Thursday, December 9

Should Ukraine accept Chinese money for its huge road improvement project?


When driving in Ukraine, you sometimes feel like your head spends more time hitting the roof of your vehicle than your rear with the seat.

The country’s roads are riddled with potholes, centuries-old wounds from years of neglect.

In some places, the holes take up more space than asphalt, making it difficult to cross Ukraine, which is the second largest country in Europe after Russia.

From the war zone in eastern Ukraine, south to the Black Sea and west to the Carpathian mountain ranges, thousands of kilometers of roads are in poor condition.

But Ukraine’s President Volodymyr Zelenskyy is on a mission to do something about it. He calls it the Great Construction Project, a project to build and repair thousands of miles of roads during his presidential term.

Last year, the plan was to build or improve 4,200 kilometers of roads. This year, the goal is to build or restore 6,800 kilometers of asphalt; 150 bridges and a major ring road around Kiev; and a bridge over the Dnieper River.

But there is only one problem, quite big: money.

To finance its infrastructure ambitions, Ukraine must find billions of euros. Kiev had surveyed the International Monetary Fund (IMF), but the couple’s relationship is stagnant due to lack of progress on reforms and uncertainty about the independence of the National Bank of Ukraine.

That means Ukraine may have to accept Chinese funds. However, receiving money from Beijing comes with substantial downsides, experts warn.

“China is not interested in political changes, China gives money without political obligations, and that is why it is interesting for Zelenskyy. From his point of view, China’s money is money without obligations such as political reforms or judicial reforms. It’s money with no strings attached, ”Alexei Jakubin, associate professor at the Kiev Polytechnic Institute, told Euronews.

While the negotiations are believed to be ongoing, it is unclear what stage they are at or what amounts are being discussed.

What can Ukraine learn from Europe’s flirtations with Chinese cash?

If Ukraine looks to other European countries, there are lessons to be learned on how to borrow money from China. Recently, the Bulgarian think tank, the Center for the Study of Democracy, published “The Chinese Economic Influence in Europe”, an analysis of Chinese investments in the Balkans, Hungary and the Czech Republic.

“We have analyzed different governments related to the Chinese presence and we have conducted a survey of experts throughout the region. As a result, we saw that in the countries where China has invested the most, there has been the lowest quality of government, “said Martin Vladimirov, one of the researchers behind the report.

But Chinese debt is not necessarily linked to poor governance, said Amanda Paul, a senior policy analyst at the Center for European Policy in Brussels.

“It depends on the type of investment,” he said. “If you look at where they invest the most, they are countries like the UK, the US and Germany, where governance is not bad. But the countries where they invest in construction and infrastructure, in Africa, Eastern Europe and the Far East, many of these countries have poor or moderate governance. “

However, he still asks for caution when it comes to Ukraine borrowing from China.

“Personally, I don’t think Ukraine should completely fill the IMF void with Chinese money. It is reckless. But it depends on the agreements they sign. These would have to be very transparent. The type of money we are talking about is huge and Ukraine’s ability to pay it back is questionable. The Chinese do not care if the money is returned to them, because it gives them the opportunity to improve their position in the countries, ”said Paul.

According to Vladimirov, if countries cannot pay, in many cases China will simply take control of the projects they have financed.

“I think this is a decided strategy for China. They use loans as a lever to establish a presence in the countries. It may not have been designed that way from the start, but it is a favorable benefit of the relationship. In the case of Sri Lanka, China used the construction of the port to pressure the government to change its strategy with China, ”Vladimirov said.

Does the West really want to push Ukraine into the arms of China?

For China, there is another big problem to solve through these contracts. Often times when it comes to Chinese investments, the contractors for the deals will also be Chinese companies.

“China needs to find work for millions of Chinese workers, so they turn to projects abroad where they can continue to finance companies that are not in good shape domestically. One of the ways is to sign long-term loans and guarantee the projects of these companies for their labor and equipment, ”said Vladimirov.

Under Donald Trump, the United States has been less than enthusiastic about China-Ukraine relations. When Ukraine tried to sell jet engine maker Motor Sich to the Chinese, Washington loudly protested.

Clearly, there was little interest from the Trump administration in seeing Ukraine get closer to bed with China. Biden shares this concern and so do many leaders of the European Union.

But they are left with a dilemma.

Should Western lenders like the IMF and the World Bank loosen their requirements for recipient countries, to make China a less desirable financial partner?

“These governments need to see that they can sell a Euro-Atlantic future to their constituents, but if they can’t, they will look the other way,” Vladimirov said.

“[The] The EU needs to step up its game. There is a power vacuum left by the EU and the United States that Russia and China are willing to fill ”.

Euronews reached out to President Zelenskyy’s office for comment. Zelenskyy’s press secretary declined to comment in detail, adding: “Mentioning the presidential office here would be manipulation.” Instead, he suggested speaking to Ukraine’s infrastructure ministry, which did not respond to Euronews’ request for comment.

The president has previously commented on the relationship with China, though not specifically on borrowing money for infrastructure.

“We are a fairly independent country that chooses business partners for itself. If the business is clean, open and generates additional jobs in Ukraine, this is the priority, “Zelenskyy said, according to the state news agency Ukrinform.


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