By Charlotte Middlehurst, China-Britain Business Council

Swapping souks for solar plants and camel caravans for wind farms, the Silk Road is undergoing a makeover. President Xi Jinping’s plan to revive the old Silk Road through a US$4 trillion programme of trade deals and infrastructure investment has attracted the eye of green enterprises that see a golden opportunity to win contracts and gain valuable experience in overseas markets.

First unveiled in 2013, the Belt and Road Initiative (BRI) is China’s most ambitious overseas investment project yet. Stretching over 60 countries across Asia, Africa, Latin America and Europe, it aims to develop industrial agriculture and core infrastructure such as ports, container terminals, railways, roads, power plants, and factories.

It is key both to China’s “going out” strategy and to “globalization 2.0”, President Xi’s vision to reboot and rebalance international trade relationships with Asia at the helm.

Over 900 BRI deals have been slated so far with projects ranging from lithium mines to hydroelectric dams. But beyond the “win-win” rhetoric there is international concern about a lack of transparency around certain projects and the access granted to foreign companies.

Additionally, there is concern that China will offload its excess industrial assets, as domestic demand slackens and overcapacity in the coal, cement, and steel sectors grows.

However, there is an alternate path available that speaks to a broader global movement towards sustainability – one that is paved with green investment.

China’s push for global leadership of the green tech and energy markets has been aided by US President Trump, whose personal disinterest in renewables and fondness for coal has left the vacancy open. In the current Five-Year Plan, China has made sustainable development and environmental restoration pillar industries and set aggressive targets to reduce pollution and increase the share of electricity derived from renewables (15 percent by 2020).

Focus on efficiency, domestic consumption and green technology has led to big investment in solar and wind power, “smart” grids, electric vehicles and battery storage. Leading companies, with the encouragement of central government, are therefore eager to enter the newly available foreign markets under the umbrella of BRI.

So how can China “green” the new Silk Road?

In three ways. First, by encouraging companies to introduce sustainable design into their projects and adopting sustainability criteria in their decision-making. Second, by focusing on investment in solar, wind and hydropower at a time when most countries are shifting away from coal and oil in accordance with the Paris Climate Agreement. Third, by galvanising the financial sector, upon which it is incumbent to steer investors away from environmentally harmful projects.

Green enterprise on the rise

China invested a record US$32 billion in overseas renewable energy and related technologies last year, marking a 60 percent year-on-year increase in spending, according to the research group Institute for Energy Economics and Financial Analysis (IEEFA).

For China’s environmental tech companies, the BRI is a chance to secure lucrative contracts and broaden their experience and expertise of working in internationally regulated foreign markets.

“If environmental enterprises don’t venture into the wider international market and work hard to gain experience there, their capabilities will not improve, and they will find it difficult to meet global market requirements,” says Luo Jianhua, secretary general of the China Environment Chamber of Commerce.

With this in mind, Premier Li Keqiang, speaking at last year’s National People’s Congress, reasserted that Chinese environmental enterprises will benefit from new investment contracts made through the BRI.

This was followed up by a comment from Luo Jianhua that Chinese enterprises, in particular mineral and chemical companies, should seek to emulate international best practice, pointing as an example to German chemical giant BASF SE which co-opts water treatment and sustainable design into its projects.

While energy is a key focus, China is pushing into related markets, such as green data monitoring. The country has seen a six-fold increase of sales in monitoring equipment between 2006 and 2015, paving the way for new alliances with Europe.

Renewable energy

China is expected to install around a third of the world’s total wind energy, solar and hydroelectric generation capacity by 2021. A proportion of this will go into decentralised wind, solar and micro grid solutions along the BRI route. In some cases, this will be in countries that are being sidelined by national governments and traditional donors such as the World Bank.

In Myanmar, where only 34 percent of people have access to electricity through the grid, falling to 16 percent in rural areas, China is working on local initiatives to provide solar energy to households. In Thank Bayar Khond, a few kilometres outside of Yangon, the Chinese NGO Global Environment Institute has teamed up with Myanmar NGOs and the Blue Moon Foundation to provide small household solar panels and clean cook stoves to families in the village.

In Mongolia, China's efforts to fight desertification, or soil loss, has been touted by United Nations deputy secretary-general Erik Solheim as a model for other regions ravaged by sand and dust in Africa, the Middle East and Latin America.

In Pakistan, China has been pursuing green investments opportunities from solar and hydropower projects to vast rail networks.

However, China must go further to repair the reputational damage caused by environmentally and politically harmful projects such as Myanmar’s Myitsone dam, which has since been halted, and its controversial road building in Pakistan’s disputed border region.

