Belt and Road and PPP Projects Guides
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dentons.com One Belt One Road: PPP Alchemy – is the Silk Road paved in Gold? 2 dentons.com Contents OBOR and PPP Projects 4 What is OBOR? – an overview 5 What are the objectives of OBOR? 6 Current Investment in OBOR 9 Types and locations of OBOR projects so far 9 OBOR and the PPP Model 11 Types of PPP 12 Key Challenges for OBOR 14 China’s true agenda 15 Funding 15 Political 16 Legal 17 Competition or cooperation 17 Resourcing and quality 18 Security 18 OBOR Case Studies 19 Karot Hydropower Project – Pakistan 20 Almaty Ring Road Project (BAKAD) – Kazakhstan 21 Conclusion – is the Silk Road paved in gold? 22 Biographies 24 Neil Cuthbert 25 Atif Choudhary 26 dentons.com 3 OBOR and PPP Projects 4 dentons.com What is OBOR? – an overview South East Asia, Russia, the Persian between. It will encompass in excess The “One Belt One Road” project Gulf, the Middle East, North Africa, the of 65% of the world’s population and (OBOR) is one of China’s key initiatives Mediterranean and in between. This include over 65 countries, which as part of its plan to assert its position as has been dubbed the New Silk Road have a combined GDP of over US$20 one of the world’s strongest economic Economic Belt (Silk Road). The second trillion and growing. The primary powers. OBOR was initially launched comprises a maritime route which purpose of OBOR is to create a by China’s President Xi Jinping in late runs southbound down the east coast gateway for China’s burgeoning 2013 as one of the Asian superpower’s of China, through the South China capital and other resources in a ambitious plans to accelerate outbound Sea and into the South Pacific before manner and on a scale not seen investment and to consolidate its heading westbound through the Indian before. Once the wheels of OBOR position generally across the globe. Ocean and Mediterranean Sea to are fully set in motion it will lay a Physically, OBOR is best understood Europe (Maritime Silk Road). platform for economic investments with reference to its two key tangible in almost every sector, but with an cornerstones. The first is an overland OBOR is China’s ambitious economic inclination towards infrastructure route from China through to Western road map which seeks to link Asia and trade. However, while it is easy to Europe, sweeping through South and and Europe and most quarters in consider OBOR as a project focused dentons.com 5 on tangible outcomes in the form entered into a letter of intent with the corridors, whether it be roads, rail, of roads, railways, airports, ports, oil United Nations Economic and Social pipelines, airports, ports and more pipelines, power plants and the like, Commission for Asia and the Pacific which will not only link China with it is just as important to recognise (UNESCAP). For the United Nations to other OBOR nations but also OBOR that it is in fact modelled on a much throw its support behind OBOR in this nations themselves. wider premise. It is intended that manner goes some way to showing just OBOR, once fully fledged, will create how powerful this strategy is. The Silk Road and Maritime Silk everything from cooperation and Road can be broken down into six collaboration between members in Some commentators, mostly in the specific “economic corridors” which sectors of technology sharing and west, have likened OBOR to the have been identified by China, being flow of financial capital to wider Marshall Aid programme introduced the New Eurasian Land Bridge, the economic, political and social co- by the US after the Second World China-Pakistan Corridor, the China- operation between its members. War to energise and relaunch the Central Asia-West Asia Corridor, the economies of Europe battered by Bangladesh-China-India-Myanmar Following the launch of OBOR, many the devastating impact of six years of Corridor, the China-Mongolia- nations along its path have rushed war. There are similarities with some Russia Corridor and the China- to enter into bilateral treaties and of the overall goals of OBOR and the Indochina Peninsula Corridor. These agreements with China. To date, Marshall Aid programme, but there corridors identify sectors of special China has entered into well over are many structural, economic and importance along the route; however, 30 such agreements and trade political differences that make such a the reach of OBOR has no defined negotiators are working on overdrive comparison somewhat superficial. footprint per se and no country (or to increase this number. In some body of ocean) should be considered cases these agreements have already What are the objectives of as being outside its potential scope. gone through rounds of extension OBOR? and expansion, such has been the Although the true extent and detail of However, it is not only physical early success for all involved. It should the objectives of OBOR can only be connectivity which the Chinese are be noted that we are talking here of known within the corridors of power in concerned with. OBOR seeks also significant deals with countries such Beijing, the following are some of the to connect people along the route as Russia, Turkey, India and Pakistan, key objectives which are apparent in a through cultural understanding, which goes some way to showing just programme of this scale: financial integration, social integration how seriously OBOR is being taken and interaction, educational ties and among some of the regions and the Connectivity other intangible connections. world’s economic heavyweights. OBOR seeks to map out and construct more developed and efficient physical Export markets In a show of its intention that OBOR routes to support China’s unparalleled OBOR will assist Chinese enterprise will not just be a series of bilateral deals export market. The same routes would in tapping new markets and throughout the wider Eurasian region, be used to facilitate imports from strengthening China’s position in but something much more far reaching the same trading partners. What is existing markets. Many, but by no and global, earlier this year China envisaged is all manner of transport means all, of the OBOR member 6 dentons.com nations are underdeveloped Over capacity the provision of vital infrastructure nations with huge demand for new OBOR will provide an outlet for the investment, the scale of which no infrastructure and materials which release of China’s vast amounts of other country currently has the same China is uniquely well placed to economic capital and production appetite for as China. Beijing has made provide. China would be primed to capacity which have built up both it clear to all and sundry that OBOR provide an “end-to-end” solution domestically and overseas. China is intended to facilitate collaboration in that it can put up the required is the world’s largest producer of and cooperation between China finance (through debt and/or equity), many sought after commodities, and its neighbours (and beyond). A construction expertise, provision including cement and steel. However, natural outcome of this is that China’s of raw materials and goods and at the present moment there is not geopolitical power along the route will operational services. enough worldwide demand for the consolidate and strengthen. level of supply which China is able to While China has traditionally been provide. The launch of OBOR-driven By also providing the majority of strong in Asia, the Middle East and projects should see levels of utility the required financing for such Africa, it has not been able to force increase in order to close that gap investment China is encouraging its way as deep into the European and see China’s export markets begin and stimulating growth along OBOR market as it would like. Through to live up to their true potential. that otherwise might take decades OBOR, China will eventually be able to realise. As with the Marshall to present itself as a viable partner in Political Aid programme in Europe, the European markets, which is the next All states which sign up to OBOR beneficiaries of the aid programme frontier for them in many respects. undoubtedly have something to gain became inextricably “connected” to out of the strategy. For most, it will be the US and nowhere was this more dentons.com 7 apparent than the collaboration on which make up the Special Drawing coming years and decades, there historical projects such as the General Rights (SDRs). This takes the RMB is a clear opportunity for financial Agreement on Tariffs and Trade into the elite class of currencies of markets both domestically in China (GATT), the International Monetary which the only other members are and abroad to develop and flourish Fund (IMF) and NATO. It will be the US Dollar, the Euro, the Japanese in sectors of the financial world interesting to see if there is a similar Yen and the Great British Pound. where China has so far been a less alliance of interests flowing from significant participant. A prime OBOR and how this manifests itself. In addition, China has entered into over example is that of Islamic finance 30 bilateral swap agreements with debt and equity capital markets in the Chinese growth jurisdictions all over the world, including Middle East. Today the finance sector One of the key objectives of OBOR a number of states on the OBOR route in the Middle East, led by the financial is that it should serve for the and significant players such as the gateway of Dubai, is experiencing general betterment of the Chinese EU, Great Britain, Russia, Switzerland growth in numbers which makes it population generally, particularly and Canada.