The Middle East and North Africa region (MENA) has its strategic location between three important seas—the Mediterranean, Red Sea and the Persian Gulf, which are of vital importance for China’s trade and oil routes. China’s long, traditional cooperation with the MENA region focuses on energy, but is politically based on foreign policies and principles similar to those pertaining to other countries.
The Belt and Road Initiative (BRI), begun in 2013, provides a new dynamic for deepening cooperation with MENA, as the traditional economic relations remain in the energy and daily-necessity goods sectors. A new framework of cooperation was set up, mainly composed of “1+2+3 “ elements – i.e., energy cooperation, infrastructure building and trade-investment, and nuclear power industry, space satellites and new types of energy.
Energy cooperation will remain the key pillar since China’s fast economic growth heavily relies on importing oil and gas: China became the world’s biggest oil importer in 2017 and biggest gas importer in 2018; its estimated degree of dependence on these imports is 69.8% and 45.3% respectively. However, cooperation will be expanded from pure energy purchasing to the whole industry, with cooperation in oil and gas field exploitation and guaranteeing the safety of energy transportation corridors.
In terms of infrastructure building and trade-investment, the BRI will focus on mega-project building, landmark livelihood projects, trade institutionalization, and investment facility. The mega-projects have a total value of $3.5 trillion and, among others, include the Saudi Arabia Neom City, Cairo Metro Network National Authority for Tunnels, King Abdulaziz International Airport, Dubai Al-Maktoum Airport phase 2, Qatar Integrated Rail Project. In this area of highway and bridge building, China has great ability as well as comparative advantages. As planned by China, bilateral trade volume will reach the target of $600 billion within next decade.
As for the third part of new emerging areas of cooperation, the first is the nuclear power industry. Saudi Arabia, the UAE, Egypt, Jordan, Turkey and other MENA countries have plans to develop nuclear power industries, and several competing nuclear countries have bid for investment. So far, China has been frustrated at getting “a piece of the cake” from this market since Russia got the upper hand in this competition. The second area is aerospace satellite cooperation. It is China’s goal to deploy its BeiDou Navigation Satellite System in more Arab countries, where China has attracted great interest. As agreed upon between the parties, China will launch eight satellites over the skies of Arab countries for communication, navigation and meteorological remote sensing services.
The final potential cooperation area is in new types of energy. Saudi Arabia, Egypt, the UAE, Morocco and several MENA countries have all adopted significant measures to transform their energy consumption structures by developing new energy sources. Among others, Saudi Arabia together with Japan’s Soft Bank plans to build the world’s largest solar power plant with the capacity of 200 gigawatts, with a $200 billion investment. In addition, they also aim to build a 600-MW solar park in Mecca—part of a larger complex totaling to 2,600 MW. Lastly, in Dubai, the UAE will build the Mohammed bin Rashid Al Maktoum Solar Park. One of China’s energy firms has signed a cooperation agreement with Ajlan & Bros to launch a $1 billion solar thin-film industrial park in Saudi Arabia, the first in the Middle East region. China now has strong photovoltaic and wind-power-generation technologies, which could meet the growing needs of the MENA region in this market.
The “1+2+3” cooperation framework is designed by China, but exists and develops inside the MENA region because it has such a good market as well as a tangible trend of industrial policy transformation. Of course, other factors also contribute to this cooperation, one of which is financial support. The Asian Infrastructure Investment Bank (AIIB) is now the biggest Asian inter-governmental bank and its members far exceed the Asia Development Bank’s (ADB), in which MENA has seven founding members—Saudi Arabia, the UAE, Qatar, Oman, Jordan, Iran and Kuwait. As many MENA countries are less developed or economically well off, the AIIB plays a key role for them to obtain the money necessary to carry out their construction work. Both Oman and Egypt received grants for infrastructure building, $301billion and $265billion the former and $21billion the latter. Furthermore, China jointly set up two common investment funds with the UAE and Qatar, respectively of $10 billion each, and the money will be invested in the areas of energy, infrastructure and high-end manufacturing in the MENA region.
This cooperation is promoted under the banner of the BRI, but actually is just normal economic cooperation. Without the BRI, this kind of cooperation would also be carried out under a different name and framework, probably more bilateral with different countries. The BRI looks like a grand scheme for wide geo-economic and political purposes over the Eurasian continent and Indian Ocean, but in practice, it is not a very well integrated and coordinated plan since most resources are distributed and projects are invested in the manner of enterprises making independent market decisions based on the cost/benefits balance. The Chinese government politically supports all kinds of investment and trade, and will help to make some official agreements with project-host countries to get legal guarantees for investment. Certainly, the government directly participates in some big infrastructure projects, but the focal points are in the six corridors linked with China on land; however, except for the China-Pakistan Economic Corridor (CPEC), the corridors are not in substantial progress, or have not gotten political support from the host countries.
As the BRI advances in more than a hundred countries, more problems and risks will arise as many investments are not well calculated in advance; in particular some grant-receiving countries do not have consensus about the projects’ beneficial prospects, and some have complicated religious-ethnic conflicts. Therefore, the Chinese government and many enterprises will have to gain more experience from the problems and improve the decision-making process, strengthening field risk studies before bidding for investment. The international rules and quality standards for infrastructure investment should also be taken into account in future development.