Win-Win Cooperation & Dual-Use Ports

Chinese investments, touted as win-win economic cooperation, have proliferated across the globe under China’s Belt and Road Initiative. Many of these investments, though, contrary to Chinese Communist Party (CCP) pronouncements, do not evince merely win-win intentions. Indeed, an entire set of investments speaks directly to this: ports and potential ‘dual-use’ facilities. According to some analysts, the CCP now has at least 17 such port investments facilities in its portfolio.11https://asia.nikkei.com/Spotlight/Asia-Insight/China-s-Belt-and-Road-ports-raise-red-flags-over-military-plans While Hambantota jumped into public consciousness following Sri Lanka’s now infamous debt for equity swap with a Chinese State Owned Enterprise (SOE) on a 99-year lease over the port, many other investments are similarly structured and have similar strategic value.22https://www.reuters.com/article/us-sri-lanka-china-ports/chinese-firm-pays-584-million-in-sri-lanka-port-debt-to-equity-deal-idUSKBN1JG2Z6 Two such cases are herein explored: Gwadar in Pakistan and Dara Sakor / Koh Kong in Cambodia. This report will explore the long-term security and strategic interests that, beyond economic cooperation, undergird motivations for many Chinese port projects.

The Rise of Gwadar

In 2000, Pakistan’s newly ascendant military leader Musharraf went to Beijing to make a plea: help Pakistan develop a southern port.33https://www.dawn.com/news/27285 The strategic incentives that led both parties to find this to be a mutually agreeable development have only grown more manifest since. From Pakistan, and then-President Musharraf’s perspective, China’s involvement in Pakistan would serve as a deterrent against Indian aggression, and development of Pakistan’s insurgent-laden Baluchistan province might help stabilize the region and bring economic development. Beijing, meanwhile, beyond supporting its ‘all-weather’ friend, clearly saw a potential opportunity to contain India (part of, arguably, a broader strategy that has been dubbed the ‘string of pearls’) while utilizing excess capacity and training its SOEs. While substantial developments took place in the intervening years, it was the BRI’s announcement in 2013 that substantially heightened and made more salient China’s fundamental strategic opportunities in Gwadar.

Gwadar: Strategic Rationale Beyond Win-Win

Perhaps the most obvious reason belying Gwadar’s win-win economic rationale is the lack of it, for either side. Indeed, on a near to medium-term economic horizon Gwadar is difficult to rationalize. Pakistan is known for its inefficiency, political risk, and terrorist violence—and the area around Gwadar is particularly vulnerable to these problems.44https://www.reuters.com/article/us-pakistan-attacks/attack-on-workers-at-key-pakistan-port-for-chinese-project-26-hurt-idUSKBN1CP0O6 But Gwadar is also not a location likely to see substantial shipments in the near future. Indeed, today, with the initial port functional, Gwadar only sees, on average, two ships per month. There is likely good reason why the Singaporean Port Authority gave up its jurisdiction over it. Yet a Chinese SOE, China Overseas Port Holdings (COPH), eagerly took over the managerial contract. Meanwhile, Pakistan is drowning in debt, having recently received a bail-out from the IMF, and Gwadar is a project that adds to the toll. Particularly given the fact that the profit sharing agreement disproportionately benefits COPH as it accrues 91% of profits from the zone over its 40 year lease.55https://timesofislamabad.com/21-Mar-2019/91-of-gwadar-port-revenue-went-to-china-and-9-to-pakistan-report While the current economic prospects for Gwadar are slim, China does have a longer-term economic plan to develop the area surrounding Gwadar, a-la a development model it calls “Ports, Parks & Cities” (PPC).66https://www.chinadaily.com.cn/business/2017-09/21/content_32276598.htm This type of development will give China’s SOE(s) more opportunity to expand operations in Pakistan while potentially allowing for the connection of Gwadar to the Karakoram highway and into Xinjiang, allowing it to serve as the initial node in an overland supply line. These developments, however, are far in the future and of economically dubious value.

The immediate strategic and security utility of Gwadar, however, is far more evident. Located right at the mouth of the Gulf of Oman, one of the foremost choke points for transnational oil shipments in the world, a base there would match and mirror China’s recently built Red Sea ‘strategic strong point’ (as the CCP euphemistically calls it) in Djibouti.77https://jamestown.org/program/strategic-strong-points-and-chinese-naval-strategy/ As China’s first overseas base, Djibouti has obviated China’s long-standing rhetoric against their establishment. Further, given China’s well-known anxiety over its energy supply chain, Gwadar, or a nearby location (some speculate a base may be built a few miles west in Jiwani)88https://thediplomat.com/2018/02/a-new-china-military-base-in-pakistan/, is an obvious location for its next base, as that will provide China operational cover over both oil chokepoints along the Arabian Peninsula. Thus, while it is difficult to decipher how Gwadar is a win-win development between Pakistan and China economically at this point, it is relatively easy to see how it may now fit into China’s larger strategic and security interests.