To improve this, a group of Chinese and foreign non-governmental organisations have committed to helping China develop guidelines under the umbrella of the China Green Leadership: Belt and Road Green Development project.

Finance gets on board

The BRI is an opportunity to scale-up green finance and coordinate international lending institutions to hasten the uptake of environmental risk into loan decisions.

During the Hangzhou G20 summit in August 2016, China championed green finance and has since demonstrated its commitment as the largest issuer of green bonds in 2016. Meanwhile, the China-led Asia Infrastructure Investment Bank, a key supplier of BRI investment, has stated a commitment to ensuring its projects are “lean, clean and green".

In the past, China’s overseas investments have courted controversy for their environmental impacts, particularly in the resources sector, such as mining or hydropower. Through the New Silk Road, China has the opportunity, brought about by globalisation, to improve the capabilities of its environmental enterprises. Companies who do this efficiently stand to be big winners.

This article was first published in China-Britain Business FOCUS. Please click to read the full report.

Transformative East Coast Rail Link secures mainland investment, enhancing connections to China-funded port.

The East Coast Rail Link: Set to transform the economic prospects of Malaysia's less-developed regions.

Work is set to begin on two of Malaysia's most ambitious infrastructure development projects – the construction of the East Coast Rail Link (ECRL) and a major upgrade to the Kuantan Deepwater Port. Both projects are being bankrolled by Chinese investment, with their development managed by two mainland-led consortiums, a sure sign that Beijing sees the programmes as an integral part of the Belt and Road Initiative (BRI), China's ambitious infrastructure and trade facilitation programme.

The ERCL is one of the key planks in Malaysia's bid to economically rejuvenate its eastern region. With a proposed budget of some RM55 billion (US$13 billion), the 700km rail line is being constructed by the China Communications Construction Company (CCCC), the state-owned infrastructure development giant, and is expected to be operational by July 2024.

Fully-electrified, the oxbow-shaped line will be built in two phases, ultimately connecting Port Klang on the west coast, the country's largest container port, with Kuala Lumpur, the Malaysian capital, while also servicing several urban centres and ports along the eastern seaboard. Its northernmost terminal will be Pengkalan Kubor, a strategically significant town on the Thai-Malaysia border. The line will carry both a 160 kph passenger service and a more sedate 80kph freight service.

With 15 viaducts and 10 tunnels – the longest being 5.6km in length – 70% of the ECRL's capacity will be given over to freight services, with a throughput of more than 54 million tonnes of cargo anticipated by 2030. The remaining 30% will be allocated to the 5.4 million passengers expected to travel the route every year, making it the country's primary inter-regional transport system.

The initial 600.3km phase of the project will run from the Gombak Integrated Transport Terminal in the state of Selangor to Kota Bharu, the capital of the north-eastern state of Kelantan. With 21 stops along the way, it will connect Kota Sas, Kuantan Port, Cherating, Kertih Port, Kertih Airport and Kuala Terengganu, the largest city on the east coast. The second phase will deliver two extension lines – a 24.5km northern link running from Kota Bharu to Pengkalan Kubor and a 78.6km southern spur connecting Gombak and Port Klang.

In total, 85% of the funding for the project has been provided by the Export-Import Bank of China (EximBank) with the loan repayable at a rate of 3.25%. The remaining 15% has been sourced via Malaysia's sukuk Islamic bond scheme, an initiative managed by three of the country's domestic banks.

Overall, developing the country's rail infrastructure has been designated as a priority by the Malaysian government and forms a key component of its economic transformation plan. This focuses on providing enhanced links between the country's eastern and western seaboard ports, while reducing the development gap between the west coast and the country's less-industrialised eastern states.

It also seeks to remedy one of the country's most pressing infrastructure shortcomings. With the majority of Malaysia's inter-city rail lines running on a north-south axis, many of the towns, cities, ports and industrial zones in the country's eastern region have long been left solely reliant on road links. It is now hoped that the huge investment planned for the rail sector will bring it up to the standard of the country's existing port, air and road networks.

Once completed, the ECRL is expected to jumpstart economic activity in the East Coast Economic Region, which extends across 51% of Peninsular Malaysia and is home to some five million people. It is hoped the new line will boost the region's per annum GDP by 1.5% annually for the next 50 years.

Aside the from the economy of eastern Malaysia, the other key beneficiary of the ECRL is expected to be Kuantan, the state capital of Pahang and the site of the country's most significant east coast port. The port, which offers strategic access to the South China Sea, is currently undergoing a major upgrade. This will double its capacity to 52 million freight weight tonnes (FWT) and allow the largest container ships to berth.

