來源：新華財金社

"絲綢之路經濟帶"與歐亞經濟聯盟的對接，正在使區域經濟融合駛入快車道。日前，中國社會科學院俄羅斯東歐中亞研究所研究員李建民表示，歐亞經濟聯盟所跨區域是"絲綢之路經濟帶"西出國門的必經之路，"絲綢之路經濟帶"與歐亞經濟聯盟對接實屬必要，"一帶一路"倡議與歐亞經濟聯盟互為機遇、相互支撐，對接合作已進入從理念到行動的新階段。

李建民介紹說，歐亞經濟聯盟是一個由俄羅斯主導的、在後蘇聯空間推動的一體化國際組織，成立於2015年，目標是建立類似於歐盟的經濟聯盟。目前成員國包括俄羅斯、哈薩克斯坦、白俄羅斯、吉爾吉斯斯坦和亞美尼亞，五國均是"一帶一路"建設的重要合作夥伴。

近10年來，歐盟三次東擴不斷擠壓俄羅斯經濟空間,俄羅斯主導的後蘇聯空間一體化進程不斷加快：從2010年成立的俄、白、哈關稅同盟，到2012年形成的統一經濟空間；從2015年1月1日啟動的歐亞經濟聯盟，再到2025年實現區域內商品、服務、資本和勞動力的自由流動，歐亞經濟一體化路徑業已形成。

"歐亞經濟聯盟戰略目標是利用俄羅斯在現有區域內的優勢來實現經濟一體化。"李建民表示，區域一體化包括功能性一體化和制度性一體化兩層含義，歐亞經濟聯盟是緊密的制度性一體化，成員國之間通過簽訂條約或協定逐步統一經濟政策和措施，甚至建立超國家的統一組織機構，並由該機構制定和實施統一的經濟政策和措施。從世界區域一體化的實踐來看，制度性一體化更有效，也具有更為重要的現實意義。

李建民認為，同樣是區域一體化的組織，相較歐盟和東盟，歐亞經濟聯盟僅用5年時間就完成了"三級跳"，發展前景特別引人關注，影響其今後發展的重要因素來自兩方面：一方面，歐亞經濟聯盟內部現有成員國之間經濟發展存在差距，另一方面，歐亞經濟聯盟面臨協調與"絲綢之路經濟帶"的關係。

"俄羅斯一家獨大，一體化具有人為推動的特徵，是歐亞經濟聯盟的一大特點。"李建民介紹說，俄羅斯具有國土面積和經濟總量的優勢，佔歐亞經濟聯盟的市場份額約90%，成為聯盟的"推進器"和"發動機"，作為主導國，該國的經濟發展對聯盟的發展具有決定性影響。歐亞經濟聯盟主要由俄羅斯推動，具有強制性和高效率的特點，但尚未實現預期效果，成員國之間的貿易依存度太低。

李建民說，隨著中俄兩國推進"絲綢之路經濟帶"建設和歐亞經濟聯盟的對接，中俄經濟合作進入縱深發展的新階段，而俄羅斯大力實施的"向東看"政策，為中俄經貿進一步發展釋放更大合作潛力。今年，中國與歐亞經濟聯盟簽署經貿合作協定，中俄已啟動歐亞經濟夥伴關係協定聯合可行性研究，並取得階段性成果。以"一帶一路"建設與歐亞經濟聯盟對接為主線的合作格局進一步鞏固。

至於對接路徑，李建民表示，可以從戰略層面、制度層面和優先領域三個方面考慮。職能部門間可以搭建一個互利共贏的合作平台，企業、行業間可以瞄準經貿、產能、互聯互通等方面，若能落實貿易便利化措施，就能擴大貿易規模，利於繁榮歐洲和亞洲的經濟。李建民建議說："我們目前需要加強對歐亞經濟聯盟制度和運行機制的研究，並以法治化保證'一帶一盟'對接，提高有效應對的能力。"

原文鏈接

Series of off and on again mainland-backed energy projects spur growing concerns over sustained national power outages.

Can BRI-backed hydropower projects nip Nepalese energy problems in the bud?

On 19 September 2018, the newly-elected Nepalese government announced it was cancelling its agreement with the China Three Georges Corporation (CTGC) to build the US$1.5 billion West Seti Hydropower Project. Set in Western Nepal, this 750 MW project was one of the country's flagship Belt and Road Initiative (BRI) developments and the second most expensive hydropower installation ever to be given the green light by Kathmandu. Within the space of a week, it was then announced that the China Gezhouba Group Corporation (CGGC) had been reappointed to oversee the 1,200 MW Budhi Gandaki project – with its US$2.5 billion price tag making it the most expensive such project in the country's history.

