Speaker: Laurence Brahm, Founder, Chair, Himalayan Consensus Institute
Moderator: Sujeev Shakya, Chairperson, Nepal Economic Forum
Nepal Economic Forum (NEF), as a part of its regular #neftalk, had Laurence Brahm speak on China’s Belt and Road Initiative (BRI). Laurence Brahm is the Founder, Chair of Himalayan Consensus Institute. The Himalayan Consensus Institute is a non-profitable organization that serves to coordinate a network of organizations exchanging developmental experiences and promoting Himalayan Consensus principles of sustainable development. It has been collaborating with NEF for organizing the annual Himalayan Consensus Summit in Kathmandu since 2016.
While introducing the topic, Sujeev Shakya explained that this initiative of China dwarfs the Marshall Plan and cannot be ignored. Given the emerging geopolitical trends with new Quad block and Indo-Pacific initiatives being revived by Australia, Japan, India and United States, there is a new world order emerging. Therefore, Nepal should take advantage of the synergy that China’s BRI and India’s Act East policy presents rather than pursuing equidistance policy between China and India.
From the Speaker:
The Belt and Road Initiative (BRI) is motivated by the ‘China experience’; the experience of being one of the major economies within a span of 25 years. Looking at the historical growth of China’s economy, Zhu Rongji, the-then Mayor of Shanghai, was mulling over how to transform China’s state-owned enterprises to multinational corporations. There were two major challenges: basic infrastructure and interior of China. Availability of basic infrastructure is an important factor to lure foreign investment. Another problem, akin to Nepal, is the interior of China. Due to its size, many of the interior provinces are facing the same complex problems that Nepal is facing today. Infrastructure is the core. Today, fixed asset infrastructure investment is one of the key driving forces behind China’s economic development in parallel with the market forces investment coming in and commerce. This is the China experience; the experience behind the BRI. However, the concept faces a major problem, it is ‘lost in translation’. There is a collective unconsciousness that the Chinese language is encrypted and does not make concepts easily translatable as they exist within a much broader context.
After 20 years of super-hyper growth rates, China is facing issues like health security, water security, food security which are already the biggest causes of social instability over the past 10 years. This cost of growth has led China to devise policies around ecological civilization which was adopted as an official policy on 25 April 2015. As opposed to the view that the environment is holding back the economy, which is the traditional view that was held by China and is held by other major institutions in Western countries today, actually, the environment is an opportunity for growth because it is the new investment megatrend. Ecological civilization as a policy is a part of the BRI.
Another major challenge of the BRI is culture and cultural connectivity. China is having a big resuscitation of traditional values and a revival in the culture. But what is required is a call for more cultural dialogues, not only in China but in all countries in Asia. Because there is an understanding that Silk Road was not only about tea and silk but also an incredible exchange of ideas. It was a constant fusion of ideas, architecture and culture back and forth that needs to come back.
Addressing the audience’s concern over the impulse that is driving BRI in relation to LDCs, Laurence responded that sinceChina is a very saturated, sophisticated and well developed market, the Chinese companies have to go out of China to invest. This is part of the motivation of the BRI, the interest of the Chinese as an opportunity to expand outwards. The infrastructure is about business, not about aid. China is no longer the factory of the world; it is the investor of the world and will soon be the Central Bank of the world that creates financial architectures.
In response to one of the audience’s query of Renminbi (RMB) being the second currency behind the USD, he answered that the Chinese are very careful about the speculations and very cautious having gone through the Asian financial crisis and having washed out by the 2008 financial crisis. This is the reason for developing the financial institutions like Asian Infrastructure Investment Bank (AIIB) and the new development bank or the BRICS Bank. China had also tried to have more influence on the IMF and the World Bank purchasing more SDRs but it was not able to gain policy influence. That is the main motivation behind setting up the AIIB, the BRICS development bank, the Silk Road Investment Fund. At the same time, China is developing swap centres and establishing RMB direct trading agreements such that trading through the USD will not be essential. The eventual globalization of the RMB and the question of what would be the second reserve currency after the USD, is the future question that is not yet answered but is now being discussed.
Laurence acknowledged the audiences’ view that Nepal and China’s relationship cannot be kept in isolation given India’s scepticism towards BRI, and proposed that Nepal has to find ways for both the countries to work together in Nepal and for the benefit of Nepal. Nepal is in a difficult place between India and China. Nepal is landlocked and its access to sea is through India. Hence, Nepal has to find ways for both the countries to work together in Nepal and for the benefit of Nepal. The politics will keep changing and those in the power need to get the infrastructure moving to a trajectory, sustainable enough to keep economy growing. China can solve large part of the infrastructure problem. India can solve it as well. Hence, the two countries should work together as there are many things they can do in symbiosis. The vision here is about macro-coordination, consultation and consensus; it is not unilateral but a consensual process. That is where Nepal would want to internally come clear on what is needed.
Sujeev Shakya summed up the talk in a positive note that if there is competition between China and India on who is going to invest more in Nepal, it is Nepal that is ultimately going to benefit.