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At SCO summit, India again says ‘no’ to Belt and Road

India on Sunday again said “no” to China’s Belt and Road project, while Prime Minister Narendra Modi and Pakistan President Mamnoon Hussain merely shook hands on the final day of the Shanghai Cooperation Organisation (SCO) Summit in Qingdao city.

India, which participated at the Chinese-led security bloc for the first time after being inducted into the grouping last year, did not figure in the list of rest of the member states endorsing Beijing’s Belt and Road initiative in the joint declaration.

 Earlier in the day, Modi made it clear that New Delhi was all for connectivity projects but could not compromise its sovereignty and territorial integrity.

India strongly opposes Beijing’s multi-billion dollar project, which aims to connect Asia with Europe through a network of roads, ports and sea lanes.

New Delhi’s objection is to the key artery of the project – the China-Pakistan Economic Corridor (CPEC), which goes through the Kashmir governed by Pakistan and claimed by India.

“We have again reached a stage where physical and digital connectivity is changing the definition of geography. Therefore, connectivity with our neighborhood and in the SCO region is our priority,” Modi said.

“We welcome any new connectivity project, which is inclusive, sustainable and transparent, and respects a country’s sovereignty and regional integrity,” he said at one of the sessions at the Summit.

This is one of the contentious issues between India and China but both seem to have decided not to let it affect other aspects of bilateral ties.

Like India, Pakistan also became a member of the SCO in 2017 and attended the event for the first time.

“It was noted that the SCO had asserted itself as a unique, influential and authoritative regional organization whose potential had grown remarkably following the accession of India and Pakistan,” the 17-page Qingdao declaration said.

With the inclusion of India and Pakistan, the grouping has expanded into an 8-member bloc. China, Russia, Kyrgyz Republic, Kazakhstan, Tajikistan and Uzbekistan are SCO’s other members.

Modi, who had bilaterals with Chinese President Xi Jinping and other leaders, just had a handshake with the Pakistan head of state.

The ties between the two countries have plummeted following attacks at Indian Army bases and continuing violence in Jammu and Kashmir.

The bloc vowed to fight terrorism.

“The SCO’s coordinated policy of waging an effective fight against challenges and threats to security remains unchanged. Practical interaction in this area will be facilitated by the adopted Programme of Cooperation between the SCO Member States in Opposing Terrorism, Separatism, and Extremism for 2019-21.”

During the summit, Modi and Xi had a “substantive” meeting on Saturday. India struck major deals like the export of rice and Indian pharmaceutical products to China.

The bilateral trade target of $100 billion by 2020 was another important announcement by both sides.

The Kyrgyz Republic will take over the Presidency of the organization. The next meeting of the Council of SCO Heads of State will be held in the Kyrgyz Republic in 2019.

SOURCE: http://m.greaterkashmir.com/news/world/at-sco-summit-india-again-says-no-to-belt-and-road/287805.html

To avoid China’s debt trap, Malaysia to re-examine projects under Belt and Road Initiative

Malaysia is not keen to blindly go ahead with projects offered by China under its Belt and Road Initiative (BRI), the recently-elected Malaysian government has said. It also indicated that it would attempt to balance its relationship with Beijing and re-examine the projects that were earlier agreed to by the previous government.

The need to avoid the Chinese debt trap was a topic that was repeatedly underscored in the run-up to the elections in Malaysia by the Pakatan Harapan alliance and its leader and current Prime Minister, the 92-year-old Mahatir Mohamad.

“China comes with a lot of money and says you can borrow this money. But, you must think, ‘How do I repay?’ Some countries see only the project and not the payment part of it. That’s how they lose large chunks of their country. We don’t want that,” Mohamad said, reported news agency ANI.

 Mohamad’s newly formed government would take a look at the projects under the BRI that were agreed to by the previous government led by Najib Razak, Mohamad’s former protégé.

Malaysia is not the first country in which projects funded or built by China have come under the scanner when the government changed after an election. The same thing happened in Sri Lanka in 2015, when the new Maithripala Sirisena government cancelled some of the Chinese-backed projects that had been signed by the previous government of Mahinda Rajapakse.

The Sirisena dispensation, left to deal with the mounting debt because of the Chinese projects, found itself unable to repay the loans. In December 2017, the Sri Lankan government was forced to hand over control of the Hambantota Port to Chinese companies for a period 99 years.

Concerns have also been rising in Pakistan, which has placed its already-precarious economy under further strain of Chinese loans to continue its projects along the troubled China-Pakistan Economic Corridor (CPEC).

