Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 1 Foreword

2018 marked the fifth year since International Import Exposition Municipal Commission of Commerce, President Xi Jinping first put forward (CIIE), China has deepened its ties releasing the Belt and Road Country the Belt and Road Initiative (BRI). The with partners about the globe in Investment Index Report series Initiative has transformed from a trade and economic development. to provide a rigorous framework strategic vision into practical action President Xi Jinping has reiterated at for evaluating the attractiveness during these remarkable five years. these events that countries should of investing in each BRI country. enhance cooperation to jointly build Based on extensive data collection There have been an increasing a community of common destiny and in-depth analysis, we evaluated number of participating countries for all mankind , and the Belt and BRI countries' (including key and expanding global cooperation Road Initiative is critical to realizing African nations) macroeconomic under the BRI framework, along with this grand vision. It will take joint attractiveness and risks, and identified China's growing global influence. By efforts and mutual understanding to key industries with high growth the end of 2018, China had signed overcome the challenges ahead. potential, to help Chinese enterprises BRI cooperation agreements with better understand each jurisdiction's 122 countries and 29 international Chinese investors face risks in the investment environment. organizations. According to the Big BRI countries, most of which are Data Report of the Belt and Road developing nations with relatively The Belt and Road Country (2018) published by the National underdeveloped transportation and Investment Index Report 2017 Information Center, public opinion telecommunication infrastructures. attracted attention from and was towards the Initiative has also Moreover, as BRI countries span highly appreciated by a wide range of evolved from suspicion and hesitance Asia, Europe, Africa, Oceania and audiences. In 2018, China's economic to advocacy and willingness to beyond, there are substantial cross- reforms and rising outbound participate, marked by an increase in regional differences in political, social investment prompted us to establish positive attitude towards the BRI from and legal environments, as well as a sound framework to facilitate 16.5% in 2013 to 23.7% by the end of diverse resource endowments and decision making for institutional 2017. industrial development statuses. and corporate investors. This Some countries are experiencing 2018 report refines the evaluation In 2018, China made strides towards political instability, ethnic or religious framework and indicators on the the five BRI policy goals, which conflicts and even extremism and basis of the previous report, and are achieving policy coordination, terrorism. Therefore, investors need covers 80 countries—adding New facilities connectivity, unimpeded to carefully evaluate opportunities Zealand, East Timor, Panama and trade, financial integration, and and identify risks before investing in Madagascar, which recently joined people-to-people bonds. By hosting overseas markets to improve returns the Initiative—to present the latest the successful Boao Forum, Shanghai and operational sustainability. trends and dynamics of the Belt and Cooperation Organisation Summit Road Initiative as a whole and each 2018, Forum on China-Africa Deloitte has researched this topic participating country. Cooperation (FOCAC) and China under the guidance of the Shanghai Table of Contents

Section I: Belt and Road Initiative Trends in 2018 1 1. Belt and Road Initiative in 2018: Achievements and Status Quo 1 2. Belt and Road Initiative progress and milestones in 2018 5 1) China has depended trade ties, improved cooperation 5 mechanisms and expanded areas of cooperation with BRI countries 2) BRI countries: rising investment attractiveness and overall risks 8 3) Macroeconomic attractiveness of Southeast Asian countries has 9 grown remarkably 4) Investment risks have increased in Southeast Asian, 9 Central Asian and Middle Eastern countries 5) China playing a more important role in facilitating 9 BRI countries' economic development

Section II: Research Methodology 11 1. Objectives and principles of the research 11 2. Summary of BRI countries 12 3. Investment Attractiveness Evaluation Framework 13 1) Macroeconomic attractiveness assessment 13 2) Risk assessment 13 3) Key industries assessment 14

Section III: BRI countries Investment Attractiveness Analysis 16 1. Investment attractiveness analysis 16 1) Macroeconomic attractiveness index 18 2) Investment risk index 19 2. Regional Trends 20 1) Southeast Asia 20 2) Eastern Europe 21

3) Commonwealth of Independent Countries 22

01

4) Africa 23 5) Middle East 24 6) Central Asia 25 3. Key Industries Assessment 26 1) Manufacturing 26 2) IT 27 3) Transportation 28 4) Energy 29 5) Agriculture 30

Section IV: BRI countries Investment Index–Country Analysis 32 1. Southeast Asia 32 1) Singapore 32 2) Philippines 35 3) Laos 38 4) Nepal 41 5) Malaysia 43 6) Brunei 45 7) India 47 8) Bhutan 49 9) Thailand 51 10) Indonesia 53 11) Pakistan 55 12) Vietnam 57 13) Myanmar 59 14) Bangladesh 62 15) Sri Lanka 64 16) Cambodia 66 17) Maldives 68 18) East Timor (Timor-Leste) 70 2. Central Asia 72 1) Mongolia 72

2) Kazakhstan 75

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3) Turkmenistan 77 4) Uzbekistan 79 5) Kyrgyzstan 81 6) Tajikistan 83 7) Afghanistan 85 3. Middle East 87 1) Israel 87 2) Oman 90 3) Qatar 92 4) Yemen 94 5) United Arab Emirates 96 6) Lebanon 98 7) Saudi Arabia 100 8) Jordan 102 9) Kuwait 104 10) Iraq 106 11) Iran 108 12) Syria 110 13) Bahrain 112 4. Commonwealth of Independent States (CIS) 114 1) Russia 114 2) Belarus 117 3) Ukraine 119 4) Azerbaijan 121 5) Georgia 123 6) Armenia 125 7) Moldova 127 5. Eastern Europe 129 1) Slovenia 129 2) Turkey 131 3) Croatia 133

4) Estonia 135

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5) Romania 137 6) Serbia 139 7) Bulgaria 141 8) Slovakia 143 9) Macedonia 145 10) Hungary 148 11) Latvia 151 12) Montenegro 153 13) The Czech Republic 155 14) Lithuania 157 15) Albania 160 16) Bosnia 162 17) Cyprus 164 18) Greece 166 19) Poland 168 6. Africa 171 1) Ethiopia 171 2) Egypt 175 3) South Africa 178 4) Kenya 181 5) Nigeria 184 6) Angola 187 7) Morocco 189 8) Algeria 191 9) Ghana 193 10) Sudan 195 11) Tanzania 197 12) Congo (Democratic Republic) 199 13) Tunisia 201 14) Madagascar 203

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7. Oceania 205 1) New Zealand 205 8. Central America 207 1) Panama 207

Appendix 1: BRI Countries Investment Index Evaluation Framework 210 Appendix 2: List of Data Sources 214 Appendix 3: Abbreviations and Explanations 216 Closing Remarks 217

1 2 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section I: Belt and Road Initiative Trends in 2018

Section I: Belt and Road Initiative Trends in 2018

2018 marked the fifth year of the implementation of theBelt and Road Initiative. The BRI has transitioned from a government-led strategy focusing on publicizing its ideology and propositions, featuring investment by state- owned enterprises, towards a more collaborative initiative exploring international cooperation mechanisms for BRI countries that jointly promote trade and investment, and involving more diverse participants. An increasing number of multinational companies and private enterprises have joined the BRI.

1. Belt and Road Initiative in 2018: Achievements and Status Quo The BRI had several fruitful achievements in 2018. As China shifted its policy focus from Going Out to two-way communication and cooperation with other countries, President Xi Jinping reiterated at the Boao Forum, Shanghai Cooperation Organisation Summit 2018, FOCAC (the Forum on China-Africa Cooperation) and other events that China would adhere to a collaborative strategy that strengthens cooperation, sustains common development and promotes a more open, balanced and mutually beneficial approach to globalization. Participating countries have committed to build the Belt and Road jointly with China.

Figure 1: President Xi Jinping's speeches on the BRI in 2018

Five years ago, I put forward the Belt and Road Initiative. Since then, more than 80 countries and international organizations have signed cooperation agreements with China. The BRI may be China's idea, but its opportunities and outcomes are going to benefit the world. China has no geopolitical calculations, seeks no exclusionary blocs and imposes no business deals on others. It must be pointed out that as the BRI is a new initiative, it is perfectly natural for there to be different views. As long as the parties embrace the principle of extensive consultation, joint contribution and shared benefits, we can surely enhance cooperation and resolve differences. This way, we can make the BRI the broadest platform for international cooperation in keeping with the trend of economic globalization and to the greater benefit of all our peoples. — April 10, 2018, President Xi's Speech at the Boao Forum Opening Plenary

The Belt and Road is an economic cooperation initiative, not a geopolitical or military alliance. It is an open and inclusive process, and not about creating exclusive circles or a 'China club'. We do not exclude others on the basis of ideological differences or play the 'zero-sum game'. We welcome all countries that are willing to participate in the initiative. — August 27, 2018, President Xi's Speech at the Forum on the Five-Year Anniversary of the Belt and Road

To respond to the call of the times, China will get actively involved in global governance and stay committed to the vision of consultation, cooperation and benefit for all in global governance. China has all along played its part in promoting world peace and development and upholding the international order. We call for increasing the representation and voice of developing countries in international affairs and support efforts to strengthen the South, a weak link in the global governance system, as well as efforts to create synergy in South-South cooperation. We will continue efforts to make the global governance system better represent the will and interests of the majority of countries, especially developing countries. Let us build a China-Africa community with a shared future that pursues win-win cooperation. We can both seize the opportunity created by the complementarity between our respective development strategies and the major opportunities presented by the Belt and Road Initiative. We need to see to it that the Belt and Road Initiative and the AU Agenda 2063, the UN 2030 Agenda for Sustainable Development and the development programs of African countries better complement each other. With these efforts, we can expand areas of cooperation, unlock new cooperation potential, consolidate our traditional areas of cooperation, and foster new highlights of cooperation in the new economy. — September 3, 2018, President Xi's Speech at the FOCAC Opening Ceremony

President Xi has attended four high-profile BRI-themed international conferences across 13 Asian, African and Latin American countries. 1 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section I: Belt and Road Initiative Trends in 2018

Figure 2: Summary of international events President Xi attended in 2018

September 11-12 Event: Eastern Economic Forum Attending countries: Sussia

November 15-21 Event: APEC Summit July 19-27 Attending countries: Papua New Guine, Event: BRICS Summit Brunei, the Phillipines Attending countries: UAE, Senegal, Rwanda, South Africa, Mauritius

November 27–December 5 Event: G20 Summit Attending countries: Spain, Argentina, Panama, Portugal

China launched a series of policies • 23 policies and measures and measures to further open up its promulgated to utilize foreign economy in 2018, including: investment, expand areas of China's economy open to foreign entry and • 17 trade agreements with 25 simplify business registration for countries and regions, with foreign-invested enterprises; ongoing negotiations on new trade agreements with 28 countries; • 35 cross-border e-commerce pilot zones and the extension of zones • 4 customs duty reductions lowering into inland areas; overall tax rate from 9.8% to 7.5%; • 28 cooperation zones in 24 BRI countries, with total investment reaching USD29 billion and creating more than USD2 billion for local governments.

2 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section I: Belt and Road Initiative Trends in 2018

Figure 3: Summary of China's Open Economy Policies China (2017/18)

Year Policy Highlight 2018 Special Administrative Measures on Access to Foreign • Remove 10 clauses and 27 measures from the previous Negative List to relax Investment 2018 (Negative List) or remove restrictions on foreign investment in services and manufacturing • Further open up the economy in coastal and inland regions to foreign investors 2018 Guidelines for Compliance and Management of • Require all outbound trade, investment and EPC (engineering-procurement- Enterprises' Overseas Operations construction) activities to comply fully with regulations 2017 Measures for the Administration of Overseas • Further streamline administration and delegate power to lower levels Investment of Enterprises • Improve the regulatory procedure for Chinese outbound investment; National Development and Reform Commission (NDRC) responsible for guiding and facilitating enterprises' investment overseas 2017 Guiding Opinions on Further Guidance and • Change mode of approval and registration of outbound investments to Standardization of Overseas Investment encourage development + negative list approach • Categorize outbound investment as encouraged , restricted or prohibited 2017 Guiding Opinions on Strengthening Credit System • Accelerate construction of credit records related to foreign economic in Outward Economic Cooperation cooperation • Promote credit information sharing applications • Establish joint punishment mechanism for bad credit • Regulate the behavior of foreign economic cooperation participants 2017 Opinions on Promoting the Construction of the • Step up support for innovative talents Silk Road Economic Belt Innovation-Driven Pilot • Improve title evaluation system for science and technology personnel Zone • Support commercialization of research findings 2017 Notice for Promoting International Trade on • Support SMEs' engagement in trade and investment in BRI countries Launching a Special Campaign to Support Small • Provide high-quality services to SMEs and Medium-sized Enterprises to Participate in • Enhance competitiveness of Chinese SMEs on the international stage the Belt and Road Initiative 2017 Vision for Maritime Cooperation under the Belt • Enhance cooperation on marine resource exploration and utilization and Road Initiative • Promote maritime connectivity by improving shipping service networks among BRI countries, and jointly establishing international and regional shipping centers

Compared to 2017, China's non-financial investment in and trade volume with BRI countries increased by 9% and 13%, respectively, in 2018.

Figure 4: Non-financial investment by Chinese enterprises in BRI countries (2014-2018) Unit: Billion USD

180 +9% 156 160 148 145 144 140 125 120

100

80

60

40

20

0 2014 2015 2016 2017 2018

3 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section I: Belt and Road Initiative Trends in 2018

Figure 5: China's total trade volume with BRI countries (2014-2018) Unit: Trillion RMB

+13% 9 8.4

8 7.4

7 6.2 6.3 6 5 5

4

3

2

1

0 2014 2015 2016 2017 2018

China Railway Express carried 6,300 TEUs in 2018, achieving YoY (year-on-year) growth of 72% and reaching the goal of reaching 5,000 TEUs annually set out in the China Railway Express Construction Development Plan 2016-2020 two years ahead of schedule.

Figure 6: China Railway Express Annual TEUs (2011-2018) Unit: TEU

2018 6,300

2017 3,673

2016 1,702

2015 815

2014 308

2013 80

2012 42

2011 17

• China Railway Express (CR Express) • CR Express has expanded its is an important rail freight solution network, adding 13 cities in China connecting the Eurasia corridor. and 8 cities in 2 European countries, It had reached 1,000 TEUs by reaching a total of 49 cities in 15 March 2018. The CR Express has European countries. Returned trains undergone rapid development in now account for 71% of departed recent years— the time taken to trains. Quality indicators including reach 1,000 TEUs fell from 256 days containerization and goal realization in 2016 to 133 days in 2017 and only rates have hit record highs. 88 days in 2018.

4 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section I: Belt and Road Initiative Trends in 2018

2. Belt and Road Initiative progress The BRI has provided a novel and agreement with China as of the end and milestones in 2018 innovative framework for realizing of 2018, over 60 of them joining 1) China has depended trade coordinated global governance and during the year. Most countries ties, improved cooperation building a community of common have continued to support the BRI mechanisms and expanded areas destiny for all mankind , receiving in the midst of global political and of cooperation with BRI countries more endorsement and support economic turbulence. Our report First, more international actors have from countries and international focuses on 80 BRI countries that have acknowledged and participated organizations. More countries have signed agreements and deepened in building the Belt and Road joined the BRI Friends Circle —122 cooperation with China. Initiative. Since its debut in 2013, countries have signed cooperation

Figure 7: Countries that have signed BRI cooperation agreements with China (as at the end of 2018)

Asia (35) Europe (24) Africa (37) Oceania (9) South Central Caribbean (5) America (7) America (3)

South Korea Nepal Azerbaijan Russia Lithuania Sultan Gabon Burundi New Zealand Chile Costa Rica Dominican

Mongolia Maldives Georgia Austria Slovenia South Africa Namibia Cape Verde Papua new guinea Guyana Panama Trinidad and Tobago

Singapore United Arab Armenia Greece Hungary Senegal Mauritania Uganda Samoa Bolivia Salvador Antigua and Emirates Barbuda

East Timor Kuwait Kazakhstan poland Macedonia sierra leone Angola Gambia Niue Uruguay Dominica

Malaysia Turkey Kyrgyzstan Serbia Romania Cote d'Ivoire Djibouti Togo Fiji Venezuela Grenada

Myanmar Qatar Tajikistan Czech REP. Latvia Somalia Ethiopia Rwanda Micronesia Suriname

Cambodia Oman Uzbekistan Bulgaria Ukraine Cameroon Kenya Morocco Cook Islands Ecuador

Vietnam Lebanon Indonesia Slovakia Belarus South Sudan Nigeria Madagascar Tonga

Laos Saudi Arabia Philippines Albania Moldova Seychelles Chad Tunisia Vanuatu

Brunei Bahrain Croatia Malta Guinea Congo Libya

Pakistan Iran Bosnia Portugal Ghana Zimbabwe Egypt

Sri Lanka Iraq Montenegro Zambia Algeria

Bangladesh Afghanistan Estonia Mozambique Tanzania

Covered in report Not covered in report Countries that have not initiated concrete cooperation with China are not covered in this report.

Developed countries including Great for post-Brexit Britain to identfify Britain have embraced the BRI. development opportunities. Leading Faisal Rashid, Chair of the All-Party companies including British Petroleum Parliamentary Group for BRI and the and British Telecom have established China-Pakistan Economic Corridor joint ventures and initiated cooperation views BRI as a great opportunity with Chinese enterprises in BRI regions.

5 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section I: Belt and Road Initiative Trends in 2018

Figure 8: Comment by Chair of British All-Party Parliamentary Group for BRI and the China-Pakistan Economic Corridor

I identify the BRI opportunity as massive … post-Brexit Britain should explore the potential opportunities it can bring. The best thing about the initiative is connectivity across different parts of the world. Connectivity is key for trade, for social and cultural cohesion. BRI is abosolutely a brilliant idea, especially Its connectivity, as many countries would benefit from it. However, we need more clarity on how that idea gets delivered. —Faisal Rashid, Chair of All-Party Parliamentary Group for BRI and the China-Pakistan Economic Corridor

Southeast Asian and African countries Third, China has improved Analysts were optimistic on the are among the most active participants cooperation mechanisms with BRI global economic outlook in 2017 in the BRI. President Xi has revealed countries. The trade and economic as current and projected growth that China will provide USD60 billion cooperation mechanism under the rates rose. According to the IMF to FOCAC countries in the next BRI framework has been upgraded (International Monetary Fund), global three years. Macky Sall, President to render institutional protection economic growth averaged 3.6% in of Senegal, commented that Africa for BRI implementation. Some 2017, the most expansive growth needs investment for development remarkable advances include setting for a decade. Throughout 2018, in this new era. Africa will not be up Unimpeded Trade Working many BRI countries enhanced their disturbed by any noise, and will Groups with Thailand and Kenya and economic openness and capacity firmly facilitate mutual support and Investment Cooperation Working through pro-FDI policies and assistance with China to jointly build Groups with Kuwait and Jordan strengthening trade ties with other the BRI . Hage Geingob, President of under the framework of the Bilateral countries. Namibia, said the BRI plays a vital role Economic and Trade Commission and in connecting countries across Asia, Joint Committee of Economy, as well In the meantime, the global political Africa and Europe, and in facilitating as building services trade cooperation and economic landscapes have industrialization in Africa. mechanisms with seven countries. become increasingly complicated. In addition, China has taken several BRI countries—most of which are Second, China has deepened measures to strengthen economic emerging economies—have riskier trade ties and expanded areas of cooperation with BRI countries, investment environments than those cooperation with BRI countries. China including signing new FTAs (Free of developed countries. These risks is engaging actively with BRI countries Trade Agreements), reducing tariffs, range from threats to economic in communication and cooperation promulgating pro-FDI (foreign direct stability due to insufficiently in non-economic sectors such as investment) policies, strengthening diversified industrial structures, science and technology, education, cross-border e-commerce, and political risks due to geopolitical culture and public health to improve promoting overseas economic dynamics, changes in authority cross-regional policy coordination and cooperation. These measures are and religious conflicts, as well as foster people-to-people bonds. For expected to further boost China's government credibility risks due to example, 30 countries had provided trade with BRI partners. high public debt and poor repayment visa exemptions or visa-on-arrival ability. According to the 2017 Global services for Chinese citizens by the 2) BRI countries: rising investment Political Security Risk Tracker by the end of 2018. China has established attractiveness and overall risks Phoenix Think Thank, 8 of the top 1,023 pairs of Friendship Cities across Our research for the BRI Investment 10 countries with high political and 61 BRI countries as of April 2018. Index Report 2018 found that security risks are BRI countries: the BRI countries exhibit both rising Philippines, Afghanistan, Iraq, Syria, investment attractiveness and risks. Pakistan, Congo, Sudan and Nigeria.

8 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section I: Belt and Road Initiative Trends in 2018

3) Macroeconomic attractiveness jeopardized their attractiveness to of Southeast Asian countries has foreign investors. grown remarkably The average macroeconomic 5) China playing a more important attractiveness of SEA (Southeast role in facilitating BRI countries' Asian) BRI countries has increased economic development sharply. Among these countries, China has become a prominent Indonesia, Brunei, Cambodia and growth facilitator in more BRI Thailand have exhibited the most countries. In 2018, Chinese investors outstanding improvements in have facilitated infrastructure attractiveness, driven by growth in FDI developments, supporting key and domestic capital investment. local industries to drive industrial upgrading and economic growth SEA countries recorded their highest- across BRI regions. ever private equity fund investment of USD23.5 billion in 2017. A report First, China has stepped up by the Singapore Venture Capital infrastructure investment in & Private Equity Association shows developing countries, including by PE deal value in Southeast Asia improving transport and logistics surged from USD9.2 billion in 2014 to infrastructure in Vietnam, the USD15.5 billion in 2017. Multinational Philippines, South Africa and Kenya, companies are also actively entering laying a solid foundation for trade and the region, seeking to invest in other economic activities. companies with diversified business lines, high penetration rates and Second, China has become more high growth potential in the regional active in facilitating key industries in market. BRI countries, including: • Agriculture: 23 international joint 4) Investment risks have agricultural experiment platforms increased in Southeast Asian, established, including the China– Central Asian and Middle Eastern Kazakhstan Joint Agricultural Science countries Lab, China-Uzbekistan Joint Cotton The investment risks of BRI countries Lab and China-Pakistan Hybrid Rice in Southeast Asia, Central Asia and the R&D center Middle East have escalated for various reasons. • Industrial parks: China has set up industrial parks in Belarus, the Risks in Southeast Asia and Central Philippines, Serbia, Ethiopia and Asia mainly stem from political other countries to promote local instability and foreign exchange economic growth fluctuations. Sri Lanka, Thailand, the • IT (information technology): China, Maldives, Laos and the Philippines alongside Egypt, Laos, Saudi Arabia, have experienced shocks to political Serbia, Thailand, Turkey, the UAE stability, including religious conflicts and other countries, created the and constitutional amendments. Initiative on Belt and Road Pakistan, Malaysia, Nepal had large Digital Economy Cooperation, fluctuations in foreign exchange rates, which focuses on the connectivity which posed major threat to foreign and development of digital investors. infrastructure

Risks in Middle Eastern countries • Energy: In October 2018, China came from security threats including signed the Belt and Road Energy wars and terrorism. Afghanistan, Partnership Declaration with Tunisia, Lebanon, Iran and other 17 countries including Algeria, countries are in the midst of repeated Azerbaijan, Afghanistan and terrorist attacks, political unrest and Bolivia, to enhance international domestic protests, signaling high cooperation and development in the security risks that severely have energy sector.

9 10 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section II: Research Methodology

Section II: Research Methodology

This report follows the research framework of the 2017 report, forming its analysis from extensive desktop research and meticulous data collection from databases, government publications, scholarly articles and industry reports. We have summarized 2018's key achievements and the ongoing trends in China's cooperation with BRI countries. Moreover, we have adjusted select indicators in the previous evaluation framework of country-specific investment attractiveness to capture BRI countries' economic development prospects, investment risks and industry-based attractiveness more objectively, helping investors better understand the opportunities and threats in BRI countries and regions.

1. Objectives and October 2017. The Plan specifies six of the total. Newly signed EPC contracts principles of the special actions: removing trade and amounted to USD4.69 billion, up research investment barriers; advancing financial 188.97% and accounting for 74.82% The Belt and Road openness; strengthening connectivity; of the city's total, with completions of Initiative will remain enhancing cooperation in technology USD1.848 billion accounting for 66.1% an important and innovation; advancing social and of the total. Completed EPC projects guiding framework cultural communications; and building generated revenue of USD1.85 billion for China's think tanks. Moreover, the Plan seeks and contributed 29.2% of the municipal outbound trade and international to strengthen institutional protections, total. In addition, Shanghai has built cooperation, helping it build an open integrate policy resources, enhance a multi-tiered global investment and economy at all levels. President Xi monitoring and preventative measures trade network through 23 memoranda has urged Shanghai to leverage its and the implementation mechanism of of economic and trade partnership Free Trade Zone (Shanghai FTZ) to BRI, as well as effectively mobilize social with 18 countries across Asia, Europe, build a pioneering BRI services center resources to assure Shanghai's critical Oceania and Central America. In recent that facilitates Chinese companies' role in building the BRI. years, the Shanghai Foreign Investment expansion into overseas markets. Promotion Center has also signed This will drive Shanghai to further With the Shanghai Municipal 29 memoranda of cooperation with upgrade its services, providing capacity Government's strong support, investment promotion agencies in for an ever more open economy. Shanghai-based enterprises have Liverpool, Montreal and Dubai, as well On a national level, Shanghai plays a actively responded to and connected as the Japan-China Economic and Trade major role in building the coordinated with BRI strategic deployments, Center, the World Trade Center of India development model between China's making remarkable progress Its trade and other institutions. The Shanghai Eastern, Central and Western regions, investment, contracting projects and Municipal Commission of Commerce's which together facilitates China's economic and trade mechanisms. economic and trade partner network integration into the global economy. According to the Shanghai Municipal now covers all the major BRI countries. Commission for Commerce, Shanghai In response to the goals and contributed trade volume of USD329.9 requirements set out by the central billion to BRI countries between government, and to carry forward January and June 2018, achieving a YoY the spirit of the Belt and Road increase of 2.5% and accounting for Forum for International Cooperation, 20.4% of the city's total trade volume. Shanghai Municipal Government BRI countries' FDI in Shanghai reached set up the Office of the Leading USD496 million, an increase of 25.4% Group on Building the Belt and Road and accounting for 5.8% of the city's Initiative and released the Shanghai total FDI. Registered non-financial direct Action Plan for Serving the Nation to investment in BRI countries reached Build the Belt and Road Initiative in USD1.79 billion, accounting for 29.2%

11 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section II: Research Methodology

2. Summary of When the Shanghai Municipal • Comprehensive evaluation: BRI countries Commission of Commerce initiated its the Index takes into account The national extensive research on the BRI, Deloitte cross-regional differences in analysis section of was invited to compile the BRI countries macroeconomic environment and this report covers Investment Index Report 2018 under resource endowment. We believe 80 countries the Commission's guidance. This 2018 enterprises need to assess target (target countries), report presents the latest investment countries' macro environment including 18 Southeast Asian trends in BRI countries, identifies (including economic development countries, 7 Central Asian countries, opportunities and risks along the prospects, political stability, security 13 Middle Eastern countries1, 7 CIS BRI, and re-computes the Investment and systematic risks) but also (Commonwealth of Independent Attractiveness Index to quantify the the micro environment in target States) countries, 8 Eastern European opportunities and risks on a country- industries. We have therefore countries, 14 African countries2, 1 by-country basis. Based on an updated broke the investment attractiveness Central American country and 1 evaluation framework and indicators, analysis into three sections: Oceanian country. With reference to the Index takes into account each macroeconomic attractiveness, risk the list of countries in the Big Data country's growth prospects, overall assessment and key industries. Report of the Belt and Road (2018) investment risks and the attractiveness We selected industries that exhibit published by the National Information of key industries, helping enterprises high investment potential in the Center, we added New Zealand, East make rational investment decisions. next 3-5 years and are compatible Timor, Panama and Madagascar, which The three guiding principles in the with or complementary to Chinese signed BRI cooperation memoranda Investment Attractiveness Index's enterprises' competitive advantage. with China between 2017-2018. design are: • Comparable indicators: The Index • A forward-looking approach: aims to help enterprises screen and Below is a detailed list of countries the Index takes into account BRI select top regions and countries as covered in this report: countries' past and current economic investment destinations based on performance, growth prospect as quantitative measurement. For this well as the key drivers of the national purpose, the research team made economy and industries in the short/ all indicators comparable across long term. countries through meticulous data cleaning and standardization.

Region Countries Southeast Asia (18) Singapore, the Philippines, Laos, Nepal, Malaysia, Brunei, India, Bhutan, Thailand, Indonesia, Pakistan, Vietnam, Myanmar, Bangladesh, Sri Lanka, Cambodia, Maldives, East Timor

Central Asia (7) Mongolia, Kazakhstan, Turkmenistan, Uzbekistan, Kyrgyzstan, Tajikistan, Afghanistan Middle East (13) Israel, Oman, Qatar, Yemen, United Arab Emirates, Lebanon, Saudi Arabia, Jordan, Kuwait, Iraq, Iran, Syria, Bahrain Commonwealth of Russia, Belarus, Ukraine, Azerbaijan, Georgia, Armenia, Moldova Independent States (CIS) (7)

Eastern Europe (19) Slovenia, Turkey, Croatia, Estonia, Romania, Serbia, Bulgaria, Slovakia, Macedonia, Hungary, Latvia, Montenegro, Czech Republic, Lithuania, Albania, Bosnia and Herzegovina, Cyprus, Greece, Poland Africa (14) Ethiopia, Egypt, Kenya, South Africa, Nigeria, Angela, Morocco, Algeria, Ghana, Sudan, Tanzania, Congo, Tunisia, Madagascar Central America (1) Panama Oceania (1) New Zealand

1. There is very limited publicly available information on Palestine in credible databases. We did not include Palestine in the country analysis for this reason. 2. See Appendix 2 for the selection criteria for African countries.

12 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section II: Research Methodology

3. Investment coefficient, imports/exports as a • Financial risks: 4 secondary Attractiveness proportion of GDP, and inflation. It is indicators—bank systematic risk, Evaluation assumed that higher consumption internal liability, external debt Framework and demand drives economic level, and size of foreign exchange This report follows growth, and stronger purchasing reserves. We assume a sound and the macroeconomic power drives more balanced stable financial system, a reasonable evaluation economic growth, creating business level of debt and sufficient exchange framework and indicators of the 2017 opportunities and attracting more reserves contribute to a stable edition. investment. financial environment, which greatly enhance a country's investment 1) Macroeconomic attractiveness • Labor supply and cost: 3 attractiveness. assessment secondary indicators—labor The macroeconomic attractiveness force population, labor cost and • Political risks: 2 secondary system covers 6 primary indicators education level of the labor force. indicators: political stability and and 19 secondary indicators. The Chinese enterprises need to soundness of the legal environment. weight assigned to each indicator in consider whether a host country has Political unrest, domestic conflicts computing the index differs based sufficient human capital to support and defects in the legal system on the indicator's importance in its operations over the long term. A pose substantial threats to foreign overall assessment. Specifically, the large, well-educated and low-cost enterprises' operations in a host 6 primary indicators include size of labor force helps enterprises control country. economy, investment, consumption labor costs, expand capacity and • Government sovereign risk: 3 and demand, labor supply and cost, improve operational efficiency. In secondary indicators—sovereign tax burden and capital supply. The particular, the education and skills credit rating, government debt assumptions and selection criteria for proficiency of labor is critical for as a percentage of GDP, and the 19 secondary indicators are as enterprises seeking investments in fiscal balance (surplus or deficit). follows: technology-intensive industries such Governments with higher sovereign • Size of economy: 4 secondary as IT and high-end manufacturing. ratings, reasonable levels of debt and indicators, namely GDP (gross • Tax burden: approximated by fiscal sustainability are assumed to domestic product), per capita overall tax level. A lower tax burden be more stable and credible, which GDP, historical GDP growth (recent allows enterprises to have stable is conducive to stable government- 5-year average), and projected GDP cash flow and makes a country enterprise relations. growth. It is assumed that higher attractive. GDP and GDP growth means better • Business environment risk: economic performance and greater • Money supply: secondary 4 secondary indicators: ease of investment attractiveness. indicators including M2 supply as market entry for foreign investors, a percentage of GDP, M2 supply ease of contract enforcement, • Investment: 2 secondary growth rate and the interest rate cost of business registration, and indicators—FDI and domestic fixed difference between savings and government efficiency are adopted asset investment. In general, large- loans. These indicators represent to assess ease of business entry and scale FDI and fixed asset investment a country's potential purchasing setup and a government's ability to implies a positive economic power, and imply the ease of provide public services efficiently. outlook, higher expected return on obtaining local financing in a host • Foreign exchange risk: 2 investment and lower investment country. risks, which would attract foreign secondary indicators—foreign exchange rate fluctuations in the investors. 2) Risk assessment local currency and foreign exchange • Consumption and demand: The risk assessment framework covers freedom. The above indicators affect Consumption and demand at home 5 primary indicators and 15 secondary foreign enterprises' future returns and abroad are two of the forces indicators: financial risk, political risk, on investment and their ability to driving economic growth. Domestic government sovereign risk, business transfer returns. Large or frequent consumption, import and export environment risk, and foreign exchange rate fluctuations will volume are proxies for consumption exchange risk. The weight assigned to reduce profits, and stricter foreign and demand. This report includes each secondary indicator varies. exchange controls increase the 6 secondary indicators: domestic difficulty of converting profits into income, HCFE (household final The assumptions and selection criteria investors' home country currency. consumption expenditure), Gini of the 15 secondary indicators are as follows:

13 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section II: Research Methodology

3) Key industries assessment First, the industry assessment • IT: dimensions include the scale This report continues to focus on the framework incorporates a country's and maturity of the IT sector, market 5 key industries identified in the 2017 macroeconomic performance and the penetration of IT services and scale report, namely: performance of specific industries. The of IT infrastructure. We assume assessment framework only takes into a larger, more developed IT with • Energy: Some BRI countries are account the most relevant indicators a high technology adoption rate rich in energy resources, but lack due to data accessibility issues and among local residents and sound sufficient funding and technologies a lack of comparability between infrastructure are conducive to to use these resources efficiently. some indicators. Second, according foreign investment China has relatively advanced to the NDRC's Catalogue of Sensitive resource utilization technology but • Transportation: dimensions include Industries for Overseas Investment has been dependent on imported oil core transport infrastructure such as (Revision 2018), restricted industries and gas. As China's expects growing railway, logistics and ports. We use for foreign investment include: energy demand to fuel urbanization traffic mileage and transportation production and maintenance of and industry development, it needs volume as proxies for the size of a weapons, exploration of transnational to expand the sources of energy country's transportation sector. We water resources, media and press, imports. Chinese skills and funds assume that the larger the sector, real estate, hotels, studios, culture and could be complementary to the the more potential investment entertainment, sports clubs and equity energy sector in some BRI countries. opportunities it presents, and that funds or investment platforms without a sound logistics system implies • Transportation: Development of actual projects in overseas markets. a more developed transportation this sector facilitates the integration Our industry analysis excludes these sector. of regional transport systems, sensitive (restricted) industries. which supports China's trade, • Manufacturing: the scale of communication and cooperation The 2018 report follows the key a manufacturing sector, labor with BRI countries and realizes the industry assessment framework in force and labor cost affect its BRI's goal of facilities connectivity. the previous edition, and fine-tuning attractiveness to foreign investment. secondary and tertiary indicators used Countries with lower labor • Manufacturing: Some BRI costs and large manufacturing countries have low labor costs, to evaluate the manufacturing sector. sectors are more likely to attract which are conducive to developing The report evaluates the key industries foreign investment. The 2018 labor-intensive manufacturing and in each target country and provides report replaces the average exporting low-value added product, suggestion on investing in selected income indicator with labor force but are relatively underdeveloped industries with high growth potential. population , since the latter better in manufacturing. They need skilled represents the labor resources labor and technology to upgrade The assumptions and criteria for required to support manufacturing manufacturing industry. assessing industry growth potential are set out below (for indicator details, development. • IT: China can collaborate on building see Appendix 1): • Agriculture: dimensions include transnational ICT networks such agricultural resources, agricultural as cable networks to improve bi-or • Energy: dimensions include the productivity and volume of multi-lateral ICT connectivity. scale and maturity of the local electricity market as well as energy agricultural output. We assume • Agriculture: Chinese investors reserves. First, we assume more countries with ample resources, can promote the development of electricity consumption is associated higher productivity and higher agriculture, enhance food security with greater demand for energy and output value in agriculture attract and boost living standards at implies strong investment potential more foreign investment. home and in BRI countries through in this sector. Second, we believe transferring agricultural technology, China can establish partnerships investing in agricultural commodities with natural resource abundant BRI and deepening trade in agriculture countries on energy exploration, with BRI trade partners. utilization and export-import. Moreover, the greater its use of The selection of the five industries natural resources, the more active an was based on two considerations. energy market is.

14 15 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section III: BRI countries Investment Attractiveness Analysis Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section III: BRI countries Investment Attractiveness Analysis

Section III: BRI countries Investment Attractiveness Analysis

1. Investment attractiveness analysis The Investment Attractiveness Index is computed based on the Macroeconomic Attractiveness Index and the Risk Index.

The following 20 countries (Tier 1 countries) show the highest investment attractiveness. They include 8 Eastern European countries, 5 Middle Eastern countries, 4 Southeast Asian countries, 2 CIS countries and 1 Oceanian country.

Figure 9: The 20 Countries with Highest Overall Investment Attractiveness and Ranking Changes (2017-2018)

Ranking Change Country 2017-18

709 Singapore = - 646 New Zealand = - 639 UAE ↓ -1 625 Qatar = - 600 India ↓ -2 598 Israel = - 596 Georgia ↑ 11 592 Czech Rep. = - 586 Estonia ↑ 4 585 Latvia ↑ 2 583 Saudi Arabia ↓ -4 575 Poland ↓ -3 574 Kuwait ↓ -3 572 Bulgaria ↑ 2 568 Lithuania = - 568 Malaysia ↑ 9 567 Russia ↓ -12 567 Cyprus ↓ -1 560 Slovenia ↓ -5 559 Thailand ↑ 12

The tier 2 countries (ranked 21st to Nigeria, Ethiopia, Egypt, Pakistan, have abundant energy resources 50th) are Indonesia, Oman, Romania, Madagascar, Uzbekistan, Ukraine, and sufficient public funds for Croatia, Slovakia, Panama, Brunei, Sri Lanka, East Timor, Algeria, Iraq, development, and their governments Hungary, Bahrain, Cambodia, Vietnam, Tunisia, Tajikistan, Sudan, Congo, have promulgated supportive policies Armenia, Macedonia, Kazakhstan, Yemen, Angola, Syria and Afghanistan. to develop local industries. Although Mongolia, Maldives, Jordan, Turkey, these countries have favorable Philippines, Montenegro, Albania, Overall, Eastern Europe, Southeast investment environments and Kyrgyzstan, South Africa, Serbia, Asia and the Middle East are the optimistic economic outlooks, political Bosnia and Herzegovina, key investment destinations and we turmoil in the region could hinder Moldova , Azerbaijan, Kenya, expect robust economic growth in their growth the future. Morocco and Nepal. these regions. Among BRI countries, Eastern European and Southeast The Tier 3 countries (ranked 51st to Asian nations, on average, have better 80th) are Turkmenistan, Lebanon, institutions and infrastructure to Laos, Greece, Ghana, Belarus, Bhutan, underpin economic development. Bangladesh, Tanzania, Myanmar, Iran, Some Middle Eastern countries

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Figure 10: Average score for three indices by region Overall investment attractiveness index – regional average (2018)

537 506 502 499 433 413

Eastern Southeast CIS Middle East Central Asia Africa Europe Asia

Macroeconomic attractiveness index – regional average (2018)

215 203 195

191 169 159

Southeast Middle East Eastern CIS Central Asia Africa Asia Europe

Investment risk index – regional average (2018)

342

308 299 291 264 254

Eastern CIS Middle East Southeast Central Asia Africa Europe Asia

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1) Macroeconomic attractiveness index The following 20 countries (Tier 1 countries) show the highest macroeconomic attractiveness.

Figure 11: Macroeconomic attractiveness: top 20 countries and ranking changes (2018)

Ranking Change Country 2017-18

316 India = - 296 Singapore = - 259 Qatar = - 253 UAE = - 247 Indonesia ↑ 5 242 Israel ↑ 2 238 Saudi Arabia ↓ -2 233 Kuwait ↑ 1 231 Russia ↓ -3 229 Georgia ↑ 18 229 Brunei ↑ 13 225 Bahrain = - 223 Thailand ↑ 5 218 New Zealand = - 218 Cambodia ↑ 8 218 East Timor = - 218 Vietnam ↑ 2 217 Cyprus ↓ -7 215 Turkey ↓ -12 214 Croatia ↑ 6

The average score of the top 20 The Brunei Government has actively The Croatian government achieved a countries increased, indicating participated in international forums fiscal surplus with a reasonable level a higher overall macroeconomic and cooperation agreements. of debt in 2017. Croatia has stable performance. The ranking of the top 4 Brunei joined the RCEP (Regional economic growth and high scores in countries is unchanged. Since 2017, Comprehensive Economic import and export volume, tourism the Maldives, Malaysia, Hungary, Iran, Partnership), a proposed FTA that held development and aviation. Poland and Slovenia have dropped out its first Ministers' Meeting in November of the top 20 list, and Georgia, Brunei, 2017, and reached the Regional China's Ministry of Foreign Affairs Cambodia, Croatia, East Timor and Comprehensive Economic Partnership warned citizens of travel dangers New Zealand have entered it, of which Agreement. The RCEP aims to establish during the Maldives' 45-day state of East Timor and New Zealand are new a regional free trade zone. Brunei is emergency, which was prompted by BRI countries for 2018. The investment expected to benefit from this through domestic political turmoil, hurting the attractiveness of the rising stars faster economic growth. Estimates country's tourism industry. increased for various reasons: suggest the RCEP will contribute 5.8% of Brunei's GDP. Iran's economy has been damaged Georgia has promoted economic by US sanctions. The United States development through trade Cambodia has also deepened withdrew from a comprehensive expansion. The free trade agreement cooperation with China and benefited agreement on Iranian nuclear between Georgia and China came from the Belt and Road Initiative. After development in 2018 and resumed into force on 1 January 2018. Under visiting Beijing in December 2017, unilateral sanctions on Iran's energy the agreement, the two countries Cambodian Prime Minister Hun Sen and financial sectors, leading to a removed tariffs on the vast majority signed a USD7 billion investment constant devaluation of the Iranian of goods (97% of Chinese goods contract with China, covering a wide currency. and 94% of Georgian goods), and range of industries including finance, improved rules on intellectual property infrastructure and tourism and Although Poland and Slovenia rights, environmental protection, creating upward momentum for the experienced no major social or e-commerce and competition, to Cambodian economy in 2018. economic turbulence in 2018, they fell promote economic development and out of the top 20 because they were bilateral trade. outranked by other outperformers.

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2) Investment risk index The top 20 countries, apart from New Zealand and Singapore, which have the lowest overall risk, show similar risk levels. These countries have sound legal frameworks, stable political environments as well as clear and transparent foreign investment regulations.

In comparison, Afghanistan, Iraq, Syria, Sudan, Congo and Ukraine saw rising risk of doing business due to political instability.

The top five countries with the lowest Figure 12: risk: 20 countries with the lowest risks and ranking changes (2018) investment risk remained stable. Ranking Change Country However, the ranking of each country 2017-18 dropped one place as New Zealand joined the list for 2018. Since 2017, 428 New Zealand = - Russia, Saudi Arabia, Kuwait and 414 Singapore ↓ -1 Estonia ↓ -1 Croatia have dropped out of the 405 390 Czech Rep. ↓ -1 top 20, and New Zealand, Malaysia, 387 Latvia ↓ -1 Panama and Cyprus have entered it. 383 UAE ↓ -1 382 Lithuania ↓ -1 Saudi Arabia faced a series of 367 Slovakia ↓ -1 Georgia ↑ 6 domestic and foreign policy challenges 367 365 Qatar ↑ 1 in 2017/18, including the failed 362 Bulgaria ↑ 2 blockade of Qatar, house arrest of 362 poland ↓ -3 Lebanese Prime Minister Saad al- 359 Hungary ↓ -1 Hariri, diplomatic row with Canada 359 Romania ↑ 5 over human rights issues, and the 357 Malaysia ↑ 12 355 Israel ↓ -3 disastrous war in Yemen, marking 352 Panama = - a shift towards a tougher stance 352 Oman ↓ -8 on the global stage. Domestically, 347 Cyprus ↑ 3 the government introduced several 346 Slovenia ↓ -4 reforms, including allowing women to drive, but also silenced critics through assassination, abduction or Cooperation agreement with China a result of a decline in bad loans. In confiscation of property. in March 2017. The country has the 2018, the Ministry of Finance of Cyprus lowest overall investment risk among issued the Economic Stabilization Plan Kuwait's and Croatia's scores were BRI countries due to its outstanding 2018-2021, which prioritized bad loans roughly the same as last year's as the political stability, social security, in the banking sector on its policy two countries did experienced no and economic performance, the agenda, and will tackle the issue— significant shocks to their stability. soundness of its legal system, as well which hinders healthy growth—with Their rankings dropped as they were as the transparency and efficiency three pillar strategies to reduce the outperformed by other countries. of government services. Panama amount of undesirable loans by 40%. is another new country. It has low There were 24 terrorist attacks in financial, political and government Dagong Global Credit Rating has raised Russia in 2017, posing a substantial sovereignty risks. the outlook for Malaysia's federal threat to Russia's national security. sovereign credit rating from negative to Moreover, Russia's currency oscillated China established diplomatic relations stable, while maintaining the country's wildly in 2018, with the ruble dropping with Panama in June 2017 and Xi domestic and foreign currency 21.1% versus . According to The Jinping visited there for the first time sovereign credit rating at A+. Malaysia's Economist, the ruble is expected to in November 2018. Panama was the overall business environment score further depreciate by 11% between first Latin American country to sign a rose by 2.57 from last year with its 2018 and 2022, which will bring risks to memorandum of cooperation on global ranking surging to 15. The investors. the BRI. government's administrative efficiency improved sharply in 2017/18, driven New Zealand is a new country in Cyprus's debt crisis has been mitigated by red tape cuts in the electricity and this report, added because its in the past year and its overall construction sectors, and property government signed a Belt and Road investment risk decreased, mainly as development applications.

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2. Regional Trends 1) Southeast Asia The Tier 1 countries are Singapore, India, Malaysia and Thailand, of which Singapore and India show the highest investment attractiveness, albeit for different reasons: Singapore has a highly developed market economy, sound legal system, FDI-friendly business environment and a well-educated labor force, whereas India has a sizable labor force that includes both high-skill technicians and relatively low-skill, low-cost labor.

The Tier 2 countries are Indonesia, Brunei, Cambodia, Vietnam, the Maldives, Philippines and Nepal.

Figure 13: Regional distribution of investment potential – Southeast Asia (2018) Tier 1 countries: Singapore, India, Malaysia, Thailand

Tier 2 countries: Pakistan Nepal Bhutan Indonesia, Brunei, Cambodia, Viet Nam, Bangladesh Maldives, Philippines, Nepal India Myanmar Laos Tier 3 countries: Laos, Thailand Bhutan, Bangladesh, The Phillipines Cambodia Myanmar, Pakistan, Sri Vietnam Lanka, East Timor Brunei Sri Lanka Malaysia

Maldives Singapore

Indonesia

East Timor

Malaysia's investment attractiveness to ensure Brunei's self-sufficiency transparency of utility price changes, has grown constantly in recent years. in refined products and boost improving online tax platforms, and Malaysia's imports and exports as a spinoffs for further high value-added, introducing new systems to increase share of GDP reached 136% in 2018. downstream industries. This is a key customs clearance efficiency. This strong export performance BRI project and one of the largest has driven economic growth and single FDIs in Brunei. The Brunei Indonesia had an FDI boom in 2017, contributed to a rosy economic government has stepped up efforts with an increase of 418% from 2016. outlook. After Malaysia incorporated to attract foreign investment and The country has become increasingly an Industry 4.0 development strategy build a diversified economy through favored by foreign investors for its into its economic transformation a series of internal government outstanding advantages in low-cost blueprint, demand for local industry reforms, including establishing a new labor force and robust economic upgrading increased, evidenced by one-stop service platform, cutting growth. In recent years, the a 13% increase in total fixed asset red tapes in business creation and Indonesian government has made investment from 2016. enhancing the transparency of credit business environment more investor- ratings. friendly through tax incentives and Brunei's total FDI increased sharply supportive policies such as the from last year. In 2017, Hengyi, a Thailand's FDI in 2017 reached about negative list for investment and other joint venture company co-formed by USD8 billion, an increase by 163% incentive policies to promote the China's Zhejiang Hengyi company from 2016. China is the second development of capital- and labor- and its Bruneian partner, announced largest foreign investor in Thailand. intensive industries. investment in building an Industries' In 2018, Thailand made investment Crude Oil Refinery and Aromatics more convenient by introducing fixed Pakistan's imports have hit new highs Cracker Complex on Pulau Muara business registration fees, optimizing but exports have remained sluggish, Besar, which will turn the island into electricity account application creating a widening trade deficit and a world-class oil processing center procedures, increasing the depreciation of the local currency.

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In response, the central bank of Political instability in Sri Lanka has including the Czech Republic, Estonia, Pakistan sought to implement a weakened the country's investment Latvia and Poland. Serbia, Bosnia managed floating exchange rate attractiveness. The announcement of and Herzegovina and Greece are less system, but the strategy has yet the dissolution of Parliament by the attractive investment destinations. As to see the desired results, so the President of Sri Lanka in 2018 led to an integral part of the Belt and Road, current account deficit has continued a seven week political crisis, which Eastern European countries have the to expand. raised ongoing concerns about the geographical advantage of connecting political situation and resulted in the Asia and Europe, making them Rising prices of imported products devaluation of the Sri Lankan rupee important gateways for enterprises to the Maldives have increased its as well as a large surge in consumer seeking entry into European markets. inflation rate, with growth rising prices. According to Nomura from 0.5% to 2.7% in 2017, with Securities, Sri Lanka can expect a negative impact on its overall greater exchange rate risk and is macroeconomics. highly vulnerable to an exchange rate crisis in the coming year. Nepal's economy is still in recovery. Struck by an earthquake on 25 April 2) Eastern Europe 2015, Nepal has since spent over Eastern European shows strong USD10 billion–nearly half its GDP–on investment attractiveness as a reconstruction. region. It has eight Tier 1 countries,

Figure 14: Regional distribution of investment potential – Eastern Europe (2018) Estonia

Latvia Tier 1 countries: Czech Republic, Lithuania Estonia, Latvia, Poland, Bulgaria, Lithuania, Cyprus, Slovenia

Poland Tier 2 countries: Romania, Croatia, Slovakia, Hungary, Macedonia, Turkey, Czech Republic Montenegro, Albania, Serbia, Bosnia and Slovakia Herzegovina Slovenia Hungary Romania Tier 3 countries: Greece Croatia Bosnia Serbia and Herzegovina 马其顿Bulgaria Montenegro

Macedonia Albania Greece Turkey

Cyprus

Hungary's investment attractiveness is moderate. With higher tax rates and the introduction of special taxes on foreign companies hampering its investment attractiveness, the country experienced a net direct investment outflow in 2017/18, amid further negative shocks to the country's security, political and legal environment.

Greece's public debt as a share of GDP increased to 184% in 2017. Its exorbitant debt level is likely to constrain economic growth.

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Figure 8: Comment by Chair of British All-Party Parliamentary Group for BRI and the China-Pakistan Economic 3) Commonwealth of Independent Countries Corridor This region's Tier 1 countries include Georgia and Russia. Russia has a mature manufacturing sector with advanced technology in oil and gas, mining, processing precious stones and metals, and aircraft building, but its light manufacturing sector is less competitive. Three CIS countries fall into Tier 2 and Belarus and Ukraine are lagging behind in the region. CIS countries in general have well-developed infrastructure, which is conducive to foreign investment, but most countries other than Russia are small economies with limited international trade.

Figure 15: Regional distribution of investment potential – CIS (2018)

Russia

Belarus

Ukraine

Moldova

Azerbaijan Georgia Armenia

Tier 1 countries: Georgia, Russia Tier 2 countries: Armenia, Moldova, Tier 3 countries: Belarus, Ukraine Azerbaijan

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4) Africa underdeveloped industrial bases industries. However, the strength African countries show lower overall and infrastructure, high political and of African countries lies in their investment attractiveness among security risks and a dependence abundance of natural resources and BRI countries. Most countries except on foreign aid. Another prominent relatively low labor cost, which are for South Africa, Kenya and Morocco issue is that the size and skill levels of advantages for investing in labor- are in Tier 3. This is because a local labor forces cannot effectively intensive, low-end industries. majority of African countries have support the development of high-end

Figure 16: Regional distribution of investment potential – Africa (2018)

Tunisia Morocco

Algeria Egypt

Sudan Tier 2 countries: South Africa, Kenya, Morocco Nigeria Ghana Ethiopia Tier 3 countries: Ghana, Tanzania, Nigeria, Ethiopia, Egypt, Madagascar, Algeria, Tunisia, Sudan, Congo, Angola Congo Kenya (Democratic Countries not covered in this report Republic) Tanzania

Angola

Madagascar

South Africa

Ghana's investment attractiveness Egypt introduced a floating exchange has risen. The country saw a 41% rate system in 2017, but its currency increase in fixed asset investment depreciation was sharper than in 2017. The local government has expected. As a result, domestic approved nine offshore oil exploration inflation rose to 30%, up 114% YoY. blocks for commercial purposes in 2019 and 2020. With rising oil prices, Tunisia's security environment was higher production, and new deals aggravated by domestic political driving an oil boom in Ghana, we turmoil, strikes and protests and expect high economic growth in the terrorist attacks in 2017. Sluggish country. economic growth has resulted in high unemployment and sparked protests.

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5) Middle East The United Arab Emirates, Qatar, Israel, Saudi Arabia and Kuwait are among the Tier 1 countries, showing high investment attractiveness. Most countries in this region have rich energy resources, robust economic performance and supportive government policies for industrial development. The investment attractiveness of Iraq, Yemen and Syria have plummeted due to civil unrest and wars that have increased political and security risks.

Figure 17: Regional distribution of investment potential – Middle East (2018)

Syria Lebanon Iraq Iran

Israel Jordan Kuwait Tier 1 countries: UAE, Qatar, Tier 2 countries: Oman, Israel, Saudi Arabia, Kuwait Bahrain, Jordan Bahrain Tier 3 countries: Lebanon, Iran, Countries not covered in Qatar Iraq, Yemen, Syria this report Saudi Arabia UAE

Oman

Yemen

US-Iran relations have continued Influenced by continuing instability in to deteriorate under the Trump the Middle East and Syria's civil war, administration. The United States the Lebanese economy remained has withdrew from the nuclear sluggish, reflected by shrinking foreign deal and re-imposed sanctions on investment and domestic fixed asset Iran's energy and financial sectors investment. A surge in the number in May 2018, leading to a constant of Syrian refugees in Lebanon has devaluation of the rial against USD intensified inflationary pressures on and slowing economic growth in Iran. the local economy and the public Unemployment is high as the job services system. market continues to shrink.

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6) Central Asia in economic development and Kazakhstan, Mongolia and Kyrgyzstan infrastructure construction and are in Tier 2. Their investment maintain more control over FDI, attractiveness derives from abundant they show investment potential in energy resources, developed energy and transportation given their animal husbandry industries, strategic geographic locations, energy low tax burdens, and increasing reserves and longstanding trade ties financial openness. Although other with China. Central Asian countries lag behind

Figure 18: Regional distribution of investment potential – Central Asia (2018)

Kazakhstan Mongolia

Uzbekistan Kyrgyzstan

Turkmenistan Tajikistan

Afghanistan

Tier 2 countries: Kazakhstan, Mongolia, Tier 3 countries: Turkmenistan, Kyrgyzstan Uzbekistan, Tajikistan, Afghanistan

Kyrgyzstan has gradually recovered The May bombing in downtown from regional crises including the Kabul, Afghanistan's capital, was the Ukraine conflict, oil price declines, deadliest attack in 16 years. A Taliban Western countries' sanctions on suicide attacker detonated a car Russia and the steep devaluation of bomb in western Kabul in May, killing the Kazakhstani tenge. The KGS-USD up to 35 people and wounding more exchange rate remains stable. than 40 in what was the worst attack in 16 years. Prolonged political unrest in Afghanistan has led to a volatile The Mongolian government plunged security environment. The local into an external debt crisis in 2017 government has not established a as it recorded government debt sound policy framework to protect the equivalent to 252% of the country's interests of foreign investors. Political GDP. Facing a USD580 million debt, risk in Afghanistan heightened in 2017 mainly to foreign creditors, the as the Taliban continued to press government implemented a series offensives in the region and posed of reforms to mitigate the issue, but risks to business operations. their efficacy is uncertain. Moody's upgraded the Government of Taliban militant groups are active and Mongolia's long-term issuer rating and are seriously threatening to carry out senior unsecured rating to B3 from production and operation activities. Caa1 in early 2018.

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3. Key Industries Assessment This section assesses investment attractiveness from an industry perspective by analyzing the investment potential of the five key industries—manufacturing, IT, transportation, energy and agriculture—in each country.

1) Manufacturing Some of the target countries have relatively underdeveloped manufacturing technology and low labor costs, which implies opportunities for Chinese enterprises to invest in industry upgrading. Among the top 20 countries, the attractiveness of India's manufacturing sector has risen sharply for these very reasons. In addition, most countries with high investment potential in manufacturing are concentrated in Southeast Asia, mainly because of sizable and relatively low-cost labor forces in most countries.

Figure 19: Manufacturing investment attractiveness - top 20 countries and ranking changes (2018) Ranking Change Country 2017-18

73 India = - 58 Myanmar ↑ 3 58 Algeria ↓ -1 56 Bengal = - 56 Vietnam ↑ 2 55 Indonesia ↓ -3 54 Thailand ↓ -1 53 Belarus ↑ 5 53 Mongolia ↑ 23 52 Ethiopia ↑ 5 52 Philippines ↑ 1 52 Malaysia ↓ -4 50 Tajikistan ↑ 12 50 Cambodia ↓ -4 50 Kyrgyzstan ↑ 1 49 Romania ↓ -2 49 Czech Rep. ↓ -8 49 Uzbekistan ↓ -7 48 Pakistan ↑ 2 48 Ghana ↓ -2

The ranking of the top 20 countries Tajikistan's manufacturing value remained largely stable except added grew 13.8% in 2017. The China- for Mongolia and Kyrgyzstan. Tajikistan collaborative lead smelting Myanmar ranked 2nd, driven by the plan was put into operation, and the government's increasing efforts to China-Tajikistan Industrial Park, both attract FDI and a rapidly developing opened officially in 2018. manufacturing sector. Myanmar achieved 9.3% growth in Mongolia has adjusted its industry manufacturing value added in 2017. structure since 2017 by reducing its The country has embarked on 136 dependency on mining and promoting manufacturing projects in 2017/18. the development of its manufacturing sector. The country recorded 22.8% growth in manufacturing value- added, the highest growth among BRI countries.

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2) IT IT is a technology- and capital-intensive industry that requires high-skill labor. Among BRI countries, Singapore, Israel, New Zealand and Estonia have well- developed industrial bases, fast developing technology resources, and relatively skilled labor forces that are conducive to further development of IT. Meanwhile, Malaysia and Cyprus have well developed tourism sectors that create demand for tourist-oriented information services, but they need to improve their IT infrastructure, products and services, which would create considerable investment opportunities in the IT sector.

Figure 20: IT investment attractiveness - top 20 countries and ranking changes (2018) Ranking Change Country 2017-18

83 Singapore = - 56 Estonia = - 53 Israel = - 53 New Zealand = - 51 Malaysia ↑ 2 51 Cyprus ↑ 3 50 UAE ↑ 1 49 Hungary ↓ -3 48 Bahrain ↑ 3 48 Slovenia ↑ 1 48 Kazakhstan ↓ -7 47 Greece ↓ -2 46 Belarus ↑ 1 46 Croatia ↑ 5 46 Serbia ↑ 2 45 Czech Rep. ↓ -10 45 Bulgaria ↑ 7 44 Latvia ↓ -2 44 Lithuania ↓ -4 43 Russia ↓ -7

The ranking of the top 20 countries The Serbian government is also was largely stable. The rankings committed to promoting the of Bulgaria and Serbia improved national IT. It has improved laws remarkably. and regulations pertaining to the information and communication The Bulgarian IT posted double-digit industry, and promoted the growth in 2017/18, five times the application of intelligent digitalization increase in national GDP growth. The in e-commerce and public services. government clearly stated in its latest Moreover, Serbia has relaxed Medium-and-Long-Term Development restrictions on foreign investment Plan 2020 that it will enhance in information and communications innovation and high technology infrastructure, including digital investment and promote development television and broadband networks. of the IT.

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3) Transportation considerable investment potential which will contribute to further The transportation industry is a in this sector. These countries have transportation network integration in core component of infrastructure. developed sound, nation-wide future. Countries with high-potential Investment in transportation along transportation infrastructure and transportation industries are mainly the BRI helps build integrated accelerated integration with the rest in Southeast Asia (e.g. Malaysia and regional networks to underpin China's of their regions through government Singapore) and Eastern Europe (such deepening economic and trade policy support. as the Czech Republic and Hungary), cooperation with BRI countries. The partly because of their respective UAE, India, Singapore and Russia These countries already have strategic locations in the maritime silk top BRI countries' transportation the foundations for transport road and close to the Eurasia gateway. attractiveness ranking. Qatar, New construction, and their future overall Zealand and Turkey have also showed development potential is promising,

Figure 21: Transportation investment attractiveness - top 20 countries and ranking changes (2018)

Ranking Change Country 2017-18

72 UAE = - 66 India = - 63 Singapore = - 61 Russia = - 53 Qatar = - 51 New Zealand = - 50 Turkey ↓ -1 46 Thailand ↑ 1 46 Malaysia ↓ -2 45 South Africa ↓ -2 45 Panama = - 45 Indonesia ↑ 3 43 poland ↑ 8 41 Estonia = - 39 Czech Rep. ↓ -5 38 Slovenia ↑ 3 38 Israel = - 37 Saudi Arabia ↓ -6 37 Vietnam ↑ 11 36 Greece ↑ 2

The rankings of Vietnam, Poland and of understanding on international Indonesia have improved remarkably. logistics and supply chain cooperation. Poland has also The Vietnamese government has accelerated infrastructure vigorously promoted transport modernization, with air cargo freight network construction. Thirty-four up 43% in 2017 and rail cargo volumes transportation projects were continuing their uptrend. completed and put into operation in 2017/18. The China-Vietnam road- Indonesia launched a Five-Year Plan rail freight transportation route in 2017 to promote infrastructure completed its first trial cargo delivery construction. The Patimban Deep in September 2018. Sea Port in Subang, West Java is under construction and completion is In 2018, Poland National Rail expected in 2019. The country's port Freight and China signed a rail infrastructure index increased by 11% freight transport memorandum over 2016/17.

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4) Energy imports. Chinese skills and funds Most BRI countries are rich in could complement the energy sector energy resources but generally lack in some BRI countries. sufficient funds and technologies to use these resources efficiently. Countries with high energy China had relatively advanced investment potential are mostly in resource utilization technology but the oil-abundant Middle East. Central is dependent on imported oil and Asian and African countries also gas. As China's expects growing have rich oil and gas endowments. energy demand to fuel urbanization In addition, Russia ranks among the and industry development, it needs countries with the highest energy to expand its sources of energy investment attractiveness.

Figure 22: Energy investment attractiveness - top 20 countries and ranking changes (2018) Ranking Change Country 2017-18

74 Kuwait = - 56 Saudi Arabia = - 54 Qatar = - 53 Iraq = - 47 Bahrain ↑ 1 42 UAE ↑ 2 42 Oman = - 41 Russia ↓ -3 38 Brunei = - 36 Azerbaijan = - 35 Iran = - 35 Turkmenistan = - 34 Algeria = - 33 Angela ↑ 1 30 India ↑ 1 30 Kazakhstan ↓ -2 29 Nigeria = - 27 Mongolia = - 24 Congo = - 15 Ghana ↑ 1

The ranking of the top 20 countries Saudi Arabia launched Saudi Vision remains largely stable due to minimal 2030 in 2016, a blueprint setting out changes in their energy resources over long-term goals and expectations, the year. Kuwait, Saudi Arabia and including plans to vigorously develop Qatar remain the top three countries. new energy sources, double gas production by 2030 and generate 10% Kuwait plans to invest USD11.6 billion of the country's total electricity from in developing renewable energy. renewable sources by 2023. According to the Kuwait 2035 Plan, Kuwait will generate twice as much In 2018, Qatar's LNG (liquefied natural electricity from renewable energy in gas) giants Qatargas and RasGas 2030 as it did in 2016. merged to form a new Qatargas, now the world's largest LNG producer. In addition, Qatar plans to raise its LNG export capacity from 77 million tons to 110 million tons by 2024.

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5) Agriculture Agriculture is the pillar industry of most BRI countries, especially those in Southeast Asia, Africa and Central Asia. Investing in the agriculture sector in target countries helps complete China's agriculture production value chain, expand its external food supply channels, and optimize agricultural resource allocation.

India and Russia have the most attractive agriculture sectors among BRI countries. Ethiopia, Mongolia and Tanzania rank among the leaders in agriculture investment attractiveness.

Figure 23: Agriculture investment attractiveness - top 20 countries and ranking changes (2018) Ranking Change Country 2017-18

60 India = - 53 Russia = - 47 Ethiopia ↑ 1 46 Mongolia ↑ 4 45 Tanzania ↓ -2 44 Kazakhstan ↓ -1 42 Laos ↓ -1 40 Cambodia ↓ -1 40 Angela = - 37 Sultan ↑ 1 37 Myanmar ↓ -1 36 Kenya = - 36 Ukraine ↑ 8 35 Nigeria = - 35 Nepal ↑ 2 35 Pakistan = - 34 Indonesia ↑ 1 34 Ghana ↑ 2 33 Uzbekistan ↓ -4 33 Bahrain ↓ -1

The ranking of the top 20 countries agricultural machinery and high with the most attractive agriculture value-added food industries to drive sector remained stable, except for economic growth. Ukraine and Mongolia. Mongolia has a fast-developing Ukraine's crop production index agriculture sector. Government rose 21% from 2016. Its enterprises subsidies for agriculture rose to in agriculture, forestry and fishery 75%. By the end of 2017, the total reached a profitability of 22.7% in number of livestock in Mongolia had 2017, well above Ukraine's overall reached its highest-ever level, and economic profitability of 8.9%. During the country's crop production index 2017/18, the Ukrainian government was up 56% from 2016. promoted development of the

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Section IV: BRI countries Investment Index – Country Analysis

1. Southeast Asia risk, especially due to its stable political 1) Singapore environment and sound legal system. (1) Investment Advice However, Singapore lacks natural Overall, investing in Singapore is and human resources. Therefore, we attractive. It has a high attractiveness recommend investors avoid resource score, especially in the scale of its and labor-intensive industries, economy, consumption and market and focus on unique and superior demand, and investment environment. industries including IT and transport Singapore also has low investment infrastructure.

Figure 24: Singapore Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile races. The official languages are English, Singapore is located in the Malay Malay, Chinese and Tamil. Singapore Peninsula, adjacent to the Straits of also has many religions, and the Malacca, with a land area of 719.1 km2 state implements a policy of religious and a coastline of more than 200 km. freedom and promotes the inclusive It has a tropical maritime climate, with spirit of religious culture. high temperatures, humidity and rain all year round. There is no significant Singapore has a well-developed market change in temperature throughout economy and is one of the Four Asian the year, and the annual average Dragons, acting as an international temperature is between 23-35 °C. The financial center and Asian shipping country has a beautiful environment center. Singapore is very active on the and is known as The Garden City. international stage. It is not only one of the ASEAN (Association of Southeast Singapore is an immigrant country Asian Nations) members, but is also that advocates multiculturalism. The a member of the WTO (World Trade total population of the country is 5.61 Organization), the Commonwealth million, most of whom are Chinese, and APEC (Asia Pacific Economic with the rest Malays, Indians and other Cooperation).

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(3) Macroeconomic attractiveness3 Its labor supply and cost, Singapore's From an economic development score is quite high, ranking among perspective, Singapore's score is quite the top BRI countries, mainly due to high and its economic level is advanced. the high quality of local education. In 2017, Singapore's GDP was Singapore has a well-developed USD323.9 billion, and per capita GDP education system, a superior group was as high as UD58,000. Historically, of higher education institutions, and GDP has grown at an average annual strong scientific research, so is able rate of 3%-4%. It is expected that to cultivate high-level talent. The Singapore's GDP will maintain steady unemployment rate in Singapore is growth of 2%-3% in the next three stable at 1.8%, and the labor force is years. However, due to its small fully employed. However, Singapore population, its GDP scale is relatively has a small labor force and lacks small, so volume is slightly lower than labor resources for the long term. The those of other target countries. national labor force was 3.31 million in 2017. Overall in Singapore's labor The investment score is high because market, its high-quality talent is more of its friendly foreign investment suitable for investments in finance and environment. Singapore's foreign high-tech industries. investment level is among the highest in the world, and the highest in the Its tax scores is high, implying BRI countries. In 2017, FDI reached Singapore's tax burden is quite light. USD63.6 billion. Based on World Bank statistics, the total tax rate on commercial profits is Singapore's consumption and demand 20.6%, which is better than most BRI score is also high. Based on its countries. strategic position as a center of trade and shipping, Singapore's economic Singapore's M2 money supply score is development is driven by foreign moderate. Singapore is in a mid-level trade. In 2017, imports and exports position among BRI countries. Money accounted for 322.4% of GDP, and the supply is favorable, with M2 accounting value of trade was more than USD1 for 129.7% of GDP and growing at trillion. The national per capita income about 3.2%. The interest rate difference level is quite high, at USD55,000. Its between loans and deposits is 5.1%. Gini coefficient is 0.46. After factoring Overall, Singapore's money market is in government transfer payments and quite stable. taxation, the Gini coefficient reaches 0.4, indicating a narrow wealth gap. (4) Risk Indicators The inflation coefficient is low, and CPI Overall, Singapore has low investment growth in 2017 was 0.6%, conducive risk. to residents' consumption. Overall, Singapore's consumption environment Financial risk is low. Its banking industry is superior, but its smaller population risk index is the lowest among BRI size restricts the scale of total countries, mainly because of the high consumption demand. degree of financial marketization

3. Note: The scores of secondary-level indicators (such as money supply) indicated by the spider map icons in this report are obtained from a weighted sum of the third-level indicators (M2 scale, M2 growth rate, etc.), and standardized by 0-10, with 10 indicating the best performance, and 0 indicating the worst perfromance. For example, the secondary-level indicator weight of economic scale is 100. If the weighted total score of a country's third-level economic scale indicators is 80, then its graphic score is 80/100*10=8. However, there is no difference between the weightings of secondary-level indicators.

