It has been nine years since the One Road One Belt (OROB), or New Silk Road project was announced by the Chinese government. Meanwhile, more than 100 projects have been kicked off and are
visible results of the Chinese geopolitical advance, be they in central Asia, Africa, or southeast Asia.
And the Europeans? They have preferred to stay on the sidelines and remain rather aloof when it comes to commitments. All, that is, except for Hungary or Greece, which have actively supported some of Beijing’s initiatives. However, now Brussels’ political class has apparently woken up from its paralysis by launching the “Global Gateway” project as an alternative to China’s OROB.
300 billion euros will be made available for this purpose within the next 5 years, Brussels announced last week. The money is to be used to develop and strengthen infrastructure in Eastern Europe, Central Asia, and, above all, Africa. Priority projects are currently being identified; some of which are due to start as early as February.
Enormous cash requirements
The most important target area for the Global Gateway project is the vast sub-Saharan region stretching from landlocked Chad to South Africa. However, the financial requirements there are enormous. The World Bank estimates that this part of the continent will need up to USD 170 billion in annual investments over 10 years to meet its infrastructure requirements.
In view of this massive demand, the EU will proceed very prudently and selectively, focusing on key areas such as climate & energy, transportation, health, and education & research. Investing in both mitigation and climate resilience, as well as in clean energy, is a necessity to stop global warming, but also a major economic factor in creating new jobs, enabling local people to generate a regular income, Brussels states.
Close monitoring of investments
To support the intended green transformation, technological exchange will be promoted and financially secured, the EU assures. Simultaneously, the 27-member block intends to invest massively in African infrastructure to foster sustainable, smart, resilient, and safe networks in all modes of transport. The measures are to be paid for by deposits managed by the Sustainable Development Fund (135 billion euros), European financial institutions (145 billion euros), with the remainder being contributed by other EU programs and by European private companies expecting the project to improve their market access through their commitments.
In order to prevent misuse of funds or corruption, which is widespread in Africa, independent control bodies are to monitor the cash flow. This includes continuous reporting on the allocation of resources and the progress of projects. Accountability and transparency will be the key factors for success or failure of the Global Gateway initiative.
OROB and its debt trap risks
The EU approach differs significantly from China's OROB policy. China offers its support to any African state, whether democratically ruled, dictatorially governed, or dominated by the military. Africa is an example where China has expanded its influence in leaps and bounds in recent years under the OROB advance, focusing on the transport sector, trade, and infrastructure. Thus, in Kenya, Angola, Tanzania, Nigeria, or Ethiopia, the Chinese have built important railroad lines and thousands of kilometers of roads. In Angola, a new city called Nova Cidade de Kilamba is being built with their help, based on the pattern of uniform Chinese apartment blocks. The price tag attached to the new Cidade: around 3.3 billion euros. The Angolan government committed to repaying the loans with oil exports.
Those who fail to repay the instalments despite contractual obligations by way of funds or exports of raw materials, risk being caught in a debt trap. In 2017, Sri Lanka handed over the EXIM Bank of China funded Hambantota port to Chinese state-owned companies on a 99-year lease, after defaulting on an infrastructure loan. Pakistan was forced to sign a 40-year lease arrangement over Gwadar port, allowing the Chinese to retain 90% of its revenues.
Cart blanche for political influence
Most Chinese loan agreements contain secret clauses that prohibit indebted governments from rescheduling the loans they receive in coordination with other creditors. These contractual obligations open the door to political interference. Anna Gelpern, Professor of Law at Georgetown University, comes to this conclusion: “Cancellation, acceleration, and stabilization clauses in Chinese contracts potentially allow the lenders to influence debtors' domestic and foreign policies,” she states in a 2021 published research paper on Chinese OROB policy.
Meanwhile, a growing number of critics in Africa speak of a neo-colonial policy exercised by Beijing and urge their governments not to sign further credit financed OROB projects. Uganda’s auditor general warned of the state’s ballooning debt and the risk that conditions placed on its loans were a threat to its sovereign assets. Over in Kenya, the parliament opened an investigation into the circumstances under which the strategic Indian Ocean port of Mombasa was used as a collateral for the loan the government secured from China’s EXIM Bank to build the Mombasa-Nairobi railroad.
So far, there are no official reactions from African governments to the EU project Global Gateway.
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