6 ways Canadian companies can get involved in the Belt and Road Initiative
Photo: Prime Minister Justin Trudeau hosted Chinese Premier Li Keqiang in Ottawa in September 2017 (credit: Jake Wright, The Hill Times)
Here are 6 ways Canadian companies can follow in the steps of other foreign firms and get involved with the Belt and Road Initiative (BRI).
Since the BRI was first put forward, most of the project’s financing has been done through Chinese policy banks.
However, the Chinese government has already begun to seek foreign investment to fund various projects, in part through its infrastructure bonds. For example, in August 2015 the China Construction Bank listed its first US$152 million BRI bond on the Singapore Exchange (SGX). In May 2017, the Bank of China’s Singapore branch issued bonds worth US$600 million to support the BRI.
The opportunities for foreign investments are growing as Chinese companies are now seeking alternative sources of finance to help organize projects in a manner that will appeal not only to Chinese private capital but, most importantly, to global capital. As such, companies can already invest in infrastructure projects either by co-investing with Chinese firms or through partnerships with existing Chinese banks such as the Silk Road Fund.
Companies also have the opportunity to supply construction equipment, machinery, and solutions for infrastructure projects, especially where environmental or safety standards are a concern. There has already been much collaboration between Chinese companies and foreign multinationals, as well as between foreign supply companies and Chinese state-owned Enterprises (SEO).
Companies that possess specialized infrastructure equipment could, for example, support Chinese engineering, procurement, and construction (EPC) projects overseas. In Turkey, the Swiss ABB Group has worked with CRRC Tangshan, China’s first railway equipment manufacturing company, to provide tailor-made traction motors for the project.
Companies that have well-known international experience in large-scale infrastructure projects or in working with local engineering, procurement, and construction (EPC) companies, could partner with Chinese firms by providing the technical know-how and by sharing their experiences in designing and developing infrastructure.
Such partnerships will not only enable companies to gain access to new markets along the BRI routes but also secure credibility with Chinese companies which in return can help them to access the Chinese domestic market.
For example, Mexican cement company, CEMEX, has partnered with CBMI Construction and China National Building Materials Group Corporation in many overseas ventures along BRI corridors. The company also signed a contract in June 2017 with CBMI to build a new kiln production line in the Philippines which will have an overall capacity of 1.5 million metric tons of cement.
As experts in international project management
As international project managers, companies can advise Chinese SOEs on how to best navigate local laws, regulations, and business environments, and how to work with local enterprises and workforces. Companies can also share their expertise which is especially critical in working with BRI projects as they are both complex and large in scale and require managing multiple stakeholders.
There are also other partnership opportunities for companies specializing in professional services and project and commercial management. As such, some companies that traditionally provide infrastructure are already creating advisory services that will enable them to provide various project management services.
For example, U.K. company, Amec Foster Wheeler (AFW), has used its expertise in managing complex infrastructure projects to contribute to various opportunities along the BRI routes. In 2015, AFW obtained a three-year project management contract with Shenhua Ningxia Coal Industry Group to offer engineering, commercial procurement, health and safety, and quality project control services to coal chemical by-product processing plants.
Companies can impart their operational experience in effectively, profitably, and sustainably managing the new facilities and newly constructed infrastructure.
Chinese companies are also interested in operators who can help Chinese and BRI companies manage tasks after completion in ways that are profitable and sustainable. As such, the country needs help managing stakeholders across various regions.
For example, Dubai Ports World operates 77 land and sea terminals throughout Asia, the Middle East, and Europe, and is expanding into Central Asian markets along the BRI routes to take advantage of the prospective growth in trade. This includes its involvement in operating the Yarimca container terminal in Turkey and in providing advisory services to develop a free trade zone in Azerbaijan.
As sellers of assets
Companies who desire to enhance their existing capabilities can sell assets to Chinese or local enterprises operating along the BRI routes.
For example, Air France has divested 10 per cent of its company to China Eastern Airlines, one of China’s largest state-owned airlines. This agreement reflects the predicted increase in transport between Asia and Europe, as well as the increasing number of Chinese travellers the BRI is likely to bring. This alliance is a win for both parties as it provides Air France with a European leadership position in Shanghai.
Chinese contractors are also looking to obtain leading technologies from around the world to compete with the biggest markets in the BRI region. Envision Energy, a Shanghai-based company, recently acquired Bazefield, a Norwegian provider of wind-farm management systems. These technologies will be essential in markets where Chinese SOEs are looking to win over the competition or are required to meet strict environmental standards.