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in Singapore. The credits provided fluctuations in 2017/18 were negligible. Manufacturing: Manufacturing is by Singapore's domestic financial The exchange system for the Singapore an important part of the Singapore institutions accounts for 140.8% of dollar and foreign currencies is very economy, accounting for 18% of GDP. GDP and foreign exchange reserves are liberal. According the Chinn-Ito Financial In 2017, affected by strong demand UDD288 billion. Due to the high degree Openness Index, Singapore's foreign for global semiconductors and related of financial openness in Singapore, the exchange freedom index is 1.0, ranking equipment, Singapore's electronics ratio of external debt to GDP is also first among BRI countries. As a mature industry grew strongly with a high, at 448.6%. global financial center, Singapore's production value of SGD124.85 billion, financial system and management are 40.9% of total manufacturing output. Political risk is low. In political stability paragons for the whole international In 2018, British home appliance and legal environment, Singapore's market. manufacturer Dyson announced score is the highest among BRI plans to establish an electric car countries. This is due to Singapore's (5) Key Industries manufacturing plant in Singapore sound legal system and mature political Among the key BRI industries, by 2020, expecting to launch its first management system. Singapore's IT, transportation and electric car in 2021. manufacturing industry are developing Sovereign risk is low. According to the well, whereas agriculture and energy Energy: Singapore has limited land latest Moody's sovereign credit rating, are relatively weak. area, few resources and a lack of Singapore is rated Aaa, the highest energy resources. Recently, Singapore possible credit rating. Singapore's IT: Singapore's IT is well-developed has relied on the locational advantages public debt is quite high, accounting for with a high degree of digital product in the Strait's oil channel to vigorously 110% of GDP. However, considering penetration. The network penetration develop its refining industry. In developed countries' debt levels are rate is as high as 84.5%, with a wide 2006, China Petroleum International generally higher than those of emerging spread of comprehensive IT and (Singapore) Co. and Singapore Xinlong markets, and Singapore's overall solid industry foundations. High-tech Group built Huanyu Oil Depot, economic situation is positive and its products account for 48.8% of GDP. including 73 tanks with total storage repayment ability strong, debt risk is The government's Smart Nation 2025 capacity of 2.28 million cubic meters quite small. program is dedicated to developing a and 12 berths ranging from 5,000 tons smart country driven by IT. to 300,000 tons on Jurong Island. In Business environment risk is low. September 2014, Singapore built the Singapore has a relaxed business Transportation: Singapore has a first underground oil storage facility in environment for local and foreign developed transportation industry with Southeast Asia on Jurong Island. institutions, and has a comparative convenient facilities. It is an essential advantage in corporate income tax and international transit hub and aviation Agriculture: Limited by its restricted entry barriers. The entry difficulty score center connecting Asia, Europe, Africa land and water resources, 90% of for foreigners is the second lowest in and Oceania. In 2017, the passenger Singapore's agricultural products the world. Singapore has demonstrated volume of Changi International Airport are imported. Agriculture accounts excellent standards in all areas. The was 62.22 million passengers, cargo for a relatively small proportion of cost of establishing a company is volume was 2.13 million tons, and the economy. In response to this, equivalent to just 0.4% of per capita the number of aircraft exceeded Singapore has adopted a typical urban national income. The government 370,000. Singapore is also one of the agriculture model, focusing on the strongly supports foreign greenfield busiest ports among major global development of modern, intensive investments and M&A investments, and Asian transit hubs, with more agro-technology parks. There are six among other channels, and related than 200 routes connecting over agro-technology parks in Singapore, processes and regulations are sound. 600 ports about the world. The port which are dedicated to increasing On the whole, Singapore has one of the handled 630 million tons of freight and agricultural output by applying cutting- best foreign investment environments 36.67 million standard containers in edge technologies. among BRI countries and indeed the 2017. Singapore's domestic railway is world. developed; as of the end of 2017, total railway length was 228.4 km, including Foreign exchange risk is relatively 199.6 km of subways and 28.8 km of minimal. The SGD-USD exchange rate light railways. is quite stable, and exchange rate

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2) Philippines supply and cost, although there is human resources, broad prospects (1) Investment Advice still room to improve its tax burden. for domestic demand, abundant Overall, investing in the Philippines Its investment risk score is moderate. resources and energy, and is moderately attractive. The Scores for business environment preferential tariffs from Europe and Philippines has a high macroeconomic risk and political risk are low. The the United States. Investors should attractiveness score and performs favorable factors in the Philippines focus on areas such as manufacturing, well Its the scale of its economy, labor include obvious advantages in agriculture and the IT.

Figure 25: Philippines Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile The total population of the Philippines Its consumption and market demand, The Philippines is located in Southeast is 110 million (2018), of which 85% are its score is mid-range. The Philippines Asia. The North is opposite Taiwan Malays. Other groups include Tagalog, is an export-oriented economy and across the Baba Channel. The south Yilo and international immigrants. has a strong dependence on Western and southwest is opposite Indonesia The Philippines' national language is countries, especially the United and Malaysia, separated by Sulawesi Filipino, based on Tagalog, and the States. In 2017, total import and and the Balabac. The West is adjacent official language is English. export volume accounted for 71.8% to the South China Sea, and the east of GDP. The Philippines has the world coast is linked to the Pacific Ocean. (3) Macroeconomic attractiveness 12th largest population, with average The Philippines covers an area of The Philippine economy is generally annual population growth of nearly about 300,000 km2 and has more than well-developed and ranks high among 1.9%, the fastest population growth 7,000 large and small islands (including BRI countries. Its scale, its score is rate in Asia. Residents have strong 11 major islands including Luzon quite high. With a GDP of USD313.6 willingness to consume. In 2017, Island, Medan Island and Samar Island, billion, the average annual growth household consumption expenditure accounting for 96% of the country's rate over the past five years has been was USD230.4 billion, 73% of GDP. total area and a coastline of 18,533 over 6%. It is expected to maintain (The population distribution in the km). The landforms of the Philippines an average annual growth rate of Philippines is very uneven due to are complex and diverse, with 6.5%, and its total economic volume regional development differences. mountains, plains, plateaus, canyons, is comparable to that of Singapore. Cities with higher population density lakes, rivers, volcanoes, grasslands However, due to the large population such as Manila are the main drivers of and forests. Mountain areas account of the Philippines, per capita GDP in domestic demand.). In the past year, for two-thirds of its total area. The 2018 was only USD3,198. the inflation index of the Philippines Philippines has a tropical rainforest has grown healthily, at 2.9%. In climate with high temperatures and The investment environment indicator summary, the prospects for the humidity, as well as typhoons. The score is high. In 2017, total FDI was consumer market in the Philippines annual average temperature is about USD10.1 billion, and investment in are considerable. 27 °C. fixed assets was about USD89.6 billion.

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As for labor supply and cost indicators (4) Risk Indicators Business environment risk is medium score is comparatively high. The Financial risks are moderate. The to high, which is an improvement Philippines has a large, cheap and Philippine Bank's risk assessment is from the previous year. The highly educated workforce. Some at 0.4. Credit provided by domestic Philippines has imposed restrictions 80% of the population are fluent in Philippine financial institutions on foreign-funded public utilities, English, with a literacy rate of 94.6%, accounts for 66.3% of GDP. Its foreign natural resource development and which is among the best in Asia. In debt to GDP ratio is 22.1%, and land ownership, as well as on the 2017, the Philippines had a working foreign exchange reserves are about proportion of shares foreigners population of about 45 million and USD77.9 billion. can hold in companies in other the unemployment rate was 1.9%, industries. Due to redundant tax both in a reasonable range. The labor Political risk are comparatively high: categories, high tax rates, high market has rich supply and its talent the Philippines' political stability and electricity prices and monopoly is obvious. It can not only meet the legal environment scores are low. of raw materials, establishing and needs of labor-intensive industries, but On one hand, in 2018, 22 judges operating foreign-funded enterprises also attract high-end industries. of the Philippine Constitutional is relatively costly. Meanwhile, Advisory Committee passed the administrative efficiency is not high, The tax burden score is quite low. final version of the draft Federal with cumbersome procedures. It can Based on World Bank statistics, Constitution, which proposed to take 962 days for legal proceedings the tax rate on commercial profits change the Philippine polity from a to fulfill. In 2018, the Philippines is about 42.9%, which can be single presidential system to a federal strengthened compliance reviews considered a tax burden. However, system. On the other hand, friction of cross-border trade, including for exporting industries, there is still between the Philippine government increased import inspections, which a great attraction to investing in the and anti-government armed forces will extend import time. At the same Philippines: the United States and the has escalated, and the number of time, the Philippines launched the European Union give corresponding casualties in conflicts in some areas Ease of Doing Business and Efficient preferential tariff treatments to has risen. Government Service Delivery Act of Philippine exports. In particular, 2018 (Ease of Doing Business Act), since 2015 the EU has granted GSP+ Sovereign risk is generally low-to- aiming to improve the business treatment to the Philippines, allowing medium. Moody's, the Philippines' environment, including streamlining more than 6,000 products to be national sovereign credit rating is the company's post-registration exported to the EU with zero tariffs. Baa2, and its outlook is stable. Public process (including tax registration and debt accounted for 33.2% of GDP, social security registration), protecting Its M2 money supply indicators score and its fiscal balance deficit was 2.2%. the rights of minority shareholders is quite high. Philippines' M2 accounts and improving the risk management for 79% of GDP, growing at about process for building construction. 11.4%. The national interest rate difference between loans and deposits is 3.8%. The Philippines is relatively friendly to foreign investment.

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Foreign exchange risk is moderate. IT: This is the primary income source The exchange rate between the local for the Philippines. The fast-growing currency and the is quite stable, IT can be attributed to the hundreds however the degree of foreign of new companies in the country. The exchange freedom is relatively poor. main drivers are business process According to The Chinn-Ito Financial outsourcing, software development, Openness Index, freedom of foreign internet services, communications exchange in the Philippines is 0.5. and educational institutions. In 2017, the proportion of high-tech products (5) Key Industries to industrial products exported by Due to the abundant labor resources the Philippines was 55.1%, second of the Philippines and its natural only to Singapore and Malaysia in BRI environment suitable for agricultural Southeast Asian countries. development, manufacturing, IT and agriculture are key industries with Agriculture: Forestry and fisheries high investment attraction in the play an important role in the country. Philippine economy. Seventy percent of the population live in rural areas. Manufacturing: Ramon Lopez, the Two-thirds of them depend on Secretary of the Department of Trade agriculture for their livelihoods, and and Industry, stated at the end of half of the workforce is engaged in 2016 that manufacturing is gradually agricultural activities. The Philippines becoming the main growth driver has about 1,244 km2 of agricultural of the Philippines' economy and is land, with cultivated land area of expected to replace labor exports as about 5.6 million hectares, and the country's main income source. agricultural output value accounts for The manufacturing industry is growing about 9.7% of GDP. The main exports faster than the service industry. In are coconut oil, bananas, fish and 2017, the average manufacturing shrimp, sugar and its products, and growth rate was 8.6%. Finished unprocessed tobacco. products are mainly light industrial products such as electronics and Transportation infrastructure: food, accounting for nearly 60% of the This is a high potential industry for the output of the manufacturing industry. country. After President Duterte took The Philippine IPP (Investment Priority office, he approved the Philippine Plan) 2017-2019 removed regional Development Plan 2017-2022. restrictions on subsidies for some Infrastructure investment is estimated industries and further promoted the to reach 7.4% of GDP by 2022. The development of manufacturing. In government recently announced the old version, only the agricultural 75 flagship projects to be carried processing industry in Mindoro, out or completed by 2022, covering the Muslim Autonomous Region of railways, bridges, airports and dams. Mindanao, and Palawan enjoyed The Philippines will also work closely subsidies. This type of regional with China to start construction of the restriction was eliminated in the new Kaliva Dam and the Chico River Water investment priority plan. Conservancy Project.

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3) Laos in scale of economy and tax burden, the business environment score is low. (1) Investment Advice but poorly in M2 money supply, We recommend investors pay keen Laos's Investment Attractiveness Score consumption and market demand. attention to opportunities in Laos' is low. Macroeconomic attractiveness Investment risk index score is agriculture sector for its abundant scored moderately, performing well moderate, but financial risk is high and agricultural resources.

Figure 26: Laos Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile (3) Macroeconomic attractiveness that weakens the enthusiasm of Laos is the only landlocked country in The macroeconomic indicator score foreign investors. However, the the northern part of the Indo-China is low. The modern exploitation of Laotian government has increased Peninsula. It borders China to the colonialism in Laos, coupled with its infrastructure investment over recent north, Cambodia to the south, Vietnam domestic feudal system, the shackles years. In 2017, fixed asset investment to the east, Myanmar to the northwest, of religious forces and lengthy wars, increased 13% from 2016. At the and Thailand to the southwest, with have seriously hampered economic same time, it has encouraged foreign a land area of 237,000 km2. Laos has development. investment cooperation. In 2017, a tropical and subtropical monsoon foreign investment increased by climate with an average annual Laos' scale of economy score is low. 60% from 2016, and the investment temperature of about 26°C. Laos had low GDP, reaching USD16.8 environment is gradually improving. billion in 2017, and per capita GDP Laos has a population of 6.8 million of only USD2,457, which is only a Consumption and market demand and is a multi-ethnic, small country. quarter of China's. In recent years, scores are low. Household final There are 49 ethnic groups in Laos, Laos has been politically stable and consumption expenditure accounts mainly the Lao-tai group (about 60% of its economy has developed rapidly. It for 65% of GDP, and household the national population), the Menggao has maintained a rapid growth rate of consumption expenditure per capita ethnic group, the Sino-Tibetan 7% per year. GDP growth is expected is higher than those of Myanmar language group and the Miao-Yao will remain at about 7% in the next few and Cambodia. However, due to its language group. Most Laotians follow years. By 2020, per capita GDP could limited population, overall household Hinayana Buddhism. Buddhists reach USD3,200. The economy has consumption expenditure is lower account for approximately 65% of the strong development potential. than those of neighboring countries. total population. The Gini coefficient is 0.5, higher than The investment environment score in China and most Asian countries, Laos abolished its monarchy in is comparatively low, and investment indicating a large gap between 1975, establishing the Lao People's attraction is not advantageous rich and poor. Imports and exports Democratic Republic, officially joined compared to other BRI countries, account for 75.8% of GDP. Laos has ASEAN in 1997, entered the WTO in mainly because of poor infrastructure a persistent trade deficit, mainly due 2013, and held the ASEAN presidency in 2016.

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to the lack of advanced domestic (4) Risk Indicators technology and talent. Exports Financial risks are higher than in rely heavily on primary products other countries in Southeast Asia, and resource-based products (low including Myanmar and Cambodia. technical complexity), and the main Laos' banking risk index is 0.6. Banking imports are fuel, vehicles, various business in Laos is relatively narrow, spare parts and machinery. The and its development is lagging. inflation rate of 2017 was 0.8%, a Support for investment is quite sharp drop from previous years', in limited. Laos is one of the heavily fact the lowest for nine years, mainly indebted poor countries identified due to policies to attract foreign by the International Monetary Fund. investment and exchange rate The government's fiscal revenue controls. and solvency are limited. In addition, foreign exchange reserves are low, Labor supply and cost scores are at only USD1.06 billion, and external low, positioning Laos at the lower- payment capacity is weak. middle level among Southeast Asian countries. The main reasons are labor Political risk is moderate. Laos shortages and low levels of national implements a socialist system. The education. According to the World People's Revolutionary Party is the Bank, as of the end of 2017, Laos only political party in Laos. The political had a labor force of 3.68 million. Only situation is quite stable, and there 17.4% of people in higher education should be no threats of instability that age groups in Laos have received might endanger it in the short term. higher education. Labor resources are insufficient, and the national education Sovereign debt risk is moderate. level is low. Therefore, labor quality is Moody's, Standard & Poor's and Fitch generally low, with quantity and quality do not assign a sovereign credit rating failing to meet overall market needs. to Laos. According to National Risk Analysis 2018, Laos has a mid-high Tax burden score is quite high. Laos national risk rating and a moderate has a reasonable tax burden. World sovereign credit risk rating. Public debt Bank statistics show that the total tax accounts for 64.7% of GDP and it has a rate on commercial profits is about fiscal deficit of 5.6%. 24.1%. Business environment risk is M2 money supply score is low, ranking moderately high, but the overall last among BRI countries. Laos' M2 business environment has improved level only accounts for 18% of GDP, from previous year. In 2018, the and M2 growth declined in 2017. Laos country mainly improved customs encourages the use of its national clearance processes. Laos performed currency, the kip, but the kip and the worse than surrounding Southeast Thai baht can be exchanged and used Asian countries in ease of foreign in the market. companies entering the market, difficulty in fulfilling contracts, establishment costs and government efficiency. The average time required to enforce a contract exceeds 828 days; it takes 174 days to establish a new enterprise, and the cost of establishing a new enterprise is equivalent to about 6.6% of per capita gross national income.

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Foreign exchange risk is high. The main signed in 2016 said the two countries Energy: The market has great reason is a low degree of freedom should increase communication potential. The energy industry score of foreign exchange. The Chinn-Ito and focus on promoting trade for 2018 is lower than for 2017, mainly Financial Openness Index gives Laos cooperation in pollution-free due to a slowdown caused by the a score of 0.2, similar to Thailand agricultural products, crop breeding, collapse of the Xe-Pian Xe-Namnoy and Sri Lanka. Laos has a managed agricultural machinery and biomass power plant's saddle dam. Laos has float exchange rate mechanism that energy research and development. abundant water resources. There are sets a reference exchange rate each In addition, the China-Laos railway more than 20 rivers totaling more than day, allowing commercial banks and has driven agricultural cooperation 200 km in the country, with more than foreign exchange administrations and the construction of agricultural 60 power-rich hydropower stations. to float within± 0.3%. In the past parks along its route, including the The Mekong River, an important river few years, the exchange rates of the Yunnan-Udomi Agricultural Science in Southeast Asia, exceeds 1,900 km. In Laotian currency have shown a steady and Technology Demonstration Park recent years, many Chinese companies uptrend, and there is no large risk of and the Chongqing (Laos) Agricultural have invested in hydropower projects foreign exchange fluctuations. Comprehensive Park. Grain crop in Laos. For example, China Heavy mechanized planting, green organic Machinery Co. has built the Nan Ngum (5) Key Industries agricultural products, wood processing 3 hydropower station in Laos with an Laos scores highly in agricultural and renewable biogas energy have installed capacity of 480 MW and a investment, but lower in the strong investment and cooperation contract value of USD1.29 billion. manufacturing, IT, transportation, and potential. energy industries. Transportation infrastructure: Manufacturing: This has some There are plenty of development Agriculture: Investment prospects potential future room. Current opportunities here. Laos is a are bright. Laos has good agricultural manufacturing value added is low. landlocked country with poor resources and has three major Recently, exports of semi-finished infrastructure, especially in highways positive characteristics: First, it has electronics, telecommunications and railways. It only has 3.5 km in abundant arable land, at about 8 and electrical equipment products railways. The 414 km China-Laos million hectares, with agricultural from Laos have increased, and Railway will be completed by 2020. land of about 4.7 million hectares, key manufacturing industries such and the soil is fertile. Second, the as garment plants and electronic population density is low, with only equipment assembly companies have 27 people per km2. Third, excellent set up production bases in Laos. climatic conditions, adequate sunshine Driven by exports of electronics, and abundant rainfall, which are telecommunications and electrical extremely suitable for the cultivation equipment manufactured in special of food, cash crops and tropical fruits. economic zones such as the Savan- Laos' main crops include rice, corn, Seno Special Economic Zone, potatoes, coffee, tobacco, peanuts and Vientiane Industrial and Trade Park, cotton. the total value of manufacturing exports has nearly tripled in the Agriculture is a key area in which the past five years, from USD270 million Laos government encourages foreign to USD780 million. Meanwhile, investment and promotes cooperation the establishment of the AEC with China. China has advantages (ASEAN Economic Community) in in agricultural capital, technology, 2015 strongly promoted regional and management, as well as a large integration, providing Laos with domestic consumer market. China more opportunities to participate in and Laos have strong synergies in the regional manufacturing chain, agriculture. In recent years, China creating possibilities for production and Laos have continued to deepen diversification. The manufacturing cooperation in this sector. For industry is expected to improve example, the Sino-Lao Joint Statement continuously.

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4) Nepal index score is low so risk is high. Nepal. Meanwhile, transportation (1) Investment Advice Nepal is an agriculture-dependent infrastructure has some space for Overall, Nepal's investment landscape country, but its agricultural technology development, therefore infrastructure is less attractive than average. Its is not advanced. We recommend investment in Nepal's transportation macroeconomic attractiveness score investors consider investing in sector has room for expansion. is generally low. Its investment risk agricultural technology imports to

Figure 27: Nepal Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile including Nepali, the national language, few years, Nepal's economic growth Nepal is a landlocked country in and English among the elite. More rate has been 7%-8%, and growth is mountainous regions of South Asia, than 85% of Nepal residents follow expected to reach 5.3% per year in the covering about 147,000 km2. It is Hinduism, and a small number of next three years. located in the southern foothills of residents follow Buddhism, Islam and the Himalayas, bordering China's other religions. The investment environment score Tibet to the north and India to the is low, mainly because Nepal's east, west and south. There are a Nepal is one of the least developed infrastructure is very undeveloped and huge number of mountains in Nepal, countries, according to the United there is insufficient investment in fixed earning it the moniker Mountain Nations. It joined the WTO in 2004 assets. In addition, a 10-year civil war Country since ancient times. Mount and is a founding member of SAFTA has had a far-reaching impact on the Everest (called Sagarmatha in Nepal) is (the South Asian Free Trade Area) domestic environment and has greatly on the Sino-Nepalese border, highest and BIMSTEC (the Bay of Bengal weakened its attractiveness for foreign in the north and lowest in the south. Multi-sector Economic and Technical investors. India is the largest source of Nepal's height differences are a rare Cooperation Initiative). A huge FDI in Nepal, but China is catching up. phenomenon. Nepal is divided into earthquake hit Nepal on 25 April 2015, three climatic regions: the northern devastating the country's economy. In consumption and market demand, high mountainous temperate zone, its scores are relatively low. Nepal's the central temperate zone and the (3) Macroeconomic attractiveness overall price level is low. As a southern subtropical zone. The lowest Nepal's score for economic scale is low landlocked country, its trade deficit is temperature in winter is -41 °C and and the macroeconomic level is weak. huge, and manufactured goods are the highest temperature in summer Nepal is one of the 48 least developed heavily dependent on imports. The can be 45 °C. countries as identified by the UN. Its main imported products include fuel, GDP in 2017 was USD24.08 billion, machinery and automobiles, mostly The total population of Nepal is 29.3 with per capita GDP of USD849. The from India and China. Its scores in million. Nepal is a multi-ethnic country Nepalese economy relies heavily on labor supply and cost are low. On the with more than 30 ethnic groups external funds, and one-third of the whole, Nepal has a large pool of labor including Nival, Gurung and Rye. It state's budget comes from foreign and low labor prices. The labor force also has more than 90 languages, donations and loans. In the past is mainly farmers and urban poor who are engaged in heavy physical labor.

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According to the World Bank, the Sovereign risk is high. Moody's, agricultural economic zone in Nepal. unemployment rate was 2.7% in 2017. Standard & Poor's and Fitch have According to Nepal's economic The number of unemployed people no Nepal sovereign credit rating. overview for the 2017/18 fiscal year, in Nepal decreased from 2016. There According to National Risk Analysis the agricultural growth in 2017-18 are not many local job opportunities. 2018, Nepal has a quite high national fiscal year was 2.9%, accounting for As a result, labor exports to foreign risk and sovereign credit risk. 29.2% of GDP. countries increase rapidly each year, and the main importing country is Business environment risk is low and Energy: Nepal's electricity supply India. has improved since the previous year. is very tight, and only 40% of the In 2017/18, Nepal sought to improve country's population can access Its tax burden score is mid-range-low the business environment through electricity. However, Nepal has and Nepal has a high tax burden. amending its labor law, modifying abundant hydropower resources Based on World Bank statistics, the employment rules, trial periods, and advantageous terrain, indicating total tax rate on commercial profits is introducing an overtime mechanism, future potential in hydropower about 36.7%. sick leave, and maternity leave. The development and huge market main purpose was to protect the rights prospects. It is estimated that Nepal's Its M2 money supply score is mid- of informal workers who account for hydropower reserves are 83 million range. Nepal's money supply is 96% of local workers. To attract more kilowatts, of which 43 million kilowatts positive, with M2 accounting for foreign investment, the Nepalese can be used to develop hydropower, 104.1% of GDP, and its growth rate is government is committed to improving yet the current development rate is about 12.0%. The national interest rate the investment environment, legal less than 2%. There are more than difference between loans and deposits system and regulations, enhancing 10 large-scale hydropower projects is moderate at 5.8%. the transparency of laws, and under construction in Nepal with total implementing preferential investment capacity of more than 1,000 MW. (4) Risk Indicators policies. Among them, the Upper Tamakoshi Financial risks are moderately low, Hydropower plant developed by but are some of the highest among Foreign exchange risk is moderately China Hydropower Construction Southeast Asian countries. The 2017 high. The Nepalese currency is Group International Engineering Co. Banking Risk Assessment Index is the Nepalese rupee (NPR) and has has installed capacity of 450MW. 0.4, lower than most Southeast Asian low freedom of foreign exchange. countries, including Thailand and Maintaining a fixed exchange rate Transportation infrastructure: the Philippines. In 2017, the credits with the Indian rupee, exchange Nepal's infrastructure is very provided by Nepal's domestic financial rate depreciation risk mainly arises underdeveloped. There is currently institutions accounted for 85.7% of from fluctuations of the Indian rupee no railway in the country. The GDP. Foreign debt accounted for against the US dollar. government is actively investing in 17.2% of GDP (a new low since 2006), transportation construction including and total foreign exchange reserves (5) Key Industries roads and railways, implying potential were about USD9.3 billion. In the five key industries mentioned development in the future. In April in the BRI, Nepal has a quite high 2016, the Nepalese government Political risk is high. Nepal abolished agricultural score, while a low score announced its strategic plan for its monarchy and implemented a in manufacturing, energy, IT, and the development of transportation multi-party, republican system in transportation infrastructure. facilities for the next five fiscal years 2008. The political situation is quite (2016/17 to 2020/2021), with the goal turbulent, and the security situation Agriculture: The agricultural of building interconnected transport relatively unstable. In many areas, population accounts for about 80% of networks. In 2018, China and Nepal including the capital, there were the total population, and agriculture signed a cooperation agreement to frequent demonstrations and strikes, is Nepal's most important industry. build a railway on the border between which sometimes escalated into riots. The country has limited but fertile the two countries that will connect Its political risks mainly come from farmland: southern Nepal is a fertile Lhasa in Tibet and Kathmandu, the party struggles, ethnic and religious alluvial plain with dense forests and capital of Nepal. It is expected to be contradictions and terrorist activities. vast grasslands, and is an important completed in 2022. The Nepal section will start construction in 2020.

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5) Malaysia and M2 money supply. However there advantageous geographical location, (1) Investment Advice are tax burdens. Its investment risk abundant oil resources, bright Overall, investing in Malaysia is index has a high score, indicating low economic growth prospects, high attractive. Its macroeconomic risk and a good business environment. quality and low cost human resources. attractiveness score is high with strong Malaysia is one of the most attractive There is a wealth of investable areas. indicators in investment environment countries in Southeast Asia, with an We would focus on IT, manufacturing and transportation infrastructure.

Figure 28: Malaysia Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile 21% and Indians 6.3%. Due to its Its investment environment score is Located in Southeast Asia, Malaysia long-term common life of multi-ethnic high, although the volume of FDI needs is positioned between the Pacific people, multiculturalism is established. to be increased. In 2017, Malaysia's FDI Ocean and the Indian Ocean. It is Malay is the national language, English was only USD9.5 billion, accounting for divided into east and west regions by the common language, and Chinese is 3% of GDP. the South China Sea. West Malaysia also widely used. Islam is the national is located in the southern Malay religion of Malaysia. Its consumption and market demand Peninsula, bordering Thailand to the scores are relatively low, mainly due north, Singapore across the Johor Malaysia is a founding member to its low per capita national income, Strait to the south, the South China of the WTO and ASEAN. It is also and the limited volume of imports and Sea to the east and the Malacca Strait a member of IORA (the Indian exports. Malaysia's Gini coefficient is in the west. East Malaysia is located Ocean Rim Association), APEC, the 0.39, and the wealth distribution gap is in the northern region of Kalimantan, Commonwealth, the Non-Aligned low among Southeast Asian countries. adjacent to Indonesia, the Philippines Movement and the Organization of the In 2017, the inflation rate in Malaysia and Brunei. With a land area of about Islamic Conference. was 3.9%. After sales and service tax 330,000 km2 and a coastline of 4,192 was restored in 2018, the inflation rate km, Malaysia has a tropical rainforest (3) Macroeconomic attractiveness increased. and tropical monsoon climate. In macroeconomic terms, Malaysia's It is hot and rainy all year round, economic development is in good In labor supply and cost, its score with no obvious four seasons. The shape. After decades of development, are high. In recent years, the labor temperature differences during the Malaysia entered the rankings of market in Malaysia has been stable. In year are extremely small. The average middle-income countries in the 1970s. 2016, the labor force was about 12.78 temperature is 31-33°C in the daytime In 2017, Malaysia's GDP was USD314.7 million. With a high quality, low wage and 23-28°C at night. billion, with an annual growth rate of cost workforce, Malaysia has strong 5.9% and per capita GDP of UD9,951. relative advantages in labor resources. Malaysia is a multi-ethnic country with The economic base is generally solid a population of 31.62 million, of which and expected to grow at a rate of 4.2% Malays account for 61.5%, Chinese in the next three years.

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Its tax burden score is comparatively Foreign exchange risk is low. The with an investment of MYR3.9 billion high, implying a reasonable tax burden Malaysian currency is the Malaysian (USD980 million) China has been the in Malaysia. According to World Bank ringgit (MYR) and the government largest source of foreign investment figures, total tax on commercial profits implements a managed floating in Malaysia for two consecutive years. is about 34.1%. exchange rate system. Its foreign China's invested projects, including exchange controls are moderate, the Two Countries, Twin Park project, M2 money supply score is high, creating an open environment for Xinyi Glass, Qibin Glass, the CRRC suggesting a stable money market. foreign investment. ASEAN Manufacturing Center and M2 money supply accounts for Shandong Yanyin Spinning Mill, are 133.9% of GDP, growing at 14.6%, (5) Key Industries progressing smoothly. and the deposit to loan spread is 2%, Overall scores of several industries are conducive to the release effective high, especially in IT, manufacturing Transportation infrastructure: investment demand. and transportation infrastructure, Malaysia's 2017 Logistics Performance which warrant attention. Evaluation Index and Port (4) Risk Indicators Infrastructure Quality Index rank are Political risk is moderate. Malaysia is IT: This is mainly driven by the high among the best of the BRI countries. a federal state with a constitutional proportion of high-tech products Malaysia's existing infrastructure monarchy, with little political turmoil to manufacturing exports, at 43%. can serve all types of investors. At and harmonious ethnic relationships Electronic and electrical products the same time, the government's among its three races. exports were MYR343 billion in 2017, future infrastructure plan provides an making it the largest export category opportunity for foreign investment Sovereign risk is low. As of June 2017, and a key investment area for foreign and contracts in infrastructure. Moody's has a sovereign credit rating manufacturers. The 11th Malaysia Plan (2016-2020) of A3 on Malaysia, with a stable includes numerous initiatives for outlook. Manufacturing: Manufacturing is economic and social development one of the main drivers of Malaysia's over the next five years. Strengthening Business environment risk is low. economy. The main sectors infrastructure and supporting The Malaysian government has include electronics, petroleum, economic expansion is one of its six been actively creating a positive machinery, steel, chemicals and strategies. Chinese investments in the business environment, providing full automobile manufacturing. In 2017, plan warrant attention. The Malaysian legal protection to foreign interests. manufacturing value added accounted East Coast Railway, which is being Besides, its unique geographical for 22.3% of GDP, ranking high among built by China Jiaotong Construction, position near the Straits of Malacca, BRI countries. In 2017, manufacturing officially started construction in connecting ASEAN, India, and the growth was 6%, higher than the September 2017. It is the largest Middle East, are conducive to GDP growth rate. At the same time, railway construction project in attracting and encouraging overseas the minimum wage level for labor Malaysia and an important element of investors to invest in manufacturing in Malaysia is quite moderate, with BRI infrastructure construction. and related service industries. The low labor costs making investment average time required to enforce attractive. In manufacturing, foreign Energy: Malaysia's has abundant oil a contract exceeds 425 days, new investors have since June 2003 been and natural gas reserves, as well as enterprise establishment cost is able to hold 100% of the equity in iron, gold, tungsten, coal and minerals. equivalent to 11.6% of per capita new projects. China was Malaysia's The Chinese-invested Shandong gross national income, and handling largest source of manufacturing Hengyuan Group acquired Shell government-related matters takes up sector foreign investment in 2017, Malaysia Refinery Project and OM about 9.8% of senior management's Materials Co. Ferroalloy Plant Phase work time. I expansion projects are progressing smoothly.

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6) Brunei (1) Investment Advice Brunei's investment landscape is not very attractive. Its macroeconomic attractiveness score is low, with small economic scale, insufficient labor and limited investment. Investment risk is moderate. Brunei is an oil and gas exporter. We recommend Chinese companies focus on investment opportunities in the energy sector in Brunei.

Figure 29: Brunei Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand

2

Sovereign risk 0 Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile country with a unique religious culture To realize its national economic Brunei's full name is Brunei and customs. Brunei joined ASEAN in transformation, Brunei decided Darussalam, and it is also known as the 1984, becoming its sixth member. It to build a refinery and chemical Brunei Islamic Monarchy. It is located also joined the WTO in 1995. integration base and transform crude in the northwestern Kalimantan Island, oil processing into higher value-added bordering the South China Sea to the Brunei has abundant oil and gas products such as gasoline, diesel and north and Malaysia to the east, south, resources. However, other mineral kerosene. However, more than 90% and west. The boundary line between resources are scarcer. Forestry of Brunei's crude oil comes from the Malaysia and Brunei is 381 km. Brunei resources are abundant, with a forest sea, and it would be difficult to lay a has a small land area of about 5,765 coverage rate of over 70%. submarine pipeline that meets refining km2 and a coastline of about 162 km. needs with the current construction It has 33 islands, with high terrain (3) Macroeconomic attractiveness technology available in Brunei. China in the east and swamps in the west. Brunei's macroeconomic intends to work with Brunei to help Brunei has a tropical rainforest climate attractiveness is quite low, mainly due it achieve industrial transformation with high temperatures and rain to the small scale of its economy, slow through technology exports. most of the year. The year is divided growth and its investment status. into two seasons: dry and rainy. The Its investment score is low. In 2017, temperature range in Brunei is 24- The score for scale of economy is low. FDI was only USD470 million, or just 33°C, with an average temperature In 2017, Brunei's GDP was USD12.1 3.9% of GDP. Fixed asset investment of 28°C. billion, up 1.3% from 2016 (GDP was only USD4.85 billion. growth contracted from 2013-16). The population of Brunei is small It is expected to grow at 1%-1.5% in Brunei has quite high consumption at about 430,000 in 2017. Malays the next three years, with no large and market demand scores. Its per account for 66%, Chinese for fluctuations. Oil and gas are the capita GDP ranks among the highest 10%, and other ethnic and foreign mainstay of Brunei's economy, with in the world. In 2017, per capita GDP populations for 24%. Malay is the production accounting for about was about USD28,000, 4.3 times national language, the commonly-used 53% of GDP. The contraction in GDP Thailand's and 2.8 times Malaysia's. language is English, and Chinese is growth of recent years was mainly due Its Gini coefficient is 0.34, and wealth also widely used. Brunei is an Islamic to declines in oil and gas production. distribution is generally even. Inflation

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is low, having remained below 1% for Business environment risk is low, 66% compared from 2017's level. At many years. In 2017, Brunei's import with a strong ranking among BRI the same time, excessive reliance on and export volume accounted for countries. Brunei's infrastructure oil and gas resources has led to a 85% of its GDP, mainly from industrial is highly developed and broad single economic structure in Brunei. equipment, agricultural products and radiation to neighboring countries. In recent years, Brunei has been necessities. The government welcomes and attracting foreign investment, actively encourages foreign investment, and promoting industrial transformation, Its tax indicator score is high. Based attempts to create a positive business and vigorously supporting the on World Bank data, the total tax and investment environment. The development of non-oil and gas fields. on commercial profits is about 8%, average time required to enforce a However, the results are ambiguous, making it the lowest tax-paying contract is 540 days. New enterprise with no significant growth yet evident. jurisdiction among BRI countries. establishment costs are equivalent to only 1.2% of per capita gross national Transportation infrastructure: Brunei's labor supply and cost score income. Senior management spend As a transportation hub in Southeast is low. The shortage of local labor about 10% of their working hours Asia, Brunei has convenient ports resources in Brunei is mainly due to its dealing with regulatory matters. In and developed land transport. It limited population. In 2017, the labor 2018, Brunei improved its business is one of the countries with the force of Brunei was 230,000, and the environment by simplifying the highest proportion of private proportion of foreign workers was establishment process, accelerating vehicles in Southeast Asia. Recently, high. According to statistics from the the application process for housing government has continued to attach Brunei Labor Bureau, the proportion power supply, and improving great importance to infrastructure of foreign workers in 2014 was 27.5%. the transparency of credit rating construction and development, The unemployment rate in Brunei in information. and connections with neighboring 2017 was quite high at 7.1%, mainly countries. There is an expressway because of the heavy losses of state- Foreign exchange risk is low. The under construction, and bidding on owned oil and gas enterprises, which Brunei currency is the Brunei dollar. some other large-scale infrastructure employ the most people. This led to a According to the currency swap projects has begun. In 2014, the rising youth unemployment rate. agreement between Brunei and the Brunei government issued the Land Singapore government, the Singapore Transport Master Plan for Brunei (4) Risk Indicators dollar and Brunei dollar are in Darussalam, signaling it will develop Financial risk is moderate. Its Banking circulation at BND1:SGD1. interconnections with neighboring Risk Assessment Index is 0.4, which countries, improve infrastructure and is higher than more developed (5) Key Industries develop public transport. In June 2016, Southeast Asian countries'. Brunei's Among the five BRI key industries, the 18.6 km Trisai-Lumu Expressway, external debt accounts for a low energy, transportation infrastructure built by a Chinese company in Brunei, proportion of GDP, at 2.4%, and overall and IT have high scores, was opened to traffic. The bridge risk is controllable. agriculture's score is moderate, and connecting Pulau Muara Besar with manufacturing's score is low. Brunei's mainland was built by the Political risk is low. Brunei has a China Harbor Company. This was reputation as a peaceful state, with a Energy: According to the BP Statistical completed on May 18 2018 and is of stable political situation and safe living Review of World Energy 2018, great significance to Brunei's efforts to environment. Brunei has proven oil reserves of 1.1 attract investment. billion barrels and 300 billion cubic Sovereign risk is low. Brunei's meters as at the end of 2017, both sovereign credit rating is Aa2, and accounting for 0.1% of the global the ratio of public debt to GDP is low. total. In 2017, Brunei produced However, due to its fiscal deficit, there 113,000 barrels of oil a day. The are still certain risks, although they are Brunei government is exploring new controllable overall. oil and gas areas, and has adopted a control policy over exploitation. In 2018, the energy industry score rose

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7) India (1) Investment Advice In general, investment in India is very attractive. Its macroeconomic attractiveness score is high, and all indicators are excellent except for tax burden. Its investment risk index score is low and the business environment is poor. Chinese enterprises should invest mainly in labor-intensive and service-oriented industries, focusing on agriculture, energy and IT.

Figure 30: India Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile accounts for 46%. The world's major Its consumer and market demand India is one of the four ancient religions all have believers in India, of score is high, mainly thanks to India's civilizations of the world and the which Hindus and Muslims account large population base and high final largest country in South Asia, with its for 80% and 14% respectively. Hindi household consumption expenditure. area of 2.98 million km2 (excluding is the most widely spoken language in This means the domestic consumer the China-India border and zone the country, used by about 30% of the market demand is very strong. controlled by Kashmir), also ranking population; followed by English, which India's Gini coefficient is 0.42, and seventh in the world. The northeastern is a national lingua franca, primarily in the distribution of wealth still needs part borders China, Nepal and Bhutan, political and business activities. further improvement. The inflation the east is bordered by Myanmar, rate in 2017 was 3.3% and certain the southeast is adjacent to Sri Lanka (3) Macroeconomic attractiveness inflation risks. across the sea, and the northwest is India's scale of economy is high. It is bordered by Pakistan. The country is one of the fastest growing countries Its labor supply and cost score is also bordered by Bengal Bay to the in Asia, and the world. In 2017, GDP comparatively high. The main reasons east and the Arabian Sea to the west, reached USD2,600.8 billion, increasing are its large amount of cheap labor, with an 8,000km coastline. India has by 7.3%. It is expected to maintain making India a large labor exporter. a tropical monsoon climate, although economic growth of over 7% in the In 2017, the local labor force reached temperatures vary with altitude. The next three years. 530 million. However, in contrast to its year can be divided into cool (October rapid recent economic development, to March), summer (April to June) and Investment is attractive with quite India still lacks high-quality talent and rainy seasons (July to September). high score. In 2017, India's FDI skilled workers. reached USD40 billion, second only According to the World Bank, India's to Singapore among BRI countries. Its tax burden score is low. India is total population in 2017 was about In 2017, its fixed asset investment among the countries with the highest 1.33 billion, ranking second worldwide. was more than USD800 billion, again tax burdens in the world. Total tax on India is a multi-ethnic, multi-religious ranking first among BRI countries and commercial profits is 52.1%, a quite country with more than 100 ethnic about 2.5 times the second-ranked high level among BRI countries. groups, of which the Hindu population nation, Indonesia.

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Its M3 money supply score is quite prices; strengthened the credit Energy: India has abundant mineral high. The ratio of M2 to GDP is 76%, system; replaced multiple indirect resources, including bauxite reserves and the growth rate remains at taxes with a single indirect GST (Goods that rank fifth in the world. Mica about 10%. and Services Tax) and simplified the exports account for 60% of the tax system; and enacted the bill to global total, but important strategic (4) Risk Indicators regulate weekend labor, overtime and resources, such as oil and natural gas, Financial risks are low. The ratio of annual leave. are relatively scarce. The draft of the foreign debt to GDP is less than 10%, 13th Five Year Plan sets out a clear and foreign exchange reserves are Exchange rate risk is high. Indian strategy for developing renewable abundant. India's main financial risks currency is the Indian rupee and it energy. The draft sets a goal of are in the banking industry, with a is based on a single exchange rate increasing renewable energy installed risk assessment index of 0.5. In 2018, system. India's foreign exchange capacity to 175 GW by 2022 (including due to the problems with the banking management system is still relatively 100 GW of solar energy and 60 GW of mechanism, India experienced a non- strict, with many restrictions on foreign wind power). This means India's solar performing loan and bad debt crisis. currency exchange, remittances and capacity will increase by 10-fold over 5 account opening. years, the average annual growth rate Political risk is high. India is a gathering will be about 60%, and wind power place for all religions, including Islam, (5) Key Industries capacity will double. Hinduism, Christianity, Buddhism Among the five BRI key industries, and Judaism. Differences in religious energy, agriculture and IT industries IT: India's IT has obvious advantages beliefs have led to frequent sectarian scored highly, and the manufacturing and it has become the world's second conflicts, especially between Islam and and transportation infrastructure largest software producer, after only Hinduism. Terrorism and separatism ratings were moderate. the United States. Recently, with the in India has led to decades of extreme development of the software service violence from the northeastern part Agriculture: India is one of the industry, several well-known software of the country to the Indian-controlled world's largest grain producers, with service cities such as Bangalore, Kashmir region. In addition, social one-tenth of the world's arable land Chennai, Hyderabad, Mumbai, Pune security in some areas is poor with (160 million hectares and 0.2 hectares and Delhi have been formed. In high crime rates, especially in the per capita). Rural residents account addition, the number of internet users northwest, northeast and east. for 72% of the total population. The in India has developed rapidly. As of Sovereign risk is low. Moody's latest main food crops are rice and wheat. the first quarter of 2017, the total sovereign credit rating for India is The main commercial crops are oil, number of internet users in India was Baa2. The ratio of public debt to GDP cotton, jute, sugar cane, coffee, tea 460 million, of which more than 80% decreased in 2017 from the previous and rubber. The government supports of online activity was through mobile year. Although a fiscal deficit exists, the agriculture by improving water phones. Tariffs are relatively low overall risk is relatively low. resource management efficiency, because of the competition between irrigation systems and fertilizer use. state-owned, private and foreign- India's business environment risk The government is also increasing funded operators. Services such is high. Forcing the fulfillment of investment in agricultural technology as mobile banking and agricultural contracts takes more than 1,400 days, research and development, continues short messages have emerged. There and the cost of new businesses has to promote the reform of land is huge potential for expansion, reached the equivalent of 14.4% of per property rights, and improve logistics especially of 3G services and mobile capita national income. However, the systems, to provide more market services in rural areas, and gradually business environment has improved opportunities for small farmers popularizing 4G services. Currently, significantly in 2018. The main reasons and increase financial support for Indian telecom operators provide 4G are: the Indian government has agriculture. services in 15 cities. significantly shortened import and export filing processes; optimized the access process for building construction; reduced electricity

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8) Bhutan (1) Investment Advice Bhutan's macroeconomic attractiveness score is low, especially Its investment and money supply. Its investment risk score is low, and financial, sovereignty and foreign exchange risk are high. Bhutan's transport situation is poor, but it has certain development potential, and investors can pay more attention to opportunities in this field.

Figure 31: Bhutan Investment Attractiveness Score

Economy scale Foreign exchange risk 10 Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile (3) Macroeconomic attractiveness Its labor supply and cost is also low. Bhutan, located in the foothills of the Bhutan's overall investment appeal The labor pool is not large, with only Himalayas, is known as the Kingdom is weak. 400,000 individuals in 2017. Most of of Bhutan. It is a small inland country these are farmers with little formal with a border with China to the north Its economy scale score is moderate. education, so they cannot work in and India to the south. It is the least Bhutan is one of the least developed technical jobs. populous country in South Asia and countries in the world. It opened its economy is less developed than to the outside world late and this, Its taxation score is moderate. others. The land area of Bhutan is combined with constrained national Bhutan's general tax rate on approximately 38,000 km2. conditions, means economic commercial profits is 35.3%. development has been slow. In 2017, In 2017, Bhutan had a population of GDP was about USD2.53 billion and Its money supply score is low as well. 810,000, 50% of which are Bhutanese, per capita GDP was about USD3,131. The ratio of M2 to GDP is much lower with 35% from the Nepalese ethnic than that of other Southeast Asian group. Dzongkha is the official Its investment attractiveness score is countries (4.4%). Indeed, M2 growth language and Tibetan Buddhism is low. In 2017, FDI was almost zero. contracted in 2017. the state religion. The Nepalese ethnic group follows Hinduism. Its consumption and market Bhutan is a member of the South demand, its score is relatively low. Asian Association for Regional Bhutan's urbanization level is low Cooperation and the Bay of BIMSTEC and purchasing power is weak. In and is preparing to join the WTO. 2017, national per capita income was USD2,660. Household final consumption expenditure is low, accounting for 53% of GDP, far lower than in other Southeast Asian countries.

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(4) Risk Indicators (5) Key Industries Transportation infrastructure: Due Financial risk is high. Its banking Among the five BRI key industries, to Bhutan's location in mountainous industry risk assessment index is at Bhutan's energy, agriculture, areas, with deep, horizontal rivers, 0.6, the highest risk among Southeast manufacturing and IT industries traffic is extremely inconvenient. At Asian countries and ranking first have moderate scores, while the present, the road transport network is alongside Pakistan. Foreign exchange transportation infrastructure industry basically formed, but air transportation reserves are USD1.1 billion. has a lower score. is still relatively undeveloped. In recent years, with the assistance of India, Political risk is low. In 2008, Bhutan Agriculture: Agriculture and forestry Bhutan has begun to construct a was converted from a pure monarchy are the pillar industries of Bhutan, second international airport, Gelephu to a constitutional monarchy and supporting more than 90% of the International Airport, and repaved Paro it has since maintained close ties country's population and accounting International Airport. As for highways, with India. Due to its relations with for 15.7% of GDP. Economic activity the Indian Border Road Building India, Bhutan and China have not is dominated by land farming and Group has refurbished National yet established formal diplomatic aquaculture. About one-third of Road 31 from Gelephu to Samto Bali. relations and are engaged in territorial Bhutan's land is covered by forests, The Bhutanese government also disputes. However, relations between making timber production another built the Devon-Minjiang road. The the two countries are generally stable important industry in the country. transportation industry is expected and active. Settlement of the border to have development potential in the issue will inevitably lead to more Energy: Bhutan has sufficient future. communication and the gradual mineral reserves, including dolomite, improvement of bilateral relations, as limestone, marble, graphite, gypsum, well as more transactions in business coal, lead, copper and zinc. Water and trade. resources are abundant, contributing to power reserves of about 30,000 Sovereign risk is high. Bhutan's megawatts. Hydropower is a big sovereign credit rating is B3, indicating contributor to the economy (20% high sovereign risk. As of 2017, public of GDP, 30% of exports, and 40% of debt accounted for 106% of GDP, and national fiscal revenue). Almost all of there are various risks. Bhutan's exports are to India, with hydroelectric power representing Business environment risk is low. In about 50%. In recent years, Bhutan Bhutan, the registration period for has sold hydroelectric power to India new businesses is just 12 days, and to boost GDP growth. However, its the cost is equivalent to only 3.5% of important energy reserves, such as national income per capita. oil and natural gas, are very small, so the country lacks strategic resources Foreign exchange risk is high. The advantages. Bhutan ngultrum is fixed to the Indian Rupee, which is also a legal currency in Bhutan. This means foreign exchange risk is similar to that of the Indian rupee. The International Monetary Fund has pointed out that Bhutan's economy is overly dependent on India, presenting certain risks.

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9) Thailand (1) Investment Advice Overall, Thailand's investment landscape is attractive. Its macroeconomic attractiveness score is quite high, and investment, labor supply and cost and money supply are all excellent. Its investment risk score is high, so risk is quite low, and the business environment is friendly. On the whole, Thailand's agriculture, transportation and manufacturing attractiveness indexes are high, and we recommend Chinese enterprises focus on them.

Figure 32: Thailand Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Malay and Khmer. More than 90% national income increased by 6% in Thailand is located in south-central of people follow Buddhism, while 2017, reaching USD5,950. Education, parts of the Indo-China Peninsula. Malays follows Islam, with a few health, and social welfare status It is bordered by Cambodia, Laos, people following Protestantism, continue to improve, and household Myanmar, and Malaysia. It faces Catholicism, Hinduism and Sikhism. consumption continues to increase. the Gulf of Thailand (Pacific) to the In 2017, household consumption rose southeast and the Andaman Sea (3) Macroeconomic attractiveness 8% from 2016. Meanwhile, due to (Indian Ocean) to the southwest. Thailand's scale of economy score is Thailand's large population, domestic It has a tropical monsoon climate mid-range. In 2017, GDP was about consumer demand can be expected to and is divided into three seasons— USD455.3 billion, and its per capita develop further. Inflation has been low hot, rainy and cool, with an average GDP was USD6,595. The GDP growth and stable. annual temperature of 27°C. rate in the next three years is expected Thailand has a land area of 513,000 to be the same as before (about 3.8%). In labor supply and cost, Thailand's km2. score is high, mainly due to its Thailand scores highly in investment ample labor pool. Thailand's working In 2017, the total population was indicators. In 2017, FDI in Thailand population in 2017 was 39.26 million 68.31 million. There are more was about USD8 billion, up 163% people. The overall unemployment than 30 ethnic groups across the from 2016. China is Thailand's second rate is low, staying below 2%. The labor country. The Thai people are the largest foreign investor. Thailand's force is well-educated, and education main ethnic group, accounting for fixed asset investment in 2017 was expenditure is 20% of GDP. 40% of the population. The rest approximately USD115 billion. are Laos, Chinese, Malay, Khmer, Thailand also scores highly in tax and mountain peoples. Thai is the Thailand also scores highly in indicators. Based on World Bank data, national language and the dialect consumption and market demand. the general tax rate on commercial of central Bangkok is the standard With recent economic growth profits is 35.9%, an advantageous form. The official languages economy, living standards have level among BRI countries, albeit not are Thai and English, with the increased. For example, minimum superior to other Southeast Asian Chaozhou and Hainan dialects and wages for workers and officials have countries. Cantonese commonly used, as are been raised several times. Per capita

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Its money supply score is also high. introducing new systems to increase brilliant exports are mainly driven by In 2017, Thailand's M2 accounted for customs clearance efficiency. the high level of education in Thailand, 124.3% of GDP, and M2 grew 5% from and its skilled and productive workers. 2016. Foreign exchange risk is moderate. The Overall, these factors offset the Thai baht's exchange rate fluctuations adverse effects of quite high salaries (4) Risk Indicators are reasonable, but foreign exchange and have found favor among foreign Financial risk is low. Thailand's bank freedom is not very high. According investors. The Thai authorities have risk assessment index registers at 0.4, to the Chinn-Ito Financial Openness taken several measures to open up low among Southeast Asian countries Index, Thailand's financial openness is markets and promote free trade, and second only to Singapore and just 0.2. further optimizing prospects for local Malaysia. The credits provided by manufacturing. Particularly noteworthy domestic financial institutions are (5) Key industries measures include improving local equivalent to 165% of GDP and the Among the five key BRI industries, workers' skills, supporting technology foreign debt to GDP ratio is 29.7%. Thailand has high scores in agriculture, transfer and promoting innovation. transportation infrastructure, Political risk is moderate. Thailand's manufacturing and IT, and a moderate Transportation infrastructure: political stability score is at a mid-low score in energy. Thailand has relatively well developed level, but its legal environment score transportation, mainly highways is higher. After the promulgation of a Agriculture: This is Thailand's pillar and aviation. The total length of new constitution in 2017, the rights industry. Thailand's national arable national highways is about 51,537 and freedoms of political parties have land area is about 15 million hectares, km. All its prefectures and counties been greatly reduced. Maneuvering accounting for 31% of total land are connected by roads. There are between political parties and military area. Agricultural output accounts for a total of 74 airports in Thailand. groups followed. Large-scale political more than 10% of GDP. Agricultural Suvarnabhumi International Airport gatherings and demonstrations could products are one of Thailand's replaced the original Don Mueang occur, affecting stability. Religious important export commodities, International Airport as an important contradictions are also a serious including rice, rubber, cassava, corn, air transportation hub in Southeast challenge. Tensions between the sugar cane and tropical fruits. Thailand Asia. Moreover, Thai shipping lines can Thammayut and Mahanikai Buddhist is the world's largest producer and reach China, Japan, the United States, orders, as well as supporters and exporter of rubber, as well as a major Europe and Singapore. There are 122 opponents of Wat Phra Dhammkaya, source of cassava and rice. The annual ports across the country, and the are ongoing. output of rubber is about 4.5 million quality of port infrastructure is among tons, accounting for one-third of the best among BRI countries. Sovereign risk is low. Moody's the world's total. Most of the rubber rates Thailand's sovereign credit produced is exported (ThB500 billion/ Thailand's railway development is Baa1. Its public debt to GDP ratio is USD16.2 billion in 2017) and annual slightly less developed. In February 39.4%, which is low level among BRI export volume accounts for 40%-45% 2017, the Ministry of Transport set countries. There is a fiscal deficit, albeit of total global exports. Thailand's a five-year development target, with accounting for less than 2.5% of GDP, cassava production ranks third in plans to build 112 bridges, tunnels so the risk is controllable. the world, with 60% of it exported. and 14 stations, thereby increasing In 2017, rice exports reached their train passengers by 60%. In December Thailand's business environment risk is highest ever level (11.25 million tons), 2014, China and Thailand signed the low. The new enterprise establishment up 14.8% YoY. Thailand is proposing to Memorandum of Understanding on cycle is only 4.5 days, and the cost is transform basic agriculture into value- Railway Infrastructure Development equivalent to just 3.1% of per capita added agriculture, and this is expected Cooperation. The project was designed gross national income. In 2018, to create many new markets. and built using Chinese standards and Thailand further improved its business was implemented in two phases. On environment by introducing fixed Manufacturing: Manufacturing as December 21 2017, the first phase of registration fees, optimizing electricity a percentage of GDP is about 27.5%. the Sino-Thai Rail project, the Bangkok- account procedures, increasing The main sectors include automotive to-Kele section, officially started the transparency of electricity price assembly, electronics, plastics, textiles, construction. As of November 2018, fluctuations, strengthening corporate food processing, toys, building 40% of this first section has been online tax payment platforms, and materials, and petrochemicals. These completed.

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10) Indonesia (1) Investment Advice Indonesia's investment attractiveness score is quite high, performing well in scale of economy and consumption and market demand. Investment risks are moderate and there some political and foreign exchange risks. We recommend Chinese enterprises invest in manufacturing and transportation infrastructure projects of a certain size.

Figure 33: Investment Attractiveness Score Indonesia

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile oil and rubber, which rank first and economy and population in ASEAN, Located in Southeast Asia and second in the world respectively. Oil and with leading national consumption traversing the equator, Indonesia and gas resources are also abundant. among BRI countries, Indonesia's connects Asia and Oceania, facing There are 66 oil and gas basins with domestic demand is huge, and future Papua New Guinea, East Timor, oil reserves of 9.7 billion barrels (1.31 development prospects are bright, Malaysia, and Thailand, Singapore, billion tons). with great investment potential. Due the Philippines, Australia and other to the frequent depreciation of the countries across the sea. Indonesia is Indonesia is the largest economy in local currency (the Indonesian rupiah/ the largest archipelago in the world ASEAN. IDR), its consumer market has been and is part of the Malay Islands, threatened by inflation, which reached consisting of approximately 17,508 (3) Macroeconomic attractiveness 3.8% in 2017. islands. Its land area is approximately Scale of economy score is 1.9 million km2 and marine area 3.17 comparatively high. Among South and Labor supply and cost score is also million km2. Southeast Asian countries, Indonesia's quite high. Indonesia has an ample economy is second only to India labor force. The working population Indonesia is the fourth most populous (GDP was about USD1,015.5 billion (130 million in 2017) is second only country in the world (260 million as of and per capita GDP approximately to India's among BRI countries. 2017). There are hundreds of ethnic USD3,847 in 2017). Its economy is The unemployment rate is high, groups in the country, of which the stable and growing quickly. In 2017, reaching 4.3% in 2017. The workforce Javanese population accounts for 45%. GDP increased by 5% from 2016. The is less educated than elsewhere, There are more than 200 languages, growth rate is expected to remain at making Indonesia more suitable and the official language is Indonesian. 5.1% for the next three years. for investment in labor-intensive About 87% of the population follows industries. Islam, making them the largest Muslim Indonesia's investment indicator score population in the world. is high. FDI and fixed asset investments Its tax burden score is high. Based on in Indonesia reached USD21.5 billion World Bank data, the average tax rate Indonesia is rich in natural resources and USD337.1 billion in 2017. on commercial profits is 30.1%. and is known as a tropical island paradise. It is productive in agricultural Its consumption and market demand and forestry products such as palm score is also high. As the largest

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The money supply score is low. M2 Foreign exchange risk is high. Due Chinese companies' direct accounts for only 39.9% of GDP, and to the large fluctuations between investment into Indonesia has its growth rate is about 8.3%. the Indonesian rupiah and USD, grown rapidly in recent years. In combined with its limited freedom March 2017, Indonesian Foreign (4) Risk Indicators of foreign exchange, Indonesia has a Ministry spokesman Almanata Nasir Financial risk is moderate, with a large foreign exchange risk. According stated that Indonesia was looking bank risk assessment index of 0.5. to The Chinn-Ito Financial Openness forward to cooperating with China in Foreign debt is 33.9% of GDP, and Index, Indonesia's openness is 0.4. infrastructure and energy, especially foreign exchange reserves are about attempting to link China's BRI with USD117.9 billion. (5) Key Industries Indonesia's Global Ocean Pivot Indonesia's transportation and strategy. The government's positive Political risk is quite high. Political manufacturing industry scores highly, attitude will further optimize the stability is mid-range, and the legal but its agricultural, IT and energy environment for China's investment environment score is at mid-low. industry scores are quite low. in Indonesia. In addition, Indonesia's Frequent regulatory changes have led Ministry Of Finance predicts the to more risks for foreign companies Transportation infrastructure: country's infrastructure construction investing locally. This is an area of government focus, will require approximately USD424.5 yet there is a substantial funding gap, billion in 2015-2020. This funding gap Indonesia's sovereign risk is low. creating large potential. At present, will provide investment opportunities Moody's gave Indonesia a sovereign roads and waterways are the main for Chinese enterprises. credit rating of Baa2 in 2017, improved transport modes in Indonesia, of which from 2016. Increased debt repayment roads carry nearly 90% of passenger Manufacturing: As a rapidly ability, controllable short-term traffic and 50% of freight traffic. Air developing industry, Indonesia's inflationary pressure, and relatively transport has developed rapidly in manufacturing contributed 22% easy monetary policy helped the credit recent years with mature airlines. of GDP, the highest among ASEAN system strengthen its support to the However, due to Indonesia's large countries. This is due mostly to the real economy. Moreover, the capital number of islands, railway facilities are low-cost labor force, with about 12% adequacy ratio and profitability of the relatively underdeveloped, covering of labor engaged in manufacturing. banking system have remained at a only Java and Sumatra. In recent years, The textile industry is an important quite high level. The economy has also China and Indonesia have cooperated industry in Indonesia. Indonesia been growing quickly in the short term frequently on transport infrastructure. has become one of the world's top and has large potential in the medium For instance, the Yawan High- 10 textile producing and exporting and long term. Finally, although the speed Railway, a key project jointly countries. The textile industry has short-term fiscal deficit has expanded undertaken by China and Indonesia, formed a complete industrial chain slightly, repayment sources are stable has obtained all construction licenses. of fiber-making, spinning, weaving, and secure. The Indonesian government strongly dyeing and finishing, and garment encourages foreign investment in manufacturing. It accounts for about Indonesia's business environment infrastructure. In the 2017 national 15% of manufacturing industry risk is low. The average contract budget, infrastructure projects were employment. The Indonesian enforcement time is 403 days, new allocated IDR337 trillion (mostly for manufacturing index shows enterprise registration takes 19 days, transport facilities). In addition, the manufacturing industry is still in and new enterprise establishment cost government has formulated the 2015- the expansion stage, and has large is equivalent to the equivalent of 6.1% 2019 Medium-Term Construction investment opportunities. of per capita gross national income. Development Plan, focusing on The business environment improved infrastructure construction projects in hugely in 2018 from the previous 12 areas including highways, railways, two years, mainly reflected in the airport expansion and construction, integration of social security accounts, ports and express bus lines. faster land dispute resolution, and more transparent credit data.

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11) Pakistan (1) Investment Advice In general, Pakistan's investment landscape is less attractive than others. Its macroeconomic attractiveness score is moderate, while its investment risk score is low, due to high political, sovereign and business environment risks. We recommend Chinese-funded enterprises focus on agriculture and manufacturing, and seek to avoid risks caused by political instability and terrorist threats.

Figure 34: Pakistan Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Pakistan is rich in coal. According to household consumption expenditure Pakistan is located in the northwestern estimates by the Geological Survey of in 2017 was approximately USD249.9 South Asian sub-continent, Pakistan, coal reserves are about 185 billion. Total imports and exports bordering India to the east, China billion tons, of which 184 billion tons accounted for 25.1% of GDP and to the northeast, Afghanistan to the are in Sindh (99.5% of the national inflation was 4.0%. Its tax score is northwest, Iran to the west, and the total). moderate. According to the World Arabian Sea to the south. The coastline Bank, the total tax rate on commercial is 840 km long. Except for its tropical (3) Macroeconomic attractiveness profits in Pakistan is 34.1%. climate in the south, the rest of the As for the scale of Pakistan's economy country is subtropical. The south score is quite high. Despite Pakistan's Its score on labor supply and cost is muggy with a long rainy season, huge economic base, nearly one-third is comparatively low. Although the influenced by the monsoon, while the of residents cannot be certain of volume of the Pakistani workforce north is dry and cold, with some places basic living needs. Pakistan's GDP in is huge (71.52 million in 2017), and having snow all year round. The annual 2017 was USD305 billion and its per the unemployment rate is quite low average temperature is 27°C. Pakistan capita GDP was about USD1,548. Local (about 4.2%), most individuals can only has a land area of approximately poverty has persisted for a long time. participate in low-tech production due 800,000 km2 (excluding Pakistan- The GDP growth rate is expected to be to their lack of education. controlled Kashmir). 5.4% in the next three years. Money supply has a medium score. In Pakistan is the sixth largest country in Its investment, it is moderately 2017, M2 accounted for 57.2% of GDP, the world, with a total population of attractive. Pakistan's investment and its growth rate was about 9.9%. 200 million. It is a multi-ethnic country, attractiveness is in the mid-low with Punjabi accounting for 63% of group of South and Southeast Asian (4) Risk Indicators the population. Urdu is the national countries. In 2017, FDI was USD2.8 Financial risks, especially banking language and English is the official billion. Fixed asset investment was industry risk, are high. Pakistan's language. More than 95% of residents about USD42 billion. banking risk assessment is at 0.6. follow Islam (the state religion), and a Pakistan's largest bank was suspected few follow Christianity, Hinduism, and Pakistan has a medium consumption of money laundering and fined Sikhism. and market demand score. Final USD230 million by US regulators in

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2017. The ratio of foreign debt to GDP Manufacturing: This industry shows both sides have signed a agreements is 37.2%, and total foreign exchange steady growth and great potential and memorandums of understanding reserves are about USD6.64 billion. for exports to China. Manufacturing, to collaborate on agricultural mainly textiles, machinery, automotive information exchange and training, Political risks are high. Pakistan's and handcrafts, is the backbone of product processing, animal and plant political stability and legal environment Pakistan's economy, contributing quarantining, agricultural machinery both score weakly because of its 13.6% of GDP in the 2017/18 fiscal production and maintenance, pesticide longstanding political turbulence. year. In scale-oriented products management, and agricultural Furthermore, conflict between output, the market share of seven products trade. The two countries Pakistan and India has not been large industries—textiles, food, have cooperated not only on hybrid resolved, resulting in recurring military coke and petroleum products, rice, tea, high-quality corn and cotton friction. In addition, there are many steel, automobiles, fertilizers and varieties, but also on agricultural loopholes in the local legal system. medicines—remains at about 55%. machinery and pesticides. Among these, the agriculture-reliant Sovereign risks are high. The country textiles industry is the most essential. In October 2018, Pakistan's Ministry is continuously threatened by It has formed a complete industrial of Planning, Development and terrorist attacks, domestic political chain, from raw cotton, ginning, Reform and National Food Security and geopolitical risks. Moody's spinning, weaving, printing and and Research stated that China rates Pakistan B3. With public debts dyeing to garment manufacturing, and Pakistan will further strengthen accounting for 68.7% of GDP, the contributing nearly a quarter of Chinese investment in Pakistan's country faces a fiscal deficit and industrial added value, creating jobs agricultural sector under CPEC (the financial pressure. for 40% of the industrial labor force China-Pakistan Economic Corridor), and representing 60% of exports. In promoting exports of Pakistani Business environment risk is high. 2017/18, textile exports grew by about agricultural products to China and The average time required to enforce 8.7% YoY to USD13.53 billion. Cotton other countries through joint ventures, a contract is approximately 1,072 yarn, textiles, medical equipment, value chain integration and cold- days, the registration period for new leather, dried fruit and rice are the chain management, as well as brand enterprises is 16.5 days, and the main products in Pakistan's exports to marketing. Both countries can apply establishment cost of new enterprises China. their own comparative advantages to is equivalent to about 6.8% of per deepen investment cooperation, and capita gross national income. In Agriculture: This is the area with cooperate on agricultural science and 2018, the government vigorously steady development and great personnel training. improved the business environment investment potential. Agriculture is by promoting an online, one-stop a pillar industry in Pakistan. During Transportation infrastructure: registration platform, automating 2017/18, agricultural output increased This is the key area of collaboration asset registration flows, introducing by 3.8%, accounting for 24% of GDP, between China and Pakistan, with restructuring and improving the and about 42.3% of the labor force is broad investment prospects. The business environment for debtors. engaged in agriculture. The main crops transportation network in Pakistan is are cotton, sugar cane, rice, wheat dominated by highways (260,000 km), Foreign exchange risk is high. In 2018, and corn. Other important products accounting for 90% of total passenger the local currency depreciated sharply include fruits, vegetables, milk, beef, traffic, and 96% of total freight against the US dollar. Combined with and mutton. Pakistan's 2017 census volume. China and Pakistan are now insufficient foreign exchange reserves, shows domestic population's growth promoting 1+4 cooperation, in which depreciation pressure of local currency reached 2.4%, stimulating demand transport infrastructure is a key area. will remain. Freedom of foreign for agricultural products and creating Paving construction on the largest exchange is not high. In the Chinn-Ito investment opportunities. CPEC project, the Peshawar-Karachi Financial Openness Index, Pakistan's Motorway (Sukkur-Multan section) has openness scores 0.2. Agricultural cooperation is vital started. The expressway will be 1,152 to China-Pakistan economic km long and greatly reduce traffic time (5) Key Industries and trade relations. Recently, between the two cities. It will link other Among key BRI industries, Pakistan's agricultural technology cooperation parts of Pakistan and neighboring agriculture and manufacturing sectors has strengthened, proven by the countries through subsequent are developing well, transportation expanding trade volume of agricultural extensions. scores moderately, however the IT and products. Agricultural authorities on energy industry scores are lower.

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12) Vietnam (1) Investment Advice Overall, Vietnam's investment landscape is attractive. Its macroeconomic attractiveness score and investment risk index are good, and risks are low in politics, government sovereignty and business environment. We recommend Chinese- funded enterprises focus on agriculture and manufacturing, and seek to avoid the risks caused by political instability and terrorist threats.

