Westernization on Higher Education: The Impacts on the Life of Global Community
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Conference Proceedings of International Seminar on Global Issues (ISGI 2019)
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Assoc. Prof. Dr. Rozeyta Omar Dr. Halimah Mohd Yusof
ISBN 978-967-15950-2-2
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The responsibility for opinions expressed in articles, studies and other contributions in this publication rests solely with their authors, and this publication does not constitute an endorsement by SHARPS, FSSK or UTM of the opinions so expressed in them.
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Published by The School of Human Resources Development and Psychology, Faculty of Social Sciences and Humanities, Universiti Teknologi Malaysia, 81310 UTM Skudai, Johor.
INTERNATIONAL SEMINAR ON GLOBAL ISSUES 2019
3
Conference Proceedings of International Seminar on Global Issues (ISGI 2019)
Editors
Assoc. Prof. Dr. Rozeyta Omar Dr. Halimah Mohd Yusof
*The Editorial Board is not responsible for the content of any articles published in this proceeding.
EDITORIAL BOARD
INTERNATIONAL SEMINAR ON GLOBAL ISSUES 2019
Patron: Prof. Datuk Ir. Dr. Wahid Omar
General Chair: Prof. Dr. Muhammad Sukri Saud
Advisor 1: Assoc. Prof. Dr. Siti Aisyah Abdul Rahman @ Panatik Advisor 2: Dr. Roziana Shaari
Organizing Committee
Organizing Chair: Dr. Mohd Koharuddin Mohd Balwi Organizing Vice Chair: Dr. Mohd Nasir Markom Secretary: Dr. Muhammed Fauzi Othman Deputy Secretary: Dr. Mohd Nasir Masroom Treasurer: Assoc. Prof. Dr. Mohd Azhar Abd Hamid
Proceeding: Assoc. Prof. Dr. Rozeyta Omar, Assoc. Prof. Dr. Kassim Thukiman, Assoc. Prof. Dr.
Norhani Bakri
Program Book: Dr. Halimah Mohd Yusof & Dr. Salwa Abd Patah
Publicity: Dr. Azra Ayue Abd Rahman, Siti Noraini Mohd Zali & Azura Baharudin Food: Dr. Fadilah Zaini & Assoc. Prof. Dr. Hashim Fauzy bin Yaacob
Sponsorship: Mr. Azlah Md Ali & Dr. Zulkifli Khair Registration: Zaidah Ramli & Siti Khadijah Jabar
Technical: Mohamad Zahar Abd Samad, Jeffri Mohd Sidik & Mohammad Hafiz Hassan Student Committee: Gan Jen Ling, Hannah Syafinaz Rosnin, Hazriyani Hasah, Jamilla Syaza
Zainourudin, Masturah Mohd Azhar, Mohd Hafiq Hakim Zukiman, Nur Amirah Ismail, Nur'Sahira Abd Razak, Nurul Izzati Alias, Shuaida Ahmad Shuhaimi & Siti Nur Shuhada Mansor
ISGI 2019 COMMITTEE
INTERNATIONAL SEMINAR ON GLOBAL ISSUES 2019
5 TABLE OF CONTENT
GLOBAL ECONOMIC DEVELOPMENT ... 7
Moving Towards a Cashless Economy ... 8
China’s Belt and Road Initiative: Six Economy Corridors ... 21
Factors on Malaysians Working Abroad Instead of in Malaysia ... 32
China and Southeast Asia ... 42
MALNUTRITION AND GLOBAL HUNGER, ECONOMIC CRISIS, WAR TRADE AND GLOBAL POVERTY ... 49
A Review on Food Security in Singapore, Ethiopia, China and Malaysia ... 50
Realiti Kemiskinan Bandar di Negara Sedang Membangun: Malaysia dan Indonesia ... 66
Isu-Isu Berbangkit dalam Membangunkan Industri Francais Tempatan ... 83
Makanan Segara: Impak Terhadap Kesihatan ... 91
ENVIRONMENTAL ISSUE ... 101
Plastic Pollution. How Serious this Problem? ... 102
Pengurusan Alam Sekitar dan Sumber Semulajadi dalam Memangkin ... 118
Matlamat Pembangunan Mampan ... 118
Tahap Kesedaran Terhadap Pengurusaan Sisa Pepejal Isi Rumah ... 129
Dalam Kalangan Masyarakat di Sekitar Skudai, Johor ... 129
Water Pollution Sources and Solutions – From Global to Local ... 141
EDUCATIONAL DEVELOPMENT, SOCIAL ISSUES AND DIGITAL DIVIDE ... 157
Westernization on Higher Education: The Impacts on the Life of Global Community ... 158
Konseptual Faktor dan Kesan Fenomena Migrasi ... 177
Hedonisme – Definisi, Faktor dan Kesan ke atas Belia di Malaysia... 188
Impak Globalisasi terhadap Pendidikan di Malaysia dan Strategi Menghadapinya ... 195
Sekularisme dan Kesannya Terhadap Sistem Pendidikan Negara Malaysia ... 205
CONFLICT, WAR AND TERRORISM ... 214
Peranan Malaysia Dalam Menangani Keganasan Dunia ... 215
Kepahitan Tragedi 11 September ... 226
Air Mata Bumi Syria ... 239
Keganasan Gerakan Islamic State of Iraq and Syria (ISIS) dan Penyebaran di Media Sosial ... 252
Genocide in Cambodia. A Case of Human Crisis ... 260
Hubungan Antara Penyesuaian Silang Budaya Dengan Tahap Komitmen Organisasi Dalam Kalangan Buruh Asing ... 271
CULTURE, GENDER AND OTHER SOCIAL ISSUES ... 275
Inisiatif ke Arah Matlamat Pembangunan Mampan Selagat dalam Pemeriksaan Wanita ... 276
Konsep Kesamarataan Gender Menurut CEDAW Pada Perspektif Islam dan Perlembagaan Malaysia ... 281
Hubungan Dua Hala Malaysia-Singapura: Satu Penilaian Dari Sudut Budaya, Sosio-Ekonomi, Perdagangan dan Diplomatik . 292 Impak Pelajar Asing Terhadap Budaya dan Hubungan Sosial di Universiti Teknologi Malaysia (UTM) Skudai ... 307
A Review of Smoking Leads to Lung Cancer and Its Preventions ... 330
Earthquake Hazard: Are We Ready? ... 339
Pemakanan Sihat Menurut Perspektif Islam dan Pengaruhnya dalam Mengatasi Masalah Malnutrisi di Malaysia ... 357
Peranan Malaysia Dalam Menangani Keganasan Dunia ... 367
Harimau Malaya: Tangisan Sang Belang ... 377
Obesity and Its Effects on Health ... 384 TABLE OF CONTENT
INTERNATIONAL SEMINAR ON GLOBAL ISSUES 2019
Isu Global Pemerdagangan Manusia ... 395
7
GLOBAL ECONOMIC DEVELOPMENT
Moving Towards a Cashless Economy
Khor Wei Han*a1, Lee Mei Bao *a2, Lee Chiew Tin *a3, Adam Maxwell Doumin *a4, Muhammed Fauzi bin Othmanb a: School of Mechanical Engineering, Universiti Teknologi Malaysia (UTM), Malaysia
b: School of Human Resource Development and Psychology, Universiti Teknologi Malaysia (UTM), Malaysia.
