Prospect of Infrastructure Construction under "Belt and Road" Initiative

BAI Yun， CHEN Wei， XU Dilu

(College of Civil Engineering, Tongji University, Shanghai 200092, China)

0 Introduction

The concept of the "World Bridge" was first raised by the Schiller Institute in Germany in 1990. After German unification in 1989, the Schiller Institute founder put forward a construction project named "Paris-Berlin-Vienna Triangle" to promote the coordinated development of science and technology in Eastern Europe and Western Europe. After the collapse of the Soviet Union, the Schiller Institute also incorporated Asia into its vision. The construction of a "mainland bridge" would link the population, industry and economic centers of the countries along the route closely. The advantages of a regional development would benefit the countries along the route. At the same time, the convenience brought by the transportation will contribute to the further development of the lead regions and achieve a win-win situation. However, the world political and economic structure and regional culture at the time caused many obstacles for the realization of the "World Bridge". For example, the Bering Strait Tunnel connecting Asia and America was impossible due to the lack of political trust of the neighboring countries. The countries on both sides of the Bering Strait were rich in energy but sparse in population. The economic situation in these neighboring countries was weak and not complementary towards each other. The undersea tunnels connecting Japan and South Korea was impossible because of Japan′s historical invasion in South Korea.

The Chinese government first proposed the "Belt and Road" Initiative in 2013. On March 28, 2014, China′s National Development and Reform Commission, Ministry of Foreign Affairs and Ministry of Commerce jointly issued Promoting the Construction of the Economic Belt of Silk Road and the Vision and Action of the Maritime Silk Road in the Twenty-first Century, which caused great excitement around the world. Since the global financial crisis in 2008, the world economic situation has been in a downturn. Countries all over the world have realized the need to strengthen cooperation in order to promote economic development. It is necessary to establish a new economic cooperation platform globally. China maintained a steady economic growth during the global financial crisis, showing strong economic vitality. China′s advantage in economic development can provide opportunities for the development of other countries through the construction of the “Mainland Bridge". The concept of the "Belt and Road" Initiative is the same as the “World Bridge". It can bring huge economic benefits

to all countries involved in Asia and Europe. Given that it promotes the balance of economic development in different regions, it also helps to build a new world peace order in the Twenty-first Century.

Compared with the "Belt and Road" Initiative, the goal of the “World Bridge" is more ambitious. It should be an objective requiring our joint effort after the completion of the “Belt and Road".The roadmap of "Economic Belt of Silk Road" is shown in Fig. 1, and the route-plan of the "World Bridge" is shown in Fig. 2.

Fig. 1 Roadmap of "Economic Belt of Silk Road"

Fig. 2 Route-plan of the "World Bridge" (From "zhidao.baidu.com")

1 Opportunities the "Belt and Road" Initiative provides for China

The "Belt and Road" Initiative is crucial for defusing excess domestic capacity, encouraging Chinese enterprises to "go out". The "Belt and Road" Initiative will bring great opportunities for China to promote the transformation of economic development mode and the transformation of industrial structure, and to further expand China′s economic development. This will ensure a sustained and stable development of the domestic economy. The problem of unbalanced regional development domestically will also be solved through this strategy.

1.1 Opportunities for development in inland and border areas

China′s "Western Development" strategy aims to promote the economic construction and the development in inland and border areas. The inferior geographical locations of inland and border areas have hindered the development for a long time. The "Belt and Road" Initiative will change this situation. The inland border cities can be designed into new opening ports through the "Belt and Road" Initiative. Compared with the United States, one of China′s major disadvantages is that there was no seaport in the West, which can be compensated through the "Belt and Road" Initiative. Through the road network, China can strengthen the ties with neighboring land powers and expand the scope of connection by replacing the shipping capacity with road networks in future.