Figure 35: Vietnam Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile and Caodaism. Vietnam is a socialist USD2,160 and the Gini coefficient Vietnam is located in the eastern country and the Communist Party is was 0.46. part of the Indo-China Peninsula, the only legal ruling party. bordering China to the north, Laos and Its positive performance in labor Cambodia to the west, and the South (3) Macroeconomic attractiveness supply and cost is mainly driven by China Sea to the east and south. The The scale of the economy is highly abundant labor resources (a workforce territory of Vietnam is narrow and rated, mainly due to its high economic of 58 million in 2017). The overall long, about 329,000 km2. The coastline volume among Southeast Asian education level is quite high, resulting is more than 3,260 km long. Due to countries and the steady growth in high-quality human resources its location in the south of the Tropic rate in recent years. GDP was relative to other Southeast Asian of Cancer, it has a tropical monsoon approximately USD223.8 billion countries. climate and is hot and rainy. The North in 2017, but limited by the large has distinctive seasons, with annual population base, per capita GDP was Vietnam's tax score is mid-low. Based average temperatures ranging from not high (USD2,342). GDP is expected on World Bank data, the total tax rate 23-25°C. The South has dry (October to grow by 6.4% annually in the next on commercial profits in Vietnam to April) and rainy seasons (May to three years. is 37.8%. September). The average annual temperature in most areas is 26-27°C. Vietnam's investment indicators Its money supply score is high. In 2017, score highly, behind only India, M2 accounted for 155.3% of GDP, and The population of Vietnam ranks 13th Singapore and Indonesia across its growth rate was about 11%. in the world and 3rd in Southeast South and Southeast Asia. In 2017, Asia (93.7 million in 2017 and a 1.1% FDI was USD14.1 billion. Fixed asset (4) Risk Indicators increase YoY). Vietnam is a multi-ethnic investment was about USD58.3 billion. Financial risks are low. The main country with the Jing people as its main risks are banking industry risk and populace. There are 54 ethnic groups Vietnam's mid-range score in insufficient foreign exchange reserves. (the Jing people account for 86% of the consumption and market demand The banking risk assessment is at 0.5, total population). The main language is caused by low per capita national and total foreign exchange reserves is Vietnamese. The main religions are income and a large wealth gap. In are about USD63 billion. Foreign debt Buddhism, Catholicism, Hoahaoism 2017, per capita national income was accounts for 37% of GDP.

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Political risk is moderate. Vietnam is a one of the 15 most manufacturing- and Vietnam has accelerated recently. one-party state with a stable political competitive countries in the world For example, in 2018, Yunnan Province environment. The legal environment is by 2020. Vietnam has become and Laojie, Laizhou, Hejiang, Haiphong rated medium-low. popular among global manufacturers, and Xuanguang provinces held an attracting well-known companies international road transport event Sovereign risk is also moderate. In including Microsoft, Samsung, in Dali. They said they will deepen 2017, Moody's upgraded Vietnam's LG, Intel, Nokia and Fuji Xerox to collaboration and achieve further sovereign credit rating to Ba3. Moody's build manufacturing plants there. development. believes its economic growth potential Benefiting from a large amount of is in large part driven by improving FDI, the manufacturing industry has IT: This industry is developing resources and capital utilization rate. experienced a significant trend in rapidly, with policy support, Government bonds have a long tenor, recent years of transforming from and it has extensive investment and are gradually easing Vietnam's labor-intensive basic industries to prospects. According to statistics dependence on foreign currency debt. electronic products and machinery from the Ministry of Information and The local bond structure also limits the processing. These have become Communications, as of November impact of financial shocks. The ratio of pillar industries of the Vietnamese 2018, the software industry achieved public debt to GDP is 60.7%, and there economy. Meanwhile, export-oriented USD4 billion in turnover, and IT service is a fiscal deficit, but it is controllable. manufacturing performed strongly, industry turnover was close to USD5.2 with major commodities shifting from billion . Software and IT services Business environment risk is low. The textiles to high value-added electronic exports reached USD3.5 billion and average time required to enforce a products and machinery. In 2018, USD4.2 billion respectively. Recently, contract is about 400 days, and the high-tech product exports, which the export volume of the mobile cost of establishing a new business is accounted for a third of total exports, phones and spare parts industry has about 5.9% of per capita gross national increased 33% year-on-year. been high, with an average annual income. In 2018, the government growth rate of 20% to 50%. China is introduced online business Transportation infrastructure: the main importer and exporter for registration to reduce the cost of Domestic transportation infrastructure these products. business registration, simplified the is underdeveloped, and there are tax payment process and optimized investment opportunities. According Vietnam will focus on building this contract execution. to a Vietnamese government report industry over the following decades. in 2018, due to insufficient national The government has introduced the Foreign exchange risk is low. The budget, the railway transportation IT Industry Development Plan 2020 exchange rate between the local sector is seriously lagging behind. All and Vision 2025. These programs currency and USD is quite stable, its strategic development targets for mainly support development of IT and the degree of foreign exchange railway development in 2008-2018 industrial products, focusing on freedom is moderate. In the Chinn-Ito have not been realized. Current funds products for national institutions, Financial Openness Index, Vietnam can only maintain the current status education, agriculture, and rural scores 0.4. and daily operations. Insufficient use. It will also invest in hardware funds are creating opportunities research, design, manufacturing, and (5) Key Industries for overseas investment. At the production, as well as development Among the key BRI industries, same time, the government has of the ultra-micro circuit, electronic Vietnam's manufacturing, strengthened its emphasis on product, semiconductor, and other transportation infrastructure and IT transportation infrastructure. In auxiliary industries. Most of Vietnam's sectors have developed well, however 2018, it will focus on promoting IT enterprises are small and mid-sized, agriculture and energy have lower transport infrastructure construction. lacking international competitiveness scores. The ministries of industry, trade, and high-quality talent. This will limit transportation and others will industry development. Against the Manufacturing: Vietnam is a global speed up the construction of key background of rapid development and investment hotspot with rapid infrastructure and energy projects, strengthened policy support, Chinese- development and strong exports. Due and accelerate the development of funded enterprises have extensive to its low labor costs and raw material high-speed railway lines, as well as investment opportunities. prices, and substantial demographic some parts of the eastern section dividend, the manufacturing industry of the North-South Expressway. In is promising, expected to become addition, cooperation between China

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13) Myanmar (1) Investment Advice Overall, Myanmar's investment landscape is less attractive than others. Its macroeconomic attractiveness score is at the mid-level among BRI countries, with consumption and market demand especially weak. Investment risk is high, especially due to its politics and foreign exchange landscape. Moreover, the business environment is poor. Due to its unique political situation and the complexity of ethnic conflicts in Myanmar, institutions interested in investing in the country should pay attention to winning support from local people in addition to obtaining government and legal approvals. Therefore, we recommend that Chinese enterprises manage public relations in Myanmar and establish a positive reputation. Investors are advised to focus on manufacturing and agriculture.

Figure 36: Myanmar Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile (3) Macroeconomic attractiveness In 2017, Myanmar's price index rose Myanmar is a member of ASEAN Its scale of economy score is high, 4.6% from 2016, and it has fluctuated located in the western part of the mainly thanks to a stable GDP growth wildly. In 2018, there was heavy Indo-China Peninsula. The northeast rate (6.8% in 2017 from 2016). The inflation due to the appreciation of is adjacent to China, the northwest is growth rate is expected to maintain the US dollar, an unstable national connected with India and Bangladesh, at more than 6% in the coming three economy and high production costs. the southeast is bordered by Laos and years. In 2017, Myanmar's GDP was Thailand, and the southwest borders about USD67.1 billion, and its per Myanmar's labor supply and cost score the Bay of Bengal and the Andaman capita GDP was about USD1,257. is mid-range. In 2017, the labor force Sea. The coastline is 3,200 km long. It in Myanmar was about 25.75 million. has a tropical monsoon climate with an The score of investment indicators The unemployment rate has remained average annual temperature of 27°C. is high. FDI has been increasing in at about 0.8%, and labor supply is Its land area is about 677,000 km2. the past two years. FDI increased by quite sufficient. However, the local than 40% in 2017, reaching USD4.68 labor force is not involved in high-tech The total population is 53.37 million billion. China is the largest investor in work because of an underdeveloped (2017) with 135 ethnic groups (65% of Myanmar. Investment in fixed assets is education system and rudimentary the population is from the Myanmar quite stable (USD22.1 billion in 2017). teaching facilities, and especially a lack ethnic group). All the ethnic minorities of higher and professional education. have their own languages. More than Its consumption and market demand 85% of people follow Buddhism, and score is quite low, mainly due to low Its tax indicators score is high. Based about 8% follow Islam. per capita income. Local consumption on World Bank data, total tax on power is weak, even though prices are commercial profits is 31.2%, low Myanmar's mineral resources are cheap. In 2017, the per capita national among Southeast Asian countries. mainly tin, tungsten, zinc, aluminum, income was only USD1,210 . However, antimony, manganese, gold and silver, the Gini coefficient in Myanmar is very and its gemstones and jade are of high, at 0.53. The wealth gap is huge, global repute. with most of national life still poor.

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Its money supply score is moderate. development, with growing foreign In 2017, M2 accounted for 52.78% of trade and investments; the Myanmar GDP, and its growth rate was about government has a limited amount 20.5%. of debt, and creditor countries and international organizations have (4) Risk Indicators repeatedly reduced or restructured Financial risks are high, mainly because its debts, making debt repayment of high risk in the banking industry. pressure quite light. The banking industry risk assessment index is at 0.5. Foreign debts to GDP is Business environment risk is high. 42.5%, and foreign exchange reserves The average time required to enforce are about USD8.5 billion. a contract is approximately 1,160 days. The new business registration Political risk is high. First, Myanmar's period is 14 days, and the new central and local policies are enterprise establishment cost is inconsistent and can arouse equivalent to about 24.8% of per uncertainty. Secondly, Myanmar capita gross national income. In 2018, has one of the most complex ethnic the business environment improved makeups among Asian countries. from the previous two years, mainly There are many ethnic contradictions due to reduced registration costs, the and regional separatist forces. Due optimization of electricity regulations to the decentralization of central and more transparent electricity tariffs. government, some areas are restive. Many areas, including Kachin Foreign exchange risk is high. The State and Shan State in the north, exchange rate between the local have exercised autonomy. Military currency and USD has fluctuated conflicts are common, the political sharply. In recent years, it has been situation is unstable, and the security affected by the appreciation of the environment is poor. US dollar, with Myanmar's currency continuing to depreciate. The Bank Sovereign risk is moderate. Moody's of Myanmar intends to stabilize the does not rate Myanmar's sovereign currency and prices by opening credit. Lianhe Credit Rating first exchange business to private banks rated Myanmar's sovereign and and restricting local dollar use. foreign currency credit as BBi+ Whether this policy is effective or in 2019. In 2018, New Century will need to be verified in time. Reviews rated Myanmar's long- Additionally, foreign exchange is not term foreign currency credit and very liberal. The Chinn-Ito Financial long-term local currency credit as Openness Index gives Myanmar a BBg, with a stable overview. The score of zero. main considerations are as follows: Since the newly elected government came to power, Myanmar's political situation has stabilized; but the economy of Myanmar is relatively small. As European and American countries gradually loosened economic sanctions on Myanmar, the economy has maintained rapid

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(5) Key Industries companies to operate, grants tax-free providing abundant water resources Among the key BRI industries, concessions to specific industries for that support growing various crops. Myanmar's manufacturing and 5-7 years, and opens land access in Agricultural output accounts for nearly agriculture development is rated the zone for 50 years. According to 40% of GDP. The main crops include more highly than its energy, IT and industry analysis, future investment rice, wheat, corn and peanuts. transportation sectors. opportunities will be concentrated in the garment and footwear industries, China-Myanmar agricultural trade is Manufacturing: This industry is as well as related industries that are quite small, at only 0.3% of China's developing rapidly and attracting in line with domestic demand, such as total agricultural trade. China- foreign investment. Myanmar's food processing, construction, electric Myanmar agricultural trade has strong modern industrial base is weak. motor equipment and automobile and complementarity, however. China Existing manufacturers are mostly motorcycle parts. mainly exports primary processed small value-added machinery products to Myanmar and imports industries, such as textiles, printing According to Ministry of Commerce, aquatic products and raw materials and dyeing, rice milling and wood the Myanmar Investment Commission such as nuts, fruits, dried beans and processing, as well as sugar, paper, approved 222 foreign investment oilseeds. In addition, Myanmar's fertilizer and pharmaceutical projects in 2017/18, attracting agricultural production technology is industries. The food and beverage USD5.72 billion. Manufacturing underdeveloped, with low-qualified industry accounts for 85% of such attracts over 30% of the total foreign employees. In response to this industries and focuses on agricultural investment, ranking first (136 situation, China and Myanmar have products such as rice, cooking oil, projects and USD1.76 billion). The strengthened cooperation on the sugar and salt. These products transportation and communications exchange of crop varieties, breeding, are mainly for local consumption. industry has attracted USD900 million, cultivation, and personnel training Myanmar's garment industry is the energy industry USD400 million in recent years. The Myanmar the main representative of local and agriculture USD100 million. China government also revised the Foreign manufacturing, not only as the is the second largest foreign investor Investment Law in 2016 to attract pillar industry promoting economic in Myanmar (USD1.4 billion). investment in agriculture. Specific development, but also as the main measures include eased entry limits employment source. Since 2011, the Agriculture: Myanmar is rich in for the rubber and seed sectors. garment manufacturing industry has agricultural resources, with arable land Foreigners do not need to collaborate developed rapidly. The industry earned area of 10.77 million hectares and per with local enterprises to enter the USD1.6 billion in the first 11 months of capita arable land area of 0.2 hectares. production and distribution of hybrid 2017, and is expected to create nearly Forest areas cover 3,013.4 hectares, seeds, high-yield or local seeds, or the 1.5 million jobs by 2020, bringing in with a 46.1% coverage rate. Most manufacture of rubber and rubber USD8-10 billion in foreign exchange areas have tropical monsoon climates products. earnings. with numerous lakes and rivers,

In recent years, Myanmar's manufacturing industry has focused on internationalization, attracting investment with its large domestic demand market and low labor costs. The Myanmar Investment Commission emphasizes the development of import substitutes and resource- processed exports. Investors are welcome to invest in manufacturing machinery and equipment, steel, telecommunications equipment, plastics and other import substitutes. The government passed the Special Economic Zone Law in early 2014, which allows wholly-owned foreign

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Figure 8: Comment by Chair of British All-Party Parliamentary Group for BRI and the China-Pakistan Economic 14) Bangladesh Corridor (1) Investment Advice Overall, Bangladesh's investment environment is less attractive than others. Its macroeconomic attractiveness score is mid-range, but consumption and market demand are weak. Investment risk is high, especially due to its high political risk and poor business environment. We recommend investors focus on labor-intensive industries such as manufacturing and agriculture.

Figure 37: Bangladesh Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Natural resources are abundant, Its consumption and market demand Bangladesh borders India and Myanmar, including natural gas, coal, silt and score is quite low. Constrained by low the Bay of Bengal to the south and forestry resources. The main industrial national income (per capita income of several enclaves to the north. It has a pillar is agriculture, and the overall USD1,470 in 2017), Bangladesh's overall land area of 148,000 km2 and a coastline economic development level is low. consumption level is insubstantial. of 550 km. Plains comprise 85% of Furthermore, its Gini coefficient is quite its land area, and the southeast and (3) Macroeconomic attractiveness high, at 0.45, implying a wide national northeast are hilly. Most land is below 12 Bangladesh's economic scale score is wealth gap. In 2017, the price index rose meters above sea level. Bangladesh has moderate, mainly due to rapid and stable 5.7% from 2016. a subtropical monsoon climate, which growth of GDP. In 2017, GDP increased is hot and humid. The annual average by 7.3% from 2016, and it is expected Its labor supply and cost score is mid- temperature is 26.5°C. The lowest to maintain growth of more than 7% in range, and low among Southeast Asian4 temperature in winter is 4°C, the highest the next three years. In 2017, GDP was countries. Bangladesh has sufficient temperature in summer is 45°C, and the USD249.7 billion. However, per capita labor resources but their level of average temperature in the rainy season GDP is low (only USD1,517 in 2017). education is limited. In 2017, the national is 30°C. labor force was 67.9 million, accounting Its investment score is mid-range. The for 41.2% of the total population. In 2017, Bangladesh had a total amount of FDI is relatively low, reaching The labor force is fully employed population of about 160 million and USD2.2 billion in 2017 and accounting and the labor market is healthy and high population density. Bengalis are the for only 0.9% of GDP. This is due to stable. However, education is not yet main ethnic group (98%), living alongside Bangladesh's late implementation of widespread, with an adult literacy rate of more than 20 minorities. The state market economy principles, immature 25%, falling to just 16% among women. religion is Islam, with Muslims making up investment environment and a lack of 88% of the total population. Bengali is related policy support. International aid Tax indicators have a medium rating. the national language and English is the is the main source of funds for domestic According to the World Bank, the total official language. projects, including aid from Japan, the tax rate on commercial profits is 33.4%. United States, Canada, the World Bank and Asian Development Bank. Fixed asset investment is substantial (USD84.2 billion in 2017). 62 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section IV: BRI countries Investment Index – Country Analysis Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section IV: BRI countries Investment Index – Country Analysis

Bangladesh's money supply score is Foreign exchange risk is high. Its largest export product. In September moderate. In 2017, M2 accounted for foreign exchange controls are 2017, the government decided to 65.7% of GDP, and its growth rate was extremely strict, and all importers are increase the export subsidy rate on about 14%. The money market is quite required to conduct foreign exchange jute products from 7.5% to 10% in stable. transactions through banks authorized the 2017/18 fiscal year to encourage by the Central Bank of Bangladesh. exports. (4) Risk Indicators The Bangladeshi currency, the taka, Overall risk is high in Bangladesh. is facing depreciation risk. During The overall level of agricultural 2017/18, it depreciated against USD mechanization in Bangladesh is Financial risks are high, especially by 4%. The main reason is the huge low. In recent years, the Ministry of in the banking industry. Its banking current account deficit in balance of Agriculture has implemented projects industry risk assessment index is at payments. In addition, Bangladesh's to improve the mechanization level, 0.6, higher than most Southeast Asian financial openness is low, with the such as the national agricultural countries. The Agricultural Bank of Chinn-Ito Financial Openness Index mechanization project to provide Bangladesh experienced frequent putting it at only 0.2. subsidies for the use of agricultural credit card defaults in 2018. The machinery and equipment. In addition, overall NPL (non-performing loan) ratio (5) Key Industries the government plans to reduce rose from 8.4% in 2016 to 10.4% in Thanks to low labor costs, labor- import tariffs on agricultural machinery 2018. In addition, the quality of state- intensive light industries such as and equipment components, enabling owned banks' assets is concerning, clothing and leather have developed the establishment of agricultural with their average NPL ratio having well. Among the key BRI industries, machinery production and assembly reached 26%. Bangladesh has higher scores in the plants in Bangladesh, and introducing manufacturing and agriculture sectors, foreign investment in agricultural Political risk is high. Bangladesh is a while energy, IT and transportation machinery industry in an economic multi-party political system with fierce industry have lower ratings. development zone. competition between the two major political parties. Especially in the 2018 Manufacturing: This is Bangladesh's Energy: The BRI will assist the general election, political struggles most important industry. The development of Bangladesh's energy have caused social tensions, including clothing industry is a pillar industry industry. Some 75% of Bangladesh's production and personal safety threats in Bangladesh. In the 2016/17 fiscal electricity comes from natural gas from strikes and marches. Bangladesh year, garment exports amounted to power generation, with coal-fired is also threatened by terrorist attacks. USD28.15 billion, accounting for more power generation less than 30%. than 80% of total exports. The main Energy China NEPC has been Sovereign risk is low. In 2018, the export destinations were Europe, the contracted to construct two 660,000 world's three major rating agencies United States and Japan. In addition, kW supercritical coal-fired power released sovereign credit ratings for the cable manufacturing industry stations in Pajala. It is estimated that Bangladesh, with Moody's and S&P is growing rapidly, with an average the coal power generation rate will respectively awarding Bangladesh Ba3 annual growth rate of 15%-20%. At increase to 50% through this project. and BB- ratings for nine consecutive present, about 70 companies are years, and Fitch giving it a BB rating engaged in cable manufacturing. In for five consecutive years, indicating a 2017, the cable manufacturing market steady, stable economy. was BDT60 billion, double its size ten years earlier. The business environment is high risk. The business environment improved Agriculture: With cultivated land of in 2018, yet is still underdeveloped 77.642 million hectares, agriculture among BRI countries. The average plays an important role in the time required to enforce a contract Bangladeshi economy. Bangladesh is approximately 1,442 days, the new is the world's second-largest jute enterprise registration period is 19.5 producer, with an annual output of days, and the establishment cost is more than 1 million tons, of which equivalent to approximately 21.2% of 65% is for domestic production and per capita gross national income. the rest for export. Jute is the second

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Figure 8: Comment by Chair of British All-Party Parliamentary Group for BRI and the China-Pakistan Economic 15) Sri Lanka Corridor (1) Investment Advice Overall, Sri Lanka's investment landscape is less attractive than others. Its macroeconomic attractiveness score is low, as are consumption and market demand, and its tax burden is high. Investment risk is high and the business environment is poor. On the whole, Sri Lanka's manufacturing and transport infrastructure are highly attractive, and we recommend Chinese companies focus on them.

Figure 38: Sri Lanka Investment Attractiveness Score

Economy scale Foreign exchange risk 10 Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile good conditions for developing an USD1.37 billion, up 53% from 2016, Sri Lanka is an island country in the agricultural economy. Sri Lanka is but only 1.6% of GDP. south Indian Ocean, facing India across dominated by the plantation economy, the Strait of Palk in the northwest. It with tea, rubber, coconut and rice Sri Lanka's consumption and market is close to the equator, and has no the main crops. Its industrial base is demand score is low, mainly due distinctive four seasons, only a rainy weak, and agricultural products and to low per capita income and high and dry season. The country has a garment processing industries are the inflation. Sri Lanka's per capita national tropical monsoon climate, with an mainstream. The country was early income is USD3,850. However, prices average annual temperature of 28°C, among Southern Asian countries in rose 7.7% in 2017 from the previous and Sri Lanka is known as the Pearl of implementing economic liberalization. year, high inflation for a Southeast the Indian Ocean . The country covers In 1978, it implemented an open Asian5 country. 66,000 km2. economic policy, vigorously attracting foreign investment, promoting Its labor supply and cost score is also The total population in 2017 was privatization and gradually forming a moderate. The main reasons include 21.44 million, mainly Sinhalese, who market economy. a limited number of working people. accounted for 74.9%, alongside The working population was 8.76 Tamil (15.4%), Moor (9.2%), and (3) Macroeconomic attractiveness million in 2017, accounting for only other ethnicities (0.5%). Sinhalese Sri Lanka's scale of economy score is 41% of the total population. Sri Lanka's and Tamil are its official and national moderate. In 2017, GDP was USD87.36 aging population is a problem, and languages, and the upper echelons billion and per capita GDP reached the number of males of working age of society use English. Residents have USD4,074 . Economic growth is stable, is declining. Education in Sri Lanka diverse religious beliefs: 70.2% follow and GDP is expected to continue to is generally good, with 83% of the Buddhism, 12.6% follow Hinduism, grow at about 4% in the next three population receiving an education past 9.7% Islam, and 7.4% Christianity. years. high school and a 92.8% literacy rate.

Sri Lanka has fertile land and Its investment indicators score is Tax burden score is poor. Sri Lanka's excellent climatic conditions. It is rich also moderate. There is still room overall tax level is 55%, and it has the in tropical economic crops and has for growth in FDI. In 2017, FDI was highest tax among Southeast Asian countries. 5. As per Chinese-language version of this report 64 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section IV: BRI countries Investment Index – Country Analysis Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section IV: BRI countries Investment Index – Country Analysis

Sri Lanka's money supply score is Foreign exchange risk is high. systems, advanced bogie technology, mid-range. In 2017, M2 accounted The national currency is the Sri new air conditioning and passenger for about 43% of GDP, with an annual Lankan rupee, which has continued information systems, will operate growth rate of 17.5% and loose money to depreciate since a change of in the high mountains of Sri Lanka, supply. government in 2015. The country improving traffic conditions. In air also regulates foreign exchange. transportation, the main element of (4) Risk Indicators According to the latest research report the Bandaranaike International Airport Financial risk is moderate. The banking (2018) from Nomura Securities Japan, Runway Project, built by International industry risk assessment index is at Sri Lanka faces high exchange rate Engineering Corporation, was 0.5, and the external debt to GDP ratio risks and is highly vulnerable to an completed in 2017 and has improved is 62.6%. exchange rate crisis in the coming aviation facilities. In water transport, year. In addition, the Sri Lankan rupee China and Sri Lanka have jointly Political risk is high. Similar to many is not freely exchangeable with foreign developed Hambantota Port. Phase other South Asian countries, Sri currencies. Its Chinn-Ito Financial I and Phase II have been completed, Lanka's political ecology is unstable Openness Index score is low at making it the second largest port in Sri and there has been a recent regime only 0.2. Lanka, with container, dry bulk, ro-ro change. In 2018, the President and oil terminals. announced the dissolution of (5) Key Industries parliament, with the country falling into In the key BRI industries, Sri Lanka's Energy: To improve its relatively a seven-week political crisis. manufacturing and transportation underdeveloped energy industry, industry score relatively well, with the Sri Lanka state electricity utility Sovereign risk is high. The three energy, agriculture, and IT relatively developed the LCLTGEP (Least Cost major international credit rating low-scoring. Long Term Generation Expansion agencies (Fitch, Standard & Poor's, Plan) 2018-2037, which aims to use and Moody's) successively lowered Manufacturing: Due to a lack the most sustainable technologies to Sri Lanka's sovereign credit rating of resources, capital-intensive ensure low-cost electricity supply that in 2018. Moody's adjusted it to B1, industries have not yet formed. meets expected electricity demand mainly due to political turmoil caused Sri Lanka is in the initial stage of increases. In addition, Sri Lanka will by parliament's dissolution. Sri Lanka's labor-intensive manufacturing, with vigorously develop renewable energy, government debt level is high, but has mainly light industry, including pillar especially solar energy, which will declined in recent years. Its overall industries such as construction, food become one of the main sources of external debt level is acceptable and manufacturing, textiles and clothing. power generation. The cabinet has repayment risk is controllable. Among these, the textile and garment approved the construction of a hybrid industry is the most important, and energy industrial park in Pooneryn Business environment risk is high. also the largest export-oriented in the north of the country, including It takes as long as 1,318 days to industry in Sri Lanka. In 2017, textile construction of an 800 MW solar enforce a contract. Other indicators and apparel exports reached USD5.03 power plant and a 240 MW wind are relatively good. For example, the billion, accounting for 58.9% of the power plant. new enterprise registration period country's foreign trade exports. is nine days, and establishment cost is equivalent to 9.4% of per capita Transportation infrastructure: Sri gross national income. In 2018, the Lanka's transportation industry is quite government improved the business developed. It has about 1,439 km of environment through a series of railways, air cargo volume of about measures, including launching a one- 400 million tons, and air passenger stop construction permit, simplifying traffic of about 53.425 million registration of fixed assets, introducing passengers. Sri Lanka has undertaken an online tax payment platform, extensive cooperation with China to and launching pre-trial meetings to promote transport development. In strengthen implementation of legal 2017, Dongfang Electric Corporation contracts. reached a cooperation agreement to export 90 diesel units to Sri Lanka. These trains, with modern control

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16) Cambodia (1) Investment Advice Overall, Cambodia's investment attractiveness is quite strong. Its macroeconomic attractiveness score is high, with large economic scale, but consumption and market demand is somewhat lacking. Investment risk is low. Labor-intensive manufacturing and agriculture are the key industries worth focusing on.

Figure 39: Cambodia Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Cambodia is rich in forests and GDP is expected to continue to grow Cambodia is bordered by Thailand, fishery resources. It is a traditional at about 6.8% in the next three years. Laos and Vietnam and is in the Indo- agricultural country with a weak However, most of the Cambodian China Peninsula of Southeast Asia. industrial base, a low level of economic population lives in poverty, with per The coastline of Cambodia is about development and many poor people. capita GDP of only USD1,384 . 460 km long and it has a land area The Cambodian government has of 181,000 km2. The country has a implemented a free market economy Its investment score is low. Cambodia tropical monsoon climate divided into open to the outside world, promoting attracted FDI of USD2.79 billion in two seasons (rainy season: May to privatization and trade liberalization. 2017. In recent years, FDI has mainly October; dry season: November to Economic development and poverty come from China, Japan, Thailand and April). The annual average temperature eradication are considered top South Korea. The real estate industry is 24°C. priorities. There are about 700,000 was one of the biggest beneficiaries Chinese in Cambodia. Cambodia is in 2018. Fixed asset investment, Cambodia had a population of about rich in precious wood such as teak, at USD5.62 billion and accounting 16 million in 2017. The geographical ironwood, red sandalwood and ebony, for 25% of GDP, lags behind other distribution of the population is and has various bamboos. Its timber Southeast Asian countries. extremely uneven. Residents are reserves are about 1.1 billion m3. Its mainly concentrated in the Central forest coverage rate is 61.4%, mainly Its consumption and market Plains. There are more than 20 ethnic in eastern, northern and western demand score is relatively low. The groups in Cambodia, of which Khmer mountainous areas. local manufacturing industry is is a major ethnic group (80% of the underdeveloped. Most commodities population). Cambodian Khmer is the (3) Macroeconomic attractiveness are imported, so prices are high. lingua franca, with English and French Its scale of economy score is favorable. Moreover, per capita national income as official languages. Buddhism is Overall economic volume is small, is low, leading to a lack of purchasing the state religion, followed by 93% of but due to stable and rapid growth of power. In 2017, per capita national residents, and ethnic minorities follow GDP, it has economic development income was only USD1,230. Total Islam. potential. In 2017, GDP was USD22.16 import and export volume accounted billion, an increase of 7.1% from 2016. for as much as 125% of GDP in 2017, showing high dependence on trade.

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Cambodia's labor supply and cost Foreign exchange risk is low. Due Agriculture: Cambodia is rich in score is medium. In 2017, the labor to unregulated foreign exchange in agricultural resources and agriculture force was 9.49 million people, and the Cambodia, and the dual currency plays a pivotal role in the national unemployment rate was merely 0.2%, policy (USD and the riel), its exchange economy. In 2017, rice planting area but the labor force is generally under rate is very stable. Cambodia is the was 3.191 million hectares, and paddy educated. third largest USD user in the world, output was nearly 105.22 million with a high degree of freedom in tons. The government attaches Its tax score is high. Cambodia's total foreign exchange. According to the great importance to rice production tax rate is 21.7%, second only to Chinn-Ito Financial Openness Index of and exports. Rice exports were Brunei and Singapore in Southeast 0.7, financial openness is high. 636,000 tons in 2017, an increase Asia, making it very attractive to of 17%. However, infrastructure and investors. (5) Key Industries technology are underdeveloped, Among the key BRI industries, with funding and talent scarce. The Money supply scores comparatively Cambodia's manufacturing and Cambodian government has listed highly. In 2017, M2 accounted for agriculture are relatively strong, while agriculture as a development priority about 88% of GDP, with an annual energy, transportation infrastructure and is striving to improve agricultural growth rate of 12% and ample money and IT are quite weak. technology and its investment supply. environment. Manufacturing: The Cambodian (4) Risk Indicators manufacturing industry has two Transportation infrastructure: Financial risk is moderate. Banking pillars: garment and footwear, and Performance is relatively weak, but industry risk is quite high. The risk construction. In the garment and there is investment potential. The assessment index for the banking footwear industry, Cambodia uses Chinese government has provided industry is at 0.6, largely caused preferential policies fully, such as Cambodian the government with aid by excessive lending growth. The the GSP (Generalized System of and concessional loans worth about ratio of credits provided by financial Preferences) provided by 28 countries USD2.581 billion for the construction institutions to GDP increased from including the United States, every of roads, bridges and other facilities 58.8% in 2016 to 74.4% in 2017. member of the European Union, to help Cambodia improve its and Japan. It has attracted foreign underdeveloped traffic conditions. Political risk is moderate. The investment by virtue of its low cost of There is considerable space for future democratic system in Cambodia is labor. In 2016, clothing and footwear cooperation between China and quite stable. exports totaled USD7.3 billion (78% of Cambodia. national exports). In the construction Sovereign risk is moderate. Moody's industry, according to the Ministry of credit rating for Cambodia is B2. Land Management, Urban Planning Moody's has stated that the existence and Construction, there were 3,052 of high debt, falling growth rates construction projects in progress and rising interest rates are risks in 2017, with a construction area to Cambodia, weakening debt of 10.746 million km2 and total affordability and sustainability. investment of USD6.43 billion, a YoY increase of 22.3%. From 2000 to the Business environment risk is high. The first half of 2017, 18 countries invested registration period for new enterprises in 309 construction projects in in Cambodia is 99 days, and the cost Cambodia (13.23 million km2, with total of establishing new enterprises is investment of USD4.7 billion). equivalent to 47.4% of national per capita income. Cambodia's business environment is not as advanced as other BRI countries'.

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Figure 8: Comment by Chair of British All-Party Parliamentary Group for BRI and the China-Pakistan Economic 17) Maldives Corridor (1) Investment Advice Overall, investment in the Maldives is moderately attractive. Its macroeconomic attractiveness score is decent, but there are some shortcomings in investment and labor. Investment risk is moderate and there is some sovereign and business environment risk. We suggest looking at investments in the transportation infrastructure and IT industries.

Figure 40: The Maldives Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile the implementation of small-scale, The Maldives' consumption and The Maldives is an archipelago country open economic policies. Additionally, market demand score is better. in the Indian Ocean. It is about 600 due to environmental protection and Per capita national income is quite km from southern India and about its efficient use of existing resources, high, at USD9,760 in 2017, creating 750 km from southwest Sri Lanka. The the country actively absorbs foreign consumption potential. Even though total area of the country is 90,000 km2 funds and assistance, accelerating its the local population is small, the (including its territorial sea area), and economic development. Maldives is able to rely on tourism to the land area is 298 km2. The Maldives attract consumption by many foreign spans the equator and has typical (3) Macroeconomic attractiveness tourists. tropical characteristics. Most areas The Maldives has a favorable macro have a tropical monsoon climate. The economy. Its labor supply and cost score is low southern part has a tropical rainforest because of the limited population of climate, which is hot, humid and rainy Its scale of economy score is quite the Maldives. The labor force in 2017 all year round. There are no four high. Although the overall economy was only 230,000, and the level of seasons, and the annual average is small (USD4.87 billion in 2017), education level is limited. temperature is about 28°C. per capita GDP was as high as USD11,151 and GDP is growing rapidly. Tax score is high. The overall tax level The total population of the Maldives Recently, the economic growth rate in the Maldives is 30.2%. is about 440,000 people (2017), all has reached more than 6%. In 2017, of which are Maldivian. The official Maldives' GDP growth reached 6.9%, Its money supply score is mid-range. language is Dhivehi and the upper and it is expected to maintain growth In 2017, M2 to GDP ratio was 42.8%, class uses English. Sunni Islam is the of about 7%. maintaining a growth rate of 10%. state religion. Funds are relatively loose. Its investment score is low, mainly Maldives has plentiful marine due to a low level of FDI and fixed resources. Tourism, fishery and asset investment. In 2017, FDI in shipping are the three pillar the Maldives was USD580 million, industries. The country emphasizes accounting for 12% of GDP; fixed the development of a diversified and asset investment was USD1.3 billion, sustainable national economy and accounting for 26.7% of GDP.

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(4) Risk Indicators (5) Key Industries Energy: The government recently Financial risks are high, mainly driven Among the key BRI industries, received financial support for the by risks in the banking industry. The transportation infrastructure and IT relatively underdeveloped energy banking industry risk assessment are relatively strong, while agriculture, sector and plans to invest USD140 index is at 0.6. In 2017, the ratio of manufacturing and energy are quite million in renewable energy foreign debt to GDP was 22.8%. weak. development, of which USD95.5 million has been obtained from the Political risk is moderate. The Maldives Transportation infrastructure: Strategic Climate Fund, World Bank, is deeply affected by terrorist Thanks to rapid development of Asian Development Bank, Indian activities, and the resulting frequent tourism, the Maldivian transportation Development Bank, and The Japan violence has caused an unstable industry has developed quickly. The Bank for International Cooperation. security situation. Meanwhile the industry is dominated by shipping, with The remaining USD42.5 million is Maldives is in the early stages of a total of 10,647 registered vessels. intended to be introduced to private constitutional and democratization The international shipping industry capital investment and operated under reforms, and policy changes have mainly operates from Hong Kong to BOT (build-operate-transfer). Bidding been frequent. However, compared the Persian Gulf and the Red Sea. The is ongoing. The field involves solar with other Southeast Asian6 countries, civil aviation industry has developed energy, wind energy, garbage disposal risks are still controllable. rapidly in recent years. There are and bioenergy. four international airports and six Sovereign risk is high, mainly due to domestic airports in the country. Manufacturing: Manufacturing is a serious debt problem. The fiscal As for highways, China has built a relatively underdeveloped. Housing deficit rate (the ratio of fiscal deficit to 15km island-connected highway in tensions have become increasingly GDP) reached 15% in 2018. Moody's the Laamu Atoll in the south, as well prominent. With the support of the sovereign credit rating for the as the China-Maldives Friendship Chinese government, the Maldives is Maldives is B2. Bridge connecting Malé, Hulhule and committed to solving this problem, Hulhumalé. having signed up to new large The business environment risk is high. projects: China State Construction The business environment improved IT: The Maldives attaches great Engineering Corporation undertook slightly in 2018 from 2017. The importance to developing telecoms, the construction of a Maldivian social average time required to enforce a and it is developing rapidly. The main housing project; China Machinery contract is 760 days, the new business residential islands and tourist islands Engineering Corporation undertook the registration period is 12 days, and have network coverage. The per capita construction of Phase III of 1,500 unit establishment cost is equivalent to possession of mobile devices is as high housing project; and First Construction about 4% of per capita gross national as 189.9 per 100 people. The network Engineering Limited of China income. penetration rate is about 59.1%. Construction Third Engineering Bureau undertook the construction of 3,800 Foreign exchange risk is low. The local residences at Hulhumale Phase II. legal currency, the rufiyaa, is stable against USD. Moreover, the country's investment profits and income are freely remitted, and the financial openness is quite high, with a Chinn- Ito index of 0.8.

6. As per Chinese-language version of this report

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18) East Timor (Timor-Leste) (1) Investment Advice Overall, investing in East Timor is not particularly attractive. The macroeconomic attractiveness score is mid-range, with weak investment and money supply. Investment risk is high. Therefore, Chinese companies are recommended to focus on the energy and transportation industries.

Figure 41: East Timor Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile The official languages are Tetum and machinery and accessories, electrical East Timor is located at the Portuguese; the working languages products, beverages, optical and easternmost point of Nusa Tenggara are Indonesian and English. Teton is photographic equipment. in Southeast Asia. It comprises the a lingua franca and a major national eastern half of the island of Timor, the language. Its labor supply and costs score is west Oekusi area, the nearby islands comparatively low, because of a lack of of Atauro and Jaco, and an exclave on East Timor joined ASEAN in 2017. local labor and low level of education. the northwestern side of the island This means there is a limited number surrounded by Indonesian West Timor. (3) Macroeconomic attractiveness of skilled personnel. The working Australia is the country's southern Its scale of economy score is mid-range. population was 290,000 in 2017. The neighbor, separated by the Timor Sea. GDP was USD2.95 billion in 2017, up secondary school enrollment rate was The country is 14,874 km2 and the 3.9% from 2016. Per capita GDP is low only 55.8% and the adult literacy rate coastline is 735 km. It is a mountainous (USD1,299 in 2017, excluding oil). was 64.1%. country with plains and valleys along its coast. Most areas have a tropical East Timor's investment score is quite The tax burden score is high. The rainforest climate. The plains and low. The country is less attractive commercial profit tax rate is 11.2%, valleys have a savanna climate. The to foreign investment than several second only to Brunei among BRI average annual temperature is 26°C. others. In 2017, FDI in East Timor was countries, making it one of the most only USD10 million, accounting for tax-friendly countries. The total population of East Timor 0.3% of GDP. is approximately 1.32 million: 99.6% M2 money supply score is low. In 2017, are Catholics, 0.1% Muslim, and Its consumption and market demand M2 accounted for only 28% of GDP, 0.2% follow other religions. Some score is mid-range, subject to factors far lower than in most Southeast Asian 78% are indigenous (mixed ethnicity including population size and per capita countries. of the Papua tribe and Malay or income. Local consumer demand Polynesians), 20% are Indonesian and potential is small. Import and export (4) Risk Indicators 2% are Chinese. The East Timorese volume accounts for 118% of GDP, Financial risks are low. East Timor's Chinese are the smallest Chinese with stable import demand and few financial markets are immature. group in Southeast Asia and are exports. The main imported products Commercial banks have nearly no mainly concentrated in the capital Dili. are refined oil, automobiles, food, deposits, and there is no securities market.

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Political risk is high. First, the post- by transportation infrastructure. The independence East Timor region rest is relatively underdeveloped. The has serious contradictions, social economy is dominated by agriculture turmoil, and social turmoil rooted in and there are no industrial or a deep divide between East and West manufacturing foundations. Timorese. Second, the political parties struggle and authorities' legitimacy Energy: East Timor's natural resource is poor. The main political parties use accounted for 20.2% of GDP are each supported by armies and in 2017, ranking top among BRI have engaged in large-scale armed countries. This is mainly due to its conflict with each other. They do not rich oil and gas resources. The Timor recognize each other and are fighting Sea has abundant oil and natural gas for political power. Also, the influence resources, with proven oil reserves of other countries makes it difficult of about 190 million tons (about 5 to achieve true independence. After billion barrels) and natural gas of about independence, East Timor has sought 700 billion cubic meters. More than to survive while being caught between 80% of fiscal revenue comes from oil Indonesia and Australia. The issue of and gas. As of the end of 2017, the East Timor is expected to cause further Timor-Leste Petroleum Fund had problems between these two countries. reached approximately USD16.8 billion. However, the construction of a planned Sovereign credit risk is high. According southern oil city still has a long way to The Strategic National Risk to go, and the industrial system is still Assessment 2018, East Timor is rated under developed. The energy industry CC, representing high sovereign risk. has opportunities and challenges for The main culprit is East Timor's fiscal foreign investors. deficit, the fourth highest in the world. Transportation infrastructure: The business environment is With East Timor's overall infrastructure highly risky. East Timor's business construction still at the initial stage, environment risk ranks worst among there are plenty of investment BRI countries, mainly due to its long opportunities. The country plans to contract implementation period increase investment and reform in (1,285 days), lengthy building license infrastructure construction over the acquisition (207 days) period, and next two decades with a planned expensive electricity (equivalent to investment of USD10 billion, in 1,170% of per capita national income). accordance with the Timor-Leste The business environment in the Strategic Development Plan 2011-2030. country did not improved much in According to the East Timor Investment 2018. Guide 2017, the key support areas include road network construction Foreign exchange risk is low. East and upgrading. State-owned Chinese Timor generally issues and uses enterprises are mainly engaged in domestic coins equivalent to USD, so engineering projects in East Timor. exchange rate risk is low. In addition, Chinese companies signed seven East Timor has no formal foreign new contracts in 2017 worth USD325 exchange controls, so funds can be million. The major projects include a freely remitted to and from the country. new container terminal project in Tibar Financial openness is high. Bay, road upgrades and maintenance from Baucau to Lautem, and other (5) Key Industries maintenance projects. Infrastructure Among the key BRI industries, the will continue to warrant attention from energy industry in East Timor is the investors. most worthy of attention, followed

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2. Central Asia 1) Mongolia (1) Investment Advice The overall investment landscape in Mongolia is quite modest. Its Macroeconomic Indicators score highly, especially in labor supply and cost. However the investment environment is flawed. Financial and sovereign risks are high. Mongolia is rich in mineral resources. We recommend investors focus on energy, manufacturing and agriculture.

Figure 42: Mongolia Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile deposit has been listed as one of the Mongolia is a landlocked country in world's top 10 copper-molybdenum central Asia with a land area of 1.566 deposits, ranking first in Asia. Its million km2. It borders China to the economic development relies on east, south, and west, and the north natural resources, with agriculture, is adjacent to Russia. Mongolia has animal husbandry, mining and related a temperate monsoon climate with industries the main sectors. little and uneven precipitation. The temperature change between day and Mongolia implemented planned night can be substantial. Forest covers economics from 1947 to 1990 and 18.3 million hectares and the forest transitioned to a market economy coverage rate is 8.2%. from 1991. In July 1997, the government adopted the Privatization With a total population of about 3.12 Plan for State-Owned Assets (1997- million (2017), Mongolia has one of the 2000), which promotes the private smallest population densities in the sector to play a leading role in the world. The Khalkha account for about national economy. 80% of the population, and the rest consists of ethnic minorities including Kazakhs. The official language is Khalkha Mongol, and residents mainly follow Lamaism.

Mongolia is rich in minerals and forest resources. It has proven reserves of more than 80 kinds of minerals including copper, molybdenum, gold, coal and petroleum. Among these, the Erdenet copper-molybdenum 72 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section IV: BRI countries Investment Index – Country Analysis Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section IV: BRI countries Investment Index – Country Analysis

(3) Macroeconomic attractiveness (4) Risk Indicators about its solvency, Moody's put Its overall investment score is high. Overall investment risk in Mongolia is Mongolia on its observation list for high. downgrades in 2017. In 2018, due to Its economic scale score is quite high. the release of external pressures, and GDP in 2017 was USD11.43 billion, Financial risks are high. The Mongolian the government's increasing ability or USD3,717.5 per capita. The GDP Banking Industry Risk Index is high, to control commodity fluctuations growth rate reached 5.3%, and is at 10.2. Credits provided by domestic through reforms, Moody's upgraded expected to maintain at about 5% in financial institutions account for its rating to B3. Future GDP growth the next three years. Mongolia has 65.5% of GDP. Due to the weak prospects appear stable and the better growth prospects than many private economy and small domestic outlook is positive. other countries in Central Asia. Total financial market, the financial gap import and export volume accounted to economic development is mainly Business environment risk is low. for 117% of GDP, indicating high closed through government borrowing Ease of entry for foreigners to enter dependence on foreign trade. and FDI. External debt is therefore the Mongolian market is mid-range. heavy, accounting for 252% of GDP. Contract performance is excellent, with The investment score is low. In 2017, Its foreign exchange reserves have the average time required to enforce FDI in Mongolia was about USD490 been affected since 2012 by declining a contract approximately 374 days. million, and domestic fixed asset mineral product prices reducing The establishment cost of enterprises investment was USD2.67 billion. Mongolia's export revenue. The foreign is relatively low, equivalent to 1.3% exchange reserves shrank from of per capita national income. The Mongolia's consumption and market USD3.63 billion in 2012 to USD1.04 government's administrative efficiency demand score is low. The population billion in 2017, which also weakened score is low. of Mongolia is the smallest among Mongolia's solvency. Central Asian countries, limiting Foreign exchange risk is low. The consumption scale. The Gini coefficient Political risk is low. The domestic Mongolian currency is the tughrik, is 0.3, indicating relatively even political situation is stable, with and its exchange rate fluctuations distribution of national wealth. The Mongolia applying the principle of were small in 2017/18 at only 0.1%. inflation coefficient is mid-high, with unicameralism. Every new government However, its Chinn-Ito Financial CPI growth in 2017 of 4%. must re-examine the unimplemented Openness Index reached 0.8, and such proposals of the previous government, high financial openness and freedom Its labor supply and costs score is leading to certain risks. The of foreign exchange could increase quite high. The labor force in 2017 was legal environment in Mongolia is foreign exchange risk. 1.3 million, and unemployment rate challenging. was high at about 6.7%. The education rate and education level of the labor Sovereign risk is high. In 2017, the force are quite high. Mongolian government faced a debt crisis and had to pay back USD580 Its tax burden score is moderate. million in bonds issued by the Trade Mongolia has the lightest tax burden and Development Bank of Mongolia. among Central Asian countries. Based Public debt accounts for 252% of on World Bank statistics, the overall GDP. The country has even needed to tax rate is about 24.7%. mobilize people to donate materials to help pay off debts. Due to concerns Its money supply score is medium. Mongolia's money supply is stable, with broad money supply accounting for 56.9% of GDP and growing at about 30.5%. The interest rate difference between loans and deposits is 7.1%.

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(5) Key Industries Manufacturing: In 2017, Mongolia's In the key BRI Industries, Mongolia's manufacturing industry grew 20%, energy industry is relatively strong, ranking first among BRI countries. with manufacturing and agriculture are To adapt to international market also worth attention. changes, Mongolia began to adjust its economic structure according to Energy: In 2017, Mongolia's natural its actual situation and strengthen resources accounted for 24% of GDP, the development of manufacturing. ranking top among BRI countries. At present, domestic manufacturing This is mainly due to its rich mineral is still in its infancy, dominated by resources. The economy depends livestock products and basic mineral on mining because of the country's processing. Meanwhile, the minimum abundant mineral resources, with wage level is relatively moderate, and some large ore reserves are in world- labor costs are quite low. The future leading positions. Current proven development should be decent. reserves are about 162 billion tons of coal, 36 million tons of copper, 2 Agriculture: Mongolia's has 11,109.2 billion tons of iron, 200 million tons of km2 of agricultural land, and its phosphorus, 3,000 tons of gold, and animal husbandry production index 1.5 billion barrels of oil. The output reached 149.6 in 2017, in the top value of the mining industry was echelons among BRI countries. Animal MNT9.4 trillion (USD3.57 billion) in husbandry is a traditional industry 2017, up 32.8% YoY and accounting in Mongolia and the foundation of for 72.5% of total industrial value. its economy. In 2017, the number of livestock continued to grow, reaching Mineral products accounted for a new record (approximately 66.2 62.7% of total exports. However, million heads at the end of 2017, because of its lack of professional up 7.6% YoY). In February 2017, geological exploration teams, and Mongolia passed the amendments outdated technical equipment, the to its Corporate Income Tax Law and exploration level is generally low, decided to implement tax incentives and foreign investment is required. for some agricultural sectors. Overall, In 2018, China participated in the the current processing technology Mongolia Power Plant #2 expansion for livestock products is still relatively project and Changhungtana 4x150MW underdeveloped. There could be large coal-fired power station. Also, China investment opportunities for Chinese signed a framework agreement with enterprises in animal products Mongolia to increase production processing and agricultural machinery. capacity and investment cooperation. Under the framework and the China- Mongolia mineral energy cooperation committee, both sides will strength cooperation in mineral development and processing, manufacturing, transportation, energy, and agricultural product processing.

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2) Kazakhstan (1) Investment Advice Overall, Kazakhstan's investment landscape is attractive. Its macroeconomic indicators score is high, but there are some problems with money supply. Investment risk is low: the business environment is good, but financial and foreign exchange risks are high. Based on Kazakhstan's resource and land advantages, we recommend considering investment in energy and agriculture. In addition, according to government planning, the IT is a potential investment target.

Figure 43: Kazakhstan Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile member of Eurasian Economic Union distribution. Imports and exports Kazakhstan is located in Central Asia, and has signed an agreement to link account for about 60% of GDP. The bordering the Caspian Sea to the with China's BRI. latest round of economic sanctions west, Russia to the north, China to the against Russia by the United States east, and Uzbekistan, Turkmenistan (3) Macroeconomic Indicators has brought shocks to Kazakhstani and Kyrgyzstan to the south. With Its economic scale score is low. economy, weakening the local a land area of 2.72 million km2, it is In 2017, Kazakhstan's GDP was currency. Inflation is as much as 7.4%, the largest landlocked country in USD162.89 billion, and per capita a high level among BRI countries. the world. Kazakhstan belongs is GDP was about USD9,030. The GDP in the North Temperate Zone, with growth rate is expected to be 2.9% in Its labor supply and cost score is high. a typical continental climate: huge future, slower than other Central Asian The national labor force in Kazakhstan temperature difference between countries. is about 9.26 million and the winter and summer, dry air and scarce unemployment rate is 5.1%. The level precipitation in most areas. Its investment score is high. In 2017, of education is in the top class among the net FDI inflows were about BRI countries, albeit below Mongolia's. The total population of Kazakhstan USD4.65 billion. It performed well in is 18.04 million (2017). Kazakhs are Central Asia, well ahead of Mongolia, Tax score is high. The overall tax rate the main ethnic group. Kazakh and Turkmenistan and Kyrgyzstan. is 29%. The corporate tax burden is Russian are the official languages. relatively small. Its consumption and market demand Kazakhstan is rich in natural resources score is mid-range. The per capita Its money supply score is low. In 2017, such as oil, natural gas, coal and non- national income of Kazakhstan is about Kazakhstan's broad money supply was ferrous metals. It is a major exporter USD7,970, much higher than those small at only 37% of GDP, having fallen of oil and natural gas to the world. Its of other central Asian countries. As a from the previous year. Currently, agricultural foundations are superior, result, households have higher final Kazakhstan's deposit and loan interest with excellent ecological conditions consumption expenditure (USD84.61 rate difference is 4.9%, mid-level and vast pastures suitable for animal billion in 2017). The Gini coefficient among BRI countries. husbandry. In addition, Kazakhstan is a is 0.3, implying generally even wealth

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(4) Risk Indicators (5) Key Industries Agriculture: Kazakhstan has a vast Financial risks are low. The credit scale Among the key BRI industries, territory and a continental climate, of Kazakhstan's domestic financial Kazakhstan's energy, IT and agriculture which is highly suitable for agricultural institutions accounts for about 41% of sectors are worthy of attention. development. In 2017, agricultural GDP. Foreign exchange reserves are land reached 21,699.2 km2, and high, totaling UD30.9 billion. External Energy: Kazakhstan is rich in natural the crop production index reached debt accounts for about 98% of GDP. resources. In 2017, it extracted 79.323 167.2, ranking among the top BRI million tons of oil, 13.269 million tons countries. Total grain output was 20.09 Political risk is low. Kazakhstan scores of liquid natural gas, and 52.93 billion million tons in 2017, of which wheat mid-high in political stability and legal cubic meters of gaseous natural gas. accounted for about 90%. In addition, environment. Oil exports accounted for 60.7% the country has a pool of quality of its total exports in 2017. China's labor. There are some opportunities Sovereign risk is low. Moody's latest three major oil companies (CNPC, to invest in large-scale mechanized ratings, Kazakhstan's sovereign state Sinopec, and CNOOC) have already modern agriculture. In recent years, has a credit rating of Baa3, which is at entered oil exploration. The country's to promote a diversified economy, the the upper-middle level. Although the oil processing industry has also government has hoped that foreign country has a fiscal deficit, the ratio of developed rapidly in recent years, with investors will shift from single type public debt to GDP is much lower than output value growing from USD6.8 investments in energy to primary that of other Central Asian countries at billion in 2001 to USD28.09 billion in areas such as agriculture. In 2018, only 17.7%. 2017. According to the Kazakhstan Chinese enterprises and Kazakhstan Strategic Plan to 2020, it plans to signed agreements on beef cattle Business environment risk is low. expand pipeline construction and breeding, agricultural irrigation and Kazakhstan has a leading score. There increase oil export capacity from 28 wheat processing factory construction is little difficulty in foreigners entering million tons to 52 million tons. projects. Future cooperation potential the local market, contract fulfillment or is quite strong. the cost of establishing an enterprise, Kazakhstan's electricity industry but government's efficiency is low. In has developed rapidly in recent IT: Basic mobile and network the past year, Kazakhstan has adopted years, and its self-sufficiency has penetration, and density of secure a series of measures to improve the greatly improved. In 2017, per capita network servers, are high. According business environment, including the electricity consumption reached 5,133 to the industrial plan for 2016-2020, use of electronic customs declaration kWh, ranking among the top BRI Kazakhstan will build infrastructure system ASTANTA-1IS, reducing countries. It is also very rich in solid with modern optical fiber and wireless customs administrative expenses to mineral resources such as copper, transmission multimedia technology improve the convenience of cross- zinc, aluminum and other non-ferrous by 2020. The government has also border trade, reducing the time it metals. The Sino-Kazakhstan oil proposed the Digital Kazakhstan takes to register for VAT, and pushing pipeline project, Karazhanbas oilfield plan for 2017-2020. It will promote corporations to disclose transparency project, Sino-Kazakhstan uranium the development of e-commerce reports. mining project, Luteniqi hydropower and the digitalization of government project and other projects are service systems. Chinese companies Foreign exchange risk is high. progressing smoothly. In 2018, China such as Huawei have already started The exchange rate between the announced it would jointly develop cooperation with Kazakhstan Electric local currency and the US dollar is the Rakushechnoye oil and gas field on 4G infrastructure. The overall quite stable, and the fluctuation in with Kazakhstan and signed a number situation and government policies are 2017/18 was only 0.06%. However, of agreements on cooperation in oil beneficial for further development of the Chinn-Ito index shows freedom and gas, hydropower and wind power. this industry. Chinese enterprises can of foreign exchange is low, with a Prospects are promising. use their development experience score of only 0.2. in the IT to deepen cooperation with Kazakhstan.

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3) Turkmenistan (1) Investment Advice Overall, Turkmenistan's investment environment is not very attractive. Its macroeconomic indicators are low and risks are high, mainly political risks. The country is rich in energy resources and the energy sector is a traditionally advantageous one, with large investment and cooperation opportunities. The textile industry has developed rapidly of late. Benefitting from advantages in labor cost, there are some investment opportunities in manufacturing industry. However, the local legal environment is quite flawed, and current law imposes restrictions and regulations on foreign shareholdings and local labor employment ratios, which warrant caution.

Figure 44: Turkmenistan Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Turkmenistan is rich in oil, gas and USD21.11 billion. Turkmenistan's Turkmenistan is located in the mineral resources, mainly oil, natural investment scale ranks second southwestern Central Asia, on the gas, metabolite, iodine and non- in Central Asia, second only to eastern coast of the Caspian Sea, with ferrous metals. Its prospective oil and Kazakhstan, but it is mid-level among a land area of 491,000 km2. About 80% natural gas reserves are 12 billion BRI countries. of the territory is covered by desert. tons and 50 trillion cubic meters, The country is a typical temperate respectively, and natural gas reserves Consumption and market demand continental climate with large rank fourth in the world. Oil and gas score relatively low. Per capita national temperature differences between is a pillar industry in Turkmenistan. In income is about USD6,380, second day and night, winter and summer agriculture, the main crops are cotton only to Kazakhstan in Central Asia. seasons, and a dry climate. and wheat. However, the final consumption expenditure of the Turkmen The population is 5.76 million (2017). (3) Macroeconomic Indicators population is about USD18.96 billion, Its ethnic composition is diverse: Its economic scale score is high. GDP a quite low level among BRI countries. the main ethnic group are Turkmen, in 2017 was USD37.93 billion, and The Gini coefficient is as high as 0.5, accounting for 95% of the population, per capita GDP was about USD6,587. indicating a large gap in national and the remaining 5% is composed of Historical GDP growth is 6.5%, second income. Imports and exports accounts Uzbek, Russia, Kazakhstan, Armenia, only to Tajikistan in central Asia. for about 54% of GDP, so the country Tatar, Azerbaijan and other ethnic According to IMF World Economic is not very dependent on trade. groups. The official language is Report, Turkmenistan's economic Inflation rate is high at 8%. Turkmen, and Russian is the lingua growth was 6.2% in 2018 and 5.6% in franca. Most residents follow Islam 2019, the highest in Central Asia. Its labor security and costs score (Sunni), with Russian and Armenian is low. In 2017, there were 2.65 residents following Orthodox Its investment score is mid-range. In million working people, and the Christianity. 2017, FDI was USD2.31 billion, and unemployment rate was 3.3%, much fixed assets investment reached lower than other Central Asian

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countries. However, the average level companies registered in Turkmenistan Project, local oil well repair and drilling of education is low, with only 7.9% can open foreign exchange accounts projects, and export oil and gas of the population receiving a higher at Turkmenistan banks, but they equipment projects have been carried education. are not allowed to withdraw large out smoothly. However, the current amounts of cash. Money can only be law does not allow foreign parties to The tax burden score is high. transferred by bank when paying in US take control of joint ventures, and Turkmenistan's tax system is based dollars. There is no need to pay special since 2017 the foreign to domestic on value-added tax and income tax, taxes on remitted foreign exchange. labor force employment ratio has collected via a national unified tax Turkmenistan has no restrictions on been limited to 1:9, which could be a system. The main taxes include value- the number of dollars foreigners can concern. added tax, consumption tax, mineral bring into the country, but a customs use tax, property tax, corporate profit declaration is required. Manufacturing: In 2017, (income) tax, personal income tax and manufacturing value added accounted local charges. The total tax rate is 30%, (5) Key Industries for 38% of GDP, a sharp increase a moderately low level. In the key BRI areas, Turkmenistan has from the previous year and ranking good investment potential in energy among the top BRI countries. This (4) Risk Indicators and manufacturing. is mainly due to improvements in Financial risks are low. Turkmenistan's textile industry manufacturing in external debt is the smallest of all BRI Energy: Turkmenistan's oil exports recent years. Cotton is the main countries', accounting for only 1.2% of accounted for 90.3% of merchandise commercial crop in Turkmenistan GDP. Foreign exchange reserves are exports in 2017, ranking in the top (production: 1.1 million tons in 2017). USD13.62 billion. five among BRI countries. The country The textile industry has continuously is rich in energy resources, with introduced international advanced Political risk is high. Turkmenistan proven reserves of about 2.9 trillion technology from Japan and Europe, scores quite high in political stability, cubic meters of natural gas and and its product quality has reached but the social and legal environment prospective reserves of about 26.2 international standards. According to is imperfect and a major risk point for trillion cubic meters, ranking fourth in the Textile Industry Development Plan corporate investment. the world and accounting for about 2020, the country will expand textile 12.7% of the world's total reserves. exports and build a batch of modern Sovereign risk is low. Moody's rates Proven oil reserves are 100 million textile enterprises with an investment Turkmenistan's sovereign state at tons and prospective reserves are of at least USD2 billion. Meanwhile, the Baa1, which is superior to other 20.8 billion tons. moderate wage level of the labor force countries in the region, although the creates a cost advantage. The industry country has a fiscal deficit. Turkmenistan is China's largest natural as a whole has room for development. gas supplier in Central Asia and the Business environment risk is starting point of the Central Asia–China moderate. The average time required Gas Pipeline. Significant progress for the enforcement of a contract has been made in interconnected is about 910 days, and the cost of construction. According to the National establishing a new enterprise is Social and Economic Development equivalent to 0.4% of gross national Outline 2011-2030, Turkmenistan income per capita. will continue to expand its energy export market, increase its existing Foreign exchange risk is moderate. pipeline export capacity, and promote The exchange rate between the local TAPI natural gas pipelines and currency and the US dollar is quite trans-Caspian natural gas pipelines. stable. In addition, the country's Chinn- As pioneers in natural gas pipeline Ito financial openness score is only 0.2, construction, Chinese companies a moderately low level in Central Asia. continue to be optimistic about Foreign exchange can be transferred their future investment potential. in and out freely, but is strictly Chinese projects such as the China- regulated by the government. Foreign Turkmenistan Natural Gas Pipeline

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4) Uzbekistan (1) Investment Advice Overall, Uzbekistan's investment attractiveness is low. Its economy is not favorable, and investment risk is high. Uzbekistan has advantages in agricultural production, and agricultural cooperation with China continue to deepen, resulting in considerable investment prospects. The country is rich in energy resources, and power production is its dominant industry. Recently, the development of renewable energy has accelerated, indicating large space for investment cooperation. In 2017, the country canceled foreign exchange controls, bringing significant benefits to investors. However, investors should pay attention to the imperfect local legal environment and related business risks.

Figure 45: Uzbekistan Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Uzbekistan is rich in resources and has Uzbekistan's investment score is Uzbekistan is located in the proven nearly 100 mineral products low. In 2017, foreign investment was hinterlands of Central Asia. Its five (gold reserves of 3,350 tons: 4th in only USD100 million, and fixed-asset neighboring countries have no the world; oil reserves of 590 million investment was about USD11.2 billion, seaports. Its land area is 449,000 km2. tons; natural gas of 2.1 trillion cubic less than in most BRI countries and The north of the country borders meters; coal reserves of 1.83 billion countries in the region. Kazakhstan, the east and southeast tons; uranium reserves of 186,000 are connected to Kyrgyzstan and tons: 7th in the world). Mineral deposits Consumption and market demand Tajikistan, the west is adjacent to of copper and tungsten are also quite score is also low. The Gini coefficient Turkmenistan, and the south is abundant, as are the country's non- is 0.4, implying a large national income bordered by Afghanistan. Uzbekistan metallic mineral resources, including gap. Per capita national income is has an arid, continental climate. potash, rock salt, sulfate, fluorite and about USD2,000, which is low among kaolin. The pillar industries are the Central Asian countries. However, final Uzbekistan has a population of 32.39 four golds : gold, platinum (cotton), household consumption expenditure million. There are more than 130 black gold (oil), and blue gold is USD31.76 billion, which is second ethnic groups. In addition to the (natural gas). only to Kazakhstan in the region. Uzbek population, which accounts In addition, imports and exports for 80% of people, and 5.5% of the (3) Macroeconomic attractiveness accounts for about 69% of GDP, population who are Russian, the other Uzbekistan's overall investment quite low. On September 5 2017, major ethnic groups include the Tajik, attraction is low. the government announced it would Kazakh, Karakalpak, Tartar, Kyrgyz, and achieve foreign exchange liberalization Korean. Most residents follow Islam Its scale of economy score is high. In through an almost 100% depreciation (Sunni), and the rest follow Orthodox 2017, GDP was USD49.68 billion, and of its currency (UZS), causing Christianity. The official language is per capita GDP was about USD1,534. substantial inflation. The annual Uzbek and the common language is The historical GDP growth rate is 5.3%, inflation rate reached 13%, the highest Russian. and growth is expected to remain among Central Asian countries. steady at about 5%.

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Labor supply and cost score is low. classification allows small businesses Manufacturing: The share of industry The national labor force is about 15.51 to pay single and fixed rates, but in the national economy has increased million and the unemployment rate not less than 65% of the minimum YoY. While stabilizing agricultural is 6.9%. The level of education is low, wage standard for employees), production, the government has also about the same as Yemen among cutting export processing time by focused on accelerating the pace of Central Asian countries. introducing an electronic filing and industrial development and shifting payment system, and improving the from a traditional agrarian country to The tax burden score is moderate. The convenience of cross-border trade. one with equal emphasis on industry overall tax rate is about 32%, and the and agriculture. In 2017, industrial corporate tax burden is higher than in Foreign exchange risk is moderate, output value was UZS74.9 trillion other Central Asian countries. mainly because of the high risk (USD8.74 billion), a YoY increase of of exchange rate fluctuations. 4.6% and accounting for 30% of GDP. (4) Risk Indicators Uzbekistan's currency is the som. In Financial risks are low. Credits of 2017, the government depreciated Energy: Uzbekistan is a power domestic financial institutions account the som by nearly 100%, resulting exporting country with installed for about 14% of GDP. External debt in a large fluctuation in its exchange capacity of 14,000 megawatts, of accounts for 39.7% of GDP. Foreign rate with USD. Since September 2017, which hydropower represents 1,854 exchange reserve are USD15 billion. Uzbekistan has eliminated foreign megawatts and thermal power 12,000 exchange controls, and all legal and megawatts, using 50% of the complete Political risk is quite high. According to natural persons are free to exchange sets of power generation equipment the World Bank, Uzbekistan's politics foreign currency. Freedom of foreign in Central Asia. Production fully meets is generally unstable and the legal exchange has improved. the needs of the national economy environment is imperfect. The 2017 and residents. In 2017, Uzbekistan regime transfer was stable, and the (5) Key Industries Energy produced 60.09 billion kWh of risks of war and armed conflict are Among the five BRI key industries, electricity. According to its Renewable low. The threat of terrorism is also agriculture, manufacturing and energy Energy Development Program 2017- low, and border conflicts have been are the key developed industries in 2021, Uzbekistan plans to implement initially resolved, but the drug threat Uzbekistan. 81 renewable energy projects costing remains high. USD5.3 billion, and the proportion of Agriculture: Uzbekistan is a renewable energy will increase from Sovereign risk is low. According to the traditional agricultural country. It is 2016's 12.7% to 19.5%. latest Moody's rating, Uzbekistan's self-sufficient in food and has good sovereign debt is rated Ba2, which is at agricultural foundations. It is the main In addition to the abovementioned a mid-high level. Government debt as food, fruit and vegetable production key industries, Uzbekistan's a percentage of GDP is only 14.4%. base of the Commonwealth of transportation infrastructure also Independent States. In 2017, has superior development potential. Business environment risk is low. agricultural output accounted for Currently, infrastructure is relatively Uzbekistan's local market is somewhat 16.1% of GDP. Due to a lack of funds underdeveloped. With steady growth difficult for foreigners to enter. The and underdeveloped technology, its of the economy, the government will establishment cost is quite low, agricultural products are generally increase infrastructure construction, and the cost of establishing new characterized by low processing levels including road construction, enterprises is equivalent to about 3.1% and added value. The country relied renovation and supporting facilities, of per capita gross national income. on the Republican Fund of Irrigated railway electrification and network Contract performance is excellent, Lands Ameliorative Improvement to construction. Electrification mileage with an average mandatory contract adopt a series of modern measures will reach 2,000 km. time of 225 days, the lowest among in agricultural production, renovation Central Asian countries. However, and new water supply and drainage administrative efficiency is quite systems. China is set to become low. In the past year, the country the largest importer of Uzbekistan's has taken measures to increase agricultural products. According to commercial attractiveness, including: statistics from the National Statistical strengthening protection measures Committee of Uzbekistan, the trade for minor investors, reducing taxation volume between the two countries by increasing tax categories (new increased by 35.2% last year, exceeding UD6.4 billion.

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5) Kyrgyzstan (1) Investment Advice Overall, Kyrgyzstan's investment attractiveness is moderate. Macroeconomic attractiveness is weak while investment risk is low. Kyrgyzstan has favorable agricultural foundations and has deepened its cooperation with China in recent years. The investment prospects of this industry are positive. In addition, transportation infrastructure is ripe for improvement. This industry is expected to become an investment hot spot, driven by local policies. Investors should pay attention to the imperfect legal environment and unstable politics.