Corresponding Author Email: [email protected], [email protected], [email protected], [email protected]
Abstract
Cashless transactions are referred to the economic setting whereby goods and services are transacted without cash (Paul
& Friday, 2012). With the emergence of the barter system 8000 years ago till the introduction and wide usage of bank notes, followed by the establishment of debit and credit cards, experts have been predicting the demise of paper instruments and emergence of a “cashless society”. Although it sounds promising, many fundamental issues need to be addressed for the smooth sail of a cashless economy. In this paper three countries are used as case studies: Sweden, India and Malaysia. Case Study 1 is on Sweden, which is expected to be the first country to go completely cashless. Sweden is a successful example of a cashless society where its transactions is one of the lowest globally with barely 1% of the value of all the payments made in the country. Case Study 2 is on India, which the cashless economy is greatly promoted when the government decided to conduct demonetization to mitigate problems on black money and counterfeit notes. However, cashless in India is limited due to lack of internet penetration and technology advancement. Case Study 3 is on Malaysia. Malaysia is still taking small steps in converting to a cashless economy, whereby cash is still the most preferred payment methods compared to cashless payment methods although we have better internet coverage and technology advancement compared to India. Thus, suggestions are discussed to improve the pace of converting to a cashless society in Malaysia.
Keywords: Cashless; Demonetization; Electronic Payments; Sweden; India; Malaysia.
1 Introduction
Looking back at the primitive age of human history where money was yet invented, human solely depended on the tools they hold to hunt for food and shelter. As they start to settle down to form a community, the demand for commodities and necessities increased, and that was when the barter system came to existence, where goods and services are being exchanged with something of similar value (Bank & Davies, 2002). Eventually, various forms of money were introduced starting with gold and silver and coins, followed by bank notes and plastic money (credit and debit cards). Thenceforth, experts have been predicting the demise of paper instruments and emergence of a “cashless society”.
Cashless transactions are a common metaphor used in science fiction novels, where economic transactions are done effortlessly with a wave of card or physically embedded chip, or whatever the author imagines money to be transferred, without the usage of “ancient methods” such as bank notes. A cashless society is often described as a paperless office, where documents are passed from one another in the form of softcopies through the email, Dropbox or Google Drive. Hardcopies are no longer needed to save the time of printing and moving around to pass the documents. Besides similar in terms of convenience, cashless payments and a paperless office are also similar in terms of pace of adopting. Both sounds promising, but there is a need for the fundamental issues to be addressed before the smooth sail of adopting and implementing in this modern society.
2 Literature Review 2.1 Definition of Cashless
In accordance to Collins Dictionary, cashless payments are made using cards or electronic methods rather than physical money. It can also be defined as the functioning, operated or performed without the usage of coins or banknotes for money transactions but instead using credit cards or electronic transfer of funds. A cashless transaction refers to an economic setting whereby goods and service are transacted without cash (Paul & Friday, 2012).
2.2 Historical Background
As shown in Figure 1 is a summary of the history of payments as it started 8000 years ago, when human beings settled down from being nomads and started forming a community. To exchange for the necessities and luxuries they desired, the system barter was henceforth existed. People swapped valuable and rare products such as shells, livestock and salt for other things they desired with the similar monetary value. After 5000 years of system bartering with rare products, people started to use silver and gold to pay as these valuable metallic products were discovered. After 2500 years, Chinese merchants invented the first paper money and paper money was introduced to Europe by Marco Polo in the 13th century. In the 19th century, paper money was common throughout the world.
9 Figure 1. The History of Payments
In 1920’s the first cashless payment was introduced. Some department stores, hotel chains and service stations started providing charge cards to customers with cars so that they do not need to travel to their hometown bank to get cash. In 1950, the first credit cards were used for cashless payments. Diners Club released its first card made of cardboard that can be used in more than 20 restaurants in New York City. After a year in circulation, the Diners Club garnered almost 20,000 users and eight years later, the first version of American Express and Visa cards was issued.
In 1994, online banking was introduced to private customers. Through the official debut of online shopping, one of the first documented internet purchases was a pizza. In 1997, mobile payments were introduced when Coca-Cola set up several vending machines that can accept payment via text messages. Today, a huge percentage of bank notes have been replaced with virtual money which is transformed from account to account. Payments are also possible via a simple tap on the smart phone at the cash register.
2.3 Money
Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a country of socioeconomic context (Smithin, 2002). The four main functions of money in any economy is as a medium of exchange, store of value, unit of account and standard of deferred payment. As recorded in history, shells, livestock and grains are known as commodity money while gold, silver and other precious metal coins are known as commodity coinage. Current notes, coins and other means of payments are known as fiat money. Fiat money is any money issued and declared by a government as legal tender (Goldberg, 2005). It typically has no intrinsic value outside the promise by the government to maintain the value of the money. Money is an abstract representation of value where the currency works because of our collective trust that it will.
2.4 Types of Cashless 2.4.1 E-cards/ Card Payments
Payment via E-cards or more commonly known as plastic money, includes credit, debit and prepaid cards is one of the
most preferred or most familiar type of electronic payment over the world and in terms of volume used for cashless transactions (Chen, 2015). Major credit and debit cards include Visa, Mastercard, American Express, Discover and Diners Club. Among the types of cashless payments, e-card services provide the best alternative for quick and easy payment instead of traditional transactions using bank notes. Card also remain an attractive type of electronic payment due to the rewards they offer. Electronic cards usually contain an integrated chip (IC) to improve the safety and accessibility.
2.4.2 E-banking/ Bank Transfer Payments
Online transfer via E-banking is the transfer of money or funds from one bank account to another bank account, credit card or third party through mobile phone or a computer. Money can be transfer through National Electronic Funds Transfer (NEFT), Real-time gross settlement (RTGS) or Immediate Payment Service (IMPS) all at a nominal cost. In the past banking systems depend on the human knowledge and skills to perform basic functions and earlier bank transactions were slow due to the manual systems, but later improved with the adaption of computerization. E-banking channels are also equipped with fast, safe and secure environment for instant e-transfer to water, electricity or phone bills from our homes.
2.4.3 E-money/ E-wallet Payments
E-money, also known as digital money, is the electronic exchange and transfer of money with the help of electronic devices such as phone, computer and cards (Wulandari, Soseco & Narmaditya, 2016). E-money can also be described as the physical (cash) money stored in any electronic device known as E-wallet. E-money can be divided into two types, single-purpose and multi-purpose. Single purpose E-money is used for specific purpose including game cards, travel cards, mobile cards and loyalty cards, while multi-purpose E-money is used for multiple and different transactions such as PayPal or Google Wallet.
