The ‘One Belt, One Road’ initiative. MSIL develops a strategy for member firms

It is one of the most ambitious economic programmes in history. The ‘One Belt, One Road’ (OBOR) initiative was first unveiled by China’s Xi Jinping in 2013. Since then, it has gathered momentum to span around 60 countries. But what is it?

In essence, it is a development strategy to create infrastructure and investments ultimately in as many as 150 countries across Europe, Asia, Middle East, Latin America and Africa. The Chinese government characterises the initiative as a ‘bid to enhance regional connectivity’. With some commentators estimating the initiative will mean around USD 1.3trn being committed by 2027, it is a once in a century commitment by the world’s fastest growing economy with many of the countries on the (OBOR) corridors standing to benefit from improved infrastructure, transportation and other economic benefits.

Jeff Blackbeard, Middle East and Africa Regional Director has begun working with member firms along the OBOR corridor to ensure these areas of the network are prepared to potentially benefit from the initiative. "Building on the existing strengths we have in our client base for manufacturing, maritime logistics and construction provides an ideal platform for strategic partnerships and co-operation,” says Jeff. “The OBOR initiative has illustrated China’s rebalancing from export-led growth towards a strategy of more active global participation,” says Blackbeard.

The OBOR presents clear opportunities for Moore Stephens firms to provide expertise and support. Due diligence exercises, facilitating partnership or joint venture arrangements with inbound Chinese investors with clients of local Moore Stephens member firms being some of the immediate examples. East Africa has been one of the earliest areas of the globe to be impacted by the OBOR programme. In Kenya, Joy Bhatt is already positioning Moore Stephens for success.

“Finding the right partners and providing the strong support networks through our understanding of local companies, the regulatory environment, market conditions, and the business cultures and practices of both China and Africa will support our success,” says Joy Bhatt, senior partner of Moore Stephens Kenya.  “A strong working relationship with Moore Stephens Da Hua is a key element in this client service model, adding enormous value to our clients from China.”

The investment of Foton Motors in 2006 into combining manufacturing, sales and services into the Kenyan market brought the company closer to its customers and the markets it serves in East Africa. Foton has now expanded its operations into several African countries, including Kenya and Egypt. “This trend of Chinese companies moving manufacturing capacity closer to the markets in Africa is a strategy we will see more of in the future,” says Bhatt.

Chinese companies, with the support of various international funding agencies are providing huge amounts of funding to develop African infrastructure in the forms of new rail links and ports to facilitate continental trade. These investments are paving the way for the manufacturing, distribution, service centres and retail operations to follow.

Jeff Blackbeard has been facilitating OBOR strategy sessions with partners and staff within his region. These strategic planning sessions help to determine the level of readiness to work with Chinese clients, and also to develop specific growth plans that cover aspects of brand building, sector collaboration and global mobility – key MSIL trends for 2019 and beyond.

“There is a big opportunity for MSIL firms to benefit from the OBOR initiative, which can be supported by the wider collaboration efforts that are now gaining momentum across the network. A key element of the strategy as we move ahead will be to engage our Mandarin speaking specialists in tax and advisory services as well as more closely link with MS global experts in manufacturing, supply chain management and transfer pricing. East Africa is one of the first areas to be impacted by the OBOR initiative and it is already driving high activity levels and economic benefits. By acting now to prepare, the other areas of the network can be very well positioned to take advantage of the opportunities this will bring and meet future client demand.”

Key Data

All firms were contacted, and we have received 63 responses to date (24%).  Of these firms, 30 already have Chinese clients (11%).  However, 58 (22%) have registered an interest in exploring business with China.
Regarding knowledge of the Belt and Road we asked about your awareness of the initiative, whether you were planning a specific strategy, and whether you would be interested in becoming more involved in this strategy.
 
How aware are you of OBOR? 14% (very) 35% (basic) 51% (not aware)
Have you got a strategy for OBOR? 5% (yes) 22% (thinking) 73% (no strategy)
Do you wish to be involved in developing a OBOR strategy 33% (actively) 59% (interested) 8% (not interested)
 
Focus

Naturally enough, when we look at the services provided then we are covering both Audit and Tax services.  However, when we look at the key sectors of the network[1] it is encouraging to see that each is strongly represented amongst those respondents with Chinese clients or an interest in developing an OBOR strategy.
 
Manufacturing & Distribution 47%
Real Estate & Construction 43%
Energy, Mining, Renewables 13%
Shipping 10%
   
Other 40%

Interestingly, a number of firms are already undertaking marketing activity with China (whether this is through trade visits to Da Hua or through directly with Chinese clients) which, in itself, indicates that perhaps efforts could benefit from being more coordinated – joint materials, joint meetings, joint proposals etc.

What Next?

A team has been formed within MSIL Executive to work on the OBOR Strategy and it will be looking for input from interested firms.  We are already looking at where our key sectors have specific relevance to the Chinese Belt and Road strategy and, over the coming weeks and months, we will be researching where we can use the strengths we already possess and where we need to develop further capabilities.

Further updates will be provided in future newsletters, on the intranet or via the OBOR Collaboration Group.
Connect to our newly-formed OBOR Collaboration Group to find out further information about the work we are undertaking or how you can get involved.  Alternatively, please contact Jeff Blackbeard (jeff@msdbn.co.za) or John Stanford (john.stanford@moorestephens.com