Figure 46: Kyrgyzstan Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile of oil are about 100 million tons Its scale of economy score is low. Kyrgyzstan is located in Eurasia with a with natural gas of 7.26 billion cubic GDP in 2017 was USD7.56 billion, and land area of about 200,000 km2. The meters. per capita GDP was only USD1,220. north is adjacent to Kazakhstan, the However, the GDP growth rate is south is connected to Tajikistan, the Kyrgyzstan is a member of the stable, with a historical growth rate of southwest is bordered by Uzbekistan, Eurasian Economic Union. The alliance about 4.6%. GDP growth is expected and the east is bordered by China. was established in 2015. Its current to remain at about 4.6%, and the members, Russia, Kazakhstan, Belarus, economy should develop steadily. Kyrgyzstan has a total population of Kyrgyzstan and Armenia, are important 6.78 million, with more than 80 ethnic partners in the BRI. In May 2018, the Its investment score is low. In 2017, groups, of which the Kyrgyz account Ministry of Commerce of China, the FDI was almost zero, and fixed asset for 72.8%, Uzbeks 14.5%, with the Eurasian Economic Commission and investment was USD2.43 billion, lower rest Russian, Donggan, Uyghur, Tajik representatives of member states than that of countries in the same and Turkish. More than 70% of the signed an agreement on economic region and other BRI countries. residents follow Sunni Islam. The and trade cooperation between the official language is Russian. Eurasian Economic Union and its The score for consumption and market member states, and the People's demand is low. Per capita national Kyrgyzstan is rich in water, coal and Republic of China. They agreed to income is about USD1,130, ranking mineral resources. The dominant further simplify customs clearance 73rd among BRI countries and higher minerals with proven reserves are procedures and reduce trade costs only than Tajikistan in the same gold, tungsten, tin, aluminum, mercury, through cooperation and information region. Final household consumption antimony and iron. According to the exchange. expenditure is lower than in most BRI Geological Survey of Kyrgyzstan in countries, at about USD6.14 billion. 2013, proven reserves are 565.8 tons (3) Macroeconomic attractiveness The Gini coefficient is 0.3, indicating of gold, 117,000 tons of tungsten, Kyrgyzstan's overall investment a narrow national income gap. In 52,000 tons of rare earth, and 35,000 landscape is not attractive. addition, total import and export tons of aluminum. Proven reserves volume accounted for about 102.2% of

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GDP, implying that the country relies law enforcement standards are (5) Key Industries heavily on foreign trade. The inflation variable. Foreign investment projects Kyrgyzstan has no significant rate is moderate and reached 3.6% in are subject to various inspections, advantages in the five key industries. 2017. and some officials are still corrupt, Only agriculture has a higher level negatively affecting the investment of development relative to other Kazakhstan's labor supply and cost environment. domestic industries. However, based score is moderate. The national labor on its current underdeveloped force is about 2.63 million, and the Sovereign risk is low. According to the infrastructure and the government's unemployment rate is high, at about latest Moody's rating, the sovereign plans for industry, transport could 7.4%. The level of education is close to credit rating of Kyrgyzstan is Ba2. become a promising industry. Kazakhstan's, with about 47.6% of the Public debt accounts for 58.1% of population attending higher education. GDP. The government is in deficit. Agriculture: Agriculture is the main The official 2018/19 budget hearing pillar of the economy. In 2017, due to Tax burden score is high. The overall announced that the government will the rapid development of planting and tax rate is about 29%, a low corporate continue to maintain its fiscal deficit in animal husbandry, increased output tax burden. the next three years. from agriculture, forestry, animal husbandry and fishery accounted Its money supply score is low. In 2017, Business environment risk is low. It for about 12.8% of GDP. China Kyrgyzstan's broad money supply was is easy for foreigners to enter the and Kyrgyzstan have cooperation only 5.1% of GDP, a sharp drop of 85% local market. Kyrgyzstan has excellent in agriculture. The Ministry of from the previous year. In addition, scores in cost of establishment Economic Affairs of Kyrgyzstan and the deposit and loan interest rate and contract performance, but the the 'Asian Star' Agricultural Industry difference is as high as 17.1%. government is quite inefficient. It has Cooperation Zone developed recently taken measures to reduce by Chinese enterprises signed (4) Risk Indicators the difficulty of contract performance, a cooperation memorandum, Financial risks are quite high. Its including introducing pre-trial under which they will establish a banking industry risk index is the meetings on contract disputes through partnership with the to promote highest in the region, reaching voluntary mediation. The average food and goods export to China. 16.7%. The proportion of domestic time contract enforcement time in financial institutions' credit to GDP 2017 was about 410 days, and the Transportation infrastructure: is about 20.5%. In 2017, external cost of establishing a new business is At present, most of Kyrgyzstan's debt accounted for 104.7% of GDP. equivalent to about 1.9% of per capita infrastructure (roads, airways and Multilateral debts were mainly from gross national income. railway) is in disrepair and cannot the World Bank, Asian Development withstand increasing passenger Bank and International Monetary Fund. Foreign exchange risk is low. The traffic demands of 10% per year. Bilateral debt mainly included loans country has a floating exchange rate Due to its own economic difficulties, from China, Russia and Japan. Foreign system. In 2017, the exchange rate Kyrgyzstan relies mainly on foreign exchange reserves in 2017 totaled between the som and USD was quite aid or international organizations USD1.94 billion. stable. Foreign exchange management for assistance, loans and various is relatively loose, and its Chinn-Ito investments to rectify this. The Political risk is high. According to the Financial Openness Index is at 0.5, country welcomes foreign investors' World Bank's assessment, Kyrgyzstan indicating high exchange freedom. participation in local infrastructure has low scores in political stability The Foreign Exchange Trading construction. The local government's and legal environment. In politics, Act stipulates that all individuals, current plans include the proposed the 4·7 revolution broke out in 2010, institutions and groups can convert restoration of five roads and causing political turmoil. However, som freely at commercial banks, maintenance of existing roads, under since President Atambayev took office financial institutions and exchange CAREC (the Central Asia Regional at the end of 2011, the situation has points without any formalities or Economic Cooperation) program. They generally stabilized. The legal system restrictions. Citizens and foreigners also plan to repair weak layers on over needs to be improved. At present, can freely carry and exchange 300 km of pavement, and built a new currency, enter the country through 170-mile long beltway in Batken. prescribed procedures, and remit without restrictions.

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6) Tajikistan (1) Investment Advice Overall, investment in Tajikistan is not very attractive. Macroeconomic attractiveness is low and the risks are high. The economic base is weak and investment highlights are rare. Tajikistan invests heavily in transportation infrastructure. Chinese enterprises might pay close attention to this field.

Figure 47: Tajikistan Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile reserves rank 1st in the world, but among the five countries in Central Tajikistan is in southeastern Central the development volume is less than Asia. Recently, the economy has Asia. In 1991, after the disintegration 10%. Tajikistan also has abundant maintained stable development, with of the former Soviet Union, it became mineral resources, mainly non-ferrous an average GDP growth rate of about a sovereign state. With a land area of metals (lead, zinc, tungsten, antimony 5%. It is predicted that GDP will grow 143,000 km2, it is the smallest country and mercury), rare metals, coal, and steadily at 5.3%. in Central Asia. The west and the rock salt, as well as oil, natural gas, north are bordered by Uzbekistan rich uranium and various building Its consumption and market demand and Kyrgyzstan respectively, and it is materials. Its lead and zinc mines rank score is low. Tajikistan's per capita connected with Sinkiang in the east 1st in Central Asia, but they are under national income is low (about and Afghanistan in the south. The developed, leaving great potential. USD990), as is total household final country is mountainous, representing consumption expenditure (USD5.9 93% of land area. It is known as the (3) Macroeconomic attractiveness billion). In 2017/18, the annual inflation Country of Mountains. The overall investment landscape in rate reached 6%. Tajikistan is not that attractive. Tajikistan has a population of 8.92 The investment score is relatively million and 86 ethnic groups. The The political situation is stable. In low. The economy is small and its main ethnic group is the Tajik, which recent years, economic growth development depends largely on the accounts for 80% of the population. has been generally stable, but the international community. According The remaining ethnic groups include industrial structure is concentrated to the World Bank, Tajikistan attracted Uzbek, Russia, Tartar and Kyrgyz. in a single area and the aggregate FDI of about USD110 million in About 86% of residents follow Islam economy is small, which limits 2017, of which nearly 80% came (mostly Sunni). The national language the investment scope of the Tajik from China (47%) and Russia (31%). is Tajik and the common language is government to some extent. Foreign capital is mainly invested in Russian. the mining, processing, transportation Its scale of economy score is mid- and production of precious metals. Tajikistan is rich in water resources, range. According to World Bank Domestic fixed asset investment is with approximately half the Central statistics, Tajikistan's GDP in 2017 was relatively low (only USD220 million in Asian total, and its reserves rank approximately USD7.15 billion. Per 2017). 8th in the world. Per capita water capita GDP is only USD801, the lowest

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Its labor supply and costs score is Sovereign risk is high. In the latest The somoni is freely-convertible. comparatively low. Tajikistan has Moody's ratings, Tajikistan is at B3, Under the law, investors have the right about 3.49 million working-age people, lower than its neighbors. The key issue to open local and foreign currency accounting for nearly 40% of the is persistently high domestic external accounts. After tax is paid, they have population. However, the quality of debt. In 2017, public debt accounted the right to convert the national the labor force is generally not high. for 85.6% of GDP. Multilateral currency into other currencies. Due to limited local employment debts are mainly owed to the Asian Similarly, they can subscribe to other opportunities, the unemployment rate Development Bank and IMF. Bilateral foreign currencies to pay overseas is as high as 10.3%, much higher than external debts are mainly with China. businesses. Investors and foreign in most of BRI countries. Debt has been used mainly for road workers have the right to remit foreign construction, infrastructure and food currency income and wages from legal The tax burden score is low. The total imports. The government is in fiscal investments and operating profits tax rate is 67.3%, and the pressure on deficit. abroad without paying special taxes. enterprises is high. The entry and exit of cash of more The business environment risk is than USD3,000 need to be declared. Tajikistan's money supply score is low. high. Tajikistan scores poorly in entry In 2017, broad money supply was difficulty for foreigners, contract (5) Key Industries small, accounting for only 29.5% of performance, corporate establishment The five key industries are relatively GDP, but growth was rapid (21.8%). costs, and government efficiency. The underdeveloped in Tajikistan. The deposit and loan interest rate average time to enforce contracts in Transportation infrastructure has difference is significant, as high as 2017 was about 430 days, and the some potential. The government has 26.1%. cost of establishing a new business is been restored, improved and rebuilt equivalent to about 18% of per capita with the help from the international (4) Risk Indicators gross national income. In recent years, community. Recently, infrastructure Financial risks are high. The banking Tajikistan has been committed to has been greatly improved. sector is highly risky, with domestic improving its business environment institutions providing only 15.8% of and focusing on economic and trade Transportation infrastructure: credit, indicating the financial system relations with Uzbekistan. For example, Tajikistan has poor travel conditions. relies on offshore financial institutions. in 2018 it signed 27 cooperation Local routes are mainly highways. Foreign exchange reserves are only documents covering economics, trade, There are only three railway lines, USD490 million. investment, transportation, hydraulic in the north, south and south. They engineering, tourism and security, are non-connected with one another Political risk is high. According to including the simplification of customs but link to the Commonwealth of the the World Bank, Tajikistan has low clearance procedures for trade with Independent States and neighboring political stability. Current political Uzbekistan. countries through Uzbekistan. Since risks mainly come from domestic independence, Tajikistan has invested security deterioration brought about Foreign exchange risk is high, mainly in the construction of 2,100 km of by turbulence in Afghanistan, as well due to exchange rate fluctuations. international roads and more than as tensions between large foreign In recent years, the exchange rate 1,000 km of domestic roads. The countries and the objectives of of the Tajikistan somoni against USD government has said that with the regional interest groups. Tajikistan is fluctuated sharply and continuously, construction of international highways, the only one of the five Central Asian falling to TKS9.2:USD1. The reasons it will link with China, Afghanistan and countries to have erupted into civil include large demand for US dollars Kyrgyzstan, break traffic congestion war. Despite national reconciliation, among corporations, and the and achieve national strategic goals. conflicts between regional political reduction of national foreign exchange Tajikistan built about 200 km of roads groups have not been fundamentally sources (including labor migration). and 45 bridges in 2018. Fourteen resolved. The legal environment is The decrease in the exchange rate national transportation investment weaker than in most BRI countries, has led to more speculative sentiment projects are being implemented with a mainly because the legal system is not among ordinary people. Some banks total value of TJS7.5 billion (USD794.5 perfect. It is unstable and changeable, have a shortage of dollars. million). and therefore fails to provide a stable investment environment for foreigners.

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7) Afghanistan (1) Investment Advice Investment in Afghanistan is not that attractive. Its macroeconomic attractiveness is low and risks are high. Infrastructure has been damaged by war. The government has focused on improving transportation infrastructure, creating investment opportunities. However, the political situation remains turbulent and the security environment is poor. Therefore, infrastructure projects in Afghanistan are very risky for most Chinese contractors and are unlikely to realize high profits in the short term. Additionally, although the country has sufficient natural resources, its lack of infrastructure and labor has increased the difficulty of mining and utilization.

Figure 48: Afghanistan Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile than any other country. In 2015, it absolute poverty line. In recent years, As a central Asian, landlocked country, was recognized by the IMF and World domestic price levels have fluctuated Afghanistan is at the intersection Bank as one of the HIPC (heavily sharply. The main reasons include of West, South and Central Asia. indebted poor countries). According to the withdrawal of United States and It borders China to the northeast, data released by the UNHCR (United NATO forces, the depreciation of the Turkmenistan, Uzbekistan and Nations High Commissioner for afghani against the US dollar, and Tajikistan to the north, Pakistan to Refugees) and Ministry of Refugees border conflicts. Foreign trade has the east and south, and Iran to the and Repatriation, there were 9.3 consistently had huge deficits. This west. The territory is about 648,000 million humanitarian workers in situation is unlikely to change in the km2. Afghanistan is located in the Afghanistan in 2016, accounting for short term. Annual export volume subtropical climatic zone, but because about a third of the total population. accounts for only about 4%-7% of total of its distance from ocean and high The local people lack housing, food, trade. Exports include only dozens of altitudes, the continental climate is water, medical resources, access primary products such as handmade characterized by dry weather and little to education, and employment blankets, dried fruits and cotton. precipitation, with cold winters and opportunities. hot summers. Its investment score is low. In 2017, (3) Macroeconomic attractiveness cumulative FDI was only USD50 million, Afghanistan has a population of 35.53 The overall investment attraction of and fixed assets investment was million (2017). There are 30 ethnic Afghanistan is low. USD3.71 billion. Both are the lowest groups. In addition to the Pashtun, among BRI countries. there are Tajik, Uzbek, and Turkmen. Its scale of economy score is low. Residents generally follow Islam, Afghanistan is one of the least Its consumer and market demand accounting for about 99% of the total developed countries in the world and score is low. Per capita national population. The official languages are relies heavily on foreign aid. World income is only USD560, and final Pashto and Dari. Bank statistics show Afghanistan's household consumption is USD15.7 GDP in 2017 was USD19.54 billion, but billion. Years of war have brought deep per capita GDP was only USD550, the fissures to Afghan society. Afghanistan lowest in the target countries. About Afghanistan's labor supply and costs receives more international assistance 40% of the population is still below the score is low. Although it has a large

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workforce, their education level is low. addition, the Islamic State penetrated (5) Key Industries In 2017, only 11% of citizens received Afghanistan and continually launched As a result of a more than 30-year war higher education. Since 2014, the terrorist attacks. Overall, the in Afghanistan, the economic base is withdrawal of US and NATO troops security situation in Afghanistan has poor. Transportation, communications, from Afghanistan and reductions in deteriorated since the withdrawal of industry, education and agricultural aid from the international community NATO troops in 2014. infrastructure have been severely have led to a sharp increase damaged, and the scores of several in unemployment. The current Sovereign risk is high. Due to the industries are low. unemployment rate is about 9%. heavy debt burden, pressure on debt repayment is substantial. In April Agriculture: Agriculture and animal Its tax burden score is quite low. 2015, Afghanistan was recognized husbandry is an important pillar Afghan companies have high tax by the IMF and World Bank as an of the Afghan national economy. burdens, with a total tax rate of 71.4%. HIPC. Afghanistan is not rated by People involved in agriculture and There are nine types of tax in the international rating agencies. The livestock account for 85% of the country, among which the income tax National Risk Analysis Report issued by total population. Agricultural farming rate is up to 20%, corporate income the China Export & Credit Insurance techniques are similar to those tax 20%, and capital gain tax 20%. Corporation gave a sovereign credit of China in the 1960s-70s, lacking rating of B3 to Afghanistan. The modern, high-tech facilities. There is Its money supply score is also government is in fiscal deficit. insufficient local food and international low. Broad money supply in 2017 assistance or imports are needed to accounted for 34.5% of GDP, an Business environment risk is high. The address food shortages every year. increase of 4.1%. cost of establishing an enterprise is mid-high, equivalent to about 6.4% IT: Years of war have caused the (4) Risk Indicators of per capita gross national income. industrial base of Afghanistan to Long-term political unrest in Market entry by foreigners and collapse. The country largely focuses Afghanistan has led to instability in its contract implementation are much on light industry and handicrafts. The social and public security environment. harder than in most BRI countries. The communications industry had a low Moreover the government's measures average time to enforce a contract in starting point, but has developed to encourage and safeguard foreign 2017 was approximately 1,642 days. rapidly and become a major foreign investment are not sound. In Corporate executives spend 10% of investment attraction. It is now the general, Afghanistan has significantly their working time on government main pillar of Afghanistan's industrial higher risks in the finance, politics, regulatory issues. In addition, the local and economic development, and sovereignty, business environment, government is inefficient. In 2017, one of the most profitable areas of and foreign exchange than other Afghanistan adopted approaches to government. countries, with political risks improve the business environment, particularly prominent. including new tax management and Transportation infrastructure: legal manuals, clarifying tax audit rules Most facilities have been destroyed Financial risks are high. The Afghan and guidelines, automatic submission due to years of war. Facilities such as banking industry is highly risky of tax returns to improve convenience, roads, railways and air transport are and highly dependent on foreign broadening access to corporate credit, gravely inadequate. Afghanistan is institutions to provide credit. However, and strengthening minority investor vigorously promoting the construction external debt is only 12.9% of GDP. protections. of the Five Nations Railway: China- The reason is that since about 60% Kyrgyzstan-Tajikistan-Afghanistan- of Afghanistan's budget comes Foreign exchange risk is high, mainly Iran; Three Nations Railway: from international aid, the size and because of large exchange rate Tajikistan-Afghanistan-Turkmenistan; conditions of its debt are restricted fluctuations and low openness. In 2017, and the Kandahar-Quetta and by international organizations such as the exchange rate of the afghani against Jalalabad-Peshawar railways between the IMF. Additionally, foreign exchange USD fluctuated significantly. The country Afghanistan and Pakistan. Afghanistan reserves are small at USD7.5 billion. implements the principle of national plans to build 1,425 km of railways treatment for foreign investment, by 2020 and complete a technical Political risk is high. Afghanistan has and foreign exchange control is strict. survey of a further 2,025 km. By 2030, low levels of political stability and a Foreign investors can open foreign Afghanistan will have built 3,000-3,500 challenging legal environment. Its high currency accounts, remit personal and km of railways. By then, 70% of the political risk mainly comes from the company legal income through local traffic problems in Afghanistan should ineffective operation of government banks and handle foreign trade payment be resolved. forces against Taliban militants, settlements. The country's Chinn-Ito with losses of territorial control. In score is 0.

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3. Middle East developed and it has cooperated 1) Israel with Chinese contractors. Overall, (1) Investment Advice China's processing and manufacturing Investment in Israel is very attractive. capacity is strong, so mutually The country has a favorable complementary advantages, macroeconomic environment and bilateral trade and investment low investment risk. Israel's high- prospects are very broad. Chinese tech industry is developed, with companies are advised to pay close many start-ups, R&D and innovation attention to Israel's high-tech sector, capabilities that are prominent intelligence-intensive industries, internationally. In addition, its as well as investment, contracting transportation infrastructure is well and cooperation opportunities in transport infrastructure.

Figure 49: Israel Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile from November to March. The Israel is located in Western Asia, total population of Israel is about bordering Lebanon to the north, 8.71 million. The population is Syria to the northeast, Jordan to the predominantly Jewish, accounting for east, Egypt to the southwest, the about 75% of the total population Mediterranean Sea to the west, and and about 44% of the total number the Gulf of Aqaba to the south. As a of Jewish people worldwide; Arabs result of ongoing territorial disputes account for about 21% of the between Israel and the Arab States, population. The local population Israel now has an area of about 25,000 mainly follows Judaism, with some km2 where it has de facto control. followers of Islam and Christianity. Its national territory is narrow, only 135 kilometers from east to west The official languages are Hebrew and at its widest point, and about 470 Arabic, and English is also common. kilometers long with a coastline of 198 Israel is at the junction of Asia, Europe kilometers. Israel is dominated by a and Africa, and has experienced Mediterranean climate, with hot and many migratory flows, creating a dry summers and mild, humid winters. combination of many cultures and religions. There are only two distinct seasons each year: dry summer from April to October, and rainy winter

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Israel is a member of the WTO and As a result, Israel's labor security Business environment risk is low. Israel the OECD (Organization for Economic and cost scores are high among BRI has the highest level of economic Cooperation and Development). countries. development, freedom of information and overall development in the Middle (3) Macroeconomic Indicators The tax score is also high. The tax East. Despite its scarcity of natural Its scale of economy score is high. burden is low, with total tax on resources, Israel's inclusive approach Israel's economy is well developed, commercial profits of about 26.2%, and investment rapport creates a good mainly due to high GDP per capita, according to the World Bank. Its capital business environment, making foreign with GDP of about USD350.9 billion supply score is high too, with broad access to the local market relatively in 2017 and GDP per capita of money supply accounting for 86.2% of easy. However, contract enforcement USD40,000. GDP and growing at about 5.3%. difficulty is high, taking an average of Overall, the money market is stable. up to 975 days, and the inefficiency of Israel's GDP grew by 3.3% in 2017 the government increases the risk of from 2016 and is expected to grow (4) Risk Indicators doing business. at about 3% in future. Its investment Overall investment risk in Israel is score is high. Israel is highly low. Financial risk is also low. The In 2018 Israel made improvements modernized, with extensive science Israel banking risk assessment index in the following areas: speeding up and technology assets and is attractive is at 0.3, low among BRI countries. access to tax clearance certificates, to foreign investors. FDI amounted to Israel's foreign exchange market, increasing the transparency of land USD18.2 billion in 2017, an increase with its strong economy and global registries and making property of 53% over 2016 and ranking first integration, can cope with substantial registration less difficult; improving among Middle Eastern countries. foreign exchange trading without regulations on weekly working hours, damage to its financial markets, with overtime and maternity leave. Fixed asset investment amounted to total foreign exchange reserves of USD78.1 billion in 2017, an increase about USD115.3 billion. Foreign exchange risk is low. Israel's of 21% from 2016. Its consumption currency, the new shekel (NIS) has a and demand score is high. Israel has Credit provided by Israel's domestic relatively smooth relationship with a small total population but a high financial institutions is equivalent to USD. per capita national income, reaching 79.7% of GDP, and external debt as a USD37,000 in 2017, second only to share of GDP is 24.3%. Israel has a high degree of freedom Qatar and the United Arab Emirates in of foreign exchange, with a Chinn-Ito the Middle East. Its political risk score is low. Israel's index of 1.0. political stability index is at minus At the same time, as a result of the 0.9. because of religious, territorial Israeli government's measures to and other legacy issues, Israel suffers reduce the cost of living, consumer from tension with surrounding Arab price inflation is low, at only 0.2% countries, raising the risk of terrorist in 2017. Its labor security and cost attacks and some risk of political score is higher. The high quality of instability. the labor force is one of Israel's most remarkable advantages, with more However, the Israeli legal system is than a quarter of the local working well formed, with its legal environment population having a university degree index in a leading position among BRI and more than one-tenth having a countries. university degree or above. Among industrialized countries, the level of Sovereign risk is low. Moody's rates education of Israelis' level of education Israel's sovereign credit at A1, a high is the third highest in the world after rating. the United States and the Netherlands respectively. Public debt as a share of GDP is 63.6%, with a small fiscal deficit, 2.7% of GDP.

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(5) Key Industries Energy: Israel's natural resources are In the five key BRI industries, Israel has relatively scarce. Its main resources high ratings in IT and transportation are potassium salt, magnesium, infrastructure, moderate scores in bromine and other minerals from the energy industry and agriculture, and a Dead Sea. Meeting energy needs is low rating in manufacturing. highly dependent on imports. Israel has consistently made advances in IT: Israel's high-tech development energy efficiency and new energy leads the world, with strong academic R&D. More than 100 companies in infrastructure, rich military and Israel have mature technologies for civil research and development the development and utilization of experience, and strong support from renewable energy, involving solar, government and private enterprises. wind, geothermal, biofuels, wave It is the world's third largest investor energy, nuclear and other forms of in high-tech R&D as a proportion energy. It has a leading position in of GDP, after Japan and Switzerland. solar energy, geothermal technology Thanks to Israel's high-tech ingenuity, and other areas, playing an important its highly developed information and role in driving humanity away from its communications industry is one of overdependence on carbon-based the country's leading sectors, with fuels. a complete industry chain, from electronic components to final The outlook for Israel's energy sector equipment and services. is positive.

A large number of emerging IT start- ups have brought a wealth of venture capital investment opportunities to Israel, with many becoming the world's leading companies in their fields.

Transportation infrastructure: Israel has developed transport infrastructure. It has convenient transportation, mainly via land, including more than 18,000 kilometers of roads, as well as more than 1,340 kilometers of railways. In November 2017, China Railway Construction Turkey Group, Shenzhen Metro Group, and Israel's largest bus operator, the Tel Aviv Bus Company, worked together on a winning bid for the Red Line light rail operation and maintenance contract. In February 2018, a joint venture between a wholly-owned subsidiary of China Railway and a group under the Central Railway Electrification Bureau won a general contract project for the Tel Aviv light rail line.

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2) Oman (1) Investment Advice Investment in Oman is relatively attractive as its economy is quite strong and investment risk is low. Investing in its dominant industries, such as oil and gas, is a more robust option. The government of Oman attaches particular importance to environmental and construction safety issues and has developed stringent environmental laws. Therefore, when Chinese enterprises invest in the oil and gas industry, they should fully grasp the characteristics of the market environment and industry rules. In addition to the energy sector, companies are advised to focus on key areas of Oman's transformation, including transport infrastructure, manufacturing, logistics and other non-oil and gas industries.

Figure 50: Oman Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile and Filipinos making up the majority of national economy at about 30% of GDP. Oman has one of the longest histories the expatriate population. Export earnings account for nearly 70% in the Arabian Peninsula. Located at of government revenue. the southeast end of the Peninsula, The local official language is Arabic, bordering the Gulf of Oman and the and English is universal. Oman joined Oman has a moderate investment Arabian Sea, it is a main transit point for the WTO in 2000. It is a member of rating. In 2017, Oman absorbed USD2.9 crude oil, as well as a commercial hub the customs union of the GCC (Gulf billion in FDI and invested USD21.5 connecting the Middle East, India, Africa Cooperation Council). billion in fixed assets, mid-range among and Europe, with substantial location BRI countries. advantages. Oman has a coastline of Oman is also a founding member of the 1,700 kilometers and covers an area Indian Ocean Group and an Arab Free Its consumption and demand score is of approximately 400,000 km2. Oman, trade area. moderate. National income per capita with the exception of its Northeastern is high, at about USD14,000, with Mountains, has a tropical desert (3) Macroeconomic Indicators household final consumption of about climate, with hot and humid summers On the macroeconomic front, Oman USD2.8 billion showing residents have in the coastal areas and hot and dry scores quite low. Oman's GDP was a quite low propensity to consume. The inland areas, while some mountainous about USD72.6 billion in 2017, with a inflation rate last year was about 1.6%. areas are cooler. historical growth rate of 0.3%, largely due to declines in international oil Oman's total imports and exports There are two seasons in Oman, the prices. Future GDP growth is expected accounted for 98.9% of GDP. Its Gini hot season from May to October, with to be about 5%. The Omani people coefficient is 0.5. Its labor security and temperatures as high as 40°C; and the have a good standard of living, with per cost indicator scores are high. cool season from November to April, capita GDP of about USD16,000, one of with an average temperature of about the highest among Arab countries. Oman's level of access to higher 24°C. Oman, with a total population of Oman is a typical resource-exporting education is 47%. 4.64 million, is overwhelmingly Arab, country, with the crude oil and natural with Indians, Bangladeshis, Palestinians gas industry the backbone of the Its tax score is high, with a low tax burden. According to the World Bank,

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total tax on commercial profits in Oman national economy and being the main is about 27.4%. source of national revenue. In 2017, oil and gas industry output was USD21.89 Its capital supply score is moderate, billion, accounting for 29.3% of GDP. Oil with broad money supply accounting production was 350 million barrels, with for 57.6% of GDP and growing at output value of USD18.35 billion and about 4.2%. export volume of 290 million barrels, of which 77% was sold to China. Natural (4) Risk Indicators gas production was 40.91 billion cubic Overall, investment risk in Oman is low. meters with output value of USD3.54 Financial risks are moderate. Oman's billion. banking risk assessment index is at 0.4, low among BRI countries. To meet potential demand for natural gas from domestic electricity Oman has high foreign exchange production and industrial enterprises, reserves of about USD17.5 billion, but and cope with supply shortages that its external debt as a share of GDP is can occur at any time, the Omani 67%, pushing up foreign debt risk. government is stepping up efforts to develop the upstream natural gas Political risk is low, with a political industry and encourage local and stability index score of 0.7. Oman's foreign companies to undertake oil and political situation is stable, society is gas exploration, production, gas-based orderly, and the legal system is sound projects and support services.

Its legal environment index is at -0.4, Transportation infrastructure: quite high among BRI countries. Oman's infrastructure is well developed. Transport costs are low and Moody's gives Oman's sovereign credit it is a very important strategic road hub a Baa3 rating. and port. Road transport is the most important and convenient mode of Public debt as a share of GDP is 50.8%, transport in Oman and, as at the end of and the fiscal deficit is 12.6%. 2017, the total length of Omani tarmac was 62,000 kilometers. The road from The business environment is the capital Muscat to Salala in the south moderately risky. Enterprise is more than 1,000 kilometers long and establishment cost is equivalent to is the longest road in Oman. Oman 3.7% of national per capita income, and has no railways, with railway networks the average time required to enforce a connecting Kuwait, Bahrain, Saudi contract is 598 days, mid-range among Arabia, Qatar, the United Arab Emirates BRI countries. and Oman having been planned for a long time. Foreign exchange risk is low. The local currency of Oman is the Omani real. Oman is conducting an assessment It is fully convertible, with a Chinn-Ito of a planned tender for consultancy score of 1.0. services on a domestic mineral railway project, and plans to build a (5) Key Industries 625-kilometer railway line connecting Among the five BRI key industries, limestone and gypsum-rich mining Oman has high scores in energy, areas including Shuwaymiyah and Manji manufacturing and transportation, and to the port of Du Qom. In the next moderate ratings in agriculture and IT. phase, connections between another wealthy area, Thamrait, and Salala Energy: Oil and gas is the pillar are envisioned as part of the Omani industry of Oman, dominating the national railway network.

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3) Qatar should pay attention to investment global contractors. Because of Qatar's (1) Investment Advice opportunities in this area. In addition, low economic dependence on China On the whole, investment in Qatar is there is substantial investment and China's quite high demand for its very attractive. Its economy is more potential in the infrastructure sector. energy resources, Chinese companies attractive than those of most BRI face greater competition than countries and investment risk is small. Bidding competition for the elsewhere when developing markets Qatar's energy sector is its dominant contracting market in Qatar is very in Qatar. industry, and Chinese companies fierce, with the participation of large

Figure 51: Qatar Investment Attractiveness Score

Economy scale Foreign exchange risk 10 Investment environment 8

6 Business environment risk Consumption and 4 market demand

2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Philippines, as well as Arab countries USD63,000 in 2017. Its investment Qatar is an Arab country in Western such as Egypt, Jordan, Lebanon and rating is high. FDI amounted to Asia, on the western south coast of Syria. USD990 million in 2017, quite low. the Persian Gulf at the Qatar Pen. It has a southern land border with Saudi Arabic is the official local language. Fixed asset investment is extremely Arabia and sea to the east, north and high, however, at about USD88.7 west. Its coastline is 563 kilometers Qatar is a member of the WTO, the billion. Qatar has a high rating in long, with land area of 11,521 km2. Gulf Arab Cooperation Council and the consumption and demand. National Qatar has a tropical desert climate Organization of Petroleum Exporting income per capita is USD60,000, the with two seasons, summer and winter. Countries. Gini coefficient is 0.4 and inflation rate is as low as 0.4%. Summer is from May to October, (3) Macroeconomic Indicators and the weather is hot and humid, On the macroeconomic front, Qatar That said, household final with temperatures from 25-46°C has a very high rating. According to the consumption expenditure and and sometimes reaching more than World Bank, Qatar's GDP was about imports and exports as a proportion 50°C. Winter is from November to USD177.6 billion in 2017, with an of GDP are mid-range, with room for April, with cool and dry weather and economic growth rate of 2.7%. Oil and improvement. temperatures of 10-30°C. gas and the petrochemicals industry associated with it have long accounted Qatar has a moderate rating in Qatar had a total population of 2.64 for more than 50% of Qatar's GDP. labor security and costs. Labor million in 2017, of which approximately supply is strained because of the 15% are Qatari citizens. The expatriate The rapid development of the oil and small population base. More than population accounts for about gas industry has led to high economic 90% of Qatari nationals serve in 85% and is mainly from South and growth in Qatar, making it the world's government departments or state- Southeast Asian countries such as fastest growing economy with the owned enterprises, hence the need to India, Bangladesh, Nepal and the highest per capita GDP, at about introduce a large amount of foreign talent and ordinary labor.

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Qatar's unemployment rate remains government is not efficient, and Transportation infrastructure: low, at about 0.1% in 2017. contract execution is highly difficult. Qatar has relatively complete and The average contract enforcement modern infrastructure including Its tax score is high. Based on World takes about 570 days and the roads, airports and ports. Qatar has Bank statistics, tax on commercial government efficiency score is a total road length of 9,830 km, of profits is 11.3%, a small corporate tax only 0.7. which 1,580 km are trunk roads and burden. 8,250 km are feeder roads, forming In 2018, Qatar made improvements the framework for a nation-wide road Qatar has a high money supply rating, by eliminating the minimum margin network. Qatar has high-grade roads with broad money supply as a share requirement, which makes the to Saudi Arabia, which can be used to of GDP at 99.3%, a growth rate of establishment of enterprises more ultimately reach the UAE. 21.3% and adequate capital supply. Its convenient, and improving access to deposit-loan interest rate difference is loan information. Qatar Air's cargo volume increased only 1.8%. from 1.52 million tons in 2015 to 1.7 Foreign exchange risk is low. The million tons in 2016, up 11.8% YoY, (4) Risk Indicators Qatari currency is the rial, and it uses a making it the third largest international Overall, Qatar has low investment fixed rate of 3.6:1 to USD. air cargo company in the world. risk. Financial risk is also low. Qatar's banking risk assessment index is at In addition, Qatar has adopted a free Qatar's main ports are Hamad, Doha, 0.5, at a good level among the BRI exchange system, with no controls, Lafan and Messeyide. Hamad was countries. Qatar has a high foreign and its Chinn-Ito score is 1.0. officially opened on 5 September exchange reserves of about USD24 2017, with an area of more than billion. (5) Key Industries 28.5 km2 and capacity for 7.5 million Among the five BRI key industries, standard containers. Total investment However, external debt as a share of Qatar's energy, transportation, was USD2 billion, and several elements GDP is 84.6%, so foreign debt risk is manufacturing and IT score highly. Its of the port were built by China Harbor higher. Political risk is low. Qatar is a agricultural score is moderate. Engineering. constitutional monarchy with political stability and good social security, and Energy: Qatar's resources are A new direct route between Hamad there are no anti-government forces. mainly oil and gas. Its main products and Shanghai, the China Gulf Express are liquefied natural gas, crude oil, Line (Shanghai-Hamad), opened Its political stability index is at 0.6, condensate oil, gasoline, polyvinyl on 17 September 2017. The route with a legal environment score of 0.4, chloride, liquefied propane, urea is operated by Yangming Shipping both in the upper echelons among BRI and methanol, with the vast majority Company once a week, with 6,000 countries. of production for export. Qatar containers of capacity, and visits Petroleum Corporation completed Ningbo, Kaohsiung, Xiamen and Sovereign risk is low. Moody's gives the merger and reorganization of Shekou in China, as well as Malaysia's Qatar a sovereign credit rating of Aa3. Qatar Gas and RasGas on 1 January, Klang, before reaching Hamad. 2018, creating a new QatarGas. After Public debt as a share of GDP is 54.4%, the merger, QatarGas will exclusively with a fiscal deficit of -6.2%. manage annual liquefied natural gas exports of 77 million tons. Business environment risk is high. Qatar has a good degree of While Qatar is now seeking economic marketization, but foreign entry transformation, oil and gas-dependent into the market is challenging, the industries remain its mainstay.

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4) Yemen (1) Investment Advice Yemen's investment landscape is less attractive that most BRI countries' due to an unappealing macroeconomic environment and high investment risk. Yemen is very rich in oil and gas resources, but is not a member of any oil organization, so production is highly autonomous. This means it has high investment appeal, but enterprises need to pay special attention to the continued political turmoil in Yemen when investing, as overseas operations could involves great security risks.

Figure 52: Yemen Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile of the Greater Arab Free Trade area. Yemen is one of the least developed Yemen is in the southwestern Arabian Since 2015, the country has been countries in the global economy, Peninsula, adjacent to Saudi Arabia mired in a complex civil war, with rebel with poor living standards and about to the north, Oman to the east and Houthis fighting government forces USD,1000 in GDP per capita. bordering the Red Sea, Gulf of Aden backed by a Saudi Arabia-led coalition and the Arabian Sea, making it an and Islamic State and Al Qaeda taking Its investment rating is low. FDI in 2017 important strategic location. Yemen advantage the conflict. was USD270 million and investment in has land area of 555,000 km2 and fixed assets reached USD4.47 billion, a 2,200 kilometers of coastline. The long civil war has led famine and a low level among BRI countries. humanitarian crisis in Yemen. The mountainous and highland Yemen has a low consumption and regions of Yemen have a milder (3) Macroeconomic Indicators demand rating. National income per climate and sit alongside hot and dry On the macroeconomic front, capita is about USD935, household desert areas. The average annual Yemen's score is extremely low. final consumption spending is about maximum temperature is 39°C and Yemen's economic development USD2.8 billion, indicating quite the minimum is 8°C. Yemen is the is largely dependent on oil export a low propensity to consume. In most populous country in the Arabian revenues. Since 2010, affected by recent years, as a result of the tense Peninsula, with a total population of the international financial crisis and internal situation in Yemen, oil and about 28.25 million. falling oil prices, Yemen's oil export gas pipelines have been repeatedly earnings have fallen sharply and damaged by terrorists, resulting in a The majority of inhabitants are Arabs, economic growth has slowed. The shortage of fuel and electricity. Prices the official language is Arabic and Yemeni economy deteriorated further have also risen, with inflation in 2017 the state religion is Islam. Yemen has in 2015 as a result of the escalation of about 24.7%, and there has been a a history of more than 3,000 years the internal conflict. Yemen's GDP was severe currency devaluation. of written records and is one of the about USD31.3 billion in 2017, having cradles of civilization in the Arab world, been shrinking at a rate of about 6%. with a brilliant history. Yemen joined GDP growth is expected to be the WTO in 2014 and is a member about 3%.

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Yemen's total imports and exports The business environment risk is Yemen's oil and gas industry has account for 14.3% of GDP and it has a high. Tribal politics and culture prevail an open-door policy that allows Gini coefficient of 0.4. Its labor security in Yemen. Tribes, as a relatively international investors to legally and cost indicators are very low. closed system, with Islamic rules and engage in oil and gas exploration Yemen has a small labor force, and tribal practices, are very different and exploitation after signing a although the minimum wage is very from modern societies ruled by law. corresponding production sharing low, it is not suitable for investment in Therefore, foreign investors need to agreement with the Ministry of Oil labor-intensive industries. not only to communicate with the and Mines through a block bidding central government and departments exercise. Yemen also has a low level of in Yemen, but also coordinate with education, with a gross tertiary local governments and tribal forces, Agriculture: Yemen's main enrolment ratio of only 9.8% in 2017. making it extremely difficult for foreign agricultural products are cereals, fruits, Its unemployment rate is 14.2%. businesses to enter the market. vegetables, pulses, curry (an anesthetic extracted from khat), coffee, cotton, Yemen's tax index score is high, with The government is inefficient, with dairy products, livestock, poultry and tax on commercial profits of about a score of 1.9. The average time fish. After oil and gas, fishery is an 26.6%, according to the World Bank. required to enforce contracts is about important industry in Yemen's national 645 days, and the cost of setting up economy. Yemen has more than 2,000 It has a low supply of funds score, new enterprises is equivalent to 118% kilometers of coastline and is rich in with broad money supply accounting of gross national income per capita. offshore aquatic resources, with nearly for 35% of GDP and growing at about 300 species and 1.6 million tons of 16.4%. Foreign exchange risk is high. The potential. The current annual catch is Yemeni currency is the dinar, with an about 100,000 tons. (4) Risk Indicators exchange rate of 0.6% against USD in Yemen has high investment and 2017/18. In addition to local consumption, financial risks higher. Its banking risk Yemeni seafood is mainly exported assessment score is 0.9, low among Yemen has adopted a system of free to Saudi Arabia, Italy, France, Jordan, BRI countries. Foreign exchange exchange, with relatively lax foreign Switzerland, Canada, China, Singapore, reserves are low at only USD1.98 exchange controls and a Chinn-Ito Hong Kong, China, Egypt, the United billion. index of 1.0. Arab Emirates and the United States.

External debt as a share of GDP (5) Key Industries is 34.4%, so external debt risk is Yemen's energy industry and moderate. agriculture score moderately, with low ratings for IT, manufacturing and The political stakes are extremely transportation. high. The Yemeni government is in a transition period, with social instability Energy: Yemen is a typical resource- and several security challenges. Its based country, with oil and gas as political stability index is at -3.0, and its important natural resources. the legal environment index is at -1.5. Recoverable proven oil reserves are about 4 billion barrels, with proven Sovereignty debt risk is high. Moody's natural gas reserves of about 18.5 gives Yemen a sovereign credit rating trillion cubic feet. Yemen is very rich of Caa1. in non-oil resources, including metal ores, mainly gold, silver, lead and zinc. Public debt as a share of GDP is 71%, with a fiscal deficit of -6.9%.

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5) United Arab Emirates (1) Investment Advice Investment in the UAE is generally attractive. The macroeconomic environment is attractive and investment risk is low. Chinese companies are advised to focus on investment opportunities in the UAE energy industry and, in addition to traditional petrochemicals sector, focus on investment opportunities in high-tech markets such as renewable energy and nuclear power. In addition, the UAE's manufacturing sector (especially aluminum, textiles and apparel) and IT have stable production bases and market demand, resulting in huge investment space. At the same time, Chinese companies need to be aware that because the UAE economy is highly open, they will face fierce competition with European and American companies during the bidding phase of a UAE project.

Figure 53: UAE Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile The United Arab Emirates joined the USD63,249 per capita, at the forefront The United Arab Emirates, or UAE, is WTO in 1996 and is a member of among the BRI countries. a federal state of the seven emirates the GCC member States, the Greater of Abu Dhabi, Dubai, Sharjah, Ra's Al Arab Free Trade Area, the IMF, OPEC, GDP is expected to grow at an average Khaymah, Al Fujayrah, Umm Al Quwain the IAEA (International Atomic Energy annual rate of about 3%. and Ajman. The capital is Abu Dhabi. Agency), the Asian Infrastructure The UAE is in the eastern Arabian Investment Bank and other Its investment indicators score are Peninsula, bordering the Persian Gulf international multilateral organizations. also high. In 2017, the UAE absorbed to the north, with a coastline of 734 foreign capital flows of USD10.4 billion, km. The west and south border Saudi (3) Macroeconomic Indicators an increase of 8% YoY, with fixed asset Arabia, the east and northeast are The UAE has among the highest levels investment of USD100.7 billion. adjacent to Oman and the northwest of economic openness in the Middle is adjacent to Qatar. East and Gulf states, with higher Its consumption and demand score scores in macroeconomic indicators. is high, too. The UAE's foreign trade The UAE has a total area of about is highly prosperous, with total 83,000 km2. As of 2017, the UAE With its stable political situation, imports and exports accounting for had a population of 9.4 million, with relaxed business environment and 172.8% of GDP in 2017. With steady Arabs accounting for 87% and other developed infrastructure, the UAE economic growth in recent years, ethnic groups accounting for 13%. has become a haven for regional national income per capita amounted The national population accounted capital flows and logistics, and is an to USD39,130 in 2017, and household for about 11.5% and the expatriate important trade, finance and logistics final consumption expenditure population about 88.5%. The foreign hub in the Middle East and the Gulf. amounted to USD133.6 billion, population is mainly from India, accounting for about 74% of total Pakistan, Egypt, Syria and Palestine. Its scale of economy score is high. The social final consumption. Most of the residents follow Islam. The UAE's GDP was about USD382.6 billion official language is Arabic and English in 2017, up 1% from a year earlier, and is widely spoken.

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Prices have remained stable in recent Sovereign risk is low. Moody's has a Manufacturing: Aluminum refining years, with inflation of 2% in 2017. stable outlook on the UAE's sovereign is one of the main non-oil industries credit, with a rating of Aa2. in the UAE. In June 2013, the UAE's Its labor security and cost indicators two aluminum giants, DUBAL (Dubai score highly. The UAE had a Public debt is low, accounting for only Aluminum) and EMAL (Emirates population of 6.5 million in 2017, of 20.8% of GDP in 2017. Aluminum), announced their merger which foreign workers dominated, to create a company with combined accounting for 90% of the total. The Business environment risk is also assets of AED55 billion (about USD15 unemployment rate was 1.7% in 2017 low. The UAE's scores for contract billion), becoming the world's fourth and is within reasonable limits. performance and ease of business largest aluminum company. entrance rank near the top among BRI However, education in the overall countries, although the cost of setting In plastics, November 2019 saw the labor market is low, limiting the up a business is equivalent to 22.8% UAE's ADNOC and Denmark's Borealis development of high-end industries. of national per capita income, slightly establish the world's sixth largest high. polyolefin company (Borouge). By Its tax burden scores well. To the end of 2017, the company had encourage foreign investment, the Government efficiency is high and the reached 4.5 million tons of production, UAE taxes lightly, creating one of the overall business environment is good. making it the world's largest single-site, most preferential tax environments integrated polyolefin production base. among BRI countries. Based on World There is low foreign exchange risk. The Bank statistics, the country's total tax UAE implements an open monetary The textiles and garments industry level on commercial profits is 15.9%. policy with a very high degree of accounts for 10% of the UAE's gross freedom of foreign exchange. domestic product and is the second Capital supply indicators also rate largest export. highly. In 2017, broad money supply The exchange rate of the national accounted for 91% of GDP, and was currency, the dirham, has remained IT: UAE network infrastructure growing at about 4.1%. The domestic stable. construction is quite advanced, and deposit and loan interest rate telecommunications network maturity difference is 3.5% and the money (5) Key Industries is high. As of the end of July 2017, the market is stable. Among the five BRI key industries, total number of subscriptions to UAE energy, manufacturing, IT and Telecom services (including mobile, (4) Risk Indicators transportation industry score highly, landline and internet businesses) Overall, investment risk in the UAE is and the agricultural score is low. amounted to 23.36 million, according low, as is financial risk. to the UAE Telecommunications Energy: The most important Authority. The UAE has a high degree In 2017, the credit provided by resources in the UAE are oil and of internet use per capita, ranking domestic UAE financial institutions gas, with proven oil reserves of 97.8 first among Middle Eastern countries. was 10.8% of GDP, and it had foreign billion barrels (about 13.3 billion tons) According to a study published by the exchange reserves of USD89.79 billion, and proven natural gas reserves of World Economic Forum in 2016, the at the forefront of BRI countries. about 6.1 trillion cubic meters. Oil UAE's telecommunications network and gas production occupies a key ranks 26th out of 139 countries and Political risk is low. The UAE has a position in the UAE economy. There first its region. stable political situation and good are successful Chinese investment social security. Especially since the cases in the petrochemicals industry, In communications, China's outbreak of the international financial including Sinopec's involvement in Huawei and ZTE have become crisis and regional turmoil, the UAE the UAQ gas field project. The project major communications equipment has become a safe haven for regional has cumulative investment of about suppliers to the UAE, and their capital flows and logistics, and its USD100 million, with an expected peak successful investments have earned regional trade, finance and logistics daily gas supply of 80 million cubic feet a good reputation locally for Chinese hub has strengthened its position. and a life of 25 years. companies, creating an opportunity for other Chinese companies with technological advantages to invest in relevant fields in the UAE.

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6) Lebanon (1) Investment Advice Overall, investment in Lebanon is less attractive than elsewhere, with moderate macroeconomic attractiveness but substantial investment risk. Lebanon has worked in recent years to improve local infrastructure, but the government's financial resources have been unable to support the implementation of large-scale projects, creating large funding and technology gaps. We recommend Chinese companies pay attention to investment opportunities in Lebanon's infrastructure sector, particularly transport infrastructure. In addition, enterprises interested in investing in Lebanon need to pay attention to the complex local political environment, frequent local conflicts, and tensions between some neighboring countries, ensuring strong risk assessment, market research and security precautions.

Figure 54: Lebanon Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile East-West communication. The main drivers of Lebanon's Lebanon is in Southwestern Lebanon's services are well developed, economic growth are finance, real Asia, on the eastern coast of the with finance, tourism, trade and estate and tourism. Mediterranean, adjacent to Syria to the remittances the four pillars of its north and east and bordering Israel to economy. The Lebanese appreciation However, owing to instability in the the south. of doing business is deeply rooted and region in recent years, the Syrian the private economy is well developed. refugee issue and resulting resource The land area is about 10,000 km2 and constraints and social security the coastline is 220 km long. Lebanon Lebanese businesspeople are strong challenges, the Lebanese economy had a population of 6.08 million in in trade, keen to engage as agents and faces multiple challenges. 2017, and main ethnic group is the intermediaries across the world, with Lebanese, accounting for 95%, with many of them active in the Middle East, Its investment indicators scored Armenians accounting for about 4%. Africa, South America and elsewhere. moderately, with USD9.85 billion Arabic is the official language and invested in fixed assets in 2017, French and English are common. (3) Macroeconomic Indicators quite low. Some 60% of the population follow Lebanon's macroeconomic indicators Islam and 40% are Christian. are mid-range among BRI countries. Its consumption and demand Its scale of economy score is low. ranking is low. Imports and exports Lebanon is a member of the WTO Lebanon GDP was about USD53.6 as a share of GDP in 2017 were and the Greater Arab Free Trade billion in 2017, up about 1.5%, but 67.9%. Household final consumption area. Its unique geographical location its economy is smaller than many expenditure in 2017 was USD46.9 and historical evolution, as well as BRI countries. However, because of billion and the Gini coefficient was modern French rule and other factors, its small population, GDP per capita 0.6, representing a large income gap have created a blend of traditional reached USD8,808 in 2017, among residents. Lebanese Arab culture and modern ranking highly. Western culture, become a conduit for

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The cost of living is generally high a unique political system based on sectors have moderate ratings, and due to a dependence on consumer sectarian decentralization, and religion the scores for energy, agriculture goods imports in the Lebanese has a very important influence on and manufacturing are low, with no market, with high housing prices in the political and social life. outstanding performance among the capital, Beirut, and even greater use five industries. of transportation and public facilities Due to religious, political and historical there than in New York. factors, and the overall situation in the The Lebanese economy is dominated Middle East, including conflict among by services, which account for about Its labor security and cost is mid- major powers, having a substantial 70% of GDP. Major industries include range among BRI countries. Lebanon impact on the political situation in the financial sector, real estate attaches importance to education, and Lebanon, Lebanese party relations and tourism. the overall quality of education and are complex, government turnover is literacy are high. It has more high- frequent, and the legal system needs Lebanon's 15-year civil war and the quality professionals than other Middle to be improved. Israeli-Palestinian conflict, which Eastern countries, but has a serious erupted in the summer of 2006, brain drain, with many people traveling As of 2018, S&P rates Lebanon's have caused enormous damage to the Gulf countries for employment. sovereign credit at B3. Lebanon is a to Lebanon's infrastructure. The moderately middle-income country, government lacks sufficient funds It had a labor force of only 2.23 million but as a result of prolonged war and to improve local infrastructure, so in 2017, absorbing a group of Syrian severe damage to infrastructure, large infrastructure construction is refugees, with a high unemployment post-war reconstruction has put a more dependent on foreign loans rate of 6.7%. large debt burden on the government and aid. With the stabilization of and a fiscal deficit has been in place the domestic political situation, to Its tax index score is better. The total for years. Lebanon's public debt as a improve infrastructure development tax on commercial profits in Lebanon share of GDP reached 156.1% in 2017, the Lebanese Development and is 31.1%. However, for foreign and the fiscal deficit was Reconstruction Commission, together investment, Lebanon provides tax USD9.7 billion. with government departments, has incentives and exemptions based on launched a series of infrastructure the type of investment and its location. The business environment is highly projects to provide opportunities for The tax concessions are greater in risky, and the 2017 government Chinese investors and contractors IT, telecommunications and media, efficiency score is -0.5, low among BRI interested in participating in the tourism, agriculture, industrial projects. countries. Enterprise establishment development and reconstruction of cost is equivalent to about 40% of Lebanon. Its capital supply scores are high. national per capita income, and Lebanon's broad money supply level contract enforcement takes about Following the adoption of the PPP in 2017 accounted for 258% of GDP, 721 days. (Public-Private Partnership) Act in the highest among BRI countries, September 2017, the government with a domestic deposit and loan Foreign exchange risk is moderate. launched a large-scale investment interest rate difference of about 1.2%, Foreign exchange freedom is better plan to boost Lebanon's infrastructure conducive to the release of investment than elsewhere, with the Lebanese capacity. Involving transportation, demand. pound having remained stable energy, telecommunications, water for a long time, and circulated treatment and multiple other fields, (4) Risk Indicators simultaneously with USD. Lebanon is with a total of more than 200 projects, Overall investment risk in Lebanon is the financial center of the Middle East, the project aims to raise USD16 high. Financial risk is low. and its banking sector leads billion in three phases over 12 years. the region. At the CEDRE conference in Paris in Its domestic financial institutions April 2018, Lebanon raised USD11 provided credit worth 198.3% of GDP This relatively open and stable financial billion in financial assistance from the in 2017, and external debt as a share market has created a decent financial international community. More than of GDP was only 54.5%. environment for foreign investment. 60% of the projects will be completed through PPP. There is high political risk in Lebanon, (5) Key Industries with low scores in political stability Among the five BRI key industries, Lebanon has large space for and legal environment. Lebanon has Lebanon's transportation and IT infrastructure investment.

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7) Saudi Arabia (1) Investment Advice Saudi Arabia has high investment and macroeconomic attractiveness, with relatively low investment risk. It is actively seeking transformational development, with enormous investment potential in traditional energy and emerging areas (such as electricity, electromechanical equipment, heavy industry and electronics).

Figure 55: Saudi Arabia Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile (3) Macroeconomic Indicators Saudi Arabia has a high rating in labor The Kingdom of Saudi Arabia is located On the macroeconomic side, Saudi security and costs. in the Arabian Peninsula, east of the Arabia has a lower rating. According Persian Gulf and west of the Red to the World Bank, Saudi GDP was The government emphasizes national Sea, bordering Jordan, Iraq, Kuwait, about USD686.7 billion in 2017, with science and technology development, the United Arab Emirates, Oman and a historical growth rate of 0.9%, and investing heavily in higher education. Yemen. Located at the intersection future GDP growth is expected to be Gross enrollment ratio of tertiary of the three continents of Asia, Africa about 2%. education reached 73.7% in 2017. and Europe, the land area is 2.25 million km2. The western plateau of Saudi Arabia's GDP per capita was Saudi Arabia's total labor force in 2017 Saudi Arabia has a Mediterranean about USD20,000 in 2017. was 1.4 million, with an unemployment climate, while the rest of the region is rate of 5.4%. subtropical desert. Its investment raking is high Saudi Arabia. FDI was USD1.42 billion in Its tax burden score is high, with total Summer is hot and dry, and the 2017, and fixed asset investment was tax on commercial profits of 15.7%. maximum temperature can reach about USD160 billion. more than 50°C. The winter climate Saudi Arabia has a low rating in supply is mild. Saudi Arabia has a total In consumption and demand, Saudi of funds, with broad money supply population of 32.94 million, of whom Arabia rates highly. National income as a share of GDP only 70.3% and about 67% are Saudi citizens. per capita is high at about USD20,000; growing at just 0.2%. Its deposit and household final consumption loan interest rate gap is large at 5.7%. The state religion is Islam and the expenditure in 2017 was USD283.6 official language is Arabic. billion and consumer demand was (4) Risk Indicators robust. There was deflation of -0.8% in Overall, Saudi Arabia has relatively Saudi Arabia, the largest economy and 2017, which could become a trend. low investment and financial risk. The consumer market in the Middle East, is banking risk assessment index is at the birthplace of Islam and a member In addition, Gini coefficient, imports 0.4, among the best BRI countries. of the WTO, OPEC and the Group and exports as a proportion of GDP, Saudi Arabia has high foreign of 20. and other indicators, are mid-range exchange reserves of about USD506.4 amoung BRI countries. billion.

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Its external debt as a share of GDP is Energy: Saudi Arabia, known as the project expected to complete and be 27.6% and its external debt risk is low. Oil Kingdom , is rich in oil and gas handed over within two years. The resources, with proven oil reserves of Mecca Metro project is an important Political risk is moderate. Saudi 264.2 billion barrels, close to a fourth part of the JPTP (Jeddah Public Arabia's political stability index is at of the global total (1.1477 trillion Transport Project), with investment -0.6, the legal environment index is 0, barrels). Proven natural gas reserves expected to be as high as USD5 billion both mid-level among BRI countries. are 235 trillion cubic feet, ranking and design work now 30% complete. fourth in the world. In addition, there Moody's raised Saudi Arabia's are a wealth of mineral resources, The Ministry of Transport of Saudi sovereign credit rating to A1 in 2017, including gold, copper, iron, tin, Arabia intends to increase the as public debt to GDP declined to just aluminum, zinc and phosphate. contribution of the private sector to 20.7%. However, Saudi Arabia has a the development of railway operations fiscal deficit of 8.8%, underperforming The oil and petrochemicals industry to 50%, encouraging participation in other BRI countries. is the lifeblood of Saudi Arabia, large-scale transport projects such as accounting for 75% of the country's the Riyadh Metro. Business environment risk is revenue and 45% of GDP. quite high. Government efficiency, IT: According to statistics released by enterprise establishment cost and In 2017, the Saudi petroleum and the communications agency, Saudi contract fulfillment difficulty score petrochemicals industry contributed Arabia had more than 53 million moderately, but foreign investor entry SAR732.9 billion (USD195.4 billion), or mobile subscribers at the end of 2017, into the market is quite difficult. 28% of GDP. The main products are with a penetration rate of 171%; fixed crude oil and petrochemical products, telephone communication subscribers Saudi Arabia made improvements in with current year exports of USD170.2 had reached 4.63 million, an increase 2018 in the following areas: improving billion (including oil and refined of 9% with a 16% penetration rate. the quality of services through products). However, network construction in compensatory incentive schemes, and Saudi Arabia is not very advanced, ensuring the reliability of electricity Petrochemical refining is one of the creating a huge demand gap. supply; enhancing the protection of key areas of development in Saudi small and medium-sized investors; and Arabia. Although Saudi Arabia has Saudi Arabia is one of the most making imports and exports easier the world's largest reserves of oil, its competitive telecoms markets in the by enabling new electronic single oil processing capacity is weak. This, region, with annual revenue of about windows and extending customs alongside China's wealth of oil refining USD18.35 billion, ranking 14th in the opening hours. experience and mature technology, world and 1st in the Middle East. With means there is great potential for the ongoing implementation of the Contract execution difficulty has cooperation. Saudi Smart City plan, Saudi Unicom's eased. development project continues to Transportation infrastructure: grow, and the telecommunications Foreign exchange risk is low. The Saudi The government of Saudi Arabia industry will demand more technology Arabian rial can be freely converted strongly supports the construction of and investment in future. with USD at a stable exchange rate transport infrastructure. In 2016, the of about 3.8:1. As well as the free Arab states of the Persian Gulf set out Saudi Arabia has issued full business exchange system, the government plans for USD2,400 trillion in railway licenses for foreign investment for does not apply foreign exchange project contracts, within which Saudi two Chinese enterprises, Huawei and controls, and Saudi Arabia's Chinn-Ito Arabia planned the largest number of ZTE. In recent years, Huawei's branch index is at 1.0. projects and the highest investment. in Saudi Arabia has grown rapidly to So far, Saudi railway projects have become its largest overseas branch, (5) Key Industries reached nearly USD130 billion in value, fully demonstrating Saudi Arabia's Among the five BRI key Industries, accounting for about 50% of total huge investment potential in this Saudi Arabia's scores are high in contracts under multi-state program. market. energy and transportation, moderate The Riyadh Metro project has a total in IT and agriculture, and low in cost of USD22.5 billion. Six subway manufacturing. lines are under construction, and progress has reached 48%, with the

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8) Jordan (1) Investment Advice Investment in Jordan is quite attractive. Its scale of economy score is low, but so is investment risk. There are no significant investment highlights, but the local government's focus on building transport networks, involving subways, airports, ports and many other areas, is expected to enhance demand for transport-related investment and technical assistance (cooperation), with greater investment space for Chinese companies with experience in overseas infrastructure.

Figure 56: Jordan Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile (3) Macroeconomic Indicators More than half its foreign investment Located in Western Asia, in the Jordan has a low macroeconomic rating. comes from Arab countries, followed northwest Arabian Peninsula, Jordan GDP was about USD40.1 billion in 2017, by European and American nations. is ideally located at the crossroads with a historical growth rate of 2% and Industry, transportation and tourism of trade routes linking Asia and expected GDP growth of about 2.5%, are the main investment areas. Europe. Western Jordan is close to according to the World Bank. Jordan's Israel and Palestine, the north is GDP per capita was about USD4,130 in Jordan has a low consumption and connected to Syria, the northeast 2017. demand rating. GDP per capita was borders Iraq, and the south-east and only USD3,980 in 2017, and household south are connected to Saudi Arabia. Because of Jordan's lack of agricultural final consumption expenditure was The southwest adjoins the Red Sea. land and water resources, most of the USD31.6 billion. Inflation was 3.3% Jordan's territory covers 89,000 km2. necessities of life need are dependent in 2017, with imports and exports on imports, so it has a huge trade accounting for 93% of GDP. The Western highlands of Jordan have a deficit and prices are vulnerable to mild, subtropical Mediterranean climate sharp fluctuations. Most of Jordan's Its Gini coefficient is 0.4, mid-range with an average temperature of 7-14°C exports are of resources such as among BRI countries. in January, 26-33°C in July and deserts phosphate and uranium deposits. It to the east and southeast. Jordan had a has a low level of strategic resource Jordan has a very low labor security population of about 9.7 million in 2017, reserves. and costs rating. The total labor force 98% of whom are Arabs, with a small was only 2.5 million in 2017 and the number of Circassians, Turkmen and The growing problem of local unemployment rate was as high as Armenians. government debt, coupled with the 14.7% . proliferation of refugees, has increased The state religion is Islam. The official the economic burden on Jordan. The level of education in 2017 was language is Arabic, and English is widely 34.3% and the quality of the labor spoken. Jordan has a low investment score. FDI force was not high. was USD2.03 billion in 2017, and fixed asset investmet was USD8.5 billion.

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Jordan scored moderately in tax Jordan made improvements in 2018 Transportation infrastructure: burden. According to World Bank in the following areas: improved Jordan's key construction and planning statistics, total tax on commercial access to loan information; enhanced objectives are to improve and upgrade profits is 28.6%. protection for small and medium-sized the basic transport network, improve investors, including through improved the efficiency of land transport, and Jordan's supply of funds rating is corporate transparency; easier tax build Akaba Port into a logistics hub higher, but the supply of funds is payments through the introduction of for Iraq and Syria, with major projects insufficent. Broad money supply as a an online filing system; and improved including New Town construction, the share of GDP is 121%, but it shrank contract execution. Amman Metro, a rapid transit system, by 0.7% in 2017. Its deposit and loan the National Railway, three major interest rate gap is large at 4.9%. Foreign exchange risk is low foreign. airports, and Aqaba Xingang. The local currency of Jordan is the (4) Risk Indicators Jordanian dinar, which is freely During 2018-2022, Jordan's total Overall, investment and financial risks convertible with major international investment in transport is expected to in Jordan are moderate. common currencies such as USD, reach JOD2.7 billion (USD3.81 billion). GBP, and EUR. Its Chinn-Ito index is Jordan's banking risk assessment is at at 1.0. Exchange rate fluctuations are IT: Telecommunications is Jordan's 0.5, with foreign exchange reserves relatively small. third largest industry, and the of about USD15.4 billion and external market is quite open, with two debt as a share of GDP at 74.3%, mid- Jordan has pegged its currency to mobile operators and one integrated low among BRI countries. USD since 1995, and although it did operator. According to the Jordan not implement a fixed exchange rate Bureau of Statistics, in 2016 Jordan Political risk is moderate. Jordan's system, the dinar has remained at had 39 telephones per thousand political stability Index is at -0.5, and 1:1.4 against USD. people and 69.2% of households with the legal environment index is at 0.1. access to network services. Jordan's (5) Key Industries ICT (information and communications Unrest in the Middle East, particularly Jordan's agriculture and transportation technology) industry accounted for the years of war in Syria and Iraq, the industry score moderately, with 12% of GDP in 2017, according to the spread of al-Qaeda and Islamic State, manufacturing, IT and energy posting Jordan Communications Technology the growing influx of Syrian refugees low ratings. Overall, Jordan is weak Association. At present, Jordanian and increased security pressure on in the five key BRI industries, but ICT companies invest four times the Jordan, have led to longstanding according to Jordan's Vision 2025 average investment among Middle political instability in Jordan. plan and the Jordanian Economic East countries, and the industry Growth plan 2018-2022, its attracts average annual investment of Moody's rated Jordan's sovereign government intends to vigorously USD1.5 billion, creating 84,000 jobs. credit at B1 in 2017, with public promote development in various debt accounting for 93.5% of GDP sectors, including transportation, Jordan's total investment in and a fiscal surplus of 6.6%, poor telecommunications and telecommunications is expected to performance compared to other BRI construction. The transportation and reach JOD430 million in 2018-2022, countries. telecommunications sector is expected mainly comprised of government to grow by 12% in the next five years, investment, covering 11 projects with a Business environment risk is high. with construction growing 15%. focus on digital Jordan, e-Government Jordan's government efficiency score is and network information security. moderate, but it is difficult for foreign As a result, Jordan has some potential investors to enter the market, and for development in infrastructure. contract performance is a challenge, with 642 days the average time required to enforce a contract and a high cost of establishing an enterprise.

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9) Kuwait and Chinese investors should keep extensive overseas construction (1) Investment Advice an eye on it. At the same time, the experience. In addition, the Investment in Kuwait is attractive, with government has vigorously promoted government emphasizes the strong economic attractiveness and the construction of municipal development of a diversified economy low investment risk. and transport infrastructure, and and focuses on the development encouraged foreign investors to of finance, trade, tourism and other Kuwait's energy industry (especially participate, releasing positive signals industries, within which Chinese oil, gas) is its traditionally dominant, to contracted enterprises with enterprises can also pay attention to investment opportunities.

Figure 57: Kuwait Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Kuwait takes Islam as the state religion Foreign trade occupies an important Kuwait is in Western Asia, northeast and Arabic as its official language. The position in the Kuwaiti economy. of the Arabian Peninsula, on the capital of Kuwait, Kuwait City, on the The main export commodities are northwest side of the Persian Gulf, south bank of the Gulf of Kuwait, is the petroleum and chemical products, bordering Iraq to the west and north, most important deep-water port on with oil exports accounting for 95% of Saudi Arabia to the south, the Persian the east coast of the Arabian Peninsula total exports. Gulf to the east and facing Iran across and is the political, economic and the sea. Kuwait covers an area of cultural center of the country. Imported goods include machinery, approximately 18,000 km2 (including transport equipment, industrial the north-east corner of the Arabian Kuwait is a member of the WTO and products and food. Peninsula and the islands of Bubitin the GCC, and its overseas markets and Feleke). Kuwait has a tropical are dominated by its trading partners, Kuwait has a moderate investment desert climate with long, hot summers, namely the Arab states of the Persian rating. FDI is minimal, at USD110 reaching 51°C in the shade at its Gulf and the Arab States of Africa. million in 2017, but investment in fixed hottest, and 80°C in direct sunlight. assets is higher, at about USD42.5 Winter is wet, rainy, and short. (3) Macroeconomic Indicators billion. Kuwait has a moderate The average temperatures in macroeconomic rating. According to It scores higher in consumption and January and July are 12°C and 34°C, the World Bank, Kuwait's GDP was demand, with high per capita income, respectively. Kuwait has a population about USD120.1 billion in 2017, with a at USD31,000 in 2017, and moderate of about 4.14 million, of which Kuwaitis historical growth rate of 2.9%. Future household consumer spending of account for about 30%, with about GDP growth is expected to be about USD52 billion. 70% expatriates. 5.3%. GDP per capita was about USD29,000 in 2017.

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Its inflation rate in 2017 was 2.2%, current system, the consolidation According to the United Nations and imports and exports accounted of their status and royal power, the Conference on Trade and Statistics, for 98% of GDP, quite high among BRI adoption of a series of measures to Kuwait exported USD30.56 billion in countries. resolve social contradictions, maintain oil, petroleum products and related political stability and achieve the raw materials in 2017. Kuwait has a low rating in labor healthy functioning of society. security and costs. The total labor Transportation infrastructure: force was 2.27 million in 2017 and the Government sovereignty risk is low. Kuwait's transport infrastructure unemployment rate was 2% . Kuwait's Moody's gave Kuwait a sovereign is relatively complete, and well gross tertiary enrolment was 29.2% in credit rating of Aa2 in 2017, with public developed, but with economic 2017 and the quality of the labor force debt accounting for 33% of GDP and a advances, population growth, local was quite low. deficit of 7.2%. transportation, housing and medical problems are becoming increasingly Kuwait scores well on tax, with a The business environment is prominent. light tax burdern of about 13% on somewhat risky. Its government commercial profits, according to the efficiency and contract fulfillment The government is stepping up World Bank. This indicator is superior scores are moderate, foreign market efforts to implement infrastructure to those of most target countries. entry is quite difficult, but the projects, including several urban road enterprise establishment cost is low. construction and renovation projects Kuwait scores well in supply of funds. that will be or are being implemented; General money supply as a share Foreign exchange risk is low. The local 60 wharf construction projects in the of GDP is 102%, the growth rate is currency of Kuwait is the dinar, which Kuwait Silk City Plan, with the port 3.8% and the supply of funds is good. is freely convertible. Its Chinn-Ito package now under construction. In Its deposit and loan interest rate score is 0.7. Statistics from the Central 2016, Kuwait established an inter- difference is moderate at 3.1%. Bank of Kuwait show the Kuwaiti dinar ministerial coordination committee strengthened slightly against USD in to promote the construction of (4) Risk Indicators 2017. development planning projects, Overall, investment and financial risks including the Northern Five Islands in Kuwait are low. Kuwait's banking The Kuwaiti currency has been pegged project. risk assessment index is at 0.4, with to a basket of currencies, reducing its foreign exchange reserves of about exchange rate fluctuations. In recent years, as international oil USD33.1 billion and external debt prices have continued to fall, the as a share of GDP at 41.3%. Kuwait's (5) Key Industries Government of Kuwait has introduced financial sector is well developed, and In the five BRI key industries, Kuwait PPP to expand project financing some banks have expanded their has high scores in energy and channels, encouraging projects to operations to other Gulf and Middle manufacturing, and moderate ratings be implemented using PPP models Eastern countries. The National Bank in transportation, agriculture and IT. and foreign investors to participate in of Kuwait operates in Lebanon, Jordan, construction. Iraq, Egypt, Bahrain, Saudi Arabia, the Energy: Kuwait is rich in oil and gas United Arab Emirates and Turkey. reserves. It has proven oil reserves of 104.9 billion barrels, ranking 5th in Political risk is moderate. Kuwait's the world. Natural gas reserves are political stability index is at -0.04 and 1.8 trillion cubic meters, ranking 19th the legal environment index is at -0.06. in the world. The oil and gas industry Kuwait's politics are largely stable. is the main pillar of Kuwait's national Kuwait is the hereditary Emirate of economy. At constant prices, the oil the monarch and the Emir is head of and gas industries accounted for state and supreme commander of KWD21.46 billion (about USD70.73 the armed forces. In 2013, the Emir billion) in 2017, accounting for 54% announced the maintenance of the of GDP.