2.5 Importance of Cashless
The first importance of going cashless is fighting against crime, terrorism, counterfeiting and black markets. These illegal activities usually involve huge sums of money that are being carried around in suit cases. By abolishing huge bank notes, it causes handicaps to these illegal activities as small bank notes will make a bigger volume to be carried around compared to big bank notes. Going cashless will also leave a trail whenever transactions are made making it easier for the government to track down the transactions of huge sum of money. Abandoning the usage of cash also tackles the issue of fake currencies as counterfeit bank notes that have been spread in to the market is very hard to detect.
The second importance is the tackling of the “shadow economy”. The shadow economy is an underground economy where transactions are conducted “below the radar” and taxes are not paid. Examples of shadow economy are part time jobs paid by cash, nanny or babysitting, or paying a taxi by cash. These activities are not taxable or traceable by the government causing the economist unable to calculate what is going on in the shadow economy as there is no official recording of the cash flow. By adopting a cashless economy, the government can increase their revenue more effectively by more tax payments and tackling the shadow economy.
The third advantage is the transparency of business transactions. Transactions via cashless methods has a complete record of where, who and when the transaction is made. Each source and method of transaction is clear where the government can fully monitor the income of the business and tax appropriately. Any unclear sources of income into the account will produce and alert for illegal situations. Transparent business activities also help to develop positive relationships and increase healthy competitions.
In terms of usage of cashless for the society, it will bring huge convenience and save time for the consumer as they no longer need to look for cash points such as ATM machines to withdraw money. Transactions can be done immediately with the swipe of a card of by using mobile application payments. Each transaction is also recorded immediately, thus saving the need for a receipt.
2.6 Downturn of Cashless
Although cashless transactions have been introduced since the 1990s, globally 85% of the transactions are still based on cash payments. Most people believe that e-transaction is an easy mode of payment but they do not trust the degree of security (Thomas, 2013). This is especially true for elders that have been using cash throughout their lifetime, where they believe that is more convenient for them to store their money at home and use cash for transactions instead of leaving the money to someone they do not trust. Online thieves and fraud calls lead to grave concern for the safety and security issues, such as stolen PIN number, duplication of cards and the increase in online hacking cases.
Next is the need for advance technology to conduct cashless payments. Cashless society is still in its infant stage (Garcia, Hahm & Layne, 2004), as the cost of cashless transactions is still higher than the usage of cash due to the need of advance technology. In terms of convenience, E-payments are faster, but it is not within the reach of everyone especially in third world countries, where most of the community are not tech-savvy and the need for advance technology makes the wide spread of the concept of cashless harder. It will be a burden for those living in poverty.
3 Methodology/Materials
The methodology used for this paper is by adopting the library research process which involve the assembling of information. The research process is by identifying and locating relevant information and material, analyzing the relevant
11 information followed by developing and expressing the ideas when writing the paper. Two sources of research materials are used, which is primary sources and secondary sources. Primary sources include statistical data, research reports and government documents while secondary sources consist of books, journal, magazine articles, news and reviews.
4 Results and Findings
4.1 Case study 1: First country to go completely cashless – Sweden
A research has been conducted in year 2018 by the Forex Bonuses for world’s top 10 countries that implement the cashless society (Moneymailme, 2018). The measuring method they used was based on six metrics to calculate the score and rank accordingly. The six metrics are 1) the number of credit cards per person; 2) the number of debit cards per person; 3) the cards in issue that have contactless functionality; 4) the growth of cashless payments over the past five years; 5) payment transactions made using non-cash methods; and 6) the number of people that are aware of what mobile payments options they have available to use.
The results revealed that Canada obtained the top one position of cashless country because its citizens have more than two credit cards per person and at the same time 57 percent of the payments inside the country are made using cashless methods. On the other hand, Sweden that ranked in the top two position showed 59 percent of the payments inside the country are made using cashless methods. While, 47 percent of citizens in Sweden are also aware of the types of mobile payment services available to them. Although Sweden is narrowly edge out by Canada from the top position in the ranking of year 2018, but still have the saying that “Sweden will be the first country in the world that would go completely cashless”.
Data shown in Figure 2 is one of the evidence to prove the above statement. Sweden has the lowest value of cash in circulation as a percentage of gross domestic product (GDP) in the world. Cash circulation in Sweden has been decreased since year 2007, from 100 billion until today left only around 45 billion cash in circulation. So it is a decrease of more than 50% over the past decade. When we compared the cash in circulation of GDP in the world of Sweden with others country, we clearly seen that Sweden is leading for the cashless society. Sweden are about 1.4%, while the top rank Canada is still around 4.2%. Other than that, the deputy of Riksbank, Cecilia Skingsley also announced that Sweden would be probably become a cashless country in 3 to 5 years’ time at a London banking conference (Jones & Smith, 2018).
Figure 2. Cash in circulation as a percentage of gross domestic product (GDP) in the world 4.1.1 Factors encouraging Sweden to go Cashless
In history, Sweden is the first country that adopted the usage of banknotes in Europe at the year of 1661. Now, Sweden is expected to be the first country that is going to introduce their digital currency in year 2021 and becoming the world’s first cashless society in year 2023 (Fourtane, 2019). What is the factors that have encouraged the country to move fast ahead to a cashless country in such an astonishing speed? The main factors that encouraged Sweden to be a cashless country are: 1) robust card payment system, 2) strong internet infrastructure, 3) a popular mobile payment app, 4) supportive legal framework and 5) a cultural mistrust of cash (Wharton, 2018).
One of the factors that causes Sweden to move towards cashless is the robust of card payment system. Back in 1950s in Sweden, adoption of cards payment is already widespread in the country and bank accounts are also digitalize since the 1960s. More and more stores in Sweden are putting up signs that they do not accept cash. When it comes to retail and shopping, payment cards are the primary mode of the consumer to made payments because it is very efficient and convenient to pay using cards that provide with the Near Field Communication, (NFC)-enabled “tap and go” features.
Other than that, strong internet infrastructure available in the country is the key point of encouraging Sweden to go
cashless. In Sweden, the setting up of internet infrastructure and internet banking starts in the mid of 1990s. Sweden had an extremely fast adoption of internet technologies that was subsidized by their government. Now, they had a mobile coverage of 100% in the country and this allows them to use mobile payments everywhere. One key reason for Swedes to adapt so fast being cashless is because that they have a very good relationship with their government.
Furthermore, a popular mobile payment application, called Swish was developed as a collaboration by the six largest banks in Sweden in year 2012. This application “Swish” was then embraced and used by everyone in Sweden to make electronic payments (Fourtane, 2019). One of the reasons for Swedes unwillingness to pay with cash is because these mobile payment applications can conduct all the payments digitally in Sweden even for small items or without a minimal amount of transaction.
