China's Belt and Road Initiative: Is it Truly Neocolonialist?

During a visit to Kazakhstan in 2013, President Xi Jinping proudly announced the launch of the Belt and Road Initiative (BRI). This multi-trillion-dollar infrastructure project seeks to create an economic belt and maritime "silk road" that connects China to over sixty countries in Eurasia and Africa. The BRI aims to fund infrastructure projects such as highways, railways, seaports, airports, and oil refineries. Since its launch, China has been accused of enforcing neocolonialism through the BRI. By using the Hambantota Port and Colombo Port City project in Sri Lanka, I will argue that although China may have demonstrated neocolonialist intentions, partnering countries are equally responsible when making BRI project deals and can combat neocolonialism through negotiation. To expand off that, this piece argues that the BRI is not so much an example of neocolonialism as it is economic regionalism. 

The Belt and Road Initiative could potentially economically integrate several developing countries in the Asian region and beyond. But what's in it for China? The policy goals of the initiative include enhancing communication between foreign governments, implementing hard and soft infrastructure, strengthening cultural ties, and promoting regional cooperation. Hard infrastructure includes building transportation, networks and power grids, while soft infrastructure includes creating regulatory standards and trade deals. Cultural ties refer to sustaining intellectual and cultural exchanges, as well as tourism. The BRI would economically integrate countries within the Asian region by having fewer trade tariffs and standards for China when trading goods with partnering countries.

Because the concept of neocolonialism is interpreted in numerous ways, it is essential to first define it. The first Prime Minister and President of Ghana, Kwame Nkrumah, argues that neocolonialism has emerged as a substitute for traditional colonialism, where hegemonic powers exploit developing countries as colonies. Neocolonialism occurs when the economic and/or political system of an independent state is manipulated by another state. In other words, an outside state gains control over another state through "economic and monetary means," In neocolonialism, a state gaining economic control through the banking system or private industry is the start of foreign control over government policy. Nkrumah claims that because of this, the outside state uses the neocolonial state for exploitation rather than genuinely developing the state.

It is widely discussed that the BRI is neocolonialist because of its infamous "debt trap." A debt trap is a form of predatory lending in which a borrower is not able to pay their debts, so they continue to borrow until it becomes a cycle. It is often caused by high-interest rates. Akshan DeAlwis, John Jay Scholar at Columbia University, argues that the economic goals of the BRI are a facade, and by using the debt trap, China would be able to establish a military presence in the Asian region. DeAlwis further discusses non-economic factors of the BRI. He argues that China is trying to exert dominance through this opportunity to destroy local economies. DeAlwis also mentions the "String of Pearls" theory, which proposes that China is planning to develop overseas naval bases along the Indian Ocean to expand military forces in order to become a regional global power quicker than its rival power, India. 

China has made several deals with Sri Lanka through the BRI, and the two most prominent projects are the Hambantota Port and the Colombo Port City Project. These projects have demonstrated that partnering countries are equally responsible when making deals with China.

It is important to acknowledge that the host country is also responsible for its actions when making deals with BRI projects. In China's Asian Dream, author Tom Miller visited Sri Lanka to discuss China's involvement in projects under the government of Mahinda Rajapaksa, who went out of power by the January 2015 election. From 2009 to 2014, China financed almost $5 billion in ports, roads, bridges, railways, an international airport, and a coal-fired power station. This $5 billion loan, however, came at a high interest rate. Other multilateral banks and national banks, such as Japan's, typically offered lower interest rates. Ravi Karunanayake, Sri Lanka's Minister of Finance, stated that the high-interest rates by China's banks came from corruption on China's part, but also Mahinda Rajapaksa's corrupt regime of the past. Once Maithripala Sirisena's administration took over in 2015, it made sure to hold China accountable for its actions by suspending the Colombo Port City project. The project was suspended due to legal issues over land, the project's financing, and environmental effects. Karunanayake clearly states "'We mean business when we say we want clean, transparent, good governance... perhaps Chinese companies had to be corrupt in the past, but if they do that now they will be disqualified.'" When current President Sirisena visited Beijing, he blamed the previous regime for the issues that Chinese banks faced with the projects. Sirisena's administration renegotiated loan repayments with Chinese banks, lowering the interest rate and including additional environmental protections. 

China's neocolonialist intentions and the String of Pearls theory can be disproved by Sri Lanka's Hambantota Port project on the southeast coast of Sri Lanka. Dr. Natalie Klein, author of Maritime Security and the Law of the Sea, states that the Hambantota port is a commercial port and that BRI deals are commercial deals and loans, emphasizing that there is a difference between a commercial port and a military base. Klein continues to argue that the coastal state in which the port resides in is the one who has authority, regardless of who operates the port. This law has been established by the United Nations Convention on the Law of the Sea (UNCLOS). China cannot move forward with its projects without the acceptance of the host country. Therefore, Klein believes that no matter how big foreign investment is in a port, the coastal state still has control. 

The Hambantota Port project has sparked controversy within Sri Lanka because of China's debt trap and the fear of China using the port for military purposes. Hambantota was historically a Sri Lankan naval base but has switched into a port that has been built and now controlled by China. The port is under a 99-year lease to China Merchants Port Holdings for $1.12 billion. Because of this, there have been rallies conducted by the Sri Lankan public, fearing that China would use the port for their military to gain more influence on Sri Lanka as well as get closer to India, China's rival. Despite popular fears, the port deal has a clause that clearly states that the port cannot be used for military purposes. Additionally, Prime Minister Ranil Wickremesinghe's office stated that the Sri Lankan government has informed China that they are prohibited from using the port militarily, as the port is still under the control of the Sri Lankan navy.