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10) Iraq investment risk. Its oil and natural gas However, Iraq's infrastructure (1) Investment Advice resources are abundant, with related construction lags behind, investment Overall, investment in Iraq is not very industries quite developed, creating risk is high and multiple factors attractive, as the country has low high investment value in the energy cause instability in the business economic attractiveness and high sector. environment, so Chinese enterprises need to make prudent investment decisions. Figure 58: Iraq Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Its natural gas proven reserves of 3.2 Iraq's consumption and demand Iraq is in Southwestern Asia, to the trillion cubic meters account for 1.7% ratings are moderate. Total imports north of Turkey, east of Iran, west of the world's total, ranking 12th in the and exports accounted for 76% of GDP of Syria and Jordan, south of Saudi world. in 2017. National per capita income is Arabia and Kuwait, and southeast USD4,630. Household final consumer of the Persian Gulf. Iraq's territory (3) Macroeconomic Indicators spending is higher, at about USD119.5 covers an area of about 438,000 km2. Iraq's economic score is low. Several billion. The Gini coefficient is 0.5. The coastline is 60 km long and its major wars in recent years have had a territorial sea is 12 nautical miles wide. huge impact on Iraq's economy. After Inflation is low, at 0.2% . the war in Iraq, the task of economic The mountainous regions reconstruction was heavy. However, Iraq's labor security and costs score is of northeastern Iraq have a progress in economic reconstruction low. Low levels of education and high Mediterranean climate. The rest of the has been slow owing to the precarious unemployment remain a problem in region is tropical desert. security situation and grave damage to Iraq, with an unemployment rate of infrastructure. Iraq's GDP in 2018 was about 8.2% in 2018. As of the end of 2017, the total USD225.91 billion, and GDP per capita population of Iraq was 38.27 million, was about USD5,000. Its tax score is moderate, as Iraq has a of which Arabs accounted for 78%. moderate tax burden, with total tax on The official languages are Arabic and Iraq's GDP is growing at a rate of 2.1%, for commercial profits of about 30.8%, Kurdish, with 95% of the country and is forecast to grow by 6.3% over according to World Bank statistics. following Islam and a few following the next three years. Its financial supply index score is low. Christianity or Judaism. Broad money supply, which accounts Its investment score is low. for only 40.8% of GDP, is growing at Iraq's geographical conditions are 2.6%. The domestic deposit and loan superior, with very rich oil and natural OFDI (outbound foreign direct interest rate difference is 9%. gas resources making the oil industry investment) in 2018 was USD5.02 the main pillar of the economy. With billion, contributing to a net outflow Overall, money supply is quite tight. 142.5 billion barrels of proven oil of foreign investment; the amount reserves, it accounts for about 9% of invested in fixed assets was larger, at the world's total reserves and ranks about USD51.37 billion. 5th in the world.

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(4) Risk Indicators (5) Key Industries Iraq's overall risk assessment index Among the five BRI key Industries, is low and investment risk is high. Iraq's energy sector scores highly, Financial risks are also high, with a but the scores for IT, transportation, banking risk index score of 0.6. Credit agriculture and manufacturing are low. provided by Iraq's domestic financial institutions is low as a proportion Energy: Iraq's has very rich mineral of GDP, at just 18.2%. Iraq's external resources, especially oil and gas debt as a share of GDP is also low, at reserves, with the oil and gas industry 32.5% . having consistently dominated the national economy. Iraq's crude oil Foreign exchange reserves are decent, reserves are second only to Saudi totaling USD54.06 billion. But political Arabia's and Iran's, ranking third in risk is high. Government stability and the world and accounting for 9.6% of legal system development both have global reserves. It has proven natural low scores. gas recoverable reserves of 3.2 trillion cubic meters, accounting for 2.4% There are growing sectarian and ethnic of the world's total. The oil and gas divisions in Iraq, with weak central industry is one of the few valuable government and tensions with local areas of investment in Iraq. The Iraqi Kurdish local governments creating National Investment Commission's heightend political risk, and a serious reconstruction and investment plan, security threat. released in January 2018, proposed 11 oil projects, including five refinery Moody's rates Iraq's sovereign credit at plants, five oil storage areas and a Caa1. The Iraqi government is in a tight seawater supply project, as well as 30 financial situation, affected by falling fertilizer, cement, chemicals, glass and international oil prices. Iraq's national other industry projects. fiscal deficit accounted for 11% of GDP in 2018, with government debt as a Agriculture: Iraq's agricultural score share of GDP at about 5.3%. is weaker than other BRI countries, but it still occupies an important position Given Iraq's abundant oil resources, in the national economy. Arable land its long-term solvency is relatively accounts for 27.6% of Iraq's total land secure. Its business environment area, and agricultural land is heavily score is low, mainly due to difficulty dependent on surface water, mainly for foreign investors entering the local concentrated in the lands between market and the high cost of setting up Dijlah, Nahr and Al Furat. Irrigated an enterprise. Contract performance agriculture in these lands has a history is moderately difficult in Iraq and the of thousands of years. The main government is somewhat efficient. agricultural products are wheat, rye, barley, rice, cotton, tobacco, temperate Foreign exchange risk is high. The local fruits and dates. The agricultural currency, the dinar, is quite stable population accounts for one-third versus USD, with effectively no change of the total population, although in exchange rate in 2017/18. Iraq is not self-sufficient in food. The January 2018 Iraq Reconstruction However, foreign exchange freedom & Investment plan proposed 88 between dinars and other currencies projects to promote the resumption is very low, with a Chinn-Ito forex of agricultural development, so there openness score of zero. may be some development space and investment attraction in future.

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11) Iran participation of Chinese enterprises are considerable. (1) Investment Advice in several infrastructure projects in An excellent geographical location Iran (the Tehran Metro project was Chinese companies need to carefully and abundant natural resources completed by Chinese enterprises), consider investment opportunities in are key factors in attracting foreign it has established a good reputation related industries as a result of the US investment to Iran. Iran's oil and gas, in the local infrastructure industry, withdrawal from the Iran nuclear deal agriculture, transportation and other and prospects for future cooperation and the resumption of sanctions on industries have investment space between Chinese contractors in Iranian energy, shipbuilding, shipping for Chinese companies. Given the Iranian public transport infrastructure and banking.

Figure 59: Iran Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile In 2017, with the help of the Iranian population is moderate, at USD5,430, The Islamic Republic of Iran, formerly nuclear agreement, the development but its Gini coefficient is at 0.5, Persia, is an ancient civilization with of key industries in Iran maintained indicating a widening income gap. a history of more than 5,000 years. growth momentum, with special Located in Western Asia, Iran is a industries like agriculture achieving Inflation was high, at 10%. Iran's Middle Eastern country. It borders some development. high score in labor security and cost Pakistan and Afghanistan to the indicators is mainly due to the large size east, Turkmenistan to the northeast, (3) Macroeconomic Indicators of its working population and their high Azerbaijan and the Caspian sea to the Iran's economic scale is low. Iran's GDP level of education. The quality of Iran's north, Turkey and Iraq to the west, and in 2018 was USD452 billion, with GDP labor force has increased significantly the Persian Gulf to the south. The land per capita of about USD6,450. in recent years, with abundant labor area is 1,648,195 km2. The climate has resources and a workforce of 2.8 four distinct seasons. Iran's historical GDP growth rate is million, but high unemployment about 3.8%, and GDP is expected to remains a major challenge. According Iran has a population of about 82 contract by 2.5% over the next three to the World Bank, the national million, the second largest in the Middle years. unemployment rate in Iran was 12.4% East after Egypt, of which the Persians in 2018. account for 66%, Azerbaijanis 25% and Its investment score is high. Iran's FDI Kurds 5%, with Arabs, Turkmen and amounted to about USD5.02 billion in Its tax index score is low, Iran's tax other ethnic minorities. The official 2018 and investment in fixed assets burden is quite heavy, according to language of Iran is Persian and Islam is was USD80.59 billion. World Bank statistics, with total tax on the state religion. commercial profits at 44.7%. Its consumption and demand score Iran is rich in oil, gas and coal. It is low, with total imports and exports Its capital supply score is high, as Iran's accounts for just 1% of the world's declijning in 2018 to account for 48.8% money supply situation has improved, population, yet has 7% of the world's of GDP. The per capita income of the with broad money supply at 94.3% of natural resource reserves. GDP and growing at about 22%.

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The difference between domestic Foreign exchange risk is high. The Agriculture: Iran is a traditional deposit and loan interest rates is 3%. Iranian currency is the rial, and in agricultural and animal husbandry recent years it has shown a continuing country, rich in agricultural resources, (4) Risk Indicators downtrend versus USD. After the Iran with arable land of more than 52 million Iran has a lower overall risk assessment nuclear deal was reached in 2015, the hectares, accounting for more than index and high investment risk. rial remained relatively strong, with a 30% of its land area. The agricultural Financial risks are moderate. Iran's narrowing margin of devaluation, but it population accounts for 43% of the banking risk index is high at 0.7%. was quite volatile, with a fluctuation of total, and agriculture accounts for Credit provided by Iran's domestic 0.2% in 2018. Iran's Money Banking Act about 12% of Iran's gross domestic financial institutions was 77.6% of GDP. does not specify whether rials are freely product. Agriculture and agricultural Iran's external debt as a share of GDP convertible, but the general population trade, and other non-oil trade, hold is only 2.1%. Foreign exchange reserves can go to local banks to freely exchange an important position in the national are plentiful, totaling USD132.6 billion. it. The Iranian rial has a Chinn-Ito forex economy. openness score of 0.3. Political risk is high. As a result of Iran's main agricultural products its rivalry with the United States, (5) Key Industries include wheat, rice, barley, cotton, tea, Iran has long been subject to In the five key BRI industries, Iran has a beet, fruit, dried fruit, dairy products, economic and financial sanctions, high rating in energy, moderate scores caviar and wool. However, the degree resulting in numerous challenges in agriculture, IT and transportation, of agricultural mechanization is low. to Iran's economic development. and a low score in manufacturing. Since the conclusion of the Iran In recent years, the Iraqi government nuclear agreement in 2015, the Energy: Iran is rich in oil and gas has attached great importance to Iranian sanctions predicament had resources, with natural gas and and vigorously developed agriculture, eased, with relations with Western petroleum proven reserves ranking achieving 90% self-sufficiency in food countries gradually improving, 1st and 4th in the world, respectively. production. In 2017, Iranian saffron, positive developments in the internal Relying on superior natural resource nuts, caviar and other special cash crop and external political and economic endowments, Iran's petrochemical exports continued to grow. environment, and endogenous industry is booming, and petrochemical development momentum emerging. exports account for about one-third of From March to July 2017, Iran exported However, the Trump administration Iran's non-oil trade exports. USD92.36 million of saffron to 54 re-imposed sanctions on Iran in 2018, countries, an increase of 35.4% YoY. In a move that sparked mass protests in In 2017 the Iranian government the same period, Iranian nut exports Iran and heightened political risks. continued to increase crude oil reached 132,000 tons, up 9%, and it production and stabilize crude oil ranked second in the pistachio export Iran is a country where church and exports as the main thrust of economic market, while caviar exports reached state are unified, the crime rate is quite policy, exporting a total of 780 million USD1.39 million, an increase of 22% low, and public security is generally barrels of crude oil from March 2017 year-on-year. good. However, there have been to March 2018, with an average daily frequent terrorist attacks in Iran since export of 2.62 million barrels. In the Transportation infrastructure: 2017, as well as robberies and thefts. petrochemicals industry, production Iran's infrastructure development is not of Iranian petrochemical products high, but the government is stepping Moody's rates Iran sovereign debt reached 54 million tons from March up efforts to support transport at Ba2. Iran has low public debt, 2017 to March 2018, and exports of development. The Iranian Ministry accounting for 30.8% of GDP. petrochemical products hit 22 million of Roads and Urban development is tons (USD12 billion), increases of 6% speeding up the promotion of several Its low business environment score and 20% respectively. highway projects, including the 121 is mainly due to difficulty for foreign kilometer Tehran-Shomal Freeway investors entering the local market Iran's Sixth Five-year Social and (section 1 was 83% completed by April and the high cost of setting up an Economic Development Plan (March 2017) , and it is expected that Iran will enterprise. Contract enforcement is 2016-March 2021) has an average have more than 7,000 km of high-speed less problematic, and government annual economic growth target of 8%, mileage by 2021. efficiency been improved by optimizing and Iran plans to raise oil production tax and cross-border trading systems. to 4.7 million barrels/day, attract According to Iran's 20 Year National USD30.05 trillion of foreign investment, Vision (2005-2025), its total length of and continue to push privatization. railways will reach 25,000 km.

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12) Syria support policies, Chinese companies Business Council said in 2017 the BRI (1) Investment Advice are not advised to invest because of would bring new trading opportunities Overall, investment in Syria is less continuing turmoil and high security to China and Syria, and that the Syrian attractive than elsewhere, as its risks since the outbreak of the Syrian business community looked forward economy is small and investment risk Civil War in 2011. to working with China in areas such is high. as infrastructure construction, oil and Syria's economy has gradually gas development, the food industry Although Syria's manufacturing, recovered in recent years and it and new energy. Chinese companies agricultural and energy industries have has sought to strengthen economic should focus on related investment sustainable foundations and potential, and trade relations with China. The opportunities, he added. and the government has introduced president of the Syrian-Chinese

Figure 60: Syria Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Some 85% of the population follow prices and high unemployment that Syria is located in Southwestern Islam and 14% follow Christianity. damaged the economy. Asia, at the eastern end of the Syria's main mineral resources include Mediterranean Sea. It is bordered by oil, natural gas, phosphate, rock salt Syria's economic statistics have been Turkey to the north, Lebanon to the and asphalt. It has proven oil reserves weak in recent years as a result of the west, Israel to the southwest, Iraq of 2.5 billion tons, natural gas reserves ongoing war. Its size of economy score to the east, and Jordan to the south, of 300 billion cubic meters, and is low, with GDP in 2018 of USD45 and is opposite the Mediterranean phosphate reserves of 1.8 billion tons. billion or only USD25,000 per capita. island of Cyprus. Its land area is Before the 2011 civil war, Syria's two GDP has been falling at an average approximately 185,000 km2 (including pillar industries were agriculture and annual rate of 11%, and is expected to the Golan Heights) and the coastline is oil, accounting for about half of GDP. continue to contract at about 4%. 183 kilometers long. After the Syrian Civil War war broke out, these two major industries were Its investment score is low. Syria's fixed Syria is wet in winter and dry and hot hit hard. asset investment in 2018 was about in summer. According to World Bank USD2.84 billion. data, as of the end of 2017, Syria has (3) Macroeconomic Indicators a population of about 18.27 million, Before the war, Syria had investment It has low ratings in consumption and of which Arabs account for more appeal, with a strategic location, demand. Household final consumer than 80%, with other etchnic groups economic reform, and good spending is low at just USD12.61 including Kurds, Armenians, Turkmen relationships with Arab countries and billion. Its Gini coefficient is 0.4. Syria's and others. Arabic is the national foreign companies. However, after the limited imports and exports account language. English and French are turmoil in 2011, the West and the Arab for 39.4% of GDP. According to the commonly heard. League imposed sanctions on Syria, World Bank, inflation was 9.8% in 2018, and Syria faced multiple pressures high among BRI countries. including currency devaluation, rising 110 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section IV: BRI countries Investment Index – Country Analysis Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section IV: BRI countries Investment Index – Country Analysis

Syria's consumption and demand Moody's rates Syria at Caa3. According and agricultural infrastructure, and score is low. Since the war, the to statistics, Syria's national fiscal many agricultural populations have standard of living has been low, the deficit accounted for 18.6% of GDP left their homes, with agricultural domestic economy stagnant and in 2018, and government debt as a output had shrinking considerably. the labor market depressed, with a share of GDP was as high as 107.7%. national labor force of 4.78 million in Syria is influenced by domestic unrest The war has caused up to USD16 2018. Unemployment is high at 14.9%. and economic sanctions, and debt billion in losses to Syrian agriculture. servicing risk is high. Between 2011 and 2016, more than Its tax score is low. Syria has a half of the rural population left their heavy tax burden, with total tax on The business environment is highly land, prompting a sharp drop in commercial profits of about 42.7%, risky. It is difficult for foreign investors household livestock ownership. according to World Bank statistics. to enter the local market, hard to enforce contracts, and expensive to A lack of agricultural infrastructure, (4) Risk Indicators establish an enterprise. such as irrigation systems. However, Overall investment and financial risks the focus of post-war agricultural in Syria are high. Syria's banking risk Syria has high foreign exchange reconstruction on basic agricultural index is high at 0.9. Domestic financial risk. The Syrian pound is not freely materials such as fertilizers, seeds and institutions provide credit worth only convertible, and as a result of veterinary drugs, credit, processing 36.2% of GDP, and Syria has low the country's volatile political and and marketing, and the rehabilitation foreign exchange reserves of just economic situation, it continues to of agricultural infrastructure, show the USD1.04 billion. External debt as a depreciate against USD. industry has some investment space. share of GDP is low, at about 24%. (5) Key Industries Energy: Syria has rich resources, Political risk is very high. Syria's Syria has a high score in but in recent years has had a large political stability and legal environment manufacturing, with low scores reduction in production. Syria is have the lowest ratings among BRI in agriculture, IT, transportation in the world's richest oil and gas countries. After Syria's independence, infrastructure and energy. region, and rich in these resources. it has faced a complex domestic However, since 2011, the US, European situation and become involved in Syria's agriculture, industry and Union, Arab League and others have international disputes. services accounted for 20%, 19.6% implemented sanctions on Syrian and 60.4% of GDP, respectively, in oil, including the most important In 2011, escalating tensions between 2017. energy enterprise, Syrian Petroleum the Syrian government and the Corporation, with the aim of enabling opposition eventually turned into an Agriculture: The war led to a European oil companies to abandon armed conflict. ISIS (Islamic State) and sharp reduction in production, but most of their operations in Syria, al-Qaeda subsequently intervened, there has been a gradual recovery. thereby restricting oil revenues that and sectarian clashes became more Syria is a big agricultural country are vital to Assad's government. land. pronounced. Since 2012, many Syrians in the Middle East, with agriculture have become international refugees occupying an important position in to escape the war. The situation the national economy. Rich in a variety remains chaotic, with large swathes of of food crops, the armed conflict had land once controlled by the extremist destroyed large amounts of farmland forces of ISIS.

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13) Bahrain Bahrain's financial market is open machine manufacturing, engineering (1) Investment Advice and standardized, conducive to the contracting and infrastructure. On the whole, Bahrain's investment enterprises' overseas operations. Pipeline construction related to the landscape is more attractive energy industry also has investment than those of most BRI countries. In addition to the traditionally potential. The country has a favorable dominant industrial energy macroeconomic environment and low industry, the diversification of In view of China's comparative investment risk. Bahrain's economic Bahrain's economic structure has advantages in infrastructure scale, political stability and business expanded the space for bilateral construction and processing and environment are good. As the investment cooperation, especially manufacturing, cooperation is financial center of the Gulf region, in information and communication, expected to continue to deepen.

Figure 61: Bahrain Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Bahrain was the first oil-extracting a steady rate of 1-2% over the next Bahrain is an island nation in the country in the Gulf region, and the oil three years. Persian Gulf connected to Saudi Arabia and gas industry is the strategic pillar by the 25-kilometer-long King Hurd of its economy. Its investment score is low. In 2018 Bridge. Bahrain's OFDI was only USD520 In recent years, Bahrain has million, and fixed asset investment was Bahrain is the smallest of the six begun to develop into a diversified just USD8.56 billion. Member States of the GCC, with economy, establishing an oil refining, a total land area of approximately petrochemical and aluminum products Its consumption and demand rating 767 km2, consisting of 36 islands of industry, vigorously developing the is high, with imports and exports varying sizes, the largest of which is financial sector and becoming a accounting for 139.4% of GDP in the island of Bahrain. Bahrain had a regional banking and financial center. 2018. The level of national income per population of 1.5 million in 2017 and capita is also high, at USD21,000 in more than 50% of inhabitants are (3) Macroeconomic Indicators 2018. Bahrain's Gini coefficient is 0.4. non local, mainly Indians, Pakistanis, Bahrain's economic development Inflation is low, at 1.4%, conducive to Bangladeshis and Filipinos. Some 85% score is moderate. Bahrain's GDP in domestic consumption. of the population follow Islam. The 2018 was USD35.31 billion, and GDP official language is Arabic, and English per capita was USD24,000. Its high labor security and cost score is is widely spoken. mainly due to high levels of education Bahrain's historical GDP growth is and low unemployment rates. about 3-4% a year, and Bahrain's GDP According to the government, Bahrain is expected to continue to grow at has the highest comprehensive quality

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workforce in the GCC countries. its fiscal deficit has climbed, accounting At the same time, because Bahrain Bahrain's local labor force is mostly for about 10.3% of GDP in 2018. is short of natural gas and it needs fluent in Arabic and English, generally to be imported from countries such has a high level of education, and The business environment is as Russia, the construction of related can obtain a large number of labor moderately risky. Bahrain focuses pipelines (including a new oil pipeline skills and employment training on protecting small and mid-sized from Saudi Arabia to Bahrain, an opportunities from the government. investors by increasing shareholder LNG receiving terminal, and the The unemployment rate in Bahrain equity and its participation in construction of a railway bridge linking was as low at 1.2% in 2018 and major decision-making. Bahrain Bahrain to Saudi Arabia) has created the labor force was fully employed. has improved cross-border opportunities for investment. However, Bahrain has a small working investment efficiency through a population of only 920,000, and will range of measures, including process Manufacturing: An important lack long-human resources in the optimization. industry in the national economy. long run. Smelting and petrochemicals is an Bahrain has small foreign exchange important industrial sector in Bahrain, Its tax score is high and the tax risk. The legal tender of Bahrain is and the Bahrain Aluminum Plant is one burden is small. Based on World Bank the Bahraini dinar, which is freely of the top 10 aluminum plants in statistics, total tax on commercial convertible. Bahrain has adopted a the world. profits is 13.8%, better than most BRI linked exchange rate system between countries. the dinar and USD dollar since 2001, Manufacturing output as a share of and the exchange rate is stable at GDP reached 14.6% in 2015. Its capital supply score is low, with BHD1 to USD2.7. general money supply accounting for Transportation infrastructure: 66.9% of GDP in 2018, down 13.4% (5) Key Industries Infrastructure is quite complete and from a year earlier, and the difference Bahrain has high scores for energy, IT the government encourages foreign between domestic deposit and loan and manufacturing, with low scores for investment. It intends to upgrade interest rates is 3%. transport and agriculture. infrastructure including airports, roads and railways, expanding (4) Risk Indicators Energy: Oil and gas is Bahrain's most existing airports to improve the Overall, Bahrain currently has important natural resource, and the pasenger capacity and repairing and moderate investment and financial oil and gas industry is the backbone rehabilitating roads. risks. Banking risk is at 0.5. Bahrain's of its economy, with energy pipeline domestic financial institutions provide construction bringing investment Because of financial constraints, credit equivalent to 90.9% of GDP, opportunities. It has proven reserves the government struggles to a high rate, and external debt as a of 20.55 million tons of oil and 118.2 support infrastructure projects with share of GDP is also high, at 112.5%. billion cubic meters of natural gas. In large investments on its own, so Its total foreign exchange reserves are 2017 it extracted 200,000 barrels of welcomes the participation of foreign USD4.66 billion, smaller than those of oil, mostly for oil refining. Daily average investors and private capital in local other BRI countries. natural gas extraction is 2 billion cubic infrastructure investment, presenting feet, mainly for power generation, medium term opportunities. Bahrain's Political risk is moderate. Bahrain is in water desalination and chemical ambassador to China has said a more unstable political situation than products. energy-intensive and manufacturing usual, but its legal environment score companies have a clear advantage is high and public order is good. In 2015, the oil and gas industry when investing in Bahrain. accounted for 19.7% of GDP, Sovereign credit risk is high. Moody's ranking first in output value. Due The government welcomes foreign rates Bahrain at B2. Bahrain has high to low oil prices in recent years investment in transport infrastructure public debt, accounting for 98.6% of and strict management by the (railways, subways, ports, and airport GDP, and falling oil prices have led to a Bahraini government, we would not construction), renewable energy (solar sharp drop in total exports. In addition, recommend investing in the and wind power), mineral development government revenues have fallen and oil industry. and smelting (aluminum smelting and manufacturing, cables and steel mills) and food processing.

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4. Commonwealth of Independent Among non-energy sectors, Russia's States (CIS) heavy industry is growing steadily, 1) Russia and light industry, whch is diverse, (1) Investment Advice has the potential to increase further Russia has quite high investment and replace imports, making it attractiveness with considerable suitable for Chinese companies to macroeconomic appeal and invest in. Chinese companies can also moderate investment risks. The focus on investment opportunities Russian market has great potential, in transportation, including vehicle and its transportation, energy and aerospace manufacturing and and heavy industries all have large transportation hub construction. investment space. The energy sector is a key investment area for Chinese companies in Russia.

Figure 62: Russia Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile winter is long and cold, summer is The Russian Federation (Russia) is a short and cool, spring and autumn presidential federal state composed of are short. Annual precipitation ranges 22 autonomous republics, 46 cantons, from 200mm-3,000 mm, with snow nine krai, four autonomous regions, falling almost throughout the winter. one autonomous prefecture and three federal municipalities. Russia straddles Russia, with a total population of about Eurasia, with its territory including 140 million, of whom about 78% are eastern parts of Europe and northern Russian, is a multi-ethnic country with parts of Asia, having an area of about 194 ethnic groups. Russian is the 17.1 million km2, making it the vastest official language, although republics country in the world. have the right to set their own official languages and use them with Russian Russian terrain is complex and diverse. in their territories. The west is mostly vast plain, with highlands and mountains in the east. The main religion is Russian Russia spans multiple climatic zones, Orthodoxy, followed by Islam. but most of them are temperate, subtropical continental climates;

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As the political and economic core Its tax index score is low. Russia's tax Companies and personnel from of the former Soviet Union's largest burden is heavy, according to World overseas engaged in business republic, Russia is rich in resources, Bank statistics, with tax on commercial activities are vulnerable to interference has developed science and technology, profits of 46.3%, high among BRI from security issues, and personal stable economic development, and countries. and property safety needs to be continues to play an important guaranteed. role in international affairs since Capital supply is moderate. Russia's independence. Russia is one of the five money supply level is quite low, with Russia has low sovereign risk. In 2018, permanent members of the United broad money supply at 46.2% of GDP, Moody's maintained a Ba1 ratinng on Nations Security Council and has a a mid-low level, and growth of about Russia's sovereign credit, which looks veto over Security Council bills. Russia 10.5%. stable. is one of the BRICS countries. Overall, the money market is quite Public debt as a share of GDP is about (3) Macroeconomic Indicators stable. 17.7%, and although there is a fiscal Due to the size of the Russian deficit, the risk is low overall. economy, its macroeconomic score (4) Risk Indicators is quite high. Russia's GDP of about Russia's financial risk is low. External Russia's business environment risk is USD1.5775 trillion in 2017, up 1.5% debt as a share of GDP is moderate also relatively low. The cost of setting YoY, has emerged from a recession at about 30.4%, and foreign exchange up a business is equivalent to only and is expected to continue to grow at reserves are strong, having reached 1.1% of national income per capita. about 1.7%. USD466.9 billion. Its banking risk score Russia ranks 31st worldwide in ease is 0.5. of entry for foreign investors. In Russia's GDP per capita is about 2018 Russia sped up the process of USD11,000 and is mid-range. Its In June 2017, Russia's central bank enterprise access to building permits, investment score is higher, with FDI strengthened its banking consolidation improved the cost and efficiency of reaching USD28 billion and investment mechanism, a move set to further enterprises' access to electricity, and of more than USD340 billion in fixed strengthen management of the sector reduced the tax costs of enterprises by assets. and continue to root out unqualified allowing higher depreciation rates on financial institutions, although banking fixed assets. Cross-border trade has Its consumption and demand score risks still need to be reduced further. been made easier through measures is high. Russia's per capita national such as improved online customs income amounted to USD9,230, with Russia has high political risk. Its clearance and automated customs household final consumer spending political stability index is at -0.7, and clearance. of USD826.4 billion, in the higher the legal environment index is at -0.5, echelons of spending power. Inflation both low. The main political risks to Russia has quite high foreign exchange last year was 3.7%, a healthy level. investments in Russia are: changing risk. The ruble has depreciated, mainly policies and regulations, with a lack because of large fluctuations in its Russia's total imports and exports of continuity in national laws and exchange rate against USD 2017. account for 46.7% of GDP, indicating government regulations. Foreign that its economy is relatively less investment policy is not consistent (5) Key Industries dependent on trade. enough, related laws are imperfect, Russia scores highly in transportation, and the overall legal environment agriculture and energy, but its Its labor security and cost indicators needs to be improved; the problem manufacturing and IT scores are low. are at a high level among BRI of political corruption, which is deeply countries. Russia has about 75 million rooted in Russia, and the lack of working people, or about 50% of efficiency of government policies, the population. The unemployment which adds substantial uncertainty rate was stable at about 5% in 2017, to investors; and the problem of roughly the same as in 2016. An influx social and environmental security of foreign labor has played a key role Russia, with triads and other criminal in optimizing the structure of the organizations increasingly rampant. Russian labor market. As of the end of 2016, 9.6 million foreign workers have emigrated in Russia, 85% of them from CIS countries.

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In early 2018, the Russian Ministry Manufacturing: State financial of Industry and Trade reported that, support has created a good situation thanks to state financial support, for growth in heavy and light industry. Russia's industrial manufacturing Russia has a strong industrial base, industry is emerging from its crisis of mainly in machinery, steel, metallurgy, 2014/15, with every manufacturing petroleum, natural gas, coal, forestry sector except metallurgy showing and chemicals, with a well developed growth. wood and wood processing industry.

Machinery, cauto manufacturing and On the whole, Russia's heavy industry heavy manufacturing have been the is well developed and light industry fastest growing industries over the is developing slowly. This situation last three years. has improved in recent years with the significant growth of light industry. Transportation infrastructure: Russia's vast territory, complex In August 2017, initiatives to develop and changeable geographical of light industry were supported environment, mean overall road traffic by Putin, and the total amount of is quite underdeveloped. Domestic financial support provided by the railway and aviation and water Industrial Development Fund for transport have decent foundations, light industry, including concessional but most of it was build during the loans and loan discounts, has reached Soviet period so is quite old. RUB3 billion (USD47.1 million). In 2017, Russian light industry growth reached The Russian government is investing 7%, with a market size of RUB2.5 heavily in the development of trillion, and will have maintained this transport infrastructure and has growth trend in 2018. made this area a priority task for the country for the next 15 years. In the past three years, Russia has accelerated construction of synthetic At a transport sector conference in fiber fabric enterprises, mainly 2018, President Vladimir Putin said sportswear producers, with the Russia would further develop large domestic share of special clothing transport hubs in the Baltic Sea, Black reaching 98%. Sea, the Pacific and the Arctic, while strengthening river transportation In heavy industry, the Russian infrastructure, hydrological government in December technology facilities and deepening 2018 allocated RUB16.8 billion waterways to improve inland of supplementary funds for waterway cargo traffic, especially for development. The machine tool large cargo and overweight goods. industry has grown at a rapid rate of 10-15%. Energy: Russia is rich in several natural resources, has large reserves and a high degree of self-sufficiency. Russia is also one of the world's largest oil and gas exporters. Proven reserves of petroleum are 10.9 billion tons, accounting for 13% of the global total. It has 48 trillion cubic meters of natural gas reserves, 35% of the world's total and ranking 1st in the world.

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2) Belarus IT, represented by electronic attention to traditional IT, machinery (1) Investment Advice manufacturing, which has a similar manufacturing and chemicals, and Belarus has weak investment place in China's national strategy. The related enterprises may consider attractiveness. Its macroeconomic two countries can be expected to investing directly in Belarus to set up indicators are lower and investment further deepen bilateral investment factories. We also suggest China's risk is slightly higher than in most BRI and cooperation by relying on their high-tech enterprises pay attention to countries. respective accumulation of innovation Belarus's fine chemicals, biomedicine, and R&D results that complement each new materials and other fields, using Belarus is focusing on the development other. the preferential policies of industrial of high-end manufacturing and parks and local enterprises to high-tech industries, as well as Chinese enterprises should pay cooperate.

Figure 63: Belarus Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Church, and parts of the northwest Its consumption and demand score Belarus is a landlocked country practice mixed Catholicism and is moderate. Belarus has per capita bordering Russia, Latvia, Lithuania, Orthodoxy denominations. national income of about USD5,280, Poland and Ukraine. Due to its household final consumption strategic location, Belarus has become The capital, Minsk, is the political, expenditure of about USD30 billion an important commercial transport economic, scientific, technological and and a lower propensity to consume. route in Eurasia. cultural center of Belarus and is home The inflation rate in the last year was to CIS headquarters. about 6%. Its land area is about 208,000 km2. With a population of about 9.492 (3) Macroeconomic Indicators Belarus's imports and exports account million (2018), there are more than Belarus's macroeconomic score is for 134.1% of GDP and it has a Gini 140 nationalities. About 80% of the quite low. GDP was about USD54 coefficient of 0.4. population is native Belarusian, with billion in 2017, with growth of around the main ethnic minorities Russians, 2.4%. Belarus has GDP per capita of Its labor security and cost indicator Poles and Ukrainians, in descending about USD5,727, at a low global level. is at a high level. Belarus has a order. GDP growth in Belarus is expected to working population of about 5 million, sustain at about 2.7%. accounting for about 50% of the total Belarusian and Russian are the population. The unemployment rate official languages of Belarus. English Belarus has a low investment score. is only 0.5% and is among the best is the main foreign language, but the FDI is less than USD1.3 billion and worldwide. The proportion of people in proportion of Belarusian officials and fixed asset investment is only USD15.7 higher education has reached 85%, a the general public that can speak billion, both of which are low among high level. English is not high. More than 70% of BRI countries. the population follow the Orthodox

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Belarus has a low tax burden score. Foreign exchange risk is high. The IT: Belarus's electronic manufacturing Its tax burden is heavy, with total tax Belarusian ruble is pegged to a variety industry is a world leader and a on commercial profits at 53.3%, higher of foreign currencies and is freely national key development industry. than the vast majority of BRI countries. convertible. However, the exchange Belarus's microelectronics and rate oscillates wildly and there is high integrated circuit manufacturing Its capital supply index is mid-range devaluation risk. industry is highly developed, and it among BRI countries. Belarus has a has strong R&D capabilities and the low level of money supply, at 37.8% of (5) Key Industries world's leading equipment producer. GDP, but its growth rate is high, about Belarus scores highly in manufacturing Electronics and information technology 17.4%. and IT and low in agriculture, has been another key development transportation and energy. industry in Belarus over recent years. (4) Risk Indicators Belarus has high financial risk. Its Manufacturing: The industrial base Transportation infrastructure: banking risk assessment score is 0.7, is decent, with a focus on developing Belarus's transport foundations are a high level among BRI countries. high-end manufacturing. Belarus solid, with remarkable investment Belarus has a low foreign exchange was one of the former Soviet Union's potential. Its transport infrastructure reserves of about USD4.8 billion. Its industrial hubs. The industrial sector includes a broad network of road, external debt as a share of GDP is is well established and the dominant rail and air routes. The passage of 67%, with a relatively high risk level. industries include machinery two pan-European corridors through manufacturing, chemicals and Belarus is an important component of Political risk is moderate. Belarus's petrochemicals, and electronics, some the European transport system. social and political environment is of which are world-leading. Machinery stable, and the legal and regulatory manufacturing is the pillar industry. In a 30 year national strategy for systems are well formed. Its political social and economic stability, the stability index is at 0.03, mid-range, Economic and trade cooperation government of Belarus proposed that and the legal system is quite well between China and Belarus has in the next five years it would focus on formed but still has room for deepened in recent years. For the development of a major highway improvement. example, Geely Automobile, a Chinese network, strong road network, railway carmaker, set up a Belarusian joint infrastructure and airport upgrades. Sovereign risk is moderate. Moody's venture and a local plant to produce has assigned Belarus a B3 rating with cars for sale to the Russian market. Given China's extensive experience in a stable outlook. Its public debt as a Belarus and China have created a infrastructure construction, Belarus's share of GDP is 56.7%, and the fiscal platform for economic and scientific transport needs should present good surplus is 0.5%, quite stable. and technological cooperation, investment opportunities for Chinese including an industrial park that companies. Doing business in Belarus is low risk, provides preferential tax, land, leasing, with a welcoming attitude towards corporate loan financing measures, foreign investment to promote including one of the most preferential economic development. It lowered the tax policies among CIS countries. threshold for enterprise registration and testing in 2018, and optimized the In recent years, Belarus has application process for enterprises to accelerated the development of obtain construction permits. Belarus high-tech industries, focusing on ranks 37th in ease of entry for foreign the development of fine chemicals, investors. biomedicine, new materials and other emerging fields. The average time taken to enforce a contract is only 275 days, and business establishment costs are equilvalent to only 0.5% of gross national income, but the government efficiency index is somewhat low at -0.3.

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3) Ukraine (1) Investment Advice Investment in Ukraine is relatively unattractive. Its economy is quite strong but investment risk is high. Ukraine's economy is growing slowly but it has a plentiful workforce. Investment risk is quite high, the political situation is variable, and the overall business environment needs to be improved. Ukraine still has great potential for development in the transportation and energy, and its unique agricultural development conditions and growth in IT outsourcing are also worthy of investors' attention.

Figure 64: Ukraine Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Ukraine has a temperate continental Its consumption and demand score Ukraine is in Eastern Europe, near climate. The average temperature is low. Ukraine's per capita national the Black Sea and the north Azores. in January is -7.4°C and the income is USD2,390, household final It borders Russia to the east and average monthly temperature is consumer spending is only USD74.6 northeast, Belarus to the north, 19.6°C. Neighbouring Crimea has a billion, and consumption capacity Poland, Slovakia and Hungary to the Mediterranean subtropical climate. and willingness are weak. Inflation in west and Romania and Moldova to the Ukraine reached 14% in 2017. south. (3) Macroeconomic Indicators Ukraine has a low economic Its labor security and cost score is It has a land area of 604,000 km2 environment score. GDP in 2017 high. Mainly because of its large labor and a population of about 45 million. was USD112.15 billion, or USD2,639 force, of about 20 million people, Ukraine is 1,316 km long from north to per capita. Ukraine's economy grew and its high quality, with 73.6% of south and 893 km from east to west. at 2.5% the previous year, and is people having undertaken higher Its largest mountainous region is the expected to grow at 3.1%. education. Its total number of IT Western Carpathians, within which professionals ranks fifth in the world. the highest peak is Gorvilla at 2,061 The main factors restricting Its unemployment rate is about 9%, meters. The longest river, the Dnieper, Ukraine's economic growth include mid-range. originates in Russia and flows 981 km political instability, Russian military through Ukraine. intervention, and a non-diversified Its tax scores are quite low and the industry structure that depends on tax burden is high. Based on World The population of Ukraine in 2017 was producing low value-added products. Bank statistics, total tax on commercial 45 million. Ukraine is a multi-ethnic profits is about 41.7%. country, with more than 110 ethnic Its investment environment score is groups, the Ukrainian ethnic group is moderate. Total FDI is only USD2.8 Ukraine's capital supply score is also the largest at 72% of the population billion, with investment in fixed assets rather low. M2 accounts for 40.5% of and the Russian minority accounts of USD22.5 billion, mid-range among GDP and is growing at an average rate for 22%. The official language is BRI countries. of about 9.6%. The two indicators are Ukrainian and Russian is widely used. quite low among BRI countries. Its main religions are Orthodoxy and Catholicism. 119 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section IV: BRI countries Investment Index – Country Analysis Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section IV: BRI countries Investment Index – Country Analysis

(4) Risk Indicators (5) Key Industries However, the low utilization rate in Financial risks are high. Its 2017 Ukraine's manufacturing, IT and Ukrainian agriculture, lack of deep banking risk index was at 0.7, high agriculture have quite high scores, processing capacity for agricultural among the CIS countries, and in 2017 with energy and transportation products, low value added, and financial institutions provided credit scoring lower. underdeveloped infrastructure such equivalent to 65.7% of GDP. as agricultural products warehousing Manufacturing: The main industrial and logistics, create risks for foreign External debt accounts for up to 86.1% sectors are coal, steel, machinery investors while also providing of GDP and total foreign exchange manufacturing, electricity, defense, opportunities to fill market gaps. reserves are about USD17.2 billion. aviation manufacturing and shipbuilding. Ukraine is the world's Energy: Rich in mineral resources. Ukrain has high political risk. The 10th largest steel-producing country Ukraine has identified more than 80 domestic situation is temporarily stable, (2016), with steel industry exports potentially mineable resources, mainly but it has not fundamentally escaped accounting for about 80% of total coal, iron, manganese, nickel, titanium, the power game . Ukraine's political production. mercury, graphite, refractory soil system is still in transition, with fierce and stone. Oil and gas resources are struggle between various political IT: IT services are growing rapidly and scarce. forces. A political crisis erupted in 2013 are becoming more important in the as a result of a change of government, export structure of Ukraine. Ukraine Transportation infrastructure: and the volatile political situation has is the world's fifth largest exporter Ukraine has good infrastructure and added uncertainty to investment. of IT services, as well as the biggest a mature transport industry. Ukraine Ukraine's political stability index is at market for software development has formed a complete transport -1.9, and the legal environment index is programming and IT outsourcing system comprising roads, railways, at -0.3. services in Central and Eastern rivers, sea, air and pipelines. Europe. In recent years, the market Sovereign risk is high. Moody's gives has grown by an average of 19% a Developing transport infrastructure Ukraine a sovereign credit rating of year, with turnover of USD1.1 billion is a key government task, with specific Caa2, quite a low rating. Public debt as and 127,000 professionals at the end plans including an investment of a share of GDP is as high as 83.5%, and of 2017. UAH30 billion (USD117.2 million) the fiscal deficit has reached 3.2%. in renovation of national roads Ukraine's IT industry exports 80% of and UAH130-150 billion to develop Business environment risk is low. In services overseas and has become railways that will also improve railway 2017, Ukraine improved protections its second largest service export its port capacity. A rapid railway for some investors, simplified cross- industry, with substantial investment system from Borispol International border trade processes for auto potential. Airport to Kiev is backed by Chinese parts and contract performance, loans. The government welcomes but there is insufficient support for Agriculture: Ukraine is rich in foreign enterprises' bids for local foreign investment, with imperfect cultivated land resources. Its fertile infrastructure investment and and ineffective policies, so the overall soil, adequate water resources, and construction, which have strong environment still needs to be improved. highly developed agriculture make investment potential. it the world's third largest food Ukraine contract enforcement period exporter. Its main crops include is about 378 days and the cost of cereals, oil crops, sugar crops and business establishment is equivalent potatoes. Ukrainian crop production for 0.6% of national income, both is 1.5-2 times its domestic demand, mid-range, although the government so it is self-sufficeint, with the surplus efficiency index is low at 0.5. exported to the European Union, Asia and North Africa. Foreign exchange risk is high. However, Ukraine's exchange rate with USD has remained quite stable, with fluctuations of about 0.02 over the past year.

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4) Azerbaijan (1) Investment Advice Investment in Azerbaijan is generally attractive. Overall macroeconomic attractiveness is mid-to-low, and the economy is quite underdeveloped. Investment risk is medium and financial risk is high. Azerbaijan is encouraging foreign investment in non-oil sectors, and investors should focus on opportunities in infrastructure upgrading and IT.

Figure 65: Azerbaijan Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile The official language is Azerbaijani, Its consumption and demand score The Republic of Azerbaijan is at the with Russian the major non-official is low. Per capita national income edge of Eurasia, bordering Russia to language, and the population mainly is USD4,080 and household final the north, Iran to the south, Georgia follows Islam (Shia). consumption expenditure is USD23.47 and Armenia to the West. It is part of billion, both low among BRI countries. the Silk Road. (3) Macroeconomic Indicators Azerbaijan has a Gini coefficient of 0.4, Azerbaijan has a low level of economic which is mid-range, and imports and Its land area is 87,000 km2, with a total development. With GDP of USD40 exports account for 90.6% of GDP. The population of about 9.86 million in billion in 2017, it is growing at just inflation rate was 12.9%, a high level. 2017. The Caspian sea is to the east 0.1%. However, because of its small Its security and cost score is moderate. of Azerbaijan and close to the capital, population, per capita GDP is mid- The labor market in Azerbaijan is Baku. range, at about USD4,131. According stable, with a Labor force of about to the World Bank, GDP growth could 5.04 million people in 2017, but the Azerbaijan has a diverse climate, dry reach 2.8%. quality of human resources is low, with in central areas and the east, with only 29.7% having attended higher abundant rainfall in the southeast. The Its level of investment is moderate. FDI education. temperature averages4°C in January volume was USD2.87 billion in 2017, and 27.3°C in July. The northern and and the amount invested in fixed The tax index score is low. Based on western mountainous areas are assets was USD7.22 billion. World Bank statistics, total tax on cooler, with average temperatures of commercial profits is about 40.8%, a 12°C in summer and 9°C in winter. heavy tax burden.

Azerbaijan is a multi-ethnic country, with 43 ethnic groups. Azerbaijanis account for 90.6%, Lezgans 2.2%, Russians 1.8%, Armenians 1.5% and the Taresh 1%.

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(4) Risk Indicators (5) Key Industries Its money supply score is low. M2 as Azerbaijan's scores highly in energy, a share of GDP is only 32.4% and it is IT and manufacturing, but low in growing at about 9%. transportation infrastructure and agriculture. Azerbaijan has a high financial risk. Its bank risk sssessment score is at 0.7, Energy: Azerbaijan is rich in oil and with a low level of foreign exchange gas resources. Proven oil reserves are reserves at about USD44 billion, 2 billion tons, with geological reserves although its external debt is small, of about 4 billion tons, and proven accounting for only 32.6% of GDP. natural gas reserves are 2.6 trillion cubic meters with a potential total Political risk is high. Although Azerbaijan of 6 trillion cubic meters. Oil and gas pursues balanced diplomacy, because exploitation is its pillar industry. There of its abundant resources it has long are also metal deposits in Azerbaijan, been regarded as a key country in including iron, molybdenum, copper Europe's battle with Russia over alleged and gold. Russian energy blackmail. There is fierece competition between Russia Azerbaijan's industrial structure is and the United States over Azerbaijan. highly dependent on energy exports, with oil and gas accounting for 43.4% Its political stability and legal of total GDP. environment indexes are at -0.8 and -0.3, respectively, both below mid- IT: The government is focused on IT range. industry layout. In 2008, Azerbaijan formally proposed the Trans-Eurasian Sovereign risk is moderate. Moody's Information Superhighway, a 11,000 km gives Azerbaijan a credit rating of Ba2, fiber-optic information superhighway with a quite stable outlook. Public debt across Azerbaijan, Kazakhstan, Russia, as a share of GDP is 41.1%, the fiscal Ukraine and China. Azerbaijan signed deficit is about 1.4%, mid-level. a memorandum of understanding with China Telecom in 2013 to jointly The risk of doing business in Azerbaijan develop this project. is low. It ranks 25th in ease of entry for foreign investors, contract enforcement In accordance with the 2015-2020 takes about 277 days, and the cost Industrial Development Plan of the of setting up a business is equivalent Republic of Azerbaijan, the govenrment to about 1.3% of national income, all will focus on promoting the strong figures. introduction of domestic and foreign investment in non-hydrocarbon However, government is somewhat industries, as well as the establishment inefficient, with as core of -0.2, mid-low of industrial parks, science and range. technology parks and industrial zones.

Foreign exchange risk is low. The The Strategic Roadmap for Azerbaijan's Azerbaijani state currency is the National Economic Development, manat, and exchange rate fluctuations introduced in 2016, covers the oil are limited. Its Chinn-Ito score is 0.5, and gas industry, agriculture, heavy representing high financial openness industry, logistics, trade, financial and foreign exchange freedom. services, telecommunications and other sectors. In addition to oil and gas and other traditionally advantageous industries, all the BRI key industries show substantial investment potential.

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5) Georgia (1) Investment Advice Georgia is quite attractive for investment, with mid-range macroeconomic attractiveness, a small population and a small domestic market. Investment risk is low with a sound infrastructure and legal business environment. The country has strong potential for deepening economic cooperation and trade with China. Chinese enterprises can consider investment opportunities in water resources, transport upgrading and tourism.

Figure 66: Georgia Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Georgia is a multi-ethnic country, Union, Georgia's economic situation Georgia is in the midwest of the South with Georgians accounting for 83.8% has gradually improved. In recent Caucasus, with Russia to the north and of the total population, Azerbaijanis years, it has worked to establish a Azerbaijan and Armenia to the south. 6.5%, Armenians 5.7%, ethnic Russians free market economy, vigorously Georgia's total land area is 70,000 km2, 1.5% and other nationalities2.5%. promoting economic reform, further and it is part of the ancient Silk Road Georgia is a member of the WTO and reducinc various taxes and tariffs, and modern Asia-Europe corridor. is actively developing relations with speeding up structural adjustment and international organizations such as the privatization, and attracting foreign Georgia has four distinct seasons and European Union, IMF, the World Bank, investment. a pleasant climate. It is rich in wine Asian Development Bank and Asian and mineral water, with many tourist Infrastructure Investment Bank. According to World Bank data, resorts, and has been called God's Georgia's GDP is growing at a rate of Garden . In March 2017, the European Union about 4.8% and growth will remain at granted visa-free access to Georgian about 4.9% in the future. Most of Georgia is occupied by citizens, allowing them to enter alpine areas with plentiful sunshine, Schengen Zone countries without a Its investment indicators score is low. averaging 2,500 hours a year. The visa for short stays. Its FDI of USD1.83 billion, and fixed average annual temperature is about asset investment of about USD5 15.8°C. (3) Macroeconomic Indicators billion, are low among BRI countries. Its scale of economy score is low, The total population of Georgia in mainly due to its limited land area and Its consumption and demand score is 2017 was 3.72 million. The official small population. also low. Per capita national income is language is Georgian, and Russian is USD3,780, household final consumer the most common second language. Georgia had GDP of USD15 billion spending is USD9.4 billion and the Residents are highly proficient in in 2017, or GDP per capita of purchasing power of its residents Russian, but English is gradually USD4,057. The economy was relatively is low. becoming popular among government undeveloped. With the easing of its officials and young people. conflict with Russia, and Georgia's active move towards the European

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Its labor security and cost score is and a clean government. According as an important oil transit hub on the moderate. Georgia has an adequate to the World Bank's Doing Business Black Sea. labor force, with a working population Report 2018, Georgia's business of 2.03 million, of which about 74.3% environment ranks 6th out of 190 Transport has become a pillar have attended higher education. countries and regions of the world. industry of Georgia's economy, However, due to the lack of job supply, Its contract enforcement period is contributing more than 10% of GDP. unemployment is high at 11.6%. 285 days and the cost of setting up In 2017, Georgian transport and a business is equivalent to 2.2% of communications was the largest area Its capital supply score is moderate. national income, both strong. of foreign investment, with its USD530 M2 accounts for 48.6% of GDP, with a million accounting for 28.3% of total growth rate of 14.7%, both mid-range. However, Georgia's government foreign investment. efficiency needs to be improved, as the (4) Risk Indicators index is at only 0.6. In addition, Georgia has received Georgia's financial risk is low, and its loans and assistance in recent years financial sector policies are relaxed. In Georgia has low foreign exchange to vigorously develop domestic recent years a large amount of capital risk and a stable exchange rate. Its transport facilities, including EUR150 has been invested in local banks, Chinn-Ito score is 1, with high degrees million (USD168.2 million) from the spurring rapid development. Its 2017 of financial openness and foreign European Investment Bank in 2016, banking risk assessment index score is exchange freedom. of which EUR100 million euros will be 0.3, a decent level. used for municipal construction and (5) Key Industries development and UER49.45 million will External debt is at low level, accounting Georgia scores highest in support highway construction. for 115.3% of GDP, but foreign manufacturing and energy. exchange reserves are slightly less It has also received USD140 million than USD2.76 billion. Manufacturing: In 2017, Georgia's in loans from the World Bank for the manufacturing output was USD1.4 rehabilitation and reconstruction Political risk is low, Georgia's basic billion, accounting for 9.3% of GDP. It of the E60 Expressway in Georgia; foreign policy is to strengthen regional attracted a total of UD74.71 million in and USD 110 million from the Asian cooperation while taking into account foreign investment, accounting for 4% Infrastructure Bank in 2017 to support the development of relations with of foreign investment that year. construction of the Batumi Bypass. Eastern European countries. Its priorit is to mediate conflicts, and it attaches Energy: Georgia has among the most In 2016, the government launched a great importance to the development abundant water resources per capita in plan to develop a strong, democratic of friendly and cooperative relations the world, with 319 rivers. Its theoretical and united Georgia, giving transport with neighboring countries such reserves of hydropower are 15.6 million and logistics, infrastructure, the energy as Azerbaijan, Armenia, Turkey and kilowatts a year, but development and industry and the rational management Ukraine. After parliamentary elections utilization is low. of environmental and natural resources in October 2012, the government priority. It will improve the existing advocated improved relations with The main mineral resources are iron, transport system by accelerating Russia. manganese, copper, lead and zinc, the development of transport with the world-renowned Chiatura infrastructure, multimodal transport Its political stability and legal manganese mine having proven and logistics centers. environment indexes are at 0.4 and 1.0 reserves of 230 million tons, of which respectively, both mid-high. about 160-170 million tons can be Overall, the government encourages mined. foreign investment in infrastructure Its sovereign risk is moderate, with a projects such as roads, ports, Ba3 rating and stable outlook from In 2017, energy attracted the 4th largest pipelines, telecommunications facilities, Moody's. Its public debt as a share of amount of investment into Georgia, manufacturing, energy facilities GDP is 42.7% and its fiscal deficit is accounting for about 10% of foreign (especially hydropower and new or -3.9%, mid-range. investment that year. revamped transmission networks), agriculture and tourism, with the aim of Business environment risk is low. After Transportation infrastructure: promoting economic development and years of reform, Georgia now has a Georgia's transportation is convenient, increasing employment. better legal and business environment with its geographical advantage obvious

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6) Armenia domestic market. Armenia's energy which poses considerable risks and (1) Investment Advice scarcity implies substantial difficulty in political uncertainties to foreign Armenia's investment environment is developing energy-driven industries. investors. Investors can consider moderately attractive. The country's opportunities in manufacturing economy is lagging behind others and Overall investment risk is moderate, industries such as metalworking. the economic growth rate is heavily but the country is facing an economic influenced by Russia due to a small blockade by Azerbaijan and Turkey,

Figure 67: Armenia Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile The level of education in Armenia is Investment is low. The country Armenia is a landlocked country on low, it has insufficient workers and attracted only USD250 million in FDI the border of Europe and Asia, with those it does have tend to be low- and fixed asset investment was just Turkey to the west, Iran to the south, skilled, so human capital is relatively USD2.1 billion. Georgia to the north and Azerbaijan to underdeveloped. the east. Its land area is about 30,000 Its consumption and demand score km2, and 90% of its territory is at an In October 2014, Armenia signed up is moderate as Armenia's has low altitude of more than 1,000 meters. to Treaty on the Eurasian Economic per capita national income at only Its climate varies with the terrain, from Union. The Eurasian Economic Union USD3,990, and low household final dry subtropical conditions to sharp was officially launched on 1 January consumption expenditure of USD8.92 cold. Average temperatures range 2015 and Armenia became its 4th billion, indicating low consumption from 2°C to 12°C in January and 24°C member the following day. capacity. to 26°C in July, with the average annual precipitation of 200mm-800mm. (3) Macroeconomic Indicators Its inflation rate is only 1%, indicating Armenia has a low economic score. stable consumer prices. The total population of Armenia in According to the Armenian National 2017 was 2.93 million. It is a multi- Bureau of Statistics, GDP in 2017 was Armenia's labor security and cost ethnic state, with the Armenian USD11.54 billion, or USD3,936 per score is low. As a result of a lack of population accounting for about 96%. capita. The growth rate of Armenia's economic underdevelopment and economy declined in 2016, with real prolonged exposure to blockades The official language is Armenian. The GDP growth just 0.2%, affected by the by neighboring countries including country promotes freedom of religious Russian economic downturn. Azerbaijan and Turkey, outflows of belief, although 94% of the population labor are severe and the labor force follows Christianity. Because it is Since 2017, as the Russian economy is insufficient, with only 1.42 million largely underdeveloped, Armenia has a has stabilized, Armenia's economy has working people in 2017. Education is low level of urbanization. recovered and its GDP growth reached underdeveloped and the quality of 7.5% in 2017. labor is low. Unemployment is as high as 18%.

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Its tax score is high. The country has Sovereign risk is moderate. Moody's In 2017, Armenia's industrial output low taxes, with a commercial profit tax assessment gives Armenia a B1 rating, value was about USD3.44 billion, rate of 18.5%. In general, the Armenian which looks stable. Public debt as a an increase of 12.6% YoY, with tax system is beneficial to investors, share of GDP is 58.3%, and the fiscal manufacturing output of about with the vast majority of taxes are deficit is about 3.4%. USD2.15 billion, an increase of 15.7% levied nationaly. VAT is the largest tax YoY. The highest output industries at about one-third of the country's Risk of doing business is low, with are metalworking, food processing budget revenue. Profit tax is the Armenia ranking 41st in ease of foreign and tobacco products processing, second largest, accounting for about investor entry. To create a favorable non-metallic products and jewelry 15% of revenue. business investment environment processing. Beverage industry output for foreign investors, the government value is growing rapidly at over Armenia has a low funding score. has continuously deepened reforms, 30% YoY. Money supply is inadequate, with M2 promoting investment facilities, accounting for only 46.3% of GDP, simplifying customs clearance tax Energy: Armenia's energy scarcity, albeit with steady growth of about procedures, improving the efficiency especially the low strategic energy 18.4%. of government work, promoting reserves such as oil and gas, makes the steady development of foreign it difficult to develop energy-led (4) Risk Indicators trade and improving the economic industries. Armenia has moderate financial risks. environment. Its external debt as a share of GDP Agriculture: Armenia belongs to is 89.7%, which is reasonable, but The Armenian contract enforcement the Highland countries, with an foreign exchange reserves are only period 570 days, the cost of business average elevation of 1,800 meters, USD2 billion. establishment is equivalent to 0.8% of a small number of mountains and national income, at the mid to upper underdeveloped agriculture. Armenian's banking risk score is 0.4, level among BRI countries. mid-range. According to the 2017-2022 Armenia has high economic freedom, development plan formulated by Political risk is moderate. Armenia small foreign exchange risk. The its government, Armenia will focus pursues a balanced foreign policy local currency is the Armenian dram on developing the digital economy, with a focus on Russia. It is striving to and the exchange rate is stable. Its high and new technology, energy, consolidate strategic alliances with Chinn-Ito score is 0.8, high among BRI mining, agriculture, tourism and Russia and actively develop relations countries. infrastructure. with the US and the EU. (5) Key Industries Armenia, with no diplomatic relations Armenia's manufacturing industry is with its neighbors Azerbaijan and mature, with energy, agriculture and Turkey, has actively developed good- other sectors underdeveloped. neighborly and cooperative relations with Georgia and Iran, deepened Manufacturing: Growth is rapid. ties with countries in Eastern Armenia has a decent industrial base Europe and the Middle East, and and non-ferrous metal resources, actively participated in multilateral suitable for the development of non- organizations including the CIS, OSCE ferrous metal smelting and supporting (Organization for Security and Co- industries. operation in Europe), the Council of Europe and the Black Sea Economic Cooperation Organization.

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7) Moldova (1) Investment Advice Moldova's has low overall investment attractiveness. The economy is underdeveloped and investment risk is mid-range. Transportation, logistics and other infrastructure is relatively underdeveloped, creating some investment opportunities. It has a developed agriculture industry, and investors should pay attention to the country's planting, food processing and wine industries. In addition, Moldova and China have strong trade ties in culture and medicine, and Moldova's government has provided strong policy support to drive the development of these two industries.

Figure 68: Moldova Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Some 98% of Moldovans are Orthodox Its GDP of USD8.1 billion, or just Located in Eastern Europe, Moldova is Christians and 1.5% practice Judaism. USD2,289 per capita, is low. bordered to the west and southwest Moldova has actively developed by Romania and to the north, south, relations with the US and EU countries, Moldova's investment score is low and east by Ukraine. Most of its and has made integration into Europe and it absorbs relatively little foreign territory lies between the area's two and the EU a priority objective of capital. Because it is an IMF controlled main rivers, the Nistru and the Prut. its internal and foreign affairs. It state, the Moldovan government's The Nistru forms a small part of also attaches importance to the acceptance of foreign investment is Moldova's border with Ukraine in the development of relations with Russia subject to many restrictions. It mainly northeast and southeast, but flows and the CIS countries. accepts aid in the form of low-interest mainly through the eastern part of concessional loans from international the country, separating Bessarabia Moldova has joined the UN, the World financial organizations such as the IMF, and Transnistria. The Prut forms Bank, the IMF, IAEA, OSCE, Council World Bank and EBRD, and investment Moldova's entire western boundary of Europe, EBRD (European Bank for in Moldova is mainly through with Romania. Groundwater resources Reconstruction and Development), purchasing shares in privatized are abundant and forest covers 9% of NATO Cooperation Council and enterprises. national territory. Black Sea Economic Cooperation Organization. In 2017, Moldova absorbed USD160 Moldova has a total population million in foreign investment and of about 3.558 million, of which (3) Macroeconomic Indicators invested USD2.1 billion in fixed assets. Moldovans account for 75.8%, Moldova has a relatively low level Ukrainians 8.4%, Russians 5.9% and of economic development. Since Its consumption and demand Bulgarians 1.9%. Moldovan is the only independence, the Moldovan economy indicators are low. National income official language, and Russian is most has gone from severe recession per capita is only USD2,200 and people's second language. to a return to growth to economic household final consumption spending fluctuations, and the economic is just USD6 billion. situation has been greatly influenced by climate, politics and agriculture.

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Moldova's inflation is quite high, at Sovereign debt risk is moderate. Agriculture: With strong foundations, 6.5%. Moody's assigns Moldova a B3 agriculture is the backbone of the sovereign credit rating. Public debt country's economy, and focuses Its labor security and cost score accounts for about 40.5% of GDP on attracting foreign investment. is moderate. With a low level of and the fiscal deficit is 0.8%, with a Moldova's fertile land, characterized domestic employment due to manageable level of risk. by black calcium soil, accounts for limited job opportunities, the three-fourths of its land area, with per majority of Moldova's labor force Risk of doing business in Moldova capita arable land of 7.5 acres. seek employment abroad. Private is also moderate. It is quite easy for enterprises and small businesses foreign capital to enter the market and The country's main cash crops are are the main generators of new the cost of business establishment corn, sunflowers and tobacco, and its employment opportunities. High is low, at equivalent to 5% of national grape growing and brewing industries business operating costs due to income. However, local regulations are particularly well developed. Its numerous administrative barriers and contract performance are major processed agricultural products are the main reason for the low level challenging, with the latter taking are wine, beet sugar, chocolate, fruit of domestic employment. These about 585 days. and vegetables and tobacco, most of costs reduce the expected return which are exported to the CIS. on business activities and affect the Moldova has moderate foreign formation and growth of enterprises. exchange risk and a low exchange Moldova's total agricultural Moldova lacks senior blue-collar and rate against USD. Foreign exchange production was USD1.6 billion in 2017, skilled technicians due to severe freedom is moderate to low. The up 8.6% YoY and representing 17.6% brain drain. The brain drain, especially government has stringent regulations of GDP. among those with higher educations, on foreign currency exchange, was aggravated by the liberalization of remittances and account opening. Moldova's key investment areas EU visa restrictions in April 2014. include agriculture (especially (5) Key Industries harvesting, storage and processing), Moldova has a high tax burden. The Moldova's manufacturing and IT power engineering, power grid total tax rate on commercial profits is industries have high scores and are construction, water supply and 40.5%, high among BRI countries. mature. Natural resources are quite pollution management system scarce, with a lack of coal, iron, oil construction, as well as railways, roads Capital supply is moderate. M2 as a and natural gas and other energy and other transport infrastructure share of GDP is 51.2% and expected to resources and bulk minerals, but construction. grow at 9.2%. Moldova has abundant non-metallic ores, mainly marble, gypsum, (4) Risk Indicators limestone, sand, diatomite and clay. It Moldova has quite high financial risk. is particularly rich in high-quality clay, an important raw material for bricks, Its banking risk score is 0.6, quite high. pottery and porcelain. External debt as a proportion of GDP is low, but foreign exchange reserves Manufacturing: Moldovan industry only about USD2.1 billion. is mainly invested in or collectively controlled by foreign, private sector Moldova has moderate political risks, investors and consists of agricultural with a stable political situation, decent product processing, tobacco and social security and few extreme cigarettes, textiles and clothing, incidents involving foreigners. Its leather processing and footwear political stability index is at -0.2 and (mainly EU orders). The total value legal environment index scores -0.04, of industrial production in 2017 was mid-range. Moldova has established about USD2.62 billion, an increase of a parliamentary democratic system 7.8% YoY. with a separation of powers, having basic political stability and good social order.

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5. Eastern Europe 1) Slovenia (1) Investment Advice Overall, investment in Slovenia is quite attractive. It macroeconomic attractiveness is high, with strong consumer demand and good labor quality. Investment risk and sovereign risk are low and should be stable. Slovenia has fully adopted the EU's trade policy, and the government gives substantial preferential treatment to foreign investment. Investors should focus on Slovenia's well-established machinery manufacturing and rapidly developing IT service industries.

Figure 69: Slovenia Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile English, German or Italian. Hungarian The republic of Slovenia covers 20,273 and Italian are official languages km2. It is a small country in southern in some border towns. Slovenia is central Europe, adjacent to the Alps, predominantly Catholic, with a small with Italy to the west, the Adriatic Sea population of Orthodox Christians and to the soutwest, Croatia to the east and Muslims. south, Hungary to the northeast and Austria to the north. Slovenia is a founding member of the WTO, and its economy is highly export- Its national average altitude is 557 oriented. meters. The highest peak is Triglav at 2,864 meters. Slovenia's forest (3) Macroeconomic Indicators coverage rate is 66%, ranking 3rd in Slovenia has a high level of economic Europe, with rich forest resources. In development, with a GDP of USD48.7 addition, the country has 5,593 km2 of billion in 2017 and per capita GDP of grasslands, 363 km2 of orchards and USD23,597, much higher than those 216 km2 of vineyards. of other new EU members. Slovenia's economy is highly export-oriented The population is about 2.07 million. and exports are the main driver of The main ethnic group is Slovenian, economic development. Due to its accounting for about 83% of the small size, the domestic economy is population. Ethnic minorities include heavily influenced by global conditions, Croats, Serbs, Bosnians, Hungarians, especially in the European economy. and Italians. The official language is Slovenian. Most people can also speak

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Its investment environment score is and multilateral relations continuing to printing are at a quite high level. The low. FDI was USD1.08 billion and fixed deepen. automobile and metal processing asset investment was only USD10.6 Sovereign risk is low. In 2017, Moody's industries have a long history. Electrical billion in 2017. rated Slovenia Baa1. Public debt is and electronic products (including low at 73.9% of GDP and the deficit is electric motors, household appliances, Its consumption and market demand about 0.7%. telecommunications equipment, score is high. Slovenia's per capita and electronic instruments), national income of USD22,000 is higher The business environment is automotive products and medicine than those of most countries in Eastern moderately risky, with a contract have substantial shares in EU export Europe. Inflation has been steady enforcement period of 1,160 days, markets. at 1.3%. However, household final longer than in most BRI countries. consumer spending is medium-low at However, the cost of setting up a Transportation infrastructure: USD25.74 billion. business is extremely low and its Slovenia has complete infrastructure government efficiency index is high and broad space for growth. Its road, Its labor supply and cost score is quite among BRI countries. The World rail, air and water transportation high. The labor force is high quality, Bank ranks Slovenia 40th out of 190 networks are complete, covering the with good technical knowledge and countries and regions in ease for whole country. Two pan-European high proficiency. Average productivity foreign investors to enter local market. transport corridors (Barcelona-Kyiv is close to that of western European Salzburg-Salonika) converge in countries. Labor cost is lower than in Its foreign exchange risk score is quite Ljubljana, the capital of Slovenia. western and northern Europe, and mid- high. The exchange rate is stable range for the continent as a whole. The and freedom of foreign exchange is Road density is higher than the EU unemployment rate was 6.2% in 2017. reasonably good, with a Chinn-Ito average, with passenger and freight score of 0.7. road traffic accounting for more than Its tax burden score is moderate. 60% of total traffic. According to World Bank statistics, total (5) Key Industries tax on business profits is about 31%. Slovenia scores high in manufacturing, In shipping, the throughput of transportation and IT, and low containers and other goods at the Its money supply score is moderate. in agriculture and energy. Since port of Koper has increased at an M2 accounts for 103.4% of GDP. Slovenia joined the EU in 2004, annual rate of 13% in recent years and The interest rate difference between the government has been actively reached 20.71 million tons in 2015. Its domestic deposits and loans is 2.5%. pursuing free trade policies, focusing average annual growth rate in business on EU and central European markets. with Asia is more than 50%. Koper is (4) Risk Indicators Automobile products manufacturing, set to further enhance its position as a Financial risk is modest. The banking metal processing, chemical and national hub in southern Europe and sector risk index is at 0.3, with pharmaceuticals, electronics, the former Yugoslavia. domestic financial institution credit telecommunications, other services accounting for 68% of GDP. External and tourism have comparative IT: Slovenia prioritizes IT debt is 96% of GDP and is under advantages. development. The main products are control. However, reserves are only telecommunications equipment and UD870 million. Manufacturing: Slovenia has solid services, IT services, software, hardware, foundations and significant advantages equipment and network services. In Political risk is quite low. Its political in processing industry. Manufacturing recent years, exports of IT and services stability and legal environment indexes accounted for 20% of GDP in 2014, have been growing rapidly, mainly are at 0.9 and 0.6. After Slovenia ranking 2nd. destined for European and central Asian became independent, it sought countries and the US. friendly cooperation with its neighbors Chemicals, electronic equipment, and was committed to maintaining machinery manufacturing, Under Slovenia's 2015-2020 stability in southeast Europe. On transportation and metal internationalization plan, total foreign the whole, Slovenia has no serious manufacturing are the five major investment will increase from USD10.5 disputes with neighboring countries. industries. Electronics, wood billion to USD 15 billion, and China will Many cooperation projects are being processing, food, non-metallic mineral be an important market. Bilateral trade or will be carried out, with bilateral processing, non-ferrous metal and and investment relations are expected to strengthen further.