Mahatir Mohamad’s concerns seem to stem from the spate of agreements that were signed by the Najib government under Chinese President Xi Jinping’s pet Belt and Road Initiative. Among these was the $13.1 billion East Coast Rail Link (ECRL), which aims to link Malaysia’s more industrialised east coast with its less-developed western coast and interior highlands. will run from Port Klang, Malaysia’s main port near the capital Kuala Lumpur, to Tumpat on the border with Thailand, bisecting the peninsula’s hilly interior.

Other projects include a build-and-manage agreement for a deep-sea port and an industrial park near the city of Melaka, a port rebuilding project in the town of Kuantan, and a massive residential project close to the southern border with Singapore.

China has already been accused by a number of countries of using the Belt and Road Initiative as a tool to further its expansionist goals by giving out loans for high-value projects of uncertain viability.

Malaysia’s geography would also provide an attractive strategic positioning for China, given its location along the Malacca Strait, through which a massive portion of China’s energy supplies pass through.

SOURCE: http://zeenews.india.com/world/to-avoid-chinas-debt-trap-malaysia-to-re-examine-projects-under-belt-and-road-initiative-2114262.html

CPEC: A momentum for prosperity

In a world defined by unexpected conflicts, CPEC and BRI have the potential to push these trajectories into altogether different directions. For Pakistan it will mean trading conflict and insecurity for peace and prosperity, argues the Senate’s Leader of the Opposition, Sherry Rehman.

The CPEC Summit 2018 was an important event with a distinguished group of thought leaders. In a conference full of unconventional wisdoms and cutting edge info, a lower‑riparian speaker’s job was quite unenviable. In more ways than one, the summit signalled Pakistan’s commitment to change and growth. What it signalled bang in the middle of election year was Pakistan’s agreement across the board on one thing: no one wants to be left out of this momentum.

The first thing that came to mind at a big‑ticket CPEC conference in Pakistan was that we are currently standing at a nodal pivot in Pakistan and China’s long‑established special relationship; but what also came to mind is that we are at an axial point where the world is rapidly turning in a re‑calibration of its priorities. Amidst the noise of dangerous new global conflicts that threaten the peace and prosperity of many nations, and fires that engulf entire regions, CPEC and BRI signal another engine moving relentlessly on, in entirely another direction of growth and peace. We can literally hear the wheels of a bold new order shift its shape under our feet.

We can also see the pulsation of the pointless regional neuralgia this partnership is giving some. My advice to them is that, they really shouldn’t worry, but instead join this enterprise.

It is truly the Asian Century. By linking the Atlantic to the Pacific through BRI, President Xi Jinping’s China is poised to redefine the global economic order as we know it, and change the way we think about the world. As the tracks for new global connectivity reframe human enterprise, with Gwadar as its launching pad, and Malacca not the only option, China becomes a two‑ocean power. This is both commercially relevant and strategically significant. As a key part of the constitution of the Peoples Republic, One Belt One Road (OBOR) has now cemented its place in the wheelworks of China’s long‑term vision of progress through economic partnerships. It is a projection of soft power unparalleled in the 21st century.

All this is relevant to Pakistan obviously in ways no other grand plan for exporting surplus was. Today, as we see China’s investments in Pakistan materialising through CPEC, I am clear that a major part of its success is powered by the groundwork and foundation PPP’s government provided.

Under [the then] President Zardari’s leadership, rooted in Zulfiqar Ali Bhutto’s revolutionary vision to share the Chinese Communist Party’s goals, and PM Benazir Bhutto’s brilliant championing of this joint vision, Pakistan’s relationship with China has gone into another dimension altogether. President Zardari’s vision was based on a grand idea for pivoting to the East at a time when the rest of the world was still busy calling on other capitals. This vision is shared and will be carried on forward by PPP under Chairman Bilawal Bhutto‑Zardari’s leadership.

PPP understood the grand Chinese dream well. Providing state support and strategic access to our warm waters was part of the vision. Therefore, we knew that Chinese development stewardship for Gwadar Port was pivotal to the CPEC becoming a reality.

CPEC has already created 60,000 jobs and Pakistanis would likely be able to make the most of these opportunities. We need trained manpower though.

Over the years, all of us have worked closely with Chinese officials and investors in facilitating projects, people‑to‑people relationships, cultural exchanges, and, most importantly, ensuring the security of everyone involved in CPEC projects. As we speak, 2,700 students from Pakistan were granted scholarships to study in China with thousands already learning Mandarin across the country. This kind of exchange is as important as big‑scale projects. Because building trust between peoples is what binds countries together in ties that sustain the tests of time, in all weathers and all storms.

