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This week our top story examines what we know – and don’t know – about China’s billions of dollars in loans to Uzbekistan. We also have an interview with Dr. Choi Eunmi, a researcher at the Asan Institute for Policy Studies, about South Koreans’ lingering distrust of Japan, despite warmth at the political level.
The Diplomat Brief
July 17, 2024thediplomat.com
The Wang Gungwu Visiting Fellows Programme
Welcome to the latest issue of Diplomat Brief. This week our top story examines what we know – and don’t know – about China’s billions of dollars in loans to Uzbekistan. We also have an interview with Dr. Choi Eunmi, a researcher at the Asan Institute for Policy Studies, about South Koreans’ lingering distrust of Japan, despite warmth at the political level.
Story of the week
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Economy

The Risks of China’s Loans to Uzbekistan

What Happened: Since 2002, Uzbekistan has received $18 billion in development finance from China. Roughly half of that came in the form of loans from a single source: the China Development Bank. Uzbekistan still owes $2.2 billion to the CDB, making it the third largest creditor to Uzbekistan. However, a consortium of Central Asian researchers noted in an analysis for The Diplomat, “Due to the low level of transparency on both sides, there are virtually no publicly available documents on lending terms.” Based on analysis of public information and comparisons with Chinese loans to other Central Asian states, the researchers laid out what we know – and don’t know – about the loans.

Our Focus: The vast majority of CDB loans to Uzbekistan – $5.7 billion, or 63 percent of the total – went to projects in industry, mining, and construction. Another $940 million went to transport and storage, followed by $74 million to energy. There’s no clarity on the terms of repayment – the interest rates, repayment schedule, or consequences of default – nor on other conditions attached to the loans. For example, Chinese loans to Kyrgyzstan and Tajikistan stipulate that projects funded by Chinese loans must be implemented by Chinese companies using Chinese equipment, artificially dampening competition and potentially driving down quality. Chinese projects have also been associated with major corruptions scandal in Kyrgyzstan.

What Comes Next: “The China Development Bank’s huge quantity of loans to Uzbekistan over the last two decades has raised concerns and questions,” the researchers conclude. The terms of the loans “may limit local economic benefits and technological autonomy” while opening space for corruption among both lenders and recipients. And then there’s the classic “debt trap” dilemma: “If debts cannot be repaid, there is also a high risk of losing control of strategic assets, as evidenced by similar situations in neighboring countries.” Overall, the case of Chinese loans to Uzbekistan underlines the pitfalls of two largely unaccountable regimes doing business with each other: a lack of oversight and even awareness among the public.

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Behind the News

INTERVIEW

Choi Eunmi

Dr. Choi Eunmi, a researcher at the Asan Institute for Policy Studies and a member of the Ministry of National Defense’s policy advisory committee, on Japan’s lack of attention to its image in South Korea: “After World War II, Japan extensively tried to rebrand itself as a pacifist state, but these endeavors have mainly resonated with the United States and other nations. Japan’s public diplomacy initiatives in South Korea were sporadic and only gained momentum in the 2000s.”

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This Week in Asia

Northeast Asia

South Korea’s Ruling Party Gets a New Leader

The People Power Party has a new chair: Han Dong-hoon. The intra-party election was preceded by a particularly vituperous campaign that pitted Han against the preferred candidate of President Yoon Suk-yeol. Han, despite being a long-time colleague of Yoon’s, including serving as his first justice minister, has now broken ranks with the president, even offering support for investigations into Yoon and his wife. His election sets up a battle for future of the PPP while the opposition Democratic Party, which controls the legislature, watches.

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South Asia

Bangladesh Reels After Deadly Crackdown

Bangladesh’s student protests rocked the country last week, especially after a major crackdown brought about clashes between police and protesters, causing hundreds of deaths. Initially focused on calling for an end to quotas in the civil service reserving jobs for independence fighters’ descendents, the protests morphed into direct calls for the ouster of Prime Minister Sheikh Hasina, who has been in power for 15 years, including through three suspect elections. The internet has been shut down since July 18, making recent developments difficult to verify, but the protesters have vowed to carry on, despite a court ruling drastically curtailing the quota system.

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Southeast Asia

Vietnam Mourns Passing of Communist Party Chief

Flags in Vietnam are flying at half-mast this week following the death of Nguyen Phu Trong, the long-serving general secretary of the Communist Party of Vietnam (CPV). Trong, who died on July 19 at the age of 80, has held the party leadership since 2011. Over the past decade-plus, he has succeeded in balancing relations with contending major powers including China, Russia, and the United States, while engineering a sweeping anti-corruption campaign that has led to resignations and arrests at all levels of the government. A state funeral for Trong will be held in Hanoi later this week. He will then be replaced in an interim capacity by President To Lam, who is viewed as a likely candidate to assuming the party leadership at the next CPV National Congress in early 2026.

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Central Asia

A University Degree in Uzbekistan Isn’t What It Used to Be

It’s a bit of a paradox: As the number of higher education institutions has expanded in Uzbekistan, the value of a college diploma has decreased. In part, it was scarcity of access that inflated the prestige of attending university. But while admissions quotas remain far below demand, Uzbek students are increasingly critical of costly programs, poor quality, and a lack of guaranteed employment even with a degree in hand. Given Uzbekistan’s huge youth population, educating and employing the country's future workforce is critical.

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Visualizing APAC

Source: World Bank

Pakistan’s GNI per capita was just ahead of South Korea’s as of the mid-1960s. Today, the gap is a yawning $34,000 in Korea’s favor.

See the full picture
Word of the Week

Politics

রাজাকার

Razakar, the Bengali term for Bangladeshis who collaborated with Pakistan during the war in 1971 (and, more generally, referring to traitors). The student protests escalated dramatically after Prime Minister Hasina conflated the protesters with “Razakars.”

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Indian Foreign Policy Under Narendra Modi: A Decade of Transformation

The Diplomat Magazine | July 2024

Indian Foreign Policy Under Narendra Modi:
A Decade of Transformation

This month, our cover story takes stock of how Prime Minister Narendra Modi’s decade in power has reshaped Indian foreign policy – and what to expect from the next five years and beyond. We also analyze Japan’s growing security role in the Pacific Islands region and trace the Shanghai Cooperation Organization’s evolution from a regional security grouping to an emerging bloc in great power competition. And, of course, we offer a range of reporting, analysis, and opinion from across the region.

Read the Magazine