‹‘ ƒ…”‘••
tŠ‡ A•‹ƒ ”‡‰‹‘, ƒ† ’ƒ”t‹…uŽƒ”Žy ‹ s‘utŠ‡ƒ•t A•‹ƒ, •‘‡tŠ‹‰ ‡x‡’Ž‹ -
‡† „y tŠ‡ …ƒ•‡ ‘ˆ i†‘‡•‹ƒ ‰‹v‡ ’”‡v‹‘u•Žy. it wƒ• ‹ ‘”†‡” t‘ •‡” v‹…‡
tŠ‹• tŠƒt tŠ‡ A•‹ƒ iˆ”ƒ•t”u…tu”‡ iv‡•t‡t Bƒ (AiiB) wƒ• •‡t u’, ‘
CŠ‹ƒ’• ‹•t‹‰ƒt‹‘, ‹ 2014. mƒy ‘ˆ ‹t• 56 ˆ‘u†‹‰ ’ƒ”t‹‡• ƒ”‡ ˆ”‘ tŠ‡
”‡‰‹‘, ‹…Žu†‹‰ …‘ut”‹‡• Ž‹‡ i†‘‡•‹ƒ, mƒŽƒy•‹ƒ, tŠƒ‹Žƒ†, myƒƒ”,
ƒ† tŠ‡ PŠ‹Ž‹’’‹‡•. tŠ‡ AiiB ‹• ‘‡ ‘ˆ tŠ‡ ‘•t tƒ‰‹„Ž‡ ‘ut…‘‡• ‘ˆ tŠ‡
BRi, ’”‘v‹†‹‰ ƒ ƒ…‹ƒŽ „ƒ…„‘‡ t‘ tŠ‡ ‹†‡ƒ ‘ˆ CŠ‹ƒ tƒ‹‰ ƒ ‰”‡ƒt‡”
”‘Ž‡ ‹ tŠ‡ †‡v‡Ž‘’‡t ‘ˆ tŠ‡ ”‡‰‹‘. d‡•’‹t‡ ‹‹t‹ƒŽ A‡”‹…ƒ ”‡•‡” vƒ -
t‹‘•, tŠ‡ AiiB Šƒ• „‡‡ Œ‘‹‡† „y ƒ u„‡” ‘ˆ eu”‘’‡ƒ …‘ut”‹‡•, ƒ†,
‡v‡tuƒŽŽy, †‡•’‹t‡ ‹‹t‹ƒŽ ”‡ˆu•ƒŽ, „y Au•t”ƒŽ‹ƒ.
tŠ‡ AiiB ‘’‡”ƒt‡• ƒ• ƒ ’‘t‡t‹ƒŽ ƒ…‡” ˆ‘” ’”‘Œ‡…t•, tŠ‘u‰Š tŠ‡ …u” -
”‡t …‘‹tt‡† …ƒ’‹tƒŽ ‹• ‘Žy usd 200 „‹ŽŽ‹‘, wŠ‹…Š ‹• ‹‹•…uŽ‡ …‘ -
’ƒ”‡† t‘ ’”‘Œ‡…t• ˆu†‡† „y tŠ‡ A•‹ƒ d‡v‡Ž‘’‡t Bƒ ƒ† tŠ‡ w‘”Ž†
Bƒ. wŠƒt tŠ‡ AiiB †‘‡• †‘, Š‘w‡v‡”, ‹• t‘ ‘’‡”ƒt‡ ƒ• ƒ ‡ƒ• „y wŠ‹…Š
CŠ‹ƒ …ƒ •Šƒ”‡ ‹†‡ƒ• ƒ„‘ut ‹t• ‘w ‡x’‡”‹‡…‡ ‘ˆ „u‹Ž†‹‰ ‹ˆ”ƒ•t”u…tu”‡,
ƒ† †‡v‡Ž‘’‹‰ ‹t• ‡…‘‘y, „‡y‘† ‹t• „‘”†‡”•.
tŠ‹• w‹ŽŽ‹‰‡•• t‘ •Šƒ”‡ Šƒ• t‘ …‘ˆ”‘t, Š‘w‡v‡”, •‘‡ ‘ˆ tŠ‡ ’‡”‡ -
‹ƒŽ …ŠƒŽŽ‡‰‡• tŠƒt CŠ‹‡•‡ ‹v‡•t‡t ƒ† ‹v‘Žv‡‡t Šƒv‡ ˆƒ…‡†, ‘ut -
Ž‹‡† „y tŠ‡ …ƒ•‡ •tu†‹‡• ‹ tŠ‹• …Šƒ’t‡”. tŠ‡•‡ „”‘ƒ†Žy ˆƒŽŽ ‹t‘ tŠ‡
ˆ‘ŽŽ‘w‹‰ …ƒt‡‰‘”‹‡•, ƒ† ƒ”‡ ƒ””‹‡† t‘ tŠ‡ v‡ ‘„Œ‡…t‹v‡• ‘utŽ‹‡† ‹ tŠ‡
ndRC B‡Žt R‘ƒ† i‹t‹ƒt‹v‡ ƒ‘u…‡‡t ˆ”‘ tŠ‡ CŠ‹‡•‡ ‰‘v‡”‡t
”‡ˆ‡””‡† t‘ ’”‡v‹‘u•Žy:
1. P‘Ž‹…y …‘-‘”†‹ƒt‹‘: CŠ‹‡•‡ ‹v‘Žv‡‡t ‹• ˆ‡ƒ”‡† t‘ „‡ ‰‡ƒ”‡†
t‘‘ u…Š t‘ ‹t• ‘w •‡Žˆ-‹t‡”‡•t, t‘ „‡ ƒ•y‡t”‹…ƒŽ, …”‡ƒt‹‰ ƒ
z‘‡ ƒ”‘u† ‹t ˆƒv‘u”ƒ„Ž‡ t‘ ‹t• ‘w ‡…‘‘‹… ƒ† •‡…u”‹ty ’”‹‘”‹ -
t‹‡•. CŠ‹‡•‡ …‘’ƒ‹‡• ƒ”‡ ƒ……u•‡† ‘ˆ „‡‹‰ ‹‰‘”ƒt, ‘” Š‡‡†Ž‡••,
‘ˆ Ž‘…ƒŽ Žƒw• ƒ† ”‡‰uŽƒt‹‘•. f‘” †‡‡’‡” ’‘Ž‹…y …‘-‘”†‹ƒt‹‘, CŠ‹ƒ
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114
will need to offer much more detailed ideas about its plans, and its
implementation strategy, to regional partners.
2. Facilities connectivity: China is seen as having the capital and some
of the technological ability to achieve this for the rest of the region.
However, it is accused of being unwilling to share or transfer tech -
nology. It is also distrusted as a supplier of some telecom technology
through espionage reasons. There is a trust deficit in many countries
in the region, meaning that being reliant on China for such connec -
tivity will carr y a high security price.
3. Unimpeded trade: With the demise of the TPP, China does stand to
create its own free trade zone across the region. Its investment and
trade figures have increased hugely in the last two decades, giving it
a strong advantage in this area. But there are complaints that its
trade is often geared against the employment of countries it trades
with, that its investments suffer from poor local knowledge, rule of
law, compliance, environmental standards, and cultural understand -
ing, and that they are still relatively small players.
4. Financial integration: The AIIB and the rise of the use of Chinese
RMB trading offer a good foundation here, though the USD, Euro,
and Japanese Yen are still more widely traded. This area also depends
on China opening its current account and its currency to the outside
world, rather than maintaining its protected status. China has more
to gain than lose in this area through partnership with Singapore
and other more developed economies.
5. People-to-people links: These links are growing through tourism
and trade throughout Southeast Asia. But as the demonstrations
against Chinese investment in Vietnam in 2015 after issues over the
South China Sea, and protests in China against Malaysia after the
MH70 disappearing aircraft the same year showed, relations that on
the surface can seem harmonious can quickly deteriorate. China
through its size and the scope of its ambition in ideas like the BRI
can create as much distrust as warmth.
ResPonses : P ivoting veRsus ‘tHe B ig deAL ’
w‹tŠ ‹t• †‡•‡ ‡tw‘” ‘ˆ †‹ˆˆ‡”‡t ‹†• ‘ˆ t”‡ƒty ƒŽŽ‹ƒ…‡•, ƒ† „‡…ƒu•‡
‘ˆ ‹t• ‹‡•‡ •t”ƒt‡‰‹… ƒ† ‡…‘‘‹… ‹’‘”tƒ…‡, ‹t ‹• u•u”’”‹•‹‰ tŠƒt
ƒy ˆ‡ƒ” tŠ‡ •‹tuƒt‹‘ ‹ tŠ‡ A•‹ƒ Pƒ…‹… ”‡‰‹‘, „”‘ƒ†Žy …‘v‡”‡† „y tŠ‡
ƒ”‹t‹‡ BRi, ‹• †‡Ž‹…ƒt‡, ƒ† „‡…‘‹‰ ‘”‡ †ƒ‰‡”‘u•. Jƒ’ƒ‡•‡ P”‹‡
k. BRown

115
Minister Shinzo Abe was not alone in musing over whether the situation
in 2014 in his region was much like that which prevailed in Europe before
the First World War, where commitments between nations led to a dom -
ino effect and the start of a huge, destructive, and needless war once an
issue provoked their collapse. 9 Such thinking continued the anxieties over
the previous decade, inside and outside the PRC, over how to avoid con -
flict when a power was rising and, slowly, replacing a dominant one. Some
international relations experts like Christopher Coker wrote on the ver y
possibility of war in the Asian region between China and the United States
being the best possible defence against it ever happening. 10 Others like
Belgian academic Jonathan Holslag painted a picture of a region where
the possibility of war was much more imminent than people thought. 11
Within the region, the spectrum of opinion on how to respond to
China’s increasing role is captured by the arguments between, on the one
hand, Australian academic Hugh White, and on the other hand, former
US Undersecretar y of State Kurt Campbell. For White, the onus is on the
United States to articulate a new role in Asia, and one that cedes more
space to China. ‘Essentially, America has three options’, White argues:
It can resist China’s challenge and tr y to preser ve the status quo in Asia. It
can step back from its dominant role in Asia, leaving China to attempt to
establish hegemony. Or it can remain in Asia on a new basis, allowing China
a larger role but also maintaining a strong presence of its own. Most
Americans assume that the first of these options is the only choice. Only a
few take the second option seriously, although that could change. Most
don’t even consider the third. 12
For Campbell, however, things are more complicated. The United
States and China have a relationship that is defined by a ‘careful, calibrated
mixture of cooperation, competition, and interdependence developed
over decades’. Both countries need to ‘coexist in an increasingly intercon -
nected Asia and to work together for the betterment of both countries and
the region’. Fundamental to this is a rules-based order, which the United
States had taken the lead in, and which China has profoundly benefited
from. They, in turn, are built on what Campbell calls ‘time tested princi -
ples’: ‘freedom of navigation, sovereign equality, transparency, peaceful
dispute resolution, sanctity of contracts, free trade, and cooperation on
transnational challenges’. The pivot to Asia exists to defend these princi -
ples, which, in turn, will avoid hegemony by any one power in the region. 13
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116
Either side of this argument, there is the issue of just how a vision like
the BRI, particularly its maritime dimension, might help to satisfy those
like Campbell in the United States, or figures like White in Australia, who
seem to be coming from different directions in arguing over what China’s
role in the region in the future should best be like. For the five core dimen -
sions of Chinese intention mapped out in the BRI, on the surface at least
all seem to spell out relatively benign intentions. Policy co-ordination,
trade harmonisation, people-to-people links, greater connectivity, and
financial co-operation are all good things. But it is clear too that policy
makers in Washington have remained somewhat unconvinced that this is
the full stor y from Beijing’s point of view. For them, there is often a dis -
joint between the actions and the rhetoric of the PRC leadership. And the
BRI, while stepping some way towards filling in some of the gaps around
Chinese intentions, still leaves a lot unstated or simply avoided.
With the Trump presidency starting from early 2017, even more uncer -
tainty is introduced. Trump has a contradictor y and wholly inconsistent
position on the region, one characterised by hawkishness in terms of the
economy (a desire to have tougher trade deals with China and more
emphasis on job creation back in the United States) along with a willing -
ness to relax some of the United States’ security interest in the region and
ask it to look after itself. Trump, for instance, has questioned the need for
the United States to commit so much financially to the security role it
plays throughout the Southeast Asian and Asian region. If implemented,
this would cause a major shift in the power dynamics around China, creat -
ing a potential vacuum that it would be able to fill were it to fill this advan -
tageously. There are many other areas, however, where China might find
this new responsibility unwelcome. It has made it clear it has no desire to
be a regional, let alone, global policeman. But Trump’s US retreat might
force it to take up this role, with all the criticisms and exposure that it will
present.
Con CL usion
tŠ‡ …‘’Žƒ‹t ‹ tŠ‡ 2000• wƒ• tŠƒt PRC Ž‡ƒ†‡”• w‡”‡ t‘‘ •Šy ‹ •’‡ƒ‹‰
‘ut ‘”‡ …Ž‡ƒ”Žy ƒ„‘ut wŠƒt tŠ‡‹” ‹t‡”ƒt‹‘ƒŽ ‹t‡t‹‘• w‡”‡. tŠ‡ vƒ”‹ -
‘u• ‡v‘Žut‹‘• ‘ˆ tŠ‡ BRi ut‹Ž ‹t• ƒŽ ˆ‘”uŽƒt‹‘ •‡‡ t‘ ƒt Ž‡ƒ•t •t‡’
t‘wƒ”†• ƒ ‘”‡ …‘u‹…ƒt‹v‡ •tƒ…‡ ‘ ˆ‘”‡‹‰ ’‘Ž‹…y. tŠƒt ƒt Ž‡ƒ•t ‹• ƒ
v‡” y ’‘•‹t‹v‡ tŠ‹‰ ƒ† •‘‡tŠ‹‰ tŠƒt ‹• Šu‰‡Žy •‹‰‹…ƒt ‹ ’ƒ”t‹…uŽƒ”
ˆ‘” ‹t• ”‡‰‹‘ƒŽ ’ƒ”t‡”•.
k. BRown

117
Despite this, the scope and ambition of the idea, while laudable, means
that it has proved hard so far to conceptualise adequately. It also partially
covers an area in which the PRC’s actions have recently seemed at odds
with the harmonious intent contained in the formal language around the
BRI emanating from within China. So far, therefore, while the maritime
BRI has spoken to strengthening the PRC’s economic narrative within the
region, it has done little to spell out a similarly compelling security one—
and it is in this area where there is most lack of consensus amongst the
different countries involved in the idea. Even in the economic realm, too,
the record of China as a partner and investor in the region is a highly
mixed one. If it wishes to develop and improve this, it will need to operate
in ways that are more collaborative and communicative than ever before.
Whether the BRI does succeed across the Asia Pacific region will depend
on activities that show how it operates in action. Investments by the AIIB
for instance, or projects that are clearly badged with the BRI on them, will
at least give it some tangible form and visibility. The BRI does show will -
ingness on the part of the PRC to at least seem to be operating on differ -
ent, new terms with others. The fundamental question in the end is whose
interests will ultimately be best ser ved by this—the PRC’s, or those seek -
ing to work with it. The Trump presidency might mean that for many in
the region, they will have no option but to go along with a Chinese
agenda, and the BRI will assume a prominence that it is as yet not ready
for, or designed for, but which it will have no choice but to fill.
notes
1. R‘„‡”t s R‘••, ‘CŠ‹‡•‡ s‡…u”‹ty P‘Ž‹…y: st”u…tu”‡, P‘w‡” ƒ† P‘Ž‹t‹…•’,
L‘†‘ ƒ† n‡w {‘”: R‘utŽ‡†‰‡, 2009, ’ 60.
2. B‹ŽŽ Hƒyt‘, ‘tŠ‡ s‘utŠ CŠ‹ƒ s‡ƒ: tŠ‡ st”u‰‰Ž‡ ˆ‘” P‘w‡” ‹ A•‹ƒ’, {ƒŽ‡:
{ƒŽ‡ u‹v‡”•‹ty P”‡••, 2014.
3. A Ž‹•t ‘ˆ tŠ‡•‡ …ƒ „‡ ˆ‘u† ƒt L‹•t ‘ˆ A…t‹v‡ P‡‘’Ž‡’• L‹„‡”ƒt‹‘ A”y
nƒvy sŠ‹’•. Štt’•://‡.w‹‹’‡†‹ƒ.‘”‰/w‹‹/L‹•t‘ˆƒ…t‹v‡P‡‘’Ž‡%27•
L‹„‡”ƒt‹‘A”ynƒvy•Š‹’• .
4. s‡‡ mƒ” e†wƒ”† L‡w‹•, ‘tŠ‡ eƒ”Žy CŠ‹‡•‡ e’‹”‡•: Q‹ ƒ† tŠ‡ Hƒ’,
Cƒ„”‹†‰‡, mƒ•• ƒ† L‘†‘: B‡Žƒ’ P”‡•• ‘ˆ Hƒ” vƒ”† u‹v‡”•‹ty,
2007, ’  143: ‘A• ˆ‘” tŠ‡ ‹†‡ƒ ‘ˆ ƒ •‹Ž ”‘ƒ†, tŠ‡ t‡” wƒ• …‘‹‡† „y ƒ
g‡”ƒ ‰‡‘‰”ƒ’Š‡” ‹ tŠ‡ Žƒt‡ ‹‡t‡‡tŠ …‡tu” y. n‡‹tŠ‡” tŠ‡ CŠ‹‡•‡
‘t tŠ‡ R‘ƒ•, wŠ‘ …‘•t‹tut‡† ‹t• tw‘ t‡”‹‹, w‡”‡ ƒwƒ”‡ ‘ˆ tŠ‡ ‡x‹• -
t‡…‡ ‘ˆ •u…Š ƒ ”‘ut‡ ‘” ‡v‡ ‘ˆ tŠ‡ ‡x‹•t‡…‡ ‘ˆ ‘‡ ƒ‘tŠ‡”’.
tHe PRC’s mARitime siLk RoAd initiAtive, soutHeAst AsiA

118
5. Full text available on the website of the National Development and Reform
Commission: http://en.ndrc.gov.cn/newsrelease/201503/t20150330_
669367.html , accessed 27 August 2016.
6. John W. Gar ver, ‘China’s Quest: The Histor y of Foreign Relations of the
People’s Republic of China’, Oxford: Oxford University Press, 2016,
p. 74.
7. ‘China’s Xi Says Political Solution for Taiwan Can’t Wait Forever’, Reuters,
October 6 2013, www.reuters.com/article/us-asia-apec-china-taiwan-
idUSBRE99503Q20131006.
8. Prashanth Parameswaren, ‘Indonesia and China’s AIIB’, The Diplomat,
http://thediplomat.com/2016/07/indonesia-and-chinas-aiib/ , accessed
13 November 2016.
9. Gideon Rachman, ‘Davos Leaders: Shinzo Abe on WW1 Parallels,
Economics and Women at Work’, Financial Times, 22nd Januar y 2014,
https://www.ft.com/content/7378a719-bd7e-3c99-b63f-330a
17ce7a78 .
10. Christoker Coker, ‘The Improbable War: China, the United States and the
Logic of Great Power Conflict’, Oxford: Oxford University Press, 2015.
11. Jonathan Holslag, ‘China’s Coming War with Asia’, Cambridge: Polity
Press, 2015.
12. Hugh White, ‘Excerpt from ‘The China Choice: Why America Should
Share Power’, published by the Lowy Institute, http://www.lowyinsti-
tute.org/files/lowy_institute_extract_-_the_china_choice.pdf .
13. Kurt Campbell, ‘The “Pivot”: A Reply to Hugh White’, Lowy Interpreter,
July 2016, at http://www.lowyinterpreter.org/post/2016/07/05/The-
Pivot-A-reply-to-Hugh-White.aspx .
K. BROWN

PART IV
Corporate Social Responsibilities and
Insurance Performance of Chinese
Investments

121 © The Author(s) 2018
A. Arduino, X. Gong (eds.), Securing the Belt and Road Initiative ,
https://doi.org/10.1007/978-981-10-7116-4_7
CHAPTER 7
China Power Investment Corporation
in Myanmar
Xue Gong
Introduct Ion
Under the previous militar y government in Myanmar, China became
Myanmar’s largest foreign investor and wielded the most international
influence in the countr y. China supported Myanmar’s militar y junta largely
through economic aid, such as interest-free loans, economic assistance pro -
grammes, and technological cooperation. As anticipated, economic state -
craft provided China with a new regional ally and helped the development
of China’s least-developed Yunnan Province. Therefore, China’s economic
statecraft contributed to the close leaning of Myanmar. Accordingly, China
made its presence felt when it supported the militar y junta through various
means, among which economic means has been the most prominent but
also the most controversial. Despite its economic success in Myanmar,
China’s plans were occasionally waylaid by its government counterpart.
Since March 2011, the new government has brought significant challenges
to China’s political and economic relations with Myanmar. The suspension
X. Gong ( *)
S. Rajaratnam School of International Studies (RSIS), Nanyang Technological
University, Singapore, Singapore
China Power Investment Corporation (CPI), was merged with State Nuclear
Power Technology Corporation (SNPTC) to form the current State Power
Investment Corporation (SPIC). This chapter will use CPI as the subject.

122
of the Myitsone Dam project announced by the quasi-civilian government
in 2011 and opposition over other China- invested projects taught the
Chinese government a lesson: the ‘licence to operate’ is becoming more
important in protecting its interests overseas. China now has to engage
with different actors in the society that influence Myanmar’s socio-political
landscape and other foreign actors.
In 2013, Chinese President Xi Jinping’s Belt and Road Initiative (BRI)
was  embraced by Myanmar. In December 2013, the two countries signed
memorandums of understanding (MOUs) and Economic and Technological
Cooperation Agreements (ETCAs) under the framework of Bangladesh–
China–India–Myanmar Forum for Regional Cooperation-Economic Corridor
(BCIM-EC). Myanmar also responded by becoming the founding member
of the Asian Infrastructure and Investment Bank (AIIB). In September 2016,
the Chinese-backed AIIB provided a USD 20 million loan to develop a gas
power plant in central Myanmar. The Kyaukpyu project, which involves the
construction of a deep-water port at the Special Economic Zone (SEZ), is
intended to become a key element of China’s BRI.
With enormous capital and supportive policies, Chinese companies
enjoyed an over whelming investment advantage in Myanmar, particularly
when the militar y junta faced sanctions and needed foreign investment.
However, the implications of China’s investments have upset the target
countr y in various issues, such as national security, governance, and environ -
ment, with the Myitsone Dam project ser ving as a warning sign of China’s
overseas business practice. A case study of Myanmar offers great insights into
understanding the backlash on bilateral relations caused by business activities
of the Chinese enterprises and the reasons for the behaviour of these Chinese
companies. Myanmar possesses a unique set of characteristics. Despite the
scarcity of reliable data from both China and Myanmar, this chapter aims to
provide a systematic investigation of China’s CSR behaviour.
Econom Ic rElat Ions of  chIna and  m yanmar
Sino-Burmese Trade Relations
China’s trade with Myanmar has been on the rise since 1988 when the
focus of its foreign policy was switched from ideology-driven to economic
pragmatism. Between 2003 and 2015, the bilateral trade relations appeared
asymmetrical and China enjoyed trade surplus with Myanmar (see Fig.  7.1 ).
X. GONG

123
China’s Investment in Myanmar
In tandem with the growing trade, Chinese investment flows to Myanmar
also increased. From 2004 to 2015, the volume of China’s investment
increased nearly 200 times (see Fig.  7.2 ). Figure  7.2 shows that 2011 was
a turning point of Chinese investment in Myanmar when the Myitsone
Dam project suspension was declared under Thein Sein’s presidency. After
the dam suspension crisis, Chinese investment rose though the pace was
slow. This was a result of a series of incidents targeting Chinese invest -
ments such as the public resistance in Letpadaung Copper Mine and heavy
blows to the Chinese investors’ confidence caused by the construction of
gas and oil pipelines. Besides, the political transition period of Myanmar’s
government hindered Chinese investment. Based on project numbers in
Myanmar since 2012, Singapore overtook China (excluding Hong Kong)
to become the leading investor (see Fig.  7.3 ). Meanwhile, Myanmar had
more diverse foreign investment (FDI) inflows as the sanctions were grad -
ually lifted. Countries such as the United Kingdom, Japan and South
0
2000
4000
6000
8000
10000
12000
14000
16000
Export
Import
Fig. 7.1 Myanmar’s export and import figures with China from 2003 to
2015 in USD million. Source: CEIC Database https://www.ceicdata.com/
en?loc=SG&rand=fTaUp , accessed 12 November 2016
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Korea increased their investments and competed directly with China’s
investment in Myanmar.
However, the total volume of China’s investment in Myanmar reached
USD 18,529.301 million, surpassing other countries. Second and third
places were taken by Singapore and Thailand (see Fig.  7.4 ). It is prudent
to note that the Chinese ventured into places where investments from
other developed countries have shunned. The development of Myanmar
currently lags far behind other Association of Southeast Asian Nations
(ASEAN) members on most standards, such as poor road connectivity,
insufficient power generation capacity, and inefficient port management.
The lack of infrastructure also restricted Myanmar’s development of trade
and manufacturing industries.
Chinese investments would fit in situations where other investors are
reluctant to invest in a poor investment environment (Corkin et al. 2008 ;
Urban et al. 2012 ). More importantly, Chinese investment could offer the
local people access to basic infrastructure and the host countr y a much-
needed boost in infrastructure for economic development. For example,
developing mining requires stable electricity supply and thus building the
Shweli 1 and Tarpein 2 Dams enabled the neighbourhood to access elec -
tricity and water (International Rivers 2012 ; Urban et al. 2012 ).
China’s investments in Myanmar have extended from traditional sec -
tors such as agriculture, industr y, and trade, to tertiar y sectors such as
4.09 11.5 4 12.6 4 92.3 1
232.53
376. 7
875.61
217.82
748.96
475.33 343.13 331.72
0
100
200
300
400
500
600
700
800
900
1000
Year2004 Year2005 Year2006 Year2007 Year2008 Year2009 Year2010 Year2011 Year2012 Year2013 Year2014 Year2015
Fig. 7.2 China’s investment in Myanmar from 2004 to 2015  in million USD.
Source: CEIC Database, accessed 20 July 2016
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159
100
221
134
85
130
56
23
89
20
05 01 00 1502 00 250
China
Thailand
Singapor e
Hong Kong of Chin a
UK
Kore a
Malaysi a
Indi a
Japa n
Brune i
Fig. 7.3 Approved leading projects in Myanmar by October 2016. Source:
CEIC Database, accessed 20 July 2016
18529.301
15596.23
7434.025
4079.94 8
3501.641
10606.59 6
1921.522 994.566 732.649 694.86 2682.096
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Fig. 7.4 Approved FDI countr y source in Myanmar by October 2016 in million
USD. Source: CEIC Database
CHINA POWER INVESTMENT CORPORATION IN MYANMAR

126
telecommunication, technology, tourism, and fisheries. However, four
sectors are most commonly seen in Myanmar (see Fig.  7.5 ). The majority
sector of Chinese investment in Myanmar is still energy, accounting for 58
per cent.
Some scholars argue that China’s outbound direct investment (ODI)
exacerbated weak governance in the pariah regimes (Alden 2007 ; Tull
2006 ; González-Vicente 2011 ), especially in the resource-extractive areas.
Given China’s heavy investment in Myanmar’s energy sector, and its
elite- oriented approach in obtaining projects, populist protests broke out
against several Chinese-involved investments (see Table  7.1 ).
csr P ract IcE by chInEsE com Pan IEs
thtoughout the yectu, chineue coopcnieu hcve deen ucddned with c tenc -
tiveny dcd teputction fot the countt yu inveutoent cctivitieu in mycnoct.
aftet the hecvy dnowu ccuued dy uevetcn inveutoentu in mycnoct, they
teuonved to ioptove dut with nittne uucceuu. bcued on dctc connected ftoo
intet viewu cnd oedic uoutceu, thete wete ocjot coopncintu ovet chincu
inveutoentu. 1 fitut, chineue inveutoentu wete cccuued of deing itteuponuidne
58%
34%
3%
5%
Energy
Metals
Real Estate
Tran spor t
Fig. 7.5 China’s investment share in Myanmar by sectors from 2005 to 2016.
Source: China Global Investment Tracker by American Enterprises Initiative
accessed 4 December 2016
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and environmentally damaging. China invested heavily in Myanmar’s energy
sector, yet neglected environmental assessment before and during the proj -
ects. For example, the industrial waste from the Letpadaung Copper Mine
was released to the nearby village, damaging the soil for farming and har -
vesting. Similarly for the refiner y factor y for the oil and gas pipelines, chemi -
cal sewage was directly released into Andaman Sea, harming water quality
and fish stocks.
Second, Chinese companies were blamed for alienating the local people
and depriving them of employment opportunities. In many contracting
Table 7.1 Chinese major controversial investment projects in Myanmar
Projects Enterprises
1. Sino-Myanmar pipelines project China National Petroleum Corporation a
2. Myitsone Dam project China Power Investment b
3. Letpadaung Copper Mine project Myanmar Wanbao Mining Copper Ltd.
4. Thanlwin River 6 hydropower projects Hanergy Holding Company, Hydrochina Corporation, China China Three Gorges Corporation, China Datang Overseas Investment Company, Sinohydro, EGAT International Co., Ltd. c
5. China state, Mt. Mwe and Mt. Pa Nickel mining project
North Mining Investment Corp.
6. Rakhine state, Rethedaung and Maungdaw titanium mining project
Gold Finder
7. Kachin state, illegal logging Unknown 8. Kyaukpyu-Kunming railway CREC 9. Kyaukpyu Special Economic Zone CITIC Group
10. Dawei Oil Refiner y Guangdong Zhenrong Energy Co. 11. Khaunglanphu Dam CPI 12. Chibwe Dam CPI 13. Lakin Dam CPI
Source: Adapted from Myanmar media reportsaCompanies include Daewoo International, Myanmar Oil and Gas Enterprise (MOGE), Oil and Natural Gas Corporation (ONGC) Videsh, Gas Authority of India (GAIL), Korean Gas Corporation (KOGAS), and China National Petroleum Corporation (CNPC). But when people criticise this project, they often mention only CNPCbThe company has changed its name to the State Power Investment Corporation in 2015cEGAT International Co., Ltd is a Thai enterprise
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projects, Chinese companies only hired Chinese workers because the latter
have better labour skills and faced fewer language and cultural barriers.
The CNPC was said to employ far fewer local workers in the upper section
of the Shwe pipeline than the Indian company in charge of the lower sec -
tion (Walker 2014 ). The influx of about 2000 Chinese workers hired by
CPI in Myitkyina for the hydropower project angered the local people
because of the stiff competition for employment and the temporar y supply
shortage and price spikes (Yang 2012 ). The Chinese workers and even the
Chinese managers behaved badly towards the local people. They were
ignorant of the cultural and religious importance to the Burmese society,
and this resulted in more resentment against the Chinese investors and
workers.
Third, Chinese companies were accused of non-compliance with
Myanmar logging law and regulations. Myanmar’s laws stipulated that
wood and wooden products were allowed to be exported only through
the river ports at Yangon. Foreign sales of logs were banned completely in
April 2014. However, the lucrative logging trade for both Chinese traders
and border officers and the conflict-prone area controlled by the ethnic
groups provided the opportunity for illegal logging and log smuggling. In
2015, more than 153 illegal Chinese workers were arrested for the illegal
logging. 2 Unauthorised Chinese investments in jade and minerals exploi -
tation were also common in northern Myanmar where it is too remote for
the central government to regulate.
Finally, Chinese investment lacked transparency and was carried out
under close contact with the militar y government, resulting in ignorance
of the grassroots demands. Most of the investments in the energy sector
required land expropriation, and thus Chinese companies relied heavily on
the brutal militar y government to launch the resettlement plan, resulting
in inadequate compensation and the lack of sustainable planning for the
community. For example, the Letpadaung Copper Mine project, which
resulted in the expropriation of 7800 acres of land in 26 villages, provoked
a series of protests. Neither Myanmar’s government nor the Chinese com -
panies produced a long-term plan for the villagers who had lived on the
land for generations. Another outstanding example, the protests and
national objection against the construction of the Myitsone Dam project
for similar reasons: lack of transparency in the investment, unfair
land expropriation, potential environmental degradation, and disrespect
for the Burmese culture, and so on. The China-based non-governmental
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o rganisation Green Watershed found that, even when the Chinese compa -
nies provided public goods to the local population, they usually did so
through the unpopular militar y government, which resulted in limited
benefits to the local population (Walker 2014 ).
Realising the negative impact of its overseas activities, the Chinese gov -
ernment began to show interest in international experiences in imple -
menting CSR for its dam investment (International Rivers 2012 ). In fact,
the CSR implementation of Chinese hydropower companies became a
prerequisite, according to government policies. In 2003, China passed a
new Environmental Impact Assessment Law, requiring companies propos -
ing projects with significant environmental impact to conduct an
e nvironmental impact assessment (EIA) prior to the project construction,
and to obtain approval at the environment bureau.
The Chinese government also institutionalised public participation
and displacement into its EIA law system. In 2006, the Ministr y of
Environmental Protection (MEP) (then SEPA) issued Provisional
Measures for Public Participation in EIA and Rules of Land Compensation
and People Resettlement in Medium and Large Hydraulic and
Hydroelectricity Projects . In 2007, the MEP and the Ministr y of
Commerce, People’s Republic of China (MOFCOM) announced that
Chinese exporters who caused environmental harm would have their
export operations suspended.
In addition, financial organisations issued their own policies to
improve the CSR of the companies (see Table  7.2 ). China EXIM Bank
funded most of China’s overseas dams by providing export credits, guar -
antees, and concessional loans. It issued the Guidelines for Environmental
and Social Impact Assessment of the China Export Import Bank’s Loan
Projects in 2007, requiring the project owner to submit governmental
approval documents, particularly the environmental and social impact
assessments (SIA), in order to obtain approval for the loan (Hensengerth
2014 , p. 237).
However, the activity on the ground failed to abide by the rules laid
down on paper (Mang 2015 ). Although Chinese institutions issued many
advanced regulations, their capacity for implementation and super vision
remained ver y weak. It is not specified who should regulate hydropower
companies overseas and which domestic regulator y tools should be used
for non-compliance. For example, MOFCOM issued the Guidelines of
2013 requiring Chinese companies to respect the local community and
CHINA POWER INVESTMENT CORPORATION IN MYANMAR

130
protect the ecology. Nevertheless, the punishment mechanism was absent
for non-compliance. Furthermore, the regulator y overlapping jurisdiction
embedded in the domestic bureaucracy structure hindered consistent
super vision over various aspects of overseas business activities. Several
ministries were directly in charge of dam investment issues: Ministr y of
Table 7.2 Timeline for Myitsone Dam planning from 2006 to 2011
2006 December: CPI signed a memorandum of understanding with the Ministr y of Electric Power No.1 of Myanmar 2007 May: Agreement to build the seven dams was signedJune and July: Kachin Independence Organisation (KIO) chairman approached Yunnan Province State Council, head of state senior general Than Shwe and head of Myanmar Militar y Northern Command in Kachin State to express objectionDecember: Changjiang Institute of Sur vey, Planning, Design and Research (CISPDR) completed planning report for the feasibility of the hydropower projects 2008 March: Terms of reference for the EIA were completed, and subsequently approvedDecember: Yunnan Power Investment Co., Ltd. was created for hydropower projects on the IrrawaddyDecember 24: The Biodiversity and Nature Conser vation Association (BANCA) and CPI signed an agreement to conduct an EIA special investigation 2009 Januar y to July: Both Chinese and Myanmar experts conducted a special investigation on the upper IrrawaddyOctober: The baseline environmental impact assessment by BANCA was finalisedDecember: Stage 1 (out of a total of five construction stages) began on the Myitsone Dam site. The resettlement of people had begun 2010 March: CISPDR finalised the EIA ReportApril: Four explosions occurred at the Myitsone Dam siteSeptember: 1994 Ceasefire Agreement between Myanmar government and the KIO was signed, while communications and cooperation were halted. KIO invited CPI to a discussion but received no response 2011 Januar y: Developers finalised the overall EIA for hydropower projects on the upper IrrawaddyMarch: The chairman of KIO sent a letter to the Chinese leaderJune: Fighting erupted, affecting the construction siteJuly: Full-scale construction resumedSeptember 17: The Burmese government hosted a workshop to discuss the impact of hydropower projects on the Irrawaddy RiverSeptember 30: Thein Sein suspended the construction of Myitsone Dam
Source: Adapted from International Rivers and other media sources
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Water Resources, Ministr y of Environmental Protection, and MOFCOM.
However, there was no coordination mechanism among them to instruct
the companies. For China EXIM Bank that funded most of the overseas
dams, the overseas super vision proved to be ‘a really disappointing situa -
tion’ though the bank made progress in China, according to Peter
Bosshard, a senior advisor at International Rivers. 3
Subsequently, the Chinese companies usually lacked experience in
engaging civil society, including labour unions, which was an important
reason for the low CSR performance. The governmental legislation on the
disclosure of government information came into effect in 2008, and this
created a mechanism for the Chinese public to demand governmental
information. 4 The regulation required government offices to release infor -
mation on a timely and regular basis. Such regulations made it easier for
the civil society to access information related to the procedures employed
in dam projects. The Chinese environment-oriented NGOs grew in power
and sought to influence China’s policy-making procedures. For example,
the Guidelines of 2013 by MOFCOM and MEP were based on the recom -
mendations by the Global Environmental Institute (GEI). 5 The Guidelines
also created an opportunity for the Chinese civil society to obtain informa -
tion on overseas investors that hold the latter responsible. The Chinese
NGOs provided communication channels for the government and the
local NGOs in the host countr y. The success of suspending dam construc -
tion on the Nu (Salween) River shows that the government consented to
the participation of the public after seeking consultation from the Chinese
NGOs and those residing along the Salween River from Thailand and
Myanmar (International Rivers 2008 ). China’s NGOs also operated over -
seas as its companies did. In 2008, Chinese NGO Green Watershed and
other Chinese organisations launched the Green Banking Innovation
Awards in order to encourage banks to cover environmental protection
when issuing loans for overseas investment. 6
However, Chinese NGOs still face challenges in influencing the policy
making at home. They have limited financial support and experiences in
cooperating with the SOEs and national banks that dominate the overseas
investment. Although they have worked to push the government for more
information on the activities of the overseas Chinese companies, their suc -
cess is undermined by institutional barriers of partnering with overseas
NGOs, given the deep suspicion of the Chinese government.
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132
cas E study : cPI In m yItson E dam
chinc inveuted in the conuttuction of oote thcn 25 ocuuive dcou on the
Ittcwcddy, scnween, cnd sittcng rivetu, with itu soEu tcking the initictive
in mycnoct. chincu cctive invonveoent in mycnoct cound de ctttiduted
to uevetcn fcctotu. mycnoctu powet uectot wcu fccing uetiouu uhottcge,
pctticunctny when Weutetn ucnctionu iopeded technonogiccn cnd econooic
coopetction with potenticn inveutotu, hindeting itu econooic devenopoent.
the oinitct y juntc intended to ioptove the powet uhottcge to uttengthen
itu poniticcn negitioccy. mycnoctu deocnd fot powet devenopoent wound
coopneoent chincu Going out Ponicy whetedy chineue coopcnieu ccn
expcnd the intetnctioncn octket to ovetcooe dcttietu of c uctutcted dooeu -
tic octket. chinc viewed the dco inveutoent cu c win- win fot the two
counttieu deccuue chinc conuideted hydtopowet devenopoent cu pctt of itu
goodwinn in ptoviding fcvoutcdne conceuuioncn nocnu, devenopoent of the
noccn econooy, cnd ttcnufet of technonogy to the hout countt y. to chinc,
the devenopoent of hydtopowet induutt y in mycnoct uet ved cu c doout to
itu econooic cnd poniticcn inuence in mycnoct.
au nctecooetu to hydtopowet inveutoent, chineue coopcnieu did not
hcve ocny optionu in the ecuiny ccceuuidne cnd octute octket. Inutecd, the
inveutoentu wete genetcnny noccted in conttovetuicn cnd conict-ptone
tegionu. Even chincu sInosurE, c govetnoentcn dody in iuuuing inuut -
cnce fot the ovetuecu inveutoent coopcnieu, pncced mycnoct in the high-
tiuk cctegot y 7 fot inveutoent (chinc Expott cnd ctedit Inuutcnce
cotpotction 2007 , p. 149). chincu inveutoentu wete vunnetcdne to poniti -
ccn conictu, ethnic iuuueu, cnd even tettotiuo in theue deutinctionu.
howevet, the chineue coopcnieu tenied on the utcte-to-utcte cpptocch to
ucfeguctd theit ptojectu. beccuue of the enite-otiented cpptocch, the noccn
cooounitieu cnd nGou wete excnuded ftoo the decnu, which teuunted in
the civin uocietyu oppouition.
the myituone dco ptoject wcu uigned duting then Vice Pteuident Xi
Jinpingu viuit to mycnoct in 2009 (uee tcdne  7.2 ). chinc Powet
Inveutoent wcu dccked dy chinc EXIm bcnk. thiu ptoject wcu conttccted
to cPI cnd the auic Wotnd coopcny with cnoue connectionu with the oini -
tct y juntc. 8 In cddition, sInosurE, the conuttuction bcnk of chinc,
cnd the Induutticn bcnk of chinc cnn enteted into negotictionu fot uuppott -
ing conuttuction in the Ittcwcddy. When negotictionu wete ncniued, othet
coopcnieu uuch cu sinohydto cnd Gezhoudc Gtoup wete cnuo invonved cu
conttcctotu. 9
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133
However, the vast scale of Chinese hydropower investment resulted in
large-scale protests. Civil society in Myanmar was actively vocal in oppos -
ing the Myitsone Dam project. The Kachin Development Networking
Group (KDNG) and Burma Environmental Working Group (BEWG),
among other organisations, strongly opposed the dam project. As part of
the Burma Partnership Network, they demanded community rights within
the context of protecting the countr y’s rivers from hydropower develop -
ment. As early as 2009, the KDNG even sent an open letter to CPI to urge
the company to stop the Myitsone Dam project and other dam projects in
Kachin State. The anti-dam sentiments began to appear in several
influential social media, such as The Irrawaddy (a local magazine), after
Thein Sein relaxed media control. On 24 September 2011, famous envi -
ronmentalists, meteorological experts, representatives of local residents
from Myitsone, and the media gathered for a CSR seminar in Yangon.
Myanmar Affairs, a Myanmar public opinion sur vey and environmental
protection agency, led a poll of 1059 people in Yangon from 27 to 30
September 2011. Of those polled, 90 per cent objected to the Myitsone
Dam project, while 4 per cent agreed, and 6 per cent said they had no
idea. In addition, 79 per cent of the people believed that the project would
damage national unity if it continued. For the solution of the Myitsone
Dam problem, 46 per cent of the people said that it should be re-sur veyed
by experts, and results were published and made known to the local popu -
lation, before coming to a decision whether or not to continue. 10
The Myitsone Dam project remained highly controversial for social,
economic, and security reasons. First, the consequences of the construc -
tion of the dam proved unfair to the local residents. The cost of the
Myitsone Dam project was estimated at USD 3.6 billion and Myanmar’s
government would receive USD 54 billion for the project over the first 50
years of the project before the operation rights would be transferred to
Myanmar. Of the electricity generated by the Myitsone Dam, 90 per cent
would benefit China while the remaining 10 per cent would be reser ved
for Myanmar’s own consumption. Many Kachins were primarily engaged
in agricultural production for their livelihood, and the reser voir affected
the loss of 60 villages and approximately 15,000 people. 11 When Myanmar’s
militar y government and the CPI announced that the hydropower project
would benefit the local people, the positive news were undermined by a
report stating that CPI hired approximately 10,000 workers from China
to build the dam (Myint-U 2011 , p. 111). Moreover, Chinese companies
imported all necessar y equipment and construction materials from China,
CHINA POWER INVESTMENT CORPORATION IN MYANMAR

