What implications on business in shorter and longer term does the largest infrastructure initiative of our time - China’s “One Belt One Road” - provide for Finnish companies and for Europe in strategic terms? Team Finland Future Watch is contributing to the discussion by providing two studies on the subject: one for China and one for Kazakhstan. The following report is about the China’s OBOR initiative.
Summary: China's "One Belt One Road" Initiative: Insights for Finland. Team Finland Future Watch report, January 2016
1. CHINA’S “ONE BELT ONE ROAD” INITIATIVE:
INSIGHTS FOR FINLAND
TEAM FINLAND FUTURE WATCH, JANUARY 2016
2. Team Finland Future Watch Report, January 20162
What implications on business in shorter and
longer term does the largest infrastructure
initiative of our time - China’s “One Belt One
Road” - provide for Finnish companies and for
Europe in strategic terms?
Team Finland Future Watch is contributing to
the discussion by providing two studies on the
subject: one for China and one for Kazakstan.
The following summary is about the China’s
OBOR initiative. Full report is available via the
link above.
Team Finland Future Watch on käynnistänyt
hankkeen, jonka tavoitteena on ymmärtää mitä
tämä vuosisadan suurin infrahanke One belt
One Road (OBOR) merkitsee käytännössä ja
millaisia bisnesmahdollisuuksia suomalaisille
yrityksille voi aueta lyhyemmällä ja pidemmällä
aikajänteellä.
Hankkeessa tehdään kaksi selvitystä: toinen
Kiinan ja toinen Kazakstanin näkökulmista.
Tämä esitys on kooste Kiinaa koskevasta
selvityksestä, joka löytyy kokonaisuudessaan
ao linkistä.
One belt one road – Insights for Finland. Team
Finland Future Watch
INTRODUCTION
3. Team Finland Future Watch Report, January 20163
1. “One Belt One Road” Defined
2. Countries covered by obor
3. The main OBOR routes
4. Key OBOR Provinces in China
5. Goals of obor
6. Some OBOR Agreements /
Implementation Plans
7. Key OBOR Provinces in China
8. OBOR background
9. Institutions Related to OBOR
10.Founding Members of the AIIB
11.Wider Implications of OBOR
12.Types of Opportunities created by
OBOR
13.What to do?
CONTENT
4. CONTACT DETAILS
Professor Michael J. Enright
Enright, Scott & Associates, Ltd.
Team Finland Future Watch Report, January 2016
Sari Arho Havrén
Tekes Asia Pacific, Future Watch Asia
4
5. • “One Belt One Road” is a Chinese
initiative to connect more than 60
countries (64 at present) with
physical, commercial, cultural, and
other links
• “One Belt” = the “Silk Road
Economic Belt,” a recreation of land-
based trade routes from China
through Central Asia and on to the
Middle East and Europe. This is also
called the “Modern Silk Road.”
• “One Road” = the “21st
Century
Maritime Silk Road,” also called the
“Maritime Silk Road,” which
recreates and expand on traditional
sea routes.
• Both “One Belt” and “One Road”
were personally announced by
China’s President Xi Jinping during
overseas trips.