As the first container ship sailed into Gwadar in March, CPEC has already started making an impact in all provinces in order to bring prosperity. We have a long way to go in providing safe drinking water and schools to the people of Gwadar, but I am glad to see that social responsibility and signature projects are beginning to complement each other.

This must be something we work on together as early projects start harvesting into reality. Everywhere there is an industrial park or SEZ, a port or energy project, there should be a groundswell of children going to schools, functioning healthcare units and waste‑to‑ energy plants, which China is so good at doing at every level. The responsibility for this lies with Pakistan, and with the provinces too, but I urge our Chinese friends to double their interest and investment in social development as they are doing already in partnership with UNDP in Balochistan.

We are proud to say that the forward‑looking government of Sindh has also been leading the way in renewable energy projects to bring prosperity. Sindh province contributes 930 megawatts of wind energy to the national grid with the help of CPEC projects. In line with this, the federal government should allow the use of renewable energy in Sindh.

As part of our history of joint cooperation, PPP looks forward to continuing to work closely with local and Chinese stakeholders in achieving our common goals and interests for the betterment of our people and the region. Two ports are now operating in their optimal capacities and other commercial ports, including the important Keti Bunder, are under development in partnership with the Chinese.

But CPEC is not a one‑party or one‑province ambition. It is a national project that goes beyond infrastructural development and we will stand by all efforts to create consensus and operationalise this grand ambition. Consensus‑building among political parties and provinces is crucial as the windfall from this venture can change the game for Pakistan.

Pakistan is not equivocal about its relationship with China. Right now, as we see promises turning into projects, the widespread public ownership of the ‘feel‑ good’ factor that China generates in Pakistan continues as do questions about equity transparency spread. With a multi‑billion dollar investment like CPEC, responsibilities and obligations for both Pakistan and China double. Transparency and equitability are the foundations for which an initiative with a scale as grand as CPEC must be built on.

As CPEC rolls out in Pakistan, there are three obvious areas to focus on: economy, environment and security.

It is undeniable that as an infrastructure and investment pipeline, CPEC has the potential of taking Pakistan into a quantum leap of prosperity and peace. It is believed that Chinese investment can stimulate a 15pc increase in Pakistan’s GDP by 2030 and would likely create over a million jobs across multiple sectors in Pakistan which will in return bring prosperity. While still in its very early stages, CPEC has already created 60,000 jobs and we hope that Pakistanis would be able to capitalise on this new job market. We need more Pakistanis trained to hold down these jobs.

However, development does not start and end at infrastructure and economic growth. We must also look into tech‑knowledge sharing and collaborations as we enter the Fourth Industrial Revolution. The development of regional value chains, a phenomenon that has entirely reshaped global trade in recent decades, is a particularly exciting prospect. Pakistan is well‑positioned to gain from this shift and CPEC is the perfect opportunity to bring advanced manufacturing and production practices to the country.

We have a responsibility to empower our youth and Pakistan can be a powerhouse of opportunities. Almost 60pc of Pakistan’s population is under the age of 30, making it the country’s most important demographic. To put that in context, three out of five Pakistanis are under the age of 30, full of hope and energy, but most without real employment prospects. Close to 60pc of them are currently in unstable or underpaying jobs and about 35pc are working in unpaid jobs. CPEC has given the millions of young people who enter the workforce every year a renewed hope and prosperity. We have a joint task to find ways in which we can tap into the potential of Pakistan’s youth and expand their growth, and look at ways to accelerate youth employment and skill training and to bring prosperity to this region. I look forward to working with the Chinese leadership on ensuring that more jobs and skills are created for Pakistanis.

As CPEC grows, Pakistan and China must look into a broader range of ventures and issues where we can cooperate and work on, one of which is environmental protection and climate change. Pakistan currently is the 7th most vulnerable country in the world to climate change. Pakistan’s carbon emissions are expected to double in two years and surge 14 times by 2050, which is way more than the global average. Given my travels in China, I know that the People’s Republic is no stranger to challenges brought about by climate change.

The enormous industrial investments and projects that will come with CPEC can be amplified if we prioritise creating a clean energy economy. I can only hope that we safeguard the future of the generations to come and that what we do today, in the name of progress, does not create new challenges for them. We hope that the Chinese government can bring to Pakistan the clean energy initiatives they have strictly enforced at home. We are old friends, and whom else can you ask for more, except from friends. Together, we must resolve to move towards eco‑friendly, sustainable and renewable energy sources.

