As Chinese President Xi Jinping concluded the latest high-level Belt and Road gathering of world leaders in Beijing last month, China’s signature project has seemingly entered a new phase: worldwide acceptance of the Belt and Road Initiative (BRI) as a fact of international life (like it or not). So, with the wind at its back, is China doubling down on its investments worldwide? Not exactly. The total value of China’s global investments and construction contracts actually fell by $100 billion in 2018, according to data analyzed from the American Enterprise Institute’s China Global Investment Tracker. Just about every region saw a significant decline in Chinese investment or construction projects except, surprisingly, for one: the Middle East and North Africa (MENA).
A flurry of Chinese investment and construction projects in the MENA region over the last three years has made it a key geoeconomic partner for Beijing. But surely, in pure volume terms, the MENA region could not have attracted as much Chinese economic activity as sub-Saharan Africa or East Asia, right? Think again. The MENA region ranked as the second-largest recipient of investment and Chinese construction projects worldwide after Europe in 2018, as the chart below shows.
MENA’s Growing BRI Clout
In 2018, the Middle East and North Africa leapfrogged other emerging markets as a destination for BRI projects.
The MENA region ranked ahead of traditional BRI stalwarts East Asia and sub-Saharan Africa last year, recording $28.11 billion in new projects. The region still lags behind both those regions as a whole since the launch of BRI in 2013 and dating back to 2005, but a three-year surge has brought it in closer proximity to the top of the table. That could mean a windfall for Chinese state-owned construction companies as the majority of MENA projects involve construction, rather than foreign direct investment.
Of the 2018 MENA total, nearly three-quarters was targeted at Egypt, the United Arab Emirates, and Saudi Arabia. Those three countries also make up half of the “$20 billion club”—the group of countries with more than $20 billion worth of projects from China dating back to 2005.
Chinese Investment in MENA Countries
MENA countries with more than $20 billion worth of investment and construction projects by Chinese firms since 2005.
The list here is heavily skewed toward regional oil producers, with the exception of Egypt, and most of China’s projects in the region involve construction rather than investment. Despite a recent setback, Chinese state-owned enterprises will likely play a prominent role in Egypt’s ambitious infrastructure program, including the building of a new, gleaming capital city just outside Cairo. Chinese construction companies were vitalin President Abdel Fattah al-Sisi’s ambitious Suez Canal economic zone project.
At the Belt and Road Forum last month, Chinese enterprises also announced a new $3.4 billion investment to build a trade hub for Chinese goods in Dubai’s Jebel Ali Port, as well as a manufacturing and processing hub for animal and agricultural products for the food industry. China’s dramatic ramp-up of projects in the UAE suggests that it sees the country as an important piece of its Belt and Road logistics network.
Other significant nodes of China’s economic footprint in the region are Israel ($12.19 billion), Kuwait ($10.43 billion), and Qatar ($7.27 billion), according to data analyzed from AEI’s China Global Investment Tracker for the years 2005-2018.
China is pouring a lot of concrete and cement into construction projects in the region but what of Middle East exports to China? How is China affecting the bottom line of key MENA states?
The answer broadly: If you have oil or gas, China is likely to be a major export destination.
Exports to China From MENA Countries
China has emerged as a vital export destination for several countries in the Middle East and North Africa. For these countries below, China made the top five in 2018.
Major oil and gas producers generate significant revenues from Beijing, and China ranks as the top export destination for Saudi Arabia, Iran, Kuwait, and Oman, according to an analysis of data from the International Monetary Fund’s Direction of Trade Statistics.
In some cases, key U.S. allies such as the UAE send nearly three times more exports to China than to the United States, and for Kuwait, Qatar, and Oman, the gap is even starker, with nearly eight times, nearly nine times, and nearly 28 times, respectively, more goods exported to China than to the United States.
For Saudi Arabia, the difference in 2018 was less stark, sending some 30 percent more exports to China than to the United States, according to an analysis of IMF data. Expect this gap to widen as the United States continues to ramp up domestic oil production.
Meanwhile, most North African countries still maintain an export profile heavily dependent on Europe rather than on China, and Israel sends four times more goods to the United States than to China.
You can expect this map to get to darker shades of red over the next decade, particularly as China’s demand for energy—especially natural gas—continues to grow.
