More than 60 percent of exhibitors in the just concluded China-Kenya Industrial Capacity Cooperation Exposition in Nairobi, Kenya, were construction companies, an indication that Chinese enterprises are not cooling their bid for more market share in the East African nation’s lucrative infrastructure sector.
Out of 81 Chinese companies present at the Kenya expo, 51 specialize in infrastructure, machinery and equipment, transportation and logistics, energy and new energy. And they were looking for local contracts. The organizers say it was a 20 percent jump in the number of participants compared with the previous year.
According to experts, Chinese companies continue to prioritize the regional market against the backdrop of increasing competition by foreign countries and Beijing’s strong push for the realization of the Belt and Road Initiative.
|
Two cooperation agreements were signed at the opening ceremony. Liu Hongjie / China Daily |
“The Belt and Road has pushed China-Africa cooperation to a new level, driving major economic and trade cooperation projects. Infrastructure projects under the BRI have seen trade and investment cooperation between the two partners gather new kinetic energy to achieve new development,” said Wang Xiaoguang, vice-president of China International Exhibition Center Group Corp and head of the Chinese delegation, during the opening ceremony of the expo, which ran from Nov 14-17.
The BRI plans to build bridges, roads, ports and railways to increase cross-border trade in more than 65 countries and form a clear linkage geographically with the Maritime Silk Road, which stretches from East Asia westward across the Indian Ocean. “That would explain the increased interest by foreign firms in the regional construction sector,” says Robert Kagiri, an economics scholar at the University of Nairobi.
The economist says Chinese companies are also banking on affordable credit from the Asian Infrastructure Investment Bank, the Silk Road Fund and the New Development Bank, which have committed approximately $1.1 trillion (965 billion euros; ￡860 billion) in BRI infrastructure investment. “This will increase the firms’ capacity to participate in the lucrative sector in Kenya and East Africa,” he says.
Competition is intensifying from US and European Union companies that are eager to jump back into the region. Earlier this year, an American company was awarded a $3 billion contract to build the 473-kilometer Mombasa-Nairobi expressway. In addition, the UK government has announced a $724 million fund set aside by UK Export Finance to provide loans for UK companies.
“The region’s push toward integration, which has won accolades from the African Union is not going unnoticed. The regional governments are serious in building a bigger trading bloc, and this unlocks more opportunities in the sector,” says Kagiri.
To tighten China’s grip, however, there is need for partnership deals between Chinese and local companies. “Under the going-out strategy, Chinese firms are eager to enter the African market and participate in its growth,” says Kagiri.
According to the African Development Bank’s East African Economic Report released early this year, the region recorded its best economic performance in 2017 with a GDP growth of 5.9 percent, higher than the continent’s average of 3.6 percent.
To navigate barriers, including diversity of economies, cultures and the regulatory environment, partnerships present a viable entry proposition, Kagiri says. “Local (small and medium-sized enterprises) need to take advantage of this unprecedented interest in both China’s infrastructure and manufacturing capabilities through partnerships and joint ventures, technology and skills transfer, learning more about China’s markets, working closely on research and development and diversifying to other markets such as South America and Eastern European countries.”
Other sectors that were noticeably present at the exposition were information and communications technology, with 12 companies, followed by agriculture and agri-processing companies, with seven. According to the government, this aligns with the national agenda known as the Big Four, which aims to create 1.3 million manufacturing jobs by 2022 and raise the share of the manufacturing sector from 9 to 15 percent of the gross domestic product by the same year.
(China Daily European Weekly 11/23/2018 page30)