Let me reiterate, if there is one thing that Pakistanis agree on, it is CPEC’s vision of human security, economic cooperation, reform and joint prosperity. As an economic bloc, South Asia will be one of the wealthiest regions in the world, with markets and growth vectors second only to China. At the same time, the region is also forecast for growing inequality, land hunger, poverty‑based migrations, water stress, and social deficits. These trends can be divisive in a region already crackling with tensions.

We believe that CPEC will create a new engine for reinvigorating innovation and ingenuity not just in both the countries but for the region as well. It is this cooperation, innovation and ingenuity that will drive the project of peace in a world divided by inequities, conflicts and social disorder.

The CPEC Summit once again highlighted the Chinese government’s unfaltering cooperation, support and friendship to the people of Pakistan. The future really does lie in peace through economic partnerships. Let us hope our roadmaps take our young people into a brighter, energised, connected millennium.

The writer is Leader of the Opposition, Senate of Pakistan.

SOURCE: https://www.dawn.com/news/1409514

China signs deals worth USD 390 bn with ‘Belt and Road’ countries

China has inked trade deals worth USD 390 billion with the countries participating in its ambitious Belt and Road Initiative in the first four months of this year, the Chinese Ministry of Commerce has said.

China has inked trade deals worth USD 390 billion with the countries participating in its ambitious Belt and Road Initiative in the first four months of this year, the Chinese Ministry of Commerce has said.

The Belt and Road Initiative (BRI), a pet initiative of Chinese President Xi Jinping was proposed in 2013, and five years on, over 100 countries and international organisations have supported and got involved in this initiative.

The BRI aims to build trade and infrastructure networks connecting economies around the globe along the ancient Silk Route.

 “China and countries participating in the Belt and Road Initiative inked trade deals worth USD 389.1 billion in the first four months. It represented a growth of 19.2 per cent year on year,” Commerce ministry spokesperson, Gao Feng was quoted as saying by state-run Xinhua in a Global Times report.
 China’s non-financial investment in those countries increased 17.3 per cent from the same period a year ago to USD 4.67 billion, the spokesperson said, adding that business volume of outbound contract projects came in at USD 24.2 billion, up 27.7 per cent year on year.

China held the first round of free trade agreement (FTA) negotiations with Mauritius and the second round of FTA talks with Pakistan. It also signed an economic and trade cooperation pact with the Eurasian Economic Union. The FTA reached between China and Georgia has become effective.

“Construction of major projects have progressed well with a range of railways and infrastructures going smoothly,” Gao said.

By the end of April, China had built 75 economic and trade cooperation zones along the Belt and Road countries with accumulated investment of USD 25.5 billion, the report said.

More than 3,800 companies have joined the cooperation zones, paying nearly $1.7 billion in tax revenue and generating nearly 220,000 jobs, it said.

How China’s Belt And Road Just Got A Big Boost From Europe’s TIR Convention

In 2016, China became a member of the UN’s TIR Convention, which enables transporters to ship goods through 73 partner countries by truck with just a single customs inspection, but it wasn’t until this month that their participation officially went into effect.

On May 18th, a caravan of trucks with large blue and white TIR plates departed in a ceremonial launch from Dalian in the northeast of China bound for Novosibirsk in Russia, 5,600 kilometers away. Having already undergone a customs inspection in the Dalian-bonded zone, these vehicles will not need to go through another for the duration of the journey, speeding up their transit time considerably. Why does this matter so much to China and its future economic prospects?

What is the TIR Convention?

Founded in Geneva in 1975, the Transports Internationaux Routiers (TIR) or International Road Transports convention is a multilateral treaty facilitated by the United Nations Economic Commission for Europe (UNECE) to improve road transportation throughout the continent by removing en route customs inspections and on-site duty payments for approved carriers departing from select locations. This essentially allowed trucks to traverse dozens of European countries without needing to be checked at each border, which greatly improved the speed and efficiency of trade, decreasing the lead time of a journey by up to 80%.

With the creation of the European Single Market in 1993, TIR was rendered moot for intra-European transit. However, as globalization kicked into high gear throughout the 1990s and 2000s, the TIR was expanded to include countries outside of the EU, eventually attracting 73 member states across Europe, Central Asia, the Middle East, North Africa, and East Asia, making it the go-to customs arrangement for international ground transport which is currently speeding up 1.5 million border crossings per year.