Afshin Molavi is a senior fellow at the Foreign Policy Institute of Johns Hopkins School of Advanced International Studies and the editor and founder of the New Silk Road Monitor blog.
CleanTechnica Fossil Fuels elaborated on the more and more overwhelming tendency of eying Fossil Fuel complicity as no longer hidden in America’s investments institutions. as well as elsewhere in the world. Here it is.
They’re not giving up. Yes, several attempts were defeated to persuade the Massachusetts municipal and county retirement systems to remove fossil fuel investments from their portfolios. But the Massachusetts Legislature is still considering measures that open up possibilities for divestment. To do otherwise, they argue, is to engage in fossil fuel complicity.
And they’re not alone. All over the US, organizations are pushing for divestments within institutions and municipalities. Led by FossilFree.org, individuals and advocacy groups are raising the discourse around the necessity to stop and ban all new oil, coal, and gas projects bypassing local resolutions to divest and by building community resistance.
Divestment has been a tool used to promote social change since at least the 1970s, when anti-apartheid activists urged institutions to move their investment dollars away from companies that did business with South Africa. Fossil fuel divestment has been gaining momentum in recent years, with more than 1,000 institutions pledging to remove $8.55 trillion from investments in the fossil fuel sector.
Fiduciary Duty is Now a Companion Argument to Social & Environmental Reasons to Divest
In 2017, Somerville, Massachusetts’ governing board agreed to move $9.2 million — 4.5% of the total invested funds — out of fossil fuel investments. The regulatory body that oversees public pension systems rejected the move, however, with reasons ranging from procedural to breach of fiduciary duty. The Massachusetts Public Employee Retirement Administration Commission (PERAC) claimed Somerville was failing to put the financial needs of its beneficiaries ahead of social and environmental causes. PERAC oversees 104 public pension plans across the state, with about $86 billion in total assets.
Demand for fossil fuels is likely to drop as much of the global economy shifts to renewable energy.
Increased storm frequency due to climate change can cause supply chain disruption and infrastructure damage for oil companies.
“From the fiduciary perspective, there are a lot of questions as to the economic health of the fossil fuel sector moving forward,” Alex Nosnik, a member of the Somerville board, said. “Risk, certainly in concert with the environmental and social issues, was driving our decision to move forward.”
Ultimately, after lots of divestment advocates worked alongside sympathetic legislators to craft a local option bill that would authorize any municipal or county retirement system to divest from fossil fuels should they so choose. Standalone bills have been filed in the House and Senate; similar language has also been included in a wide-ranging clean energy bill pending in the Senate.
Several of the state’s environmental groups have come out in favour of these measures, including the Massachusetts chapter of the Sierra Club, the Green Energy Consumers Alliance, and the Climate Action Business Association.
“We have to stop putting money into fossil fuels,” said Deb Pasternak, director of Sierra Club Massachusetts. “We need to take our money and direct it toward the renewable energy economy.”
Governments in the Middle East are becoming more
receptive to growing private sector involvement in their economies because
public sector debt in many markets is ballooning, an official from the World
Bank’s International Finance Corporation (IFC) has said.
Speaking on an investors’ panel debate at the
Global Financial Forum in Dubai on Monday, the IFC’s Middle East and North
Africa (MENA) director, Mouayed Makhlouf, said: “For the first time,
because of the massive rise in public debt across the region, we see a
difference. Our narrative with these governments has changed. Now, they are coming to us and they are saying
‘can you help us with the reforms?'”
Makhlouf said that the MENA region needs to create
300 million new jobs – “basically, double the population” by 2050 due
to the burgeoning youth population in the region, and that Egypt alone needs to
create around 700,000 jobs per year, although he said it is MENA’s fastest
growing economy currently, with GDP growth of 5.3 percent, compared with a
regional average of around 2-3 percent.
“The social contract in MENA is as such where
most of the services (are) provided by the public sector. But what you have ended up with… is a huge
public debt that has been rising for the past few years,” he said, adding
that debt-to-GDP ratios stand at around 96 percent in Egypt, 97-98 percent in
Jordan and 150 percent in Lebanon.
“For us, the main thing we need to find in
this region are… growth and jobs. And
I really believe both of these things can only come through a larger private
sector participation,” Makhlouf said.
