Thursday 25 April 2019 (Beijing) – It was announced today that 27 global institutions have signed up to a set of voluntary principles – the Green Investment Principles (GIP) for the Belt and Road -- to promote green investment in the Belt &Road region.

 

The announcement was made at the GIP signing ceremony as part of the Financial Connectivity Forum organized by the People’s Bank of China (the Central Bank) and the Ministry of Finance in Beijing during the second Belt and Road High-level Forum. Deputy Governor Chen Yulu from the People’s Bank of China attended the GIP signing ceremony.

 

 

Chen Yulu, Deputy Governor of the People’s Bank of China

 

As a mandate from the China-UK Economic and Financial Dialogue in 2017, the Green Finance Committee of China Society for Finance and Banking and the City of London Corporation’s Green Finance Initiative led the initiative to develop the GIP, which was first published in London in November 2018. The World Economic Forum, UNPRI, Belt & Road Bankers Roundtable, the Green Belt and Road Investor Alliance and the Paulson Institute are also part of the drafting group. A full list of the principles is provided at the bottom of this release.

 

Building on existing responsible and ESG investment initiatives, the GIP aims to incorporate low-carbon and sustainable development practices into investment projects in Belt and Road countries, which will host the majority of the world’s infrastructure investments in coming decades.

 

Since its launch five months ago, the GIP has received strong backing from the global financial industry, including commercial banks, development banks, institutional investors, stock exchanges and other stakeholders that invest or help mobilize investment in the Belt and Road. As of April 25, 2019, twenty-seven institutions have signed up to the GIP. These institutions include (in alphabetical order):

 

Agricultural Bank of China, Agricultural Development Bank of China, Al Hilal Bank, Astana International Exchange, Bank of China, Bank of East Asia, China Construction Bank, China Development Bank, China International Contractors Association, China International Capital Corporation, Crédit Agricole-CIB, DBS Bank, Deutsche Bank, Export-Import Bank of China, First Abu Dhabi Bank, Habib Bank of Pakistan, Hong Kong Exchanges and Clearing, Industrial and Commercial Bank of China, Industrial Bank, Khan Bank, Luxembourg Stock Exchange, Mizuho Bank, Natixis Bank, Silk Road Fund, Standard Chartered Bank, Trade and Development Bank of Mongolia and UBS Group.

 

These signatories include all major banks from China that invest in the Belt & Road region and some of the largest financial institutions from (in alphabetical order) France, Germany, Hong Kong, Japan, Kazakhstan, Luxembourg, Mongolia, Pakistan, Singapore, Switzerland, United Arab Emirates and the United Kingdom. Several service providers, including Deloitte, Ernst & Young, KPMG and PWC, have also expressed their support for the GIP.

 

Ma Jun, Chairman of China’s Green Finance Committee, announced at the GIP signing ceremony that a Secretariat would be established to support future work of the GIP. The GIP Secretariat will work on expanding the membership, the development of implementation tools and case studies, a green project database for the Belt & Road, as well as compiling the progress report.

 

Chen Yulu, Deputy Governor of the People’s Bank of China, said at the signing ceremony: “The financial institutions represented here today are the leading institutions of green investment for the Belt and Road. I hope that all signatories can seize the great opportunity of the BRI, and actively promote the GIP and enhance their capacity for green investment.”

 

Dr. Ma Jun said: “The majority of global infrastructure investment in the coming decades will be in the Belt and Road region and they will have a significant impact on the implementation of the Paris Agreement and UN Sustainable Development Goals. The aim of the GIP is to ensure that environmental friendliness, climate resilience, and social inclusiveness are built into new investment projects in the Belt and Road.”

 

Ma Jun, Chairman of China Green Finance Committee

 

Catherine McGuinness, Chair of Policy at City of London Corporation commented: “While there is some way to go to ensuring the Belt and Road is truly green, today’s announcement is another step in the right direction, and a powerful statement of intent from financial firms in China, the UK and across the world.”

 

Catherine McGuinness, Chair of Policy at City of London Corporation 

 

Family photo of major GIP Signatories

 

David Aikman, Chief Representative Officer of China and Member of the Executive Committee, World Economic Forum, addressed the importance of making GIP an opportunity for green transformation in the region and said: “It will be a shared opportunity for inter-connectivity, environmental friendliness and economic development through green investment in many countries around the world.”

