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Chapter 1
The Belt and Road Initiative: Strategy, Collaboration, Innovation
Anna Visvizi, Miltiadis D. Lytras, Wadee Alhalabi and Xi Zhang
1. Introduction
For several reasons, the announcement of the launch of the Belt and Road Initiative (BRI) in 2013 triggered questions among experts and academics. Symptomatically, very little information about the initiative was available at that time, and so a sense of confusion was induced in the debate on BRI scope as well as its potential influence on all stakeholders involved. Connotations with the historical Silk Road had infused the debate on BRI not only with great expectations and hopes, but also with fears. Specifically, considering that China epitomizes export-led growth model, many observers argued that BRI might be just another way of facilitating Chinese exports. Caution has been recommended as regards the modes of financing BRI-related projects with regard to sustainable financing, potential indebtedness, and management of debt problems in borrower countries (Hurley, Morris, & Portelance, 2018). In the same context, implications for Southeast Asian regional architecture and the prospect of Sinicization have been stressed (Suehiro, 2017). As ever, a balanced view and a sober assessment of the developments is needed. This chapter and, indeed, the entire volume seek to contribute to this effort.
Today, six years into the official start of BRI, an understanding of what the initiativeās objectives are consolidates. This is reflected in academic research and more policy-oriented publications stemming from the think-tank sector (Albert, 2018; Gabuev, 2016; JakĆ³bowski & Kaczmarski, 2017). There is a growing recognition on the part of international organizations, such as the World Bank Group (WB), and other key players on the international scene, such as the International Chamber of Commerce (ICC), to mention just these two, that serious consideration should be given to BRI and its implications. At the same time, developments on the ground suggest that in as much as BRI embodies a bold vision of the future, it is also beset, like the original Silk Road, by a variety of contingencies and constraints (Blanchard & Flint, 2017; KozÅowski, 2018a).
The objective of BRI is to strengthen infrastructure, trade, and investment links between China and 86 countries that ā as some estimates suggest ā signed collaboration agreements. Collectively these countries account for over 30% of global GDP, 62% of the worldās population, and 75%of known energy reserves. Estimates suggest that about $1 trillion could be invested in projects associated with the implementation of BRI and its objectives. Other, perhaps more detailed, assessments suggest that China may be investing in infrastructure-related projects up to $150 billion a year (Hillman, 2018; Saarela, 2018; WB, 2018a). The two major components of BRI are the Silk Road Economic Belt, linking China to Central and South Asia and onward to Europe, and the New Maritime Silk Road, linking China to the countries of South East Asia, the Gulf Countries, North Africa, and on to Europe. Within this framework, the establishment of six economic corridors have been discussed with the aim of linking other countries to the BRI (WB, 2018a). Arguably, a certain vagueness and, indeed, open-endedness of BRI, are its key features.
The lack of a clear delineation of what BRI is and who it is addressed to, renders BRI more of an intention, a process, rather than a well-structured institutionalized framework. True, BRI is a part of Beijingās ambitious and refocused āGo Globalā strategy (Saarela, 2018). Possibly, as this volume suggests, BRI is Chinaās response to challenges and opportunities of tomorrow. As ever, though, attempts to anticipate and respond to perceived patterns of change in an agentās external environment, alter those patterns of evolution, while at the same time inducing change in the same agentās domestic environment. In other words, BRI is Chinaās response to developments China anticipates. To reap opportunities that these developments will bring and to face challenges they will create, China inadvertently induces new dynamics in the global political and economic system, while at the same time necessitating change in China itself. From a slightly different angle, BRI represents a new approach to economic integration, where traditional tools of incremental build-up of economic collaboration consistent with bilateral agreements, free trade areas, economic corridors, etc., have been replaced by a set of tailor-cut measures and tools corresponding with the specificity of a given market. In this sense, BRI defies traditional definitions outlined in textbooks on economic integration.
While drawing from and taking advantage of the well-established multilateral trading system, BRI promotes and necessitates the emergence of new forms and methods of collaboration-driven economic integration, focused on clusters and corridors rather than on inter-national collaboration. In this view, any attempt to explore BRI through the lens of traditional conceptual frameworks is at risk of offering a fragmented insight, unfit to depict the complexity and dynamics inherent in BRI. Seen in this way, BRI is a unique case study in mastering global economic exposure, strategy, diplomacy, and political communication. Perhaps most importantly, it is a case study in mastering global business and innovation. The objective of this volume is shed some light on these issues.
2. BRI and the European Union
Implicit in the debate on BRI is the understanding that it pivots Europe. Indeed, the map of land connections and see routes that, in line with Chinese authoritiesā plans, BRI embodies, suggests that Europe is the center of BRIās gravity. Certainly, the 500 million consumers that the Single Market represents is a bargain. Interestingly, in the European Union (EU) itself, BRI has not received the attention and policy response that it should have. In other words, even if the EU and China have collaborated on establishing strong and balanced bilateral relations for several years now, there is no unified EU policy position toward BRI. Arguably, the prerogatives the European Commission has in the field of Trade and Investment Policy would allow it to lead a debate on these issues and, consequently, create a consensus among the EU member-states around ways of dealing with Chinese foreign direct investment in the Single Market. The situation may change though. Consider that in April 2018, twenty-seven of the twenty-eight (excluding Hungary) Ambassadors of EU member-states in Beijing issued a report in which several aspects of BRI have been criticized. In the report, leaked to the press, it was argued that BRI runs counter to the EU agenda for liberalizing trade, pushes the balance of power in favor of subsidized Chinese companies, and that ā overall ā it blurs the international transparency rules (Heide, Hoppe, Scheuer, & Stratmann, 2018). Clearly, BRI is a part of a greater strategy that China implements. However, the EU is not a newcomer in international affairs and it remains to be seen how the EU will address the matter of Chinaās presence in Europe. Certainly, the issue is complex and complicated (Bohman and Ljungwall, 2018; Ferdinand, 2016; Gostin, 2018).