In a separate panel on the outlook for the region’s
banking sector, JP Morgan‘s Asif Raza said that the decline in oil prices
that began in 2014 had created opportunities for
international banks to advise governments that are looking to
diversify on how to embark on “monetisation and privatisation” of
Kamal, MENA head of corporate banking at Citi, said that governments had run up deficits as oil
revenues fell, and had financed these through “various instruments where
banks have been involved”.
“And we expect to see that continue over the
next 2-3 years.”
Although total GCC fixed income issuance declined
by 16 percent year-on-year to $145.3 billion in 2018 as oil prices rallied,
according to Kamco Research, JP Morgan’s Raza said the current pipeline is
A faster flow
Raza said that at this stage last year, “over
$15.4 billion worth of issuance was done in the MENA region – this year, it’s
He added that in 2018, “the loan market
was (at an) all-time high in this region”. Figures published earlier this month from
Acuris showed that syndicated loan activity in the MENA region last year
outstripped bond issuance – with $133 billion of syndicated loans issued,
compared to $89.5 billion in bonds.
Raza said that at the top end of the corporate
banking market, “there’s lots of activity still happening”.
“There’s still quite a decent pipeline of
financing and refinancing,” he said.
However, Citi’s Kamal argued that the market has
been much tougher for SMEs in recent years.
“I believe that there is room for improvement
for all countries in the region as far as creating the right balance for SMEs
(is concerned),” he said.
He said that “time and again” in tougher
economic times large corporates, government-related entities and even government
departments have delayed payments to SMEs, which causes cashflow problems and
affects their ability to repay creditors.
“And some of the legal framework that
surrounds the corporate sector – we all know about bounced cheques and the
consequences of that. In summary, what
happens is SMEs can’t stay back in a number of cases (to) fight through these
cycles. So, we see skips, people leave
and that does not leave a very strong impact as far as consumer confidence is
Yet funding shortages for private sector firms can
also create opportunities – not least for the region’s private equity sector,
according to Karim El-Solh.
Speaking on the investment panel, El-Solh said that
his firm’s pipeline “has increased dramatically as a result of a lack of
availability of funding for businesses elsewhere.
“The IPO market is not open; the bank
liquidity has dried up so for us it’s an opportunity to come and be a provider
of growth capital. We are seeing more
companies, better quality companies, we’re acquiring controlling stakes at
lower valuations,” he said.
Makhlouf said more opportunities need to be created
for the private sector, stating that levels of private sector involvement in
the economy in the region lag behind other emerging markets.
“MENA region is only one-fifth in terms of
private sector participation compared to Latin America,” he said.
This article originally appeared on Fast Company, it was republished by the World Economic Forum on 8 March 2019. It is to be noted that in the eastern end of the MENA region, notably in the Gulf Cooperation Countries, Asian populations and investments happily cohabitate with the respective native minorities.
By Parag Khanna, Senior Research Fellow, Lee Kuan Yew School of Public Policy, National University of Singapore
This excerpt is from Parag Khanna’s book “The
future is Asian”. The book was chosen as February’s book for the World
Economic Forum Book Club. Each month, a new book will be selected and discussed
in the group. The author will then join in on the last day of the month to
reply to some questions from our audience.
When we look back from 2100 at the
date on which the cornerstone of an Asian-led world order began, it will be
2017. In May of that year, sixty-eight countries representing two-thirds of the
world’s population and half its GDP gathered in Beijing for the first Belt and
Road Initiative (BRI) summit. This gathering of Asian, European, and African
leaders symbolized the launch of the largest coordinated infrastructure
investment plan in human history. Collectively, the assembled governments
pledged to spend trillions of dollars in the coming decade to connect the
world’s largest population centers in a constellation of commerce and cultural
exchange—a new Silk Road era.
The Belt and Road Initiative is the
most significant diplomatic project of the twenty-first century, the equivalent
of the mid-twentieth-century founding of the United Nations and World Bank plus
the Marshall Plan all rolled into one. The crucial difference: BRI was
conceived in Asia and launched in Asia and will be led by Asians. This is the
story of one entire side of the planet—the Asian side—and its impact on the
Asians once again see themselves as
the center of the world—and its future. The Asian economic zone—from the
Arabian Peninsula and Turkey in the west to Japan and New Zealand in the east,
and from Russia in the north to Australia in the south—now represents 50
percent of global GDP and two-thirds of global economic growth. Of the
estimated $30 trillion in middle-class consumption growth estimated between
2015 and 2030, only $1 trillion is expected to come from today’s Western
economies. Most of the rest will come from Asia.
