09 - 11 Dec 2018

UAE stands to be a big winner from China's $900bln Belt & Road plan - report

TheUnited Arab Emirates has been ranked as third in a global index of nations thatstand to benefit most from China's Belt and Road Initiative, according to a newreport released on Tuesday by property consultancy Knight Frank.

Only Singapore and Qatar finished higher onthe Belt & Road Index, a measure drawn up by Knight Frank that looks at theinvestment potential of markets along the route). It measured countries via sixcategories - economic potential, demographic advantage, infrastructuredevelopment, institutional effectiveness, market accessibility and resilienceto natural disasters.

The Belt & Road Initiative is a $900billion policy initiated by the Chinese government to build on ancient traderoutes from China through central Asia by rail (Belt) and to Africa and beyondby sea (Road).

Theinitiative covers 69 countries which make up 60 percent of the world'spopulation and 40 percent of global gross domestic product (GDP), KnightFrank's report said. It was first announced by Chinese president Xi Jinping in September 2013, and a major forum forinternational cooperation around the initiative was held in May last year.

The initiative involves the construction ofmajor infrastructure projects, including a Pan-Asia railway from China toSingapore, a railway from Western China to Iran, and major investments inhighways, ports and refineries, including the Yanbu refinery in Saudi Arabia.

Althoughthere are no such large-scale infrastructure projects planned for the UAE,Knight Frank's Middle East head of research, Taimur Khan, argued that theconstruction market has already benefitted from plenty of Chinese involvement.

"In terms of projects, it's a slightlytricky one," he told Zawya in a telephone interview.

"China is involved in quite a lot ofprojects here, but it's more on different types of private and publicpartnerships.”

Building a presence

He said that of the total value of current andfuture UAE projects, firms with a Chinese origin are involved with about sixpercent, and that this is expected to increase to between 7-9 percent in2019-20.

Chinese investment into the region has beengrowing in recent years. Thomson Reuters data for mergers and acquisitionsactivity showed that Chinese investment was responsible for 28 percent of the$9.8 billion worth of inbound mergers and acquisitions into the Middle Eastlast year. This included a $1.77 billion investment into Abu Dhabi National OilCompany onshore concessions by China National Petroleum Company.

The world's biggest construction firm, theChina State Construction Engineering Corporation, has also grown its MiddleEast footprint, working on projects like the Dubai Canal andthe City of Lights project at Reem Island in Abu Dhabi. It has also co-investedin schemes, including the Five Palm Jumeirah hotel resort, and it signed anagreement at Cityscape Global in September to jointly develop the remainder ofUnion Properties' Motor City scheme alongside the Dubai-based developer. Thisis an 8 billion dirham ($2.17bn) project involving the construction of 44 newapartment buildings and 150 villas.

Khan argued that there is a heightened demand,both for commercial and residential property, in Dubai among Chinese investors.

Legal standing

"It's been led by a variety of reasons.You've had quite a lot of businesses that set up here who use Dubai as a hubbecause of the safety offered from the legal point of view,” he said."Whether that's in Dubai or from the DIFC (DubaiInternational Financial Centre) or ADGM (Abu Dhabi GlobalMarkets), where you have an English law basis.

"If you're working around the region, ifyou're working in Africa, being able to set up here (and) having that safetynet, it gives you that access to a lot of the southern (region)population."

Added to this, he said, Emirates offers directconnections from Dubai to 13 Chinese cities.

Trade figures show that China has been Dubai'sbiggest non-oil trade partner since 2014, and in a press release lastweek Dubai LandDepartment listed Chinese nationals among the most activebuyers. However, DLD did not give a breakdown of the volume or value ofproperties bought by Chinese nationals.

It had previously said in September last yearthat since 1996, 4,475 Chinese investors had completed 8,259 real estate dealsin Dubai, with a combined value of 12 billion dirhams ($3.2 billion).

By international measures, this is fairlyinsignificant, with a Chinese Global Property Investment Report by propertyportal Juwai.com stating  in July last year that Chinese buyers spent$101.4 billion on overseas properties in 2016 (the most recent year for whichit has figures), and that over $50 billion of this was spent in the UnitedStates. Other favoured markets were Australia, Hong Kong, Canada and the UnitedKingdom.

"The scale isn't there yet, but I thinkthere's potential there for it to (be a) more significant market," Khanargued. He cited growing government links between China, and particularlyDubai, as an example of this, citing a reciprocal agreement signed between DIFCCourts and the Shanghai High People's Court in 2016 to collaborate more closelyon commercial cases as evidence.

"There's a lot more cooperation that'sgoing on,” Khan said.

Yet, in terms of hub status, the UAE has someway to go to rival Singapore, which shares some of the advantages of being afinancial hub with the physical infrastructure development programmes.

Speaking at the World Economic Forum at Davosin Switzerland in a session on the Belt & Road Initiative, which waslive-streamed over the internet, Chan Chung Shen, a minister in the SingaporePrime Minister's Office, said that 33 percent of outbound investment related tothe Belt & Road Initiative, and 85 percent of the inbound investment,flowed through Singapore.

"The reason that Singapore is able to dothis is because we are a financial hub to syndicate loans together," Shensaid.

He argued that the long-term impact of theBelt & Road Initiative will be its ability to connect markets.

"And that will usher in a new era ofgrowth for the entire global community."

(Reporting by Michael Fahy; Editing by ShaneMcGinley)

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Published: 01/30/18