SCO Showcases Chinese Investment in Central Asia

SCO Showcases Chinese Investment in Central Asia

The Shanghai Cooperation Organization (SCO) was intended to be an influential Eurasian organization that would improve both economic and security ties among members. Instead, it has become a symbolically powerful yet institutionally empty institution in Eurasia. Last week’s summit in Bishkek, Kyrgyzstan was further proof of this sentiment.

The summit turned out to be a place for Chinese President Xi Jinping to show off his economic influence in the region. All of the actual economic deals were done before the summit itself, as Xi embarked on his first Central Asia tour since taking office. And there were a lot of deals: 38 agreements between governments and companies, mainly focused on energy and infrastructure.

As long as the SCO lacks a comprehensive financing tool for major energy and infrastructural projects, it will be difficult for the organization itself to become a flourishing regional economic organization with significant private sector participation.

This seems to be fine for the Chinese government as it works to strengthen its foothold in the region. Most funds for these bilateral deals come from state governments. Most of the companies across Central Asia involved in these deals are either state-owned or heavily influenced by the state.

Moreover, as long as the relationship between the Central Asian states remains tense, there will not be any comprehensive regional financing entity to drive development in the region. Unresolved bilateral disputes in the region are many and persistent, and they hinder meaningful economic and security ties.

Xi emphasized his policy of non-interference in the region’s domestic affairs during his tour. And as long as China continues to cooperate with the countries on a bilateral basis, intra-regional economic and trade ties remain nonexistent, there will be no real need for the SCO to achieve its economic aspirations.

As far as security developments, the SCO is largely considered to be lagging behind Russia’s Collective Security Treaty Organization (CSTO) with its military equipment and training guaranteed for the region. Chinese influence in this realm will depend more on bilateral investments, not multilateral ones.

Security and economics often go hand in hand in Central Asia. The region’s leaders have long used their geographical location to their advantage. For them, security and economic stability have always trumped political reform and progression of a vibrant civil society.

For the past decade, Afghanistan has been key to this advantage. The Northern Distribution Network (NDN), a web of railways and airways through Central Asia, has been the major transportation route for military cargo to and from Afghanistan. Although it is much longer and more inconvenient, it bypasses Pakistan, making it the better option.

The NDN is definitely the ideal choice for Central Asian leaders. As long as the U.S. is involved in Afghanistan in some capacity, then security and economic cooperation will persist. Participation in the NDN not only provides a security cover for these countries, it also provides them a counter to balance Chinese (and Russian) power.

Central Asian leaders have been masters at playing the great powers off one another. Most recently, Uzbekistan has been lobbying the U.S. military for money or leftover military supplies once troop withdrawal begins.

What will happen post-2014? Central Asian leaders have worried whether their U.S. relationship will even continue once the country starts playing a smaller role in Afghanistan. Xi’s tour this month is only the latest manoeuvre by China in securing access to the vast natural resources of the region.

China has also been investing in Afghanistan’s energy and wireless sectors. This is undoubtedly seen as a welcome investment since China does not have the history or the political strings attached to its aid and investment that the Western world does in Afghanistan.

China is taking greater control of the security and economic environment in Eurasia, and so far it is succeeding without the need for multilateral engagement. Last week’s SCO summit was simply a platform for the country to showcase its most recent economic investments in the region.

Categories: Economics, International

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