Commentary: Shady practices and soiled hands – can corruption along the Belt and Road be stemmed?

SINGAPORE: Unless you have been living under a rock, you would have heard about the Belt and Road Initiative (BRI), also known as One Belt, One Road (OBOR) or yi dai yi lu in Mandarin.

Spearheaded by China, the BRI aims to bolster connectivity and cooperation between Asia, Europe and Africa through infrastructure building, trade and investment along the overland Silk Road Economic Belt and the new Maritime Silk Road. To date, more than 120 countries have jumped on the BRI bandwagon, according to Beijing.

As a signature foreign policy programme of Chinese President Xi Jinping, the BRI is a brilliant strategy that kills many birds with one stone.

Not only does the mega scheme boost the domestic and international stature of the most powerful Chinese leader after Mao Zedong, it also delivers a much-needed stimulus to China’s slowing economy, and serves as a platform for the rising power to realise its global ambitions.

READ: Italy takes bite of China apple with entry into Belt and Road Initiative, a commentary

The Belt and Road Initiative was launched by Chinese President Xi Jinping in 2013 The Belt and Road Initiative was launched by Chinese President Xi Jinping in 2013 (Photo: AFP/SERGEI CHIRIKOV)

Integral to Xi’s “Chinese Dream” of China’s rejuvenation, the BRI feeds into the growing national pride of its people, and will ultimately strengthen the legitimacy of the Chinese Communist Party (CCP) if it is successful.

However, a plan on such a grand scale and with such lofty goals could easily go awry, as evident from the backlash over fears of the debt-trap and overdependence on China.

Such misgivings have arisen after Sri Lanka ceded some control of the Hambantota Port to Chinese companies because it was unable to repay the loans.

And there are also legitimate concerns over how the BRI may turn out to be a “corruption bonanza” or a magnet for corruption, given the endemic Chinese practice of greasing the palms of business partners on the pretext of cultivating good relations or guanxi.

GREASING THE WHEELS ALONG THE BELT AND ROAD

A case in point is former Hong Kong official Patrick Ho, who was recently sentenced to a three-year jail term for bribing African leaders to secure oil rights for Chinese oil company CEFC China Energy.

Ho earlier tried to defend his act by tying it to the BRI, claiming that the US$2.9 million was supposed to be “charitable donations” meant to “promote general, long-term goodwill for the Chinese state and Chinese companies, including CEFC China Energy, rather than to secure specific and immediate contracts or business advantages”.

Patrick Ho Chi Ping Patrick Ho is consoled by his attorney Benjamin Rosenberg during his sentencing in a bribery trial by US District Judge Loretta Preska in New York. (Photo: REUTERS/Jane Rosenberg)

Another infamous instance is that of former Malaysia Prime Minister Najib Razak.

China allegedly offered bailouts for Najib, who was mired in the 1MDB fund scandal, in exchange for stakes in BRI infrastructure projects in 2016.

READ: How the 1MDB scandal brought down a century-old Swiss bank, a commentary

In Kyrgyzstan, a former prime minister and a mayor were arrested in 2018 for corruption charges to do with a Chinese BRI financial aid package meant for modernising a thermal power plant in the capital.

In Sri Lanka, large sums of money from the Chinese construction fund for the Hambantota Port were allegedly funnelled to the election campaign of former President Rajapaksa, who lost the election anyway.

WikiLeaks cables from the US Embassy in Sri Lanka opined that: 

It is likely that corruption and political patronage are significant factors playing into the focus on Hambantota. Often when Chinese companies win contracts, their success is due in part on their widespread distribution of graft to senior Sri Lankan government officials.

READ: Sri Lanka’s debt problem wasn’t made in China, a commentary

According to a Transparency International study of 100 companies in 15 emerging markets, Chinese multinational companies are some of the least transparent in the list.

Among 43 companies that score zero at the bottom of the scale, 26 are Chinese firms.

FILE PHOTO: Workers inspect railway tracks, which serve as a part of the Belt and Road freight rail Workers inspect railway tracks, which serve as a part of the Belt and Road freight rail route linking Chongqing to Duisburg, at the Dazhou railway station in Sichuan province, China. (Photo: REUTERS)

IT TAKES TWO HANDS TO CLAP

While shady Chinese business practices may have contributed to corruption in the recipient countries of BRI investments and loans, the latter have to take their fair share of the blame too.

