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Green Trends: OBOR and Environmental Implications ; By Preethi Amaresh

, dated May 16, 2017

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C3S Article no: 0046/2017

“OBOR is a 21st century big idea – probably the biggest idea floated in the last 10 years and it is being implemented in a Chinese manner. You cross the river by feeling the stones”.

– Jean-Guy Carrier

The One Belt One Road (OBOR) is a Sinocentric vision that harks back to the ancient Silk Roads but this time on Beijing’s terms. The 1979 reform that Deng Xiaoping launched is the world’s most radical economic reform program that saw the re-awakening of the dragon as a global power. As Jean- Pierre (Emeritus Professor of International Political Economy Founder of the Evian Group) stated, “The Middle Kingdom is now back”.

This project is a major geopolitical and geo-economic initiative of China with respect to connectivity, economic planning, market development, market dominance and geopolitical assertion which stretches from East Asia to Africa, Europe and West Asia. There is a saying in International Diplomacy: “ Watch what countries do, rather than what they say”. [i] One reason behind OBOR is said to be Asian pivot of the United States besides its own internal imperatives. China’s approach to dealing with its growing global environmental impact is double-sided. China for two decades has promoted an increasingly expansionist “Going-out” policy among its state-owned enterprises that includes strong financial and political support for construction and telecoms companies to penetrate Asian and African markets. This which aims to take forward the country’s influence and trade links with almost 60 countries could be a major source of environmental damage unless projects are backed by green banking. How has it impacted the environment?.

China government announced the Chinese Environmental Protection Act and new logging bans in China’s natural forests in its northeastern provinces. It has accumulated enough institutional capacity to open up the next chapter in its development, following a path previously travelled by Western countries undertaking ecological modernisation a few decades earlier. Chinese announcement of a new developmental phase in its domestic policies known as “Ecological Civilisation,” one of five interconnected pillars for the development may appear to be disingenuous. The changes in China’s domestic policy priorities toward a greener economy do not necessarily imply that they will affect its new infrastructure development projects taking place outside of Chinese borders. For many multinationals, China has remained a low cost pollution heaven, attractive for its lower costs of labor and lower environmental standards. [ii]

Some of the high pollution wastes are the cement and steel industries, chemicals, and materials and metals production. Economic shift and globalisation from Western countries towards the East are primarily driven by international trade. International observers have alleged Chinese banks that their lack of environmental standards has created unfair competition. Many countries have hope that China will help them develop economically. But there are also other concerns ending up like paying a huge environmental price for economic development. Some findings suggest that the greening of China’s own economy does not currently seem to have any impact on China’s planning of the Silk Road Economic Belt. The fears of a U.S.-China trade war have also increased the pressure on officials to approve OBOR projects and move them forward expeditiously. China has faced allegations from Indonesia over-budget coal power plant and a failed high-speed rail project and also from Myanmar regarding Chinese firms clear-cutting forests. Laos, Vietnam, and Cambodia have also complained regarding environmental damage and droughts from Chinese hydropower projects along the Mekong River.[iii]

The world also knows how China is prone to air and water pollution and there is a negative impression created by some problems that China has faced with previous overseas investments. For instance, Myanmar government halted the Myitsone hydropower project on the Irawadddy in 2011 because the Kachin people of Myanmar were concerned that the dam would affect the environment. The “One Belt, One Road” development strategy predicts a giant web of infrastructure crisscrossing more than 60 countries, weaving them more tightly together which will affect China’s global reputation for decades. If China wants to maintain its international standing, its banks need to get greener.

According to Chatham House, China can limit major damage to the environment outside its borders by demanding better governance from countries included in ‘One Belt, One Road’.[iv]

Promotion of green development in the region requires effective environmental control and treatment measures along with financing at an early stage that favours greener projects.

In the last two decades China’s position began to change with the adoption of new laws, investments in cleaner technologies and the signing of multilateral and bilateral treaties on biodiversity protection and climate change. Green financing can direct funds to greener sectors rather than to companies or projects which are polluting or consume too much energy and resources. It also makes recommendations for policymakers looking to understand the country’s more active role in the energy, metals and minerals sectors. A report on Navigating the New Normal: China and Global Resource Governance by Chatham House recommends China to take an active role in creating new high-level fora for dialogue. The report also considers China to join the Extractive Industries Transparency Initiative (EITI) to adopt enhanced environmental monitoring and reporting, including along the new Silk Road routes. China was already aware of the role financial bodies would play in economic development and environmental governance. “Green finance” agenda took place for the first time at the G20 summit in Hangzhou on 4-5 September and the G20 leaders supported it.