• A related initiative the “Digital Silk
Road,” which attempts to foster
international cooperation,
cooperation in 5G, cloud computing,
the Internet of Things, big data, e-
commerce, digital investment, smart
cities, and smart energy has received
less attention
Team Finland Future Watch Report, January 20165
“ONE BELT ONE ROAD” DEFINED
6. COUNTRIES COVERED BY OBOR
• China
• Southeast Asia: Brunei, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, Philippines, Singapore, Thailand, Timor-Leste, Vietnam
• South Asia: Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri
Lanka
• Central and Western Asia: Afghanistan, Armenia, Azerbaijan,
Georgia, Iran, Kazakhstan, Kyrgyzstan, Mongolia, Tajikistan,
Turkmenistan, Uzbekistan
• Middle East and Africa: Bahrain, Egypt, Iraq, Israel, Jordan, Kuwait,
Lebanon, Oman, Palestine, Qatar, Saudi Arabia, Syrian Arab
Republic, Turkey, United Arab Emirates, Yemen
• Central and Eastern Europe: Albania, Belarus, Bosnia &
Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia. Hungary,
Latvia, Lithuania, Macedonia, Moldova, Montenegro, Poland,
Romania, Russia, Serbia, Slovakia, Slovenia, Ukraine
Team Finland Future Watch Report, January 20166
7. Team Finland Future Watch Report, January 20167
COUNTRIES COVERED
BY OBOR
Source: Xinhua
8. Team Finland Future Watch Report, January 20168
THE MAIN OBOR
ROUTES
Source: Xinhua; Enright, Scott & Associates
9. OBOR ECONOMIC CORRIDORS
• New Eurasian land bridge to run from Jiangsu Province to Rotterdam:
China –Mongolia- Kazakhstan-Russia- Belarus- Poland- Germany-
Netherlands would extend existing route to Kazakhstan freight railways
• China-Mongolia-Russia Corridor: High speed rail and road links, freight
trains are already running along this route
• China-Central Asia-Western Asia Corridor: mostly for energy, China-
Central Asia gas pipeline already exists (world’s longest) Turkmenistan,
Uzbekistan, Kazakhstan, Xinjiang plans to link Middle East with this
pipeline as well
• China-Southeast Asia Corridors: three lines Kunming through Vietnam,
Laos, Myanmar also connect through Nanning to Guangdong Province
• China-Pakistan Corridor: note passes through Kashmir and Indian
Government is opposed to this
• Bangladesh-China-India-Myanmar Corridor: rail construction, road
construction, industrial parks
• China-Myanmar Corridor: pipelines, highways, rail
Team Finland Future Watch Report, January 20169
10. Team Finland Future Watch Report, January 201610
OBOR ECONOMIC
CORRIDORS
Source: Hong Kong Trade Development Council; Enright, Scott & Associates
11. GOALS OF OBOR
• STATED
• To achieve policy co-ordination
across OBOR nations
• To build the infrastructure to
enhance connectivity among
OBOR nations
• To increase trade and
investment flows
• To promote financial integration
• To foster better relations among
the peoples of the OBOR
nations
• With respect to Europe: to foster
greater economic cooperation
and integration so China and
Europe can be two engines of
global growth and development
• UNSTATED
• To enhance China’s energy
security
• To expand markets for Chinese
industries (including those with
overcapacity)
• To increase the competitiveness
of Chinese companies
• To enhance China’s hard and
soft power
• To extend China’s economic and
geopolitical influence
• To shift the balance of power
within Asia
• To enhance China’s status as a
great power
• To recycle some of China’s
international reserves
• To enhance the development of
China’s peripheral regions
Team Finland Future Watch Report, January 201611
To re-assert the
notion of the ”middle
kingdom”
12. Team Finland Future Watch Report, January 201612
NASA: THE EARTH AT
NIGHT –EASTERN
HEMISPHERE
Shows centers of
economic
development
Source: NASA. Prepared for TEKES by Enright, Scott & Associates
13. SOME OBOR AGREEMENTS / IMPLEMENTATION PLANS (1)
Team Finland Future Watch Report, January 201613
Joint Communique on the
14th Meeting of the Council
of Heads of Governments of
the Shanghai Cooperation
Organization Member States
(15 Dec 2015)
Henan’s Implementation
Plan for Participating in the
Building of the Silk Road
Economic Belt and 21st
Century Maritime Silk Road
(1 Dec 2015)
Co-operation between China
and the CEE Countries: The
Medium-Term Agenda and
The Suzhou Guidelines (24
Nov 2015)
Action Plan for
Harmonization of Standards
Along the Belt and Road
(2015-2017) (22 Oct 2015)
NDRC Approves
Infrastructure Projects
Serving Belt and Road (15
Sept 2015)
Sino-Kazakhstan Joint
Declaration on a New Stage
of Comprehensive Strategic
Partnership (31 Aug 2015)
Hunan’s Belt and Road
Action Plan (2015-2017) (14
Aug 2015)
Mid-term Roadmap for
