“Going East”; should Lebanese politicians double-check their compasses?
Opinion Analysis by Michael Maalouf, Staff Writer and Karim Bassil, Staff Writer
July 19th, 2020
While the world is occupied with the CoViD-19 outbreak, major economic and political shifts are occurring around the world. There is a geopolitical battle that is increasing along the Silk road; where major world powers have been struggling over their control points. In all of this, Lebanon’s strategic location might be underestimated; however, it is in a critical one when it comes to connecting the continents of the old world (Asia, Europe, and Africa).
The ongoing struggle over management has become intense. Lebanon is currently witnessing one of the hardest points in its modern history, while facing the fact that the country became the world’s third most indebted nation, inflation in prices, deterioration of the Lebanese Lira, shortage of basic necessities and much more. The country went from being “Switzerland of the Middle East” to becoming “Venezuela of the Middle East”. As the days go by, the desperation for help from foreign powers grows. Lebanon finds itself seeing that it has two choices to get out of this crisis; the first option is going to the International Monetary Fund (IMF) for support - the second would be heading East and opening the door for Chinese investors.
As most big states usually provide support with harsh measures and since the country has tried the west for many years many think that China is a better solution which is not necessarily true. There are many previous examples of China’s policies when it comes to foreign investment and how they may have exploited the opportunities of those countries. Arguably going East will not only create economic hardships, but will also create social ones down the line.
At the first glance, one may assume that China’s economic power is solely dependent on its trading power and vast variety of products. Wherever you go around the world and even the countries that are considered to be China’s enemies such as the U.S. which are in fact China’s number one trading partner. As most nations throughout history that based their economy solely on expanding exports to employ its citizens’ expansion of territory through military or economic warfare is inevitable. However, China’s approach to it isn’t as apparent as the strategy used by the U.S. to expand its influence. The us has expanded influence in a variety of ways, for example through its large navy that is scattered around the world, economic development programs which it takes favor off, military intervention, as well as other tactics.
China’s approach appears to be more ‘innocent’ as it depends on economic intervention through taking projects for its governmental clients, which have expanded to around 65 countries around the world which in most cases are part of the Silk road.
Why the Silk Road? The Silk goes throughout an important strategic part of the world which is Eurasia where most of the trade happens. It has arguably been proven that whoever takes over this area has a favorably large advantage in world trade. China has been making a lot of projects along this area, however, as they might seem to be harmless simple investments there are many stories that fell into debt after Chinese projects.
During an interview for Bloomberg, with the Deputy Chairman of Indonesia's Corruption Eradication Commission; Laode Muhammad Syarif, warns about the negative aspects of Chinese foreign investments. He argues that there is a huge potential for corruption and economic influence. The negative aspect of Chinese investments is concerned with corruption and economic influence. Sayrif notes that "We are advising the government to be more careful with investment from China, they are doing it as a part of their business, trying to expand their economic influence, so that's why we have to be very, very careful."
According to Forbes; Ted Bauman, a senior research analyst and economist who works at Banyan Hill Publishing, has argued that "Indonesian anti-corruption officials are right to be concerned about corruption surrounding Chinese investment." Bauman hits at studies by corruption watchdog agencies, such as Global Corruption Watch, which found that when projects are Chinese-supported, there is a consistent rise in local corruption. Those are conveyed sthrough bribes and other mediums, which worsen development outcomes. The projects were compared to ones that were supported by other countries, and the traces of corruption were significantly higher when China was involved. Perhaps the Lebanese government should try and see the other examples where nations have dealt with China and its investments. Many countries have been struggling before the Chinese investors intervened, and are left struggling despite the financial aid they were given.
One example where China came to play, is in Sri Lanka. The country was struggling to pay its debts to Chinese firms, and decided to formally hand over the strategic port of Hambantota to China on a 99-year lease in 2017. It was a deal that government critics have said threatens the country’s sovereignty. Recently, China has propped up its presence in the Indian Ocean, investing billions of dollars to build port facilities and plan maritime trade routes as part of its “Belt and Road” initiative to help increase its market reach. Smaller countries like Sri Lanka have found themselves owing debts they cannot pay. Sri Lanka owes more than $8 billion to state-controlled Chinese firms, officials say. In July of 2017, China Merchants Port Holdings Company, which is state-controlled, signed a deal with the Sri Lanka Ports Authority for a stake of 70% of control in the Hambantota port. Criticizers of the deal said the deal could set a standard for Sri Lanka and other countries that owe China money; to accept deals that involve the signing over of territory.
To the North of Sri Lanka, India, fears that their neighbors to the south, could become a Chinese military outpost, on its southern coast which is one of the world’s busiest shipping routes. That has lead India to partner up with Japan to develop a port on Sri Lanka’s eastern coastline. India has also entered talks to invest in an airport near Hambantota. The current political turmoil that is a result of the Chinese investments could certainly be reflected in Lebanon, or even increase its pre-existing political turmoil, if China ever decides to invest in the country.
Sri Lanka was not the only country who has had to deal with large Chinese tycoons. China has also invested in the small European country of Montenegro, who are already regretting the Eastern investors. In 2018 the Center for Global Development, a US think-tank it must be noted, stated that the project puts Montenegro in an unpleasant company with Djibouti, Mongolia and Tajikistan and four other countries that “could suffer from debt distress due to future Belt and Road Initiative related financing”. The contract that was made between China’s Exim Bank and the Montenegrin government states that if the latter is unable to pay back the loan, China can seize Montenegro’s assets. The World Bank reports that the project could be a serious challenge to the fiscal sustainability of Montenegro. Also, according to European Commission Progress Report in regards to the matter; the rapidly rising public debt, high fiscal deficits and unemployment rates are key issues that are threatening the talks for an agreement between Montenegro and the EU. Montenegro tried and failed twice to secure European funding for the project.
It seems like Montenegro will not be able to generate the money it owes China through the highway or other means as all the numbers have shown. If China does get its hands-on Montenegrin assets as was agreed per contract, then it will have a strategic hand in the Balkans. With that being said, imagine a stronger hand on the Mediterranean, in Lebanon.
Lebanon’s strategic position holds great importance in the region even though it might not seem like that. The port of Beirut and Tripoli serve major roles in logistics on the easyern side of the Mediterranean as they serve as the vessels that provide the region’s markets with products. Major powers such as Russia, U.S., and China has always played a role in the struggle to take over such points to gain advantage within the market. China’s entry into Lebanon has been interesting as it is indeed not a new deal on the table.
China has expressed its interest in persuing projects in Lebanon through its ambassador to Lebanon. Chinese projects in Lebanon aren’t new in fact China aid started building a Lebanon’s higher national conservatory in Dbayeh, a project which started in 2019 and is expected to finish in 2021. This project is considered to be the largest thus far, however, several other projects exist such as the solar powered lighting system in Dora highway. China has expressed its interest in investing in the port of Tripoli back in 2019 and has also shown its interest in building highway’s, tunnels, railways, and electricity plants. What has happened recently with the statements of the secretary general of Hezbollah Sayyed Hassan Nasrallah concerning going East is that it shed light on China’s interests, proposals for investment, and its projects.
The Chinese model in Lebanon is still in its early stages as China still didn’t start with large scale projects, therefore it still has yet to show its true form. These prospective projects have yet to be seen in the region, and thus it is difficult of foresee the possible future for Lebanon in such deals. T
With social media campaigns highlighting supposed concentration camps for Uyghur muslims in China, many have responded to Sayyed Nasrallah’s statements asking if Lebanon really wants to deal with a nation that seems prosecutes over a million muslims?