 Sri Lanka has planned to create economic opportunity and jobs back to Colombo, its capital city. Through the BRI, the Sri Lankan government made a deal with the China Harbour Engineering Company to construct a $1.4 billion Port City development. The Colombo Port City would be used as an urban center for residential and commercial use. Bendix further explains that the China Harbour Engineering Company aims to add about 17 billion gallons of sand along the coast of the city, which has sparked concern from the Sri Lankan government due to environmental issues. Because of this concern, the project was suspended in 2014 by Prime Minister Ranil Wickramasinghe. Though this angered the China Communications Construction Company, the project's investor, the Sri Lankan government, and the China Communications Construction Company were able to continue the project after new environmental protections were implemented. The China Harbour Engineering Company had to obtain a permit to dredge about 3 miles out the coastline and at a depth of slightly less than a mile, and the company was not allowed to dredge near reefs and fishing grounds. Last, the company had to put aside $7 million in reparations to fishing associations considering the project's economic cost to local fishermen.

Stepping aside from Sri Lanka, the BRI has demonstrated a sense of cooperation when creating policies for the initiative. Many of the BRI's core tenants are consistent with international rules that have been written into the United Nations (UN), Group of Twenty (G20), the Asia-Pacific Economic Cooperation (APEC), and other international and regional organizations. Additionally, China signed about 170 cooperation documents with 150 countries and international organizations. The BRI also promotes financial connectivity by supporting the Guiding Principles on Financing the Development of the Belt and Road with 27 countries. Lastly, the People's Bank of China co-financed more than 100 projects in 70 countries and multilateral development institutions, which involves numerous nations acting together. 

After analyzing two of Sri Lanka's significant BRI projects, it can be concluded that the BRI is not so much neocolonialism, rather it is economic regionalism. Economic regionalism pertains to the liberalization of trade between neighboring countries in the same geographic region. The most important tenet of trade liberalization is economic interdependence, which intertwines national markets, making countries wealthier and raising the cost of war with their trade partners. Amitav Acharya, a scholar and author of The End of American World Order, discusses the emergence of regionalism within the changing international system. He states that emerging powers, such as China, take part in the world of interconnectedness and interdependence by focusing on initiatives based on infrastructure and economic strategy rather than trade and political strategy. Local and regional initiatives like the BRI are the future to this international system. 

China's President Xi Jinping spoke against protectionism in a 2017 speech in Davos, and Chinese policymakers, such as current Vice-Minister of the Ministry of Foreign Affairs He Yafei, have also spoken in favor of globalization. Additionally, in a 2016 Pew Survey, 60 percent of the Chinese public thought that being involved in the global economy is positive. On April 25 to 27 of 2019, President Xi Jinping held the second Belt and Road Forum in Beijing, welcoming leaders from 37 countries and delegates from 150 countries. President Xi Jinping discussed concerns raised by the United States over the BRI, trade, and infrastructure. He additionally addressed China's commitment to open its economy, enhance the interests of partnering countries, and implement environmental protection to BRI projects. China has made an effort to calm the fears of nations like Sri Lanka and the United States, advocating for economic liberalization and more particularly regionalism, as it would most strongly connect the Asian region. After decades of being closed off from the world, China has opened itself up to connect with neighboring countries and promote trade and infrastructure development, which benefits not only China but its neighbors as well. 

Damming to Disaster: The Dangers of Hydropower Proliferation in Laos

The proliferation of renewable energy is rarely a controversial issue, but painting the construction of new hydroelectric dams in the Lao People's Democratic Republic as exclusively positive ignores the negative impacts of such dam construction on rural communities. Laos hopes to transform itself into the ‘the battery of Southeast Asia,’ enacting a plan that aims to construct upwards of 140 dams at a furious pace. This plan includes building numerous dams on the Mekong itself, which is the lifeblood of 60 million people who fish the river and farm the lands along its banks. Stemming from China, where it is known as the Lancang River, the Mekong flows through Myanmar, Laos, Thailand, Cambodia, and Vietnam before emptying into the South China Sea. The fish caught from the Mekong alone account for more than 10 percent of the world’s trade in fish, with the river supplying food to more than 300 million residents of the Mekong’s riparian nations. Yet, while dam building presents an important opportunity for Laos to utilize the vast stretches of the Mekong that languidly meanders through the nation’s territory in the Indochinese Peninsula to generate power and revenue for the nation, improper project planning and a lack of adequate precautions threaten to destroy the river’s ecosystems and displace the communities that depend on it. The shortcomings in damming projects specifically impact the rural population in Laos, while benefiting the investors and government officials driving the dams’ construction. In order to assuage the harsh criticisms of Laos’ hydroelectric aspirations, the Laotian government must open channels for local input into projects before they are approved, ensure that the proceeds of dams’ construction benefit those who dams displace, and strictly adhere to regional processes addressing the transboundary impacts of the project.

Proposed dams on the Mekong River

The Mekong is the second most biodiverse river in the world, but inadequately planned dams could denude the fragile balance of life in the ecosystems it supports, robbing littoral communities of crucial food and revenue sources. The Mekong River Commission (MRC), an intergovernmental management institution with representatives from regional administrations, reported in a six-year, multimillion-dollar study that current dam development plans would result in a loss of 97 percent of the sediment in the Mekong by 2040 and reduce yearly fishing revenues by nearly 5 billion dollars. Sediment is a crucial fertilizer for much of the Mekong’s littoral farmland, and plays an important role in preventing sea-water creep in the Mekong delta downriver in Thailand. Existing dams already threaten fishing and farming communities, currently reducing sediment in the river by 40 percent. Another study by the MRC indicates that the losses that local fishing industry would incur as a result of the dams would reduce the economic benefit of the dams’ construction by roughly 25 percent by 2020. While more than 1,300 species of fish currently breed in the Lower Mekong Basin, dam construction plans that do not account for environmental concerns threaten to inhibit fish from migrating to their breeding grounds. The partially-constructed Don Sahong dam in Laos lies a few miles from the habitat of the only 80 Irrawaddy dolphins left alive, and the destruction in habitat caused by the dam may drive the species to extinction. Proper consideration of environmental concerns could mitigate such fears, yet unfortunately the government of Laos and the private investors building the dams fail to demonstrate such adequate consideration. Accusations emerged recently that the officially released impact assessment of the proposed Pak Lay dam contained major sections that are copied and pasted from the previous Pak Beng dam assessment, an assessment subsequently disproven by the MRC. The copied sections falsely claimed that the environmental impact of the dam would be “insignificant or positive.” The paucity of substantial pre-construction environmental consideration  illustrates the Laotian government’s callous attitude toward the toll levied on riparian communities by changes to ecosystems and presents significant obstacles to Laos’ goal of becoming a sustainable dynamo for Southeast Asia.

