new silk roadforum

At the forefront of new horizons

New Silk Road ForumAt the forefront of new horizons

BackgroundTraditionally, the “Silk Road” was known as a network of trade routes that linked commerce, between Asia, the Middle East and Europe. The term “New Silk Road” become an umbrella term to describe the increasingly important trade and economic links between the developed economies stretching from South East Asia to the Middle East, Central Asia and Europe. For further information on the “New Silk Road” please see the article published in Bloomberg on 2 August 2010 by Simon Kennedy, Matthew Bristow, and Shamim Adam at the end of this brochure.

New Silk Road Forum (NSR Forum) is a non-profit, self-funded organisation which seeks to promote the development of links between governments, international financial institutions, corporates and professionals of various disciplines with the “New Silk Road” countries.

NSR Forum acts to fulfil its objectives by:

• Establishing Sector Working Groups to provide an environment for dialogue, produce reports and findings on areas which are of relevance and importance to the “New Silk Road”.

• Hosting an Annual Forum at which the Sector Working Groups attend and present their findings and reports. The Annual Forum also convenes participants allowing networking and relationship opportunities.

• Acting as a medium for participants to meet/ discuss and understand the opportunities of the “New Silk Road”.

Structure

1. NSR Forum acts as medium for participants to meet/ discuss and understand the opportunities of the “New Silk Road”. Participants will include governments, institutions, corporates and professionals.

2. Sector Working Groups will be established by NSR Forum on an annual basis. As well as providing an environment for dialogue, they will produce reports and findings on areas which are of relevance to the “New Silk Road”.

3. The Annual Forum will convene participants from the Sector Working Groups to discuss and make available their findings/ reports for the relevant year. The Annual Forum allows networking and relationship opportunities.

Professions Corporates Governments Institutions

New Silk Road Forum

Working Groups

Annual ForumPublication of Findings + Reports

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ObjectivesNSR Forum’s objectives are:

1. to promote dialogue and interaction between industry leaders, governments and professionals of various disciplines in connection with the “New Silk Road”;

2. to inform and increase knowledge on the “New Silk Road” and its potential;

3. to promote consensus building on issues of broad importance to participants involved in business with the “New Silk Road”;

4. to promote best practices that enhance the operation, transparency and confidence in transactions and investments within the “New Silk Road”;

5. to enhance further understanding of the diverse cultures of the “New Silk Road” countries; and

6. to assist with any appropriate charitable causes that may arise impacting the “New Silk Road” countries (in this respect, a New Silk Road Charity Committee has been formed).

EventsForum/Working Groups

NSR Forum’s key events include:

• an Annual Forum that will convene key industry leaders, government representatives, academics, politicians and professionals to discuss the opportunities that are offered by the “New Silk Road” and various topical issues for that year which will include feedback and/or reports from the Sector Working Groups providing ample networking opportunities for anyone working, or interested in working in the region; and

• annual meetings of Sector Working Groups formed to discuss and report on topical matters on an ongoing basis and at the annual forum.

Conference

NSR Forum had its inaugural opening conference on 7 April 2011 in London. Delegates debated geo-economic policies and commercial opportunities arising out of the “New Silk Road”. Speakers included leaders of the China-Britain Business Council, Middle East Association, UK India Business Council as well as several large banking institutions, ambassadors and diplomats.

Internship Programme

NSR Forum provides students with an opportunity to gain exposure to some of the leading industry experts of NSR Forum and be involved with NSR Forum projects. Interns can get involved in the organisation of events, production of the reports issued by the working groups and other NSR Forum initiatives.

Internship opportunities are available to undergraduates, graduate students and post graduates.

Website

For further information and to contact NSR Forum please visit www.nsrforum.com.

Supporting Organisations*

* The above logo’s are not the property of The New Silk Road Forum Limited.

New Silk Road Forum Structure*

Advisory Board

Working Group Working Group

*The New Silk Road Forum Limited is a non-profit organisation and is not affiliated or in any way connected to any political party, government, state, association or similar entity

Lord Waverley, Chairman Chairman of the United Kingdom All Party Parliamentary Groups on Central Asia

Mr Abradat Kamalpour, President Partner, Head of Emerging Markets & Islamic Finance Desk SDG, Ashurst LLP

Mr Anupam Gupta, Advisory Board Managing Director and Head of EM Structuring and Solutions (CEEMEA), Bank of America Merrill Lynch

Mr Bruce Gregory, Advisory Board Managing Director, Drawbridge Special Opportunities, Fortress Investment Group, New York

Mr Charles Hollis, Advisory Board Director General, Middle East Association

Mr Charlie Geffen, Advisory Board Senior Partner, Ashurst LLP

Mrs Diala Minott, Secretary Counsel, Ashurst LLP

The Rt Hon The Baroness Elizabeth Symons of Vernham Dean PC, Advisory Board Chairman of the Arab-British Chamber of Commerce, the UK side of the Saudi-British Joint Business Council, the All Party Parliamentary Group on Qatar, and the British Egyptian Society. Advisory Boards of the Middle East Association, British Expertise, and the Egyptian British Business Council.

