Second Belt and Road Forum: Fostering trade relationships

In Summary

• Belt and Road Initiative was launched by China’s President Xi Jinping in 2013

• BRI seeks to play a catalytic role in emerging economies across Europe, Asia and Africa

An impression of the SGR
An impression of the SGR

With the Second Belt and Road Forum for International Cooperation being held this week in Beijing from 25 April 2019 to 27 April 2019, it is expected that the world’s attention will be squarely on China, and her plans for the Belt and Road Initiative (BRI).

The BRI, launched by China’s President Xi Jinping in 2013 and colloquially termed as the Silk Road Economic Belt, is hailed as one of the largest global initiatives of recent times. With land and maritime trade routes stretching across Europe, Asia and Africa, the BRI seeks to revolutionize global trade and infrastructure and ensure that China plays a more prominent role in global trade, particularly in the European, Asian and African markets. Specifically, through the BRI, China aims to establish infrastructure networks, including railways, roads, pipelines and utility grids that link China to the rest of the world. To achieve this, China has pledged USD 1 Trillion in funding toward infrastructure development.

Similarly, the BRI seeks to play a catalytic role in emerging economies across Europe, Asia and Africa by focusing on economic stimulants such as trade, finance and investment, agriculture and manufacturing, connectivity of infrastructure and facilities, ecological and environmental protection, tourism, cultural, social and educational exchanges. It is estimated that as many as 74 countries stand to directly benefit from the catalytic effect of the BRI, Kenya included.

Closer to home, it is clear that the Chinese push for infrastructure development is having an impact. On the back of Chinese loans, the Government of Kenya has embarked on ambitious infrastructure mega-projects that aim to modernize and revitalize Kenya’s aging infrastructure networks. From the Standard Gauge Railway to LAPSET, and numerous roads, bridges and power plants in-between, it is clear that accelerated infrastructure development is hot on Kenya’s agenda and within China’s lending capacity.

The above notwithstanding, critics have continuously cautioned against over-reliance on Chinese lending to fulfil Kenya’s ambitious growth strategy. Taking the fore, is the ‘debt trap’ concept that warns against China-skewed loan agreements. While the jury is still out on the validity of the ‘debt trap’ argument, it is yet imperative to ensure that our partnership with China, as with any other international trade partner, is mutually beneficial and inherently symbiotic. To ensure this, it is necessary to revisit the trade deficit between Kenya and China so as to ensure that Kenya maintains a mutually beneficial partnership with China in the long run.

This will involve securing market access for Kenya’s products in China therefore bridging the gap between Kenya’s imports from China and exports to the Chinese market. Similarly, maintaining information exchange programs will ensure that Kenya stands to learn from China’s strengths and expertise.

Karen Kandie – MD IDB Capital

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