In total, the West Seti Project has been thirty years in the making, even though the Nepalese government only signed a Memorandum of Understanding (MoU) with CTGC with regard to the initiative as late as 2012. In recent months, however, it is understood that the state-owned mainland power company had become increasingly disillusioned as to the overall viability of the project.

The issue came to a head during a two-day meeting between CTGC and the Investment Board Nepal (IBN), the government body charged with seeing the project through. Negotiations between the two eventually faltered, despite an offer from the Nepalese side to cut the project's agreed installed capacity from 750 MW to 600 MW and to ratify a future power purchase agreement in US dollars (rather than in Nepalese rupees) as a way protecting the deal from any untoward currency fluctuations.

Overall, it is thought that CTGC's concerns over the cost of resettling the villagers likely to be displaced by the project, together with the expense of ameliorating the high level of the anticipated environmental impact, caused it to pull out. At present, the two sides are said to be at an impasse, with the future of the project far from clear.

In the case of the Budhi Gandaki Project, the reappointment of CGGC came 10 months after the company had been dismissed as the lead contractor by the previous Nepalese administration, as headed by former Prime Minister Sher Bahadur Deuba, when a decision was taken to develop the project with solely local financing.

Addressing the apparent change of heart, Gokul Baskota, the country's current Minister for Communications and Information Technology, said: "The decision to scrap the agreement with CGGC, as taken by the previous administration, lacked any proper grounding. For our part, we have decided to correct that, largely as Nepal doesn't have the capacity to build such a large project on its own, while securing the necessary funding has also proven something of a challenge."

Once completed, the now back-on-track 1,200 MW Budhi-Gandaki plant will virtually double Nepal's current hydropower capacity. In order to help balance the books until the project begins turning a profit, CGGC has agreed to work under the engineering, procurement, construction and financing (EPCF) model, an arrangement that will defer many of the costs for the Nepalese side.

The decision to bring CGGC back on board, though, has not been without controversy. This has mainly been on the grounds that the project was handed back to the Chinese company without any competitive bidding process being undertaken, a requirement that could have resulted in lower overall costs.

Widespread concern has also been caused by the level of displacement likely to be necessitated by the project. In all, more than 8,000 households will be compromised by the development, with the reservoir for the storage project set to submerge 3,560 homes, while a further 4,557 will also be adversely affected.

Such concerns, however, are seen as being more than balanced by the fact that Nepal is currently suffering a massive energy-production shortfall, one that obliges it to buy power from neighbouring India at a premium cost. It is a problem that is only being exacerbated by the fact that many of the country's planned power projects continue to run behind schedule and over budget.

As a result, hastening the completion of the Budhi Gandaki project is seen as the best way of heading off major power outages across the country. Indeed, it is a problem that was further compounded back in 2015, when an earthquake damaged 31 of the country's hydropower installations, cutting its power generation capacity by 20% overnight.

Geoff de Freitas, Special Correspondent, Kathmandu

By Andrew Haskins and Terry Suen, Colliers International

Executive Summary

Despite capital controls, total Chinese investment in overseas property assets reached an all-time high of USD39.5 billion in 2017, up by 8% over 2016. Chinese investment in Asian property assets grew 34% to USD12.5 billion, and was focused on Hong Kong, Japan and Singapore. Chinese interest in Hong Kong will probably moderate in 2018, but we think it will stay high in Singapore where the office and residential markets have entered a multiyear upcycle. Singapore remains one of our preferred Asian investment property markets.

Looking ahead over five years, China's ambitious "One Belt, One Road" project, coupled with the firm Chinese economy and RMB strength, ought to drive Chinese investment in emerging South East and South Asian markets. Large-scale investment in central Asian markets should come later. OBOR investment will be led by big infrastructure projects usually handled by state-owned groups. Such projects should stimulate growth in wealth in cities and regions along the project’s chief corridors, enhancing existing investment opportunities.

South East Asian countries mostly look attractive for property investment, although Indonesia perhaps stands out for long-term growth potential and the Philippines for breadth of development opportunities. Shortage of quality property stock suggests that development projects with local partners will generally represent the most effective strategy for accessing the markets. We expect these projects to target industrial and residential property in particular.

