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China’s One Belt, One Road Initiative And Asia Is A Crucial Trade Route Starting Point, Part 5, South Korea, Sri Lanka,Tajikistan, and Thailand

ArmchairTechInvestor, May 30, 2018, by Brad Peery

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Below are summaries of the OBOR initiatives in the countries covered in the Asia Part 4 Region.

South Korea

*The South Korean economy grew by 3.1% in 2017, following a 2.9% expansion in the previous year. Korea is very dependent on trade, with total foreign trade accounting for about 80% of the country’s GDP. China was Korea’s largest export partner 2017, and accounted for about 25% of total exports. Other major export destinations were the U.S., 12%, and Vietnam 8%. Major sources of imports to Korea were China, 20%, Japan, 12% and the U.S., 11%.

**The tensions between North Korea, and South Korea and the U.S. have slowed any benefit South Korea might get from China’s OBOR Initiative. So far, China’s Initiative has focused on investments, particularly infrastructure projects, in Central and Southeast Asia, Africa, and Europe. “However, the Chinese government’s Vision and Action Plan also foresees the provision of economic opportunities to regions in Northeast Asia. Specifically, three northern Chinese provinces — Liaoning, Jilin, and Heilongjiang — are positioned to become part of a Northeast Asian economic zone that could link Russia, Mongolia, and possibly even the Korean Peninsula.”

South Korea has developed its own Eurasia Initiative (EAI). EAI is also based on economic cooperation in Eurasia through infrastructure projects, such as the trans-Korean railway, that ultimately hope to promote peace to the Korean Peninsula. By doing so, South Korea could also access train routes over the Eurasian landmass, reducing the logistics costs of its exports to Europe by up to 30%. This initiative could also benefit North Korea, should a unified Korean Peninsula come about.

The OBOR Initiative makes no mention of South Korea or North Korea. By creating new access to the Eurasian market, South Korea hopes to create an improved economy, while becoming less dependent on trade with China and the United States. At the same time, the initiative foresees possible North Korean economic integration into the region, which might trigger changes for South Korea.

***“Comparing the outlook of the two initiatives for the peninsula, it seems that they cannot coexist at this state without creating further tensions in the region. If China does not include South Korea in its initiative, but approaches North Korea for trade, then relations between Seoul and Beijing might deteriorate. Likewise, China will not be too pleased if the South pushes forward with an initiative that diminishes China’s economic grip on the peninsula.”
**One Belt, One Road, One Korea?, Together, China’s Belt and Road and South Korea’s Eurasia Initiative could help pave the path to peace on the peninsula.
The Diplomat, By Maximilian Römer, February 10, 2018

Sri Lanka

Sri Lanka’s economy is growing at about a 4.5% rate. Sri Lanka is a mid-sized country in South Asia in terms of GDP and population. The services sector is about 60% of the Sri Lankan economy. Information technology, financial services, tourism and telecommunications are the main growth engines. The industry sector accounts for about 26% of GDP.

In July 2017, the Sri Lanka Ports Authority (SLPA) and China Merchants Port Holdings (CMP) signed an agreement under which the joint venture majority-owned by the CMP, which will invest up to US$1.12 billion, will handle the commercial operations of the Chinese-built Hambantota Port on a 99-year lease, with the port expected to play a strategic role in the OBOR Initiative.
In 2016, Sri Lanka granted China the permission to build its flagship Colombo Port City under the Megapolis initiative. Huawei has also invested significantly in Sri Lanka and teamed up with the major Sri Lankan telecom operators. Sri Lanka defaulted on its Hambantota Port project, and China traded debt for equity and basically owns the project for 99 years.