 

Signatories also expressed their commitment to greening their investment practices with the implementation of GIP. “Business and economic ties between China, Europe, and BRI countries continue to strengthen”, said Werner Steinmueller, Deutsche Bank Management Board Member and Chief Executive Officer for Asia Pacific. “We are one of the most active foreign banks participating in BRI with full corporate and investment banking offerings along the route. By committing to the GIP, we are pledging that we will not only help steer BRI’s open collaboration across countries from China to Europe, but also strive to ensure these projects are as sustainable as possible.”

 

Gu Shu, President of Industrial and Commercial Bank of China, commented: “Green investments play a critical role in addressing environmental and climate challenges along the Belt and Road. ICBC has participated actively in the drafting of the GIP. We have also invited BRBR members to sign up to the GIP and integrate environmental factors into the BRI-related financing decisions, operations, product development and risk management.”

 

Gu Shu, President of Industrial and Commercial Bank of China

 

Bill Winters, Group Chief Executive of Standard Chartered PLC, stated: “We have been supporting our clients in managing their environmental and social risks for decades and are committed to working with all parties to implement the Green Investment Principles and contribute to commerce and prosperity across the Belt and Road markets.”

 

Benjamin Hung Pi Cheng, Regional CEO of Greater China & North Asia, Standard Chartered

 

Philippe Brassac, CEO of Crédit Agricole S.A and the Chairman of Crédit Agricole CIB, said: “Today, we reaffirm our ambition to be your long-term banking partner for your energy transition projects. A partner that is both realistic and demanding concerning the climate.”

 

 “As China’s development finance institution and its major bank for the Belt and Road, the China Development Bank will stay committed to green finance, implement green investment principles, increase the provision of green finance, and grow the capacity for green development, to contribute to sustainable economic and social development along the Belt and Road”, said Hu Zhirong, Director of International Finance Bureau of China Development Bank.

 

Huang Liangbo, Vice President of Export-Import Bank of China, said: “To cater to the needs of the BRI participating parties to conserve resources, protect the environment and cope with climate change, the Export-Import Bank of China has been diversifying its financial products and services related to green projects, and played a major role in investing and financing green infrastructures.”

 

Lin Jingzhen, Vice President of Bank of China, said: “By signing up to the GIPs, it marks a milestone for Bank of China to integrate green development strategy into our efforts of supporting the construction of the Belt and Road ‘financial artery’. We look forward to working with international counterparts to foster the green and sustainable development along the Belt and Road.”

 

Qian Wenhui, President of Agricultural Development Bank of China, said: “Agricultural Development Bank of China will gather forces from all sides and assist domestic agriculture-related enterprise and projects to participate in the Belt and Road green investments.”

 

Tao Yiping, President of Industrial Bank, commented: “By proactively supporting the low-carbon, green and sustainable development of countries along the Belt and Road, GIP will support global financial institutions to establish more extensive and intensive corporations within multilateral frameworks and to increase environmental and social risk management ability.”

 

Xie Duo, Chairman of the Silk Road Fund, commented: “The Silk Road Fund, being a medium to long-term development and investment fund to support the BRI, is committed to implementing and promoting green investment philosophy, and dedicated to building a green Silk Road.”

 

Muhammad Aurangzeb, President and CEO of Habib Bank of Pakistan, said: “It is a great initiative taken by China Green Finance Committee and City of London for this GIP signing. As Pakistan’s largest Bank, and the largest executor of CPEC related financing in Pakistan, HBL is positioned to play an integral role towards a greener CPEC, with the ultimate goal of a greener BRI.”

 

Tim Bennett, CEO of Astana International Exchange, said: “The sign up to the GIP emphasizes the regional perspective of AIX to support infrastructure and economic development in Kazakhstan and in the region in accordance with environmentally and socially friendly international practices.”

 

Abdulhamid Saeed, Group Chief Executive Officer of First Abu Dhabi Bank, stated: “By becoming one of the first signatories to the GIP, we intend to take a more active role in the Belt and Road Initiative and in supporting global efforts to promote green investments within the UAE and beyond.”