The first phase of the work on the port's new deep-water terminal is expected to be completed by the summer of this year, with phase two scheduled to go online in 2019. Already one of the country's prime conduits for imported goods and raw materials for industrial production and manufacturing, the expanded facility is also expected to handle a greater throughput of imported oil and gas.

The redevelopment work on the port is being headed by the Kuantan Port Consortium, a joint venture between IJM Corporation Berhad, one of Malaysia's leading construction groups, and Beibu Gulf Holding (Hong Kong), a subsidiary of the Guangxi Beibu Gulf International Port Group, one of China's largest port development and management specialists. At present, ownership of the consortium is split on a 60:40 basis in favour of IJM, with the Malaysian government also having a special rights share.

One of the key beneficiaries of the port's redevelopment will be the nearby China-Kuantan Industrial Park, the first Special Economic Zone to be jointly developed by Malaysia and China. At present, the park primarily focuses on power generation, energy-saving initiatives, environmentally-friendly technology, high-end equipment and the manufacturing of advanced materials.

Geoff de Freitas, Special Correspondent, Kuala Lumpur

Mainland-backed fund earmarks US$20 billion investment for 17,000km distant Belt and Road Initiative projects.

New dawn: Rio de Janeiro airport investment marks major upgrade to Brazil-China co-operation.

In total, China has now invested more than US$117 billion in Brazil, according to the Brazilian Ministry of Planning. A significant proportion of this funding has been targeted at three particular sectors – energy, mining and agribusiness – that together account for some 45% of all mainland-sourced FDI. More recently, China has also begun to up its commitments in the country's infrastructure redevelopment sector, in line with Brazil's status as one of the proposed endpoints of the Belt and Road Initiative (BRI).

For 2018, it is expected that the level of Chinese investment in Brazil, a country seen as having one of the most robust economies in Latin America, will rise still further. As a clear indication of this, the Brazil-China Productive Capacity Expansion Fund (BCPCEF), a joint infrastructure investment facility established by the two countries in March 2017, currently has $20 billion in funding earmarked for projects deemed to be mutually beneficial.

In line with the initial agreement, China will contribute $3 for every $1 sourced from Brazil's own financial sector, with the China Latin American Industrial Cooperation Investment Fund (Claifund), the Brazilian Development Bank (BNDES) and Caixa Economica Federal, Brazil's federal savings bank, having signed up as supporters of the initiative. Among the sectors already designated as BCPCEF priorities are logistics, infrastructure, energy/mineral resources, high-tech manufacturing, agribusiness and the digital economy.

Jorge Arcbache, the Secretary of International Affairs at Brazil's Ministry of Planning, is seen as one of the prime movers in this new chapter of China-Brazil economic co-operation. Addressing both the motivation behind this new partnership and the opportunities likely to emerge, he said: "China is no longer solely concerned with raising its export levels or capitalising on the surplus capacity of its production facilities.

"Instead, it is looking to scale its activities up and to establish sustainable business partnerships across the world. This is not just in terms of manufacturing, but also with regards to the supply of services and the sharing of technical expertise.

"There is already a 100 year-long history of China-Brazil co-operation, a legacy that has given both parties a clear understanding of each other's economic realities and trade priorities. Beginning in 2009, this century-old connection has evolved into a new relationship, with China now one of Brazil's key sources of overseas investment."

In 2017, this relationship saw China emerge as one of the principal backers of a number of Brazil's infrastructure development projects. Among the most high-profile of these was the development of the Paranagua Water Terminal, the construction of the Sao Simao Hydroelectric Facility and a major upgrade to the Tom Jobim International Airport, Rio de Janeiro's principal air terminal.

Marina Barros, Sao Paulo Consultant

by Inframation News

Thailand's Department of Highways will meet with investors interested in the M6 and M81 motorway PPP projects on 31 January.

Project information will be released at the pre-tender meeting, with feedback from infrastructure investors as well as financial and legal firms being solicited ahead of the release of requests for proposal for the projects.

The scope of private financing for the M6 and M81 projects includes the design and construction of toll plazas and installation of toll collection and traffic control systems, at an estimated to cost USD 240m and USD 180m respectively.

The concessionaires will also be responsible for operation and maintenance over 30-year concession periods. They will receive availability payments while all toll-related revenues will go to the public sector under the PPP gross cost model.

The 196km M6 will start from Bangpa-in and the 96km M81 start from Bangyai, both located on the Eastern Bangkok Outer Ring Road.

Construction of the M6 and M81 is due to be completed in 2020. Registration for the 31 January meeting is here.

