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How China’s Belt and Road Initiative could boost south-eastern Europe

By Axel  Reiserer

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Transforming a route for goods into a corridor of value

The Belt and Road Initiative to connect China via land and sea with the global economy will eventually encompass three continents, over 65 countries and more than 4 billion people who produce 55 per cent of the world’s gross national product. But what some may see as an almost insurmountable challenge, others are seizing as an opportunity.

A conference in Trieste today, hosted by the Central European Initiative (CEI) and the European Bank for Reconstruction and Development (EBRD), examined the impact of the project on south-eastern Europe.

The consensus here was that the world was looking ahead to a unique opportunity. “We hope that the initiative will lead to the blossoming of countless flowers,” said Li Ruiyu, China’s ambassador to Italy.

In order to succeed the initiative needs the involvement of partners. Although China is putting aside enormous amounts of money (the Silk Road Fund alone has total capital of US$ 40 billion), it will also need cooperation and support from other parties. Countries, development banks, international financial institutions, supranational organisations and the private sector all need to be involved. “Competition is healthy, but cooperation is key,” said Italy’s Minister of Transport and Infrastructure, Graziano Delrio.

This is crucial in order to channel funds at a time of scarce resources and to avoid overlaps and duplication with already existing plans. “Before we make any investment in infrastructure we have to ask ourselves honestly: ‘Do we really need this project?’’’ remarked Alain Baron from the European Commission.

Thomas Maier, EBRD Managing Director for Infrastructure, struck a similar note: “Projects must be bankable, compatible and represent a win-win: they must be beneficial for the investor as well as the recipient.”

This is especially true for the region of the Western Balkans and south-eastern Europe which was the special focus of the conference. “Our goal is the further rapprochement of the CEI countries outside the EU with those already inside,” said Giovanni Caracciolo di Vietri, Secretary General of the Central European Initiative.

“After being hit hard by the global financial crisis of 2007-08 the region is now on the mend,” stated Alain Pilloux, EBRD Acting Vice President, Policy and Partnerships. “What we are seeing is maturing economies, advancing reforms and political stability,” he said.

External support by the European Union (Berlin 2014, Vienna 2015, Paris 2016) or international investment forums organised by the EBRD (London 2014 and 2016) provide a framework for real cooperation. “This is tangible reality now,” Mr Pilloux added.

The need for cooperation is urgent: on the one hand to overcome the limitations of small and fragmented markets, on the other to generate stronger indigenous growth. “Only 20 per cent of what the countries produce is traded regionally, the rest is exported to the EU,” warned Claudio Viezzoli, EBRD Managing Director SME Finance.

China, with its huge domestic market, offers attractive alternatives, which some countries are already using. Wang Wei, Director General of the Development Research Centre of China’s State Council, told the audience how a cluster of small- and medium-sized enterprises (SMEs) in the north Spanish town of Zaragoza has established close links with Chinese customers. Also Italian goods, culture and lifestyle are hugely popular in China; as Ambassador Ruiyu remarked: “People in China are crazy for their cappuccinos.”

Strong brands which are recognisable abroad are something many SMEs from the Western Balkans are missing, observed Svetozar Janevski, Chairman of FYR Macedonia’s Tikves Winery. China’s discovery of new markets could work wonders here, and not only for bringing in investment and new products. As Mattia Romani, EBRD Managing Director, Economics, Policy and Governance noted: “Connections work in two ways. Containers that arrive fully loaded do not need to go back empty.”

As the Commissioner of the Port of Trieste, Zeno D’Agostina, commented: “The challenge is how we transform a route for goods into a corridor of value.”

The conference, held at the magnificent Teatro Lirico Giuseppe Verdi in central Trieste, brought together representatives from China, CEI member countries, the EU, EIB and the EBRD to discuss how to support local enterprises and SMEs along China’s Belt and Road Initiative in south-eastern Europe. Panel discussions were dedicated to infrastructure and SME development, while breakout sessions discussed small business support through the improvement of skills and access to finance.

The Central European Initiative was founded in 1898 and today has 18 member states. Its goal is to support European integration through cooperation. Its current chairman, the Foreign Minister of Bosnia and Herzegovina, Igor Crnadak, said about China’s interest in the region: “When the second-largest economy in the world starts to develop an interest in you then you can believe you are on the right path.”

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