Most recently, Belt and Road Initiative (BRI) has completed its first ten years. It was introduced by the Chinese president Xi back in 2013. It is now “responsible” for a new era of transit routes, trade, and growth for economies in Asia, Central Asia, ASEAN, Africa, EU and around the world.
The CPEC flagship project of the Belt and Road Initiative has brought great “positive” changes to Pakistan, which is reflected in the fields of economy, urban construction and energy. In the future, it hopes to carry out broader cooperation with China in the fields of economic development, education, health, climate change and so on. Moreover, CPEC Phase-II would bring more “progress” and “prosperity” in the country in the days to come.
Chinese International Development Cooperation Agency:
In this regard, the Chinese International Development Cooperation Agency (CIDCA) has published that the Belt and Road Initiative has seen the completion of over 3,000 projects within the last ten years. This expansive effort has garnered support from more than 180 countries and international organizations which is good omen for the regional as well as international economy.
According to many published report, the Belt and Road Initiative has become a mega development project with US$4 trillion investment in more than 160 countries, 1590 projects of 1.9 trillion tagged to BRI, 1574 projects of 2.1 t were Chinese investments.
Main projects pertaining to infrastructure development, formation of corridors, rail & transport connectivity, ports, railways in Western China, Central Asia, Western Asia, to Europe remained “strategic priorities” during the last ten years. Cargo trains run from Spain to China’s Western province Xingjian highlighted increasing influence of China in the world.
BRI Confrontation with multiple factors:
Critical analysis reveals that during last decade the Belt and Road Initiative confronted with pandemic, Western constant & continued propaganda of debt trap diplomacy, so-called imperialistic designs and grabbing of natural and financial resources of the participating countries. Ongoing Russia-Ukraine conflict, the US initiated decoupling and de-risking along with unilateral imposition of socio-economic, trade, tech and punitive legal measures have also tried to stop the journey of the BRI in the world but despite it the BRI has become an “ideal” engine of economic growth and stimulator of rail and transport connectivity in the world.
Thus Chinese “Geo-Economics” is dominating over Geo-Politics which is good omen. Moreover, Xi numerous initiatives mainly Shared Community, Global Development Initiative, Global Security Initiative, Global Civilizational Initiative and last but not least South-South Dialogue have become “new drivers of economic” stability and sustainability in the world and within the members countries of the BRI.
Geopolitically and geographically it is predicted that Kazakhstan, Turkmenistan, Uzbekistan, Iran, Laos, Indonesia, Malaysia, Singapore, Pakistan, Azerbaijan, Gulf States (Saudi Arabia, UAE, Qatar), Ethiopia, Nigeria and Somalia and many countries of the EU would be main focus of BRI projects in the next decade creating new window of opportunities of befitting proposition.
Iran-SaudiArabia Peace Deal:
In this connection, it is estimated that Chinese brokered peace deal between Saudi Arabia and Iran would be “New Launching Pad” for the BRI in the Middle East, GCC and MENA in the next decade.
Technologically and innovatively, it further forecasts that green financing, climate change, renewables (solar & wind), blue/green hydrogen energy production, lithium batteries, EV vehicles, hybrid cultivation/farming, disaster management, digitalization, e-commerce, big-data, quantum technologies, AI modernization, openness and last but not least, qualitative industrial cooperation would also be mainly focused in the next ten years under the flagship project of BRI.
Geo-economically, it is envisaged that BRI may increase global GDP up to 7 trillion annually increase of 5 percent for the next 10-15 years. International trade and investments in BRI may increase to 10 percent and 8 percent respectively. Resultantly, it may add 3 percent increase in income growth and 3 percent increase in standard of living in all the participating countries of the BRI.
Financially, inclusion of Islamic finances mainly Sukuk Bonds and Islamic Economies would play an important role in further expansion, development, strategic orientation and utility of the BRI in the next decade.
With BRI’s core and periphery involving many Muslim majority countries, it would naturally fit for Islamic finance to play an active role in the further expansion and development of the same particularly in infrastructure development/projects.
Hong Kong issuance of a Sukuk bond in 2014 it highlighted the chances of Islamic finance in the BRI. There have been further cooperation and collaboration in Sukuk bond of Malaysian and Qatari financial institutions in China.
According to Global Islamic Economy 2022, the Islamic finance has worth of US$3.6 trillion and has great potential to be used in BRI in the next decade. There is optimism about green financing through Sukuk issued by Indonesia, Malaysia. It would be helpful for China to achieve their goals for carbon neutrality, footnote reduction and further increase of Halal trade in the Muslim participating countries of the BRI in the next ten years.
Furthermore, the high capital intensity of BRI projects calls for innovative financing mechanism that could lead to win-win scenarios. To promote economic cooperation and infrastructure construction of countries along the BRI, China has allocated considerable financial resources, which include Silk Road Fund and Asia Infrastructure Investment Bank.
AIIB is a multilateral development bank that aims to finance infrastructure and capital projects in Asia and beyond. Muslims-majority countries like Pakistan, Iran, Kazakhstan, Saudi Arabia, Qatar, UAE, Indonesia, Malaysia and Bangladesh have been the key BRI beneficiaries. Collectively, these Muslims-majority countries occupy a strategic position along the BRI routes and thus having a good relationship with the Islamic countries is critical for the successful implementation of the BRI for China in which Islamic finance would play an important role.
In summary, Islamic finance receives growing interest, even in non-Muslim countries. World Bank (2017) upholds that the inherent structure of the Islamic banking system and its link to the real economy makes it a stable financing system. The IMF (2010) concluded that Islamic banks showed stronger resilience during financial crisis.
In the light of ongoing development of bilateral economic and trade cooperation between the Islamic World and China, banking and financial cooperation opportunities will continue to increase. Many conventional financial institutions in China started to engage in Islamic financial transactions: for example, Chongqing-based Southwest Security signed an agreement with Qatar National Bank (QNB) and Qatar International Islamic Bank (QIIB) in 2015 to develop Shariah-compliant finance products.
It is good omen that since the launch of the BRI in 2013, Chinese banks have made efforts to establish outbound Islamic financing frameworks and the cooperation between AIIB with Islamic Development Bank (IDB) is the prime example of it providing infrastructure financing facilities to Islamic countries.
Moreover, People’s Bank of China also became an associate member of Islamic Financial Services Board (IFSB) in 2009 thus moving towards further strengthening of Islamic finance cooperation in the next ten years of the BRI.
Interestingly, in 2009, Ningxia Bank launched a pilot project for Islamic finance offering Islamic banking for the local residents and businesses which should be further institutionalized in the days to come.
It is suggested that Islamic financing could provide China with a financing facility that is tailored for investment requirements and operational needs.
This article is written by Dr Mehmood Ul Hassan Khan
Executive Director: The Center for South & International Studies (CSAIS) Islamabad
Regional Expert: China, CPEC & BRI