Koh Kong Port in Dara Sakor, Cambodia

The Koh Kong development project in Dara Sakor, Cambodia, like with Gwadar, offers dubious economic prospects for both China and Cambodia. While development has occurred predominately under the auspices of the nominally private Chinese firm Union Development Group (UDG), as with all Chinese companies, the degree to which the firm actually operates independently from the CCP is questionable. Indeed, Zhang Gaoli, the head of the BRI Leading Small Group, has been a major backer of the project and even presided over the signing of the agreement between UDG and the Cambodian government.99https://www.scmp.com/week-asia/geopolitics/article/2188558/cambodias-koh-kong-project-chinese-tourists-or-chinas-military Vis-a-vis Gwadar, the Koh Kong development may offer slightly more immediate economic opportunity, as it attempts to become a hotspot for Chinese tourism and hospitality-based development. The prospects of this though are also dubious and it’s unclear how the Cambodian government stands to benefit, particularly when UDG is reported to be receiving 100% of profits from the development over the duration of its 99 year lease while only having paid $1 million USD thus far for roughly 20% of Cambodia’s coastline.1010https://static1.squarespace.com/static/566ef8b4d8af107232d5358a/t/5ad5e20ef950b777a94b55c3/1523966489456/Harbored+Ambitions.pdf Meanwhile, multifarious Chinese interests, demonstrative of China’s fragmented (authoritarian)1111Lieberthal, Kenneth and Oksenberg, Michel, Policy Making in China: Leaders, Structures, and Processes (Princeton, NJ: Princeton University Press, 1988) framework, are at play, as elites seem to be attempting to offshore their wealth, ostensibly private enterprises are striving to maximize profits, and Party officials are pushing BRI based branding and win-win cooperation.

Recent Developments in Koh Kong

Yet, as with Gwadar, security and strategic considerations loom large in Koh Kong. Located within the Gulf of Thailand close to the major chokepoint of the Malacca Straights, developing a port that can serve as a logistics support facility there has tremendous value for China. The first major indicator that China may be preparing the investment for military usage came from satellite imagery that showed development of an airport with a landing strip longer than that in the capital Phnom Penh, which makes little sense given the isolated nature of Dara Sakor.1212https://www.ft.com/content/861d20ce-ad39-11e9-8030-530adfa879c2 Similarly the deep water port being constructed at Koh Kong is estimated to be large enough to station Chinese naval vessels.1313https://www.ft.com/content/23968248-43a0-11e6-b22f-79eb4891c97d But alarm bells really blared when the Wall Street Journal broke the news that China has allegedly signed an agreement to use Ream naval base (roughly 70 km away from Koh Kong Port & developments) over the next 30 years, marking the area as Beijing’s next ‘strategic strong point’ following Djibouti.1414https://www.wsj.com/articles/secret-deal-for-chinese-naval-outpost-in-cambodia-raises-u-s-fears-of-beijings-ambitions-11563732482 Some even speculate that China’s decision to opt for a secret deal on Ream was motivated by the negative global attention its intentions to do the same in Dara Sakor / Koh Kong drew.1515https://www.asiatimes.com/2019/07/article/cambodia-china-ink-secret-naval-port-deal-report/

Commonalities across Chinese Port Investments

Pakistan and Cambodia share a crucial feature: both are long-time patrons of the Chinese Party-state whose authoritarian elites are now increasingly cozying up to China to ensure their own stability. The governments of these countries have found Beijing’s largesse and desire for influence to be politically and geo-strategically expedient. As Pakistan has long been a state-controlled largely by its elites, and Cambodia is increasingly shifting towards one-Party rule, both states see a common incentive in accepting Chinese largesse that is indifferent (or even encouraging) of such developments, even if Pakistani PM Imran Khan has been an ostensible critic of late.1616On Pakistan: https://www.scmp.com/news/china/diplomacy-defence/article/2157186/imran-khan-expected-stick-chinese-investment-projects& On Hun Sen in Cambodia: https://www.foreignaffairs.com/articles/asia/autopsy-cambodian-election Geo-strategically, Pakistan also sees Chinese involvement as a counter-balance to India, while Cambodia sees China primarily as a counter-balance to Western influence. Both, however, have found it expedient to take Beijing’s no-strings attached financing, allowing them an alternative to highly-conditioned loans from the World Bank. A common thread that emerges from both the Gwadar and Dara Sakor cases is that China’s desire to increase its geostrategic positioning via dual-use investments, under a patina of economic win-win cooperation, is finding partners desirous of no-strings attached CCP money that entails bolstering their own staying-power.

