One belt one Route (OBOR) Initiative: Objectives, progress and future outlook Marcus Meissner Managing Partner
Agenda 1 CAMELOT Who we are? 2 Setting Stage for OBOR 3 Current Status of OBOR 4 Impacts on the Region 5 Future Outlook
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Agenda 1 CAMELOT Who we are? 2 Setting Stage for OBOR 3 Current Status of OBOR 4 Impacts on the Region 5 Future Outlook
Due to major changes in the world and the region, new mega trends are making an impact on the Middle East 6 Economic Diversification by GCC Governments due to oil price instability 1 Rise of Special Economic Cities Retail Healthcare Industry Impacts 5 Cost optimization becomes a key driver for projects Kuwait Bahrain Saudi Arabia Qatar UAE Digital Disruption and Internet of Things in Logistics 2 Logistics Chemicals Construction Oman Education Africa as a rising emerging market, leaving BRICS behind 4 China s involvement as investor in the region One Belt One Route Initiative 3 Manufacturing Utilities Oil & Gas Mining Global Trends Regional Trends Source: Camelot Knowledge Centre
Investments in Smart Cities will double by 2021, making them powerhouses that will drive national economies and innovation in the future Key Pillars of Economic Cities Industries Hospitality Financial Services Focused on driving FDI Generation of jobs Relaxed regulations Research & Development Education Healthcare Leisure World-class infrastructure Improved lifestyle Innovation Key Pillars of Smart Cities Residential Commercial Logistics Services Sustainability Citizen-centric Efficient public services Technologydriven Hyperconnectivity Highly secure Economic City Economic City Elements Smart City Source: Camelot Knowledge Centre
Impacts Digitalization poses many opportunities for businesses and it s importance over the next years will grow and expand to all business departments Digitalization Landscape What importance will digitalization have for chemicals industry within different function in the coming 3 years? HR 3% 47% Finance & Administration 14% 53% R&D 11% 58% Marketing 16% 55% Production 20% 63% Sales 27% 70% Supply Chain & Logistics 29% 63% 0% 20% 40% 60% 80% 100% Critical to success fundamental Source: Camelot Knowledge Centre
Agenda 1 CAMELOT Who we are? 2 Setting Stage for OBOR 3 Current Status of OBOR 4 Impacts on the Region 5 Future Outlook
OBOR Initiative in Numbers Launched in 2013 by China s president Xi Jinping, the One Belt One Route (OBOR) Initiative will connect major Asian and European economies through trade, infrastructure and investment Creation of economic growth in China s western regions Landlocked cities can benefit from export earnings and investments Increases its influence politically and economically in the regions Eased trade between the regions Secures the trade route that reduces implications of South Chinese sea dispute Creation of new markets and growth of GDP China s three key goals: 1. Regional development through enhanced integration with neighbor countries 2. Enhance China s industry and sell Chinese industry expertise 3. Addressing and eliminating China s issue of excess capacity The One Belt One Road (OBOR) initiative will bind different regions together - Illustrative Connect 65 countries across Asia, the Middle East, Africa and Europe 31% of the global GDP will be accounted by the involved countries 60% of the world s population (4.5 Bn. People) will be connected through OBOR 4-8 Tr.$ will need to be invested in OBOR Source: Camelot Knowledge Centre
The first One Belt One Road (OBOR) summit in Beijing was attended by 30 world leaders and 70 high ranked ministers 1 st One Belt One Route Summit: May 2017 OBOR Summit was attended by 30 world leaders, representatives from another 70 countries as well as the heads of the United Nations, International Monetary Fund and World Bank Russia s president Vladimir Putin, Pakistan s Prime Minister Muhammad Nawaz Sharif were of the notable attendees of the summit KSA s Minister of Energy, Industry, and Mineral Resources Khalid Al- Falih attended the summit Dr. Sultan Ahmed Al Jaber, Minister of State and Group CEO of ADNOC from UAE attended the summit OBOR connects 60 percent of world s population, 33 percent of world s GDP, and a quarter of world s trade US$ 5 trillion will be spent on OBOR connectivity 68 countries appear interested in jointly developing their infrastructure on the new Silk Road trade links between China, Asia, Africa and Europe Next summit is planned to be held in 2019 Source: Camelot Knowledge Centre
China s successful investments strategy is to focus on the OBOR countries in order to guarantee an impeccable development of a superior infrastructure system Chinese investments in global context China s Global Investment & Construction Contracts 2005-2017 China seems to follow a two birds, one stone strategy when investing abroad in developing regions, creating demand, facilitating trade and securing natural resources China is considered one of the leading global investors next to Europe and the United States in Africa Chinese annual foreign investments and construction grew between 2005 and 2015 by 8.3% (annual average Total investments and construction reaching USD 1.65 trillion between 2005 and mid-2017 China has gained new allies, improved its trade and secured natural resources as a part of this journey China will follow this strategy as well as most of the countries along OBOR Source: Camelot Knowledge Centre are developing countries 700 600 500 400 300 200 100 0 Investment & Construction Contracts per Sector (Bn. $US) 2005-2017 630 304.5 164.5 154.9 93.7 77.7 66.7 41.4 38 23.7 21 38.5
Latest developments and announcements influence the OBOR Initiative s progress and are part of the shaping progress
Agenda 1 CAMELOT Who we are? 2 Setting Stage for OBOR 3 Current Status of OBOR 4 Impacts on the Region 5 Future Outlook
