China's Belt and Road initiative: What's in it for Israel?

The initiative is "the new game in town" for China - and perhaps Israel.

January 10, 2018 21:18
Netanyahu China

Prime Minister Benjamin Netanyahu meets with Chinese President Xi Jinping in Beijing on March 21. (photo credit: REUTERS)

One of the curious episodes at the 19th National Congress of the Communist Party of China last October was the enshrining of Chinese President Xi Jinping’s political thought into the party’s constitution. That put the president in the company of the country’s most revered leader of yore, Mao Zedong.

Another notable development that emerged from the proceedings was the stamp of approval placed on Xi’s signature 2013 “Belt and Road” initiative, a massive investment strategy that the party has undertaken to boost the economies of countries in the vicinity of China as well as in those further afield. These moves cemented Xi’s oversight of political and economic policy for at least the next five years (during the Congress, he easily secured his second five-year term) and perhaps will bolster his influence over China for many years to come.

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Given Belt and Road’s centrality to Chinese economic policy, it warrants taking a close look at what the initiative is and what it can do – and already is doing – for Israel.

What is Belt and Road, broadly speaking? Richard Griffiths is a professor of international studies at Leiden University in the Netherlands. His recent book, Revitalising the Silk Road: China’s Belt and Road Initiative, takes a long-term, historical perspective of the Silk Road trading routes. Griffiths shows how the Silk Road – by connecting Europe to Chinese civilization thousands of years ago – reshaped much of the world’s commerce and culture. He then looks at how Xi is reinventing the memory of this ancient route for our times.

Speaking with The Jerusalem Post, Griffiths said: “The Belt and Road initiative represents an offer by China to help resolve the ‘infrastructural deficit’ in Asia and thereby help promote economic development and international trade. All the policy instruments point in that direction – soft loans and construction contracts with Chinese firms helping to build roads, railways, pipelines, ports and enterprise zones.”

Right off the bat, it’s easy for Westerners to be skeptical. We are used to seeing European countries or America as the privileged players when it comes to these kinds of global investments. China, in this sense, seems the undeserving upstart.

“Because it is China, and because China is a ‘rising power,’ the initiative has been greeted by suspicion and scorn – its ambition derided and its occasional setbacks magnified to the point of ridicule,” Griffiths said.

Instead of heaping on more disparagement, Griffiths offered three points to better place China’s efforts in context. First, he said, China’s plans to improve its energy and transportation position in Eurasia are not new. Second, China has been part of these planning efforts, though not as the leading partner. Third, national and international aid organizations and private businesses have been, and still are, active in constructing infrastructure in the region.

“What is new and different,” he said, “is China’s willingness to commit its financial resources and expertise to making things happen.”

So, what does Israel stand to gain from it all? Israel is already gaining and can do so directly, Griffiths said.

“There are nationally and internationally financed projects that are not tied to Chinese firms,” he said. “In addition, the secondary demand from China’s investments in South and Central Asia and the rising prosperity in the region is creating a demand for the kind of technology-intensive products that Israel can produce.”

But Israel can also gain indirectly, Griffiths said.

“Behind the efforts to improve connectivity lies the rationale that lowering ‘transaction costs’ [the costs involved in doing business] will stimulate demand,” he said. “Following this logic, Israel could work on reducing the costs of obtaining trade documentation or the time lost waiting at border crossings. Alternatively, it could more actively cut trade costs. A railway to Eilat, or between Ashdod and Eilat, would produce a major time-saving over the Suez route for both direct and for transit trade.”

‘The new game in town’

Offering another perspective on Israel’s interests in the initiative is Alexander Pevzner, founding director of the Chinese Media Center, the only Israeli outlet that engages Chinese media in systematic dialogue over important issues and professional exchange. The center endeavors to promote understanding between the two peoples, thus enhancing bilateral relations.

When it comes to Belt and Road, Pevzner, who recently sat down with the Post, said it’s “the new game in town.”

“Though it might sound a bit bombastic, you can call it a herald of economic integration on a scale that hasn’t been previously seen,” he said.

It’s a bit like the EU, not in the sense of political, but of economic integration, Pevzner said, and as such, it offers an opportunity for Israel to participate in economic cooperation on a global scale. “If you are not there at the table, you miss out by definition,” he said.

THIS IS why Pevzner believes Belt and Road is so vital to Israel’s interests. Just by being involved in it, sitting at the table, Israel has a connection to countries with which it does not have diplomatic ties.

“So even if the immediate economic benefits are not so obvious – though I think there are and will be such benefits – it’s important for Israel just to be there,” he said.

But why have Muslim countries not opposed Israel’s participation in Belt and Road like they did for other international investment groups? Pevzner cited Israel wanting to join the Asian Development Bank in 1993. In the end, it couldn’t because Muslim countries were opposed.

“Now, because of the Belt and Road initiative, we are there with Iran and Pakistan, as well as many Muslim and Arab countries, a situation that demonstrates China’s influence in bringing countries together,” he said. “That is a huge positive for Israel.”

Aside from these political dividends, how exactly can Israel leverage the plan to benefit economically? Pevzner said there are two different stages of Belt and Road that are important to keep front and center.

The first stage relates to big infrastructure projects the Chinese are already carrying out in Israel or are planning for the future. These projects are often bridges, railways and ports. For example, he said, a new port is being built in Ashdod by a Chinese company, an initiative that is part of Belt and Road.

There are also several railway projects currently under way, also by Chinese companies, including a light-rail line in Tel Aviv.

But it is the second stage where Israeli companies have much more to gain, Pevzner said. For example, once the rail lines or ports have been built and cities are connected, Israeli companies can step in to make technological improvements, he said, adding: “This can be urban development and green infrastructure. Here, Israeli companies – clean-energy or smart city companies – have a lot to offer.”

Of course, the money the Chinese invest in big infrastructure must be paid back (and Israel is already paying for the ongoing infrastructure projects), Pevzner said, but the opportunities they create radiate out and provide plenty of business opportunities for Israel’s hi-tech and green sectors.

“For example, there is an Israeli company called TaKaDu, which uses big data to monitor large, urban-scale leaks in water systems so it can detect them earlier, saving money in maintenance costs,” he said. “These are just some of the projects that Israeli companies can participate in.”

“It’s the reason why the government and Prime Minister Benjamin Netanyahu are wholeheartedly embracing the Belt and Road,” Pevzner said.

So is the new Silk Road model becoming the preferred one around the world when it comes to infrastructure development? Do Israel and other countries find the Chinese investment model more attractive than those of the US, Europe, the World Bank and the IMF? Griffiths said the answer is “yes and no.”

“The two do not exclude each other, and they never will,” he said. “China does not have enough money to do everything itself. But foreign governments do find its funds attractive for several reasons: The decision-making is fast, the loans usually cover about 80% of construction costs, and recipients are co-determinants in what gets done. This gives less-scrupulous governments the chance to grandstand for political spin-off today and pay back when long gone. However, there is no evidence that China is worse than other countries in this respect.”

As far as Israel is concerned, Pevzner said if Belt and Road spurs new construction and urban development, it will likely translate into more business for the Start-Up Nation.

“The Chinese plan simply means a bigger pie,” he said, “and if there is a bigger pie, there is a chance – by no means guaranteed – that Israel will get more lucrative business opportunities and enjoy a decent slice.”

The writer was a guest of the 2017 Media Cooperation Forum on Belt and Road hosted by the People’s Daily.

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