基础设施发展指数报告 - chinca · 2019-05-29 · cis-7 countries and mongolia include...

2019 REPORT-

CHINA INTERNATIONAL CONTRACTORS ASSOCIATION中国对外承包工程商会

基础设施发展指数报告The Belt and Road Infrastructure Development Index Report 2019

“一带一路”国家

CONTENTS

FOREWORD ……………………………………………………… III

GLOSSARY ……………………………………………………… Ⅶ

Chapter One The Status Quo and Characteristics of

Infrastructure Development along the Belt and Road ……… 01

Section One: Belt and Road Infrastructure Development

Trend …………………………………………………………………… 02

Section Two: Belt and Road Infrastructure Development

Characteristics ……………………………………………………………… 09

Section Three: 2019 Outlook on Global Risks ……………………… 14

Chapter Two The Belt and Road Infrastructure Development

Index ……………………………………………………………… 17

Section One: The Sub-index of Belt and Road Infrastructure

Development Environment ………………………………………………… 18

Section Two: The Sub-index of Belt and Road Infrastructure

Development Demands …………………………………………………… 28

Section Three: The Sub-index of Belt and Road Infrastructure

Development Costs ………………………………………………………… 35

Section Four: The Sub-index of Belt and Road Infrastructure

Development Passions …………………………………………………… 41

I

Chapter Three Infrastructure Development in Portuguese-

Speaking Countries ……………………………………………… 47

Section One: PSCs’ Infrastructure Development Index ………… 48

Section Two: Mainland Chinese Enterprises’ Involvement in

Portuguese-speaking Countries’ Infrastructure Development ……… 50

Section Three: Macao’s Contribution to the Belt and Road

Initiative …………………………………………………………………… 55

Chapter Four Several Key Countries’ Infrastructure

Development Index ……………………………………………… 58

Section One: The Arab Republic of Egypt ………………………… 60

Section Two: The Republic of Indonesia …………………………… 66

Section Three: The Republic of Angola ……………………………… 73

Section Four: The Kingdom of Saudi Arabia ………………………… 79

Section Five: The Republic of Kazakhstan ………………………… 84

Chapter Five The Outlook and Suggestions on Infrastructure

Development along the Belt and Road ………………………… 89

Sect ion one: Belt and Road Infrastructure Development

Opportunities ……………………………………………………………… 90

Section Two: Belt and Road Infrastructure Development

Challenges ………………………………………………………………… 93

Section Three: Suggestions on Belt and Road Infrastructure

Development ………………………………………………………………… 97

References ……………………………………………………… 99

Appendix (List of Figures & Tables) ………………………… 109

IIII

On April 26, 2019, President Xi Jinping attended the opening

ceremony of the Second Belt and Road Forum for International

Cooperation and delivered a keynote speech. He reviewed the

substantial success after six years of the Belt and Road cooperation,

laid out a roadmap for constant high-quality progress of the Belt and

Road Initiative, and announced China’s determination and actions to

deepen reform and expand opening-up in the new era. This resounding

message offered a strong impetus for us to make transition from making

high-level plans to intensive and meticulous implementation of the

Belt and Road Initiative. President Xi emphasized the importance of

connectivity as the key to advancing the Belt and Road cooperation.

According to him, infrastructure is the bedrock of connectivity, while the

lack of infrastructure has held up the development of many countries.

High-quality, sustainable, resilient, affordable, inclusive and accessible

infrastructure projects can help countries fully leverage their resource

endowment, better integrate into the global supply, industrial and value

chains, and realize inter-connected development. However, given

the infrastructure gap and the widely different political and economic

contexts along the Belt and Road, uncertainties are looming over global

contractors. In particular, the resurging trend of trade protectionism

and unilateralism, accompanied by anti-globalization movements, has

presented new risks and challenges to all parties involved in the Belt and

Road infrastructure development.

To develop an in-depth insight into the status quo, characteristics

and trend of the international infrastructure market, seize investment

opportunities, and stand up to potential challenges, China International

FOREWORD

IIIIII

Contractors Association (CHINCA), China’s sole national industrial

association representing overseas contractors, and China Export & Credit

Insurance Corporation (SINOSURE), the only policy-based insurance

agency in China, worked jointly on the Belt and Road Infrastructure

Development Index (BRIDI) 2019, and issued the 3rd BRIDI report, as

sponsored by Macao Trade and Investment Promotion Institute. The

aim is to offer supportive information for domestic and international

infrastructure investors and contractors, open up new horizons for the

Belt and Road infrastructure connectivity, and lead the way toward a

community with a shared future for mankind.

Altogether 71 countries, including 63 Belt & Road countries and

8 Portuguese-speaking countries, were chosen for the 2019 BRIDI

research to envisage the future of the infrastructure industry over the

next 2 or 3 years from the perspectives of the environment, demands,

costs and passions for infrastructure facilities. This year, new features

were added to the BRIDI model to make the prediction more sound

and accurate: (a) The original model was improved and restructured

upon review of over 100 domestic and overseas landmark written

works. The sub-indices, originally concerned with development

environment, potential and trend, now look into four areas, i.e.

development environment, development demands, development

costs, and development passions. Further, the number of indicators

was increased from 31 to 45, all of which were chosen on reasonable

grounds. (2) We took more scientific approaches to model evaluation.

The approaches were selected to align with the characteristics of sub-

indices. For example, we adopted the Principal Components Analysis

(PCA) for the Development Environment Sub-index, Econometric

Model for the Development Demands Sub-index to identify the supply-

demand gap, and Analytic Hierarchy Process (AHP) for the sub-indices

of development passions and costs. (3) The evaluation results were

IVIV

still robust. After the many improvements to the model, evaluation

results remained robust. Unlike the previous two years, we calculated

the BRIDIs for all years from 2010 to 2019 this time. But the results

revealed generally the same trends as before. This report is structured as

follows: The first section introduces the status quo and characteristics of

infrastructure development along the Belt and Road; the second section

analyzes the infrastructure development trend of related countries

in four dimensions; the third section focuses on the infrastructure

development of Portuguese-speaking countries; the fourth section

identifies the BRIDIs of major countries; the fifth section elaborates on

the opportunities and challenges facing the Belt and Road infrastructure

industry and puts forward policy suggestions.

All data in this report comes from publicly accessible sources,

including the International Monetary Fund (IMF), World Trade

Organization (WTO), World Bank, World Economic Forum (WEF),

the Ministry of Commerce of China (MOFCOM), China International

Contractors Association (CHINCA), China Export & Credit Insurance

Corporation (SINOSURE), and Business Monitor International (BMI). This

report is presented for the purpose of analysis and information exchange

only. While constituting an independent analysis and prediction of future

infrastructure prospects, it does not represent any government's stance

or attitude towards related issues. Considering the ongoing adjustments

to the international political, economic and social landscapes and policies,

this report may be slightly different from the changing picture and may

include judgments based on limited evidence. Also, given the authors’

subjectivity and capacity boundary, this report is unlikely to be flawless.

Your comments will be very much appreciated.

China International Contractors Association

China Export & Credit Insurance Corporation

May 2019

VV

Infrastructure Industry

The UN and OECD definition applies herein. Infrastructure refers to the system

of public works in a country or region. Infrastructure investment refers to public

and private investment of fixed, immovable assets that can support sustainable

economic growth in the long run. Infrastructure is a system of public products

by economic attribute, and involves energy (electricity), transportation (railway,

highway, airport, and port), communications, water (water supply and sewage

disposal) and other facilities in this report.

Belt and Road Initiative (BRI)

During his visits to Kazakhstan and Indonesia in September and October 2013,

Chinese President Xi Jinping proposed the initiative of jointly building the Silk Road

Economic Belt and the 21st Century Maritime Silk Road, which is referred to as the

Belt and Road Initiative (BRI).

Belt and Road countries

Altogether 71 countries, including 63 Belt & Road countries and 8 Portuguese-

speaking countries, were chosen for this year’s report. The 63 Belt & Road

countries are the Philippines, Cambodia, Laos, Malaysia, Myanmar, Thailand, Brunei,

Singapore, Indonesia, Vietnam, Azerbaijan, Belarus, Russia, Georgia, Moldova,

Ukraine, Armenia, Mongolia, Afghanistan, Pakistan, Bhutan, Maldives, Bangladesh,

Nepal, Sri Lanka, India, Egypt, UAE, Oman, Bahrain, Qatar, Kuwait, Lebanon,

Saudi Arabia, Turkey, Yemen, Iraq, Iran, Israel, Jordan, Kazakhstan, Kyrgyzstan,

Tajikistan, Turkmenistan, Uzbekistan, Albania, Estonia, Bulgaria, Poland, Bosnia and

Herzegovina, Montenegro, Czech Republic, Croatia, Latvia, Lithuania, Romania,

North Macedonia, Serbia, Cyprus, Slovakia, Slovenia, Greece and Hungary.

Southeast Asia

According to the UN Geoscheme, Southeast Asia includes the Philippines,

Cambodia, Laos, Malaysia, Myanmar, Thailand, Brunei, Singapore, Indonesia and

Vietnam.

CIS-7 Countries and Mongolia

CIS-7 Countries and Mongolia include Azerbaijan, Belarus, Russia, Georgia,

Moldova, Ukraine, Armenia and Mongolia. Although Ukraine started the procedure

to withdraw from the CIS on April 12, 2018, it is still treated as one of the CIS-7

Countries in this report, for the sake of consistency in regional classification with

the previous two years.

South Asia

According to the UN Geoscheme, South Asia includes Afghanistan, Pakistan,

Bhutan, Maldives, Bangladesh, Nepal, Sri Lanka and India.

GLOSSARY

VIIVII

Portuguese-speaking Countries

There are eight Portuguese-speaking countries, including Angola, Brazil, Cape

Verde, Guinea-Bissau, Mozambique, Portugal, Sào Tomé and Príncipe, and

Timor-Leste.

West Asia and North Africa

According to the UN Geoscheme, West Asia and North Africa include Egypt, UAE,

Oman, Bahrain, Qatar, Kuwait, Lebanon, Saudi Arabia, Turkey, Yemen, Iraq, Iran,

Israel and Jordan.

Central Asia

According to the UN Geoscheme, Central Asia includes Kazakhstan, Kyrgyzstan,

Tajikistan, Turkmenistan and Uzbekistan.

Central and Eastern Europe

According to the UN Geoscheme, Central and Eastern Europe includes Albania,

Estonia, Bulgaria, Poland, Bosnia and Herzegovina, Montenegro, Czech Republic,

Croatia, Latvia, Lithuania, Romania, North Macedonia, Serbia, Cyprus, Slovakia,

Slovenia, Greece and Hungary.

Belt and Road Infrastructure Development Index (BRIDI)

BRIDI is an index that looks into the environment, demands, costs and passions for

infrastructure development in the Belt and Road countries. The higher the BRIDI,

the better the prospect of a country's infrastructure industry, and the greater the

attraction for companies to engage in infrastructure investment, construction and

operation in the country.

The Sub-index of Belt and Road Infrastructure Development Environment

(Development Environment Sub-index)

It explains the environment for a company to participate in the Belt and Road

infrastructure development in six dimensions, i.e. political environment, economic

environment, sovereign solvency, business environment, market impact factors and

industrial environment.

The Sub-index of Belt and Road Infrastructure Development Demands

(Development Demands Sub-index)

It reflects the sum of relative and absolute demands for a country's infrastructure

development. The higher the sub-index, the greater the demands for infrastructure

investment and the market potential of the country. Relative demands refer to

the demands for infrastructure investment to meet the needs of consumers and

producers for work and life at the current level of per-capita income. Absolute

demands are the demands for infrastructure investment to achieve optimal social

services in the country.

VIIIVIII

The Sub-index of Belt and Road Infrastructure Development Costs (Development

Costs Sub-index)

It examines two factors, i.e. operational costs and financing costs. To be specific,

the operational costs cover raw materials, labor force, exchange rate fluctuations,

licenses and other costs incurred during the infrastructure development and

operation. It should be noted that the operational costs are a reverse indicator. The

higher the value, the lower the operational costs. The financing costs measure the

capital borrowing costs for a company to engage in infrastructure development.

They are a reverse indicator, too. The higher the value, the lower the financing

costs.

The Sub-index of Belt and Road Infrastructure Development Passions (Development

Passions Sub-index)

It is calculated based on the value of new contracts for global infrastructure

development, the amount of private investment in infrastructure projects, the value

of new contracts for overseas contracting projects of China, and other indicators

to reflect the short-term passions for infrastructure investment in a country. The

higher the sub-index, the more active the infrastructure investment in the country,

and the greater the market appeal.

IXIX

Chapter One

The Status Quo and Characteristics of Infrastructure Development

along the Belt and Road

The year 2018 saw profound changes in global geopolitical risks,

economic landscape, business environment and industrial structure. The

global economy encountered headwinds from rising protectionism and

populism. New challenges unfolded before the global economic governance

system. Considering the varying internal and external environments and their

significant impacts on the infrastructure industry, international governments

have taken measures to channel capitals into infrastructure projects, in a bid

to stimulate economic growth, iron out economic volatility, optimize industrial

structure, and achieve other development goals. With growing concerns and

multi-dimensional policy supports from the international governments, diverse

investment opportunities began to emerge. In a nutshell, the international

infrastructure industry sustained a generally stable state of play amidst

changes and opportunities.

02

“一带一路”国家基础设施发展指数报告

The Belt and Road Infrastructure Development Index Report

Section One: Belt and Road Infrastructure Development Trend

1 BRIDI remained high despite slower infrastructure development

The BRIDI remains stable in 2019, despite a dip from 121 to 119 over the

previous year. The heightened global political risks, economic slowdown, and

disruption of the world economic and political structures amidst the tug-of-war

between big powers, alongside the domestic and international complexity and

volatility of the Belt and Road countries, have dragged down the sub-indices of

development environment, demands, costs and passions by small margins. But

BRIDI still stabilizes at a 5-year high.

Figure 1: 2019 Belt and Road Infrastructure Development Index

Source: CHINCA, SINOSURE’s Country Risk Database.