M7 expansion
The government is adding 32km to the M7 (from Pattaya to Map Ta Phut), also due for completion in 2020. ​​​​​​

At its first meeting of the year, Thailand's Cabinet yesterday approved a 75% hike in tolls on the existing Bangkok to Pattaya M7 motorway: from THB 60 (USD 1.85) to THB 105 for passenger cars and up to THB 170 and THB 245 for six and ten-wheeled vehicles. The government is converting the motorway to a closed system by blocking entry points between toll booths.

by James Marshall & Paul Culliford, Berwin Leighton Paisner

In any major tender procurement exercise, both fair procurement and competition law considerations are relevant. A recent decision by the Nepalese Government provides a timely example. Having reached an agreement with China’s Gezhouba Group in June to construct the $2.5bn, 1,200MW Budhi-Gandhaki hydroelectric plant, the Nepalese government subsequently scrapped the plans in November, amid criticisms over the tender process.

This example highlights the importance of complying with rules around open tendering. However, it is not just rules surrounding fair tendering that are relevant. With the continued expansion of competition law across Asia, particularly across the ASEAN Member States, competition law rules have an important part to play in the procurement and tendering process. Key jurisdictions such as China, Singapore, Malaysia and Hong Kong have active competition law regimes, and market participants need to be aware of their obligations under them.

Two key competition issues that could arise during a procurement process are:

• Bid Rigging: Most competition law regimes across Asia (and worldwide) classify bid rigging as illegal cartel conduct. Bid rigging refers to arrangements between competing bidders on bid terms in order to ensure a particular bidder wins. As well as tenderers needing to ensure they avoid any accusation of illegal bid rigging, procurers should be alert to potential bid rigging in the tenders they receive.
• Bidding Consortia and Joint Ventures: The establishment of joint ventures and consortia to submit bids can raise competition law issues. Depending on the terms of the joint venture and the level of integration between the joint venture parties, the joint venturers may need to consider anything from an analysis under competition law provisions that prohibit anticompetitive conduct to full merger clearance before executing the joint venture.

In addition, other competition law issues such as abuse of dominance (when either a procurer or a tenderer is in a dominant market position) and anticompetitive agreements may be relevant.

BLP’s Antitrust & Competition group advises clients on antitrust compliance globally, and would be happy to answer any questions you may have.

by Stefan Chapman, Berwin Leighton Paisner

With news of a consortium led by China’s CITIC announcing plans to acquire a 70% stake in the Kyauk Pyu port located in the western Rakhine state of Myanmar for an estimated US$7.2 bn (which includes the development of a Special Economic Zone ("SEZ") in Rakhine), we examine the challenges that foreign investors face investing in SEZs across the country.

A key goal of the opening up and liberalisation of the Myanmar economy has been to develop industries and grow the export potential of the country. Sitting on the crossroads of China, India and South East Asia, Myanmar is ideally situated to become a key regional manufacturing destination surrounded by large consumer markets.

China’s leaders in turn have ambitious plans for Myanmar as part of the Belt and Road initiative, having identified plans to develop dams, roads, ports and bridges across the country, as well the sharing of its latest technology, products and workplace talent.

The development of SEZs where investors with export orientated businesses can establish their manufacturing base has been identified by the Myanmar Government as a driver for attracting much needed investment. The Government is offering numerous incentives to businesses in operating in such SEZs including the provision of generous tax breaks and the streamlining of bureaucratic processes to simplify the regulatory hurdles.

Seizing the opportunity to take advantage of these benefits developers from Japan, Thailand and China intend to develop large SEZs across Myanmar with projects respectively in Thilawa, Dawei and Kyaukphyu. Chinese developers are looking at the development of the Kyaukphyu SEZ as part of its Belt and Road initiative. While the Japanese developed Thilawa SEZ has started operating the other developments have encountered some difficulty in getting off the ground.
Negotiations on the Kyaukphyu SEZ, providing China direct access to the Indian Ocean, have been held up with negotiations revisiting Myanmar’s equity stake in the project, with it wanting to increase its stake from 15% to 30%, while uncertainty remains on how such an increased investment will be financed on the Myanmar side.

While this project demonstrates the great potential for investing in Myanmar it also showcases some of the considerations which foreign investors must consider in implementing their investments. A key consideration is acquiring the necessary land. Investors should carry out thorough due diligence on the potential land plot at an early stage of every investment.

A common issue in Myanmar is that the person claiming ownership of land may be different from the registered owner on the title documents. This is normally due to restrictions on transferring land or buyers wanting to avoid paying taxes. Rectifying the ownership position can be a time consuming and costly endeavor and can increase the risk of the investment. Another issue which frequently arises is that much of the land outside of commercial centers cannot be developed without a change of use procedure. The change of use procedure depends on the type of land, but in most cases it is a lengthy procedure with little certainty that at the end of the process that the change of use application will be approved.

