Updates from the New Silk Road
The Belt and Road Initiative is a major development strategy launched by the Chinese government in September 2013 to sponsor and promote economic co-operation among countries along the proposed Belt and Road routes. With our focus on built environment and infrastructure development, we aim to keep you updated on the latest developments.
Bangladesh joins the New Silk Road
Following a visit by Xi Jinping, President of the People’s Republic of China, to Bangladesh on 14-15 October, China and Bangladesh announced a “strategic partnership of cooperation” between the two countries. Both countries signed documents of cooperation, agreeing to expand trade and investment in the fields of infrastructure; industrial capacity; energy and power; transportation; information and communication technology; and agriculture.
This strengthening of relations between Bangladesh and China aligns closely with several strategic initiatives. One such initiative is the BCIM (Bangladesh, China, India and Myanmar) Economic Corridor, a much-touted project which aims to improve transport infrastructure and facilitate trade between the countries it traverses. Another is Bangladesh’s target of becoming a middle-income country by 2021 and a developed country by 2041, one which will require substantial investment in the areas identified during President Xi’s visit. A third is the need to improve Bangladesh’s port infrastructure; Chittagong port, which handles around 97% of the country’s trade, is in acute need of investment. Having financed and built port infrastructure at Gwadar in Pakistan and Hambantota in Sri Lanka, China is well-placed to add a further stop on the Maritime Silk Road.
ICBC pledges up to RMB50 billion to fund ‘Belt and Road’ infrastructure projects
The Singaporean branch of Industrial Commercial Bank of China Limited (ICBC) has announced it has signed an memorandum of understanding with the Singapore Business Federation (SBF), which aims to inject up to RMB50 billion to support SBF member businesses, in the provision of professional services and project financing of infrastructure projects which form part of the ‘Belt and Road’ initiative.
With the goal of focusing on infrastructure construction in Southeast Asia, ICBC to date has currently provided financing in the region of US$22 billion to support 95 separate ‘Belt and Road’ projects.
China invests in excess of US$1.6 billion in Cambodia’s hydropower resources
Cambodia, a Southeast Asian founding member of the AIIB with abundant water resources, has a huge hydropower potential of more than 10,000 megawatts. Currently, the financing of six out of the seven current hydropower projects are fully provided by Chinese companies as part of the wider ‘Belt and Road’ initiative’. The overall value of investment in these six completed projects is over US$1.6 billion.
The six hydropower plants are developed under build-operate-transfer contracts and have a capacity of 928 megawatts in total (which is only 10% of Cambodia’s hydropower potential).
Presently, the only hydropower project which is not wholly financed by Chinese companies is the 400-MW Lower Sesan 2 project on the Se San River in north eastern Cambodia. It is a joint venture between Chinese, Cambodian and Vietnamese companies.
In addition to investing in Cambodian hydro projects, China has also invested heavily in other infrastructure projects including mining and the tourism industry.
Further projects are in the pipeline, following Xi Jiping’s first presidential visit to the country in October where he encouraged Chinese investment in developing Cambodia’s high-speed rail network.
Dispute resolution on the Belt and Road – an opportunity for Hong Kong
Hong Kong is well-poised to be a key centre for dispute resolution for Belt and Road Projects.
The Hong Kong Policy Research Institute has issued a report which includes a number of recommendations as to how to develop Hong Kong’s already strong dispute resolution services industry. The institute recommended that Hong Kong:
- Work to attract renowned arbitration bodies to set up offices in Hong Kong. HK already hosts the well regarded HKIAC and the regional office of the International Chamber of Commerce’s arbitral institution.
- Promote HK law as a governing law for Belt and Road contracts.
- Create a new position in the Department of Justice with responsibility for Belt and Road issues.
- Develop a database on the legal issues and environment prevailing in each Belt and Road country.
- Review and enhance its Arbitration Ordinance, being the legislation governing arbitration in Hong Kong to ensure that Hong Kong’s legal framework is up to date with legal and commercial developments in international arbitration.
- Develop its capacity to provide and support Islamic finance products – many of the countries along the Belt and Road have Muslim majorities.
The priorities set out by the Institute, if they find strong and vocal champions in government should assist Hong Kong to reinforce its position as a premier dispute resolution service centre and allow Hong to carve out a key supporting role for the Belt and Road.
Not only about hard infrastructure
The Belt and Road Initiative does not simply translate into hard infrastructural investments; Information and communication technology (ICT) development such as FinTech and big data is as important to improve the interconnectivity between countries along the Belt and Road routes.
In a recent big data report released by the State Information Centre of China which provided an assessment on the implementation of the Belt and Road Initiative to date, the findings pointed to Russia, Thailand, Pakistan, Indonesia and Kazakhstan being the most cooperative states in promoting the Belt and Road Initiative. Based on the collection of over 300 billion sources of information related to the initiative, the report analysed the participation of 64 different countries Belt and Road cooperation based on categories including policy communication, connectivity, trade finance and public support.
Big data improves transparency by providing basic information, economic and industry dynamics, latest news and policies of each region for governments and corporations.