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2) Turkey (1) Investment Advice Overall, Turkey has moderate investment attractiveness. Its macroeconomic attractiveness is high, with a large scale economy and ample and high-quality labor. Investment risk is high, as the challenging legal system and uncertainty of regime change challenge business and investment. The manufacturing industry, especially automobiles and textiles, is quite developed. Meanwhile, Turkey is focused on transforming its transport infrastructure, which should create some investment opportunities. Chinese companies should focus on the abovementioned areas.

Figure 70: Turkey Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile China-Turkey strategic cooperation, In consumption and market demand, The Republic of Turkey connects especially in economics and trade, Turkey's score is moderate. Due to Europe and Asia, bordering the Chinese has become one of the major a large population base, Turkey's Black Sea to the north and the foreign languages. per capita national income is about Mediterranean to the south, Syria and USD11,000, mid-range. However, as Iraq to the southeast, the Aegean Sea, (3) Macroeconomic Indicators local people have strong spending Greece and Bulgaria to the west, and Turkey has a high scale of economy power and advanced consumption Georgia, Armenia, Azerbaijan and Iran score. The economy has developed ideas, final household consumption to the east. Turkey has an extremely rapidly in the past decade, with GDP expenditure is USD502.7 billion, taking important geographical location and is growth of 7.4% in 2017, when total the lead among countries in Eastern of geopolitical strategic significance. Its GDP reached USD851.5 billion and Europe. total area is 784,000 km2. GDP per capita reached USD15,000. With its rapid growth and promising The inflation rate reached 11.1% in The western and southern coastal prospects, Turkey has become one of 2017, the first time in the past six regions of Turkey have a typical the biggest emerging economies after years it has exceeded double digits. Mediterranean climate, with hot and China, Russia, India, Brazil and South The Turkish government says it will dry summers and mild, rainy winters. Africa. undertake reforms to lower the cost The annual average temperature is of key commodities such as food, 16-22°C. Turkey has a high investment control inflation and boost consumer environment score. In 2017, FDI confidence. Turkey has a total population of 80.75 was USD10.9 billion, of which 65% million, with Turks accounting for came from the EU, with the largest Turkey scores highly in labor supply more than 80%, and Kurds about 15%. five inflows going to insurance, and cost. Turkey has an adequate The official language is Turkish, with transportation and warehousing, supply of labor, with a large proportion ethnic minorities using Kurdish, Arabic, manufacturing, and energy and of young people and well-qualified Armenian and Greek. Popular foreign construction, according to the central labor force. It it experiencing a languages include English, French, bank. Fixed asset investment was demographic dividend. German, and Spanish. In recent USD226.8 billion. years, with the rapid development of 131 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section IV: BRI countries Investment Index – Country Analysis Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section IV: BRI countries Investment Index – Country Analysis

Turkey has a low tax score. Turkey Foreign exchange risk is moderate. In addition, Turkey is one of the world's has a heavy tax burden. According Turkish lira exchange rate volatility leading producers and exporters of to World Bank statistics, tax on versus USD has been at 0.3%. building materials. Its chemicals and commercial profits is 40.9%, high Freedom of foreign exchange is high. machinery manufacturing technical among BRI countries. content and R&D levels are high. (5) Key Industries Its money supply score is modest. Turkey scores highly in transportation Transportation infrastructure: Turkey's M2 level is low, accounting for infrastructure and manufacturing. Transportation infrastructure is a only 54.3% of GDP. But the M2 growth key development area, with broad rate was quite high in 2017, reaching Manufacturing: Turkey's dominant investment prospects. 16.3%. The difference in interest rates industries are diversified, with the between deposits and loans is 3.3%, textile and garment industry leading At present, the total length of the mid-range among BRI countries. the world, and the automobile industry railway system in Turkey is 8,400 km; developing rapidly. In light industry, only about one seventh of the road (4) Risk Indicators Turkey is the 5th largest textile system has pavement, and automobile Turkey has low financial risk. The exporter and the 7th largest garment transport still dominates. International banking industry risk indicator is at exporter in the world. There are and domestic shipping relies on the 0.5, still under control. Foreign debt is about 56,000 enterprises and more ports of Istanbul, Izmir and Mersin. relatively small, accounting for about than 2 million workers engaged in the 62.7% of GDP. Foreign exchange industry, with output value accounting The local government is carrying out a reserves are about USD98.4 billion, for about 7% of GDP. Turkey's textile series of transportation construction quite high among countries in Eastern technology is advanced, and its projects including road, railway, Europe. featured products include carpets, aviation and maritime transportation. home textile products, fur and leather These projects involve the construction Political risk is high. Since 2016, the products. of 1,775 kilometers of expressways political environment has been more and more than 15,000 kilometers of complicated because of a change in In heavy industry, Turkey has the other roads, the development of a central government, an attempted 7th largest automobile industry in high-speed railway network through military coup, a referendum Europe, after Germany, France, a PPP model, as well as investments on constitutional law, and the Spain, the United Kingdom, Russia of USD940 million in terminal projects deterioration of security. The political and Italy. The automotive industry at five international airports and stability index is at-1.8, and its legal in Turkey has developed rapidly in EUR22.15 billion to build a third environment scores 0.04, low among recent years. When the government airport in Istanbul. Turkey's booming BRI countries. encouraging vehicle manufacturing transportation infrastructure should and local production, several leading create investment opportunities. Sovereign risk is moderate. Moody's automakers including Fiat, Renault, sovereign credit rating for Turkey is Mercedes-Benz and Ford have set up Agriculture: Turkey has good natural Ba3 as of 2017. Turkey's public debt factories in Turkey and carried out conditions and abundant agricultural accounts for only 27.9% of GDP, technical cooperation with local parts and forestry resources. Turkey has indicating relatively low debt pressure. factories. At present, there are 15 large the 7th largest agriculture production The fiscal deficit is 2%, mid-range automobile manufacturers in Turkey, area in the world, with good amoung countries in Eastern Europe. which have created more than 50,000 foundations and gradual increases jobs. In 2016, automobile production in mechanization over recent years. Business environment risk is low. ranked 1st in Europe, export volume Agriculture accounts for about 6% of Turkey ranks 43rd in ease for foreign increased by 15%, and exports GDP. About a quarter of the domestic businesses to enter the local market, reached USD21.1 billion . Automobile labor force is engaged in agriculture. with a contract fulfillment period of products have been the largest export Products with higher yields include 609 days. Its company establishment product in Turkey for 11 consecutive tobacco, cotton, rice, olives, sugar cost is relatively low, equivalent years. The automotive industry is beets, and livestock, of which cotton to 10.6% of national income. The gradually replacing the textile industry and tobacco are important export government efficiency index is at 0.1. as the leading industry in the country. commodities. In addition, the forest area of Turkey is about 220,000 km2, and its wood processing industry is developed.

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3) Croatia (1) Investment Advice Overall, Croatia's investment attractiveness is high. Its macroeconomic indicators are quite strong, with a relatively low tax burden. Investment risk is low and the political environment is quite stable. Its relatively complete infrastructure and systems create a favorable environment for foreign investment, and its good geographical location and membership of the EU have increased investment. Given the high quality and high cost of the Croatian workforce, investment in labor-intensive industries should be avoided. Croatia has broad development opportunities in new energy and power, and huge demand for transport upgrading and transformation, which investors can focus on.

Figure 71: Croatia Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Croatia separated from Yugoslavia in Its consumption and market demand Croatia is in south-central Europe, 1991 and joined the EU in 2013. score is high. Although, per capita adjacent to Serbia, Bosnia and national income is about USD13,000, Herzegovina, bordering Montenegro (3) Macroeconomic Indicators and final household consumption to the east, Hungary to the north, Croatia's scale of economy score is expenditure is only USD31.6 billion, Slovenia to the northwest and the quite low. After the economic crisis indicating people have little willingness Adriatic Sea to the south. With a land in 2008, Croatia's economy fell into to spend, inflation is just 1.1%. area of 56,594 km2 and a national recession and only began to recover in forest coverage rate of 40%, Croatia 2015. The recovery in secondary and Croatia has a moderate labor supply has abundant forest and water tertiary industries is clear. Its GDP of and cost score. Due to its small resources. Croatia has a temperate USD55.2 billion and per capita GDP of population, Croatia does not have continental climate with four distinct USD13,000 in 2017 indicate relatively a significant labor force advantage. seasons and mild summers. The good economic conditions. With a relatively advanced education average temperature in July is 18-22°C. system and generally high level of The winter is cold, with temperatures Croatia's investment environment education, labor force quality is high. below 0°C. score is mid-range. Limited by its Although wages in Croatia are not high small area and population, Croatia in Europe, they are much higher than The total population of Croatia is has a small domestic market. In 2017, those in Southeast Asia, giving it only 4.13 million. Croats are the main Croatia received USD2.04 billion of a slight labor cost advantage in global ethnic group, accounting for 90.4% FDI, relatively little. Foreign capital terms. Unemployment in Croatia is at of the total population. Serbs are the has gone mainly to the financial, 9.1%, low in Eastern Europe. largest minority, accounting for 4.5% retail and wholesale, real estate, of Croatia's population. The official telecommunications and chemicals Croatia has a low tax burden, with a language is Croatian and English is industries. total tax rate of 20.5% on business widely spoken. There are also many profits, according to World Bank German and Italian speakers statistics.

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Croatia has a moderate score in Its business environment risk is mid- Transportation infrastructure: money supply. Money supply is range. According to the World Bank, Croatia's location next to the ocean reasonable, with M2 accounting for Croatia ranks 58th out of 190 countries means it has complete port facilities. 71.3% of GDP, but growth at only 3.8%. and regions in ease of doing business. In addition, Croatia has excellent road The interest rate spread between Its contract fulfillment period of 650 and railway networks, and convenient domestic deposits and loans is low days and government efficiency index transportation overall. at 3.5%. of 0.6 are mid-range. The cost of setting up a business is equivalent The government of Croatia and (4) Risk Indicators to 6.6% of national income. Croatia the IBRD (International Bank for Financial risk is modest. Croatia's has simplified asset transactions by Reconstruction and Development) banking industry assessement index is digitizing land registration certificates. have launched a project to improve at 0.5, quite stable. Foreign debt is low, links between Rijeka port and at 74.8% of GDP. Foreign exchange Foreign exchange risk is low. The international roads and railways, and reserves are modest, at about local currency is stable against USD to expand the market of the port. The USD14.31 billion. and freedom of foreign exchange is government also plans to modernize reasonable. According to Croatian and upgrade the railway from Rijeka Political risk is low. With political foreign exchange law, foreign to the Hungarian border to improve parties gradually maturing, Croatia's enterprises registered in Croatia can the speed and capacity of trains. In political situation is quite stable. After open foreign exchange accounts at addition, in 2018 a consortium of Croatia joined the EU, policies and laws local banks for import and export Chinese enterprises led by China emphasized full integration with the settlements. Foreign exchange to and Road And Bridge Corporation began EU and its market scope expanded. from Croatia must be declared. There construction of the first phase of the is no special tax on foreign currency Pereshats Bridge and its connecting The country has a sound institutional transfered to Croatia. routes. environment, with high policy transparency and low trade (5) Key Industries Energy: Croatia currently imports and investment risk. Its political Among the key BRI industries, Croatia's about 45% of its electricity. In recent stability index is at 0.8 and its legal IT and transportation infrastructure years, the Croatian government has environment scores 0.4, at the mid- are quite well developed, while actively encouraged the development upper level. agriculture, energy industry and of renewable energy. At the end of manufacturing are somewhat weak. 2018, the wind power project in Senj Sovereign risk is moderate. Moody's Croatia, partly financed by a Chinese gives Croatia's a sovereign credit rating IT: Croatia is highly digitalized. The company, Northern International of Ba2, with a stable outlook. Since internet penetration rate is 72.7%. Investments, started construction. The the Andrej Plenković government High-tech exports account for 11.6% project, with a total installed capacity was formed in 2016, with the goal of of GDP. The number of telephone of 156 megawatts, is expected to achieving sustainable growth, it has devices per 100 people is 34.1. In generate a total of 530 million kilowatt strived to improve the investment and 2014, Ericsson signed a five-year hours of electricity annually. business environment, maintaining management service agreement with fiscal and financial stability, increasing Croatia Telecom. Ericsson will help investment in energy, transportation, Croatia Telecom improve its network tourism and agriculture, improving quality and operational efficiency, was economic competitiveness, enhancing well as be responsible for construction public and judicial management, and and maintenance of its telecom expanding foreign economic and trade infrastructure. cooperation. The ratio of public debt to GDP is 79.6%, and Croatia has a fiscal deficit of about 0.5%, both quite high.

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4) Estonia (1) Investment Advice Overall, investment attractiveness is high. Estonia has a low macroeconomic attractiveness and low investment risk overall. The core attractions of international investment in Estonia include sound infrastructure, a stable political environment and sound market mechanisms. Estonia is rich in forest and oil shale resources, which are of great strategic value. Its superior geographical location and solid transportation foundations benefit the development of logistics industry development. Estonia has a high-quality labor force and advanced information and communication technology. Its manufacturing industry has developed rapidly in recent years, and there are some investment opportunities in high-tech industries.

Figure 72: Estonia Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Estonia has a total population of between the EU and the United States The republic of Estonia, with Latvia 1.32 million and has 11 main ethnic and other trading powers. and Lithuania to the south, is one of groups. The five largest ethnic the three Baltic States. Estonia is on groups are Estonians, Russians, (3) Macroeconomic Indicators the eastern shore of the Baltic Sea Ukrainians, Belarusians and Finns. The scale of the Estonian economy and southern shore of the Gulf of Ethnic Estonians account for 68.7% is moderate. It has been affected Finland, bordering the Gulf of Riga to of the country's population. Estonian by fluctuations in global economic the southwest, Latvia and Russia to is the official language, with English conditions several times in the 21st the south and east. The total land area and Russian are also widely used. century, particularly the European debt is 45,227 km2, with low-lying territory. Estonians have a high level of foreign crisis in 2012. Estonian GDP growth The average elevation is 50 meters and language ability, most residents started to drop rapidly in 2011 from the highest point is Dome Mountain, speak at least one, and young people 8.3%. In 2017, Estonia's GDP reached 318 meters above sea level. The often master 2-3 foreign languages, USD25.92 billion, up 4.8% YoY, with coastline is 3,794 kilometers long, with including English, Russian, Finnish and per capita GDP of nearly USD20,000. 2,355 islands. Swedish. Estonia's investment environment sore Estonia has a maritime climate Estonia is a member of the EU is quite low. FDI was only USD1.56 affected by the ocean. Spring is cool and NATO and attaches great billion and fixed asset investment and rainy; summer and autumn importance to the maintaining was about USD7.07 billion in 2017, are warm and humid; winter is cold traditional friendships with Baltic underdeveloped compared to some and snowy. The average annual and Nordic countries. It also strives countries in Eastern Europe. temperature is 7°C. In January and to promote and strengthen regional February, the average temperature is cooperation and actively participates Its consumption and market demand -5.5°C. In July the average temperature in international affairs. It supports scores are also moderate. The is 17.5°C. relations between EU and partner level of per capita national income countries in Eastern Europe, as well is reasonable. However, limited as promotes free trade agreements

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by a small domestic population not issue national debt. Public debt is Transportation infrastructure: base, household final consumption only 8.8% of GDP and its fiscal deficit is Transportation plays an important role expenditure is low. The ratio of about 0.2%. in the development of the national imports and exports to GDP is 151.5%, economy. Estonia has developed indicating a high degree of the trade Its business environment score is high. road and rail facilities, convenient dependence. However, with the Estonia ranks 16th in ease of market for passenger and freight transport, development of the Estonian economy, entry. The contract enforcement and high-quality port infrastructure. further expansion of domestic period is 455 days and it costs the From 2014 to 2020, the Estonian demand is possible. Inflation is 3.4%, equivalent of 1.1% of national income government plans to invest EUR290 under control. to set up an enterprise. million in Tallinn port infrastructure to further improve handling and carrying Its labor supply and cost, Estonia Estonia has low foreign exchange capacity. also posts a moderate score. Estonia risk. There is little exchange rate has a small population. However, volatility between the euro and other The Estonian government, together the workforce is highly educated currencies, and freedom of foreign with the Latvian and Lithuanian and demand high wages, and cheap exchange is high. Estonia has no governments, plans to build a high- labor is in short supply. This makes controls on foreign exchange or speed railway from Tallinn, capital of Estonia more suitable for developing restrictions on international payments. Estonia, via Latvia and Lithuania, to technology-intensive industries. Any currency, regardless of the Warsaw, capital of Poland. This project Unemployment is 5.6%, within normal amount, can be freely exchanged is an important part of EU transport levels. and remitted. However, for large network planning. The Estonian and inward and outward remittances, an Finnish governments are discussing Its tax burden is low. According to anti-money laundering declaration the construction of an undersea World Bank statistics, total tax on form should be filled according to tunnel from Tallinn to Helsinki, which is business profits is 48.7%. EU regulations. Under Estonian law, scheduled to open in about 2035. foreign companies are free to open Estonia has a relatively low money foreign exchange accounts in the Energy: Estonia is rich in electricity, supply score. Although money supply country and can remit operating with per capita consumption of 6,518 is not abundant, with M2 accounting profits after paying taxes. KWH. Estonia, along with Lithuania and for only 51.6% of GDP, it is growing Latvia, is considering integrating its at 10.2%. The interest rate difference (5) Key Industries national grid system with the Europe's. between domestic deposits and loans Among the BRI key industries, Estonian is moderate at 3.7%. IT, transportation infrastructure and Estonia is rich in oil shale, which energy are quite well developed, generates more than 90% of the (4) Risk Indicators with manufacturing and agriculture electricity. By 2020, Estonia will have Estonia has low financial risk. The relatively weak. built a shale oil plant with annual banking system is sound. The processing capacity of 4 million tons to government attaches great importance IT: Estonian IT is advanced, leading ensure fuel supplies. to controlling its fiscal deficit and in the EU, with communication has conservative fiscal policy. The infrastructure and application Manufacturing: Since Estonia has risk index of the banking sector is technology leading the world. In 2017, no natural resources, such as iron 0.2. External debt is low, accounting the added value of the information ore, non-ferrous metals or coal, for 82.2% of GDP. However, foreign and communications industry grew it has no upstream industries like exchange reserves are relatively low at by 15.6% to EUR1.23 billion. The steel and non-ferrous metals. This only USD490 million in 2017. Estonian government attaches great means manufacturing development importance to broadband internet is relatively low among BRI Estonia has a stable political situation, and third-generation mobile phone countries. However, in recent years, with a sound legal system, strict services. The internet penetration rate manufacturing has grown rapidly. judiciary and clean officials. Its political is up to 87.2%, and the mobile devices During 2017, manufacturing grew at its stability and legal environment indexes have reached 144.6 per 100 people. In fastest pace in nearly three years, with are at 0.7 and 1.6, both high. recent years, the Estonian government value-added increasing by 3.9%, mainly has been committed to realizing the due to increased production of wood Sovereign risk is low. Moody's gives complete digitization of government products, food, metal products and Estonia's a sovereign credit rating of operations to simplify administrative electrical equipment. A1, with a stable outlook. Estonia does procedures and improve transparency.

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5) Romania (1) Investment Advice Overall, Romania's investment attractiveness is high. Its macroeconomic attractiveness is moderate. In recent years, the economy has been improving. However, the domestic consumption market is relatively small. Labor force quality is high but is suffering from a serious brain drain. Overall investment risk is low and the business environment is friendly. Investors should focus on transportation infrastructure upgrades and opportunities in energy development.

Figure 73: Romania Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Romania says it pursues a foreign Romania's investment environment Romania lies northeast of the Balkans policy of friendship and peace, scores are high. FDI totaled USD5.95 in southeast Europe. It borders advocating extensive opening-up billion and fixed asset investment Ukraine and Moldova to the north and to safeguard and develop its own was USD52.59 billion in 2017. The northeast, Bulgaria to the south, Serbia interests. Romania prirotizes Europe government attaches great importance and Hungary to the southwest and and the United States, takes into to introducing foreign investment northwest, and the Black Sea to the account neighboring countries, and seeking development of local southeast. The country covers an area and attaches importance to other industries. of 238,000 km2. The terrain is diverse, major nations. It joined NATO in with plains, mountains and hills each 2004 and the EU in 2007. Romania Its consumption and market demand covering one third of the territory. has diplomatic relations with 187 score is moderate. Romania's small Romania has a typical temperate countries. size labor force exodus make the continental climate, with the average domestic market small. Per capita annual temperature about 10°C. (3) Macroeconomic Indicators national income is about USD10,000 Romania's macroeconomy is quite and household final consumption Romania has a population of 19.59 attractive, having developed rapidly in expenditure is USD132.52 billion. It million, of which 88.6% are Romanian, recent years. In 2017, Romania's GDP has a Gini coefficient of 0.35, indicating 6.5% Hungarian, 3.2% Roma, 0.2% was about USD211.8, with a growth a small wealth gap. Imports and Germanic and Ukrainian, and the rest rate of 7.2%. Romania is the fastest exports account for about 84.9% of Russian, Turkish and Tartar. Some growing country in the EU. In 2017, GDP, a small proportion. Inflation is 86.5% of the population follow the GDP per capita reached USD11,000. low at 1.3%. Eastern Orthodox Church, 4.6% follow According to the World Bank's Catholicism Church, 3.2% Protestanism forecast, Romania's economy will and 0.8% Greek Catholicism. The continue to improve, with estimated official language is Romanian, and GDP growth of 4.2%. Hungarian is quite widely spoken. English and French are also used.

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Its labor supply and cost score is high. Sovereign risk is low. Moody's gives Transportation infrastructure: Romania has 8.72 million workers, Romania a sovereign credit rating of Romania has 10,774 kilometers of with a healthy unemployment rate Baa3, with a stable outlook. The ratio railways. In 2017, railway cargo volume of 4.6%. The quality of its labor force of public debt to GDP is 40.1% and the totaled 56.08 million tons. Its logistics is quite high, with obvious foreign fiscal deficit is-3.1%. performance index is high. However, language advantages. There are Romania's transport infrastructure many universities in Romania. Many Its business environment risk is is relatively poor compared to the graduates enter the labor market reasonable. Romania ranks 52nd in rest of the EU. In 2015, according to every year. Technical education is ease of domestic market entry, with a EU guidance, Romania introduced a developed. Its IT and software talent contract enforcement period of 512 transport plan with total investment are renowned at home and abroad. days and a government efficiency of EUR43.6 billion EUR, covering road, Labor cost is quite low among EU index of -0.2, both above mid-range. rail, water transport and aviation. members. However, due to a low level The cost of setting up a business is of urbanization, many workers move to equivalent to only 0.4% of national Manufacturing: Industry is the other countries in Europe to seek work income, one of the lowest among BRI pillar of Romania's national economy. opportunities while few high-quality countries. Manufacturing industry development workers stay at home. is advanced, with added value of Romania has low foreign exchange 20.9%. In recent years, manufacturing The tax burden is quite heavy. risk. The local currency is the leu, has developed rapidly, with a growth According to World Bank statistics, which is freely convertible. Its Chinn-Ito rate of 9.1%, within which the total tax on business profits is about score is 1, ranking among the top BRI pharmaceuticals sector has a low debt 40%, a high level among BRI countries. countries. Romania has liberalized ratio, positive profit margin and is long-term foreign exchange circulation particularly well developed. Its money supply score is low. M2 under its capital account. Residents only accounts for 40.7% of GDP and and non-residents can freely conduct Energy: Romania has the fourth the growth rate is 10.7%, indicating foreign exchange business under largest oil reserves in Europe. insufficient currency circulation. The current and capital accounts, although However, according to the strategy interest rate difference between the state bank has some with special released by its energy ministry, oil domestic deposits and loans is 4.6%. provisions. The RON-USD exchange production will decline from 2030 rate continued to stabilize in 2017. to 2050. Romania has relatively (4) Risk Indicators abundant electricity resources, with Romania's financial risk is moderate. (5) Key Industries per capita electricity consumption Its banking sector risk index is at 0.5, Among the key BRI industries, of about 2,242kwh. The government and foreign exchange reserves are IT, transportation infrastructure is committed to the construction USD40.15 billion. External debt is low and manufacturing are relatively of energy infrastructure. It has at 50.5% of GDP. well developed, while energy and cooperated with China General agriculture are quite weak. Nuclear Power Group on development Political risk is relatively low. Romania's of the Cernavoda nuclear power political stability index is at 0.06 IT: The IT sector is advanced. High- station, and with China Huaxin Energy and the legal environment index is tech accounts for 8.5% of total to develop the Rovinari coal-fired at 0.5. The democratic system has exports. The Romanian government is power station, the only foreign-funded been constantly improved and the developing 4G networks. It has issued oil and gas project in the Balkans. political situation is quite stable. After 4G licenses to major operators and Romania joined the EU, it revised laws piloted 4G services in some areas to to keep in line with those of the EU. In expand coverage. In 2017, Huawei recent years, the crime rate has been set up a global service center in decreasing and it has become one of Romania. The software industry is also the safest European countries, with developed. Romania's Bitdefender is good security. one of the world's premier antivirus companies.

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6) Serbia (1) Investment Advice Overall, Serbia's investment attractiveness is moderate. Serbia's overall macroeconomic attractiveness score is low, and it has a cheap but insufficient labor force. Overall investment risk is moderate, with political stability and the financial environment performing quite well. Its IT and automobile indstries have development prospects and investment value. The infrastructure market has huge demand, with broad prospects for cooperation.

Figure 74: Serbia Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Serbia is a multi-ethnic country with Its investment environment score is Serbia is a landlocked country in a total population of 7.02 million. modest. FDI reached USD2.88 billion Southeast Europe and the Central Ethnic Serbians make up 83.3%, and fixed asset investment USD9.23 Balkans. It covers an area of 77,000 and the rest are Hungarian, Bosnian billion in 2017, mid-range among BRI km2 (excluding Kosovo) and its Croat, Romanian and Slovakian. The countries. capital is Belgrade. Serbia borders official language is Serbian. English Montenegro, Bosnia and Herzegovina, is spoken by 40% of the population. Its consumption and market demand Croatia, Hungary, Romania, Bulgaria, Many residents can speak German or score is also moderate. Its small Macedonia and Albania. Its northern Russian. The majority of the population population base and challenging regions include parts of the Pannonian is Christian Orthodox, with Roman economy mean domestic demand is plain, which is near the Danube and Catholic and Islamic minorities. insufficient. In 2017, Serbia's per capita the autonomous Vojvodina region. national income was USD5,180 and final With its flat terrain and fertile soil, it is (3) Macroeconomic Indicators household consumption expenditure known as a major grain region. Its macroeconomic attractiveness is was USD29.79 billion. Inflation is at a low. The economy has been in recovery healthy level of 1.1%. Northern Serbia has a temperate since 2009, when it contracted sharply continental climate and the south due to the global financial crisis. In 2012 In labor supply and cost, Serbia again enjoys a Mediterranean climate. Serbia and 2014, due to the impact of extreme has a moderate score. It has an has four distinct seasons. The summer climate conditions, the economy insufficient labor force, at about 3.11 is hot, with an average temperature declined again. In 2017, Serbia's GDP million people. The labor force's leve of of 25-28°C. It is pleasant in spring and was USD41.4 billion, or about USD5,900 education is low and unemployment is autumn, with an average temperature per capita . According to the World Bank, high, at 13.1% in 2017. of 15°C. In winter, the average Serbia's GDP will grow at 3.3% a year. temperature is 0-5°C. Its tax score is agian moderate. Serbia has a relatively low tax rate for Eastern Europe and offers investment tax incentives. The total tax rate on business profits is 36.6%.

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Its money supply score is quite low. The up a business is low, equivalent to industry hub is being rebuilt. In 2017, ratio of M2 to GDP in Serbia is 50.9% 2.2% of national income. Government Chinese auto parts maker Meda Group and M2 growth is at 3.5%. The interest efficiency is at 0.2, mid-range. invested EUR60 million to build a plant rate difference between deposits and in Serbia. loans is 5.4%. Foreign exchange risk is moderate. Exchange volatility between the dinar, Transportation infrastructure: (4) Risk Indicators Serbia's currency, and USD is small. Due to war and other issues, Serbia's Serbia's financial risk is modest. According to foreign exchange law, transport infrastructure is relatively Since 2001, when Serbia entered foreign enterprises registered in Serbia underdeveloped and in urgent a stage of economic recovery can open foreign exchange accounts need of improvement. The Serbian and transformation, the financial at domestic and foreign banks government has conducted extensive environment has improved significantly for import and export settlement, cooperation with Chinese enterprises. and the privatization of banks has business operations and investment. achieved remarkable results. Since Its key railway projects include the 2016, the Serbian government, EBRD (5) Key Industries Belgrade-Stara Pazova section of the and the European Investment Bank Among the key BRI industries, Belgrade-Budapest Railway, built by have issued several commercial Serbia is quite strong in IT and China Communications Construction loans for small and medium-sized manufacturing, and relatively weak Co. and China Railway International Co. enterprises to encourage private in the transportation infrastructure, entrepreneurship, achieving good energy and agriculture. Its key highway projects include the results. Serbia's banking sector risk first phase of the E763 expressway, index is at 0.4. External debt is 62.1% IT: Serbia's information and contracted to Shandong Expressway of GDP. Foreign exchange reserves are communication technology industry Group, and the second phase of the USD12.15 billion. has comparative advantages and same expressway, contracted to China more than 1,600 companies, with Communications Construction Co. Political risk is low. With a stable about 14,000 employees. High-tech political situation, sound social exports accounted for about 9.9% of In water transportation, the Morava security, weakening ethnic conflicts, total exports. Microsoft has a research Canal development project is a key economic development has become and development center in Serbia project in imporiving Serbia's water the mainstream. Serbia's political with more than 130 technicians. In transportation capacity. stability index is at 0.1 and the legal recent years, the Serbian government environment index is at 0.01, both has vigorously promoted the Energy: As domestic generating mid-range. development of the information capacity cannot meet its economic and communications industry by and social development needs, Serbia Sovereign risk is moderate. Moody's improving laws and regulations, and needs to import power. To improve its gives Serbia sovereign credit a Ba3 implementing intelligent information power supply level, in 2017 Serbia's rating, with a stable outlook. In 2017, programs such as e-commerce, state power company cooperated the ratio of public debt to GDP in e-government, e-finance and e-health. with China Mechanical Equipment Serbia continued to decline to 67.9% In addition, to attract more foreign Engineering Co. to develop the largest and the fiscal deficit was about -1.7%. investment, Serbia is further opening power project in Serbia to date, the its information and communications second phase of Kostolac power Business environment risk is below markets including digital TV, cable station's 350MW coal-fired power unit. average. The Serbian government and wireless broadband network encourages foreign investment, infrastructure to foreign investors. Hydropower and green energy are also seeking to create jobs, reform and key areas promoted by the Serbian revise investment regulations, develop Manufacturing: The automobile government. Its major hydropower infrastructure and labor-intensive industry used to be one of the biggest projects include the Bistrica pumped industries, and strengthen the industries in Serbia. In 2008, the storage power station, the third phase construction of free trade zones and Serbian government again listed the of the Iron Gatespower station, and a national industrial parks. Serbia ranks automobile industry as a key economic stepped hydropower station project 48th in easy of entry into the local development industry, welcoming on the Ibar River. market, with a contract enforcement Italy's Fiat group to a new factory period of 635 days. The cost of setting on which the country's automobile

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7) Bulgaria (1) Investment Advice Overall, Bulgaria's investment attractiveness is high. Its macroeconomy is decent, although domestic demand is quite narrow. The workforce is less competitive than those elsewhere. Investment risk and political risk are low while financial risk is moderate. Investors should focus on new energy development, IT development and infrastructure upgrading.

Figure 75: Bulgaria Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Bulgaria prioritizes relations with Its investment environment score The republic of Bulgaria is in the Europe, the US and other Western is moderate. FDI in 2017 was low southeast of the Balkan Peninsula of developed countries, as well as at USD2.18 billion and fixed asset Southeast Europe, bordering Romania, participating actively in regional investment was USD12.64 billion. Serbia, Macedonia, Greece and Turkey, cooperation, attaching importance to and the Black Sea to the east. Bulgaria good-neighborliness and friendship. Its consumption and market demand has an area of 110,000 km2. Bulgaria Bulgaria carries out diversified scores are also moderate. Per is endowed with unique natural diplomacy, having developed friendly capita national income is USD7,860, conditions, with mountains, hills, plains relations with CIS, Asian, Middle and household final consumption and other landforms, lakes, rivers and Eastern and North African countries. expenditure is USD35.3 billion, abundant agricultural and tourism both low. Its Gini coefficient of 0.37 resources. Its forest area is 3.88 million Bulgaria has established diplomatic indicates a small gap between rich and hectares, accounting for about 35% relations with more than 140 poor. Imports and exports account for of total territory. Bulgaria is located countries. It joined NATO in March 131% of GDP, and are mainly traded in the southernmost temperate zone 2004 and the EU in January 2007. among EU countries. Its inflation rate of the northern hemisphere, with a is low at 2.1%. continental climate in the north and (3) Macroeconomic Indicators Mediterranean climate in the south. Bulgaria's macroeconomic Bulgaria scores highly in labor supply Average annual temperature is 10.5°C. attractiveness score is low. The and cost. It has a workforce of 3.21 economy is export-oriented, small and million with a high level of education. Bulgaria has a total population of 7.08 highly dependent on external markets. The unemployment was 4.9% in 2017. million, of which 84% are Bulgarian, Its economic development relies 9% Turkish, 5% Romany and 2% heavily on the large EU countries. Tax burden is small. Tax on Bulgarian from other ethnicities (including In 2017, the Bulgarian economy commercial profits is 27.7%, lower Macedonian and Armenians). maintained a steady recovery, with than in most BRI countries. Bulgarian is the official and common GDP reaching USD58.2 billion or USD language. Turkish is the main minority 8,228 per capita. GDP is expected to language. Residents mainly follow grow at 3.6%. Orthodox Christianity, and a few follow Islam.

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Bulgaria's monetary supply score is (5) Key Industries In pipeline transport, Bulgaria and moderate. M2 is at 84.5% of GDP Among the key BRI industries, Greece are building a natural gas and growing at 7.7%, mid-low range. Bulgaria is relatively strong in IT and pipeline between them. To diversify The interest rate difference between transportation infrastructure, but quite natural gas supply, Bulgaria plans to deposits and loans is 5.4%, high weak in manufacturing, energy and participate in the construction of a among BRI countries. agriculture. new LNG terminal at the Aegean port of Alexandria, Greece, which will supply (4) Risk Indicators IT: IT is developing rapidly. The LNG to Bulgaria from the US, Qatar Bulgaria's financial risk is modest. internet penetration rate is about and Algeria. The banking sector risk index is at 59.8%. Individual user and business 0.4. Foreign debt is relatively small, e-government user penetration Energy: The Bulgarian government accounting for only 60.1% of GDP. rates have reached 20.7% and 71% plans to vigorously develop energy Foreign exchange reserves are respectively. IT is growing fast, having projects. In addition to the planned USD24.32 billion. enjoyed double-digit growth for construction of large thermal power several years and accounting for about stations, the Belene and Kozloduy Unit Political risk is low. Its political stability 2.3% of GDP. 7 nuclear power projects are moving and legal environment indexes are at forward. In addition, according to the 0.4 and 0.6, indicating that the political Multinational IT companies in Bulgaria requirements of the EU, Bulgaria is environment is quite stable. include Cisco, VMWARE and Microsof. actively promoting the development of The software industry is the most solar, wind and other clean energy. Sovereign risk is low. Moody' rates attractive and innovative sector in Serbia's sovereign credit at Baa2, with Bulgaria. In 2017, Huawei and Vivacom Agriculture: In 2017, agriculture a positive outlook. Public debt is 24.1% signed a strategic cooperation accounted for 3% of Bulgaria's of GDP, indicating little pressure. In agreement to jointly develop cloud GDP. In recent years, the Bulgarian recent years, Bulgaria has been known technology for Bulgarian enterprises government has focused on for having sound macroeconomic and government. ZTE will launch a cooperation and communication policies among countries in Central smart city project integrating offices with other countries. In May 2017, and Eastern Europe, with a surplus and housing in Sofia, the capital of the first agricultural cooperation of 0.8%. Bulgaria. demonstration zone between China and Central and Eastern European was Business environment risk is quite Transportation infrastructure: established in Bulgaria. In November small. Bulgaria ranks 59th out of Port infrastructure is high quality and the same year, the first e-commerce 190 countries and regions in ease of logistics is developed. Some 60% logistics center for agricultural domestic market entry. It takes 564 of Bulgaria's imports and exports products between China and Central days to enforce a contract and the are transported by sea. Thus ports and Eastern Europe was built in cost of setting up a business is low, play an important role in Bulgaria's Plovdiv. SR to here. equivalent to 1.1% of national income. transportation infrastructure. In 2016, Government efficiency is good, with the throughput of Bulgarian ports was a score of 0.3, mid-range in Eastern 30.053 million tons. Europe.

Foreign exchange risk is low. The legal tender of Bulgaria is the lev. In the past three years, the lev has been fixed to EUR. Exchange rates are stable. The lev is freely convertible and Bulgaria's Chinn-Ito index is at 1.

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8) Slovakia (1) Investment Advice Overall, the investment attractiveness of Slovakia is quite high. Macroeconomic attractiveness is above average. In recent years, the economy has been growing rapidly, with great potential. But the tax burden is heavy. Investment risk is low. Business environment risk is moderate, with investment environment improved in recent years. In the electronics industry, investors can focus on the automobile industry and the upgrading of transportation infrastructure.

Figure 76: Slovakia Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile friendly relations with members USD95.77 billion, up 3.4%, with per The Slovak republic, bordering the of the EU and NATO. It attaches capita GDP of USD18,000. Czech Republic to the northwest, importance to retaining relations Poland to the north, Ukraine to the with large countries. Slovakia actively In investment environment, Slovakia east, Hungary to the south, and Austria promotes regional cooperation and scores quite highly, with FDI of to the southwest, is a landlocked participates in international affairs. USD5.92 billion and fixed asset country in Central Europe. Slovakia Slovakia became an independent and investment of USD22.97 billion. has a temperate climate that transits sovereign state on 1 January, 1993, from ocean to continental weather, and joined NATO and the EU in 2004. Slovakia also scores quite highly in with four seasons and annual average From 2006 to 2007, Slovakia was a consumption and market demand. Per temperature of 9.8°C. non-permanent member of the UN capita national income has reached Security Council. Slovakia became a USD17,000, and household final Slovakia has a population of 5.44 party to the Schengen Agreement in consumption expenditure USD52.39 million. The main ethnic groups in 2007. It joined the euro in 2009. billion, indicating residents' strong Slovakia are Slovaks, representing purchasing power and willingness to 81.3% of the population, 8.4% are (3) Macroeconomic Indicators consume. Import and export trade is Hungarians, 2% are Romany, and Slovakia's scale of economy score relatively developed, accounting for the rest are Ukrainian, German and is quite high. It has been one of the 189.1% of GDP. Inflation is healthy Russian. Slovak is the official language. fastest growing countries in EU over at 1.3%. The main foreign languages are the past decade. In recent years, a English, German and Russian, and the large number of foreign enterprises Its labor supply and cost score is main minority language is Hungarian. have invested in Slovakia. Pillar high. With a total labor population Slovaks mainly follow Roman industries such as automobiles and of 2.74 million and high-quality labor Catholicism and a minority follow electronics dominated by foreign resources, Slovakia ranks highest Slovak evangelism and Orthodox enterprises have become drivers among Central and Eastern European Christianity. of rapid growth. Driven by foreign countries in labor productivity and investment, exports and domestic labor cost ratio. The unemployment Slovakia is active in diplomacy. Slovakia demand, the economy is growing rate was 7.2% in 2017. has developed good-neighborly and rapidly. In 2017, GDP grew to

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Slovakia has a heavy tax burden, with Business environment risk is Manufacturing: Manufacturing is an a total tax rate of 49.7% on business moderate. In the Doing Business important part of Slovakia's national profits, according to World Bank Report released by the World economy. The added value of the statistics, which is higher than those of Bank, Slovakia is 42nd out of 190 manufacturing sector has increased most countries in Eastern Europe. economies in ease of domestic market by 3.4% to 20.1%. The automobile entry. Setting up business is cheap, industry is one of the pillar industries Its money supply score is modest. equivalent to only 1% of national of Slovakia, with an important strategic M2 accounts for 70.5% of GDP, with a income. However, the contract position. In 2017, Slovak automobile growth rate of 6.1%. The interest rate enforcement period is 775 days, manufacturing accounted for 44% difference between loans and deposits and government efficiency is at 0.8, of total manufacturing output. is 2.2%, indicating a stable money somewhat low. The Slovak government Volkswagen, PSA Peugeot Citroen and market. has started improving the efficiency of KIA have invested in Slovakia. contract performance, mainly through (4) Risk Indicators process informatization. The electronics industry is another Financial risk is relatively low and important industry. In recent years, the degree of financial openness is Foreign exchange risk is low. with the support of the government, quite high. Major commercial banks After joining the EU, the financial multinational companies such as have been held by large international environment of Slovakia has been Samsung and Sony have entered companies. There are 15 commercial greatly improved and foreign exchange Slovakia. The growth of the electronics banks and 13 foreign bank branches, controls have been gradually eased, industry has accelerated. In addition, with a banking risk assessment index creating a good financial environment the development of the Slovak of 0.3. External debt is moderate, for foreign investors. Slovak foreign automobile industry has led to the at 111% of GDP. Foreign exchange exchange law stipulates that foreign development of automotive related reserves are USD2.88 billion. Slovakia enterprises registered in Slovakia can electronic products such as on-board is one of the few countries in Central open foreign exchange accounts at communications and entertainment and Eastern European that has joined Slovak banks for import and export equipment. the eurozone. In general, the financial settlement. The import and export market is quite stable and the banking of foreign exchange needs to be Transportation infrastructure: industry has good prospects. declared. There is no special tax on Slovakia, in the heart of Europe, is at foreign currency transfered out of the intersection of European transport Political risk is relatively low. Slovakia is Slovakia. routes. However, the development now politically stable. The government of transport is affected by its attaches great importance to (5) Key Industries mountainous terrain. According to economic diplomacy, with the primary Among the BRI key industries, the EU's integration strategy, Slovakia task of promoting exports and FDI, Slovakia is relatively strong in IT and has invested heavily in transport and strengthening economic and manufacturing, and relatively weak in infrastructure to better integrate into trade cooperation between Slovak and transportation infrastructure, energy Europe's overall transport network. regions outside Europe, especially the and agriculture. Key upcoming projects include the emerging economies represented by reconstruction of the Dobra wide BRICS. China-Slovakia relations have IT: The information and and narrow rail transit station on the been developing smoothly in recent communication industry in Slovakia Uzbekistan border, and multimodal years. The current government is developed early and is mature. The transport stations at Leo Podov and friendly to China and willing to conduct internet penetration rate is as high the capital Bratislava. Long-term pragmatic cooperation with China. The as 80.5%. High-tech represents 9.9% key projects include a wide-gauge government stability index is at 0.9 and of exports. The internet is widely railway and the Zhilina to Katowicz the legal environment index is at 0.8, used in government affairs, trade, expressway. both high. transportation, finance and other fields. As an important partner in the Sovereign risk is low. Moody's gives development of the digital economy in Slovakia's a sovereign credit rating of Slovakia, Huawei has been developing A2 with a positive outlook. The ratio of in Slovakia for nearly 10 years and is public debt to GDP is 49.6%, which is the most important communications reasonable. Slovakia has a deficit equipment supplier in Slovakia. of 1.5%.

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9) Macedonia (1) Investment Advice Overall, Macedonia's investment attractiveness is modest. The economy is in recovery. The labor market is difficult but the tax burden is small. Investment risk is medium, with a sound business environment but high foreign exchange risk. Investors should focus on power infrastructure construction and transportation upgrading.

Figure 77: Macedonia Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Macedonia has established diplomatic since independence due to internal The Republic of Macedonia is a relations with 167 countries. It and external instability. Although the landlocked country in the middle of became a member of the UN in 1993 economy began to recover gradually the Balkans in Southeastern Europe, and joined the Council of Europe in 2002, Macedonia is still one of the bordering Bulgaria to the east, Serbia in September 1995. In addition, poorest countries in Europe. In 2017, to the north, Albania to the west and Macedonia is a member of Central Macedonia experienced political Greece to the south. Macedonia covers European Initiative, Southeast Europe turmoil and a sharp drop in investment, an area of 26,000 km2, with mostly Cooperation Process, Central European which led to a contraction of the mountainous terrain. Macedonia has Free Trade Agreement, EBRD, UN FAO economy. GDP is USD11.28 billion, with a temperate continental climate. In (Food and Agriculture Organization, a growth rate of 0.3%, and per capita most agricultural areas, the highest IAEA, IBRD, IFC (International Finance GDP is USD5,414 . In recent years, temperature in summer reaches 40°C, Corporation), IMF, Interpol, the Macedonia has actively implemented and the lowest temperature in winter International Olympic Committee, the reforms and made great efforts to is -30°C. There is a large temperature International Organization for Migration develop its economy. The economy is difference between day and night (observer status), ISO (the International expected to recover and develop, with because of the mountain climate. Organization for Standardization), growth recovering to 2.2%, the same OSCE, the United Nations Conference level as in some previous years. Macedonia has a population of 2.08 on Trade and Development, the million. The main ethnic groups are United Nations Educational, Scientific In investment environment, Macedonia Macedonians, Albanians, Turks, Romany And Cultural Organization, the World has a low score, with FDI of USD380 and Serbs. Macedonian is the official Health Organization and many other million and fixed asset investment of language and Albanian is one of the international organizations. USD4.13 billion, both quite low. main languages. Many Macedonians speak English, French, German, Russian, (3) Macroeconomic Indicators Italian or another European language. Its economy of scale score is quite Some 67% of the population are low. Macedonia used to be a republic Orthodox Christians, 30% follow Islam of Yugoslavia. It is economically and 3% follow other religions. underdeveloped and has been stagnant

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In consumption and market demand, (4) Risk Indicators Macedonia also scores low. Macedonia Financial risk is moderate. The risk has a small population, a low level of index of the banking industry is at 0.5, economic development and insufficient quite stable. External debt accounts for domestic demand. Per capita national 79.6% of GDP, relatively little. Foreign income is only USD4,880 and final exchange reserves are low at USD2.48 household consumption expenditure billion. is USD7.43 billion, indicating low purchasing power and consumption Political risk is moderate. In recent propensity. years, Macedonia's domestic political situation has been stable. Although Imports and exports, mainly among EU a large number of Middle Eastern countries, are 124.5% of GDP. In 2017, refugees passed through Macedonia in the 28 countries in the EU accounted 2015, their status is complex. Overall, for 81% of exports and Western Balkan Macedonia's public security was quite countries 11.7%. In imports, the 28 stable in 2017, with a political stability countries of the EU accounted for score of -0.3 and legal environment 62.9% and Western Balkan countries scoring 0.5. accounted for 9.6%. Sovereign risk is moderate. Moody's Its labor supply and cost score is gives Macedonia's sovereign credit a low. Macedonia has a small labor Ba1 rating, with a stable outlook. Public force of 960,000, less than 46% of debt is relatively small at 41.5% of the population, but labor cost is low. GDP. The fiscal deficit is 3%, still under In 2017, the unemployment rate in control. Macedonia dropped to about 22.3%, reflecting a large amount of unused Business environment risk is low. human capital and a serious shortage According to the World Bank, of jobs. Macedonia ranks 10th out of 190 countries and regions in ease of market Its tax burden is less heavy. The overall access. Its business establishment tax rate on business profits is 13%, low cost and government efficiency scores in Europe and the world. are quite high. However, contract implementation requires an average of Its money supply score is low. M2 634 days. accounts for 48.7% of GDP, with a contraction in the past year, indicating Foreign exchange risk is quite high. insufficient money supply. The interest Macedonia's currency is not freely rate difference between domestic convertible in foreign exchange deposits and loans is 4.4%, a high level. markets, and can only be exchanged for foreign currency through the official foreign exchange market, including banks and savings institutions, and foreign currency exchange offices. For a long time, the National Bank of Macedonia has implemented an exchange rate system linked to the euro. The Macedonian denar has been stable at MKD61.5:EUR1 for 15 years. Its exchange rate against USD has fluctuated greatly due to quantitative easing and raised interest rates in the United States.

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(5) Key Industries Energy: Macedonia's energy industry Among the BRI key industries, is relatively underdeveloped. Oil Macedonia is quite strong in and natural gas are dependent on transportation infrastructure and IT, imports. With insufficient power supply, and weak in manufacturing, energy Macedonia's domestic electricity industry and agriculture. production can only meet 60%-70% of demand. The Macedonian government Transportation infrastructure: Air attaches great importance to the transport in Macedonia has developed development of natural gas energy rapidly in recent years. In 2016, Skopje and actively promotes the construction Airport and Ohrid Airport carried a of domestic natural gas distribution total of 1.794 million passengers, up systems. 15% YoY. In 2016, the cargo volume of Skopje Airport was approximately 3,090 In addition to the existing natural gas tons, up 10% YoY. pipeline from the border of Galicia to Kriva Palanka, two pipelines, Stip- In recent years, Macedonia has been Negotino and Skopje-Tetovo, are being committed to the development of planned. Natural gas pipelines from road and rail traffic. The Macedonian Tetovo to Gostivar and Kicevo, and from National Railway Company used the Negotino to Prilep, will also be built. EBRD to purchase six EMUs and four electric locomotives from China in Macedonia is striving to actively 2014 and 2017. In recent years, the upgrade its energy transmission system Macedonian government has been and plans to build a transmission line committed to constructing national project with Albania. It also plans to high-speed and local expressways build power generation projects, with to promote domestic transport key projects including the Cebren- interconnection. Key projects include Galiste Hydropower Station and a large a highway being built by China number of small and medium-sized Hydropower Construction Group hydropower facilities, as well as power International Engineering Co. plants that integrate cycle gas and thermal power generation in the capital IT: IT in Macedonia has a high level of Skopje. development. The network penetration rate is 72.2%. Mobile communication signals cover 99% of the country's population and have been upgraded to 4G.

Macedonia focused on development of the digital economy. The use of electronic signatures came into effect in 2001. To meet the needs of government, individuals and businesses, Macedonia has established a certification center.

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10) Hungary (1) Investment Advice Overall, Hungary's investment attractiveness is quite high. Hungary has moderate macroeconomic attractiveness, with a high level of economic development and competitive advantages in labor force. Overall investment risk is low, with low business environment and foreign exchange risk. The upgrading and transformation of its automobile industry, IT and transportation infrastructure warrant investors' attention.

Figure 78: Hungary Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Hungary's diplomatic objectives and Its investment environment score is Hungary is in Central Europe, bordering tasks are to ensure national security, relatively low. Hungary has had a net Ukraine and Romania to the east, serve domestic economic development outflow of investment in recent years, Serbia, Croatia and Slovenia to the and improve people's livelihood; but the situation has improved over the south, Austria to the west and Slovakia respond effectively to the challenges of past two years. Fixed asset investment to the north. It covers an area of 93,000 globalization; strengthen cooperation of USD38.68 billion is also quite low. km2 with a border of 2,246 kilometers. between Central Europe and actively Its consumption and market demand The Danube and its tributary Tisa participate in the construction of score is high. Located in the heart of River run through the whole territory. European integration; and strengthen Europe, Hungary covers a market of Influenced by a continental climate, the unity of Hungarians by focusing on 250 million people and is able to enter Hungary has an annual average promoting pragmatic cooperation with the EU market of 500 million people. temperature of 10.8°C. the United States, EU, Russia, China Domestic demand is high, with per and its neighbors, which are listed as capita national income of USD13,000 Hungary has a total population of five priority regions. Hungary became a and final household consumption 9.78 million. The dominant ethnicity member of the EU in 2004. expenditure of USD68.97 billion. Its Gini is Hungarian (Mazar), accounting coefficient is 31.6, indicating a small for about 90% of the population. (3) Macroeconomic Indicators gap between rich and poor. Import and Ethnic minorities include Slovakians, Its scale of economy score is moderate. export trade is developed, accounting Romanians, Croatian, Serbian, Hungary's development is mid-range, for 172.4% of GDP. Inflation is quite Slovenian and German. Hungarian with per capita GDP exceeding healthy at 2.3%. is the official language. English and USD14,000 and a level of economic German are also very popular. Some development at the forefront of Central Its labor supply and cost score is 66.2% of Hungarians follow Catholicism and Eastern Europe. In 2017, the high. According to statistics from the and 17.9% Protestantism. economy grew by nearly 4% and GDP Hungarian Investment Promotion totaled USD139.14 billion. Growth is Agency, labor cost per unit of GDP expected to remain at about 3.8%. in Hungary is the lowest in Central

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and Eastern Europe, and the average wage is about one third lower than Political risk is quite low. The Hungarian that of Western European countries. government implements a multi-party About two-thirds of Hungary's working parliamentary democracy and the population has received secondary separation of legislative, administrative educations, technical training or and judicial powers. In recent years, vocational educations. There is a Hungary's political situation has particular abundance of talent who remained stable. After joining the EU have received higher educations in 2004, Hungary implemented a trade in engineering, IT, pharmacy, tariff policy consistent with the EU, economics, mathematics, physics and legal and regulatory systems have and other professional spheres. been constantly improved. The political In addition, Hungary's labor force stability index is at 0.8 and the legal is also competitive because of its environment index is at 0.7, both employee-friendly labor law, high quite high. English proficiency and long working hours (second only to the United Sovereign risk is moderate. Moody's States). Hungary has the third highest rates Hungary's sovereign credit rating employment rate in Europe, after at Baa3 with a stable outlook. Public Germany and the Czech Republic, with debt makes up a comparatively small an unemployment rate of 3.7% in 2017. proportion of GDP, at about 71.3%. Hungary has a fiscal deficit of 2.1% of Its tax score is relatively low. According GDP. to the World Bank, total tax on commercial profits is about 40.3%, Its business environment risk score indicting a heavy tax burden. is moderate. According to the World Bank, Hungary ranks 53th out of Its money supply score is moderate. 190 countries and regions in ease of M2 accounts for 60% of GDP, with a access. Contract fulfillment takes about growth rate of 7.8%. The interest rate 605 days. Its government efficiency difference between deposits and loans index is low at 0.5. However, the cost is 1.3%, high-mid level. of business establishment is low, equivalent to 4.9% of national income, (4) Risk Indicators which is conducive to enterprises Hungary has moderate financial risk. entering the local market. According to the National Bank Act, the main objective of the Hungarian Central Foreign exchange risk is low. The legal Bank is to maintain price stability. Base currency is the forint, which can be interest rates are set each month by converted freely. The government the Monetary Policy Council. Since promulgated a decree to abolish all the implementation of privatization foreign exchange controls, consistent in 1990, more than two-thirds of with EU regulations, and allows the Hungarian banks have becoem free flow of capital. Companies and controlled by foreign capital. Some individuals can freely own foreign 80% of total banking sector assets and exchange. The HUF:USD exchange rate 85% market share are held by the 10 is becalmed. largest commercial banks. Banks have no special restrictions on opening accounts for foreign enterprises, but they attach great importance to anti- money laundering. Hungary's foreign debt level is low, constituting 93.4% of GDP, and its foreign exchange reserves are USD31.37 billion.

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(5) Key Industries Manufacturing: Hungarian Among the key BRI industries, Hungary manufacturing occupies an important is developing well in IT, transportation position in the national economy. The infrastructure and manufacturing, but is added value of manufacturing is as relatively weak in energy and agriculture. high as 19.9%, with growth about 5% in recent years. IT: Hungary's communication infrastructure is well developed, with Automotives is the pillar industry. a network penetration rate as high as In 2015, the output value of the 79.3%. Hungary's telecommunications automotive industry reached USD28 market is completely liberalized, and billion, accounting for 31% of foreign-funded enterprises occupy manufacturing output value. Due to a dominant position within it. About Hungary's well developed local supplier half the fixed line telephone market is system, superior geographical location controlled by Deutsche Telecom and and abundant human resources, its its subsidiary, Hungary Telecom. The automotive industry is very attractive mobile market is controlled by Deutsche to foreign investors. At present, 14 Telecom, Norway and Vodafone. of the world's 20 leading automobile Hungary pays great attention to the suppliers have set up in Hungary, and development of 5G technology. In their production scale is expanding. In 2017, the 5G Alliance was established addition, the automotive component to support 5G development and chain is relatively complete. Fifteen applications. of the world's 20 largest suppliers of components are stationed in Hungary, Transportation infrastructure: including Bosch, Japan's Takata, and Hungary has a superior geographical Hankook Tires. position and prominent geographical advantages. It is one of the transport Energy: The Hungarian government network hubs of Europe. According to aims to diversify energy input channels the requirements of the EU, Hungary and attract foreign capital to invest in has formulated an infrastructure energy projects. During the Shanghai development plan for 2014-2020, Import Expo in 2018, China Electricity focusing on promoting the construction Construction International Corporation and upgrading of railways and and Turkey's Polat Group signed a expressways. memorandum of cooperation on Hungary's 750MW photovoltaic power The main projects include rebuilding generation project. the main trunk lines of Pan-European corridors IV, V and V/b, developing combined railway transportation and logistics center services, and establishing safe railway information, passenger information and ticketing systems. Its logistics performance index is as high as 3.4, indicating the high development level of the logistics industry. Hungary attaches great importance to logistics infrastructure and promotes the construction of multimodal transport logistics centers, including the construction of a Sino- European logistics park in cooperation with China.

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11) Latvia (1) Investment Advice Overall, Latvia's investment attractiveness is high. Macroeconomic attractiveness is moderate. The economy is small but the quality of the labor force is high. Investment risk is low, with well formed financial and legal systems, so the business environment is good. Investors should focus on railway and port infrastructure, power facilities, IT upgrading and forestry processing.

Figure 79: Latvia Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile The four main drivers of Latvia's Its consumption and market demand Latvia is in Northeast of Europe, economy are agriculture, chemicals, score is high. Although its economic bordering the Baltic Sea to the West, logistics and wood processing. volume is small, per capita GDP and Russia and Belarus to the east. Forestry, wood processing and reached USD15,594 in 2017, ranking It is one of the three Baltic countries furniture manufacturing occupy among the top BRI countries. Latvia's alongside Estonia and Lithuania . a particularly important position. Gini coefficient of 34.5 indicates Its superior geographical location Other well-known industries include balanced distribution of national makes it an important logistics center textiles, food processing, machinery income. Total imports and exports connecting the EU and CIS. Latvia has production and green technology. accounted for 122.3% of GDP. Trade an intermediate subclimate ranging was relatively active and inflation was a from ocean to continental conditions. (3) Macroeconomic Indicators healthy 2.9% in 2017. The total land area is 64,589 km2, with The overall investment attractiveness a population of 1.94 million as of 2017. of Latvia is moderate among the BRI Its labor supply and cost score is The country has indigenous Latvians, countries. high. Citizens' education level is at the and the descendants of Nordic, forefront among BRI countries, and the German, Russian and Polish people. It Its scale of economy score is quality of the workforce is quite high. has diversified cultural characteristics. moderate. GDP in 2017 was Unemployment fell to 8.6% in 2017. Some 61.1% of the population are USD30.26 billion, indicating a quite However, the problems of population Latvian and 26.2% Russian. The official small economy, but growth reached loss and labor cost increases have language is Latvian, and Russian is 4.6%, ranking at the forefront of EU arisen in recent years. very popular. Latvian and English are countries. GDP is expected to continue mainly used on official occasions. to grow at about 3%. Its tax burden score is moderate. Local residents mainly follow Christian Latvia's tax burden is reasonable. Lutheranism, Roman Catholicism Its investment environment score According to World Bank statistics, and the Eastern Orthodox Church is quite low. In 2017, fixed asset total tax on commercial profits is and Baptism. Latvia is a member of investment was only USD7.8 billion, about 36%. the EU and APEC, and is a Schengen while FDI was also small at only Agreement country. USD1.14 billion.

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Its money supply score is quite low. Foreign exchange risk is at the lowest ports. The government attaches The interest rate difference between level among BRI countries. As a great importance to port renovation. domestic deposits and loans was 2.5% member of the EU, Latvia uses the Riga Free Port plans to complete in 2017, within a reasonable range. euro. The exchange rate is stable, about EUR1.1 billion of infrastructure However, M2 accounted for only and the degree of exchange freedom development and renovation projects 43.4% of GDP, indicating a low level of is high. With relatively free foreign between 2010 and 2020. money supply. exchange management, domestic after-tax investment profits are free to Latvia is also one of the three major (4) Risk Indicators enter and exit Latvia. participants in the Baltic Railway Overall, Latvia has a low investment Project (the Baltic Railway is 265 km risk. (5) Key Industries long in Latvia, 213 km long in Estonia Among the five BRI key industries, and 392 km in Lithuania). Due to the Financial risk is low. The Latvian Latvia is developing well in IT, low level of railway electrification banking industry has been transportation infrastructure and in Latvia, the government expects experiencing a credit contraction. manufacturing, but it is relatively weak to spend USD1.3 billion on railway Since 2016, the government has in energy and agriculture. electrification projects. stepped up efforts to combat money laundering, and banking sector IT: Latvia's IT has quite a high level Manufacturing: Manufacturing indicators have gradually improved. of development, with a network is an important part of Latvia's The banking risk index is at 0.4, penetration rate of 79.8% and high- national economy. In recent years, and the ratio of credit provided by tech export ratio of 13.2%. Latvia manufacturing has developed rapidly, domestic financial institutions is attaches great importance to the with a growth rate of 8.1%. Forestry, 76%, good performance among BRI application and development of wood processing and furniture countries. 5G technology. In 2018, Bite, the manufacturing occupy an important third largest mobile operator in position in manufacturing. In 2017, Political risk is low. Latvia is a member Latvia, signed a memorandum of Latvia exported EUR2.22 billion of of the EU. In recent years, the political understanding with China's Huawei forest products, accounting for 19.5% situation has been stable and public on 5G network infrastructure of the country's total exports. security has been sound. The legal construction in Latvia, including the environment score was 1.2 in 2017, construction of a 5G base station in Energy: Latvia's domestic electricity ranking among the top BRI countries. Riga in 2019 and the development of supply is insufficient and it depends narrowband Internet of Things. on imports. Latvia's power grid is Sovereign risk is also low. Moody's currently part of Russia's UPS IPS maintains an A3 rating on Latvia's Transportation infrastructure: system. For this reason, the EU is sovereign credit, with a stable outlook. Latvia is at the crossroads of Russia investing under the Baltic Energy Government debt accounts for only and Western and Nordic Europe, Market Integration Plan to enable the 33.2% of GDP, indicating low risk. containing Riga International three Baltic countries to access Nordic Airport，the largest airport on the and Eastern European power grids. Latvia's business environment risk Baltic Sea. Based on its superior score is high. According to the World geographical location and good Bank, Latvia ranks 19th out of 190 infrastructure, Latvia plays an countries and regions in ease of important role in cargo transportation market access. Foreign enterprises via Baltic Sea and Central and Eastern and local enterprises are treated Europe. The transshipment industry equally. In ease of entering the market, is the second largest sector of laws and regulations, Latvia scores Latvia's national economy. Latvia's highly. The cost of establishing an port infrastructure is high quality. enterprise is equivalent to only 1.6% of There are 10 ports in the country, national per capita income. and three are international ice-free

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12) Montenegro (1) Investment Advice Overall, Montenegro's has moderate investment attractiveness. Its macroeconomic indicators are not strong, with asmall economy and scarce labor force. Investment risk is also moderate. In recent years, society has gradually stabilized and financial risk has improved. Investors should focus on the transformation of the Heishan Highway system and energy development.

Figure 80: Montenegro Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile (3) Macroeconomic Indicators Its labor supply and cost score is low. Montenegro is a small mountainous Montenegro's overall investment Montenegro is sparsely populated with country in the Southern Balkans, on attractiveness is mid-range. insufficent labor resource. In 2017, the the eastern shore of the Adriatic Sea, national labor force was only 250,000, bordering Serbia to the northeast, Montenegro economy is quite small, and unemployment was as high as Albania in the southeast, Bosnia limited by the size of its population. 16.1%, albeit down from the previous. and Herzegovina to the northwest, GDP in 2017 was USD4.8 billion, with Croatia and the Adriatic Sea to a growth rate of 4.4%. In 2017, per Montenegro's tax score is quite high. the southwest. Montenegro has a capita GDP was USD7,782.8, ranking Montenegro has a relatively light tax temperate continental climate, with among the top BRI countries. GDP is burden. According to the World Bank, a Mediterranean climate in coastal expected to maintain growth of about total tax on commercial profits is regions and a harsh climate in its 2.7%. about 22.2%. higher regions. Its investment environment score is Its money supply score is below The country covers 14,000 km2. As of low. In 2017, FDI was USD560 million average. In 2017, M2 accounted for 2017, the total population is 620,000, and fixed asset investment was only 46.9% of GDP, with growth of less than of which 43% are Montenegran and about USD1.55 billion. 2%, and the interest rate difference 32% Serbians. Montenegro was between domestic deposits and loans part of the former Yugoslavia. The In consumption and market demand, was 6%. official language is Montenegran, but Montenegro scores quite highly. historically Montenegro has used The Gini coefficient of 0.32 indicates Serbian. Montenegro is a member of relevatively balanced national income NATO and a candidate for the EU. distribution. Total imports and exports account for 105.6% of GDP. Because Montenegro's economic base is weak. living requirements have been met by Tourism and the aluminum industry imports for a long time, Montenegro are its economic pillars. is active in trade. In 2017 inflation was steady at 2.4%.

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(4) Risk Indicators IT: Montenegro has developed Energy: To improve the integration of Montenegro has medium investment well in the IT. Its communication power systems in European countries, risk. technology facilities are strong. The a submarine cable project developed network penetration rate is about by Montenegro and Italy began Financial risk is moderate. The banking 69.9%, possession of mobile phone construction in 2014. The total cost is system in Montenegro is quite stable, equipment is as high as 165.6 per 100 estimated to be EUR800 million and with a moderate level of external debt. people, and possession of telephone the total length is 415 kilometers, of Foreign exchange reserves were only equipment is at 23.6 per 100 people. which 390 kilometers will be laid on USD730 million in 2017, relatively low. High-tech products account for 7.3% the seabed. Montenegro's government Credit provided by domestic financial of exports. has attached great importance to the institutions accounted for 60.4% of development of renewable energy GDP. Transportation infrastructure: and has been actively engaged Montenegro transportation mainly in international cooperation. For Political risk is low. Politics in relies on road and sea routes. In example, Fortum, a Finnish power Montenegro is quite stable and the 2016, the total length of railways company and the state-owned power social and legal environment is decent. was 326 kilometers, with freight supplier EPGC will develop a 100MW However, ethnic and religious conflicts volume of 1.395 million tons. The solar project; Shanghai Electric Power have threatened the security and total length of roads was 7,773 will develop a wind power project stability of Montenegro. kilometers. In 2017, air transport with the Malta Energy Company. After passenger volume reached 508,000. the project is put into production, Its sovereign risk score is low, with the Montenegro is the most important renewables will account for 5% of sovereign credit rating of B1 in 2017. natural port in the Adriatic, through power generation in Montenegro. which all the countries and regions of Its business environment risk is quite the world can be reached. However, high. According to the World Bank, Montenegro's transportation system Montenegro ranks 50th out of 190 has a serious aging problem, and the countries and regions in ease of government has vigorously promoted market access. The cost of establishing the improvement and upgrading of a business is equivalent to only 1.3% of transportation infrastructure. national per capita income. The rrepair and reconstruction of the Foreign exchange risk is moderate. Kolasin-Kos railway, built by China Civil Exchange rate fluctuations against Engineering Group Co., was completed major currencies are small. in 2017. After the repair, train speed increased from 50-60 km/h (5) Key Industries to 80 km/h, which is positive for the Among the key BRI industries, economic development. In addition, Montenegro has developed quite Montenegro will cooperate with China well in IT, manufacturing and to build a North-South Expressway transportation infrastructure, with project connecting the port of Bar in relatively weak energy and agricultural the southern part of Montenegro with development. the main traffic corridors of Central and Eastern Europe.

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13) The Czech Republic (1) Investment Advice Investment in the Czech Republic his highly attractive. The Czech Republic has a strong macroeconomic indicators, with good economic development and solid industrial foundations. It is an important stronghold for access to Western European markets. With sound systems and low foreign exchange risk, investment risk is low. Investors should focus on machinery manufacturing, the automobile industry and transportation network upgrades.

