China companies involved in the initiative are seeking those who know South-east Asia well and have networks in the region
The Belt and Road Initiative (BRI) has evolved over the last three years from what seemed like a regionalisation strategy on China's part to an initiative.
The distinction is important, as the word "strategy" denotes what China wants to do, while "initiative" denotes an open platform that welcomes participation from other parties.
The Chinese government has taken pains to emphasise the latter. It is seeking cooperation across the BRI's geographical spread of 65 countries and numerous languages, cultures as well as economic and political systems. Despite its capacity and resources as the world's second-largest economy, China knows it cannot accomplish the BRI alone.
Beijing has placed tremendous diplomatic, institutional, financial and economic resources behind the BRI. The inaugural Belt and Road Forum for International Cooperation last month reflected China's ambition to step up its leadership of nations that can participate in the BRI. Scepticism from some countries towards China's ambition to expand its global standing and influence has not slowed the BRI momentum.
The BRI will continue to be one of China's top priorities. It is already President Xi Jinping's signature initiative and is consistent with a key foreign policy of his administration - to establish global collaboration with other countries. Vice-Premier Zhang Gaoli heads the Leading Group for Advancing the Development of the BRI, and the National Development and Reform Commission has plans to set up more BRI-related offices and facilities. From what we see, the BRI is backed by about US$310 billion (S$430 billion) worth of funding initiatives announced thus far by Chinese financial institutions.
HERE TO STAY
Depending on your perspective and where you and your company stand in your industry, the BRI could result in either greater Chinese competition or business opportunities right on Singapore's doorstep. From IE Singapore's perspective, individuals and businesses should not ignore this economic wave sweeping across various regions along the Belt and Road that are of interest to us, in particular, Singapore's traditional hinterland of South-east Asia and South Asia, and also other emerging markets like Africa and Central Asia.
Instead of looking at the BRI as just a source of competition, Singapore companies should look at how to make themselves relevant so as to seize the opportunities arising from it. We are in a very good position to tap into this growth, given our longstanding and large bilateral trade and investment volumes with China, as well as our three decades of official, business and people exchanges.
What will be key - whether one is a student or business executive - is knowledge of our hinterland, and that includes familiarity with its varied languages, cultures and people networks. Singaporean executives and managers have always been sought after due to our ability to bridge Western and Eastern cultures. In the BRI era, we need to further integrate ourselves into South-east Asia and South Asia.
From the business perspective, the BRI is a massive catalyst to the ongoing trend of Chinese enterprises internationalising. Many Chinese enterprises, be they state or privately owned, have heeded Beijing's call to commit investments along the BRI. Singapore businesses need to consider their value-add and complementarities so as to partner these Chinese companies.
Companies can start by considering how to find common ground with their Chinese counterparts, so as to convert them from competitors to partners. It will always be difficult for Singapore enterprises to match the financial and human resources of strong Chinese enterprises, and increasingly, that is the case with technological resources as well. Thus, it may not make sense for Singapore companies to compete head-on with Chinese firms.
In IE Singapore's engagements with Chinese enterprises looking to expand into South-east Asia, we have had feedback that the key challenges are not in hardware but in the "soft", intangible aspects, like an understanding of the local language, and cultural and business landscape. These are daunting for Chinese enterprises, and are areas where they need partners. Singapore companies have the capacity to take the lead in navigating regional markets they are familiar with.
Although the Singapore Inc brand enjoys a good global reputation and credibility when it comes to projecting delivery and value-add, there must be a "Chinese element" before companies can enjoy greater access to BRI funding. Those that have found initial success due to the BRI have done so through Chinese partnerships. They include:
•Pacific International Lines (PIL) and China Merchant Port signed a memorandum of understanding (MOU) to develop new markets in South-east Asia, South Asia and Africa, as part of the BRI strategy. PIL's managing director Teo Siong Seng has acknowledged the collaboration as an example of potential benefits for businesses from the BRI.
•Ascendas-Singbridge formed a joint venture with China Machinery Engineering to invest in industrial and business parks in China, India, Vietnam, Indonesia and Malaysia.
