Can #China and #Europe Unite for #African #Railway Projects under ‘Third Party Market Model’ ?

By Olawale Rasheed

Many across African capitals are genuinely worried about how a post covid -19 recovery will look like. This is especially so in countries with ambitious rail projects supported by China under the Belt and Road Initiative(BRI). But a signal is coming that may see China integrating western nations in the implementation of BRI projects across Africa.

Within the context of post -Coronavirus geo- economics, China may have smartly foresee ongoing trade war especially with respect to its penetration of the African markets.The mounting anger across the West is however masked by division between Europe and the United States on how to approach China’s rising global economic influence. As at today ,Chinese investments across Europe is vast and rising. Europe going by trends in Germany appears to also favour accommodation despite the anti-China rhetoric  from Brussels.

It is within the context of mixed signals in approach to China’s rise between Europe and the USA that the third model has taken the centre stage. Pre-Coronavirus, President Xi Jinping had said: “We welcome the participation of multilateral and national financial institutions in BRI investment and financing and encourage third-market cooperation. With the involvement of multiple stakeholders, we can surely deliver benefits to all.”

Expanding on the above according to a perspective by, “the first wave of investments under the BRI came from Chinese banks, but “the scale of development ahead makes it likely that non-Chinese financial services organizations will play bigger role in future projects.

“This demand for third-party investment, particularly from the private sector, is also helping to ensure that Belt and Road projects conform to global standards of viability, transparency and governance.This, in turn, makes them more attractive to investors. And opportunities may not be restricted to large global players, with innovative small to medium enterprises being encouraged to offer their services and products in the execution of the BRI projects.”

In simplified terms,Chinese rail projects in Africa may be opened to participation by non-Chinese companies , leading to a more open and transparent processes many are clamouring for.

This will open the field to participation by private sector investment from Europe,Turkey,Japan and North America.. Then,BRI will transform into a global projects with the West and Asia joining hands especially for African infrastructural  development.

But what does the third party market model entails?

According to  a report issued by the global business service organization Ernst & Young, the “third-party market cooperation” model under the Belt and Road Initiative (BRI), seeks to engage more developed countries in construction projects and strengthen international cooperation. Under the innovative “third-party market cooperation” model, Chinese enterprises and their peers in developed countries could jointly develop projects in a third country involved in the BRI Initiative.

“The model is able to connect China’s competitive production capacity and developed countries’ advanced technology with the third-party’s vast development demand, said Loletta Chow, global leader of EY China Overseas Investment Network and B&R Task Force leader.

 For instance, the cooperation model between China and Japan set an example for the cooperation and development of third-party markets. The model can combine advantages from the two countries: China has strong government and financing support, as well as production capacity advantages; while Japan has rich overseas experience, developed technology and advanced risk management mechanism, according to EY experts.

“China and the United Kingdom are also seeking opportunities to become closer partners under the BRI, especially in infrastructure construction cooperation, the report showed. Besides, the Shanghai-London stock connect program is expected to launch this year, and the interconnectivity of securities market further expands the “two-way” opening up of China’s capital market, said Chow.

Third-party market cooperation under the BRI should be based on commercial principles and develop on the premise of win-win cooperation – respecting market rules, maintaining a fair competitive environment, and also adhering to the principle of sustainable economic development, said Alex Zhu, Investment and M&A Services leader of EY B&R Task Force, Power & Utilities Market Segment leader of Greater China According to a report by China Daily.

“We expect that third-party market cooperation under the BRI will become a new driving force for deepening the economic and trade relations between China and developed countries,” he said.

Will the third party market model answers questions of transparency and due dilligence on projects?  To a large extent,it will especially as western companies will enter the scene with their proven know how in project management and design including applicable international best practices.

There is however a geo-political and geo-economics battle that may hamper the application  of a third party market model- the rabid anger against China in White House.

…Olawale Rasheed is the CEO of African Railway Consult Limited, a railway firm based in Abuja, Nigeria.

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