“We hope that this center will be the biggest tourist center in the world. Not only Chinese or Kazakh but other countries, cultures, to all come and meet in the middle,” said Kaharman Jazin, the new president of the ICBC.
There is also more of an international presence here in the ICBC than I witnessed before. This place isn’t just meant to be for trade between China and Kazakhstan, but is intended to be a great market that connects China with the entire CIS and potentially even Europe beyond, and this is particular true for the Eurasian Economic Union — the customs area that includes Russia, Kazakhstan, Kyrgyzstan, Belarus, and Armenia — that the ICBC is on the border of. The next phase of development for this emerging free trade zone consists of expanding its reach out through this region, and Budukov is currently running a traveling road show, going from country to country trying to entice investors to come and set up operations on the doorstep of China.
According to Budukov, 10,000 visitors from China and 3,000 visitors from Kazakhstan are currently coming into the ICBC each day — which is up from the 1,500 daily visitors that were coming at the time of my previous visit.
A duty free shopping center on the Chinese side of the ICBC. Image: Wade Shepard.
Another long-term aim of the ICBC is to become a place where visitors don’t only come to buy more or less utilitarian items at a cheaper price but also the luxury items that are trending throughout Asia. While there are signs advertising the presence of Chanel, Calvin Klein, Clinique, Prada, and Gucci in the ICBC, a visitor would be hard-pressed to find any of these luxury products actually being sold here. I walked through one trade center on the Chinese side that boasted the presence of luxury brands only to find the displays empty. The workers told me that the would be restocked after the Chinese New Year holiday. Maybe.
But even if these luxury products were actually sold here, the import restrictions of both the Eurasian Economic Union and China would hamper their sales volumes. Visitors can only take
50 kilos or 1,500 euros worth of merchandise tax-free per month out of the ICBC and into Kazakhstan. While China
has an 8,000 yuan (US$1,250) daily limit. There are reports of a cottage industry that has developed in the nearby Kazakh town of Zharkent, where local high-school and college students carry merchandise out of the ICBC for shoppers who wish to buy more tax-free than the import restrictions allow.
“Do you feel as if this is a major problem limiting the potential success of the ICBC?” I asked both Kaharman and Budukov.
“Yes,” they both replied in unison.
“Is there anything that you can do about it?”
Kaharman just shook his head and smiled. This is an issue that’s even higher than Astana; it goes straight to the heart of the Eurasian Economic Union — straight to Moscow,
who hasn't been the biggest fan of the whole ICBC concept, to put it mildly.
This entire stretch of the China / Kazakhstan border region is being cultivated as a massive bi-national conurbation of development -- all of the various projects have synergy with each other and are ultimately rising up in unison. This development zone is a national-level ambition of both China and Kazakhstan, and the political will and funding is there to take it to fruition — perhaps by any means necessary. To repeat an adage that has become popular during China’s decades-long development boom, the ICBC may in fact be "too big to fail," and may potentially become the central market of the entire New Silk Road.
I'm the author of Ghost Cities of China. I'm currently traveling the New Silk Road doing research for a new book. Follow by RSS.
http://www.forbes.com/sites/wadeshe...tz-may-finally-be-set-to-boom/2/#7d2166731434
Here Are 5 Ways China's New Silk Road Is Good For Western Companies
Alex Capri ,
CONTRIBUTOR
I write about international trade and cross-border business.
Opinions expressed by Forbes Contributors are their own.
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A sign shows the distance in kilometers to various destinations as a freight train transporting containers laden with goods from China, arrives at DB Cargo's London Eurohub rail freight depot in Barking, east London on January 18, 2017, from Yiwu in the eastern Chinese province of Zhejiang. NIKLAS HALLE'N/AFP/Getty Images.
China’s One-Belt-One-Road initiative is the most ambitious infrastructure project in history. Referred to as "
OBOR," this immense network of planned highways, railways, energy grids and port facilities will create economic corridors between
65 countries in Asia, Africa and Europe.
But Beijing's high profile gambit is viewed with suspicion by outsiders. Many foreign observers regard OBOR as the Chinese ruling party's grand design to establish geopolitical hegemony throughout Asia and beyond. To underscore the OBOR initiative, Beijing has also been the chief architect behind two other Sino-centric projects: the Regional Comprehensive Economic Partnership (
RCEP) -- which, if ratified, would become the world’s largest multilateral free trade agreement -- and the Asia Infrastructure Investment Bank (
AIIB).
