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China urged to improve BRI image using local workers

China urged to improve BRI image using local workers

China should tap into a network of local stakeholders to improve the image of its flagship Belt and Road initiative (BRI), according to a panel of experts at the business, government and tech-focused Milken Institute Asia Summit 2018.

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By Meili Chen 17.09.2018

China should tap into a network of local stakeholders to improve the image of its flagship Belt and Road initiative (BRI), according to a panel of experts at the business, government and tech-focused Milken Institute Asia Summit 2018.

The Chinese government said that the investment program underpins its aim to “enhance regional connectivity” and support a brighter future for all in the region, but some have criticized it for pushing debt-trap diplomacy. Experts at last week’s Asia Summit believe that Beijing could make the project more successful by working with stakeholders and employees in countries where it invests.

President Xi Jinping unveiled the BRI almost five years ago, and it has since become one of the largest infrastructure and investment projects to date. It encompasses nearly two-thirds of the world’s population, involving 68 countries and accounting for around 40% of global GDP last year. However, the program’s focus on cultural exchange and integration has not extended to host countries, according to detractors.

The move by newly-elected Malaysian Prime Minister Mahathir Mohamad to cancel a controversial rail project in August also highlighted the financial toll that investment can bring. Mohamed said that the project was superfluous and unaffordable at the current time. “I believe China itself does not want to see Malaysia become a bankrupt country,” he added.

“A common lament of recipient nations is that despite all the investments from huge infrastructure projects, there's a lack of local employment opportunities," Temasek Holdings Head of Sustainability and Stewardship Robin Hu said.  

Many of the BRI’s on-the-ground projects focus on the use of Chinese employees to complete work, which means that participating countries do not benefit from new job opportunities. This has been a problem in Laos and the sovereign state of Turkmenistan, where anti-Beijing sentiment is clear. However, even when local workers are employed, there have been complaints about substandard working conditions. This has led to public demonstrations in a range of countries, including Sri Lanka and Vietnam.

Beijing’s reliance on Chinese workers stems from the use of its domestic state-owned enterprises model (SOE) for the BRI. Hu revealed that the enterprises generally “air-drop the entire ecosystem,” from engineers to chefs, into participating countries. Just 44% of managers working on BRI-related projects in Africa were local, according to a McKinsey study published in 2017.

“We may be missing the bigger point of the BRI, which is that it's simply an avenue for Chinese entrepreneurs to go forth and conquer," McKinsey Global Institute Director Jonathan Woetzel noted at the Asia Summit. However, many Chinese SOEs are now dealing with debt, which may make it more difficult for them to manage operations in other countries.

“China has significant leverage to GDP. It's generally connected in local government financing vehicles and SOEs," Canada Pension Plan Investment Board CEO and President Mark Machin said at the summit, which was held in Singapore. Machin also admitted that China’s project may offer a viable opportunity for his company.

The panel said that sourcing locals for key jobs would improve the image of the BRI. It also pointed to increased engagement with labor unions and the development of human capital as other possible avenues to achieve this aim. Experts also believe that Xi is aware of the issue and the need for changes to ensure that robust economic activity supports the newly built infrastructure.

S&P Global Ratings Chief Asia-Pacific Economist Paul Gruenwald also called on Western institutions to improve the transparency of debt deals so that everyone knows what is involved. This would foster positive momentum in the international community and win over locals who may be reticent about the project.

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