While the OBOR project covers India and the country has huge long-run growth potential, Chinese capital is unlikely to be a driving force in India for political reasons. Pakistan is a big beneficiary of OBOR infrastructure investment, but it is too early to consider this country as a major investment destination.

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Mainland and Hong Kong contractors drafted in to steer struggling coal-fired power station developments.

The Quynh Lap 1 Power Plant: Vital coal-fired facility set to be mainland-managed.

Two of Vietnam's major coal-fired thermal power station projects have been turned over to mainland / Hong Kong developers following fears that local contractors lacked the funds and know-how required to see the initiatives through. With much of the country's power-renewal programme reliant on financial backing funnelled via the Belt and Road Initiative (BRI), relinquishing control of such projects to the primary backers has been widely seen as making sound logistical and operational sense.

The first project to be handed over, in June this year, was the Quynh Lap 1 Power Plant, which was originally being developed by the Vietnam National Coal and Mineral Industries Holding Corporation (Vinacomin), a state-owned mining conglomerate. Responsibility will now fall to Geleximco-HUI, a joint venture between Geleximco, a Hanoi-based investment house, and Hong Kong United Investors (HUI). According to a statement issued by the Vietnamese government, the move follows growing concerns that Vinacomin's position was becoming increasingly untenable, given that the company had debts in excess of VND78 trillion (US$3.4 billion) and a debt-to-equity ratio of 2.5.

The following month, the transfer of the investment rights relating to the Long Phu III Thermal Power Plant was also mooted. Prior to that, the project had been handled by PetroVietnam, the Hanoi-headquartered state-owned oil and gas giant.

While a final decision has yet to be made, a shortlist of two proposed new operators has been agreed upon, both of which are largely China-backed. This sees, in one corner, a consortium of five mainland firms (including Zhejiang Energy International, a Hong Kong-headquartered utility business) and WIN Energy, a Hanoi-headquartered privately-owned power business, squaring up against the China Southern Power Grid Company (CSG), a Guangzhou-based state-owned energy supplier, in the other.

In CSG's favour, it is no stranger to the Vietnamese market. It is already the lead contractor on the $1.75 billion Vinh Tan 1 Thermal Power Project, China's biggest single investment in the country. Due to come online before the end of the year, the project will supply Vietnam's national grid with 7.2 billion KWh on an annual basis once its construction and testing period has been completed. The company already supplies Vietnam with about 33.4 billion kWh of electricity through a number of other, previously delivered projects.

The moves to reallocate responsibility for these projects come at a time when the Vietnamese government has been under increasing pressure from the country's environmental lobby to scale back on its plans for thermal-coal powered plants. Despite the obvious depth of local feeling, ministers have maintained that there is little option but to continue to pursue the current programme.

Defending the government's position, Hoang Quoc Vuong, the Deputy Minister of Industry and Trade, said: "Due to the high costs of renewable energy and the annual 10-15% rise in domestic demand for power that we are continuing to see, we have no choice but to boost the development of the coal-fired power sector.

"While we dearly want to develop renewable energies, that remains a very real challenge. This is largely down to a combination of technical difficulties and a lack of stability with regard to the country's wind and solar power generation facilities."

Of the country's coal-fired projects, China is now by far the largest financier. According to a report by the Green Innovation and Development Centre (GreenID), a Hanoi-based champion of renewable energy, as of the end of 2017, of the country's 27 coal-fired thermopower plants, 14 had been built by Chinese contractors. At the same time, some $8 billion (or 50%) of the total foreign capital flowing into Vietnam's coal-fired thermal power sector was derived from mainland China.

It is also proving harder to find non-mainland based funding for coal-fired electricity-generating projects. Indeed, the London headquartered Standard Chartered Bank is the latest of a growing number of Asia-Pacific-active banks to put a block on coal-related power projects. To date, Singapore's three leading banking groups – DBS, the Oversea-Chinese Banking Corporation and the United Overseas Bank – as well as Japan's Sumitomo Mitsui Banking Corporation, Mitsubishi UFJ Financial Group and Mizuho Financial Group, have all adopted a policy of vetoing such investments.

Marilyn Balcita, Special Correspondent, Hanoi

By Jonathan E. Hillman, Fellow, Simon Chair in Political Economy, and Director, Reconnecting Asia Project, Center for Strategic & International Studies (CSIS)

The big numbers being floated for President Xi Jinping’s signature foreign policy effort, the Belt and Road Initiative (BRI), do not add up. Popular estimates for Chinese investment under the BRI range from $1 trillion to $8 trillion, hardly a rounding error. Without a clearer sense of the BRI’s scale, it is difficult to assess its economic and strategic implications. A closer look reveals the highest figures are inflated, scoring political points for Beijing in the short term but also creating unrealistic expectations.

