Today’s guest post is from Edmund Bao, a lawyer with King & Wood Mallesons who works principally in the areas of international arbitration and anticorruption:
The “One Belt, One Road” Initiative (OBOR), spearheaded by China, is an enormous and ambitious infrastructure development project (or series of integrated projects) involving an inland economic “belt” and a maritime silk “road” that together will include approximately 65 countries across Eurasia and parts of Africa, require a total capital expenditure of approximately US$4-8 trillion dollars, and affect around 4.4 billion people (63% of global population). Given the size of the initiative—as well as the fact that infrastructure projects are often considered especially high corruption risks, and the fact that so many of the countries involved are known to suffer from high levels of public corruption—ensuring integrity in this project must be a top priority if it is to succeed. Some projects have already been affected by corruption, including the cancelled US$2.5 billion Budhi Gandaki Hydro Electric Dam Project in Nepal (irregularities in the project bid phase) and the temporary funding halt for the flagship China-Pakistan Economic Corridor Road Project (due to graft).
The countries participating in OBOR have acknowledged this concern. At the opening of the Belt and Road Forum in June 2017, President Xi Jingping called for countries to “strengthen international counter-corruption coordination so that the Belt and Road will be a road with high ethical standards.” And in the joint communique released at the conclusion of the Forum, the leaders of OBOR countries in attendance agreed to “work together to fight against corruption and bribery in all their forms.” Yet it is not yet clear what measures can or will be put in place to achieve the sort of coordination that President Xi and the other OBOR country leaders recognized is necessary.
I suggest that one way—perhaps the best way—to achieve the requisite level of anticorruption coordination in the context of the OBOR initiative is to establish a supranational anticorruption body with oversight for OBOR projects. That is, I advocate the creation of a “Silk Road Anticorruption Body” that would have four primary functions:
- Coordinating investigations. A unified Silk Road Anticorruption Body could be authorized to investigate allegations of corrupt conduct in OBOR projects. The agency’s investigative unit, which could be modelled along the same lines as the World Bank Integrity Vice Presidency’s investigative department, would coordinate investigations across different infrastructure projects, while providing a centralized avenue for the referral of corrupt conduct to domestic regulators and prosecutors. The key advantages of a single agency are uniformity of approach, and greater capacity (at least compared to the less-mature domestic investigation and prosecution bodies in some OBOR countries). Such a body could also assist in asset tracing and recovery by working with various domestic financial regulators and institutions. Over time, the proposed Silk Road Anticorruption Body would develop investigative expertise, as well as a centralized repository of corruption-related information in OBOR and infrastructure development projects, that would make locating and investigating corrupt conduct in the OBOR region more efficient and effective.
- Coordinating financial regulation. A Silk Road Anticorruption Body could also facilitate greater regulatory coordination for associated financial aspects of corruption such as money laundering, embezzlement, and false accounting. This is especially important given the different sources of funding in OBOR projects, including China’s state-owed commercial banks, subsidiary sources such as the Silk Road Fund, the Asian Infrastructure and Investment Bank, and in the future possibly private investors or public-private partnerships
- Policy coordination and guidance. A centralized Silk Road Anticorruption Body could also support coordinated approach in tackling corruption on OBOR projects. For example, such a body could produce a uniform set of anticorruption guidelines that would set out the requisite ethical standards and the specific prohibitions applying applicable to all OBOR projects, including the procurement and implementation processes; a Silk Road Anticorruption Body could also help establish best practice guidelines for business transactions. Over the longer term, a centralized Silk Road Anticorruption Body could assist and encourage OBOR countries in coordinating their domestic anticorruption strategies, increasing regional cooperation, and establishing information sharing networks and protocols.
- Advocating and facilitating integration of anticorruption provisions in future agreements. The OBOR initiative seeks to promote free trade and investment through “negotiation of international investment treaties.” A Silk Road Anticorruption Body can help promote new and uniform standards in the anticorruption provisions of such treaties. As has been previously discussed, the TPP (withstanding its political setbacks) has demonstrated the feasibility for inserting anticorruption provisions into multilateral trade and investment treaties; a Silk Road Anticorruption Body could facilitate trade negotiations on anticorruption obligations, as well as being an authoritative body for consultation on the issue.
Of course, the proposal to create a centralized anticorruption coordinating body for OBOR raises a host of questions. How would such a body be established? Would it be a treaty-based intergovernmental organization established by OBOR nations, or would it be a Chinese body with international reach, administered out of Beijing? What can be done to assure that it is sufficiently independent and transparent? These and other important questions would need to be addressed at the appropriate time, when and if the proposal is under serious consideration. My objective in this post is not to answer all these questions, but rather to make the case that such consideration is warranted. If China and the other countries participating in OBOR are serious about the need for a coordinated and effective approach to counter the inherent corruption risks in this ambitious project, they should consider creating a new, centralized, and powerful body with the capacity to fulfil this vital coordinating function.