2019-10-07 19:17:34 Voices

This article was produced in partnership with the Shanghai Academy of Social Sciences.

Since it first appeared in official discourse in Sept. 2013, China’s Belt and Road Initiative has developed into a key part of the country’s international engagement strategy, a locus for state and private investment, and a topic of much discussion in both domestic and foreign media outlets. According to an April 2019 speech by China’s foreign minister, Wang Yi, in the nearly six years since the BRI was proposed, China has built 82 overseas cooperation parks in participating countries, through which it has helped create close to 300,000 local jobs.

Yet the infrastructure-centric nature of the BRI, together with the vast sums of money involved and the lax local regulatory environments of many BRI partner states, pose a challenge to anti-corruption efforts — both in China and around the world. If we do not take these problems seriously and address them promptly, they could put the integrity of the broader project at risk.

Corruption is a serious problem in a number of countries participating in the BRI. Indeed, many BRI partner states appeared on the bottom half of Transparency International’s “Corruption Perceptions Index 2018.”

Domestic corruption in partner countries not only affects BRI investment, but can also leave Chinese enterprises operating abroad facing government defaults, tax or environmental disputes, and rent-seeking or bribe-seeking behavior. Going further, corruption cases may become politicized, tarnishing China’s national image abroad and harming bilateral economic and diplomatic ties.

The fault is not always with local officials. Some Chinese companies have gotten into trouble for prioritizing the so-called shuren society way of doing things — in which problems are solved through connections — over strict adherence to local rules and regulations. In one case, a Chinese enterprise building a power station in Africa received a detailed list of requirements regarding the construction process, including equipment specifications, installation standards, and work safety regulations, from the local authorities. Operating under mistaken assumptions about local law enforcement and supervisory practices, the company failed to adhere strictly to the agreed-upon plans.

After inspecting the completed plant, the local government concluded that the construction work did not meet the standards outlined in the original tender, and refused to complete the transaction and take over management of the facility. Although the company attempted to smooth things over, in the end, it had no choice but to comply with the host country’s requirements, and the incident dealt a blow to its reputation across the African continent.

Corruption is the enemy of social equity and justice: it impedes cooperation and development, and it affects government credibility and the rule of law. If the BRI is to survive, China must safeguard the program’s integrity and minimize the possibility of corrupt behavior.

To this end, the Chinese government has already proposed that BRI partner countries create a standardized, fair, and transparent business environment, and anti-corruption language has been included in cooperation documents signed between China and other nations participating in the BRI. Earlier this year, during the Second Belt and Road Forum for International Cooperation, delegates to an anti-corruption meeting published the “Beijing Initiative for the Clean Silk Road.” Backers included representatives of both China and other BRI partner states, members of international organizations, and prominent business and academic figures. The document calls upon governments to improve their legal systems and mechanisms for fighting corruption and to intensify efforts to combat bribery.

As the Chinese government has stepped up its campaign against domestic corruption, it has also taken a more active role in policing the behavior of its firms abroad.

Although improving the business climate of partner countries is important, the nature of the BRI also requires Chinese companies to abide by a wide range of local laws and regulations. For this to happen, firms participating in the BRI must further improve their corruption prevention work and institutional practices.

One company that has taken steps to address this problem is China Minmetals Corporation, which currently has operations in 45 countries and regions along the BRI. Although CMC has experienced difficulties at some of its project sites around the world, it has also taken pains to emphasize its work strengthening compliance procedures and curtailing corruption risks.

Company officials say CMC studies the potential corruption risks in the countries where it operates. For example, so-called facilitation payments — money customarily paid to local interests to ensure work goes smoothly — exist in a kind of legal gray area in many nations along the BRI. According to the company, it tries to ensure that its on-the-ground staff don’t mistake these local unspoken rules for actual regulations, putting the company on the wrong side of the law.

In recent years, as the Chinese government has stepped up its campaign against domestic corruption, it has also taken a more active role in policing the behavior of its firms abroad. In 2017, the Central Commission for Discipline Inspection — the country’s most powerful anti-corruption body — announced a pilot project in tandem with the Laotian authorities. As part of the program, the CCDI sent inspectors to Laos to monitor China Railway’s work on a rail line there and published a manual detailing 430 potential ways to prevent or control corruption.

The CCDI’s pilot program offers a good case study in how to improve anti-corruption work, and a number of countries, including the Philippines, have expressed interest in one day porting the model to projects on their own soil, once the procedures have been standardized.

Corruption exists in every country. If the BRI is to be kept relatively free from its malign influence, participants must work together to improve frameworks for judicial and law enforcement collaboration, strengthen international cooperation in apprehending fugitives and recovering stolen assets, and promote good governance.

Translator: David Ball; editors: Lu Hua and Kilian O'Donnell.

(Header image: A visitor inspects a map at the Belt & Road Brand Expo in Shanghai, June 30, 2018. Lü Liang/China Business News/IC)