Development of Trilateral
Co-operation between
China, Russia and Mongolia
(9 July 2015)
Joint Ministerial Statement:
Fostering Pragmatic
Cooperation towards the
Future of GMS Economic
Corridors (11 June 2015)
14. SOME OBOR AGREEMENTS / IMPLEMENTATION PLANS (2)
Team Finland Future Watch Report, January 201614
Guangdong’s
Implementation Plan for
Participating in the Building
of the Belt and Road
Initiative (3 June 2015)
Joint Statement on
Cooperation on the
Construction of Joint
Eurasian Economic Union
and the Silk Road Projects
(8 May, 2015)
Joint Statement on
Establishing All-weather
Strategic Co-operative
Partnership between the
People’s Republic of China
and the Islamic Republic of
Pakistan (20 April 2015)
Announcement on the
Reform of the Integrated
Regional Customs
Clearance Along the Silk
Road Economic Belt (30
March 2015)
Vision and Actions on Jointly
Building the Silk Road
Economic Belt and 21st
Century Maritime Silk Road
(28 March 2015)
The Belgrade Guidelines for
Co-operation between China
and the CEE Countries (16
Dec 2014)
The Bucharest Guidelines
for Co-operation between
China and the CEE
Countries (26 Nov 2013)
15. Team Finland Future Watch Report, January 201615
KEY OBOR PROVINCES
IN CHINA
Source: Enright, Scott & Associates. Prepared for TEKES by Enright, Scott & Associates,
Ltd
16. • Infrastructure needs in OBOR nations
• ~USD 1 trillion per year
• Not being met by existing mechanisms
• China more prominent role globally
• Active in multilateral organizations
• Seeking to counter TPP
• Extend relationships and connections in
strategically important regions
• Southeast Asia
• South Asia
• Central Asia
• Middle East
• Africa
• Central and Eastern Europe
• Western Europe
• China’s resource security
• Protect oil and resource trade routes
• Invest in resources in critical regions
• Extend and link up China’s existing investments in
trade routes in OBOR nations
• Ports, railways, highways
• Other infrastructure
• Extend China’s “Go Global” company
internationalization scheme
• Increase international activities of Chinese firms
• Improve competitiveness of Chinese firms
• Severe overcapacity in key industries at home, so seek
international markets
• Extend China’s “Go West” program to develop
underdeveloped areas of China.
• Large regional disparities in China
• Many key OBOR provinces are in lesser developed areas
Team Finland Future Watch Report, January 201616
OBOR BACKGROUND
17. Team Finland Future Watch Report, January 201617
• Asian Infrastructure Investment Bank
(AIIB)
• Announced 2014, opened 2016
• Multilateral development bank
modeled on WB, ADB, etc. and
focused on infrastructure
• Initial capital USD 100 billion
~50% from China
• New (“BRICS”) Development Bank
(NDB)
• Announced 2014, to be opened
2016
• Multilateral development bank, but
BRICS countries (Brazil, Russia,
India, China, South Africa) to have
>55% of shares
• Initial capital USD 34 billion to go
to USD 100 billion (41% of the 100
billion to come from China)
• Silk Road (Investment) Fund (SRF)
• Announced 2014, already investing
• Funded and managed by China’s
policy banks (CDB, Ex-Im Bank)
• USD 40 billion allocated
• Note: while not an “OBOR institution”
per se, the China Development Bank is
the world’s largest development bank,
with outstanding loans greater than the
capitalization of the AIIB, NDB, and SRF
combined
INSTITUTIONS RELATED TO OBOR
18. FOUNDING MEMBERS OF THE AIIB
Team Finland Future Watch Report, January 201618
Australia
Austria
Azerbaijan
Bangladesh
Brazil
Brunei
Cambodia
China
Denmark
Egypt
Finland
France
Georgia
Germany
Iceland
India
Indonesia
Iran
Israel
Italy
Jordan
Kazakhstan
Kuwait
Kyrgyzstan
Lao
Luxembourg
Malaysia
Maldives
Malta
Mongolia
Myanmar
Nepal
Netherlands
New Zealand
Norway
Oman
Pakistan
Philippines
Poland
Portugal
Qatar
Republic of Korea
Russia
Saudi Arabia
Singapore
South Africa
Spain
Sri Lanka
Sweden
Switzerland
Tajikistan
Thailand
Turkey
UAE
United Kingdom
Uzbekistan
Vietnam
19. WIDER IMPLICATIONS OF OBOR
Team Finland Future Watch Report, January 201619
For Europe:
Potential economic growth in important
regions
Europe may lose some centrality in
some trade routes
May increase EU’s trade deficit with
China
Increased Chinese investment and
influence in Europe
May influence European policy toward
China (such as market economy status)
The OBOR
initiative is
nothing less than
an attempt to re-
establish the
notion of China as
the Middle
Kingdom with all
roads leading to
China
The OBOR initiative
provides an overarching
vision that combines several
of China’s key initiatives in a
way that it believes is not
threatening to other nations.