134
depriving the Burmese of opportunities for investment-related industr y
development. The Myitsone Dam construction would have an uncertain
ecological and cultural impact on the local villagers. A massive reser voir,
almost the same size as Singapore, would be created as part of the project,
posing potential ecological threats to biodiversity and the livelihood of the
local people. Important historical and cultural relics that represent the
national heritage of Myanmar would be vulnerable, too. 12
Second, the project was strongly resented due to the lack of transpar -
ency and clarity. The CPI was found to hide the dangers and risks of the
project from the public. China actually conducted an EIA on the Myitsone
Dam in 2008 at the request of the Power Ministr y, but it was not disclosed
until the protests broke out in 2011. It was widely criticised for lacking an
‘alternative analysis’, proper consideration of downstream impact, the
cumulative impact of the seven dams, and the absence of social impact
assessment. It was found out later by the civil society groups that the
Chinese company had concealed the findings and suggestions by the
Burmese experts. Contrar y to the CPI’s official report, the Burmese
experts suggested replacing the Myitsone Dam with two smaller hydro -
power dams to preser ve the ecology. 13 The transparency also extended to
the land expropriation. While the CPI was not directly involved in the
forced relocation of villagers, it had links with the militar y government
because the negotiating process was exclusively government-to-
government and the public was kept in the dark. 14 The opposition against
Myitsone Dam soon intensified. According to Aung, the leaked report is
the flash point of public concern for the project. 15
The CPI president and party secretar y, Lu Qizhou, said in an inter view
that the suspension of the Myitsone Dam was not informed by the Burmese
government. 16 Even before the suspension, they were asked to accelerate
the construction. Lu also explained how CPI had followed the legal pro -
cess in China and Myanmar, how it had given full consideration to project
safety, environmental impact, and resettlement of displaced communities,
and how the economies of both countries would have benefited from the
dam. 17 The Burma Rivers Network (BRN) refuted Qizhou’s point and
stressed that CPI was late in releasing the environmental assessment report
and the process of resettlement was opaque. The Chinese company was
also reluctant to interact with NGOs. For example, Li Guanghua, the
president of China Power Investment (Yunnan), expressed that it was
unnecessar y to get in touch with NGOs. He said, ‘The environmentalists
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135
are all well-fed and clothed, they are not the ones who need to improve
their circumstances. There is no need to talk to them’. 18
Lastly, the construction of the dam heightened ethnic tension while
China’s business interests were hijacked by the internal conflicts of
Myanmar. The interests of the Kachin people in stopping the dam were
not only due to the environmental and social impact, but also due to ter -
ritorial control against the Tatmadaw. Myanmar’s militar y government
was seen as using the Myitsone Dam and other hydropower projects in
the Irrawaddy River to justify sending troops into the region. While con -
cerns over the dam building began as early as 2007 when it was just
announced, 19 the first sign of armed conflict came in 2010, when Chinese
workers died in the bomb blast at the site of the Myitsone Dam. 20 In
2011, the chairman of the KIO wrote a letter to the then president Hu
Jintao, warning that the Myitsone Dam project could even lead to civil
war in Myanmar. 21 While the issue between KIO and the militar y junta
was clearly a domestic affair, the Myitsone Dam became a rallying point
against invasive Chinese investments as their opinions were not included
in the state-to-state deals.
The building of the Myitsone Dam was not without its domestic rea -
sons. First, CPI was born from the reform of the China Power Corporation
in 2002. It operated as a central SOE directly under the leadership of the
State-owned Assets Super vision and Administration Commission of the
State Council (SASAC). This connection implied that the Chinese gov -
ernment had a major influence over the investment decisions of the
CPI.  The president of CPI Lu Qizhou would also be a member of the
National Committee of the Chinese People’s Political Consultative
Conference, which advised the National People’s Congress. Given
Qizhou’s position on the Committee, he enjoyed connections with the
government. Given such connections and the importance of energy
security, it would be no surprise that CPI invested in the Myitsone Dam
p roject. Yu Xiaogang, the founder of Watershed, referred to the domestic
state-business relations in a comment on the China model. China’s large
SOEs had significant resources and huge capital and this marginalised
private companies. SOEs enjoyed domestic monopoly and had no worries
about the costs of conducting CSR. They also did not have to worr y as
much as the private companies about the environmental and social impact
of their operations in Myanmar. 22
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136
Second, domestic competition led to the extensive hydropower ventur -
ing in Myanmar. In the past two decades, Chinese companies were
involved in the construction and investment in many dam projects as well
as power plants in Myanmar. For example, the China National Machiner y
Corporation signed three contracts with Myanmar to provide equipment
for generating electricity for the Kun and Kabaung Hydropower Plants
and also for the Yeya Hydropower Project. China’s Gezhouba Group par -
ticipated in the construction of hydropower projects in Yeya and Tasang as
well, while providing equipment for hydro-electricity generation to the
Papun, Shwe Gin, and the Tasang Hydropower projects. Li Guanghua,
the CPI’s president, explained the investments in Myanmar, ‘There are
over a dozen Chinese firms, including CPI, working on hydropower in
Myanmar …. we may be based in China, but we compete in Myanmar-
almost always with other Chinese firms, and fiercely’. 23
Behind each leading SOE, there were various subsidiar y Chinese com -
panies involved in the Myitsone Dam project. For example, in the Dapein
Power Plant project, the Sinohydro Corporation was in charge of the con -
struction, while the Datang Corporation and Central China Power Group
were investors. The Jiangxi Provincial Water Conser vancy Planning and
Designing Institute were in charge of the design and impact sur vey of the
project.
Third, the building of Myitsone Dam was a reflection of China’s belief
and experience of reliance on hydropower for its own domestic economic
development. By the same token, the development of the Myitsone Dam
would greatly benefit Myanmar’s economy and accelerate industrialisa -
tion. According to Li Guanghua,
The 10 percent of electricity given to Myanmar is equivalent to two gigawatts,
and the entire countr y only has three gigawatts of generating capacity. And if
that is not enough, CPI will give priority to meeting Myanmar’s needs…we
are just doing business and it is nothing but good news for Myanmar. Over a
centur y, there will be one trillion Chinese yuan of profit to Myanmar. 24
Given the importance and the amount of Chinese investment in the
Myitsone Dam project, the Chinese government inter vened by calling for
action from both CPI and Myanmar’s government. On the one hand,
while the Chinese government was aware of the negative impact of its
companies’ overseas activities and the need to improve corporate behav -
iour (McDonald et  al. 2009 ), the Chinese companies in charge of the
dam  construction and design failed to fulfil the international standard of
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137
environmental and social impact. The official guidelines on Chinese busi -
ness activities overseas gave the following warning:
China’s companies …should actively work with the local society participate
in social welfare and build some small projects benefiting the Myanmar peo -
ple, in order to get support from the places where the construction project
is located and to ensure China’s investments’ and projects’ steady and sus -
tained development. 25
On the other hand, the Chinese government urged Myanmar’s govern -
ment to address the suspension issue. Hong Lei, China’s spokesman for
the Foreign Ministr y, noted that the dam had undergone thorough exami -
nation by specialists in both countries, and urged Myanmar’s government
to ‘protect the legal and legitimate rights of Chinese firms abroad’.
According to Li Guanghua, Myanmar’s government did not accuse CPI
of not complying with the EIA and SIA procedures, and CSR implemen -
tation. He implied Myanmar’s government assured them that the
r esponsibility of suspension was not on the Chinese side, but rather it was
Myanmar’s own difficulty. 26
There were also voices demanding for the reassessment of the relation -
ship between China and Myanmar. They believed that the suspension of
the Myitsone Dam project was not due to the poor CSR standards imple -
mented by the Chinese companies. Instead, they held the internal political
conflict and ethnic conflict in Myanmar accountable for the Chinese loss.
They also believed that the suspension was indirectly caused by the Western
conspiracy to contain China by provoking tensions between China and its
neighbouring countries through supporting NGOs and media (Zhang
2012 ; Chu and Huang 2016 ).
The CPI thought that it was taking responsibility by following the
agreement with Myanmar’s government. Therefore, Chinese companies
tended to think that as long as they followed the domestic laws and rules
of Myanmar’s government, they would be acting as responsible investors
(Soe 2016 ). However, what most Chinese investors tended to overlook is
that the decades of dictatorship instilled in the Burmese people a deep
mistrust for their government. Any foreign company that would only deal
with the government but ignored the local society would be at risk of
condemnation from the Burmese people.
In fact, the sponsor of the Myitsone Dam project for CPI, China EXIM
Bank, failed to super vise the activities of CPI in terms of assessing the EIA
and SIA for providing loans. The CPI Yunnan conducted the EIA
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138
according to the requirement ( Guidelines for the EIA and SIA of China
EXIM Bank’s Loan Project of 2008 ) mandated by China EXIM Bank even
though EIA is not mandator y in Myanmar. 27 The Biodiversity and Nature
Conser vation Association (BANCA) said, ‘Regarding hydropower devel -
opment of Irrawaddy (Ayeyar wady) River, we should appreciate China’s
concern on EIA and should refer to their EIA procedure’. 28 However, it
proved that the Chinese company did not strictly follow the guidelines as
it was found out that the CPI also did not wait for the EIA to be finalised
before commencing construction and resettlement. Construction began
in December 2009, three months before the final EIA was reportedly
available to CPI from Changjiang Institute of Sur vey, Planning, Design
and Research (CISPDR) in March 2010. 29 Local people were asked to
relocate by the authorities at the start of the EIA while the SIA was omit -
ted during the resettlement. During the process of relocation, there was
no specific long-term arrangement for the local people’s living arrange -
ments (Soe 2016 , pp.  144–176) despite the fact that the company had
paid compensation to the villagers.
Although the Chinese institutional setting improved after the application
of environmental and social impact assessment, China EXIM Bank’s failure
to act as a super visor for the CPI implied that there was still a gap for actual
implementation. It was found that staff of financial institutions still viewed
environmental protection under the jurisdiction of the MEP in China and
the local government’s responsibility if the investment was overseas. 30 To
the Chinese banks, loan repayments outweighed issues such as environmen -
tal protection. Moreover, China EXIM Bank lacked accountability and
transparency in issuing loans. The CPI received the financial support from
the bank even before submitting the EIA and SIA reports. When protests
broke out, China EXIM Bank did not respond to questions.
To be fair, the CPI did carr y out certain forms of CSR, though mainly
in philanthropy and infrastructure building. From 2009 to July 2011, in
addition to the construction of new resettlement houses, the CPI donated
a large amount of study supplies and school uniforms to students,
malaria- preventive medical kits, television sets, allowances, as well as rice
and cooking oil to all the villagers affected. 31 Moreover, the Chinese
c ompany also built roads, bridges, telecommunication stations, hospitals,
temples, and churches for the resettlement of the local people. However,
the CPI failed to publicise its activities timely online until the suspension
of the Myitsone Dam project. Some people believed that Chinese compa -
nies lacked public relations skills in reaching out to the local people, taking
blame away from China’s inept CSR practice. Even Li Guanghua’s claim
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139
of ‘just do but not say it’ led to more misunderstanding towards Chinese
investments. 32
After the suspension of the Myitsone Dam project, the company’s offi -
cial website showed that its CSR activities became more diversified even
though philanthropic activities still dominated CSR implementation.
Their activities included the following:
• Flood relief: 33 In August 2015, the company contributed MMK 2
million to the disaster area and visited the Magway Region to distrib -
ute relief supplies together with the Chinese Embassy in Myanmar.
The CPI handed more than MMK 50 million of relief to the Ministr y
of Electricity of Myanmar despite the suspension of the dam project.
At the end of August, the company provided rice valued at MMK 4.2
million to two newly relocated villagers.
• Malaria disease investigation and medical ser vices: 34 The CPI
launched a 100 per cent malaria-eradication campaign in Myanmar.
By fumigation and providing malaria prophylactic drugs and mos -
quito nets at the project site, hotels, and other public areas, the med -
ical team achieved its goal. This is the fourth time in two years that
the company provided malaria-disease investigation and medical ser -
vices to the local population.
• ACHC Scholarship award ceremony: 35 The scholarship award cere -
mony was launched in 2013 in order to support education opportu -
nities for the local people. A total of MMK 5.61 million was awarded
to 163 students by the end of 2015.
With the suspension of the Myitsone Dam project, the Chinese govern -
ment and companies realised the importance of the ‘license to operate’ to
China’s overseas investment and thus the concept of CSR emerged in
Chinese investments in Myanmar. On 5 July 2013, more than 100 Chinese
companies that invested in Myanmar hosted a press conference and also
launched a proposal emphasising China’s CSR implementation in
Myanmar. In the proposal, the Chinese companies agreed to abide by the
bilateral laws and regulations, strictly implement investments based on
contracts, protect the environment, as well as enhance the employability
and safety of the labour force.
The Chinese companies started their own CSR efforts. The CNPC
formed the Friends of the Sino-Burmese Pipeline Association, liaised with
local community groups, and invited the civil society stakeholders to a meet -
ing in Beijing. The China  Nonferrous Metal Mining (Group)  Co., Ltd
CHINA POWER INVESTMENT CORPORATION IN MYANMAR

140
agreed to become a member of the multi-stakeholder group of the Myanmar
Extractive Industries Transparency Initiative (EITI) that is working to
implement the EITI in the countr y. Wanbao Mining began its environmen -
tal and social assessment by inviting an Australian consultancy company. The
CPI directly engaged different stakeholders, Myanmar militar y government,
the NLD, Kachin government, civil society groups such as 88 Generation
Students Group, the media such as 7Day Daily , and the general public such
as the representative of the villagers. Starting in early 2012, the CPI distrib -
uted pamphlets disclosing the design of the dam and the impact of the dam.
In April 2012, Lu Qizhou visited villagers in Kachin State to negotiate with
the environmentalists, and offered an extra year’s worth of free electricity
and rice in exchange for support for the project to continue.
As a Chinese company in Myanmar, the CPI was the first to release a
detailed CSR report. Despite the absence of the United Nations Global
Compact company (UNGC), 36 the CPI issued the 2010–2012 CSR
Report, borrowing the advanced standards of the UNGC and Global
Reporting Initiative (GRI). 37 In this report, the CPI acknowledged its
shortcomings in communicating and cooperating with the local society,
given the restrictions set by the militar y government. It also acknowl -
edged the negative impact of the dam project and provided scientific solu -
tions for crisis management. Moreover, the report provided detailed
information on a large number of areas such as project planning, environ -
mental protection, safety management, quality control, social security,
long-term vocational training for the relocated villagers, and employability
development. The Report even adopted the assessment from the third
party to increase transparency.
In October 2015, a company official from CPI commented that the
company already invested USD 800 million on the Myitsone Dam project
for the following: 38
• The soil and water flow assessment at construction sites for Myitsone,
Chipwe, Lasa, or Maliyan hydropower plants
• EIA for the total construction of dam sites
• A dam construction on the Chipwe stream that flows into the
Maykha River
• Relocation and compensation expenses for households living at
watershed areas after dam construction
• Miscellaneous expenses
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141
The Chinese representatives from NGOs such as Green Watershed
based in Yunnan also conducted investigations regarding the Myitsone
Dam project. The Chinese NGO GEI helped to arrange an informal visit
by a vice-minister from the Chinese Ministr y of Environment Protection
to attend a one-day workshop organised by EcoDev in Myanmar. As an
alternative to the state-to-state relationship, the citizen-to-citizen exchange
created a more transparent and acceptable mechanism for the information
exchange. Go Mingbo, the former head of the political section at the
Chinese Embassy in Myanmar, boosted the image of Chinese companies
by creating a Facebook account in Myanmar, even though Facebook is
blocked in China.
‘Meet-the-press’ gatherings and the CSR Report gained some positive
feedback. However, such attempts were made under the false assumption
that the problems faced by Chinese companies originated not with the
projects per se but with the lack of public understanding about these proj -
ects and the good deeds done by the Chinese companies. In other words,
Chinese companies assumed that the local resistance against Chinese oper -
ations in Myanmar can be traced to weak Chinese public relations skills,
civil society’s resentment against the Myanmar militar y junta, as well as the
provocation by Western NGOs. Such ideas were unlikely to win over the
local population.
In March 2016, 61 civil society organisations, political parties, and reli -
gious groups released a statement calling for a halt to all resource extraction
in Kachin State until conflicts were resolved. 39 At the same time, ethnic civil
society organisations and environmental activists with local communities
joined the International Day of Action for Rivers and Against Dams in the
eastern border where Chinese investments were involved in many projects
along the Salween River across Shan, Kayah, and Karen States. 40
To be fair, one should acknowledge that Chinese investments were
treated with bias by the civil society. Under-developed civil society in
Myanmar did not have the financial or technical resources in communicat -
ing and establishing a professional relationship with the government and
CPI. They also lacked knowledge on verifying news and sources regarding
CPI’s activities. Some organisations slandered CPI as participating in ille -
gal activities such as panning for gold or stealing livestock of the villagers
that are forbidden in Myanmar. When the CPI invited the local media and
conducted inter views to investigate the truth, CPI became a scapegoat. 41
Some Chinese inter viewees said given China’s vast scale of investment in
Myanmar, companies with Asian faces are easily mistaken as Chinese com -
CHINA POWER INVESTMENT CORPORATION IN MYANMAR

142
panies. The non-compliance of the local laws and regulations were the
result of Myanmar’s corrupted and backward investment environment.
But the local people remained unaware of the truth and thus only trusted
the Western media and NGOs, which aimed at containing China’s invest -
ment. 42 However, approaching communities with the idea that the
Burmese people are uninformed, ignorant, or pro-West will only further
damage the business reputation of Chinese companies.
Nonetheless, questions concerning the capability of Myanmar’s gov -
ernment in monitoring Chinese business activities arose, despite ongoing
political reforms. After Myanmar’s government established the Myitsone
Dam project investigation commission in 2016 and visited Myitgyinar for
inspection in September, 53 NGOs in Kachin State submitted a proposal
that had five statements requesting the committee to stop the Myitsone
project completely. According to the inter viewee, one of the reasons for
perpetual termination was that the local people had doubts about the
Burmese government’s financial, intellectual, and political capacity to
monitor the business activities. The roles of the governmental agency were
not yet defined as the government was still in the transitional phase.
Moreover, Myanmar’s government lacked the enforcement mechanism
for non-compliance. The local people believed that Myanmar still has a
long way to go in eradicating corruption in businesses.
conclus Ion
the uuupenuion of the myituone dco ptoject highnightu the need fot
chineue coopcnieu to decn with key weckneuueu in theit duuineuu ooden.
chineue weck csr petfotocnce wcu c teuunt of hecvy tenicnce on the cot -
tupted oinitct y tegioe, ncck of ttcnupctency, cnd iuonction ftoo the civin
uociety. chincu weck uupet viuion ftoo dooeutic inutitutionu cnuo hindeted
efcient csr iopneoentction.
the uuupenuion of the myituone dco ptoject hcd decooe c wctetuhed
fot chinc to utctt to wotk with diffetent uectotu in mycnoct, eupecicnny the
noccn cooounitieu cnd nGou. aoid the ttcnuition of mycnoctu govetn -
oent cftet the enection, ethnic conict, cnd dotdet utcdinity, ocny chcnnengeu
teocin. chineue inveutoentu wound continue to de uudject to the inutcdinity
of mycnoctu poniticu cnd itu nioited ccpcdinity in ctecting c fcit cnd ttcnu -
pctent envitonoent fot foteign inveutotu. onny concetted effottu in ioptov -
ing the csr uupet viuion cnd enfotceoent ftoo doth chineue cnd butoeue
uideu ccn enfotce uttict csr coopnicnce coong chineue coopcnieu.
X. GonG

143
not Es
1. fot excopne, http://dutoc.ittcwcddy.coo/ctticne/2014/03/06/55850.
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2. http://www.econooiut.coo/newu/cuic/21665030-chineue-tou-cte-
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3. chincu dcou: doth wencooe cnd wott ying, http://www.thenctioncn.ce/
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deutinction. the tut tcnking indiccteu the ucfeut whine the ninth iopnieu
the oout tiuky countt y. mycnoct iu tcnked eighth in the tepott.
8. the myituone dco on the Ittcwcddy rivet: a btieng, Intetnctioncn
rivetu, 28 septeodet 2011, httpu://www.intetnctioncntivetu.otg/
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9. http://www.ctioeu.coo/ctioeu/southecut_auic/nb07ae01.hton ,
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10. mycnoct affcitu, the ponn of ayeyct wcdy myituone hydtopowet ptoj -
ect, Myanmar Affairs Newsletter , http://www.myanmaraffairs.com/
mmaffairs2015/sites/default/files/poll_pdf/2011_Sur vey/Opinion%20
Poll%20on%20Ayeyawaddy%20Myitsone%20Dam%20Hydropower%20
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dam-0 , accessed 27 November 2015.
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the-irrawaddy-river-a-briefing-3931 .
14. BRN responds to inter view on Myitsone dam by CPI president, Mizzima
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15. http://burmese.dvb.no/archives/15756 , translated by a student in
Yunnan, accessed 19 December 2015.
16. President Lu Qizhou’s Answers to Media about the Suspension of
Construction of Myitsone Hydropower Station, 4 October 2011, CPI
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t20111004_163111.htm , accessed 27 November 2015.
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from-the-Irrawaddy , accessed 17 December 2015.
18. https://www.chinadialogue.net/article/show/single/en/4852-Chinese-
power-Burmese-politics , accessed 26 December 2015. Yang Meng, 2 April
2012.
19. Five anti-Irrawaddy dam detainees freed in Myitkyina, Kachin News
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five-anti-irrawaddy-dam-detainees-freed-in-myitkyina.html , accessed 13
December 2015.
20. Four killed, 12 injured in bomb blasts in Irrawaddy-Myitsone dam site,
17 April, 2010, Kachin News Group, http://www.kachinnews.com/
news/1512-four-killed-12-injured-in-bomb-blasts-in-irrawaddy-
myitsone-dam-site.html , accessed 13 December 2015.
21. KIO warns China: Myitsone Dam could spark ‘civil war’, May 20, 2011,
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23. Li Guanghua, in Meng, Y., Chinese Power, Burmese Politics. China Dialogue,
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24. Ibid.
25. Chinese Academy of International Trade and Economic Cooperation of
Ministr y of Commerce, Investment Promotion Agency of MOFCOM,
Economic and Commercial Counsellor’s Office of the Embassy of China,
Duiwai Touzi Hezuo Guobie Zhinan (Miandian), Guidelines for Overseas
Investment and Cooperation in Other Countries and Regions (Myanmar),
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November 2015.
26. http://www.cec.org.cn/xinwenpingxi/2013-08-16/107538.html ,
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28. http://burmese.dvb.no/archives/15756 , translated by a student in
Yunnan, accessed 19 December 2015. Aung 2011.
29. https://www.internationalrivers.org/resources/the-myitsone-dam-on-
the-irrawaddy-river-a-briefing-3931 , accessed 17 December 2015.
30. Personal communication, Beijing, 7–8 December 2015.
31. Canyu Gongyi Shiye, Lvxing Shehui Zeren, (Participate in Philanthropy,
Fulfil Social Responsibility), http://www.cpiyn.com.cn/Liems/site/
zeren/zerenNews.jsp?nid=6827 , accessed 15 April 2016.
32. Xinhua Wang: Chongqi Zhongmian Hezi Misong Dianzhan Husheng
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htm , accessed 29 December 2015.
33. Luo YongChan and Zhang Ruogu, Guojia Diantou Xiang Miandian
Shuizai Diqu Tigong Zhenzai Jiuzhu, “CPI participated in the
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34. Jituan Gongsi Jianxing ‘Yidaiyilu’, Zuo Fuzeren Quanqiu Gongmin, 16
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35. Ibid.
36. CPI was a member of UNGC in 2009. However, it was removed from the
membership in 2014 due to communication problems, https://www.
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147 © The Author(s) 2018
A. Arduino, X. Gong (eds.), Securing the Belt and Road Initiative ,
https://doi.org/10.1007/978-981-10-7116-4_8
CHAPTER 8
CSR as a Tool to Mitigate Risk for the B&R
Initiative: The Case of Thailand
Zhimin Tang
The Silk Road Economic Belt and the 21st Centur y Maritime Silk Road
policy initiatives (B&R Initiative) is a strong driver for Chinese firms ventur -
ing into more than 60 foreign countries. 1 Chinese Outward Direct
Investment  (ODI) in B&R countries amounted to US$50 billion from
2014 to 2016, and is expected to reach US$150 billion in the next five
years, one fifth of the total Chinese ODI in the world. 2 The risk and risk
management of these B&R investments attract increasing attention inside
and outside China. For example, at the World Economic Forum on ASEAN
2017, it was commented that “risks accentuated in B&R projects, particu -
larly from a geopolitical, funding and operational perspective” (Wijeratne,
D.  2017 ).
This chapter focuses on why and how Corporate Social Responsibility
(CSR) can be a tool to mitigate risks for Chinese firms involved in the
B&R Initiative. Following a widely accepted definition in the literature,
CSR here refers to the integration of an enterprise’s social and environ -
mental responsibilities into its operations and core business strategy in
cooperation with relevant stakeholders. In other words, its triple bottom-
Z. Tang ( *)
Panyahpiwat Institute of Management, Bangkok Metropolitan, Thailand
Prof. Dr. Tang Zhimin is the Dean of International College, and Director of
China ASEAN Studies, Panyahpiwat Institute of Management, Thailand.

148
line of economic, social and environmental performance (Rasche et  al.
2017 ; Aguinis et al. 2012 ; Crane et al. 2008 ; Lee, 2007 ; Windsor, 2006 ;
McWilliams et al. 2001 ). In the part of theoretical background, the ratio -
nal for CSR as a tool to mitigate the B&R risk will be established, followed
by the guidance of its implementation. The CSR performance of Chinese
firms overseas is then discussed with a case study of Thailand.
Theore Tical B ackground
Why CSR Could Mitigate the B&R Risks
In the literature of risk and risk management, risk of a firm could be under -
stood as the threat to the firm and the firm’s vulnerability to the threat
(Kytle et  al. 2005 ). The mitigation of the risk involves the management
system to create controls and countermeasures that minimize or eliminate
the threat and shorten the recover y time from disruption, thereby reduc -
ing its impact on the business.
The risk of B&R investment abroad can be analyzed with the STEP
framework of international business, in other words, the threats from the
Social, Technological, Economic and Political systems of the host coun -
tr y (Table  8.1 ). Beside direct impacts from the laws, regulation and
administrative decisions of the government, these threats may enter the
firm in concern through its interaction with its stakeholders of investors,
customers, employees, suppliers and NGO/civil society (Fig.  8.1 ).
CSR is relevant to B&R risk because the mismanagement of a Chinese
firm’s responsibility towards the environment and society of the B&R
countries may directly or indirectly evoke threats to the firm in  local
political, economic, social and technological systems through its interac -
tions with its stakeholders and local governments. For example, Corporate
Table 8.1 STEP framework of risk in international business
System Threats from
Political Change in laws, regulation and administrative decisions of government Economic Change in the market parameters: demand and supply, price of goods, ser vice and factors of production Social Change in structure, sentiment and behavior of social groups Technological Change in technology or adoption of technology
Source: Author’s compilation
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Social Irresponsible (CSI) behavior that damages local environments may
cause operations prohibited by government, boycott or low acceptance of
its products by consumers or disruption of its supply chain.
On the other hand, CSR programs may give a Chinese firm the “social
license” to operate, that is, local community’s acceptance or approval of a
company’s project or ongoing presence in an area. Moreover, the active
engagement with the local stakeholders for the firm’s social and environ -
mental responsibility may help to mitigate the STEP risks listed above by
receiving intelligence about what those threats are, and by generating an
effective means to respond to them.
According to Kytle et al. ( 2005 ), what a firm may learn from engage -
ment with local stakeholders through CSR may include: the issue or prob -
lem of a threat, its complexity and scope, the parties involved, the workable
approach to the problem and what would be accomplished by engaging
others in the dialogue.
The relevance of CSR to B&R risk could also be examined through the
looking glass of special drivers of CSR in developing countries (Visser
2008 ). Most B&R countries are indeed developing countries where social
and environmental crises are usually most acutely felt, and globalization
and economic growth are likely to have the most dramatic social and envi -
ronmental impacts.
Fig. 8.1 Entr y points of threats to a firm
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Following the analysis of Visser ( 2008 ), the Chinese companies involved
in B&R Initiatives should pay particular attention to CSR issues for mitigating
risks because of the special nature of the B&R countries as the following:
1) Cultural Tradition
The B&R countries may have deep-rooted indigenous cultural
traditions of philanthropy, business ethics and community
embeddedness.
2) Political Reform
The B&R countries are ver y often in the process of socio-political
reform, which would integrate business behavior with social and
ethical issues towards democracy and redressing the injustices of the
past.
3) Socio-economic Priorities
Most B&R countries are facing socio-economic development chal -
lenges, including poverty alleviation, health-care provision, infra -
structure development and education.
4) Governance Gaps
Many B&R countries are plagued with the “governance gaps” left
by weak, corrupt or under-resourced governments that fail to pro -
vide adequate social ser vices (housing, roads, electricity, health care,
education, etc.).
5) Crisis Response
Various kinds of crises in B&R countries may catalyze CSR responses.
These crises can be economic, social, environmental, health or
industrial related.
6) Market Access
Some least developed B&R countries may have a large untapped
market at the “bottom of the pyramid.” The CSR activities may
enable Chinese firms to access these segments.
How CSR Could Mitigate the B&R Risks
To mitigate the risks, a Chinese firm involved in the B&R Initiative may
follow the guidance of the theor y of neo-institutionalism to gain its legiti -
macy in a new environment with CSR activities through three mechanisms
(Matten et al. 2008 ):
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1) Coercive Isomorphism
Coercive isomorphism occurs when an organization is forced to
change by external forces such as governmental mandates or con -
tract law. A Chinese firm may follow the codified rules, norms or
laws in B&R countries.
2) Mimetic Process
The mimetic process refers to the tendency of an organization to imi -
tate another organization’s structure, where the environment is uncer -
tain. A Chinese firm may follow the “best practice” in their
organizational field, where the codified rules are not well established.
3) Normative Pressure
The normative pressure comes from the profession. A Chinese firm
may also follow the guidance set up by a third-party professional
authority.
ISO 26000 and GRI Sustainability Reporting Standards are two well-
established international standards for CSR practice and disclosure. The
ISO 26000 has seven core subjects covering “organizational governance,”
“human rights,” “labor practices,” “environment,” “fair operating prac -
tices,” “consumer issues” and “community involvement & development”
(ISO 2010 ). Table 8.2 lists the seven core subjects with examples of the
Table 8.2 Core subjects of ISO 26000
Core subjects Examples
Organizational governance (12) Commitment to social responsibility System of incentives Human rights (8) Discrimination and vulnerable groupsCivil and political rights Labor practices (5) Health and safety at workHuman development and training Environment (4) Prevention of pollutionSustainable resource use Fair operating practices (5) Anti-corruptionFair competition Consumer issues (7) Consumer data protection and privacyEducation and awareness Community involvement & development (7) Community involvementHealth
Source: ISO ( 2010 )
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standards. The numbers in parentheses in the first column indicate the
number of standards in each core subject.
The newly revised “GRI Sustainability Reporting Standards” is another
popular set of standards for CSR (GRI 2016 ). After a set of universal stan -
dards for the disclosure practice and management approach, it has three
topic-specific sets covering the triple bottom-lines of a firm: its economic,
environmental and social performance (Table 8.3 ).
Another approach for implementing CSR is to check each stage of the
value chain of a firm (Porter and Kramer 2006 ). The CSR issues should be
addressed in primar y activities such as inbound logistic, operations, out -
bound logistics, marketing and sales, and after-sale ser vices (Table 8.4 ), as
well as the supporting activity such as procurement, technology, HR and
firm infrastructure (Table 8.5 ).
Table 8.3 GRI sustainability reporting standards
Set Standards
Universal standards GRI 101: Foundation GRI 102: General DisclosuresGRI 103: Management Approach GRI 200: Economic 201: Economic Performance 202: Market Presence203: Indirect Economic Impacts204: Procurement Practices205: Anti-corruption 206: Anti-competitive Behavior GRI 300: Environmental 301: Material 302: Energy 303: Water 304: Biodiversity305: Emissions 306: Effluents & Waste307: Environmental Compliance308: Supplier Environmental Assessment GRI 400: Social 401: Employment 402: Labor/Management Relations403: Occupational Health and Safety 404: Training & Education405: Diversity & Equal Opportunity 406: Non-discrimination407: Freedom of Association and Collective Bargaining408: Child Labor 409: Forced or Compulsor y Labor410: Security Practices 411: Rights of Indigenous Peoples412: Human Rights Assessment 413: Local Communities414: Supplier Social Assessment 415: Public Policy416: Customer Health Safety 417: Marketing and Labeling418: Customer Privacy 419: Socioeconomic Compliance
Source: GRI ( 2016 )
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cSr of  chine Se firm S
CSR of Chinese Firms in the Literature
There are increasing interests in CSR of Chinese firms in the literature (Xu
et al. 2010 ). The earlier studies focused on the perception of CSR and its
drivers by Chinese firms in China (Wang et al. 2009 ; He et al. 2012 ), the
disclosure of CSR practice (Yao et  al. 2011 ) and linkage between CSR
practice and financial performance (Chen et al. 2011 ).
Table 8.4 CSR issues in the value chain of a firm (1)
Supporting activity CSR issues
Procurement Procurement practices (briber y, child labor, pricing to farmers) Use of particular inputs (e.g., fur), & natural resources Technology Relationships with universitiesEthical research practices (e.g., animal testing, GMOs)Product safety, conser vation & recycling HR Education & job training, safe working conditionsDiversity & discrimination, health care & other benefitsCompensation, layoffs Firm infrastructure Financial reporting practices, governance & transparencyLobbying for policy change, stakeholder engagement
Source: Adapted from Porter and Kramer ( 2006 )
Table 8.5 CSR issues in the value chain of a firm (2)
Primary activity CSR issues
Inbound logistics Transportation impacts (e.g., greenhouse gases) Operations Emissions & waste, ecological impactsEnergy & water usage, worker safety & labor relationsHazardous materials Outbound logistics Transportation impacts (e.g., greenhouse gases)Packaging disposal
Marketing & sales Truthful & suitable marketing & advertisingPricing practices (anti-trust, pricing for the poor)Consumer information & Privacy After-sales ser vice Disposal of obsolete products & consumablesCustomer privacy
Source: Adapted from Porter and Kramer ( 2006 )
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The difference in CSR perception and practice between Chinese firms
and Western firms operating in China was also scrutinized. Xu et  al.
(2010 ) found the unique dimensions of CSR perception of Chinese firms
such as “Increase job opportunities” and “Ensure social stability and
harmony.”
Tang et al. ( 2009 ) studied the difference between Chinese firms and
their Western counterparts in terms of “what” they do and “how” they
do it in CSR practice. The CSR activities are targeted towards com -
munity (with programs for youth and senior citizens, education, sports,
art and culture, development, disaster relief, environment conser va -
tion), customers (with programs for product quality and safety) and
employees (with programs for employee health and safety, welfare,
development and equal opportunity). The Western firms seemed to be
more active on programs for environment conser vation and product
safety. The CSR practices include company policy, CSR report, founda -
tion, volunteering, sponsorship, donation, award, partnership with
governments, partnership with NGOs and partnership with universi -
ties. The Western firms seemed to emphasize more on CSR policy and
report.
However, there are few empirical studies on CSR practice of Chinese
firms overseas besides some general description (Shen et al. 2016 ; Zhang
2015 ; Wu 2013 ).
CSR of Chinese Firms in Thailand
Thailand as a Case
Thailand boasts a strategically important position in the B&R Initiative. It
not only links the Silk Road Economic Belt to Southeast Asia, but also
bridges the 21st Centur y Maritime Silk Road from Pacific Ocean to Indian
Ocean. Following the B&R Initiative, many Chinese firms entered
Thailand and made it a regional center for markets in the continental
ASEAN. According to data from the Board of Investment (BOI), China
has become the second largest investor in Thailand in 2016, with approved
FDI of 54 billion Baht (around US$1.5 billion). 3
There are more than 3000 registered Chinese firms in Thailand. 4 Their
sectoral distribution covers: manufacturing (e.g., machiner y, cars and
motorbikes, electric and electronic (E&E) appliances, food and chemicals);
agriculture (e.g., rice, rubber, fruit farms); resource (e.g., lead recycling);
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infrastructure (e.g., roads and bridges, telecommunication); ser vice (e.g.,
banking, logistics and tourism); and real estate (e.g., industrial parks and
residences). As illustrated in the six case studies that follow, some of those
firms have started their CSR programs at different levels.
Framework and Methodology
This study on the CSR practice and performance of Chinese firms in
Thailand follows the grounded theor y approach; no prior framework or
hypothesis is set up before the case study of the six firms. Through several
rounds of inter views and field obser vation, several key concepts were dis -
tilled. In the end, a framework emerges based on which the research find -
ings are presented.
Six Chinese firms were selected for the case study based on their repre -
sentation for sectors, ownership structure and size. They are:
A. a multinational manufacturer for electric appliances
B. a marketing branch for electronic products
C. a small and medium-sized enterprise (SME) for processed food
D. a joint venture for infrastructure development
E. a real estate operator
F. a subsidiar y of a state-owned enterprise (SOE) in the financial sector
The six cases cover E&E, food, infrastructure, real estate and financial
ser vice. It reflects the sectorial distribution of Chinese investment
in  Thailand. There are joint ventures and subsidiaries of SOEs, large and
medium-sized publicly listed companies as well as a small private company.
After the qualitative analysis of the inter view and obser vation notes, a
4I model is constructed as a framework to describe the CSR of Chinese
firms in Thailand (Fig. 8.2 ). Their practice and performance are described
though four dimensions: “Intention” (how CSR is positioned in the firm);
Fig. 8.2 A 4I model for CSR practice and performance. Source: Author
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“Involvement” (how stakeholders are involved in CSR activities);
“Inter vention” (what CSR activities are conducted); and “Impacts” (how
CSR activities impact the firm).
Findings and Implications
It is found that in terms of their CSR activities, Chinese firms in Thailand
could be grouped in three levels with different features in the 4I model
(Table 8.6 ), supported by the evidence in the case examples (Table 8.7 ).
The letters A through F in parentheses in Table 8.7 correspond to the
six cases listed above.
Level One
The intention of CSR at this level is “philanthropy,” with CSR activities as
“ad hoc donations” normally initiated by the communities who will send a
request for such donations. For example, firms may donate money, books,
sports equipment or their products (like old TV sets) to schools or areas
devastated by flood. They may even sponsor sports competitions or initiate
“Clean Beach” programs to collect garbage. The firms achieve brand
awareness through good PR in news coverage. The donated products also
ser ved as advertisement for the firm. In some cases, the donation also
brings a tax advantage when the expenses can be double or triple counted.
Level Two
The intention of CSR at this level is “compliance,” with CSR activities
as  “systematic actions” to follow the good practice to comply with laws,
regulations or industrial standards normally initiated by the firms.
Table 8.6 Three levels in the four i model
Level Intention Inter vention Involvement Impacts
1 Philanthropy Ad hoc donation Community initiated Brand awareness Tax deduction 2 Compliance Systematic good practice Firm initiated Operational efficiencyBrand association 3 Strategy Built-in mechanismCompetency enhancement
Two-way communication Competitive advantageBrand loyalty
Source: Author
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For example, firms may voluntarily comply with the rules of government
in hiring foreign labors from neighboring countries, achieving zero dis -
charge of polluted water or responding to the government’s call for “local -
ization” to train and develop local staff. The positive impacts may be
operation efficiency as a result of energy saving or well-trained and happy
employees. Customers may also have a good brand association with these
firms who are environmentally friendly or society friendly.
Level Three
The intention of CSR at this level is “strategy.” In other words, CSR is a
built-in mechanism and is positioned as a strategic tool for the firm to
enhance its competitive advantage. For example, a formal department under
the name of Organization Development is set up to integrate CSR with the
strategy of the firm. New products are specially designed for local customers.
Product knowledge lectures (e.g., healthy food and knowledge about electric
appliances) are conducted to actively nurture the new customers. The
involvement with the stakeholders is normally a two-way communication,
with a project initiated with the inputs from both parties. The firms achieve
local-oriented innovation and extend and consolidate their customer base.
Table 8.7 Case examples of the three levels
Level Inter vention case examples Impacts case examples
1 Flood donations, book donations (A) Donation of TV sets, sports equipment to schools (B)Sponsor of GO competition (C) & (F)“Clean beach” initiative (F)
PR through news media (C)Donated products as advertisement (B)
2 Compliance to use foreign labor (C) & (E)Zero discharge of polluted water (C) & (E)Issue of radiation to environment (D)Localization: training & developing local staff (A)
Skilled & happy labor force (A)Energy saving with solar power (C)
3 Organization & communication department (A)New products for Thai consumers (low-voltage washing machine) (A)Product knowledge lecturing & activity nurturing new customers (A)Consumer education on healthy food (C)
Local-oriented innovation (A)Nurture new customer base to enhance competency (A) (C)
Source: Author
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As an overall assessment, most large Chinese firms in our case study
have achieved the first level of CSR.  The achievements at this level for
SMEs are uneven, possibly due to their unequal financial resources. Some
SMEs may not have adequate financial resources in their early stage of
development. The second level of CSR is partially achieved by large as well
as small and medium-sized Chinese firms. Some Chinese firms have started
to position CSR as a strategic tool to enhance their competitive
advantage.
It is also a consensus of the Chinese firms inter viewed that mismanage -
ment of CSR is indeed a risk for Chinese firms involved in B&R Initiatives.
In extreme cases, mismanagement may be a threat to the sur vival of a firm.
It would certainly be a threat to a firm’s market share and profit, as well as
future development opportunity.
In terms of impacts on business, the case studies show the benefit of
CSR could var y from “brand awareness” and “tax deduction” (at philan -
thropy level), to “operational efficiency” and “good brand association” (at
compliance level), and towards “competitive advantage” and “brand loy -
alty” (at the strategy level).
The adoption of CSR by Chinese companies in Thailand may be also
traced back to the political, economic and social backgrounds of the coun -
tr y (Visser 2008 ). The cultural traditions of philanthropy, the governance
gaps to provide adequate infrastructure, the transition towards poverty
relief and inclusive development create necessity and opportunities for
CSR activities for Chinese companies.
conclu Sion
Thg rism anf rism managgmgnt of B&r invgstmgnt attracts incrgasing attgn -
tion insifg anf outsifg china. cSr is rgngvant to B&r rism bgcausg thg
mismanaggmgnt of a chingsg rms rgsponsibinity towarfs gnvironmgnt
anf socigty of thg B&r countrigs may firgctny or infirgctny gvomg thrgats to
thg rm in  nocan ponitican, gconomic, socian anf tgchnonogican systgms
through its intgractions with its stamghonfgrs anf nocan govgrnmgnts.
Thg activg gngaggmgnt with thg nocan stamghonfgrs through cSr activi -
tigs may hgnp to mitigatg thg risms by rgcgiving intgnniggncg to ifgntify thg
thrgats, anf by ggngrating an gffgctivg mgans to rgsponf to thgm. in this
rggarf, intgrnationan cSr stanfarfs nimg iSo 26000 or gri Sustainabinity
rgporting Stanfarfs may hgnp chingsg rms to pnan anf fiscnosg thgir
cSr activitigs to covgr gvgr y stagg of thgir vanug chain. efforts havg bggn
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159
made for setting up CSR standards for certain industries in China (Zhang
et al. 2017 ). It is suggested that such standards or similar standards based
on the CSR practice of overseas Chinese firms should be adopted, and
platforms for exchanging the information on demand and supply of CSR
activities and CSR best practices should be enacted.
The case studies of Chinese firms in Thailand show that some Chinese
firms, especially SOEs, have understood and indeed engaged in CSR activ -
ities overseas. They are advised to move from the “philanthropy” level
towards the “compliance” and “strategy” levels of CSR. CSR is a critical
factor for the B&R Initiative as it is a license for Chinese firms to operate
and thrive, a component of China’s soft power in the world.
noTeS
1. in thg Vision anf actions on Jointny Buinfing Sinm roaf economic Bgnt
anf 21st cgntur y maritimg Sinm roaf issugf by thg ministr y of forgign
affairs anf thg ministr y of commgrcg of china in 2015, thg ggographic
covgragg of B&r countrigs is fgngf as: Thg Sinm roaf economic Bgnt
focusgs on bringing toggthgr china, cgntran asia, russia anf europg (thg
Bantic); ninming china with thg pgrsian gunf anf thg mgfitgrrangan Sga
through cgntran asia anf Wgst asia; anf conngcting china with Southgast
asia, South asia anf thg infian ocgan. Thg 21st cgntur y maritimg Sinm
roaf is fgsigngf to go from chinas coast to europg through thg South
china Sga anf thg infian ocgan in ong routg, anf from chinas coast
through thg South china Sga to thg South pacic in thg othgr.
2. data of ministr y of commgrcg, china quotgf in 一带一路 ”投资大数据
(Big Data of B&R Investment) in 北京商报 (Beijing Business Today) May
17, 2017.
3. BOI Thailand 2017: FOREIGN INVESTMENT FROM MAJOR
COUNTRIES The figure is the FDI from China (excluding Hong Kong
and Taiwan), approved by BOI.
4. Data from “Chinese Thai Enterprises Association”.
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163 © The Author(s) 2018
A. Arduino, X. Gong (eds.), Securing the Belt and Road Initiative ,
https://doi.org/10.1007/978-981-10-7116-4_9
CHAPTER 9
China, Securing “Belt and Road Initiative”:
Risk Management
HaoMing Zhou
China ’s international expansions : C onstru Ction
proje Ct C ontra Cting and  dire Ct investment
China’s international expansion in the form of construction project con -
tracting and foreign direct investment has progressed significantly in the
last 10 years.
Estimated by a leading global reinsurer Swiss Re, 1 the requirement for
infrastructure development in Belt and Road countries between 2015 and
2030 is about USD 20 trillion, equivalent to about 3 percent of the GDP
collectively. China will be the leading provider of the funding and con -
struction capability.
Construction Project Contracting
According to the Ministr y of Commerce, Chinese contractors have com -
pleted projects abroad with the revenue of USD 159 billion in 2016, of
which 48 percent is from the Belt and Road countries. According to the
Engineering News-Record (ENR), seven of the top 10 global contractors
are from China, and China has the largest numbers of contractors listed in
H. Zhou ( *)
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164
the Global Contractor 250, and has achieved revenue of USD 95 billion
collectively. In 2007, the highest revenue ranking of a Chinese contractor
was 14th and there were 49 contractors among the Global Contractor
225, with total revenue of USD 7.6 billion.
There are various kinds of risks associated with project contracting.
Many Chinese contractors often tr y to bid using a low-price strategy.
Some bidding prices were based on their experience from their practice
back in China (such as labor and material cost), which is not necessarily
applicable in other countries. Some countries require employing all or a
certain percentage of labor forces in the countries where the labor cost
could be much higher than the cost of using Chinese labor. Some con -
tracts have appointed the designers for some sub-contracts; as such, the
costs of the sub-contracts are often influenced by the designer appointed.
When a Chinese enterprise bids for the Engineering, Procurement,
Construction (EPC) Contractor, without knowing the hidden cost of
some sub-contracts, it would possibly bid at an inadequate price. The
only way to avoid bidding at inadequate price is knowing, before bid -
ding, the exact cost (material and labor) and the law and regulations
around the material and labor supply in the project countr y. This can be
achieved by engaging the relevant professional ser vices in the project
countr y.
China Railway Construction Corp., the builder of more than half of
China’s railways, was booking a loss of RMB 4.1 billion on its Mecca
Light Rail Project, which is 18 kilometers of track linking religious sites
around Mecca and Medina in Saudi Arabia, pending compensation talks
with the project owner. 2 After the construction contract was signed, the
project owner raised planned capacity, changed other instructions and
delayed land purchases. China Railway Construction, as the contractor,
had to add resources to ensure on-time completion. China Railway was in
negotiations with the owner for the compensation for the aforementioned
variations. It is unknown if the loss fully resulted from the owner’s varia -
tions and ultimately recovered from the owner, or only partially recovered
due to the underprice bidding by the contractor. The truth is probably
somewhere in between. This is the largest loss Chinese enterprises have
ever suffered from an overseas project.
Underprice bidding for international projects is often an outcome of
the competitions between Chinese companies. China South Locomotive
& Rolling Stock Corporation (CSR) and China North Locomotive and
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165
Rolling Stock Corporation (CNR) had similar market shares in China and
had competed often for the same tendering, mainly on price, for the rail -
way projects in the international markets. They were merged in 2015, and
it was considered a good move for China as it enhances their market influ -
ence and eliminates “internal” price competition.
Foreign Direct Investment (FDI)
In 2004, China State Council issued “Decision on Investment System
Reform,” 3 which formalized the market-oriented investment system
(instead of the government-driven approach). This policy, together with
other government policies thereafter, clearly defined the different roles
between the government and the enterprises (one super vising and the
other investing) and helped to establish a formal platform of Chinese over -
seas expansions.
According to the Ministr y of Commence, China’s FDI during 2015
of USD 146 billion was historically high and ranked the second highest
FDI after the United States (USD 300 billion). The accumulative FDI
(i.e., “stock”) is almost USD 1100 billion, ranking 8th. In 2005, the
FDI outflow was only USD 12 billion and the stock was USD 57 billion.
The Belt and Road Initiative will further fuel the expansion in the tar -
geted geographic areas (more than 60 countries) and the targeted
segments— infrastructure including natural resources, energy, road, rail -
ways and so on.
There are different reasons for China to make FDI. It could be consid -
ered to secure natural resources for China, to avoid trade barriers by estab -
lishing a manufacturing facility for domestic consumers and to secure
international market shares. Ultimately, the objective is to achieve financial
profits.
Some of the FDI, such as a greenfield manufacturing facility or energy
facility, is constructed by Chinese contractors; as such, the construction
part of the FDI has the same risk exposure as construction project
contracting.
More and more project tendering favors construction contract bidders
who provide or help source full or partial project financing. There are
increasing numbers of projects awarded to Chinese contractors with proj -
ects financed partially from China. Chinese enterprises will face risks asso -
ciated with both categories of project contracting and FDI.
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The risk landscape of construction project contracting and direct invest -
ment can be better understood through the following risk categories and
the risks can be best dealt with under a risk management framework.
the risk lands Cape
tje Belt apd road coupttieu tepteuept oote tjap 60 petcept of tje
wotld’u populatiop apd oply about 30 petcept of tje wotld’u gtouu
dooeutic ptoduct (gdp). tjey ate ooutly developipi coupttieu at tje
political, uocial apd ecopooic ttapuitiop pjaue. tje upcettaipty ip uecutity,
ipadequate political iovetpapce apd developoept ditectiop cooooply
ptevailu ip oout of tjeue coupttieu, patticulatly ip uooe coupttieu ip tje
middle eaut, nottj aftica, Cepttal auia apd soutj auia.
Political Risks
Terrorism, political violence, armed conflicts and anti-establishment polit -
ical movements are in the categor y of political risks, and we have witnessed
their continuous growth in both emerging and developed countries. For
example, the Islamic State (IS) is not only in Iraq and Syria, but also
expands its presence in North America, Europe and Asia.
Many multinational risk professionals are reasonably well equipped
with knowledge and skills for some of these threats. Chinese enterprises
and workers are increasing their awareness and developing such skills.
According to “Sustainable Overseas Development of Chinese Enterprise
2015,” 4 the higher the investment level and the longer experience of
investment practice, the better the risk management capability of Chinese
investors. The companies with individual investment exceeding USD 100
million are doing noticeably well in all aspects of risk management. It is
not difficult to understand this sur vey outcome as risk management
requires resources and professionals that smaller companies may not con -
sider necessar y.
Chinese contractors had about 50 large construction projects in Libya
with a contracting value of USD 18 billion before the war in 2011 (accord -
ing to the Ministr y of Commerce of China). Political risk insurance claims
of only USD 130 million were recovered, according to the China Export
and Credit Insurance Corporation (SINOSURE). The total losses of the
Chinese contractors are unpublished, but it can be estimated that a large
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number of projects were uninsured for the specific political risks because
this type of insurance is not mandator y.
Financial, Legal and Operational Risks
The global financial segment is heavily impacted by the quantitative easing
in Europe and Japan, the interest rate hike in the United States and other
possible geo-political events (such as the potential conflict in the Korea
peninsular, Middle East, or the South China Sea).
Financial Risk is a term for types of risks associated with financing, typi -
cally including risks of interest rate, credit and commodity price. These
risks are quite obvious in any international trading and investment.
Legal Risk is the risk of financial or reputational loss that can result from
lack of awareness, misunderstanding of, ambiguity in, or uncertainty of
the way law and regulation apply to the business, its relationships, pro -
cesses, products and ser vices. Typical examples are heavy expenses of liti -
gation and change in law that makes a project or investment void or not
executable.
Operational Risk is the risk of financial or reputational loss caused by
inadequate or failed internal processes, people and systems. Some will put
external events, including legal risk, under this categor y. Operational risk
in projects starts from project design, construction and operation. These
risks are not specific to Belt and Road countries, but Chinese operations in
the Belt and Road countries would have higher risks in comparison to the
operations by local people. The Chinese would probably not be able to
understand “local elements” as well as the local people because of, for
example, the difference in language or in culture.
Geo-Risks (also Often Called Act of God)
Geo-risk includes earthquake, cyclone, typhoon and flooding, which are
not specific to the Belt and Road countries, but is part of the consider -
ations for the investment location.
The Chinese know the natural hazards in China well, but some compa -
nies do not know these risks in other countries.
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risk m anagement
Risk management is the identification, assessment and prioritization of
the effect of uncertainty on objectives followed by coordinated and eco -
nomical application of resources to monitor, minimize and control the
probability and/or impact of unfortunate events or to maximize the real -
ization of opportunities.
The risk management process consists of the following elements (in the
following order): Identify, characterize threats; Assess the vulnerability of
critical assets to specific threats; Identify ways to reduce those risks; and
Transfer and retain residual risks.
Risk Identification
Risk identification is the starting point for the risk management process to
determine what risks or hazards exist or are anticipated, their characteris -
tics, and remoteness in time, duration period and possible outcomes.
The significance of individual types of risks differs from countr y to
countr y, for example, environmental risks in North America are more
costly than say in a developing countr y. Political instability in some African
countries is a bigger concern than in some other countries.
Different risks require different risk identification methods. Here are
some examples.
Geo-Risks
Geo-hazards are assessed in feasibility study reports, but the risk of earth -
quake, storm, flooding and so on is also available from public information.
The leading reinsurer, Munich Reinsurance Company, has online inter -
active tools to assess natural hazard risks by inputting a location. Most
project companies engage consultants, and the project geo-risks are ana -
lyzed in a project feasibility study report.
Political Risks
Maps are available from the global leading firms for risk management,
Marsh and Aon. Marsh publishes Political Map, which provides the overall
risk scores based on three categories of risk—political, economic and
operational—and reflect both short- and long-term threats to stability.
The Aon Political Risk Map examines political risk in 162 emerging econ -
omies, considering risks through nine types of risk, namely: exchange
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transfer, sovereign non-payment, political interference, supply chain dis -
ruption, legal and regulator y risk, political violence, risk of doing business,
banking sector vulnerability and inability of government to provide
stimulus.
Kidnaping, Ransom and Extortion
These risks are increasingly and particularly high in less political-stable
countries such as in some countries in the Middle East and Africa. It is
often more important to reduce and manage the risks to our people than
to our assets. Specialist risk management firms such as Terra Firma Risk
Management produces the Kidnapping Map, and NYA International pub -
lishes the Kidnap and Piracy Map.
Risk Assessment
Risk assessment is the determination of quantitative and/or qualitative
estimate of risk related to a defined situation and a recognized hazard.
Quantitative risk assessment requires calculations of two components of
risk: the magnitude of the potential loss and the probability that the loss
will occur.
Methods for risk assessment may differ between industries and whether
it pertains to general financial decisions or environmental, public security
or health risk assessment.
Here are some examples of well-known risk assessment methods.
HAZOP and Fault Tree Analysis
Hazard and Operability Study (HAZOP) was initially developed in the
1960s to analyze major chemical process systems, but has since been
extended to other areas, including mining operations and other types of
process systems and other complex systems such as nuclear power plant
operation. It is a structured and systematic (qualitative) examination of a
complex process or operation in order to identify and evaluate problems
that may represent risks to personnel or equipment.
Fault Tree Analysis (FTA) is a top-down, deductive failure analysis in
which an undesired state of a system is analyzed using “false or true”
logic to combine a series of lower-level events. This analysis method is
mainly used in the fields of safety engineering and reliability engineering
to understand how systems can fail, to identify the best ways to reduce
risk or to determine event rates of a safety accident or a particular system
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170
level (functional) failure. FTA is used in the aerospace, nuclear power,
chemical and process, pharmaceutical, petrochemical and other high-haz -
ard industries.
When the critical hazard is identified through HAZOP, the undesirable
state can be further analyzed through FTA.
Total Risk Profiling
This is no standard terminology, but often it represents a systematic
approach to addressing an organization’s major exposures. It delivers a
comprehensive assessment of business objectives, the associated chal -
lenges and the mitigation strategy to help you identify, prioritize and
manage business risks across your enterprise. It is often conducted by a
consultant.
In the insurance community, a similar process is engaged, but focusing
on insurable risks, to determine the key risks, understand their financial
impact and determine the optimal insurance requirement for the
organization.
Different risk assessment methods normally apply to different types of
risk. The risks around the Belt and Road Initiative can be quite different
from the risks in other countries. Political risks, social unrest and kidnap -
ping risks are in practice easy to identify, but not easy to assess and reduce.
Risk Reduction
Risk reduction is either to reduce the probability or the undesirable con -
sequence of the event.
Safety and risk management has been a key focus in the Chinese policy
for outbound investment. Out of the 33 government polices from 2000,
eight of them are related to Safety of Personnel and Production. 5 For
example, China’s Ministr y of Commerce published “Safety Risk Early
Warning and Information Reporting System” 5 in 2010 to establish the
system of early warning and information communication for the security
risks in outbound investment.
For example, good intelligence and security will reduce the probability
of terrorism and sabotage. Stronger construction will reduce the causality
or property damage from earthquakes, and sprinkler systems could contain
and extinguish the fire spread, but both are unable to eliminate the prob -
ability of the events.
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An important step in the risk assessment and reduction for the Belt and
Road projects is the approval of project financing. Most of the insurance is
driven by the lenders’ requirement, and is ver y comprehensive. Some
Chinese banks have less restrictive requirements for project financing than
most multinational banks and some banks have less restrictive require -
ments for public projects than for private projects. There are various rea -
sons for this including inadequate awareness and less comprehensive
internal procedures. When the projects are important for a bilateral rela -
tionship with the Belt and Road countr y, Chinese state-owned banks may
exercise some flexibility in risk management.
Different types of risks can be dealt with by different types of risk reduc -
tion methods; some examples are provided as follows.
Due Diligence
Due diligence is a term used for involving either the performance of an
investigation of a business or person, or the performance of an act with a
certain standard of care. It is more commonly applied to voluntar y inves -
tigations. In particular, due diligence is a process through which a poten -
tial acquirer evaluates a target company for acquisition. Due diligence is
often performed by the specialists from within the potential acquirer or
from external sources.
Specialist risk management firms such as Terra Firma and NYA
International help the clients to review the risks of the operational envi -
ronment, provide risk management solutions and deal with the incident/
crisis when it occurs.
Natural Hazards
These are also called “Acts of God” and include disasters such as earth -
quakes, tsunamis, hurricanes and typhoons, floods and inundations. Risk
reduction aims to reduce socio-economic vulnerabilities to disaster as well
as deal with the environmental and other hazards that trigger them. The
United Nations Office for Disaster Risk Reduction (UNISDR) was cre -
ated in December 1999 to ensure the implementation of the International
Strategy for Disaster Reduction. In addition, there are similar national
strategies. For enterprises, the risk reductions are about to select the loca -
tion of investment at less hazardous area, to apply minimum construction
codes.
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Fire Risk Management Programs
Fire, next to natural hazards, is another major cause of losses. As such,
many risk management programs in the insurance community are fire-
prevention focused, such as fire protection equipment inspection and pre-
emergency planning.
Emergency Response Plan and Crisis Management
An emergency response plan or crisis management system is also part of
risk reduction. It effectively prevents, controls or mitigates the occurrence
of accidents and reduces bodily injuries and financial losses. Terra Firma
and NYA International provide crisis management ser vices to clients and
design a strategy to deal and negotiate with the parties on behalf of the
client until a conclusion is reached. They have in many instances reduced
the risk of bodily injur y and financial losses.
In contrast to risk management, which involves assessing potential
threats and finding the best ways to avoid those threats, crisis management
involves dealing with threats before, during and after they have occurred.
Contractual Obligations
Contractual obligations are negotiable before the contract is agreed upon.
Each party wishes to maximize the responsibility and obligation of the
other parties in the contract, and the parties who understand the relevant
rules and practices well will have an advantage in the negotiations.
A public-private partnership (PPP) practice is a good example. Different
governments play different roles in PPP projects depending on the types
of projects. The obligation, willingness and effectiveness of the govern -
ment to reinforce a PPP contract differ.
Often, different terms are used in PPP contracts such as “exert due care
to, on a best effort basis, be obliged to, be responsible, warrant.” If they
are the requirement to the government, it is better to use the term requir -
ing the highest levels of engagement possible. The best practice is to have
the government be on the panel of investors (it is the case for many PPPs
in China); as such, the government will be more proactive in executing the
project and there is a better chance for the project to be successful.
Commercially we see Chinese enterprises shift their international
engagement from EPC to BOT (Build–Operate–Transfer) or
PPP.  Inadequate funding for infrastructure projects, which is often the
case in the Belt and Road countries, leads some owners to invite some
Chinese enterprises to invest (BOT) or to jointly invest (PPP). The risk
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exposure landscape to BOT or PPP participants is much broader than to
EPC, as BOT or PPP involves operations to produce revenue and profit
over a long period of time, which are subject to the law, regulation and
market risks. The risks around PPPs are the highest as it involves with deal -
ing with other PPP partners.
Risk Transfer and Retention
Risk can be reduced, but not always possible to be eliminated. The resid -
ual risks are dealt with by risk transfer and retention.
An acceptable risk is a risk that is understood and tolerated, usually
because the cost or difficulty of implementing an effective countermeasure
for the associated vulnerability exceeds the expectation of loss. If the resid -
ual risk is acceptable, it would be the best to retain it.
Insurance is the most common and effective vehicle for risk transfer.
There are deductibles in monetar y amount and/or as percentage of the
loss and exclusions for insurance coverage, which are risks to be retained
by the insured. Insurance policy deductibles and exclusions are required
for careful review to ensure the insured is able to retain these risks.
Basically all types of risks can be insured to a certain extent. The follow -
ing insurance types are most relevant to China’s international expansions.
Insurance was not on the priority list for SOEs; still only basic insurance
coverage is bought today. But it is getting better as the bank’s requirement
and tight scrutiny in case of incidents not insured. PPP is a good example,
where the lenders require much boarder coverage than BOT or EPC proj -
ects to deal with bigger risks.
Political Risks
The following insurance is only offered by SINOSURE China according
to the current insurance regulation:
Overseas Investment Insurance covers loss of capital and realized earn-
ings directly caused by expropriation, restriction on transfer and conver -
sion, war damage, liability to operate due to war and breach of
understanding (political risks in host countr y). It consists of Equity
Insurance and Credit Insurance.
Overseas Investment Equity Insurance is for the shareholders and
Credit Insurance is for the financial institutes (such as the bank) for its
loan overseas. A variation is Overseas Leasing Insurance, which is to pro -
tect a company leasing its equipment overseas.
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174
Export Credit Risks
Export Credit Insurance is used to protect against the default of payment
due to certain political and commercial risks. The lending bank is insured
and the policy holder can be an exporter or a lending bank.
Political Risks and Mid- to Long-Term Credit Insurance is more or less
monopolized by SINOSURE in the Chinese market.
Political insurance is also provided by other foreign (re)insurers such as
Lloyd’s, but they often have little risk appetite for certain unstable coun -
tries and for investment in some industries.
Terrorism and Sabotage Risks
Terrorism is, in its broadest sense, the use of intentionally indiscriminate
violence as a means to create terror or fear, in order to achieve a political,
religious or ideological aim. Various legal systems and government agen -
cies use different definitions of terrorism in their national legislation.
In practice, one organization or individual may be identified and
announced as a terrorist by one government, but not by another govern -
ment, often for political reasons.
The international insurance community has formulated a standard defi -
nition: “an Act of Terrorism means an act or series of acts, including the
use of force or violence, of any person or group(s) of persons, whether
acting alone or on behalf of or in connection with any organisation(s),
committed for political, religious or ideological purposes including the
intention to influence any government and/or to put the public in fear for
such purposes.” 6,7 “An Act of Sabotage means a subversive act or series of
such acts committed for political, religious or ideological purposes includ -
ing the intention to influence any government and/or to put the public in
fear for such purposes.” 8
Kidnap and Ransom
The typical perils are kidnap, extortion, wrongful detention and hijacking,
and the insurance provides financial reimbursement for the loss incurred
for ransom demand, negotiator costs and medical care. Access to specialist
response consultants who offer support to the crisis management team
and the victim’s family through an incident can be provided.
Warranty and Indemnity Risks
Warranty and Indemnity Insurance can help bridge the gap between a
buyer and seller (of a mergers and acquisitions deal) and benefit both with
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175
the policy helping protect against financial loss as result of a breach of war -
ranty in the mergers and acquisitions contract.
Construction and Delay in Start-Up Risks
Construction Insurance covers any direct and sudden physical loss of or
damage to the Property Insured , which the Insured could not reasonably
have foreseen and which occurs at the construction site during the Period
of Insurance due to any cause not specifically excluded. The policy period
runs from the commencement date to the completion of the project
construction.
The Delay in Start-Up policy indemnifies a loss of gross profit and/or
other associated charges when the project completion is delayed as it suf -
fers indemnifiable loss or damage under Construction Insurance.
There are key exclusions under these insurances; terrorism is one of
them.
Cargo and Delay in Start-Up
Project Cargo Insurance covers any damage to the project cargo from the
time of departure from the manufacturer to the project warehouse due to
any cause not specifically excluded.
The Delay in Start-Up policy indemnifies a loss of gross profit and/or
other associated charges when the project completion is delayed as it suf -
fers indemnifiable loss or damage under Project Cargo Insurance.
Property and Business Interruption Risks
Property Insurance covers any direct and sudden physical loss of or dam -
age to the Property Insured , which the Insured could not reasonably have
foreseen and which occurs. This is normally an annual insurance policy.
Business Interruption Insurance indemnifies a loss of gross profit and/
or other associated charges when the business is interrupted and suffers
indemnifiable loss or damage under Property Insurance.
More and more Chinese insurance companies have placed great impor -
tance on the Belt and Road Initiative and have provided insurance prod -
ucts and other ser vices to the risk under the Belt and Road Initiative.
However, many of them had little experience in doing so overseas, and
some are competing with low-price strategy. In order to avoid a loss-
making outcome, some companies have started working with the interna -
tional (re)insurance community in terms of insurance terms, risk
management and client ser vices.
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176
It is a natural progression for the Chinese insurance companies to fol -
low their clients’ international expansion. It has been the approach for
many global companies and some of the Japanese and Korean companies
as well.
Insurance and Reinsurance Community
The insurance communities are interlinked globally. When an insurance
company considers a risk bigger than its under writing capacity (which is a
function of its paid-up capital), it normally turns to reinsurance companies
for reinsurance.
The Chinese insurance market enjoys support from the global reinsur -
ance community despite the difficulty of making some profit for the rein -
surers. The global reinsurance companies are struggling with their business
growth other than in the emerging markets. China’s non-life insurance
market has grown its premium income significantly to RMB 1,351 billion
in 2016 8 and become the second largest market after the United States,
according to Swiss Re Sigma (while the premium was only RMB 109 bil -
lion in 2004). China has been the growth engine for many reinsurance
companies in terms of premium income, but not necessarily in terms of
profit.
Reinsurance is in business to make profit. When the underlying insur -
ance terms are too competitive, and could lose money, the reinsurer suf -
fers loss too. The reinsurers will request better insurance terms, which will
then push up the price for insurance and ultimately the insured will have
to pay bigger premiums.
The global capital market has been flooded with cheap capital in the last
many years; as such, the capital return expectation has not been high. The
capital market will require better return as the interest rate increases, and
it will transpire in the insurance community to push up the premium rates.
Con Cluding C omments
globalizatiop of ftee ttade iu limely to uuffet a uetbacm, tje Belt apd road
ipitiative to ptooote ttade apd ipveutoept jau becooe tje oaip fotce to
coptipue ilobalizatiop. tjat iu wjy tje ipitiative iu aluo welcooe by coup -
ttieu beyopd tje Belt apd road.
Cjipa iu playipi ap ipcteauipily iopottapt tole to lead tje wotld eco -
pooically, apd a uoupd tium oapaieoept ftaoewotm apd ptactice will
epuute a uuutaipable developoept fot Cjipa apd fot tje wotld.
h. Zhou