Investors should also keep in mind that if they are making investments outside one of the SEZs, the Myanmar Investment Law will apply, which requires that any company leasing government land or building for more than 5 years needs to apply for an investment Permit and any foreign investor wanting to enter into a lease for more than a year will need a Land Rights Authorisation from the Myanmar Investment Commission.

With the development of Myanmar’s financial system still in its early stages, foreign investors looking for joint venture partners may find it difficult to find local partners with sufficient access to capital to make the investments required in developing capital intensive projects. Myanmar partners will normally be looking at making their contributions through other means such as providing by providing land, existing assets or other non-cash contributions. Debt financing of large projects will normally require offshore financing.

Identifying and engaging with the relevant authorities at an early stage to avoid subsequent delays in obtaining all the necessary approvals is vital to ensuring the smooth implementation of any investment.

While obstacles to investment remain, proper planning and addressing regulatory issues at an early stage will increase the chances of a smooth and successful investment in Myanmar.

By Mikael Weissmann - Senior Research Fellow, Swedish Institute of International Affairs; and Elin Rappe - Analyst and Programme Manager, Swedish Institute of International Affairs

Sweden and the Belt and Road Initiative

China is Sweden’s largest trading partner in Asia and a priority country in Sweden’s export strategy. Sweden exported to China worth SEK 46 billion in 2016 and its imports from China were worth SEK 59 billion. Bilateral exchanges between China and Sweden are now more frequent than ever. Swedish ministers are regular visitors to China and there have been several visits to Sweden by Chinese leaders of varying importance in recent years. Today, 10,000 Swedish companies are trading with China and more than 500 are established there. An increasing number of Chinese companies now invest in Sweden. Scientific and technological cooperation between the two countries has expanded to new areas such as bio-medicine, energy saving and environmental protection.

Thus, given China’s economic importance to Sweden, a large-scale initiative such as the BRI being promoted by Xi Jinping — domestically, the most powerful Chinese leader since Mao Zedong—might be expected to engender great interest among Swedish policymakers and the business community alike. Thus far, however, responses have been quiet and often cautious. Swedish stakeholders have displayed a tendency to wait and see how developments unfold before making a decision on how to react. At first, the significance of the project was unclear. At the beginning of 2015, however, the initiative took a big step forward when China devoted US$ 50 billion to the new Asian Infrastructure Investment Bank (AIIB) and allocated US$ 40 billion for a Silk Road Fund to finance investment. Sweden became a founding non-regional member of the AIIB, although it is somewhat indicative of Sweden’s cautious approach that it decided to join the bank on the last day on which it was possible to register.

The Silk Road Economic Belt, that part of the initiative most relevant to Sweden, is still in its early stages. So far, the focus has been mainly on China’s closest neighbourhood, with a particular emphasis on Central Asia. While it is clear that Chinese funding has been targeted at Central Asia, in later stages the aim is that the initiative will be more focused on Europe. China claims that the initiative has received a positive response from the 60 countries along the route as well as international organizations such as European Union (EU), the Association of South East Asian Nations (ASEAN), the Shanghai Cooperation Organization (SCO) and the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP).

The real impact of the BRI on Sweden has been very limited. While the BRI has received more attention in the past year or two, as of late May 2016 the Swedish Foreign Ministry was unable to identify any BRI projects in Sweden. However, the Chinese Embassy uses a broader definition of a BRI project and at the same point identified Chinese attempts to bid for the construction of a Swedish high-speed railway and two private wind power projects as BRI projects. China also emphasizes the importance of building a connection between China and Sweden—or, on a larger scale, between Asia and Europe—and that these kinds of infrastructure projects would give rise to a “win-win situation”.

There are still some uncertainties about the execution of the high-speed railway, as well as some scepticism in Sweden about the idea of Chinese companies building such a railway.  However, China sees this as its most important BRI project in Sweden. Chinese companies have already registered in Sweden and are just waiting for the decision to proceed to be taken by the Swedish Parliament. China has no experience of building high-speed railways in developed countries and Chinese companies would like to acquire this experience and a reputation for having these competences, which would open many new doors.

China’s approach in Sweden

When discussing China’s strategy for promoting the concept of the BRI in Sweden, it is important to remember that Sweden is at the very end of the Belt Road, which means that it is obviously not one of the most important countries in the BRI context. The Swedish Foreign Ministry believes that the BRI could lead to business opportunities for Swedish companies, but that these will come in China or Central Asia rather than for companies operating in Sweden.