Mapping the BRI is part art, part science. It is a moving target, loosely defined and ever expanding. It includes Chinese investment in roads, ports, and other hard infrastructure. It includes trade deals, transportation agreements, and other “soft” infrastructure efforts. If you traveled to China since September 2013, congratulations, you may have participated in the BRI. It includes tourism and other “people-to-people” ties such as education and cultural exchanges.

The BRI is not constrained by geography or even gravity. When announced in 2013, it had two major components: an overland “belt” across the Eurasian supercontinent and a maritime “road” across the Indian ocean and up to Europe via the Suez Canal. Since its announcement in 2013, this vision has stretched into the Arctic, cyberspace, and outer space. Countries have signed onto the BRI in places as far-flung from China as Central America.

But participation in the BRI is less meaningful than it might seem. Roughly 70 countries have joined, but their levels of Chinese investment vary widely. Pakistan has attracted some $60 billion for projects. South Korea signed up, but as of last year, it had no BRI projects. Despite being among the most vocal critics of the BRI, India has still attracted some Chinese investment. An industrial park in Gurajat, for example, would be easily branded as a BRI project elsewhere. In sum, participation in the BRI is not a prerequisite for doing related business with China, nor is participation a guarantee of more business.

There is no firm timeline for the BRI. Some projects and activities that started before the BRI was announced have been rebranded and are often counted along with more recent projects. Until recently, some experts expected the BRI would be phased out when Xi left office in 2022. But having done away with presidential term limits, Xi could stick around for longer, as could his signature foreign policy vision. Theoretically, the BRI could stretch to 2049, the 100th anniversary of the People’s Republic of China and Xi’s target date for establishing China as “fully developed, rich, and powerful.”

Different assumptions for these basic questions—what, where, who, and when—naturally lead to different estimates for the BRI’s size. Stretch any dimension, and the numbers start to rise, especially if looking into the future. But look at what has happened to date, and a more modest picture begins to emerge, including risks that could eventually deflate the BRI’s grand ambitions.

Consider the most common estimate: $1 trillion. This figure is usually tied to promised infrastructure investment. Note the two key qualifiers: infrastructure and promised. Infrastructure, which the CSIS Reconnecting Asia Project tracks, is a major component of the BRI, but as noted earlier, not the entirety of it. There is a natural lag between infrastructure pledges and actual investment, given the complexity of the project planning and construction process. But China, like other countries, also tends to promise more than it delivers.

The best available data suggest that China’s $1 trillion promise has not been met, and at current trends, will not be met for several years. The Reconnecting Asia Project is tracking roughly $90 billion of Chinese funding for transportation projects (specifically, railways, roads, ports, and dry ports) during 2014–2017. Later this year, we’ll add power plants, which along with other energy projects, play a significant part in BRI activities. For example, roughly half of the China-Pakistan Economic Corridor’s investments are energy related.

The American Enterprise Institute (AEI) and Heritage Chinese Global Investment Tracker, which tracks Chinese construction and investment across all sectors, puts the total at roughly $340 billion during 2014–2017. According to AEI’s Cecilia Joy-Perez and Derek Scissors, current trends suggest it would take six to seven years for the BRI to reach the $1 trillion mark. Given limited private-sector participation, they reason that state-driven activities could push the BRI across the $2 trillion threshold in the 2030s.

So how did BRI estimates balloon to $8 trillion? Here’s a theory: they conflate Asia’s massive infrastructure needs with comparatively modest Chinese investments.

Many references to the $8 trillion figure lead back to a 2016 commentary in the Hong Kong Economic Journal, which noted, “The financial experts at the State Council have estimated that ‘One Belt, One Road’ would cost as much as US$8 trillion if it was fully implemented following Xi’s orders.” That State Council estimate has remained elusive. But a similar number was in circulation around the same time. In 2009, the Asian Development Bank (ADB) estimated that developing Asia needed $8 trillion of infrastructure investment during 2010–2020.

If there was a State Council estimate, its author may have adopted the ADB’s figure for several reasons. The BRI has only been defined in broad strokes, making reliable estimates difficult if not impossible. And why create a new estimate from scratch, when you could borrow an existing one? Additionally, the BRI has evolved since its announcement. A vision document for maritime cooperation under the BRI was not issued until June 2017. Even the name has changed, having started as the “One Belt, One Road” (OBOR).

