In his forward to this special issue of Eurobiz on the Belt and Road Initiative (BRI), Mats Harborn, President of the European Chamber of Commerce in China, outlines the constructive role the Chamber has to play when it comes to improving BRI projects. Focusing on issues of feasibility, transparency and the low rate of participation of non-Chinese companies, President Harborn puts forward constructive recommendations with the aim of unlocking the full potential of the initiative and increasing EU-China cooperation.
This year we have been celebrating the 40th anniversary of China’s reform and opening-up, a truly remarkable and fundamentally transforming time for China and the global economy. I have personally witnessed how new infrastructure projects in roads, harbours, airports and the like have connected local economies with the country’s larger economy. Now, developing countries across the globe are seeking to undergo a similar process by signing up to the Belt and Road Initiative (BRI).
However, as is to be expected, the road has not been free of bumps: concerns have been raised on issues of feasibility, transparency and the low rate of participation of non-Chinese companies in the execution of BRI projects. The European Chamber is eager to provide constructive input to ensure continuous improvements in implementing the BRI.
To ensure the sustainability of infrastructure projects, greater care needs to be paid to feasibility studies that take a more realistic approach to local markets and their ability to repay loans required to finance such pursuits. Such an approach would also help open up the BRI for participation by multilateral financing institutions. At the same time, the BRI should also consider how to incorporate foreign aid through grants to plant the seeds of development in areas not yet ready to bear the debt of more extensive infrastructure.
While Chinese state media often emphasises that the BRI is highly transparent and that it offers boundless opportunities for foreign companies to participate, European companies are somewhat uncertain, as indicated by lack of transparency ranking highly on a list of reasons for low participation by surveyed companies. Members of the European Chamber report difficulties in finding information on bids in time to meet the (often brief) windows of opportunity between announcements and closings of procurement procedures.
Finally, the dominance of Chinese companies in the BRI raises questions about fairness. A study by the Centre for Strategic and International Studies found that 89 per cent of contractors on BRI projects were Chinese companies. Of the remaining 11 per cent, about two-thirds were awarded to local companies, while non-Chinese foreign firms shared the remainder. In comparison, shares in similar projects financed by multilateral development banks average out to about 29 per cent Chinese, 41 per cent local and 30 per cent non-Chinese foreign.
A fully successful BRI would be of great value to the world if these concerns can be resolved. Doing so will not only unlock the full potential of the initiative but may also open up new opportunities for cooperation with the recently-announced European Union Connectivity Strategy. Fair and equal opportunities for foreign companies to participate in BRI projects would be a great way to demonstrate that the BRI is, as President Xi Jinping said at the BRI Forum in May 2017, “open to all friends”.