17 Jun 2016

Belt and Road Initiative Infrastructure Projects: Implementation Principles and Practices

By Joseph W. Ferrigno III, Managing Partner, AMCG Partners

Summary

A. The Belt and Road Initiative (“BnR”) is a comprehensive vision for the development of China and other countries during the 21st Century initiated by China in 2013. The Asian Development Bank has estimated that Asia needs an average US$730 billion a year in infrastructure investment until 2020, including only some of the identified BnR related projects. According to the Peterson Institute for International Economics, “…investment in the Belt and Road is expected to reach $4 trillion”.

B. Asia’s overall national infrastructure investment need is estimated to be US$8 trillion over 2010-20. BnR is attractive to governments and the private sector because of the significant potential economic and political benefits if BnR projects are successfully implemented.

C. Requirements for capital, risk absorption and management capabilities necessary to successfully implement BnR-inspired projects far exceed what governments can provide. Public/private partnerships ("PPP"), via various models, are essential to contribute ideas, capital, risk absorption and project management capabilities. The private sector, working closely with the public sector helps plan and control BnR projects resulting in projects which have the most appropriate designs, the most cost-efficient construction and the most efficient operation.

D. The implementation of PPP projects, which typically involve multiple parties of different nationalities, is highly complex and requires special expertise and experience and is more of an art than a science. The “packaging” for such projects, getting them ready for construction start, is quite difficult and requires dealing with many challenges and problems which must be solved during long project development periods.

E. In my experience with the packaging of PPP projects, in both developed and developing economies, there are effective solutions which require the relentless application of sound project implementation general principles and specific practices. Although each project is unique, and correct timing is a critical factor, such principles and practices can be applied to result in the successful implementation of PPP infrastructure projects.

F. Hong Kong is functioning effectively as a kind of “Super-connector” putting together various parties which are interested participating in BnR-inspired projects so that they have opportunities to meet and consider collaborating. In addition, Hong Kong’s well-developed project services sectors - including its expertise in infrastructure development sectors - are unique in Asia in terms of their international business orientation, depth of service, expertise and professionalism. Moreover, an essential characteristic of Hong Kong is the reliability of the enforcement of contracts. The independence of the Hong Kong Judiciary and the adherence to the Rule of Law are of high importance for international businesses, investors and creditors involved with infrastructure projects.

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