1.2 Prospects of the "Belt and Road" Initiative

Many emerging economies and developing countries are located along the "Belt and Road", whose economic development is generally on the rise. The total population of these countries is 4.4 billion, and the economic aggregate of these countries account for 28% of the total of the globe. The countries with large population and backward economy along the "Belt and Road" provide great potential and huge market, for China with further opportunities to expand overseas markets and enhance its international influence. The "Belt and Road" strategy will also profoundly improve the economy of these countries. The "Belt and Road" Initiative stimulates the demands for production,investment and ecomomic cooperation which will have a far-reaching influence on the development of domestic industries both quantitatively and qualitatively. From a quantitative point of view, this will expand the scale of domestic industries; while qualitatively, it will promote the transformation and upgrading of domestic industries[1].

In the plan of "Belt and Road" Initiative, the inter-operability of infrastructure is the key to reinforce communications among countries along the route. Considering that the infrastructure in these countries generally lags behind, the infrastructure construction will be the priority of the "Belt and Road" Initiative. These countries will strengthen the infrastructure planning, the coordination of technical standard systems, and jointly promote the construction of international key channels, gradually forming a network connecting Asia′s sub regions as well as between Asia and Europe. As to global warming, China will pay more attention to "green construction" and operational management to reduce carbon emission. The influence of climate change during construction will also be taken into consideration.

The transportation infrastructure of the countries along the "Belt and Road" is backward, which seriously hinders transnational economic exchanges and the economic development of their own. Therefore, we should concentrate on key transportation channels, nodes and projects, with a priority to make up missing sections and clear bottlenecks, achieving an efficient international transport system. In addition, it is necessary to promote the construction of ports to expedite land-water multimodal transportation channels. We should also promote the collaboration of port construction and accelerate the upgrading of aviation systems. The construction of port infrastructure will further enhance communication among the countries involved in the "Belt and Road" Initiative. In terms of energy infrastructure, the countries along the "Belt and Road" should strengthen their cooperation, promote the construction of the power infrastructures and cross-border power transmission channels, and carry out regional power grid upgrading actively. Solving the energy infrastructure problem is the key to promote the economic development[2].

At present, there have already been trade exchanges between China and the countries along the "Belt and Road":

(1)In 2015, the total bilateral trade between China and related countries reached 995 billion and 500 million US dollars, accounting for 25.1% of the total foreign trade of China.

(2)In 2015, Chinese enterprises invested 14 billion and 820 million US dollars directly in related countries, with an increase of 18.2%. Those countries in turn invested 8 billion and 460 million US dollars in China, with an increase of 23.8%.

(3)From January 2016[1]to November 2016[2-3], the direct investment from China in the countries along the route is 13 billion and 400 million US dollars, accounting for 8.3% of China′s total foreign investment in the same period. The amount of new foreign contract projects with the countries along the route is 100 billion and 400 million US dollars, with an increase of 40.1%.

(4)In the first three quarters of 2016, Chinese enterprises signed 4 191 new contracts with the countries along the "Belt and Road". The total value of these contracts reaches 74 billion and 560 million US dollars, with an increase of 26.1%.

(5)China Construction Engineering Corporation signed a contract of 2 billion and 700 million US dollars for the new capital construction project in Egypt. It is the largest construction project achieved by Chinese enterprise under the "Belt and Road" Initiative in the first three quarters of 2016.

Through the "Belt and Road" Initiative, China will speed up the cooperation with the countries along the route.

2 Infrastructure market along the "Belt and Road"

According to IMF′s calculation, one-percentage increase of the infrastructure budget of the government of developed countries can boost the GDP growth by 1.5% in four years; the same increase of the government of undeveloped countries can result in a GDP growth of 3% in four years.The infrastructure′s pulling effect on economy is shown in Fig. 3.

Fig. 3 Infrastructure′s pulling effect on economy

The infrastructures in the countries along the "Belt and Road" is commonly backward, and an upgrade is urgently needed. Moreover, while the economy of the emerging market fluctuates badly and the growth rate of economy is falling, infrastructure investment is considered as a powerful and effective solution to improve the predicament. Previously, the infrastructure construction of these countries was restricted by lack of capital, technology and organizational capacity etc. Through the "Belt and Road" Initiative, these countries can solve these problems with China′s help. China has just experienced large-scale infrastructure development for decades and has become the most competitive in the industry and the best choice for collaboration. The performance of Chinese enterprises and the volume of infrastructure construction in China proves that China has the ability to undertake the projects needed under the "Belt and Road" Initiative. The ENR global contractors′ ranking in 2016 and 2017 is shown in Table 1 and infrastructures needed in the major countries are shown in Fig. 4.

