What To Do When China Lends Money For Belt & Road Projects? Steal It and Run Away

• Recipient Governments must put checks and balances in place to avoid corruption scandals and theft.

Op/Ed by Chris Devonshire-Ellis 

A court in Kazakhstan’s capital, Nur Sultan has jailed seven former senior officials from the city’s government and from companies that were supposed to build a light railway system.

Prosecutors said that the seven men had been part of a crime unit headed by Kanat Sultanbekov, the former deputy mayor of Astana and Talgat Ardan, head of the Astana Light Rail Transport (LRT) system. They had inflated the cost of the project and stolen cash. Both Sultanbekov and Ardan have fled Kazakhstan.

“The purpose of the group was to steal funds allocated for the development of design estimates, the provision of consulting services and technical supervision for the Astana LRT project” the court said.

Started with much fanfare in 2015, work on the Astana LRT was stopped in 2019 when Kazakh President Kassym Jomart Tokayev ordered an investigation into the incomplete project. Concrete pillars that were supposed to lift the 22km railway system above the capital’s auto traffic stand idle, a salient reminder of Kazakhstan’s ongoing battle with corruption. It’s not just the loss of the money, it’s the loss of income from what would have been improved infrastructure leading to increasing further investment that have been damaging – and for Kazakhstan’s government a huge political and public embarrassment.

Kazakhstan’s capital city – no light railway for now

The State Development Bank of China had lent US$1.5 billion in funds for the LTR, branding it as part of its headline Belt and Road Initiative.

China’s Belt and Road financing has come in for much criticism over recent years, with accusations of laying ‘debt-traps’ – lending money to gain political influence – to corruption. While the debt trap issue has now largely been debunked, the corruption issue remains a problem – but one in which recipient governments must take responsibility for.

This is an issue raised in my recent book ‘Identifying Opportunities with the Belt and Road Initiative’. Chapter 2 specifically deals with legal and compliance issues and advises placing correct financial and procedural checks and balances in place. This was obviously not the case in Kazakhstan, with officials at some point in the financial transaction process able to divert government funds into private, offshore bank accounts. China may be benefactors, however fiscal responsibility, and mechanisms to keep Government financing secure must be put into place. The book can be downloaded free of charge here and has been described as ‘essential reading’ for Government officials dealing with Belt and Road project financing or looking at where investment opportunities can be found.

Related Reading

• Increasing Your Due Diligence as Belt & Road Infrastructure Provides New Regional Opportunities for Fraud
• It’s Corrupt Democracies that are the Source of Belt and Road Debt Problems, Not China per se