 

For more information, please contact:

 

CHENG Lin

China Coordinator of the GIP, China Green Finance Committee

Tel: +86 (10) 8302 1702

Email: lin.cheng@greenfinance.org.cn

 

Simon Horner

Head of Policy and Innovation, City of London

Tel: +44 (0) 7721 977119

Email: simon.horner@cityoflondon.gov.uk

 

 

ANNEX: GREEN INVESTMENT PRINCIPLES FOR THE BELT AND ROAD

 

Principle 1: Embedding sustainability into corporate governance

 

We will embed sustainability into our corporate strategy and organisational culture. Our boards and senior management will exercise oversight of sustainability-related risks and opportunities, set up robust systems, designate competent personnel, and maintain acute awareness of potential impacts of our investments and operations on climate, environment and society in the B&R region.

 

Principle 2: Understanding Environmental, Social and Governance Risks

 

We will strive to better understand the environmental laws, regulations, and standards of the business sectors in which we operate as well as the cultural and social norms of our host countries. We will incorporate environmental, social and governance (ESG) risk factors into our decision-making processes, conduct in-depth environmental and social due diligence, and develop risk mitigation and management plans, with the help of independent third-party service providers, when appropriate.

 

Principle 3: Disclosing environmental information

 

We will conduct analysis of the environmental impact of our investments and operations, which should cover energy consumption, greenhouse gas (GHG) emissions, pollutants discharge, water use and deforestation, and explore ways to conduct environmental stress test of investment decisions. We will continually improve our environmental/ climate information disclosure and do our best to practice the recommendations of the Task Force on climate-related Financial Disclosure.

 

Principle 4: Enhancing communication with stakeholders

 

We will institute stakeholder information sharing mechanism to improve communication with stakeholders, such as government departments, environmental protection organizations, the media, affected communities and civil society organizations, and set up conflict resolution mechanism to resolve disputes with communities, suppliers and clients in a timely and appropriate manner.

 

Principle 5: Utilizing green financial instruments

 

We will more actively utilize green financial instruments, such as green bonds, green asset backed securities (ABS), Yield Co, emission rights based financing, and green investment funds, in financing green projects. We will also actively explore the utilisation of green insurance, such as environmental liability insurance and catastrophe insurance, to mitigate environmental risks in our operations.

 

Principle 6: Adopting green supply chain management

 

We will integrate ESG factors into supply chain management and utilize international best practices such as life cycle accounting on GHG emissions and water use, supplier whitelists, performance indices, information disclosure and data sharing, in our investment, procurement and operations.

 

Principle 7: Building capacity through collective action

 

We will allocate funds and designate personnel to proactively work with multilateral organizations, research institutions, and think tanks to develop our organizational capacity in policy implementation, system design, instruments development and other areas covered in these principles.

 

Georgia has huge potential as a new trading partner for Hong Kong, with a substantial number of business opportunities arising from its combination of firm support for the Belt and Road Initiative (BRI), its open and business-friendly economy and its strategic location in the central Caucasian region of Eurasia. A country of 3.7 million people, its prime setting at the very crossroads of China and Europe, as well as its extensive array of Free Trade Agreements (FTAs) –  including treaties with the Chinese mainland and Hong Kong – sees it offering a host of new trade and investment possibilities.

Its appeal has been boosted by a number of ongoing reforms, including a greater emphasis on open governance, improvements to the local business environment and an ambitious infrastructure development programme. In the case of the latter, this has seen a number of landmark investment projects being given the greenlight, including the US$2.5bn Anaklia Deep Sea Port and Special Economic Zone, the Baku-Tbilisi-Kars Railway and ongoing railway track modernisation work. Taken together, these projects are not only seen as representing major steps forward for Georgia’s international connectivity, but also as playing a key role in the country’s evolution from being a simple transit hub to becoming a true regional logistics and industrial centre. Hong Kong investors and professional service providers, of course, could clearly play a huge role in facilitating this ambitious and capital-intensive reinvention process.

 

 

A Leading Reformer in Europe and Central Asia

Georgia, which borders Russia to the north, the Black Sea to the west and Turkey, Armenia and Azerbaijan to the South, is a leading reformer and significant emerging Caucasian market. According to the World Bank, it has implemented 47 business-friendly reforms in the past 15 years, topping the ranking of European and Central Asian countries.

Owing to these reforms, all tax procedures and customs clearances in the country are now web-based and unified under one tax code. This has reduced the average number of days and procedures to register a new business greatly, from 25 days and nine procedures in 2003 to just two days and two procedures now.