Table 1 ENR global contractors′ ranking in 2016 and 2017

Fig. 4 Infrastructures needed in related countries

According to the "Belt and Road" Initiative, China′s foreign investment in the following years will mainly be concentrated in 22 countries including Russia, Mongolia, 5 countries in Central Asia, 10 countries in ASEAN, India, Pakistan, Bangladesh, Maldives, and Sri Lanka. Based on the data of Asian Development Bank (ADB), we can infer the growth of GDP and the total amount of related economies of related countries in the following years. Considering the proportion of the infrastructure investment in GDP, the proportion of China′s contribution to the infrastructure investment in these countries and the expected growth rate, the scale of China′s investment in the countries involved in the "Belt and Road" Initiative can be calculated. The results are shown in Fig. 5 and Fig. 6.

Fig. 5 Predicted infrastructure investment in countries along the "Belt and Road" in 5 years (From "Statistical Bulletin of China′s Outward Foreign Direct Investment")

Fig. 6 Predicted infrastructure investment in countries along the "Belt and Road" in 5 years due to Chinese contribution (From "Statistical Bulletin of China′s Outward Foreign Direct Investment")

Based on IMF data, the investment of infrastructure in Asia needs 8 trillion and 220 billion US dollars in the next 10 years. The ADB and WORLD BANK can only provide 24 billion US dollars a year. However, the Asian Infrastructure Investment Bank (AIIB) can finance about 400 billion US dollars a year. The "Belt and Road" Initiative has sufficient financial support, which plays a great role in promoting the economy of the countries along the "Belt and Road". The implementation of "Belt and Road" Initiative requires a strong capability in infrastructure construction, especially in bridges and tunnels. Humanity has already made many breakthroughs in the field of tunnels and bridges. Some major projects built demonstrate this capability(Table 2). The following are examples in this regard.

Table 2 Infrastructure construction capability

3 Introduction to major project cases under the "Belt and Road" Initiative

There is a lot of research on the "Belt and Road" Initiative, which reflects the significance and international influence. This paper introduces two major project cases, namely China-Nepal-India Trans-Himalaya Corridor and Kra Isthmus Canal in Thailand.

With today′s technology, it is feasible for us to connect three continents.

China-Nepal-India Trans-Himalaya Corridor is a transportation corridor linking the three countries. Based on field investigations, the necessity of the channel and the benefit afterwards are analyzed, and the preliminary planning of the project is carried out. At present, 90% of goods between China and India are transported by sea. Most of Chinese goods are transported to India′s Mumbai port through Tianjin Port, and vice versa. Considering the vast west area of China that borders on India, transportation by sea wastes time and cost comparing with land transportation[3]. At the same time, the channel will solve the problem of Nepal′s poverty and underdevelopment caused by its geographical location. In the long run, the volume of passengers and freight in China and India will increase even further, which makes it necessary to build railway lines to overcome the current restrictions. The construction of railway lines will reduce traffic congestion and strengthen economic cooperation among China, India and Nepal. The link of the three countries will reinforce cultural exchanges, increase employment and promote tourism of pan Himalaya. Furthermore, the change from sea transportation to land transportation will contribute to the reduction in CO2emission.The transportation between India and China is shown in Fig. 7.

Fig. 7 Transportation between India and China

The construction of Kra Isthmus Canal in Thailand(as shown in Fig. 8) is a major project that has been proposed since ancient times. If it is opened, the voyage between the Indian Ocean and the Pacific Ocean will be shortened by at least 1 200 kilometers, which has enormous economic and political influence for Asia, as well as for the world. The Kra Isthmus Canal has its own unique natural advantages. The construction of the Kra Isthmus Canal has been supported by many East Asian countries. However, there has also been strong internal and external resistance. For China, the opening of the Kra Isthmus Canal can ease the "Malacca Dilemma" of energy imports. Furthermore, it can contribute to the construction of "Maritime Silk Road" and the implementation of China′s "Two Ocean Strategy", which will support China′s maritime strategy[4].