Laos’ dam construction plans particularly impact rural communities where citizens wield insufficient resources to surmount the challenges posed by their forced displacement and changing sources of livelihood. The Lower Mekong Basin’s population is 85 percent rural, and not only relies on the Mekong for more than just their commercial livelihood, but also for their very subsistence, with locals eating 18 times more fish than citizens in the United States. Even if communities downstream of dams successfully weather the water-related shocks, state-sanctioned forced displacement will uproot numerous communities upstream of dams. The reservoir created by the aforementioned Pak Lay dam will displace 20 villages, necessitating the forced relocation of at least 1,000 families. The construction of the Xayaburi dam, Pak Beng dam, Nam Theun 2 dam, and Theun-Hinboun Expansion Project further displaced roughly 20,000 people. Beyond flooding and erosion, the nearly 5,000 people relocated for the Theun-Hinboun Expansion Project face serious concerns about their ability to sustain themselves in their new towns. Now living in consolidated villages without access to the Mekong, this population lost access to land that they historically fished and raised rice on, and land near their new village is predominantly allocated to rubber tree plantations. Dam projects also significantly impact the communities living downstream of the dams. The Xayaburi dam impaired the agricultural and fishing capacity of 200,000 people, placing the population at acute risk of food insecurity, according to estimates by the NGO International Rivers. The construction of the Pak Beng dam altered the water level in regional rapids and pools, damaging the ecosystems that many local villagers fished to eat from and earn a living. The Cambodian director of the World Wildlife Fund criticized the decision to construct the Don Sahong less than two miles from the Cambodian border, given that in Cambodia upwards of 70 percent of the protein eaten by the local population is from fish, noting that “the dam will have disastrous impacts on the entire river ecosystem all the way to the delta in Vietnam.” While the government of Laos is a clear proponent of dam construction, it must commit adequate resources to easing the relocation process for the affected rural population. A decreased number of fish in waterways and insufficient governmental allocation of land for farming specifically endanger the primary income sources of the rural population. The forced displacement of large subsets of the rural population coincides with an effort by the government of Laos to switch agricultural practices from crop rotation to large-scale cash crop cultivation. Such rice and other cash crop cultivation requires lowland areas for farming, which is expensive to acquire because it is already limited in Laos and made further scarcer by the construction of dams in lowland areas. Indeed, although the populations forcefully displaced are often in some of Laos’ poorest regions, switching to monoculture farming requires significant upfront investment, forcing many displaced farmers to go into debt in order to switch their agricultural practices. Furthermore, monoculture farming places farmers at risk of price shocks in the market and pestilence. The government of Laos must pay specific attention to the struggles that the rural population faces as a result of the state-enacted forced displacement in the name of hydropower projects.

Laos’ hydropower proliferation projects follow a prototypical narrative of unequal core-periphery relations, with the governmental elites ignore the impact of dam construction projects on local income and food sources in order to profit off of foreign investment in hydropower projects. While energy from Laos’ dams sold to other nations could yield 17 billion dollars in profits, the damage to the Mekong River could result in costs as high as 66 billion dollars. Scholars criticize international institutions such as the World Bank and the Asian Development bank, along with private investors, for ignoring the needs of local communities in favor of their own profits. Indeed, the Laotian government is similarly at fault, for its model of dam construction relies almost entirely on foreign investment, and the government consistently proves itself unable to ensure that such foreign investors adequately account for social and environmental concerns. Still, the government of Laos continues to pursue such projects because they view them as crucial to maintaining Laos’ growth rate, which is currently characterized as “a star in South East Asia,” at roughly 7 percent. One cannot begrudge Laotian growth aspirations, yet growth-oriented projects such as dam construction must benefit the Laotian people, rather than lining the pockets of governmental officials. The high growth rates enabled by new projects such as hydropower that capitalize on Laos’ factor endowments will evaporate unless the profits of such projects are used to fight poverty and develop human capital resources. Troublingly, Professor Martin Stuart-Fox of Queensland University characterizes the government of Laos as “massively corrupt,” elucidating that “if you are the top of the party you get a lot of money, and there’s a lot of Chinese money coming in, of course, and there are top people in the politburo who are extremely wealthy.” While Laos transitions to a market economy, it remains a single-party political system, allowing those in power to benefit from their privileged position. The Laotian government argues that the revenues of energy sales from dams will finance anti-poverty and social welfare programs. This is a sound policy in theory, but in practice the gross majority of power produced by the dams goes to the foreign companies that financed the dams, and is then reimported back into Laos at a higher price, resulting in electricity prices tripling for some citizens in Laos. After a catastrophic dam collapse in late July of this year, the government supposedly issued a moratorium and nationwide review on dam construction, yet the developers constructing the Pak Lay and Pak Beng dams reported that they received no instructions to halt construction. Just days after the moratorium’s release, Laos, Thailand, Cambodia, and Vietnam agreed to begin the regional consultation process for the Pak Lay dam, a clear indicator that the government of Laos does not plan to end its dam construction any time soon. Laos itself does not require greater hydropower to meet its domestic electricity demand, with energy sales already constituting 30 percent of its national exports. The lack of domestic need for hydropower signifies that the construction of new dams is aimed at foreign markets, thus involving foreign investors who will likely offer monetary incentives to the officials approving such projects, while the rural population continues to bear the burden of new dam construction. Obstacles to Laos’ goals of expanding energy exports may cause the hardship inflicted upon the rural population to be entirely unnecessary. While Laos and Thailand signed an understanding concerning expanding Laotian energy sales to Thailand through 2036, experts caution that Thailand already meets its energy needs, and thus may not be a sustainable market for future energy sales. In March, Thailand retracted its plans to purchase energy from the planned Pak Beng dam, the construction of which was predicated on an agreement to sell 90 percent of the energy it produced to Thailand. The Laotian National Policy on the Environmental and Social Sustainability of the Hydropower Sector outlines that all projects must include full public disclosure of the dams’ impact, yet without a free press and with Laos ranked near the bottom of global corruption indexes, there is little indication that the government of Laos will change its course and properly account for the struggles of the rural population.