Asia produces and exports, as well as
imports and consumes, more goods than any other region, and Asians trade and
invest more with one another than they do with Europe or North America. Asia
has several of the world’s largest economies, most of the world’s foreign
exchange reserves, many of the largest banks and industrial and technology
companies, and most of the world’s biggest armies. Asia also accounts for 60
percent of the world’s population. It has ten times as many people as Europe
and twelve times as many people as North America. As the world population
climbs toward a plateau of around 10 billion people, Asia will forever be home
to more people than the rest of the world combined. They are now speaking.
Prepare to see the world from the Asian point of view.
To see the world from the Asian point
of view requires overcoming decades of accumulated—and willfully
cultivated—ignorance about Asia. To this day, Asian perspectives are often
inflected through Western prisms; they can only color to an unshakable
conventional Western narrative, but nothing more. Yet the presumption that
today’s Western trends are global quickly falls on its face. The “global
financial crisis” was not global: Asian growth rates continued to surge, and
almost all the world’s fastest-growing economies are in Asia. In 2018, the
world’s highest growth rates were reported in India, China, Indonesia,
Malaysia, and Uzbekistan. Though economic stimulus arrangements and ultralow
interest rates have been discontinued in the United States and Europe, they
continue in Asia. Similarly, Western populist politics from Brexit to Trump
haven’t infected Asia, where pragmatic governments are focused on inclusive
growth and social cohesion. Americans and Europeans see walls going up, but
across Asia they are coming down.
Rather than being backward-looking,
navel-gazing, and pessimistic, billions of Asians are forward-looking,
outward-oriented, and optimistic.
These blind spots are a symptom of a
related oversight often found in foreign analyses of Asia, namely that they are
actually about the United States. There is a presumption that Asia (and frankly
every other region as well) is strategically inert and incapable of making
decisions or itself; all it is waiting for is the US leadership to tell them
what to do. But from the Asian view, the past two decades have been
characterized by President George W. Bush’s incompetence, President Barack
Obama’s half-heartedness, and President Donald Trump’s unpredictability.
The United States’ laundry list of perceived
threats—from ISIS and Iran to North Korea and China—have their locus in Asia,
but the United States has developed no comprehensive strategy for addressing
them. In Washington it is fashionable to promote an “Indo-Pacific” maritime
strategy as an antidote to China’s Belt and Road Initiative, failing to see how
in reality Asia’s terrestrial and maritime zones cannot be so neatly separated
from each other. For all their differences, Asians have realized that their
shared geography is a far more permanent reality than the United States’
unreliable promises. The lesson: the United States is a Pacific power with a
potent presence in maritime Asia, but it is not an Asian power.
The most consequential misunderstanding
permeating Western thought about Asia is being overly China-centric. Much as
geopolitical forecasters have been looking for “number one,” many have fallen
into the trap of positing a simplistic “G2” of the United States and China
competing to lead the world. But neither the world as a whole nor Asia as a
region is headed toward a Chinesetianxia, or harmonious global system guided by
Chinese Confucian principles. Though China presently wields more power than its
neighbors, its population is plateauing and is expected to peak by 2030. Of
Asia’s nearly 5 billion people, 3.5 billion are not Chinese.
Asia’s future is thus much more than
whatever China wants. China is historically not a colonial power. Unlike the
United States, it is deeply cautious about foreign entanglements. China wants
foreign resources and markets, not foreign colonies. Its military forays from
the South China Sea to Afghanistan to East Africa are premised on protecting
its sprawling global supply lines— but its grand strategy of building global
infrastructure is aimed at reducing its dependence on any one foreign supplier
(as are its robust alternative energy investments).