Misperceptions about the BRI’s size carry practical implications. For now, Chinese officials can enjoy watching the estimates rise and could even reap some political benefits. They have conjured up a massive carrot that has caught the world’s attention. Some developing countries are “linking” their development plans with the BRI. International companies have assembled teams to source BRI deals. All of these activities reflect a willingness to organize, at least in appearance, around China’s vision.

But China also faces downsides to unrealistic BRI estimates. The BRI’s size excites some observers but worries others. As the effort inflates, so do concerns about its impact on debt levels, the environment, and even regional security. For China, perhaps the biggest risk is unmet expectations. With the world watching, China now faces pressure to deliver on its promises. Even if Chinese officials did not promise trillions of dollars in investment, they have done little to correct these misperceptions.

A little modesty about the BRI’s scale could go a long way. For supporters, it could help reset expectations. For skeptics, it could temper fears about the BRI’s risks. The benefits are obvious, but they require bringing Xi’s grand vision down to earth. That is a price few of his advisers will be eager to pay.

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Mainland money has triggered a property boom in Thailand's most sought-after locations, with corporate and individual investors increasingly keen to secure a stake in one of the most popular vacation destinations in the Asia-Pacific region.

Thai Smile: Looking to woo mainland holidaymakers with budget Bangkok flights.

Tourism in and between many of the countries along the route of the Belt and Road Initiative (BRI) is growing fast, with holidaymakers from China particularly prized for their big-spending ways. These aside, about 85 million trips are expected to be made to China from countries in the BRI region between 2016 and 2020, with the collective spend estimated to be about US$110 billion. After China, one of the other big beneficiaries is likely to be Thailand. In 2017, the country received more than 9.8 million tourists from China alone, representing about 28% of its total arrivals for the year.

For want of a somewhat unfortunate phrase, it has not all been plain sailing, however. In July this year, the tragic capsizing of a tour boat in Phuket, the island province that is one of Thailand's primary tourist destinations, resulted in the deaths of 47 Chinese visitors. Inevitably, this incident has deterred many mainlanders from visiting their southern neighbour.

An immediate consequence was that Chinese tourist arrivals fell 0.9% year-on-year. Although the figures are not yet in, the Thai Tourism Ministry expects the overall figures for August to show a far greater decline, with some estimating the drop to top 14%. As a result, the official target for Chinese visitors in July-December this year has been cut by 669,000 (11.5%) to 5.15 million.

Over the long term, however, the disaster is unlikely to derail the tourism sector's underlying growth. Nor is it set to deter the many overseas investors – with a significant proportion of them mainland-based – who have been only too keen to back the many property- and tourism-related developments spurred by the BRI.

As well as the many major BRI-backed infrastructure projects already under way – including new airports, rail links and road networks – a number of commercial operators have also looked to capitalise on the growing Thai-China tourism trade. Nok Air, a Bangkok-based budget airline, for instance, has opened a direct route between Pattaya and Zunyi, a prefecture-level city in China's Guizhou province, while also announcing plans to introduce flights to several other mainland cities, including Baotou, Linyi, Yichang and Nanchang. Meanwhile, Thai Smile, the budget-flight wing of Thai Airways, the national carrier, has launched a Bangkok-Datong service, linking the Thai capital with one of the most popular tourist destinations in the northerly Shanxi province.

In terms of larger-scale plans, moves are also afoot to develop U-Tapao, currently a joint civil-military airport, into a third Greater Bangkok gateway facility in line with the aims of the Eastern Economic Corridor (EEC) initiative, a key element of the BRI masterplan. The EEC initiative also extends to a planned upgrade to the tourism facilities of Pattaya and Rayong, two of Thailand's primary visitor destinations.

Both resorts have attracted substantial investment from China, a development that has triggered something of a property boom in the two locations. In fact, with 86% of Chinese property buyers first visiting the locations they ultimately invest in as tourists, this has seen Bangkok, as well as Pattaya and Phuket, enjoy a surge in real-estate purchases by mainland Chinese buyers.

Huang Xiaodan is the Founder and Chief Executive of Uoolu, a Beijing-based portal that matches would-be Chinese buyers with overseas properties. Highlighting the appeal of Thai property, he said: "Thai real estate stands out on account of its high value proposition, impressive rental yields and low thresholds. In total, Thailand represented half our total 2017 transactions, driving our turnover up by 307%."