03

Chapter One The Status Quo and Characteristics of Infrastructure Development along the Belt and Road

Figure 2: Changes in 2010-2019 BRIDIs


Table 1: BRIDI scores1

Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Ranking

Indonesia 135 146 139 142 138 139 137 140 146 138 1

Vietnam 125 127 124 123 116 118 118 120 125 123 2

UAE 109 108 108 115 110 110 110 123 119 123 3

Pakistan 125 122 119 121 115 115 124 125 128 123 4

Russia 128 131 124 133 121 124 122 122 130 123 5

Brazil 133 131 130 136 127 126 127 119 122 120 6

Saudi Arabia 121 121 118 117 114 119 115 116 115 120 7

India 123 129 127 123 111 113 112 113 117 120 8

Kazakhstan 119 120 117 120 112 116 117 117 119 119 9

Malaysia 108 109 109 113 108 112 114 121 126 119 10

Philippines 113 115 116 118 112 117 114 120 123 119 11

Qatar 110 108 108 107 104 104 107 113 113 117 12

Singapore 119 117 116 117 123 117 112 116 117 116 13

Thailand 112 113 112 114 110 112 112 113 119 115 14

Bengal 115 117 114 120 111 115 114 118 117 115 15

Egypt 116 117 114 115 108 113 115 116 111 114 16

Kuwait 113 110 113 113 108 107 108 114 115 114 17

Slovakia 108 106 107 110 107 109 106 110 113 113 18

1　 The BRIDI scores are rounded in the report, but the rankings are based on unrounded results.

04



Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Ranking

Mongolia 120 126 120 122 114 116 113 118 117 113 19

Croatia 105 106 108 109 106 109 106 112 112 113 20

Georgia 113 116 111 114 107 110 107 111 115 112 21

Portugal 105 102 104 108 105 106 103 107 111 112 22

Hungary 101 103 104 106 101 103 103 106 109 112 23

Uzbekistan 109 112 108 111 105 106 108 109 110 111 24

Cambodia 113 116 112 115 105 109 109 110 113 111 25

North

Macedonia

109 111 112 112 108 112 107 113 114 111 26

Bulgaria 114 115 115 114 115 115 114 112 113 111 27

Bhutan 110 111 105 112 103 108 107 109 110 110 28

Slovenia 104 103 104 107 103 104 104 107 111 110 29

Poland 110 108 109 111 107 109 110 111 114 110 30

Tajikistan 109 112 109 112 106 105 107 108 108 110 31

Brunei 107 106 108 112 106 106 107 111 113 110 32

Czech

Republic

105 104 107 109 107 108 110 112 115 109 33

Romania 110 111 112 114 109 110 108 111 113 109 34

Laos 109 113 113 115 108 111 112 117 116 109 35

Myanmar 107 114 111 107 106 112 113 111 111 109 36

Sri Lanka 108 110 105 107 102 106 103 105 106 109 37

Bosnia and

Herzegovina105 109 111 111 104 109 104 109 111 109 38

Albania 111 110 109 111 105 108 107 110 112 109 39

Kyrgyzstan 109 111 108 110 107 109 108 108 111 109 40

Belarus 105 110 106 107 105 105 104 105 108 108 41

Armenia 114 113 112 113 105 107 105 108 110 108 42

Latvia 110 107 108 111 108 109 104 109 111 108 43

Iran 120 113 111 115 106 113 111 113 108 108 44

Turkmenistan 113 117 113 115 109 114 107 109 110 108 45

Angola 106 110 110 119 105 107 116 112 115 107 46

Israel 105 103 102 108 104 104 104 104 107 107 47

Oman 108 104 103 106 103 103 104 108 109 107 48

Iraq 108 110 108 113 106 111 104 108 109 107 49

Serbia 104 106 104 105 99 101 102 103 106 106 50

Jordan 108 111 108 109 103 105 106 111 114 106 51

Nepal 112 115 112 114 107 108 108 106 110 106 52

Lithuania 102 103 103 106 102 104 101 107 108 106 53

Turkey 109 115 114 110 108 108 114 103 106 106 54

05


Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Ranking

Moldova 105 111 113 114 107 108 106 107 107 106 55

Montenegro 107 107 105 106 101 104 101 104 105 105 56

Cape Verde 107 108 112 113 107 107 102 107 108 105 57

Mozambique 105 107 106 112 104 105 104 100 103 105 58

Greece 98 96 97 103 99 99 97 100 104 104 59

Estonia 104 102 102 105 102 103 99 102 104 104 60

Maldives 111 110 108 110 103 104 105 105 106 104 61

Azerbaijan 115 116 111 111 106 108 106 111 107 104 62

Cyprus 104 102 102 106 102 101 100 102 105 102 63

Bahrain 101 100 99 101 97 98 100 102 104 101 64

Lebanon 101 101 105 107 100 102 102 102 102 101 65

Timor-Leste 104 108 107 107 98 100 101 101 103 99 66

Guinea-

Bissau

100 104 103 105 98 98 98 96 99 98 67

Sào Tomé

and Príncipe

100 102 100 103 96 98 96 97 98 97 68

Ukraine 104 103 101 105 96 98 96 95 96 96 69

Yemen 100 104 101 104 97 99 95 98 97 96 70

Afghanistan 99 103 100 105 97 98 98 94 98 95 71


2 Infrastructure development was uneven across regions

Southeast Asia maintains strong momentum and comes out first among seven

regions for the third consecutive year. While South Asia and West Asia & North

Africa have moved up one place from last year’s rankings, PSCs and Central &

Eastern Europe have slipped one spot. Central & Eastern Europe (CEE), in particular,

end up at the bottom of the rankings.

The huge population, fast-expanding economy and favorable infrastructure

environment have translated into booming demands and market potentials for the

investment and development of energy, transportation and other infrastructure

facilities in Southeast Asia (SEA), where BRIDI scores 125 in 2019. Major SEA

countries stay at the head of the rankings. To be specific, 6 out of the 10 SEA

countries appear on the Top-20 list.

06



Table 2: 2019 rankings for SEA countries

Southeast

AsiaBRIDI

BRIDI

Rankings

Rankings for

Development

Environment

Sub-index

Rankings for

Development

Demands

Sub-index

Rankings for

Development

Costs

Sub-index

Rankings for

Development

Passions

Sub-index

Indonesia 138 1 8 2 27 1

Vietnam 123 2 7 35 14 7

Malaysia 119 10 33 36 8 6

The

Philippines119 11 31 25 3 12

Singapore 116 13 1 71 26 21

Thailand 115 14 21 65 2 22

Cambodia 111 25 43 11 43 25

Brunei 110 32 22 34 32 44

Laos 109 35 41 14 55 29

Myanmar 109 36 65 5 66 18


CEE contains a large number of countries which vary widely in economic

conditions, resource endowment, and infrastructure demands. It scores 109 this

year, its ranking dropping to the last of the seven regions from the second to last

in 2018. Due to lower-than-expected economic growth and the lack of drivers for

infrastructure construction, Czech suffers the sharpest fall among regional countries,

its index slumping from 115 of 2018 to 109. Cyprus, Estonia, Montenegro and

Lithuania have been lingering at low levels in recent years. The economy of Cyprus,

in particular, is highly dependent on foreign capital, and the country’s infrastructure

sector is vulnerable to changes in the external economic environment. In 2019,

Cyprus ranks at the bottom with 102 points. Nevertheless, as key links between

Asia and Europe, CEE countries like Hungary and Slovakia stand out in geographic

importance and labor costs. The potential of their infrastructure sectors should not be

overlooked.

07


Figure 3: CEE countries with major fluctuations in the Infrastructure Development Index

Source: CHINCA, SINOSURE’s Country Risk Database

3 Country-specific BRIDIs showed a huge gap

Indonesia, Vietnam, UAE2, Pakistan and Russia rank top five for country-specific

BRIDIs. Indonesia scores 138, topping the list for the third year in a row. Its sub-

indices of development environment, demands and passions also rank high. In

contrast, Angola suffers the biggest fall in BRIDI score and rankings, as the passions

for infrastructure development have shriveled due to the sharp local currency

depreciation and high inflation. Saudi Arabia records the biggest rise in BRIDI score,

as driven by the huge influx of investment into port, energy and other industries.

Egypt and Hungary, on the other hand, jump up the farthest in BRIDI rankings.

While Egypt benefits from brisk private investment activities, Hungary’s locational

superiority gives a huge push to the development passions and hence the BRIDI.

2　 United Arab Emirates.

08



Figure 4: Some country-specific BRIDIs (2010-2019)


Table 3: 2019 BRIDI rankings and changes (Top 20)

Country BRIDI RankingRanking

ChangeCountry BRIDI Ranking

Ranking

Change

Indonesia 138 1 - Philippines 119 11 ↓ 5

Vietnam 123 2 ↑ 3 Qatar 117 12 ↑ 16

UAE 123 3 ↑ 7 Singapore 116 13 ↓ 1

Pakistan 123 4 ↓ 1 Thailand 115 14 ↓ 6

Russia 123 5 ↓ 3 Bengal 115 15 ↓ 4

Brazil 120 6 ↑ 1 Egypt 114 16 ↑ 22

Saudi

Arabia120 7 ↑ 12 Kuwait 114 17 ↑ 1

India 120 8 ↑ 5 Slovakia 113 18 ↑ 11

Kazakhstan 119 9 - Mongolia 113 19 ↓ 5

Malaysia 119 10 ↓ 6 Croatia 113 20 ↑ 10


09


Section Two: Belt and Road Infrastructure Development Characteristics

1 The transportation & energy industries show robust demands

The Development Demands Sub-index is generally higher in transportation

and energy industries than in the other two. The transportation industry carries

great weight to the BRI, and is the main driver powering regional connectivity and

international infrastructure development. According to the BMI’s statistics about

global infrastructure projects, in 2018, the transportation industry took the largest

share of the total value of newly-signed contracts among the four industries

along the Belt and Road. The sector of roads and bridges accounted for 47.5%

of the transportation industry by the value of new contracts. Most Belt and Road

counties are middle-income economies3 that have huge potentials and demands

for transportation infrastructure development. In the coming years, the accelerated

industrialization and urbanization will generate new demands for transportation

infrastructure. An interconnected network of roads, railways, ports, airports and other

transportation facilities along the Belt and Road will also provide a strong boost to the

international infrastructure development.

3　 Including lower-middle-income countries and upper-middle-income countries.

10



Airports,6.3%

Figure 5: The share of each sector in the transportation industry in 2018

Source: BMI

The energy industry, dedicated to power infrastructure projects, has also

contributed to the international infrastructure landscape. The increased electricity

consumption, be it commercial, industrial or residential, and upgraded electrification

schemes along the Belt and Road have stimulated demands for energy development.

Meanwhile, as we shift towards a sustainable approach to infrastructure, the notion

of green development and green infrastructure begins to be recognized by the

international community. Clean energy such as wind, solar and nuclear power has

gained growing attentions.

Demands remain stable in the water industry and communications industry.

The supply-demand gap for the water industry seems most prominent in South

Asia, while that for the communications industry is mainly seen in the West Asia &

North Africa. But the growing needs for cloud-enabled service and the application

of office automation and other advanced technologies will nurture new investment

opportunities.

11


2 Diversified financing tools are used for infrastructure development

At present, development and policy-oriented financial institutions, special

investment funds, commercial banks, and emerging multilateral development financial

institutions constitute the financing channels for the Belt and Road infrastructure

projects, where multilateral financial institutions are the most supportive. In 2017

alone, the International Bank for Reconstruction and Development (IBRD) and

International Development Association (IDA) – the World Bank's lending arms –

extended USD 192.1 billion worth of loans to 71 Belt and Road countries, up 7.7%

y-o-y. Sovereign wealth funds (SWFs) and investment funds are also playing a

bigger role. For example, SWFs like Abu Dhabi Investment Authority (ADIA) and

China Investment Corporation, have significantly increased their investment into

the Belt and Road countries. China-EU Joint Investment Fund, which began full

operation in July 2018 with an injected capital of EUR 500 million, has enabled the

BRI to dovetail with the Juncker's Investment Plan for Europe.

Figure 6: Financial supports from multilateral financial institutions for Belt and Road projects

Source: IBRD, IDA.

The massive influx of capital, however, falls short of the required amount to

accommodate the huge infrastructure demands. Therefore, as an innovative financing

12



mechanism for the infrastructure sector, Private Participation in Infrastructure (PPI)

investment finds favor with proprietors and contractors. According to the World

Bank’s PPI database, in 2017, USD 62.14 billion worth of private funds poured

into the Belt and Road infrastructure projects, up 64.7% y-o-y. There might be

ups and downs in the amount of PPI investment, but as the financing environment

and infrastructure industry improve, the private capital will play a greater role in

infrastructure projects and help diversify the financing channels.

Figure 7: Changes in the volume of Belt and Road PPI investment

Source: The World Bank.

3 BRI lends fresh impetus to global infrastructure development

The recent years have seen heighted enthusiasm for infrastructure projects

among all parties. Many countries have launched policies and programs to align

with and better serve the BRI, such as the Eurasian Economic Union (Russia),

Steppe Road Program (Mongolia), Bright Road Initiative (Kazakhstan), Juncker’s

Investment Plan (Europe), Amber Road (Poland), Two Corridors and One Economic

Circle (Vietnam), Economic Diversification Strategy "2035 Ambition" (Brunei), and The

Rectangular Strategy (Cambodia). Their aim is to facilitate economic restructuring

13


and industrial upgrading, increase public expenditure and government subsidies

on infrastructure, encourage cross-border investment, explore new ways of

cooperation, and strengthen supports for infrastructure interconnectivity.

Meanwhile, all countries are taking a more flexible approach to participating

in the BRI development. China has intensified partnership with the UK, Spain,

Japan, Italy, Germany, Australia and other developed countries on the third-party

markets, in a bid to pursue win-win benefits based on complementary strengths.

For example, SEPCOIII Electric Power Construction Co., Ltd. developed the Saudi

Arabia Yanbu Phase III Oil-fired Power Plant project, together with well-known

companies from Spain, U.S., South Korea, etc.; China Communications Construction

Company Limited joined hands with Atkins (UK) over the design of Mombasa-

Nairobi Railway stations, and with French companies over a port construction project

in Cameroon; China State Construction Engineering Corporation and Egis (France)

formed a consortium that is responsible for the operation of the National Road No. 1

in the Republic of Congo. In addition, several investment funds have been set up for

global infrastructure development. It is noteworthy that Macao SAR has leveraged

its unique strengths and achieved substantial success in China-PSC Business and

Trade Cooperation Service Platform, exhibitions & conferences and featured financial

service.

14



Section Three: 2019 Outlook on Global Risks

1 The U.S. pursues unilateralist policies and instigates trade frictions

As the U.S.-led western countries have reoriented their foreign policies and the

unilateralist U.S. administration instigated trade frictions, the international political

and economic order is undergoing intense changes and readjustments. The trade

frictions will probably become a protracted battle. The U.S. trade protectionism has

seriously hampered the process of economic globalization, and will have significant

direct impacts on international business, especially foreign trade and investment in

emerging economies, for quite a long time to come. Given the growing backlash

against globalization, infrastructure investors and contractors must prepare

themselves for a long, hard and stubborn fight against this round of protectionist

moves. They must seek expansion into emerging markets with a long-term vision,

and minimize the impacts of the U.S. unilateralist policies and trade conflicts by virtue

of a diversified investment portfolio.

2 FED's monetary policy uncertainties cause financial market turmoil

The U.S. dollar hegemony influences the international capital flows. Since the

Federal Reserve System (FED) announced its decision to increase interest rates and

shrink the balance sheet, global funds have changed their direction of movement.

Many emerging markets begin to see severely adverse capital outflows, continued

declines in foreign currency reserves, and fast depreciation of local currencies.

For example, continued gains in the U.S. dollar came in the year 2018 when other

currencies suffered sudden falls in their value. Within a short period of time,

Argentine peso lost over 20% of its value, and Turkish lira depreciated almost 10%

against the U.S. dollar. Egypt and Nigeria, for example, were left with no other

options, but to shift from a pegged exchange rate regime to a floating one, so as

to avoid the collapse of their economies. But the U.S. monetary policy was revised

15


once again in 2019, as the FED voted to leave the federal funds rate unchanged

and slashed the projected interest-rate increases this year to zero from two. It also

decided to halt the decline of its balance sheet in September. Given the complex

and volatile international trade environment and the indistinct outlook for the U.S.

economy, the U.S. monetary policy is fraught with uncertainties. If the Fed continues

to keep an interest-rate hike on the table, it will produce systemic shocks to the

global financial market.