China’s launching the Belt and Road
Initiative doesn’t prove that it will rule Asia, but it does remind us that
China’s future, much like its past, is deeply embedded in Asia. BRI is widely
portrayed in the West as a Chinese hegemonic design, but its paradox is that it
is accelerating the modernization and growth of countries much as the United
States did with its European and Asian partners during the Cold War. BRI will
be instructive in showing everyone, including China, just how quickly colonial
logic has expired. By joining BRI, other Asian countries have tacitly
recognized China as a global power—but the bar for hegemony is very high. As
with US interventions, we should not be too quick to assume that China’s
ambitions will succeed unimpeded and that other powers won’t prove sufficiently
bold in asserting themselves as well. Nuclear powers India and Russia are on
high alert over any Chinese trespassing on their sovereignty and interests, as
are regional powers Japan and Australia. Despite spending $50 billion between
2000 and 2016 on infrastructure and humanitarian projects across the region,
China has purchased almost no meaningful loyalty. The phrase “China-led Asia”
is thus no more acceptable to most Asians than the notion of a “US-led West” is
China has a first-mover advantage in
such places where other Asian and Western investors have hesitated to go. But
one by one, many countries are pushing back and renegotiating Chinese projects
and debts. Here, then, is a more likely scenario: China’s forays actually
modernize and elevate these countries, helping them gain the confidence to
resist future encroachment. Furthermore, China’s moves have inspired an
infrastructural “arms race,” with India, Japan, Turkey, South Korea, and others
also making major investments that will enable weaker Asian nations to better
connect to one another and counter Chinese maneuvers. Ultimately, China’s
position will be not of an Asian or global hegemon but rather of the eastern
anchor of the Asian—and Eurasian—megasystem.
The farther one looks into the
future, therefore, the more clearly Asia appears to be—as has been the norm for
most of its history—a multipolar region with numerous confident civilizations
evolving largely independent of Western policies but constructively coexisting
with one another. A reawakening of Western confidence and vitality would be
very welcome, but it would not blunt Asia’s resurrection. Asia’s rise is
structural, not cyclical. There remain pockets of haughty ignorance centered
around London and Washington that persist in the belief that Asia will come
undone as China’s economy slows or will implode under the strain of nationalist
rivalries. These opinions about Asia are irrelevant and inaccurate in equal
measure. As Asian countries emulate one another’s successes, they leverage
their growing wealth and confidence to extend their influence to all corners of
the planet. The Asianization of Asia is just the first step in the Asianization
of the world.
The Norwegian government announced
Friday a bold recommendation for the Norwegian Sovereign Wealth Fund to divest
all its holdings, worth nearly $40 billion, from oil and gas industries. The
proposal, if approved by the nation’s parliament, would see the world’s largest
sovereign wealth fund worth $1 trillion, divest from all fossil fuels. (Photo:
In a move that climate campaigners
say should send a “shockwave” through the global oil and gas
industry, the Norwegian Sovereign Wealth Fund—the largest of its kind in the
world—has recommended the Norway government divest the entirety of the fund’s
$40 billion holdings from the fossil fuel industry.
“If [proposal passes through parliament it
will produce a shockwave in the market, dealing the largest blow to date to the
illusion that the fossil fuel industry still has decades of business as usual
ahead of it.”
—Yossi Cadan, 350.org
In a statement on Friday, Minister of
Finance Siv Jensen explained the decision is meant to “reduce the
vulnerability” of the Norwegian fund “to permanent oil price
decline.” With an estimated $1 trillion in total holdings, Norway’s
Sovereign Wealth Fund is the largest publicly held investment in the world.
According to a spokesperson for the finance ministry, the fund currently has
roughly 66 billion Norwegian krone ($7.5 billion) invested in energy
exploration and production stocks—approximately 1.2% of the fund’s stock
The recommendation from the Norwegian
fund will now be sent to the nation’s parliament for approval.
Climate groups that have pushed
aggressively for divestment from the fossil fuel industry in recent years as a
key way to decrease the threat of greenhouse gases and runaway global warming
celebrated the announcement as a possible crucial turning point.
“We welcome and support this
proposal,” said Yossi Cadan, senior divestment campaigner at 350.org, “if
it passes through parliament it will produce a shockwave in the market, dealing
the largest blow to date to the illusion that the fossil fuel industry still
has decades of business as usual ahead of it. The decision should sound like a
red alert for private banks and investors whose oil and gas assets are becoming
increasingly risky and morally untenable.”