Inequitable land titling regulations in Laos exemplify both the preferential treatment of foreign investors and the dearth of Laotian governmental capacity to protect both rural populations and the environment around them. Scholars in Energy Research & Social Science elucidate that without “stronger supervision and conditionality for project implementation,” elites will be able to capture the benefits of dam construction. Indeed, rather than protect rural populations, regulatory apparatuses can also further disenfranchise rural populations. When planning new dam construction, the government is able to designate land as ‘underutilized’ in order to justify the forced displacement of the local population. Given that since the governmental transformation in 1975, the Government of Laos controls all land in the nation, thus requiring that the government give titles for all land use. The Laotian Land Titling Program gives permanent land usage rights to those in urban areas, which cannot be easily withdrawn. In contrast, the Land and Forest Allocation policy in Laos grants rural residents temporary land use rights. As a result of this, not only are rural residents not secure in their homes due to the temporary nature of their land use permissions, but the process to acquire those permissions is also more lengthy. In 2015, the Government of Laos issued barely half of the number of titles that they intended to. Even when titles are issued to the rural population, “...due to corruption, titles may simply be ignored and land taken regardless of titling schemes that involve local land and resource users,” according to the NGO Global Witness. Global Witness estimates that private companies leased between 1.1 million and 3.5 million hectares of land, affecting 18 percent of the villages in Laos.  As previously discussed, the forced changes in rural agricultural practices make farmers more vulnerable to crops’ price fluctuations and harvest failure, which may lead to ‘distress sales,’ wherein the residents of an area are forced to sell of their land to survive. For foreign investors, on the other hand, Special Economic Zones grant land at a far more expedited rate to foreign investment projects. Additionally, new dam building plans such as the Build-Own-Operate-Transfer scheme result in foreign investors controlling the majority share in many newly constructed dams. This significantly erodes the Laotian government’s ability to regulate the effects of dams. The Laotian government only owned 25 percent of the Xe-Pian Xe-Namnoy dam, which collapsed in summer 2018. This precedent is increasingly worrying, given that the Laotian government will control as little as 10 percent of the shares in some new dam projects. Researchers write in the journal Global Environmental Change that “ownership and finance is increasingly private and less sovereign as use rights and decision making power over the exploitation of natural resources have been centralized and privatized into the hands of a consortium that has financial interests in maximizing power production.” The trend of decreasing Laotian government ownership in damming projects and the preferential treatment given to foreign investors in land titling demonstrates the need for stronger governmental oversight in the planning of new dam projects.

If Laos aims to transform itself into the renewable hydro-power engine of Southeast Asia, then foreign investment is the gear that allows that engine to turn, but derisory regulatory oversight allows the interests of foreign investors to supercede those of the local populations. Laos’ insufficient capacity to construct dams independently results in 80 percent of the funding for dam projects originating from foreign investors. The demonstrated interest of foreign investors creates new pressure on the Laotian government to use hydropower projects as a catalyst for greater national growth, resulting in greater numbers of dams. The subversive power of foreign capital shifts the Government of Laos’ focus from specific goals such as poverty reduction through dam development to the act of dam construction itself, due to the monetary incentives for officials to support such foreign-funded construction projects. Foreign investment is a large enough component of the Laotian economy that different groups emerged with the Laotian one party government, with a faction of older party members and party members from the South of Laos favoring Vietnamese investment, and a faction of younger party members and members from the North favoring Chinese investment. Serious Laotian infrastructure projects even outside of dam-building exist with both Vietnam and China. A newly announced highway will link the Laotian capital, Vientiane, with the Vietnamese capital, Hanoi. Entirely landlocked, Laos also gained access to the Vung Ang seaport in Vietnam after the two governments signed a joint agreement, with a railway between Vientiane and the port projected to cost 5 billion dollars. In 2013, China surpassed Vietnam to become Laos’ largest foreign investor, with China footing the bill for the most expensive infrastructure project in Laos, a railway connecting China and Laos, which will cost, 6 billion dollars, half of Laos’ GDP. China also funds the construction of the Pak Beng dam, with a Chinese firm to control the sales of the gross majority of energy from the dam.  Singapore is also involved in Laotian investment, spending more than a quarter million dollars in the nation. As public debt reached 60 percent of the Laotian GDP in 2017, combined with plateauing demand for the energy produced by Laos’ dams, fears arise about if Laos will ever be able to repay this debt, and about the influence that Laos’ lenders may wield on Laotian policy decisions. The now collapsed Xe-Pian Xe-Namnoy dam was constructed by a South Korean company, with Thai and Laotian partners. Shalmali Guttal, executive director of Focus on the Global South, argues that the dangers of the Xe-Pian Xe-Namnoy dam were sidelined in favor of corporate ambitions, positing that “The risks are masked to make the investment worth it.” The Laotian Prime Minister, Thongloun Sisoulith, aims to combat corruption such as that which enabled the construction of dangerous dam projects during his tenure, yet his administration’s former finance minister was arrested along with four other senior officials for giving out bonds for infrastructure projects that never existed. Thongloun took important steps by advising an audit of public officials’ finances, and banning the opening of new banana plantations and the export of timber to China, both of which caused significant pollution and environmental destruction. While Thongloun’s stated belief that “we can have foreign investment, but we must share the benefits. There should be fairness,” is encouraging, Laos must strengthen its government oversight of foreign investment projects and enforcement of protective regulations in order to achieve such fairness.

