Stuart Tait: Viewpoint

Viewpoint: Stuart Tait

China’s BRI has been dubbed the project of the century – it is a vast and ambitious strategy with the objective of boosting the flow of trade, capital and services between China and various areas in the rest of the world by funnelling billions into international transport, telecommunications, energy and other infrastructure undertakings.

The initiative’s geographical sweep covers countries as far afield as southern Asia (including Sri Lanka), Africa and Europe, which between them account for 29% of the world’s GDP and nearly two-thirds of its population. It will generate a plethora of business and investment opportunities, not just for Chinese corporates, but also for companies around the world, and for their suppliers.

Before that, of course, there are the opportunities that surround the infrastructure projects under construction, including railways, roads, and air and sea ports, as well as power, telecommunications, water and sanitation ventures.

It is also about financing and investment opportunities. China has an intensified appetite not only to begin projects, but also to get them financed through a variety of means, including by tapping the capital markets. Further down the line, many of the larger projects will serve as catalysts for commercial and real-estate developments along newly invigorated transport routes.

The impact on trade should also be considered. Improved rail, road, sea and air connections will increase the flow of goods and services, and push down the cost of doing business. Whether it be lamb from New Zealand or textiles and apparel from Sri Lanka, goods will be able to reach markets in Central and South-east Asia, Europe, the Middle East and in China itself more quickly and cheaply.

Infrastructure projects are the physical building blocks that will facilitate greater trade flows with China and its close neighbours in Asia. By 2030 countries in Asia are expected to account for more than 66% of the world’s middle-class population. This will translate into the region having 3bn more middle-class people than it does today.

Sri Lanka in particular is of strategic importance to China as the country is at the centre of the international shipping lanes connecting the East and West, carrying two-thirds of the world’s oil exports and half of all container shipments.

The BRI will certainly bolster trade ties between China and Sri Lanka in the coming years. Trade between the two countries began in the early 1950s, and total trade flows reached $4.4bn in 2017. Sri Lanka was quick to recognise the opportunities that the BRI offers, and bilateral discussions have been under way since 2016 to finalise a free trade agreement between the two countries.

China expects its annual trade with the countries along the Belt and Road routes to surpass $2.5trn in the next decade, up from about $1trn in 2015.

This will bring a welcome boost at a time of relatively anaemic global trade growth, and it provides a great opportunity for Sri Lanka to increase its trade flows with not only China, but also other countries along the Belt and Road routes, even if they are not geographically located within it.

The BRI is about opportunities for construction, logistics and energy companies the world over, as well as for exporters, who will be able to get their goods to market more quickly and cheaply, and for local and international investors.

These groups are anticipated to benefit from fundraising and financial market activity across dozens of countries with populations of hundreds of millions of people in the coming years.

I have no doubt that BRI has the potential to be one of the most potent forces underpinning international development in the 21st century, and it will be one that Sri Lanka will benefit from greatly.