Despite Thailand's clear success in attracting individual mainland investors into its property market, the corporate sector is proving to be a little harder to woo, at least according to Suphin Mechuchep, Managing Director of JLL Thailand, a Bangkok-headquartered commercial-real-estate agency. Assessing the current state of the market, he said: "While Chinese corporations have been actively looking for opportunities to invest in a wide range of real-estate assets in Bangkok and in the major resort markets, actual investment activity has remained limited. To date, most of the deals that have actually gone through have either been joint venture property development projects or acquisitions of stakes in Thai property development companies."

Indeed, a quick look at the projects underway clearly bears out Mechuchep's point. Among the currently active Thai-Chinese joint venture property developments is the Baba Beach Club Phang Nga, comprising 16 hotel villas, 104 residential suites and 42 villas, with the project backed by China's Junfa Real Estate and Charn Issara Development, a Bangkok-based property developer. China-based investors are also working with Thai developers on a number of other projects, including The Terminal Phuket, a mixed-use development, and Artemis Sukhumvit 77, a 30-storey residential project.

Looking to the future, the Thai cabinet recently approved plans for a Southern Economic Corridor (SEC), an infrastructure initiative comprising 28 projects at a combined cost of $6 billion. Stretching down the coastline southwest of Bangkok, it will transform the region into the Thai Riviera, a series of resorts that will form the backbone of the SEC. As part of the plan, four coastal provinces – Phetchaburi, Prachuap Khiri Khan, Chumphon, and Ranong – will be reinvented as high-end tourism hubs.

While the combined scale and scope of these tourism-oriented initiatives may seem daunting, it should be remembered that currently less than 10% of Chinese citizens – the primary target of all these developments – are passport holders, a clear indication of the vast growth potential of the mainland's outward-bound tourism sector.

Geoff de Freitas, Special Correspondent, Bangkok

By Deloitte

Executive summary

It is difficult to think of any recent venture that has generated such a mixture of optimism and discussion as China’s transcontinental development project, the $900 billion Belt and Road Initiative (BRI).

Some in the West perceive it as simply a vast infrastructure project. Others fear its benefits are overestimated and the political, economic and environmental risks poorly understood. Or they worry BRI might, as the Financial Times put it in an editorial, “export the worst aspects of the Chinese economy, while increasing the strains on its already stressed financial system.”

The view from China is quite different. For President Xi Jinping, BRI is “the project of the century.” BRI’s proponents point to its successes to date and the promise of more to come in revitalising infrastructure ― and by extension trade and economic growth―across Asia and beyond.

A common complaint is that BRI has mainly benefited China’s state-owned enterprises (SOEs). That is largely true and, given the long investment horizon associated with infrastructure projects, will remain a feature of BRI. However, changes are afoot. BRI’s initial focus was on energy and infrastructure; it is now widening to trade, manufacturing, the Internet and tourism. Multinational corporations (MNCs) with competitive advantages are winning BRI-related deals, and we predict more will do so in the near future. In addition, geopolitical and financial risk considerations mean China will need to ensure more widespread participation in projects.

If we were to draw an analogy, it would be this: BRI is a journey, one with opportunities and risks, and one that―four years in―is still closer to its start than its end. That means investors need to take a longer view of projects than they are accustomed to doing. And while we do not downplay the risks, we believe they are less severe than many assume.

Although it remains to be seen how successful BRI will be, it is indisputably here to stay. In May 2017, a senior official at the top economic planning body, the National Development and Reform Commission, said China would spend a further $600– 800 billion over the next five years on outbound investment, and that “a fairly large proportion . . . will go into markets related to the Belt and Road Initiative.”

And, in October 2017, BRI was written into the Communist Party’s constitution, a sign of the project’s policy significance, and an indication, too, that Beijing wants to boost the participation of private firms.

In short, BRI, which has been a large part of the investment landscape across a swathe of the world for four years, will become increasingly important.

This paper summarises Deloitte’s key BRI insights for 2018, and also explains how firms can best position themselves to seize the ever-widening range of BRI investment opportunities.

Conclusion: Three key insights and predictions

Our experience with BRI projects over the years has allowed us to develop three key insights and predictions, all of which have appeared in this report in some form.

Firstly, BRI is much more than a Chinese-funded infrastructure project. And although SOEs have undertaken the bulk of BRI projects to date, we expect many more POEs and MNCs will become involved in the near future. Linked to this, many projects are underpinned by strong bilateral relationships between China and the countries concerned, which makes these investments more secure than outsiders might imagine. And while most participants are developing countries, it is also true that developed nations are increasingly involved.