Diplomacy and business contacts are the tools used by China to promote the BRI in Sweden. China promotes the concept by raising it in its diplomatic meetings with the Foreign Ministry, Swedish government officials and Swedish companies. The Foreign Ministry of Sweden shares this view of the strategy used to promote the BRI. The Chinese Embassy in Stockholm has supported events on the BRI in Stockholm and made presentations to Swedish companies that have shown an interest in the Silk Road Initiative.

China’s promotion of the BRI in Sweden is targeted mainly at politicians. However, most of the BRI-related contacts in Sweden have been taking place between Chinese companies and various government agencies, such as the Swedish Transport Agency on the subject of the highspeed railway. In addition to business, Ambassador Chen Yuming has also mentioned the importance of student exchanges and increased cultural exchange between China and Sweden as important aspects of the BRI. However, when asked directly what China has done to actively engage Sweden in the BRI, a representative from the Chinese Embassy responded: “Not much frankly”.

China welcomed Sweden’s decision to become a founding member of the AIIB—but the fact that Sweden announced the decision on the last day that it was possible to register did not signal strong support for the Bank. Within the AIIB, China has not prioritized Sweden because it is a small country and because of its perceived lack of serious commitment. This should be contrasted with countries such as the United Kingdom, which was eager to register to become a co-founder of the AIIB and realized early on the importance of President Xi’s initiative.

Even though Sweden is not one of the most important countries for China in the Silk Road Initiative, China still sees great potential for increased cooperation if Sweden were to decide to engage more actively in the BRI. From China’s perspective, Sweden needs to join the infrastructure projects within the AIIB. According the Embassy, Chinese companies in Sweden want to cooperate more with Swedish companies, but so far the Swedes have been overcautious. There is particular interest in deepening cooperation with Sweden on high-tech manufacturing and emerging industries.

The Swedish response to the BRI

The Swedish governmental actors working on the BRI are mainly in the Foreign Ministry, Growth Analysis and the public-private partnership Business Sweden. The Ministry for Enterprise and Innovation [Näringsdepartementet] has not been actively involved in these questions, but there are signs that this has been changing as the BRI has gained more attention in the past year or so. For instance, the former Minister for Infrastructure, Anna Johansson, participated in the “Belt and Road Forum for International Cooperation” in Beijing in May 2017. Nonetheless, besides the Swedish companies in China, the Swedish Embassy in Beijing, Growth Analysis and Business Sweden still seem to be the three musketeers working on the BRI on the ground in China. Business Sweden’s office in Istanbul monitors the Silk Road Initiative in Central Asia, as does the Eastern Europe department of the Foreign Ministry in Stockholm. Together with Growth Analysis and Business Sweden, the Swedish Embassy in Beijing has organized various seminars on the AIIB. The embassy also regularly organizes visits to Chinese infrastructure projects for Swedish companies, together with Growth Analysis.

There are no formal agreements on the BRI between the governments of Sweden and China and there is no national strategy on the BRI. In fact, as late as a year ago there was scepticism in the Foreign Ministry about whether such a strategy was needed. The BRI was seen as an issue mainly to be handled locally by the embassy in Beijing. While there have been some signs that this perception is changing, Sweden is still far behind other countries. Many other European countries have acted much more swiftly to monitor developments and investigate the possible business opportunities arising from the BRI. Poland, for example, is lobbying to change the route of the Silk Road Economic Belt to go through its territory.

Please click to read the full report.

Export-Import Bank of China to fund completion of Padma Bridge Rail Link, a key conduit of the Belt and Road Initiative.

The Padma Bridge Rail Link: Carrying cars, trains and a nation's economic aspirations.

Later this month, the Export-Import Bank of China is expected to confirm its willingness to cover the US$300 million funding shortfall that has left the Padma Bridge Rail Link in development limbo over the past few months. As well as being a key element in Bangladesh's bid to radically overhaul its internal transport network, the 6.15km bridge is also seen as a prime conduit for the Belt and Road Initiative, China's massively ambitious international infrastructure development and trade facilitation programme.

First mooted in 1999, but not formally commissioned until 2006, the contract to develop the multi-purpose, 42-pillar, $3.69 billion bridge was awarded to China Railway Group, the Beijing-headquartered, state-owned construction company that is, arguably, the world's largest civil engineering conglomerate. As of October this year, progress on the project was said to be approaching the halfway mark.