The OBOR initiative will
undoubtedly bring the
various parts of Asia closer
together through physical,
psychological, economic,
cultural, and political
linkages.
The OBOR initiative will also
substantially expand China’s
influence in Southeast Asia,
Central Asia, South Asia,
Africa, and Europe.
Since the main new linkages
will be land linkages, there
will be something of a shift in
relative importance of sea
transportation and land
transportation
Attempt to re-create the
“Middle Kingdom”
20. FURTHER IMPLICATIONS
Team Finland Future Watch Report, January 201620
How OBOR may affect
investments
Funding for investments that
are strategic as well as
economic (may reduce
financial hurdle for some
investment)
Failure of OBOR is not an
option for China’s leaders
Other governments may keep
commitments to China more
than to others
Challenges
Size and scale of undertaking,
will supplementary funding be
available?
Lack of development in many
OBOR countries
Geography and topography
Political and geopolitical
challenges and potential
backlash
Potential reputational risks for
some governments and
companies
Who will get contracts?
Chinese firms
Non-Chinese firms with needed
technical capabilities
Firms from countries in which
projects are built
Firms from other countries that
fund OBOR activities
Likely to be a more open
process for AIIB funded projects
than others
21. TYPES OF OPPORTUNITIES
Infrastructure Development,
Operation, and Maintenance:
This will include planning,
design, engineering,
construction, materials,
construction equipment,
utilities, project logistics and
management, related goods
and services, operations,
maintenance.
Financial and Professional
Services:
This will include fundraising
opportunities through
organizing bond issues, loan
syndication, IPOs, public-
private-partnerships, special
purpose vehicles, Islamic
finance; legal, accounting, and
related services; trade finance,
trade settlement, commodities
trading, commodities futures,
marine and aviation financing,
insurance, leasing; payments
and treasury arrangements for
OBOR projects.
Team Finland Future Watch Report, January 201621
Transportation and Logistics:
This will include trucking, rail
services, port activities,
pipelines, transportation
equipment (as well as parts
and maintenance), fuel,
transportation management,
logistics, and logistics
management.
22. TYPES OF OPPORTUNITIES
Information and
Communication Systems:
This will include
communications systems for
OBOR institutions, project
management systems, control
of transport systems,
integrated information
systems, 5G, cloud computing,
Internet of things, big data, e-
commerce, digital investment,
smart cities, smart energy.
Commerce, Manufacturing,
and Supply Chains:
This will include expanded
trade, new manufacturing
locations, new supply chains,
industrial parks, e-commerce.
Team Finland Future Watch Report, January 201622
Energy, Natural Resources,
and Agriculture:
This will include energy and
resource transport, energy and
resource investment,
agricultural investment, cold
chain operations, and related
activities.
23. Team Finland Future Watch Report, January 201623
OPPORTUNITIES FOR
FINLAND
“One Belt Two Roads” with
the second road being the
Arctic route in which Finland
would be less peripheral than
in the existing OBOR plans.
24. WHAT TO DO
• Be outwardly supportive but inwardly analytical and opportunistic
• Develop or find projects that can be put under the OBOR rubric
• Find areas in which Finnish companies have distinctive capabilities to contribute to OBOR
projects
• Seek opportunities in which Finland / Finnish companies might be favored
• Look beyond the initial stages of the OBOR initiative to operations, maintenance, and
improvement
• Redirect or re-brand existing efforts to fit the OBOR rubric
• Explore where consortia involving Finnish companies may contribute
• Seek out the right Chinese partners
• Explore the indirect implications of OBOR (including market developments, shifting
economic geography, changing competitive positions, development of new supply chains)
• Seek guidance where appropriate
• Avoid being passive in addressing OBOR opportunities.
Team Finland Future Watch Report, January 201624
25. Sari Arho Havrén
Consul (Innovation)
Head of Tekes, Hong Kong
Consulate General of Finland, Hong
Kong
TEKES, The Finnish Funding Agency for
Innovation
Tel (852) 2525 5385 • Fax (852) 2810
1232
Mobile: (852) 6895 5221, (358) 40 9111
226
10/F, Club Lusitano • 16 Ice House Street
• Central, Hong Kong
sari.arhohavren@tekes.fi • www.tekes.fi
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