Based on a 2018 TRACE matrix that measures business bribery risk on a scale of 1 to 100 where higher values represent greater risks, many countries involved in the BRI suffer from a significant level of corruption. 

Out of 126 BRI participating countries, 63 (excluding China) have total scores that are higher than the median of 53.

This means 50 per cent of the BRI participating countries fall into the bottom half of the 200 sampled countries where bribery risks are higher.

Fifteen BRI countries scoring 70 and above – including Bangladesh, Laos, Cambodia, Sudan, Venezuela, Libya and Somalia – are amongst the world’s 20 most notoriously corrupt.

China, with a score of 63, is ranked 151th.

The Worldwide Governance Indicators developed by the World Bank throws further light on the prevalence of corruption in these countries.

The sign of an international forum on the "Belt and Road" Legal Cooperation is pictured i FILE PHOTO: The sign of an international forum on the “Belt and Road” Legal Cooperation is pictured in Beijing, China July 2, 2018. REUTERS/Jason Lee

In each of the six dimensions of governance – Control of Corruption, Government Effectiveness, Regulatory Quality, Rule of Law, Voice and Accountability, and Political Stability and Absence of Violence/Terrorism – 54 per cent to 60 per cent of 129 BRI participating countries (excluding China) are below the 50th percentile rank.

The majority of BRI partakers, therefore, consistently perform worse in governance than most countries in the world.

It is apparent that graft would be rife in these countries, in the absence of an accountable and effective government, a functional regulatory system and the rule of law.

So it is not just Chinese firms that have soiled hands.

READ: An Italian port awakens to China’s siren call, a commentary

CLEANING UP ITS ACT AT HOME BUT NOT OVERSEAS

Under China’s Criminal Law, individuals, companies and organisations under Chinese criminal jurisdiction are prohibited from giving property to foreign public officials or officials of an international public organisation, for the purpose of seeking illicit commercial benefits.

Yet to date, even with the ongoing anti-graft drive at home, China is not known to have prosecuted any Chinese firms for bribing foreign public officials.

Chinese flags flutter at Tiananmen Square ahead of the Belt and Road Forum in Beijing Chinese flags flutter at Tiananmen Square ahead of the Belt and Road Forum in Beijing, China May 13, 2017. (Photo: REUTERS/Stringer)

Beijing’s reluctance to clamp down on overseas bribery has created an uneven playing field because business competitors from countries that prosecute transnational bribery will be disadvantaged.

With the publicity blitz and intensifying spotlight on the BRI, however, the stakes are getting high for China.

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This is especially so for President Xi, who has lent his name to the ambitious global programme.

Perhaps to avoid tarnishing the image of both Xi and his brainchild, the Chinese state has recently taken small steps to address corruption concerns surrounding the BRI.

In his closing address at the 2017 Belt and Road Forum for International Cooperation, Xi himself said that China would strengthen international efforts to fight corruption and climate change.

This was followed by a seminar in September held by China’s top anti-graft watchdog in collaboration with the World Bank that focused on joint action with BRI participants to check corruption.

Last year, Foreign Minister Wang Yi reiterated Beijing’s commitment to foster legal cooperation among BRI countries to tackle transnational crime and corruption at the July Forum on the Belt and Road Legal Cooperation. 

China's Foreign Minister Wang Yi delivers a speech at an international forum on the "Belt China’s Foreign Minister Wang Yi delivers a speech at an international forum on the “Belt and Road” Legal Cooperation in Beijing, China July 2, 2018. (Photo: REUTERS/Jason Lee)

Words aside, Beijing needs to demonstrate greater resolve in policing illicit deals along the Belt and Road.

For a start, it may look to its other initiative, the Asian Infrastructure Investment Bank (AIIB), for ways to improve transparency and accountability in BRI related processes.

With 93 approved members worldwide, including developed countries such as Germany, UK and Canada, and an International Board of Directors that has oversight of the Bank’s operations, the AIIB is a shining example of how adopting international best practices can enable China to dispel scepticism and win global support.

Furthermore, in view of how several countries have recently scaled down on BRI projects over mounting financial concerns, improving transparency and accountability may help allay such fears and prevent bad debts.

Exercising greater prudence in the selection and execution of BRI projects will, in turn, save China from bearing the brunt of popular resentment against rising official corruption and white elephant projects, particularly in volatile countries.

Dr Yew Chiew Ping is head of the Contemporary China Studies at the Singapore University of Social Sciences.