Once completed, this multi-purpose, double-decker bridge will span the Padma River – actually the lower course of the Ganges, the world's third-largest river – connecting the Louhajong region, south of Dhaka, the Bangladeshi capital, with the districts of Munshiganj, Shariatpur and Madaripur. In addition to the rail link on its lower level, the bridge will also house a four-lane highway on its upper deck. When it comes online in late 2018, it will be the largest bridge in Bangladesh and the country's first fixed river crossing open to road traffic.

The bridge is a key component in the far larger Dhaka-Khulna Railway Project, itself an integral part of Bangladesh's grand strategy to improve access to the capital from the southwest of the country. It is also expected to boost Dhaka's ambitions to become a transport hub for passengers and freight in transit from the coastal areas of the country to its northern and eastern regions.

The railway itself is scheduled to be up and running by 2022 and will cut the travel time from Dhaka and Khulna, Bangladesh's third-largest city, to just three and a half hours, a significant reduction on the current journey time of seven hours or more. As well as installing 215km of upgraded track, 66 large and 244 small bridges have been constructed in order to bring the project to fruition, in addition to the building of 14 new stations and the redevelopment of six existing facilities.

The line itself will also feed into the Southern Corridor of the Trans-Asian Railway, a 14,080km rail route that will eventually run from Singapore to Turkey. One of the primary roles of the Dhaka-Khulna link will be to act as a rapid land transport conduit for goods in passage to and from the Mongla Port, the second-busiest marine cargo handling facility in Bangladesh. A further rail project will also see Dhaka linked to Payra, a new deep-sea port facility being developed in the south of the country.

For Bangladesh, the bridge and its subsequent rail links are just one of seven state-initiated mega development projects set to transform the country, broadening its economic base, upping its appeal for overseas investors, creating jobs and helping to alleviate the poverty that blights the lives of many of its citizens. Among the other key projects under way are the construction of a series of nuclear and coal-fired power-generation plants, upgrades to several of the country's sea ports and a new gas processing terminal.

From China's point of view, the Padma Bridge Rail Link forms part of the Bangladesh-China-India-Myanmar Economic Corridor (BCIM), a key BRI channel. Once completed, the 2,800km corridor will link Kolkata, the capital of the Indian state of West Bengal, with Kunming, the largest city in southwest China's Yunnan province, via Assam, Bangladesh, Manipur and Myanmar.

Geoff de Freitas, Special Correspondent, Dhaka

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By Asian Development Bank

Highlights

• Developing Asia will need to invest $26 trillion from 2016 to 2030, or $1.7 trillion per year, if the region is to maintain its growth momentum, eradicate poverty, and respond to climate change (climate-adjusted estimate). Without climate change mitigation and adaptation costs, $22.6 trillion will be needed, or $1.5 trillion per year (baseline estimate).

• Of the total climate-adjusted investment needs over 2016–2030, $14.7 trillion will be for power and $8.4 trillion for transport. Investments in telecommunications will reach $2.3 trillion, with water and sanitation costs at $800 billion over the period.

• East Asia will account for 61% of climate-adjusted investment needs through 2030. As a percentage of gross domestic product (GDP), however, the Pacific leads all other subregions, requiring investments valued at 9.1% of GDP. This is followed by South Asia at 8.8%, Central Asia at 7.8%, Southeast Asia at 5.7%, and East Asia at 5.2% of GDP.

• The $1.7 trillion annual estimate is more than double the $750 billion Asian Development Bank (ADB) estimated in 2009. The inclusion of climate-related investments is a major contributing factor. A more important factor is the continued rapid growth forecasted for the region, which generates new infrastructure demand. The inclusion of all 45 ADB member countries in developing Asia, compared to 32 in the 2009 report, and the use of 2015 prices versus 2008 prices also explain the increase.

• Currently, the region annually invests an estimated $881 billion in infrastructure (for 25 economies with adequate data, comprising 96% of the region’s population). The infrastructure investment gap—the difference between investment needs and current investment levels—equals 2.4% of projected GDP for the 5-year period from 2016 to 2020 when incorporating climate mitigation and adaptation costs.

• Without the People’s Republic of China (PRC), the gap for the remaining economies rises to a much higher 5% of their projected GDP. Fiscal reforms could generate additional revenues equivalent to 2% of GDP to bridge around 40% of the gap for these economies. For the private sector to fill the remaining 60% of the gap, or 3% of GDP, it would have to increase investments from about $63 billion today to as high as $250 billion a year over 2016–2020.

• Regulatory and institutional reforms are needed to make infrastructure more attractive to private investors and generate a pipeline of bankable projects for public–private partnerships (PPPs). Countries should implement PPP-related reforms such as enacting PPP laws, streamlining PPP procurement and bidding processes, introducing dispute resolution mechanisms, and establishing independent PPP government units. Deepening of capital markets is also needed to help channel the region’s substantial savings into productive infrastructure investment.

