Published: 22 May 2018
One Belt One Road - A New Economic Paradigm
"Maritime Silk Road has the potential to shape global trade and investment well into the future and it is vital that Malaysian companies understand what Maritime Silk Road could mean in the years ahead.”
Maritime Silk Road (MSR)
The 21st Maritime Silk Road - One Road One Belt (MSR) is the name of a development initiative by the Chinese government to revive the ancient Silk Road which has a history dating back to 130 BCE during the Han Dynasty. It is an ambitious strategic, political and economic plan with the potential to create a new model of growth from Asia to the Middle East and Europe. MSR will involve more than 65 countries - including Malaysia - on three continents, 60% of the world's population and nearly half of global GDP.
The Belt which is the land component consists of a network of rail routes, overland highways, oil and gas pipelines and other infrastructural projects, stretching from Xian in Central China, through Central Asia and Russia, with one artery crossing Kazakhstan and the other through Mongolia but both linking up with the trans-Siberian railway and going on to Moscow, Rotterdam and Venice.
The Road is the maritime component which envisages a network of ports and other coastal infrastructures from China's eastern seaboard stretching across south-east Asia, South Asia, the Gulf, East Africa and the Mediterranean, forming a loop terminating at Piraeus (Greece), Venice (Italy) and Rotterdam (Netherlands) in Europe and Mombasa (Kenya) in Africa.
Both the Road and the Belt include regional loops and branches which extend the reach of the emerging transportation networks and which also tie the two components at critical points.
The document on The Vision and Actions on Jointly Building the Silk Road Economic Belt and 21st-Century Maritime Silk Road announced by the China National Resource and Development Commission and the Ministry of Foreign Affairs in March this year sets out the overall rationale behind the initiative.
According to Vice Premier Zhang Ga oli, and head of the high level group charged with piloting the project, the Maritime Silk Road objectives are:
• Enhancing policy coordination across the Asian continent
• Trade liberalization
• Financial integration
• Connectivity including people-to-people links
The document describes the MSR as "a systematic project which should be jointly built through consultation to meet the interests of all and effort should be made to integrate the development strategies of the countries along the Belt and the Road".
Impact of MSR on Malaysia, Ports and Logistics Providers
With the Maritime Silk Road encompassing 65 countries across Asia, Europe, the Middle East and Africa, there will be exciting new commercial opportunities in the short, medium and long term. The MSR has the potential to shape global trade and investment well into the future and it is vital that Malaysian companies understand what the MSR could mean for them in the future.
The participation of Chinese companies in Malaysian projects has been steadily increasing. Some major development projects in Malaysia which have a strong Chinese presence include:
• In Pahang, a RM5.6 billion initiative to build a steel mill and upgrade port infrastructure in the Malaysia-China Kuantan Industrial Park is being undertaken jointly by Chinese and Malaysian private and public sector entities.
• In Johor, the state-owned China Railway Corporation is building the RM7 billion Gemas-Johor Bahru electrified double-tracking rail project. The track which will allow existing trains to travel up to 160kph will improve the transportation of goods across the country, including to Singapore.
• In Malacca, Guangdong Province is teaming up with the state government to promote tourism and manufacturing opportunities in the state while private Chinese firms have also indicated interest to participate in the Melaka Gateway project.
• In Kuala Lumpur, a consortium led by Iskandar Waterfront Holdings (the master developer of Danga Bay) and China Railway Engineering Corp has acquired a 60% equity for RM7.41 billion in Bandar Malaysia. CREC will also invest RM8.1 billion to build its own regional centre at Bandar Malaysia which is also the site of the Kuala Lumpur station for the upcoming high-speed rail to Singapore and two proposed MRT stations.
About 70km south of Kuala Lumpur, the Xiamen University Malaysia, located on a 150-acre site in Sepang, was opened recently. The Malaysian campus which offers a full range of studies, and has a target intake of 10,000 students, is the first overseas expansion of the renowned Chinese university.
The rapid growth in Chinese investment in Malaysia is not only a reflection of the good relations between the two countries but also of China's commitment to making the MSR initiative a reality. As the MSR concept takes shape, Malaysian businesses should not overlook the potential but should take steps to embrace the opportunities arising.
The MSR is expected to exert multi-dimensional impacts on the global supply chain and maritime connectivity. Ports and logistics providers in ASEAN countries and stakeholders of various regional economic blocs will be impacted by the initiative because they play a key role in maritime networks and the global supply chain system.
Malaysia is strategically located along the Straits of Malacca, one of the world's busiest shipping routes connecting east and west between the Indian Ocean and the Pacific Ocean. This puts the country in an excellent position to capitalise on the expected increase in seaborne trade volume and investment in maritime infrastructure that will arise from the MSR initiative.
Port Klang, owing to its location, is ideally placed to be a key MSR gateway and transshipment hub. PKA is spearheading efforts on behalf of Malaysian ports in support of the government's initiative to prepare the local maritime and logistics industry for the advent of MSR. A recent boost for PKA's efforts has been the Transport Ministry's formation of the China-Malaysia Port Alliance comprising six federal local ports and ten Chinese ports. The Memorandum of Understanding on the formation of the Alliance was signed by Transport Minister Datuk Seri Liow Tiong Lai and his Chinese counterpart Yang Chuangtang in November 2015.
PKA on its part has established sister port relations with ten Chinese ports with the objective of enhancing cooperation in key areas of port development and trade and networking. The sister port relations will not only be a useful platform for cooperation and expansion of trade but also beneficial for all concerned in the MSR context.