Figure 81: Czech Republic Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile manufacturing, pharmaceuticals and The tax system is transparent but The Czech Republic is a landlocked biotechnology, nanotechnology and tax is high, with total tax of 50% on country in Central Europe, bordering new materials. Industrial products business profit, according to the World Slovakia to the east, Austria to are mostly exported, mainly to the Bank. the south, Poland to the north EU, especially Germany. The Czech and Germany to the west. It is the Republic is also one of the most The Czech Republic also scores transportation hub of Europe and successful countries in Central and highly in consumption and market has close contact with neighboring Eastern Europe in attracting foreign demand. In 2017, total imports and countries. It covers an area of 78,866 investment. exports accounted for 151.7% of km2, with a total population of 10.59 GDP, indicating active trade. Per million as of 2017. The main ethnic (3) Macroeconomic Indicators capita national income is USD18,160, group is Czech, accounting for 94% The overall investment attractiveness high among BRI countries. Inflation of the total population. The official of the Czech Republic is high. remained healthy at 2.5% in 2017. language is Czech, and foreign Prices are relatively low, at about 70% languages include English, German Its scale of economy score is high. of the EU average, and with a Gini and Russian. Educated young people With GDP of USD215.73 billion or coefficient of 25, the wealth gap is generally speak English and older USD20,000 per capita in 2017, the small. people speak German or Russian. Czech Republic has become one of Some 39.2% of residents follow Roman the fastest growing economies in the The Czech Republic's labor supply and Catholicism, 4.9% follow Protestanism, EU. GDP is expected to grow at about cost score is also high. Unemployment and some follow the Orthodux church 3.3%. was just 2% in 2017. The Czech or Judaism. The Czech Republic joined Republic subsidizes higher education. the European Union in 2004. The Czech Republic's investment The quality of the labor force is environment scores highly. In 2017, high and there are many Czech The Czech Republic is a traditional fixed asset investment reached researchers. According to the OECD, industrial country, with industry playing USD62.7 billion and FDI was USD9.2 the Czech Republic has among the an important role in the national billion, above the average level among highest proportion of science and economy. The major industries BRI countries. engineering students in the world. include automobiles and accessories, The workforce is highly skilled and machinery, electrical and aircraft

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productive. However, in recent years, Foreign exchange risk is low. As a in machinery, electronics, chemicals wages have been rising gradually. The member of the EU and Schengen Area, and pharmaceuticals, and metallurgy, labor force is not sufficient. In 2017, the Czech Republic uses the euro and with products well received at home the national labor force was 5.35 foreign exchange is freely convertible. and abroad. million, so investors should consider In recent years, exchange rate the high cost of labor when investing fluctuations have been quite stable. Transportation infrastructure: in the Czech Republic. The Czech Republic is at the center of (5) Key Industries Europe, with a developed transport Its tax score is low. According to the Among the key BRI industries, the network and infrastructure. Since latest World Bank statistics, total tax Czech Republic has developed 2014, with the improvement of on business profits is 46.1%, indicating relatively well in IT, manufacturing the macroeconomy, the Czech a high tax burden. and transportation infrastructure, but Republic has increased investment energy and agriculture are quite weak. in transportation infrastructure. Key In money supply, the Czech Republic projects include the D1 expressway, scores well. In 2017, M2 was 83.9% IT: Czech IT is highly developed. railway network upgrades, the of GDP. The interest rate difference The internet penetration rate is as EU's Nine Corridors , the Baltic- between domestic deposits and loans high as 76.5%. High-tech exports Adriatic corridor, Eastern Europe- was slightly high, at 3.3%. account for about 14% of the total. In Mediterranean corridor and the February 2016, the Czech government Danube-Oder-Elbe river trans-national (4) Risk Indicators launched a next generation internet canal. Investment risk is overall low. development plan, which aims to increase the internet bandwidth Energy: The Czech Republic is rich Financial risk is low. In 2017, the of every Czech town to at least 30 in lignite, hard coal and uranium banking industry risk index was at megabits. Currently, 64% of Czech resources, with small oil and gas 0.3, a top ranking. In 2017, foreign households are covered by 30 megabit reserves, basically relying on imports. debt was up to 92.1% of GDP and networks. The Czech Republic has plenty of foreign exchange reserves were quite electricity and is Europe's second adequate at USD144.1 billion . Manufacturing: Manufacturing largest electricity exporter.According to industry is highly developed and takes EU requirements, the Czech Republic Political risk is low. The Czech Republic a leading position in the national will vigorously promote new energy has a parliamentary political system economy. The value added of the projects. In addition, given the Russia- and market economy. The legal system manufacturing sector has reached Ukraine crisis, the Czech Republic is sound and with high transparency. 24.3%, with growth of 7%. will accelerate the development The political situation is stable. of oil and gas pipelines and other The automobile sector is the pillar strategic energy projects to reduce its Sovereign risk is low. The Czech industry. In 2017, the Czech Republic dependence on Russian energy. Republic's latest sovereign credit rating ranked 1st among Central and is A1 (2017), with a stable outlook. Eastern European countries in car Public debt is only 32.5% of GDP. production. A growing number of well-known automobile manufacturers Business environment risk is low. have choose to set up their design, According the World Bank, the innovation and technology R&D Czech Republic ranks 35th out of centers in the Czech Republic, forming 190 countries and regions in ease of a dense and complete automobile domestic market entry. The cost of industry chain, giving it one of the setting up a business is equivalent to highest concentrations of automobile only 1% of per capita income. manufacturing, design and R&D in the world. The Czech investment authority has also set up a database of auto parts suppliers to improve the overall competitiveness of the automotive industry. The Czech Republic also has strong foundations

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14) Lithuania (1) Investment Advice Overall, Lithuania's investment attractiveness is quite high. Macroeconomic indicators are moderate. The level of economic development is high, as is the quality of labor, but the domestic market is small. Overall investment risk is low, with a superior business environment and favorable government investment policy. Investors should focus on opportunities in high-tech industries, especially financial technology and machinery manufacturing.

Figure 82: Lithuania Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile In 2017, the total population The Republic of Lithuania is on the was about 2.83 million, of which eastern shore of the Baltic Sea and Lithuanians accounted for 84.2%, one of the Baltic States alongside Poles 6.6%, Russians 5.8%, with Latvia and Estonia to its north. The Belarusians, Ukrainians, Jews, Latvians country borders Belarus to the and other ethnic groups making up southeast, the Kaliningrad region of 1.3%. Residents mainly follow Roman Russia and Poland to the southwest. Catholicism, with some Christian The capital is Vilnius. Lithuania has a Orthodox and Lutherans. Lithuania is a land area of 66,000 km2. The terrain is member of the EU, the eurozone, the dominated by plains, with hills to the Schengen Area, the OECD and NATO. west and highliands to the southeast. Lithuania is in the geographical center Lithuania has a mixed oceanic and of Europe, bordering the Baltic Sea. It continental climiate. Its long winter is connects with Scandinavia, Western rainy and snowy, with little sunshine. European countries, Russia and other CIS countries. It is an important transportation hub in Europe, with strong radiation capacity. In recent years, the commercial outsourcing industry, mechanical engineering and electronics manufacturing, the laser industry and life sciences have developed rapidly.

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(3) Macroeconomic Indicators (4) Risk Indicators Lithuania's overall macroeconomic Lithuania has low investment risk. attractiveness is moderate. Financial risk is moderate. The financial Its scale of economy score is mid- system including the Bank of Lithuania range. In 2017, GDP was low at is quite stable, with a banking industry USD47.17 billion, but the growth rate risk score of only 0.3. External debt was 3.9%, the largest increase since is slightly high. In 2017, foreign debt 2012 and at in the forefront among accounted for 80.8% of the GDP. EU and Eurozone countries. Per capita Loans were mainly from the EU, GDP level is quite high, reaching Norway and Switzerland. The level of USD17,000 in 2017. GDP is expected foreign exchange reserves is relatively to maintain a growth rate of 3%. low and is in a downtrend, reaching only EUR1.23 billion in 2017. Its investment environment score is relatively low. In 2017, FDI was only Political risk is low. Lithuania is USD1.19 billion, quite low among BRI politically stable, with good law and countries. order.

Its consumption and market demand Sovereign risk is low. Lithuania's latest score is quite high. In 2017, per capita sovereign credit rating is A3, with a national income reached USD15,200, stable outlook. Public debt accounted high among BRI countries. In 2017, for only 35% of GDP, indicating low inflation was 3.7%, maintaining a debt risk. relatively healthy level. Its business environment risk score Its labor supply and cost score is high. is high. According to the World Bank, With the high proportion of Lithuanian Lithuania ranks 14th out of 190 nationals who receive higher countries and regions in ease of education, a high quality labor force, market access. The cost of business and lower wages than in developed establishment is equivalent to only countries of the EU, Lithuania has 0.5% of national per capita income. advantages in labor supply and cost. The average contract enforcement However, the labor force was only takes only 370 days, among the top 1.45 million and 38,000 people left echelon of BRI countries. the country in 2017, which warrants In recent years, the government attention. has introduced easing policies to promote the development of financial Its tax burden score is relatively low. technology. It takes only three days According to the latest World Bank for a financial technology enterprise statistics, total tax on commercial to register. It takes only three months profits is 42.6%. In recent years, to obtain a payment institution or the Lithuanian government has electronic money institution license, continuously improved the investment 2-3 times faster than in other EU environment to attract foreign jurisdictions. In addition, Lithuania, as investment. In 2017, the government a member of the EU, implements a expanded tax incentives in its free unified foreign trade policy. Products economic zone. produced in Lithuania are deemed products of EU origin, so are free to Its money supply score is quite high. In enter the EU market. 2017, M2 accounted for 76% of GDP, with growth of 5%. The interest rate difference between domestic deposits and loans was 2.5%.

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Foreign exchange risk is low. Lithuania China Merchants Group has signed Among several preferential polices, the belongs to the Eurozone, with low a memorandum of cooperation with state gives operations management exchange rate fluctuations and the Klaipeda Free Economic Zone companies a 50% reduction on land high degree of freedom of foreign and Kaunas Free Economic Zone transfer fees and allows land to be exchange. and Science and Technology Park subleased to settled enterprises at to provide cooperation facilities the market price, with a land use term (5) Key Industries for domestic investors. In 2017, is 49 years. Enterprises that settle in In key BRI industries, IT and five Chinese financial technology Lithuania are exempt from corporate manufacturing are worth focusing on. companies were registered in income tax for the first 10 years (the Lithuania and obtained electronic Lithuanian corporate income tax rate IT: Overall, Lithuania has the money institution or payment is 15%), pay half tax for the following most advanced information and institution licenses from the Central six years, and are exempt from real communications infrastructure Bank of Lithuania. estate tax, land tax and dividend in Central and Eastern Europe. In tax. With huge future development the 2017 World Competitiveness Manufacturing: In 2017, potential, manufacturing is worth Yearbook, Lithuania's communications manufacturing value added accounted full attention and exploration from technology ranked 1st in the world, for 17.6% of GDP, ranking 1st among Chinese investors. with broadband speed ranking 2nd in BRI countries. According to the 2018 the EU. In 2017, possession of mobile Global Manufacturing Risk Index devices reached 144.6 per 100 people. Report released by DTZ in March The coverage level of secure network 2018, Lithuania's attractiveness to servers is high, which is very beneficial manufacturing companies ranks 2nd to the development of IT. among the world's countries and regions, second only to China. Lithuania is gradually becoming a regional aggregation center for small Manufacturing investment growth software and game development ranks 4th in the world. Manufacturing start-ups and large information industry attracted a total of USD2.77 and communications technology billion in 2017, accounting for 18.9% of companies. In addition, the the total foreign capital. An increasing development of fintech companies is number of international, large-scale active, encouraged by the European manufacturing engineering companies Financial Technology Center policy. have settled in Lithuania, driving the There are 117 domestic financial rapid growth of the manufacturing technology companies, 50% of which industry in recent years. are payment companies. Lithuania also has a strong presence There are five science and technology in mechanical engineering and parks in Lithuania. Each park electronics manufacturing, particularly cooperates with universities and in the oil and gas, robotics, aerospace colleges to promote a combination and automotive industries. The of production, learning and research, Lithuanian government has set up four and engages in high-tech innovation industrial parks and six free economic in semiconductors, electronics, zones for manufacturing. information and communications. In addition, to develop national innovation and creativity, Lithuania stipulates that companies whose main business is in innovation or high- tech can enjoy a triple deduction on research and development expenses of up to 50% of taxable profit.

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15) Albania (1) Investment Advice Overall, Albania's investment attractiveness is moderate. Macroeconomic indicators are low. The level of economic development is quite low and labor is in short supply. Investment risk is moderate and financial risk slightly high. Investors should focus on opportunities in agricultural facility improvement, agricultural product processing and infrastructure transformation.

Figure 83: Albania Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Albania has a superior geographical Its investment environment score Albania is in the western part of the position and is close to the developed is relatively low. In 2017, FDI was Balkan Peninsula in Southeastern markets of Western Europe. Its about USD1 billion. Although fixed Europe. It borders Serbia, Montenegro products are sold to EU markets, with asset investment in 2017 was about and Macedonia to the north and tariff and logistics cost advantages. USD3.72 billion, higher than the northeast, Greece to the south and Hydropower, solar energy and previous year, the overall level is still the Adriatic Sea to the west. It faces chrome ore resources are abundant. mid-range. Italy across the Otranto Strait. The However, the industrial base is weak coastline is 472 kilometers long. It has and industrial systems are relatively Albania has a mid-range consumption a subtropical Mediterranean climate underdeveloped. In recent years, and market demand score. In 2017, with plenty of rainfall. The land area service industry has developed rapidly, imports and exports accounted for is 29,000 km2, with mountains and and tertiary industry represented by 78.1% of GDP. Its small population hills in the territory accounting for tourism has become an important and national per capita income of 77% of its total area. In 2017, the total driver of economic growth. USD4,320 in 2017 indicates insufficient population was about 2.87 million, internal demand. Inflation was healthy of which Albanians accounted for (3) Macroeconomic Indicators in 2017 at 2%. 82.6%. The main ethnic minorities are Albania's overall macroeconomic Greeks and Macedonians. The official attractiveness is low. Its labor supply and cost score is low. language is Albanian. Some 56.7% of Albania has a small labor force. In the residents follow Islam, 10% follow Its scale of economy score is low. 2017, the national labor force was only Catholicism and 6.8% follow Orthodox Albania's GDP in 2017 was only about about 1.33 million. The unemployment Christianity. Albania is a member of USD13 billion, which is small. In 2017, rate was as high as 15.2%. However, NATO and actively develops relations per capita GDP was about USD4,538, Albania has a quite high proportion with Western countries. In 2014, it was mid-range among BRI countries. GDP of residents with higher educations. granted EU candidate status. is expected to grow at 3.6% in the next The workforce has obvious language five years. advantages. Apart from the mother tongue, a considerable number of Albanians are familiar with English and Italian.

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Its tax burden score is above average. (5) Key Industries Due to underdeveloped infrastructure According to the latest statistics Among the key BRI industries, Albania construction in Albania, the from the World Bank, total tax on has well-ddeveloped agriculture but is government has launched a series of commercial profits is 37.3%. relatively weak in the other industries. preferential policies for infrastructure Since overall infrastructure Albania is projects. Local infrastructure Albania's money supply score is quite underdeveloped, Chinese enterprises projects are generally operated low. In 2017, M2 accounted for 81.5% have some development space in under franchise. Enterprises of GDP, with growth of only 0.2%. infrastructure projects. and governments sign franchise The interest rate difference between agreements and cooperate under BOT domestic deposits and loans is 5.8%. Agriculture: Albania's crop models. The money market is quite weak. production index reached 182.1 in 2017 and the food production index According to the National (4) Risk Indicators was at 150.9, ranking among the top Development and Integration Albania's investment risk is moderate. BRI countries. In 2017, agricultural Strategy (2014-2020), infrastructure added value accounted for 21.7% of construction mainly focus on Financial risk is high. The banking GDP. About 77% of agricultural land in transportation, energy, water supply risk index is at 0.6, high among BRI Albania is in its plains while 23% is in and drainage, and information countries. Foreign exchange reserves the mountains and hills. and communication. In recent are insufficient, at only USD3.19 billion years, Chinese companies have in 2017. The main agricultural products become increasingly active in these exported include livestock products, fields. China Construction Co., Political risk is low. Albania's political plants (including herbs and seeds), China Power Construction Group stability and legal environment scores aquatic products and fruits, among International Engineering Co., China are mid-high. which medicinal and spice plants, olive Communications Construction oil, honey, wine and other specialty Co., China Gezhouba Group Sovereign credit risk is high, with a agricultural products are quite Overseas Investment Co., Northern latest rating of B1. Public debt in 2017 competitive in the market. Agricultural International Cooperation Co., was 68.2% of GDP, lower than the facilities are quite underdeveloped, Power Technology Equipment Co. previous. and it urgently needs to promote have tracked infrastructure projects agricultural mechanization. including transportation and energy in Its business environment risk score Albania. Everbright has acquired the is quite high. According to the Although current electricity franchise rights to Tirana International Doing Business 2018 report from production can meet basic needs, Airport until 2025 and Chinese the World Bank, Albania ranks 63rd Albania is prone to power shortages companies have participated in the out of 190 countries and regions during dry period since electricity construction of Shengjin Port in in ease of market access. Its scores relies entirely on hydroelectric power. northern Albania. for government efficiency, business The government has begun to develop establishment cost, ease of foreign power industry infrastructure. In the investors entering the domestic Strategic Investment Law formulated market and contact performance are by the Albanian government in average. In 2017, contract execution 2015, agriculture is clearly defined took an average of 525 days. The as a strategic field , and a series cost of establishing a new business is of facilitation measures have been equivalent to 11.3% of per capita gross introduced to domestic and foreign national income, ranking among the investors. In recent years, Albania has top BRI countries. aimed to develop organic agriculture.

Foreign exchange risk is moderate. Exchange rates between the local currency and USD are quite stable. Freedom of foreign exchange is moderate, with a Chinn-Ito score of 0.4.

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16) Bosnia (1) Investment Advice Overall, investment in Bosnia and Herzegovina's is moderately attractive. Its macroeconomic indicators are mid-range among the BRI countries. In tax burden and money supply, Bosnia and Herzegovina performs well. Overall investment risk is quite high, with elevated financial risk and foreign exchange risk. Investors should focus on manufacturing and energy.

Figure 84: Bosnia and Herzegovina Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Bosnia and Herzegovina is rich in fixed asset investment of USD2.9 Bosnia and Herzegovina is located in natural resources. With mineral, water billion in 2017. the central and western Balkans. Its and forest resources, it has quite south, west and north border Croatia, substantial economic development Its consumption and market demand and the east is adjacent to Serbia and potential. With huge underground score is mid-range. In 2017, imports Montenegro. Located in the hinterland coal reserves, Bosnia and Herzegovina and exports accounted for 94.6% of of Central and Eastern Europe, Bosnia plans to vigorously develop its coal GDP, quite small. However, its Gini and Herzegovina is regarded as the and electricity industry and export coefficient is about 0.4, indicating Back Garden of the EU. Most of its to European markets. Its forests an appropriate national wealth gap. land is in the Dinara Plateau and Sava are rich in resources. The wood Consumer inflation is extremely low River Basin, and it touches the Adriatic processing industry is developed, and stable at about 1.2% in 2017. Sea to the south with a coastline with wood products of one of Bosnia of only about 21.2 km. Its southern and Herzegovina's main export Its labor supply and cost score is low. regions have a Mediterranean climate, commodities. Labor is scarce. In 2017, the national with a continental and mountainous labor force was only 1.4 million, climate in the middle of the country (3) Macroeconomic Indicators lower than the previous year, with and a temperate continental climate The overall macroeconomic increasing population loss. In 2017, in the north. Bosnia and Herzegovina attractiveness of Bosnia and the unemployment rate was as high as consists of the Federation of Bosnia Herzegovina is moderate. 26.1%, the highest in Europe. Bosnia and Herzegovina (about 51% of and Herzegovina has among the territory) and the Republika Srpska Its scale of economy score is low. In lowest purchasing power of countries (about 49% of territory) and Brčko 2017, Bosnia and Herzegovina's GDP in Europe. The proportion of labor with District. The territory of Bosnia and was about USD18.05 billion and per higher educations is limited. Bosnia Herzegovina is 51,000 km2. In 2017, capita GDP was USD5,148, mid-range and Herzegovina is therefore more the total population was 3.51 million, of among BRI countries. The GDP growth suitable for labor-intensive industries, which the Bosnians account for 50.1%, rate is expected to be about 3.7%. and less attractive for high-end Serbians 30.8% and Croatians 15.4%. industries. They follow Islam, Orthodox Christianity Bosnia and Herzegovina's investment and Catholicism. The official languages environment score is also quite low, are Bosnian, Serbian and Croatian. with FDI of only USD460 million and

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Bosnia and Herzegovina has a high new business is equivalent to 14.9% of processing, Bosnia and Herzegovina tax score. According to the latest per capita gross national income, high has certain labor cost and raw material statistics from the World Bank, total among BRI countries. advantages. tax on business profits in Bosnia and Herzegovina is 23.7%, better than in Foreign exchange risk is high. The There are four free trade zones most BRI countries. mark, the currency of Bosnia and in Bosnia and Herzegovina. The Herzegovina, is linked to EUR, with a preferential and convenient treatment Its money supply score is quite high. In fixed exchange rate. The BAM:USD enterprises in the zone can enjoy 2017, M2 accounted for 70.6% of GDP. exchange rate is quite stable. However, include exemption from VAT and The interest rate difference between freedom of foreign exchange is not import tariffs (including imported domestic deposits and loans was 3.2%. high. In 2017, Bosnia and Herzegovina equipment for self-use), free transfer The money market is quite stable. had a Chinn-Ito score of 0.2, slightly of investments and profits, and lower than the previous year. exemptions from various investment (4) Risk Indicators transfer fees. Overall investment risk in Bosnia and (5) Key Industries Herzegovina is quite high. In the key BRI industries, Bosnia In addition, in recent years, Chinese and Herzegovina is relatively companies have been more active Financial risk is high. The 2017 Banking underdeveloped. Manufacturing has in coal-fired power generation in Risk Assessment Index of Bosnia and some advantages. The coal-fired Bosnia and Herzegovina, given there Herzegovina reached 0.6, low among thermal power sector has gained are huge untapped coal resources. BRI countries. Foreign debt accounted recent attention from Chinese Bosnia and Herzegovina has proven for 51.9% of GDP, and foreign investors. reserves of 5.5 billion tons of coal, exchange reserves in 2017 were only including 2 billion tons of peat lignite USD5.37 . Manufacturing: The growth rate and 3.5 billion tons of block lignite. The of the manufacturing industry in two types of lignite have combined Political risk is moderate. Bosnia Bosnia and Herzegovina reached recoverable reserves of 2.6 billion and Herzegovina's political stability 8.2% in 2017, quite high among BRI tons. However, the infrastructure and legal environment scores are countries. Metal processing is one of Bosnia and Herzegovina is still moderate. However, due to civil war important industry. Before the war relatively underdeveloped and needs from 1992 to 1995, weaponry is (which started in 1992), metalworking to be upgraded. scattered among residents. Cases in Bosnia and Herzegovina contributed of theft and robbery have edged 12% of GDP. After the war (since In November 2017, China Energy up in recent years. There are many 1995), the contribution rate dropped Construction signed a loan agreement mountainous areas in Bosnia and to 3%. Metal processing, the pillar for the Tuzla 7 thermal power Herzegovina with poor access. industry, now accounts for 20% of project, the largest power project Therefore, despite the good security manufacturing industry. Exports of undertaken by a Chinese company environment, investors in Bosnia and metal-processed products make up in Central and Eastern Europe. In Herzegovina should pay attention about 50-60% of production. The August 2018, the warranty period of to personal, transport and property main products of the metal processing a 300,000-kilowatt standard thermal safety. industry are steel, electrolytic power station project contracted to aluminum and alumina, lead, zinc and Dongfang Electric Company ended Sovereign risk is high. Bosnia and copper processing products. and was handed over to the owner. Herzegovina's sovereign credit rating is This was the first infrastructure project B3. Public debt is 73.6% of GDP. Bosnia and Herzegovina is also rich completed by a Chinese company in in forestry resources, with a forest Bosnia and Herzegovina. Its business environment score is coverage rate as high as 63%. In 2017, moderate. Ease of foreign companies the output value of forestry and timber entering the local market, contract processing accounted for 1.9% of performance, the cost of establishing Bosnia and Herzegovina's GDP, with a business, and government efficiency more than 60% exported to Germany, are average. The average time Italy and other EU countries. With required to enforce a contract is about a large number of skilled forestry 595 days. The cost of establishing a workers and cheap labor in timber

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17) Cyprus (1) Investment Advice Overall, Cyprus's investment attractiveness is quite high. The macroeconomic indicators are high among BRI countries, with strong performance in tax burden and money supply. Although overall investment risk is low, business environment risk is quite high. Investors should focus on the ICT industry and transportation infrastructure.

Figure 85: Cyprus Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile Cyprus joined the EU in May 2004 and no significant negative impact on the Cyprus, in the northeastern the Eurozone in January 2008. economy. Consumer price inflation is Mediterranean Sea, is located in low, at 0.6% in 2017. the sea traffic arteries of the three (3) Macroeconomic Indicators major continents of Asia, Africa and Its scale of economy score is quite Its labor supply and cost score is quite Europe. It is the third largest island high. In 2017, the GDP was about low. In 2017, the labor force in Cyprus in the Mediterranean after Sicily and USD22 billion or USD25,000 per was only about 620,000, with higher Sardinia, with an area of 9,251 km2. It capital, with growth of 4.2%. Growth is education participation of 43.6%, faces Greece, Turkey, Syria, Lebanon, expected to remain at about 3.9%. and unemployment of about 10.4%, Israel and Egypt across the sea. Cyprus some of the weaker figures among BRI has a subtropical Mediterranean Its investment environment score is countries. climate with dry and hot summers, high. FDI in 2017 was USD11 billion. mild and humid winters, and short With a superior geographical position, Its tax burden score is quite high. springs and autumns. It has about low tax rates, developed financial According to the World Bank, total 300 days of sunshine a year. The services and fewer restrictions than tax on commercial profits in Cyprus rainy season usually runs between elsewhere, Cyprus has become one of is about 22.2%, indicating a low tax November and March of the following the most important areas of FDI from burden. year. The average temperature in Europe, at 87% of the total. From 2016 winter is 18-20°C, and the average to 2017, fixed asset investment rose Its money supply score is relatively low. summer temperature is 34-36°C. 57% to USD5.5 billion. The interest rate difference between domestic deposits and loans is low, at The population of Cyprus is about Its consumption and market demand 2.8% in 2017. 1.18 million, mainly Greek and Turkish. score is high. Although Cyprus has Cyprus is divided into South and a small population, its per capita North, with the south government- national income is quite high, at about controlled area. The main religions USD24,000 in 2017. In 2017, imports are Orthodox Christianity and Islam. and exports accounted for 133.6% The official languages are Greek and of GDP, quite high. Its Gini coefficient Turkish. English is generally used. suggests the national wealth gap has

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(4) Risk Indicators (5) Key Industries Transportation infrastructure: Overall, Cyprus has a relatively low Cyprus has developed tertiary industry, Cyprus is a major transportation investment risk. including financial services, real estate hub for Asia, Africa and Europe, with and tourism. Their total output value developed air and sea transportation. Financial risk is moderate. Cyprus has accounts for 85.5% of GDP. Among In recent years, the government a moderate banking risk score of 0.4 the key industries of the BRI, investors has been committed to improving (as of 2017). Total foreign exchange should focus on IT and transportation infrastructure, creating a new reserves were about USD890 million, infrastructure. generation of digital networks, building and foreign debt was 526% of GDP, secure electronic communication making it among the lower ranking BRI IT: Cyprus has a high degree of networks and infrastructure, countries. informationization. In 2017, the broadening the air transport network, national network penetration rate and forming a modern three-in-one Political risk is low. Cyprus's political reached 74.4%, and the coverage transportation layout encompassing stability index is at 0.6 and the of secure network servers was high sea, land and air. legal environment index is at 1.0. among BRI countries. In October Political situation is stable and legal 2015, the government announced it Cyprus also vigorously supports the environment is sound. would build Cyprus's first Science and development of shipbuilding. The Technology Park and turn Cyprus into operating income of ships registered Sovereign risk is moderate. Moody' a regional center for the integration of in Cyprus and the dividends from assigned Cyprus a sovereign credit production, education and research ship-owning enterprises are all exempt rating of Ba3 in 2017. Public debt and high-tech enterprises. As of the from tax. Chinese investors should accounts for 102% of GDP and the end of 2017, the project is seeking focus on investments in the digital fiscal deficit was 0.9%, which is small. investment from multiple parties, and upgrading of transportation. warrants investors' attention. In April Business environment risk is high. It 2017, Guangdong Dahua Intelligent In recent years, Chinese enterprises is relatively easy for foreign investors Technology Co. acquired a satellite have become increasingly active in to enter the local market, but contract orbiting company in Cyprus for USD73 Cyprus's transportation infrastructure. performance is difficult, with the million. In March 2018, Zhejiang Jinke In January 2016, HVAC Holdings, a average time required to enforce Culture Co. acquired the Talking Tom subsidiary of AVIC, acquired a 49% a contract exceeding 1,100 days. Cat game development company, stake in Cyprus Deep Blue Airlines with Government efficiency is low among which is managed and operated in an investment of approximately EUR34 BRI countries. Cyprus, for USD1 billion. million.

Foreign exchange risk is low. Cyprus has joined the Eurozone and the legal currency is the euro. The RMB and the euro can be settled directly. Its Chinn- Ito Financial Opennes Index is at 0.9. The EUR:USD exchange rate fluctuated by 0.1% in 2017/18.

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18) Greece (1) Investment Advice Overall, Greece's investment attractiveness is quite low. Macroeconomic indicators are low, although money supply, labor supply and cost perform well. Overall investment risk is moderate, but financial risk, sovereign risk and business environment risk are quite high. Investors should focus on ICT, transportation infrastructure and energy.

Figure 86: Score Greece Investment Attractiveness

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile (3) Macroeconomic Indicators Its labor supply and cost score is Greece is at the southernmost tip Its scale of economy score is quite quite high. In 2017, the labor force in of the Balkans in Europe, bordering low. In 2017, Greece's GDP was about Greece was about 490,000, and the Bulgaria, Macedonia and Albania to USD220.3 billion, or USD19,000 per unemployment rate was about 21.4%. the north, Turkey to the northeast, capita. Greece's GDP growth rate was The higher education level and quality the Ionian Sea to the southwest, only 1.4% in 2017, and it is expected to of the labor force are high. the Aegean Sea to the east, and stay at about 1.8%. Africa to the south. The coastline is Its tax burden score is low. According about 15,021 kilometers long and Its investment environment score is to the World Bank, total tax on Greek the territorial sea is 6 nautical miles quite high. In 2017, FDI amounted commercial profits is about 51.9%, a wide. Greece has a land area of to USD3.6 billion, mainly in service high tax burden. 131,957 km2, of which 15% consists industries such as telecommunication, of islands. Greece has a subtropical finance, trade, real estate and tourism. Greece's money supply score is Mediterranean climate, consisting Fixed asset investment in 2017 was moderate. M2 accounted for 78% of cold and humid winters with USD26.4 billion, up 17% from 2016. of GDP and the growth rate was temperatures of 0-13°C, and dry and about 6.4% in 2017. The interest rate hot summers with temperatures of Its consumption and market demand difference between domestic deposits 23-41°C. score is quite high. In 2017, per capita and loans was 4.4%, mid-range among national income of Greece was quite BRI countries. The Greek population is about 10.76 high at USD18,000 . Imports and million. People are concentrated in exports accounted for 67.5% of GDP, Athens and Thessaloniki. Overseas quite small. Consumer price inflation is Chinese, of which there are nearly low, at 1.1% in 2017. 20,000, also live mainly in Athens and Thessaloniki. The official language is Greek. English is widely used.

Greece is a member of the EU and NATO and has substantial influence in the Balkans.

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(4) Risk Indicators In 2017, Greece had 4,199 ships sector, ZTE and Huawei have actively Overall, Greece's investment risk is with a deadweight tonnage of 310 participated in the construction of moderate. million tons, accounting for 16.7% Greece's communications sector, of the world's total tonnage, ranking helping Greece build a Smart City and Financial risk is high. In 2017, the 1st in the world. Maritime transport upgrade its IT infrastructure. At the banking risk assessment index was the first area in which China 12th meeting of the China-Greece reached 0.6. Total foreign exchange and Greece developed economic Joint Committee on Science and reserves were about USD760 million, and technological cooperation. Technology Cooperation in 2018, and foreign debt accounted for The two countries have carried the two sides agreed to strengthen 223.5% of GDP, both among the out comprehensive cooperation in cooperation in electronic information, weaker figures of BRI countries. marine transportation, shipbuilding, science and technology parks and ship repair, crew labor and ship technology transfer. Political risk is low. Greece's political registration. In 2016, Cosco Shipping stability index is at 0.1 and the legal Group took over the port of Piraeus, Energy: Greece is ramping up its environment index is at 0.2. The the largest container terminal in power grid, aiming to turn the country political situation is generally stable. Greece. It has become the fastest into an energy hub in Southeastern growing port in the world. Cosco Europe and meet the goal of Sovereign risk is high. Moody's gave shipping has built 55 shipping routes generating 18% of electricity from Greece's a sovereign credit rating of to Piraeus, making it an important renewable sources by 2020. B3 in 2017. Public debt accounts for meeting point of the road and 184.5% of GDP. The current public maritime Silk Roads. It plays an From 2019, depending on the actual finance structure, with a small fiscal important role in the fast land-sea development, Greece will invite bids deficit of 1.3%, is not conducive to line between China and Europe, for two 800MW wind or solar power promoting growth. providing great convenience for the projects, with a total of 2,600MW and trade and transportation by Chinese total investment of EUR2.5-3 billion. Business environment risk is high. It enterprises. In 2017, State Grid Corporation of can be difficult for foreign businesses China acquired a 24% stake in the to enter the local market. Contract Greece is of great strategic independent power transmission performance is also difficult, with significance in the proposal network company affiliated to the an average enforcement period of for China's Maritime Silk Road. Greek public power company. It more than 1,580 days. Government Chinese enterprises have broad will participate in Greek power efficiency is low among BRI countries. prospects in the development of grid transformation, operation and the Greek maritime industry. In maintenance projects. In recent years, Foreign exchange risk is low. The Euro addition, the Greek government is China National Energy, Shenhua is the legal tender in Greece. Its Chinn- actively upgrading infrastructure Group, Sinovel Wind Power, Three Ito score is 0.8. construction. So far, it has announced Gorges International Energy, China 28 large-scale construction projects, Energy Construction Gezhouba (5) Key Industries including railways, ports, airports and International and China New Era have In the key BRI industries, Greece's subways, most of which are under invested in several new energy power transportation infrastructure PPP cooperation, which warrants the businesses in Greece. is developed. Energy and attention of Chinese enterprises. telecommunications are the focus of a three-year cooperation plan between IT: In May 2017, China and Greece the Greek government and China's signed a 2017-2019 cooperation plan, National Development and Reform which listed transportation, energy Commission. and communication as three key areas of cooperation. Greece is actively Transportation infrastructure: promoting next generation network Thanks to its developed maritime construction, mainly fiber optic industry, Greece's logistics cable laying, internet access speed performance and port infrastructure improvements and the strengthening quality ranked among the top BRI of network construction in remote countries in 2017. areas. As representatives of China's IT

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19) Poland (1) Investment Advice Overall, Poland's investment attractiveness is high. Poland's macroeconomic attractiveness is quite high among BRI countries. Its scale of economy and tax burden perform well. Overall investment risk is low, although financial risk and business environment risk are quite high. Investors should focus on manufacturing and transportation infrastructure.

Figure 87: Poland Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile (3) Macroeconomic Indicators Its labor supply and cost score is high. Poland is in Central Europe, bordering Its scale of economy score is quite In 2017, the labor force in Poland Germany to the west, the Czech high. In 2017, Poland's GDP was about was about 18.17 million people, Republic and Slovakia to the south, USD526.5 billion, or USD14,000 per and unemployment was only about Russia, Lithuania, Belarus and Ukraine capital. In 2017, GDP growth was 4.8%. 4.4%. Moreover, higher education to the east and the Baltic Sea to the It is expected to be steady at about participation and the quality of the north. The coastline is 528 kilometers 3.8%. labor force are excellent. long and the land area is about 310,000 km2. Poland has a temperate Its investment environment score is Its tax burden score is quite low. forest climate that transitions to a high. In 2017, FDI was USD10.7 billion. According to the World Bank, total tax continental climate. The climate is mild, Poland absorbs more FDI than any on commercial profits is about 40.7%, with a cold and humid winter of -10- other country in Central and Eastern indicating a high tax burden. 5°C on average, a pleasant spring and Europe. Fixed asset investment in autumn with abundant rain, and a cool 2017 was USD106.5 billion, up 25% Its money supply score is moderate. summer which averages 15-24°C. from 2016. M2 accounted for 66.6% of GDP in 2017, with growth of about 4.7%. The total population of Poland is about Its consumption and market demand The interest rate difference between 37.98 million, within which Polish score is high. In 2017, the per capita domestic deposits and loans was 3.3%, people account for about 98%, and national income of Poland was about mid-range among BRI countries. Germans, Belarussians, Ukrainians, USD13,000. Imports and exports Russians, Lithuanians, Jews and other accounted for 104.6% of GDP, quite ethnic minorities account for the rest. high. Final household consumption The official language is Polish. expenditure was USD308.5 billion, indicating sufficient domestic demand. Poland joined the WTO in 1995, NATO in 1999, the EU in 2004, and the Schengen Area in 2007.

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(4) Risk Indicators (5) Key Industries Overall, Poland has low investment Among the key BRI industries, Poland's risk. manufacturing and transportation infrastructure warrant attention. Financial risk is low. In 2017, the Polish banking risk assessment index was at Manufacturing: Thanks to its low 0.3. Total foreign exchange reserves cost, high-quality labor force, and reached USD119.5 billion, and foreign geographical advantage connecting debt accounted for 66.6% of GDP, Eastern and Western Europe, Polish both performing well among BRI manufacturing has good momentum. countries. In 2017, the added value of Poland's manufacturing sector accounted Political risk is low. Poland's political for 17.6% of GDP, with growth rate stability index of 0.5 and legal of 6.1%, ranking high among BRI environment index of 0.9 indicate a countries. stable political situation and sound social and legal environment. In 2016, the automobile industry contributed 10% of Poland's Sovereign risk is low. Moody's rated manufacturing output, 90% of Poland's sovereign credit at A2 in which was exported. Poland is a 2017. Public debt was moderate at manufacturing center for leading 53.8% of GDP and there was a small international automobile and auto fiscal deficit of 2.3%. parts manufacturers, and has formed a complete automotive industrial Business environment risk is chain. The production capacity of moderate. The government has Polish automobile enterprises is a positive attitude toward foreign quite strong, and about 500 OEM investment. It establishes special enterprises have obtained ISO/ economic zones, and provides TS16949 quality management system preferential investment policies, which certification. Krakow's Delphi is the make it relatively easy for foreign largest R&D center in Poland, with business to enter the local market. more than 1,000 engineers. World However, difficulty in performing famous auto parts manufacturers, contracts, the high cost of establishing including Tenneco, Trina, Valeo, a business, and low government Faurecia, Wibco, Eaton and Mercedes, efficiency create some business also have R&D facilities in Poland. environment risk. Poland's electronics industry has Foreign exchange risk is low. The developed rapidly in recent years. Polish currency is the Zloty. The Poland has become an important PLN:USD exchange rate is quite producer of television monitors, stable. In addition, freedom of foreign liquid crystal displays, and household exchange is very high, with a Chinn-Ito appliances of many brands. Financial Openness Indicator of 0.7.

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According to Poland's 2011-2020 plan In February 2016, the new government for the national economy, investors proposed the Luxtorpeda 2 project in priority areas such as automobiles under a responsible development (especially electric vehicles), electronics plan that aims to design and build and household appliances can apply urban public transportation, highways for central government funding. and low-carbon transportation such In February 2018, the government as subways and an urban express said it planned to expand its special railway connecting Warsaw and Lodz. economic zones to the whole of To integrate Poland's network into Poland to further enhance investment the European transport infrastructure attractiveness, and make preferential network, the government has tax policies more favorable to projects loosed regulations on infrastructure to enhance regional competitiveness investment and limited investment and innovation capacity. in infrastructure that damages the environment. Chinese enterprises such as Guangxi Liugong, Hubei Sanhuan, TCL, TPV In water transport, the Batory Project, Electronics, Shengli Technology, proposed under the Strategy for Yuncheng Plate Making Group, Dalian Responsible Development, includes Daren, CIMC, Hongbo New Energy cooperation with foreign partners to and BMI are all involved in the Polish build Polish passenger ferries, making manufacturing industry. In 2017, the Polish shipbuilding industry NUCTECH invested in and built a stronger and more advanced. Poland's factory in Poland, aiming to build shipbuilding law, which came into force an important production base for in 2017, offers a VAT exemption on the professional security equipment in production of parts and components Europe, marking the first greenfield for many types of ships, giving investment project by a Chinese high- shipbuilders a choice between paying tech enterprise in Poland. 19% corporate income tax and a new 1% fixed business tax. Transportation infrastructure: In recent years, Poland has increased In air transport, the government is investment in infrastructure to looking for investors in LOT, one of improve the operation capacity of Poland's national airlines. Poland is transport network and port facilities. interested in closer cooperation with In transportation infrastructure, China in developing the Far East and although Poland ranks high among BRI European aviation markets. countries, there is still a gap between Poland and longstanding EU members. Generally, the investment potential Poland's railway network is badly for Chinese-funded enterprises degraded, with about a third of railway in the transportation industry is lines speed limited or shut down for quite large. However, the Polish technical reasons, and another third in contracted engineering market is need of maintenance. relatively mature, and Chinese-funded enterprises have entered the market quite late. Chinese investors should be careful and prudent in preliminary research as well as their assessment of laws and regulations, and should take an active but steady approach in opening up to the Polish market.

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6. Africa 1) Ethiopia (1) Investment Advice Overall, Ethiopia's investment attractiveness is relatively low. With good performance in scale of economy and investment, Ethiopia's macroeconomic attractiveness is quite high. However, overall investment risk is high, particularly financial risk and political risk. Investors should focus on manufacturing and agriculture.

Figure 88: Ethiopia Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile With a total population of about 100 Ethiopia is a landlocked country in million (2017), Ethiopia is the second Northeastern Africa with a land area largest country in Africa. There are of approximately 1.1 million km2, more than 80 ethnic groups in the bordering Djibouti and Somalia to the country, including 40% Oromos and east, Sudan and South Sudan to the 30% Amharas. Some 45% of residents west, Kenya to the south, and Eritrea follow Ethiopian Orthodoxy, 40%-45% to the north. Plateaus account for follow Islam, 5% follow Protestantism two-thirds of the country's total area and the rest follow local religions. and it has an average elevation of The language of work in federal nearly 3,000 meters. It is sometimes institutions is Amharic, the common described as the Roof of Africa. language is English, and the main national languages are Oromo and Tigray.

Ethiopia is a member of FOCAC (the Forum on China-Africa Cooperation).

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(3) Macroeconomic Indicators Ethiopia has a low labor supply and Ethiopia's macroeconomic cost score. In 2017, the national attractiveness is high. labor force in Ethiopia was about 53.29 million. In recent years, the Ethiopia's scale of economy score unemployment rate has remained at is high. Ethiopia's GDP is about about 5.3%, and the proportion of USD80.56 billion, or USD707 people with higher educations has per capita. Driven by national been about 10.7%. urbanization, Ethiopia has experienced strong economic growth Ethiopia has a low tax score. According in recent years, leading African to World Bank statistics, total tax on countries with growth rate of 10.3%. Ethiopian corporate profits is about GDP is expected to grow at 9%. 37.7%, and the overall corporate tax burden is quite high. Its investment environment score is high. In 2017, FDI in Ethiopia reached Its money supply score is moderate. USD4.02 billion, and fixed asset M2 accounts for about 34% of GDP, investment was USD30.76 billion. and is growing rapidly at about 30%. In recent years, China-Ethiopia The interest rate difference between cooperation has continued to deepen. domestic deposits and loans is quite China has become Ethiopia's largest high, at about 7%. trading partner, the largest source of investment and the largest project (4) Risk Indicators contractor. By the end of 2017, China Overall, Ethiopia has high investment had directly invested more than risk. USD2.3 billion in Ethiopia. Financial risk is quite high. Domestic In 2018, the Ethiopian government financial institutions of provide 36.9% revised the investment law and its of the financial sector credit. External implementation measures. The debt is small, accounting for 38.9% of new regulations focus on modifying GDP. Foreign exchange reserves are preferential policies for foreign sufficient, at about USD3.11 billion. investment, comprehensively evaluating the business performance Political risk is high. According to the of foreign-invested enterprises, and World Bank, the political stability and taking a results-oriented approach to legal environment of Ethiopia have determining preferential investment relatively low scores. preferential policies. The new law is expected to take effect in 2018/19. Sovereign risk is high. In 2017, Moody's rated Ethiopia's sovereign credit at B1, Ethiopia has a low consumption which is low. Public debt accounts for and market demand score. In 2017, a high proportion of GDP, reaching Ethiopia's per capita national income 59.1%. The government is in deficit. was low at only USD740. Final household consumption expenditure Business environment risk is high. It was about USD51.17 billion. Its is difficult for foreign businessmen to Gini coefficient of 0.47 indicates a enter the local market, and the cost large income gap among Ethiopian of establishing enterprises is high, nationals. The overall economy is not equivalent to 52.7% of per capita highly dependent on foreign trade, gross national income, second only with imports and exports accounting to Tanzania among African countries. for 31.5% of GDP. In 2017, inflation rate Contract performance is below is as high as 7.3%. average, with enforcement taking more than 530 days on average. In addition, government lacks efficiency.

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Foreign exchange risk is high. Since Ethiopian farmers and herdsmen the government depreciated the local account for more than 85% of the currency, the birr, by 15% in November total population, and are mainly 2017 to curb inflation and stimulate engaged in planting and animal exports, exchanges rates have husbandry, with some fisheries and fluctuated sharply. In addition, the forestry. Cereal crops such as moss country's freedom of foreign exchange bran and wheat account for 84.2% is not high, with a Chinn-Ito score of of the output of food crops. Cash 0.17. Ethiopia has foreign exchange crops include coffee, where Ethiopia controls. Foreign enterprises can is at the forefront among African open foreign currency accounts at countries with annual output in local banks, and they can remit freely, 2016/17 of about 350,000 tons, chia, but cannot withdraw cash. Foreign flowers, oil and cotton. Cereal crops exchange remittances as capital such as bran and wheat account for inputs must be filed with the National 84.2% of food crop output. Foreign Bank of Ethiopia, and corporate exchange earnings through coffee profits and shares can be remitted exports account for about 25% of after approval procedures. In recent Ethiopia's export income, and 15% of years, the Ethiopian government has global exports. In recent years, flower gradually relaxed foreign exchange cultivation and exports have grown controls. substantially, with flower export volume leaping to second place (5) Key Industries in Africa. Sugar cane is becoming In the key BRI industries, agriculture the main agricultural product. The and manufacturing are worthy government plans to make Ethiopia of attention. According to the the largest sugar production and government's development plan, export base in Africa. energy, especially renewable energy, has great potential for development. Ethiopia is also a large animal husbandry country. Grazing land Agriculture: In 2017, Ethiopia's accounts for more than 50% of the arable land area reached 15.12 country's territory. Husbandry is million hectares, and the crop mainly based on family lifestock, which production index and food production is of low resilience, with output value index ranked among the top BRI at about 20% of GDP and production countries. Agriculture is the mainstay representing 30% of the labor force. of Ethiopia's national economy Ethiopia's total number of livestock and exports. The added value of ranks first in Africa and 10th in the agricultural production accounts for world. 34.8% of GDP. Agricultural product exports account for about 80% of Potentially, fishing in Ethiopia could total exports, with coffee and oilseeds produce about 40,000 tons, but it has the main products. not yet been commercialized.

In recent years, due to the Based on good agricultural conditions, government's abolition of an Ethiopia's agriculture and agricultural agricultural product monopoly, product processing industries have the relaxation of price controls, great potential for development, encouragement of small agricultural and the government has introduced loans, promotion of agricultural preferential tax policies. technology and the use of chemical fertilizers, food production has increased. But the level of agricultural mechanization is still low.

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Manufacturing: Although the added Transsion's mobile phone assembly value of Ethiopian manufacturing in plant, and Suzhou Orient's textile 2017 only accounted for 5.6% of GDP, factory. manufacturing growth was as high as 17.4%, ranking among the top BRI Energy: Ethiopia's current power countries. supply basically meets domestic demand, but is still underdeveloped. Ethiopia's manufacturing sector The inconvenience of power facilities is dominated by food, beverages, has impacted corporate investment. textiles, leather processing, steel and As of March 2018, Ethiopia has automobile assembly. According to total installed capacity of 4,200 MW Ethiopia's 2015 development and and plans to increase its power implementation of GTP II (the second generation capacity to 17,347 MW five-year Growth and Transformation by 2020. At present, it has earned Plan), the government planns to foreign exchange through exporting restructure the economy, increase electricity to neighboring countries the contribution of industry to GDP to such as Djibouti, Tanzania and Kenya, 22.3%, encourage the development and plans to export electricity to of export-oriented and import- Egypt, Tanzania and South Sudan in replacement industries, and promote the future. vertical links between agricultural resources and industry. To achieve power supply and export targets, Ethiopia is actively To improve the development level developing new energy fields such as of the manufacturing industry, hydropower, geothermal, wind and the Ethiopian government plans solar energy, and encouraging inflows to develop 100,000 hectares of of capital and experience from various industrial parks between 2016 and countries. To further attract foreign 2025. Development of projects under investment, Ethiopia allows foreign construction has so far exceeded investors to purchase shares of expectations. The government is Ethiopian Electric Power Corporation, striving to build the country into a light which was previously monopolized industry development base in Africa by state-owned capital (the Ethiopian by 2025. Well-equipped infrastructure, government will remain in control). clean energy and high technology have attracted 15 manufacturers from Ethiopia is promoting PPP in the China, the United States and other infrastructure sector, but regulations countries to settle in the park. have not yet been formed. In addition, China and Ethiopia have not yet In recent years, Chinese enterprises formally signed an infrastructure have made significant investments cooperation agreement, so in Ethiopia's manufacturing industry. enterprises need to conduct their Iconic projects include the China ownresearch and negotiation in the CAMC Engineering Co. sugar factory early stages of investment. Large- project, Jiangsu Sunshine's textile scale energy projects by Chinese- factory, Wuxi No.1 Cotton Mill's textile funded enterprises include the GD-3 factory, Jiangsu Yongyuan's industrial Hydropower Project by Gezhouba park, the Ethiopia-Hunan industrial Group and China Hydropower park (which also involves Egypt), Engineering Consulting Group Co., Huajian's shoe factory, the Hansheng and the first wind energy project in glass factory, Xintian Kuroda's leather Ethiopia, which was built by a China- products factory, Shenzhen-based overseas joint venture.

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2) Egypt (1) Investment Advice Overall, Egypt's investment attractiveness is relatively low. Macroeconomic attractiveness is low among the BRI countries. The investment environment and money supply perform relatively well. Overall investment risk is high, particilarly foreign exchange risk, business environment risk and political risk. Investors should focus on manufacturing and transportation infrastructure.

Figure 89: Egypt Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile The total population of Egypt is about (3) Macroeconomic Indicators Egypt touches Asia and Africa and 110 million. The state religion is Islam, Egypt's overall investment score is low. covers an area of about 1,000,000 km2. with Sunni accounting for 84% of the Most of the country is in Northeastern total population. The official language Scale of economy is moderate. Egypt's Africa. Only the Sinai Peninsula east is Arabic. GDP was about USD235.4 billion in of the Suez Canal is in Southwestern 2017, and it has maintained a growth Asia. Egypt borders Liliana to the west, Egypt is rich in natural resources and rate of about 4.2% in recent years. Per Sudan to the south, the Red Sea, has proven oil, natural gas, phosphate, capita GDP is about USD2,412. GDP is Palestine and Israel to the east, and iron, manganese, coal, gold, zinc, expected to grow at 5.6%. the Mediterranean to the north. The chromium, silver, molybdenum, copper coastline is about 2,900 kilometers and talc reserves. In 2015, the largest Its investment environment score long. It is dry throughout the country. natural gas field in the Mediterranean is high. In 2017, FDI in Egypt was The Nile Delta and northern coastal was discovered in the offshore waters about USD7.39 billion. Fixed asset region have a Mediterranean climate of Egypt. Egypt has an open market investment was about USD41.67 with average temperatures of 12°C in economy, with complete industrial, billion . January and 26°C in July. Most of the agricultural and service systems. rest of the region has a tropical desert Service industry accounts for about climate, hot and dry with temperatures 50% of GDP. The main sectors are reaching 40 °C in desert areas. light industry such as textiles and food processing. Its four major sources of foreign exchange earnings are oil and gas, tourism, remittances and the Suez Canal

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Its consumption and market demand Political risk is high. Since the political score is low. Per capita income was turmoil in Egypt in 2011, extremist USD3,010, mid-low in the world. forces in the Sinai Peninsula have Household final consumption continued to instigate violence. expenditure reached USD207.4 billion Since 2017, the security situation in in 2017. Egypt's Gini coefficient of Egypt has been complicated, and the 0.4 indicates a reasonable national government still struggles to counter income gap. Imports and exports terrorism. In addition, Egypt's legal accounts for 45.1% of GDP. With the environment score is at a low level. implementation of a floating exchange rate policy in early November 2016 Sovereign risk is high. Moody's gives and the sharp depreciation of the Egypt's sovereign credit a B3 rating. Egyptian pound, domestic market Public debt accounts for nearly 89% prices in Egypt have increased of GDP. The country has an ongoing significantly. In 2017, inflation was as deficit crisis, with the budget for the high as 29.5%. 2018/19 fiscal year of EGP433.8 billion, equivalent to 8.4% of GDP, which is Its labor supply and cost score is about 2% (EGP7.8 billion) more than low. In 2017, the national labor force that for 2017/18 (EGP430.8 billion). was about 31.87 million. In recent years, the unemployment rate has Business environment risk is quite remained at about 11.8%. The overall high. Egypt's ease of foreign entry into quality of the workforce is high, with the local market, contract fulfillment, about 40.4% of people having higher cost of setting up a business, and educations, mid-high among BRI government administrative efficiency countries. perform poorly. Contract enforcement takes about 1,010 days, and the Its tax score is low. According to World cost of establishing a business is Bank statistics, total tax on commercial equivalent to about 40.3% of per profits is about 46.4%, indicating a capita gross national income. heavy corporate tax burden. Foreign exchange risk is high. In Egypt's money supply score is high. the past year, the exchange rate of In 2017, M2 accounted for 92.3% EGP:USD exchange rate has been of GDP, with growth remaining at quite stable. The Central Bank of 21% in recent years, indicating active Egypt has imposed strict foreign investment and markets. The interest exchange controls. However, rate difference between domestic according to a loan agreement deposits and loans is quite high, at reached between the IMF and Egypt close to 6.1%. in recent years, Egypt has gradually phased out foreign exchange control (4) Risk Indicators measures. In June 2017, the central Overall, Egypt has high investment bank canceled the limit of USD100,000 risk. per year on personal remittances. In November 28 the same year, the Financial risk is low. Banking risk government lifted restrictions on in Egypt is relatively low. The ratio foreign exchange access to non- of foreign debt to GDP is 38.5%, essential imports, indicating that and foreign exchange reserves are the foreign exchange liquidity of sufficient, at USD44 billion. the Egyptian banking system has improved. However, according to the Chinn-Ito index, freedom of foreign exchange is still at a moderately low level.

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(5) Key Industries There are 30 airports in the country, Egypt has the largest cotton and textile Among the key BRI industries, Egyptian including 11 international airports. industry cluster in Africa. The industrial transportation industry is worthy of Cairo Airport is the second busiest chain from cotton planting to garment attention. The manufacturing industry, airport Africa. The government plans manufacturing is quite complete. especially textiles, has recently to develop Cairo as a logistics center, Garment manufacturing is relatively received increasing attention from build an international logistics belt, mature, although weaving, printing and investors. and launch a series of transportation dyeing are weak. Products are mainly construction projects, including exported to the United States, EU and Transportation infrastructure: the construction of high-speed and surrounding Arab markets. There are Egypt's transportation is relatively light railways, road expansions and currently 7,344 textile companies in developed among African countries. logistics center to ease road transport Egypt, 90% of which are small and In recent years, sea, land and air pressure. medium-sized enterprises, absorbing transportation capacity has grown 30% of the industrial workforce, with rapidly. Railway mileage is 5,085 The Egyptian government encourages private companies most active. kilometers. Cairo has three subway Chinese enterprises to invest in the lines. The government plans to transportation sector. In the past With low labor costs, a superior build six subway lines by 2032 to two years, Chinese enterprises have geographical location for trade and connect the Greater Cairo area with been active and successively signed transportation, and favorable trade surrounding suburbs. a total of USD3 billion in construction agreement terms, Egypt warrants projects, including the Cairo CBD, the attention of Chinese enterprises. The total length of inland water light railways and the COSCO Egypt In recent years, Chinese textile routes is about 3,500 kilometers. International Bonded Logistics Park. companies have been investigating In 2017, Egypt's Port Infrastructure the Egyptian market, and some have Quality Index ranked first among BRI Foreign worker approvals in Egypt are already shown clear investment countries. There are 62 ports including quite strict. New regulations allowed intentions. In addition, the Suez Alexandria, Port Said, Dumiyat and the proportion of foreign workers Economic and Trade Cooperation Suez. Annual throughput is 8 million to increase to 20%. However, actual Zone built by China and Egypt has containers, and port trade volume is application is very difficult, and it takes attracted more than 80 manufacturing 100 million tons. a long time to train labor. enterprises as of 2018, with its four major industries, new building The Suez Canal is the main Manufacturing: In 2017, Egypt's materials, petroleum equipment, international waterway connecting manufacturing value added accounted high and low voltage equipment and Asia, Africa and Europe. In recent for 16.4% of GDP, within which the machinery manufacturing, gradually years, the canal has undergone a textile industry is strong. In 2017, the maturing and developing. A new large-scale expansion, which enables export value of various types of textiles industrial cluster for passenger car it to carry a capacity of 240,000 tons was about USD2.37 billion. manufacturing, textiles and apparel is and accommodate 4th generation planned for the zone, which could be a container ships. good opportunity for investment.

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3) South Africa (1) Investment Advice The overall investment attractiveness of South Africa is quite low. Macroeconomic attractiveness is low among BRI countries. Its investment and tax burden scores are quite high. Overall investment risk is moderate, but sovereign and business environment risks are quite high. Investors should focus on transportation and energy.

Figure 90: South Africa Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Company Profile (3) Macroeconomic attractiveness African was high, at about USD207.3 South Africa is in the southernmost Investing in South Africa is not billion. Imports and exports accounted part of Africa, with a land area of attractive. for 58.2% of GDP. Inflation was 5.2%, a about 1.22 million km2. The country's high level. boundary faces east to the Indian Its scale of economy is score low. Ocean, west to the Atlantic Ocean, South Africa's GDP is about USD348.9 South Africa’s labor supply and cost and north to Namibia, Botswana, billion and its per capita GDP is about score is low. In 2017, the national labor Zimbabwe, Mozambique and USD6,151. In recent years, GDP growth force totaled 22.38 million. In recent Swaziland. The coastline is 3,000 has been slow, at about 1.3%, although years, unemployment has been high km long. Most areas have a tropical it is expected to rise slightly to 1.6%. at about 27.3%. The level of labor savanna climate. education is low, with only about South Africa’s investment score a quarter of people having higher South Africa has a population of is high. In 2017, FDI was about educations. approximately 56.72 million (2017) USD1.37 billion, mid-low among BRI and has four major races: black, countries. However, annual fixed asset Its tax burden score is high. Based colored, white and Asian, accounting investment was quite high, reaching on World Bank statistics, total tax on for 79.6%, 9%, 8.9% and 2.5% of the USD67.92 billion. commercial profits is 29.1%, relatively population respectively. There are 11 friendly to enterprises. official languages, of which English and Its consumption and market demand Afrikaans are most common. About score is low. South Africa's per capita South Africa’s money supply indicator 80% of people follow Christianity, with national income is USD5,430, which score is low. Broad money supply is the rest following local religions, Islam is ahead of most African countries. 72.2% of of GDP, with growth of about and Hinduism. The Gini coefficient is as high as 0.7, 6.4%. The difference between loan exceeding the warning line of uneven and deposit interest rates is small, and wealth distribution and representing basically stable, at 3.1%. the largest income gap among BRI countries. In 2017, final household consumption expenditure of South

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(4) Risk Indicators The business environment is Overall, South Africa's investment risk moderately risky. South Africa scores is low. well in entry difficulty of foreign companies, establishment costs and Financial risk is low. South African government efficiency, but contract banks have quite low risk, with foreign enforcement scores poorly. The debt accounting for 54.6% of GDP and average time required to enforce a foreign exchange reserves totaling contract is too long (600 days). The about USD50.7 billion, a mid-high cost of establishing a new business is level. equivalent to only 0.2% of per capita gross national income. Political risk is low. South Africa performs well in political stability and Foreign exchange risk is high. The the legal environment. The domestic South African currency (the rand), is political situation was generally stable against USD. Local exchange stable in 2017 and the legal system controls are implemented by the has become more developed. The Foreign Exchange Administration of government has enacted a series the South African Reserve Bank, and of labor laws to strengthen labor are executed through Authorized protection. On one hand, this has a Dealers at commercial banks. In positive effect on protecting labor recent years, foreign exchange rights, maintaining fair employment, controls have gradually been relaxed. and realizing income. However, the Non-residents are free to invest in emphasis on trade union power has South Africa, but there are some caused frequent strikes, bringing restrictions on taking out capital. shocks to mining, manufacturing, Currently, the degree of freedom of agriculture, and some Chinese mining foreign exchange is mid-low, with a companies. Chinn-Ito index score of 0.17.

Sovereign risk is low. Moody's gives South Africa’s sovereign credit a Baa3 rating. Public debt accounts for 55.6% of GDP, and the government is in fiscal deficit.

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(5) Key Industries The overall transportat situation South Africa's four main industrial Among the key BRI industries, South in South Africa is conducive to the clusters include energy metallurgy, Africa's transportation infrastructure development of business activities. agricultural product processing, and energy industry have developed The South African government will petrochemical and trade logistics, well. continue to invest in transportation which warrant Chinese investors' infrastructure. attention. Transportation infrastructure: South Africa has the most In 2018, Cyril Ramaphosa was elected South Africa has also begun to focus comprehensive transportation system President of South Africa. In The on the development of new energy. In in Africa and plays an important role State of the Nation Address 2018, 2018, its Minister of Mineral Resources in local and neighboring countries' the government released a USD100 and Energy signed an agreement economies. The main transportation billion investment plan, hoping to for 27 separate new energy power is railways and highways, and air attract this amount of foreign capital plant projects. Successful project transportation has developed rapidly. to drive economic development in the launches by Chinese enterprises next five years, which should benefit include PowerChina's power station In recent years, infrastructure Chinese enterprises. Recent projects at the Metallurgical Industrial Park, construction in urban and economic include cooperation between China Sinosteel's chrome ore project, development zones has been Export & Credit Insurance Corporation Jinchuan Group's platinum ore project, strengthened. The total length of and South African Transnet on the HBIS Group's copper project and Gold railways is about 34,000 km, of which construction of an infrastructure One Group's gold project. 18,000 km are electrified, with 180 insurance and financing platform, and million tons of annual freight volume. a logistics development project by In recent years, South Africa's Minister The luxury Blue Bus from Pretoria Gezhouba Group Corporation. of Home Affairs has tightened many to Cape Town has an international visa policies. The Black Economic reputation. South Africa has the Energy: South Africa is amoung the Empowerment initiatives have greatly longest road network in Africa, world's five largest mineral resources increased requirements to supporting covering the whole country and countries. It has many types of black enterprises and localization. The connecting to neighboring countries. minerals with large reserves and high challenge posed by trade unionism in Its roads are about 755,000 km yields. There are more than 70 kinds South Africa are worth watching. long, including 16,170 km of national of minerals with proven reserves being highways. Annual passenger traffic mined in South Africa, with a total is about 4.5 million passengers and value of about USD2.5 trillion. In 2017, cargo volume is 3.1 million. the value added of mining accounted for 7.5% of GDP. South Africa's marine transportation industry is developed. About 96% of Platinum production ranks 1st in the exports are shipped. The main ports world. Platinum, gold and coal exports are Cape Town, Durban and East respectively rank 2nd, 3rd and 6th in London, and its port quality index the world. ranks highly among BRI countries. Annual port throughput capacity is The mining machinery and equipment about 1.2 billion tons. Durban is the sector in South Africa is developed, busiest port and the largest container with advanced systems. South Africa distribution center in Africa with an provides incentives for mining projects annual container handling capacity of that support the country financially 1.2 million containers. and technically. The Musina-Makhado Special Economic Zone (South African South Africa has about 27 civil Energy and Metallurgical Zone) is aviation airports, 11 of which handle operated jointly with China Sea international traffic. Annual passenger Trade. It is the first economic zone volume has reached 20.82 million. established since related legistlation was promulgated in 2016.

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4) Kenya (1) Investment Advice Kenya's overall investment attractiveness is not high. Although its scale of economy is quite good, Kenya's macroeconomic attractiveness is low among BRI countries. Overall investment risk is high, particularly its significant political risks, but business environment and foreign exchange risks are low. Investors should focus on transportation infrastructure and agriculture.

Figure 91: Kenya Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Company Profile Kenya has a population of 49.7 Kenyan industry is dominated by Kenya is in East Africa with a land million (2017). There are 42 tribes manufacturing, accounting for about area of 569,000 km2 and a coastline in the country, divided into three 10% of GDP, with the food processing of 536 km. Its geographical position is major groups, Bantu, Nilotic and industry relatively developed. In advantageous, near the Indian Ocean Cushitic. The Kikuyus are the largest addition, Kenya is rich in natural with the equator running through it tribe, accounting for 17% of the total resources. Its mineral deposits are center. The Great Rift Valley spreads population. About 45% of residents mainly soda ash, salt, limestone, across the country from north to follow Protestantism, 33% follow gold, silver, copper, and aluminum. south. Except for a 200 km-wide area Catholicism, 10% follow Islam, and Renewables including geothermal, along its coast, Kenya's remaining the rest follow traditional religions hydropower and wind energy are also land area consists of plateaus with an and Hinduism. Swahili and English are abundant. altitude of 1,000-2,000 meters. Mount official languages. Kenya in the center of the country is 5,199 meters high, making it the Kenya is a relatively developed country second highest peak in Africa. Its forest in East Africa and has one of the better area is 87,000 km2, accounting for economic bases in sub-Saharan Africa. 15% of land, with forest reserves of Agriculture, services and engineering 950 million tons. Kenya is in a tropical are the three pillars of the national monsoon region, with hot and humid economy. Among these, agricultural coastal areas and a mild climate on the output accounts for nearly one-third plateaus. of GDP and more than half of total exports. About 80% of the population is engaged in agriculture and animal husbandry.

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(3) Macroeconomic attractiveness (4) Risk Indicators Kenya's overall investment Kenya has overall high investment attractiveness is low. risk.

Its scale of economy score is high. In Financial risk is high. Kenya has highly 2017, GDP was about USD70.5 billion, risky banks. Foreign debt is low, or about USD1,455 per capita. GDP is accounting for 31.3% of GDP, and expected to grow at 4.4%. foreign exchange reserves are small at USD8.44 billion. Kenya's investment score is quite low. In 2017, FDI was about USD670 Political risk is high. According to the million (up 67.5% YoY), and fixed asset World Bank, Kenya's political stability investment was about USD15.03 and legal environment are both at billion (up 23.2% YoY), but both are mid-low levels. mid-low among BRI countries. Sovereign risk is high. Moody's gives Its consumption and market demand Kenya a sovereign credit rating score is also low. Kenya's wealth of B2. In recent years, Kenya has distribution is uneven, with a Gini borrowed heavily for infrastructure coefficient of 0.5. Per capita national development, and the cost of debt has income is only USD1,460, one of been high, resulting in government the smallest among BRI countries. debt accounting for nearly 56% of However, final household consumption GDP. The government is has a serious expenditure is quite high, reaching fiscal deficit. USD64.68 billion. Imports and exports account for 37.3% of GDP. Inflation is Business environment risk is at 8.2%. comparatively low. Entering the Kenyan market is not that difficult. Kenya's labor supply and cost score Contract enforcement is generally is low. In 2017, the national labor smooth, taking an average of about force was about 19.96 million. The 465 days. The cost of establishing unemployment rate was quite high, at a company, at equivalent to 24.9% 11.4%. The quality of the labor force of per capita gross national income, is low, with only about 18.6% of the is quite high among BRI countries, population having received higher but lower than in most other African educations. countries. Government administration is not very efficient. Its tax burden score is also quite low. Based on World Bank figures, Kenya's Foreign exchange risk is low. In total tax on commercial profits is 2017, there were mild exchange rate 37.2%, moderately high. fluctuations between local currency, the Kenyan shilling, and USD. Kenya's money supply rating is The degree of freedom of foreign moderate. Broad money supply is exchange is high, with a Chinn-Ito small (36.7% of GDP), but growth Financial Openness Index score of 0.7. rate is rapid at 8.9%. The difference between loan and deposits interest rates is high at nearly 6%.

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(5) Key Industries Overall, Kenya's transportation Among the key BRI industries, Kenya's infrastructure is better than those of transportation infrastructure and most African countries, but has some agriculture are developing well, while room to improve. In recent years, other industries lag behind. in addition to the Mombasa-Nairobi railway, Chinese enterprises have Transportation infrastructure: Kenya, participated in projects including as a hub and a gateway to East Africa, Kenya Railways, the Maraba-Nairobi has a superior geographical location. Railway, the Nairobi Municipal Highway Its transportation industry radiates and construction of an oil terminal in to neighboring countries. In recent Mombasa. years, with Kenya's economic recovery, transport has developed rapidly. Agriculture: As of 2017, Kenya has 2,763 km2 of agricultural land, and Its air transport facilities are quite its crop production index is 129, developed, with international airports in ranking 1st among BRI countries. Its Nairobi and Mombasa. Jomo Kenyatta agricultural added value accounted for International Airport in Nairobi is one of 32.1% of GDP. the busiest airports in Africa. Agriculture earns more foreign Mombasa is the largest port in East exchange than any other industry in and Central Africa and one of the Kenya, with horticultural products most modern ports in Africa. Its (flowers), vegetables, fruits, tea and port infrastructure quality ranks coffee the main export products (54% among the top BRI countries. There of total exports). are 16 deep water berths and two large oil terminals. In 2017, cargo To improve the quality of agriculture, throughput reached 30.27 million Kenya's government has strived to tons, with an annual growth rate of improve irrigation equipment and the 10.6%. Kenya Vision 2030 proposes level of agricultural mechanization, to expand the Port of Mombasa into a increase agricultural chemical regional shipping center with annual production capacity, and develop throughput of 50 million tons. an agricultural product processing industry to increase added value. Kenya's road network is quite developed, but conditions are poor. Kenya allows foreign capital to Roads are the main transportation purchase contracted management mode, accounting for about 70% of rights for arable and forest land, total traffic. with leases of up to 99 years and 45 years, respectively. However, foreign Kenya has 3,329 km of railways. The investors are not allowed to buy land. recently built, 480 km Mombasa to Nairobi line is a national railway built There are broad prospects for by China to Chinese standards. It is cooperation between China and Kenya the largest infrastructure construction in agriculture. Over the past two years, project since Kenya's independence China-Africa projects have progressed and the flagship project of Kenya smoothly, including the China-Kenya Vision 2030. It opened to traffic in May Joint Laboratory for Crop Molecular 2017. The line is regarded as the first Biology, a coffee plantation irrigation link in East Africa's railway network. system project involving Gezhouba The long-term plan is to connect Group, and an agriculture industry six East African countries (Kenya, chain cooperation platform involving Tanzania, Uganda, Rwanda, Burundi Jutubao China. and South Sudan) by rail.