Fig. 8 Kra Isthmus Canal in Thailand (From "Thai Canal Engineering")

4 The challenge of the "Belt and Road" Initiative and countermeasures

As a founding member, China will face great challenges in the promotion of the "Belt and Road" Initiative.

(1)The "Belt and Road" Initiative hopes to build a win-win cooperation and to share the results of China′s development. However, when there is a conflict of interest between China and other countries along the "Belt and Road", China′s interest will not necessary be protected, which will hinder speed and effect of the "Belt and Road" Initiative.

(2)British standards or American standards, which are different from Chinese standards, are used in the design of the infrastructures in countries along the "Belt and Road". Therefore, Chinese engineers may encounter problems in implementation of the "Belt and Road" Initiative.

(3)Economies of the countries along the "Belt and Road" are generally underdeveloped, but the construction of the infrastructure requires huge financial support. In cases where loans are provided by China, if the debtor country is politically unstable or its economy is stagnant, the money may not be returned. This makes the infrastructure investments in those countries rather risky. Furthermore, the AIIB, the major financial source of the "Belt and Road" Initiative, has many member countries. As a result, China′s decision-making right may be restricted. This may hinder the construction of the infrastructures in economically weak areas, even though the infrastructure is greatly needed.

(4)Some countries along the "Belt and Road"like France and India will have homogeneous competition with China. The "Belt and Road" strategy provides opportunities not only for China, but for other countries as well, especially for countries along the "Belt and Road". Chinese enterprises and research institutions will face competition from these countries, which means they have to meet strict requirements.

(5)Demolition is almost inevitable for any construction. Any change of a route will have great impact on a project both technically and financially. For projects under "Belt and Road" Initiative, loss can be caused by a road alteration due to restrictions on cutting (moving) trees or demolishing temples for cultural reasons. Moreover, some Chinese contractors lost money due to decision-making errors, improper project management and engineering problems. This is not conducive for Chinese companies to be actively involved in the "Belt and Road" Initiative.

It is crucial to find right countermeasures for China. "Do in Rome as the Romans do" which is very important to the successful implementation of the "Belt and Road" Initiative. China should do research on "Literary Society and Folk Religion" and "The Political and Economic Strategy", fully understand social and cultural background of relevant countries. At the same time, China should intensify the training of contractors to avoid losing money or offending customs, which goes against for success of project construction.

In relation to global warming, a large number of infrastructure construction will have pressure on the environment. In order to maintain sustainable and reputable development under the "Belt and Road" Initiative, China should improve people′s environmental awareness. In terms of enterprise competitiveness, China should strengthen technology advantage, so that it can retain its competitiveness when completing with high-tech enterprises from developed countries in Europe.

For the issue on lack of infrastructure and inability to repay such project loans caused by political and economic instability in countries along the "Belt and Road", China should cooperate with the World Bank, ADB and other multilateral organizations to enhance the repayment ability of recipient countries[5]. For example, in 2016, the AIIB approved its first four loan programs, three of which are related with the World Bank, ADB and other multilateral development banks. The three projects are the Indonesia slum renovation project with 216 million and 500 thousand US dollars, the Pakistan high-speed railway project with 100 million US dollars, and the Tajikistan-Uzbekistan border high-speed railway project with 27 million and 500 thousand US dollars. These are effective guarantees to promote infrastructure construction in the countries along the "Belt and Road".

5 Conclusion

In the rise of countries around the world, the Thucydides Trap warned that emerging countries would compete with the old powers, which may lead to unstable factors and even war. To promote "peace and development", Chinese government has learned lessons from history and proposed a new idea. So as to promote the development of all parties through the "Belt and Road" Initiative and to create a win-win cooperation with neighboring countries.

The "Belt and Road" Initiative proposed by China is not only the will of the country, but also the determination of the government. The government will be directly involved in the implementation of the "Belt and Road" Initiative. Under the government′s supervision, Chinese enterprises have been actively involved in the work. Research institutions have also contributed positively with their advice and suggestions. The "Belt and Road" Initiative has bright prospects, bringing us great opportunities as well as tough challenges.

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