There are at least 65 countries involved in the Belt and Road (B&R) initiative, but which of them stand to benefit the most, and where has the money gone so far?
Many projects within the huge B&R geographic footprint are not financed solely through recognised B&R channels like the Silk Road Fund and Chinese policy banks, so determining whether a particular project falls under the initiative is not an exact science. As it progresses, the initiative may be seen as the ‘supercharger’ of a development process that will become increasingly multilateral as international involvement accelerates.
While Chinese state-owned companies have been the early beneficiaries of development projects funded under the B&R umbrella, the advantages are flowing two ways. For example, China has pledged to purchase USD2 trillion worth of imports from B&R countries by 2022. Almost half of the trade generated by the B&R initiative will flow within Asia, and about almost a quarter in Africa, according to official Chinese estimates.
In terms of overall committed investment, the major beneficiary recipient countries so far have been concentrated in Asia:
China has committed USD62 billion to an economic corridor with Pakistan that will feature massive infrastructure projects to improve transportation and energy supply.
Approximately USD38 billion has been committed to the country to boost land, rail, aviation and waterway connectivity.
With more than USD34 billion committed to infrastructure projects, Malaysia so far leads its Southeast Asian neighbours in B&R investment.
China has pledged infrastructure aid equal to 10.5 per cent of Philippine GDP (about USD31 billion), with another USD9.5 billion worth of investment secured in 2018.
However, smaller economies in Southeast Asia (Laos, Myanmar) and Central Asia (Uzbekistan, Kazakhstan, Tajikistan and Azerbaijan), as well as African countries such as Kenya and Egypt, are likely to see the fastest benefits, as large-scale infrastructure projects typically have a more immediate economic and social impact on economies that lack bedrock facilities.
The USD3.8 billion Mombasa-Nairobi railway, for example, has cut the cost and travel time almost in half for passengers moving between Kenya’s capital and its largest port city, relieving congestion on an accident-prone highway. The construction of the world’s biggest dry port in Khorgos, Kazakhstan has seen Europe-bound rail freight triple between 2016 and 2018, spawning a housing boom, tourism, an industrial centre, and a new rent-free city designed for 100,000 incoming workers.
The B&R initiative has heightened competition in the international development sphere traditionally dominated by US, European and Japanese companies by unleashing a new wave of Chinese bidders for major projects. Rivalry between Japanese and Chinese companies for high-speed rail projects, for instance, enabled India to secure favourable loan terms from Japan for its Mumbai-Ahmedabad line.
In terms of sectors, most investments so far have been in infrastructure, energy, mining and transportation. But these developments will continue to spawn opportunities in other industries, such as real estate, banking, technology, logistics, warehousing and manufacturing. For example, a new port will generate business for local or foreign private-sector warehousing and logistics companies, which require updated technology, creating work for IT firms. The port will also need workers, which requires housing, opening up opportunities for utilities, retailers, F&B and entertainment businesses, which need suppliers. And all of these businesses need financial services.
In this way, the B&R can succeed by laying the topsoil from which new supply chains sprout, spreading the benefits throughout entire communities.