The Mekong crosses the borders of six nations, and any change to it will inherently affect the other riparian nations, yet the Laotian government worryingly circumvents the processes of regional regulatory mechanisms. The Mekong Agreement established the Mekong River Commission in 1995, aimed at analyzing the transnational impacts of projects on the river. Laos, Cambodia, Thailand, and Vietnam all signed the agreement, with China and Myanmar not joining the agreement in an effort to escape its jurisdiction. This effort succeeded, with 8 Chinese dams already on the Mekong and 20 more soon to come, none of which were subject to approval by the MRC. This exhibits a clear weakness in the MRC, for it lacks the enforcement power necessary to ensure that nations adhere to its directives. Laos’ unilateral decision to proceed with the Xayaburi dam’s construction illustrates this institutional weakness, for while Article 5.4.3 of the MRC’s procedures states that the committee of nations must jointly approve a proposed project, Laos decided to begin the dam’s construction without the approval of its fellow riparian nations. Laos instead cited a report by a Swiss company that used more than 40 still-unfinished studies to falsely argue that concerns about the dam were adequately addressed. This is a further example of corporate interests subverting regulatory mechanisms and endangering both the local ecosystems and population. The copied and pasted report that Laos submitted to the MRC was at best a tacit attempt to conform the regional body’s rules. The lack of concern for the regional impact of national dam projects sets a worrying precedent for the future of the Mekong and the communities that rely on it.

On July 23rd, 2018, an auxiliary dam at the Xe-Pian Xe-Namnoy hydropower complex burst, releasing a thunderous wave of 5 billion cubic meters of water that claimed 36 lives, with 98 people still missing, and destroyed the homes of more than 7,000 people. Less than a year before the Xe-Pian Xe-Namnoy collapse, the Nam Ao dam broke after the company constructing it did not follow standard practices, yet regulatory enforcement did not expand following that previous collapse. The collapse affected 13 villages, and reportedly destroyed 95 percent of the homes in some of the villages affected. The man made crisis has lasting repercussions, with families losing vast food stores that would have fed them for months, and with waist-deep mud preventing those whose homes survived from returning. The CEO of the MRC expressed hope that following this most recent collapse, sustainable and less contentious paths for development along the Mekong could be explored. Yet, just weeks after the collapse, the MRC began the consultation process for the proposed Pak Lay dam. This raises concerns about the Laotian government’s ability to protect its citizens from predatory business practices, for the dam’s builders knew that something was wrong before it collapsed. The Xe-Pian Xe-Namnoy project was previously criticized in 2013 for its inadequate public consultation, environmental planning, and impact assessments. The support provided to those displaced by the dam’s original construction also proved insufficient, with those displaced without adequate access to food, water, and new land. Following the dam’s collapse, citizens criticized the government’s efforts to conceal the disaster through social media posts, given that all other forms of media are tightly censored. Authorities also failed to notify Cambodian officials about the incoming water, with 1200 Cambodians displaced by the dam collapse. The effects of the collapse stretched as far as the Mekong Delta in Vietnam, where farmers’ fields were damaged. The question remains if this disastrous loss of life and the monumental crossborder impacts will prove sufficient impetus for the Laotian government to reconsider its hydroelectric ambitions. Former analyst for the U.S. Department of Energy, François Le Scornet, expounds that “..hydropower development is too important for the political power in place to significantly challenge the overall development plan,” demonstrating the conflict between the political motivation for dams’ construction and their sometimes-lethal impact on rural communities. The widespread impacts of the Xe-Pian Xe-Namnoy auxiliary dam’s collapse should serve as a call for Laos to reexamine its policy of forcefully displacing its citizens to serve foreign corporate interests.

The former vice minister of energy and mines who was behind Laos’ unilateral decision to proceed with the controversial Xayaburi dam responded to news of the Xe-Pian Xe-Namnoy collapse by saying that “For me, it is for the better. We have done so many projects; it is time we reassess.” Such reassessment is critical to ensuring Laos’ prolonged success. Renewable energy is an admirable aspiration, but it must be constructed in a way that does not unfairly inflict harm on the rural population through forced displacement, insufficient available land, and environmental destruction. The government of Laos must develop regulatory mechanisms capable of standing up to the powerful capital of foreign investors. Furthermore, the Laotian government must follow the procedures of the MRC, to assuage the transboundary impacts of its rapid dam proliferation. Laos as a whole can benefit from dam building, but only if the concerns of local communities are addressed, environmental impacts are analyzed, regional partners are engaged in discussion, and above all else, if the proceeds of dam building benefit the communities where dams are built rather than corrupt officials.

Infrastructure is Donald Trump’s Most Popular Policy, But The President Can’t Strike a Deal

“The oath of office I take today is an oath of allegiance to all Americans. For many decades, we’ve enriched foreign industry at the expense of American industry; Subsidized the armies of other countries while allowing for the very sad depletion of our military; We’ve defended other nation’s borders while refusing to defend our own; And spent trillions of dollars overseas while America’s infrastructure has fallen into disrepair and decay.”

