Brand View: The Belt and Road Initiative will bring huge benefits to Africa and the Middle East, according to Standard Chartered Bank's Sarmad Lone and Saif Malik, co-heads of Global Banking, Africa and Middle East
As China pushes on with its massively ambitious Road & Belt Initiative to recreate its ancient Silk Road and maritime trade links, regions like Africa and Middle East are well positioned to contribute to and benefit from China’s accelerating trade links with China.
Standard Chartered has the largest footprint as an international bank along the B&R initiative, how do you see the AME region placed within the silk road?
Sarmad: As our regional hub for AME is based in Dubai, we see the UAE’s geographic location, political stability, centuries-old experience of trade with Africa, highly advanced infrastructure and strong financial sector all make the country the ideal partner for China in developing its trade route through Central Asia, Pakistan and on to Africa.
This is clearly evident in the number of annual trade between China and the UAE, which exceeded $50 billion last year and is expected to rise to $70-80 billion by 2020.
The Belt & Road initiative – history’s largest ever infrastructure scheme – will involve China investing a projected $900 billion on building an interconnected system of roads, railways, ports, oil and gas facilities, power supply networks and other infrastructure projects across two vast trade corridors.
The Silk Road Economic Belt will be developed as a land trading route joining China with Europe via Central Asia and Russia, while the 21st Century Maritime Silk Road will establish a network of modern ports linking China and Southeast Asia with Europe and Africa via the South China Sea, the Indian Ocean and the Red Sea.
Where do you see Sub Saharan Africa placed with China’s $900 billion Belt and Road initiative boosting development across the AME network?
Saif: The country that is most actively leading the push into Africa is China. Over the past two decades, China has grown from a small investor into the continent’s largest economic partner. Two-way trade has been growing since the turn of the millennium at around 20 percent a year, and Chinese direct investment has been soaring by 40 percent a year. The UAE comes second to China in Greenfield investment in Africa, with capital investments reaching US$ 14.9 billion over 2015-16.
I was in Beijing earlier this year with, Sarmad and we discussed with clients and the Chinese media how investments in Belt & Road projects will be commercialised rather than depending solely on Chinese companies, banks, finance and labour.
Our strategic location in Africa, Middle East and Pakistan enables us to support client needs as a one-stop financial services firm that has knowledge and expertise in the AME region for over 150 years.
How do you see the China Belt and Road initiative contributing to the African infrastructure gap estimated around $95 billion a year in countries such as Kenya, Nigeria and Ghana?
Saif: For China, the scheme will open up new export markets, particularly in developing regions such as Africa, which will be able to absorb excess capacity, while helping to develop China’s own poorer, western regions. It will also extend China’s soft power, bringing many countries more firmly into its sphere of influence.
Nigeria, for example, is one African country that is expected to benefit from the Belt & Road initiative, and the government has asked corporate, political, and economic experts to offer their recommendations so it can develop a framework for the country to make the most of the project.
I believe the infrastructure gap that needs to be financed in Africa is conservatively estimated at around $95 billion a year.
"The Belt and Road Initiative fits well into that need, not just on the traditional belt, which is on the east coast of Africa. The Chinese investment has touched many other parts of sub-Saharan Africa, for example, Kenya will also lobby for the development of regional projects under the Belt & Road Initiative to enhance intra-Africa trade.
In East Africa, the initiative is related to the Chinese-funded Standard Gauge Railway from the Kenya port city of Mombasa to the capital of Nairobi and is expected to extend to neighbouring Uganda. Kenyan Treasury Cabinet Secretary Henry Rotich said, "We shall look at what connects Africa, like the railway line linking several African countries for trade benefit".
Ghana, too, is seeking to strengthen links with the initiative, and recently invited some representatives of Chinese businesses for talks on how this can be achieved. Our operation and presence in Ghana really is to bond with the Chinese companies on the market and to reassure them that our network, indeed the Standard Chartered network, is here to support their business growth in Ghana.”
How do you see the Middle East Leveraging its infrastructure to facilitate China-Africa trade?
Sarmad: Although many countries stand to gain from the infrastructure investment China will provide, the Middle East is well placed to become a lynchpin of China's ambitions to further trade with Africa both geographically and in terms of infrastructure, financing and experience.
The Gulf particularly has a long history of trading links with Africa and the two-way flow of goods and people continues to this day.
Chinese President Xi Jinping in July signed a memorandum of understanding concerning joint cooperation with the UAE on the Belt & Road project, particularly with regard to capital, technology, commodities and the environment. Soon afterwards, it was announced that China’s Silk Road Fund had acquired a 24% stake in Dubai’s Mahamed bin Rashid Solar Park, the world’s largest single-site solar power plant.
The UAE, for example, possesses high-quality, technologically advanced infrastructure, particularly seaports and airports, which could play a vital part in linking trade running from Asia through to Europe and Africa. Dubai offers Jebel Ali, one of the world's largest ports. Around 60 percent of China’s overseas trade passes through the Jebel Ali Free Zone, for re-export to Europe and Africa.
Bahraini Transportation and Telecommunications Minister Kamal bin Ahmed Mohammed said recently the Belt & Road Initiative could become a great opportunity for the GCC nations, adding that “the infrastructure already exists, already we have the routes and the [trade] corridor available, a politically stable region, a resilient financial sector, and there are a lot of areas in which both regions, China and the GCC, can benefit from each other… it’s a win-win for both sides.”
Similarly, the Karakoram Highway – the world's highest paved road – running from Kashgar in northwest China through the Karakoram mountain range before joining Pakistan's national highway system west of Islamabad, is being partially reconstructed and upgraded and will eventually extend as far south as Gwadar. The first cargo was transported along this route last November. This route provides an essential link between the landward economic Belt and the Maritime Silk Road.
Brand View allows our business partners to share content with Arabian Business readers.
The content is supplied by Arabian Business Brand View Partners.