177
Insurance is not only a mean to transfer risks, but often requires sound
risk management by the insured. Chinese domestic insurers, despite the
huge market premium (the majority from simple motor insurance), offer
standard insurance products, while the multinational insurers and reinsur -
ers offer many specialty insurance products and relevant risk management.
Specialty insurance products such as political risk, kidnapping, and Delay
in Start-Up for BOT or PPP are much more required for the Belt and
Road projects than the projects domestically.
The cooperation between Chinese domestic insurers and multination -
als under the Belt and Road Initiative helps the Chinese enterprises (the
insured) and Chinese insurers in terms of risk management and specialty
insurance products. This, in turn, will further promote good risk manage -
ment and sophisticated insurance products in China.
notes
1. iptet view of jaype plupmett auia head of swiuu reipuutapce Coopapy by
Cjipa ecopooy Weemly, jupe, 2017.
2. Cjipa railway Coputtuctiop Cotp lipi 25 oct 2010 to hopi kopi
excjapieu apd Cleatipi Co.
3. 2004 Cjipa state Coupcil iuuued deciuiop op ipveutoept syuteo refoto
.《国务院关于投资体制改革的决定》国发 [2004]20 号.
4. Sustainable Overseas Development of Chinese Enterprise 2015 《2015 中国
企业海外可持续发展报告》 .
5. Safety Risk Early Warning and Information Reporting System 2010 《对外
投资合作境外安全风险预警和信息通报制度》 .
6. NMA2918 Lloyd’s Under writers’ Non-Marine Association (a business and
employers membership organizations).
7. LMA3030, Lloyd’s Market Association.
8. sigma 3/2017: World insurance in 2016: the China growth engine steams
ahead, Swiss Reinsurance Company.
CHINA, SECURING “BELT AND ROAD INITIATIVE”: RISK MANAGEMENT

PART V
Risk Forecasting and Crisis Mitigation
along the Eurasian Landmass and
Middle East

181 © The Author(s) 2018
A. Arduino, X. Gong (eds.), Securing the Belt and Road Initiative ,
https://doi.org/10.1007/978-981-10-7116-4_10
CHAPTER 10
One Belt, One Road in Central Asia:
Progress, Challenges, and Implications
Farkhod Tolipov
“S ilk R oad ” aS a N ew B RaNd of  C eNtRal aSia
In September 2013, Chinese President Xi Jinping proposed the new stra -
tegic initiative called the “Silk Road Economic Belt” (SREB). In October
of the same year, he proposed the “21st Centur y Maritime Silk  Road”
(MSR). These two strategic initiatives are combined in the concept “One
Belt, One Road” (OBOR).
The OBOR mega-project in Central Asia is mostly understood in terms
of the broadly propagated and discussed concept of the SREB. The ver y
notion of “Silk Road” is currently used by Central Asian states—Kazakhstan,
Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan—for, so to speak,
self-branding, which manifests itself, particularly, in various semiotic exer -
cises by which these states advertise their territories, resources, economic
potential, reliability, perspectives, and even histor y. They more often than
not refer to such semiotic designations as “bridge,” “crossroad,” “corri -
dor,” “hub,” “center,” “segment,” and even “strategic location.”
However, such seemingly normal aspiration to gain a more attractive
image has implicit geopolitical implications. From this perspective, such a
motion can have both its benefits and detrimental effects. The notion of
Silk Road is not simply about revitalization of the erstwhile vast network
F. Tolipov ( *)
Non-governmental Research Institution “Knowledge Caravan”,
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182
of land transport and trade routes that used to connect eastern shores of
China to western edges of Europe in the ancient time and Middle Ages. It
is also about modern geopolitical interactions of great and mid-ranking
powers as well as small countries of Central Asia—ver y specific types of
interactions of the globalized era. The specificity of type of interactions
that I am talking about reveals itself in what I call the third “ transportiza-
tion ” of Central Asia.
The first transportization of Central Asia was, in fact, the mission of the
ancient Silk Road, which, on the one hand, ascribed the region the transit
function, and on the other hand, raised Central Asia to the world arena.
With the advent of oceanic trade and sea routes, the significance of the Silk
Road declined. The second transportization of the region played the
opposite role and is related to the creation, beginning from the mid-
nineteenth centur y, of the network of northward-oriented railroads that
ser ved the strategic task of supplying the “dominating power,” that is,
Russia, with natural resources and other products, and at the same time
creating a buffer zone between Russia and southern powers by cutting off
Central Asia from the external world. That’s why, during the Soviet rule,
the entirety of transport arteries in the region were disrupted in all direc -
tions but north. The modern third transportization has a mission of bring -
ing the region back to the world system. The first tokens of what is
discussed and advanced as Modern Silk Road projects at the dawn of the
twenty-first centur y—the mega idea of creating the system of railroads,
highways, and pipelines stretching from this region to the north, south,
east, and west—arose with the gaining of independence by countries of
the region.
Therefore, the mega idea implies mega projects and the latter means
mega-scale interactions. Moreover, the New Silk Road, should it come to
pass, will have long-term substantive implications in terms of a triple diver -
sification—economic, geopolitical, and security. “A new Silk Road of
modern railroads and highways that would effectively give China a land
route far to the west, ultimately to Europe and to an Iranian opening on
the Persian Gulf, would have enormous strategic consequences, possibly
comparable to the impact that the advent of Suez and Panama Canals once
had.” 1
Actually, the OBOR is an integral part of the mega connectivity projects.
These are the China-Mongolia-Russia economic corridor; New Eurasia
land bridge economic corridor; China-Central Asia-West Asia economic
corridor; China-Pakistan economic corridor; Bangladesh-China- India-
Myanmar economic corridor; and China-Indochina economic corridor.
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183
The OBOR-related projects would also provide an outlet for China to
use its overcapacity in steel, cement, and construction materials, as also its
surplus financial reser ves. Through this Chinese expression of expansion,
China aims at promoting a whole range of Chinese interests. The protec -
tion of resources such as oil, gas, uranium, copper, and gold is another key
motive, along with the setting up and expansion of new trade routes and
sales markets. According to a report by the news agency Reuters, Xi told a
delegation of Chinese entrepreneurs that he hopes to achieve a trade vol -
ume of more than 2.5 trillion dollars with the OBOR countries in around
ten years’ time. The main focus of the initiative is on the countries within
Central Asia, which is where these interests are precisely highly complex. 2
Besides, China is being driven both by domestic and foreign consider -
ations. The urge to achieve development in all of China’s 31 provinces is
a major factor and all provinces have already affirmed their active partici -
pation in different aspects of the enterprise. 3
It has to be noted that “Silk Road” is a new brand of not only Central
Asia but also even more of China. Moreover, China is actually building
three Silk Roads, one through Central Asia to Europe; a second, maritime
one through Southeast Asia to India and South Asia; and third, China is
building a robust commercial network through the Arctic to connect it
with Europe. In pursuit of these geoeconomic and geopolitical goals that
would bind Asia to China ever more closely through commercial means,
Beijing has recently allocated US$40 billion for the first Silk Road alone,
on top of all of its previous large-scale investments in Central Asia, infor -
mation systems, telecommunications, transportation, energy pipelines,
and infrastructure. 4
Therefore, the overall transportization of Central Asia should be con -
sidered not simply per se or as a “ thing-in-itself ,” but rather in a broader
context of the special variant of New Silk Road, which in turn pushes
China to the forefront of the implicit or explicit geopolitical reformatting
of the space around this rising global power. In China, the intercontinen-
tal railroad connecting it with Europe through Central Asia and Iran was
labeled “second Eurasian terrestrial bridge” (the first being the road
through Russian territor y).
PRog ReSS
thg fonnowing sgngctgf nist of ongoing projgcts innustratgs that, anthough
thgy ann can bg combingf unfgr ong mgga branf, “Sinm Roaf,” in fact
somg of thgm wgrg startgf bgforg thg oBoR was initiatgf. Somg of thgm
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184
at the ver y onset didn’t even include China. That’s why these projects
were and are stipulated with multiple interests of multiple actors.
In 1996, the construction of the Tedjen-Serakhs-Mashhad railroad was
completed. This connected the network of Iranian railroads to those of
Turkmenistan and other Central Asian countries and opened the shortest
way from the Central Asian region towards the Middle East and Europe.
It was done more than a decade before the OBOR, but today it can
become one of the links in the chains of OBOR.
In April 1997, three states—China, Kyrgyzstan and Uzbekistan—
signed a memorandum on the construction of the new railroad, Andijan
(Uzbekistan)-Osh (Kyrgyzstan)-Irkeshtam (Kyrgyz-Chinese border)-
Kashgar (China), which would connect the region and ultimately connect
the eastern shores of China all the way through to Amsterdam. With the
construction of that strategically important segment, the railroad systems
of China, Central Asia, Iran, and Trans-Caucasus can be connected.
Thereby the eastern Chinese export-import port of L yanyungan and
Amsterdam will become two ends of one vast transport system. The dis -
tance between them is 8000  km shorter than the sea route through the
Suez Canal. It is likely that no less than 30 countries will benefit from the
construction of this road. However, this project still faces geopolitical
problems related to diverging positions of two neighbors—Uzbekistan
and Kyrgyzstan—regarding the ways of adjusting their local territorial
interests.
Kyrgyzstan President Almazbek Atambaev is skeptical of this project.
He stated that despite its attractiveness, it is more beneficial for China and
Uzbekistan, not Kyrgyzstan, since this projected railroad doesn’t help
connect northern and southern regions of this countr y, which is vital for
Kyrgyzstan. 5
In 2011, at the initiative of Uzbekistan President Islam Karimov, an
agreement was signed on the construction of the new international
transport- communication corridor Uzbekistan-Turkmenistan-Iran-Oman
(Central Asia-Persian Gulf). This is another example that the overall future
outlines of the OBOR space are shaped not only from east (China) to
west, but also independently as some clusters of roads and infrastructure
that are to be combined gradually within OBOR.
Of special significance is the international multi-modal transport hub
and logistical center created in the Uzbek city Navoi. This project was
realized jointly with the airline Korean Air and offers a combination of air
transport, highways, and railroads ser vices of export, import, and transit
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185
of goods and passengers. Currently, 12 flights a week are made by Korean
Air on such itineraries as Incheon (Korea)-Navoi (Uzbekistan)-Milan
(Italy), Incheon-Navoi-Brussels, and Shanghai-Navoi-Milan. Uzbeck
Air ways itself makes 11 flights a week on the itineraries Navoi-Delhi,
Navoi-Mumbai, Navoi-Bangkok, and Navoi-Frankfurt, as well as char -
tered flights Navoi-Dakka и Navoi-Frankfurt. The cargo terminal center
in Navoi has a processing capacity of 300 tons of cargo a day. 6
On 22 June 2016, in Tashkent, an official ceremony took place devoted
to the completion of the most strategically important grand project sym -
bolizing Uzbekistan-China cooperation—the construction of the railroad
segment Angren-Pap (in the southeast of Uzbekistan) and the Kamchik
tunnel. The general contractor of the project was China Railway Tunnel
Group. During the opening ceremony, Uzbekistan President Islam
Karimov and the chairman of the PRC, Xi Jinping, made solemn speeches
and emphasized that the project was accomplished within 32 months,
resulting in a tunnel 19.2 km long.
It has to be said that the Kamchik tunnel represents in itself the biggest
construction of this type in the post-Soviet space and in the world ranking
by its complexity; it is the eighth longest tunnel in the world. The tunnel
began its operation in August 2016.
Currently, intra-regional highways and railroads are being constructed
between Central Asian countries; thereby, the regional clusters of the New
Silk Road are being shaped. Especially, this is peculiar to two key countries
of Central Asia—Kazakhstan and Uzbekistan. The reconstruction of the
old 99 km-long highway connecting Uzbek city Tashkent with Kazakh
city Shymkent is under way. Soon it will be the first categor y international
road and an important segment of the “West China–West Europe” transit
corridor. Its length in the territor y of Kazakhstan is 2787  km. 7 Besides,
the railroad is about to be constructed soon, connecting the Uzbek town
Uckuduk with the Kazakh town Kyzylorda, which further has connection
to the Russian Ural and Siberia regions.
The OBOR in Central Asia cannot be considered separately from the
Shanghai Cooperation Organization (SCO). By and large, since the ver y
inception until now, the SCO has ser ved, so to speak, as a litmus test for
checking suppleness of Central Asian countries and as a ground for grad -
ual seeding of the Chinese idea of the modern Silk Road. It is noticeable,
in this regard, that both Ufa (2015) and Tashkent (2016) declarations of
the SCO display member-states’ support of the Chinese SREB initiative.
Former Uzbekistan President Islam Karimov stated at a June 2016 summit
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186
that one of the key conditions for achieving programmatic goals and tasks
of the organization is the further expansion and deepening of economic
cooperation. “Our common task in this direction,” he said, “should be the
realization of priority economic and infrastructural projects matching
interests of all states of the region, above all in the sphere of transport
communications.”
One can firmly assume that from its inception, the organization has laid
the groundwork for OBOR.  Dialectically speaking, the old SCO has
shaped the modality of OBOR and vice versa; OBOR is shaping the
modality of the new SCO.
Analyzing the OBOR perspectives one cannot overlook one specific
phenomenon—the so-called shuttle trade of ordinar y people, traders, and
businessmen. The scale of shop tours from Central Asian countries to
Chinese cities such as Beijing, Shanghai, Urumqi, and others is increasing
from year to year. In fact, the shuttle trade can also be regarded as a sym -
bol of renaissance of the Great Silk Road. Alongside the shuttle trade,
sizable trucking with various types of transport was established between
Central Asian and Chinese cities.
Alongside inter-state (macro-) and people’s (micro-) trade, “culture
follows trade!” Since millennia, the emergence of the Silk Route gave a
boost not only to political contacts of states, but also led to development
of cities and regions. These cities were not only centers of trade but cen -
ters of learning as well. 8 Hundreds of students from Central Asian coun -
tries currently are engaged with famous Confucius Institutes, which the
Chinese state sponsors.
Uzbekistan President Shavkat Mirziyoev, who participated in the
OBOR Forum in Beijing on 15 May 2017, made a speech in which he
expressed Uzbekistan’s full support of the initiative and stated that
Tashkent expects the realization of major projects in the sphere of trans -
port, logistics, trade, investments, energy, and high technologies. The
OBOR will help not only China in its westward movement, but also help
Central Asian countries to connect through China with markets of South
and Southeast Asia as well as Europe.
He also spoke for the creation along the SREB of industrial techno
parks, scientific-innovative clusters, and free economic zones. Mirziyoev
advanced the proposal of encouragement of direct dialogue between busi -
ness communities within the frameworks of the OBOR as well as of
strengthening cultural-humanitarian ties, including tourism. 9 Meanwhile,
during his visit to China in May 2017, an unprecedented investment
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187
package of agreements was signed between the two states totaling about
US$23 billion.
Chinese investments and trade with Central Asian countries have been
growing significantly since these five countries gained their independence
in 1991. Energy and trade cooperation between China and the Central
Asian republics was further boosted during the visit of Chinese President
Xi Jinping to Central Asia in September 2013 when Xi promoted the idea
of the “Silk Road Economic Belt” and signed an estimated US$48 billion
worth of investment and loan agreements (US$15 billion with Uzbekistan,
US$30 billion with Kazakhstan, US$3 billion with Kyrgyzstan, and an
undisclosed sum with Turkmenistan) with a focus on energy, trade, and
infrastructure. 10
Illustrative in this regard is the construction of four gas pipelines (A, B,
C, and D lines) from Turkmenistan through Uzbekistan and Kazakhstan
to China (lines A, B, and C), and from Turkmenistan through Uzbekistan,
Tajikistan, and Kyrgyzstan to China (line D). It is envisaged that by 2020
the annual gas supply from Turkmenistan to China will reach 65 billion
cubic meters.
Challe Nge S
whgn it comgs to thg ovgrann channgnggs that thg oBoR projgct can bg
facgf with, ong can group thgm into thrgg catggorigs: thosg causgf by
nationan intgrgsts, thosg rgnatgf to sgcurity issugs, anf tgchnican ongs.
National Interests Conundrum
This challenge stems from what some experts call the “geographical
trap”—fluctuation of the states’ regional relationships between self-
isolation from each other dictated by the attributes of sovereignty and
regional integration dictated by historical commonality and indivisibility
of the single region.
On one hand, two countries of Central Asia—Kazakhstan and
Kyrgyzstan—are members of the Russia-led Eurasian Economic Union
(EEU), three others—Tajikistan, Turkmenistan, and Uzbekistan—are
not. But even for those two countries, membership in the EEU was not so
much economically beneficial but rather a politically motivated decision.
That’s why the expert community and political elites in these countries are
divided in their attitudes towards the EEU based on their perception of
the national interests.
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On the other hand, until recently there has been no unity among Central
Asians themselves regarding the future shape of the region-wide transport
networks to be covered by the OBOR; moreover, there are competitions
for transit corridors. The countries of the region have yet to solve the
number of issues stemming from one or another vision of their national
attitude towards the regionalism as to custom tariffs, common market,
regulation of border control and management, mutual trade, intra-
regional migration, and many others. One example in this regard is quite
illustrative. Until recently, Tajikistan and Uzbekistan have had chronic dis -
putes over management of water flow of the Amu Dar ya River. In order to
resolve this dispute to its advantage, Uzbekistan often had used transport
blockage tactics towards Tajikistan (whose transport arteries traverse
Uzbekistani territor y) to exert pressure upon the latter.
Therefore, the national interests’ conundrum reflects a threefold con -
troversial situation: the intermingling of national interests of individual
Central Asian countries, their common regional interests, and interests of
neighboring great powers—Russia and China. This issue was well described
in the following analysis: “For both Russia and China, an important issue
is whether the ‘one belt, one road’ (OBOR) project will be based primarily
on bilateral agreements with individual countries, or multilateral agree -
ments with regional organizations. Russia would much prefer multilateral
agreements. This is because Russia has been seeking to expand the signifi -
cance of regional groupings such as the Eurasian Economic Union (which,
besides Russia, includes Kazakhstan, Belarus, Armenia, and Kyrgyzstan)
and the Shanghai Cooperation Organization (Russia, China, Kazakhstan,
Kyrgyzstan, Tajikistan, and Uzbekistan, and, soon, India and Pakistan).
Through these organizations, Russia can exert an influence more propor -
tional to its political and militar y weight, whereas a series of bilateral
agreements would lessen Russia’s potential influence over China’s rela -
tions with countries in Central Asia. So far, however, it appears that China
leans toward using bilateral agreements with individual countries along
the route, ultimately leading toward the formation of a huge trade and
investment zone for China. China also envisions expanding cultural and
academic exchanges through the project.” 11
Security Conundrum
Since the beginning of their independence, Central Asian countries have
been exposed to threats and risks of different types and different degrees,
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189
such as terrorism and religious extremism, interethnic conflicts, territo -
rial claims in the border areas, disputes over water sharing of major
regional trans-boundar y rivers Syr Dar ya and Amu Dar ya, as well as a
dangerous situation in neighboring Afghanistan. However, so far, states
of the region have been able to cope with such challenges and keep them
in check, with a few exceptions, like a civil war in Tajikistan that lasted
five years from 1991 to 1997, and a few days-long massacre in June 2010
between local Uzbeks and Kyrgyz communities in Osh, the southern city
of Kyrgyzstan.
The term “security conundrum” means not only a set of threats and
risks to security but also providers of security. Many point out the division
of labor between great powers—Russia and China. Russia is a provider of
a “security umbrella,” China provides economic assistance. However, with
growing domestic economic stagnation in Russia, in the long term China
could still challenge Moscow’s monopoly as a main security guarantor and
may gradually increase direct engagement with Central Asian states in
militar y and security spheres. Consequently, this could lead towards a
more assertive Chinese policy, where Beijing will frame its own security
agenda in the region, rather than following Moscow’s steps. This is
particularly important as Chinese investment and capital in the region
increases, indicating that China will need to protect its interests. 12
At the same time, there is another school of thinking according to
which China’s growing presence in Central Asia is regarded as a challenge
because it causes the perception of its geopolitical expansion (see later in
the chapter).
Security conundrum can be well illustrated with the consideration of
the challenges that the China-Pakistan Economic Corridor (CPEC) is fac -
ing nowadays. “In December 2016, China’s Ambassador to Pakistan,
Zhao Lijian, stated that ‘CPEC is working well’ with the support of the
Pakistani people, notwithstanding certain opposition. The statement is
characteristic of China’s and Pakistan’s praise for the China-Pakistan
Economic Corridor (CPEC) as a game changer for their respective econo -
mies and regional connectivity. Yet in reality, the project faces a variety of
intricate economic challenges as well as security threats. Its success will
therefore depend upon an inclusive, balanced and sustained China-
Pakistan approach towards the forces hostile to the project. Even then, the
project will have various geopolitical, geo-economic and geo-strategic
implications for the region and the world.” 13
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Technical Conundrum
The vast space covered by OBOR and its ver y ambitious character cannot
help but cause questions about its technicalities. Some experts, for instance,
point out to complexities of the combination of physical components of
infrastructure and transportation projects and such spheres as ser vices,
financing, management, involvement of economically weak countries, and
even such costs as corruption. 14 This is, as one can see, a multifaceted
issue. Only the railway transportation, for instance, has a number of seri -
ous infrastructural limits ranging from the issue of track width divergence
(Central Asians use 1520 mm, while European and Asian countries, China
and Iran included, use 1435 mm) to the wagons standards, to the average
speed of goods movement (it is necessar y to have 80–100 km/h speed to
compete with sea transportation, while currently the speed is about 65–70
km/h), to underdeveloped processing facilities, and so on. 15 The reduc -
tion of transport costs depends on the increase of tonnage. Consequently,
land transportation is not able to compete either in price for the freight or
in terms of transit volumes. The speed of deliver y is the only competitive
advantage in these circumstances. 16
However, even the speed is not too critical an issue for a number of
reasons. First, 90 percent of Chinese foreign trade freight traffic are
shipped by sea. Second, most export-oriented clusters of China are located
in its eastern seashore. Third, the difference in speed is not a decisive fea -
ture of the land transport, since relatively slower shipment of goods from
China to Europe doesn’t yield a deficit of Chinese goods there. Finally,
there is a serious problem of insufficient reverse loading of trains by goods
on the way back from Europe to China.
Finally, conjugation of OBOR with other similar projects advanced by
other states (such as transport corridor Europe-Caucasus-Asia
[TRACECA]; gas pipeline from Iran, Iraq, Central Asia, and Azerbaijan to
Europe [NABUCCO]; north-south, and others) is another important
question that has, besides technical aspects, also geopolitical implications
(see next section).
imPliCatio NS
thg impnications of thg oBoR arg consifgrgf hgrg from two pgrspgc -
tivgsstratggic anf ggoponitican. on thg stratggic ngvgn, two qugstions
havg to bg gxpnorgf rgnatgf to thg notion of “conngction” bgcausg
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191
OBOR’s connotation is connectivity. If connection implies only transport-
logistical, that is, a transit-related question, we will have one approach to
the problem; but, if connection implies a broader question of the compre -
hensive regional development, we will have another approach. Today,
many are primarily focused on the former approach thereby simplifying
the task of the exploration. However, even consideration of the problem
through transport-logistical lenses encounters various challenges, as was
indicated earlier. In general, strategic implication can be understood as a
dilemma: Transit and/or development?
From this viewpoint, “if tangible benefits are not identified and com -
municated to local populations, then the SREB will not only fail to reach
its full potential; it could also raise suspicions that this is more of a geopo -
litical project than China says, with China benefiting far more than the
Central Asian populations and gaining further leverage over the region’s
political elites through economic influence.” 17
Meanwhile, there are reports that “both Chinese firms and the Chinese
government realize the necessity of localization to make projects palatable
to local populations. Wages in China are also much higher than in Central
Asia (except for perhaps Kazakhstan) which provides an economic incentive
to hire locals. Questions remain around the patchiness of local employ -
ment, but it is clear that broad statements about Chinese only hiring their
own no longer hold true.” 18 Anyhow, much, in this respect, will depend
on Chinese self-identification and self-positioning not only internally but
also internationally. As former President Hu Juntao said, China should tr y
to establish a new type of foreign relations that can “satisfy the Chinese
public and at the same time reassure people of all nations.” 19
On the geopolitical level, the implications are even less clear. It must be
noticed that right after the collapse of the Soviet Union, Central Asia
found itself and has remained until today a geopolitically galvanized area.
Central Asian countries invoked the spirit of the ancient Silk Road and felt
temptation to return to their erstwhile glor y and niche in the international
system. They desperately need to break the landlocked status, but interest -
ingly, such a position is not merely geographical destiny, it is rather a geo -
political condition due to such circumstance that the unlocking of the
region depends largely on neighboring great powers—China and Russia.
The ancient Great Silk Road was in essence a mere trans-continental
trade route. But the modern one, which OBOR is supposed to create in
the turbulent era of globalization and the shaping of the new world order,
will likely be more than a trade route. It will be facing, symbolically
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192
speaking, explicit and implicit “geopolitical stations” on the way, that is,
numerous encounters in unprecedented scale of various subjects who will
interact in uneasy conditions. In particular, the vast space is expected to be
shaped by means and in the form of rising China’s westward impulses. Yet
in 2005, former Uzbekistan President Islam Karimov stated that “a situa-
tion of geopolitical uncertainty emerged in Central Asia, and the real
interests of great powers in the region remain ambiguous.”
That’s why many today correlate the OBOR with the current geopoliti -
cal trends, which should stipulate Beijing’s one or another form of geopo -
litical activation. These trends explicitly and implicitly manifest themselves,
in particular, in the two following situations.
1. The scenario of possible direct Chinese involvement in Central
Asian regional security affairs. American analyst Stephen Blank
points out the creeping Chinese militar y involvement in Central
Asia in order to defend Chinese interests and investments in these
states rather than rely on unreliable local governments or Russia.
This trend can increase dependence of the Central Asian states on
the Chinese security umbrella. Blank puts forth a question as to
whether a Chinese move to upgrade its powers and obligations in
the region would be “met with equal and opposing countermoves
from other powers who also have important equities and interests
there? Given the nature of contemporar y international relations, the
answer to that question is almost certainly yes. In other words, a
new chapter of the contemporar y great game in Central Asia is
under way.” 20 This argument sounds quite strong. However, the
region currently is not facing security threats to the degree that
would require a great power “umbrella.” Even the decades-long
conflict in Afghanistan hasn’t raised the level of security threats in
Central Asian countries to the highest point. The region is relatively
peaceful and stable in sharp contrast to the area where, for instance,
the CPEC is supposed to be built.
2. There is also a strong perception that the OBOR can in part be seen
as China’s response to the “pivot” or “rebalance” to Asia under US
President Barack Obama and to Russia’s relative decline in Central
Asia. 21 However, the geopolitical dimension is more ambiguous than
it can seem in a linear approach. This can be illustrated in the possible
long-term implications of the Northern Distribution Network
(NDN). One report made by the Washington-based Center for
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193
Strategic and International Studies noticed: “While the creation of
the NDN was motivated by the U.S. militar y’s immediate logistical
needs, its establishment nonetheless offers a unique opportunity for
Washington to further broader strategic objectives. This opening will
not last forever. With prompt attention, adequate coordination, and
the correct set of policies, the U.S. government could leverage the
NDN to lay a foundation for the so-called Modern Silk Road. This
development would help stabilize Afghanistan in the long term and
have a transformative effect on Eurasia.” 22
Add to this picture other geographical areas where respective geopoliti -
cal equations can also come into being, since the countries, companies,
and development banks involved in New Silk Road-related projects are
also international, and span across the entire Eurasian theater: 23
– The Trans-Siberian Railway, a vital link in both of the main China-
Europe rail routes, is still Russian.
– Poland, Belarus, and Germany are building key Silk Road
Economic Belt-related dr y ports and corresponding industrial
zones without much in the way of Chinese funding or direction.
– Georgia chose an American-led consortium to build their Silk
Road-connected deep-sea port rather than a Chinese-led one.
– Azerbaijan is building a new port, highways, rail lines, and other
trans-Eurasian transportation infrastructure with their own oil
money and loans from the World Bank.
CoNC lu Sio NS
So thg oBoR winn bg crgatgf in thg ggoponiticanny ganvanizgf arga whgrg
trafg, movgmgnt, transit, sgr vicgs, communications, gxchanggs, anf so on
winn bg affgctgf by ggoponitics anf, in turn, affgct ggoponitics. oBoR is a
Chingsg initiation, but its gmbofimgnt winn bg thg fgrivativg of various
intgrnationan anf rggionan confitions. thats why a fiangctican anf systgms
approach is rgquirgf for strong anf corrgct comprghgnsion of nuancgs anf
mofanitigs of thg rgan fgvgnopmgnt of thg oBoR procgss, muntipng chan -
ngnggs thg stamghonfgrs can facg, anf ann impnications of this procgss for
rggionan countrigs anf grgat powgrs.
many ananysts anf ofcians point to, anf gmphasizg, thg fact that this
mgga-projgct gmbracgs morg that 60 pgrcgnt of thg wornfs popunation.
howgvgr, tamgn as it is, this gurg can misngaf stronggr ananysis of thg
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project’s perspectives. Out of this 60 percent, about 37 percent live in
China. Dozens of other nations are much smaller and ver y diverse with
diverse interests and political and economic systems. As one analyst argues:
“Where the Silk Road network begins and ends is unclear, when it actually
got started is debatable, and inquires into what countries it even includes
are often inconclusive. It is perhaps easier to simplify the issue and just
label the project as a” Chinese “initiative and look at it through the lens of
the Belt and Road but it just isn’t correct: the New Silk Road is interna -
tional.” 24 When it comes to the Central Asian segment of the OBOR, the
main strategic task for the countries of this region would be consolidation
of a common five-lateral vision of the project emanating from much higher
value and goal—unification, not fragmentation, of the region—a goal that
was proclaimed yet in 1991 as their own mega-project in itself.
Note S
1. munro, R.h. “China, infia, anf Cgntran asia,” in J.Snyfgr, gf., After
Empire. The Emerging Geopolitics of Central Asia (Washington: National
Defense University Press, 1995), p. 130.
2. Bessler, Patrick, “China’s ‘new Silk road’: Focus on Central Asia,” EU-Asia
Economic governance Forum, www.kas.de/wf/doc/kas_43841-1522-2-
30.pdf?160401030733 .
3. Nirmala Joshi and Kamala Kumari. “China’s Silk Road Economic Belt and
the Central Asian Response,” in World Focus, Annual number , on Indian
Foreign Policy, December 2016.
4. Blank, S. “China’s Silk Roads and Their Challenges,” 01/07/2015 issue
of the CACI Analyst, http://cacianalyst.org/publications/analytical-
articles/item/13119-chinas-silk-roads-and-their-challenges.html .
5. http://rus.azattyk.org/content/article/25205660.html .
6. www.mfa.uz .
7. Капитал , 05.11.2013, http://kapital.kz/gosudarstvo/22958/opredelen-
podr yadchik-po-stroitelstvu-trassy-tashkent-shymkent.html .
8. Nirmala Joshi and Kamala Kumari. “China’s Silk Road Economic Belt and
the Central Asian Response,” in World Focus, Annual number , on Indian
Foreign Policy, December 2016.
9. https://www.gazeta.uz/ru/2017/05/15/belt-road/ .
10. Fabio Indeo. “China as security provider in Central Asia post 2014: a real -
istic perspective,” in Central Asia Security Policy Briefs (Bishkek), No.17,
Januar y 2015.
11. Thomas F.  Remington. One belt, one road, one Eurasia. http://blogs.
nottingham.ac.uk/chinapolicyinstitute/2016/04/06/one-belt-one-
road-one-eurasia/#.VwTDUGK0pg0.twitter April 6, 2016.
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12. Kosnazarov, D. and Akylbaev, I. “The great bargain between Russia and
China for Central Asia” in China and Central Asia , November 6, 2016,
http://chinaincentralasia.com/2016/11/06/the-great-bargain-between-
russia-and-china-for-central-asia/ .
13. Mushtaq A. Kaw “The China-Pakistan Economic Corridor Between Hope
and Fear,” the CACI Analyst, April 26, 2017, http://cacianalyst.org/
publications/analytical-articles/item/13440-the-china-pakistan-
economic-corridor-between-hope-and-fear.html .
14. https://reconnectingasia.csis.org .
15. See for details: Aset Ordabayev. “The Geopolitics of Transport Corridors
in Central Asia,” in Working paper of the Institute of World Economics
and Politics. – Almaty, June, 2015.
16. Ibid.
17. Sarah Lain. “Trade Connectivity: the missing link in the belt and road,” in
China and Central Asia, December 11, 2016, http://chinaincentralasia.
com/2016/12/11/trade-connectivity-the-missing-link-in-the-belt-
and-road/ .
18. Dirk van der Kley. “Chinese companies increasingly employ Central
Asians,” in China in Central Asia , December 27, 2016 http://chinain-
centralasia.com/2016/12/27/chinese-companies-increasingly-employ-
central-asians/ .
19. Quoted in Wang Yizhou. Creative Involvement: A New Direction in
Chinese diplomacy.   – Mark Leonard edited, “China 3.0” (European
Council on Foreign Relations, 2012), p. 123.
20. Blank, S. “New signs of Chinese militar y interest in Central Asia,” in CACI
Analyst , 16 Januar y 2017 http://cacianalyst.org/publications/analytical-
articles/item/13421-new-signs-of-chinese-militar y-interest-in-central-
asia.html .
21. Clarke, M. “Beijing’s ‘March West’: One Belt, One Road and China’s
Quest for Great Power Status,” http://centralasiaprogram.org/blog/
event/michael-clarke-beijings-march-west-one-belt-one-road-and-
chinas-quest-for-great-power-status/?instance_id=822 .
22. The Northern Distribution Network and the Modern Silk Road. Planning
for Afghanistan’s future. (Washington, DC: A Report of the CSIS),
December 2009.
23. http://www.forbes.com/sites/wadeshepard/2016/10/14/regardless-
of-what-beijing-says-the-new-silk-road-is-not-chinese/
#7f746f907289 .
24. Shepard, W. “The New Silk Road Is Not Chinese, It’s International,”
Forbes, Oct. 14, 2016 http://www.forbes.com/sites/wadeshepard/
2016/10/14/regardless-of-what-beijing-says-the-new-silk-road-is-not-
chinese/#7f746f907289 .
ONE BELT, ONE ROAD IN CENTRAL ASIA: PROGRESS, CHALLENGES…

