The Silk Road and Global Trade
Have you ever heard of the Silk Road? The Silk Road was an important trade route in ancient times that linked the Western world with the Middle East and Asia. Merchants would use this route, bringing along goods such as silk and spices to trade between the Roman Empire and China and later between medieval European kingdoms and China.
Geography and Map Division/Library of Congress, Washington, D.C. (gct00215-ca000005)
In ancient times, traders would have taken months to years to move their goods across the Silk Road from Italy to China. What if we had a modern-day Silk Road that could reduce this travel time to a matter of weeks or days? This is the aim of China’s Belt and Road Initiative (BRI), also known as the New Silk Road, which is to improve regional connectivity and facilitate trade liberalisation.
What is the Belt and Road Initiative (BRI)?
Launched in 2013, the Belt and Road Initiative (BRI) is the largest and most ambitious infrastructure programme to date, loosely organised around seven corridors and spanning over 70 countries. At the end of June 2020, there are 3,412 BRI-related projects planned or underway, with a total value of US$4.16 trillion. In the map below, you can see how massive the extent and geographical reach of the BRI is projected to be.
How is Singapore Involved in the BRI?
Singapore is a major financing hub for the BRI. Amongst ASEAN member countries, Singapore ranks as the top fifth country seeing the largest BRI-related capital flow, with US$70 billion of funds. Singapore captured close to 23% of total investment outflow from China to BRI countries in 2018 and 85% of China-bound inward investments flow through Singapore.
As a leading financial centre in the region, Singapore is one of the largest offshore Renminbi centres and serves as a base for several international banks. Many companies in the infrastructure financing ecosystem, such as infrastructure developers and legal service providers are based in Singapore. Singapore’s financial centre can play a useful role in structuring and providing specialised insurance coverage for Belt and Road infrastructure projects. Two-thirds of Southeast Asia infrastructure projects are arranged by Singapore-based project finance teams.
Singapore is also a source of third-country partnerships for the BRI. Singaporean firms have already been proactive in exploring new opportunities under the BRI, particularly infrastructure consultancies. For example, Singapore government-owned Surbana Jurong and China Highway Engineering Consulting Corporation signed a joint venture agreement in 2018 to undertake infrastructure-related projects in Belt and Road countries. In 2018, Singapore’s Ministry of Trade and Industry and Enterprise Singapore also signed a Memorandum of Understanding with China’s National Development and Reform Commission, to promote collaboration between Singapore and Chinese firms on BRI projects through initiatives such as business matching activities.
Environmental Impacts of BRI Projects
The Belt and Road Initiative appears to be a great idea, until you consider the environmental impacts of the projects. Infrastructure projects require inputs, such as water and resources (e.g. minerals, sand, oil, natural gas). They also produce non-product outputs, such as greenhouse gas emissions, air pollutants, water pollutants and solid waste. If not managed properly, the extraction of inputs and the release of outputs can have devastating impacts on the surrounding ecosystems near project sites, as well as on the environment and climate. As a result, ecosystem services can be disrupted, leading to widespread repercussions for our societies and economies.
A spatial analysis conducted by WWF-Hong Kong showed that BRI corridors overlap with the range of 265 threatened species including saiga antelopes, tigers and giant pandas. In addition, BRI corridors also overlap with environmentally important areas – 1,739 Important Bird Areas or Key Biodiversity Areas and 46 biodiversity hotspots or Global 200 ecoregions. Through the analysis, all protected areas in BRI corridors were potentially impacted with 32% of the total area of all protected areas in countries crossed by BRI corridors being potentially affected.
Transportation was the biggest sector for BRI projects, accounting for US$1.04 trillion or 45.81%, of the total project value at the end of June 2020, followed by Power & Water and Real Estate. It is also highlighted that several types of energy and transport infrastructure projects under the BRI (particularly coal, hydropower and shipping) pose particularly significant environmental risks, such as for biodiversity and climate. Linear infrastructure projects such as transport railways involve clearing land, which can lead to habitat fragmentation and biodiversity loss. Energy projects such as coal mining require removing massive amounts of topsoil, which can lead to erosion, loss of habitat and pollution (not forgetting that the burning of coal for energy itself produces massive amounts of carbon dioxide as a by-product, exacerbating global warming).
Moving Towards a Green BRI
Although there are many environmental risks and impacts from infrastructure projects, there exists an opportunity for sustainable development if environmental considerations are taken into account in projects. Sustainable infrastructure projects, that integrate environment, social and governance considerations, can protect the environment and increase resilience while supporting economic development through generating employment and boosting international trade.
Several green guidelines and frameworks for BRI projects have been released, such as the Guidance on Promoting Green Belt and Road and the Green Investment Principles (GIP) for the Belt and Road, encouraging companies to integrate environmental considerations in their investment processes. On an upside, there has been some project financing for sustainable infrastructure projects – at the end of the second quarter of 2020, there were 101 active projects in solar, wind, nuclear and biothermal energy amounting to a value of US$129 billion.
Although there has been some progress in advancing the green development of the BRI, there remains much to be done. It is clear that a critical challenge remains – how can the BRI projects tie in with China’s net-zero and biodiversity commitments, and avoid creating ecological shadows? Investments in sustainable infrastructure projects have to be scaled up to ensure that the BRI creates lasting positive impact for our environment and societies in the years to come, and Singapore has a key role to play in contributing towards that development.
Glossary
- Ecological shadow: The environmental resources a country draws from other countries and the global commons (i.e. the earth’s shared natural resources).
- Investment: Committing money or capital to an endeavour with the expectation of obtaining an additional income or profit.
- Infrastructure: The set of structures and systems that supports the day-to-day functioning of society, including transportation and communication systems, ports, power plants, flood defences etc.
- Sustainable infrastructure: Infrastructure that integrates environmental, social and governance aspects into a project’s planning, building and operating phases.
- Trade liberalisation: The removal or reduction of restrictions or barriers on the free exchange of goods between countries.
- Ecosystem services: Any positive benefit that wildlife or ecosystems provide to people (e.g. Mangroves provide the ecosystem service of coastal erosion protection.)