Table 4: FED’s rate hikes timetable (since 2015)

Time Basis Points Post-hike Federal Funds Rate

2015.12.16 25 0.25%-0.5%

2016.12.14 25 0.5%-0.75%

2017.3.15 25 0.75%-1%

2017.6.14 25 1%-1.25%

2017.12.13 25 1.25%-1.5%

2018.3.22 25 1.5%-1.75%

2018.6.13 25 1.75%-2%

2018.9.27 25 2%-2.25%

2018.12.20 25 2.25%-2.5%

Source: SINOSURE’s Country Risk Database.

3 Geopolitical risks and global investment risks keep rising

As the global geopolitical risks continue to build up and big-power games

gradually take form, the global investment risks are on the rise. In Europe, the

prospect of booming Euroscepticism indicates a growing threat of terrorism across

the continent. In the Middle East, as the U.S. pulled itself out of the Iran nuclear

deal, tensions are running high again in Iran, and there might be a significant risk

spillover; Turkey’s relations with Europe and the U.S. deteriorated, which suggests

future economic and diplomatic uncertainties. Constantly challenged by the U.S., the

three countries of Russia, Turkey and Iran established close contacts, in an attempt

to team up against the U.S. But given their conflicting interests over the Syria

policy, substantial cooperation can only be expected in limited areas. The regional

landscape is unlikely to be altered. In Africa and Latin America, some countries

are facing worsened economic conditions and prominent social issues. In other

countries, political risks are mounting due to the frictions between the ruling party

16



and opposition parties.

4 Gaps kept widening in economic growth

In its latest release, the IMF predicted that the global economic growth would

ease further to 3.3% from 3.6% last year. The global economic activities will

decelerate, with widening gaps between countries. The forecast for the 2019 growth

in advanced economies was revised to 1.8%, down 0.2 percentage point from the

IMF’s outlook in January. The IMF also cut its forecast for the 2019 U.S. real GDP

growth to 2.3%, down 0.2 percentage point from the January projection, pointing to a

0.6% decline over last year. The downgrade was due to the fading impacts of the U.S.

fiscal stimulus and the U.S. economic slowdown. The real GDP growth for developing

and emerging countries was expected to reach 4.4%, down 0.1 percentage point

from the previous projection. The downward pressure on commodity price, U.S.

dollar interest rate hikes, intensified trade tensions and geopolitical conflicts, among

other factors, have translated into huge external stresses for emerging countries

with weak economic foundations. The IMF cut forecasts for India, Brazil and Mexico

from the January projections, where the forecast for the Brazilian economy was

reduced by 0.4 percentage point. In contrast, the forecasts for China and Nigeria rose

by 0.1 percentage point, respectively; those for Russia and Saudi Arabia remained

unchanged.

Table 5: IMF forecasts (in %)

Economic Growth 2018 2019

Developed Economies 2.2 1.8

U.S. 2.9 2.3

Japan 0.8 1.0

Eurozone 1.8 1.3

Emerging Economies 4.5 4.4

CIS 2.8 2.2

Emerging and Developing Economies in Asia 6.4 6.3

Emerging and Developing Economies Europe 3.6 0.8

Middle East & North Africa, Afghanistan, Pakistan 1.8 1.5

Sub-Saharan Africa 3.0 3.5

Latin America and the Caribbean (LAC) 1.0 1.4


Chapter Two

The Belt and Road Infrastructure Development Index

The Belt and Road Infrastructure Development Index (BRIDI) has four dimensions: development environment, development demands, development costs, and development passions. This chapter will look into infrastructure industries in the Belt and Road countries from the four aspects.

18



Section One: The Sub-index of Belt and Road Infrastructure Development Environment

The sub-index explains the environment for a company to participate in the Belt

and Road infrastructure development in six dimensions, i.e. political environment,

economic environment, sovereign solvency, business environment, market impact

and industrial environment.

DevelopmentEnvironment Sub-index

Figure 8: Development environment heat map


1 Changes in the Development Environment Sub-index

(1) Development Environment Sub-index drops slightly given the higher market

access threshold and stricter foreign exchange control

In 2019, the sub-index drops slightly to 115 from 116 of 2018. The top

performers are Singapore, Portugal, the UAE, Slovakia and Slovenia. As many

countries hold a general election this year, as the geopolitical relations keep evolving,

the mounting political risks have left an imprint on infrastructure development.

Meanwhile, the tightening of foreign exchange control in Brazil, India and Myanmar

makes these markets less accessible to international infrastructure contractors.

19

Chapter Two The Belt and Road Infrastructure Development Index

Figure 9: Development Environment Sub-index (2010-2019)


(2) Southeast Asia surpasses CEE as regional development environment

stabilizes

In 2019, regional development environment is stabilizing across the board. The

Development Environment Sub-index of nearly half of the regions stays at the same

level as last year; that of four regions falls slightly from 2018.

Table 6: Changes in regional Development Environment Sub-index

Region2019 Development

Environment Sub-index2019 Ranking

2018 Development

Environment Sub-index

2018

Ranking

Southeast Asia 129 1 129 2

CEE 127 2 131 1

PSCs 116 3 117 3

Central Asia 114 4 115 4

Western Asia &

North Africa112 5 113 5

South Asia 111 6 111 6

CIS-7 Countries

and Mongolia99 7 99 7


Southeast Asia comes out top with 129 points, the same as the previous

20



year. Most economies in the region have recorded rapid growth and improving

business climate. In particular, Singapore, Vietnam and Indonesia rank 1st, 7th and

8th respectively in development environment. They have played an important role in

maintaining the region’s high performance.

The Commonwealth of Independent States (CIS) & Mongolia stays at the

bottom. In 2019, the score of CIS-7 Countries and Mongolia is 99, ranking last of the

seven regions as it did last year. Some countries in the region are beset by political

unrest or geopolitical challenges, whose protectionist policies weigh down the

infrastructure development environment.

Central and Eastern Europe (CEE) registers the biggest change. In 2019, its

Development Environment Sub-index drops to 127 from 131 of 2018. Given the

revised EU rules on infrastructure examination and regulation, the new changes in

the industrial climate of some CEE countries bears watching.

Figure 10: Changes in Development Environment Sub-index by region (2010-2019)


21


2 Some countries witness significant changes in Development Environment Sub-index

The fast-growing country is Serbia. Its Development Environment Sub-index

in 2019 surges to 103 from 93 of the previous year. Driven by stable long-term

economic policies, Serbia draws closer to China while enhancing economic and trade

cooperation with Eurasian countries. It plans to sign a free trade agreement with

Eurasian Economic Union in October 2019. That may reinforce Serbia’s role in the

intercontinental economic and trade network, and further improve its development

environment.

Timor-Leste suffers the sharpest decline. In 2019, its Development Environment

Sub-index nosedives to 85 from 100. Business survey shows that in the context of

falling real GDP, the continuity of infrastructure policies, the clarity of infrastructure

strategies and the openness of infrastructure industry have all plummeted in the

country.

Singapore has stayed ahead for a decade, thanks to its stable politics, sound

business environment and robust economy.

Table 7: Top 15 list of Development Environment Sub-index

Country

2019 Development

Environment

Sub-index

2019

Ranking

2018 Development

Environment

Sub-index

2018

Ranking

Singapore 175 1 166 1

Portugal 148 2 143 3

UAE 144 3 138 5

Slovakia 136 4 129 11

Slovenia 136 5 137 7

Czech Republic 135 6 150 2

Vietnam 134 7 138 6

Indonesia 133 8 136 8

Saudi Arabia 133 9 133 9

Kuwait 133 10 127 15

Poland 131 11 140 4

Bulgaria 130 12 125 17

Qatar 130 13 128 12

Israel 129 14 133 10

Croatia 126 15 122 19


22



3 Factors Concerning the Development Environment Sub-index

(1) Political factors

Political environment worsens given the evolving international order. De-

globalization, typified by political conservatism and populism, is on the rise. The

US and other Western powers have adopted more radical foreign policies, which

leaves in tatters their diplomatic ties with countries like Iran, Russia and Venezuela.

Sitting at the sensitive crossroads between Asia and Europe, Turkey is increasingly

at loggerheads with the Western world. The diplomatic and economic uncertainties

pose a dire threat to the regional political environment. In short, political risks of

Belt and Road countries are mounting as their political environment on the whole is

deteriorating.

(2) Economic factors

Economic structural imbalance increases exposure to external shocks. Belt

and Road countries at large are short of alternative development models, balanced

economic structure and robust driving forces. Some are struggling to proceed with

industrialization amid reshaping of the international division of labor. These countries

are at the low- or medium-end of the international trade chain. They need to

improve their international trade structure and wipe out their current account deficit.

Paradoxically, in a bid to step up urbanization and stimulate domestic economy,

these countries tend to adopt expansionary fiscal policies which trigger deficit. Due

to inflationary pressures and currency fluctuations, countries like Turkey, Pakistan,

Egypt, Bangladesh, India, Ukraine and Kazakhstan show high degrees of economic

instability. International infrastructure stakeholders would do well to keep their eyes

peeled.

(3) Sovereign solvency

Most Belt and Road countries are at intermediate levels of sovereign solvency4.

As infrastructure construction involves large sums of money, Belt and Road countries

tend to secure loans through sovereign guarantee. Sovereign solvency, therefore,

4　 Sovereign solvency refers to the ability of a sovereign borrower to pay matured debts in full and

on time.

23


has a vital bearing on infrastructure. According to the sovereign ratings published

by China Export & Credit Insurance Corporation (SINOSURE), most Belt and Road

countries are at intermediate levels of sovereign solvency. To be more accurate,

19.7% of the countries are at high levels (AAA, AA or A) of sovereign solvency,

53.5% at immediate levels (BBB, BB or B), 25.4% at low levels (CCC, CC or C), and

1.4% (one country where sovereign default occurred) at the CE level.

Table 8: Sovereign ratings of 2018

Ratings Country

AAA Czech Republic

AA Poland, Slovakia, Singapore, Israel

A UAE, Estonia, Qatar, Lithuania, Malaysia, Portugal, Saudi Arabia, Slovenia, Hungary

BBB Brazil, Russia, Philippines, Kazakhstan, Kuwait, Croatia, Latvia, Romania, Cyprus,

Thailand, Turkmenistan, Brunei, India, Indonesia

BB Oman, Azerbaijan, Bahrain, Belarus, Bulgaria, Lebanon, North Macedonia,

Bangladesh, Turkey, Greece, Iraq, Iran, Jordan, Vietnam

B Albania, Angola, Pakistan, Georgia, Montenegro, Cambodia, Myanmar, Moldova,

Serbia, Uzbekistan

CCC Egypt, Bosnia and Herzegovina, Bhutan, Guinea-Bissau, Laos, Nepal, Sri Lanka,

Tajikistan, Ukraine, Armenia

CC Afghanistan, Timor-Leste, Cape Verde, Kyrgyzstan, Maldives, Mongolia, Yemen,

Sào Tomé and Príncipe

CE Mozambique

Source: SINOSURE’s Country Risk Database

24



Figure 11: Distribution of sovereign ratings of Belt and Road countries


(4) Business environment

Business environment is generally on the mend, thanks to a number of reforms

in Belt and Road countries. In 2019, 79% of the countries have made it easier to start

a business, 48% improved government efficiency, and 49% enhanced centralized

management by specialized departments. Indonesia is particularly successful in

improving the business environment. It has legislated to ease restrictions on foreign

investment in a number of industries and short-circuited the investment licensing

procedure, ramping up support for foreign investors at large while giving preferences

to those in key areas.

(5) Impact factor

International sanctions have something to do with the evolving infrastructure

development environment. According to incomplete statistics, 16 of the 71 Belt and

Road countries are somehow sanctioned by the EU, the UN or the US, and 75% of

the afflicted countries rank among the bottom 16 by development environment. In

March 2019, the US, Canada and the EU imposed simultaneous sanctions on Russia

over the Kerch Strait incident. Among the latest casualties are a Russian building

25


company and a Russian energy firm. What will happen next is worthy of particular

attention.

Table 9: Details on sanctions against some Belt and Road countries

Country EU sanctions UN sanctions US sanctions

MyanmarArms embargo, assets freeze, travel ban, specific ban

on bilateral cooperation, specific ban on trade in goods

Russia

Arms embargo, specific ban on bilateral cooperation,

specific ban on trade in goods, specific ban on industrial

cooperation

Financial

sanction

Ukraine

Assets freeze, travel ban, specific ban on bilateral

cooperation, specific ban on trade in goods, specific ban

on industrial cooperation

Financial

sanction

IranArms embargo, assets freeze, travel ban, specific ban

on bilateral cooperation, specific ban on trade in goods

Financial

sanction

IraqArms embargo, assets freeze, travel ban, specific ban

on bilateral cooperation

Arms

embargo,

assets freeze

Financial

sanction


(6) Industrial environment

Industrial environment remains stable despite increasing market entry and

investment barriers. With the deepening of cross-country infrastructure cooperation,

Belt and Road countries at large enjoy a stable industrial environment. Some of

them, however, are putting up entry and licensing barriers, which further establishes

protectionism as the No.1 enemy of international infrastructure investors. It is

particularly noteworthy that as demands shrink, stakeholders concerned should pay

more attention to the industrial environment of the host countries. They should also

be more compliance-minded, observing local policies and regulations while retooling

their business models and promoting the extension of industry and value chains.

26



Table 10: Infrastructure rules of some Belt and Road countries

Country Plans and Policies

Egypt Licensing rules: To operate in Egypt, a foreign contractor must engage an Egyptian

company as an agent, and Egyptian nationals must account for no less than 90%

of the contractor’s workforce. A foreign institutional bidder must meet either of

the two conditions: (1) it has a subsidiary registered in Egypt; or (2) it engages an

Egyptian company as an agent and has relevant certificates.

Prohibited industries: No industries are officially prohibited for foreign contractors

in this country. Public and private project owners have the right to decide whether

to launch an international bidding. According to Egyptian laws, however, military

engineering projects are usually closed to commercial enterprises.

Pakistan Licensing rules: Pakistan’s contracting market is less restricted. In principle, any

foreign contractor accredited by Pakistan Engineering Council (PEC) may operate in

this country.

Prohibited industries: Unless specially authorized by the government, foreign

contractors in Pakistan cannot undertake engineering projects involving weapons,

high power explosives, radioactive materials, security printing and coinage, and

manufacturing of liquor (except industrial alcohol).

Indonesia Licensing rules: According to Indonesian laws, only licensed foreign contractors

can operate in this country.

Prohibited industries: Foreign companies are restricted from undertaking

government-led infrastructure projects in Indonesia, in an effort to maintain the

market share of domestic enterprises. Foreign companies are only allowed to

bid for such projects whose total value exceeds IDR 100 billion for construction,

or IDR 20 billion for goods and services, or IDR 10 billion for consulting services.

However, foreign companies are not prohibited from undertaking private projects.

Kazakhstan Licensing rules: Only the foreign companies with an overseas engineering project

contracting license may bid for such projects in Kazakhstan. And the bid winners

should register a subsidiary or independent joint venture before implementing the

projects.

Prohibited industries: Foreign investors may enter Kazakhstan’s building market

in the form of joint venture, provided that they hold a no more than 49% stake in

it. If a wholly foreign-owned local company participates in a building joint venture,

it may hold a more than 49% stake in it.