Nearly 31 million Americans were listening in to the new president’s inaugural address on a chilly January morning. The speech they heard was unlike any other given by a U.S. president in living memory, calling out a dying nation whose most basic industry and infrastructure were in ruin. “American carnage,” he called it, pointing to the country’s once-famous highways, airports, and bridges that had fallen into disarray. The president went on to assure the audience that under his leadership, the nation would soon embark on the great mission of rebuilding its crumbling infrastructure “with American hands and American labor.”

This was not the usual promise of newly-elected Republican presidents, but it was a familiar refrain from Donald Trump, who had spent over a year on the campaign trail vowing to invest in American infrastructure. In October of 2016, the Trump campaign unveiled a groundbreaking new infrastructure plan: a spending package that would combine private and public investment, clocking in at over $1 trillion dollars, easily eclipsing Hillary Clinton’s $500 billion plan. Donald Trump’s campaign site on infrastructure included a length list of promises, including a “visionary” new transportation system in the tradition of President Dwight Eisenhower, the establishment of new pipelines and coal export facilities, and the creation of thousands of jobs in construction and manufacturing. Such a massive government spending project was major departure from Republican orthodoxy, which had long been averse to any such public spending increases. Just eight years prior, Republicans had staunchly resisted President Barack Obama’s post-recession stimulus proposal that included, among other things, broad investments in infrastructure and transportation. Donald Trump had never been a typical Republican, however, campaigning on a platform based more in populist nationalism that left little room for the fiscal conservatism that had come to characterize the Republican party. Americans recognized this, with polls showing that voters thought of Trump as less conservative than any other Republican presidential nominee in modern history.

From an electoral perspective, Donald Trump had plenty of reason to embrace the infrastructure investment plan. Increased infrastructure spending is popular among Republicans and Democrats alike, and was one of Trump’s most well-received budget proposals earlier this March with a 79 percent approval rating. At the time of his inauguration, 69 percent of Americans believed that President Trump’s pledge to increase infrastructure spending was “very important,” exceeding every other promise that Trump made on the campaign trail. Infrastructure also handily weds the liberal objective of public investment with the conservative goal of job creation and attracted support spanning the political spectrum from liberal economist Paul Krugman to former White House chief strategist Steve Bannon. The proposal also deliberately evoked memories of Dwight Eisenhower’s leadership of the Interstate Highway System, which remains widely celebrated by liberals and conservatives alike decades later (a rare feat). Infrastructure spending would theoretically be an easy sell to both the public and D.C. insiders, with significant amounts of support on the left and the right.

Donald Trump’s advocacy of an infrastructure investment plan also highlighted one of his strongest qualities as a presidential candidate, namely his reputation for deal-making and pragmaticism. Infrastructure has long been a major goal of the Democratic party, pushed repeatedly by President Obama and shot down time and again by congressional Republicans. Trump is no stranger to this fact, and has spoken openly about his goal of cutting an infrastructure deal with Democrats in Congress. Democratic senators representing states that Trump won could be particularly open to the promise of an infrastructure package, aiming to reach out to Trump’s base and bring needed investment to struggling states like Ohio and North Dakota. One New York Times interview showed President Trump beaming at the possibility of an deal, hoping for “tremendous” support from Democrats “desperate” for a win on infrastructure.

Eight months out from his inauguration, however, President Trump has taken little action to begin negotiating an infrastructure investment deal. In May, Trump announced that the White House’s plan was “largely completed” and would be released within two to three weeks if not sooner, but the story was quickly overshadowed as the president moved on to traditional Republican policy goals such as repealing the Affordable Care Act. Trump’s initial appointment of Elaine Chao as Secretary of Transportation was well-received, but other key positions in the department such as the administrators of the Federal Highway Administration and the Federal Railroad Administration have been left empty since Trump took office. Now the president seems more concerned with promoting the Republican party’s tax cut plan, even in the wake of destruction unleashed by Hurricanes Harvey and Irma that necessitates large-scale infrastructure rebuilding.

But even if Donald Trump did have his sights set on an infrastructure negotiations, he would likely face several obstacles on the path to a deal. Even though Trump should have an advantage with Republicans controlling both houses of Congress, his spending plan would likely be a hard sell with conservatives. Congressional Republicans have already spent the last eight years challenging President Obama’s proposals to increase transportation and infrastructure spending, including Obama’s post-recession stimulus package in 2009. Though Trump’s proposed plan focuses far more on private spending and investment than Obama’s, Republican leaders have still been lukewarm at best about the prospects of an infrastructure deal. Speaker of the House Paul Ryan and Senate Majority Leader Mitch McConnell have been largely silent on the issue, while House Majority Leader Kevin McCarthy has emphasized that he would only a consider an infrastructure plan that did not come with any increases in spending. Congressional Republicans, currently preoccupied with the conservative goal of large-scale tax cuts, are unlikely to provide much help to President Trump on a massive infrastructure spending package.

Trump’s recent negotiations with Democratic leaders on the debt ceiling and DACA point to the possibility that the president could push through infrastructure reform by working on a deal with Democratic leadership. However, this path poses its own difficulties. The president’s current deals could quickly unravel, owing to his impulsiveness and tendency to go back on his word, which raises doubts about the fate of any future negotiations. In addition, Trump’s current infrastructure proposal emphasizes private investment, which would likely face resistance from Democrats who favor a plan based in direct government spending. Though Trump could negotiate a new plan featuring greater public investment, he risks alienating many of the Republicans he would need to cross over and vote with Democrats to pass a bill. Congressional Democrats who were initially optimistic about the possibility of working with the president have also grown more wary in recent months. Ohio Senator Sherrod Brown, once open to negotiating with President Trump in areas they agree on, has expressed fears that the president’s infrastructure plan would empower Wall Street while sacrificing protections for workers and the environment. Trump would have to win over reluctant Democrats by proving that an infrastructure deal will be to the benefit of their own states and not just the current administration’s allies.

