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International Consultants LtdAndrew Leung

How Oman can leverage China’s OBOR to achieve Diversification

- Gaining more with Less

Andrew K P Leung, SBS, FRSA International and Independent China Strategist

University of Buraimi, OMANSeptember, 2016

Disclaimer

All materials contained in this presentation, including any analysis, comments, remarks, opinions and pointers are for information, debate and discussions ONLY. No warranty of their accuracy, completeness, timeliness or reliability is implied.

Any reliance on these materials in any way assumes total exemption of any liability whatsoever of Andrew Leung International Consultants Limited and Andrew K P Leung including all their current and future Affiliates, Associates or Assigns.

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Volatile and uncertain global growth prospects

Fidelity Investments

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Collapsing oil prices

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Changing of the guards

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Rivalry and inter-dependence

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SAARC =South Asia Association for Regional CooperationPIF= Pacific Islands ForumARF = ASEAN Regional Forum

Regional bonds

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Shared Destiny

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Start of the Fourth Industrial Revolution

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Oman’s economy too narrowly focused

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Too dependent on too little oil

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Falling behind in R&D to build human capital

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Oman’s Vision 2020

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China’s OBOR offers epochal opportunities

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81,000 km (50,000 miles) high-speed rail to be built in 65 countries. Potential investment estimated at $1.4 trillion = 12 x Marshal Plan ($120b in today’s prices)

… with strategic energy implications

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… and military linkages

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China’s dual use port arrangements Helping to guard OBOR’s Red Sea entrance

Anti-piracy patrols and operations

Silk Road Economic Belt to be linked by high-speed rail

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A high-speed rail grand vision of continental proportions to connect China’s world’s longest high-speed rail network, across the Eurasian Continent, to the Middle East, Western Europe, and Africa.

•Third Eurasian Land Bridge – proposed railway network linking the Port of Shenzhen to Kunming onwards to Myanmar, Bangladesh, India, Pakistan and Iran, across Turkey to Rotterdam.

•Across 20 countries in Asia and Europe over 15,000 km, 3,000 to 6,000 km < sea route via the Indian Ocean and Malacca Straits.

•Total annual trade volume of the regions traversed - $300 b in 2009.

•A branch line to start in Turkey, cross Syria and Palestine, and end in Egypt, facilitating transportation from China to Africa.

•A new Chongqing-Xinjiang-Europe high-speed line via Duisburg proposed by President Xi during visit in April, 2014

Plus an alternative to Panama Canal ?

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• Nicaragua's Congress has granted Wang Jing's Cayman Islands-registered HKND company a 50-year concession to develop a 286-km (178-mile) canal connecting the Caribbean with the Pacific via Lake Nicaragua, at a cost of $40 billion, to be completed in 6 years.

• The canal is three times longer than Panama and can accommodate the largest container vessels, thoseShanghai’s Linyungang can accommodate as the world’s deepest container port.

• To anchor China’s commercial and geopolitical interests in Latin and South America

• Likely partner – China Railway Construction

And an even grander vision or pipedream?

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• China-Russia-Canada-America" line –13,000km, entire trip to take two days, travelling at an average of 350km/h (220mph).

• Crossing the Bering Strait between Russia and Alaska in 200 km (125 miles) of undersea tunnel

• China to provide funds, technology and construction and to share operation with countries traversed in exchange for resources

• According to Beijing Times report 8 May, 2014, already in discussions.

• According to Inhabitat.com 23.08.11, Russia has already given the greenlight to $65 Billion Siberia-Alaska Rail and Tunnel to Bridge the Bering Strait.

Silk Road Infrastructure Fund

• China contributes $40 billion to set up a Silk Road infrastructure fund to boost connectivity across Asia, through building roads, railways, ports and airports across Central Asia and South Asia.

• To focus on China's Silk Road Economic Belt and the 21st Century Maritime Silk Road initiative.

• To be "open" and welcome investors from Asia and elsewhere.

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Asian Infrastructure Investment Bank

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• 57 Founding Country Members including 16 of world’s largest economies (except US, Japan, Canada, Mexico) and key US allies (latest Philippines)

• All BRICS countries included. Nearly all of Western Europe, except Belgium and Ireland.

• Non-Asian countries limited to overall 25% shares

Jordan Kazakhstan Kuwait Kyrgyzstan Lao Luxembourg Malaysia Maldives Malta Mongolia Myanmar Nepal Netherlands New Zealand Norway Oman Pakistan Philippines

Poland Portugal Qatar Republic of Korea Russia Saudi Arabia Singapore South Africa Spain Sri Lanka Sweden Switzerland Tajikistan Thailand Turkey UAE United Kingdom Uzbekistan Vietnam

Australia Austria Azerbaijan Bangladesh Brazil Brunei Cambodia China Denmark Egypt Finland France Georgia Germany Iceland India Indonesia Iran Israel Italy

Final list of 57 founding members of the AIIB

AIIB as an alternative global financial institution

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• World Bank president reserved for an American

• IMF head for an European • ADB – Japan’s voting power 2X China’s• Bretton Woods institutions follow

Washington Consensus – full privatization and liberalization of markets, exchange rate, interest rates, trade and investment, tight budget – Not working for most developing countries