Mr Emmanuel Crenne, Advisory Board Managing Director, Head of Emerging Markets Structuring, Goldman Sachs

Mr James Ball, Advisory Board President and Director, Gas Strategies Group

Sir John Stuttard, Advisory Board Deputy Chairman Advisory Board PricewaterhouseCoopers LLP and Co-Chair of the Kazakh-British Trade & Industry Council, Lord Mayor of the City of London 2006/2007

Mr Mark Elliott, Advisory Board Managing Director & Global General Counsel, Merrill Lynch Commodities Europe

Mr Rashid Gaissin, Advisory Board Managing Partner, Grata Law Firm

Mr Richard Heald, Advisory Board Chief Executive, UK India Business Council

Mr Richard Threlfall, Advisory Board Partner, Head of Infrastructure, Building and Construction, KPMG LLP

Mr Simon Kennedy, Advisory Board Bloomberg – Co-author of an article on the “New Silk Road” published in Bloomberg, 2 August 2010

Mr Stephen Phillips, Advisory Board CEO China- Britain Business Council

Mr Walid Sarieddine, Advisory Board Head of Islamic Finance, Sumitomo Mitsui Banking Corporation

Mr Will Salomone, Managing Director of Communications, NSR

Working Group ChairsMr Ash Tehrani, Chair of Charity Committee JP Morgan

Mr Richard Gubbins, Chair of Transparency and Governance Working Group Partner & Head of India Practice, Ashurst LLP

Further working groups to be announced

Diplomatic SupportA number of diplomats and ambassadors have expressed their strong support for NSR Forum and have undertaken to attend NSR Forum functions

Management

The high-speed rail link China Railway

Construction Corp. is building in Saudi Arabia

doesn’t just connect the holy cities of Mecca

and Medina. It shows how Asia, the Middle

East, Africa and Latin America are holding the

world economy together.

Ties between emerging markets form what

economists at HSBC Holdings Plc and Royal

Bank of Scotland Group Plc call the “new Silk

Road” -- a $2.8-trillion version of the Asian-

focused network of trade routes along which

commerce prospered starting in about the

second century.

Today’s world-spanning web is insulating

markets such as China from the drag of weak

recoveries in the advanced world and providing

global growth with a new power source.

Stephen King, HSBC’s chief economist, predicts

the relationships will strengthen and lists them

as a reason for his forecast that emerging

markets will grow about three times faster than

rich nations this year and next on average.

“The potential for inter-emerging market trade

is ginormous,” said Jim O’Neill, chief economist

at Goldman Sachs Group Inc. in London, who

coined the term BRIC in 2001 to describe the

rising role of Brazil, Russia, India and China.

“That makes it quite difficult to see how you get

a sustained global recession because of what’s

going on in the west.”

Share of Trade

The BRIC economies hold a 13 percent share

of world trade and have been responsible for

about half of global growth since the start of

the financial crisis in 2007, according to O’Neill.

He predicted the BRICs will grow about 9

percent this year and next compared with 2.6

percent in advanced nations.

Investors are tuning in. Research by Kieran

Curtis, who helps oversee $2 billion at Aviva

Investors in London, found growing trade

between emerging markets helps explain why

they now account for about 30 percent of

global final consumption, about the same as

the U.S. and up from 10 percent in 1990.

That should increase demand for the Chinese

yuan if the government continues to loosen

restrictions on settling trade transactions with

its currency, he said.

“Go to a market in Nairobi and you’ll see

Chinese goods on sale,” Curtis said. “If emerging

market fundamentals continue to be superior,

there is the potential for serious currency

appreciation against old-guard currencies.”

Currency Policy

China’s government signaled June 19 that it will

allow a more flexible exchange rate. So far, it’s

limited the yuan’s rise to less than 1 percent

against the dollar after allowing a 21 percent

appreciation in the three years to July 2008.