The 2005 tax code changes were especially significant, transforming the country’s fiscal landscape. The types of taxes applicable in Georgia were slashed from 21 in 2004 to six simple, flat taxes with rates so low that the country has once been ranked fourth in the world (after Qatar, the UAE and Hong Kong) in terms of how much it taxes its citizens. Today, to introduce new taxes or increase existing rates, the Georgian government would have to call a national referendum as required by its constitution.

While most of the taxes are already exempted in the country’s four free industrial zones (FIZs) and two free tourism zones (FTZs), the Georgian government also introduced a new growth-oriented model of corporate income tax in 2017. The relevant tax payment is postponed or deferred until actual profit distribution in a bid to promote re-investment of earned profits into existing and/or new business endeavours.

The reform-driven economic success has helped Georgia lay a solid foundation for continued economic progress. In the two decades ending 2017, the country registered an average economic growth of more than 5%, a pace far higher than many of its Commonwealth of Independent States (CIS) peers, such as Russia, Ukraine, Belarus and Kyrgyzstan.

A Staunch Supporter of Free Trade

Georgia, given its strategic geographical location and dearth of natural resources beyond agribusiness, has developed a transit-oriented economy, where up to 60% of the cargo flows the country handles are actually in transit. This is in stark contrast to its Caucasian neighbours, such as Russia and Armenia, which are rich in mineral resources such as oil and gas, iron, copper, molybdenum, lead, zinc, gold, silver, antimony, aluminium, as well as other rare metals.

To facilitate trade and strengthen its role as a transit hub, Georgia supports free trade and has entered into an extensive network of FTAs. Agreements are in place with most, if not all, of its key trading partners, including European Union (EU) and CIS countries, European Free Trade Association (EFTA) members, Turkey, Mainland China and Hong Kong. Apart from the unfettered market access to a 2.3 billion-strong market under this web of FTAs, Georgia also enjoys preferential Generalised System of Preferences (GSP) treatments on some 3,400 products from Canada, Japan and the US.

As a historic step in the continued effort to support the BRI, Georgia signed the FTA with Mainland China in May 2017, coming into force on 1 January 2018. The Sino-Georgia FTA is not only the first FTA China has signed with a Eurasian country, but also the first Chinese-initiated FTA since the BRI was put forward in 2013.

Under the Sino-Georgia FTA since 1 January 2018 Georgia imposes zero tariffs on 96.5% of mainland products, covering 99.6% of the total imports from Mainland China. The mainland imposes zero tariffs on 93.9% of Georgia’s products, covering 93.8% of China's total imports from Georgia, of which 90.9% of product types (taking up 42.7% of imports) will have zero tariffs immediately and the remaining 3% of product types (51.1% of imports) will be phased out within five years.

In a similar vein, Hong Kong and Georgia signed an FTA on 28 June 2018, scheduled to come into effect by the end of the year, after completion of the necessary procedures. The Hong Kong-Georgia FTA is comprehensive in scope; encompassing trade in goods, trade in services, investment, dispute settlement mechanisms and other related areas in 18 chapters. On coming into effect, Georgia will eliminate all import tariffs for products of Hong Kong origin, with the exception of 3.4% of tariffs lines, comprising mainly agricultural products, such as a fruits and nuts and their preparations, as well as beverages and spirits, due to domestic sensitivity.

In addition to merchandise trade, both Sino-Georgia and Hong Kong-Georgia FTAs have chapters for trade in services, under which both sides will further open their markets to each other on the basis of their WTO commitments. Broad consensus has been reached in many fields, such as environment and trade, competition, intellectual property, investment and e-commerce.

These FTAs will bring legal certainty and better access to the Georgian market for Hong Kong and mainland businesses, while offering potential opportunities as a gateway to the Caucasian region of Eurasia covered under the BRI. They will also enhance trade and investment flows between Hong Kong, the Chinese mainland, Georgia and the greater Eurasian region.

Unique Taste and Fashion Ready for Export

Among the many export sectors likely to benefit from the new FTAs are Georgia’s wine, food and fashion industries. Georgia has an 8,000-year wine-making history and 525 indigenous grape varieties, such as Kristel, Mtsvane and Saperavi highly popular in former soviet republics, but novel to many Asian drinkers. Georgian wine has already become a rising star in the Chinese wine market, with exports increasing exponentially since 2008[1]. Last year, the mainland, buying 7.6 million bottles of Georgian wine, became its third largest wine export market after Russia and Ukraine.