The prospects for Donald Trump’s massive infrastructure rebuilding plan seem great, and would likely be met with broad support from both the American public and the chattering class. However, the path to passing such a massive spending plan is far more rocky than the president’s rhetoric seems to indicate. Though Trump prides himself on his deal-making talent, he has yet to to demonstrate the commitment to careful and difficult policy negotiations that a bipartisan infrastructure spending deal would mandate. Striking an agreement between Republicans and Democrats in Congress would require President Trump to walk a fine line between private and public spending, and party priorities are currently focused more on tax cuts and DACA than on infrastructure. As it stands, Trump’s lack of interest in advancing his most popular policy proposal prevents these negotiations from even getting off the ground.

The Pragmatic, the Exciting, and the Uncertain: Hillary Clinton's Infrastructure Proposal

In late November 2015, the Clinton campaign announced plans to pursue an increase in federal infrastructure spending by $275 billion over 5 years, a plan the campaign calls “a major down payment on a stronger America”. Though comments concerning the plan have been largely muffled on the campaign trail by emphasis on the historical achievement of her mere nomination, email scandals, and the bewildering aura of her Fall challenger, Clinton did state in late May her intention to send “a comprehensive infrastructure proposal to Congress in her first 100 days in office”. Presumably, the inclusion of the plan in the agenda of her first 100 days signifies the status of this issue as a top priority for Clinton, and something she seems willing to bet her legacy on should she have the pleasure of serving.

Which is an issue, because while the plan is appealing rhetorically, it features a worrying lack of detail. While the Clinton campaign claims that the plan will be fully paid for, it only mentions “business tax reform” as its method of payment, without any specifics concerning which particular taxes will change, the manner in which they will change, or how reforming the business tax code will capture an extra $275 billion over 5 years. Nevertheless, it should be noted that it is generally accepted in the economic community that “business tax reform” is a worthwhile policy goal, as it is much more efficient to simply tax people’s incomes if you’re looking to tax them. That being said, if a President Clinton finds herself facing a Republican Congress next Spring, the likelihood of her presiding over revenue positive tax reform is dubious.

However, once one gets past the unclear method of payment, the Clinton campaign’s plan starts to get interesting. Of the original $275 billion sticker price, $250 billion will be set aside for direct infrastructure investment via conventional tax and spend methods. General repair is a major part of this spending—as the campaign vows to “fix and expand our roads and bridges”, oversee maintenance projects on various pipelines, dams, and levees, and address the “pothole tax”. But the biggest emphasis seems to be on new projects with an eye on efficiency and new technology. Not only does the plan call for the construction of new airports and air traffic control systems, expansion of public transport options with an emphasis on higher capacity passenger rail systems, and “initiating the upgrades of the at least the 25 most costly freight bottlenecks by the end of her first term”, but the plan also articulates a desire for investment in clean energy via attention to the development of a “smart” electrical grid, creating space for non-gasoline fueling stations, and ensuring that “the federal government is a partner in delivering clean and affordable energy”. The Clinton campaign even commits itself to ensuring that, by 2020, “100 percent of households in America will have access to affordable broadband that delivers world class speeds”. If all this was not enough, the campaign assures voters that this infrastructure plan will involve to creation of thousands of “good paying, middle class jobs – paying well over the national median” in order to make it happen.

And according to economists at large, all of this is pretty good stuff, as infrastructure investment in general has shown to have a positive relationship with economic growth (though the magnitude of this relationship is still up for debate). Specifically, economists will be generally be favorable to the idea of repairing roads to address the “pothole tax”, allowing money that would otherwise be allocated to car maintenance to flow into consumption that is utility positive, raising social welfare. Additionally, while not a public good by definition, clean energy is generally considered a type of good which is chronically underprovided by the market due to the typically large up-front costs and low rates of return, meaning that third party intervention is needed to capture the gains in welfare that are not realized when it is underprovided. Also, Clinton’s plan to connect 100 percent of Americans to high quality broadband is another provision of her plan that is likely to score points with labor economists, as lack of internet access is one of many things that have been cited as holding potentially capable workers from realizing their maximum income potential.

But perhaps the most interesting part of Clinton’s plan is the allocation of $25 billion as a seed fund for an independent, government owned infrastructure investment bank, both because the design and role of the bank lacks detail and precedent, but also because it could potentially offer a more permanent solution to infrastructure neglect in the future. The Clinton campaign states that the bank will exist to “provide loans, loan guarantees, and other forms of credit enhancement” to fund investment in “complex multi-modal projects like freight and port improvements, and in projects to modernize our energy, water, broadband, and transportation systems in urban and rural communities”. The bank will do this by issuing “special ‘super’ Build America Bonds”, building upon the structure of a program that lived and died within Obama’s first term. The campaign also mentions that the bank will be a “one-stop-shop” for state and local governments, municipalities, and project sponsors to secure the capital and expertise needed to see through infrastructure projects that have been vetted and approved by the bank’s “bipartisan review board”.

Unfortunately, but perhaps not surprisingly, the campaign leaves out many of the technical details of the bank’s creation and operation schemes that would be useful in imagining what exactly the bank would look like and how it would operate. Currently, the Build America Transportation Investment Center (BATIC), the keystone of the July 2014 executive action Build America Investment Initiative, considers itself a “one-stop-shop” for expertise in infrastructure projects. The BATIC does not, however, issue credit itself, but rather walks applicants through the process of securing private loans or applying for financing via the Transportation Infrastructure Finance and Innovation Act (TIFIA) program, administered by the Department of Transportation, which provides long-term, flexible financing for highway and transit projects at below market rates, allowing communities easier access to funding for certain infrastructure projects.