Secondly, BRI’s opportunities will become increasingly plentiful, but a longer timeframe is needed when measuring returns―10–15 years rather than 3–5. And although many projects involve higher risks than conventional investments, it is important to keep those risks in perspective and deal with them dynamically.

Thirdly, BRI is a collaborative ecosystem that to date has focused on energy and infrastructure, but that over the next five years and beyond will evolve to concentrate on trade, manufacturing, the Internet, tourism and other aspects.

It is worth saying, too, that Beijing’s view of BRI is not well understood abroad: It sees this initiative as comprising a different interpretation of globalisation, one that is about optimising returns, not about maximising them in solely financial or commercial terms. This is encapsulated in the principle underpinning BRI: 共商共建共享, which translates as, “Trade together, build together, enjoy together.”

And so, while BRI is in part an initiative designed to push China’s economy to the next stage, to Beijing it is more too: a way to create a more equitable global economic system. MNCs that manage to position themselves well should find BRI a striking, multiyear opportunity.

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US$10 billion tourism-focused Khonphapheng Special Economic Zone project becomes latest China-Laos joint venture.

SEZ's: Set to boost employment prospects across Laos, while remedying infrastructure shortfall.

Laos' Belt and Road Initiative (BRI) backed infrastructure upgrades have enjoyed a busy few months of late. Not only has it been announced that work on the China-funded US$6 billion Laos-China Railway project had passed the 20% completion mark, but it has also transpired that the Lao government and the Guangdong Yellow River Industrial Group (GYRIG) have come to an agreement on the proposed development of a Special Economic Zone (SEZ) in the country's Champassak province.

The formal announcement follows the August 2017 signing of a memorandum of understanding between the two parties, which saw the GYRIG agree to review the overall viability of the project and to work on initial design concepts. With that review now completed, apparently to the satisfaction of all the parties concerned, GYRIG has formally committed to covering at least part of the $10 billion cost.

With the project officially designated as the Khonphapheng Special Economic Zone, it will be sited in the far south of the country, near to the Cambodian border. Set close to Pakxe, the provincial capital of Champassak, it falls within the highly scenic Siphandone region. Ringed by a number of national parks and adjacent to the Khonephapheng Falls – the mightiest waterfall in Southeast Asia – it is a region that already attracts thousands of tourists a year. Handily, it is less than 400km by road from Siem Reap, Cambodia's prime tourist destination, and its nearby international airport.

According to the strategic agreement between the Laos authorities and the Chinese contractor, the SEZ will be built in two phases, with the first scheduled to be completed by 2025. This initial stage will focus on ensuring all the zone's required infrastructure is in place, including roads, utilities and drainage facilities.

The second phase will then involve the construction of the actual on-site commercial properties, including several restaurants, a shopping centre and range of other tourism-related businesses. Over the long-term, there are also plans in place to construct a dedicated air-transport facility. In total, the project is estimated to require about 9,000 hectares of land, of which 7,000 has already been allocated.

This will not be the country's only Special Economic Zone, with the first such site developed in 2002. Today, there are 12 Special Economic Zones in operation, which are in total home to 377 domestic and overseas companies extend across a combined area of 19,612 hectares, and represents total registered capital of $8 billion.

The Lao government is now committed to building 41 further special and specific economic zones, with a combined target of creating 50,000 new jobs. It is hoped that the programme will boost local yearly  per-capita income by as much as $2,400, almost double its current estimated level.

In line with this, in July this year the government introduced a wide-ranging new package of tax breaks, all of them related to Special Economic Zones. As part of this raft of incentives, any SEZ developer that pursues a programme of road construction or ensures the provision of electricity, water or draining services will be granted an exemption from all VAT charges, while other SEZ-related construction activities will only incur VAT at 50% of the statutory rate.

Furthermore, any SEZ developer investing in industrial production, tourism, the services sector, healthcare, education or real estate will be entitled to a 16-year corporate tax exemption in all Zone 1 locations and an eight-year exemption in all Zone 2 locations. Once these initial exemption periods expire, companies will then be taxed at the country's statutory corporate rate of 24%.

In terms of further incentives, any production facility with a 100% focus on the export sector will be entitled to pay VAT at a reduced rate. At the same time, any overseas investor that buys land or rents property in any of the designated zones will enjoy a number of visa privileges.