All of this needs to be put into the context of the latest political drama coming out of Washington. When viewed together with the Trump Administration’s rejection of the Trans-Pacific Partnership (
TPP)—as well as the new President’s apparent abdication of responsibility regarding America’s longstanding leadership role in the neoliberal world order— it’s clear that the OBOR initiative could fundamentally
change today’s geopolitical landscape and redraw the map of global trade.
Which begs the question:
Is it realistic for U.S. and other Western firms to expect good business opportunities within the OBOR? This question becomes even more compelling as the public dialog between the U.S. and China grows increasingly hostile and confrontational.
Even without the complications of deteriorating political relationships, infrastructure projects in emerging markets always present firms with a multitude of uncertainties. And given OBOR’s massive scale, many sceptics think the initiative is unrealistic.
But Beijing has done
a masterful job when it comes to big infrastructure projects. China Inc. understands that infrastructure is the backbone of connectivity, and connectivity is the lifeblood of modern day commerce. Even if it doesn’t reach its full potential, OBOR’s connective corridors will redefine regional supply chains, create new markets, and redraw the map of today’s production networks.
FindTheData | Graphiq
Thus, despite many risks, OBOR presents multinational businesses with historic possibilities.
The challenge for Western companies, therefore, is two-fold: first, they must identify OBOR’s true opportunities; second, they must gauge their tolerance to a wide range of risks.
Identifying OBOR’s Opportunities
Here are five key areas of interest for Western firms.
Capacity Building – OBOR’s massive funding requirements must come from both public institutions and private investors. To date, private investors have stayed away. Chinese state owned banks generally lack transparency and are widely perceived to suffer from the ill effects of corruption and poor management. This creates a window of opportunity for Western professional services firms, particularly those specializing in accountancy, consultancy, banking and insurance. The presence of these firms, as they work with local partners to implement good governance and transparency, will make OBOR more attractive to private banks and investors.
Clean Energy and Sustainable Projects – China’s recent endorsement of the
Paris Agreement — and President Xi Jin Ping’s proclamation that China will lead the world in the fight against climate change — will create an opening for foreign firms. Here, Western engineering firms and energy companies can find real opportunities to participate in sustainable projects with Chinese SOEs and local firms. This also provides an opening for Western NGOs, as they work with key stakeholders.
Strategic Value Chains – As new OBOR corridors connect economic zones, Western MNEs will have access to labor pools in Central Asia, Southeast Asia and Africa. The global footwear and wearing apparel industry, in particular, will have opportunities to relocate manufacturing centers and other value-adding activities along OBOR, as wages and other costs escalate in China. These new value chains will provide faster access to key markets in Europe and Asia, given their connectivity to high speed rail networks.
New Markets for Consumer Goods – As OBOR’s functional infrastructure expands,
new population clusters will emerge along its main arterials, providing new “local” markets and new consumers. Western brands, from hand phone makers to pharmaceutical companies, should push to capture market share. As customer bases along OBOR grow, Western MNEs — which enjoy high brand value and good reputations — will have the opportunity to reengineer their supply chains and
to perform manufacturing closer to their customers.
Faster Transit Times – OBOR will allow faster transit times for cargo. DHL Global Forwarding, one of the world’s largest freight companies, is already routing increasing amounts of freight along the “Belt,” from the city of Lianyungang, China, all the way to Istanbul. Transit times are just 14 days. For MNEs throughout Asia, a new logistical window is opening, offering a variety of new routes, distribution hubs and supply chain networks. As more MNEs route their cargo via OBOR, their legacy logistics providers will be compelled to offer end-to-end services across the OBOR network.
Dealing With OBOR’s Risks
Initially it will not be easy for U.S. and other Western firms to compete in an environment that is heavily influenced by Beijing’s central planners and SOEs. Chinese companies in the construction, banking, steel, high-speed rail and energy sectors will dominate early infrastructure efforts. Local competitors will also present obstacles to foreign firms. And the usual emerging market risks will be ever present: lack of transparency and uniformity within regulatory environments, corruption, macro-economic and financial risks — even supply chain security risks.
Eventually, however, state-sponsored development will have
to give way to pragmatic collaboration between Chinese SOEs, local companies and foreign firms. The sheer scale and amount of capital — both monetary and human — needed to create the infrastructure of OBOR will compel all parties to seek the most optimal partnerships. This will have to involve the world’s best-in-class foreign companies.
For now, uncertainty prevails.
Western companies will need to adopt a wait-and-see strategy and hope that Washington and Beijing walk-back their tough rhetoric and find a way to craft a coherent, stable working arrangement. Given today’s geopolitical environment, this is far from guaranteed.
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