27


Country Plans and Policies

Saudi Arabia Licensing rules: Saudi Arabia’s contracting market is protected by the national

government. Foreign contractors which have successfully registered with the

Saudi Ministry of Commerce and Industry and received an investment license from

the Saudi Arabian General Investment Authority may directly bid for government-

led or private engineering projects. Technical barriers to the country’s mainstream

contracting market lie in the fact that the qualifications for entering the market as

contractors or main equipment/material suppliers are controlled by government

bodies under the Saudi Ministry of Municipal and Rural Affairs as well as State-

owned monopolies in major industries.

Prohibited industries: No industries are prohibited for foreign contractors in this

country.

Slovenia Licensing rules: Foreign companies are allowed to bid for local engineering

projects, provided that they have registered a local subsidiary specializing in

contracting and provided relevant qualifications of the headquarters along with

information on sample projects, performance, debts, and bank credit, as the case

may be.

Prohibited industries: Slovenia gives all bidders a fair shake. No industries are

officially prohibited for foreign contractors in this country. However, local bidders

and those from the EU are prioritized for Slovenia/EU-funded projects.

Source: Overseas Investment Cooperation Country (Region) Guide of China’s

Ministry of Commerce (MOFCOM)

28



Section Two: The Sub-index of Belt and Road Infrastructure Development Demands

The sub-index reflects the sum of relative and absolute demands for a country's

infrastructure development. The higher the sub-index, the greater the demands for

infrastructure investment and the market potential of the country. Relative demands

refer to the demands for infrastructure investment to meet the needs of consumers

and producers for work and life at the current level of per-capita income. Absolute

demands are the demands for infrastructure investment to achieve optimal social

services in the country.

DevelopmentDemands Sub-index

Figure 12: Development demands heat map


1 Changes in the Development Demands Sub-index

(1) Development Demands Sub-index drops slightly

In 2019, the sub-index drops slightly to 130 from 132 of 2018. Given the low

level of infrastructure development in Belt and Road countries across the board,

the BRI markets still have a great potential. For most of the countries, energy and

transportation have scored higher than the other two sectors, and will remain to be

investment hotspots in the near future.

29


Figure 13: Development Demands Sub-index (2010-2019)


(2) Central Asia surpasses Southeast Asia amid drops in regional Development

Demands Sub-Index

Development Demands Sub-index falls in all regions except South Asia.

Southeast Asia suffers the sharpest decline (4% YoY). There is, however, no major

change in regional rankings. CIS-7 Countries and Mongolia, PSCs, and South Asia

remain to be the Top Three. Central Asia climbs one spot, overtaking South Asia.

Western Asia & North Africa and CEE rank low.

Table 11: Changes in regional Development Demands Sub-index


Demands Sub-index

2019

Ranking

2018 Development

Demands Sub-index

2018

Ranking

CIS-7 Countries and Mongolia

163 1 166 1

PSCs 149 2 151 2




Western Asia & North Africa

110 6 112 6

CEE 104 7 107 7


30



CIS-7 Countries and Mongolia comes out top in development demands. In

2019, the region sees its Development Demands Sub-index drop slightly to 163

from 166, yet it is still the best performer of the seven regions. With huge demands

for infrastructure investment and construction, major countries like Russia (172) and

Mongolia (133) have played an important role in maintaining the regional sub-index

at a high level. The transportation sector of CIS-7 Countries and Mongolia scores

199, energy 180, communication 138, and water industry 135. The first two deserve

particular attention from international infrastructure stakeholders.

Figure 14: Changes in the Development Demands Sub-index of CIS-7 Countries and Mongolia


CEE ranks at the bottom in Development Demands Sub-Index. In 2019, the

Development Demands Sub-index of the region drops slightly to 104 from 107.

Unlike differentiated regions where development demands are driven by major

countries, the sub-indices of CEE countries hover around 105. The top performer

is Bosnia and Herzegovina (116); the runner-up is Serbia (113). The transportation

sector of CEE scores 109, energy 110, communication 103, and water industry 110.

Their differences are minor.

31


Figure 15: Changes in the Development Demands Sub-index of CEE


Southeast Asia suffers the sharpest fall of the seven regions in Development

Demands Sub-Index. In 2019, the Development Demands Sub-index of the

region slumps 4% YoY to 128. The transportation sector of Southeast Asia scores

131, energy 138, communication 116, and water industry 126. The drastic decline

in energy demands from 145 of the previous year drags down the regional sub-

index. However, the score of energy is still high, which indicates that the sector will

remain to be an investment hotspot in the near future. Given the new situation, the

transportation and water industry sectors of Southeast Asia are likely to gain traction.

Figure 16: Changes in the Development Demands Sub-index of Southeast Asia


32



(3) Development demands are differentiating amid drops

In 2019, only four countries (Mozambique, India, Malaysia and the UAE) register

YoY growth in the Development Demands Sub-index; six countries (Kazakhstan,

Kuwait, Croatia, Latvia, Lithuania and Saudi Arabia) stay at the same level; and 61

countries are going downhill. When it comes to the rankings, 19 countries (26.7%)

stay in the same places, and 62 countries (87.3%) have moved up or down by no

more than five spots. Not a single country records a double-digit change in its

ranking.

Table 12: Top 15 list of Development Demands Sub-index

Country 2019 Development

Demands Sub-index

2019

Ranking

2018 Development

Demands Sub-index

2018

Ranking

Russia 172 1 175 1


Brazil 155 3 158 3

Pakistan 146 4 151 4

Myanmar 141 5 143 6

Egypt 140 6 149 5

India 139 7 137 10

Kazakhstan 136 8 136 9

Angola 135 9 138 7

Mongolia 133 10 137 8

Cambodia 127 11 130 12

Iraq 126 12 128 13

Nepal 126 13 132 11

Laos 124 14 128 14

Kyrgyzstan 124 15 127 15


Mozambique turns out to be the fastest growing country in development

demands (from 117 of 2018 to 119 of 2019). Transportation is the main driving force.

Due to faltering energy demands, Egypt falls sharply to 140 from 149. Relevant

projects in this country are likely to slow down. Russia, an all-time leader, stays

ahead with 172 points.

33


2 Factors Concerning the Development Demands Sub-index

(1) Differentiating development demands reflect different development levels

In light of the World Bank’s country income classifications, this report divides

the 71 Belt and Road countries into four categories: high-income, upper-middle-

income, lower-middle-income and low-income. As the figure below shows, the

score of low-income countries is 118. The score is high in its own right, yet the

demands vary widely among sectors. Fundamental sectors like energy and water

industry are facing more urgent demands for infrastructure development. The score

of lower-middle-income countries is 123, the highest of the four. Steady progress

of industrialization and urbanization in some of the countries gives infrastructure a

shot in the arm. The score of upper-middle-income countries is 117. Energy and

transportation sectors will be the main drivers behind infrastructure investment

and construction in these countries. The score of high-income countries is 102.

Communication and energy sectors will generate most of the demands in the future.

Figure 17: Development Demands Sub-index of countries by income level


(2) Energy and transportation remain the main sources of demands

The sub-index indicates robust demands from energy and transportation

sectors of all country categories. According to the World Economic Forum Global

Competitiveness Index, the transportation infrastructure score of Belt and Road

34



countries was only 50.8 in 2018, a far cry from the full mark (100), which implies

great room for improvement. In the long run, energy has great potential as a key area

of international infrastructure cooperation. The adjustment and upgrading of power

generation modes, coupled with the growing demands for clean and new energy, will

bring new opportunities to the energy sector of various countries.

(3.) The potential of water industry sector is underestimated

Energy and transportation are the traditional investment hotspots of all regions.

Most countries have issued detailed plans correspondingly. The potential of water

industry, however, is underestimated to some extent by investors. Take South Asia.

In 2018, the region registered the lowest Global Competitiveness score of the seven

regions in water industry (58.9), far from the full mark. What is more, the score

of Pakistan, a major country in South Asia, is only 54.2. With the growing level of

infrastructure development, water industry will likely become a priority of regional

countries in the coming years. International infrastructure stakeholders should take

the opportunity and cater for the water industry demands of countries concerned

while looking deep into relevant technologies, regulations, and market entry rules.

35


Section Three: The Sub-index of Belt and Road Infrastructure Development Costs

The Development Costs Sub-index examines two factors, i.e. operational

costs and financing costs. To be specific, the operational costs cover raw materials,

labor force, exchange rate fluctuations, licenses and other costs incurred during the

infrastructure development and operation. It should be noted that the operational

costs are a reverse indicator. The higher the value, the lower the operational costs.

The financing costs measure the capital borrowing costs for a company to engage in

infrastructure development. They are a reverse indicator, too. The higher the value,

the lower the financing costs.

Figure 18: Development costs heat map


1 Changes in the Development Costs Sub-index

(1) BRI infrastructure markets are facing higher cost pressure

In 2019, the score of BRI markets is 107, which indicates higher cost pressure

than last year. The main reasons are the universal rise in operational costs and the

36



reduction in soft loans. Qatar, Thailand, the Philippines, North Macedonia and Croatia

are less exposed to the pressure.

Figure 19: Development Costs Sub-index (2010-2019)


(2.) Rankings stabilize amid rise in regional development costs

In 2019, all regions exhibit varying levels of decline in the Development Costs

Sub-index. In other words, they have to spend more on infrastructure. However,

the rankings of all regions but South Asia and Central Asia remain the same. The Top

Three regions with the lowest development costs are Southeast Asia, CEE and South

Asia.

Table 13: Changes in regional Development Costs Sub-index


Costs Sub-index

2019

Ranking

2018 Development

Costs Sub-index

2018

Ranking


CEE 113 2 118 2



Western Asia & North

Africa104 5 107 5

CIS-7 Countries and

Mongolia99 6 103 6

PSCs 95 7 96 7

37



Southeast Asia maintains its cost advantage, thanks to cheap labor and raw

materials. In 2019, the region’s Development Costs Sub-index is 122, the highest

of the seven. Thailand leads the pack as the Thai baht remains strong. Myanmar

is at the bottom, whose raw material costs are pulled up by its weak currency.

Myanmar’s economy - and therefore its sub-index - are also held down by the

fresh round of EU sanctions in 2018.

CIS-7 Countries and Mongolia registers the highest development costs of

the seven regions. Due to higher operational costs, the region only scores 99 in

2019. Ukraine bears the brunt, whose operational costs fall victim to the prolonged

currency depreciation.

Central Asia is facing higher cost pressure. In 2019, its development costs grow

sharply from the previous year, partly because of ruble devaluation and international

oil price fluctuation, and partly of mounting raw material prices. The region’s top

performer is Kyrgyzstan; the second best is Turkmenistan.

Figure 20: Trends of regional Development Costs Sub-index (2010-2019)


38



(3) Country rankings are reshuffled as development costs pile up

In 2019, only seven countries register lower development costs from the

previous year. They are Qatar, Iran, Israel, Guinea-Bissau, Uzbekistan, Brazil and

Mozambique. One country, Ukraine, stays at the same level. A total of 63 countries

record higher costs. Not a single country records a ranking change by over 15 places.

Ten countries (14.1%) stay put, while 64 countries (90.1%) move up or down by no

more than ten spots.

Table 14: Top 15 list of Development Costs Sub-index

Country2019 Development

Costs Sub-index2019 Ranking

2018 Development

Costs Sub-index2018 Ranking

Qatar 150 1 127 12

Thailand 143 2 148 2

Philippines 141 3 148 3

North Macedonia 137 4 150 1

Croatia 133 5 139 6

Georgia 132 6 142 4

Jordan 131 7 141 5

Malaysia 131 8 133 9

Lithuania 128 9 133 8

Armenia 126 10 130 10

Albania 123 11 129 11

Bulgaria 122 12 136 7

Bosnia and

Herzegovina122 13 126 13

Vietnam 118 14 121 17

Kyrgyzstan 117 15 117 24


Qatar embraces the sharpest decline in development costs. In 2019, its

Development Costs Sub-index soars from 127 to 150, the highest score of all

countries. The improving infrastructure environment and the influx of cheap labor

from neighboring countries work together to keep Qatar’s operational costs in

check. On the opposite side is Bulgaria. Its sub-index plummets from 136 to 122.

The main reason is the rise of financing costs along with interest rates. Higher raw

material and labor costs also have a hand in this.

39


2 Factors Concerning the Development Costs Sub-index

(1) Operational costs

Skilled labor shortages and import cost hikes push up operational costs of all

regions in 2019, as the sub-index shows. According to the international construction

market survey of Turner & Townsend, the number of markets constrained by skilled

labor shortages is growing. It is estimated that such shortages will one day become

a global concern. The development of infrastructure, a labor-intensive industry,

is bound up with labor costs, and the mounting labor costs due to skilled labor

shortages have a direct impact on the sub-index. Thanks to inflation, operational

costs are further pushed up by the rising costs of imports such as raw materials

and factory equipment. Therefore, the changing landscape of international trade is a

factor to be reckoned with.

(2) Financing costs

The days of cheap financing come to an end. It is inevitable that the cost of

financing will rise. In order to offset the negative effects of the global financial

crisis and stimulate domestic economy, central banks around the world adopted

easy monetary policies. As a result, global interest rates stayed low over the past

few years, which was a blessing to infrastructure-hungry Belt and Road countries,

emerging markets and developing economics. However, since the Federal Reserve

halted quantitative easing to increase interest rates and unwind its balance

sheet, global monetary policies have been heading for the pre-crisis “normal”.

Cheap financing comes to an abrupt end. The increase in benchmark interest rate

announces the end of the “soft loan” era, and costs will further pile up for large

cross-country infrastructure projects relying on dollar funding.

40



Figure 21: Changes in three-month US dollar Libor rate (%)


Regulatory changes make financing harder and more costly. BRI infrastructure

cannot do without the engagement and support of financial institutions, and any

change in financial regulations will have a direct bearing on infrastructure financing.

After the full-scale implementation of Basel III and the International Financial

Reporting Standards, the banks’ hands are tied, and infrastructure fundraisers are

turning to more complex and difficult sources. In addition, the evolving geopolitics

and global trade tensions put a question mark on the availability and consistency of

capital supplies.

41


Section Four: The Sub-index of Belt and Road Infrastructure Development Passions

The sub-index is calculated based on the value of new contracts for global

infrastructure development, the amount of private investment in infrastructure

projects, the value of new contracts for overseas contracting projects of China

, and other indicators to reflect the short-term passions for infrastructure investment

in a country. The higher the sub-index, the more active the infrastructure investment

in the country, and the greater the market appeal.

DevelopmentPassions Sub-index

Figure 22: Development passions heat map


1 Changes in the Development Passions Sub-index

(1) Development Passions Sub-index drops slightlyIn 2019, the sub-index drops slightly to 119 from the previous year. A total of

23 countries have witnessed declining passions. Jordan suffers the biggest hit. Its

score falls to 93 from 102 of the previous year, and its ranking to 59th from 22nd. Five

countries (Tajikistan, Hungary, Uzbekistan, Mozambique and Croatia) see a sharp rise

in the sub-index. Seven stay at the same level as last year.

42



Figure 23: Development Passions Sub-index (2010-2019)


(2) Development passions differentiate across regions as CIS-7 Countries and

Mongolia dramatically cools

Southeast Asia and CIS-7 Countries and Mongolia register a sharp decline

in development passions, while other regions are heating up to varying degrees.

Although the score of Southeast Asia drops from 135 to 122, it is still the highest of

all regions. Western Asia & North Africa jumps from 4th in 2018 to 2nd. PSCs remain

at the 3rd place.