Riding on the success in the mainland, Georgian winemakers are looking for new growth opportunities in the burgeoning Asian market. Some of them, with the state support from the National Wine Agency of Georgia, have been actively exhibiting in wine fairs, organising wine-tasting activities and appointing agents/distributors in the region. Exports aside, the National Wine Agency of Georgia is also keen on promoting wine-related investment opportunities in Georgia to Asian investors.

Irakli Cholobargia, Head of the Marketing and Public Relations Department of the National Wine Agency of Georgia, said: “Although there are more than 500 companies producing wine in Georgia, only about 25 out of the country’s 525 indigenous grape varieties have been widely used in the industry. There is plenty room for growth and foreign investment.”

Hong Kong, with zero duty and duty-related customs/administrative controls for wine as well as widely-recognised neutrality in trading and promoting wine is a ready trading and distribution hub for Georgia wine in Asia. Hong Kong can also offer a good platform for Georgia winemakers to meet prospective Asian investors who are now the prime movers in global wine investment, with a growing appetite not just for fine wines, but vineyards and wineries.

Wine aside, Georgia, with 22 micro-climates varying from cool and dry to warm and humid, was also seen as a quality food supplier during soviet era. Nowadays, Georgian fresh fruits and vegetables are still well-regarded as healthy and of good quality in the CIS region. Also, the country’s traditional delights, such as the sausage-shaped churchkhela[2] confectionary and Borjomi fizzy mineral water, are reportedly gaining more attention from the increasingly health-conscious consumers worldwide.

Long dubbed the culinary capital of Asia, with some 14,000 restaurants serving an array of cuisines from all over China, the rest of Asia and the world, Hong Kong can be a good showroom for Georgian food companies to launch into Asia. In particular, Hong Kong businessmen, who have a good understanding of mainland consumer tastes, can help Georgian food exporters show how their produce can be used with Asian ingredients and culinary skills to complement favours found in Asian cuisines.

In addition to agribusiness, design – including fashion – is booming in Georgia, as the government promotes the use of modern design to convey core values, such as administrative transparency. This goes hand in hand with Georgian consumers, especially the younger generation, becoming more fashion savvy. This demand is driven by increases in income as well as a reaction to the soviet era when outfits tended to be more standardised.

The greater willingness and ability to spend on fashion has also led to the emergence of a number of designer brands such as Avtandil and Rosebud that have built a following in both the domestic and international markets. Given their relatively small production volume, they usually either only sell online or rely on fashion houses and showrooms in West Europe (including Milan and Paris) to reach out to Asian fashion lovers. These budding fashion brands are therefore ready clients for Hong Kong fashion traders able to offer extensive industry knowledge and distribution networks in the Asian region.

Growing Chinese Foothold in Georgian Trade and Investment

Given the geographical proximity and historic ties, CIS members, EU countries and Turkey are Georgia’s principal trading partners. In 2017, these key partners accounted for 75% of Georgia’s total trade. Thanks to the BRI and wider presence of Chinese enterprises in Georgia, the mainland has fast gained a foothold in Georgia and has become the country’s biggest Asian trading partner.

Last year, Mainland China was Georgia’s fifth-largest export market and third-largest import source, accounting for 7.6% of the country’s total exports and 9.2% of its total imports. Hong Kong sold US$103 million worth of goods to Georgia and bought US$6.3 million in 2017, accounting respectively for 0.2% and 1.3% of Georgia’s total imports and exports.

The growing Chinese presence permeates not only in trade, but also investment in Georgia. In spite of a similar EU and CIS dominance, the mainland is estimated to have grown to be the country’s fifth-largest foreign investor, growing from a US$590 million position in 2015 to US$656 million in 2017. An estimated US$51.9 million of the US$1.9 billion annual FDI inflow to Georgia last year came from China, accounting for some 2.8% of the total.

Falling largely in line with Georgia’s economic strengths, Chinese investors have a diversified investment portfolio in the country. Investment span many different sectors such as infrastructure development, engineering contracting, project contracting, trading, banking and finance, hospitality and real estate, telecommunication, forest resources development, building materials processing, manufacturing, renewable energy and mineral exploitation.