AIIB - 57 Founding Member Countries including key US allies, $50b paid-in capital, $100b authorized capital

New Development Bank (BRICS Bank)

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• Representing 41.4% (3 b) world population, 25% of world land mass and GDP

• HQ in Shanghai; African regional centre in Johannesburg

• Inaugural President from India

• Inaugural Chairman of B of Directors from Brazil

• Inaugural Chairman of B of Governors from Russia

• No veto power for any Member

• No increase in any Member’s share without other 4 Members agreeing

• Non-BRICS country can join but BRICS share > 55%

• Authorized lending up to $34 b p.a., to start in 2016

ASEAN infrastructure shortfall

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World Bank lent only $25 b for Asian infrastructure in 2011 = 50% of total WB capacity

Thinking outside the box in the South China Sea

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Potential investments in Central Asia natural resources

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Joint Chinese investment in Central Asia natural resources

Oman strategically-favourable to leverage OBOR

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Gwadar

(1) Linking Oman with China-Pakistan Economic Corridor

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(2) As oil refinery hub for the Gulf

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(3) OBOR investment in Oman’s solar and wind energies

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Oman to study use of renewable energies for desalinationOman’s massive 200 MW desert solar farm for oil industry

(4) Oman as Gulf financial hub – RMB and Islamic finance

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(5) Oman as telecom hub for the Gulf

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(6) OBOR to invest in strategic linkages to Oman’s industries

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Examples :

• Development of drilling rigs -potential business opportunity estimated at $1.4bn-1.5bn

• Reshoring of engineering and engineering management services ($2.5bn-2.7bn).

• Localising the sourcing of construction materials and equipment ($3.9bn-4.3bn of business and 577-639 jobs)

• Fertilizers

• Metal products

(7) OBOR’s linkages with Special Economic Zones e.g. Duqm

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(8) OBOR to boost Oman’s tourism

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Arabic Theme Parks Arabic cultural tourism Oman merchandizing for world markets

(9) OBOR linkages for higher education

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International business schoolsExchange programs Joint R & D

(10) OBOR linkages to boost Oman’s creative industries

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Wanda’s Oriental Movie Metropolis in Qingdao Fashion

Interior design and furniture

Back to the Future – achieving more with less

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Andrew Leung International Consultants Ltd

Thank you

Andrew K P Leung, SBS, FRSAwww.andrewleunginternationalconsultants.com

International and independent China Specialist with over 40 years professional experience covering Hong Kong and Mainland China. Chairman of Andrew Leung International Consultants, founded in London now relocated to Hong Kong. Provides strategic advice on China-related finance, investment, politics and economics globally, including both business and governments. China Futures Fellow selected worldwide by Berkshire Publishing Group, Massachusetts. On the Brain Trust of Evian Group, a Lausanne-based think-tank. Founding Chairman of China Group of Institute of Directors City Branch, London. Advisory Board Member of China Policy Institute, Nottingham University, 2005-10. Governing Council, King’s College London, 2004-10. Visiting Professor with Metropolitan University Business School. Helped set up Standard Chartered Bank’s first merchant-banking subsidiary in Hong Kong (1983); oversaw the trans-migration of industries into China as Deputy Director-General of Industry; US-government sponsored month-long visit to brief Fortune 50 CEOs on China beyond Tiananmen Square (1990); Editor-at-Large of a London-based international consultancy on China’s energies (2007). Sponsored Speaker on China at international conferences, including Forum Istanbul, Turkey, Annual African Banking and Financial Institutions Conference in Accra, Ghana, and Low Carbon Earth Summit in Dalian, China. Regular interviewee on live television with CNBC, Aljazeera English, Times Now of India, BBC and other international channels. Awarded Hong Kong’s Silver Bauhinia Star (SBS) and included in UK's Who's Who since 2002.

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Andrew Leung Disclaimer Volatile and uncertain global growth prospects Collapsing oil prices Changing of the guards Rivalry and inter-dependence Regional bonds Shared Destiny Start of the Fourth Industrial Revolution Oman’s economy too narrowly focused Too dependent on too little oil Falling behind in R&D to build human capital Oman’s Vision 2020 China’s OBOR offers epochal opportunities … with strategic energy implications … and military linkages Silk Road Economic Belt to be linked by high-speed rail Plus an alternative to Panama Canal ? And an even grander vision or pipedream? Silk Road Infrastructure Fund Asian Infrastructure Investment Bank AIIB as an alternative global financial institution New Development Bank (BRICS Bank) ASEAN infrastructure shortfall Thinking outside the box in the South China Sea Potential investments in Central Asia natural resources Oman strategically-favourable to leverage OBOR (1) Linking Oman with China-Pakistan Economic Corridor (2) As oil refinery hub for the Gulf (3) OBOR investment in Oman’s solar and wind energies (4) Oman as Gulf financial hub – RMB and Islamic finance (5) Oman as telecom hub for the Gulf (6) OBOR to invest in strategic linkages to Oman’s industries (7) OBOR’s linkages with Special Economic Zones e.g. Duqm (8) OBOR to boost Oman’s tourism (9) OBOR linkages for higher education (10) OBOR linkages to boost Oman’s creative industries Back to the Future – achieving more with lessAndrew LeungSlide Number 40