Why the West has to join the Belt and Road Initiative

In today’s increasingly complex, fast-paced and interconnected world, breakthrough technologies, demographic shifts and political transformations are having far-reaching societal and economic consequences. Our societies are facing systemic global challenges that can no longer be addressed through the conventional linear approach of hierarchical corporate and governmental structures.

The theme of the World Economic Forum’s Annual Meeting 2018, Creating a Shared Future in a Fractured World, makes the case for renewed commitment to international collaboration as a way of solving critical global challenges.

We are the cross-roads between utopia and dystopia. However, we still believe that a versatile combination of multi-stakeholder, collaborative platform as well as a systemic leadership approach is urgently needed to enable a new era of amicable global cooperation to protect humanity and the planet. Large infrastructure programmes such as the Belt and Road initiative are an outstanding opportunity to catalyse a positive development by forming new alliances in project provision and adopting transformational delivery practices that drive our communities towards sustainability and shared prosperity.

As Klaus Schwab, Founder and Executive Chairman, World Economic Forum suitably puts it:

“The Belt and Road Initiative makes a unique contribution to international cooperation and economic development: it is based on the stakeholder approach, it seeks to leverage market forces in best ways, it prepares best for the age of the Fourth Industrial Revolution, it is built on the open platform concept, and most importantly, this initiative is the positive narrative the world needs.”

The west has to join the Belt and Road Initiative to deepen global cooperation. The initiative has the potential to prompt a profound shift in the global order towards a new multilateralism. In a narrow sense, this initiative is primarily a strategic infrastructure initiative of historic proportions.

The planning and delivery of scalable infrastructure for power generation, transportation, water supply, and telecommunications will bring much-needed economic and societal connectivity to the 65 countries along this new network. Through Belt and Road, China is proposing to share its immense financial and industrial resources and capabilities, as well as its experience of four decades of reform and opening-up, while securing its own long-term development.

If done right, the Belt and Road Initiative will have the potential to reform project delivery models which are increasingly contractually complex often leading to inflated transaction costs as well as conflicts and disputes, as shown in a recent World Economic Forum report.

A new open and collaborative approach enabled by technology and open data exchange is urgently required to assure value for money and to ultimately meet the sustainable development goals. In a recently published paper, the World Economic Forum showcased the importance of a shared vision, open and multilateral policy dialogue, a project-preparation facility, proper risk mitigation to enable sustainable development, to create an environment of innovation that is human-centric, future-ready and that increases people-to-people exchange.

Due to globalisation, hyper-connectivity and massive urbanization, the demand for infrastructure to be sustainable and complex is increasing at a rate that the engineering and construction sector is not keeping up with. This matters because the engineering and construction sector accounts for about 6% of global GDP and is growing. We would like to emphasise that we could be able to transform the sector since a rise of only 1% in productivity worldwide could save as much as $100 billion a year.

Furthermore, infrastructure investment has actually declined as a share of GDP in 11 of the G20 economies since the global financial crisis, despite glaring gaps and years of debate about the importance of shoring up foundational systems. Cutbacks have occurred in the European Union, the United States, Russia, and Mexico. By contrast, Canada, Turkey, and South Africa increased investment.

There is hope and we believe the key is global cooperation: New trends are currently shaping the construction industry – from innovative business models to new products and processes that are boosting productivity and enhancing efficiency. Innovative technologies that could change the way the industry has traditionally operated should be embraced more fully.

Supported by technology, deepening the global cooperation will also enhance businesses to bring innovation into the sector through knowledge exchange as well as increased access to technical and financial resources. A consolidation of a globally fragmented industry will ease access to capital and improve the ability to bid for larger and more complex projects not only in the Belt and Road context but globally in developed and emerging markets.

Short political cycles, short-term investment horizons, and a lack of viable financing structures and risk assessment frameworks mean that infrastructure and development lacks investment. There is currently a $1 trillion annual shortfall versus a $4 trillion demand for infrastructure alone. Closing these gaps is paramount if the world is to stay on a path to inclusive economic growth and recovery.

Deepening global cooperation will be an effective contribution to closing the infrastructure funding gap. As President Xi said in Davos, “we should develop new growth models and seize opportunities presented by the new round of industrial revolution and digital economy. We should strike a balance between efficiency and equity to ensure that different countries, different social strata and different groups of people all share in the benefits of economic globalisation. The people of all countries expect nothing less from us and this is our responsibility as leaders of our times.”

This article was originally published here. It was written by:

John M. Beck, CEO, President & Director, Aecon Group Inc.
Michael Buehler, Head of Infrastructure and Urban Development Industries, World Economic Forum.

--Future of Construction 14:17, 19 Dec 2017 (BST)