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BRI 30 Jan 2018

The Belt and Road Initiative (BRI): Reshaping the Global Value Chain

4 February 2018

On 30 January 2018 the EU-Asia Centre together with ACCA (the association of Chartered Certified Accountants), the European Movement International (EMI) and UEAPME organized a multi-stakeholder conference on the Belt and Road Initiative (BRI): Reshaping the Global Value Chain.

Maggie McGhee, Director of Professional Insights at ACCA, pointed out that finance teams had a crucial role to play at every stage of the realization of the BRI in order for this grand scheme to be successful. The demand for professional accountants was an indicator for the need to mitigate financial risks associated with the BRI. 

Counsellor Shi Wei, Mission of China to the EU, presented the five aspects of the BRI (policy coordination, connecting infrastructure, unimpeded trade, financial integration, people-to people bonds). Though initiated by China the core principle of the initiative was its idea of mutual benefits for all stakeholders.

Xavier Coget, member of the Cabinet of Vice President of the European Commission Jyrki Katainen, said that while the EU welcomed the initiative in general, concerns remained. Success of the BRI depended on a number of aspects, among them inclusiveness of all countries on the BRI corridors, reciprocity and access to the Chinese market as well as compliance with political, social, financial and environmental standards.

 

Economic and Policy Implications of the BRI

The first panel was moderated by Fraser Cameron, Director of the EU-Asia Centre, who said that the BRU presented both risks and opportunities.

Natasha Khanjenkova, Managing Director, Central Asia & Russia, EBRD, underlined the possible impact of the BRI on stability and security in the landlocked region of Central Asia. Yet despite singular positive examples like Kazakhstan FDI was still very limited and conditions for the private sector needed to be improved.

Luc Devigne, Deputy Managing Director For Europe and Central Asia at the EEAS, argued that fiscal sustainability was of overall importance in order to avoid the danger of over-indebtedness of countries participating in the BRI. He announced that the new Eurasian Strategy of the EU was to be published this summer.

Anna Saarela, European Parliament, Policy Department, said that the EU’s immediate top priority was the conclusion of a comprehensive EU-China Agreement on Investment (including reciprocal market access). This would facilitate a successful BRI.

The Venerable Ji-jing, Chief Monk of Shanghai Dragon Monastery and Chengdu Daci Monastery offered a spiritual perspective of the BRI in highlighting its potential to advocate “friendship, which derives from close contact between the people” being “the key to sound state-to-state relations”.

Liina Carr, Confederal Secretary of the ETUC, expressed concern about the lack of a level playing field given the absence of freedom of association and collective bargaining in China. Social and environmental commitment on the Chinese part had to be a prerequisite for any European participation in the BRI.

In the discussion questions were raised about the Eurasia Union, the role of Russia, ASEM as a possible governance structure to the BRI, the BRI’s infrastructure gap and Chinese attempts to install courts as a means of dispute settlement mechanisms.

Panel on Business experiences, moderated by Ada Leung, Head of ACCA China

Ada Leung said that exchanges of best business practices in accountancy and in other fields were key to unlock the full potential of the BRI.

Gwenn Sonck, Executive Director, EU-China Business Association, said that EU companies should fully integrate the BRI in their long-term strategies. They should establish strong partnerships with Chinese enterprises to mitigate the risks associated with some BRI projects.  

Dilek Aydin, TÜSIAD & TÜRKONFED Representative to the EU, argued that multi-stakeholder engagement was necessary to tackle the lack of coordination of BRI-related projects. The upcoming Istanbul Belt and Road Industrial and Commerce Alliance (BRICA) Summit in October 2018 should therefore be helpful. In addition, synergies should be created between the BRI goals and national and regional development strategies.

Maurice Fermont, Adviser, Business Europe, suggested that EU companies have a significant competitive advantage in infrastructure as the core focus of the BRI. He stressed the need for EU unity on the BRI, greater transparency, increased multilateral cooperation, early involvement of the companies in BRI projects, upholding the key market principles and public procurement standards.

Liqin He, General Manager, Bank of China (Luxembourg), outlined the main goals of the initiative, namely the development of policy coordination, smooth trade, capital connectivity and people-to-people exchanges. For the bank, emphasis should also be laid on RMB internationalisation and financial innovation.

Alain Baron, Team Leader of the EU-China Connectivity Platform at the DG Move, raised the issue of the financial viability of projects, an important element that moneylenders have to bear in mind. Although the largest part of BRI infrastructure will be built outside China, Chinese companies win the majority of contracts in Eurasia (89%), instead of local or foreign contractors (respectively 7,6% and 3,4%).

During the discussion, questions were raised about e-commerce (whose potential in BRI projects could be hampered by different standards on intellectual property), environmental sustainability and restriction to online freedoms as a possible obstacle to innovation and creativity.   

 

In his concluding remarks, Jo Leinen, MEP, Head of the EP EU-China Delegation, called for a much needed multilateral approach on the BRI. The upcoming EU strategy on Central Asia should give a good signal on EU’s response to the BRI. EU and China should step up cooperation to develop African countries.