2015 reports of WWF China and the China-ASEAN Environmental Cooperation Centre states that China lacks clear environmental rules and supervision for its firms working overseas.

Since 2015, China has invested US$161 billion in 64 countries and territories included in OBOR accounting for 20% of China’s overseas investments which is likely to rise sharply.

In the past China has greatly expanded its overseas engagement by supporting new financial institutions, such as the Asian Infrastructure Investment Bank (AIIB), which challenge the Bretton Woods System and by announcing big trade, investment and resources extraction initiatives under the OBOR strategy. According to reports from two of the UK and China’s most influential think-tanks which looks at China’s growing role in global governance, China’s slowdown has had a big impact on commodity markets.

Heritage conservation is also fast emerging as an important component of the intra-regional economic and political ties that are binding states and populations in the region. Against this backdrop, the recent Chinese announcement of a new developmental phase in its domestic policies, referred to as “An ecological civilization,” one of five interconnected pillars for the development of a “new beautiful China,” may appear to be disingenuous. The government claims that China is ready to leap forward through “a green shift,” transforming or phasing out polluting industries, reducing emission levels per GDP and restoring degraded ecosystems.

Initiatives like the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank have been created to finance sustainable infrastructure in developing countries. The challenges China faces is United States and Japan remain non-committal to the AIIB. However it remains to be seen whether AIIB will function effectively without the participation of Washington D.C and Tokyo. Some of the projects AIIB has taken on so far which were approved by the Board bear the green label like an electricity distribution system upgrade and expansion project in Bangladesh which will reduce systemic loss and improve the quality and reliability of power supply, a national motorway project in Pakistan which will provide cost-effective transportation in support of economic and social development, a slum upgrading project in Indonesia which will improve access to urban transport and solid waste management services and a road improvement project in Uzbekistan which will improve mobility and connectivity with Tajikistan. [v]

China’s 13th Five Year Plan also promotes a cleaner and greener economy with strong commitments to environmental management and protection, clean energy and emissions controls, ecological protection and security, and the development of green industries. [vi]

With respect to the environmental concerns, NGOs can do preliminary research and when issues are identified they can gather stakeholders together and act as coordinators. NGOs can help bridge a gap between private sector and the government when conflicts arise. China’s global commitments on climate change have completed a U-turn in the past decade, from being a passive observer at the United Nations Framework Convention on Climate Change negotiations, with no binding greenhouse gas (GHG) reduction targets. The internationalization of Chinese NGOs should be an important adjunct to China’s One Belt, One Road initiative, a trade and infrastructure program inspired by ancient Silk Road trading routes. [vii]The Economic Defence Fund (EDF) by the U.S has established a strong strategic partnership with the China Association for NGO Cooperation.[viii] It helps to mobilize funding, build capacity, and provide back-office services to promote effective project management.

To conclude, OBOR offers great prospects for economic progress and should be an instrument for environmental progress so that it becomes a green belt and road. Trade and investment are certainly the instruments for the progress. These powerful engines of change will pave way for environmental progress.

References:

[i] Sam Geall, 2016. China can curb environmental impact of new silk roads,

(https://www.chinadialogue.net/blog/8642-China-can-curb-environmental-impact-of-New-Silk-Roads-report/en ).

[ii] Elena Tracy, 2017. China’s new Eurasian ambitions: the environmental risks of the

       Silk Road Economic Belt, (http://www.tandfonline.com/doi/full/

      10.1080/15387216.2017.1295876).

[iii] .   Eisenman and Stewart, 2017. China’s new silk road is getting muddy,

(http:// foreignpolicy.com/2017/01/09/chinas-new-silk-road-is-getting-muddy/).

[iv]   Zhu, 2016. New Asian Infrastructure Investment Bank Starts Building a Green 

      Future, (http://www.wri.org/blog/2016/07/new-asian-  infrastructure-investment-bank-starts-building-green-future).

[v]  Ibid

[vi]  .   2016. China’s 13th Five Year Plan: Environment, King and wood Mallesons (http://

      www.kwm.com/en/hk/knowledge/insights/china-13th-5-year-plan-environment-

      sustainability-initiatives-20160414).

[vii]   Fred Krup, 2015. How to keep Belt and Road green, Chinadaily (http://

      europe.chinadaily.com.cn/epaper/2015-05/08/content_20654025.htm).

[viii]  .    Zhiqun Zhu, 2015. China’s aiib and obor ambitions and challenges, (http://thediplomat.com/2015/10/chinas-aiib-and-obor-ambitions-and-challenges/

(Preethi Amaresh is a Research Officer at C3S. She can be contacted at preethiamaresh@gmail.com. The views expressed are the author’s own.)

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