Bill McKibben, one of the group’s
co-founders, called it a “huge, huge, huge
In a statement, 350 added:
In order to avoid the most
catastrophic impacts of climate change and keep global warming below 1.5°C we
have to keep fossil fuels in the ground and shift finance towards sustainable
energy solutions for all. Climate impacts are already hitting home and we have
no time left to lose. Last year Nordic heatwaves, wildfires in the Arctic
Circle and alarming news of the thickest Arctic sea ice starting to break up,
showed how climate change is close to home for Norway. It seems unthinkable for
Norwegian financiers to continue to invest in companies that are causing this
Catherine Howarth, chief executive of
ShareAction, which provides analysis for investors focused on creating a more
sustainable society, said the Norwegian fund’s announcement
“is further evidence that investors are growing increasingly dissatisfied
with oil exploration and production companies.”
Institutional investors that manage
sovereign wealth funds and pensions funds, she added, “are withdrawing
their capital from oil and gas companies on the grounds that
quicker-than-expected growth in clean energy and associated regulation is
making oil and gas business models highly vulnerable. This announcement will
put pressure on investors to ramp up their engagement with integrated oil
majors ahead of [annual general meeting] season” when stock holders gather
to assess and review company performance and strategies.
While the financial reality of the
climate crisis comes into increasing view for global investors and markets,
350.org says that credit belongs to the campaigners from around the world who
have bravely stood up to demand an end to the financial and energy hegemony of
the fossil fuel industry.
At the heart of the global divestment
campaign, the group said, “is a people-powered grassroots movement—it’s
ordinary people pushing their local institutions to take a stand against the
fossil fuel industry —the industry most responsible for the current climate
Gulf Times of Qatar in this ViewPoint dated February 26, 2019, elaborates on Climate Change, a clear risk and danger for investments that are not only increasingly apparent to all but very obvious especially where it hurts the most.
events are the most threatening global risks this year, the World Economic
Forum warned last month.
The financial sector has for long worried that a crisis could shape up from
growing climate risks. And insurers are increasingly concerned that rising
temperatures will lead to a slump in property values that could spark broader
In a report published last week, ClimateWise,
a group run out of the University of Cambridge including some of the world’s
biggest insurers, said increasing catastrophes linked to climate change could
triple losses on property investments over the next 30 years.
The warning adds to concerns raised by Munich Re last
month, which said a string of floods, fires and violent storms had doubled the
normal amount of insurable losses. Munich Re said global climate-related losses
may have topped a record $140bn last year, adding investors should look again
at whether they’ve properly accounted for rising damages from weather catastrophes.
The German insurer reported $160bn of losses from natural catastrophes last
year, some $20bn above inflation-adjusted averages in the previous three
Wildfires in California have just caused a corporate casualty of climate change
with utility PG&E Corp collapsing due to liability from two years of
When PG&E filed for Chapter 11 on January 29, it marked not just one of the
largest utility bankruptcies in history; it’s also one of the first tied to
PG&E, owner of California’s largest electric utility, made the move after
estimating that it faced a $30bn liability from wildfires whose intensity has
been blamed by state officials on worsening droughts linked to global
There are growing signs that global warming is causing noticeable dents in some
of the world’s largest and most sophisticated economies.
A protracted drought in Germany that made crucial waterways impassable to ships
shaved around 2 percentage points off growth in Europe’s largest economy in the
fourth quarter of 2018.
The US Defence Department last month warned climate change could compromise US
security, with rising seas increasing flood risk to military bases and
drought-fuelled wildfires endangering those inland.
In December, the Bank of England said it would force banks to make better
preparations for climate change after finding only a few had done so.
Make no mistake, the overheating planet is bad for the economy.
Rising temperatures could curtail the pace of US economic growth by as much as
one-third by 2100, according to research from the Federal Reserve Bank of
Richmond in mid-2018.
The climate impact could be disproportionately damaging to developing
The world’s 100 poorest countries could be 5% worse off by the end of the
century with climate change – wiping trillions of dollars from the global
economy every year – according to research findings by the University of Sussex and La Sapienza
economists in early 2018.
For sure, a collective global effort to enact stricter carbon emissions
policies is a must to deal with global warming concerns. For the financial
sector, not only should investors price in climate risks; but they need to
incorporate scientists’ climate projections into their own catastrophe models.