The TIR has also been adapted from its original vision of being solely for road transport and has become truly multimodal, allowing for rail, river and sea legs to be included if at least one part of a journey is done by truck.

Now that China is part of the TIR picture, goods can be shipped from some of the biggest manufacturing centers in the world more rapidly and cheaper. Going the other way, the TIR allows manufacturers from other member states to get their products to China’s booming middle-class market by land more efficiently than they ever could before–in theory, anyway.

“As well as opening up new, more efficient and cost-effective trading routes for China’s manufacturers to the rest of the world, the TIR Convention will open up reciprocal trading routes for external manufacturers into the country,” said Umberto de Pretto, the Secretary General of the IRU, a major international road transport organization with over 100 member countries.

Why this matters

Hard infrastructure—roads and rail lines and airports—mean little without the soft infrastructure which makes them viable. Countries don’t only need to “build it” but they need to come up with policies and agreements with other countries to maximize the potential of these new infrastructural offerings. Some of these agreements come in the form of trade organizations, customs zones and multinational economic areas, while others are along the lines of initiatives like China’s Belt and Road Initiative (BRI) or conventions like the TIR. As we previously covered on Forbes:

The first stage of China’s Belt and Road initiative, which aims to create a network of interconnected trade stations across Eurasia, is customs. Getting rid of the red tape to allow goods to traverse this massive land mass as efficiently as possible is key to making these routes sensible and profitable. The aim is to make land borders nearly as easy for goods to flow across as the open ocean, and this is being done step-by-step.

Later this month, the Shanghai Cooperation Organization (SCO) is going to have its summit in Qingdao, and it should not go without notice that every member of the group has already ratified TIR.

How the TIR Convention helps China’s Belt and Road

IRU press photo

Truck with TIR plates departing from Dalian.

China’s Belt and Road Initiative (BRI) is a large-scale endeavor to create and enhance economic and political corridors across Eurasia and Africa, and programs such as the TIR Convention ultimately provide a major boost towards these ends. According to the IRU, the TIR convention has the potential to increase the volume of total trade between China and the other countries of the Belt and Road by $13.6 billion.

It currently takes between 8-12 days to transport products door-to-door by truck between an inland city in China and Europe. This is roughly four times faster than shipping by sea and around 50% faster than rail. Now with China being a full-fledged member of the TIR, shipping overland between China and Europe becomes an increasingly attractive option for manufacturers looking to get their products to the other side of Eurasia.

Production moving deeper inland

The impact of the TIR convention and China’s participation in it is magnified many-fold by the geographic redistribution of manufacturing to inland areas throughout Eurasia.

Beginning in the early 2000s, China’s “Go West” policy saw the all-out rebuilding of the country’s transportation infrastructure and the large-scale migration of companies inland from the prosperous cities of the east coast to then-backwaters like Chongqing, Chengdu, Zhengzhou, Wuhan and Xi’an.

Chongqing City, China. (Photo by: Prisma Bildagentur/UIG via Getty Images)

This movement has gained momentum in recent years with the Belt and Road initiative, and even cities in China’s far west, such as Horgos and Kashgar, have been primed to become major manufacturing centers.

These development gave new relevance to overland trans-Eurasian transport, as the places where goods were being manufactured in China were suddenly very far from any seaport and significantly closer to their target markets in Europe, so it no longer made any logistical sense to truck products thousands of kilometers east in order to ship them back west again.

It is no coincidence that most of the TIR gateways in China are emerging BRI transport hubs:

Dalian: a major multimodal transport hub on the Pacific.

Erenhot: a new city and trade station on the border of China and Mongolia that sits at the heart of the China-Mongolia-Russia Economic Corridor.

Horgos: a massive conurbation of development that extends across the China/Kazakhstan border.

Manzhouli: a major BRI hub on the China/Russia border.

Suifenhe Port: another China/Russia trade hub.

When you add to this picture the emerging special economic zones in other parts of Eurasia–such as those on the Kazakhstan side of Khorgos, Alyat in Azerbaijan, Malaszewicze in Poland, and dozens of others–along with mega-transportation projects like the Western Europe-Western China Expressway, which runs from the east coast of China all the way to the Baltic Sea at St. Petersbur–it is looking as if the the geospatial distribution of manufacturing and the way goods are moved across Eurasia could have the potential to be significantly altered in the near future.