An overseas investor purchasing property in any such zone with a value of $100,000 or above, for instance, will be automatically granted multiple entry visas for themselves and their family. These visas will be valid for up to 10 years and may be extended at the government's discretion. In the case of any non-Laos resident renting an apartment within the perimeter of one of the designated zones, they will automatically be entitled to a three-month, multiple-entry visa.

Geoff de Freitas, Special Correspondent, Vientiane

By Le Hong Hiep, Fellow at ISEAS – Yusof Ishak Institute

Executive Summary

Vietnam is offering diplomatic support to China’s Belt and Road Initiative (BRI), but is cautious about applying for loans from it.

This attitude can be explained by:

• Its distrust of Beijing and concerns about the strategic implications of the Initiative in the context of the South China Sea disputes;

• The unattractive commercial terms and conditions of Chinese loans; and

• Vietnam’s access to other options.

Hanoi may start by applying for a couple of “pilot” projects, especially through private investors, in order to get a better assessment of the BRI.

Although the actual implementation of the BRI in Vietnam may be slow, there is little doubt that Hanoi will continue to lend diplomatic support to the Initiative.

As the BRI is about China’s stature as a benevolent rising power, Vietnam’s diplomatic support for it will still matter to China.

BRI’s Appeals and Vietnam’s Initial Reactions…
 
The Downsides of BRI Loans and Vietnam’s Hesitations…
 
BRI’s Prospects in Vietnam

The above analysis suggests that despite Vietnam’s enormous need for infrastructure investment and its largely positive responses to the BRI so far, Vietnam will be cautious, if not reluctant, in applying for BRI loans. As a consequence, the implementation of the BRI in Vietnam is likely to be slow.

So far, no new infrastructure project in Vietnam has been officially labelled as BRI-funded, although the Cat Linh – Ha Dong metro line in Hanoi, which has been under construction since October 2011, has been quietly classified as such by both sides. More specifically, the initial total cost for the project was US$552 million, of which US$419 million came from loans provided by China Eximbank. Later, however, due to cost overruns, the total investment was increased to US$891 million and China agreed to provide an additional loan of US$250 million for the project. It is this new loan, which was released in 2017, that has unofficially been considered by both sides as part of the BRI.

At the same time, AIIB has indicated that it is seeking to finance suitable projects in Vietnam, with the first expected to be identified in 2017. However, according to AIIB’s website, no such project has yet been approved or even proposed.

In coming years, whether the BRI will be successfully implemented in Vietnam will continue to depend on Hanoi’s evolving perception of the Initiative. On the one hand, Vietnam’s budget deficit is likely to persist, causing public-funded investment in infrastructure projects to fall. As such, Vietnam’s interest in the BRI is likely to stand. Vietnam may apply for one or two “pilot” projects to get a better assessment of the upsides as well as downsides of BRI loans. However, due to rising public debt, Vietnam may refrain from applying for government-to-government loans. Instead, it may encourage domestic private investors to apply for BRI loans, especially from AIIB, to construct infrastructure projects under the BOT model. This measure will also reduce the political and strategic implications of BRI loans for Vietnam.

Vietnam’s perception of the BRI will also depend on the commercial terms of BRI loans as well as the credibility of Chinese contractors and technologies. In this regard, Vietnam will not only observe the performance of China-funded projects within the country but also BRI-funded projects in other parts of the world. In other words, in order to ensure the BRI’s long-term success in Vietnam and elsewhere, it is essential for China to make sure that the performance of the first batch of BRI projects meet the expectations of not only the beneficiary countries but also of the international community.

Finally, the ongoing South China Sea disputes may prove to be a wild card in determining Vietnam’s perception of the BRI, and thus its future prospects in the country. Should the dispute intensify and bilateral relations come under greater tensions, Vietnam will become more sensitive to the political and strategic implications of the Initiative. By the same token, if the situation remains calm, and the two sides achieve progress in the management of the disputes, such as the conclusion of a Code of Conduct (COC), Vietnam will be more willing to embrace the BRI.

In sum, there is little doubt that the BRI will face significant challenges in Vietnam. China should acknowledge these challenges and work with both domestic stakeholders and Vietnamese partners to address them. In the meantime, although the actual implementation of the BRI in Vietnam may be slow, it is almost certain that Hanoi will continue to lend diplomatic support to the Initiative as a measure to strengthen the overall relations with Beijing. And as the BRI helps promote China’s stature as a benevolent power and provider of international public goods, such diplomatic support for the BRI from Vietnam, even if limited, will still be of value to China.

This commentary first appeared in ISEAS Perspectives 2018 no 18. Read the original article here.