Supportive legal framework is also one of the important factors encouraging Sweden to go cashless. Even though cash is a legal tender in Sweden, contract laws always have higher precedence than banking and payment laws in this country. For example, a store writes up a sign that they do not accept cash, then as a customer, you should enter the contract or an agreement with that store that they do not accept cash. This is one of the reason why Sweden could go cashless more efficiently than other countries.
Finally, the culture of mistrust in cash among the citizens is also one of the main factor that encouraged the country to go cashless. Something unique has happened in Sweden, a spate of robberies in the country which resulted in the unions of various organizations such as bank employees, bus drivers and others. They have united to push for a cash free society in Sweden for the purposes of protecting their member. It led to a dramatic drop in the need for cash. Swedes believe that cash is still needed only for your grandmother and when bandits robbing the bank.
4.1.2 Successful Example of a Cashless Society
After knowing the factors and efforts that encouraged Sweden to go cashless, now we would like to see how successful Sweden is in the implementation of a cashless society in their country. In accordance to the Sveriges Riksbank, in year 2016 cash transactions are barely 1% of the value of all payments made in Sweden. About 900 banks out of Sweden’s 1,600 bank branches no longer keep cash on hand or take cash deposits (Henley, 2017). Swedish banks have started removing the cash ATM machine from rural areas. The Interest Rate at Sveriges Riksbank is in negative rate, which is (-0.500%) since February 2015 (Mandal, 2016). Sweden buses have not taken cash for years and it is impossible for you to buy a ticket on the Stockholm Metro with cash. In Sweden, shops and businesses are legally allowed to refuse cash payment. Even the Churches, street-sellers, buskers and beggars in the country accept card or phone payment. Many of Swedish churches have adapted to the cashless society.
They display their phone numbers at the end of each service and ask parishioners to use Swish to drop their contribution into the virtual Sunday collection (Henley, 2017).
One of the biggest successful example implemented in Sweden for cashless society was the development of a mobile application called “Swish”. This mobile application is a very popular application developed jointly with the major banks in Sweden including Nordea, Handelsbanken, SEB, Danske Bank, Swedbank and other banks. Swish has allowed anyone with a smartphone to transfer money from one bank account to another in real time. This application is adopted by nearly half of the Swedish population and Swish is now used to make more than 9 million payments a month. Other than that, iZettle which is a cheap and easy Swedes system is designed to allow sole traders and small businesses take card payments via an app and mini card-reader plugged into their phones.
However, the trend toward a cashless society does not come without problems. Elder people found it is hard to live without money. Many of them are without access to a computer or do not know how to use one. Educators are also worried that cashless will be a disadvantage when young people are tempted to spend money they do not have. Cash is often blamed in Sweden as being the primary generator of criminal activity. The fact is that as cash usage in Sweden has continued to fall, the overall level of criminal activity has continued to rise. Basic theft has decreased slightly, but other crimes including fraud have increased significantly. Going cashless does not stop the criminal activity but the criminal activity seems to have largely migrated to other valuables, such as gold and jewellery. For these and other social reasons, cash is not dead quite yet. Even if, in the next few years, Swedes use almost no cash at all, going 100% cashless needs a political decision. Becoming cashless is inevitable in this modern world of technology, not just for Sweden, but for other countries as well.
4.2 Case Study 2: India 4.2.1 Demonetization in India
Demonetization is introduced in India when the black market issue is widely spread in the society. Demonetization is the act of stripping a currency unit of its status as legal tender, removing currency from general usage or circulation of money in the country. It is also an act where the old unit of currency is replaced with a new currency unit that can be considered as a withdrawal of a specific currency from the market (Singh, 2018). This act had happened three times in India where the first occurrence is in the year of 1946 and the second in the year of 1978. In January 1946, Rs 1000 and Rs 10000 banknotes were withdrawn but reintroduced again in 1954 and were again demonetized in January 1978. The second demonetization was carried out by Janata Party government to withdraw Rs 1000, Rs 5000 and Rs 10000 notes (Ramdurg and DC, 2016; Singh, 2018). Both acts of demonetization happened in the past aimed for a reduction of black money, corruption and removal of fake currency in India.
Tuesday, 8th November 2016, Prime Minister of India Narendra Modi announced the 3rd demonetization of Rs 500 and Rs 1000 notes with effect from midnight, making these notes invalid. A cashless economy means that all the transactions
13 are done by digitals like banking, debit and credit cards, point of sales machine (PoS), digital wallet and others (Ashwin Honawar, 2017).
“The magnitude of cash in circulation is directly linked to the level of corruption. Inflation becomes worse through the deployment of cash earned in corrupt ways. The poor have to bear the brunt of this. It has a direct effect on the purchasing power of the poor and the middle class...High circulation of cash also strengthens the hawala trade which is directly connected to black money and illegal trade in weapons...To break the grip of corruption and black money, we have decided that the five hundred rupee and thousand rupee currency notes presently in use will no longer be legal tender from midnight tonight, that is 8thNovember2016.”
Narendra Modi, Prime Minister of India (Mayank Jain, 2016) 4.2.2 Reason of Demonetization: The Shadow Economy of India
India’s shadow economy is a commonly known crime in the world as India has the highest usage of cash across global economies. Shadow economy is also defined as a by-product of the cash economy in that country that is not taxed, unaccounted and monitored by the government. McKinsey & Company’s analysis stated that India’s shadow economy is as large as 26 percent of the country’s gross domestic product (Mayank Jain, 2016). This implies that almost 25% of India’s economy is undergoing the black market as India has a high proportion of cash-based transactions and hinders the evolution of a digital economy.
The presence of money exchange facilitates ease the growth of a business, facilitates taxation and national integration in the country by building-up a formal economy. Nonetheless, an economy contrasted with a formal economy which operated activities with the presence of corruption, black money, and counterfeit currency, poor governance etc. promotes and establishes a parallel economy. Parallel economy is also described as an unsanctioned sector in the economy whose evade tax and run parallel in contradiction with the objectives of official or sanctioned or legitimate sector in the same economy (Ramdurg and DC, 2016). This is known as an illegal economy, unaccounted economy, unsanctioned economy, tax evaded economy and black economy.
A Citi Research stated that most of the circulation of currency in India’s economy is made up of Rs 500 and Rs 1000 note. Reserve Bank of India (RBI) claimed that the proportion of Rs 500 and 1000 notes was 86.4 percent of total value of notes in circulation on 31th March 2016, equivalent to Rs 14 lakh crore. The growth rates in these notes was 76% and 109%
respectively in the last 5 years and an increase of 40% in overall currency (Mayank Jain, 2016). The process of exchange normally takes place over a 50-day period and could result in temporary inconvenience but promoting to the black economy.