SOURCE: https://www.forbes.com/sites/wadeshepard/2018/05/31/how-chinas-belt-and-road-just-got-a-big-boost-from-europes-tir-convention/#34ab6f8a2517

Peace in IOR important to reap benefits of BRI: PM Abbasi

STAFF REPORT: Institute of Maritime Affairs (IMA) Bahria University, Islamabad, organised the International Maritime Symposium (IMS-2018) in the capital on “Impact of BRI on the Geo-economics of the Indian Ocean Region (IOR): Prospects for Pakistan, the Region and Beyond”. Prime Minister (PM) Shahid Khaqan Abbasi was the chief guest on the occasion.

In his address, the prime said in reference to the importance of IOR that the global blue economy footprint showed that a major global trade share came from this region. Given the importance of the Indian Ocean and significance of globalisation, we acknowledge and appreciate the vision of Chinese President Xi Jinping for conceptualising and announcing the Belt and Road Initiative (BRI) with the economic objectives of connectivity, unimpeded trade, and financial integration, he added.

The potential scope of BRI projects was vast and its financial scale was huge, the PM said. We have to optimise our share in BRI through China-Pakistan Economic Corridor (CPEC) and for this, Gwadar Port would play an all-important role, he added.

Furthermore, PM Abbasi also highlighted the enhanced regional economic activity arising from BRI and said this would have a positive impact on the region and beyond. “We are working hard on strategising measures to ensure that both Chabahar and Gwadar ports were utilised as sister ports, so as to diversify and manage the huge potential of CPEC and BRI,” he added.

More importantly, the regional countries could pursue economic initiatives in Afghanistan for prosperity and socio-economic development to ameliorate the trends of extremism and terrorism, he said. This would be a win-win situation for the region and the world at large, he added.

Focusing on maritime concerns, Abbasi said that he was aware of the current security concerns in IOR, adding, “There is a need for collaborative and well-coordinated response mechanism to deal with security threats in order to keep IOR peaceful and economically sound.”

He also commended the role of the armed forces of Pakistan in general and Pakistan Navy in particular for their initiatives to ensure maritime security of the country, especially the security of CPEC and Gwadar port.

In his inaugural address, Chief of the Naval Staff Admiral Zafar Mahmood Abbasi NI (M) in his inaugural address said that the subject was deep-rooted in the remarkable trade history of the region which had transcended various races, cultures and religions.

In the 21st century, the conceived ‘Economic Networking’ through BRI would not only help to revive historical links but also contribute towards economic prosperity of the countries that had renewed transcontinental trade routes connecting Asia, Africa, Europe and beyond.

Asian Development Bank chief warns of Belt and Road debt trap

MANILA — The head of the Asian Development Bank on Thursday warned countries against unsustainable borrowing to fund infrastructure projects, which could leave them stuck in a debt trap.

Asian Development Bank (ADB) President Takehiko Nakao told reporters that China’s Belt and Road Initiative is a key program to connect regions and broaden integration and cooperation across Asia, and that the ADB would cooperate with China when appropriate. But he cautioned against excessive borrowing to cover infrastructure gaps.

“If countries borrow too much for certain infrastructure without seriously looking at the viability and feasibility,” he said, “it will bring more trouble in repayment.”

Nakao was holding a news conference during the multinational lender’s 51st annual meetings at its Manila headquarters. “We should look at debt sustainability issues very seriously,” he added.

Nakao echoed the concerns of International Monetary Fund Managing Director Christine Lagarde over unsound fiscal policies. In April, Lagarde told a conference in China that the initiative could put a heavier burden on countries already saddled with a lot of public debt.

“In countries where public debt is already high, careful management of financing terms is critical,” Lagarde said. “This will protect both China and partner governments from entering into agreements that will cause financial difficulties in the future.”

China’s Belt and Road Initiative aims to develop up to $8 trillion worth of infrastructure along trade routes between Asia and Europe.

The Center for Global Development, a Washington-based think tank, said in a March report that 23 countries are at risk of debt distress due to additional financing related to the Chinese infrastructure drive. Eight are of “higher concern,” including Laos, Maldives, Pakistan, Mongolia, Tajikistan and Kyrgyzstan.

“There are some countries, most of whom are small and relatively poor, that face a significantly increased risk of a sovereign debt default if planned BRI projects are implemented in an expeditious manner and financed with sovereign loans or guarantees,” the report said.

The Asian Development Bank (ADB) estimates Asia’s infrastructure needs could reach $22.6 trillion through 2030, or $1.5 trillion annually. If climate change adaptation measures are adopted, the cost would rise to over $26 trillion.

