China’s Belt and Road Initiative to reshape routes in Thailand

The Belt and Road Initiative (BRI) promises to radically transform a vast swathe of the world’s trade and transport infrastructure, which will have a marked impact on how Asia does business with the world and vice versa.

While it is a relatively new idea, the BRI also harks back to medieval times, when the Silk Road flowed between East and West. The Silk Road was a series of trade routes criss-crossing the Asian landmass. Its more famous travellers included Marco Polo and Ibn Khaldun. During this time this trade flow was responsible for the transfer of goods, services and ideas across the globe.

The BRI seeks to update this idea to meet the demands of the 21st century, adding a maritime arm and a host of road and rail links. Previously referred to as One Belt, One Road, the infrastructure investment needed for the plan is estimated at $5trn by PwC.

In May 2017 China pledged an extra $113bn for the BRI, to be disbursed via the state-owned Silk Road Fund, set up in 2015 with $40bn of initial capital from the China Development Bank and the Export Import Bank of China.

In addition, the Asian Infrastructure Investment Bank (AIIB), with some $100bn in capital, and the New Development Bank, with $50bn, are financing the project from their respective bases in the cities of Beijing and Shanghai.

This funding is backing up a range of infrastructure projects, with the BRI also making clear provisions for partnerships, particularly with non-Chinese enterprises.

The benefits of this are considerable: foreign outfits can engage in major projects that enjoy Chinese government-backed guarantees, while also contributing their expertise and local knowledge to ensure project success, further reducing risk all around.

Doors open to China

Such partnerships with third-party countries can also help open doors in China itself, by helping to establish good working relationships, which are at the heart of doing business in a market that can be difficult to navigate.

For China, the BRI builds on the outward momentum of its foreign policy, which started with the Go Out policy of the late 1990s. The increase in overseas trade and investment is boosting Beijing’s drive to internationalise its currency and find new markets to maintain growth momentum and use up excess capacity at home.

The BRI addresses a major need for improvement in Eurasia’s infrastructure

This is critical if economic growth is to move many of the supercontinent’s countries out of the low- and middle-income traps. In February 2017 the Asia Development Bank estimated that this would need $22.6trn in the lead-up to 2030, which could rise to a possible $26trn if climate change is taken into account.

The BRI, and the AIIB in particular, are thus seen…

Source link : China’s Belt and Road Initiative to reshape routes in Thailand by Oxford Business Group

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