The scale of the Belt and Road Initiative (BRI) is staggering. Whether its scale is measured by more than $500 billion of foreign contracts, the fact that the projects cover more than 120 countries, or that countries comprising over 60 percent of the global population and 45 percent of global GDP (as of 2017) will be better connected because of BRI, it is genuinely historic in scale.

By any measure, BRI is already a success. But given the ambitious scope of BRI and the fact that by 2050 the Belt & Road region aims to contribute 80 percent of global GDP growth, what is needed to sustain and even accelerate the infrastructure investment so that the next six years can be deemed as successful at the last?

Chinese money and Chinese contractors have been the engine for BRI to date. Financing and skills from the global financial and consultancy community have played an important, but secondary role mainly around advising on project structures, M&As and other services. However, this balance is shifting as BRI moves from a “one-to-many” to a “many-to-many” model. For example, development funds such as the World Bank, the Asian Development Bank and the European Investment Bank, among others, are expected to play a bigger role in the future. Their open tendering processes will make it easier for non-Chinese players to take a more active role in those projects.

This is important. China’s investment and the framework it has created are powerful catalysts but greater involvement from the global financial and consultancy community will be even more vital than they have been so far to ensure the kind of full-throttle progress that is needed to build on the momentum of the last six years.

One of the main challenges holding back global investors and consultants so far has been a data gap, particularly acute in three areas: project information, including tendering opportunities and progress updates; supply chain visibility; and information to help firms with risk analysis. It has been too hard for this community to uncover the accurate and timely data they need to assess the unique opportunities – and the risks – of bringing their advice, skills and capital into play. One of the reasons is that frontier markets where many projects are based don’t necessarily have the information infrastructure that global investors and consultants rely on. Closing this data gap is critical.

The core information that is the most important to the global financial community is understanding what projects exist, whether they are in the pipeline, moving along at full pace or stalling and behind schedule.

This is must-have information for a whole range of businesses. In order to support with project structuring, corporate transactions, tapping capital markets or providing currency or interest rate hedging services, bankers need to know what projects exist, who is involved and what the financing requirements are. Professional consultancy firms need to know what projects exist and who is working on them to understand whether there are opportunities for them to provide their services. Construction firms and infrastructure providers need actionable insight on projects they can tender for.

But it is surprisingly hard for firms to access on a global basis. There is no single official register of all the projects that are underway or planned (the BRI official website does list some projects but by no means all of them). More significantly, it has been difficult for the financial community to assess how well projects are progressing as a whole before deciding whether to tender for part of the work.

The scale of most BRI projects means that they will involve a complex web of suppliers and partners. For businesses looking to bid for work, provide equity or debt funding, or consultancy services, understanding these interconnected webs is critical, whether it is to understand dependencies, for risk management, or to provide tailored and insightful advice.

Understanding these supply chains is made harder because projects often involve emerging or frontier markets, where access to company information can be challenging. The large amount of investment in BRI means there is a new ecosystem of businesses and suppliers that have grown quickly and don’t have long track records to judge them by. Many are supported by debt financing that is aggressive and predicated on high growth models, making them atypical partners for global financial and consulting firms. Many companies are private, meaning fewer reporting obligations and less transparency into their business models, operations and people.

Detailed on-the-ground experience and expertise will help fill some of these gaps. But most businesses lack this capability across all the markets that BRI is changing. Many businesses in the global financial community looking to engage in and support BRI therefore need a single view of relevant supply chain information so they can assess the projects where they can add the most value and map the opportunities and risks before building out a fuller view through direct engagement.

There is a whole host of additional information that firms need to be able to carry out proper risk mapping. This is much broader than a compliance tick-box exercise, as global financial and consultancy firms look for opportunities that meet their risk-reward profile, but which also satisfy their governance standards, including compliance with any of the myriad global regulations they operate under, including anti-money laundering and Know Your Customer.

It is also vitally important to understand the people involved, which is particularly challenging when most counterparties are private companies. Firms need to be aware of the risks they are taking and comfortable that the risks are acceptable to them.

One area that is increasingly important to global banks, asset managers and consultants is the sustainability of projects they are involved with, which is often measured as part of their overall risk management framework. Greening the Belt and Road is an increasingly important priority, so understanding the nature of the projects and ESG credentials of firms working on the projects is moving up the agenda. For asset managers deciding to make investment decisions, it can be a deal breaker if projects don’t conform to their ESG investment criteria.

The other challenge around risk mapping is the highly dynamic nature of BRI projects and the geo-political environment they are intrinsically tied to. As risks change, firms need to track them, so fast, accurate and trusted news is vital to understand emerging risks.

The BRI data gap has been a substantial blocker for the global financial and consulting community. Detailed on-the-ground knowledge will always be important but being able to understand opportunities and risks from the global perspective is critical for the better decision making and closer engagement needed for the next phase of BRI to succeed.

Stuart Brown is Global Head of Emerging and Frontier Markets, Refinitiv.

The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.

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