Belt and Road Insights - March 2016

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Summary: Highlighting China’s increasing economic involvement in Pakistan; and further initiatives of the Hong Kong government aimed at cementing its role as a finance hub for OBOR infrastructure projects.

Welcome to BLP’s ‘OBOR Insights’ March 2016 issue – a selection of interesting OBOR news items, distilled into a monthly ‘speed read’.

This month’s OBOR Insights highlights three significant developments in the Ports sector, in Belgium, Greece and Georgia strengthening Europe’s maritime connections to Asia. Also this month, we focus on:

  • china’s increasing economic involvement in Pakistan; and
  • further initiatives of the Hong Kong government aimed at cementing its role as a finance hub for OBOR infrastructure projects.

China’s One Belt, One Road development strategy aims to increase economic cooperation across Asia, Africa and Europe. With offices spanning key locations in Europe, the Middle East and Asia and a core focus on the built environment and infrastructure development, at BLP we are excited by OBOR’s promise.

1. ICBC partners Antwerp Port Authority in OBOR

China’s largest bank, Industrial and Commercial Bank of China (ICBC), has concluded a memorandum of understanding with Antwerp Port Authority to establish a strategic partnership for OBOR opportunities.

The port of Antwerp, a key link between China and Europe boasts extensive shipping connections to other parts of Europe. This partnership is said to allow ICBC to exploit any increase in trade volume arising as a result of OBOR and the Antwerp Port Authority to increase its market share of growing Chinese exports.

Similar collaborations are likely to occur in other parts of Europe, with Chinese investors mitigating risks in new European markets by entering into strategic partnerships with local European companies.

2. China’s COSCO takes control of key Greek port

COSCO, China’s state-controlled shipping group is the preferred bidder in a €368.5 million deal for control of Piraeus, Greece’s biggest port, located immediately south of Athens. COSCO already runs container operations from two piers at the port.

Piraeus port is one of the largest in the Mediterranean and it is an important distribution centre to the Balkans and central and southern Europe. It provides a key trade route for Chinese exports to Europe via the Suez Canal.

If successful, COSCO has agreed to invest €350 million over 10 years to upgrade the port. Of that amount, €300 million is likely to be spent on cruise and ship repairing operations in the first five years.

Away from the Piraeus, Chinese entities have expressed interest in the port of Thessaloniki and Greece’s state-run railway network.

3. Georgia to build major Black Sea port on new Silk Road

Georgia has announced that the Anaklia Development Consortium (“ADC”) a joint venture between Georgian Group TBC Holdings and US based Conti International has been awarded the contract to build a new deep-water Black Sea port at Anaklia, on the western coast of Georgia. The new port will have the capacity to accommodate the Black Sea’s largest vessels, and will provide a new maritime corridor connecting China with Europe.

The Georgian government will contribute $100 million towards the $2.5 billion project. ADC will fund the remainder of the cost through a mixture of equity and debt from private and institutional investors.

4. New coal mine and power plant in Pakistan

China has invested $1.95 billion for the development of Pakistan’s Thar Block II coal mine and coal-fired power plant, signing financing agreements on 19 February 2016 to be completed in twenty four months. The mine is expected to produce 3.8 million tons of coal per year.

On the Pakistani side, the project is supported by Engro Powergen Limited, Thal Limited, Hub Power Company, and HBL Pakistan. China’s Machinery Engineering Corporation is the construction contractor.

China has already invested more than $40 billion into the China-Pakistan Economic Corridor, and energy infrastructure has been a continuing priority.

5. HK Budget Speech promotes OBOR

Hong Kong’s Financial Secretary, Mr John C Tsang, gave his annual budget speech to Hong Kong’s Legislative Council on 24 February 2016, which included an announcement that the Hong Kong Monetary Authority will establish an office to facilitate the financing of infrastructure projects and coordination of investors, banks and other actors in the financial sector to offer comprehensive infrastructure project financial services. Mr. Tsang’s announcement followed the Chief Executive, Mr. C Y Leung’s policy address in January which mentioned OBOR more than 40 times.

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