•Surbana Jurong partnered China Highway Engineering Consulting to provide design and consultancy services for highway and infrastructure-related projects on a global scale, under the BRI .
•Sembcorp signed an agreement with Chongqing Energy Investment Group to explore a strategic partnership in a broad range of areas, including renewable energy projects, township and property development as well as design, engineering and construction projects in Chongqing, as well as overseas energy projects.
SOUTH-EAST ASIA NETWORKS
We should also develop stronger business, distribution and logistics networks within South-east Asia and South Asia. The e-commerce industry is a good case in point. In recent years, we have seen China's e-commerce market movers like Alibaba and JD.com place greater focus on expanding into Asia because of the region's phenomenal growth potential. However, Chinese enterprises need companies familiar with the region to overcome the fragmented and diverse South-east Asian markets.
Ninja Van is a home-grown Singapore logistics company that has leveraged its strong regional partnerships to provide faster and more seamless cross-border deliveries in South-east Asia at attractive rates. Through last-mile logistics companies like Ninja Van, Chinese e-commerce partners can now engage South-east Asian consumers with maximum ease and minimal risks.
Additionally, Singapore companies need to adopt an open attitude towards integration with China's industry standards, which it is starting to export to the rest of the world. These include various cross-border commodities and financial service platforms such as UnionPay, Alipay, the yuan-gold price fix and the BeiDou global navigation system. Given the massive number of Chinese users for these standards, Singapore companies should be willing to adopt an open mindset towards integrating these standards, just like we have done for various international standards over the years. This will allow us to benefit from the increased trade and financial flows as a result of being interoperable with these standards.
IE Singapore has been monitoring BRI developments and looking at ways to retain the Singapore business community's relevance. In 2014, we signed an MOU with the China Development Bank on third-country collaboration. In 2015, we signed an MOU with Suzhou Industrial Park to jointly promote Chinese enterprises in going global with Singapore companies or through Singapore. From 2015 to last year, IE Singapore signed financial-related MOUs with the Bank of China, China Construction Bank and the Industrial & Commercial Bank of China to improve financing and promote business opportunities along the BRI. The Shanghai Pudong Development Bank recently set up its first overseas branch in Singapore.
Under the ambit of the third government-to-government project with China - the Chongqing Connectivity Initiative - IE Singapore is working with Chongqing to jointly drive the development of Belt and Road connectivity, such as the links with Central Asia through Lanzhou, and the Southern Trade Corridor from Chongqing to South-east Asia through the Beibu Gulf Port.
President Xi recently also visited the Beibu Gulf Port, a key node on the Maritime Silk Road. Enhanced trade between Central Asia and South-east Asia will benefit Chongqing and West China by opening up an important transport and logistics corridor connecting inland China with the maritime connectivity of Singapore's port. A consortium of Singapore-based companies, including PSA, PIL, YCH and Kerry Logistics (Singapore), are involved in this project.
IE Singapore is also the government agency behind the Belt & Road Roundtable Series that has brought together Singapore and Chinese companies to discuss market opportunities for BRI projects and complementary areas where they can partner each other.
As we are committed to supporting the people-exchange aspect of the BRI, we have also curated various talent development programmes for the China, South-east Asia and India markets.
With the BRI ecosystem being formed here, Singapore companies can tap it to reap benefits.
Actual interim outcomes have been achieved. China's Ministry of Commerce's figures indicate that Singapore was the top recipient - of about one-third - of Chinese outward investments since 2015, out of 65 BRI countries.
It is timely and urgent for Singapore businesses to consider carefully their strategic response in this new BRI era as opportunities continue to arise for those ready to ride on the growth generated. IE Singapore will continue to engage Singapore companies to jointly review their China strategy so as to help them participate in the BRI.
•The writer is group director for China at International Enterprise Singapore and based in Shanghai.
A version of this article appeared in the print edition of The Straits Times on June 20, 2017, with the headline 'Partnerships key as S'pore firms embark on Belt and Road'. Print Edition | Subscribe
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