Examples of leading Chinese investors in Georgia include Xinjiang Hualing Group Corporation, CEFC China Energy, Sichuan Electric Power Import and Export Company, China State Grid International Development Corporation, Georgia Sinohydro, China 20th Metallurgical Construction Co., Ltd., Huawei Technologies, ZTE Corporation and Manzhouli Heyuan Economic and Trade Co., Ltd.

As the largest Chinese investor in Georgia, Xinjiang Hualing Group Corporation, for example, has already realised eight projects, including a landmark real estate development in Tbilisi, the capital. The Youth Olympic Village was converted into a residential and commercial complex, comprising Hualing Tbilisi Sea New City, Hualing Tbilisi Sea Plaza and Hualing Hotels & Preference Tbilisi, with abundant warehousing, retailing, wholesaling and meetings, incentives, conferences and exhibitions (MICE) capacity.

In consonance with Georgia’s vision to transform itself from a logistic junction into an industrial hub, Hualing has also strengthened its investment in the country’s manufacturing sector by taking a stake in the Kutaisi Free Industrial Zone (FIZ). This, together with CEFC China Energy’s recent investment in Poti FIZ on the eastern Black Sea coast to build an export hub for Chinese goods and services to Europe and Central Asia, has made Chinese investors vital for the future of two of the country’s four FIZs, and important partners in realising Georgia’s industrial potential.

Also worth noting is the growing visibility of Chinese investors in Georgia’s banking and finance sector. A good example is Hualing’s purchase of the Basis Bank in 2012, with an aim to grow RMB cross-border settlement businesses between China and Georgia. This was to facilitate bilateral trade and investment, and became one of the leading cases of Chinese private enterprises purchasing commercial banks abroad.

On a similar note, CEFC China Energy is reportedly planning to work with the Georgian government to set up a Georgian Development Bank. This will bolster RMB-denominated financial services and cross-border RMB settlement, while co-operating with the Georgian National Sovereign Fund to establish a Georgian Construction Fund to invest in financial services for projects such as roads, electric power, telecommunications and other infrastructure.

Also of interest to Chinese investors are the country’s strategic infrastructure projects, including hydropower plants and the ongoing railway modernisation. The recognition gained by a handful of Chinese investors and builders, such as China Railway 23rd Bureau Group, taking part in various signature projects in Georgia, will give Chinese investors a better position in the country’s future infrastructure development.

Situated on the shortest land route between China and Europe and being a key component of the Trans-Caspian International Transport Route (TITR) or the Middle Corridor, which stretches from Southeast Asia and China to Europe via Central Asia and the Caspian Sea, Georgia is an important BRI partner. Its strategic role as a logistic hub has been further strengthened with the October 2017 opening of the Baku-Tbilisi-Kars (BTK) railway route, which starts on the Caspian Sea in Azerbaijan and runs through Tbilisi and the eastern part of Turkey before merging with the Turkish and European railway systems.

Cargo trains from North-West China can now take as little as eight days to reach Georgia’s Black Sea coast, compared to sea voyages which can take up to 45 days. But to realise the target of receiving more than 250 cargo trains in 2018 and fully exploit the BTK, further local road and rail infrastructure enhancement work would have to be carried out in order to better connect the domestic rail networks and industrial facilities with the BTK. The route has a current annual capacity of 1 million passengers and 5 million tonnes of freight and the potential to expand to 3 million passengers and 17 million tonnes of freight.

Highlights of the Anaklia Deep Sea Port and SEZ Project

Source: Anaklia Development Consortium

As a long-term project with nine development phases spanning over more than 50 years, the Anaklia Deep Sea Port and SEZ is set to become a focal point for not only international businesses exploring new manufacturing relocation and regional distribution possibilities, but also investors looking for lucrative investment opportunities and partnerships in Georgia for many years to come.

In order to reach out to prospective investors across Asia and in other Belt and Road- connected regions, the Anaklia Development Consortium participated in the 2018 Belt and Road Summit in Hong Kong. The same event saw the signing of the Hong Kong-Georgia FTA and the promotion of the Anaklia Deep Sea Port and SEZ project to a 5,000-strong audience of investors, project operators and service providers from 55 countries and regions.

---

[1] According to Meiburg Wine Media, Georgia’s wine exports to China have been growing at an annual rate of more than 100% since 2008.

[2] Churchkhela is made from natural grape juice and different kinds of nuts.

[3] Existing Georgian ports are expected to reach full capacity limit with five years.

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

Content provided by