Table 15: Changes in regional Development Passions Sub-Index


Passions Sub-index2019

Ranking2018 Development


Ranking


Western Asia & North

Africa117 2 104 4

PSCs 114 3 108 3



CIS-7 Countries and

Mongolia104 6 124 2

CEE 93 7 93 7


43


The Western Asia & North Africa registers a significant increase in development

passions. The score of its sub-index is 117, much higher than the previous year.

The region’s Top Three economies - Egypt, the UAE and Saudi Arabia - play a

prominent role in driving up the sub-index. For instance, in the energy sector alone,

the UAE set in motion two large projects in 2018, namely the Mohammed Bin

Rashid Al Maktoum Solar Park - Phase IV (USD 3.9 billion) and Warsan Waste-to-

Energy Plant (USD 680 million). Turkey’s infrastructure market stands out in private

investment, which amounted to USD 7.9 billion in 2018, nearly three times higher

than the previous year. Transportation projects took up the lion’s share. The four

highways and one airport in question were worth USD 6.9 billion in total. Jordan

has broken grounds on renewables. In 2018, it was running three renewable power

plants worth USD 170 million in total.

Central Asia is gathering steam. In 2019, the Development Passion Sub-index

of the region rises sharply to 108 from the previous year, lifting its ranking from 6th to

4th. The main driver is the large number of port, power, highway and bridge projects

going on in countries like Kazakhstan, Kyrgyzstan and Uzbekistan. Furthermore,

Turkmenistan breaks new ground on power generation. Driven by the Concept of

Development of Electric Power Industry of Turkmenistan in 2013-2020, a national

program, the Turkmenistan-Afghanistan-Pakistan Transmission Line Project

successfully kicked off in 2018.

CIS-7 Countries and Mongolia is losing its sheen. In 2019, the Development

Passions Sub-index of the region drops significantly to 104 from the previous year,

weighing down the overall figures. The main reasons are the shrinking value of new

contracts with China and the plunging development passions of Russia, a major

regional economy. To be more accurate, the value of new contracts with China in

2018 slipped to USD 9.96 billion from USD 10.47 billion of the previous year, and

Russia’s sub-index slumps from 128 to 106 over sluggish investment in power,

highway and bridge projects. Russia’s one saving grace is private investment,

which stays at the same level as last year. In 2018, private investment in the country

amounted to USD 2.3 billion, of which USD 1.4 billion was directed towards a dry

44



bulk terminal project.

(3) Indonesia comes out top as some countries experience major changes in

rankings

Among the Top Three in development passions, Indonesia climbs to the top from

the 2nd spot of 2018. The UAE scores 132, gaining nine ranks to the 2nd. Bangladesh

stays in 3rd. In 2018, Indonesia initiated two large transportation projects, namely

the USD 5.481 billion Padang-Pekanbaru Toll Road and the USD 3 billion Jakarta

Integrated Dual Purpose Tunnel, and the launch of the USD 3.9 billion Mohammed

Bin Rashid Al Maktoum Solar Park - Phase IV, Dubai in the same year marks a new

breakthrough in the UAE’s years-long search for an alternative to its natural gas

supply.

Table 16: Top 15 list of Development Passions Sub-index


Passions Sub-index2019 Ranking

2018 Development

Passions Sub-index2018 Ranking


UAE 132 2 116 11

Bengal 131 3 134 3

Pakistan 131 4 133 4

Egypt 130 5 100 24

Malaysia 130 6 159 1

Vietnam 129 7 127 8

Saudi Arabia 128 8 104 19

Iran 127 9 128 7

Turkey 118 10 102 21

Sri Lanka 113 11 99 25

Philippines 112 12 111 13

India 112 13 104 18

Kazakhstan 109 14 100 23

Tajikistan 107 15 93 55


Countries with the greatest ranking changes are Tajikistan, Jordan, Hungary,

Uzbekistan and Albania. In 2019, the score of Tajikistan is 107. The country

skyrockets by 40 ranks to the 15th. Hungary scores 103, up 37 spots to 23rd. Its main

drivers are large energy and transportation projects, including the USD 13.2 billion

45


Paks Expansion Project and the USD 1.95 billion Budapest-Belgrade-Skopje-Athens

Rail Line. Under a favorable policy environment, Jorden has stretched itself to build

railways, highways and bridges in recent years. In 2018 alone, it gave the all clear to

the Amman-Aqaba Desert Highway Upgrade and the Aqaba Railway Project. That,

however, is not enough to offset the poor showing of port and power sectors.

Table 17: Five countries with the greatest changes in Development Passions Sub-index



Ranking2018 Development


Ranking

Tajikistan 107 15 93 55

Jordan 93 59 102 22

Hungary 103 23 93 60

Uzbekistan 103 24 93 49

Albania 92 65 94 42


2 Factors Concerning the Development Passions Sub-index

(1) Investors are increasingly attracted to railways, highways and bridges

In 2018, transportation overtook energy in private investment for the first time

in ten years. In 1H18 alone, 27 transportation projects brought in USD 12.51 billion

from the private sector, accounting for 51.1% of the total. By contrast, although

the number of privately-funded energy projects was higher (54), their scale was

relatively small, and their total worth was merely USD 10.74 billion. During the same

period, the water supply and sewage treatment sector logged five privately-funded

projects worth USD 1.15 billion in total; the communication sector greenlighted one

such project worth USD 68 million.

46



Figure 24: Private Investment in different infrastructure sectors (2009-2018)

Source: World Bank’s PPI Database

(2) Renewables win the good graces of private investors

Renewable investment gained much ground in 2018. All countries except

Pakistan, Bangladesh, Thailand and Indonesia have fared well in this field. Of the

new power projects, 89% are based on renewables. The most sought-after is solar

power. In 2018 alone, ten solar projects started in India. Brazil gave the go-ahead to

21 wind power projects during the same year.

Figure 25: Private investment in energy in 2018

Source: World Bank’s PPI Database

Chapter Three

As an important research published in Macao, to showcase Macao’s

characteristics, this report offers dedicated studies on eight Portuguese-

speaking countries (PSCs), including Angola, Brazil, Cape Verde, Guinea-

Bissau, Mozambique, Portugal, São Tomé and Príncipe, and Timor-Leste.

This report analyzes these countries’ infrastructure development prospect

based on the evaluation of their development environment, demands, passions,

and costs. It also looks at how Chinese companies participate in PSCs’

infrastructure development and Macao’s efforts in promoting the Belt and

Road Initiative. Based on these analyses, the report seeks to explore the

ways to improve Macao’s contribution as a platform and to facilitate PSCs’

infrastructure development in the future.

Infrastructure Development in Portuguese-Speaking Countries

48



Section One: PSCs’ Infrastructure Development Index

The scoring of PSCs’ development index is reduced by a small margin in 2019

to 119, ranking the fourth among the seven major regions. Six PSCs, except Portugal

and Mozambique, see lowered scores in 2019.

The scoring of PSCs’ Development Environment Sub-index is reduced slightly

to 116 in 2019, from 117 in 2018, ranking the third among the seven regions along

the Belt and Road. Some PSCs’ development environment is in urgent need of

improvement. From 2014 to 2016, due to the global price drop in commodities and

other adverse factors, key PSCs such as Brazil and Angola suffered from economic

impact—their development environment scoring dropped from 121 in 2013 to 112

in 2017. With the stable pickup of the global oil price in 2017, PSCs’ environment

scoring was restored to 117 in 2018. At the same time, inside the PSCs, the scoring

is significantly polarized—five9 of the eight PSCs have scores lower than 100,

ranking below the Top 50 among the 71 Belt and Road countries. The improvement

of PSCs’ development environment will be a key focus in promoting their

infrastructure development.

The need for infrastructure connectivity keeps the PSCs’ development

demands high. PSCs’ Development Demands Sub-index stands at 149 in 2019,

slightly lower than 151 in 2018. Specifically, PSCs’ transportation industry sees

the greatest demand—its annual scoring is 210, much higher than that of other

industries. Energy scores 147, ranking the second. Telecommunications and water

score 124 and 114 respectively. According to the Global Competitiveness Index

by the World Economic Forum, PSCs’ infrastructure is underdeveloped. With the

development of the regional economy and the implementation of the Belt and Road

Initiative, the need for infrastructure connectivity will instill new impetus to PCS’s

49

Chapter Three Infrastructure Development in Portuguese-Speaking Countries

development. Specifically, Brazil (155) and Angola (135) see the highest development

demands. Large populations and the urgent demand for economic development are

the key factors behind the growing need for infrastructure in those two countries.

PSCs underperform in their Development Costs Sub-index, with high investment

costs. The development costs in PSCs are higher than other regions, with a scoring

of 95 in 2019. Specifically, despite its slight increase over last year, Portugal’s

infrastructure development costs are still the lowest in the region, scoring 109 in

2019. Brazil’s score is 94, the same as last year. The constant depreciation of the

Brazilian Real in recent years, rising costs of overseas procurement and mounting

inflation pressure drag down the performance.

PSCs’ development passions see slight recovery but still have room for

improvement. PSCs’ Development Passions Sub-index in 2019 is 114, a slight

pickup over 98 in 2018. Timor-Leste scores 100 in 2019, rising to the 31st place in

2019 from the 46th place in 2018. Compared with 2018, Mozambique has risen by 24

ranks to No.19, mainly due to the increased value of newly signed contracts. Portugal

and São Tomé and Príncipe also have risen by five and seven ranks respectively.

As for private investment, Brazil’s private investment has a leading influence in the

region, but the investment value has been reduced significantly. In 2018, the private

investment in Brazil, consisting of 42 projects, totaled USD 6.0 billion, the lowest in

the past decade. Timor-Leste, however, sees a leapfrog development in its private

participation in infrastructure (PPI): it has had its first transportation PPI project over

the past five years—the Tibar Bay port project.

50



Section Two: Mainland Chinese Enterprises’Involvement in Portuguese-speaking Countries’

Infrastructure Development

At the request of the Macao SAR Government, CHINCA formulated the

Index of Mainland Chinese Enterprises’ Involvement in Portuguese-speaking

Countries’ Infrastructure Development (the primary index). Such index consists

of four sub-indices, i.e. Index of Portuguese-speaking Countries’ Infrastructure,

Index of China-Potuguese-speaking Countries’ Relationship Heat, Index of Local

Development Capability of Chinese Enterprises, and Index of Chinese Enterprises’

Local Influence respectively. The first index demonstrates the realities of PSCs’

infrastructure construction; the second one comprehensively measures the relations

between China and PSCs; the third one measures how Chinese companies perform

and develop as local contractors; the fourth one reflects the local contributions of and

the public opinions on the Chinese companies.

The cooperation in infrastructure development and investment between

China and PSCs is deepening, and such cooperation can be clearly divided into

three stages. In the 11 years from 2008 to 2018, the scoring of Mainland Chinese

Enterprises’ Involvement in Portuguese-speaking Countries’ Infrastructure

Development floated above 58 points—relatively high. Based on the trends in the

past 11 years, the scorings can be categorized into three groups: First, rise (2008-

2010). Despite the impact of the global financial crisis, Chinese companies increased

their support for and participation in PSCs’ infrastructure development. Second,

fluctuation (2010-2016). Due to the global financial crisis, European debt crisis, and

certain PSCs’ fiscal and debt pressures, the index closely hovered around 67. Third,

rising amidst fluctuations (2016-2018). Compared with 2017, the 2018 scoring was

reduced slightly, but it remained relatively high.

51


Figure 26: Index of Mainland Chinese Enterprises’ Involvement in Portuguese-speaking

Countries’ Infrastructure Development over time

S ource: CHINCA.

C hinese companies have huge potential for local development, and their social

influence is steadily increasing. In terms of the four sub-indices, from 2008 to

2018, the Index of Portuguese-speaking Countries’ Infrastructure, the Index of

China-Potuguese-speaking Countries’ Relationship Heat, and the Index of Local

Development Capability of Chinese Enterprises all saw high scores. Specifically, from

2008 to 2018, the Index of Portuguese-speaking Countries’ Infrastructure was

slightly reduced to 90 from 91. Compared with the height around the beginning of

the financial crisis, PSCs’ infrastructure demands were lowered by a small margin

and their infrastructure environment also changed correspondingly. The Index of

China-Potuguese-speaking Countries’ Relationship Heat rose from 64 to 81.

This shows that the relations are improving, laying a solid political foundation for

Chinese companies’ participation. The Chinese companies’ local development

capability sub-index rose from 56 to 66, which reflects the substantial progress of

Chinese businesses in accessing the PSC market. Although the Index of Chinese

Enterprises’ Local Influence scored significantly lower than the other three sub-

indices, it climbed up drastically from 42 in 2008 to 60 in 2018. This shows that

Chinese companies have become more adept at handling local relations, but on

the other hand, it also reveals that the companies’ communications with the local

communities are not perfect—they still have room for improvement.

52



Index of Portuguese-speakingCountries’ InfrastructureIndex of Local DevelopmentCapability of Chinese Enterprises

Index of China-Potuguese-speakingCountries’ Relationship HeatIndex of Chinese Enterprises’ LocalInfluence

Figure 27: Four Sub-Indices of Mainland Chinese Enterprises’ Involvement in Portuguese-

speaking Countries’ Infrastructure Development over Time

Source: CHINCA.

By comparing the four sub-indices in 2018 and 2008, we can see that the Index

of Portuguese-speaking Countries’ Infrastructure was slightly reduced (1 point

lower). The Index of China-Potuguese-speaking Countries’ Relationship Heat

and the Index of Chinese Enterprises’ Local Influence were improved significantly

(up by 17 and 18 points respectively). The Index of Local Development Capability of

Chinese Enterprises also saw a surge (up by 10 points).

Index of Chinese Enterprises’Local Influence

Index of Poruguese-speaking Countries’ Infrastructure

Index of Local Development Capabilityof Chinese Enterprises

Index of China-Potuguese-speakingCountries’Relationship Heat


Countries’ Infrastructure Development

Source: CHINCA.

53


PSCs are significantly different in their bases of development. They have

different focus areas for infrastructure investment cooperation. By country, from

2008 to 2018, in terms of the primary index, Angola kept its top position, followed by

Brazil (the second) and Mozambique (the third). Timor-Leste and Portugal gradually

caught up. The scorings for Cape Verde and Sào Tomé and Príncipe, though not

high, were moving up. Guinea-Bissau remained in the 17-22 range (see Figure 3-4).

Brazil

Guinea-Bissau

São Tomé and Príncipe

Timor-Leste

Mozambique

Angola

Cape Verde

Portugal


Countries’ Infrastructure Development

Source: CHINCA.

In the future, infrastructure cooperation between companies from the Chinese

mainland and PSCs will focus on transportation and energy (power) sectors.

However, as resource endowment, geographical significance and development

strategy vary among countries, each of them has its own priority when it comes to

infrastructure projects.

Table 18 PSCs’ Primary Index Rankings

Country 2018 Primary Index 2018 Ranking Ranking Change

Angola 82 1 –

Brazil 73 2 –

Mozambique 66 3 –

Portugal 46 4 –

54



Country 2018 Primary Index 2018 Ranking Ranking Change

Timor-Leste 40 5 –

Cape Verde 26 6 –

Guinea-Bissau 22 7 –

Sào Tomé and Príncipe 22 8 –

Source: CHINCA.