Figure 3 show that in Indian markets most of the counterfeit currency in circulation exists in high- denomination notes of Rs 500 and Rs 1000. RBI’s annual report published stated that more than 2.61 lakh counterfeit notes in the denomination of Rs 500 and 1.43 lakh fake notes of Rs 1000 were detected by banks in the year 2015-2016. By value, counterfeit notes of Rs 500 and Rs 1000 accounted for more than 92% of all the fake currency detected by banks across the country.
In accordance to The Reserve Bank of India, the significant reason for the demonetization was the rise of fake currencies of the same notes, and the uncontrollable transaction of black money in the economy. High denomination notes have been misused by terrorists and keeping as black money for illegal activities. India is a nation of a cash-based economy hence the circulation of Fake Indian Currency Notes continues to be a menace. For ordinary persons, the fake notes look similar to genuine notes, even though no security feature has been copied. Although, some solution scheme to withdraw has been introduced, but empowerment of the high-power political had been protecting those people from the judgment and ensure that a person who changed his higher value cash will get exactly the equal amount in lower denominations (Singh, 2018).
Figure 3. Statistic of different fake notes detected by RBI in 2015
Besides that, another reason for demonetization is to minimize Fiscal Deficit (Kenton, 2006). It can take out or eliminate the counterfeit notes from circulation and the unaccounted money. It will also stop Hawala system in India. Figure 4 show that in Indian markets most of the counterfeit currency in circulation exists in high- denomination notes of Rs 500 and Rs 1000. RBI’s annual report published stated that more than 2.61 lakh counterfeit notes in the denomination of Rs 500 and 1.43 lakh fake
notes of Rs 1000 were detected by banks in the year 2015-2016. By value, counterfeit notes of Rs 500 and Rs 1000 accounted for more than 92% of all the fake currency detected by banks across the country.
Figure 4. Currency in Circulation in India in 2016 4.2.3 Trend of Cashless in India
Ganguly stated that a total digital transaction of 244.81 Cr in August, 2018 increases up 207% since demonetization (Ganguly, 2018). A month after 8th November 2016, daily transaction volume from digital wallets such as Oxigen, Paytm and MobiKwik reportedly went up from 1.7 million to 6.3 million, equivalent to 271% (Cash Sticking in India, Post Demonetization, 2017). According to the RBI’s March Report 2017 stated that the volume of the overall digital transaction had increased 42% in November which is 672 million to 958 million.
Unified Payments Interface (UPI) is announced by the Prime Minister and turn into a real winner in digital transaction for the funds transfer, stood at Rs 6,900 crore. It handled 93,000 transactions worth Rs 3.1 crore for 21 banks, growth 31.2 crore transactions valued at Rs 54,212 crore and 114 banks in August 2018 in Figure 5("IBEF: Game Changers: India Encashing on Digital Payments,"2018). In 2017-18, the total number of transactions skyrocketed by more than 5000% due to the implementation of UPI by private players like Google, Paytm and others. The statistics of National Payments Corporation of India (NPCI) illustrated UPI transactions in the country have already crossed the 2 billion mark with a total Rs 3.42 lakh crore being transferred in August 2018 in Figure 6.
Figure 5. Growth Trend in UPI Transactions of India in 2018
Figure 6. Trend in UPI payments: Values and volumes, 2018 (Bhalla, 2018)
Besides that, annual report of Reserve Bank of India (RBI) showed that the acceptance of Indians in digital infrastructure has grown with the number of Point of Sale (POS) terminals, increasing 24% to 3.08 million, which is 2.53 million in 2016-17 and 3.08 million in 2017-18. However, the number of ATMs deployed by banks witnessed a marginal decline from 222,475 to 222,247 at the same time showed in Figure 7 (Bhalla, 2018).
15 Figure 7. Acceptance of digital infrastructure in 2018 (Bhalla, 2018)
4.2.4 Effects of Demonetization 4.2.4.1 Positive Impact on Society 1. Attack on parallel economy
Terrorist able finance their terror by launder the money without bypassing banking channels. Since all the money transaction are being trans-parented in digital, the effect of Parallel economy will be reduced substantially.
2. Increase the tax net
As all the transactions made is being recorded and promoting a transparent money-flow to avoid corruption, tax department can track back all the transactions if that transaction is in extraordinary conditions. Hence, residence is unable to evade tax from the government and thus increasing the tax net for the development of the country.
3. Boost in consumption
Since all the money transactions are turned into digital, there would be no limitation for people to buy their needs at any time in anywhere. A digital wallet is an electronic device which allows an individual to make electronic commerce transactions like payment of bills or online bookings through online by linked his bank accounts to the digital wallet. Online retail stores which promoting the cashless method give customers buy their goods and pay online. It will help to boost consumption in the service sector such as delivery and grocery.
4. Security and convenience
People do not need to carry a wallet with money in it. E-wallet, online banking, even using debit or credit card make the society to pay all their needs through their own mobile phone for transaction.
4.2.4.2 Negative Impact on Society
1. Security – Cyber Attack, Fraud and Power Outages
Cashless economy can be a nightmare if the security is collapsed as all in digital. Security of those digital payment have the probability prone to cyber-attacks like hacking. All sensitive personal might be compromised.
2. Need to Trust Government or Third party
The entire money is being controlled by banks or government or other third party. The residences in India had to blindly trust the parties and been confidence that they will help in protecting residences’ property as everything is under their possession. This could be scary as something happens badly will lead the residence with no hard cash.
3. Reduced Liquidity means Bad for Certain Sectors
There are certain sectors which contributes high level of transaction will be affected badly because of depending in cash society. Small and Micro business faced lot of problems as they prefer cash-based transaction. So, the move demonetization has hampered micro businesses in a bad manner resulting into slowdown in micro enterprise sector.
4. Worst for Poor
India has a portion of people with low income and still struggle to meet their basic needs. Over half of them does not have banking network and yet depend on hard cash for meeting their basic needs. Poor, the major population of the country will reject cashless economy as they feel difficulty to fulfil the requirement of going cashless.
4.2.5 The Reality of Being Cashless: Challenges
1. Half of the Population Does Not Fall in Any Banking System
The major population in India is poor and having a technology instrument or a bank account is a luxury for them to learn and use the digital payment method.
2. Limitation on the technology (Internet Penetration, Smartphone Penetration, Broadband Subscription, Internet Speed).
The availability and sufficient providing proper setup technologies required to boost digitalization of an economy. A bank account is a necessary for digitalization thus banks requires to improve and develop themselves. Internet is needed to receive and deliver information as Internet banking between customers and consumers. (Jun et al., 2001).
In India there are over 350 million internet users. However, the internet penetration rate is just 27% which is very low compared to countries like Nigeria, Kenya, and Indonesia as shown in Figure 8(a). It has to be at least 67% to reach the global
median. From the statistics obtained by Internet Live Star, it is clearly showed that India has the most lower internet users compare to others countries. Looking forward the number of internet users in India according to gender, male has the high internet user rate compare to female as shown in Figure 8 (b). Only 17% of Indians are using smartphones in 2016 which is very low for the change to a cashless economy. 154 million people, or 15% of the population with broadband on their smartphones.
