One glance at a map of China’s Belt and Road Initiative shows how the Middle East, North Africa & Turkey are well placed to take advantage of this US$900 billion infrastructure development plan stretching from Asia to Europe that aims to connect China more closely with the rest of the world.
became the largest foreign investor in the Middle East in 2017
trade expected between China and Arab nations within 10 years
will be required by BRI to fund the infrastructure of tomorrow
Leveraging the Middle East’s pivotal geographical position are the region’s diversification programmes, which aim to lessen dependence on revenues from hydrocarbons exports by developing non-oil sectors that can contribute to economic growth. These plans have the potential to both facilitate trade and investment flows and create new economic activity, and China, which overtook the UAE to become the largest foreign investor in the Middle East last year, is becoming a key partner.
China and Arab countries will adopt the “1+2+3” cooperation pattern to upgrade pragmatic cooperation by taking energy cooperation as the core infrastructure construction and trade and investment facilitation as the two wings, and high and new technologies in the fields of nuclear energy, space satellite and new energy as the three breakthroughs. As the Middle East adjusts to a lower oil price environment, plans such as Vision 2030 in Saudi Arabia, Expo2020 in Dubai, Turkey’s Strategic Vision 2023, and an economic overhaul in Egypt are spearheading social and fiscal reforms and opening up domestic markets to attract foreign investment across infrastructure, trade, investment, services and supply-chain. Saudi Arabia’s NEOM city would benefit from Chinese investment in ports, retail and construction, while Turkey’s mega projects range from a nuclear power plant involving China’s State Nuclear Power Technology Corp to a third airport. Meanwhile Smart Dubai 2021, which aims to transform the city through technology and innovation, lends itself to Chinese partnership in the high-tech space, while Egypt’s privatisations have resulted in the most populous Arab nation becoming a top-five destination for Chinese M&A activity. While Chinese state-owned and commercial banks as well as multilateral banks will support BRI funding, the private sector will also play a significant role. This includes arranging bridge financing, facilitating equity capital from governments, funds and public and private equity markets and longer-term bond issuance, including green bond issuance for renewable energy and sustainability.
Banks best positioned to support the BRI need to have strong footprints in Belt and Road markets, and also a universal banking model to offer products across the value chain, from the biggest conglomerates to retail investors,They need to be able to support not only principle investors and primary contractors coming into those projects, but also the ecosystem surrounding those projects, from subcontractors to professional services firms.
Belt and Road, the most far-reaching and significant initiative China has ever put forward, has huge implications for the Middle East, which in parallel is implementing economic transformation plans.