Sri Lanka has abundant potential as an investment destination, especially its location in the middle of the Indian Ocean. It is adjacent to one of the busiest sea lanes in the world and in the middle of the OBOR region. Its opportunity should be leveraged carefully by policy makers. “The clumsy foreign policy misjudgments of early 2015 must be carefully rectified and left behind. While the OBOR opens up enormous possibilities, Sri Lanka is also in a position to exploit its strategic location in the centre of the rapidly expanding South Asian economies.”
***One Belt One Road – A Unique Opportunity For Sri Lanka, by Dr Palitha Kohona, February 10, 2018

Tajikistan

*Tajikistan is the poorest country in per-capita GDP among the Central Asia countries. Surrounded by Afghanistan, China, Kyrgyzstan and Uzbekistan, Tajikistan is a landlocked mountainous country, with 90% of its country being mountainous. Tajikistan has close ties with Russia and is highly dependent on remittances coming from Russia. About half of its working-age males are working abroad, mostly in Russia. In 2014, the total volume of remittances amounted to US$3.9 billion, nearly 50% of the country’s GDP.

***“Tajikistan’s trade with China has been increasing. The value of bilateral trade increased from US$0.5 billion in 2007 to more than US$2.5 billion in 2014. Meanwhile, Chinese enterprises have been staffing more infrastructure projects in Tajikistan, including the Sahelistan Tunnel and Tajik-Uzbek Highway, as well as various resources extraction projects.”

Because of its geographical location and its isolated location, the government is focused on the development of transport infrastructure. Tajikistan has 14 bilateral and 12 multilateral agreements in place, has transport operations to 33 countries worldwide, and has a bilateral agreement on international road transport to China.

China’s OBOR Initiative opens up significant opportunities for the region’s carriers. It also gives them access to the sea. The OBOR development is also consistent with an important Tajikistan government strategic development initiative, which is to put an end to transport isolation and to transform Tajikistan into a transit country.
***Tajikistan – transport leader reveals how TIR in China will open up vast opportunities” for the region, IRU, September 5, 2017

Thailand

*“Thailand is the second largest economy in the 10-nation ASEAN, following Indonesia. Service is the largest sector of the economy with a GDP share of 55%, followed by 36% in industry, with agriculture constituting 9% of GDP. Major sectors include electronics, car making, transport, storage, communication, tourism, finance and real estate.”

Thailand is a very important electronics manufacturer. The largest exports are computers and parts, automobiles and parts, machinery and equipment. The most important imports are crude oil, parts of electronics and electrical appliances, chemicals, automobiles and parts.

Thailand’s top three trading partners were China, Japan and the U.S. in the first half of 2017. Thailand is a member of ASEAN, which has an agreement with China to establish the China-ASEAN Free Trade Area (CAFTA), and over 90% of the products traded between China and Thailand are now tariff-free. In November 2015, ASEAN and China concluded an improved agreement on CAFTA that projected that bilateral trade would increase to $1,000 billion, from about $480 billion in 2014. The improved CAFTA deal also covers technological cooperation.

*****Thailand has plans to build a 540-mile railroad link to its border to connect with the Laos-China railway, which is under construction and will go to the eastern ports and industrial zones of the EEC.

Thailand said a $44 billion plan to add infrastructure and upgrade industry on its eastern seaboard can link up with China’s OBOR Initiative. The US$44 billion EEC project is planned to turn Thailand’s Eastern provinces into a trade and industry hub creating as much as 100,000 jobs a year by 2020. The majority of the jobs will be in the manufacturing and service industries.

“The EEC plan covers Rayong, Chachoengsao and Chonburi provinces. Under the project, Thailand will aim to take on Singapore’s dominance in aircraft maintenance, repair and overhaul as part of a US$5.7 billion upgrade of U-Tapao International Airport. The Thai government has given approval for a 138 mile high speed train project worth $6.25 billion to link three airports as part of the development of its eastern economic corridor (EEC).”

A high-speed China-Thailand railroad under OBOR is under construction and will be the first high-speed railway in Thailand. The railroad will connect Thailand to Laos and Kunming in China. Submarine cables will connect Bangkok with Hong Kong and mainland China. This extensive connectivity is expected to boost tourism and attract investment.
*****Thailand To Integrate The EEC With China’s One Belt One Road Initiative, The Thai government intends to connect the Eastern Economic Corridor (EEC) to China’s One Belt One Road (OBOR), Thailand Business News, By Olivier Languepin, March 2, 2018

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