Reason Phase Chinese Investments in the Middle East and GCC are expected to create several opportunities but also challenges in the region China OBOR 4 phase strategy Overview GCC Opportunities and Challenges presented by OBOR Opportunities Challenges Mining Infrastructure Trade Industry Technology Transfer Increased Competition Knowledge Transfer High Chinese Investment Power Increased Supplier Base Increased Export Market Competitiveness due to Establishment of Economic Zones Knowledge of domestic market & business processes Facilitation of future collaboration areas Cultural exchange & adoption Knowledge transfer & integration Increased Local & International Customer Base Introduction of New Business Opportunities Language & Culture Barrier Different Business Culture & Working Cultures GCC is expected to attract more Chinese investment due its strategic location along the OBOR routes Source: Camelot Knowledge Centre
OBOR is regarded as the project of the century, the China Development Bank has already envisaged 900 projects worth US$ 890 Bn. along the OBOR Route Railway Projects - Extract One Belt One Road Projects run all around the Middle East China-Europe Railway Express connecting 27 Chinese and 28 European cities through overall 51 links; freight forwarding times are shorter than via sea China-Laos Route first overseas route with a total length of 418km; longest and fastest South-East-Asian railway route China-Thailand Route linkage between China and Thailand ports, boosting China s Yunnan province to trading hub Nairobi-Mombasa Route 471 km route for passengers and freight with an estimated amount of 25Mn. tons forwarded cargo per year Sea Port Projects - Extract Kumport (3 rd largest port in Turkey) has been bought by Chinese state-owned companies in order to become an important hub between Asia and Europe Trade route between Pakistanian Gwadar port and Kashgar in China New international port in Gwadar, Pakistan 487km road to link China and the Middle East via a land route Industrial Park Projects Extract Kuantan Industrial Park in Malaysia for metals and palm oil processing China-Belarus Industrial Park for high-tech industries, Minsk OBOR Projects in Middle East - Extract US$ 20Bn. Investment in infrastructure projects in Egypt COSCO partnership with Abu Dhabi Port Economic and trade deals between China and KSA, overall worth US$ 65 Bn. Source: Straits Times
China is the largest foreign investor and major contractor in the Middle East and North Africa with a total investment volume of +150 Bn. USD from 2005 until 2017 25 20 Chinese Investments & Contracts in Middle East ($ Bn.) OBOR has been announced Vision 2030 has been announced 1 st OBOR Summit Chinese Investments in Middle East Key highlights COSCO China Shipping Group CSP Terminal at Khalifa Port 15 10 5 Low Oil Price Period High Oil Price Period Low Oil Price Period China State Construction Engineering Company 16 projects in Dubai, mainly residential sector 136Mn. USD for Ajman shopping center 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Volatile Oil Price will be a key trigger for Chinese investments Government of China 2Bn. USD for diverse projects in Oman Focus on power generation, telecommunication & oil & gas Source: China Global Investment Tracker & Camelot Analysis
Areas of Collaborations Next to the areas in which China already invested, the Middle East and GCC offer various areas of collaborations in order to take advantage of new and existing facilities and their location Infrastructure Railway Ports Industrial Cities Saudi Landbridge Project (7Bn. USD) Jazan Economic City Sea Port Yanbu Industrial City (+12Bn. USD) NEOM Manufacturing Chemicals Automotive Rail OTC Yanbu Holding Company for Maritime & Land Transport agreement GCC Railway Project Energy Power Plants Solar Nuclear Hassyan Coal Power Plant (3.4Bn.USD) World s largest solar plant (200Bn. USD) Barakah Nuclear Power Plant Source: Camelot Knowledge Centre
The OBOR Initiative boosts Middle East s and Africa s role in the global Chemical industry and pushes it to further growth 2500 2000 1500 1000 500 0 Chinese Investments in Chemical Industry (in Mn. USD) Middle East Sub-Sahara-Africa Saudi Arabia Sudan Jordan Ethiopia Uganda Congo 2005-2007 2008-2010 2011-2013 2014-2017 Chemical Industry in Middle East Middle East is one of the most popular regions for Chinese chemical outbound investments Market for primary petrochemicals & plastics in ME to grow by 5.1% and to reach $ 72bn. USD by 2020 which will be majorly supported by inter country shift of Chinese manufacturing Cheapest feedstock & growing domestic markets make region attractive for investment for Chinese investors SABIC & Sinopec signed strategic agreement to develop chemical projects in China and KSA to support both Vision 2030 & OBOR Africa is expected to grow its demand in fertilizer due to increasing food shortage and growing population The Chemical Industry in Middle East received +2.5 Bn. USD Chinese Investments from 2005-2017 Source: American Enterprise Institute
Agenda 1 CAMELOT Who we are? 2 Setting Stage for OBOR 3 Current Status of OBOR 4 Impacts on the Region 5 Future Outlook
Future Outlook 1 More Chinese companies will setup / invest in chemicals manufacturing in the Middle East. 2 Overall Contracts worth $ 100 Bn. + are expected to be signed during coming 5 years time frame between MENA region and China. Future Outlook of Chinese Investments (Bn.USD) 35 3 China s influence and interest will grow in the Middle East s logistics infrastructure in order to tap growing demand in Africa. 30 25 20 4 Commodity rich regions like Saudi Arabia and Bahrain will be on high priority by Chinese investors. 15 10 5 5 OBOR investments will see a show peak in 2018 as we get close to the date of next OBOR meeting in 2019 0 2018 2019 2020 2021 2022 6 China will be securing secures trade routes by investments in MLTs and Special Economic Cities. Source: Camelot Knowledge Centre
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