197 © The Author(s) 2018
A. Arduino, X. Gong (eds.), Securing the Belt and Road Initiative ,
https://doi.org/10.1007/978-981-10-7116-4_11
CHAPTER 11
Securing CPEC: Challenges, Responses
and Outcomes
Khuram Iqbal
Introduct Ion
Chinese economic expansion led to a sense of optimism throughout South
Asia, a region that was beset with armed conflicts, impoverishment and
massive youth bulges. For Afghanistan, One Belt One Road (OBOR)
offered an opening to maximize its economic potential as a transit state
connecting South and Central Asia. Bangladesh welcomed the shift in
global centre of economic gravity from west to east and saw this as an
opportunity to restore its historic connectivity with China. 1 Sri Lankan
polity, initially divided over the role of China, came to recognize that ini -
tiatives such as OBOR fit into the capital city of Colombo’s goals of con -
nectivity, increased trade and rebuilding a war-torn economy. 2 With
anti-Indian sentiments running unprecedentedly high in Nepal,
Kathmandu stands prepared to develop cross-border road and railway
connectivity with China 3 with a view to reduce the landlocked nation’s
dependence on India. The Maldives perceives China as a counter-weight
to the “Western colonial powers” bent upon altering the Islamic identity
of the small island nation. 4 Most importantly for Pakistan, the Chinese-
financed mega developmental project the China–Pakistan Economic
Corridor (CPEC) has come to be seen as Beijing’s version of the “Marshall
K. Iqbal ( *)
National Defence University of Pakistan, Islamabad, Pakistan

198
Plan” for its “all-weather” iron friend. The Marshall Plan witnessed the
United States inter vene in continental Europe to deliver prosperity from
the ruins of the two world wars, while China today attempts to provide
Pakistan with a similar opportunity to shed the debilitating scars of war,
and establish sustainable peace within the fractured self, and extend it
beyond to temper regional perspectives.
CPEC had the immediate effects of raising Pakistan’s global profile.
From “the world’s most dangerous countr y” 5 in 2007, Pakistan came to
be seen in 2015 as the next economic success stor y. 6 Economic and finan -
cial indicators published by The Economist in Januar y 2017 highlighted
Pakistan to be the world’s fastest-growing Muslim economy in 2017
ahead of Indonesia, Malaysia, Turkey and Egypt. 7 This data reinforced a
Har vard University study that predicted Pakistan to grow by more than
5% in the next decade. The fear that Pakistan may convert its newly
acquired wealth into militar y muscle to obstruct India’s rise as a global
power has led New Delhi to vocally oppose the CPEC. 8 In opposition to
CPEC, India has invoked the disputed nature of territor y in the Gilgit–
Baltistan region from where the Pakistani section of the CPEC com -
mences. Besides strengthening Pakistan economically, CPEC is seen as
detrimental to Indian security interests for its potential to internationalize
the Kashmir dispute by increasing Chinese economic stakes. The Indian
strategic community is also apprehensive that the initiative may also chal -
lenge New Delhi’s role as a net security provider to the island states of the
Indian Ocean as the regional environment becomes ever more conducive
for China.
Indian opposition to CPEC has further complicated the South Asian
geopolitics and the regional threat environment alike. Violent extremist
organizations, which hitherto operated purely as ideological entities, are
now keen on seeking New Delhi’s patronage to fight a common enemy,
that is, Pakistan. It seems with the inception of CPEC and subsequent
Indian opposition the era of ideological terrorism has ended and is replaced
by Cold War–era “proxyism” where different states are increasingly rely -
ing on non-state and sub-state actors to pursue their strategic and com -
mercial interests. Besides external threats, internal political dynamics of
Pakistan can also hinder the timely and smooth implementation of
CPEC. This chapter aims to outline the significance of CPEC for Pakistan
and China, internal and external risks to its implementation, Islamabad’s
counter-measures and their outcomes. The first section highlights the eco -
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199
nomic and strategic significance of CPEC for both Pakistan and China,
followed by an over view of Indian and American response to the project.
The subsequent discussion elaborates the implications of powers-
competition on the regional terrorism landscape, as to how some terrorist
organizations are seeking convergences with some state actors to chal -
lenge the CPEC. An over view of security and strategic measures by China
and Pakistan is also provided to evaluate their effectiveness for smooth
implementation and utilization of the project.
Understanding CPEC
In 2013, Chinese President Xi Jinping unveiled one of the most important
infrastructure construction projects of the human histor y. The project was
entitled One Belt One Road (OBOR) or the Belt and Road Initiative
(BRI). BRI has two components: one over land and another over/through
sea. The New Silk Economic Road consists of a web of six interconnected
economic corridors. On land, the initiative will connect Asia, Europe and
Africa through six Economic corridors: (1) New Eurasian Land Bridge
(NELB); (2) China-Mongolia-Russia Economic Corridor (CMREC); (3)
China-Central and West Asia Economic Corridor (CCWAEC); (4)
China- Indo- China Peninsula Economic Corridor (CICPEC); (5) China-
Pakistan Economic Corridor (CPEC); and (6) Bangladesh-China-India-
Myanmar Economic Corridor (BCIMEC). The 21st Centur y Maritime
Silk Road (MSR) will start from eastern ports of China and travel via the
South China Sea, East China Sea, Strait of Malacca, Bay of Bengal, Arabian
Sea, Persian Gulf and Gulf of Aden, diverging towards the Red Sea in the
north and African ports in the south. In the north, through the
Mediterranean Sea, it will end at Rotterdam, and in the south, it will encir -
cle Africa. It will connect three gigantic oceans—Pacific, Indian and
Atlantic—and geo- strategically important navigational choke points, and
different East Asian, South Asian, European and African ports through
extended phenomena of “Neo String of Pearls.” Silk Railway routes,
energy silk routes and trans-state supper highways are other important ele -
ments of this hitherto mysterious and magical project.
The project would be financed by the Asia Infrastructure and Investment
Bank (AIIB), the BRICS New Development Bank, the Silk Road Fund,
the China-ASEAN Interbank Association and the SCO Interbank
Association. The Chinese maintain that OBOR will be funded initially by
SECURING CPEC: CHALLENGES, RESPONSES AND OUTCOMES

200
$40 billion from China’s Silk Road infrastructure fund, $100 billion in
Asian AIIB pledges, and an initial $50 billion commitment from the New
Development Bank of the BRICS countries—Brazil, Russia, India, China
and South Africa—with a promise to increase that to $100 billion. 9
CPEC is one of six pillars of the OBOR. It is both geopolitical and geo-
economic paw of both China and Pakistan in reconfiguring geo-economic-
cum-political realities. It is an extension of China’s 21st Centur y Silk Road
initiative. The peculiar attribute of CEPC is its intersection between the
oversea 21st Centur y Maritime Silk Road (MSR) and the land-based Silk
Road Economic Belt (SREB). Its total length is approximately 3000  km
spanning from Pakistan’s Gwadar Port to Kashgar, northwestern China’s
Xinjiang Uygur Autonomous Region. It consists of railway lines, roads,
fibre optics, energy pipelines and industrial zones.
Table given below summarizes the number of projects identified so far,
along with estimated cost under CPEC.
Sr. no. Sector No. of projects Estimated cost (Million $)
01 Energy 21 33,793 02 Transport infrastructure 4 9,784 03 Gwadar 8 792.62
Source: Author
SIgn IfIcance for  P ak IStan
Pakistan has been worst hit by terrorism sinee the outset oh the twenty-
rst eentur y. It has haeef huie monetar y, politieal, soeial, anf human
losses unfer aetive eniaiement in reiional eoniets. the uS-lef inter -
vention in ahihanistan has hurther eompounfef historieal hault lines, anf
the subsequent ilobal war aiainst the taliban has immersef Pakistan as
a fireet partieipant in the War on terror. this has also ser vef to nurture
extremism, whieh, in turn, has eertainly retarfef the eeonomie fevelop -
ment within the state. the cPec projeet between these asian neiihbors
is an emeriini opportunity hor Pakistan. It will not only help Pakistan in
overeomini eeonomie opportunities missef fue to involvement in the
War on terror, but will also transhorm the eountr y into an eeonomie
hub, resurreetini its path to fevelopment. the $56 billion bilateral proj -
eet has multi-fimensional implieations hor Pakistan promisini to renew
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its strategic significance in a rapidly altering world. This study attempts
an in-depth analysis of the benefits and the drawbacks accompanying the
proposed economic corridor between Pakistan and China, with a struc -
tured approach focusing on three tiers of geopolitical and socio-eco -
nomic realities:
• Domestic / Internal
• Regional; and
• International
The CPEC is located in the hub of the OBOR and is the cornerstone of
the MSR. This belt is intended for the promotion of systematic opening of
financially viable investments, complete with the allocation and distribu -
tion of vital resources and deep assimilation of the markets. 10 South Asia,
as a region, is understood as one that is marred by instability, economic
under-development and conflict. When mutual avenues of cooperation,
which lead towards development, are forged, it will naturally strengthen
the prospects for a stronger and stable region. Chinese President Xi
Jinping’s visit to Pakistan (April 20–21, 2015) carried forth with it the
hopes of this stability in the coming years for Pakistan as 51 memorandums
of understanding (MoUs) were signed between the premiers of both states
during the visit. 11 The idea of developing the CPEC was visualized by
Chinese Premier Li Keqiang during his visit in May 2013, and found a
legal framework in the subsequent visits. The proposed economic corridor
will ultimately connect southwestern China, via the province of Xinjiang,
with Pakistan’s emergent port city of Gwadar interlinked via a network of
roads and railways measuring roughly 3000 km, providing energy-star ved
Pakistan with much needed economic infrastructure.
Pakistan and China’s all-weather friendship stems from their shared
interests and mutual rivalr y with India, with var ying reasons for each state.
Both neighbours have developed strong ties and have been collaborating
with each other in terms of economics, militar y and politics for decades.
With China emerging as a major trading partner, and according to the
Pakistan Economic Sur vey 2013–2014, China and Pakistan’s trade vol -
ume of US$4.1 billion in FY 2006–2007 jumped 124%, increasing to
US$9.2 billion during FY 2012–2013. 12 Whereas China’s exports to
Pakistan increased nominally, Pakistan’s exports during this period
increased from US$600 million to US$2.6 billion, an increase of 400%.
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202
Consequently, bilateral trade between the two increased from 4% in FY
2008–2009 to more than 10% in 2013–2014.
The CPEC is further anticipated to bolster the developing trade and
commerce between the two nations. With the enthusiasm for the project
displayed by the leadership of China and Pakistan, the rapid development
of the project will make Gwadar not only fully operational, but also a note -
worthy deep-sea port in the region. Inaugurated in 2007, the control of
Gwadar Port was transferred to China Overseas Ports Holding Company
in Februar y 2013, a Chinese state-owned enterprise (SOE). Since then,
Gwadar is transforming under a major expansion into a full-fledged, deep-
water commercial port. When constructed, the corridor will ser ve as a
primar y gateway connecting China, the Middle East and Africa. The cor -
ridor is also expected to cut the 12,000-km route Middle East oil suppliers
now take to reach Chinese ports. Any and all transit trade stemming from
the corridor will naturally work to the benefit of Pakistan.
Aside from boosting the trade of both countries through the economic
corridor, Pakistan’s energy sector is the primar y focus with approximately
61% of the total CPEC investment specifically targeted at energy infra -
structure development, enhancing capacity, distribution and transmission
networks. Around 36% of the CPEC investment has been earmarked for
infrastructure in the transport and communication sector. The energy sec -
tor projects are being built by Independent Power Producers (IPP) with
the investment from Exim Bank of China at the interest rate of 5–6%,
while at a later phase, the government of Pakistan is committed to pur -
chasing electricity from these projects at pre-negotiated prices. Through
the projects under CPEC, an estimated 17,045 megawatts of energy will
be added to Pakistan’s national grid by 2020. Thus, these projects garner
hope to make Pakistan self-sufficient in the energy sector, traditionally a
major hurdle for the countr y on the quest for development.
Additionally, development in the infrastructure of the communication
sector, centred upon road and rail networks, most essentially along the
Gwadar Port, will not only provide an opportunity for Pakistan to gener -
ate massive foreign direct investment (FDI), but will also transmute the
countr y into a prized investment destination for global markets. Positioned
as an economic powerhouse, a post-CPEC Pakistan aligns all immediate
neighbours and regional states to further diversify their economic ventures
across Europe and Africa via accessing the Middle Eastern states through
the transit route under the corridor.
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203
SIgn IfIcance of  cPec for  chIna
chinas peaeehul rise to the status oh ilobal power ioes throuih fiversi -
eation oh its eneriy anf trafe routes. the Malaeea dilemma, however,
has always eonstrainef chinas ilobal ambitions. the eoneept was rst
artieulatef by chinas hormer presifent, hu Jintao, in 2003 when he usef
the phrase the Malaeea Strait dilemma in the central Militar y
commission. currently, more than 80% oh chinas erufe oil passes
throuih this strait. In 2013, the chinese eeonomy surpassef Japans eeon -
omy to beeome the worlfs seeonf lariest eeonomy with irowth oh 7.7%
hor 20122013.the important eomponent oh it infustrial irowth is
eneriy. china is the lariest eonsumer oh the worlfs eneriy. china is
lariely fepenfent on erufe oil imports hrom har-uni reiions, inelufini
east ahriea, West ahriea anf the Miffle east. It is fepenfent on sea routes
hor its eneriy imports. the Strait oh Malaeea is a narrow 850-km stretehef
water bofy between the Malay Peninsula anf the Infonesian islanf oh
Sumatra; at some points, it is as narrow as 15  km or even 2.5  km at its
narrowest.
to mitiiate anf pull itselh out oh the Malaeea dilemma, china startef
to fiversihy both its eneriy sourees anf routes to ensure its eneriy seeurity.
the most important phenomenon oh the fiversieation prineiple has a
paramount position in the poliey-makini proeess not only in china but
also in the entire international eommunity. the fiversieation prineiple
emerief as a main element in ilobal power transhormation. dihherent
states sueh as Infia, great Britain, franee, Saufi arabia anf russia
embarkef on the fiversieation prineiple. the main purpose is to fiversihy
market, eustomers, sourees anf hrienfs. russia is heavily investini in the
far east in orfer to eonneet with far east states to fiversihy its eneriy
market. Similarly, throuih the BrI, china wants to fiversihy its eneriy
souree. Investment in Iraq, Iran, niieria, aniola, russia anf many more
eountries eneriy sourees are just to fiversihy its market. It is also fiversihy -
ini its aeeess routes to har-uni eneriy sourees to ensure a smooth ow oh
oil even in any erisis situation. oil pipelines in Myanmars gwafar Port, oil
anf ias pipelines anf rail anf routes to central asia anf Miffle east all
are alternatives to the Straits oh Malaeea.
for china, cPec is a iame ehanier in both the strateiie anf eeonomie
senses. first, in any erisis at anfaman anf nieobar Islanfs, the Straits oh
Malaeea anf the South china Sea, gwafar provifes sahe anf smooth
aeeess hrom china to the arabian Sea. cPec iives chinas trafe eario
SecurIng cPec: challengeS, reSPonSeS and outcoMeS

204
direct access to the Indian Ocean Region (IOR), circumventing Malacca
and reducing the 12000-km distance to 3000 km. The first pilot cargo was
dispatched from Gwadar during Prime Minister Nawaz Sharif ’s visit on
November 13, 2016. The trade consisted of 160 convoys that reached
Gwadar and were dispatched to the Middle East, the European Union and
African countries. 13
Strategic aspects are more bright and pivotal for China in reconfigura -
tion of global power structure. Alfred Thayar Mahan was an American naval
captain and wrote extensively on sea powers and their influence on econom -
ics and trade. He enumerated five conditions that affect the sea power of
nations. The five principal conditions are Geographical Position, Physical
Conformation, Extent of Territor y, Number of the Population, Character
of the People and Character of the Government. Regarding Geographical
Position, Mahan says that if a countr y is situated in such a position that it
needs neither to defend itself by land nor seek territorial extension, then it
diverts maximum energies to strengthen its naval force. In the twenty-first
centur y, being a nuclear power, China could not be invaded by land. Feeling
secure by land, China has been concentrating its energies to develop its blue
water navy. The naval modernization process, which was actually started by
Liu Huaqing, the father of the modern Chinese navy, is moving towards
new heights with the induction of the Liaoning aircraft carrier, Jin nuclear
power submarine and modern destroyers.
China, owing to a 9000-mile temperate coastline with many good nat -
ural harbors, is both a land power and a sea power. 14 Projecting true sea
power the geographical position may be such as of itself to promote a
concentration, or to necessitate dispersion, of the naval force. 15 Gwadar is
bolstering China’s geostrategic leverage both in the Pacific and Indian
Ocean regions. The most important element of China’s outward approach
is establishing, investing, building and leasing seaports. Gwadar Port can
be a launching pad for China’s naval expeditions in the IOR. Gwadar is
China’s Asian Djibouti. Where Djibouti effectively controls the Red Sea,
Gwadar performs a similar function for the Persian Sea. Djibouti and
Gwadar are two important Chinese dragon wings in the IOR.
Pol ItIcal rISkS to  cPec
Sinee the announeement oh the cPec anf its ratieation, the route fesii -
natef unfer the eorrifor triiieref mueh febate anf eontroversy. the
major bone oh eontention here was reiarfini the fistribution oh eeo -
nomie, fevelopment anf inhrastrueture projeets oh this meia venture
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205
within the provinces. It was alleged and counter alleged that the route of
the corridor had been manipulated to better ser ve the interests of existing
and established industrial zones in Punjab. Terms such as the Eastern
Route and the Western Route began gaining currency, whereby it was
accepted that the Central Route was the original one approved by the
federal government, and was listed to pass through as follows:
Gwadar – Turbat – Panjgur – Khuzdar – Ratodero – Kashmore – Rajanpur –
Dera Ghazi Khan  – Dera Ismail Khan  – Bannu  – Kohat  – Peshawar  –
Hasanabdal – onwards to the Karakoram Highway.
Under the Eastern Route, cities along the eastern half of Pakistan were
more highlighted, and this version of the route specified by the federal
government is designed to pass through the following:
Gwadar – Turbat – Panjgur – Khuzdar – Ratodero – Kashmore – Rajanpur –
Dera Ghazi Khan  – Multan -Faisalabad  – PindiBhatian  – Rawalpindi  –
Hasanabdal and onwards along the Karakoram Highway.
Subsequently, after the controversy was highlighted over electronic
media, a third route was purported as well, later referenced as the Western
Route. This route heavily favoured the oft-neglected northeastern
Balochistan, and was designed to pass through the following:
Gwadar – Turbat  – Panjgur  – Khuzdar  – Kalat  – Quetta  – Zhob- Dera
Ismail Khan – Bannu – Kohat – Peshawar – Hasanabdal – and the Karakoram
Highway.
The route to be designated as the economic corridor within Pakistan
was suddenly the hotbed of controversy, fueled initially by the govern -
ment’s silence and subsequent contradictor y statements while providing
justification. The initial position taken by the federal government was that
there had been “no changes” made to the original route, however, state -
ments failed to specify what was the original route in question. Later, the
federal government took the position that the three routes existed, and all
three would be built. Dr. Bengali in his paper implored that:
This explanation cannot be accepted as plausible; as the resources to build all
three routes are not available and China would certainly not allocate resources
to pander to political disagreements in Pakistan.
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206
The latest explanation—an acknowledgement that the federal govern -
ment is prioritizing the Eastern Route—is that it is cheaper and faster to
route the corridor through areas with pre-existing road connections. This
implies that the corridor will be routed through areas of the countr y that
are already relatively developed.
Pakistan sits at geographic crossroads of ancient empires and civiliza -
tions and thus inherits a myriad labyrinth of inter-provincial conflicts span -
ning generations of active conflict and ancient rivalries. Under the CPEC
route controversy, particularly with the decision of the government to
construct the Eastern Route first, these intricate problems are rising once
more under political garb. As the Eastern Route largely passes through
Punjab, it is heavily criticized by the political leadership from other prov -
inces. Chairman of Pakistan Tehreek-e-Insaaf, Imran Khan, was of the
opinion that any preferential treatment shown by the government will give
birth to enmity between provinces. 16
Originally, the western alignment was scheduled for construction first,
covering and rapidly developing areas mostly located under Balochistan
and Khyber Pakhtunkhwa. However, the federal government’s decision
stems from the fact that it is both easier and more secure to construct first.
Further emphasis is laid on the claim that construction of the Eastern
Route does not mean the abandonment of the original plan. 17 Evidence to
this fact is granted by the National Logistics Cell (NLC) construction of
the 55-km-long road along the the Hakla–Dera Ismail Khan Motor way,
which directly feeds into the Western Route. 18
One of the key reasons for prioritizing the Eastern Route was the
marked difference in security, and another motive, ulterior or not, is inter -
preted to boost existing industrial complexes in the east. The government
claimed it decided to change the route to ensure better security for work -
ers and later on for the transit convoys once deployed. On the other hand,
the Western Route-first debate, holds that it would have been better for
both Balochistan and Khyber Pakhtunkhwa, since these are the two prov -
inces traditionally lesser developed and more prone to violence as they
share borders with active conflict zones in Afghanistan. Whereas the law
and order situation is much improved under recent militar y operations,
positive peace can be established only through competitive trade and com -
merce, where the populace of these marginalized provinces is integrated
into the national mainstream. Furthermore, economic corridors by design
are better operated across the shortest distance, where the Western Route
is decidedly shorter, with the Eastern Route being 700 km longer.
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207
According to “CPEC: The Route Controversy,” a study conducted by
the provincial government of Balochistan in May 2015, heavy analysis is
laid upon the term “opportunity costs” involved in the CPEC. Here it is
surmised the Eastern Route is costlier than the Central or Western routes.
The acquisition of land itself is lower in either case, compared to the
Eastern Route, which was designed to pass through highly populated
areas. However, the Eastern Route still offers better security. Another
report states the following:
The Western Route is likely to be the shortest and cost least in terms of opportu -
nity cost and dislocation compensation cost. By comparison, the Eastern Route
is likely to be the most expensive in terms of land acquisition and dislocation
compensation. Arguments that pre-existing sections therein are likely to save
time and costs are not tenable, as most sections will have to be widened and re-
laid to cater to the volume and load of the traffic that is likely to be generated.
The Eastern Route is also likely to be politically divisive and emerge as a source
of political instability and carries the danger of imperiling the entire Corridor
plan. If selection of the Eastern Route is made on grounds that the ‘Western’
and ‘Central’ routes carry security risks, then security considerations today will
be traded for interprovincial discord and political instability in the future.
Security considerations are important, of course; however, bombardment of dis -
affected areas with jobs is a better option than bombardment with drones. 19
Secur Ity rISkS
anfrew Small, in his work, The China-Pakistan Axis , maintains that the
biggest concern for the Chinese is the growing menace of terrorism within
the region, especially within its most trusted ally Pakistan, 20 where Beijing
has pledged and commenced an investment of $46 billion for CPEC. This
can be interpreted as a rise in violence may be the most effective way to
scare Beijing off from implementing the CPEC. Islamabad has repeatedly
accused India and other opponents of the CPEC of fomenting attacks
with this ulterior goal in mind. During Iranian President Hassan Rouhani’s
state visit to Pakistan on March 25, 2016, Pakistani law enforcement agen -
cies disclosed the arrest of a RAW spy, Kulbhushan Yadav. Pakistani
authorities claimed Yadav had entered Pakistan from Iran and was actually
arrested on March 3, 2016. The Indian government admitted that Yadav
was a former naval officer, but categorically denied any involvement with
the captured man, whereas the Pakistani government maintains he was an
“Indian spy” assigned to sabotage CPEC-related activities in Balochistan,
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208
especially around Gwadar Port. Pakistan asserts that India is bent on sabo -
taging the CPEC by funding and training anti-state elements in Balochistan.
The claim is supported by India’s official concern over CPEC and a poten -
tial Chinese naval base in Gwadar to ensure Chinese maritime hegemony
in the Indian Ocean. During India’s Independence Day celebrations, the
comments made by Prime Minister Narendra Modi added fuel to this
fire. 21 In his address to the nation, Modi especially mentioned that the
Kashmiri and Baloch people alike have thanked him for raising concerns
regarding human rights violations by the Pakistani state in these territo -
ries. 22 Pakistan has subsequently termed these remarks as a proof of Indian
involvement in its internal affairs and territor y.
Another creeping danger in Balochistan is the growing footprints of
ISIS. In 2014, Jundallah spokesperson Fahad Mar wat had claimed that a
delegation of ISIS met the head of Jundallah in Balochistan. 23 The pur -
pose of the meeting was how to unite the Islamic militants in Pakistan
under one banner. In August 2014, Abdul Rauf Rigi was killed in an
intra- Baloch conflict and Iranian press TV claimed that before his murder
he had joined ISIS. 24 The most shocking proof emerged when ISIS
claimed responsibility for the suicide attack targeting lawyers and journal -
ists in Quetta on August 8, 2016. The responsibility for the blasts was
claimed by Tehreek-i-Taliban Pakistan (TTP) splinter group, Jamaat-ul-
Ahrar (JuA) and ISIS. The next day, in a high-level official meeting, it was
acknowledged that the blast was aim at sabotaging the CPEC. 25
Hardly one and half months later in October 2016, three terrorists
stormed the Balochistan police college in the outskirts of Quetta and 61
recruits were killed. Inspector General of Frontier Corps Major General
Sher Afgan claimed that intercepted communication revealed that the
attack was carried out by the Al-Alimi faction of the Lashkar-i-Jhangvi
(LJ) militant group. 26 A day before the groundbreaking ceremony for
Gwadar Port, 52 people were killed when a suicide bomber blew himself
up at the shrine of Shah Norani in the Khuzdar district of Balochistan. 27
The Islamic State of Iraq and the Levant (ISIL) claimed responsibility .
Besides violent extremism and terrorism, Baloch and Sindhi ethno
nationalist groups are another daunting challenge for the economic cor -
ridor. On May 30, 2016, a Chinese engineer was targeted by the
Sindhudesh Revolutionar y Party. Luckily, the Chinese engineer and his
driver sustained only minor injuries. The terrorists left a pamphlet
denouncing “foreign control over Sindh’s natural resources.” 28 Another
Chinese engineer escaped when a planted bomb on a bike exploded in the
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209
Rohri area of the Sukkur District. 29 On September 30, 2016, the head of
the Balochistan Liberation Front (BLF), Allah Nazar Baloch, pledged that
he would orchestrate further attacks on the CPEC. 30 He also welcomed
Indian help against Pakistan. In September 2016, the Baloch separatist,
Switzerland-based Brahamdagh Bugti, president of the outlawed Baloch
Republican Party and the grandson of Baloch nationalist leader Nawab
Akbar Khan Bugti, sought asylum in India. 31
Following terrorist attacks on Chinese workers in the Federally
Administered Tribal Areas (FATA) and Balochistan, Chinese ambassador
to Pakistan Sun Weidong called for security of its workers in Pakistan. To
ensure foolproof security, both China and Pakistan agreed on a four-layer
security plan for the more than 3000-km-long trade route from Xinjiang
to Gwadar Port. Round about 32,000 security personnel consisting of the
Frontier Corps, police and Balochistan Levies would guard more than
14,321 Chinese workers in Pakistan. 32 A separate security division under
the title of Special Security Division (SSD) was raised in April 2015 to
protect the $46 billion economic corridor. The SSD is comprised of nine
composite infantr y battalions (9000 personnel) and six civilian armed
forces (CAFs) wings (6000 personnel) to be headed by a ser ving major-
general of the Pakistan Army. 33 On Februar y 19, 2016, the then Chief of
Army Staff General Raheel Sharif visited the headquarters of the newly
established SSD.  During his visit, Sharif said “We are totally aware of all
campaigns against the corridor and I vow that the security forces are ready
to pay any price to turn this long cherished dream into reality.” 34 The
government spent Rs 23 billion on raising SSD to ensure the security of
CPEC being commanded by Major General Abid Rafique. 35
The next level of security was maritime domain. Gwadar has immense
geostrategic importance in the Arabian Sea. In September 2014, an
attempt was made to hijack PNS Zulfiqar, Pakistan’s naval frigate. 36
Another important reason for maritime security is shifting trends from
land to naval warfare and supremacy to keep safe and open sea lines of
communication (SLOCs) for trade. On December 13, 2016 the Pakistan
Navy raised a task force to protect the CPEC and the Gwadar Port. 37 The
main task of “Task Force-88” (TF-88) is to protect the CPEC and Gwadar
Port against traditional and non-traditional threats. The newly assembled
force would comprise ships, fast attack craft, aircraft, drones (unmanned
aerial vehicles) and sur veillance assets. 38 The two components of CPEC,
the 3000-km-long land route that had already been secured by SSD and
now Gwadar Port and sea lanes, would be guarded by TF-88. Commodore
Muhammad Waris will ser ve as first commander.
SECURING CPEC: CHALLENGES, RESPONSES AND OUTCOMES

210
China also handed over two maritime patrol ships that are equipped
with Chinese state-of-the-art guns. The ships—named after the Hingol
and Basol rivers near Gwadar—were received by commander of the
Pakistan Navy, Vice-Admiral Arifullah Hussaini. China is expected to pro -
vide two more ships, “Dasht” and “Zhob,” to the Pakistan Navy. 39
According to IHS Jane’s Navy International “Armament to be fitted
onboard includes either a 37 mm or a 30 mm gun as a primar y weapon, in
addition to mountings for two 12.7 mm machine guns. An artist’s illustra -
tion of the MPV [Maritime Patrol Vessel], shown at the ceremony, sug -
gests that the PMSA has opted for an automatic stabilized naval gun
system as the platform’s main weapon.” 40
conclu SIon
chinas irowini trafe anf fehenee relationships with South asia have ere -
atef hears oh eneirelement in Infia anf harfenef its attitufe towarfs
Beijini, Islamabaf anf their joint eeonomie ventures, whieh are seen
entirely throuih a strateiie lens in new delhi. Pakistans poliey oh peaee -
hul neiihbourhoof intenfef to woo Infia to share the fivifenfs oh
cPec seems not to be payini ohh, as Infia has not responfef positively to
Pakistans ohher to join cPec. aiainst this baekfrop, new delhi ean seek
allianees anf eooperation hrom state anf non-state aetors to unfermine
cPec.
Sueeess oh the cPec is hiihly fepenfent upon Pakistans internal seeu -
rity situation anf how it manaies its relations with Infia. It is oh para -
mount importanee that Pakistani politieal leafership resolvef their internal
fihherenees over the route eontroversy anf fistribution oh benets unfer
the cPec in orfer to maximize Pakistans output hrom this meia projeet.
the eurrent state oh Pakistans eeonomy is in fire straits, severely relyini
on loans hrom international monetar y institutions anf lenfini bofies in
orfer to eover larie feeits in seal bufiets. further stress is exertef
unfer the rampant pilheraie oh extremist anf terrorist ifeoloiies.
resultantly, eeonomie opportunities have rapifly shrunk, eausini affi -
tional strain on the soeial habrie oh the nation. Within this reality, projeets
inauiuratef unfer the eorrifor have sparkef a wave oh rapif fevelopment
in Pakistan, briniini with it opportunities anew; those oh inereasef anf
sustainef eeonomie irowth, friven by the chinese juiiernaut, whieh will
not only benet the state oh Pakistan, but will fireetly benet the people
k. IQBal

211
of multiple countries. In our current arrangement of the globalized world,
nation-states now focus on progress and development through mutual
cooperation. Under this new mantra, the CPEC is a prospect that directly
benefits Pakistan, in tandem and under the direct collaboration of China,
to amplify its sway among the comity of nation.
note S
1. historieally, china was eonneetef with the Infian sub-eontinent throuih
three Silk roafs anf the Southern route linkef the Miffle kinifom with
the east Benial (now areas eomprisini mofern-fay Banilafesh).
2. debasish roy chowfhur y, exelusive: how china-Sri lanka relations are
iettini new winis this Week in asia, 03 deeember 2016, http://www.
semp.eom/week-asia/ieopolities/artiele/2051323/exelusive-how-ehina-
sri-lanka-relations-are-iettini-new-winis , last visitef 05 Mareh 2017.
3. Stahh reporter, china hopes nepal eoulf beeome member oh B&r
Initiative soon Xinhua enilish, 28 februar y 2017, http://enilish.sina.
eom/news/2017-02-28/fetail-ihyavwev9259202.shtml , last visitef 05
Mareh 2017.
4. china-Malfives frienfship Brifie projeet launehef Malfives
Infepenfent, 31 deeember 2015, http://malfivesinfepenfent.eom/
business/ehina-malfives-hrienfship-brifie-projeet-launehef-121081 , last
visitef 04 Mareh 2017.
5. davif Blair, Pakistan: the worlfs most fanierous eountr y the
teleiraph, 06 nov 2007, http://www.teleiraph.eo.uk/news/worlfnews/
1568535/Pakistan-the-worlfs-most-fanierous-eountr y.html , last visitef
05 Mareh 2017. also see ron Moreau, Pakistan: the Most danierous?
newsweek, 20 oetober 2007, http://europe.newsweek.eom/pakistan-
most-fanierous-102955?rm=eu , last visitef 05 Mareh 2017.
6. daniel runfe, Pakistan: the next colombia Sueeess Stor y? forbes, 03
auiust 2015, https://www.horbes.eom/sites/fanielrunfe/2015/08/
03/pakistan-the-next-eolombia-sueeess-stor y/#13f498b330fa , last vis -
itef 05 Mareh 2017.
7. Wali Zahif, Pakistan prefietef to be worlfs hastest-irowini Muslim
eeonomy in 2017 the express tribune, 10 Januar y 2017, https://
tribune.eom.pk/stor y/1290084/pakistan-prefietef-worlfs-hastest-
irowini-muslim-eeonomy-2017/ , last visitef 06 Mareh 2017.
8. Stahh reporter, cPec unaeeeptable to Infia, Mofi tells china
geo news, 02 June 2015, https://www.ieo.tv/latest/3473-epee-
unaeeeptable-to-infia-mofi-tells-ehina , last visitef 05 Mareh 2017.
SecurIng cPec: challengeS, reSPonSeS and outcoMeS

212
9. Marc Grossman, “Two Visions, One Collaboration? Part of a Future for
US-China Relations?” The Asia-Pacific Journal: Japan Focus, accessed
Januar y 17, 2017, http://apjjf.org/2017/02/Grossman.html .
10. The Silk Road Economic Belt and the 21st Centur y Maritime Silk Road,
May 2015, Flung Business Intelligence Centre. Source cited on November
2, 2016 https://www.fbicgroup.com/sites/default/files/The%20Silk%20
Road%20Economic%20Belt%20and%2021st%20Centur y%20
Maritime%20Silk%20Road%20MAY%2015.pdf .
11. Mateen Haider and Irfan Haider,” Economic Corridor in focus as Pakistan-
China sign 51 MoUs”, April 20, 2015, Dawn.com . Source cited on
November 2, 2016 http://www.dawn.com/news/1177109 .
12. Mubarak Zeb Khan, “FTA’s hurting Pakistan’s Trade Balance”, November
7, 2014, Dawn.com . Source cited on November 2, 2016 http://www.
dawn.com/news/1142776 .
13. Zafar, Muhammad. “First Chinese trade convoy arrives in Gwadar through
CPEC.” The Express Tribune (Karachi), November 12, 2016.
14. Kaplan, Robert D. “The Geography of Chinese Power.” Foreign Affairs.
Last modified June 2010. https://www.foreignaffairs.com/articles/
china/2010-05-01/geography-chinese-power .
15. Mahan, Alfred T. “Discussing of The Elements of Sea Power.” In The
Influence of Sea Power upon History , 29. London: Methuen & Co Ltd,
1890.
16. Web Desk, “Eastern Route for CPEC May Foster Enmity Between
Provinces, Warns Imran  – the Express Tribune,” Tribune (The Express
Tribune), September 30, 2015, http://tribune.com.pk/stor y/965041/
eastern-route-for-cpec-may-foster-enmity-between-provinces-warns-
imran/ .
17. Safdar Sial, The China-Pakistan Economic Corridor: Assessment of
Potential Threats and Constraints, (2014): 3.
18. “CPEC – Pkg1 Inauguration – National Logistics Cell,” National Logistics
Cell, May 17, 2016, accessed August 24, 2016, http://www.nlc.com.pk/
news/352-pm-inaugurates-package-1-of-cpec-western-route.
19. Aarish U. Khan, “Pak-China Economic Corridor: The Hopes and Reality,”
Regional Studies XXXIII, no. 1 (2014).
20. Andrew Small, “The China Pakistan Axis: Asia’s New Geopolitics”, Oxford
University Press, 2015.
21. Modi, Chaar vi. “Highlights: Narendra Modi’s Speech on India’s 70th
Independence Day.” (2016).
22. Usman Shahid,” Balochistan: The troubled heart of the CPEC”,
August 23, 2016, The Diplomat. Source cited on December 8, 2016
http://thediplomat.com/2016/08/balochistan-the-troubled-heart-
of-the-cpec/ .
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23. DAWN. “IS Visits Militants in Balochistan.” DAWN.COM. Last modified
November 12, 2016. https://www.dawn.com/news/1143997 .
24. Notezai, Muhammad A. “Can ISIS Gain a Foothold in Balochistan?” The
Diplomate, Januar y 7, 2016.
25. DAWN. “Consensus That Quetta Attack Targeted CPEC.” DAWN.
COM.  Accessed Februar y 27, 2017. https://www.dawn.com/news/
1276337 .
26. Sherani, Hafeezullah. “61 killed in twin suicide attacks as terrorists storm
police training college in Quetta.” DAWN (Karachi), October 25, 2016.
27. “Attack on Shah Noorani Shrine in Pakistan Kills Dozens.” Al Jazeera. Last
modified November 13, 2016. http://www.aljazeera.com/news/2016/11/
dozens-casualties-attack-pakistan-shrine-161112141000715.html .
28. Boone, Jon. “Chinese Engineer and Driver Injured in Karachi Separatist
Bombing.” The Guardian. Last modified May 30, 2016. https://www.
theguardian.com/world/2016/may/30/chinese-worker-driver-injured-
karachi-bombing-claimed-separatists .
29. PTI. “Pakistan: Chinese Engineer Sur vives Roadside Bombing in
Sindh.” The Indian Express. Last modified December 14, 2016. http://
indianexpress.com/article/world/pakistan-chinese-engineer-sur vives-
roadside-bombing-in-sindh-4427239/ .
30. Hashim, Asad. “Pakistan: BLF Chief Baloch Says Indian Help ‘welcome’.”
Al Jazeera. Last modified September 30, 2016. http://www.aljazeera.com/
news/2016/09/pakistan-blf-chief-baloch-indian-160929153641899.
html .
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India  – Pakistan.” DAWN.COM.  Last modified September 20, 2016.
https://www.dawn.com/news/1284917 .
32. Gishkori, Zahid. “Economic corridor: Pakistan, China agree on four-layer
security.” The Express Tribune (Karachi), November 1, 2015.
33. Haider, Mehtab. “17,177 soldiers deployed for security of Chinese work -
ers of CPEC.” The NEWS (Karachi), December 15, 2015.
34. Bajwa, Lieutenant General Asim S. “Press Release:No PR-60/2016-
ISPR.” ISPR.  Last modified Februar y 19, 2016. https://www.ispr.gov.
pk/front/main.asp?o=t-press_release&id=3207 .
35. Gishkori, Zahid. “Pakistan raises Special Security Division successfully.”
The News (Karachi), Februar y 3, 2016.
36. Ali, Naziha S. “Dockyard attackers planned to hijack Navy frigate.” DAWN
(Karachi), September 13, 2014.
37. Maj Gen Asif Ghafoor, Maj Gen Asif. “Press Release Navy:No
PR-PN479/2016-ISPR.” ISPR. Last modified December 13, 2016. https://
www.ispr.gov.pk/front/main.asp?o=t-press_release&id=3629&cat=navy .
SECURING CPEC: CHALLENGES, RESPONSES AND OUTCOMES

214
38. The Newspaper’s Staff Reporter. “Special force set up to guard Gwadar
port’s sea lanes.” DAWN (Karachi), December 12, 2016.
39. “China Gives Pakistan Two Ships for Security of CPEC.” The Times of
India. Last modified Januar y 15, 2017. http://timesofindia.indiatimes.
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cpec-sea-route/articleshow/56558924.cms .
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360, May 4, 2016.
K. IQBAL

215 © The Author(s) 2018
A. Arduino, X. Gong (eds.), Securing the Belt and Road Initiative ,
https://doi.org/10.1007/978-981-10-7116-4_12
CHAPTER 12
Uyghur Militant Activity in Southeast Asia
and Its Security Implications
Pinjie Sun
Introduct Ion
Southeast Asia constitutes an important transshipment hub for illegal
Uyghur migration, some of which has cross-fertilized with local and trans -
national jihadist extremism. The large-scale movement of Uyghurs to the
region commenced in 2013 and has continued to grow annually since
then with more than 10,000 using the route by the end of 2015. 1 While
the vast bulk of these individuals are seeking an alternative passage to
Turkey either as economic migrants or political refugees fleeing persecu -
tion in the Xinjiang Uyghur Autonomous Region (XUAR), there are indi -
cations that a small number have joined with active militant entities in
Indonesia and may be looking to establish additional bases in the southern
Philippines. In addition, there is a growing concern that experienced
battle- hardened Uyghurs who departed for Turkey not as a sanctuar y but
to fight in the Middle East will increasingly seek to return to Southeast
Asia as a result of the recent territorial losses that have beset so-called
Islamic State (IS) and other rebel organizations in Syria and Iraq.
This chapter looks at the scope and dimensions of illicit Uyghur move -
ment through Southeast Asia and the implications it holds for local terror -
ism in this part of the world. It first discusses the main triggers for the
P. Sun ( *)
Shanghai University, Shanghai, China

216
recent exodus from Xinjiang, how China’s on-going national security poli -
cies might impact on these flows and the principal logistics that are utilized
to gain entr y to the region as a subsequent “jump-off” point for Turkey.
The chapter goes on to analyze the interaction between Uyghur and
Indonesian jihadists and why this could have practical impact in the event
that Chinese Muslim foreign fighters start returning to Asia from the
Middle East. Finally, the implications of these dynamics for the southern
Philippines is discussed and assessed in terms of how it could extend the
Uyghur logistical and operational footprint in Southeast Asia. The conclu -
sion looks at how China is working with regional governments to enhance
joint action against common terrorist threats and how the new Trump
administration might impact on this engagement.
the X u Ar refugee /M Igr Ant crIsIs And  P ol ItIcs
In chInA
thg XuAr iu Nocatgf in thg notthwgut of thg PgopNgu rgpubNic of china
(Prc) in thg hgatt of thg eutauian contingnt. thg autonomouu tggion iu
thg countt yu Natggut ptovinciaN atga, occupying 1,664,900 uquatg MiNomg -
tgtu of Nanf, anf iu hout to 10.5 pgtcgnt of chinau minotity popuNation.
thg autonomouu tggion aNuo occupigu a quattgt of thg Prcu gntitg bot -
fgt Ngngth, abutting kazaMhutan, kytgyzutan, tajiMiutan, Afghaniutan,
PaMiutan, MongoNia, ruuuia anf Infia (sautman 1998 ).
sincg thg gnf of thg 1980u, Xinjiang hau bggn thg Nocuu of an inctgau -
ingNy ugtiouu gthno-tgNigiouu conict. In thg uummgt of 1990, thg PgopNgu
libgtation Atmy (PlA) upgcicaNNy fgNingatgf thg XuAr au thg countt yu
zong of mout uncgttain conttoN, tggcting thg Naunch of a Natgg-ucaNg
inuutggncy that uamg ygat aimgf at gutabNiuhing an infgpgnfgnt utatg to bg
Mnown au eautgtn tutMiutan fot uyghut MuuNimu (chtiutoffgtugn 1993 ;
BgcqugNin 2004 ). thg uubugqugnt two fgcafgu uaw a ugtigu of bombingu,
uptiuingu, anf auuauuinationu, aNN of which wgtg juutigf in thg namg of a
bona fg wat of nationaN Nibgtation. thg mout NgthaN incifgnt occuttgf in
JuNy 2009 whgn a ugtigu of intgt-gthnic tiotu in thg capitaN city of utumqi
Ngft 184 pgopNg fgaf anf motg than 1100 injutgfthg fgafNigut outbutut
of pubNic vioNgncg uincg thg 1989 tiananmgn squatg fgmonuttationu
(eimgt 2009a , b; ramzy 2009 ).
WhiNg thiu ucaNg of untgut hau ygt to bg tgpgatgf, unfgtNying tgnuionu
tgmain paNpabNg au gvifgncgf by tgptiuaN attacMu againut gthnic han,
P. sun

