Eight Transformation Factors for Driving the New Silk Road Towards Sustainability and Shared Prosperity What is the New Silk Road? “The Belt and Road Initiative makes a unique contribution to international The name, Silk Road (German: Seidenstraße), was first coined in 1877 by the German geographer Ferdinand cooperation and economic von Richthofen as a term given to the network of trade development: it is based on the routes linking China to Central and West Asia, India and stakeholder approach, it seeks to the Mediterranean region. More recently, Peter Frankopan, the director of the Oxford Centre for Byzantine Research, leverage market forces in best ways, it extensively writes about the ancient Silk Road departing prepares best for the age of the Fourth from Europe centric views about history. In his research, he Industrial Revolution, it is built on the highlights that this ancient space of cultural, economic and intellectual exchange did not primarily revolve around China, open platform concept, and most but many other civilizations connecting the orient with the importantly, this initiative is the positive occident. Today, China is reviving this ancient Silk Road narrative the world needs.” aiming to build stronger relationships with its neighbours through developing and sharing resources. In late 2013, Klaus Schwab President Xi Jinping announced the New Silk Road or what Founder and Executive Chairman, World Economic Forum has become known since then as the Belt and Road Initiative (BRI). The BRI, while still under development, seeks to promote the connectivity of the Asian, European and African What is its potential? regions; establish and strengthen partnerships among the countries along the BRI routes; set up multi-tiered and Today, the BRI might have the potential to prompt a profound multimodal connectivity networks; and realize diversified, shift in the global order towards a new multilateralism. The independent, balanced and sustainable development in the strategic planning and delivery of scalable infrastructure for countries involved and promote mutual prosperity among power generation, transport, water and telecommunications them. will bring the much-needed economic and societal connectivity to all the countries along this new network. With this proposal, China is willing to share its immense financial At the World Economic Forum Annual Meeting 2017 in and industrial resources and capabilities as well as its own Davos-Klosters, President Xi referred to the ancient Silk experience of four decades of reform and opening-up, and, Road to emphasize China’s peaceful intention and trade at the same time, secure its own long-term development. as an inherent human activity that has helped to maintain stability over long periods of time. According to the National The BRI has five major goals within a broad framework of Development and Reform Commission (NDRC) of China, connectivity and collaboration: policy coordination; facilities’ the spirit of the ancient Silk Road was passed down connectivity; unimpeded trade; financial integration; and from generation to generation, promoting the progress of people-to-people exchange. In a narrower sense, the BRI civilization and contributing greatly to the prosperity and is primarily a strategic infrastructure initiative of historic development of the countries along the Silk Road. proportions. Beyond the initial commitment by the Chinese government of about $1 trillion in infrastructure development, which conservative estimates believe to be viable, the BRI promote concrete actions and cooperation in the above five will require roughly an aggregate of $6 trillion for the next areas and will invite collaboration with the MDBs. 15 years to finance infrastructure projects fuelling the 65 national Belt and Road economies. During that period, Furthermore, the World Economic Forum and the NDRC the Chinese plan to cumulatively invest $4 trillion in total signed a MoU at the Belt and Road Forum for International – about 20 times the size of the post-Second World War Cooperation in Beijing, to collaborate on developing models Marshall Plan investment of $17 billion, which has a value for public-private cooperation for BRI. of about $190 billion today. In addition to the shear size, another crucial difference is that BRI had been introduced Finally, to unlock BRI's full potential, a sensitive approach at times of global peace and therefore signals a new area of to infrastructure delivery will be required. A new Oxford multilateralism. study, analysing of 95 large Chinese road and rail transport projects, recently found that low-quality infrastructure Some of the investments are already underway, for instance investments pose significant risks to the Chinese and the various pipelines such as a 3,666km gas pipeline between global economy. It argues that over half of the infrastructure Turkmenistan and China for $7.3B, economic corridors such investments in China have destroyed rather than generated as the $46B China-Pakistan highway, railway connections economic value. Therefore, we propose a framework that is such as a $16.7B Moscow-Kazan high-speed railway and able to put the focus on few but higher-quality infrastructure a $2.7B railway from Khorgos on the Chinese border to the investments, improve China’s project management track Caspian Sea port of Aktau accessing the maritime BRI. record, deliver positive risk-adjusted returns, and thus avoid overinvestment in unproductive projects, build-up of debt, The MoU covers the following areas: monetary expansion, instability in financial markets, and economic fragility. 1. Enhanced support to infrastructure and connectivity projects 2. Building stable, diversified and sustainable development What are the eight Transformation financing mechanisms Factors? 3. Improving the business climate 4. Strengthening coordination and capacity-building In the light of this initiative and building on BRI’s dimensions 5. Supporting the implementation and achievement of of connectivity highlighted above, we anticipate eight the goals set in the United Nations Agenda 2030 for transformation factors that have the potential to provide high- Sustainable Development and the Paris Agreement on level stewardship to the New Silk Road and revive the spirit climate change of shared prosperity: Also, in the MoU China committed to establishing the These insights are derived from several years of analysing Multilateral Cooperation Centre for Development Finance to the infrastructure industry and its development projects. 8 Deliver 1 Develop a a human- shared centric vision heritage 2 Curate 7 Embrace a policy mutual dialogue understanding 3 Create 6 Foster a project innovation pipeline 5 Commit to 4 Mitigate sustainability political and regulatory risk 1. Shared Vision: Achieving transnational and international As highlighted elsewhere, the international community support for a shared vision for strategic infrastructure not only perceives the BRI as an infrastructure-driven development that promotes well-being and a national development programme but also as a large-scale, soft- sense of purpose to the communities beyond national power and long-term international policy and security borders approach. Therefore, the BRI has attracted considerable scepticism. However, today’s increasing lack of global 2. Multilateralism: Curating an open and multilateral policy governance has resulted in the absence of international dialogue that addresses public-private-civic cooperation, development plans that are comparable to the scope and early-stage project financing, standardized procurement, vision of BRI. To date, the BRI involves 65 countries and and transparency to level the playing field and build accounts for 60% of the world’s population and 33% of trusted relationships global GDP. By lifting 800 million people out of poverty since 1978, China has built up the capacity to provide positive 3. Project-Preparation Facility: Creating an infrastructure change towards an economically stagnant, geopolitically project-preparation facility to ensure a pipeline of tense and environmentally degrading planet. No doubt, bankable projects and a transnational centre of China’s past 40 years have not been a straightforward excellence to deliver the largest portfolio of projects ever transformation process, but the achievements outweigh the sacrifices. 4. Risk Mitigation: Proactively mitigating political and regulatory risk to boost stakeholder engagement and In a narrower sense, the BRI is a large-scale strategic confidence in the plan by investors, off-takers and infrastructure development programme, and strategic operators infrastructure projects have often locked us into unsustainable patterns of development. For this reason, 5. Sustainable Development: Committing to sustainability, this document seeks to depart from past development inclusion and affordability principles to generate value for deadlocks and shares the insights derived from several years future generations beyond Agenda 2030 of analysing the infrastructure industry and its development projects. By presenting some of the leading practices, the 6. Innovation: Enhancing technological and business authors intend to contribute to a holistic and sustainable model innovation for sustained value creation, ensuring implementation of the Belt and Road Initiative. readiness for the future 7. People-to-People Exchange: Governing domestic and cross-border migration and promoting mutual learning and understanding to enable and deepen