malaysia poised to benefit from one belt one road
MALAYSIA POISED TO BENEFIT FROM ONE BELT ONE ROAD China’s new Silk Road or also known as One Belt One Road (OBOR) is the latest commonly discussed topic among the business community. The concept was firstly advocated by President Xi Jinping in the year 2013 with an initiative to revive trade across countries from Central Asia, the Middle East, Europe, South China Sea, and South Pacific Ocean and Indian Ocean through infrastructure developments.
WHAT IS ONE BELT ONE ROAD?
One Belt One Road is neither an entity nor a treaty. In a nutshell, “One Belt” represents the ancient trading Silk Road connecting across China to Europe through Central Asia and Middle East, where China plans to invest heavily in infrastructures such as railways, power grids, and bridges along these countries. On the other hand, “One Road” meant the 21st century Maritime Silk Road to South East Asia, Africa, and Europe with China assisting in the construction of ports and maritime facilities. Together, the policy is expected to cover 4.4billion people across 65 countries. President Xi Jinping predicted it will bring in an estimated investment of USD$160billion with annual trade volumes between China and countries of “Belt” and “Road” exceeding USD$2.5trillion.
As for Malaysia, OBOR initiative will benefit the country in different aspects. In general, the initiative is expected to boost export of local goods and services from Malaysia such as durian, halal certification, and bird’s nest. Not to mention, development of infrastructure would create job opportunities for people living along the route brought by this cooperation. This connection would also bring in leisure and tourism businesses that are also an important industry for the country.
WHO IS FUNDING THIS DEVELOPMENT?
HOW IS MALAYSIA BENEFITING FROM THIS?
As you may have guessed it, the project is capital intensive which could cost up to hundreds of billion dollars. As a result, China had launched a financial body called Asian Infrastructure Investment Bank (AIIB) to assist the Belt and Road countries with the financial support to develop infrastructures in their respective countries. AIIB is expected to lend $10 billion - $15 billion a year for the first five or six years. Another primary source of financing includes the $40 billion Silk Road fund, backed by China’s capital and a Japan led Asian Development Bank (ADB).
OBOR and TPPA are two similar strategies to extend its economic integration in Asia with very different approaches. From China’s perspective, OBOR aims to enhance economic connectivity through infrastructure construction. On the other hand, TPPA has the similar objective with a different approach. It seeks to do through implementation of new rules for global trade, tariff liberalisation, and non-tariff barriers
WHAT ARE THE DIFFERENCES BETWEEN OBOR AND TPPA?
On a side note, the OBOR initiative would encourage further economic integration of participating countries and broaden market trading activities. More importantly, OBOR will result in more widespread use of RMB currency given China will be providing most of the financing and exports trade settlement in RMB currency Strategically speaking, OBOR is a solid initiative that enable to assist some of the least developed country’s economy along the route through greater connectivity infrastructure development. We also truly believe this is a golden opportunity for Malaysia’s financial system for the upcoming rise of bilateral trade, investments and financial inflows between the two countries and reducing financial friction.
Source: South China Morning Post, The Star, Media Outreach, Bloomberg & The Diplomat
WHAT IS ONE BELT ONE ROAD?
One Belt One Road is neither an entity nor a treaty. In a nutshell, “One Belt” represents the ancient trading Silk Road connecting across China to Europe through Central Asia and Middle East, where China plans to invest heavily in infrastructures such as railways, power grids, and bridges along these countries. On the other hand, “One Road” meant the 21st century Maritime Silk Road to South East Asia, Africa, and Europe with China assisting in the construction of ports and maritime facilities. Together, the policy is expected to cover 4.4billion people across 65 countries. President Xi Jinping predicted it will bring in an estimated investment of USD$160billion with annual trade volumes between China and countries of “Belt” and “Road” exceeding USD$2.5trillion.
As for Malaysia, OBOR initiative will benefit the country in different aspects. In general, the initiative is expected to boost export of local goods and services from Malaysia such as durian, halal certification, and bird’s nest. Not to mention, development of infrastructure would create job opportunities for people living along the route brought by this cooperation. This connection would also bring in leisure and tourism businesses that are also an important industry for the country.
WHO IS FUNDING THIS DEVELOPMENT?
HOW IS MALAYSIA BENEFITING FROM THIS?
As you may have guessed it, the project is capital intensive which could cost up to hundreds of billion dollars. As a result, China had launched a financial body called Asian Infrastructure Investment Bank (AIIB) to assist the Belt and Road countries with the financial support to develop infrastructures in their respective countries. AIIB is expected to lend $10 billion - $15 billion a year for the first five or six years. Another primary source of financing includes the $40 billion Silk Road fund, backed by China’s capital and a Japan led Asian Development Bank (ADB).
OBOR and TPPA are two similar strategies to extend its economic integration in Asia with very different approaches. From China’s perspective, OBOR aims to enhance economic connectivity through infrastructure construction. On the other hand, TPPA has the similar objective with a different approach. It seeks to do through implementation of new rules for global trade, tariff liberalisation, and non-tariff barriers
WHAT ARE THE DIFFERENCES BETWEEN OBOR AND TPPA?
On a side note, the OBOR initiative would encourage further economic integration of participating countries and broaden market trading activities. More importantly, OBOR will result in more widespread use of RMB currency given China will be providing most of the financing and exports trade settlement in RMB currency Strategically speaking, OBOR is a solid initiative that enable to assist some of the least developed country’s economy along the route through greater connectivity infrastructure development. We also truly believe this is a golden opportunity for Malaysia’s financial system for the upcoming rise of bilateral trade, investments and financial inflows between the two countries and reducing financial friction.
Source: South China Morning Post, The Star, Media Outreach, Bloomberg & The Diplomat