SOURCE: https://asia.nikkei.com/Economy/ADB-chief-warns-of-Belt-and-Road-debt-trap

China’s BRI may have risks, but Citi still sees big opportunities

Warnings of financial risks may be sounding on China’s Belt and Road Initiative (BRI), but global banks are still seeing a promising opportunity.

In an interview with CNBC, Marc Merlino, Citi’s global head for its global subsidiaries group, said there are opportunities for not just banks, but institutional and corporate investors.

The initiative aims to connect Asia, Europe, the Middle East and Africa with a vast logistics and transport network, using roads, ports, railway tracks, pipelines, airports, transnational electric grids and even fiber optic lines. It’s widely seen as an attempt by China to construct a massive, multi-national zone of economic and political influence that has Beijing at its core.

 For investors, there are “multiple levels” of potential opportunities, Merlino said, highlighting infrastructure and activities surrounding major projects under the plan.

“It’s the opportunities for micro infrastructure beyond the core projects. All the knock-on effects … if building a railroad, there’s going to be a lot of goods and services moving. You need warehouses, you need distribution capabilities. That’s where private investors are getting more involved.”

“I think the risk associated with construction of large projects is well understood in the banking sector.”
-Marc Merlino, Citi’s global head for its global subsidiaries group

According to a recent report published by Nomura, new projects will create demand for goods and infrastructure. That economic boost will benefit both lenders and brokers, it said.

In fact, Citi is seeing increased corporate and institutional investment in the Belt and Road (BRI) , which Merlino said will be bigger than the numbers published by the Chinese government.

The Nomura report, quoting numbers from China’s Ministry of Commerce, said Chinese enterprises invested $14.4 billion in Belt and Road (BRI) -related projects in 2017 — accounting for 12 percent of China’s total outbound foreign direct investment. More than 7,200 new contracts on initiative-related projects were signed for a total value of $144.3 billion.

Banks have a role in the initial construction phase and long-term debt financing, but Citi has also been putting in “a lot of resources” into supporting multinational companies involved in the initiative, he said.

That’s despite the risks that have been associated with the mammoth initiative. A study in March found that debt risks in eight countries have been elevated because of their participation. In fact, 23 of the 68 countries identified as potential borrowers were found to be at a “quite high” risk of debt distress, the study found.

The Nomura report, too, flagged the risks.

“Infrastructure projects may face long payback periods, uncertain returns and potential default risk due to regulatory or political risk in the recipient economy, increasing financial risks for the investing (Chinese or other) entity,” it said.

But Merlino said that, despite such warnings, the banking industry is “well positioned” for that higher risk.

“I think the risk associated with construction of large projects is well understood in the banking sector. Generally, that tends to be a slightly higher risk than corporate kind of risks because you have completion risks, geopolitical risks. But I think the banking industry understands that and is well positioned to deal with that,” he said.

Plus, there will be investors who can fill in any gaps, he indicated.

“The good news is that there are quite a bit of institutional investors with appetite, whether it’s insurance companies, sovereign wealth funds, for long-term debt. The best solution would be risk distribution into the appropriate hands … to ensuring there’s a match between investor risk appetite and actual underlying risk of the projects,” he said.

SOURCE: https://www.cnbc.com/2018/05/03/chinas-belt-and-road-has-risks-but-banks-see-opportunities.html

Standard Chartered Bank to play key role in second phase of CPEC

ISLAMABAD: Standard Chartered Bank (SCB) on Wednesday announced to play a key role in the second phase of the China-Pakistan Economic Corridor (CPEC), and it will provide different kinds of services including solutions to the Chinese currency RMB, hedging in RMB, currency risks, and cash management.

“After the successful completion of the first phase of CPEC where most of the funding in projects was based on Government to Government transactions, the second phase is now ready in which mainly, the private sector and financial institutions will be involved, especially in services and insurance areas,” said the SCB Head of Global Banking, Jean Lu while addressing a press briefing here today.

She said Pakistan had been a special partner to China for decades and with the launch of CPEC, the bilateral relations had further strengthened.

She informed that experts from Standard Chartered’s Greater China Region hosted road shows in Sri Lanka, Bangladesh, and Pakistan to outline the benefits of, and investment opportunities from China’s Belt and Road Initiative (BRI), together with Renminbi internationalisation.

The purpose of these roadshows was to enable our clients to take advantage of the benefits presented by the China-led BRI project, which is also bringing more opportunities for Pakistan and China, she added.