55


Section Three: Macao’s Contribution to the Belt and Road Initiative

1 Macao’s Infrastructure Development

The Macao SAR government is furthering its coordinated efforts in promoting

the construction of large-scale public infrastructure, to build a secure and efficient

network of modernized infrastructure, better support the urban development and

fully connect Macao with the rest of the world. The major infrastructure projects in

the past two years include: 1.) The Hong Kong–Zhuhai–Macao Bridge was officially

opened in 2018. It is the longest immersed tube tunnel and the longest open-

sea bridge-tunnel fixed link on earth. 2.) The Taipa Ferry Terminal was officially

opened in 2017. With an area of 200,000 m2, it is one of the most important ports in

Macao. Today, the Terminal’s third phase is under construction. 3.) The expansion

of the Macau International Airport. In August 2018, the Airport’s North Terminal

extension was finished and put into operation. At the same time, the design and

construction for the South Terminal extension was open for public bidding. When the

construction is complete, the capacity of the Terminal will be increased to 10 million

annual passengers. 4.) The construction of the first railway transportation project in

Macao—the Macao Light Rapid Transit. In 2018, the first phase of the system—the

Taipa line—was basically completed. 5.) The new Guangdong-Macao border access

(Qingmao Boundary Control Point). Foundation works are under way, and outsourcing

has been successively carried out since 2018. 6.) The fourth sea-crossing bridge

connecting the Macao Peninsula and Taipa, whose main structure measures about

3.1km in length. Preliminary design of the bridge was completed in 2018, and bidding

is going on.

56



2 Building the Sino-PSCs Cooperation Platform to Promote the Belt and Road Initiative

The Macao SAR has been proactively using its unique advantages to promote

the Belt and Road Initiative since it was launched. In March 2017, Macao founded

its Working Committee for the Development of the Belt and Road Initiative. The

Committee, led by the Chief Executive, is responsible for the short, mid and long-

term plan on Macao’s contribution to the Initiative. The Committee has also

gradually defined its strategy: “Focusing on unimpeded trade, financial integration

and closer people-to-people ties, we will leverage the service platform for business

cooperation between China and PSCs and our advantageous connections with the

overseas Chinese and their relatives. We shall prioritize the PSCs and the Southeast

Asian market.” In December 2018, the National Development and Reform

Commission (NDRC) and the Macao SAR Government signed the Arrangement

between NDRC and the Macao SAR Government on Supporting Macao’s Full

Participation in and Contribution to the Belt and Road Initiative. This document

defined Macao’s potential roles in conferences and conventions, specialized

finance, building the service platform for business cooperation between China and

PSCs, etc.

Specifically, since 2017, Macao has been taking various measures to promote

the Initiative. First, moving faster in building the service platform for business

cooperation between China and PSCs. The Five-Year Development Plan of the

Macao Special Administrative Region (2016-2020) proposes to take the platform to

the next level and the “Committee for the Development of the Service Platform for

Business Cooperation between China and PSCs”, chaired by the Chief Executive,

has been founded. Second, holding conferences and conventions centering on the

Initiative. The International Infrastructure Investment and Construction Forum (IIICF),

Macao International Trade and Investment Fair (MIF) and other international events

held in recent years vividly demonstrate Macao’s active participation in the Initiative.

An important channel for the official exchanges between both sides, the Forum

for Economic and Trade Co-operation between China and Portuguese-speaking

57


Countries (Forum Macao) was founded in Macao in 2003. Over the past two years,

this Forum has also directed more attention to the Initiative and its opportunities for

both sides.

3 Specialized Financial Services for Financial Integration

Macao is leveraging its unique advantages in developing specialized finance

to promote the financial integration for the Initiative. The founding of the China-

Portuguese-Speaking Countries Cooperation and Development Fund is an important

measure in driving the cooperation between Chinese Mainland and the PSCs in

industrial capacity, infrastructure, etc. Since the Fund was founded in Macao in

June 2017, it financed four projects during its two phases, namely, the Mozambique

agricultural project, the Angola power transmission & distribution and water supply

equipment program, the Brazil solar power station project, and the Brazil JSM

hydropower project. Over 20 projects were chosen as backup projects, mainly

involving power, highway, port, and other infrastructure-related sectors in addition

to manufacturing, resource development, agriculture, etc. These projects basically

cover all PSCs. Macao’s specialized financial services include RMB settlement,

financing lease, wealth management, etc. for the PSCs. Currently, the Macao SAR

Government is looking at introducing the trust law, strengthening the financial

infrastructure and other measures to further develop the financial institutions in

Macao and introduce more financial instruments. In March 2019, the Legislative

Assembly of Macao adopted the bill—The Legal Framework of Leasing Companies,

to attract more leasing companies to Macao.

Section One: The Arab Republic of EgyptChapter Four

Several Key Countries’ Infrastructure Development Index

59

Chapter Four Several Key Countries’ Infrastructure Development Index

The Arab Republic of Egypt

60



Section One: The Arab Republic of Egypt

1 Infrastructure Development Index

The Arab Republic of Egypt (Egypt)’s infrastructure development index

score is 114 in 2019, ranking the 16th among the Belt and Road countries, 22 ranks

higher than last year. In terms of the primary Sub-Indices, Egypt’s Development

Environment, Demands, and Costs rankings all see varied decline. Its Development

Passions scoring, however, sees a significant increase, drastically improving Egypt’s

development index.

Table 19 Egypt’s Infrastructure Development Index and Changes

Egypt2018 2019 Ranking

ChangeIndex Ranking Index Ranking

BRIDI 111 38 114 16 ↑ 22

Development Environment 85 67 85 68 ↓ 1

Development Demands 149 5 140 6 ↓ 1

Development Costs 97 64 93 70 ↓ 6

Development Passions 100 24 130 5 ↑ 19


2 Factors Impacting the Infrastructure Development Index

In terms of the Development Environment Sub-index, Egypt’s environment

in general is relatively backward and has big room for improvement. Lasting issues,

including terrorist threats and religious conflicts, disturb Egypt’s social security and

political stability. Since the Egyptian President Abdel Fattah el-Sisi came into office

in April 2018, he has been dedicated to promoting economic growth, reducing debts

and introducing foreign investment. This has improved the political and economic

environment, though the development of infrastructure is still hampered by the lack

of policy transparency and efficiency, terrorism, etc.

61


Figure 30: Changes in Egypt’s Infrastructure Development Environment Sub-index


As for the Development Demands Sub-index, a decrease in demand in the

energy sector is the main reason behind the drop in the sub-index. With many

previous Belt and Road power projects completed and put into operation, Egypt’s

power shortage is being ameliorated, but the country’s transportation remains

underdeveloped. According to the World Economic Forum Global Competitiveness

Index, Egypt’s transportation infrastructure only scored 54 in 2018, slightly higher

than the average of the 71 Belt and Road countries but still far from the full mark.

Egyptian President Abdel-Fattah al-Sisi also attaches high importance to improving

the transportation infrastructure. He has promoted the implementation of a series

of transportation projects. Egypt’s transportation, among other sectors, is still

expected to see one of the highest demands in the future.

62



Figure 31: Changes in Egypt’s Infrastructure Development Demands Sub-index


Concerning Egypt’s Development Costs Sub-index, the surging costs of

domestic raw materials is the main cause for the rising infrastructure operational

costs. IMF’s loan of USD 1.2 billion has restricted Egypt’s macroeconomic and

monetary policies. The Egyptian Government has reduced its subsidies for power,

oil, natural gas and other energy-related public products. This has led to higher

procurement costs of the related raw materials, which, in turn, has driven up the

investment and operational costs for infrastructure. Moreover, the rising cost of

borrowed capital has further lowered the scoring. By the end of 2018, Egypt’s

balance of non-concessional lending from the IMF has exceeded its quota. The

country needs to finance with IMF’s conditional non-concessional lending

, hence the limited sovereign financing capability. Consequently, financing channels

for businesses to invest in and build infrastructure in Egypt have been narrowed, with

mounting pressure on the cost of borrowed capital.

63


Figure 32: Egypt’s Infrastructure Development Costs Sub-index


In terms of the Development Passions Sub-index, Egypt saw major projects

implemented in 2018 in railway, port, power and other areas. The investment was

especially active. Some projects include a railway project (the Alexandria-Cairo-

Aswan High-Speed Rail Project worth a total of USD 10 billion), two port projects

(Safaga Port Multi-purpose Terminal, worth USD 450 million, and Port Nuweiba

Multi-purpose Terminal, worth USD 400 million), and a power project (TBEA

Sunoasis Benban Solar Energy Park, Aswan, worth USD 180 million). The smooth

implementation of these large projects drastically pulled up Egypt’s Development

Passions Sub-Index scoring.

64



Figure 33: Changes in Egypt’s Infrastructure Development Passions Sub-index


3 Th e Outlook of Infrastructure Development

Egypt’s infrastructure development demands will be further unleashed. Egypt,

one of the most important ancient civilizations in the world, is at the crossroads

where Africa, Europe and Asia meet and boasts control over the Suez Canal. In

addition, its economy is improving, with huge development potential. According to

IMF’s latest forecast, from the fiscal year 2018 to 2019, Egypt’s real GDP will

grow by 5.5%. Generally speaking, Egypt still holds a special position in the global

political and economic landscape. Meanwhile, Egypt is one of the first countries

to support the Belt and Road Initiative. With the smooth implementation of the

related projects, the infrastructure in Egypt and its neighboring regions is further

improved, which facilitates future implementation. As the Belt and Road Initiative

and Egypt Vision 2030 are being advanced, Egypt is expected to further unleash

its infrastructure investment demands. However, inflation, labor shortage, limited

financing channels, and other issues might impede certain projects. International

participants in Egypt’s infrastructure development should try to avoid the above

risks.

65


Republic of Indonesia

66



Section Two: The Republic of Indonesia


The Infrastructure Development Index of the Republic of Indonesia (Indonesia)

scores 138 in 2019, ranking the first among the Belt and Road countries. In terms of

the primary sub-indices, the rankings of Indonesia’s Development Environment and

Development Demands sub-indices have not changed as compared with last year.

However, the country has risen by eight and one rank in Development Costs and

Development Passions sub-indices, respectively. This drives up the Infrastructure

Development Index.

Table 20 Indonesia’s Infrastructure Development Index and Changes

Indonesia2018 2019 Ranking


BRIDI 146 1 138 1 -

Development Environment

Sub-index136 8 133 8 -

Development Demands

Sub-index170 2 161 2 -

Development Costs Sub-

index113 35 112 27 ↑ 8

Development Passions Sub-

index152 2 136 1 ↑ 1



The Development Environment Sub-Index shows that Indonesia has a

favorable environment for infrastructure development. In 2019, Indonesia will hold

its presidential election and President Joko Widodo is expected to be reelected—

the political environment will remain stable. The unimpeded rise of the international

oil price and the increase in import demand have worsened the deficit of the current

67


account. This has weakened Indonesia’s economic environment to a certain extent,

but in general, the country’s economy has continued to grow, with small inflation.

Business environment is also improving—beneficial for companies to participate in

infrastructure development.

Figure 34: Changes in Indonesia’s Infrastructure Development Environment Sub-Index


The Development Demands Sub-Index shows that Indonesia still has big room

for improvement in infrastructure. I ndonesia has always been a popular Belt and

Road country. As the early projects begin to deliver economic benefits, Indonesia has

now been sharing the fruits of cooperation. According to the World Economic Forum

Global Competitiveness Index, Indonesia’s power infrastructure scored 93 in 2018,

up by 4% over last year and its telecommunications scored 61, up by 19% year-on-

year. Although different sectors all see reduced development demands, Indonesia’s

infrastructure still needs to be improved, as it cannot provide continued impetus for

sustainable economic growth. There are still investment demands in that market in

the short run.

68



Figure 35: Changes in Indonesia’s Infrastructure Development Demands Sub-Index


Indonesia’s Development Costs Sub-Index sees its ranking improved

significantly. The operational environment for infrastructure construction and the

financial market have improved over last year. This has reduced the operational

and financing costs—the main driver behind Indonesia’s improved ranking. In

recent years, the Indonesian Government has loosened its investment restrictions,

vigorously developed its infrastructure, and constantly improved its investment

environment. In World Bank’s 2019 Ease of Doing Business Score, Indonesia

scores higher in starting a business, dealing with construction permits, company

transparency, getting credit, and the stability of the financial market than last year.

This cuts down the implicit investment and operational costs, which drives up the

Development Costs Sub-Index.

69


Figure 36: Indonesia’s Infrastructure Development Costs Sub-Index


Based on the Development Passions Sub-Index, Indonesia is still a popular Belt

and Road destination for infrastructure investment. In 2018, Indonesia maintained

the level of investment activities in energy, airport, etc. The investment activities in

road and bridge were drastically increased, with large projects, including the Padang

-Pekanbaru Toll Road and the Jakarta Integrated Dual Purpose Tunnel Project,

smoothly implemented.

70



Figure 37: Changes in Indonesia’s Infrastructure Development Passions Sub-Index

Sourc e: CHINCA, SINOSURE’s Country Risk Database.


Indonesia’s infrastructure development demands remain high. IMF’s latest

data shows that Indonesia’s real GDP grew by 5.2% in 2019, continuing the rapid

pace of 2018. However, the country’s infrastructure development is insufficient

and unbalanced—a key limiter of the current economic development. In recent

years, the Indonesian Government has been improving its investment and business

policies and environment to promote its domestic infrastructure development. For

the same reason, Indonesia has signed a series of infrastructure memorandums

of understanding (MOUs) with other countries, such as the MOU on Railway

Technological Cooperation between Indonesia’s Ministry of Transportation and

India’s Ministry of Railways, and the MOU on Promoting Cooperation on the

Development of Regional Comprehensive Economic Corridors signed by Indonesia’s

Coordinating Ministry for Maritime Affairs and China during the second Belt and

Road Forum for International Cooperation. As the Indonesian Government continues

to implement the relevant policies, it is expected that the infrastructure demands

71


will further increase. However, for participants in Indonesia’s infrastructure

development and investment, a series of risks should be avoided, including the

inconsistency between the central and the local policies, land expropriation, work

visas for foreign labor and the volatility of the Indonesian Rupiah.

72



The Republic of Angola

73


Section Three: The Republic of Angola


The Republic of Angola (Angola) scores 107 in its 2019 Infrastructure

Development Index, ranking 46th among the Belt and Road countries, down by

30 ranks over last year. As for the primary sub-indices, Angola’s Development

Environment, Demands and Costs sub-indices remain stable, but the Development

Passions Sub-Index drops by 22 ranks. This drags down the scoring and ranking of

the Infrastructure Development Index.

Table 21 Angola’s Infrastructure Development Index and Changes

Angola2018 2019 Ranking


BRIDI 115 16 107 46 ↓ 30

Development

Environment Sub-index89 65 89 63 ↑ 2

Development Demands

Sub-index138 7 135 9 ↓ 2

Development Costs

Sub-index95 66 93 69 ↓ 3

Development Passions

Sub-index130 5 102 27 ↓ 22



The Development Environment Sub-Index shows that Angola still has big room

for improvement in its infrastructure development environment. Hit by the plunge in

the international oil price in 2014, Angola’s economy has been mired in difficulties,

with weak growth, currency depreciation, and mounting inflation for many years in a

row. The oil price recovery in 2018 slightly relieved Angola of its economic pressure,

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but the country still faces an inflation rate of over 20% and huge pressure for debt

repayment. At the same time, the stagnant economy drags down Angola’s driver

to improve the business environment. World Bank’s 2019 Ease of Doing Business

Score shows that Angola ranks 173rd among 190 countries—the country’s business

environment has big room for improvement. Corruption, low efficiency, and the

underdeveloped legal system are the main obstacles for business development.