• Multilateral development banks (MDB) have financed an estimated 2.5% of infrastructure investments in developing Asia. Excluding the PRC and India, MDB contributions rise above 10%. A growing proportion of ADB finance is now going to private sector infrastructure projects. Beyond finance, ADB is playing an important role in Asia by sharing expertise and knowledge to identify, design, and implement good projects. ADB is scaling up operations, integrating more advanced and cleaner technology into projects, and streamlining procedures. ADB will also promote investment friendly policies and regulatory and institutional reforms.

This article was first published by the Asian Development Bank. Please click to read the full report.

Domestic structural and legislative changes within the region's most populous nation could have far wider implications.

Traditional Uzbakistani jewellery: A treasure lost to the wider world for more than 20 years.

The Uzbekistan jewellery sector is the latest to benefit from the largesse of Shavkat Mirziyoyev, the 60-year-old career politician who became the country's President in November last year. His most recent legislative initiative has seen import tariffs scrapped for jewellery equipment, raw materials, parts/components, and finished items. To crown it all, he has also abolished VAT on the sale of imported and domestically-produced jewellery until at least January 2020.

The move, however, didn't come about without one or two stipulations. Primarily, the government has specified that all of the additional revenue accruing to the industry on the back of these duty cuts must be re-invested in updating the sector's technological resources, with any remaining funds used as working capital, allowing manufacturers and exporters to up their output.

Assuming jewellery businesses adhere to their side of the deal, any such upgrade, coupled with the enhanced cash flow, could prove most timely. As well as boosting the domestic industry, Mirziyoyev's initiative has also opened up the market, with the end of its prohibitive import tariff regime suddenly making Uzbekistan's jewellery sector a tempting prospect for both overseas purchasers and investors, with Russia, Ukraine, China and Turkey seen as the most likely beneficiaries.

While the end of its offputtingly excessive levies may mark something of a new dawn for the country's jewellery trade, another earlier initiative is also set to make a substantial impact. Back in September, the country's 20-year-old policy of pegging the som – the local currency – to the US dollar at an artificially low rate was abandoned, while restrictions on the amount of foreign currency that businesses and ordinary Uzbekistanis could purchase were also removed.

This change was designed to end the country's two decades of virtual economic isolation, with would-be investors long-deterred by the unjustifiable exchange rate and the currency restrictions. It is now anticipated that Uzbekistan – the most populous country in formerly Soviet Central Asia – could see overseas investment levels return to the highs enjoyed prior to 1994, the year that Mirziyoyev's predecessor, Islam Karimov, introduced the fixed-rate currency exchange system.

As a sign of the importance of the jewellery industry within the country's newly liberalized economic regime, the Uzbekistan Jewellery Industry Association (Uzbekzargarsanoati) was launched by presidential decree late last month in Tashkent, the national capital. As well as taking on responsibility for preserving and enhancing the country's centuries-old traditional jewellery styles and craftsmanship, the body will also have a more contemporary mandate, which will see it charged with driving exports, overseeing overall quality standards and ensuring the industry's major players follow through on the government's call for a widespread technological upgrade.

The legislative, structural and technological changes set to reinvent the country's jewellery industry, however, are expected to have repercussions well beyond its borders. In fact, many within the business anticipate that Uzbekistan's re-emergence onto the wider economic scene could transform Central Asia's jewellery sector.

At present, the jewellery scene in the region is dominated by two particular players – Kazakhstan and Kyrgyzstan – both of which bring something entirely different to the market. Kazakhstan has a high proportion of affluent consumers, many of whom are keen jewellery purchasers, attributes that have seen the country develop an admirable distribution network, while also seeing it as home to the Esentai Mall, the region's only truly premium shopping destination.

By contrast, Kyrgyzstan has made itself equally important to the Central Asian jewellery trade by clearly establishing itself as the region's key re-export hub. Overall, the country has its extremely liberal business regime and its accompanying low import tariffs to thank for its strategic – and lucrative – re-exporting role.

Ironically, all of this jostling for position within the region may see many of the countries re-adopt the supplier/distributor roles they held some 2,000 years ago at the time of the classic Silk Road. With the Belt and Road Initiative – China's ambitious infrastructure development and trade facilitation programme, widely seen as the successor to this ancient trade route – set to snake its way through Central Asia and Eastern Europe, it could be most timely that such a venerable hierarchy is about to be restored.

Leonid Orlov, Moscow Consultant

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