But, the internet loading speed in India is very slow. The average page load time in India is 5.5 seconds whereas in China is just 2.6 seconds (Shendge et al., 2017).
Figure 8. (a) Estimated internet used for difference countries in 2016; (b) Literacy rate of India for gender in 2011
4.3 Case Study 3: Malaysia Moving Towards Cashless Economy
Malaysia’s electronic payment (cashless) has turned into a well-known method today to pay for online purchase made or daily face-to-face payments (Bezovski, 2016). The development of web internet has encouraged the prominence of this payment instrument as electronic business (web based business) has made new financial requirements that in many cases can't be successfully satisfied by conventional traditional payments methods (Nanehkaran, 2013). Nowadays, there are various e- payment systems and vendors in Malaysia itself, and it is continuing developing alongside with the progress of online business (Sidek, 2015).
There are two major e-payment systems used in Malaysia stated by Ming (2013), namely, large value payment system (SIPS) which includes real-time electronic transfer of funds and securities system (RENTAS), and retail payment system which comprises of three categories which are retail payment systems (e.g. national cheque information clearing system, shared automated teller machine (ATM) network, e-debit, Interbank GIRO, financial process exchange, and direct debit), followed by retail payment instruments (e.g. credit card, charge card, debit card, e-money), and retail payment channels (e.g. ATM, internet banking, mobile banking, and payment) (Ming et al, 2013). Innovations in payment systems in Malaysia would result a quest to achieve higher economic growth and improve the competitiveness of the economy in both local and globally (Aliha et al, 2017).
This chapter will be focusing on detailed research of reasons why Malaysia is moving toward cashless economy, the effort that have been to in order to migrate into cashless economy, and some examples of success progression that Malaysia experienced.
4.3.1 Reasons of Malaysia Moving Toward Cashless Economy
Internet has become more advance nowadays and become a global virtual community either in information, social communication nor business etc. An investigation by Mokthar, on the internet web clients showed that Asia has the most internet clients with 45.7 percent contrasted with different areas. Be that as it may, this is presumably identified with the higher population in Asia, which is practically 3396.4 million plus, the utilization of the internet particularly in developing nations has expanded rapidly lately (Mokhtar, 2015). The utilization of the web internet turns into a well-known stage for organizations to advertise their items and administrations services in the globalized world as the advancement of internet communication are very convenient and reliable (Mokhtar, 2015).
Besides that, ICT skill abilities are an absolute necessity for a person these days. ICT skill abilities have just turned into the present needs of an individual and future requests for an association these days plus it is an advantage to acquire one in equipping for digital business (Adam S, 2017). As one researcher (Omar 2014) discovered that because of the advancement of the flow ICT, Malaysians these days are increasingly knowledgeable proficient and informative as that the data is constantly prepared and accessible with a single click on the web search tool. Subsequently, with the advancement of ICT, people saw the opportunity in digital business
Another supporting area that contributes the increase of cashless payment system in Malaysia is the number of mobile phone internet users in Malaysia. Owning a personal smartphone force its user to learn how to adapt the current modern era since everything is accessible with a smartphone including financial management. The bar chart in Figure 9 represents the
17 numbers of mobile phone internet users in Malaysia from 2017 to 2023 (in millions) obtain from Statista the Statistic Portal. As we can see, the trend from the last two years from now are increasing sharply and for the future the trends are still increasing but it is more to a stable increase. The trends of sharp increase represent that Malaysia is in a process of adapting the change of modernize society.
Figure 9. Number of mobile phone internet users in Malaysia (Statista, 2019) 4.3.2 Efforts in Moving Toward Cashless Economy
The needs to transform into a high technology state is always the goal for every nation in the world. Malaysia itself is progressing fast enough to be able compete with other developed countries. Alongside with the progress, cashless system is also being implemented in Malaysia. In the year 2011-2015, the Tenth Malaysia Plan (Tenth Plan) has been introduced as an initiative in improving ICT sector. After that, the Eleventh Malaysia Plan 2016-2020, Malaysia government focus on driving ICT in the knowledge economy through innovation and productivity to enhance competitiveness and wealth creation (Adam S, 2017).
This is where all the cashless systems start blooming in the economy sector.
In the year 2017, in order to improve the cashless system adaption, a large announcement has been done from all the banks from Malaysia where Malaysian need to change their ATM Card into PIN-enable card for better security transactions which replace the method of signature verification payment system and it added a new features of contactless payment technology such as Visa Paywave and MasterCard Paypass (L. Mark 2017). Moreover, these changes also encourage merchants to upgrade their payment system into contactless payment options (The Sun, 2018).
Another effort on embracing the digital economy, and enhancing e-payment platform, Malaysia Bank Negara Governor, Tan Sri Muhammad Ibrahim said that starting from July 01 2018, the instant transfer fees of RM0.50 will be waived for up to RM5000 for one transaction. In contrast, using cheque transaction, the cheque fee would be increased from RM0.50 to RM1.00, starting from January 2, 2021 due to its high processing fees. This action is one of the improvement for enhancing productivity and more cost efficient (The Star, 2017).
4.3.3 Success on Moving Toward Cashless Society in Malaysia
Since Malaysia will become a cashless community for the future, and it is now already starting to be implemented in the society. Various E-wallets was already being introduced in Malaysia itself with some of them were international collaboration and some is created locally. Based on a report by Bbazaar Malaysia, where they listed a top 10 list of E-wallets in Malaysia that are commonly and popularly used. The first example of e-wallet is Vcash. Vcash is an e-wallet app that curated with Digi and was firstly introduced in the year 2017. Working principle is easy as you just need to scan the QR code to initiate payments, transfer to or ask for money from anyone with a valid Malaysian phone number and deposit money into your vcash wallet through online banking, JomPAY, and any vcash-supported stores. Compettion on payments transaction by using the same principles of scanning QR codes for payment is Boost Apps, GrabPay and WeChat Pay My. Their working principles is almost the same (BBazaar, 2019).
Touch n Go is one of the popular transportation e-wallet in Malaysia. It is popular used for toll expressway and highway, and public transportation. Recently, TnG introduce a new product called The Touch 'n Go eWallet which is an electronic wallet (e-wallet) that holds electronic money (e-money) that provides services such as reloads, payments, funds transfer, via your smart phone, anywhere and anytime within Malaysia. Another easy-to-use payment gateway is Samsung Pay, CIMB pay, Visa Checkout, Masterpass, PayNets and MEPS.
