Social infrastructure, logistics and smart city projects are top sectors where businesses in the MENA region have plans to invest for opportunities based on China’s Belt and Road Initiative (BRI).
According to a survey commissioned by international law firm CMS, MENA respondents have shown almost equal interest in targeting BRI opportunities in social infrastructure (hospitals and healthcare) and the logistics sectors, at 44 percent and 41 percent respectively, while slightly more than a third (37 percent) intend to invest in smart city projects. The fourth most cited sector was transportation (road) infrastructure, at 35 percent.
Interestingly, priorities for a more sustainable and eco-friendly sectors such as renewables and hydro have surged.
Twenty four percent of MENA respondents said they are planning to target renewables projects and 17 percent are looking at conventional power developments. Almost three-quarters (72 percent) of MENA respondents say it is important that BRI projects are sustainable and eco-friendly while 63 percent of Chinese respondents share the same view.
Businesses in the MENA region are keen on smart cities with 37 percent of respondents planning to invest in the sector and a little over half (55 percent) listing it as one of the five sectors presenting the most BRI opportunities.
Karim Fawaz, CMS Corporate and Technology partner, said: “Such enthusiasm may, in part, reflect the projects already underway in the region such as The Line which is part of Neom in Saudi Arabia and Kuwait’s Silk City which are being built from the ground up. However, we also found increasing interest in the development of existing urban areas aimed at having smart and AI-connected areas as opposed to individual endeavours."
"While Chinese financiers and contractors are already involved in building smart cities such as Morocco’s Mohammed VI Tangier Tech City, Chinese companies are going a step further and taking space in these smart cities to set up operations – a sign of their optimism in potential opportunities and openness to private-public-partnerships,” he said.
Digital and Health Silk Roads
Despite the growing need to focus on digital infrastructrue amidst the global pandemic that has been causing disruptions, only less than a tenth (7 percent) of MENA respondents are considering Digital Silk Road (DSR) projects. In contrast, over one-third (35 percent) of Chinese respondents are considering DSR projects.
David Moore, CMS Infrastructure and Projects partner and UAE Managing Partner, said:
“Some BRI participants are keen to be involved in DSR projects but are wary of potential problems such as rapidly evolving technical standards, cybersecurity and geopolitical tensions.” “However, with so many BRI countries, including many in MENA, still in need of new tech and comms infrastructure, there will clearly still be significant opportunities for BRI participants along the DSR,” David added.
In 2020, the pandemic highlighted deficiencies in the health infrastructure in many BRI countries. CMS’s survey revealed a strong consensus that the pandemic will lead to an increased emphasis on the Health Silk Road (HSR) – an overwhelming majority (94%) of MENA respondents expect this to happen.
Obstacles and risks
Two-thirds (65 percent) of MENA respondents described national governments and political issues as one of the greatest obstacles to their BRI activity, making this the most commonly cited obstacle, closely followed by legal frameworks (61 percent) and operational difficulties (53 percent).
Language barriers and cultural issues was mentioned by only half as many respondents (25 percent) as a common obstacle.
Political risk was also cited by 56 percent of respondents as one of the most serious risks relating to involvement in BRI projects, marginally behind legal and regulatory risk (59 percent).
(Writing by Seban Scaria; editing by Daniel Luiz)
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