Figure 38: Changes in Angola’s Infrastructure Development Environment Sub-Index


As for the Development Demands Sub-Index, transportation sees a higher score

while the other sectors have reduced ratings. Angola’s transportation infrastructure

is underdeveloped. According to the World Economic Forum Global Competitiveness

Index, in 2018, Angola’s transportation infrastructure only scored 31, far from

100, the full score, hence the urgent need for improvement. On the other hand, the

scoring for the development demands of Angola’s water industry stands at 172

in 2019, the highest in the four sectors. Currently, Angola’s water infrastructure

remains underdeveloped. It has huge potential for development in the future.

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Figure 39: Changes in Angola’s Infrastructure Development Demands Sub-Index


In terms of the Development Costs Sub-Index, the rising financing costs mainly

contribute to Angola’s reduced development costs scoring. Higher interest rates

of foreign borrowing have increased Angola’s financing costs. Meanwhile, severe

currency depreciation and soaring inflation have raised the costs of raw materials.

As a result, Angola’s Development Costs Sub-index remains low and even drops

in 2019. In 2018, for debt repayment, the Angolan Government obtained sufficient

capital by borrowing from Commerzbank AG, Credit Suisse, UK Export Finance, the

World Bank, and the IMF, and issuing European bonds, etc. However, as Angola’s

economic risks and risk of sovereign insolvency remain high, the country’s financing

channels have continued to narrow. Angola’s infrastructure development relies on

foreign investment. The mounting pressure of debt repayment will further drive up

the financing costs.

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Figure 40: Angola’s Infrastructure Development Costs Sub-Index


In terms of Development Passions Sub-Index, the investment interest in

port infrastructure has declined. Angola’s policy support maintained the level of

investment activities in power in 2018, with the Chicapa II Hydropower Plant, Lunda

Sul, a hydropower project, smoothly implemented. However, the drop in port-related

investment interest exerts huge downward pressure on the country’s Development

Passions Sub-Index.

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Figure 41: Changes in Angola’s Infrastructure Development Passions Sub-Index



Angola will have a harder time financing its infrastructure development. Angola

is one of the major economies and the biggest recipients of foreign investment in

sub-Saharan Africa. Except areas related to national security, the country opens all

its infrastructure sectors to foreign contractors, including railway, road, port, airport,

water, etc. Today, Angola faces heavy pressure in macroeconomy, international

reserve, foreign debt repayment, etc. Such pressure will make financing for future

infrastructure projects more difficult. Angola has big potential in developing its

transportation and water industry, which will create opportunities for infrastructure

improvement. However, for participants in Angola’s infrastructure development, a

series of risks should be avoided, especially those related to inflation, exchange rate,

increasingly expensive raw materials, and narrowed financing channels.

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Kingdom of Saudi Arabia

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Section Four: The Kingdom of Saudi Arabia


The Kingdom of Saudi Arabia (Saudi Arabia) scores 120 in its 2019 Infrastructure

Development Index, ranking seventh among the Belt and Road countries, up by 12

ranks over last year. A look at the primary sub-indices shows that the improved

ranking is mainly due to the surge in the Development Passions Sub-Index from 104

last year to 128, up by 11 ranks.

Table 22 Saudi Arabia’s Infrastructure Development Index and Changes

Saudi Arabia2018 2019 Ranking


BRIDI 115 19 120 7 ↑ 12

Development

Environment Sub-index133 9 133 9 -

Development Demands

Sub-index112 41 111 38 ↑ 3


index110 44 105 47 ↓ 3


Sub-index104 19 128 8 ↑ 11



Saudi Arabia’s Development Environment Sub-Index is the same as last

year, with a good development environment in general. There are two reasons:

first, Saudi’s rich oil and gas resources create abundant national wealth, which

guarantees the stable development of the Saudi economy; second, Saudi’s

business environment is among the top in the region. For economic diversification,

Saudi Arabia is relatively open to investments in all areas except oil and gas.

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Financing is also convenient.

Figure 42: Changes in Saudi Arabia’s Infrastructure Development Environment Sub-Index


As for the Development Demands Sub-Index, Saudi Arabia scores lower this

year, but the decline is smaller than that of the other countries, hence the improved

ranking. By sector, Saudi’s energy sector scores the highest in the sub-index. Rich

oil reserve provides guaranteed resources for the infrastructure development in the

energy sector. According to the World Economic Forum Global Competitiveness

Index, Saudi Arabia’s transportation and telecommunications infrastructure scored

60.9 and 59.9 in 2018 respectively, the lowest scores among the sectors. As future

development demands continue to unleash, these two sectors might become a

focus of infrastructure investment for Saudi Arabia in this new environment.

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Figure 43: Changes in Saudi Arabia’s Infrastructure Development Demands Sub-Index


In te rms of the Development Costs Sub-Index, Saudi’s major increase of the

costs of raw materials is the main reason behind the drop in the sub-index. In recent

years, as the international oil prices remain low, economic development faces greater

pressure. To increase non-oil revenue, the Saudi government launched a series of

policies for price adjustment, including raising the prices of non-oil commodities,

increasing consumption tax, etc. This has led to the rising prices of raw materials.

Figure 44: Saudi Arabia’s Infrastructure Development Costs Sub-Index


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The Development Passions Sub-Index shows that Saudi Arabia saw active

investment in energy, port, etc., in 2018. The Ras Al Khair Shipyard Complex, Jubail

Phase 3 Complex, Souq Okaz City International Airport, and other large-scale

projects have been implemented, which drastically pulled up the sub-index.

Figure 45: Changes in Saudi Arabia’s Infrastructure Development Passions Sub-Index



Saudi Arabia’s infrastructure industry is highly competitive. A key country

in the Gulf Cooperation Council and OPEC, Saudi Arabia is also one of the most

important producers of crude oil in the world and a traditional focus of infrastructure

development in the North Africa and West Asia region. As a high-income country,

Saudi has relatively full-fledged infrastructure and has high quality requirement

for new projects. Generally speaking, Saudi Arabia’s infrastructure industry is

a competitive mid to high-end market with a good environment. Yet particular

attention should be paid to government regulations and the risk of raw material price

hike in developing infrastructure in Saudi Arabia.

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Republic of Kazakhstan

84



Section Five: The Republic of Kazakhstan


The Republic of Kazakhstan (Kazakhstan) scores 119 in its 2019 Infrastructure

Development Index, ranking ninth among the Belt and Road countries, same as last

year. In terms of the primary sub-indices, Kazakhstan’s Development Environment

and Demands sub-indices do not see noticeable changes. The Development Costs

Sub-Index has dropped significantly, but the surge in the Development Passions

Sub-Index offsets such drop, keeping the ranking of the Infrastructure Development

Index unchanged.

Figure 23: Kazakhstan’s Infrastructure Development Index and Changes

Kazakhstan2018 2019 Ranking


BRIDI 119 9 119 9 -

Development Environment

Sub-index120 21 120 23 ↓ 2

Development Demands

Sub-index136 9 136 8 ↑ 1


index115 29 108 37 ↓ 8


Sub-index100 23 109 14 ↑ 9



In terms of the Development Environment Sub-Index, Kazakhstan scores

the same in 2019 as in 2018, down by 2 ranks over last year. The development

environment remains stable. In March 2019, former President Nursultan Nazarbayev

announced his resignation and he is succeeded by Kassym-Jomart Tokayev,

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Chairman of the Senate of Kazakhstan. Askar Mamin took office as the new Prime

Minister of Kazakhstan, followed by a cabinet reshuffle. Despite these political

changes, Nursultan Nazarbayev, Chairman of the Security Council, still has the same

decision-making power and influence over the internal and foreign affairs related to

national security. Kazakhstan, therefore, is not likely to suffer from disruptive blows

and its political stability and policy continuity are somewhat guaranteed.

Figure 46: Changes in Kazakhstan’s Infrastructure Development Environment Sub-Index


The Development Demands Sub-Index shows that Kazakhstan’s development

demands are kept stable. Transportation scores 158, the highest among the four

sectors. According to the World Economic Forum Global Competitiveness Index,

Kazakhstan only scored 46 in transportation infrastructure in 2018, below the average

of 71 Belt and Road countries. Transportation sill has big room for development in

the future.

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Figure 47: Changes in Kazakhstan’s Infrastructure Development Demands Sub-Index


As for the Development Costs Sub-Index, Kazakhstan drops by 8 ranks over last

year in 2019. The rising operational costs due to currency depreciation is the main

reason behind the drop. In 2018, due to volatile international oil prices, depreciation

of the Russian currency, etc., the exchange rate of the Kazakhstani tenge to USD

continued to decrease and the rising costs of import commodities pushed up

the operational costs of infrastructure development. According to Kazakhstan’s

Committee on Statistics, the country’s import commodities rose by 7.2% in prices

in 2018, among which, raw materials rose by 17.2% in prices.

Figure 48: Kazakhstan’s Infrastructure Development Costs Sub-Index


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Kazakhstan’s Development Passions Sub-Index scores 109 in 2019, higher

than last year and up by 9 ranks. Specifically, investments in port, power, road and

bridge were especially active. The Kuryk Shipyard Project, ENI Badamsha Wind

Power Plant, and large projects such as the Almaty Ring Road Project were all

smoothly implemented. This drastically drives up the Development Passions Sub-

Index.

Figure 49: Changes in Kazakhstan’s Infrastructure Development Passions Sub-Index



Kazak hstan’s infrastructure has big room for development. Kazakhstan is a

country in Central Asia with the fastest growing economy, relatively stable politics

and good social order. With rich natural resources, the country is known as the

“base for resources and raw materials”. Kazakhstan has an optimal geographic

location and a good cultural environment. Besides, Kazakhstan has launched a series

of policies and measures to boost its economy by attracting foreign investments,

expanding export, and promoting industrial restructuring and diversification.

Kazakhstan’s economy shows obvious signs of stabilization and recovery. The

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country also proposes detailed goals for infrastructure renovation and development

in road, railway, water transportation, telecommunications, power, etc. It is expected

that major developments will be achieved in the above sectors. However, the

participants should pay more attention to risk in exchange rate fluctuation when

develop infrastructure in Kazakhstan.

Chapter Five

The Outlook and Suggestions on Infrastructure Development along

the Belt and Road

The year 2019 opens a “window of golden opportunities” for infra-

structure development along the Belt and Road. Set against a tiring global

picture of economic slowdown and sluggish trade, the Belt and Road coun-

tries look sturdy by outperforming the global averages. The robust economic

growth and fast-expanding investment will fuel further rise in infrastructure

demands. As for market supply, the improved business environment and

multi-faceted supportive policies are bringing security to the infrastructure in-

vestment. Meanwhile, the BRI dovetails with the 2030 Agenda for Sustainable

Development, both of which advocate a more equitable and balanced global

partnership for development, so as to bring economic progress and environ-

mental improvements to the Belt and Road countries, and lend new impetus

to sustainable development of the infrastructure industry. But risks also lurk in

the Belt and Road infrastructure industry. As revealed by the 2018 SINOSURE

Handbook of Country Risk , 54 (or 76% of) Belt and Road countries were given

a risk rating of level five or above (medium risk level). Political risks, econom-

ic risks, natural disaster risks and industrial risks loom over the Belt and Road

infrastructure market. In a nutshell, both challenges and unprecedented op-

portunities for infrastructure development will unfold along the Belt and Road

in 2019. Therefore, in Section III, we will advise related companies on how to

seize market opportunities and avoid risks.

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Section one: Belt and Road Infrastructure Development Opportunities

1 Supportive policies underpin infrastructure development

Now, the BRI has gained firm supports from more and more countries and

international organizations, thus creating a favorable policy environment for

infrastructure development. For example, Saudi Arabia promoted synergy between

its economic initiative “Saudi Vision 2030” and the BRI to inject new impetus and

vigor into infrastructure development and facilitate national economic transformation.

Switzerland expressed its intention to support the BRI and was among the first

European countries to join the Asian Infrastructure Investment Bank. The Kazakhstani

Ministry of Finance drafted and refined the “MOU on Belt and Road Initiative Tax

Administration Cooperation Mechanism (BRITACOM)”, together with tax authorities

from other Belt and Road countries and regions, with an aim of jointly establishing a

long-term tax cooperation mechanism under the BRI. The Philippines launched the

"Build, Build, Build (BBB)” program - a snug fit with the BRI - in 2017, and sealed

nearly 30 cooperation agreements with China in November 2018 for infrastructure,

energy, agriculture, finance, customs and other projects. These strategic approaches

have led to a sound policy environment for international infrastructure development,

and played an important role in promoting sustainable progress of the international

infrastructure investment industry and bringing all parties to the BRI.

2 Infrastructure gap remains huge

The Global Infrastructure Outlook (GIH) forecasted that, in 2019, USD 1.6 trillion

worth of investment will be needed by the global transportation industry. Besides, the

investment gap will be USD 0.9 trillion for the energy industry, USD 0.3 trillion for the

communications industry, and USD 0.2 trillion for the water industry. The investment

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Chapter Five The Outlook and Suggestions on Infrastructure Development along the Belt and Road

needs are found mostly in major Belt and Road countries. The Asian Development

Bank1 estimated a gap of USD 459 billion in Asian infrastructure investment, or about

2.4 percent of Asia’s GDP. As for the sub-regions, the investment gap will be 5.7%,

4.1%, 3.1% of GDP in South Asia, Southeast Asia and Central Asia, respectively.

Considering the economic, political and legal system complexity along the Belt and

Road, as well as project delays that may inevitably arise in many countries, the actual

gap may be wider than predicted in the Belt and Road countries.

3 Cooperative investment and financing programs offer supports for Belt and Road infrastructure development

While international multilateral financial institutions and commercial banks

are exploring new investment and financing models, national sovereign funds and

investment funds are also intensifying efforts to support infrastructure development.

As of the end of 2018, finance ministries of 28 countries endorsed the Guiding

Principles on Financing the Development of the Belt and Road. Multilateral

development banks represented by the World Bank, Asian Infrastructure Investment

Bank and Asian Development Bank have engaged in cooperative investment and

financing programs under the BRI to jointly provide the financial underpinning. It

is worth mentioning that the policy-oriented export and credit insurance has an

extensive coverage and an unparalleled role to play in supporting the Belt and Road

infrastructure development. As of the end of 2018, SINOSURE supported Chinese

enterprises in outputting more than USD 600 billion worth of goods and funds to

countries along the route2. The Debt Sustainability Framework for Participating

Countries of the Belt and Road Initiative, a joint effort between SINOSURE and other

authorities, was released at the 2nd Belt and Road Forum for International Cooperation

to inform sustainable infrastructure policy making. In the future, as we score greater

successes in financial connectivity, the financing channels will be further expanded

to better support the Belt and Road infrastructure projects

1　 Asian Development Bank: Meeting Asia’s Infrastructure Needs, Asian Development Bank,

www.adb.org/sites/default/files/publication/227496/special-report-infrastructure.pdf

2　 This refers to a broader concept of Belt and Road countries, not limited to the 71 countries of

this report.

