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Belt and Road Insights - August 2016


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Summary: Welcome to BLP’s ‘Belt and Road Insights’ August 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. Hong Kong’s role as fund raising centre strengthened by Infrastructure Financing Facilitation Office

The Hong Kong Monetary Authority (HKMA) signed agreements with Global Infrastructure Hub (GI Hub) and International Finance Corporation (IFC) as it launched the Infrastructure Financing Facilitation Office (IFFO) to develop Hong Kong as a fundraising centre for infrastructure projects from India to Southeast Asia and the Middle East as part of the Belt and Road Initiative. IFFO will be an integral part of the HKMA, with senior executives from the authority to lead the new office.

IFFO has stated it will not  be involved in deal matching but will act as a platform for its 40 partners which include multilateral development banks and agencies, public sector investors, project developers and operators, commercial banks, asset managers and professional service firms to discuss fund raising matters. Partners include BlackRock, Blackstone Group, HSBC, and CLP Group. The establishment of the IFFO will strengthen Hong Kong’s role as a centre for financing upcoming Belt and Road projects.

2. Belt and Road creates unique opportunities for Sino-British cooperation

The China-British Business Council has recently released its China-British Belt and Road Case Studies Report. According to the report, which provides 21 examples of existing China-UK cooperation, Chinese and British enterprises have already created powerful partnerships when working together on projects with a combined value of US$27 billion along the Belt and Road route.

Whilst Chinese enterprises have accumulated rich experience in developing modernised infrastructure, ensuring they are well placed to take advantage of the Belt and Road Initiative, the report highlights the mutual benefits of partnering up with British firms, who have leading expertise in operating in some of the more challenging business and geographical environments along the Belt and Road.    

3. China’s IZP Group in frame to run and operate Sri Lanka's Mattala Airport

Despite the deadline for the submission of expressions of interest being open until early August, the Chinese information technology group IZP, has emerged as a leading contender to win the rights to take over operations at Sri Lanka’s Mattala Rajapaksa International Airport.

With only two daily flights the international airport is widely regarded as one the world’s most underused. With currently little to no income, the airport  has been a drain on the economy as it is still in the process of paying back a loan of over $200 million funded by the Exim Bank of China.

IZP which is dedicated to developing a comprehensive network services platform in the countries along the Belt and Road, already has an interest in Sri Lanka through its port alliance platform with China Merchant International, as part of the wider 29 ports and 55 wharfs its covers across the globe.

4. Further progress on the EU-China strategic partnership

During a two-day summit, wrapped up on July 13, EU and Chinese leaders met in China and “moved the strategic partnership between the European Union and China forward”, as EU president Donald Tusk said in his remarks about the summit.

The EU intends to connect the European Fund for Strategic Investments with the Belt and Road Initiative. The EU investment fund attempts to use seed capital to unlock as much as $349 billion in public and private funding for infrastructure projects. On the other side, China is expected to initially invest $2.21 billion in the EU infrastructure fund.

There is momentum towards concluding a bilateral investment agreement which could usher in future negotiations on a free trade agreement between the EU and China. However both sides will need to overcome disagreement on issues including Chinese trade subsidies, industrial overcapacity and safeguarding intellectual property. The EU has also indicated a desire for reciprocity of conditions in its investment relationship with China before real progress can be made. Despite these hurdles there would appear to be a renewed willingness on the part of the EU. In a letter to Chinese Premier Li Keqiang, Tusk highlights the open and honest discussions that “reflect the depth of the strategic EU-China partnership, and the importance that we attach to it”.

5. Belt and Road: Singapore’s new growth track?

We are pleased to share a link to our latest expert legal insights article, which explores the  opportunities for Singapore to benefit from the Belt and Road Initiative. 

Read Belt and Road: Singapore's new growth track? as we discuss Singapore’s position as a super connector for its South-east Asian neighbours.

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