Considering that the Clinton campaign has explicitly stated that the infrastructure bank will serve as a “one-stop-shop…to utilize federal resources and expertise in developing infrastructure projects”, it is most likely that a President Clinton will look to combine the efforts of both the BATIC and TIFIA programs to create a single source of both expertise and federal credit for infrastructure projects. Creating a new bank on its own would simply duplicate the responsibilities of these existing programs, and dissolving the BATIC and TIFIA offices in order to create her new bank seems to be an unnecessarily roundabout way of bringing the bank into existence.

Regardless of the exact specifics of the creation scheme, it does appear that the capability of Clinton’s infrastructure bank does, to some extent, already exist within multiple programs. That should not, however, necessarily discourage their synthetization into a single entity that both counsels and finances future infrastructure projects, as advocates have noted that the ability for a bank to cut across offices to get expertise and financing options to clients allows for a more efficient process in getting projects off the ground. It should also be noted that the current BATIC and TIFIA programs are concerned with highway and transit projects, and that if the Clinton campaign’s direct spending agenda is any indication, the infrastructure bank will be tasked with financing projects far beyond repairing roads and laying down new railroad tracks.

The bank’s capability could potentially go beyond simply synthesizing the current capabilities of various offices however, as the campaign has suggested that the bank would have the authority to issue “‘super’ Build America Bonds”. The original Build America Bonds (BABs) were a part of the American Recovery and Reinvestment Act of 2009 that allowed state and local governments to reduce their borrowing costs when funding infrastructure projects, making it easier to finance projects via loans as opposed to traditional tax and spend methods. The program ended on December 31, 2010, though the Department of Transportation is still on the hook for paying interest on both the 10 and 30 year bonds that were part of the program. The campaign’s use of the adjective “super” to describe their version of the BAB program suggests that the campaign looks to reinstate and expand the issuance of BABs through the infrastructure bank, but is silent as to just what this expansion would look like. Perhaps a Clinton Presidency would look to simply issue more of these bonds, or perhaps focus on issuing longer term bonds with higher sticker prices to raise more capital up front for projects today. Unfortunately, we can do little more than speculate as to how the campaign plans to supersize the BAB program of the past, but we can be reasonably sure that the campaign looks to create an institution that uses an expanded form of BABs to help finance infrastructure projects in periods of inaction in Congress.

And the political advantages of being able to fund infrastructure investments with only the implicit approval of Congress should not be discounted, and they are doubtlessly a major point in favor of the bank’s existence. Assuming that it is adequately funded, the bank holds the potential to continue nationwide infrastructure investment irrespective of infrastructure investment’s political popularity. When the Clinton campaign highlights the need to “improve the way we invest in infrastructure”, this bank is what they are talking about. With the establishment of this bank, the Clinton campaign looks to address not only the neglect of past decades, but the potential neglect to come in future decades as well.

However while the potential to bypass Congressional inaction may certainly be appealing in the case of infrastructure investment, it must be stressed that there is little to no precedent for this kind of institution in the world. The closest example of a nationwide infrastructure bank like the one the Clinton campaign seems to be describing is The Infrastructure Bank Plc in Nigeria. The bank is tasked with “providing financial solutions to support key long term infrastructure projects”, much like the Clinton campaign’s proposal, but is majority privately owned, with federal, state, and local governments, as well as the Nigeria Labour Congress as individual minority shareholders. Additionally, the China-led Asian Infrastructure Investment Bank (AIIB) launched on Christmas Day 2015, and while it also is focused on providing expertise in and financing infrastructure projects in Asia, it has 57 countries as members/shareholders, and 20 members who are not in Asia. Again, while the goals of the AIIB are analogous to the Clinton campaign’s proposed bank, it does not appear as though its modus operandi will be comparable.

Additionally, and perhaps more worryingly, the details that the campaign offers pertaining to the practical operation of the bank are largely nonexistent, and big questions loom over the proposal. The campaign has stated that the bank will be headed by “a bipartisan board of highly qualified directors”, who will presumably influence or even make the final decisions as to which projects get funded and which do not, but does not offer suggestions as to how it plans on selecting and properly vetting candidates for the banks board of directors. The campaign also mentioned that applicants must be able to demonstrate that projects are in the “public interest”, but does not define “public interest” or clarify how one might differentiate between projects that are or are not in “public interest”. Even further, the campaign is silent as to how the bank or its directors would be held accountable for selecting projects that are in the “public interest”. Even basic concerns of equity are not addressed by the campaign, as it offers no explanation as to how local municipalities who are cash-strapped or have poorer credit are expected to benefit from this new bank, leaving the bank’s operation scheme open to criticism of only benefiting well-to-do communities that can better afford infrastructure investment, but may not need it as much.

Nevertheless, from an economic perspective, there’s a lot to like from what we do know of the Clinton campaign’s proposal, and this shouldn’t be discounted by the disappointment that may come from the proposal’s more unclear areas. Given Mrs. Clinton’s statements concerning the status of this proposal as a top priority of her presidency, it should certainly be expected of the American electorate to challenge Mrs. Clinton over the next few months to clarify details concerning her plans to pay for the proposal and of the infrastructure bank’s creation and operation schemes, in order ensure that the campaign is putting forth a thorough and realistic plan that can immediately be acted upon in a Clinton Presidency. While the buffoonery of her Fall challenger may cause some to simply accept Mrs. Clinton’s proposal as satisfactory by virtue of not being utterly ridiculous, this should not preclude a proper vetting process in which the viability of Mrs. Clinton’s proposal is put on trial by the American public. As it stands, no matter how enticing the potential of the plan may seem, the mystery surrounding key details should keep enthusiasm grounded, and the jury still out.