217
communist- approved imams who support the government and local gov -
erning officials. Some of the more recent examples include the November
2013 suicide car crash in Beijing’s Tiananmen Square (five dead, 38
injured), the March 2014 indiscriminate stabbing incident at the Kunming
train station (29 dead and 143 wounded) and the bombing of Urumqi
central market two months later (31 dead, 90 injured) (Kaiman 2013 ,
2014 , 2017 ). Although there has never been validated evidence that a
single, organized movement was behind these attacks, China has always
insisted that they were the work of the East Turkistan Islamic Movement
(ETIM) and perpetrated as part of an anti-PRC jihad undertaken in collu -
sion with al-Qaeda in the past and IS now (Singh 2016 ).
BAckground of  the  X u Ar M Igr Ant crIsIs
XuAru ptobNgmu havg in patt bggn fug to an upuutgg in uyghut ifgntity
poNiticu, hiutoticaNNy a auhpoint of uociaN untgut, which hau bggn futthgt
gxacgtbatgf by thg mobiNization of gxiNgf poNiticaN gNitgu anf Wgutgtn uym -
pathizgtu (uomg fotgign fotcgu) havg pNaygf a ctiticaN toNg in fgtmgnting
thgug tgnuionu. thgit main atgumgnt iu that unNiMg chinau hui minotity,
uyghutu atg fiutinct ftom thg han majotity, not onNy in tgNigion but aNuo
in Nanguagg, cuNtutg anf hiutoticaN gxpgtigncg. thgtgfotg, uyghutu fgugt vg
a utatg of thgit own (fuNNgt anf lipman 2004 ). thg ftivg to ugpatatg hau
bggn hgightgngf by an inux of han into XuArthough NocaN pgopNg
both on account of itu ptoupgtity anf in tguponug to Nuctativg incgntivgu
offgtgf by Bgijing at thg uamg timg. thiu ttanumigtation hau ggngtatgf
gtowing animouity au it hau upugt thg NocaN gthno-tgNigiouu uttuctutg au
wgNN au Nimitgf uyghutu in thg Mgy poNiticaN, gconomic, miNitat y, poNicg anf
gconomic poutu in thg tggion (singh 2016 ). thg tgconuttuction of hiutoti -
caN gNitg by MnowNgfgg gNitg aNuo pNayu a patt in thiu infgpgnfgncg movg -
mgnt. thg putuuit of infgpgnfgncg aNuo coincifgf with thg impNouion of
thg ussr anf thg fotmation of thg commonwgaNth of Infgpgnfgnt
statgu. sgvgtaN of thgug utatgu botfgt thg XuAr (smith 2002 ). Many
bgNigvg that cgnttaN Auian inugncg hau bggn a majot factot gncoutaging
thg tiug of tutMic nationaNium anf IuNamic ifgntity among uyghut MuuNimu
(chtiutoffgtugn 1993 ).
china hau movgf to fotcgfuNNy utgm tgbgN activity in Xinjiang, inutitut -
ing a tgguNat Naunch hatf campaign againut gxttgmium, tgttotium anf
ugpatatiumaNuo Mnown au thg thtgg gviNu. 2 thiu activity combingf with a
gtowing ttgnf of maintaining utabiNity by thg XuAr ptovinciaN govgtnmgnt.
uyghur MIlItAnt ActIvIty In southeAst AsIA And Its securIty

218
However, this does not solve the essential problem; instead, it has
intensified conflicts between Han Chinese and Uyghur Chinese. In turn,
Beijing has introduced ever more draconian internal security legislation,
setting in motion a vicious cycle of action and counter-action that has both
eroded the prospects for partial, much less genuine, ethno-religious rec -
onciliation and stimulated the “push” to leave XUAR.
The vicious cycle of action and counter-action will almost certainly be
entrenched as a result of two recent policies. First was the 2014 announce -
ment by the Xinjiang Communist Party chief that future security work in
the region will be conducted under the auspices of the National Security
Commission, which will further centralize and streamline security crack -
downs in the XUAR (Ng 2014 ). Second was the ratification of controver -
sial legislation in December 2015 that adopts an array of sweeping
measures to combat terrorism. However, it has been broadly criticized for
containing no specific safeguards to prevent its clauses from being used to
target dissidents and religious minorities, intensifying the contradiction. 3
The impetus for Uyghurs to leave China can be expected because of the
two policies. 4
Xu Ar to  southe Ast A sIA: routes
And  M odus  o Per And I
ggngtaNNy, fiuaffgctgf uyghutu Ngft Xinjiang via kytgyzutan, kazaMhutan
anf tutMmgniutan in cgnttaN Auia. thiu iu thg mout convgnignt anf fitgct
toutg to ttanuit fot tutMgy. Motgovgt, thiu toutg aNuo hau uttong tutMic
anf IuNamic chatactgtiuticu that atg tgminiucgnt of thoug founf in thg
XuAr (Zgnn 2014 ). howgvgt, thg inutitutionaNization of thg shanghai
coopgtation otganization (sco) in thg gatNy 2000u gnabNgf Bgijing to
ptguu ngighboting counttigu to tgpattiatg unfocumgntgf migtantu to
Xinjiang. 5 facing thg fifcuNty of thg toutg ftom cgnttaN Auia, southgaut
Auia hau bgcomg an aNtgtnativg toutg fot thg uyghutu. thg main toutg
pauugu thtough yunnan to laou, onwatfu to notthgtn thaiNanf, fown to
BangMoM anf movgu to thg uouthgtn ptovincgu that uhatg botfgtu with
MaNayuia. thg migtantu thgn hgaf fot kuaNa lumput whgtg thgy can gauiNy
mingNg with thg Natgg MuuNim community bgfotg boatfing tgguNat com -
mgtciaN ightu to tutMgy. 6 totaN ttavgN timg iu cuttgntNy atounf ugvgn
monthu, aNthough thiu couNf bg ftauticaNNy cut in thg ngxt vg ygatu.
ANthough, unfgt notmaN citcumutancgu it wiNN bg pouuibNg to ttavgN ugam -
NguuNy by ttain ftom kunming to thg MaNayuian capitaN. 7
P. sun

219
Typically, the migrants will ditch their identification cards before leav -
ing for southern Thailand and fabricate fake documents for entering Kuala
Lumpur. Ver y high-quality fraudulent passports can be procured in
Bangkok for approximately $2000 apiece, while cheaper (and more basic)
versions can be obtained in Cambodia, sometimes for as little as $300.
However, there is growing speculation that the Turkish government may
be complicit in accepting those Uyghurs even without authentic docu -
ments. According to some reliable sources in the region, an office at
Ankara’s consulate facilitates the provision and processing of visas and
passports to illegal Uyghur immigrants although it claims to be a non-
governmental organization (NGO). 8
Ankara’s alleged involvement in facilitating the illicit movement of
Uyghurs via Southeast Asia to Turkey—a number of whom are known to
be ultimately seeking covert entr y into Syria and Iraq—has generated
growing speculation that the Erdogan government may be seeking to
develop a deniable paramilitar y asset. Uyghur could be used by Ankara as
a paramilitar y asset, but Ankara does not want to open the links between
them. It works at the behest of the intelligence ser vices, for future terror -
ist/insurgent contingencies in the Middle East, Central Asia and even
China. 9 As one report issued by the non-partisan European Information
Center on Terrorism (CEI-T) in 2015 obser ves:
Startling new evidence has emerged of the “double game” being played by
Turkey in the crisis of Islamist radicalism. Senior Turkish embassy officials in
Southeast Asia are issuing Turkish identity papers to members of China’s
Uyghur Muslim minority so they can travel to Turkey and join Islamist
gangs fighting in Syria, or train with Islamist terrorists active in China but
using Turkey as a safe haven. 10
The continuing exodus of Uyghurs from XUAR could have implica -
tions for future terrorist contingencies in China. Such implications have
caused growing concerns in Beijing. It annoys the Chinese government
even further when those on exile send the international message that con -
ditions for Muslims in the autonomous region are not good. To amelio -
rate the situation, the PRC has leveraged both diplomatic and economic
pressure to “encourage” main Southeast Asian states where those immi -
grants transit to immediately repatriate irregular migrants and refugees.
However, the requests from Beijing have not yielded significant success,
except that 109 Uyghurs were deported from Thailand in 2015 (see Table
below). 11
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220
The explanations for this failure are varied, but there are mainly three
reasons: corruption in the local government, incapability of patrolling due
to geographical difficulty and the fear of sparking unrest and opposition in
a region where there is a high level of sympathy for Muslims in XUAR. The
last factor took on more credence in the aftermath of the bombing of the
Erawan Buddhist Shrine in August 2015. It is widely believed that this
attack, which resulted in more than 20 casualties and more than 100
injured, was an act of terrorist revenge in retaliation for Bangkok’s deci -
sion to send 109 Uyghurs back to China. 12
u yghur dePort AtIons fro M southe Ast A sIA
(chen 2016 )
Country Number deported Date of deportation
Cambodia 20 2009 Malaysia 11 2011 Vietnam 21 2014 Vietnam 21 2015 Thailand 109 2015
While Southeast Asian states remain aware of the backlash of repatriating Muslims
to XUAR, it is expected to see more cooperation to reduce and even crackdown
the illicit movement of Uyghurs in the region. One reason is that relations with
China play a dominant part in the changing policy. And this chapter argues the
security threat posed by the Islamist extremists from XUAR with militants in
Southeast Asia also accounts for the policy changes.
u yghur M IlItAnt A ct IvIty In Indones IA
In dgcgmbgt 2015, thg gNitg Infonguian countgt-tgttotiut unit dgnuuu-88
taifgf a uuupgctgf IuNamiut uafg-houug in Wgut Java whgtg thgy attgutgf 11
miNitantu who wgtg aNNgggfNy pNanning attacMu againut high-tanMing gov -
gtnmgnt ofciaNu, chtiutian chutchgu anf shiitg mouqugu in ugvgtaN citigu
on thg main iuNanfu of Java, sumatta anf kaNimnatan. Among thoug
fgtaingf wau a 35-ygat-oNf uyghut ifgntigf au ANNi. Accotfing to poNicg
chigf Baftofin haiti, ANNi haf gntgtgf thg countt y with two accompNicgu
(who gucapgf thg ftagngt anf tgmain at Natgg) via thg iuNanf of Bantam
aftgt ttanuiting thtough thaiNanf anf singapotg. thg attgutgg wau bging
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221
trained as a suicide bomber by a cell of the Mujahidin Indonesia Timur
(MIT)—the countr y’s most active and dangerous indigenous terrorist
group. 13 Alli has been investigated for complicity in the 2015 Erawan
Shrine bombing in Bankok as well as his putative involvement with Bahrun
Naim, an Indonesian national who is one of the key leaders of Khatibah
Nusantara (a special Malay speaking umbrella unit of 100 men set up in
IS) and the plan of Januar y 2016 attacks in Jakarta that left eight dead and
24 injured. 14
The 2015 incident has raised concerns that militant Uyghurs are now
willing to directly support and join forces with local jihadi groups—exacer -
bating the existing home-grown extremist threat (Singh 2016 ; Kwok
2015 ). China’s domestic action against terrorism activity have compounded
these fears, as has the public pledge of MIT’s (now deceased) leader, Santoso
(aka Abu Wardah), to accept 100 Uyghurs as part of the movement. 15
To be sure, MIT has been weakened as a result of a hard crackdown on
its activities. It is even weaker after the loss of its founder and leader,
Santoso, who died during a gunfight in Poso in July 2016. That said, the
group continues to threaten domestic security and is still considered to
have a functioning base in the jungles of central Sulawesi. According to
Indonesian intelligence officials, MIT still has the willingness and capacity
to absorb foreign fighters into its ranks (Gunaratna 2015 ; Chan 2016 ).
Uyghurs are known to constitute a component of this external network,
with security authorities putting the number of this network at around 14
by mid-2016. 16 Although not large, these militants are important as they
are believed to have both ideological and nascent operational/personal ties
with IS.  This nexus could take on a more practical dimension if combat-
hardened, experienced Chinese Muslim volunteers start returning to Asia
from the Middle East as a result of the worsening of the war situation.
Between 3000 and 4500 Uyghurs are thought to have joined rebel
groups in Syria and Iraq (Ali 2016 ). Although many are fighting alongside
Jabhat Fatah al-Sham (formerly Jabhat al-Nusra, the main al-Qaeda affili -
ate in the region), 17 a large number are known to be with IS and working
closely with Indonesians in Katibah Nusantara. 18 In 2016, Abu Bakr al-
Baghdadi’s movement saw nearly a quarter (23 percent) of its self-
proclaimed “caliphate” recaptured, compounding a 14 percent loss from
the year before. 19 Intelligence analysts have warned that, while welcome,
this reversal in fortune is liable to trigger an exodus of foreign mercenaries
from the Middle East, many of whom will likely seek alternative zones for
continuing their violent jihad. 20
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222
Although Uyghurs would plan to return to XUAR ultimately, for sev -
eral reasons, Indonesia could also be viewed as a viable option. For one
thing, the geographically ungoverned archipelago provides a safe hiding
place for the Uyghurs. For another, several radical entities in that area that
have openly pledged allegiance to al-Baghdadi provide incentives and
interests to the Uyghurs. The most important reasons, however, are the
spreading ties that have developed between Uyghurs and Indonesians in
Katibah Nusantara. Regional commentators believe this umbrella group is
already being used as the main principal vehicle for transporting Chinese
militants back from the Middle East and then linking them up with their
Islamist brethren in MIT.  Naim, who as noted was connected to Alli, is
thought to be the principal person facilitating these reverse flows, alleg -
edly operating in conjunction with Amin Baco, a Malaysian who is sus -
pected to be al-Baghdadi’s key link man in Southeast Asia. 21
If Katibah Nusantara is leveraged to entrench an ISIS-affiliated Uyghur
presence in this manner, it could have severe ramifications. Within
Indonesia, these veterans could help to strengthen a weakened MIT by
applying tactics used in Syria and Iraq. This could disrupt the good rela -
tions by spearheading attacks on Shi’a Muslims to incite sectarian hatred
and violence, as their main goal is not entirely religious extremism.
Regionally, they could work to rekindle Southeast Asian transnational
Islamic extremism by conducting cross-border strikes in the same manner
as Jemaah Islamiyah (JI) did—the group responsible for the worst terrorist
atrocities in Southeast Asia. 22
u yghur M IlItAnt A ct IvIty In the  P hIlIPPI nes
Bguifgu Infonguia, thgtg iu upgcuNation that uyghutu atg aNuo NooMing to
gutabNiuh a ptgugncg in thg uouthgtn PhiNippingu. concgtnu bggan to
gmgtgg in 2014 whgn vg chingug MuuNimu ttavgNing on faNug tutMiuh
pauupottu wgtg attgutgf in ManiNa. duting thgit initiaN intgttogation thg
gtoup cNaimgf thgy wgtg poNiticaN tgfugggu ftom XuAr. howgvgt, uubug -
qugnt invgutigationu tgvgaNgf that bgfotg attiving in thg capitaN, thgy haf
tut ttavgNgf to BauiNan anf cotabato city in Minfanao whgtg intgNNiggncg
authotitigu bgNigvg thgy haf attgmptgf to conngct with mgmbgtu of thg
Abu sayyaf gtoup (Asg) anf thg Banguamoto IuNamic ftggfom fightgtu
(BIff)two activg (aNbgit fiuaggtggatgf) 23 tgbgN otganizationu that havg
both uwotn aNNggiancg to Is. dug to uttong gvifgncg of thgit conngctionu
with thg two activg tgbgN gtoupu, thgy wgtg fgpottgf fot vioNating
PhiNipping immigtation Nawu. 24
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223
Since then, there have been several social media postings from young
members of the ASG expressing support for Uyghurs in Xinjiang. A visual
recording of a chant in Mandarin entitled “Mujahid” that was released by
the Al Hayat Media Center of IS in late 2015 has also reached followers in
the southern Philippines, including those associated with ASG and BIFF—
as well as two smaller movements that have similarly pledged loyalty to
al-Baghdadi’s self-styled caliphate, Ansar Khilafah Philippines (AKP) and
Khilafah Islamiyah Mindanao (KIM) (Banlaoi 2016 ). This affinity could
well be indicative of the possible beginnings of an extremist ideology that
increasingly co-joins the interests and sympathies of Muslim militants in
the Philippines with those in China.
The possible emergence of a Uyghur hub in Mindanao could equally
eventuate as a result of the connections that are widely thought to exist
between militants in Indonesia and the Philippines, both logistically (in
terms of the provision of funds, weapons and safe-haven) and by virtue of
blood/family ties. These alleged links have direct relevance, not least
because they could avail jihadists fighting in Sulawesi—local and foreign—
with an important rear base in Mindanao. Certainly, this is what occurred
with JI, which during its most active years conspicuously leveraged the
southern Philippines for the triple purposes of refuge, training and arms
procurement. 25
Besides these considerations, there are three facets of Mindanao that
could conceivably make it attractive as a hub for Uyghur rebels. First, like
Indonesia, porous borders, numerous ungoverned spaces and the pres -
ence of active terrorist groups are all characteristic (if not defining) fea -
tures of the region. Second, democratic sensibilities and memories of past
abuses committed under the dictatorship of Ferdinand Marcus. He has
worked against the institution of strong counter-terrorist powers in the
area (as well as nationally) for fear they could be used to silence legitimate
critics of the government. 26 Third, the Duterte administration’s current
pre-occupation with the war on drugs has greatly impeded the ability of
the police and intelligence ser vices to investigate illegal immigrants in the
southern Philippines. This is because all resources have now been diverted
to the counter-narcotics mission. 27
To be sure, it would be challenging for Uyghurs to penetrate the region
and integrate with the local population without assistance from the locals,
as their distinct ethnic features would stand out. To be successful, another
entity would be needed to facilitate their entr y and in the current regional
militant context, there are two possible operational ways. The first is MIT,
UYGHUR MILITANT ACTIVITY IN SOUTHEAST ASIA AND ITS SECURITY…

224
which is known to have accepted Uyghurs into its ranks and which alleg -
edly works closely with AKP.  The second is known as the ASG, and par -
ticularly the Basilan-based faction led by Isnilon Hapilon. He is far more
outward looking and religiously pious than Radullan Sahiron—the com -
mander of ASG’s Sulu-based branch. 28 Hapilon has also been appointed
the IS emir in Southeast Asia, which has given him enormous stature as an
Islamist “magnet” for attracting jihadists from outside the Philippines. As
one former member of the ASG summed up: “If there is going to be a
Uyghur connection with the Philippines, it will be to access training camps
in Mindanao and it will be forged through the Basilan-based faction of
Hapilon.” 29
effect of  u yghurs M IlItAnt A ct IvIty thre At
to  the  B rI
thg mout immgfiatg thtgat ftom uygut miNitiau in southgaut Auia iu atmgf
otganizationu, uuch au thg tutMiutan IuNamic Patty (tIP), that atg wgNN
ttaingf anf havg opgtationaN gxpgtigncg, uuch gtoupu might aNNiancg with
NocaN tgttotiut gtoupu now.
thgtg atg concgtnu ovgt coopgtation with NocaN tgttotiut gtoupu, but uo
fat, tIP fogu not havg uuch pNanu anf thg thtgat tgmainu Nimitgf. howgvgt,
Infonguian IsIs-tgNatgf gtoupu nggf to pay cNoug attgntion bgcauug not
onNy atg thgy fitgctNy inuttuctgf by sytian IuNamic watfatg pgtuonngN, but
thgy atg aNuo tt ying to bting thg MiffNg eaut taficaNizgf uyghut bacM to
thg countt y anf tgctuiting thgm to thgit tgttotiut activitigu, incNufing
uuing thgm au uuicifaN attacMgtu. At thg uamg timg, thgug IsIs mgmbgtu
tgtutning ftom thg MiffNg eaut in south Aftica aftgt a tm foothoNf atg
NiMgNy to futthgt tgtutn to china to catt y out uuicifg attacMu. It wouNf bg a
fitgct thtgat to chinau uociaN ugcutity.
southgaut Auia iu an impottant atga of chinau BrI.  china pNanu to
invgut hgaviNy in inftauttuctutg in thiu tggion, anf thgtg wouNf bg a Natgg
numbgt of chingug gntgtptiugu anf pgtuonngN wotMing thgtg. thgug pgopNg
anf faciNitigu wiNN bg an gauy tatggt fot uyghut tgttotiutu. It wouNf bg a ugti -
ouu impact to thg BrI. thg tiuM of tgttotiut attacMu wiNN gtgatNy inctgaug thg
cout of chinau invgutmgnt in thiu tggion anf fgNay chinau utgp to fgpNoy
itu auugtu in thiu tggion. It iu vgt y uimiNat to thg ptobNgmu gncountgtgf by
china anf PaMiutan in thg china-PaMiutan economic cottifot. PaMiutan
hau invgutgf hgaviNy in ugcutity tguoutcgu in thiu ptojgct, but thg conuttuc -
tion upggf of auuociatgf inftauttuctutg hau bggn tgNativgNy uNow.
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225
On the other hand, the activities of Uyghur terrorists can also cause
great political risks. At present, the protection of overseas interests in
China depends mainly on local law enforcement agencies and some private
local security forces, and Chinese always think the local government
should assume responsibility for security. In the face of the threat of ter -
rorist attacks, the Chinese government is often accustomed to using dip -
lomatic means to exert pressure on the local government to enable Chinese
enterprises and personnel to obtain better security conditions. However,
in many cases, these requirements were hard to fulfill. Many local govern -
ments in Southeast Asia have limited capacity to provide adequate security
resources. And this diplomatic pressure might become a greater impact on
these local governments. Normally, Uyghur terrorists in Southeast Asia
will not act alone; they prefer to link local armed groups or extremist
forces to form a joint action. Therefore, the local government is not only
dealing with the threat of terrorism, but also complex political issues. This
would destroy local social balance and weaken political stability. This insta -
bility will eventually lead to the deterioration of the local investment envi -
ronment, halting progress on the important infrastructure of the BRI,
thus seriously hindering it.
Finally, Uyghur terrorists may have a long-term impact on Southeast
Asia, where they make this region as a long-term settlement area. Southeast
Asia may replace the Middle East region as another major place to carr y
out jihad. It now appears that ISIS terrorists from the Middle East—
including Uyghur terrorists—would be a long standing issue in Southeast
Asian region. Although it has not yet had a plan to attack China’s targets,
it does not mean they would not be a threat, and their hostility to the
Chinese government will not be declining. As a result, the risk of terrorist
attacks in Southeast Asia will gradually increase, which also makes the cost
and uncertainty of the BRI far greater than expected.
conclus Ion
thg gtowing conngctionu bgtwggn uyghut anf NocaN tgttotiut gtoupu in
southgaut Auia hau pougf a ptobNgm that iu of mutuaN tgNgvancg to china
anf southgaut Auia. logicaNNy, thiu mutuaN thtgat couNf bg afftguugf
thtough tggionaN ugcutity attanggmgntu uuch au within thg Auuociation of
southgaut Auian nationu (AseAn) anf AseAn rggionaN fotum (Arf)
anf AseAn PNuu 3 that incNufg china. howgvgt, fgupitg thg announcg -
mgnt of vatiouu action pNanu anf utatgmgntu of intgnt, mganingfuN
uyghur MIlItAnt ActIvIty In southeAst AsIA And Its securIty

226
progress in the general area of counter-terrorism has always been stymied
by ASEAN’s normative preference for non-interference in internal affairs
and unanimity in decision-making. 30 Moreover, the specter of militant
Islam is only a concern to a few of the Association’s member states and is
less of an issue to countries such as Cambodia, Vietnam or Laos. So far,
there are no Muslim extremist organizations in these countries to establish
strongholds, but as the Uyghurs pass through immigration channels they
will face a certain degree of security problems.
Against this background, rigorous regional counter-terrorist coopera -
tion has historically been more bilateral or trilateral in nature, tending not
to take the form of concrete policies instituted through the ASEAN frame -
work. While providing a collective response to extremist violence might be
weak, this “hub and spokes” model still allows for more limited and nar -
row action to address common threats. The model is named after a bicycle
wheel, which has a strong central hub with a series of connecting spokes.
The problem is solved by the direct dialogue between countries, thus
greatly simplifying the path of the system. If countries faced a serious
threat of terrorism, they might be more willing to engage in counter-
terrorism cooperation directly, thus avoiding inefficiencies in complex sys -
tems within ASEAN.
To this end, China has steadily stepped up its regional interactions in
Southeast Asia to combat what it now portrays as a common threat. The
countr y has increased its counter-terrorist cooperation with Indonesia,
particularly in the areas of intelligence sharing, joint investigations, foren -
sics and training. Most of this collaboration takes place through regular
bilateral counter-terrorism consultations. On December 4, 2015 these
meetings were held and co-chaired by PRC Vice Foreign Minister Cheng
Guoping and Saud Usman Nasution, the head of Indonesia’s National
Counterterrorism Agency (BNPT). During the session, the two sides
exchanged views on their respective national security situations, the inter -
action between militant groupings in XUAR and Sulawesi and the manner
by which common threats could best be addressed to the benefit of both
countries. 31
Despite tensions on the South China Sea disputes, the PRC has also
stated a willingness to work with the Philippines in fighting terrorism. The
potential scope of this engagement has been considerably widened as a
result of a restored Sino-Philippines relationship. President Rodrigo
Duterte, elected in 2016, made it clear that he not only wants to review
parts of Manila’s defense ties with the United States, but also is intent on
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227
significantly improving Filipino-Sino relations. 32 While the actual sub -
stance of this apparent “pivot” is still open to question, 33 it is noteworthy
that in October 2016, the two countries pledged to strengthen their law
enforcement collaboration to jointly deal with narcotics trafficking and
terrorism. 34 It is expected that if Uyghurs are becoming more active with
militants in the Philippines, it is likely that this situation will take on a
more concrete form, embracing aspects such as information dissemination
and capacity building.
China has additionally sought to promote broader action to counter
religious extremism, particularly in heightening regional awareness of
Internet-based radicalization. As part of this endeavor, Beijing has hosted
several international conferences that aim to highlight best practices for
countering online extremist messaging and how these can be applied to
integrated policies that encapsulate legal tools, education and the rein -
forcement of positive socio-cultural norms. The most recent event was
held in November 2014 and brought together participants from Pakistan,
Singapore, Israel, the United States and France. 35
The threat from Uyghur militants to BRI is far higher than the threat
to China. Chinese government has a ver y mature anti-terrorism and
domestic security system in the mainland territor y, but the security capac -
ity outside is relatively weak. Although China is gaining more and more
influence on the countries involved in the BRI region, it is not enough to
support BRI’s security demand. Therefore, the Chinese government can
only passively face terrorist attacks overseas; such terrorist attacks are likely
to delay the smooth development of BRI plans. But this threat does not
create sufficient capacity to completely break the BRI program, and the
direct attack by Uyghur militants can only cause a significant increase in
security risks and costs of BRI.  However, the escalation of extremism
caused by the security environment in Southeast Asia is ver y likely to make
the goal of BRI difficult to achieve. Therefore, the threat to China was the
overall security environment in Southeast Asia rather than simply the
problem of armed Uyghur terrorists. As mentioned earlier, the Southeast
Asian countries, which have no extremist organization, are relatively less
affected by Uyghur militants, and in Southeast Asia foreign militants are
unable to gain a foothold in the absence of local support. Therefore,
China needs to cooperate with those Southeast Asian countries with
extremist issues to upgrade their ability in anti-terrorism and anti-
extremism. Increasing the anti-terrorism capability of Southeast Asian
UYGHUR MILITANT ACTIVITY IN SOUTHEAST ASIA AND ITS SECURITY…

228
countries is a fundamental measure for improving the BRI’s overall secu -
rity environment.
Finally, the PRC has tried to encourage Western nations, including the
United States, to support its efforts in blunting the activities of the East
Turkestan Islamic Movement (ETIM). 36 Thus far, progress in this direc -
tion has been hampered by the continued issue of alleged human rights
abuses in XUAR and concerns over the legitimacy of China’s new anti-
terror laws. It might change, however, as a result of the Trump administra -
tion’s current priority to eliminate Islamic radicalism in all its forms. As
Uran Botobekov obser ves in The Diplomat : “Despite serious contradic -
tions between Beijing and Washington in trade and economic concerns,
the firmness of new U.S. President Donald Trump’s position on eliminat -
ing Islamic radicalism can become common ground.” (Botobekov 2017 )
In this context, the prospect of a more concerted Uyghur militant pres -
ence taking hold in Southeast Asia could help pave the way for a joint
Chinese-US drive to resuscitate genuine counter-terrorism cooperation in
the region. Instituting forceful (but calibrated) collective responses to
militant extremism would be a mutually beneficial and politically non-
contentious area of collaboration between Beijing and Washington that
could also give real meaning to ASEAN’s Political and Security Community
as it continues to come to fruition in 2017. 37
notes
1. sgg, fot gxampNg, chtiutina lin, tutMgyu Pauupott scanfaN anf sgttNgmgntu
in sytia, The Times of Israel , October 6, 2015, available online at http://
blogs.timesofisrael.com/turkeys-passport-scandal-and-settlements-in-
syria/ , as of Januar y 26, 2017. Lin reports that more than 50,000 Uyghur
had used the route. While this number may have been exaggerated, one of
the authors obser ved that at least 10,000 had traveled to Syria based on
sources in the Middle East and propaganda materials released by the so-
called Turkistan Islamic Party in al-Sham and IS.
2. See, for instance, Sam Dupont, “China’s War on the ‘Three Evil Forces,’”
Foreign Policy, July 25, 2007; and Singh, “Southeast Asian Terrorism: The
Rise of the Uighur Factor.”
3. The legislation requires technical firms to assist with the decr yption of
electronic information, severely restricts the right of news media outlets to
report on attacks or the authorities’ response to such incidents, adopts a
ver y broad definition of terrorism and establishes a new counter-terrorism
agency and national intelligence center with significant discretionar y pow -
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229
ers. For further details see Zunyou Zhou, “China’s Comprehensive
Counter-Terrorism Law,” The Diplomat, Januar y 23, 2016; “China Passes
Controversial New Anti-Terror Laws,” BBC News, December 28, 2015,
available online at www.bbc.com/news/world-asia-china-35188137 , as of
Januar y 18, 2017; and “China Passes Controversial Counter-Terrorism
Law,” Reuters, December 28, 2015.
4. Indeed, official intelligence sources estimate that more than a thousand
Uyghur refugees are already currently seeking asylum in just three states—
Indonesia, Malaysia and Thailand. See Chen, “Uyghurs’ Presence Adds to
Southeast Asia’s Security Challenges.”
5. See, for instance, Weng Loke Yeoh, “Ethnic Unrest in Tibet, Xinjiang and
China’s Vulnerability to Separatism,” available online at https://www.
academia.edu/8353539/Ethnic_Unrest_in_China_Tibet_Xinjiang_and_
Chinas_vulnerability_to_ethnic_separatism , as of Januar y 17, 2017.
6. A secondar y passage runs from the Guangxi Zhuang autonomous region
in southwestern China into northern Vietnam and then to Thailand, either
via Laos or through Cambodia.
7. Inter views, Bangkok, Januar y 2016.
8. Inter views, Bangkok, Januar y 2016 and Manila, November 2016.
9. Inter view, Bangkok, Januar y 2016.
10. See “‘Double Game’ Turkey Issuing Identity Papers to Islamist Fighters
from China,” No-terror , European Information Center on Terrorism,
August 08, 2015, available online at https://www.noterror.eu/en/983/ ,
as of Januar y 08, 2016.
11. Thailand has generally been willing to acquiesce to the demands of China
in order to safeguard lucrative trade and investment ties with Beijing.
12. Inter views, Bangkok, Januar y 2016. See also Susan Cunningham,
“Bangkok Shrine Bombing—Case (Pretty Much) Closed,” Forbes Asia
(December 23, 2015).
13. MIT mostly acts as an umbrella movement for militants based in the sim -
mering conflict zones of Poso, Palu and Bima and has been directly tied to
numerous attacks on the police.
14. Inter views, Manila, November 2017. See also Singh, “Southeast Asian
Terrorism: Rise of the Uighur Factor”; and Shannon Tiezzi, “Indonesia
Adds 4 Uyghur Militants to Most-Wanted List,” The Diplomat, March 18,
2016.
15. Inter view, Singapore, Januar y 2016. See also Randy Fabi and Augustins
Beo Da Costa, “Indonesia Turns To China as Ethnic Uighurs Join
Would-Be Jihadis,” Reuters, Januar y 6, 2016.
16. See “Chinese Uighur Militant Killed By Indonesian Militar y,” San Diego
Union Tribube, August 19, 2016.
17. On July 28 2016 Jabhat al-Nusra, changed its name to Jabhat Fatah al-
Sham and declared that it had formerly split from its parent organization.
UYGHUR MILITANT ACTIVITY IN SOUTHEAST ASIA AND ITS SECURITY…

230
The move was widely interpreted as an attempt to remove any “pretext”
for the United States and Russia to conduct airstrikes against the move -
ment under the justification of targeting an al-Qaeda affiliate. See Liz Sly
and Karen DeYoung, “Syria’s Jabhat al-Nusra Splits from al-Qaeda and
Changes Its Name,” The Washington Post, July 28, 2016; and Mona Alami,
“Jabhat al-Nusra’s Rebranding Is More Than Simple Name Change,”
Al-Monitor, August 15, 2016, available online at http://www.al-monitor.
com/pulse/originals/2016/08/jabhat-al-nusra-sever-al-qaeda-focus-
local-syria.html , as of Januar y 20, 2017.
18. Inter views, Singapore Manila, November 2017. See also Sing.
19. See “Islamic State Group ‘Lost Quarter of Territor y’ in 2016,” BBC News,
Januar y 19, 2017, available online at http://www.bbc.com/news/world-
middle-east-38641509 , as of Januar y 20, 2017.
20. See, for instance, Liz Bourke, “Returned Jihadists: The Horror That
Comes After Islamic State,” news.com.au , September 28, 2016, available
online at http://www.news.com.au/national/politics/returned-jihadists-
the-horror-that-comes-after-islamic-state/news-stor y/6ffde8f2aa026666
8e3ab9205eb0425f , as of Januar y 20, 2017; and Jo Moir, “Foreign
Fighters in the Middle East Could Return to New Zealand as Islamic State
Crumbles—John Key,” stuff, October 24, 2016, available online at http://
www.stuff.co.nz/national/politics/85681951/Foreign-fighters-in-the-
Middle-East-could-return-to-New-Zealand-as-Islamic-State-crumbles-
John-Key , as of Januar y 20, 2017.
21. Inter views, Manila, November 2017.
22. These include the 2002 Bali bombings (202 dead, 209 injured), the 2003
suicide strike attack against the JW Marriott in Jakarta (12 dead, 150
injured), the bombing of the Australian Embassy, again in Jakarta (11
dead, more than 200 injured) and repeat attacks in Bali in 2005 (25 dead,
129 injured). For further details on the operational makeup and activities
of JI between 2001 and 2008, see Peter Chalk et al., The Evolving Terrorist
Threat to Southeast Asia: A Net Assessment (Santa Monica, CA: RAND,
2009), Chapter Five.
23. The ASG is split between two main factions: One led by Isilon Hapilon and
based in Basilan and one under the command of Radullan Sahiron in Sulu.
They have a combined strength of 500 cadres (2015 estimate) and while
cooperating logistically and financially operate independently. BIIF is simi -
larly split between branches: one led by Sheik Muhedeen Animbang (the
former Vice Chairman for Militar y Affairs and Chief of Staff) and one
under the charge of Esmail Abu Bakar (the former nominal leader of
BIFF). Animbang’s group is stronger in terms of numbers (300 compared
to 100) and it has a greater capacity to steal weapons as well as manufacture
its own. For further details, see Peter Chalk, “Terrorism in Southeast Asia:
P. SUN

231
Evolving Scope and Dimensions,” in Erich Marquadt ed., Combating
Terrorism and Irregular Warfare: The Long War Against al-Qa’ida, the
Islamic State (New York: West Point Militar y Academy, Counter Terrorism
Center, 2017).
24. Inter views, Manila, November 2016.
25. The southern Philippines constituted JI’s third regional division (or
“mantiqi”).
26. The Philippines’ chief piece of anti-terrorist legislation is enshrined in the
Human Security Act (HSA), which was passed in 2007 (prior to that no
specific anti-terror laws existed) and under writes a range of extrajudicial
sur veillance and arrest powers for the police. However, the act imposes
extremely severe penalties in the event that it is judged to have been
employed inappropriately, including a prison term of up to 12 years. In
addition, if a person is charged under the HSA and subsequently found to
be innocent, he/she has the legal right to demand 500,000 pesos (US
$125) compensation for each day of detention—the cost of which is per -
sonally borne by the arresting officer. As a result, the law has only been
used once since its inception.
27. Inter views, Manila, November 2017.
28. Sahiron is ver y insular in orientation and mostly focused on criminal
endeavors such as kidnapping and extortion.
29. Inter view, Manila, 2017.
30. Inter views, Kuala Lumpur, September 2015. See also Peter Chalk, Black
Flag Rising: ISIL in Southeast Asia and Australia (Canberra: ASPI Strategy
Report, December 2015), 25–26.
31. “Vice Foreign Minister Cheng Guoping Chairs the 4th China-Indonesia
Counterterrorism Consultation,” Ministr y of Foreign Affairs of the
Peoples Republic of China, December 03, 2015, available online at http://
www.fmprc.gov.cn/mfa_eng/wjbxw/t1321795.shtml , as of Januar y 31,
2017.
32. See, for example, “Rodrigo Duterte Wants US Troops ‘to Leave
Philippines,’” BBC News, October 26, 2016, available online at http://
www.bbc.com/news/world-asia-37773706 , as of Januar y 31, 2017.
33. Many experts believe that the real intention of Duterte’s overtures to
Beijing has been to boost economic ties and reestablish channels of com -
munication than to institute an entirely new defense partnership with
China. Author inter views, Manila, November 2016.
34. “Foreign Ministr y Spokesperson Geng Shuang’s Regular Press
Conference,” Ministr y of Foreign Affairs of the People’s Republic of
China, October 10, 2016, available online at http://www.fmprc.gov.cn/
mfa_eng/xwfw_665399/s2510_665401/t1404541.shtml , as of Januar y
31, 2017.
UYGHUR MILITANT ACTIVITY IN SOUTHEAST ASIA AND ITS SECURITY…

232
35. “Theor y and Practice of De-Radicalization in a Counter-Terrorism
Context: Global Knowledge and Local Experience,” People’s Public
Security Ser vice University, Beijing, November 14, 2016.
36. “U.S. Says Looking at More Counter-Terrorist Cooperation with China,”
Today, July 26, 2016, available online at http://m.todayonline.com/
world/us-says-looking-more-counter-terrorism-cooperation-china , as of
Januar y 31, 2017.
37. The Political and Security Community is one of three pillars of the pro -
posed ASEAN Community. Launched in 2015, this institutional initiative
is primarily aimed at transforming ASEAN into a more consolidated
regional bloc that can take decisive, unified action to address various state
and non-state challenges likely to affect Southeast Asia in coming years.
For further details see Peter Chalk, ASEAN Ascending: Achieving
‘Centrality’ in the Emerging Asian Order (Canberra: ASPI Strategy Report,
March 2015).
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235 © The Author(s) 2018
A. Arduino, X. Gong (eds.), Securing the Belt and Road Initiative ,
https://doi.org/10.1007/978-981-10-7116-4_13
CHAPTER 13
Chinese Investments in the Arab Maelstrom
James M. Dorsey
Avoiding the  P itf Alls of  diverging interests
An ongoing Chinese debate on the management of relations with the
United States informed China’s first articulation of a Middle East policy
with the publication in Januar y 2016 of an Arab Policy Paper 1 on the eve
of President Xi’s visit to the Middle East and North Africa, the first by a
Chinese head of state in seven years. The paper shied away from spelling
out concrete policies. Instead, it reiterated long-standing principles of
Chinese foreign policy like non-interference in the internal affairs of other
states, dialogue and win-win modes of cooperation as they applied to the
Arab world and emphasised China’s key interests in the region: economics,
J. M. Dorsey ( *)
S. Rajaratnam School of International Studies, Singapore, Singapore
Institute of Fan Culture, University of Würzburg, Würzburg, Germany
Dr. James M. Dorsey is a senior fellow at the S. Rajaratnam School of
International Studies, co-director of the University of Würzburg’s Institute for
Fan Culture, and the author of The Turbulent World of Middle East Soccer blog, a
book with the same title, Comparative Political Transitions between Southeast
Asia and the Middle East and North Africa , co-authored with Dr. Teresita
Cruz-Del Rosario and Shifting Sands, Essays on Sports and Politics in the Middle
East and North Africa .

