"The development of underlying infrastructure spans projects across the energy, utilities, transportation, economic zones, maritime and aviation sectors, among others, with future phases envisaged to host Chinese and local enterprises along BRI project locations," explained Suri in an email interview.
While energy continues to dominate the bilateral trade, China has recognised that the Gulf region has a key role to play in BRI, thanks to its strategic position at the crossroads of Europe, Africa and Asia.
Within the region, continued Suri, Saudi Arabia and the UAE continue to be the largest target markets for inbound Chinese investments, with several Chinese investors and contractors building up a significant presence in recent years. However, Oman and Kuwait are also targeting BRI through funds, projects and Public-Private Partnership (PPP) opportunities.
In her email, Dana Salbak, Director Research for MENA at JLL said that "a competitive advantage in terms of location, coupled with already established and strong infrastructure, be it ports or road networks, and an open business environment" is expected to enhance the partnership between the UAE and China as they look to expand their economies and growth beyond the region.
Interestingly, majority of Chinese infrastructure companies, like China State Construction Engineering Corporation (CSCEC), China Harbour Engineering Company and China Railways Construction Company are linked to State Owned Entities (SOEs) in China.
While these companies have been active for some time in the infrastructure space, there is a push towards getting closely involved in real estate projects which will continue to increase over the next five years, said Gan Mei, Director and China Desk Lead at PwC Middle East in an email interview.
Across the region, she said these companies are operating in multiple territories, from Duqm in Oman to opportunities in Kuwait under the Kuwait National Development Plan 2035 (KNDP), and the UAE and Saudi as result of bilateral agreements signed during various state visits between the countries.
"In Egypt, there is government support and robust structural demand for social infrastructures - such as housing, health and education," said Mei.
Salbak pointed out that some of the immediate projects that were inked under BRI include the 'Traders' Market' in Dubai, which is expected to be built close to the Expo 2020 site. This 60-million square metre megaproject, with an investment of $2.4 billion, will be developed to store and ship Chinese products from Jebel Ali Free Zone (JAFZA) to the rest of the world.
"This cements the UAE's position, and Dubai particularly, as a key global trading hub. In terms of real estate, this initiative is expected to stimulate demand for large warehouses and wholesale-retail outlets," said the JLL executive.
She said the second official agreement to be signed between Dubai and China is between DP World and the China-Arab Investment Fund Management and other investment and economic development companies to import and export agricultural and animal products to the world.
"These projects are expected to have a positive impact on the economy of Dubai, and also the real estate market particularly the industrial and logistics sector (industrial parks/logistics parks / supporting business centres), which has long been a key component of the city's GDP," said Salbak.
Industry experts said the initial impact of BRI is likely to reflect on the infrastructure sector as sea, air, and land transportation routes are developed to enable the seamless two-way trade in products between China and the world.
Suri pointed out that trade links provide a natural conduit to the development of logistics infrastructure, which is also a key focus of the BRI.
In terms of industrial sub-segments that are expected to see greater activities, he said this would differ from country to country in alignment with government priorities and the relative maturity of various sub-segments.
"In general, the residential property sector is likely to be key for Saudi Arabia, Oman and Kuwait, driven by an increasing need for housing stock to address supply shortfall and cater to the growing population," said Suri.
Whereas, China's leading position in renewable energy and the GCC region's interest on increasing renewable generation, in addition to boosting natural climatic conditions for solar power, are likely to make this an important sector for investments in the immediate term.
Notable BRI projects in the Gulf
The region would need close to $3 trillion infrastructure investment between 2016 and 2030 just to keep pace with projected GDP growth, said PwC's Mei citing the International Monetary Fund's (IMF) world economic outlook database April 2017.
"The proportion of that which can be linked to BRI is harder to justify but it is fair to say that Chinese firms will play a major part in these investments," she said.
KPMG's Suri said that an investment plan proposed by China at the 2018 China-Arab States Cooperation Forum for Middle East BRI projects included $20 billion in loans and $106 million in financial aid to Middle Eastern countries.
Salbak added that Chinese-state owned banks are partnering with local banks and financial institutions to ensure that BRI projects get the required funding
Since 2013, BRI investments and construction contracts worth $614 billion have been made by China, accounting for 53 percent of the value of all such transactions by China globally from 2013 to 2018, and 61 percent of the number of such contracts, according to a June 2019 report on BRI by Moody's Analytics, citing data from China Global Investment Tracker.
Trade between the Middle East and China continues to grow, with consultancy firm McKinsey predicting it to reach $500 billion by 2020.
At the Belt and Road Forum in Beijing earlier this year, the UAE Vice President and Prime Minister and Ruler of Dubai Sheikh Mohammed bin Rashid Al Maktoum announced that both the countries agreed on deals worth of $3.4 billion.
Chinese conglomerate East Hope Group in May signed an MoU with Khalifa Industrial Zone Abu Dhabi (KIZAD) to explore feasibility of a $10 billion-plus, three-phase development at KIZAD across more than seven square kilometres.
Whereas, Abu Dhabi National Oil Company (ADNOC) last year awarded a $1.6 billion hydrocarbon survey contract to China National Petroleum (CNPC).
The UAE and China also signed an agreement to launch a $10 billion strategic co-investment fund in 2015. This was followed by China's Cosco Shipping Ports winning a concession agreement in 2016 to operate Container Terminal 2 at Abu Dhabi's Khalifa Port for 35 years.
"Five Chinese companies have since pledged to invest $300 million in the adjacent industrial zone, and Bank of China has said it will provide financing to Chinese firms that establish operations there," said Suri.
Saudi Arabia's National and Housing Company (NHC) in February announced that it has signed a $666 million deal with CSCEC to build more than 5,000 housing units in Riyadh.
Other BRI projects include Duqm in Oman involving a port and industrial zone with $10.7 billion in investment from a Chinese consortium. In Kuwait, Silk City is expected to be built as part of $86 billion mega-urban development in Mubarak Port.
(Reporting by Syed Ameen Kader; Editing by Anoop Menon)
Our Standards: The Thomson Reuters Trust Principles
Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.
© ZAWYA 2019