In September 2013, Chinese President Xi Jinping proposed a Silk Road Economic Belt and in October, a 21st-Century Maritime Silk Road, together referred to as the Belt and Road Initiative (BRI), that might be the most ambitious development strategy ever. Since it has grown into a multifaceted global initiative, attracting considerable attention from the international community, including Central and Eastern Europe.
Many CEE nations sit on key trade routes identified by China in its original description of BRI and – at least until the pandemic – the region has enjoyed generally strong growth figures so in many ways it should be an attractive location for BRI activity.
China has continued to develop trading relationships across the region. However, great expectations nurtured by some in the CEE region a few years ago have not yet been realised and CEE stakeholders are questioning whether BRI will ever deliver what they had hoped for.
According to a survey commissioned by international law firm CMS, the enthusiasm in CEE is weakening as 57 per cent of CEE participants report negative sentiments towards the Belt and Road Initiative (BRI), compared with 18 per cent a year ago.
CEE participants generally report lower levels of satisfaction with the outcome of their involvement in BRI, as a result just over a quarter of the CEE respondents in the survey expect to increase their involvement in BRI-related projects, leaving a clear majority (60 per cent) who say they expect to be involved less.
However, there is enormous potential for infrastructure development in CEE, as the European Investment Bank’s Investment Report 2019/2020 report notes in Central and Eastern Europe current investment levels are around 35 per cent lower than in 2008 before the global financial crisis.
“The region’s geographic location is very important for China’s BRI trade routes and Chinese interest in the region is on the rise,” said Kostadin Sirleshtov, Managing Partner at CMS Sofia and CEE Head of Energy and Climate Change.
The survey founds that traditional BRI sectors continue to attract the most interest with nearly three-quarters (73 per cent) of CEE businesses view roads projects as one of the sectors offering the most opportunity, followed by the logistics sector (65 per cent). However, there is also an increasing interest in environmentally-friendly and sustainable sectors as areas for future BRI investments.
The survey of CMS shows that only 5 per cent of CEE respondents say their organisation has plans to target BRI opportunities in conventional power sectors in future, a 19 percentage point fall from the 24 per cent who have targeted the sector in the past. This is part of a clear tilt away from conventional energy projects towards renewables.
Renewables are now in joint second place (with roads) among CEE respondents as a target sector (32 per cent), a big step up on the 11 per cent who have previously targeted them. This green trend is also reflected by the high number (87 per cent) of CEE respondents who view oil and gas as a high-risk sector for BRI projects. Conventional power (60 per cent) and extractive industries (53 per cent) are also seen as relatively high-risk, with renewables ranked among the least risky.
While this green shift is the most dramatic aspect of sector sentiment, traditional BRI sectors relating to trade are still those where most CEE participants see opportunities. Most (73 per cent) view roads as presenting the most opportunities, with logistics (65 per cent) not far behind. These sectors remain significantly ahead of energy networks (50 per cent) and renewables (49 per cent).
More than two-thirds (70 per cent) of CEE participants and 84 per cent of Chinese respondents believe it is important for BRI projects to be sustainable and eco-friendly, with many respondents agreeing that improvements to sustainability would make them more willing to participate in such projects.
“BRI could be a way to fill the infrastructure gap in CEE,” said Marcin Bejm, CMS partner and Head of Energy and Projects in Poland. “In order to attract international finance to BRI, any project will have to embrace the principles of sustainability throughout its development and operation.”