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5) Nigeria (1) Investment Advice Overall, Nigeria's investment attractiveness is quite low. Nigeria's macroeconomic attractiveness is one of the lowest among BRI countries. However, its scores for money supply and tax burden are quite favorable. Overall investment risk is high, especially financial and political risk. Investors should focus on investing in energy, agriculture, and transportation infrastructure.

Figure 92: Nigeria Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Company Profile Nigeria is rich in resources. More than consumption expenditure in 2017 was Nigeria is in the southeastern region 30 types of mineral deposits have about USD300.2 billion, higher than of West Africa, bordering Cameroon to been discovered, mainly oil, natural in most BRI countries. Imports and the east, Chad to the northeast, Benin gas, tin, coal and limestone. Among exports accounted for 26.4% of GDP. to the west, Niger to the north, and these, oil reserves rank 2nd in Africa The inflation rate is 2.4%. the Gulf of Guinea to the south. The and natural gas reserves rank 1nd. The country covers 920,000 km2, with a forest coverage rate is 17%. Nigeria's labor supply and cost land border of 4,035 km and coastline score is low. In 2017, the national of 800 km. It has high terrain in the (3) Macroeconomic attractiveness labor force was about 60.65 million. north and low terrain in the south. Nigeria's overall investment is not very Unemployment is quite high, There are many rivers in Nigeria, and attractive. maintaining at about 7%. The overall it has a tropical monsoon climate, with quality of the workforce is low, with the dry and rainy seasons. The annual Its scale of economy score is low. proportion receiving higher educations average temperature is 26-27°C. GDP is about USD375.75 billion, or only about 10%. USD1,968 per capita. GDP is expected The total population of Nigeria is to grow at 2%. Its tax burden indicator is mid-range. about 190 million (2017). There are Based on World Bank statistics, total more than 250 ethnic groups in the Its investment score is high. FDI in tax on commercial profits is 34.8%. country, the largest of which is the 2017 was approximately USD3.5 Hausa-Fulani in the north, Yoruba in billion. Fixed asset investment was Its M2 money supply score is low. the west and Egbo in the east. About about USD66.8 billion. Negeria's broad money supply 50% of residents follow Islam, 40% accounts for about 21% of GDP, follow Christianity, and 10% follow Its consumption and market demand with growth of 2.3%. The difference other religions. The official language score is low. The income gap between between loan and deposits interest is English, and the main national residents is quite large, with a Gini rates is quite high, at 8%. languages are Hausa, Yoruba and Igbo. coefficient of 0.5. Final household

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(4) Risk Indicators (5) Key Industries Overall, Nigeria has high investment In the key BRI areas, Nigerian energy risks. and agriculture have developed quite well. Due to the relatively Financial risk is high. According to the weak infrastructure construction, World Bank, the banking industry in the government welcomes foreign Nigeria is high risk. The credit market investors in local infrastructure. relies on foreign institutions, with domestic institutions only providing Energy: Nigeria is rich in energy about 23% of credit. Nigeria's external resources. More than 30 kinds debt is small, accounting for only 8.3% of mineral deposits have been of GDP. Foreign exchange reserves are discovered, mainly including oil, sufficient at USD4.74 billion. natural gas, tin, coal and limestone.

Political risk is high. The Nigerian With coal reserves of about 2.75 billion political situation is generally stable, tons, it is the only coal producing but the upcoming presidential country in West Africa. Nigeria's election is expected to increase proven natural gas and oil reserves political uncertainty. In recent years, are about 5.1 trillion cubic meters violence has broke out frequently and 37.1 billion barrels respectively, increasing overall social stability ranking 1st and 2nd in Africa. Since the risk. In addition, the Nigerian legal 1970s, it has become Africa's largest environment score is low. oil producer.

Sovereign risk is low. Moody's rates In 2017, Nigeria's oil exports Nigeria's sovereign credit rating at B2. accounted for 96.3% of total exports. Public debt is not large, accounting for The oil industry is the backbone about 23% of GDP. The government is of Nigeria's national economy, in fiscal deficit. contributing 62% of federal revenue and 8.7% of GDP. More than 80% of Business environment risk is its oil production is held by the world's high. It is quite difficult for foreign top five multinational oil companies. businesses to enter Nigeria. The cost However, its domestic refining of establishing a company is quite capacity is quite low. More than 80% high, equivalent to about 27.6% of per of domestic refined oil consumption capita gross national income. Contract depends on imports, so fuel supplies enforcement is excellent, taking an are tight. average of approximately 454 days. According to the EGRP (Economic Foreign exchange risk is moderate. Recovery and Growth Plan), which was The local currency and exchange rate launched in April 2017, Nigeria plans has been stable. Freedom of foreign to increase power generation and exchange is moderately low, with a develop its refining industry, aiming to Chinn-Ito score of 0.3. become a net exporter of refined oil products by 2020.

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Although Nigeria's natural gas The irrational structure and reserves are abundant, its mining underdeveloped equipment in rate is less than 15%, and supporting agricultural production make Nigeria's facilities are not mature enough. After refined grain supply insufficient. Food infrastructure upgrading, upstream import cost have increased by 11% a and downstream enterprises in the year in the past 10 years. The Nigerian industrial chain have great potential. At government grants preferential present, Nigeria's power supply is very policies and support to enterprises underdeveloped, with a huge demand engaged in agriculture, from import gap. About 55% of residents have no and export tariff incentives to land electricity, which seriously restricts resources. the development of heavy industry. In general, Chinese enterprises in this Chinese companies have relatively field have good opportunities. broad opportunities in various fields such as farm development, In 2017/18, China's activities in infrastructure transformation, Nigeria's oil and gas industry include agricultural machinery imports, Energy China's gas-fired power station, agricultural product processing and China Petroleum Pipeline Engineering technology exchange. As of 2017/18, Co.'s AKK gas pipeline, China National China's cooperation with Nigeria Chemical Engineering's Dangote includes Lee Group's Jigawa Sugar refinery, Shengli Engineering's oil and Refinery, CGCOC Group's Onitsha gas project and CNOOC's oil and gas Water Conservation Project, the development projects, which involve Sino-Nepal Agricultural Training investments of USD17 billion. and Exchange Center, and Stecol Corporation's Kano River Irrigation Agriculture: Nigeria's has 7,080 km2 Project. of agricultural land as of 2017, with an arable area of 34 million hectares (33% Nigeria lags behind in transportation, of the territory), ranking top among communications, and hydro-electricity. BRI countries. Its agricultural added To develop infrastructure, Nigeria value accounted for 21% of GDP in formulated The National Integrated 2017. About 60-70% of the labor force Infrastructure Master Plan for is engaged in agriculture-related work, 2014-2043, which includes energy, and labor costs are very low. transportation, housing, water supply and communications infrastructure The main agricultural products include as key development areas, with a cassava, corn, sorghum, millet, rice, planned investment of USD25 billion peanuts, palm oil, cocoa, cashew nuts per year. About 48% of funds will and rubber. Nigeria is the world's come from private investment, with largest cassava producer, as well as investor-government cooperation the 4th largest producer and the 3rd mainly through the EPC model. In largest exporter of cocoa. However, 2017/18, China's cooperation in there is still a large amount of arable infrastructure construction includes land that has not been effectively Sinohydro's Mambilla Hydropower used. The government's insufficient Project, the Kaduna Hydropower expenditure on agriculture has led to Project, the China Harbour Lekki a long-term problem of inadequate Deepwater Port Project, and the infrastructure and technology. Lagos-lbadan Railway Project.

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6) Angola (1) Investment Advice Overall, investment in Angola is not very attractive. Macroeconomic attractiveness is low among BRI countries. Money supply and tax burden score relatively well. Overall investment risk is high, particularly financial and foreign exchange risk. Investors should focus on energy, agriculture and IT.

Figure 93: Angola Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Company Profile tungsten, gold, quartz, marble and Gini coefficient (0.5) indicates a large Located in Southwestern Africa, granite. Oil and diamond mining are income gap among residents. Final Angola has a land area of 1.246 million pillar industries of the economy. In household consumption expenditure km2. The country is bordered by the addition, Angola has dense rivers and in 2017 was about USD69.83 billion. Republic of Congo and Democratic abundant water resources. The main Imports and exports account for Republic of the Congo to the north, rivers include the Congo, Kunene, 52.3% of GDP. Inflation is the highest Zambia to the east, Namibia to the Kwanza and Kubango. Angola's among BRI countries, at 31.7%. south, and the Atlantic Ocean to the hydropower, agriculture, animal west. The coastline is 1,650 km long. husbandry and fishery resources are Its labor supply and cost score is Most northern areas has a savanna abundant. low. In 2017, the national labor force climate, the south has a subtropical was about 12.74 million. In recent climate, and high-altitude areas have a (3) Macroeconomic attractiveness years, the unemployment rate has temperate climate. The overall investment attractiveness remained at about 8.5%. About 10.2% of Angola is low. of individuals have received higher The total population of Angola is educations. 2,978,000 (2017). The main ethnic Its scale of economy score is low. groups are Ovimbundo (about 38% Angola's GDP is approximately Its tax burden score is also low. of the population), Mdundo (25%), USD122.12 billion, with per capita GDP According to World Bank statistics, Bakongo (14%) and Ronda. The official of approximately USD 4,100. GDP is total tax on commercial profits in the language is Portuguese and there are expected to grow at 1.4%. country is 49.1%, implying a quite high 42 national languages. About 49% of corporate tax burden. residents follow Roman Catholicism, Its investment score is also low. There 13% follow Protestantism, and most of was almost no FDI in 2017. Investment Angola's money supply score is low, the rest follow local religions. in fixed assets is mid-high at about with broad money supply accounting USD21.49 billion . for about 32.2% of GDP in 2017, Angola has a rich variety of energy basically the same level as the previous sources such as oil, natural gas and Angola's consumption and market year. The interest rate difference minerals. The main minerals are demand score is also low. Angola's per between loans and deposits is 9.5%. diamonds, iron, phosphate, copper, capita national income is USD3,570, manganese, uranium, lead, tin, zinc, low-mid range among BRI countries. Its

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(4) Risk Indicators (5) Key Industries Agriculture: A decades-long civil Angola's overall investment risk is Among the five key BRI industries, war has severely damaged Angola's high. energy is a key sector with agricultural production system, development potential in Angola. with nearly half of its food supply Financial risk is high. Banking risk is Agriculture and IT also have good dependent on imports or aid. In quite high among African countries. potential. 2017, Angola's total grain output Foreign debt accounted for 38.1% of was 2.508 million tons, a long way GDP. Foreign exchange reserves are Energy: Angola is rich in oil, gas and from self-sufficiency. However, sufficient, totaling USD24.1 billion. electricity resources. As of 2017, Angola's land is fertile with dense Angola has proven oil reserves of 6 river coverage. Natural conditions for Political risk is high. Angola scores billion barrels and crude oil production agriculture are excellent. At present, low in political stability and legal of 1.63 million barrels a day. It is the its agricultural land area is about 5,919 environment. 2nd largest oil producer in Africa and km2. Cultivated land area is about the 3rd largest oil importer to China. 4.9 million hectares. The agricultural Sovereign risk is high. Moody's assigns In 2017, oil accounted for 95% of population accounts for about 65% of Angola a sovereign credit rating of total export trade. Angola's natural total population. B1. Angola's public debt to GDP ratio gas reserves amount to 7 trillion is 66%, quite high. Money spent on cubic meters. Moreover, Angola has IT: With the rapid growth of election campaigns has led to an 140 billion cubic meters of water Angola's economy and increasing increase in its fiscal deficit. resources. Hydropower accounts communications demand, there are for 75% of the country's energy currently two mobile operators and Angola's business environment is generation. Total installed capacity is three fixed network operators in highly risky. Angola has low scores expected to exceed 6.3GW in 2018 Angola. China's ZTE and Huawei have in difficulty of foreign entry and and the national electrification rate entered Angola telecommunications contract enforcement. The average should reach 43%. equipment market. time required to enforce a contract exceeds 1,296 days. The cost of establishing an enterprise is low, equivalent to about 13.9% of per capita gross national income.

Foreign exchange risk is high. Angola's local currency (the kwanza) exchange fluctuated by 0.52% versus USD in 2017, must more than the currencies of most BRI countries. Foreign exchange freedom is not high, with a Chinn-Ito score of zero.

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7) Morocco (1) Investment Advice Overall, investing in Morocco is not that attractive. Although its scores for money supply and scale of economy are quite good, Morocco's macroeconomic attractiveness is low among BRI countries. Overall investment risk is moderate. Financial risk, foreign exchange risk and political risk are quite high. Investors should focus on transportation, manufacturing and agriculture.

Figure 94: Morocco Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Company Profile has been committed to expanding However, its consumption and Morocco is in Northwestern Africa domestic demand, strengthening market demand rating is quite low. and has a land area of 459,000 km2 infrastructure construction, supporting The Gini coefficient is 0.4, indicating (excluding 266,000 km2 of the Western traditional industries such as reasonable wealth distribution. Final Sahara). The country is bordered by textiles and tourism, and developing household consumption expenditure Algeria to the east and southeast, the emerging industries such as IT and was approximately UD63.63 billion in Atlantic to the west, and Spain across renewable energy. Morocco has 2017. Imports and exports accounted the Straits of Gibraltar to the north. It established free trade zone with the for 83.7% of GDP, within which the is the gateway from the Mediterranean EU in 2010 and launched its Industrial main exports were phosphates and Sea to the Atlantic Ocean. The Acceleration Plan 2014-2020 to drive automobiles (accounting for 42.5% of coastline is more than 1,700 km long. the development of automotives, the total) and the main imports were aerospace, pharmaceuticals, textiles, energy, machinery, equipment and The total population is 35.74 million information and communication. consumer goods. (2017), of which about 80% are Arabs and about 20% are Berbers. The (3) Macroeconomic attractiveness In recent years, bilateral trade between national language is Arabic and the In general, Morocco's investment China and Morocco has continued to lingua franca is French. Residents attractiveness is low. grow. In 2018, bilateral trade volume generally follow Islam. reached USD4.39 billion, a YoY Its scale of economy's score is low. increase of 14.7%. Prices remained Phosphate exports, tourism and Morocco's GDP is about USD109.71 stable in 2017, with inflation of about remittances are the main pillars billion, or USD3,007.2 per capita. GDP 0.7%. Although inflation has not yet of the Moroccan economy. The is expected to grow at 2.5%. reached worrying levels, increases country is rich in fishery resources have been growing. (1st in Africa). It has decent industrial Morocco's investment indicator development momentum, especially score is high. In 2017, FDI in Morocco in the automobile industry, which has was about USD2.68 billion. Fixed grown rapidly and achieved scale. asset investment was approximately In recent years, the government USD32.89 billion.

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Its labor supply and cost score is low. Foreign exchange risk is mid-high. Manufacturing: Agricultural product The national labor force in 2017 was Exchange rate fluctuations between processing is an important traditional about 12.88 million. Unemployment the domestic currency, the Moroccan industry in Morocco and has has remained at about 9.3%. The dirham, and USD are not large. developed rapidly in the past decade. quality of the workforce is generally Morocco has foreign exchange Mainly involving the production of good. The proportion of nationals controls, managed by the Foreign agricultural products and seafood, receiving higher educations is about Exchange Office. Foreign exchange output fluctuates with the agricultural 35.4%. freedom is limited, with a Chinn-Ito harvest. There are currently about score of 0.17. Local residents and 2,000 enterprises in the country with Morocco's tax burden score is low. overseas nationals are not allowed an output value of about MAD80 Based on World Bank data, total tax to open personal foreign exchange billion, accounting for about a third of on commercial profits is 49.8%, quite a accounts, nor can they hold any the total industrial output and 25% of tough corporate tax burden. foreign currencies. The proceeds exports. of exports and inbound currencies Money supply scores higly. Broad must be sold to Bank Al-Maghrib, Textile processing is also a traditional money supply is sufficient at 119.3% the central bank. Individuals can pillar industry. There are about 1,900 of GDP and growth of 5.5%. The retain some of their foreign exchange textile enterprises in the country, difference between loan and deposit proceeds. Foreign individuals and providing 175,000 jobs, making textiles interest rates is small at about 2.5%. corporations can open foreign the largest employer in Morocco. currency accounts or convertible (4) Risk Indicators dirham accounts. Foreign currency Automotives is a key development Overall, Morocco has moderate account holdings are automatically industry for the Moroccan investment risk. converted into dirhams. When foreign government. In recent years, it has exchange is withdrawn, foreign developed rapidly by attracting Financial risk is low. Moroccan bank's individuals or companies need to foreign investment. In 2017, Morocco risk assessment is mid-low. Foreign purchase foreign currencies from produced 377,000 cars, ranking 2nd debt accounts for 47.2% of GDP, and Moroccan banks. in Africa (after South Africa). Annual total foreign exchange reserves are export volume of automobiles was sufficient at USD23.63 billion. (5) Key Industries MAD5.86 billion (about USD729 Political risk is high. The overall Among the key BRI industries, million), accounting for 24% of total political situation is stable. The legal Moroccan transportation, exports. Automotives has been environment is at a low-mid level. The manufacturing and agriculture are the largest export industry for investment environment is generally developing quite well. four consecutive years. There are friendly. more than 150 automotive-related Transportation infrastructure: companies in Morocco, with about Sovereign risk is moderate. Moody's The Moroccan government focuses 100,000 employees. According to rates Morocco's sovereign credit at on constructing infrastructure such Morocco's Industrial Acceleration Ba1. Public-debt-to-GDP is 62.4%. The as highways, railways, airports and Plan 2014-2020, automobile industry government is in fiscal deficit. ports. Morocco has about 1,770 km output will reach 800,000 units by in highways. Cities with a population 2020 with an export revenue target of Business environment risk is quite of more than 400,000 have access to MAD100 billion. low. Difficulty of entry for foreign expressways. Africa's first high-speed businesses, contract enforment railway (Tangier-Kenitra), is expected to Agriculture: Agriculture plays and business establishment costs open at the end of 2018. an important role in the national are high-mid level. The government economy. The production of three is quite efficient. The average time In 2017, the passenger traffic of major food crops (cereal, hard wheat required to enforce a contract Moroccan airports was 20,358,000, and barley) in 2016/17 totaled 96 exceeds 510 days, and the cost an increase of 11.6%. Airport cargo million tons. In 2017, the agricultural of establishing a new business is volume was 8.14 million tons, a YoY sector grew 15.1%, driving GDP up equivalent to about 3.7% of per capita increase of 19%. by 1.6 %. It contributes more than gross national income. tourism and industry, ranking 1st Morocco plans to increase annual among all industries and employing cargo traffic through its ports from 140 40% of the workforce. million to 340 million tons by 2030, and develop five central ports.

190 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section IV: BRI countries Investment Index – Country Analysis Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Section IV: BRI countries Investment Index – Country Analysis

8) Algeria (1) Investment Advice Overall, Algeria's investment attractiveness is low. Performance in scale of economy and labor supply and cost are quite poor, and its tax burden is particularly heavy. Overall investment risk is high, particularly in financial, foreign exchange and political risk. Investors should focus on the energy industry.

Figure 95: Algeria Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile (3) Macroeconomic Indicators Algeria's labor supply and cost score Algeria is in Northwest of Africa with Algeria’s overall investment score is is also low. In 2017, the national labor a land area of approximately 2.38 low. force was about 12.26 million. In million km2. Algeria borders the recent years, unemployment rate has Mediterranean to the north, Tunisia Its scale of economy score is low. remained at about 10%. About 46.6% and Libya to the east, Niger, Mali and Algeria's GDP was about USD167.56 of workers have higher educations. Mauritania to the south, and Morocco billion in 2017. In recent years, GDP and the Western Sahara to the west. growth has been about 1.6%, with Its tax score is also low. According Its coastline is about 1,200 kilometers per capita GDP of about USD 4,055. to World Bank statistics, total tax on long. The northern coastal area has a In 2017, oil and gas production commercial profits is as high as 66%, Mediterranean climate, central Algeria declined, and recoveries in agriculture the highest among African countries. has a temperate climate, and the and industry stalled. GDP growth is south has a tropical desert climate. expected to remain about 1.6%. Algeria's money supply score is low. M2 accounts for about 80.5% of GDP, Algeria has a total population of about Algeria’s investment environment with growth of 8.4%. The interest rate 41.32 million, mostly Arabs, with score is high. In 2017, FDI was about difference between domestic deposits Berbers representing 20%. Ethnic USD1.2 billion. Fixed asset investment and loans is quite high at 6.3%. minorities include the Mzabu and the was approximately USD73.64 billion. Tuareg. The official language is Arabic and the common language is French. Its consumption and market demand The country’s state religion is Islam. score is low. The income of Algerian residents averages USD4,055. In 2017, final household consumption expenditure was about USD72.42 billion, and imports and exports accounted for a relatively low proportion of GDP at about 56.1%. Inflation in Algeria is as high as 5.6%.

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(4) Risk Indicators Foreign exchange risk is high. The Overall, Algeria’s investment risk is exchange rate between the Algerian high. dinar and USD fluctuates widely. Algeria practices exchange controls Financial risk is low. The bank risk and only the current account is index is high at 0.59. However, foreign partially convertible. The central debt is only 3.3% of GDP and foreign bank controls all foreign exchange exchange reserves are sufficient at resources. Since the abolition of a USD97.7 billion. foreign trade monopoly system in the 1990s, Algeria’s foreign exchange Political risk is high. Algeria’s political controls have been substantially stability and legal environment scores relaxed, with more liberal capital are both level. In 2017, social clashes inflows and outflows. However, foreign and ethnic conflicts intensified, exchange is not yet freely convertible deteriorating the investment and the Chinn-Ito score is just 0.17. environment. In January, protests broke out in northern Bejaia, Bouira, (5) Key Industries and Boumerdes; in December, after Algeria's economic structure is members of parliament rejected a relatively simple. Its income depends budgetary legislative amendment mainly on the petroleum industry. on teaching the Berber language, Agriculture, industry and services protests broke out in areas where are all underdeveloped. The country Berbers live, including Tizi Ouzou and cannot achieve self-sufficiency, with Bejaia in northern Algeria. food and daily necessities reliant on imports for many years. Sovereign risk is low. Moody's rates Algeria's sovereign credit at Aa2. In the key BRI areas, Algeria's energy Public debt accounts for 17.7% of GDP, industry has developed relatively with little debt repayment pressure. well. The oil and gas industry is However, the Algerian government the mainstay of Algeria's national has a large fiscal deficit, second only economy, with output accounting for to Kenya and Egypt among African about 30% of GDP for several years. countries. The government has taken Oil and gas tax income accounts for measures including printing large about 60% of the country's fiscal amounts of money and tightening revenue, and oil and gas exports policies to reduce the deficit, which account for more than 97% of the could pose risks to the economy and total. people's livelihoods. Energy: Algeria is rich in oil and Business environment risk is high. natural gas resources. It is the largest Algeria scores low in ease of foreign natural gas producer in Africa, the investors entering the local market 2nd largest supplier of natural gas and government efficiency. Its to Europe, and one of the top three contract fulfillment and business oil producers in Africa. Algeria is establishment cost scores are mid- estimated to have the 3rd largest shale low. The average time required to gas resources in the world. Algeria's enforce a contract exceeds 630 days, economy is heavily dependent on the and the cost of establishing a new oil and gas sector, which accounts for business is equivalent to about 11.8% about 25% of Algeria's GDP, more than of per capita gross national income. 95% of its export earnings, and 60% of its budget revenue, according to the IMF.

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9) Ghana (1) Investment Advice Overall, Ghana's investment attractiveness is quite low. Macroeconomic attractiveness is mid-range among BRI countries, with scale of economy, investment environment and tax burden performing well. Overall investment risk is high, particularly financial and foreign exchange risk. Investors should focus on the energy and agriculture industries.

Figure 96: Ghana Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile (3) Macroeconomic Indicators Ghana scores quite low in labor supply Ghana is in Western Africa on the Ghana’s overall investment and cost. In 2017, the national labor northern shore of the Gulf of Guinea, attractiveness is moderate. force was about 14.1 million. In recent bordering Côte d'Ivoire to the west, years, unemployment has remained at Burkina Faso to the north, Togo to Its scale of economy score is high. about 2.4%. The proportion of people the east and the Atlantic Ocean to Ghana’s GDP is about USD59 billion, with higher educations is about 17.4%. the south, with a land area of 238,000 with growth stabilizing at a high level km2 and a coastline of about 562 km. of 8.1% in recent years. It is the fastest Its tax score is high. According to The coastal plains and Ashanti Plateau growing economy in Africa. Per capita World Bank statistics, total tax on in the southwest have a tropical GDP is about USD2,046. With positive commercial profits is 32.4%, quite low rainforest climate. The Volta Valley economic prospects, GDP growth is among BRI countries. and northern plateau have a savanna expected to reach 7%. climate. The rainy season is from May Ghana's money supply score is low. to October and the dry season is from Its investment environment score M2 accounts for 26.1% of GDP, with January to April. is above average. FDI in 2017 was growth of about 16.1%. The interest approximately USD3.25 billion. Fixed rate difference between domestic Ghana has a total population of asset investment was about USD12.6 deposits and loans is 5.5%. approximately 28.83 million (2017). billion . There are four major ethic groups: Ashanti-Akan (52.4%), Mole-Dagbon Ghana's consumption and market (15.8%), Ewe (11.9%) and Ga-Dangme demand score is low. Its Gini (7.8%). The official language is English. coefficient of 0.5 indicates a large About 69% of the residents follow income gap. In 2017, final household Christianity, 15.6% follow Islam, 8.5% consumption expenditure Ghana was follow traditional religions and the about USD41.42 billion, and imports remaining 7% follow other religions or and exports accounted for 73.7% of no religion. GDP. Inflation was as high as 12.4%.

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(4) Risk Indicators large. Ghana has a Chinn-Ito score and millet. Annual output is about Overall, Ghana’s investment risk is of zero. Foreign exchange controls 6 million tons, basically meeting high. are strict. Foreign companies that domestic needs. Cocoa, which is register locally and obtain investment mainly found in southern parts Financial risk is high. According to the approvals and legal residency can of Ghana, is a traditional export World Bank, banks in Ghana have open local bank accounts in Ghana. commodity with the highest output quite high risk. Foreign debt accounts If a foreign enterprise's funds are in the world, accounting for about for 35% of GDP and foreign exchange remitted by a foreign bank, they 13% of global production. Other cash reserves are at a relatively low level, can open an offshore account crops include palm oil, rubber, cotton, about USD6.76 billion. with a domestic commercial bank, peanuts, sugar cane and tobacco. but enterprises can only open Political risk is low. The political ordinary foreign currency accounts. Energy: With Ghana's economic environment in Ghana is quite stable, Their foreign exchange can only development, the country's demand although its legal environment score be transferred within Ghana and for electricity is set to increase at is mid-low. cannot be transferred freely abroad. about 10% per year. As of 2017, Enterprises in bonded areas can open Ghana’s electricity coverage (the Sovereign risk is high. Moody's gives foreign exchange accounts at various proportion of electricity users in the Ghana's sovereign credit a B3 rating. banks in Ghana, independent of total population) was 82.3%, with Public debt accounts for as much as foreign exchange controls. rural coverage of 50% and urban 66.1% of GDP. The government is in coverage of 91%, second only to fiscal deficit. (5) Key Industries South Africa among African countries. The Ghanaian economy is dominated The Ghanaian government plans to Business environment risk is high. by mining and agriculture. Oil, achieve 100% coverage by 2020. Ghana's scores in ease of foreign gold and cocoa are the top three investors entering the local market exports. In the key BRI industries, the Oil has gradually become a new pillar and cost of business establishment agriculture and energy in Ghana have of the Ghanaian economy in recent are low. The government efficiency developed relatively well. years. In 2017, Ghana produced 18.1 score is mid-low. The average time million barrels of crude oil. Oil exports required to enforce a contract is Agriculture: Agriculture is the accounted for 22.1% of total exports approximately 710 days, and the foundation of the Ghanaian economy, and natural resource usage was at cost of establishing new business accounting for 56.2% of employment. 16.7%. is equivalent to 15.5% of per capita The agricultural land area of Ghana gross national income. is 1,570 km2 and its cultivated area is 4.7 million hectares. Food crops are Foreign exchange risk is high. mainly in the north, with an area of Exchange rate fluctuations between about 2 million hectares. The main the Ghanaian cedi and USD are quite crops are corn, potato, sorghum, rice

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10) Sudan (1) Investment Advice Overall, Sudan's investment attractiveness is low. In macroeconomic indicators, which are low among BRI countries, only investment performs well. Overall investment risk is high, within which business environment, financial and foreign exchange risks are prominent and political risk is particularly high. The Sudanese government is vigorously attracting foreign investors to invest in agriculture, mining and processing. Investors should focus on energy and agriculture.

Figure 97: Sudan Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile The total population of Sudan is Sudan scores low in consumption Sudan is in Northeastern Africa on about 40.53 million (2017). The official and market demand. In 2017, final the west bank of the Red Sea, with a language is Arabic and the common household consumption expenditure land area of 1.88 million km2. Sudan language is English. Most residents was about USD86.14 billion, and borders Egypt to the north, Libya, follow Sunni Islam. imports and exports accounted for Chad and Central Africa to the west, 21.5% of GDP. Due to loose monetary South Sudan to the south, Ethiopia (3) Macroeconomic Indicators and fiscal policies, rising fuel and and Eritrea to the east, and the Red Sudan's overall investment electricity prices, and currency Sea to the northeast. Its coastline attractiveness is low. depreciation, inflation has risen is about 720 kilometers long. The sharply in Sudan. In 2017, inflation was climate differences within Sudan are Its scale of economy score is quite close to 17%. The IMF has urged the substantial. From north to south, it low. Sudan’s GDP is about USD117.49 Sudanese government to re-examine has a tropical desert climate which billion, or USD2,899 per capita. GDP its monetary policy to curb rising transitions to a tropical rainforest is expected to grow at 3.5%. Due to pressure on inflation. climate. The temperature in the a lack of competitive industries, only hottest season can reach 50°C, and small reserves of oil, gas and gold, and Its labor supply and cost score is the annual average temperature an intensifying inflation and exchange also low. In 2017, the Sudanese is 21°C. Sudan has annual average rate crisis, the economy faces grave working population was about 11.47 rainfall of less than 100 mm, Sudan challenges. million. Unemployment has increased has suffered from drought for many consistently in recent years and is years. Sudan is located in an ecological Its investment environment score now at 12.7%. The average quality transition zone and is highly vulnerable is about mid-range. In 2017, FDI of the labor force is low, with only to climate disasters such as droughts, was USD1.07 billion and fixed asset about 17.9% of people having higher floods and desertification. investment was about USD 28.18 educations. billion.

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Its tax score is also low. Based on average of about 810 days. In addition, Agriculture is the mainstay of the World Bank statistics, total tax on the administrative efficiency of Sudanese economy. The agricultural commercial profits is 45.4%, quite Sudan's government is low among BRI population accounts for 80% of the high. countries. total. The main crops are sorghum, millet, corn and wheat. Cash crops Its money supply score is high. M2 Foreign exchange risk is high. The play an important role in agricultural accounts for 24.7% of GDP and has Sudanese pound to USD exchange production, accounting for 66% of increased at 68.8% in recent years. rate fluctuates sharply. In the first agricultural exports, mainly cotton, The interest rate difference between quarter of 2018, it fell rapidly to peanuts, sesame and gum arabic. The domestic deposits and loans is 3%. USD1:SDG38. To reduce inflation production of long-staple cotton ranks and stabilize the exchange rate, the 2nd in the world after Egypt. Peanut (4) Risk Indicators Sudanese government has adopted production ranks 1st among Arab and Overall, Sudan has high investment measures to restrict banks from African countries and after only the risk. withdrawing cash, crack down on United States, India and Argentina black market transactions and restrict wordwide. Financial risk is high. According to the imports. In addition, the Sudanese World Bank, Sudanese banking risk is government has implemented a new Sudan's sesame production ranks 1st the highest among African countries. exchange rate policy since October among Arab and African countries, Foreign debt GDP accounts for 14.4% 2018, according to which the official with most of it exported. Sudan and foreign exchange reserves total exchange was to be significantly accounts for half of the world's sesame about USD170 million. reduced from USD1:SDG28 to export volume. It has acacia planting USD1:SDG 47.5. Sudan’s freedom of area of 5.04 million hectares, with Political risk is high. Sudan scores foreign exchange is quite low, with a average annual output of about 60,000 low in political stability. The overall Chinn-Ito score of 0.3. tons accounting for 60-80% of global political situation in Sudan is quite output. stable and the external environment (5) Key Industries has improved. However, the outsting In the key BRI industries, energy and of former President Omar al-Bashir agriculture are developing well. has destabilized the country’s political situation, with ongoing protests. Sudan has the geological conditions According to the World Bank, the legal for the formation of large oil fields environment in Sudan is worse than in and has the potential to enrich other African countries. its oil resources. With the gradual improvement of oil exploration Sovereign risk is high. Agencies have technology and the continuous not yet assigned a sovereign credit expansion of exploration, its reserves, rating to Sudan. Public debt accounts production and export volume for 47.9% of GDP. The government is are rising, and its status among oil in fiscal deficit. exporting countries is gradually increasing. In recent years, with Business environment risk is high. massive export of oil and high oil Sudan ranks at the forefront of prices, Sudan has maintained rapid African countries in ease of foreign growth in its economy, which has investors entering local market. The become one of the fastest growing in cost of establishing an enterprise is Africa. Sudan is striving to change its quite high, equivalent to 20.9% of per economic structure, which is heavily capita gross national income. Contract dependent on oil exports, to develop enforcement is difficult, taking an agriculture as a long-term strategy.

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11) Tanzania (1) Investment Advice Overall, Tanzania's investment attractiveness is quite low. Macroeconomic indicators are low among BRI countries, although scale of economy and money supply perform quite well. Overall investment risk is high, notably in financial, political, business environment and foreign exchange risk. Investors should focus on agriculture, energy and manufacturing.

Figure 98: Tanzania Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile The Tanzanian economy is dominated Tanzania has a low consumption Tanzania is in Eastern Africa, south by agriculture and animal husbandry, and market demand score. In 2018, of the equator. It borders Kenya with a flat structure, weak foundations Tanzania’s per capita national income and Uganda to the north, Zambia, and low level of development. It is one was about USD910. Final household Malawi and Mozambique to the of the 48 least developed countries consumption expenditure was about south, Rwanda, Burundi and Congo in the world, according to the United USD32.63 billion. Its Gini coefficient (Democratic Republic) to the west Nations. of 0.55 indicates a large income gap and the Indian Ocean to the east. Its among residents. Imports and exports mainland coastline is 840 kilometers (3) Macroeconomic Indicators account for 32.6% of GDP, and the long. Eastern coastal areas and inland Tanzania’s overall investment scale of imports and exports is small. lowlands have savannah climates, attractiveness is quite low. Inflation is 5.3%. and its western inland plateaus have a tropical mountain climate. Tanzania Its scale of economy score is high. In Its labor supply and cost score is also has a land area of 945,000 km2, within recent years, Tanzania's economy has low. Tanzania has an ample labor which Zanzibar takes up 2,657 km2. developed rapidly, with a historical force. In 2018, the national labor GDP growth rate of 7.1%. GDP is force was about 27.24 million, but it The total population of Tanzania is expected to grow at 6.6% in the next is generally not well-educated and is 53.95 million (2017). Tanzania has 126 three years. In 2017, Tanzania’s GDP low-skilled. The proportion of people ethnic groups. The national language reached USD52.09 billion or USD936.3 with a higher education is only 3.7%. is Swahili and the official languages per capita. The local unemployment rate is about are Swahili and English. About 61.4% 2.3%. of residents follow Catholicism and Its investment environment score is Christianity, 35.2% follow Islam, and low. In 2018, FDI was about USD1.18 Its tax burden score is also low. the rest follow local religions. Almost billion and fixed asset investment was According to World Bank statistics, all Zanzibar residents follow Islam. about USD19.13 billion. total tax on commercial profits is 44%.

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Its money supply score is high. M2 (5) Key Industries accounts for 34.5% of GDP, with a Among the key BRI industries, growth rate of about 55.8%, quite high. Tanzania’s agriculture is developing The interest rate difference between relatively well better. Energy and domestic deposits and loans is 6.4%. manufacturing also have some development potential. (4) Risk Indicators Overall, Tanzania’s investment risk is Agriculture: Tanzania's agriculture quite high. is dominated by planting, forestry, fisheries and animal husbandry. Financial risk is quite high. The Agriculture is the main economic pillar, Tanzanian Banking Industry Risk Index accounting for nearly 30% of GDP and is moderate at 0.5, and the ratio of absorbing two-thirds of the national credit provided by domestic financial workforce. institutions is 20.2% of GDP. The ratio of external debt to GDP is 48.4%, but National agricultural land is 3,965 km2 foreign exchange reserves are small, with a cultivated area of 13.5 million totaling USD4.07 billion. hectares. The main crops are corn, wheat, and rice. The main cash crops Political risk is high. Tanzania's are coffee, cotton and sisal . In recent scores for political stability and legal years, the Tanzanian government environment are mid-low. proposed an Agriculture First strategy and the Southern Agricultural Growth Sovereign risk is quite high. Moody's Corridor to vigorously promote latest sovereign credit rating for agricultural production and increase Tanzania is B. Public debt accounts for food production. The agricultural 38.3% of GDP and the fiscal deficit is economy is getting more self- 2.7%. sufficient, with surpluses exported to neighboring countries. Business environment risk is high. In ease of foreign businesses entering Energy: Tanzania has very large the local market and business natural gas reserves. According to establishment cost, Tanzania performs official data, Tanzania's proven natural poorly. Its government efficiency and gas reserves are 57 trillion cubic feet, contract performance scores are quite and total reserves are expected to be high. The average time required to at least 200 trillion cubic feet. enforce a contract is 515 days and the cost of establishing a new business Manufacturing: Tanzania hopes to is equivalent to 58.7% of per capita develop into a manufacturing base gross national income. The Tanzanian for East Africa by taking advantage government has launched an online of its geography. The minimum wage company registration platform to in Tanzania is only USD0.20 an hour, improve efficiency and convenience for which is a substantial labor cost entrepreneurship. advantage. In recent years, with the discovery of a large amount of natural Foreign exchange risk is high. The local gas resources in Tanzania, foreign currency in Tanzania is the shilling investors have been optimistic about (TZS) and it is freely convertible. The the market and started investing TZH;USD exchange rate has been in Tanzania. In addition, most of its stable, with volatility of only 0.02% in manufactured products rely mainly 2017/18. However, freedom of foreign on imports, so there is considerable exchange is not high with a Chinn-Ito potential for local industrial products score of only 0.2. to replace imports.

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12) Congo (Democratic Republic) (1) Investment Advice Overall, Congo (Democratic Republic) investment attractiveness is low.

Macroeconomic indicators are low among BRI countries. Overall investment risk is high, particularly financial, business environment, political and foreign exchange risk. According to the Congo's plan for the next five years, energy, mining development, infrastructure and processing will be vigorously developed. Investors should focus on agriculture and energy.

Figure 99: Congo (Democratic Republic) Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile official language, and there are Gini coefficient is 48.9. Imports and Congo is in Central Africa, bordering 250 local languages. About 50% of exports accounted for 75% of GDP, Uganda, Rwanda, Burundi and residents follow Roman Catholicism, and inflation was 2.9%. Tanzania to the east, Zambia and 20% follow Protestantism, 10% follow Angola to the south, South Sudan and Islam, 10% follow Kimbanguism, and Its labor supply and cost score is the Central African Republic to the the rest follow various local religions. also low. Congo has an ample labor north, and Congo (Brazza) to the west. force, at 32.75 million. However, the There is a narrow corridor in the west (3) Macroeconomic Indicators quality is quality low, with on 7% of that leads to the Atlantic Ocean, with The overall investment attractiveness people having a higher education. The a coastline of 37 kilometers. Northern of Congo (Democratic Republic) is low. unemployment rate is steady at about areas have a tropical rainforest climate 3.7%. and the south has a savanna climate. Its scale of economy score is low. The annual average temperature is In 2017, GDP was USD37.64 billion, Its tax burden score is low. The 27 °C, and annual precipitation is or USD4,627.8 perperson, with a tax burden in Congo (Democratic 1,500mm to 2,000 mm. Congo covers historical GDP growth rate of 3.7% and Republic) is quite heavy. According an area of 2.345 million km2, making it an expected growth of 4%. to World Bank statistics, total tax on the 2nd largest country in Africa after commercial profits is 54.6%. Algeria. Its investment environment score is low. In 2017, FDI was approximately Its money supply score is low. M2 is The total population of Congo is USD1.05 billion and fixed asset 12.8% of GDP, with growth of about 86.859 million (2016). There are 254 investment was about USD8.96 billion. 34.3%. The interest rate difference ethnic groups in the country. Bantu, between domestic deposits and loans Central Sudanic/Ubangian and Nilotic Its consumption and market demand is 16.4%. are the three major ethnicities. Bantu score is low. In 2017, per capita account for 84% of the country's national income was USD460, with population, mainly in south, central household consumption expenditure and eastern regions. French is the of about USD29.18 billion USD. Its

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(4) Risk Indicators (5) Key Industries Overall, investment risk is high. In the key BRI industries, energy and agriculture are developing well. Financial risk is high. Its banking risk index is as high as 0.7. Debt provided Energy: Congo is rich in natural by domestic financial institutions resources. It has proven oil reserves of represents 8.4% of GDP. External 35.057 million barrels offshore and 20 debt is about 11.7%. Foreign exchange million barrels on land. Its natural gas reserves are small at about USD1.22 reserves are 20 billion cubic meters billion. offshore and 10 billion cubic meters onshore. In addition, the deep waters Political risk is high. Congo of Lake Kivu at the junction of Congo (Democratic Republic) has low political and Rwanda are rich in natural gas stability and legal environment scores. resources. Congo's water resources Congo has become known for years of are particularly rich, with estimated war and increased poverty. Although hydropower reserves that can be the law prohibits local residents from developed to generate 110 million holding guns without authorization, MW, accounting for 37% of African and there are a large number of guns in 6% of world hydropower resources. Congo, and armed robberies occur. Agriculture: Congo was once a major Sovereign risk is high. Moody's agricultural country in Africa. It has rates Congo (Democratic Republic) unique natural conditions and is highly sovereign credit at Caa2. Public debt suitable for agricultural production. accounts for 15.8% of GDP. The fiscal deficit is about 0.3%. Congo has potential arable land of 120 million hectares, ranking 2nd in the Business environment risk is high, world after Brazil. Some modern farms mainly due to low scores in ease use advanced production methods of foreign companies entering the to raise livestock and grow food on a local market, contract performance large scale. A newly developed agro- and cost of business establishment. industrial industrial park uses modern However, government efficiency is production technology and invests in high. In recent years, the Congolese various types of agricultural product government has adopted a series of processing equipment to gradually measures to simplify the property develop agricultural mechanization. registration process and implement a single window for international trade In 2017, agriculture accounted to optimize its business environment. for 18.6% of GDP. According to The average time to enforce a the Ministry of Agriculture of the contract is about 184 days, and the Democratic Republic of Congo, in cost of establishing a new businesses recent years national grain output has is equivalent to 26.7% of GDP. reached about 3,600 tons per year. The government has encouraged Foreign exchange risk is high. The private capital to participate in Congo (Democratic Republic) currency agricultural development, and is the Congolese franc. In recent formulated an outline for agricultural years, the franc has depreciated and investment development from 2013- fluctuated widely against USD. In 2020, including plans to build 22 addition, Congo (Democratic Republic) agro-industrial parks and development has a low degree of freedom in foreign projects with a total area of about exchange, with a Chinn-Ito score of 1 million hectares in key national zero. agricultural areas.

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13) Tunisia economy and capital supply, but high highlighting its desire to deepen (1) Investment Advice overall investment risk, including economic and trade cooperation with Overall, Tunisia's investment high financial, political, sovereign and China. Bilateral development prospects attractiveness is low. foreign exchange risks and mid-range are promising. Investors should focus business environment risk. In 2017, on manufacturing, agriculture and Tunisia's macroeconomic Tunisia adopted a new investment law transportation infrastructure. attractiveness is low among BRI and issued and economic and social countries, with decent scale of development plan for 2016-2020,

Figure 100: Tunisia Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile (3) Macroeconomic Indicators Its labor supply and cost score is quite Tunisia is at the north tip of Africa. It is Tunisia's overall investment low. Tunisia has a working population bordered by Algeria to the west, Libya attractiveness is low. of about 4.14 million. It attaches great to the southeast, the Mediterranean importance to vocational training and Sea to the north and east, and Italy Its scale of economy score is low. the workfoce has a generally high level across the strait of Tunis. The coastline Tunisia's GDP is USD39.95 billion. GDP of skills. About 32.1% of the population is 1,300 kilometers long. It covers an per capita is about USD3,464.4. GDP have tertiary educations. Tunisia has area of 162,155 km2. Northern Tunisia growth rate is estimated at 2.4%. a high unemployment rate of about has a Mediterranean climate, which is 15.3%. hot and dry in summer, mild and rainy Its investment environment score is in winter. The south has a tropical low. FDI in 2018 was about USD810 Its tax score is low. Business in Tunisia desert climate. million. Fixed asset investment was is heavily taxed, with a total rate of about USD7.63 billion. 60.2% on profits, according to World Tunisia has a total population of about Bank statistics. 11.445 million (as of July 2017), of Tunisia's consumption and market which more than 90% are Arabs and demand score is also low. In 2018, Its money supply score is quite high. the rest are Berbers. Arabic is the Tunisia's national income per capita In 2017, M2 accounted for 4.8% of national language and French is the was USD3,490, and final household GDP and maintained a steady growth common language. The state religion consumption expenditure was rate of about 12%. The interest rate is Islam, mainly Sunni. A few people USD28.68 billion. Its Gini coefficient difference between domestic deposits follow Catholicism or Judaism. was 39.7. Imports and exports and loans is 1.7%. accounted for 99.5% of GDP. Inflation was 5.3%.

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(4) Risk Indicators Foreign exchange risk is high. The Agriculture: Tunisia has 100,730 km2 of Overall, investment in Tunisian is quite local currency is the dinar, and it agricultural land, of which 2.9 million risky. is highly volatile versus USD, with hectares are arable. Agricultural volatility of about 10% in recent workers account for 22% of the Financial risk is quite high. Its political years. Freedom of foreign exchange is employed population. Tunisia is the stability and legal environment limited, with a Chinn-Ito score of 0.17. world's largest exporter of olive oil, scores are quite low. Tunisia is under Africa's second largest exporter of increasing threat of terrorist attacks, (5) Key Industries organic agricultural products and influenced by extremist groups from Among the BRI key industries, the world's 10th largest producer of Syria and Libya. Tunisia performs relatively well in tomatoes. manufacturing, agriculture and Sovereign risk is quite high. Moody's transportation infrastructure. Transportation infrastructure: Tunisia gives Tunisia a B2 rating. Tunisia has has a developed road network, which high public debt, accounting for 72.2% Manufacturing: Machinery and covers the whole country. There are of GDP. It has a financial deficit of electronics, and textiles, are Tunisia's 20,000 kilometers of asphalt roads and about 4.8%. pillar industries, accounting for about 360 kilometers of expressways. The 20% of GDP. Tunisia's machinery national railway company of Tunisia Business environment risk is and electronics industry is its most (SNCFT) operates Tunisian railway moderate. Tunisia performs well in important sector, with about 1,020 transport. There are 23 railway lines contract fulfillment, cost of setting up enterprises, mainly from the EU. with a total length of 2,011 kilometers. a business and government efficiency. It employs about 136,000 people. In air transport, Tunisia has nine However, the difficulty for foreigners Machinery and electronics industry international airports, which carry to enter the local market is mid-low. creates 25% of Tunisia's industrial jobs about 4.2 million passengers per year. every year. It accounts for about 37.5% The average time to enforce a contract of Tunisia's total industrial exports, is 565 days and the cost of setting ranking 1st in Tunisian industry. The up a new business is equivalent to main products are wires, cables and 4.3% of the national income per auto parts. capita. The Tunisian government has taken several measures to improve The main products in Tunisia's textile the business environment recently, industry are garments and fabrics. including implementing a one-stop There are 1,789 textile and garment company registration process to make enterprises in the country with more it easier to start a business, increasing than 10 employees, of which 1,503 the transparency of property focus on exports. Textile enterprises registration and protecting the account for 33% of manufacturing interests of small and medium-sized enterprises and employ 175,000 investors. people. Textile imports are the 2nd largest contributor to Tunisian manufacturing exports.

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14) Madagascar (1) Investment Advice Overall, Madagascar's investment attractiveness is low. Its macroeconomic attractiveness is low among BRI countries. It has high ratings in scale of economy, investment environment, consumption and market demand, labor supply and cost, and the tax burden is moderate. Overall investment risk is quite high. The political environment is quite stable, but financial, business environment and foreign exchange risks are all high. Investors should focus on agriculture and energy.

Figure 101: Madagascar Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile is Malagasy and the official languages Gini coefficient was 42.6. Imports and Madagascar is east of the main are French and English. The common exports accounted for 74.5% of GDP. African landmass in the western language is French. In Madagascar, Inflation was 8.3%. Indian Ocean. It is the fourth largest about 52% of the residents follow local island in the world, with a land area of religions, 41% follow Christianity and Its labor supply and cost score is low. approximately 590,000 km2. It is about Protestantism, and 7% follow Islam. Madagascar has a small workforce of 1,500 kilometers from north to south, approximately 1.35 million. The quality about 500 kilometers from east to (3) Macroeconomic Indicators and education level of the workforce west, with a coastline of about 5,000 Overall investment attractiveness is is low, among which 30.4% have not kilometers. Madagascar has unique low. received any education, 44.8% have terrain with a wide range of climate received primary educations, 22.7% differences. The east has a tropical rain Its scale of economy score is have received secondary educations forest climate, which is hot and humid moderate. GDP is USD11.5 billion or and only 2.2% have received higher all year round, the central plateau has USD449.7 per capita . Historical GDP educations. Gross tertiary enrolment is a tropical plateau climate with mild growth is about 4.2%, and growth is only 5.1%. The unemployment rate in weather, the west part has a savanna expected to be 5.4%. Tunisia is low at only 1.8%. climate with less precipitation and the south has a semi-arid climate. Its investment environment score is Its tax score is low. According to World low. In 2018, FDI was about USD460 Bank statistics, total tax on commercial The national population of Madagascar million and fixed asset investment was profits is 38.3%. is 24.89 million (2016), of which 98% approximately USD1.74 billion. are Malagasy, and the rest Indian, Its money supply score is also low. Pakistani and French. Madagascar Its consumption and market demand In 2017, M2 accounted for 28.5% of has a total of 18 tribes, with the score is low. In 2018, Madagascar's GDP, with growth of about 18.2%. Merina accounting for 26% and the per capita national income was The interest rate difference between Betsimisaraka accounting for 14%. USD400. Final household consumption domestic deposits and loans is up to The national language of Madagascar expenditure was about 8.92 billion. Its 45%.

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(4) Risk Indicators (5) Key Industries Overall, investment risk is quite high. Among the key BRI industries, agriculture is developing well and the Financial risk is high. Domestic energy industry has development financial institution credit is 19% of potential. GDP, and foreign debt accounts for about 41% of GDP. Foreign exchange Agriculture: In 2017, the output value reserves are small at only USD830 of agriculture, forestry, fishery and million . animal husbandry in Madagascar accounted for 21.3% of GDP. The main Political risk is quite low, with a quite agricultural products are rice, corn, high political stability score, but a cassava and vanilla. Madagascar's relatively low legal system score. In store of superior agricultural products, 2018, a presidential election year, local including 2,733 tons of vanilla, 20,000 public security risks increased. tons of cloves, 18,000 tons of lychee and 1,536 tons of raffia, has driven Sovereign risk is high. Moody's rates growth of foreign trade. Madagascar at B1. Madagascar’s public debt accounts for 41.9% of GDP. Energy: Madagascar has abundant The fiscal deficit is about 2.3%. hydropower resources with a potential of 7,800 MW, of which only 3% Business environment risk is high. developed. The underdevelopment of According to the World Bank, it is power together with a contradiction relatively difficult for foreign business between supply and demand has to enter the local market. Contract seriously restricted the economic and enforcement is difficult, taking an industrial development of Madagascar. average of 871 days. The cost of Its national development plan includes establishing a business is quite electricity infrastructure projects and high, equivalent to about 33% of allows foreign investors to make local per capita gross national income. To infrastructure. optimize the business environment, the Madagascan government has adopted a series of measures, such as optimizing the property transfer process, strengthening building quality control, and increasing credit transparency through the introduction of new laws.

Foreign exchange risk is high. There was minimal exchange rate fluctuations between Madagascan ariary and USD, with volatility in recent years of about 0.04. The freedom of foreign exchange is not high, according to Chinn-Ito's financial openness index of 0.2%.

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7. Oceania 1) New Zealand (1) Investment Advice Overall, New Zealand's investment attractiveness is high.

New Zealand's macroeconomic attractiveness is high among BRI countries, with scale of economy, consumption and market demand prominent. Overall investment risk is low. Business environment performs well. Investors should focus on agriculture, transportation infrastructure and IT.

Figure 102: New Zealand Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile As of the end of June 2017, New New Zealand is in the South Pacific, Zealand has a total population of 4.79 between the equator and the South million. The main ethnic groups in New Pole, west of the Tasman Sea and Zealand are of European descent and about 1,500 km from Australia's Maori. According to 2013 statistics, east coast. The country consists of the representation of ethnic groups two large islands, the South and the is roughly 68% European, 14% Maori, North, with Stewart Island and some 11% Asian, 7% Pacific Islander and 1% small islands nearby. The Cook Strait other countries. The official languages is between North Island and South of New Zealand are English and Maori. Island. Its land area is about 268,600 Christianity is New Zealand's most km2. New Zealand has a coastline of important religion. 15,000 kilometers and a territorial sea area of about 4 million km2. New New Zealand's dairy industry plays a Zealand has a temperate maritime pivotal role in the national economy. climate, with average temperatures There are more than 12,000 farms of about 25°C in summer and 10°C in in the country with a total area of 11 winter. million hectares.

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(3) Macroeconomic Indicators (4) Risk Indicators (5) Key Industries Its scale of economy score is high. Overall, investment risk is low. In the five key BRI industries, New Zealand is a developed country agriculture and transportation are with a strong economy. New Zealand's Financial risk is low. The New Zealand relatively mature, and IT has some GDP is USD205.85 billion, or about Banking Industry Risk Index is low development potential. USD43,000 per capita and growth of at just 0.2. Domestic financial about 3%. GDP is expected to grow at institution's provide credit worth Agriculture: New Zealand's livestock 3.1%. 150.7% of GDP, and foreign debt industry is a traditionally advantageous accounts for 100% of GDP. Foreign industry, with its lamb, venison and Its investment environment score exchange reserves total USD22.18 dairy exports ranking 1st in the is mid-range. FDI is about USD2.14 billion. world, and lamb and venison exports billion and fixed asset investment was accounting for 75% and 50% of global approximately USD45.51 billion. Political risk is low. New Zealand has trade respectively. Wool exports rank a sound legal system, good security 2nd only to Australia, accounting for Its consumption and market demand and a very low crime rate. Political 27% of global trade. The New Zealand score is quite high. New Zealand’s per stability and social legal environment dairy industry plays a pivotal role in capita national income is USD38,970, indicators score highly. the national economy. There are more and final household consumption than 12,000 farms in the country, with expenditure is approximately Sovereign risk is low. Moody's rates a total area of 11 million hectares USD108.35 billion. Its Gini coefficient is New Zealand Aaa, the highest credit and 6.5 million cows. In 2017, New 43.6. Imports and exports account for rating. Public debt is low, accounting Zealand's dairy exports amounted 51.3% of GDP. Inflation is 1.9%. for 26.5% of GDP. It has aiscal surplus to NSD14 billion (USD9.3 billion), of 0.7%. accounting for 18% of total exports of Its labor supply and cost score is quite goods and services. high. New Zealand has a small labor Business environment risk is low. force of only 2.68 million. In many In ease of market entry, contract Transportation infrastructure: industries, there is a shortage of labor. fulfillment, business establishment Due to geographical factors, New The quality of the local workforce is cost and government efficiency, Zealand and its neighbors are high, with 81.1% having enjoyed higher New Zealand performs well. The completely dependent on shipping educations. Its unemployment rate is New Zealand market mechanism is and air transportation. There are low at only 5%. fully developed and the business mature shipping and air transportation environment is friendly. In recent links between Australia, South Pacific Its tax burden score is moderate. years, the New Zealand government islands and Southeast Asia. New According to World Bank statistics, has reduced the cost of startups by Zealand's import and export goods total tax on New Zealand business reducing fees. are all transported by sea, so there profits is approximately 34.6%. are many ports and facilities. There Foreign exchange risk is low. The are 13 major ports in New Zealand In money supply, New Zealand has New Zealand dollar was quite stable with an annual handling capacity of a quite high score. M2 accounts for against USD in 2017/18. Foreign approximately 48 million tons. 101% of GDP, with growth of about exchange freedom is very high, with 7.3%, indicating sufficient money a Chinn-Ito Financial Openness Index IT: New Zealand's technology supply. The interest rate difference of 1.0. policy is distinctive, with a basic between domestic deposits and loans policy of serving economic growth is 1.8%. Overall, the money market is and promoting exports. For a long quite stable. time, the New Zealand government has placed great emphasis on the commercialization of scientific and technological achievements and scientific research activities. Since the Labor government took office in 2017, it has emphasized the use of R&D tax deductions to encourage enterprises to increase R&D investment to 2% of GDP in the next 10 years.

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8. Central America 1) Panama (1) Investment Advice Overall, Panama's investment attractiveness is moderate. Macroeconomic attractiveness is mid-range among BRI countries, with relatively good performance in scale of economy and labor education. Overall investment risk is low, although financial risk is quite high. Investors should focus on transportation and IT.

Figure 103: Panama Investment Attractiveness Score

Economy scale 10 Foreign exchange risk Investment environment 8

6 Business environment risk Consumption and 4 market demand 2

0 Sovereign risk Labor supply and cost

Political risk Tax burden

Financial risk M2 money supply

(2) Country Profile (3) Macroeconomic Indicators Panama is in the Isthmus of Panama in Its scale of economy score is quite Central America, bordering Colombia high. Panama's GDP is USD62.28 to the east, the Pacific Ocean to the billion, or USD15,196.4 per capita, and south, Costa Rica to the west and the a historical growth rate of about 3%. Caribbean Sea to the north. Panama GDP is expected to grow at 4.7%. has a land area of 75,517 km2. It is 772 kilometers long and 60 to 177 Its investment environment score is kilometers wide. The coastline is 2,988 high. In 2018, FDI was about USD4.83 kilometers long. Panama's land is billion and fixed asset investment was near the equator and has a tropical approximately USD24.72 billion . maritime climate. It is humid during the day and cool at night. The annual Its consumption and market demand average temperature is 23-27°C. score is moderate. Per capita national income is UD13,280 and final Panama has a population of about household consumption expenditure 4.07 million (2017), with Amerindian- is about USD31.34 billion. Panama's European mixed race people Gini coefficient of 0.5 indicates a large accounting for 75%, Native American's national income gap. Imports and 12.6%, black people or people of export account for 87.6% of GDP. African descent 9.2%, and the rest Inflation is 0.9%. white or Asian. About 85% of the residents follow Catholicism. Spanish is the official language.

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Panama's labor supply and cost Foreign exchange risk is low. The IT: With the steady development score is high. The national labor force exchange rate between the local of the Panamanian shipping is about 2.03 million. About 48.4% currency, the balboa, and USD was industry, demand for local merchant of people have received a higher quite stable in 2017/18. Foreign communications services continues education. The unemployment rate in exchange freedom is very high, with a to increase, promoting rapid Panama is 4.6%. Chinn-Ito score of 1.0. development of the Panamanian communications industry. There Its tax burden score is relatively low. (5) Key Industries are currently five transoceanic fiber Based on World Bank statistics, total Panama is in the Central American connections to the rest of the world. tax on commercial profits is 37.2%. isthmus and is known for its To develop its communications eponymous canal. Due to the industry, Panama has developed two Its money supply score is moderate. advantageous geography of the international technology parks, a Smart M2 accounts for about 77.9% of Panama Canal, Panama has a relatively City and the Panama-Pacific Special GDP, with growth of about 5.8%. developed transportation industry. IT Economic Zone, and the government The interest rate difference between has development potential. has included IT development in its domestic deposits and loans is about national strategy. 5.4%. Transportation infrastructure: The Panama Canal carries nearly 5% of (4) Risk Indicators the world's trade and freight volume, Overall, investment risk is relatively with the United States the largest user low. and China the second largest. Panama has a large number of ports and Financial risk is low. The Panamanian developed facilities. Nearly 30 Chinese Banking Industry Risk Index is at 0.4. enterprises are operating in Panama, Domestic financial institution credit with more than 70 private enterprises represents about 83.3% of GDP, and engaged in trade in the Colon free foreign debt accounts for about 30% trade zone. of GDP. Foreign exchange reserves are USD3.38 billion. In addition to port transportation, road bridge construction is a potential Political risk is low. Panama's political investment area. In 2018, China stability and legal environment scores Communications Construction Co. and are high. China Harbour Engineering Co. won the bid for the fourth Panama Canal Sovereign risk is low. Moody's rates bridge, with a contract price of UD1.42 Panama Baa1. Public debt is low, billion. This is the most important accounting for 40% of GDP. It has a project in Panama, and even Central fiscal deficit of about 1.6%. America, in the next few years, and is the largest bridge single project Business environment risk is Chinese companies have won in the moderate. Its ease of market entry, Americas. contract fulfillment, business establishment cost and government efficiency scores are moderate. Government efficiency is good, with improved corporate tax efficiency through a new online tax payment and filing system in recent years.

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209 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018  | Appendix 1: BRI Countries Investment Index Evaluation Framework

Appendix 1: BRI Countries Investment Index Evaluation Framework

Table 1: Macroeconomic attractiveness indicators

Primary Indicator Secondary Indicator Tertiary Indicator Data Source Scale of economy GDP GDP (current USD) World Bank GDP growth GDP growth (annual, %) World Bank GDP per capita GDP per capita (current USD) World Bank Estimated GDP growth GDP forecast Trading Economics Investment FDI FDI, net inflows (BoP, current USD) World Bank Fixed asset investment Gross fixed capital formation (current USD) World Bank

Consumption and Total population Total population World Bank demand GNI per capita GNI per capita, Atlas method (current USD) World Bank Household consumption Household final consumption expenditure World Bank (current USD) Gini Index Gini index (World Bank estimate) World Bank Total import/export Exports/imports of goods and services (% of World Bank GDP) Inflation rate Consumer price inflation (annual, %) World Bank

Labor supply and Labor force Total labor force World Bank cost Unemployment rate Unemployment rate World Bank Education level Gross enrollment ratios: tertiary education Euromonitor

Tax burden Gross tax burden Total tax on commercial profits, % World Bank Money supply Broad money (M2) supply Broad money (% of GDP) World Bank, CEIC Data, IMF Broad money (M2) growth Broad money growth (annual %) World Bank, CEIC Data, IMF Capital cost Interest rate spread (lending rate minus World Bank deposit rate, %)

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Table 2: Risk assessment indicators

Primary Indicator Secondary Indicator Tertiary Indicator Data Source Financial risk Bank risk Bank risk index Economist Intelligent Unit Domestic credit provided by the Domestic credit provided by financial sector (% World Bank, Factfish financial sector of GDP) Size of external debt External Debt/GDP (%) Wikipedia Foreign currency resources Foreign-exchange reserves (million USD) Wikipedia Political risk Political stability Political stability and violence World Bank Soundness of legal system Regulatory quality World Bank

Government Government bond ratings Local currency government bond ratings Moody's Rating sovereign risk Government gross debt Government gross debt/GDP (%) International Monetary Fund Government fiscal balance Budget surplus (+)/deficit (-) Central Intelligence Agency

Business Ease of market entry for foreign Ease of doing business index World Bank environment risk investors Ease of enforcing contract Time required to enforce a contract (days) World Bank Cost of business start-up Cost of business start-up procedures (% of GNI World Bank procedures per capita) Government effectiveness Government Effectiveness Index Euromonitor

Foreign exchange Currency exchange fluctuations Exchange rate vs. USD Euromonitor risk Freedom of foreign exchange Chinn-Ito Financial Openness Index Knoema

Table 3: Key industry assessment indicators – Energy

Primary Indicator Secondary Indicator Tertiary Indicator Data Source Electric power Electric power consumption Electric power consumption (1,000 kWh) IndexMundi\CIA World Factbook consumption Per capita power consumption Electric power consumption (kWh per IndexMundi\CIA World Factbook capita) Resource reserves Energy exports Fuel exports (% of merchandise exports) DataMarket Use of natural resources Natural resources rents (% of GDP) DataMarket

Table 4: Key industry assessment indicators – IT

Primary Indicator Secondary Indicator Tertiary Indicator Data Source Size of IT and use of Mobile cellular usage Mobile cellular subscriptions (per 100 people) World Bank IT products Fixed telephone usage Fixed telephone subscriptions (per 100 World Bank people) High-technology exports High-technology exports (% of manufactured World Bank, Trading Economics exports) internet adoption Internet applications Individuals using the internet (% of World Bank population) internet Secure internet servers Secure internet servers (per 1 million people) World Bank infrastructure

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Table 5: Key industry assessment indicators – Transportation

Primary Indicator Secondary Indicator Tertiary Indicator Data Source Scale of rail Length of domestic rail lines Rail lines (total route-km) Euromonitor, national government websites infrastructure Air transport Air transport, freight volume Air transport, freight (million World Bank development tons-km) Air transport, passengers volume Air transport, passengers carried World Bank

Logistics Logistics performance index Logistics performance index: World Bank development Overall Port development Quality of port infrastructure Quality of port infrastructure World Bank

Table 6: Key industries assessment indicators – Manufacturing

Primary Indicator Secondary Indicator Tertiary Indicator Data Source Size of labor force Labor force population Labor force population World Bank Labor cost Minimum wage Minimum wage, USD/hour Euromonitor, national government websites Size of Manufacturing output Manufacturing (value added % of GDP) World Bank manufacturing Manufacturing growth Manufacturing (annual growth %) World Bank sector

Table 7: Key industries assessment indicators – Agriculture

Primary Indicator Secondary Indicator Tertiary Indicator Data Source Agricultural Agricultural land Agricultural land (km2) World Bank resources Arable land Arable land (hectares) World Bank

Production index Livestock production capacity Livestock production index (2004-2006 = 100) World Bank Crop production capacity Crop production index (2004-2006 = 100) World Bank Food production capacity Food production index (2004-2006 = 100) World Bank

Size of agriculture Agricultural output Agriculture, forestry, and fishing, value added (% of GDP) World Bank sector

212 213 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Appendix 2: List of Data Sourcesk

Appendix 2: List of Data Sources

1. World Bank database: https://data.worldbank.org/indicator 2. CEIC Data: https://www.ceicdata.com/ 3. International Monetary Fund (IMF): www.imf.org 4. Central Intelligence Agency (CIA): https://www.cia.gov/library/publications/ 5. Moody's: https://www.moodys.com/ 6. PRC Ministry of Commerce Going Out Public Service Platform: http://fec.mofcom.gov.cn/article/gbdqzn/ 7. Yidaiyilu (Belt and Road) Platform: https://www.yidaiyilu.gov.cn/ 8. Economist Intelligence Unit 9. Chinn, Menzie D. and Hiro Ito (2006). What Matters for Financial Development? Capital Controls, Institutions, and Interactions, Journal of Development Economics 10. Index Mundi: https://www.indexmundi.com/ 11. Trading Economics: https://tradingeconomics.com/ 12. Euromonitor 13. Knoema: https://cn.knoema.com/ 14. Wikipedia: https://www.wikipedia.org/ 15. Factfish: http://www.factfish.com/ 16. Datamarket: https://datamarket.com/

214 215 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Appendix 3: Abbreviations and Explanations

Appendix 3: Abbreviations and Explanations

Abbreviation Explanation 3G The third generation of mobile telecommunications technology. 4G The fourth generation of mobile telecommunications technology. ASEAN Association of Southeast Asian Nations, formed in 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand to promote political and economic cooperation and regional stability. CPI Consumer Price Index, which measures the average change in prices over time that consumers pay for a basket of goods and services. GDP Gross Domestic Product, the total value of goods produced and services provided in a country during a year. GST Goods and Services Tax, a broadly applied value added tax. IMF International Monetary Fund. M2 M2 is a measure of the money supply that includes cash and checking deposits (M1) as well as near money. OECD The Organisation for Economic Co-operation and Development, an intergovernmental economic organization with 36 member countries, founded in 1961 to stimulate economic progress and world trade. WTO World Trade Organization LAS League of Arab States, a regional organization of Arab states in the Middle East formed in 1945 by Egypt, Syria, Lebanon, Iraq, Transjordan (now Jordan), Saudi Arabia, and Yemen. S&P Standard & Poor's, one of the Big Three credit rating agencies. Fitch Fitch Ratings, one of the Big Three credit rating agencies. Moody's Moody's Ratings, one of the Big Three credit rating agencies. GSP Generalized System of Preferences, which provides opportunities for many of the world’s poorest countries to use trade to grow their economies and climb out of poverty.

216 Shanghai Municipal Commission of Commerce Belt and Road Countries Investment Index Report 2018 | Closing Remarks

Closing Remarks

Three trends have emerged as the Belt and Road Initiative gains momentum about the globe: an increasing number of countries and international organizations have participated in this new framework of international cooperation; its industry focus has shifted from infrastructure to a diversified set of industries including agriculture, IT and beyond; and more multinational and private enterprises have joined the Initiative, joining state-owned enterprises.

This 2018 report was completed with tremendous support from the Shanghai Municipal Commission of Commerce and Deloitte Consulting. We hope that it helps enterprises identify market opportunities and risks in overseas markets, and provides data-driven evidence for investment decisions.

However, this report has several limitations due to the availability, accessibility and timeliness of data covering all 80 BRI countries. The research team has collected data from credible sources including international organizations, academic databases and national governments to present an objective, accurate analysis for readers.

As the lead entity compiling this report, Deloitte Consulting looks forward to communicating with enterprises considering investments in BRI regions, and putting their visions into actions in specific countries and industries through our global network and local expertise.

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Office2018年上海市商务委员会“一带一路 locations”国家投资指数报告 | 结束语

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