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4 Infrastructure projects have shown benefits to improve the investment environment

In recent years, a large number of infrastructure projects have started to

demonstrate the real difference they’re bringing to people’s livelihood. For

example, the Addis Ababa-Djibouti Railway, which began to carry passengers in

January 2018, has reduced the seven-day road travel between Ethiopia and Djibouti

to some 10 hours. According to The Nation, the China-Pakistan Economic Corridor is

expected to create more than 2 million new jobs for the Pakistanis. Once completed,

the Hub Power Station will support 4 million local households in annual power

consumption, and will cut hundreds of millions of dollars per year from the aggregate

energy bill, thanks to the low costs of power generation. The China-aided Jordan

Water Network Program has greatly improved the local living standards by ensuring

reliable water access for nearly 500,000 residents, and extending water supply from

3-4 hours per week to 24/7. As more and more projects are to be completed and

put into service, the word-of-mouth praises will create a favorable environment of

public opinions to bring more market opportunities.

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Section Two: Belt and Road Infrastructure Development Challenges

1 Infrastructure projects are most vulnerable to geopolitical changes and complexity

Given the enormous investment amount, infrastructure projects are generally

driven by government authorities or supported by international organizations to

serve political ends. Therefore, they are most vulnerable to social turmoil, political

power shifts and other risk events in the host countries. For example, after winning

the 2015 presidential election of Sri Lanka, the Maithripala Sirisena administration

rebalanced its foreign policy, and called for a review of some major projects invested

and undertaken by Chinese companies. The landmark Colombo Port City project

jointly developed by China and the previous Sri Lanka administration was suspended

for environmental concerns. In 2019, many of the Belt and Road countries will hold

presidential or parliamentary elections. The shifts of power will often compromise

policy continuity and political stability, increase political risks, and affect infrastructure

projects.

Table 24: Election details of some BRI countries (May-December 2019)

Country Type DateMain candidate/

Ruling party

Other candidate/Main

opposition party

LithuaniaPresidential

electionMay 12

Dalia Grybauskait

(Independent)

Gitanas Naus da

(Independent)

The PhilippinesParliamentary

electionMay 13 PDP–Laban Liberal Party

LatviaPresidential

electionJune 30 (TBC)

Raimonds

Vējonis (Latvian

Green Party)

-

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Country Type DateMain candidate/

Ruling party

Other candidate/Main

opposition party

AfghanistanPresidential

electionJuly 20 (TBC)

Mohammad

Ashraf Ghani

Ahmadzai

(Independent)

Abdullah Abdullah

(National Coalition of

Afghanistan)

PortugalParliamentary

electionOctober 6

Social Democratic

PartySocialist Party

Mozambique

Presidential/

Parliamentary

election

October 15Filipe Nyusi

(FRELIMO)

Afonso Dhlakama

(RENAMO)

UkraineParliamentary

election

October 27

(TBC)

Petro Poroshenko

Bloc “Solidarity”People’s Front

Poland

Parliamentary

election

(Upper house)

November 30

(TBC)Law and Justice Civic Platform

Poland

Parliamentary

election

(Lower house)

November 30

(TBC)Law and Justice Civic Platform

RomaniaPresidential

election

December 31

(TBC)

Klaus Iohannis

(Independent)

Candidate TBC (Social

Democratic Party)

CroatiaPresidential

election

1

December 31

(TBC)

Kolinda Grabar-

Kitarovi

(Independent)

Zoran Milanovi (Social

Democratic Party of

Croatia)


2 The changing economic environment adds uncertainties to infrastructure prospects

The global economic slowdown and sluggish performance of major economies

since 2018 have presented risks and challenges to the infrastructure industry.

On the one hand, capital begins to flow back into developed economies upon

monetary policy changes, which has to some extent increased the financial burden

on emerging markets and developing countries that are vigorously developing their

infrastructure. On the other hand, the U.S. has provoked trade wars across the world

since the start of Trump's presidency in 2017. Its protectionist policies and tariffs on

steel, aluminum and other products have caused disturbances to the world economy

95


and fluctuations in global commodity prices, and have added uncertainties to raw

material costs in the infrastructure market.

3 Natural disasters will have a major negative impact on infrastructure projects

Some of the Belt and Road countries have a harsh natural environment, where

extreme weather and natural disasters frequently occur. According to the EM-

DAT’s International Disaster Database3, 4,581 natural disasters took place in Belt

and Road countries between 1980 and 2015. Among them, Southeast Asia was the

most hit with 1,348 occurrences, followed by South Asia (1,120), Central & Eastern

Europe (583), Central Asia & West Asia (509), and Middle East & Africa (263). Natural

disasters pose a threat to safety, of course; it may also cause project delays due to

impeded traffic and raw material shortage.

Table 25: Incidence of natural disasters in some BRI countries in 2018

Country Natural disaster Month Deaths

Indonesia Tsunami earthquake September 3,400

Indonesia Earthquake August 564

Indonesia Tsunami earthquake December 453

India Flooding August 504

Pakistan Heat wave May 180

Source: The International Disaster Database.

4 Inconsistency of infrastructure engineering specifications hampers progress or causes delays.

Currently, there are many prevailing engineering specifications in the world,

including the U.S., UK, European and Russian ones, which differ greatly from each

other. The Belt and Road countries, therefore, can make different choices, and

there comes the problem of specification inconsistency in international engineering

projects. This problem, if not solved through effective and immediate negotiations,

will compromise the performance of the project in basic data collection, bidding,

design, procurement, construction, labor management, measurement, payment, and

3　 EM-DAT(the International Disaster Database)

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acceptance upon completion, etc.

5. Companies are facing even more intense competition when expanding the

international market

Contractors from the developed countries, like Europe and U.S., have superior

technical expertise, capital strength, information and equipment. They take the

lion’s share of the Middle East and European markets, making it hard for their

developing rivals to squeeze in. Meanwhile, the developed countries have launched

a string of supportive policies to send their players to the emerging markets,

including the U.S.’ "New Africa Strategy", the EU's "Four Major Actions" for Africa,

and Japan's "Partnership for Quality Infrastructure”. It is expected that, as the

infrastructure demands increase along the Belt and Road, international contractors

will face even more intense competitions.

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Section Three: Suggestions on Belt and Road Infrastructure Development

In April 2019, President Xi Jinping attended the 2nd Belt and Road Forum for

International Cooperation, and called on us to promote a global partnership of

connectivity to achieve common development and prosperity. To that end, we must

strengthen all-round and multi-tiered cooperation, continue to promote land, sea, air

and cyber connectivity, and develop high-quality, sustainable, resilient, affordable,

inclusive and accessible infrastructure. Therefore, in Section Three, we will advise

related companies on how to seize market opportunities and avoid risks, in a bid to

promote sustainable infrastructure development along the Belt and Road.

1 Seizing the BRI opportunities and sharpening the edge of good quality

Now, more than 100 countries and international organizations have come on

board the BRI. The contractors shall leverage the Belt and Road cooperation platform

and mechanism, make infrastructure connectivity a priority, and differentiate their

strategies to align with the characteristics and resource endowments of different

countries and regions. Moreover, the contractors shall adapt to the development

needs of the host countries, and make every endeavor to extend the infrastructure

industrial chain toward the two ends to benefit the upstream and downstream

sectors, based on their individual strengths and the market environment of the

host countries. In addition, the contractors shall attach more importance to quality

and management, assist the host countries in nurturing a scientific, rational and

sustainable industrial chain, and finally drive trade and investment to better promote

bilateral and regional economic interactions.

2 Insisting on win-win cooperation and demonstrating “soft power”

Countries differ in culture, especially in language, custom, religious belief

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and business practices. Large engineering projects, in particular, are likely to

be influenced by public opinions due to such cultural difference. All participants

in the infrastructure industry shall adhere to the principle of “seeking shared

benefits through extensive consultation and joint contribution”, intensify win-win

cooperation with local governments and companies, pursue localized management,

attach importance to a good public relation with the local community, and visualize

the image of a responsible international brand. We must pay due respects to local

culture and custom, fulfill corporate social responsibilities, and align corporate goals

with the economic and social development of the host countries, and jointly build a

community of shared future for mankind.

3 Improving risk awareness and understanding the importance of policy-oriented and commercial insurance services

The international market for contractors is beset with uncertainties. For example,

in some of the Middle Eastern countries, the regime and policy instability implies

increased geopolitical risks. As debts begin to mature in Africa and Latin America,

the risk of debt default is rising. Besides, the trend of trade protectionism and

unilateralism is resurging in the U.S. and Europe, accompanied by anti-globalization

movements. Given this, the externality allows no optimism for the international

contracting business and requires contractors to enhance risk control. To adapt to

the changing environment, the contractors must first establish a proper philosophy

of risks, strike a balance between benefits and risks, and scientifically evaluate

project risks and yields. Second, they shall raise risk awareness, implement the

concept of risk control throughout the entire project process, establish a lifecycle

risk warning system, work out risk plans as per project value, lifecycle and risks,

and properly evaluate and control any risks before, during and after the project.

Third, all participants shall understand the important role of policy-oriented and

commercial insurance products, especially in transferring the risks involved in

overseas investment and operation, and providing solid safeguards for Belt and Road

cooperation.

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Appendix (List of Figures & Tables)

Figure 1: 2019 Belt and Road Infrastructure Development Index …………02

Figure 2: Changes in 2010-2019 BRIDIs ……………………………………………… 03

Table 1: BRIDI scores …………………………………………………………………… 03

Table 2: 2019 rankings for SEA countries …………………………………………… 06

Figure 3: CEE countries with major fluctuations in the Infrastructure Development

Index …………………………………………………………………………… 07

Figure 4: Some country-specific BRIDIs (2010-2019) ……………………………… 08

Table 3: 2019 BRIDI rankings and changes (Top 20) ………………………………… 08

Figure 5: The share of each sector in the transportation industry in 2018 ………… 10

Figure 6: Financial supports from multilateral financial institutions for Belt and Road

projects ………………………………………………………………………… 11

Figure 7: Changes in the volume of Belt and Road PPI investment ……………… 12

Table 4: FED’s rate hikes timetable (since 2015) …………………………………… 15

Table 5: IMF forecasts (in %) …………………………………………………………… 16

Figure 8: Development environment heat map ……………………………………… 18

Figure 9: Development Environment Sub-index (2010-2019) …………………… 19

Table 6: Changes in regional Development Environment Sub-index ……………… 19

Figure 10: Changes in Development Environment Sub-index by region

(2010-2019) ……………………………………………………………20

Table 7: Top 15 list of Development Environment Sub-index ……………………… 21

Table 8: Sovereign ratings of 2018 …………………………………………………… 23

Figure 11: Distribution of sovereign ratings of Belt and Road countries …………… 24

110




Table 9: Details on sanctions against some Belt and Road countries ……………… 25

Table 10: Infrastructure rules of some Belt and Road countries …………………… 26

Figure 12: Development demands heat map ………………………………………… 28

Figure 13: Development Demands Sub-index (2010-2019) ……………………… 29

Table 11: Changes in regional Development Demands Sub-index ………………… 29

Figure 14: Changes in the Development Demands Sub-index of CIS-7 Countries

and Mongolia ………………………………………………………………… 30

Figure 15: Changes in the Development Demands Sub-index of CEE …………… 31

Figure 16: Changes in the Development Demands Sub-index of Southeast Asia 31

Table 12: Top 15 list of Development Demands Sub-index ………………………… 32

Figure 17: Development Demands Sub-index of countries by income level …… 33

Figure 18: Development costs heat map ……………………………………………… 35

Figure 19: Development Costs Sub-index (2010-2019) …………………………… 36

Table 13: Changes in regional Development Costs Sub-index …………………… 36

Figure 20: Trends of regional Development Costs Sub-index (2010-2019) ……… 37

Table 14: Top 15 list of Development Costs Sub-index …………………………… 38

Figure 21: Changes in three-month US dollar Libor rate (%) ……………………… 40

Figure 22: Development passions heat map ………………………………………… 41

Figure 23: Development Passions Sub-index (2010-2019) ………………………… 42

Table 15: Changes in regional Development Passions Sub-Index ………………… 42

Table 16: Top 15 list of Development Passions Sub-index ………………………… 44

Table 17: Five countries with the greatest changes in Development Passions

Sub-index ………………………………………………………………… 45

Figure 24: Private Investment in different infrastructure sectors (2009-2018) …… 46

Figure 25: Private investment in energy in 2018 ……………………………………… 46

Figure 26: Index of Mainland Chinese Enterprises’ Involvement in Portuguese-

speaking Countries’ Infrastructure Development over time ……… 51

Figure 27: Four Sub-Indices of Mainland Chinese Enterprises’ Involvement in

Portuguese-speaking Countries’ Infrastructure Development over

Time ………………………………………………………………………… 52

111


Figure 28: Index o f Ma in l and Ch inese En te rp r i ses’ Invo l vement i n

Portuguese-speaking Countries’ Infrastructure Development 52

Figure 29: Index o f Ma in l and Ch inese En te rp r i ses’ Invo l vement i n

Portuguese-speaking Countries’ Infrastructure Development 53

Table 18 PSCs’ Primary Index Rankings …………………………………………… 53

Table 19 Egypt’s Infrastructure Development Index and Changes ……………… 60

Figure 30: Changes in Egypt’s Infrastructure Development Environment

Sub-index ……………………………………………………………… 61

Figure 31: Changes in Egypt’s Infrastructure Development Demands Sub-index

62

Figure 32: Egypt’s Infrastructure Development Costs Sub-index ……………… 63

Figure 33: Changes in Egypt’s Infrastructure Development Passions Sub-index 64

Figure 34: Changes in Indonesia’s Infrastructure Development Environment

Sub-Index ……………………………………………………………… 67

Figure 35: Changes in Indonesia’s Infrastructure Development Demands

Sub-Index ……………………………………………………………… 68

Figure 36: Indonesia’s Infrastructure Development Costs Sub-Index …………… 69

Figure 37: Changes in Indonesia’s Infrastructure Development Passions

Sub-Index ……………………………………………………………… 70

Table 21 Angola’s Infrastructure Development Index and Changes ……………… 73

Figure 38: Changes in Angola’s Infrastructure Development Environment

Sub-Index ……………………………………………………………… 74

Figure 39: Changes in Angola’s Infrastructure Development Demands

Sub-Index ………………………………………………………………75

Figure 40: Angola’s Infrastructure Development Costs Sub-Index ……………… 76

Figure 41: Changes in Angola’s Infrastructure Development Passions

Sub-Index ………………………………………………………………77

Table 22 Saudi Arabia’s Infrastructure Development Index and Changes ……… 79

Figure 42: Changes in Saudi Arabia’s Infrastructure Development Environment

Sub-Index …………………………………………………………………… 80

112



Figure 43: Changes in Saudi Arabia’s Infrastructure Development Demands

Sub-Index ………………………………………………………………… 81

Figure 44: Saudi Arabia’s Infrastructure Development Costs Sub-Index ……… 81

Figure 45: Changes in Saudi Arabia’s Infrastructure Development Passions

Sub-Index ………………………………………………………………… 82

Figure 23: Kazakhstan’s Infrastructure Development Index and Changes ……… 84

Figure 46: Changes in Kazakhstan’s Infrastructure Development Environment

Sub-Index …………………………………………………………………… 85

Figure 47: Changes in Kazakhstan’s Infrastructure Development Demands

Sub-Index ………………………………………………………………… 86

Figure 48: Kazakhstan’s Infrastructure Development Costs Sub-Index ………… 86

Figure 49: Changes in Kazakhstan’s Infrastructure Development Passions

Sub-Index ……………………………………………………………… 87

Table 24: Election details of some BRI countries (May-December 2019) ………… 93

Table 25: Incidence of natural disasters in some BRI countries in 2018 …………… 95

2019 REPORT-

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