236
energy, counter-terrorism, security, technical cooperation and its One Belt,
One Road initiative.
In the process, the paper failed to answer influential Chinese blogger
Ma Xialing’s question: “What’s China’s strategy in the Middle East?”
Xialing argued two years earlier that China does not have a strategy.
“Strategy, for one, depends on theor y. In this regard, China still follows
the general principle set out by Deng Xiaoping – we don’t really care too
much about outside developments, for now we just make our economy
stronger. In Zhongnanhai (the headquarters of the Chinese Communist
Party), leaders don’t care much about Middle East, but about China’s
domestic interest. Moreover, even in the times of (former president) Hu
Jintao and Xi Jinping, China does not aim to develop strategy, but rather
short-term policies. That is why China will not play an important role in
the Middle East… China is hesitant to get deeply involved in the Middle
East, as it is ver y complex and a troublesome place. China is not prepared
for the risks that could be encountered there. Often, Chinese political
leaders and scholars say that the Middle East is a graveyard for empires, as
many big empires through histor y collapsed after getting involved and
failing in the Middle East,” Xialing noted. 2
If Ma Xiang’s criticism seemed reasonable in 2016, it looks ver y differ -
ent in 2017 with the rise of Donald J. Trump as president of the United
States. What seemed then failure to develop a policy, allows China in the
era of Trump to keep its options open amid uncertainty about what US
policy will be not only in the Middle East and North Africa but also
towards China itself. 3 Trump has promised to adopt a much tougher stand
on issues of trade and the South China Sea. Already, Trump initiated a
more hostile attitude towards Iran, a key Chinese partner in the Middle
East, imposing sanctions on the Islamic republic in his first weeks in office. 4
While China has exploited Trump’s apparent isolationism and inclina -
tion to back away from the US role as a champion of liberal values to
project itself as the guarantor of globalisation, it remains reluctant to
inherit the US mantle of the world’s policeman. That is particularly evi -
dent in the Middle East and North Africa, were China maintains its hesi -
tancy to become embroiled in the region’s pitfalls even though facts on
the ground inevitably push Chinese leaders towards greater engagement.
And the stakes for China are rising as its interests in the region
mushroom.
Energy and resource security are key to China’s continued economic
growth and rising standards of living on which the legitimacy of the
J. M. DORSEY

237
Communist Party of China (CCP) rides. Add to that the geo-strategic
importance of Middle Eastern and North African states as hubs for access
to African and European markets and their centrality to China’s One Belt,
One Road strategy is obvious.
Finally, as was evident in China’s complex compliance with past United
Nations sanctions against Iran and Xi’s visit to the Middle East, balancing
Chinese relations with rival Middle Eastern states as well as the United
States as they relate to the region is increasingly resembling the act of a
dancer on a tightrope.
China has sought to enhance its energy security within the limitations
of its inter-dependency with the United States and its continued reliance
on the US defence umbrella in the Gulf by investing significantly in
resource-related sectors in Middle Eastern and North African states.
The region’s increased economic and security importance to China is
reflected in the fact that an estimated 60 per cent of Chinese exports travel
through the Suez Canal. As a result, China has invested heavily in the
channel’s ports. Investments include a US $186 million joint venture to
operate a container terminal in Port Said, a US $219 million expansion of
the port’s quay and the construction of a US $1 billion quay and US $416
million container terminal in Al-Adabiyya. 5
China has also moved to ensure robustness by investing in a rail line
that links the Israeli Red Sea port of Eilat with the Mediterranean Sea that
would enable Chinese exports to circumvent the canal 6 as well as Israeli
ports. Shanghai International Port Group won in 2015 a tender for the
management of Haifa port 7 while China Harbour Engineering Co is
building Israel’s first private port in Ashdod at a cost of US $876
million. 8
The need for robustness symbolised by the Israeli backup to the Suez
Canal was driven home when Suez Canal ports experienced backlogs and
closures in the wake of the 2011 popular revolt that toppled Egyptian
President Hosni Mubarak and again in 2013 when a vessel in the canal
belonging to China Ocean Shipping Group Company was hit by rocket-
propelled grenades. 9
Israel is but one toe in China’s footprint and associated interests that
are evident across the Eurasian landmass that it envisions as part of its One
Belt, One Road initiative. In 2010, China overtook the European Union
as Iran’s largest trading partner, 10 and has more recently agreed to press
ahead with the construction of a natural gas pipeline linking Iran with
Pakistan. 11 The pipeline is part of a US $46 billion infrastructure spending
CHINESE INVESTMENTS IN THE ARAB MAELSTROM

238
plan in Pakistan, China’s largest planned investment to date in any one
single countr y. 12
China’s plans to invest in an array of Pakistani projects, including a
1700-mile trade route to the Gulf, illustrate the politics of its One Belt,
One Road Initiative. Xi Jinping believes that he can achieve Chinese domi -
nance through investment and inter-connected infrastructure. In doing
so, China is convinced that it can succeed where the United States has
failed. It expects its massive investment will ser ve as an incentive for
Pakistan to step up its crackdown on Pakistani militants and to end the
support of the countr y’s intelligence ser vice, Inter-Ser vices Intelligence
(ISI), for radical Islamist groups. China hopes moreover that Chinese-
built transport infrastructure could spur economic development in its
troubled northwestern province of Xinjiang where harsh measures against
the cultural practices of the Uighurs have fuelled Islamist violence. A job
boom in Xinjiang would allow the government to further dilute Xinjiang’s
Uighur population through the immigration of non-Uighurs.
Sun Degang Sun, the deputy director of Shanghai International Studies
University’s Middle East Institute, argued that China could afford to
adopt its economically focussed approach because of its insistence on non-
alignment and non-interference and differences in definitions of national
interest between the West and China. In contrast to the West, which sees
terrorism, proliferation of weapons of mass destruction and other great
powers seeking political and militar y dominance in the Middle East as
national security threats, China prioritises protection of its economic,
trade and energy interests. 13
Underlying the Chinese approach is the notion that rising living stan -
dards will enhance domestic stability and the security of the regime. These
different definitions constitute the backbone of One Belt, One Road,
described by Wu Jianmin, a member of the Chinese Foreign Ministr y’s
foreign policy advisor y group, a senior research fellow with the State
Council of China and former ambassador to the United Nations and vari -
ous European countries, as “the most expansive Chinese initiative ever.” 14
Wu argued that the initiative was needed given that “the epi-centre of war
and conflict is the Middle East and North Africa” and that “Iraq,
Afghanistan and Libya prove that war does not solve problems.” 15
China’s vast investments across Eurasia are rooted in a belief that geo -
politics and economics ultimately mitigate in its favour. The era of a pri -
mar y economic focus of oil-rich Gulf States on the United States and
Europe ended in 2013 with a shift in trading patterns that pushed the
J. M. DORSEY

239
United States to second place in the Gulf and saw India moving Japan out
of third place. “It’s a shift from the old industrialised powers to the newly
industrialised powers,” said Tim Niblock, a renowned expert on Gulf-
Asian relations. 16
If the traditional US approach towards the Middle East and North
Africa is rooted in the Washington Consensus, a set of value-oriented free
market economic ideas, supported by international organisations such as
the IMF and the World Bank, China’s approach amounts in the words of
political scientist Mojtaba Mahdavi to a non-ideological Beijing Consensus,
a mercantilist policy that is “another form of neo-liberalism with Chinese
characteristics” 17 focussed not only on securing resources and global trans -
portation routes but also on access to consumer export markets and access
to innovative technologies.
Leaving aside the sheer audacity and scope of Xi’s Silk Road project
that focusses on integrating the enormous swath of territories between
China and the Middle East by concentrating on infrastructure, transporta -
tion, energy, telecommunications, technology and security, applying
China’s lofty principles is easier said than done and raises a host of unan -
swered questions. Its insistence on multi-polarity as opposed to US domi -
nance in the Middle East implicitly means that the status of the United
States would have to change before Washington would be willing to
entertain the Chinese approach. The Trump era could well usher in an
opportunity with the president’s potential willingness to share the burden
of guaranteeing regional security and insisting that the beneficiaries of a
US shield pay what he describes as their fair share.
the M iddle eAst : testing the  B ound Aries
of  non -interference
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notth Aftica hau bggn gvifgnt in thg way chingug ofcialu, policy analyutu
anf fotmgt ambauuafotu to thg Mifflg eaut concgptualiug china’u
apptoach in fiucuuuionu with thgit ucholatly Wgutgtn anf Atab collgagugu.
thg fgbatg iu coloutgf by what appgat to bg ggngtational fiffgtgncgu.
oftgn, olfgt cuttgnt anf fotmgt chingug ofcialu appgat to atttibutg
gtgatgt impottancg to thg fotmal aupgctu of political ptocguugu tathgt than
political tgalitigu on thg gtounf. ong gxptguuion of that vigw iu thgit
gmphauiu on thg outcomgu of glgctionu ittgupgctivg of whgthgt thgy wgtg
chinese investMents in the ArAB MAelstroM

240
free and fair and represent a voluntar y expression of popular will. A case in
point are Chinese official statements supporting the re-election in June
2014 of Syrian President Bashar al-Assad despite the fact that the vote
lacked legitimacy or credibility in a countr y in which the government no
longer is in control of all of its territor y and has demonstrated a willing -
ness to retain power irrespective of cost.
This approach camouflages Chinese support for autocratic regimes in
the Middle East and North Africa behind a veil of declared non- interference
in a countr y’s domestic affairs and recognition of a government legiti -
mately constituted in nominal terms. It is, despite Chinese denials, a policy
akin to the US emphasis on stability in the region rather than adherence
to liberal American values. It is a policy for which the United States,
Europe and the international community have paid dearly given that it
produced the violent and often brutal undercurrents of change that are
sweeping the Middle East and North Africa as well as the emergence of
jihadism, forces that increasingly also threaten Chinese interests.
Current and former Chinese officials often frame the debate by empha -
sising external rather than domestic drivers of crisis in the Middle East. To
be sure, Chinese policymakers and politicians do not have to take into
account powerful ethnic and national lobbies like the Israel, Gulf, Turkish,
Armenian and Greek groupings that play an important role in the formu -
lation of policy in the United States.
Yet, in the spirit of all foreign policy being a function of domestic pol -
icy, China is not void of domestic drivers that play an increasingly impor -
tant role in its foreign policy making. Those drivers stem from evolving
definitions of national interest and the increased number of players in
China’s foreign policy debates as China’s global economic footprint
expands. 18 These players include major state-owned enterprises such as
national oil companies whose interests in the Middle East and North
Africa have mushroomed. The oil companies argue that China’s lack of
engagement and insistence on non-inter vention deprive the People’s
Republic of leverage needed to negotiate pricing and supply in energy
contracts in a market that is virtually inelastic. 19 China’s ambassador to
Saudi Arabia, Li Chengwen, highlighted the scale of China’s stake in the
Middle East and North Africa when he noted in 2013 that 140 Chinese
companies were involved in contracts worth US $18 billion in Saudi
Arabia’s construction, telecommunications, infrastructure and petro -
chemical sectors. 20
J. M. DORSEY

241
The domestic drivers of Chinese foreign policy further involve popular
insistence that the government ensure the safety and security of the grow -
ing number of Chinese nationals and jobs in the region. Of the Chinese
companies active in Saudi Arabia, 70 employ a total of 16,000 Chinese
workers. 21 Dubai boasts the Middle East’s largest Chinese expatriate com -
munity with 200,000 nationals and an estimated 3000 companies. 22 China
has framed its need to protect its expatriate nationals as humanitarian aid
and used it to project itself as a global power 23 and justify its mushrooming
militar y budget. 24
A further driver of Chinese policy towards the Middle East and North
Africa is mounting concern that jihadist groups like the Islamic State (IS)
could fuel unrest among Uighurs, a Turkic-speaking people that has long
felt culturally more akin to the region’s Turkic trading partners than to the
majority Han Chinese and Hui Muslims. 25
These domestic drivers and the growing realisation that China will at
the ver y least have to be opportunistic about adherence to its policy prin -
ciples have helped to narrow the gap between hardliners and moderates.
Hardliners favour a more assertive policy already visible since 2009  in
China’s soft militar y approach to the Middle East and North Africa as
opposed to proponents of a more conser vative policy that harks back to
former Chinese leader Deng Xiaoping’s maxim of keeping a low profile
that would allow China to avoid challenging US regional hegemony and
benefit from conflicts sapping US strength. 26 The gap is narrowed by the
fact that China has de facto already let go of Deng Xiaoping’s maxim.
Sun Degang acknowledged this by arguing that “the further expansion
of China’s soft militar y presence overseas is necessar y to protect its grow -
ing foreign commercial investments and other interests, not to mention
the safety of Chinese expatriate workers.” He was referring to China’s
evacuation in 2011 of 35,000 workers from Libya with the help of Chinese
naval vessels and Air Force aircraft diverted from anti-piracy operations off
the Horn of Africa 27 as Col. Muammar Qaddafi’s efforts to repress
mass-anti-government protests turned violent. Sun Degang was also mak -
ing reference to subsequent kidnappings of Chinese nationals in Sudan
and Egypt’s Sinai desert. The Libyan evacuation prompted President Hu
in 2012 to identify the protection of nationals overseas as one of three new
diplomatic priorities in his work report to the 18th Party Congress. 28 “You
need to protect your overseas interests. We will do that in a cooperative
way… It is not a zero-sum game,” added Wu Jianmen, the foreign minis -
tr y advisor. 29
CHINESE INVESTMENTS IN THE ARAB MAELSTROM

242
The Middle East and North Africa’s violent convolutions have per -
suaded some Chinese analysts that the region has become a testing ground
for an inevitable adjustment of Chinese policy principles, including the
notion of non-inter vention. Their views are rooted in realities on the
ground as well as Mao Zedong’s belief that the Middle East and North
Africa was a key arena for the struggle against the hegemony of superpow -
ers. 30 Mao’s assessment, like Chinese approaches to the region today, was
driven by China’s definition of its national security interests rather than a
desire to resolve the Middle East and North Africa’s seemingly intractable
problems.
As a result, these scholars warn that China cannot afford to further
avoid factoring into its policies profound processes that are shaking the
fundaments of the Middle East and North Africa’s nation state structure,
post-colonial borders and security architecture. Scholars like Israel expert
Yiyi Chen noted that protection of Chinese economic interests had already
forced Beijing to become more flexible in its adherence to the notions of
mutual respect for sovereignty and territorial integrity, mutual non-
aggression, non-interference in each other’s internal affairs, equality and
mutual benefit and peaceful coexistence that were adopted in 1954  in a
joint statement on peaceful cooperation by the leaders of China, India and
Burma. 31 Chen cited as an example Chinese shuttle diplomacy between
Sudan and South Sudan on the back of Chinese investments in Sudanese
oil fields and South Sudanese infrastructure. 32 Similarly, Chen argued that
it was not a question of if but when China would seek to mediate in the
Israeli Palestinian conflict. 33 China has also unsuccessfully sought to arbi -
trate in Afghanistan and Syria.
Changing patterns in China’s foreign policy driven by events in the
Middle East and North Africa were evident in the constructive role China
played in UN deliberations that led to the adoption of the principle of the
right to protect provided the use of force had been endorsed by the
Security Council 34 and in the evolution of Chinese defence policy. A
Chinese defence white paper identified in 2013 the protection of overseas
energy resources and Chinese nationals abroad as a major security concern
to be shouldered by the Chinese militar y. 35 The shift in Chinese policy was
facilitated by the fact that China had never clearly defined what would
constitute inter vention in the domestic affairs of another countr y, 36 a
vagueness that allowed China in the 1950s and 1960s to support revolu -
tionar y movements in Africa, South America and Southeast Asia. 37
J. M. DORSEY

243
Building on the evolution of China’s positions, Middle East scholar Liu
Zhongmin warned that “the deep political changes in the Middle East, the
restructuring of the regional system and the strategy adjustment of the
U.S., Europe and other Great Powers…suggests that it is urgent for China
to work out a mid-term and long-term diplomatic strategy toward the
Middle East and corresponding mechanism and measures.” 38 This, Liu
argued, would have to involve adhering to the principle of non- inter vention
“with an innovative mind” that would “enrich the connotation of the
principle from time to time.”
Liu suggested China could increase its influence in the region through
increased aid, investment and efforts to mediate in disputes. China should
“dare to propose to the related states more practical and specific resolu -
tions in line with international morality” and expand its contact with
opposition groups in the region, Liu argued. In line with the near consen -
sus among Chinese scholars and officials that puts the Middle East in the
context of China’s relations with the United States and determines the
international posture China should adopt, Liu maintained that China for
a considerable time to come would have to compensate for structural limi -
tations of its power and political disadvantages. These limitations include
the lack of the kind of soft and hard power available to the United States
and persistent tension with the Uighurs.
China’s limitations notwithstanding, some analysts suggest that China
has no choice but to position itself as a global power sooner rather than
later. Renmin University international relations professor Pang Zhongying,
one of China’s most outspoken scholars on the issue, argued that “China
should declare clearly that China inter venes globally, regionally, and mul -
tilaterally, but conditionally” adding that “a global China . . . has to
inter vene.” 39
In a variation on the theme, Peking University international relations
scholar Wang Yizhou speaking to the Beijing Review sought to address the
issues posed by non-inter ventionism by developing the concept of “cre -
ative involvement” that would allow it to participate in efforts to resolve
conflicts with “cautious, creative and constructive mediation”; create insti -
tutions; and provide global public goods, “imprinting the future world
with (China’s) contributions.” Wang argued that “creative involvement is
a concept that focuses on diplomatic, commercial and militar y fields and
stresses improving flexibility and skills of foreign affairs-related depart -
ments. It can be considered as a new direction for China’s diplomacy. It
will be a new option for China’s diplomacy based on its new position and
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244
strength as well as its culture and traditions. It will bring a Chinese style to
the world stage during the process of the peaceful development of the
countr y.” 40
Christina Y.  Lin, a former US government official and China expert,
noted that China’s commercial and financial muscle gave it a leg up on the
United States. China was not only armed with a larger war chest, but also
able to neutralise market forces by skipping over tenders and ignoring the
rules of level-playing field competition. “In addition to bilateral agree -
ments, China…provides competitive package deals that may include mili -
tar y aid in addition to concessional loans,” Lin said. 41
exPA nding chin A’s nAvAl h orizons
doubtu about us tgliability in thg Mifflg eaut that wgtg tut bolutgtgf by
Ptguifgnt Batak obama’u fgclatgf pivot towatfu Auia anf thgn by thg tiug
of ttump tginfotcg chingug concgtnu that fiffgtgncgu with Wauhington
ovgt fiuputgu in thg south anf eaut china sgau ot taiwan coulf ptompt a
us naval blockafg of thg Malacca sttaitu thtough which much of china’u
gngtgy impottu ow. thgug concgtnu conutitutg a bauiu fot china’u gtafu -
ally motg auugttivg militat y policy in thg Mifflg eaut au wgll au itu mauuivg
invgutmgnt in naval mofgtniuation. thgy aluo gxplain thg ctgation of a
utting of pottu that link china to commgtcial anf tgfuglling facilitigu in thg
infian ocgan anf thg gulf anf a ngtwotk of tailwayu that coulf play a kgy
militat y ttanupott anf logiuticu tolg oncg china fgcifgu to ptojgct powgt
actouu eutauia, 42 anf pipglingu conngcting it to cgnttal Auia anf thg Mifflg
eaut. 43
likg thg Mifflg eaut’u multiplg conictu anf ggouttatggic tglgvancg,
china’u gtafual gmgtggncg au a global naval powgt thtgatgnu thg intggtity
of itu ptinciplg of non-intgt vgntionium. thg challgngg wau tggctgf in a
chingug fgfgncg whitg papgt publiuhgf in 2015 that outlingf uignicant
changgu in thg tolg auuigngf to thg militat y that wau gxpanfgf among oth -
gtu to inclufg ptotgction of chingug intgtgutu abtoaf. 44 Militat y analyutu
uugggut that it iu at bgut a mattgt of timg until china will havg thg capabil -
ity to act in ling with thg papgt oncg it hau complgtgf thg ttaining of
ttoopu taukgf with ptotgcting ovgtugau invgutmgntu anf chingug nationalu
anf put in placg thg ngcguuat y ttanupottation anf logiuticu inftauttuctutg.
Mganwhilg, china in uituationu of gmgtggncy will likgly havg to limit ituglf
to umallgt-ucalg houtagg tgucug miuuionu. 45
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245
The change in China’s defence and foreign policy posture will probably
be further fuelled by its future acquisition of additional aircraft carriers
that in turn will heighten the need for overseas bases. This, cautioned US
Naval War College scholar Nan Li, could “contradict China’s desire to
project the image to the world that, unlike the rise of other great powers,
China’s rise will be peaceful.” 46
The change in China’s approach became formal with the 2015 defence
white paper that emphasised China’s intention to improve and project its
naval capabilities far beyond its coastline. 47 The International Business
Herald, a paper published by the Xinhua News Agency, reported that
China was likely to establish over the next decade three strings of “over -
seas strategic support bases” totalling 18 facilities: a North Indian Ocean
supply line with bases in Pakistan, Sri Lanka, Myanmar; a Western Indian
Ocean supply line with bases in Djibouti, Yemen, Oman, Kenya, Tanzania
and Mozambique; and a central-south Indian ocean supply with bases in
Seychelles and Madagascar. 48 In addition to its naval strategy, China has
sought to forge broader militar y relations with various Middle Eastern and
North African nations through joint exercises and closer cooperation.
nAvig Ating region Al rivAlries
xi’u Januat y 2016 viuit to thg Mifflg eaut illuuttatgf thg inctgauing fggtgg
to which china iu walking a tighttopg in itu gffottu to avoif bging bogggf
fown anf mitgf in thg tggion’u numgtouu watu, conictu, fiuputgu anf
animouitigu. that iu ptoving to bg a gatgantuan, if not impouuiblg tauk.
Whilg xi mafg uutg that hg viuitgf both riyafh anf tghtan, hg lgft littlg
foubt that thg lifting of intgtnational uanctionu allowgf china to tginfotcg
tigu with itan with which it hau fat motg in common than with saufi
Atabia.
xi’u viuit to thg kingfom wau accompanigf by talk of btothgtly tglationu
anf uttatggic coopgtation. thg thgtotic, howgvgt, fif littlg to mauk ugtiouu
fiffgtgncgu on iuuugu tanging ftom sytia to saufi ptopagation of
Wahhabium, a putitan intgtptgtation of iulam that many fgat btggfu jihaf -
ium, anf a tglativg fgcling in chingug tgliancg on saufi oil anf thg fact that
thg gulf playu a ugconfat y tolg compatgf to itan in thg ong Bglt, ong
roaf initiativg. thg ovgtlanf compongnt if ong Bglt, ong roaf pauugu in
itu cuttgnt concgption thtough itan tathgt than thg gulf whilg thg mati -
timg touchgu thg gulf only on thg rgf sga apptoach to thg sugz canal.
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Chinese officials worr y that alleged Saudi funding of Islamic schools or
madrasahs in Xinjiang may be encouraging Uighur militants who have
staged several attacks in a low-intensity campaign for equal rights and
autonomy, if not independence. Saudi officials have assured their Chinese
counterparts that they do not support the violence despite the fact that the
Uighurs, some of whom have joined IS, are Turkic-speaking Sunni
Muslims. Those assurances appear to have done little to put Chinese con -
cerns to rest. “Our biggest worr y in the Middle East isn’t oil – it’s Saudi
Arabia,” a Chinese analyst told the Asia Times. 49
Chinese media in 2002 questioned Saudi Arabia’s ability to cope with
the threat of Wahhabism breeding radicalism 50 and hinted at Xinjiang’s
potential in becoming an irritant in Chinese-Arab relations. In response to
the media reports, Saudi Arabia’s Arab News rankled China’s ire in an
editorial that compared China to Israel in the way it dealt with Xinjiang.
The Arab News referred to Xinjiang as East Turkestan, the anti-Chinese
Uighur reference to the region. 51 In his PhD thesis, Martin Harrison cau -
tioned that “a prolonged downturn in the Xinjiang security situation
would have consequences to which Riyadh could not long tum a blind
eye.” 52
Religious affinity is not something China has to worr y about with
Shiite-majority Iran, which has long projected itself as a revolutionar y not
a sectarian power. China moreover supports the Iranian-backed regime of
Syrian President Bashar al-Assad and favoured Russian inter vention in
Syria to prop up the Assad regime—a position that puts it at odds with
Saudi Arabia that backs the rebels and has hinted at inter vening militarily
on their behalf. Russian and US airstrikes against Saudi-backed Islamist
rebels have allowed Syrian and Kurdish forces to gain increasing control of
much of Syria’s borders, making it more difficult for Uighurs from north -
west China to find their way to Syria.
China’s subtle shift towards Iran is also visible in the oil market. Iran is
determined to win back Chinese market share with the lifting of the sanc -
tions. Iran expects to boost oil exports by 500,000 barrels a day, much of
which it hopes will go to China. Iran’s oil plans put it in direct competi -
tion with Saudi Arabia, which had emerged as one of China’s largest sup -
pliers. That has begun to change with China apparently shifting its reliance
on oil away from Saudi Arabia. Chinese oil imports from the kingdom rose
a mere 2 per cent in 2015 while its purchase of Russian oil jumped almost
30 per cent. The shift is likely to create an opening for Iran at Saudi
Arabia’s expense. 53
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247
Despite the lofty pledges of increased trade during Xi’s visit, Chinese
self-centeredness in its management of economic ties called in question in
Middle Eastern and North African minds China’s sincerity and commit -
ment. Iran cancelled in 2014 a US $2.5 billion contract with the China
National Petroleum Corporation (CNPC) for the development of the
South Azadegan oil field citing repeated delays as well as the high cost and
poor quality of Chinese equipment and ser vices. 54 Iranian businessmen
were cautious on the eve of Xi’s visit, raising questions about the degree
to which China would benefit from the lifting of international sanctions
against the Islamic republic. The businessmen charged that Chinese banks
and businesses had exploited the sanctions to charge them high commis -
sions and delay deliveries in the knowledge that they had no choice but to
buy Chinese products.
The stakes for Chinese companies are high. Iran has said that with sanc -
tions lifted it would need up to US $50 billion in foreign investment in
energy; road, rail and air transportation; agriculture; and industries such as
household, textile and ceramics. 55 In a symbolic gesture, the first train
loaded with Chinese products to traverse China’s One Belt, One Road
land expanse arrived in Februar y 2016 from China’s eastern Zhejiang
province in Tehran within weeks of Xí’s visit. Mohsen Pourseyed Aqayi,
the head of Iran’s railway company, greeted the train, which will operate
on a once-a-month schedule in the presence of the ambassadors of China
and Turkmenistan with the words: “The revival of the Silk Road is crucial
for the countries on its route.” 56
In a speech during his Middle East tour to the Arab League in Cairo,
Xi argued that “dialogue and development” offered the solution—a tough
proposition in a part of the world in which opposing parties either refuse
to talk to each other or only go through the motions to ensure that they
are viewed as being constructive with no intention of arriving at a
negotiated resolution. Xi suggested that China would succeed where oth -
ers had failed by building a “cooperative partnership network for win-win
outcomes” in the framework of One Belt, One Road and the establish -
ment of the AIIB, the Chinese-led infrastructure bank. 57
The list of failed Chinese initiatives involves many of the region’s major
disputes. It includes efforts to bridge the gap between Sudan and South
Sudan in 2011 and 2014, 58 half-hearted Chinese attempts in 2012 and
2013 to negotiate a political solution in Syria, 59 and an Israeli-Palestinian
peace deal. The Israeli-Palestinian and Syrian efforts were based on four-
point plans put for ward by Beijing. The Israeli-Palestinian one died a quiet
CHINESE INVESTMENTS IN THE ARAB MAELSTROM

248
death after it was rejected by Israel 60 while the Syrian plan failed to gener -
ate serious interest. 61 The Sudanese, Israeli-Palestinian and Syrian initia -
tives constituted nonetheless an early testing of concepts of “constructive”
or “creative” inter vention put for ward in 2010 and 2011 by scholars Zhao
Huasheng and Wang Yizhou. 62
The failures notwithstanding, Chinese Foreign Minister Wang Yi sig -
nalled his countr y’s recognition that it will progressively have to move
from non-interference to active engagement in a speech in 2013 to the
United Nations General Assembly. China intended to play a “more proac -
tive and constructive role” in the world’s hot spots and provide “public
goods to the international community,” 63 Wang said. Wang was building
on President Hu’s statement in 2004 that Chinese diplomacy should
“enhance the capability of protecting interests overseas, improve relevant
laws and regulations, strengthen the early-warning and fast-response sys -
tem, improve the style of work and enthusiastically ser ve Chinese citizens
and legal persons in foreign countries.” 64
China’s recognition of changing realities on the ground was also on
display in its shifting approach towards Afghanistan, a prime case study for
how domestic issues make it increasingly difficult for China to remain
aloof to developments beyond its borders, insist on the principle of non-
interference and attempt to make economics and investments the core
drivers of its foreign policy. Stability in Afghanistan is of vital interest to
China. The Central Asian countr y’s eastern tongue, the Wakhan Corridor,
barely touches China’s borders, but it potentially could ser ve as a route
into Xinjiang for Uighur rebels abroad who take advantage of the region’s
porous borders.
Chinese engagement in Afghanistan is further driven by the withdrawal
of the bulk of NATO forces from the countr y and the United States’ more
limited militar y commitment to a countr y in which China has invested
heavily. China has poured money into the world’s second largest copper
mine in Afghanistan as well as an oil field in the countr y. “Chinese compa -
nies can’t go there without U.S. security. We hope the U.S. keep their
troops in Afghanistan. The U.S. can’t just leave after 14 years of killing,”
said Pan. 65
China’s concern is heightened by the fact that the scala of jihadist and
Islamist groups operating in Afghanistan includes not only the Taliban, IS
and Al-Qaeda but also the East Turkestan Islamic Movement (ETIM).
East Turkistan is the name nationalist Uighurs and pan-Turkists use to
identify Xinjiang. China’s effective support for autocratic governments or
J. M. DORSEY

249
governments whose legitimacy is contested under the guise of non-
interference has reinforced perceptions among Uighur nationalists and
Islamists and their jihadist allies of China as a pillar of the status quo.
China blames the increasingly real threat emanating from instability in
Afghanistan on US and Saudi mismanagement of Islamist forces that
fought the Soviets in the 1980s and the US invasion of Afghanistan in
2001. “We gave a lot of aid to the mujahedeen in Afghanistan. They fell
into the hands of jihadists,” said Pan. Pan was referring to the anti-Soviet
Islamists who spawned jihadist groups across Asia, the Middle East and
North Africa. 66
To achieve its goal in Afghanistan, China has stepped up its contacts
with the government and invited Taliban and former Taliban for visits to
the mainland. In one instance China brought former Taliban officials with
close ties to Pakistan’s intelligence agency together with an Afghan gov -
ernment envoy in Urumqi 67 for what Foreign Minister Wan termed an
“Afghan-led, Afghan-owned” reconciliation process. 68 On an earlier visit
to Kabul, Wan announced China’s intention to help Afghanistan become
a “unified, stable, developing, and friendly” countr y. 69
conclusion
volatilg, oftgn btutal anf bloofy political ttanuition in thg Mifflg eaut
anf notth Aftica that iu chatactgtiugf by ugctatianium anf national aupita -
tionu of gthnic anf gthno-tgligiouu gtoupu challgnggu long-utanfing ptin -
ciplgu of chingug fotgign anf fgfgnug policy, inclufing notionu of
non-intgtfgtgncg, win-win gconomically ftivgn policigu anf a tgjgction of
thg fgvglopmgnt of a fotgign militat y ptgugncg. thg challgngg in thg
ftamgwotk of china’u tiuing global poututg au a uupgtpowgt iu fotcing
china in fggf tathgt than wotf to gtafually comptomiug if not abanfon
itu lofty ptinciplgu in a bif to ugcutg itu inctgauingly mauuivg invgutmgntu in
thg Mifflg eaut anf notth Aftica anf gnuutg thg uafgty of tapifly gtowing
chingug gxpattiatg communitigu.
notes
1. xinhua, full tgxt of china’u Atab Policy Papgt, 13 Januat y 2016, http://
ngwu.xinhuangt.com/gngliuh/china/2016-01/13/c_135006619.htm .
2. Ma. xiaolin, #38 evgnt rgpott: iulamic caliphatg in itaq: What can china
do? thinkinchina, 22 octobgt 2014, http://www.thinkinchina.
auia/38-gvgnt-tgpott/ .
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3. Tom Phillips, Trump keeps China on hold with letter but no phone call for
Xi Jinping, The Guardian, 9 Februar y 2017, https://www.theguardian.
com/us-news/2017/feb/09/trump-china-letter-no-phone-call-
xi-jinping .
4. US Department of the Treasur y, Iran-related Designations; Non-
proliferation Designations; Counter Terrorism Designations; Balkans
Designation Update, 3 Februar y 2017, https://www.treasur y.gov/
resource-center/sanctions/OFAC-Enforcement/Pages/20170203.aspx .
5. Emma Scott, China’s Silk Road: A Foothold in the Suez Canal, but
Looking to Israel, China Brief 14, no. 19, 2014, http://www.ccs.org.za/
wp-content/uploads/2014/11/CCS_Commentar y_Suez_and_China_
ES_2014.pdf .
6. Ibid ., Scott.
7. Avi Bar-Eli, Chinese company to run new Haifa port, Haaretz, 24 March
2015, http://www.haaretz.com/business/.premium-1.648483 .
8. Rami Amichai and Ari Rabinovitc, Chinese firm starts work on new Ashdod
port, as Haifa workers strike, 28 October 2014, Haaretz, http://www.
haaretz.com/news/national/1.623216 .
9. David Barnett (7 September 2013). Al Furqan Brigades claim 2 attacks on
ships in Suez Canal, threaten more , The Long War journal, http://www.
longwarjournal.org/archives/2013/09/al_furqan_brigades_claim_
two_a.php .
10. Najmeh Bozorgmehr, China overtakes EU to become Tehran’s largest
trading ally, The Irish Times, 9 Februar y 2010, https://www.irishtimes.
com/news/china-overtakes-eu-to-become-tehran-s-largest-trading-
ally-1.619509 .
11. Saeed Shah, China to Build Pipeline from Iran to Pakistan, The Wall Street
Journal, 9 April 2015, http://www.wsj.com/articles/china-to-build-
pipeline-from-iran-to-pakistan-1428515277 .
12. Saeed Shah and Jeremy Page , China Readies $46 Billion for Pakistan Trade
Route, The Wall Street Journal, 16 April 2015, http://www.wsj.com/
articles/china-to-unveil-billions-of-dollars-in-pakistan-investment-
1429214705 .
13. Sun Degang, China’s Soft Militar y Presence in the Middle East, Middle
East Institute, 11 March 2015. http://www.mei.edu/content/map/
china%E2%80%99s-soft-militar y-presence-middle-east .
14. Wu Jianmin, One Belt and One Road, Asia’s Stability and Prosperity, RSIS
Distinguished Public Lecture, 12 March 2015.
15. Ibid., Wu Jianmin.
16. Tim Niblock, The Gulf, the West and Asia: Shifts in the Gulf ’s Global
Relations, Lecture at 4th International Forum on Asia and the Middle
East: International Conference on Great Powers and the Middle East
Political & Social Transformation, Shanghai, 10 September 2014.
J. M. DORSEY

251
17. Mojtaba Mahdavi, Is China Becoming a New Hegemony in the Middle
East? International Conference on China in the Middle East, Indiana
University and Peking University, Beijing, 17–18 March 2015.
18. Linda Jakobsen and Dean Knox (2010). New Foreign Policy Actors in
China , Stockholm International Peace Research Institute, http://books.
sipri.org/files/PP/SIPRIPP26.pdf .
19. Chaoling Feng, Embracing Interdependence: The Dynamics of China and
the Middle East, Brookings Doha Center, 2015, http://www.brookings.
edu/~/media/research/files/papers/2015/04/28-middle-east-china-
feng/en-embracing-interdependence-pdf.pdf .
20. Ash-Sharq Al-Awsat, Saudi–Chinese trade increases by 14 percent, 20
November 2013, http://english.aawsat.com/2013/11/article55323012/
saudi-chinese-trade-increases-by-14-percent .
21. Naser M. Al-Tamimi, China-Saudi Arabia Relations, 1990–2012: Marriage
of Convenience or Strategic Alliance? London: Routledge, 2014,
p. 126–143.
22. Dania Thafer, After the Financial Crisis: China-Dubai Economic Relations,
Middle East-Asia Project (MAP), 15 September 2013, http://www.mei.
edu/content/after-financial-crisis-dubai-china-economic-relations .
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in China’s Response to International Humanitarian Crises, Journal of
Chinese Political Science/Association of Chinese Political Studies Vol.
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Opinion/2015-04/24/content_4581804.htm .
25. Enrico Fardella, China’s Debate on the Middle East and North Africa: A
Critical Review, Mediterranean Quarterly , Vol. 26:1, p. 5–25.
26. Globalsecurity.org . Deng Xiaoping’s “24-Character Strategy , http://www.
globalsecurity.org/militar y/world/china/24-character.htm .
27. Shaio H. Zerba, China’s Libya Evacuation Operation: A New Diplomatic
Imperative: Overseas Citizen Protection, Journal of Contemporar y China,
Vol. 23:90, 2014, p. 1093–1112.
28. Xinhua. 2012. Full text of Hu Jintao’s report at 18th Party Congress,
November 17, http://news.xinhuanet.com/english/special/18cpcnc/
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29. Ibid., Wu Jianmen.
30. Yitzhak Shichor, The Middle East in China’s Foreign Policy, 1949–1977,
Cambridge: Cambridge University Press, 1977 p. 160–161.
31. Ministr y of Foreign Affairs of the People’s Republic of China, China’s
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32. Yiyi Chen, Will China Interfere in the Israeli-Palestinian Conflict? Middle
East Institute, 6 May 2015, http://www.mei.edu/content/map/
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33. Ibid., Chen.
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tion, SIPRI Yearbook, Oxford: Oxford University Press, 2012, p. 30.
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cn/Database/WhitePapers/ .
36. Mathieu Duchatel, Oliver Braunel, and Zhou Hang, Protecting China’s
Overseas Interest: The Slow Shift Away from Non-interference, Stockholm
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org/files/PP/SIPRIPP41.pdf .
37. Mikhail Barabanov, Vasiliy Kashin and Konstantin Makienko, Shooting
Star , China’s Militar y Machine in the 21st Centur y, Minneapolis: East
View Press, 2012, section 3.1.
38. Liu Zhongmin, Political Unrest in the Middle East and China’s Response
in Sun Sun Degang and Yahia H. Zoubir (eds), Building a New Silk Road:
China and the Middle East in the 21st Century , Shanghai: World Affairs
Press, 2014, p. 106–125.
39. Pang Zhongying, Through Chinese eyes: Pang Zhongying (part 1 ), The
Interpreter, 22 December 2012, http://www.lowyinterpreter.org/
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40. Beijing Review, New Direction for China’s Diplomacy, 8 March 2012,
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tent_439626.htm# .
41. Christina Y.  Lin, China’s Strategic Shift Toward the Region of the Four
Seas: The Middle Kingdom Arrives in the Middle East, IDC Herzliya
Rubin Center for Research in International Affairs, 2013, http://www.
rubincenter.org/2013/03/chinas-strategic-shift-toward-the-region-of-
the-four-seas-the-middle-kingdom-arrives-in-the-middle-east/ .
42. Pakistan Defence, China’s Militar y Railway Transport, 24 June 2010,
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transport.62935/ .
43. John McLaughlin, The Great Powers in the New Middle East in John
B.  Alterman (ed), Rocky Harbours: Taking Stock of the Middle East in
2015, Washington: Center for Strategic and International Studies, 2015.
44. The State Council Information Office of the People’s Republic of China,
China’s Militar y Strategy, May 2015, http://www.chinadaily.com.cn/
china/2015-05/26/content_20820628.htm .
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253
45. John Calabrese, Fate of the Dragon in the Year of the Red Fire Monkey:
China and the Middle East 2016, Middle East Institute, 3 Februar y 2016,
http://www.mei.edu/content/map/fate-dragon-year-monkey-china-and-
middle-east-2016 .
46. Nan Li, The Evolution of China’s Naval Strategy and Capabilities: From
“Near Coast” and “Near Seas” to “Far Seas,” Asian Security, Vol. 5:2,
p. 144–169.
47. Xinhua, Full Text: China’s Militar y Strategy, 26 May 2015, http://en.
people.cn/n/2015/0526/c90785-8897779-7.html .
48. China Defense Mashup, Chinese paper advises PLA Navy to build overseas
militar y bases, 8 Januar y 2013, http://www.china-defense-mashup.com/
chinese-paper-advises-pla-navy-to-build-overseas-militar y-bases.html .
49. David P. Goldman, Saudi Arabia stews in policy hell: Spengler, Asia Times, 3
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50. China Daily, Saudis face dilemma over Islamic militancy, 2 Februar y 2002,
http://www.highbeam.com/doc/1P2-8785765.html .
51. Arab News, Uighurs, 24 March 2002.
52. Martin Harrison, Relations between the Gulf Oil Monarchies and the
People’s Republic of China, 1971–2005, Lancaster University, Unpublished
PhD thesis, 2006.
53. Bloomberg News, Russia Races Past Saudi Arabia in Tussle for Chinese Oil
Market, 21 October 2015, http://www.bloomberg.com/news/
articles/2015-10-21/russia-races-past-saudi-arabia-in-tussle-for-chinese-
oil-market .
54. Benoit Faucon Iran Cancels $2.5 Billion Contract with Chinese Oil
Company, The Wall Street Journal, 29 April 2014, http://www.wsj.com/
articles/SB10001424052702303939404579531111999051656 .
55. Charles Clover, Heba Saleh, Najmeh Bozorgmehr and Simeon Kerr, Xi faces
diplomatic test on first Middle East visit, Financial Times, 18 Januar y 2016,
http://www.ft.com/cms/s/0/6ce8bb08-bdbf-11e5-846f-79b0e3d20eaf.
html?ftcamp=published_links%2Frss%2Fworld_asia-pacific_china%2Ffeed%2
F%2Fproduct#axzz3xcDnbvIw .
56. Agence France Press, First ‘Silk Road’ train arrives in Tehran from China,
16 Februar y 2016, https://news.yahoo.com/first-silk-road-train-arrives-
tehran-china-134703954.html?soc_src=mail&soc_trk=ma .
57. Xi Jingping, Work Together for a Bright Future of China-Arab Relations,
China Daily, 22 Januar y 2016, http://www.chinadaily.com.cn/world/20
16xivisitmiddleeast/2016-01/22/content_23191229.htm .
58. Shannon Tiezzi (6 June 2014). In South Sudan Conflict, China Tests Its
Mediation Skills , The Diplomat, http://thediplomat.com/2014/06/
in-south-sudan-conflict-china-tests-its-mediation-skills/ .
CHINESE INVESTMENTS IN THE ARAB MAELSTROM

254
59. Xinhua, China announces new proposal on Syria, 31 October 2012,
http://news.xinhuanet.com/english/china/2012-10/31/c_
131942913.htm .
60. Xinhua (6 May 2013). Chinese President makes four-point proposal for settle -
ment of Palestinian question , http://news.xinhuanet.com/english/
china/2013-05/06/c_132363061.htm .
61. Amrutha Gayrathi, China Signals Greater Role in Global Affairs but Sticks
to Principle of Mutual Non-Interference, Associated Press, 11 September
2012, http://www.ibtimes.com/china-signals-greater-role-global-affairs-
sticks-principle-mutual-non-interference-866668 .
62. Ibid., Fardella.
63. Andrew Small (26 March 2015). Chinese Foreign Policy Comes of Age , The
New  York Times, http://www.nytimes.com/2015/03/27/opinion/
chinese-foreign-policy-comes-of-age.html?_r=2 .
64. Permanent mission of China to the UN at Geneva(Undated). The 10th
Conference of Chinese diplomatic envoys stationed abroad held in Beijing,
http://www.china-un.ch/eng/xwdt/t156047.htm .
65. Pan Guang, Keynote Speech at International Conference on China in the
Middle East, Indiana University and Peking University, Beijing, 17–18
March 2015.
66. Ibid., Pan Guang.
67. Edward Wong, Taliban and Afghan Peace Officials Have Secret Talks in
China, The New  York Times, 26 May 2015, www.nytimes.com/world/
taliban-and-afghan-peace-officials-have-secret-talks-in-china.html .
68. Li Jing, China stands by Afghanistan, China daily, 28 September 2015,
http://www.chinadaily.com.cn/world/2015xivisitus/2015-09/28/
content_22000357.htm .
69. Foreign Ministr y of the People’s Republic of China, Foreign Minister
Wang Yi arrived in Kabul to begin a visit to Afghanistan, 22 Februar y
2014, http://www.gov.cn/gzdt/2014-02/22/content_2619024.htm .
J. M. DORSEY

PART VI
The European Union: The Belt and
Road Terminus

257 © The Author(s) 2018
A. Arduino, X. Gong (eds.), Securing the Belt and Road Initiative ,
https://doi.org/10.1007/978-981-10-7116-4_14
CHAPTER 14
Beyond Ports and Transport Infrastructure:
The Geo-Economic Impact of the BRI
on the European Union
Alessia A. Amighini
Since Xi Jinping first announced it in 2013, the China-led Belt and Road
Initiative (BRI)—a network of land and sea trade and communication cor -
ridors eventually linking China to Europe through Central Asia, the
Middle East, North and Eastern Africa—has inspired a plethora of studies
by scholars from all over the world, speculating about its rationale, its
development and its implications on international economic and political
affairs. 1 As the terminal point of both the overland and the maritime routes
envisioned within China’s action plan (NDRC 2015 ), the European
Union faces significant geo-political, economic and geo-strategic conse -
quences from the BRI (European Parliament Research Ser vice 2016 ).
This chapter reviews the state of the art in the scholarly and policy debates
as well as in the policy actions and activities taken so far by the European
Union as a response to the BRI. 2
The most evident influence of the BRI on the European Union will
be on the sometimes-cumbersome EU-China bilateral relations. As
A. A. Amighini ( *)
University of Piemonte Orientale, Vercelli, Italy
Catholic University of Milan, Milano, Italy

258
the original focus of China’s action plan was on physical connectivity, the
initial EU response to the BRI was a proposal, in 2015, to establish a
policy forum—the EU-China Connectivity Platform—to achieve consis -
tent objectives with its own infrastructure policy. Recognising the impor -
tance of infrastructure for growth, transport infrastructure has always been
at the heart of EU policies for the completion of the single market. 3 In the
most radical overhaul of EU infrastructure policy since its inception in the
1980s, the Trans-European Transport Network (TEN-T) launched in
2013 established a core transport network built on nine major corridors
(two North–South corridors, three East–West corridors and four diagonal
corridors) that will act as a backbone for transportation in Europe’s single
market and revolutionise East–West connections within the European
Union, with a triple budget for the period 2014–2020 (€26 billion) com -
pared to the past. To be completed by 2030, the core network will improve
connections among different modes of transport and contribute to the
European Union’s climate change objectives.
What has been partly overlooked in the design of the EU TEN-T cor -
ridors—whose aim is mainly to improve connectivity within the European
Union—is the likely impact of the future transport network on the external
economic and trade relations of the Union. Although around two thirds of
EU trade is intra-EU, that is, trade flows among member states, the share
of extra-EU trade is increasing in both directions, with neighbouring
countries and faraway countries alike. This means that future goods trade
and economic relations with EU partners will also depend on the efficiency
of the transport network linking member states with its major trade part -
ners. China is the European Union’s main import partner (providing
17.6% of total EU imports) and the second largest export partner after the
United States (accounting for 9.3% of total EU exports). Almost all EU
exports to China (96.4% of total value) travel by sea. Similarly, the European
Union is China’s main import partner, accounting for 12.5% of total
Chinese imports, and the second largest export partner after the United
States, as the destination for 15.6% of Chinese exports. The vast majority
of these exports (92.3% of the total value) travel by sea, leaving ver y little
to air, rail and road transport. Although seaborne trade is by far more con -
venient than any other mode of transport, some major trade routes are
inefficient, most notably the routes of EU-China trade. As the two world
largest trading nations, the European Union and China share a common
interest in reducing the transport costs of shipping their goods abroad, an
important part of which is accounted for by time-to-destination.
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259
Transportation costs of bilateral China-Europe trade are significantly
higher than the world’s average. The average shipping time from China to
European partners is 730 hours, 20% more than China’s average shipping
time (about 610 hours, which is much longer than the world average of
406 hours). Switching to railway transport has great potential for saving
transport time: according to data provided by GEFCO, infrastructure
construction would reduce railroad travel time from China to Europe to
16–21 days (depending on departure and arrival location), compared to
37–45 days for sea freight, port to port. 4 This explains why in some high-
tech sectors (such as electronics) international freight for warding agencies
are already switching to railroad, for example, Hewlett-Packard is plan -
ning to rely solely on railway transport by 2017 for shipping its made-in-
China PCs to Europe. This runs counter to recent trends and near-future
expectations, and has prompted shipping agencies and major port authori -
ties to redesign sea lanes to reduce shipping times and improve the inter -
connectedness between the ports and the inland railway network.
However, switching to railway transportation entails a trade-off between
time and cost. In fact, China’s average cost of shipping by sea to European
countries is only US$922 for a 40-foot container, about half as much as
China’s average shipping cost, while railway transport is three times as
expensive as maritime transport (DB Schenker 2012 ). Given that it can
lead to a large decrease in transit times and the fact that technology now
allows for a reduction in railroad costs, BRI has the potential to become a
game changer in international trade by moving large volumes of com -
merce from sea to land lanes. Formulating scenarios is not easy, however,
as it is widely acknowledged that in choosing among alternative modes,
firms consider predictability in transport costs a valuable feature. Therefore,
a further element that can affect the trade-off between cost and time in
different transport modes is the high volatility of sea freight rates com -
pared to rail tariffs. This is because sea freight rates depend on the overall
trade volumes much more than rail tariffs, which is why sea freight rates
volatility has increased dramatically since the beginning of the world trade
slowdown associated with the economic crisis since 2009. Although there
is still no precise information about the cross-border infrastructure proj -
ects financed under the BRI, it is quite evident from the progress made so
far that most of them aim to increase the prospects for land connectivity
between China and Europe. This is why an important goal of the projects
funded within the BRI is trimming average travel times: documents must
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260
include statistics on the reduction in travel time and cost expected from
project completion.
Compared to the intense sea lanes between China and Europe (account -
ing for more than 90% of bilateral trade flows), land routes have been
almost totally irrelevant in EU-China trade. The extremely low degree of
connectivity within Central Asia is one the major reasons why the bulk of
world trade (more than 90%, and 60% of China’s trade in value, and a
much higher share in volume) travels by sea, due not only to the lower
transport costs associated with international shipments compared to rail -
way transport but also the lack of infrastructure for land transport across
Central Asia. While economics acknowledges the importance of efficient
and peaceful trade relations in global growth, the understanding of geo -
graphic patterns of international trade remains sketchy. The literature has
extensively analysed the determinants of individual countries’ access to
international markets and bilateral trade flows, and has found support for
the hypothesis that trade and infrastructure costs are important, but not
the choice of transport modes, let alone the efficiency of the global net -
work of trade routes (Amighini 2017 ).
The common interest by the European Union and China to reduce
travel time between one another is all the more relevant as Europe is gain -
ing a prominent role in global trade routes even far beyond the routes of
EU trade itself. A massive reshuffling of both land and seaborne trade
routes on a global scale is expected soon to occur due to two major devel -
opments. First, the relative expansion of the Suez Canal compared to the
Panama Canal will make the China-Europe maritime corridor increasingly
important for China’s trade with its other main trade partner, the United
States. Container shipping between China and the North American east
coast increasingly makes use of the Suez Canal. Because the Panama Canal
is narrower than the Suez Canal and not wide enough for the largest con -
tainer vessels, there is a shift from the trans-pacific to the trans-atlantic
route for container traffic between Asia and the North American east
coast. In 2014, the container capacity from Asia to the US east coast
through the Suez Canal surpassed that of the Panama Canal for the first
time. Although the Panama Canal is in the process of being widened, once
this is completed it will still not be able to accommodate the largest con -
tainer vessels that are currently in use. Second, the ongoing expansion of
Special Economic Zones (SEZ) in several Central Asian and CEE coun -
tries that will ser ve as gateways in other wise landlocked territories can
potentially alter the current relative dominance of sea compared to land
A. A. AMIGHINI

