CEI-EBRD conference in Trieste aims to demonstrate the attractiveness of south-eastern Europe to Chinese investors
Haste makes waste. It is some 750 years after Marco Polo set out on the first of his epochal trips to the Middle Kingdom that China is now returning the favour. With the launch of the Belt and Road Initiative (previously also known as the New Silk Road vision) the country has started a vast undertaking by providing a platform that will physically underpin its integration into the global economy. Transport corridors are under consideration, planning or construction, linking Rotterdam in the Netherlands with the Jiangsu province in eastern China and potentially reaching as far as eastern Africa and the Arab peninsula.
The project is so large that, in order to succeed, it needs many contributors. The private sector, development banks, international financial institutions and governments all need to play a role. Infrastructure investments of up to US$ 1 trillion are planned over the next ten years alone. But building roads, railways, maritime corridors and ports is just the beginning. To succeed it is crucial to invest in the wider economy, build businesses and engage in activities such as trading. A stable regulatory environment is just as important as open competition, without distortion and with full transparency and equality before the law.
For the countries of south-eastern Europe (SEE) this represents a unique opportunity. The European Union (EU) plays a crucial role, together with the relevant countries, in designing strategic corridors for infrastructure investment. The challenge is to combine these plans with Chinese investment plans and proposals.
China sees the region as a strategic link between the resource-rich Middle East and the prosperous markets of western Europe, both of which it needs for its economy to continue growing. The engagement in port of Piraeus, where the Chinese shipping company China Cosco Holding Co recently acquired a majority stake, is a clear indicator of the country’s long-term plans. Flourishing Western Balkans economies will go a long way to make the port a hub connecting continents and global trade.
The joint conference organised by the Central European Initiative (CEI) and the European Bank for Reconstruction and Development (EBRD) in Trieste – a few miles away from Marco Polo’s birthplace – on Thursday 19 May will offer countries of the region a forum to discuss business opportunities with Chinese investors and demonstrate their attractiveness.
We can already see a promising increase of economic interaction. For example, SEE exports to China increased six-fold between 2003 and 2013 from US$ 430 million to more than US$ 2.5 billion. However, this remains the proverbial drop in the South China Sea – the share of SEE’s exports to China of the region’s total exports rose from 0.8 per cent in 2003 to 1.5 per cent in 2013.
But this should be taken as a sign of encouragement to intensify the efforts and to do more. The SEE countries have a lot to offer – a well-educated, flexible workforce; a strong tradition in industrial production; natural resources; a fertile soil with high quality products; strong potential in renewables; and a strategic location. Throughout history, the SEE countries have been a bridge. Chinese investment is complementary to existing routes and at the same time it can open new dimensions.
This can trigger large foreign direct investment, where there is room for Chinese companies to catch up in order to get access to EU markets. Four Western Balkans countries – Albania, FYR Macedonia, Montenegro and Serbia – are currently EU candidates and a fifth – Bosnia and Herzegovina – has applied for the same status. This is not a passive process. While they are in the EU anteroom, the countries are requested to undertake massive internal reforms to adapt to the EU’s acquis communautaire and become ready for accession. This is crucial for investors. Conferences like the EBRD Western Balkans Business Forum demonstrate the region’s new readiness to strengthen internal cooperation and strong external political support for the countries’ prosperous development.
At the same time the SEE countries also need investments in small and medium-sized enterprises as they represent the backbone of their economies. It is here that the EBRD, with its 25 years of expertise in small business finance, can play a critical role as an intermediary with in-depth knowledge of the region. Planned Chinese investments can have a significant impact if implemented suitably. Size does matter, but the quality of projects is even more important. Equally, the countries need to prepare the conditions so that carefully planned and market-conforming investment projects will inspire more economic activity on a sustainable basis.
South-eastern Europe’s hunger for investment and China’s need for natural resources, as well as new markets, is a perfect match. It is an opportunity too big to be wasted.
Alain Pilloux is EBRD Acting Vice President, Policy and Partnerships.