The official launch of BRI in 2013 was preceded by the inauguration of the 16+1 initiative in 2012. The 16+1 initiative aims at developing collaboration between China and a group of 16 countries of Central and Eastern Europe and the Balkans, including Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia. In line with official documents, the objective of the 16+1 initiative, sometimes referred to as āalliance,ā is to promote collaboration in the fields of investments, transport, finance, science, education, and culture. Priority areas with regards to economic cooperation include infrastructure, sophisticated technologies, and green technologies. Considering that some of countries included in the group of 16 are members of the EU, while several are only about to start the membership negotiation process, the 16+1 initiative raises several questions about Chinaās hidden strategy and the EUās capacity to handle issues pertaining to the fields of common trade and investment policy as well as enlargement policy. Indeed, a lot is at stake (Visvizi, 2016; Papermans, 2018; Matura, 2018).
Frequent in the debate on Chinaās inroads in Europe, and even more so in the debate on the 16+1 format, is the argument that the 16+1 initiative creates divisive pressures in the Balkans and in the EU forum. Indeed, while negotiating in that of 16+1, China is also striking bids with neighboring countries, that is, not included in the group of 16, but are members of the EU. Here the case of the port of Piraeus is a good example. It showcases how China connects the obvious dots that the decision-makers in the EU and the Balkans seem to be overseeing.
That is, in line with the lease agreement signed for the period 35+5 years, in force since 2009, the China Ocean Shipping Company (COSCO) paid an upfront payment of ā¬678 million and follow-up infrastructure investments worth ā¬230 million (Bastian, 2017, p. 8). Considering that COSCO Hellas expressed its interest in becoming majority shareholder, should all conditions outlined in the current agreement be fulfilled, the value of the Chinese investment could reach ā¬368.5 million for the Piraeus Port Authority (PPA), with the key investor, that is, COSCO Hellas acquiring 67% of shares by 2048 (Bastian, 2017, pp. 8ā9). COSCO Shipping Ports plans to turn the port in Piraeus the number one container handling port in the Mediterranean by 2020; at the moment it is third (Glass, 2018).
3. The BRI: Outstanding Issues
Interestingly, even if the debate on BRI gathers momentum, as reflected by the burgeoning body of literature on it (Li & Schmerer, 2017; Liu & Dunford, 2016; Yu, 2017; Wang, 2016; KozÅowski, 2018b), the inroads BRI makes in the Arab Peninsula have remained underdiscussed. In a similar manner, the discussion on BRI tends to focus on China as the state, the hegemon, rather than on more specific developments in the fields of business, research, and innovation that BRI triggers. As a result, BRI tends to be queried through the conceptual lens of international relations and international political economy (Cai, 2017; Li, 2016; Ploberger, 2017). Relatively less has been written about the mezzo- and micro-levels of the initiativeās implementation (Lytras & Visvizi, 2018; Yoshikawa, 2016). In other words, the functional connections involving the business sector, the academia, and the resultant implications for research and innovation, have been less pronounced in the discussion (Lee, Zhao, & Hassna, 2016; Liao, Huang, Vidmer, Zhang, & Zhou, 2018; Visvizi & Lytras, 2018). The prevalent in the discourse emphasis on macro-level developments and processes cast shadow on issues such as business sector responses to challenges and opportunities BRI creates, including equally the Chinese business sector and that of its counterparts (Liu, Jiang, Zhang, & Chen, 2018). Similarly, societiesā attitudes to and perceptions of BRI remain underdiscussed in the literature, whereby obviously culture and history serve as powerful levers conditioning BRIās implementation at local and regional level, including cities and urban spaces (Visvizi, Lytras, Damiani, & Mathkour, 2018). These observations come atop further questions about the specific mechanisms by means of which BRI is implemented, about the dynamics of collaboration and growth BRI creates and, finally, about its implications for all stakeholders.
From a different angle, very little has been said in the existing literature on the immense diplomatic effort, including the tools of traditional and economic diplomacy, that is necessary if BRI is to be implemented effectively and create synergies. Moreover, the scope of legal issues that BRIās implementation will trigger surpasses any imagination; consider the variety of stakeholders and the multi-varied nature of collaboration that BRI embodies. In absence of a comprehensive multilateral framework agreement that would regulate relations among the stakeholders, how will possible future disputes be resolved, investorsā rights or intellectual property rights protected, environmental standards abided by, etc. To some extent, the existing multilateral frameworks and regimes will serve their purpose and will do just that, for example, the World Trade Organization or for instance the World Intellectual Property Organization. However, in absence of a state-investor dispute settlement mechanism, how will issues pertinent to this increasingly sensitive field be resolved along the New Silk Road?
BRI is an economic colla...
