Clean Belt and Road: China Establishes New Super Anti-Graft Agency

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IRSHAD SALIM: China’s National People’s Congress on Tuesday wrapped up a historic legislative session that voted to amend the constitution, scrap presidential term limits and grant President Xi Jinping a mandate to rule indefinitely– his new term ends in 2023.

The two-week annual session also paved the way for Xi to become China’s most powerful leader since Mao Zedong as he pushes through his vision of guiding the country through a “new era” of unrivaled global economic supremacy with his signature Belt and Road initiative.

Xi’s trusted allies have been elevated and taken charge of the economy and foreign affairs in the latest leadership shuffle, bringing together a wealth of expertise to clear hurdles the leader could face in his second and successive terms. His former anti-corruption czar Wang Qishan was elevated to the vice presidency while his top economic adviser Liu He became a vice premier.

During the meetings, delegates also established a powerful new anti-graft agency (the National Supervisory Commission) to oversee more than 100 million government employees and launched a sweeping reorganization of government ministries as Beijing pushes forward with its $5 trillion Belt and Road Initiative– the $62 billion China Pakistan Economic Corridor (CPEC) is its flagship project and the southern corridor passing through Gwadar in Pakistan (its closest ally and ‘iron brother’) as gateway for China to the Middle East, Africa and beyond via shortest route.

Lack of transparency remains core problem for the Communist Party, China observers say.

Historic changes introduced by the sixth plenum of the CPP Central Committee in 2016 gave Xi a stronger mandate to address social, political and economic issues.

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According to reports, the new super agency will see the ruling Communist Party’s anti-graft watchdog, the CCDI, merged with government departments tasked with tackling corruption. The new agency will coordinate with judicial and procuratorial bodies and law enforcement departments.

In a rallying speech to nearly 3,000 delegates assembled at the imposing Great Hall of the People that touched on topics from Taiwan, the economy to the Communist Party’s absolute authority in China, Xi also sought to address concerns about the ambitious Chinese development projects abroad, saying they “will not pose a threat to any country.”

“Only those who are accustomed to threatening others will see everyone as a threat,” he added in an address that drew waves of applause from the legislators.

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China’s massive global trade infrastructure initiative to revive the ancient Silk Road is drawing huge interest from under-developed and developing nations participating in the investment but also criticism from others (developed nations) fearing that it mainly serves Beijing’s interests and the interests of its state-owned-run enterprises competing for BRI and other projects overseas.

Perhaps conscious of international criticism of the Belt and Road initiative’s potential to generate huge levels of corruption, China has also focused on “best practices” to mitigate these concerns.

Last May, Xi in his opening speech at the Belt and Road Forum in Beijing, called for strengthening “international counter-corruption cooperation so that the Belt and Road will be a road with high ethical standards.” In response, China’s Central Commission for Discipline Inspection and Ministry of Supervision, together with the World Bank, held a symposium called “Strengthening International Cooperation for Clean Belt and Road” in Beijing in September.

China is right to be worried about the bribery risks within and overseas posed by the major infrastructure development that makes up the BRI (OBOR, once known as One Belt, One Road). Proposed by President Xi in 2013, the $5 trillion program is to be funded primarily by Chinese banks and China-led multilateral financial institutions, that will extend over 65 countries in Asia, the Middle East, Europe, and Africa. Given the limited oversight (by design) and the projected speed of development, as well as the countries and industries involved, businesses working on these infrastructure projects are almost certain to face bribe demands.

According to the 2017 TRACE Bribery Risk Matrix, BRI and other countries show comparable patterns of bribery risk, with one exception: BRI countries tend to demonstrate lower tolerances for the free press whose oversight boosts a country’s defenses against bribery.

Ten BRI countries — Iraq, Ethiopia, Bangladesh, Tajikistan, Laos, Yemen, Uzbekistan, Syria, Cambodia, and Turkmenistan — are among the 25 riskiest countries in the world. (China itself ranks 158th out of 200.) Coupled with overall country risks are the risks specific to the industry: thirty percent of cross-border bribery cases are in the construction and transportation sectors, and some estimate that between 10 and 30 percent of investment in publicly-funded construction projects may be lost due to corruption. Companies involved in the BRI would do well to undertake stringent risk assessment and due diligence and to ensure ongoing training and monitoring in order to navigate around bribe demands, both petty and high level, in these high-risk countries and sectors.

Despite its stated desire for a “clean belt and road,” China’s apparent past indifference to the payment of bribes beyond its borders by Chinese companies is not encouraging. China has never prosecuted a Chinese company for payment of bribes overseas. Nevertheless, by placing itself squarely in the spotlight with its current grand-scale initiative, China has given the question a newly heightened relevance: will the world’s most prolific trading partner finally begin to crack down on foreign bribery?

Francesco Sisci, a Beijing-based China analyst says while many have compared Xi’s rapid expansion of power to that of China’s founder Mao Zedong, the context now is different.

When Mao was in power, China was protected by the Cold War and the Soviet Union. And at that time, the Chinese economy did not have any impact on international markets, he said.

“However, now China is so important. It is the biggest exporter, it is the second largest economy in the world etc., etc.” Sisci told South China Morning Post. “So, whatever he does is bound to have direct and immediate effect worldwide.”

Xi’s drive to smoke out corruption as Beijing fast-racks BRI globally supplements international expectations– the establishment of a new powerful anti-graft agency appears to dovetail Xi’s move to handle potential corruption in BRI projects as an internal issue crucial for exporting his vision worldwide.

Xi used the speech to espouse his vision of realizing the “rejuvenation of the Chinese nation” ─ the “greatest dream” of the world’s second-largest economy.

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