Orient - The Official Magazine of the British Chamber of Commerce Singapore - Issue 66 May 2018 - Page 34
SPECIAL FEATURE: REPAVING THE ANCIENT SILK ROUTES By David Wijeratne, Partner and Growth Markets Centre, PwC
When the Belt & Road Initiative (BRI) was first announced by President Xi Jinping in late 2013, few could have envisaged the grandeur and ambition that it would entail. The initiative seeks to involve 68 countries and international agencies along six economic corridors, and will impact one third of the global economy. Most importantly, it will serve as a catalyst for infrastructure development in some of the least developed countries in the world, which will drive their economic growth through stimulating trade and creating domestic jobs. Despite these wide reaching benefits, many BRI commentators have been too quick to narrowly label the BRI as a purely geopolitical play by China to strengthen its influence across East and Central Asia. However, the BRI is a complex and multi-dimensional one with multi-pronged goals. It will, on one hand, provide markets to digest China’s industrial overcapacity and facilitate trade with and between the participating countries, while also potentially strengthening its diplomatic relations globally. Beyond this, it will also enable China to gain global recognition in developing complex transnational infrastructure projects, such as high speed rail networks. Belt and Road is an “away game” for China With BRI activities taking place in over 60 developing countries outside of China, the country finds itself in an “away game”, which raises numerous new challenges. While China’s state owned enterprises (SOEs) and their domestic supply chain players have plenty of experience in managing infrastructure projects within China, many are still in the early stages of internationalisation. Operating in unfamiliar and complex territories especially in developing countries along the Belt & Road – such as Khazakstan – presents issues such as managing different public and private interests, navigating varying or unclear regulations as well as uncertain political environments. In addition, operating in a different environment also means potentially working with new and lesser known suppliers and coping with new logistics difficulties. Foreign companies are well-placed to play a value-added role to China’s SOEs in this “away game”. In the BRI, foreign companies ought to be thinking of an ‘Out-Of-China strategy’ rather than an ‘In-China strategy’, with regards to partnering with Chinese SOEs and how they can best leverage their strengths and experience to support Chinese companies along the Belt & Road. Foreign companies can therefore consider being bolder in putting forward their rich international experience of operating in developing, complex markets and emphasise their world class capabilities that will support Chinese SOEs in developing the broad portfolio of infrastructure projects which make up the BRI. There is already a global competition to partner with Chinese SOEs in the BRI, which is intensifying. Leading multinational companies such as General Electric, Siemens, and ABB have established collaboration with key Chinese state-owned enterprises. Time is therefore of essence, and foreign companies must take a proactive approach in reaching out to Chinese stakeholders and to identify key commercial opportunities in the massive BRI. Six key opportunity areas for foreign companies to be involved We believe there are initially six key areas for foreign companies to participate in the BRI.