Two years back then, Malaysia e-commerce business surprisingly have increase drastically and it is still increasing nowadays. Thanks to this booming e-commerce, PayNet Group CEO Peter Schiesser mention that the number of electronic payment transactions in Malaysia also sharply increased (FMT news, 2019). Based on the data from bank Negara Malaysia in Figure 10, 2 years back, there is a leap of numbers of internet banking subscribers and mobile banking subscribers and these is due to the effort of the government on moving towards a cashless society, and increase of online business platforms.
Figure 10. Internet and Mobile Banking in Malaysia
Figure 11. Transaction Volume
In accordance to Bank Negara Malaysia statistics in Figure 11, 833.9 million transactions were made via internet banking from January to November 2018, compared with 741.9 million for the whole of 2017 and 588.2 million in 2016 (FMT news, 2019). The trend is increasing. However, number of transaction for mobile banking increase twice from 1 billion in year 2017 to 2.1 billion in 2018. How surprisingly Malaysia has contributed to the result of cashless society and to the booming of e- commerce business.
Figure 12. Payment Volume for each Instruments
Figure 12 shows the volume of specific instrument and transaction value for each payment instruments. The table shows that every cashless payment instrument experience an increase of volume usage in millions, thus when volume of the instrument increase, the amount of transaction will also increase. From a report written by L. Iris, the average transaction on MasterCard debit card is around RM70, while average transaction on MasterCard credit card will be RM97. (L. Iris and Souza.
S.D, 2017). Thus, people tend to use credit card as a cashless medium payment compared to debit card.
5 Conclusion
The cashless system has been claimed to have many advantages, yet some countries are still slow in adapting the cashless system into their economy. Sweden could adapt and expected the first country in the world to go completely cashless is due to a few factors which is: 1) robust card payment system, 2) strong internet infrastructure, 3) a popular mobile payment application, 4) supportive legal framework and 5) a cultural mistrust of cash. In year 2016, Sweden cash transactions is one of
19 the lowest globally with barely 1% of the value of all the payments made in the country.
In India, the action of demonetization taken by the government to mitigate the problems or black money and counterfeit notes, has encouraged the promoting of a cashless society such as introducing e-banking and e- commerce applications. Despite the urgency of establishing a cashless economy in India, the adaptation of a cashless economy is limited. Half of the population does not fall in any banking system and there is limitation on the technology in India, such as degree of literacy, internet penetration, smartphone penetration, broadband subscription and internet speed. Demonetization process is a long-term process and should be occur simultaneously as there are a lot of challenging needed to be overcome to ensure its successfulness. Cashless economy had been focused in controlling black money and fake money by introduced e-banking and e- commerce. However, no stone should be unturned in making e-banking fool proof as the security complacence in electronic transactions may be much more disastrous than the limitations of the hard currency.
For Malaysia, we are still in the progress of adapting cashless system and cash is still the most preferred payment methods. Malaysia only will be expected to become a cashless country on 20 years later (FMT news, 2019, S. Alita, 2019). By looking on more specific adaption, only 67% per cent of Malaysians use some form of cashless payment and most of the cashless payment contributions is on regular expenses like bills (Focus Malaysia, 2019). Malaysia itself is in a progressing stage and it depends with the community in accepting cashless system that is related on the pace of migrating into cashless.
In short, although cashless has many promising benefits compare to the risk it has, the pace of moving from a cash to cashless economy is different for each nation. Sweden could become the expected first in a completely cashless economy mainly due to its advancement in technology and proactive government, while India is still limited in cashless due to the limited technology usage. Thus, for Malaysia to pick up the pace and convert to a cashless economy, there are a few suggestions: 1) Improve internet penetration, 2) Technology advancement, 3) Development of a centralized bank application which connects most of the banks in the country
4) Supportive legal framework, 5) Actions of the government to gain trust from citizens about the security of cashless systems and 6) Government action of implementing ICT knowledge since young age.
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21
China’s Belt and Road Initiative: Six Economy Corridors
K.Mukesh*a, Y.K.Lai b, B.O. Fauzi c a: Faculty of Engineering, University Teknologi Malaysia, Malaysia
b: Faculty of Engineering, University Teknologi Malaysia, Malaysia
c: Faculty of Social Science and Humanities, University Teknologi Malaysia, Malaysia
*Corresponding Author: [email protected] Abstract
China Belt and Road Initiative (BRI) is a very ambitious programme to enhance regional cooperation and relationship on a trans-continental scale. This programme aims to improve infrastructure, international business trade and financial investment links between China and its 65 involved countries that contribute almost 30% of global economic GDP, 62% of world population, and 75% of known energy reserves. Furthermore, this programme consists of Silk Road Economic Belt in linking together China up to Central Asia and South Asia and along towards to Europe Countries, the New Maritime Silk Road in linking China to the hearts of South East Asia, Middle East, Africa and on to Europe. In addition, a total of 6 corridors has been planned to connect other countries to the Belt and Road programme. The objective of this paper is to review the impacts of Belt and Road Initiative that have been introduced and the 6 economic corridors to the related countries.
Keywords: Belt and Road Initiative; Economy Corridors; China 1 Introduction
1.1 Belt and Road Overview
China’s Belt and Road Initiative also known as BRI Initiative, this name was coined in the year 2013 by China 5th President Xi Jinping, who drive the inspiration from the concept of the Silk Road that formed during China’s Ancient Han Dynasty in 2000 years ago. It was ancient connectivity of trade routes that linked China to the Mediterranean through Eurasia for centuries. This BRI initiative also referred to as “One Belt One Road”.
BRI initiative is an economic development strategy and foreign policy of the Republic of China. There is two major directions along which China introduces to connect Europe to China through countries across Eurasia and the Indian Ocean.
The BRI initiative also connects to South Africa and Oceania. In March 2015, China has executed a plan for realizing this ambitious programme. While the BRI initiative is being implemented by China’s National Development and Reform Commission, it also mainly involves the ministries of Foreign Affairs and Commerce.
This initiative comprises the development of six main economic corridors and some important Maritime Ports across Eurasia. For Silk Road Economic Belt on land, the plan is to develop new Eurasian land routes and contrast the economic corridors of New Eurasia Economic Corridors, China-Pakistan Economic Corridors,China-Mongolia-Russia Economic Corridors, Bangladesh-China-India-Myanmar Economic Corridors, China- Central Asia-West Asia Economic Corridors and China-Indochina Peninsular Economic Corridors. In another hand, New Maritime Silk Road on the seas will focus on building secure, convenience and highly efficiency sea transport routes linking major sea shipping ports along the BRI planning (E. I., & G.
Britain, 2015).
1.2 Key Areas of Cooperation
There are total of five major key goals of the BRI Initiatives are Policy Coordination, Facilities Connectivity, Unimpeded Trade, Financial Integration, and people-to-people bonds. Firstly, policy coordination involves the related countries along BRI planning, via professional consultation on an equal footing among countries, together formulate strategy development plans and coordinates for cross-national and regional cooperation. Besides that, China provides policy support to actual cooperation and giant project implementation also through consultation in solving problems arising from cooperation.