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shipping. At the moment, only limited low-volume, high-value items are
being shipped by train, but this is largely subsidised by the Chinese SEZ in
China as well as along the way to increase the financial viability of the new
railways, which are working most westbound than eastbound.
Despite the broader policy implications of the BRI on the future geo-
economic role of the European Union, the only bilateral dialogue on the
BRI today is still the EU-China Connectivity Platform, with the aim to
promote cooperation on infrastructure, including financing, interopera -
bility and logistics. Nevertheless, there is a growing sense of urgency to
move for ward to more substantive policy dialogues to create synergies
between EU policies and projects and China’s BRI. At the “Belt and Road
Forum” held in Beijing on May 14–15 2017 Vice-President Katainen of
the European Commission set out the European Union’s vision for
improving Europe-Asia connectivity, which is a step for ward in EU-China
cooperation on a common policy objective. It confirms the European
Union’s willingness to “support co-operation with China on its Initiative
on the basis of China fulfilling its declared aim of making it an open initia -
tive which adheres to market rules, EU and international requirements
and standards, and complements EU policies and projects, in order to
deliver benefits for all parties concerned and in all the countries along the
planned routes.” 5 However, and not surprisingly, given the technical
nature of the Connectivity Forum, at the 19th EU-China Summit held in
Brussels on June 2 2017, the progress acknowledged on “policy exchange
and alignment on the principles and the priorities in fostering transport
connections between the EU and China, based on the TEN-Ts framework
and the Belt and Road initiative, and involving relevant third countries,”
in fact has boiled down to having agreed upon a list of infrastructural proj -
ects of common interest.
Within the current governance structure of EU-China relations, there
is a need for matching the technical dialogue within the Connectivity
Platform with a high-level policy dialogue on a broader range of issues.
As the BRI goes far beyond physical connectivity to encompass a variety of
policy areas, it has raised awareness of a need to give a boost to parallel
dialogues on a large number of issues on which the European Union and
China have been handling meetings under the umbrella of the EU-China
Summit since 1998, within more than sixty substantive and sectoral dia -
logues (including cooperation on climate, competition, customs, energy
and investment). Acknowledging the BRI as a simple “repackaging of the
many initiatives and projects that China was already carr ying out well
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262
before 2013” (Makocki 2016 , p. 68), it should today be widely accepted
that none of its implications for the European Union were in fact raised,
either directly or specifically, by the BRI itself. If an issue has been genu -
inely raised by the BRI, that issue is certainly the need to define a compre -
hensive response by the European Union to the increasing Chinese
influence in its territor y as well as in neighbouring countries. Such response
should not be confined to just trade and investment issues, but should
also encompass foreign policy, political and security issues in a com -
prehensive way.
This is even more important, as the technical dialogue within the
Connectivity Platform tends to cover only the new projects lying at the
“common borders” between the TEN-T and the BRI, which are obvi -
ously located in member states at the southern and eastern borders of the
European Union. 6 Instead, any other issue arising from infrastructure
projects across non-EU member states or independent from the joint
financing efforts envisaged for the projects included in the draft list is out
of the scope of the Platform, despite having potential implications on the
smooth and efficient functioning of the overall European transport
network. The focus on improving infrastructure—the hardware of globali -
sation—lies behind an approach to regional integration that widely “dif -
fers from EU-style regionalism. Rather than using multilateral treaties to
liberalise markets, China promises to facilitate prosperity by linking coun -
tries to its continuing growth through hard infrastructure such as railways,
highways, ports, pipelines, industrial parks, border customs facilities, and
special trade zones; and soft infrastructure such as development finance,
trade and investment agreements, and multilateral cooperation forums.”
(Leonard 2016 , p.  21). Because truly multilateral cooperation fora and
dialogues are missing, the building of new networks of physical infrastruc -
ture are somehow calling for the building of new fora of institutional
infrastructure.
Besides the Connectivity Platform, the EU response to BRI so far has
consisted in formal statements with extremely limited follow-up in terms
of policy actions and dialogues. Until the end of 2015, there had not even
been an official EU position on One Belt, One Road. Only in its 16
December 2015 resolution on EU-China relations did the European
Parliament take note “… of the launch of the ‘One Belt, One Road’ initia -
tive aimed at constructing major energy and communication links across
Central, West and South Asia as far as Europe.” It stressed “that given the
geostrategic relevance of this initiative it should be pursued in a multilateral
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way” and “that it is of the utmost importance to develop synergies and
projects in full transparency and with the involvement of all stakeholders.”
It urged “the Commission to reflect on the impact of China’s global
investment policy, as well as its investment activities in the EU and its
Eastern Neighbourhood.” It was only during the first “Belt and Road
Forum” in Beijing on May 14–15 2017 that an official message was deliv -
ered confirming the EU support of the BRI, while at the same time calling
for “a level-playing field for trade and investment based on full adherence
to market rules and international norms [as] a critical condition … to
maintain the political momentum for better connectivity in Asia and
between Europe and Asia.”
The need for improved institutional infrastructure has been increas -
ingly apparent following the initial workings of the Connectivity Platform.
Although discussions have not been confined to the coordination of infra -
structure development plans in the European Union and China, related
issues such as market rules for public procurement and reciprocal access
for investments in the respective markets have not yielded any substantive
progress, which is hardly surprising given the political nature of those
issues, which are supposed to be discussed at a policy rather than a techni -
cal level. Possibly the most evident case witnessing the urgent need for an
effective policy dialogue on the broad range of issues raised by the BRI,
extending far beyond the practical aspects of infrastructure coordination,
is the Belgrade-Budapest rail project. Regarded as a flagship project within
the BRI, it is currently being reviewed by Brussels for potential infringe -
ments of the European Union’s requirement that public tenders are
offered for such large-scale infrastructure projects. The latter case shows
that the differing degrees of adherence to market rules in countries
involved in the BRI is a source of inevitable frictions that can act as bottle -
necks in the progress towards an effective transport network, and at the
same time divert public opinion and policy dialogue away from substan -
tive issues. A further related issue that should deser ve an effective dialogue
is the financial viability of infrastructure projects along the BRI. Currently,
the need to make the new transport routes (railways linking different cities
in China to diverse European cities) attractive compared to the much
cheaper seaborne trade has led Chinese authorities to subsidies firms with
the aim to divert trade from sea to land. This approach acknowledges the
need to reach a sufficient trade volume in order for the rail company to be
profitable, while today the new transport routes are mainly working on the
westbound direction compared to the eastbound. However, it runs against
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264
the market rule principles prevailing in the European Union and therefore
prevents mutual benefits for Chinese firms exporting to Europe, com -
pared to European firms exporting to China as well as, in both cases, pos -
sibly also to other countries along the route. Enduring the lack of progress
on a broad range of policy issues related to the BRI—mainly investment
framework, market rules, market access and public procurement—allows
avoiding serious dialogue, but paves the way to confrontational matters
that may be even harder to handle.
Far beyond bilateral EU-China relations , the impact of the BRI on
the European Union is manifold and multifaceted, to the extent that
the BRI will spread over a large number of countries, up to and potentially
more than the current 64 countries included in the action plan. The BRI
will also affect the European Union through the European Neighbourhood
Policy (ENP) towards its southern and eastern bordering countries, many
of which are essential participants in the BRI. Moreover, and more impor -
tantly, the BRI will require the European Union to take a comprehensive
attitude about its engagement beyond traditional diplomacy, security and
defence policies towards an entire range of new diplomacy areas, including
cultural diplomacy, energy diplomacy, maritime diplomacy and “rail diplo -
macy” (Kratz and Pavlicevic 2016 ), consistently with the strategic priori -
ties included in the Global Strategy for the European Union’s Foreign and
Security Policy. 7 Finally, the increasing Chinese influence in some member
states with a central position in the BRI might call for a strengthening of
EU internal cohesion policies and the overall attention towards peripheral
member states.
The BRI marks a milestone in “China’s traditional diplomacy based on
economic and commercial calculations to embrace a broader political and
security engagement with the countries involved by the initiative.”
(Arduino 2016 , p. 4). The rising weight of China in many countries’ eco -
nomic and trade relations has increased their dependence on the former
and therefore also its geo-strategic influence. The BRI—together with the
establishment of its funding institutions, namely the Asian Infrastructure
Investment Bank (AIIB) and the Silk Road Fund—signal China’s willing -
ness to take a more active role in regional and global governance, com -
pared to the key principle of China’s foreign policy over the past decades,
that is, a “peaceful rise with a low profile.” As a result, the BRI is poten -
tially a game changer for global governance as China’s influence on inter -
national economic and political affairs has increased altogether
(Loesekrug-Pietri 2015 ). More specifically related to EU-China relations,
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265
China’s previous focus on the large EU member states has recently been
complemented by growing attention by Beijing diplomacy to the CEECs
and Southern Europe, which implies a need for the European Union to
look for a firmer balance in the Union’s foreign policy, between the diplo -
matic and economic power of larger member states and the rising power
of peripheral member states.
The growing diplomatic profile China has recently set, both bilaterally
with an increasing number of countries, and multilaterally within existing
international organisations and newly funded Chinese-led ones, perfectly
confirms the view that in “the new age of geo-economics” (Leonard 2016 ,
p.  22), “countries use economic asymmetries to achieve geo-political
goals” (Schwarz 2016 , p. 10). This is hardly a brand new age to all those
following the international exposure of China over last two decades, as
political and economic objectives have invariably been deeply intertwined
in China’s foreign policy; they do not simply reinforce each other, but are
in fact two sides of the same coin. China’s foreign investment to acquire
stakes in firms, banks, ports and utilities, many of which are in
Europe (both EU and non-EU), aimed at fostering economic alliances
and partnerships, resulted at the same time in a comparatively massive
“investment in influence” (ECFR 2015 ) that is unevenly distributed
across member states . Although the bulk of Chinese investment in
Europe over the last decade has undoubtedly gone to some of the largest
European countries (United Kingdom, Germany and Italy) (Amendolagine
et  al. 2017 ), some other CEECs (Hungar y) and countries in Southern
Europe (most notably Greece) have been targeted by Chinese firms for
massive inflows of greenfield investment and acquisitions. Therefore, some
of the latter have been gaining a prominent effective bilateral position
within Europe-China relations, a position that has not yet been matched
by a common position in the European Union’s relations with China. The
resulting instrumental use of those differing degrees of economic depen -
dence on Chinese capital for geo-political ends has been depicted by some
scholars as an attempt by Beijing diplomacy to design China’s shadow
world order (Rudolf 2016 ). In this scenario, the BRI has initially been
regarded as a comprehensive strategy to increase foreign dependence on
China, most notably to expand Chinese influence in Eurasia and to alter
the global patterns of interdependence in its favour.
However, despite being supported by ample evidence on the wide
range of subtle tools of China’s soft diplomacy to legitimately increase the
effectiveness of its foreign diplomatic activities, this argument underplays
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266
the (more active and assertive) role the international community, and the
European Union in particular, should take in the BRI. In fact, the essence
of the BRI goes far beyond “Beijing’s key geostrategic attempt to alter
Eurasian trans-regional trade in its favour” (Rudolf 2016 , p.  86), to
encompass the improvement of a multi-layered infrastructure network
including physical (i.e., transport, energy and telecommunication) infra -
structure, but also institutional infrastructure (i.e., funding institutions) to
the common benefit of a vast number of countries. Infrastructure, notably
a precondition for industrialisation and economic development across all
ages and continents, 8 has today undoubtedly become “the most innova -
tive geo-economic tool” (Leonard 2016 , p. 23) at the core of the BRI. The
improvement of infrastructure per se should not be considered a self-
oriented objective of the Chinese leadership as it does not accrue benefits
to isolated countries, but to all countries being connected into a network.
In this spirit, China’s action plan refers to the formal purpose of the BRI
as China’s contribution to international economic development by
strengthening connectivity through an improvement of transport, energy
and telecommunication infrastructure in Asia, Africa and Europe with the
ultimate aim of linking those continents together into a comprehensive
network. Improving connectivity between Asia, Europe and Africa will
potentially be beneficial to prosperity in all the regions involved, condi -
tional on the ability of each region to link the new infrastructure to their
own development goals and priorities. 9
The single most evident case of potential divergence between the BRI
and national development priorities is the progress taken by the “16+1”
cooperation framework since the launch of the BRI. The 16+1 mechanism
is a platform created in April 2012 by the Chinese leadership that seeks a
stronger connection between China and the 16 CEECs, namely Albania,
Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia,
Hungar y, Latvia, Lithuania, Macedonia, Montenegro, Poland, Romania,
Serbia, Slovak Republic and Slovenia. Nowadays, many previously agreed-
upon joint 16+1 projects were given the BRI label, which may pave the
way for diverging perceptions towards EU internal integration policies.
CEECs have shown that they are able to adopt an active policy of coopera -
tion with China and an issue has been raised about the status of Central
Europe within the region and in the European Union. There are evident
discrepancies between EU and non-EU members, especially in terms of
rules and procedures related to investments and infrastructural projects.
This poses serious challenges to the extent that EU and non-EU member
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267
countries develop common interests under the China-led 16+1 mecha -
nism but perceive the divergent rules and regulations in EU vs. non-EU
members as a source of bottlenecks in their development process.
This cooperation framework is not just paving the way to divergent
perceptions and positions on the power of the European Union to set
rules and standards within its own borders and in neighbouring countries,
but as well as on its ability to convey a unified position in international
decisions. The increasing Chinese economic and commercial influence in
some member states, together with a timely diplomatic push from Beijing,
“has boosted its capacity to influence the choices of European states and
has complicated EU diplomacy …. Following the pronouncement of the
Permanent Court of Arbitration in The Hague on the status of land masses
in the South China Sea in July 2016, for instance, the stances of Hungar y
and Greece  – key countries for China’s OBOR initiative  – resulted in a
more convoluted European position on the ruling” (van der Putten et al.
2016 , p. 10). The BRI has further exacerbated the inconsistencies in the
16+1 framework and confirmed the need for three-party cooperation
between the European Union, China and the CEECs, a region that is
central in the overall BRI and from which will depend the smooth and
efficient functioning of the entire international land transport network in
Eurasia.
Besides the CEECs, the BRI is dramatically changing the geo-strategic
environment in Eurasia. It is widely accepted that the region where the
highest impact of infrastructure is expected is Central Asia. Currently,
Central Asia is the least accessible and connected area in the world. All
Central Asian countries except Pakistan are landlocked (i.e., they have no
direct access to the sea), a major disadvantage insofar as the lack of a direct
maritime connection is associated with a handicap in terms of export value
(Amighini 2017 ) and plays an important role in determining trade costs
(Ar vis et al. 2013 ). More precisely, the absence of a direct maritime con -
nection has been estimated to have the same impact on freight rates as an
increase in distance between two countries of 2612 km (Wilmsmeier and
Hoffman 2008 ). By facilitating landlocked countries’ access to the sea, the
BRI has the potential to improve connectivity and therefore promote
socio-economic development in a vast region that is expected to become
the next emerging region.
Because infrastructure improvement will affect all cargo plying these
transport routes, the BRI is of interest to countries along the routes, but
also to countries beyond the designated Silk Road routes. Therefore, a
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further trade creation effect is likely to take place through new trade routes
that will unlock potential trade ties with new trading partners. The most
unexploited potential trade seems to be between Central Asian countries
and their largest neighbouring economies, that is, China and Europe.
Central Asia is a fast-growing emerging region, according to the World
Bank, with promising demographic (with a projected 4.45% of world pop -
ulation by 2030) and economic prospects (4% average GDP growth pro -
jected through 2017). Poor connectivity and expensive logistics rank high
in the list of factors that act as obstacles to growth, because all of the
countries (except Pakistan) are landlocked. Pakistan has in fact the highest
potential, and its economy is projected to become 16% larger than Italy’s
by 2050 according to PricewaterhouseCoopers. At the other extreme,
Uzbekistan is one of the only two countries in the world that are “double
landlocked,” that is, surrounded entirely by one or more landlocked coun -
tries and requiring the crossing of at least two national borders to reach a
coastline.
As already indicated, improving infrastructure across Central Asia
would increase connectivity and allow the region to exploit further trade
potential with both China and the European Union, its main trading part -
ners. Currently, the European Union shows much higher import and
export values than China’s trade with the region, but the (both Central
and South Asia) STANs’ imports from China have been growing ver y
rapidly since 2010, so the region’s trade balance with China has progres -
sively deteriorated. Better infrastructure will intensify trade with China,
with the STANs selling similar goods and therefore expected to face even
stronger competition with one another in the region in the future. This is
partly a source of concern for the STANs as a group, as it could lead to an
excessive dependence on China for consumption and capital goods.
Moreover, a further source of geo-economic competition is the fact
that some Central Asian countries—most notably Kazakhstan—are part of
other regional initiatives, such as the Eurasian Economic Union (EEU),
an economic union of five states in northern Eurasia (Belarus, Kazakhstan,
Russia, Armenia and Kyrgyzstan), which might become a competitor in
the global economic space. However, the trade complementarity of these
countries vis-à-vis one another is rather low (according to the United
Nations Conference on Trade and Development [UNCTAD]) (i.e., their
export profiles do not match the import profiles of any others within the
group), which means that a preferential trade agreement would not lead
to any significant trade expansion or creation, and at the same time would
A. A. AMIGHINI

269
not divert any of the trade of these Central Asian countries with other
major trade partners.
The European Union has an historical responsibility to open a high-
level dialogue on current competing initiatives for regional integration in
Eastern Europe and Central Asia. In fact, the BRI is a regional integration
effort alternative to the EUU and an important absence in the BRI is the
lack of relationships between the EUU and the European Union. The BRI
could open new opportunities for the European Union to pursue its geo-
strategic ambitions in Central Asia by deepening the EU-China strategic
partnership through cooperation in security fields, possibly paving the way
to EU-Russia reconciliation. At the same time, China, Russia, Ukraine and
the European Union have some common economic and security interests
in Eurasia that they could follow together in spite of different approaches.
Under these conditions, it is better for European countries to tr y to find a
common language with former Soviet republics and China than to pas -
sively obser ve how the existing order is being replaced by something unfa -
miliar to European values and interests.
Improving infrastructure along the land-based Silk Road Economic
Belt has the potential to contribute to economic development and regional
stability in Eurasia from which both China and the European Union could
benefit in terms of new markets and energy security. One Belt, One Road
thus opens opportunities for the European Union to pursue its geo-
strategic ambitions in Central Asia by deepening the EU-China strategic
partnership through cooperation in non-traditional security fields, possi -
bly paving the way to EU-Russia reconciliation. The maritime trajector y
of OBOR will sooner or later require the EU to take a more outspoken
position on maritime disputes in the South China Sea in favour of an inter -
national rules-based order.
Con Cludkng R ema Rks
tŠ‡ BRk ƒ‹• ƒt ‹t‡‰”ƒt‹‰ CŠ‹ƒ ‹t‘ tŠ‡ ‰Ž‘„ƒŽ ‡…‘‘y ƒŽ‘‰ u…Š
†‡‡’‡” ƒv‡u‡•ˆƒ” „‡y‘† t”ƒ†‡ ƒ† ‹v‡•t‡t ‘w•tŠƒ ‡v‡” „‡ˆ‘”‡.
aŽ‘‰ w‹tŠ tŠ‡ ‘u”‹•Š‹‰ ‘ˆ „‹Žƒt‡”ƒŽ ƒ‰”‡‡‡t• •‹‰‡† „y tŠ‡ CŠ‹‡•‡
‰‘v‡”‡t w‹tŠ ‹†‹v‹†uƒŽ ’ƒ”t‡” …‘ut”‹‡• •‹…‡ tŠ‡ 1990• (‘w u’ t‘
202 ‹t‡”ƒt‹‘ƒŽ ‹v‡•t‡t ƒ‰”‡‡‡t• ƒ† 14 ˆ”‡‡ t”ƒ†‡ ƒ‰”‡‡‡t•),
tŠ‡ BRk ‹t‡†• t‘ „u‹Ž† ƒ ‰”‡ƒt eu”ƒ•‹ƒ …‘t‹‡t ƒŽ‘‰ Ž‹‡• tŠƒt ƒ”‡
v‡” y †‹ˆˆ‡”‡t ˆ”‘ ƒy ‘tŠ‡” t”ƒ†‹t‹‘ƒŽ ’ƒ”ƒ†‹‰ ‘ˆ ”‡‰‹‘ƒŽ ‹t‡‰”ƒt‹‘.
yŠ‹Ž‡ tŠ‡ w‘”Ž† Šƒ• •‘ ˆƒ” ‡x’‡”‹‡…‡† ”uŽ‡-„ƒ•‡† ”‡‰‹‘ƒŽ ‹t‡‰”ƒt‹‘
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270
arrangements, the Chinese way to regional integration tends to be less
rule-based and more coalition-based along countr y-specific interests.
Although the BRI should be appreciated and not disregarded, Europe’s
historical responsibility is to make multilateralism prevail against closed
and competing initiatives towards regionalism. The BRI will likely con -
tribute to economic development and regional stability in Eurasia from
which both China and the European Union could benefit in terms of new
markets and energy security. Overall, the BRI presents the European
Union with a unique opportunity to re-enter the “Great Game” (Arduino
2016 ), not just in Central Asia, but also in a series of new or renewed
games. Therefore, Europe should consider the BRI as a much broader
vision than the simple improvement of physical and digital connectivity.
As regards digital connectivity, the Internet is the software of globalisa -
tion, as transport links are its hardware. Part of the BRI is to create the
so-called digital Silk Road, that is, an Internet community that would
facilitate cross-border e-commerce and Internet banking. According to
Ren Xianliang, vice minister of the Cyberspace Administration of China,
the expansion should be undertaken in addition to implementing the
countr y’s Internet Plus plan, whereby ever ything will be connected to a
superfast broadband network. 10 One of the main obstacles towards a digi -
tal Silk Road is the still high level of China’s ser vices trade barriers, includ -
ing licensing requirements, complex regulations and product quotas. 11
Moreover, “Like physical infrastructure links, the virtual infrastructure of
the internet is also being weaponised by states competing for power.”
(Leonard 2016 , p.  21). As a consequence, “countries such as Australia,
France, South Korea, India, Indonesia, Kazakhstan, Malaysia, and Vietnam
have already moved to keep certain types of data on ser vers within their
national borders. Deutsche Telekom has suggested a German-only
“Internetz”, while the EU is considering a virtual Schengen area (Leonard
2016 , p. 22).” The digital revolution … has sparked a new “Great Game”,
analogous to the race for control of Asia in the nineteenth centur y (Hobbs
et al. 2016 ).
Moreover, the European Union should seriously consider the conse -
quences of the lack of a common framework for bilateral investment with
China. In fact, the BRI will further accelerate Chinese investment activity
in various infrastructure projects in European countries. Before the BRI
was announced, China’s infrastructure investment in Europe targeted
individual EU countries and many non-EU members in Central and
Eastern Europe, mainly in the manufacturing and ser vices sectors.
A. A. AMIGHINI

271
Recently, Chinese firms have started to invest in large infrastructure proj -
ects backed by their inclusion in the BRI project list. Coalition building
around individual projects now tends to prevail over the legal rules and
procedures that are at the heart of the EU competition policy, as the core
principles around which the internal market has been developed.
As most powerfully expressed, “Beijing’s diplomacy is ver y transac -
tional in nature and the respect it accords foreign counterparts and adver -
saries depends on their ability to bargain hard and get results” (de
Jonquières 2015 , p.  3). Time has come for the European Union to bar -
gain hard to get results that will allow the Chinese BRI to become a game
changer to the mutual benefits of all the countries involved.
notes
1. mƒŒ‘” …‘’”‡Š‡•‹v‡ ”‡’‘”t• ‘ tŠ‡ BRk ƒ† ‹t• •‹‰‹…ƒ…‡ t‘ tŠ‡
eu”‘’‡ƒ u‹‘ ƒ”‡ a‹‰Š‹‹ ( 2017 ), vƒ †‡” rutt‡ ‡tƒŽ. ( 2016 ). f‘” ƒ
‘”‡ …‘’”‡Š‡•‹v‡ ƒƒŽy•‹• ‘ˆ tŠ‡ ’‘t‡t‹ƒŽ ‹’ƒ…t ‘ˆ CŠ‹ƒ'• ˆ‘”‡‹‰
’‘Ž‹…y (‹…Žu†‹‰ oBoR) ‘ tŠ‡ eu”‘’‡ƒ u‹‘, ’Ž‡ƒ•‡ •‡‡ CŠ‹ƒ'• ˆ‘” -
‡‹‰ ’‘Ž‹…y ƒ† ‡xt‡”ƒŽ ”‡Žƒt‹‘•, Bu”ƒy ‡tƒŽ. ( 2015 ).
2. kt ‹• „‡y‘† tŠ‡ •…‘’‡ ‘ˆ tŠ‹• …Šƒ’t‡” t‘ †‹‰ ‹t‘ ‹†‹v‹†uƒŽ ‡„‡” …‘u -
t”‹‡• „‹Žƒt‡”ƒŽ ƒ…t‹v‹t‹‡• w‹tŠ CŠ‹ƒ, wŠ‹…Š Šƒv‡ w‹†‡Žy †‹ˆˆ‡”‡† ‹ •‹z‡ ƒ†
•…‘’‡.
3. eu”‘’‡ƒ C‘‹••‹‘ x‹…‡-r”‡•‹†‡t s‹‹ kƒŽŽƒ•, ”‡•’‘•‹„Ž‡ ˆ‘” t”ƒ• -
’‘”t, •ƒ‹†: t”ƒ•’‘”t ‹• v‹tƒŽ t‘ tŠ‡ eu”‘’‡ƒ ‡…‘‘y. y‹tŠ‘ut ‰‘‘†
…‘‡…t‹‘• eu”‘’‡ w‹ŽŽ ‘t ‰”‘w ‘” ’”‘•’‡”. tŠ‹• ‡w eu ‹ˆ”ƒ•t”u…tu”‡
’‘Ž‹…y w‹ŽŽ ’ut ‹ ’Žƒ…‡ ƒ ’‘w‡”ˆuŽ eu”‘’‡ƒ t”ƒ•’‘”t ‡tw‘” ƒ…”‘•• 28
m‡„‡” stƒt‡• t‘ ’”‘‘t‡ ‰”‘wtŠ ƒ† …‘’‡t‹t‹v‡‡••. kt w‹ŽŽ …‘‡…t
eƒ•t w‹tŠ y‡•t ƒ† ”‡’Žƒ…‡ t‘†ƒy• t”ƒ•’‘”t ’ƒt…Šw‘” w‹tŠ ƒ ‡tw‘”
tŠƒt ‹• ‰‡u‹‡Žy eu”‘’‡ƒ. avƒ‹Žƒ„Ž‡ ƒt Štt’•://‡….‡u”‘’ƒ.‡u/t”ƒ•-
’‘”t/tŠ‡‡•/‹ˆ”ƒ•t”u…tu”‡/‡w•/t‡-t-…‘””‹†‘”•‡ .
4. tŠ‡ {ux‹‘u Rƒ‹Žwƒy, ‹ ’ƒ”t‹…uŽƒ”, ”u• ˆ”‘ CŠ‘‰“‹‰ t‘ du‹•„u”‰ ‹
g‡”ƒy ‹ ‘Žy 288 Š‘u”•.
5. eu …‘‘ ‡••ƒ‰‡• ƒt tŠ‡ B‡Žt ƒ† R‘ƒ† f‘”u, ƒvƒ‹Žƒ„Ž‡ ƒt Štt’•://
‡‡ƒ•.‡u”‘’ƒ.‡u/†‡Ž‡‰ƒt‹‘•/…Š‹ƒ/26051/„‡Žt-ƒ†-”‘ƒ†-ˆ‘”u-‡u-
…‘‘-‡••ƒ‰‡•‡ .
6. oˆ tŠ‡ 12 ’”‘Œ‡…t• …u””‡tŽy ‹…Žu†‡† ‹ tŠ‡ †”ƒˆt Ž‹•t ƒ‰”‡‡† u’‘ „y tŠ‡
eu-CŠ‹ƒ C‘‡…t‹v‹ty rŽƒtˆ‘”, ˆ‘u” ƒ”‡ ‹ r‘Žƒ†, tŠ”‡‡ ‹ sŽ‘vƒ‹ƒ,
tŠ”‡‡ ‹ BuŽ‰ƒ”‹ƒ ƒ† tw‘ ‹ ktƒŽy.
7. a gŽ‘„ƒŽ st”ƒt‡‰y ˆ‘” tŠ‡ eu”‘’‡ƒ u‹‘ ƒvƒ‹Žƒ„Ž‡ ƒt Štt’•://‡u”‘’ƒ.
‡u/‰Ž‘„ƒŽ•t”ƒt‡‰y/‡ .
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8. For a comprehensive review of the impact of infrastructure in develop -
ment, see Sawada ( 2015 ).
9. This is the same perspective that has been recently embraced and high -
lighted in the EU message at the “Belt and Road Forum” in Beijing on
May 14–15 2017.
10. China Daily, http://www.chinadaily.com.cn/world/2015-07/07/
content_21202745.htm .
11. Bergsten et  al. 2014 and https://www.oecd.org/trade/ser vices-trade/
STRI_CHN.pdf .
Refe Ren Ces
a‡†‘Žƒ‰‹‡, x., a‹‰Š‹‹, a. ƒ† Rƒ„‡ŽŽ‘tt‹, R. (2017), CŠ‹‡•‡ muŽt‹ƒt‹‘ƒŽ•
‹ eu”‘’‡, ‹ B‡”‡ttƒ, s., B‡”‘ˆ•‹, a. ƒ† |Šƒ‰, l. (e†•), Understanding
China Today , Springer.
Amighini, A. (Ed.) (2017), China’s Belt and Road: A Game Changer?, ISPI, avail -
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Arduino, A. (2016), China’s One Belt One Road: Has the European Union
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Bergsten C., Hufbauer G. C., & Miner, S. (2014). Bridging the Pacific: Towards
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based-transports-between-China-and-Europe/
de Jonquières, G. (2015), The European Union’s China Policy: Priorities and
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Union%E2%80%99s-China-Policy.pdf
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available at http://www.ecfr.eu/page/-/China_Analysis_Sixteen_Plus_One.
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European Parliament Research Ser vice (2016), One Belt, One Road (OBOR):
China’s Regional Integration Initiative, available at http://www.europarl.
europa.eu/RegData/etudes/BRIE/2016/586608/EPRS_BRI%282016%
29586608_EN.pdf
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Hobbs, C., Puddephatt, A. and Torreblanca, J. I. (2016), The Geo-Economics of
the Digital, in Leonard (Ed.), Connectivity Wars , ECFR, available at http://
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a Gravy Train?, Lau China Centre Working Paper Series, available at https://
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ECFR, available at http://www.ecfr.eu/page/-/Connectivity_Wars.pdf
Loesekrug-Pietri, A. (2015), Why Europe Can’t Afford to Ignore China’s New
Silk Road, available at https://www.weforum.org/agenda/2015/11/
europe-china-new-silk-road/
Makocki, M. (2016), The EU Level: ‘Belt and Road’ Initiative Slowly Coming to
Terms with the EU Rules-Based Approach, in ETNC (2016), Europe and
China’s New Silk Roads , ETNC Report, available at https://www.clingendael.
nl/sites/default/files/Europe_and_Chinas_New_Silk_Roads_0.pdf
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and 21st-Centur y Maritime Silk Road, available at http://en.ndrc.gov.cn/
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Sawada, Y. (2015), The Impacts of Infrastructure in Development: A Selective
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ECFR, available at http://www.ecfr.eu/page/-/Connectivity_Wars.pdf
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Wilmsmeier G. and Hoffman J.  (2008), Liner Shipping Connectivity and Port
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Economics and Logistics , 130–151.
BEYOND PORTS AND TRANSPORT INFRASTRUCTURE…

275 © The Author(s) 2018
A. Arduino, X. Gong (eds.), Securing the Belt and Road Initiative ,
https://doi.org/10.1007/978-981-10-7116-4_15
CHAPTER 15
China’s Belt and Road Initiative
and the 16+1 Platform: The Case
of the Czech Republic
Alica Kizeková
This chapter examines China’s activities in Central and Eastern European
Countries (hereinafter referred to as ‘CEECs’), with a specific reference to
the 16+1 platform, during a time of the emerging Belt and Road Initiative
(BRI). In Europe, this initiative has been looked upon with suspicion and
referred to as a ‘divide and conquer’ strategy, aiming to potentially disrupt
the workings of the European Union. The argument presented here is that
the cooperation between China and the CEECs has not been a one-sided
activity. Some countries did not hide their enthusiasm for forging closer
partnerships with China and embracing the China-led 16+1 platform, as
well as BRI. The Czech Republic is a case in point; however, it still questions
the benefits of opening up to China and what the real outcomes of promised
investments domestically and in the wider region are. In response to the
criticisms, the Chinese leadership has reassured the Europeans that China is
acting peacefully under a win-win premise for all parties involved and that
the activities within the 16+1 take in consideration the existing projects,
such as China-EU cooperation and the EU infrastructure projects.
A. Kizeková ( *)
Institute of International Relations Prague, Prague, Czech Republic

276
Introduct Ion
chincu tgcgnt gxpcnuion of cctivitigu in cgnttcn cnf ecutgtn eutopgcn
counttigu (ceecu) uhounf dg unfgtutoof in thg contgxt of itu ovgtcnn
uttctggy of dgcoming c motg cctivg pncygt in eutopg cnf wotnfwifg.
Without foudt, chinc iu uggming to gqucnizg itu gconomic powgt with itu
gnodcn poniticcn pouition. It mgcnu focuuing on fgvgnopmgnt cnf ugcutity
of itu ptojgctu cdtocf gupgcicnny thtough cottifotu cctouu eutopg, cgnttcn
auic, south cnf southgcut auic.
sincg 2017, thg wotnf hcu hcf ugvgtcn oppottunitigu to ngctn cdout
chincu vigw of itu gnodcn utcnfing cnf itu cpptocch to tgnctionu with othgt
counttigu. 1 ptguifgnt xi Jinpingu upggch ct thg dcvou Wotnf economic
fotum in Jcnuct y 2017 ptomotgf gnodcnizction cnf cngctny conttcutgf
ptguifgnt doncnf ttumpu gconomic ptotgctionium. ptguifgnt xi ctgugf
thct chinc hcf opgngf cnf gcingf thg ugconf tcnm thcnmu to thg gnodcn
gconomy within thg ncut 38 ygctu. au uuch, hg ptovifgf cn cntgtnctivg to
gxcnuuivg gconomic uyutgmu dy uuggguting thct thg chinc-ngf initictivgu
wgtg motg incnuuivg cnf opgn to cnn (xi Jinping 2017c ). hg uhctgf thg
ucmg ifgcu futing thg bgnt cnf rocf fotum fot Intgtnctioncn coopgtction
houtgf dy bgijing in mcy 2017 (xi Jinping 2017d ).
In ptgpctction fot thg fotum, thg otgcnizgtu ptiotitizgf focuuing on
inftcuttuctutg fgvgnopmgnt, ncncicn intggtction, ponicy cootfinction,
ttcfg ptomotion cnf cnougt pgopng-to-pgopng donfu cu c countgtdcncncg
to gtowing ptotgctionium cnf puuhdccm cgcinut gnodcnizction ot ftcgmgn -
tction. thg Joint ptguu communiqu ptovifgf upgcic gutgu fot gcch
uggmgnt, incnufing uomg cuuiutcncg fot tgfugggu in conncdotction with thg
unitgf nctionu (Joint ptguu communiqu 2017).
ngvgtthgnguu, thiu initictivg on gnodcnizction iu not cn immgfictg
tguponug to thg cuttgnt us cfminiuttction. It wcu inttofucgf futing
ptguifgnt bctccm odcmcu uo-ccnngf pivot to auic cnf thg ttcnu-pccic
pcttngtuhip (tpp) cnf thg ttcnuctncntic ttcfg cnf Invgutmgnt
pcttngtuhip (ttIp) nggotictionu. Whct iu unfgnicdng iu thct chinc hcu
tgcgntny dgcomg motg ptocctivg in ptgugnting itu ncttctivg cnf thg coun -
tt y iu ctgucdny moving ftom thg pouition of c notm-tcmgt to c notm-
uhcpgt ot inutitution- ctgctot (rginny 2011 ; anfgn cnf lctgg 2015 ;
huijumgnu 2016 ).
not gvgt yong cccgptu thiu chcngg of utctuu quo. somg dgnigvg thct in
eutopg, chinc uugu c fivifg cnf conqugt cpptocch dy uuccguufunny
a. kIzekov

277
institutionalizing the 16+1 cooperation and thus weakens the unity of the
European Union. 2 The European Union has not been pleased that Beijing
created a format of cooperation, which involves the EU and non-EU
member states, at the time when the EU representatives have been tr ying
to work out a more coordinated EU strategy towards China. Brussels’
concerns relate to bilateral agreements between China and individual EU
member states, especially in the CEECs. There is an argument that the
logic of economics rules over the logic of political ideals—democracy and
human rights. 3
It is premature to conclude that China would be the primar y divider of
the European Union. When, in 2015, China’s National Development and
Reform Commission (NDRC), the Ministr y of Foreign Affairs and
Ministr y of Commerce published the Vision and Actions plan on ‘One Belt
One Road’ (OBOR), now Belt and Road Initiative (BRI) , it became clear
that China was not seeking a ‘one-size-fits-all’ type of cooperation. The
focus was to be on finding the best suitable model for a specific bilateral
relationship, to ensure a win-win scenario for both parties involved.
In fact, the current disruptions have come from the internal disagree -
ments within the European Union. The member states have struggled to
find their common voice in various areas, such as the refugee crisis and,
more importantly, the supranational entity is facing a major challenge of
its unity by conducting negotiations with the United Kingdom over
Brexit. Some insecurities were dispelled after the presidential elections in
France, where Emmanuel Macron, the independent and pro-European
centrist, won the elections in May 2017. At the time of writing (December
2017), Brussels has been in anticipation for the new German government,
which has not been formed since the German Federal Elections took place
in September 2017.
Additionally, in short to medium terms, differences of opinions among
CEECs will prevent the framework from becoming a major divider
(Grieger 2016 ; Stanzel et al. 2016 ). One of the key concerns of the par -
ticipating countries is that the promises of large investments in specific
countries have not been translated into tangible results. There has been
some criticism over purchases by Chinese companies into real estate,
media and sports clubs, which would not bring adequate benefits for host
countries. Instead, the expectations had been for China to invest in sus -
tainable employment (Góralczyk 2017 ).4
This chapter undertakes the task to examine the 16+1 framework in the
context of the increasingly bolder China and how the Czech Republic
CHINA’S BELT AND ROAD INITIATIVE AND THE 16+1 PLATFORM…

278
responds to this development. The focus is going to be on possibilities and
risks. The argument presented here is that the cooperation between China
and CEECs has not been a one-sided activity. Some countries did not hide
their enthusiasm for forging closer partnerships with China and openly
embraced the China-led 16+1 platform, as well as BRI. However, there is
a growing pragmatism in assessing specific investments—promises verses
the actual outcomes. This is quite visible in the Czech Republic where the
wider expert community and media have scrutinized the results of the
Chinese investments so far.
the 16+1 I nItIat Ive : expectat Ions
and  dIsappo Intments
thg ofcicn dgginning of thg 16+1 iu ninmgf to thg uummit in Wctucw in
2012. by thgn, chincu fotmgt ptimg miniutgt Wgn Jicdco hcf cntgcfy
ptopougf thg fgvgnopmgnt of ttcfg, invgutmgntu, inftcuttuctutg ptojgctu,
uccn cnf ncncicn coopgtction cnf pgopng-to-pgopng tigu futing thg
buuinguu fotum in bufcpgut in 2011. In thg cftgtmcth of thg gnodcn ncn -
cicn ctiuiu, thg 16 counttigu wgncomgf chincu initictivg with opgn ctmu
cnf thgit gxpgctctionu of tgcn invgutmgntu wgtg cgttcinny high.
In hiu upggch, fotmgt ptimg miniutgt Wgn fguctidgf thg intgtcction
dgtwggn chinc cnf thg ceecu cu ttcfitioncn dy mcming c tgfgtgncg to
thg cncignt sinm rocf, which ninmgf auic cnf eutopg. In hiu wotfu, thg
ceecu wgtg uniqugny uttong in citctcft mcnufcctuting, cuto-mcming,
dtgwing, dio-phctmccy, ugwcgg ttgctmgnt cnf uhipduinfing whing chinc
wcu ptgugntgf cu hcving cfvcntcggu in inftcuttuctutg conuttuction, mcn -
ufcctuting cnf ptocguuing. hg mgntiongf upgcic invgutmgntu, uuch cu
hucwgiu fgciuion to ugt up itu eutopgcn uuppny cgntgt in hungct y
(Wgn 2011 ).
It wcu mcfg cngct thct thoug ceecu thct wgtg pctt of thg eutopgcn
union wounf dg vigwgf cu vicdng dtifggu to Wgutgtn mctmgtu cnf impot -
tcnt to thg eu-chinc coopgtction. accotfing to fotmgt ptimg miniutgt
Wgn, thgtg wcu cn incgntivg in invguting in ceecu. It wounf cut coutu fot
chingug gntgtptiugu cnf thuu ceecu wgtg to dgcomg c uttctggic ptiotity in
thg contgxt of chincu going gnodcn.
fotmgt ptimg miniutgt Wgn mcfg vg upgcic uugggutionu to gnhcncg:
(1) dinctgtcn ttcfg; (2) two-wcy invgutmgnt; (3) inftcuttuctutg conuttuc -
tion coopgtction; (4) uccn cnf ncncicn coopgtction; cnf (5) pgopng-to-
pgopng cnf cuntutcn gxchcnggu. hiu upggch wcu c ccnn fot cn cctivg
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279
participation in China’s development through concrete projects. Thus,
the Chinese leadership presented their plans for the development of the
CEECs’ area prior to the establishment of the 16+1 platform and without
consulting the CEECs in advance.
The formalization of the CEECs cooperation with China took place the
following year in Warsaw at the First Summit of 16+1. Upon gaining an
over whelming support from the participating countries, this China-led
initiative turned into Twelve Measures for Promoting Friendly Cooperation
with Central and Eastern European Countries.
Drawn from the Measures , the first step towards the 16+1 institutional -
ization was setting up a secretariat at China’s Ministr y of Foreign Affairs.
This Chinese institution oversees daily affairs. It communicates and coor -
dinates activities between China and the CEECs, including preparations
for meetings and forums. Each participating countr y has a national coor -
dinator who is the primar y contact point and facilitator of discussions for
their respective countr y with the 16+1 secretariat.
China suggested establishing a USD 10 billion special credit line, an
investment cooperation fund, trade and investment promotion missions,
currency swaps, the establishment of bank branches, advisor y committees,
cultural forums, scholarships and an active support for Confucius Institutes,
tourism promotion and young political forum (Twelve Measures 2012 ).
The following summits in Bucharest and Belgrade, in 2013–2014, were
no longer one-sided China-led events. The European countries contrib -
uted to the final guidelines. In Bucharest, further planning of activities
took place, and new associations were set up. It should be noted that join -
ing them by relevant Chinese and CEECs’ agencies and businesses is on a
voluntar y basis. Additionally, the Belgrade Guidelines, based on the theme
New Driving Force, New Platform and New Engine, included an update on
the progress made towards the implementation of the Measures of the
Bucharest Guidelines in the previous year.
Both guidelines dealt with the question of EU-China relations to reas -
sure the critical voices in Europe that the 16+1 cooperation was ‘in con -
cord with China-EU comprehensive strategic partnership’ (Bucharest
Guidelines 2013 ), and stressed that it would contribute ‘to the implemen -
tation of the EU-China 2020 Strategic Agenda for Cooperation’, as well
as be ‘in accordance with their respective laws and regulations, and in the
case of EU member states, the EU legislation, regulations and policies
stemming from their membership’ (Belgrade Guidelines 2014 ).
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280
While the first three summits took place in Europe, China hosted the
fourth summit in Suzhou in November 2015. The circle of additional
attendees at the meeting expanded by representatives from the European
Union, Austria and the European Bank for Reconstruction and
Development. The group stated its support for the China-EU Connectivity
Platform, BRI and the Investment Plan for Europe. In terms of planning,
a document called the Medium-Term Agenda for Cooperation between
China and Central and Eastern European Countries was issued, for the
period of 2015–2020. Influenced by the bold BRI, the summit was
themed New Beginning, New Domains, Vision .
Although, the participating countries concluded that bringing the plat -
form to life was successful, some CEECs pointed out that there had not
been many visible results. Often, the unsuccessful infrastructure project of
the Chinese firm COVEC in Poland was mentioned as a discouraging
example, and the fact that many states had relatively developed infrastruc -
ture and if not, most 16 states could access the EU funding for infrastruc -
ture projects, and the construction would be done under requirements of
high standards within the European Union.
The Riga Summit in Latvia in November 2016, themed Connectivity,
Innovation, Inclusiveness and Common Development, concluded that the
16+1 mechanism became ‘more mature and ready to har vest’ (Riga
Guidelines 2016 ). A commitment was made to complement the
EU-China Connectivity Platform and more obser vers could join the
meeting, such as Greece and Switzerland. Special attention was paid to
the joint Adriatic-Baltic-Black Sea Seaport Cooperation and an extension
of the shipping route network of inland water ways and ports. The Riga
Declaration called for ‘greater synergy between the BIR, development
strategies of CEECs and the EU’s Trans-European Transport Network’
(Riga Declaration 2016 ).
In five years of its existence, the 16+1 platform has evolved into a func -
tioning mechanism and improved the coordination of discussions among
specific ministries. It is clear now that states aim for a lasting set-up and
want to achieve realistic outcomes. Some obstacles remain. On a broader
scale, China has not fully convinced the wider EU community that its
intentions of investing in the CEECs are benign.
Some believe that Beijing is driven by the desire to gain more influence
and sway decision-makers in respective EU member states towards China,
and therefore, counteract the unity of the European Union. This could be
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the case of the European Union’s statement on legal ruling related to the
South China Sea, which avoided a reference to China (Emmott 2016 ; EU
Statement 2016 ). Additionally, Beijing could have an impact on the five
Western Balkans countries that participate in the 16+1 to even abandon
the idea of joining the European Union if their accession process is too
prolonged (Long 2014 ).
For now, the real challenge to China’s cooperation in the CEECs is
that individual states differentiate in their degree of support of the cur -
rent 16+1 mechanisms. A ‘cooperation vacuum’ has been created in
countries where the enthusiasm faded in response to the gap between
the hyped expectations and the lack of tangible results from promised
investments, as well as the lack of support from the public (Long 2016 ;
Stanzel et al. 2016 ).
The Polish decision makers, for instance, share a ver y positive approach
to BRI, a position that remained unchanged after the presidential and
general elections in 2015. The local government in Łódz ́ has also taken
up the initiative, having the cargo connection from Chengdu, and wants
to become a logistical and technological hub to facilitate trade. In con -
trast, Slovakia’s participation in BRI has been minimal. While previously
the government of Prime Minister Robert Fico lobbied for more eco -
nomic cooperation with China, such as a hydropower plant, an establish -
ment of a Chinese bank or a direct flight between Slovakia and China,
the inability to materialize these projects, as well as being outside the
main Silk Road corridors, led to a decreased enthusiasm and a lack of
media coverage in the Slovak news outlets (Szczudlik-Tatar 2016 ;
Pleschova 2016 ).
Another obstacle in gaining more support from the 16+1 countries is
the redistribution of Chinese investments. In 2016, it was reported that
the European Union was China’s favorite destination for investments,
with an increase of 75% from 2015, totaling EUR 35 billion (approx.
USD 40.8 billion) of completed outbound foreign direct investment
(FDI). However, more than half of total incoming investment was
directed to Germany (EUR 11 billion, USD 12.8 billion) and United
Kingdom (EUR 7.8 billion, USD 8.16 billion) (Hanemann and Huotari
2017 ). The investment in Central and Eastern Europe is still rather lim -
ited. It might take some time for the projects to materialize and generate
some revenues.
CHINA’S BELT AND ROAD INITIATIVE AND THE 16+1 PLATFORM…

282

Source: Hanemann and Huotari ( 2017 , p. 10)
It is important to note that the distribution of investments within the
16+1 grouping is uneven. Based on data, six out of 16 European countries—
Bulgaria, the Czech Republic, Hungar y, Poland, Slovakia and Romania
account for 95% of 16+1 investment.
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283
Six countries account
for 95 percent of 16+1
investment 5%
Albania
CroatiaEstoniaLatviaLithuaniaMacedoniaMontenegro SerbiaSlovenia
Bulgaria
Source: Liu Zuokui’s compilation based on data from the Ministryof Commerce and the NationalStatistics Bureau
Czech Republic Hungar y PolandRomaniaSlovakia
Bosnia-Herzegovina
95 %
investment