At a macro level, for the CCP, at least three overarching strategic objectives beyond win-win economic cooperation can be seen in Gwadar and Dara Sakor, which are generalizable to many of the other CCP dual-use port investments globally: (1) enabling protection of Beijing’s geographically disparate economic interests, (2) securitizing supply channels for energy inputs, and (3) facilitating Beijing’s ascendance as a global hegemon via a ‘sea-change’ in the global security environment. On the first, China ExIm and China Development Bank have invested over $500 billion abroad, meaning Beijing has an increasing array of economic interests to defend. Meanwhile, several of Beijing’s various Belt and Road segments run by and through Dar Sakor and Gwadar, including its principal Maritime segment. Dara Sakor and Gwadar are thus positioned to potentially help the CCP protect its assets in several regions. Second, a cursory look at a map reveals that Dara Sakor and Gwadar are also strategically positioned atop the two major chokepoints for the CCP’s overseas oil imports: the straits of Malacca and the Arabian Peninsula. They thereby provide obvious utility to the CCP in the event of a crisis. Third, and most abstractly, Beijing is a rising global superpower and it needs to ensure that the strategic environment is conducive to its continued rise. Building and fostering ‘friendships’ with two countries it is likely to develop ‘strategic strong points’ within, along its major BRI maritime route that is also one of the most important transnational shipping lanes in the world, facilitates Beijing’s global security aspirations. Indeed, the analysis of the two cases above confirm what many Chinese analysts themselves argue in favor of, outside the euphemistic confines of official party pronouncements: exploiting the security and strategic benefits beyond win-win cooperation that dual-use facilities offer.

Challenges across Chinese Port Investments

While Gwadar and Dara Sakor offer the CCP opportunities to enhance its strategic security environment, they also present it with at least three common challenges: (1) the increasingly obvious geostrategic elements of these projects are feeding increasing global anxiety amongst world powers regarding Beijing’s ultimate intentions, (2) the local populace in Cambodia and Pakistan is growing increasingly weary of growing Chinese influence in their domestic politics, and (3) the bilateral nature and non-transparent dealings between Beijing and the Cambodian / Pakistani governments leaves both parties open to sudden shifts in attitude from either side.

The increasing warnings from Japan, India, and the US regarding China’s debt-trap diplomacy speak to the first challenge. As smaller countries, heeding lessons observed elsewhere and listening to the other world powers, also grow weary or turn sour on Chinese investments, Beijing will have a harder time achieving either its security aspirations or its win-win economic goals. On the second point, an exiled Cambodian opposition leader summarized sentiments common in many BRI countries: “I’m afraid Cambodia is becoming a de facto Chinese colony with the skyrocketing increase in the number of Chinese, tourists, investors, traders and settlers from all walks of life and the multiplication of all kinds of facilities exclusively serving Chinese needs and interests.”1717https://www.ft.com/content/861d20ce-ad39-11e9-8030-530adfa879c2 Indeed, in Pakistan, the fact that the country has raised a 15,000 strong army division to exclusively protect Chinese investments from angry locals is a case in point.1818https://www.business-standard.com/article/pti-stories/pak-army-to-raise-another-division-to-protect-cpec-projects-chinese-nationals-119051900424_1.html This ties into the third point, though, which is that the CCP’s modus operandi of operating non-transparently on a bilateral basis with ruling elites is a recipe for instability. In particular, as the corrupt elites in Pakistan and Cambodia face increasing pressure from their populations to turn against China, lest they be ousted from power via either election or revolution, Beijing may find it harder to exert influence.1919https://asia.nikkei.com/Spotlight/Belt-and-Road/Pakistan-struggles-to-contain-rise-of-anti-China-sentiment This only adds to the already complex nature that undergirds transnational elite-elite cooperation. The concatenation of these challenges can be seen today in Malaysia with Mahathir’s on again off again stance toward China2020https://www.lowyinstitute.org/the-interpreter/mahathir-s-tilt-china-smooths-way-beijing-southeast-asia, in the Maldives with the ouster of its pro-China leader2121https://www.nytimes.com/2018/09/24/world/asia/maldives-presidential-election-ibrahim-mohamed-solih.html, in Sri Lanka with their growing disillusionment towards China, in Myanmar with its recent scaling down of a major port development project2222https://www.reuters.com/article/us-myanmar-china-port-exclusive/exclusive-myanmar-scales-back-chinese-backed-port-project-due-to-debt-fears-official-idUSKBN1KN106, and in other places as well.

Conclusion

Development of dual-use facilities such as those in Dara Sakor (i.e. Koh Kong) and Gwadar offer the CCP obvious strategic utility. With only a thin rationale for win-win economic cooperation, this report highlights the obvious geostrategic incentives for developing these projects. While elites in Cambodia and Pakistan may benefit from the CCP’s largesse, it is the CCP itself that stands to gain the most from these projects as they help it create a geostrategic environment wherein it can protect its overseas assets, securitize energy supply lines, and facilitate its own rise to global power. Yet rising insecurity amongst other global powers, backlashes from the local populations, and inherent instability in the CCP’s development model make realizing the utility of these projects deeply uncertain. Ultimately, while an analysis of Dara Sakor and Gwadar makes clear that there are common security objectives the CCP is likely pursuing in their development, the common challenges they share make realization of those objectives difficult. This is as true in Cambodia and Pakistan as it is elsewhere.