Facilities connectivity means to select areas of development as part of BRI strategy. Coordination will be made to give priority to removing obstacles in the missing parts and limited areas of core international transportation routes, improving the development of shipping ports infrastructure facilities and clearing land- water trading passages. The linking of infrastructure including high-speed train railways, highways, sea routes, air routes, networks telecommunications, oil, and gas underground pipelines will also be developed. This will establish an advanced infrastructure facilities networks linking from China to Asian Sub- Regions, Europe, Middle East, and Africa. In facilitating unimpeded trade, efforts will be made out to design equality investment and financial trade facilitation. In order to decrease investment and trade boundary, reduce trade and financial costs and promotes trades economic integration. Steps will also be planned to widen the objectives of trade, strategies international trade development via financial investment and enhance cooperation in the various industry with involved countries.
In order to implement financial integration, steps will be taken to improve coordination in monetary policy, explore new cope of local settlement of trade currency and selection of trades currency exchange and financial investment between relates countries along the BRI development routes, extend multilateral and bilateral cooperation, setting up financial consultant institutions, improve cooperation in manipulating financial risks, and strengthen the capability of managing financial risks through arrangements.
In the view of people-to-people bonds, hard works will be made to promote interchange and dialogues between different background history and cultures, deepen the friendly relationship between the people of different countries, and widen mutual understanding and friendships. These are the basis for the improvement of regional cooperation (Wilson, 2016).
1.3 The Silk Road Fund
This BRI Initiative is estimated to cost more than USD1 Trillion, although there are many different estimates as to how much money has been spending. According to articles, China has invested almost USD210 Billion in Asia.
Therefore, the Republic of China has established Silk Road Fun to finance the BRI. It will financially invest mainly in the construction of infrastructure and resources, also helping in industrial and financial cooperation. The Silk Road Fun was started up as a limited liability company in December 2014 with its shareholders includes China’s State Administration of Foreign Exchange, The China Investment Corp, The Export-Import Bank of China and the China Development Bank. This Fund will comply with international market regulation and the international finance order and promotes the participation from domestic and foreign investors as the China-Africa Development Fund and the Asian Infrastructure Investment bank.
The First Capital Installation o the Fund estimated to US 10 Billion. On May 2017, President of Republic of China, Xi Jinping delivered a speech at the opening ceremony of the “Belt and Road Forum for International Cooperation”, and then declared that China would grant an additional 100 Billion Yuan to the Silk Road Fund.
In order to smoothen the financial investment process, The Asia Infrastructure Investment Bank (AIIB) is a newly founded multilateral financial institution to bring related countries together to implement the giant project needs across Asian, Europe, Middle East, and Africa. This institution also offers sovereign and non- sovereign financing for sustainable green projects in clean energy and power generation, transportation and network telecommunications, rural development infrastructure, urban development, logistics in Air and Sea, Agriculture Technology, Water Supply, and Environmental Protection (Blackwill, R. D., & Harris, J. M., 2016).
2 Literature Review
2.1 Reveal the purpose of BRI
Supporting a diverse array of initiatives that strengthen connection through Europe, Asia, Middle East, Africa and beyond would serve to improve China’s economic and security interests while reinforcing overseas development. While in Belt and Road Forum, President of Republic China, Xi Jinping mentioned that “In pursing the BRI Initiative, we should target on the fundamental issue of development, release the growth potential of various countries and achieve economic integration and interconnected development and deliver benefits to all.”
This BRI is a giant umbrella initiative that covers a multitude of investment large scale project designed to improve the flow of trades, financial and people. The whole new connections cultivate by the BRI could restructure the relationship between involved countries, rearrangement economic activity, and changing power within and between countries. In March 2015, The Ministry of Foreign Affairs publicized an action plan that fleshed out the main key goals of the BRI that included enhancing intergovernmental communication to better align advance-level government policies like economic development strategies and plans for regional cooperation, establishing the coordination of development of infrastructure to better links hard infrastructure networks such as transportation and power, promoting the development of soft infrastructure as the international trades, aligning of regulation standards, and balancing financial integration, improving people mutual connections by raising students, experts, and cultural exchanges and tourism.
These involved countries are benefiting from the BRI most is the development of hard infrastructure. The BRI gives China a platform to use its considerable economic means to invest these giant projects among the countries. The Asian Development Bank (ADB) measured that the developing countries of Asia will acquire USD 26 Trillion financial investment in developing infrastructure to sustain growth. Measure these needs against its economic strength may basically garner China significant political manipulation. There are some areas that highlighted by China endure from underinvestment due to domestic economic struggle and register low on the United Nations Human Development Index (HDI). Thus, Myanmar and Pakistan are the two countries priorities by the BRI.
In order to support this programme, China government has invested a huge amount of capital into Chinese Public Financial Institutions as the Chinese Development Bank (CBD) and the Export-Import Bank of China (EXIM). The banks are very happy with very low borrowing costs as their shares are treated like China government debt with very minimum interest rates and they are accessible to lend money from People’s Bank of China (PBOC), permitting them to lend money with low interest to China Companies that related on BRI projects.
With the previously mentioned action taken by China government directly allows China’s state-owned enterprises (SOE) to give highly competitive bids for big projects against overseas companies that might be more financially restricted. For example, in 2015 some Japanese development companies lose to China companies in a bid to build a high-speed railroad
23 project in Indonesia. Reviewing the reasons behind this, the Indonesian government stated that CBD is financing the China companies, which came with fewer strings attached. However, the high-speed railroad projects end up with many problems.
There are conflicts in terms of the contract, which has been reviewed many times since it was mentioned as unrealistic.
Moreover, China’s contractors have to withdraw from the project due to licensing and land acquisition issues.
There are some BRI projects are in the middle of the process as the China-Pakistan Economic Corridor (CPEC), it has a total 3000-kilometer corridor that spread from China’s Kashgar to Pakistan’s Gwadar. This corridor has a wide array of infrastructure facilities includes railways, highways, oil and gas pipelines, and fiber optical cables. However, there are more than 50% of the total planned projects for CPEC are power plant projects. The Chairman of the Chinese National Development and Reform Commission, Xu Shaoshi mentioned that “CPEC is an important point in the progress of BRI and would allow the possibility of 21st Century Maritime Road”.
This CPEC is planned to link the land-based Silk Road Economic Belt together with sea-based Maritime Silk Road. The beginning of this corridor has been controlled by the state-owned China Overseas Ports Holding Company, which has expanded Gwadar Port and leased it from the Pakistani government until 2059. Furthermore, the highway from Kashgar to Gwadar has also been upgraded. There are many coming projects in CEPC which is the Gwadar Special Economic Zone that is under constructing and completion by the end of 2020 (Shelton, G., 2012).
2.2 Conceptual Framework of Belt Strategy
The
