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Belt and Road Insights - September 2016

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Summary: Welcome to BLP’s ‘Belt and Road Insights’ September 2016 issue – a selection of interesting Belt and Road news items, distilled into a monthly ‘speed read’.

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.

1. Trucking down the new Silk Road

China has signed up to a key U.N. trucking treaty, the “Convention on International Transport of Goods Under Cover of TIR Carnets” (TIR stands for "Transports Internationaux Routiers" or "International Road Transports")

The TIR Convention provides for an international trucking regime which will enable Chinese freight containers to move through member countries through a process of streamlined customs checks. It is hoped that this will provide further incentive for Chinese exports to the European Union to be delivered by road. The majority of China’s exports are currently delivered by sea or air, with only 10% currently being road-hauled.

In March 2015, China set a goal to increase its annual trade with countries which are signatories in the TIR Convention to more than US$2.5 trillion in a decade. As of 2014, this trade amounted to US$1 trillion.

China’s membership in TIR may prove to be a catalyst for additional countries in Asia and Africa to similarly seek membership of the scheme – a development which would further enhance the value of membership for the development of China’s new Silk Road.

2. China Everbright looks to the Belt and Road for WTE opportunities

Hong Kong listed China Everbright International (CEI) has announced the establishment of an international business arm, which will focus on overseas investments within the Belt and Road initiative countries, particularly in regions where waste treatment is still in the early stages of development.

CEI has within the first six months of the year secured 18 new projects which are valued at a combined total of US$3.8 billion. Recent activity includes CEI acquiring NOVAGO, Poland’s leading waste management company for EUR123 million in June, in addition to it winning the tender for a waste-to-energy (WTE) project in Can Tho, Vietnam. The Vietnam project aims to process 400 tonnes of household waste on a daily basis and aims to generate in the region of 60,000,000 kWh of green electricity annually.

As of the end of June 2016 CEI had 187 projects including 53 WTE and 70 water treatment projects for a total investment of RMB48.6bn.

3. Chinese investors pledge US$10.7bn to develop new industrial city in Oman

As of August this year, construction has commenced on the development of a new Sino-Oman industrial city, at a 11.7 square kilometre site located at the Special Economic Zone in Duqm, Oman. The development originates from an agreement valued at US$10.7bn between the Oman government and Chinese investors which will see the city being organised into three separate zones – heavy manufacturing, light manufacturing and a mixed-use area.

The site which is based 550km south of the capital Muscat will feature 35 different projects, which will include Duqm’s second oil refinery with facilities able to process 235,000 barrels a day in addition to an aluminium smelter, magnesium plant, cement and glass factories and solar factory.

One of the main investors Ningxia China-Arab Wanfang which comprises of six private companies supported by the Ningxia regional government, has pledged to developing a minimum of 30% of the site by 2022, with projections for the city to be able house a population of 25,000 by that time.

Forming part of the wider Belt and Road initiative, the investment in Oman follows on from exisiting Chinese investments in infrastructure projects in Egypt and Saudi Arabia. 

4. Myanmar pledges its support to the Belt and Road initiative

State Counsellor Aung San Suu Kyi recently concluded a five day official visit to Beijing with the aim of improving Myanmar’s strategic partnership with China.

Following a meeting between Ms. Suu Kyi and president Xi Jinping, a joint statement was subsequently released which affirmed Myanmar’s support for China’s Belt and Road initiative, in particular plans for the Bangladesh-China-India-Myanmar (BCIM) Economic Corridor. The BCIM corridor on completion will industrialise a stretch of more than 2,000km, which will connect Kunming the capital on Yunnan province in China, with Mandalay in Myanmar, passing through Bangladesh and ending at Kolkata in India. 

5. China Railway looks to the Belt and Road for overseas opportunities

The construction giant China Railway Group, has announced plans to improve the annual growth rate of its overseas revenue by leveraging off opportunities afforded by the Belt and Road initiative. With reduced levels of growth in the domestic market, demand for Chinese high-speed rail expertise internationally, continues on an upwards trend.

The announcement comes in light of the group in August being awarded the US$3.1 billion contract to build a 168km long rail link in Bangladesh, which will connect the capital Dhaka to Jessore, with projections that part of the line will be up and running by 2018.

According to analysts with the Group’s continued ambitions into international markets, the expectations are its overseas revenue will jump in the next three years to 7 or 8% of total turnover from the current figure of 5% for 2015.

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