Source: Liu in Kratz ( 2016 , p. 8)
the case of  the  czech republ Ic
thg czgch rgpudnic, which iu ong of thg top fgutinctionu of chincu
invgutmgntu cmong ceecu, hcu uuccguufunny mcncggf to mcintcin cn
cctivg gxchcngg of high-ptong fgnggctionu in thg pcut thtgg ygctu. thg
gffottu of thg cuttgnt czgch govgtnmgnt to uttgngthgn thg gconomic
cnf poniticcn tigu with chinc cunminctgf with thg hiutoticcn viuit of
ptguifgnt xi Jinping cnf thg uignctutg of fotging c uttctggic pcttngtuhip
in mctch 2016. 5
thgtg iu no qugution thct thg poniticcn tigu dgtwggn thg czgch cnf
chingug countgtpcttu ctg mcinny uuppottgf dy ptguifgnt mino zgmcn.
hiu viuit to chinc fot thg bgnt cnf rocf fotum in mcy 2017 wcu hiu thitf
ttip to chinc uincg tcming up hiu ofcg. anuo, dy thgn, hg hcf cntgcfy mgt
thg chingug ptguifgnt uix timgu within thg ncut thtgg ygctu.
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284
It should be noted that during the previous periods—especially from
the early 1990s until 2004—the communication between Prague and
Beijing was quite limited, affected by the Czech government’s policy on
human rights, Taiwan and Tibet. The Chinese authorities objected to
regular visits of the Dalai Lama in the Czech Republic. A strong reaction
from China came in 2009 after former Prime Minister Jan Fischer met
the Dalai Lama in his official government residence, and again, during
the most recent visit, which took place at the annual Forum 2000 6 in
October 2016.
The previous instances led to reduced exchange of high-profile visits
and the cancellation of participation of the former Czech prime minister
at the Shanghai Expo 2012. It was in 2014 when the first most significant
Chinese investment contract was signed in Beijing—the Slovak-Czech
J&T Financial Group and Chinese CEFC, valued at USD 750 million,
which led to subsequent acquisitions in the Czech Republic in travel
industr y and real estate (Fürst 2015 ). The latest incident in October 2016
led to the cancellation of a meeting between Czech Minister of Agriculture
Marian Jurec ̌ka and the Chinese ministers of agriculture and water man -
agement. The Czech minister explained that the Czech diplomats in
Beijing had had “received information that both ministers were cancelling
the meetings…and that it was for reasons that both sides would fully
understand” (Willoughby 2016 ).
In response to these tensions, the four highest constitutional leaders—
the president, the prime minister and the speakers of the Senate and the
Chamber of Deputies—issued an unpopular Joint Statement to reassure
China that the Czech Republic continued to respect the sovereignty and
territorial integrity of the People’s Republic of China (hrad.cz 2016 ). As
such, the Czech leadership has not been deterred from participating in
BRI. Yet, if another case of criticism of human rights or sensitive political
issues from the Czech side comes up, there is a high probability that the
Chinese leadership will use various means of pressure towards the Czechs,
notwithstanding economic tools.
When it comes to supporting the BRI and the 16+1 platform, the
Czech leadership has continued to develop the bilateral relationship while
mentioning the ‘vision’ and platform in a majority of key speeches and
during negotiations with top-ranking Chinese officials. Recently, Prime
Minister Bohuslav Sobotka attended the Local Leaders Meeting of 16+1
and opened the Summit of Health Ministers in Suzhou while primarily
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285
focusing on aviation, healthcare and financial sectors within the agreed
framework (vlada.cz 2016).
Nonetheless, after China and the Czech Republic agreed on a bilat -
eral collaboration under the umbrella of BRI during the 16+1 Riga
Summit in November 2016, several Czech experts on China, politi -
cians, media and public argued that this document was a paper tiger and
there had not been enough tangible investments to justify the invested
political capital (Agenda 2017 ). However, the Czech representation has
not stated that BRI would overshadow other forms of collaboration.
The latest ‘vision’ and added activities would have to complement the
existing China-EU partnership and the bilateral relations (CT 2015 ;
Sobotka 2016 ).
There are several opportunities for the Czech Republic’s cooperation
in the context of BRI. The Czech Republic’s strategic location in Central
Europe could ser ve as a ‘gateway’ for China vis-à-vis the Western
European markets; further, logistics, infrastructure, air industr y and
travel, production of small planes, smart cities, ser vices, environment,
advanced technologies, automobile industr y and machiner y, as well as
energy (AMO 2016 ).
Being labeled as China’s gateway or ‘bridge to Europe’ can lead to
great expectations, yet it can also end up in some disappointments. Initially,
Poland and Hungar y were frontrunners to ser ve as viable ‘bridges’. Prime
Minister Viktor Orban stated that Central Europeans could use the oppor -
tunity of CEECs-China gatherings to understand the thinking of Chinese
politicians and the Chinese political system (Orban 2016 ).
The reconstruction of the Budapest-Belgrade railway has become the
most advertised project linked to the Chinese-Hungarian relations. It is
already estimated that the construction will not be accomplished on time,
however, once finalized, the line will ser ve as an important connection to
Central, South and Western Europe. It would also ser ve as an important
reference point for future projects that China might want to achieve in the
European Union (Matura 2016 ).
Nevertheless, the project has been under revision by Brussels for pos -
sible infringements of the EU guidelines on public tenders. The focus is
on Hungar y (a EU member state). The failure to comply with the
European procurement law would most likely lead to fines and proceed -
ings to reverse infringements. The rules for Serbia are looser since it is only
a prospective candidate for EU membership. Prolonged delays and possibly
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286
breaches of the European law would cause a diplomatic embarrassment to
China (Kynge et al. 2017 ).
In Poland, China experienced different outcomes of its initiatives: a
successful one by investing in a steel works and industrial heavy machiner y
company in Stalowa Wola, and a failed one, a highly criticized construc -
tion of a highway that would connect Łódz ́ and Warsaw (Cienski 2011 ).
There are a few outstanding problems for Poland to achieve a real strategic
cooperation: a huge negative trade balance in favor of China, asymmetr y
in market access, the volume of investments in Poland—the interest in
Greenfield investments that would create jobs versus the Chinese side
acquiring existing plants. In general, there is a problem of reciprocity
when the benefits would be a real win-win scenario (Szczudlik-Tatar
2015 ). The Polish policy-makers seem to be optimistic that BRI will help
to resolve some of the issues. The government eagerly joined the Asian
Infrastructure Investment Bank (AIIB) and expressed its interest in the
Silk Road Fund (Szczudlik-Tatar 2016 ).
Similarly, the Czech government certainly believes that there is a great
potential to become and remain an important partner for China among
the CEECs. It has a pro-EU orientation with quite non-confrontational
ties with Moscow, and the GDP per capita is ranked highly in the region.
Moreover, Czech President Zeman has made it clear on several occasions
that he directly supported China and BRI, and as the sole EU leader
attended the V-Day parade in Beijing in September 2015.
However, there are two specific sectors where the Chinese investors
might find it harder to reach: nuclear power and telecommunications. A
recent comparative study of the Central European attitudes towards
Chinese energy investments, which was conducted in the Czech Republic,
Poland and Slovakia, found that these investments were viewed more neg -
atively than those in other sectors. This is due to the strategic nature of
these investments (Turcsányi 2016 ).7
It should be noted that monitoring of foreign investments into sectors
of critical infrastructure, to avoid disruptions of operations or use of power
to promote foreign economic or political interests at the expense of the
Czech Republic, are not unique to China. The Czech Security Strategy
clearly outlines the reasons behind protecting the energy, information and
communication technology sectors from any players who have a potential
to cause cyber-attacks, economic crime or politically motivated manipula -
tion of supplies of raw materials (Security Strategy 2015 ).
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287
energy , telecommun Icat Ions and  secur Ity rIsks
nucngct gngtgy in thg czgch rgpudnic pncyu cn impottcnt tong cnf thg
govgtnmgnt iu committgf to itu fututg. It iuuugf cn upfctgf stctg engtgy
ponicy in 2015. thg fonnowing ygct, c ngw committgg wcu ugt up dy thg
miniutt y of Infuutt y cnf ttcfg, which wcu tcumgf to cootfinctg c ngw
conuttuction, thg uuppny chcin, wcutgu cnf nggiunction in thg nucngct ugctot.
thg czgch govgtnmgnt fgcnctgf thg intgntion to duinf two nucngct unitu
in 2015ong ct thg dumovcny pncnt cnf ong ct thg tgmgnin pncnt. thg
cnticipctgf pticg of doth unitu iu 300 dinnion czgch ctownu (cpptoximctgny
usd 13.8 minnion). dumovcny iu c ptiotity uincg thg nucngct tgcctotu thgtg
winn mout nimgny cnoug in 2035 (mpo 2015 ). thgtg iu c ptojgction fot
nucngct gngtgy to dgcomg thg ptimct y uoutcg of gngctticity ptofuction,
with cn inctgcug ftom 32.5% to 46% to 58% dy 2040 (Iea 2016 ).
thgtg ctg ugvgtcn fotgign invgutotu who gxptguugf thgit intgtgut in pct -
ticipcting in c pudnic tgnfgt fot thg conuttuction of two cffitioncn nucngct
tgcctotu: thg ruuuicn compcny rosatom; thg ftgnch edf; thg
amgticcn-Jcpcngug Wgutinghouug engcttic compcny; thg joint ptojgct
dgtwggn atgvc cnf mituudiuhi, atmgc; thg kotgcn compcny khnp; cnf
chinc ggngtcn nucngct powgt. thg chingug gxptguuion of intgtgut in pct -
ticipcting in nucngct coopgtction with thg czgch rgpudnic wcu incotpo -
tctgf into thg bgngtcfg guifgningu in 2014 (bgngtcfg guifgningu 2014 ).
thg czgch rgpudnic iu utinn cuuguuing thg uudmittgf ptopoucnu. It iu cnuo
wotming out thg tight mofgn cnf it iu conuifgting thtgg fiffgtgnt ptiotity
ucgnctiou of ncncing. thg tut ucgnctio countu on thg cez gtoup cnf itu
pcttngt compcny cez c.u., cn intggtctgf gngtgy gtoup, with thg nctggut
uhctghonfgtthg czgch rgpudnic with c ngctny 70% utcmg in thg compc -
nyu uhctg ccpitcn. thg ugconf ucgnctio wounf gntcin thg putchcug of thg
pcttngt compcny ftom cez gtoup dy thg czgch rgpudnic cnf uudug -
qugntny thg compcny wounf dg tguponuidng fot conuttucting thg ngw unitu
in dumovcny. thg thitf ucgnctio gntcinu thg czgch rgpudnic tcming ovgt c
pctt of cez gtoupincnufing nucngct powgt pncntucnf thiu pctt wounf
dg 100% owngf dy thg utctg cnf wounf thgn ovgtugg thg dumovcny ptojgct
(hn 2017 ).
thgtg iu c wifguptgcf opinion thct if thg pudnic tgnfgt wounf go chgcf
cnf c fotgign invgutot wounf dg invitgf to unfgttcmg thg conuttuction in
dumovcny, thgn thg ugngctgf fotgign uuppnigt wounf dg tgquitgf to invitg
czgch tmu to join uiminct ptojgctu in thg thitf counttigu. thgtg ctg thoug
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288
foreign investors that are more willing to comply with the request and
those that are not.
Former Minister of Industr y and Trade Jan Mladek explained that the
Russian company ROSATOM and partially the Korean Electric Power
Corporation (KEPCO) were the most willing to comply, while Japanese-
American Westinghouse and China General Nuclear Power were not.
According to him, the Chinese representative was rather surprised that the
Czechs would participate in Chinese projects. There was an expectation
that the Chinese would use their own workers, engineers and material
(Sinopsis 2016 ).
China Nuclear Power Engineering Company (CGN) bets on getting
some help from a media company that would facilitate building a positive
image of CGN as a reliable and long-term partner of the Czech nuclear
industr y. The aim is to forge more trust and increase the company’s com -
petitiveness on the market.
In relation to telecommunications and security risks, the Czech security
ser vices identified Russia and China as ‘security threats’ in the last three
years. The annual report of the Security Information Ser vices for 2015
stated that their intelligence ser vices were the most active in the Czech
Republic. They stated that in China’s case, diplomats, intelligence officers
and economic entities were building on previous successes and strength -
ened their influence in the Czech economy and politics (BIS 2016 ).
The 2013 report specifically mentioned the Chinese companies Huawei
and ZTE as posing a ‘potential threat’ to the Czech Republic, based on
experiences from other countries who had excluded Huawei from public
tenders on the grounds of cooperation with Chinese security ser vices and
being involved in spying activities. The concerns were linked to ignoring
error reports and mistakes that could enable illegal remote access to
devices (BIS 2014 ).
Recently, Huawei has made some headlines in the Czech press for being
declined by the Ministr y of Interior due to security risks (Reflex 2016 ).
The company has operated in the Czech Republic since 2003 and has
since become one of the most successful sellers of smart phones on the
market. For marketing purposes, the company smartly picked the most
famous and popular Czech ice hockey player, Jaromir Jágr, as the promo -
tional ‘face’ of their campaigns in the Czech Republic.
For the Czech intelligence community, the biggest fear is that the
Chinese agents could use the network technology and software to ‘eaves -
drop’ sensitive communication or they could implant technology, which
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289
could enable China, in cases of a hypothetical conflict, to block selected
systems (BIS 2014 , 2016 ; Sinopsis 2016 ).
There are signs of a more pragmatic and strategic approach to
investments—in specific sectors and in terms of the level of entr y. It is,
however, clear that the Czechs are not always united in their positions.
The failure to join the AIIB is a case in point. The hesitance to become
one of the founding members has kept the Czechs away from becoming
better involved in institution, which has become the center of the financial
dimension of the BRI.
The pragmatic approach will most likely be seen in different sectors in
the future. The Czechs have sided with others within the 16+1  in their
appeals to improve the situation for the entr y of agricultural products to
the Chinese market. The most criticism has been directed towards AQSIQ,
the bureau for approving the procedures, for extremely long waiting peri -
ods of several years.
The Chinese counterparts were asked, that being members, to follow
the rulings of the World Organization for Animal Health, instead of their
own decisions, and not duplicate the processes. For the EU member
states, including the Czech Republic, it is also more viable to use the
European Union as a platform for joint negotiations—especially in terms
of unified internal veterinar y and phytosanitar y guidelines and the com -
mon market. 8
For now, both governments embrace the momentum. The latest visit of
Czech President Zeman led to Beijing, Nanjing and Shanghai in May
2017. In anticipation of the visit, the Chinese media printed articles in the
China Daily where President Zeman was quoted as stating that BRI was
the ‘greatest infrastructure project in histor y’ and that he was pleased the
plan to connect China with Europe includes the Czech Republic (Li
2017 ). Another article suggested that the Czech Republic hoped to
become a ‘regional financial center’. Ambassador Ma Keqing admitted
that the outmost priority was to institutionalize the platform and ‘design
suitable projects’ (Fu 2017 ).
There are three direct flights between Prague and Beijing, Shanghai
and Chengdu. There is a plan to add Kunming to the list. More headway
has been achieved in the air industr y. The Czech producer of ultralight
Direct Fly signed an agreement with Wanfeng in April 2016. The plan is
to produce planes with Czech know-how in China. However, Wanfeng
has also been planning to purchase more than 30 planes from various
Czech producers.
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290
One thing that is going to be crucial for the Czech Republic and other
members of the 16+1 platform is to find the common view of the initia -
tive. At one specific meeting on 27 March 2017, the general director of
the International Relations Department at China’s Foreign Affairs
Ministr y, Sui Pengfei, declared that the Chinese side would consider and
present the 16+1 as one ‘region’—and the reason behind this was to
increase the value of the small CEE states in the eyes of Chinese investors.
This, however, has not been taken positively by all representatives from
the 16 countries.
Some argued that the states were way too different and it would be
unreal to expect a common approach in many questions. The Czech
Republic would be at a disadvantage if it were separated from the more
developed member states of the European Union. As such, it will most
likely continue with viewing the platform as an added tool to strengthen
bilateral ties and in some respects, it will want to be viewed as an EU mem -
ber state first, before considering the initiatives of the 16+1. 9
The Chinese investments will also need to be evaluated in relation to
other incoming investments from East Asia into the Czech Republic.
According to the governmental statistics by CzechInvest, 235 projects val -
ued at 239 billion Czech crowns (approx. USD 10.4 million) took place
with Asian countries between 1993 and 2016. When it comes to ranking
of foreign investors, Japan came in second place, South Korea came in
fourth, Taiwan came in tenth and China came in twentieth. It is expected,
however, that China’s position is going to rise in the upcoming years
(CzechInvest 2017 ).
Chinese investors are gradually changing their approach and investing
into building new factories. Yangeng Automotive Interior invested around
USD 230 million into building two factories in Žatec and Planá nad
Lužnicí. The latter was opened with a promise of employment for 588
people (MPO 2017 ).
In the future, the Czechs will need to find the right balance between
the decision-makers in their approach to China. It is vital to stay united,
consistent and predictable even after the parliamentar y elections in
October 2017. In a recent inter view, the president of the New Silk Road
Institute Prague, former Minister of Foreign Affairs Jan Kohout, pointed
out that it was primarily up to the Czechs to opt for projects that have
some added value and there should be an effort to prepare the right condi -
tions domestically for such projects (Kohout 2017 ).
A. KIZEKOVÁ

291
conclus Ions
thg gvonving tgnctionu dgtwggn chinc cnf thg 16+1 ceecu hcvg ggngt -
ctgf uomg intgtgut cnf ptovifgf cn oppottunity to cuuguu thg owu of
chingug invgutmgntu, not juut in thg ceecu dut eutopg-wifg. Whing thg
mgchcnium fccinitctgu intgtcctionu, it hgnpu in ifgntifying ctgcu of conncdo -
tction, cnf it hcu cntgcfy dtought uomg ptccticcn tguuntu, chincu intgn -
tionu ctg utinn qugutiongf, cu wgnn cu thg nong-tgtm vcnifity of uuch c fivgtug
pnctfotm. It iu fifcunt to ptgfict how much impcct thgtg winn dg on thg
wotmingu of thg eutopgcn union if thg inutitutioncnium of thg 16+1 pnct -
fotm fggpgnu. thg ifgcn ucgnctio wounf dg if thg ptocguugu wgtg compng -
mgntct y with thg eutopgcn unionu gocnu.
thg czgch rgpudnic dgnongu to thg gtoup of ceecu thct hcvg dgng -
tgf cnf uugf thg ftcmgwotm to inctgcug itu pouition in gcining motg
potgnticn invgutmgnt oppottunitigu ftom chinc viu--viu othgt ceecu. so
fct, thg tguuntu hcvg dggn mixgf, cnf thg pudnic cu wgnn cu uomg poniticcn
oppouition cnf gxpgtt community ctg ccnning fot c motg uodgt cnf ptcg -
mctic cpptocch to invgutmgnt ptojgctu. thgy wcnt thg czgch intgtgutu to
comg tut cnf focuu on ctgcu uuch cu gcining c dgttgt cccguu to thg chingug
mctmgt cnf ptotgction of thg czgch invgutmgntu thgtg.
It iu tgcommgnfgf thct thg czgchu tgmcin cctivg in brI, howgvgt, thgy
cnuo pctticipctg in uhcping ptiotitigu. two-wcy dgngtu uhounf dg uggn. fot
thg czgchu, thg dgngtu ctg utinn mctgincn. It iu wifgny gxpgctgf thct invgut -
mgntu winn ngcf to ngw uphgtgu, tggionu with highgt ungmpnoymgnt cnf
thct thg czgch compcnigu winn dg motg invonvgf. motg ptotgction of
mnowngfgg intgtncnny cnf on thg eu ngvgn iu ngcguuct y. ong ctgc thct utinn
nggfu imptovgmgnt iu pcuuing thg tight nggiunction thct wounf ptotgct uttc -
tggic inftcuttuctutg, which wounf dgttgt ugpctctg thg poniticcn cnf gco -
nomic intgtgutu. It wounf uudugqugntny inctgcug thg confgncg in fotgign
invgutotu in thg czgch rgpudnic. thiu mgchcnium uhounf dg conuuntgf
within thg eutopgcn union to mcmg uutg thct thgtg iu no foudt cdout thg
czgch rgpudnicu commitmgnt to thg cgtggf ptocguugu.
notes
1. fot c goof cuuguumgnt of chincu cmditionu tgcf ftcnoiu gofgmgntu
expcnfgf amditionu: shtinming achigvgmgntu: how chinc sggu thg gnodcn
otfgt, ponicy btigf, eutopgcn councin on fotgign affcitu, mctch 2017.
2. thg eu mgmdgt utctgu: bungctic, ctoctic, thg czgch rgpudnic, eutonic,
hungct y, lctvic, lithucnic, poncnf, romcnic, snovcmic cnf snovgnic.
chInas belt and road InItIatIve and the 16+1 platform

292
Non-EU member states: Albania, Bosnia and Herzegovina, Macedonia,
Montenegro and Serbia.
3. The author attended an international workshop ‘European Perspectives on
China’s New Silk Road’ at the European Economic and Social Committee
of the European Parliament in Brussels on 14–15 September 2015 where
some of these concerns were raised by the majority of speakers.
4. Czech China experts, affiliated with the Czech Institute of East Asian
Studies at the Charles university in Prague, have set up a special portal,
‘Sinopsis’, in the Czech language in response to the lack of critical assess -
ment of the Chinese investments in the Czech Republic. They translate
media reports and official statements from Chinese and other languages to
provide a more balanced view of China and the interactions with the Czech
Republic. See: https://sinopsis.cz /.
5. The author attended the meeting between the Chinese President Xi Jinping
and the Czech Speaker of the Chamber of Deputies Jan Hamác ̌ek on 29
March 2016. During this meeting President Xi mentioned the dire situation
of global economy, China’s support for the EU integration, the comple -
mentarity of the Czech Republic and China and the potential of the Czech
Republic—thank to its industr y—to play a role in Central Europe in the
context of BRI.
6. This platform was jointly founded by the former Czech President Vaclav
Havel, Japanese philanthropist Yosei Sasakawa and the Nobel Peace Prize
Laureate Elie Wiesel in 1996. The purpose is to openly debate about democ -
racy, civil society, cultural and ethnic tolerance, as well as human rights.
7. Relevant comparative research has already been done in terms of China’s
interests in investing in nuclear power and telecommunications in Scandinavia
(Denmark, United Kingdom, Nor way), Pakistan, Saudi Arabia or Ukraine
by Yang Jiang, Aki Tonami, Adam Moe Fejerskov, DIIS Report 2016,
http://pure.diis.dk/ws/files/727852/DIIS_RP_2016_8_WEB.pdf .
8. The author consulted the issue with the Czech diplomatic staff in informal
inter views in Prague in April 2017.
9. The author verified the information about the meeting with the Czech dip -
lomatic staff and consulted the views on the 16+1 platform in an informal
inter view in Prague in April 2017.
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299 © The Author(s) 2018
A. Arduino, X. Gong (eds.), Securing the Belt and Road Initiative ,
https://doi.org/10.1007/978-981-10-7116-4
Index 1
1 Note: Page numbers followed by ‘n’ refer to notes.
A
Abe, Shinzo, 107, 115, 118n9
Abu Sayyaf Group (ASG), 222–224,
230n23
AFC, see Asian Financial Crisis
Afghanistan, 41, 42, 46, 54, 189, 192,
193, 197, 200, 206, 216, 238,
242, 248, 249
AIIB, see Asian Infrastructure
Investment Bank
Al-Qaeda, 217, 221, 230n17, 248
Andaman and Nicobar Island, 203
Ankara, 219
Ansar Khilafah Philippines (AKP),
223, 224
Arabian Sea, 199, 203, 209
ASEAN, see Association of Southeast
Asian Nations
ASEAN-China Free Trade Agreement
(ACFTA), 19
Asian destiny, 103
Asian Financial Crisis (AFC)
(1997), 83
Asian Infrastructure Investment Bank
(AIIB), 8, 19, 111, 113, 114,
117, 122, 199, 200, 247, 264,
286, 289
ASEAN Plus Three (APT) Summit, 74
ASEAN Regional Forum (ARF),
74, 225
Association of Southeast Asian Nations
(ASEAN), 9, 10, 17–33, 33n3,
64, 65, 67–71, 73–75, 78, 79,
106, 111, 124, 154, 225, 226,
228, 232n37
Australia, 72, 109, 113, 116, 270
Autonomous region, 4, 216, 219
B
Baloch, Allah Nazar, 209
Balochistan, 205–209
Balochistan Liberation Front
(BLF), 209
Baloch Republican Party, 209
Bangkok, 68, 218–220

300 INDEX
Bangladesh–China–India–Myanmar
Forum for Regional Cooperation-
Economic Corridor (BCIM-EC),
122, 182, 199
Bangsamoro Islamic Freedom Fighters
(BIFF), 222, 223, 230n23
Beijing, 8, 10, 11, 40, 42, 44–49,
52–55, 56n12, 57n20, 82, 86,
87, 107–110, 116, 139, 183,
186, 189, 192, 197, 207, 210,
217–219, 227, 228, 229n11,
231n33, 242, 243, 247, 261,
263, 265–267, 271, 276, 277,
280, 281, 284, 286, 289
Beijing Consensus, 239
Belgrade Guidelines, 279, 287
Belt and Road initiative (BRI), 9,
17–21, 32, 39, 44–47, 63–79,
81–95, 104, 105, 163–177, 199,
257, 261, 275–291
Bilateral Free Trade Agreements, 72
Biodiversity and Nature Conser vation
Association (Myanmar), 138
Blackwater, 49
Boao Regional Forum, 103
BRI, see Belt and Road Initiative
Bucharest Guidelines, 279
Bugti, Brahamdagh, 209
Burma Environmental Working Group
(BEWG), 133
Burma Rivers Network (BRN), 134
C
Cambodia, 22–27, 32, 33n3, 68, 69,
113, 219, 220, 226, 229n6
Campbell, Kurt, 115, 116, 118n13
CCCC, see China Communications
Construction Company
CEEC, see Central and Eastern
European countries
Central and Eastern European
countries (CEEC), 13, 276,
279, 280
Central Asia, 5, 6, 11, 39, 42, 47, 66,
103, 104, 166, 181–194, 197,
203, 217–219, 244, 257, 260,
267–270, 276
Central Asian, 10, 11, 40, 43, 104,
181, 184–192, 194, 248, 260,
267–269
Changjiang Institute of Sur vey,
Planning, Design and Research
(CSPDR), 130, 138
Cher y Group, 85
China, 3, 18, 39–55, 63, 81, 102,
121–142, 163–177, 182, 197,
216, 235, 257, 275–291
China-ASEAN Free Trade Agreement
(CAFTA), 71
China Communications Construction
Company (CCCC), 82, 86, 87,
90–92, 94
China EXIM Bank, 129, 131, 132,
137, 138
China foreign policy, 4, 7, 240, 242,
264, 265, 271n1
China Gezhouba Group, 136
China Harbour Engineering Co, 237
China Investment Corporation
(CIC), 45
China-Malaysia Qinzhou Industrial
Park (CMQIP), 84
China National Petroleum
Corporation (CNPC), 127, 128,
139, 247
China Ocean Shipping Group
Company, 237
China Overseas Ports Holding, 202
China-Pakistan Economic Corridor
(CPEC), 6, 11, 12, 19, 21, 41, 42,
47, 182, 189, 192, 197–211, 224

301 INDEX
China Power Investment, 121–142
China, Republic of, 110
Chinese government, 7, 21, 45, 48,
66, 67, 75, 79, 94, 113, 122,
129, 131, 135–137, 139, 191,
219, 225, 227, 269
Chinese Muslim foreign fighters, 216
Chinese overseas investments, 10, 17,
19, 44
Chongqing Connectivity Initiative
(CCI), 71
Civil society, 131–134, 139–142, 148
CMQIP, see China-Malaysia Qinzhou
Industrial Park
CNPC, see China National Petroleum
Corporation
Code of conducts, 55
Coker, Christopher, 115, 118n10
Cold War, 198
Concessional loans, 129, 132, 244
Connectivity, 4, 8, 13, 39–41, 44,
46, 63, 66, 67, 75, 86, 93, 104,
105, 114, 116, 124, 182, 189,
191, 197, 258–261, 263,
266–268, 270
Contractor, 22, 48, 49, 52, 82, 87,
90, 91, 132, 163–166, 185
Conundrum, 187–190
Corporate Social Responsibilities
(CSRs), 5, 7–13, 43, 73, 112,
122, 126–131, 133, 135,
137–142, 148–159
Counter terrorism, 226, 228,
228n3, 236
Counter-terrorist cooperation, 226
Counter-terrorist unit Densus-88, 220
CPEC, see China-Pakistan Economic
Corridor
Criminal violence, 5, 9, 19
Crisis management, 13, 44, 46, 54,
140, 172, 174
Czech Republic, 13, 266, 275–291,
291n2, 292n4, 292n5
D
Dalai Lama, 284
Defence, 75, 109, 115, 210, 237, 242,
244, 245, 264
Deng Xiaoping, 40, 102, 108,
236, 241
Digital Silk Road, 270
Djibouti, 43, 204, 245
Dubai, 241
Dukovany, 287
Duterte, Rodrigo, 107, 108, 226
E
East Asia Summit (EAS), 74
East China Sea, 110, 199, 244
East Coast Rail Link (ECRL), 10, 77,
78, 82, 83, 86–95, 95n2
East Turkestan Islamic Movement
(ETIM), 217, 228, 248
Eastern Turkista, 216
Economic diplomacy, 13, 40
ECRL, see East Coast Rail Link
EEU, see Eurasian Economic Union
Egypt, 198, 241
EIA, see Environmental impact
assessment
Elite-oriented approach, 126, 132
Enforcement, 20, 24, 31, 32, 55, 105,
142, 207, 225, 227
Engineering, procurement,
construction, and commissioning
(EPCC), 87, 90
Environmental impact assessment
(EIA), 129, 130, 134, 137,
138, 140
EPCC, see Engineering, procurement,
construction, and commissioning
Erawan Buddhist Shrine, 220
Erawan Shrine bombing, 221
Ethno-religious conflict, 216
ETIM, see East Turkestan Islamic
Movement

302 INDEX
EU, see European Union
EU-China Connectivity Platform, 258,
261, 280
EU-China relations, 261, 262,
264, 279
EU-China trade, 258, 260
Eurasia, 19, 182, 193, 238, 244, 265,
267–270
Eurasian continent, 11, 216, 269
Eurasian Economic Union (EEU),
187, 188, 268
Eurasian trans-regional trade, 266
European Information Center on
Terrorism (CEI-T), 219
European Neighbourhood Policy
(ENP), 264
European Union (EU), 4, 5, 8, 12,
39, 64, 69, 72, 204, 237,
257–271, 271n1, 271n6, 277,
278, 280, 281, 285, 289–291
EU’s Foreign and Security
Policy, 264
Export-Import Bank of China, 87, 90
Extractive Industries Transparency
Initiative (EITI), 140
Extremism, 6, 12, 104, 189, 200, 208,
217, 222, 227, 228
F
FDI, see Foreign direct investment
Filipino-Sino relations, 227
Five-lateral vision, 194
Foreign direct investment (FDI), 6, 9,
45, 66, 70, 83, 84, 90, 110–112,
123, 125, 154, 163, 165, 166,
202, 281
Foreign policy, 4, 7, 18, 55, 116, 122,
240, 245, 248, 262, 265
Four i model, 156
Freedom of navigation, 69, 75, 115
Friends of the Sino-Burmese Pipeline
Association (China), 139
G
Gar ver, John, 108, 118n6
Gateway, 285
GDP, see Gross domestic product
Geo-economics, 41, 189, 200, 257–271
Geographical semiotics, 181
Geopolitical reformatting, 183
Gilgit–Baltistan, 198
Global Environmental Institute (GEI),
131, 141
Globalization, 40, 69, 149, 176,
191, 276
Global Reporting Initiative (GRI),
140, 152
Government-to-government (G2G),
46, 47, 93, 94, 134
Government-to-Government Projects
(G2G Project), 71, 72
Great game in Central Asia, 192
Green Watershed, 129, 131, 141
GRI Sustainability Reporting
Standards, 151, 152, 158
Gross domestic product (GDP), 19,
56n10, 64, 70, 76, 79n1, 88,
109, 163, 166, 268, 286
Guidelines for Overseas Investment
and Cooperation in Other
Countries and Regions
(Myanmar), 144n25
Guidelines for the EIA and SIA of
China EXIM Bank’s Loan Project
of 2008 , 138
Gwadar, 11, 41, 42, 47, 56n14,
200–205, 208–210
Gwadar Port, 11, 21, 78, 82, 200,
202–204, 208, 209
H
Han, 66, 216–218, 241
High-tech industries, 66, 77
Huawei, 278, 288
Hui, 217, 241

303 INDEX
Hungar y, 265–267, 278, 282,
285, 291n2
Hussaini, Arifullah, 210
Hydropower project, 112, 127, 128,
130, 133, 135, 136
I
Independent Power Producers
(IPP), 202
India, 4, 41–43, 56n8, 183, 188, 197,
198, 200, 201, 203, 207–210,
216, 239, 242, 270
Indian Ocean, 42, 43, 63, 77, 154,
198, 208, 244, 245
Indonesia, 19, 22, 27, 30, 32, 47, 63,
68, 69, 110–113, 198, 215,
220–223, 226, 229n4, 270
Indonesian, 203, 216, 220–222, 224
Indonesia’s National Counterterrorism
Agency (BNPT), 226
Infrastructure, 4–7, 11–13, 18, 19,
21, 41, 43, 45–47, 50, 53, 54,
64–69, 73, 74, 78, 81, 82, 87,
91, 93, 94, 105, 111, 113, 124,
138, 150, 152, 155, 158, 163,
165, 172, 183, 184, 187, 190,
193, 199, 201, 202, 204, 224,
225, 237–240, 242, 244, 247,
257–271, 276, 278, 280, 285,
286, 289, 291
Investment, 5–13, 18–21, 39–41,
44–47, 52, 54, 65, 67, 68, 70,
71, 73, 77–79, 81, 84, 89, 90,
94, 103, 105, 110–114, 117,
122–133, 135–139, 141, 142,
155, 163, 166, 167, 170, 171,
173, 174, 176, 183, 186–189,
192, 201–203, 207, 224, 225,
235–249, 261–265, 269, 270,
277–282, 284–286, 289–291
Iran, 41, 42, 183, 184, 190, 203, 207,
236, 237, 245–247
Iraq, 49, 54, 190, 203, 215, 219,
222, 238
Irrawaddy river, 130, 135
ISIS, 208, 224, 225
Islamic States (IS), 6, 42, 166, 215,
217, 221–224, 241, 246, 248
Islamist extremist, 220
Island of Bantam, 220
ISO 26000, 151, 158
Israel, 227, 237, 240, 242, 246, 248
J
Jabhat Fatah al-Sham, 221, 229n17
Jamaat-ul-Ahrar (JuA), 208
Japan, 4, 18, 84, 109–111, 123, 167,
203, 239, 290
Jihadi group, 221
Jihadist, 12, 215, 216, 223, 224, 241,
248, 249
Jundallah, 208
K
Kachin Development Networking
Group (KDNG), 133
Kachin Independence Organisation
(KIO), 130, 135
Kachin State, 130, 133, 140–142
Karimov, Islam (President), 184,
185, 192
Kashmiri, 21, 198, 208
Khan, Imran, 206
Khatibah Nusuntara, 221
Khilafah Islamiyah
Mindanao (KIM), 223
Kidnapping for ransom (K&R),
45, 57n22
Kim Il Sung, 108

304 INDEX
Kuala Lumpur, 68, 82, 86, 95n2, 108,
218, 219
Kuantan Port, 68, 77, 86, 87, 92
Kyaukpyu Special Economic
Zone, 127
L
Lashkar-e-Jhangvi Al-Alimi, 208
Letpadaung Copper Mine, 123,
127, 128
Libya, 20, 166, 238, 241
License to operate, 139, 149
Li Keqiang, 19, 201
Liow Tiong Lai, 93
M
Made in China 2025, 77
Mahan, Alfred Thayar, 204,
212n15
Malacca, 40, 64, 68, 78, 81–95, 203,
204, 244
Malacca Dilemma, 10, 81–95, 203
Malacca Strait Dilemma, 203
Malaysia, 10, 22, 23, 25, 28, 30–32,
68, 69, 77, 81–95, 107–110,
113, 114, 198, 218, 270
Malaysia-China Kuantan Industrial
Park (MCKIP), 84, 85
Mao Zedong, 108, 242
Maritime Silk Road (MSR), 5, 9–11,
39, 63–66, 101–117, 154, 181,
199–201
Market access, 150, 237, 239,
264, 286
Market rules, 261, 263
Marshall Plan, 198
Ma Ying-jeou, 108, 111
MCKIP, see Malaysia-China Kuantan
Industrial Park
MEP, see Ministr y of Environmental
Protection
Middle East, 12, 22, 39, 78, 166, 167,
169, 184, 202–204, 215, 216,
219, 221, 222, 224, 225, 228n1,
235–247, 249, 257
Middle income trap, 83, 86, 89
Militants, 6, 42, 208, 215, 238, 246
Mindanao, 222–224
Ministr y of Commerce, People’s
Republic of China (MOFCOM),
129, 131, 144n25
Ministr y of Defense (MOD), 51
Ministr y of Environmental Protection
(MEP), 129, 131, 138
Ministr y of Foreign Affairs (MFA), 43,
44, 48, 50, 51, 277, 279
Misconduct, 23, 33n6
Mitigation of the risk, 50, 148
Moderately prosperous society, 67, 78
Modi, Narendra, 43, 208, 212n21
MOFCOM, see Ministr y of Commerce,
People’s Republic of China
Mohamad, Mahathir, 89
Mujahidin Indonesia Timur (MIT),
221–223
Multilateral cooperation, 55, 66, 262
Multilateral Free Trade Agreements, 72
Muslim militants, 223
Myanmar, 10, 19, 23, 25, 26, 31,
33n3, 68, 69, 78, 113, 121–142,
203, 245
Myitsone Dam, 68, 122, 123, 127,
128, 132–142
N
National Development and Reform
Commission (NDRC), 47, 52,
104, 113, 257, 277
National interests, 75, 187, 188,
238, 240
National Logistics Cell (NLC), 206
Naval, 102, 204, 207–210, 241,
244, 245

305 INDEX
Navel modernization, 204, 244
Neon-institutionalism, 150
Neo String of Pearls, 199
Newly industrializing economies (NIEs)
New normal, 46, 56n10
New Silk Economic Road, 199
New Silk Road, 8, 10, 44, 46, 54,
103, 104, 182, 183, 185, 193,
194, 292n3
New Zealand, 72, 109
NIEs, see Newly industrializing
economies
Nine-Dash Line, 107, 110
Non-compliance, 10, 128–130, 142
Non-governmental organization
(NGO), 131, 132, 134, 137,
141, 142, 148, 154, 219
North Africa, 166, 235, 236,
238–242, 245, 249
North American Free Trade
Agreement (NAFTA), 69
Nuclear energy, 287
O
Obama, Barack, 106, 192, 244, 276
OBOR, see One Belt One Road
One Belt One Road (OBOR), 6,
10, 39, 104, 181–194, 197,
199–201, 236–238, 245, 247,
262, 267, 269, 271n1
Outbound foreign direct
investments, 9, 281
P
Pakistan, 6, 11, 21, 41, 42, 47, 78,
81, 82, 188, 189, 197–202,
205–211, 216, 224, 227, 237,
238, 245, 267, 268, 292n7
Panama Canal, 182, 260
Paramilitar y asset, 219
People’s Armed Police (PAP), 49
People’s Liberation Army (PLA), 40,
49–51, 102, 216
People’s Liberation Army Navy
(PLAN), 102, 117n3
People’s Republic of China (PRC),
101–117, 185, 216, 219, 226,
228, 284
Petrochina, 112
Philippines, 19, 20, 22, 24, 27–32,
33n3, 68, 69, 107, 109, 113,
222–224, 226, 227, 231n26
Poland, 193, 266, 280, 282, 285,
286, 291n2
Political conflict, 132, 137
Political refugees, 215, 222
Political violence, 40, 43, 166, 169
Port Klang, 86, 87, 92, 93
Porter, 152
Prague, 284, 289, 290, 292n4, 292n9
Prince, Eric, 49
Principle of non-interference, 20,
40, 248
Private maritime ser vices, 18
Private militar y security companies
(PMSC), 52
Private security (industr y, ser vices,
officers, managements), 9, 17, 18,
20–24, 26–32, 33n1, 33n2,
33n5, 54
Private Security Companies/
Corporations (PSC), 20–30,
32, 39–55
Provisional Measures for Public
Participation, 129
Proxyism, 198
Proxy war, 41, 47
Public procurement, 92, 263, 264
R
Razak, Najib, 82, 83, 86, 87, 89
Regional Free Trade Agreements,
71, 269

306 INDEX
Regional integration, 12, 20, 187,
262, 269, 270
Regulation, 5, 17–33, 55, 112, 113,
128, 129, 131, 139, 142, 148,
156, 164, 167, 173, 188, 248,
267, 270, 279
Regulator y (authority, framework), 9,
18, 23–32, 73
Research and Analysis Wing
(RAW), 207
Resource extractive projects, 126, 141
Riga Declaration, 280
Riga Guidelines, 280
Rigi, Abdul Rauf, 208
Risk, 5–7, 9–11, 13, 17, 18, 31, 40,
43–48, 50, 52, 54, 64, 65, 83,
84, 86, 94, 95, 111, 132, 134,
137, 147–159, 163–177, 188,
189, 198, 204–210, 224, 225,
227, 236, 287–290
Risk analysis, 47, 54
Ross, Robert S, 101, 102, 117n1
Rules of Land Compensation and
People Resettlement in Medium
and Large Hydraulic and
Hydroelectricity Projects, 129
S
Sanctuar y, 215
Saudi Arabia, 41, 164, 203, 240, 241,
245, 246, 292n7
Security, 5, 17, 40, 67, 102, 122, 166,
182, 198, 216, 236, 262, 276
Security threat, 6, 40, 44, 47, 52, 189,
192, 238, 288
Selangor, 86, 93
Self-branding, 181
Separatism, 47, 217
Shanghai, 57n25, 186, 237, 238,
284, 289
Shanghai Cooperation Organization
(SCO), 185, 186, 199, 218
Sharif, Raheel, 209
Shuttle trade, 186
SIA, see Social Impact Assessment
Silk Road, 8, 10, 11, 63, 104, 105,
117n4, 181–183, 185, 186,
191, 194, 239, 247, 267, 270,
278, 281
Silk Road Economic Belt (SREB), 5,
18, 39, 63, 66, 104, 154, 181,
185–187, 191, 193, 200, 269
Sindhudesh Revolutionar y Army
(SRA), 42
Sindhu desh Revolutionar y Party, 208
Singapore, 9, 10, 22, 24, 27, 29–32,
33n3, 63–79, 82–84, 87, 92,
108, 110, 111, 113, 114, 123,
124, 134, 220, 227
Sinohydro Corporation, 136
Sino-Myanmar pipeline project, 127
Sinosure, 132, 143n7, 166, 173, 174
16+1 initiative, 278–283
16+1, platform, 13, 275–291, 292n9
Slovakia, 271n6, 281, 282,
286, 291n2
Small, Andrew, 207, 212n20,
254n63
Social impact assessment (SIA), 8,
129, 134, 137, 138
Socialist market, 55
SOEs, see State Owned Enterprises
South China Sea, 5, 8, 9, 40, 63–65,
69, 75, 78, 79, 82, 94, 102, 107,
108, 112, 114, 167, 199, 203,
226, 236, 267, 269, 281
Southeast Asia, 3, 7, 9, 12, 20, 32,
39, 64, 66–69, 74, 75, 82,
101–117, 154, 183, 186,
215–228, 242, 276
Southern Philippines, 19, 20, 215,
216, 222, 223
Southern Thailand, 219
South Sudan, 20, 242, 247
SREB, see Silk Road Economic Belt

307 INDEX
State-owned Assets Super vision and
Administration Commission of
the State Council (SASAC),
52, 135
State Owned Enterprises (SOEs), 5,
8–10, 20, 22, 44–46, 48–52,
54, 55, 66, 69, 87, 90, 91, 131,
132, 135, 136, 155, 159, 173,
202, 240
STEP framework, 148
Strait of Malacca, 10, 40, 64, 82, 87,
92, 93, 199, 203
Strategic partnership, 269, 279, 283
Sudan, 241, 242, 247
Suez Canal, 184, 237, 245, 260
Suzhou, 280, 284
Suzhou Industrial Park (SIP), 71, 111
Syria, 166, 215, 219, 221, 222,
228n1, 230n17, 242, 245–247
T
Taiwan, 83, 108–111, 244, 284, 290
Taiwan Relations Act, 109
Technical
connectivity, 105, 261, 262
development, 86, 89
geopolitical, 190
implications, 190
Northern Distribution Network
(NDN), 192
Obama, Barak, 192
strategic, 193
transit, 190
See also Transport projects
Tehreek-i-Taliban Pakistan
(TTP), 208
Terrorism, 6, 12, 42, 132, 166, 170,
174, 175, 189, 198–200, 207,
208, 215, 217, 218, 221,
225–227, 228n3, 238
Terrorist attack, 6, 52, 209, 224,
225, 227
Thailand, 11, 19, 22, 26, 29, 31,
33n3, 33n7, 68, 69, 112,
113, 124, 131, 148–159,
218–220, 229n4
Thein Sein, 123, 130, 133
Three evils, 217
Tianjin, 111
Tianjin Eco-city (TEC), 71
TPP, see Trans Pacific Partnershi
Trade and investment a
greements, 262
Training, 17, 22, 23, 25, 26, 28–30,
32, 50, 51, 53, 89, 140, 208,
223, 224, 226, 244
Trans-atlantic route, 260
Trans-European Transport Network
(TEN-T), 258, 261, 262, 280
Transnational jihadist extremism,
12, 215
Trans Pacific Partnership (TPP), 4, 69,
71, 106, 114, 276
Trans-Pacific route, 260
Transport
hub, 184
projects, 57n19, 184, 186, 190,
202, 244, 263
Transport infrastructure, 238,
257–271
Transportization
first, 182
second, 182
third, 182
Transshipment hub, 12, 215
Treaty of San Francisco, 110
Trump, Donald J., 4, 43, 54, 64, 69,
106, 116, 117, 228, 236, 239,
244, 276
Tsai Ing-wen, 108
Turkey, 63, 198, 215, 216, 218, 219
Turkic nationalism, 217
Turkistan Islamic Party (TIP),
224, 228n1
Twelve Measures, 279

308 INDEX
21st Centur y Maritime Road, 18
21st Centur y Maritime Silk Road, 19,
20, 39, 63, 66, 104, 154, 181,
199, 200
U
Uighur, 12, 238, 241, 243, 246,
248, 249
Uighur militant, 246
Umbrella group, 222
United Nation Global Compact
(UNGC), 140
United States (US), 4, 5, 10, 12, 43,
45, 48, 49, 54, 64, 69, 71, 75, 77,
101–117, 165, 167, 176, 192,
198, 226–228, 230n17, 235–241,
243–246, 248, 249, 258, 260, 276
UN Peacekeeping, 20
Urumqi, 186, 216, 217, 249
Uyghur, 12, 215–228
Uyghur Muslims, 216, 217, 219
Uyghur terrorist, 224, 225, 227
Uzbekistan-China
cooperation, 185
V
Vietnam, 23, 26, 30–32, 33n3, 47,
68, 69, 94, 107, 112–114, 226,
229n6, 270
W
Washington Consensus, 239
Wen Jiabao, 278
West Java, 220
White, Hugh, 22, 115, 118n12
Win-win cooperation, 5, 43
Workers, 8, 13, 19–21, 27, 32, 41–44,
47, 50, 53, 128, 133, 135, 166,
206, 209, 241, 288
X
Xi Jinping (President), 3, 13, 18, 39,
40, 50, 63, 67, 78, 81, 103, 111,
122, 132, 181, 185, 187, 199,
201, 236, 238, 257, 276, 283,
292n5
Xinjiang, 11, 12, 81, 82, 201, 209,
216–218, 223, 238, 246, 248
Xinjiang Uyghur Autonomous Region
(XUAR), 4, 6, 215–220, 222,
226, 228
Y
Yadav, Kulbhushan, 207
Z
Zeman, Miloš (President), 283,
286, 289

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