The B and R initiative, the biggest advocate of globalisation in the world today, is aiming to boost trade and growth of investment across Asia, extending to the Middle East, Africa, and Europe.

She said the total trade between China and BRI countries exceeded $3 trillion between 2014 and 2016, and the momentum has continued in 2017, despite subdued growth in global trade.

The BRI initiative has made significant headway in the past four years, and has gained support from more than 100 countries and international organisations, and more than 80 of them have signed cooperation agreements with China, she added.

Standard Chartered Pakistan CEO said that the bank was currently engaged with around 100 Chinese companies who were interested to invest in various sectors of Pakistan.

He said that with the passage of time, the trade volume will increase between the two countries and in this regard, the SCB will have a key role in providing RMB solutions to investors as they will be able to trade-in their own currencies instead of USD.

Many countries, like Pakistan, he said have robust demand for infrastructures, as they move toward further industrialization, move up the value chain, as well as absorb fast-growing populations.

He informed that the bank has been in Pakistan and China for more than 150 years.

“Our longstanding and deep-rooted presence in both countries along with 70 percent of footprint overlap with B&R countries equips us with in-depth knowledge of prevailing political, economic and cultural environments making us an indispensable partner in this extra ordinary progress,” he added.

“It is therefore incumbent upon us to assist our valued clients to capitalize on these enormous trade opportunities created through better connectivity between them and the rest of the world. This roadshow emphasize our promise to be ‘Here for good, while demonstrating our capabilities in providing comprehensive set of products, services and solutions to our existing as well as prospective clients who are looking to embark upon their growth journeys along the Silk Road”, he added

 

SOURCE: https://profit.pakistantoday.com.pk/2018/04/26/standard-chartered-bank-to-play-key-role-in-second-phase-of-cpec/

CPEC is not a new East India Company

Islamabad: Federal Minister of Interior and Planning, Development & Reforms Ahsan Iqbal has said that only continuity of policies, political stability, peace and unity in our ranks can promise successful, brighter and prosperous future of Pakistan (SDPI).

The minister was addressing the inaugural session of Special Seminar on ‘Five years of China Pakistan Economic Corridor (CPEC) — a story of success and opportunities,’ organised here by Sustainable Development Policy Institute (SDPI) in collaboration with Planning Commission and Chinese Embassy.

Ahsan Iqbal said that the spirit of the CPEC is shared destiny and shared prosperity adding that unless we preserve continuity, stability and peace we may not be able to gain the dividends of the CPEC. Ahsan Iqbal claims that China-Pakistan Economic Corridor is one of the biggest success stories that we have had in our whole history and it has become a biggest global brand of Pakistan that has grabbed the attention of the world leaders and every big economy of the world is now searching its shared future in CPEC. Ahsan Iqbal has also stated that innovation, technology and competitiveness are the new pillars of the economy to achieve growth and prosperity but recent political uncertainty in Baluchistan and Southern Punjab has pushed Pakistan’s development and prosperity on the back burner. He said the destiny is in our hands, either we want to see rising Pakistan or follow the path of destruction as we lost many chances in the past and CPEC provided the last opportunity to rise.

Yao Jing, Chinese Ambassador to Pakistan said that five years of construction, development and achievements is though very short time for the development of relationship between the two economies, but we are moving toward long lasting relationship. CPEC symbolises the strong cooperation and a new demonstration of relationship between Pakistan and China that is contributing to the new heights of state to state relationship of mutual respect. He said that by implementing CPEC projects, China wants to enhance cooperation and looking further opportunities in Pakistan.

Li Jihan Zaho, Deputy Head of Chinese mission, said that saying that CPEC is another East India Company is ridiculous and joke of the century. He urged the international investors to invest in Pakistan’s emerging economy.

Dr Abid Qaiyum Suleri, Executive Director, SDPI, said that China’s Belt and Road Initiative (BRI) is about creating a shared future in the fractured world and CPEC is one of its great successes. He observed that the success of CPEC as a transformational investment is critical for both China and Pakistan to demonstrate their ability to steer this region towards a shared prosperity.

Dr Suleri said political volatility, capacity, coordination, institutional trust, knowledge gaps, financing and flexibility in our policies are major challenges that may hinder the progress of CPEC. He said we are living in an era of economic diplomacy where we should collaborate rather compete.

SOURCE: https://www.thenews.com.pk/print/309616-cpec-is-not-a-new-east-india-company