Jerome Booth, who helps oversee $33 billion

of emerging- market assets as head of research

at Ashmore Investment Management Ltd. in

London, said emerging markets are increasingly

starting to denominate trade contracts in

currencies other than dollars as commerce

between them rises.

Commodity prices that may have been dropped

in the past when advanced nations grew less

are now cushioned by trade between emerging

markets, said Dariusz Sliwinski, head of

emerging markets at Martin Currie Investment

Management in Edinburgh.

“Commodity prices would have been much

lower without the support, which is good for

the likes of Russia and Brazil,” said Sliwinski,

who helps manage about $15 billion.

Royal Bank of Scotland Chief China Economist

Ben Simpfendorfer in Hong Kong says emerging

Asian and Middle Eastern economies will

account for 75 percent of every extra barrel of

oil consumed or produced in the next decade,

while copper should gain because it’s a key

input in infrastructure and nickel may benefit

because of its use in steel.

Impact on Commodities

The Standard & Poor’s GSCI Total Return Index,

tracking the net amount investors received

from 24 raw materials, climbed 13 percent

last year. While the price of oil fell as low as

$32.40 a barrel during the recession it has

since rebounded, ending last week at $78.95 a

barrel. The cost of nickel and copper more than

doubled over the same period.

Chu Moon Sung, a fund manager at Shinhan

BNP Paribas Asset Management Co. in Seoul,

which manages $26 billion, says investors will

increase their holdings of emerging-market

equities.

“The populations in emerging markets,

especially in Asia, are large,” he said. “They

are getting more educated and income levels

Article published in Bloomberg, 2 August 2010 by Simon Kennedy, Matthew Bristow and Shamim Adam

are rising, which make these countries very attractive for companies. China is a favorite for stock investors but we’re seeing more interest in Indian, Brazilian and Russian markets.”

Gains in Trade The Geneva-based World Trade Organization estimates intra-emerging market trade rose on average by 18 percent per year from 2000 to 2008, faster than commerce between emerging and advanced nations. It totaled $2.8 trillion in 2008, about half of emerging-market trade with all nations.

That performance is especially welcome now given the sluggish recovery in the rich economies, said HSBC’s King, author of “Losing Control: The Emerging Threats to Western Prosperity” and a former U.K. Treasury official.

Chinese exports to the emerging world accounted for about 9.5 percent of gross domestic product in 2008, compared with 2 percent in 1985, he calculated. India’s jumped to 7.3 percent from 1.5 percent and Brazil’s almost doubled to 6.3 percent.

Emerging-market economies will grow 6.9 percent this year and 6.2 percent in 2011, King said, outpacing the 2.4 percent and 1.9 percent projected expansions of developed economies.

Providing Protection “There are now massive trade connections within the emerging markets and they’re becoming increasingly important,” said King in a telephone interview. “It means in one sense the emerging world is protected from the worst ravages of the developed world.”

Those ravages were born in the global recession of 2008-09 from which the advanced world is proving slow to recover, even after policy makers cut interest rates to record lows. That’s prompting businesses and investors to seek other sources of growth.

Of the foreign direct investment flowing into south, east and southeast Asia alone, China was a source of 13.3 percent in 2008, compared with the U.S.’s 7.9 percent and up from 0.4 percent in 1991, according to a report last month from the Geneva-based United Nations Conference on Trade and Development.

China, the world’s fastest-growing major economy, dominates the push into fellow emerging markets, passing the U.S. as the biggest exporter to the Middle East in 2008.

Huawei in India Shenzen-based Huawei Technologies Co., its biggest maker of phone equipment, had orders of $1.7 billion from India in 2008 and said in January that it will invest $500 million in its research center in Bangalore.

China Mobile Ltd. of Hong Kong, the world’s biggest phone carrier, is “interested in doing business in Africa,” where it can boost services in rural areas, Chairman Wang Jianzhou said in a June 26 interview.

Elsewhere in Asia, a group led by Korea Electric Power Corp., South Korea’s largest utility, beat off competition from General Electric Co. and France’s Areva SA to win a $20 billion UAE nuclear contract. The Saudi Railways Organization last month awarded a contract to China South Locomotive and Rolling Stock Corp. to supply 10 cargo locomotives. The Mecca-Medina rail contract went to Beijing-based China Railway as part of a Saudi- Chinese consortium.

Brazil in Africa In Latin America, Brazil’s Vale SA has been on an international spending spree, helped by booming commodities demand from China and a currency that has doubled against the dollar since 2003. The company estimates that its $1.3-billion coal mine in Mozambique will have a capacity of 11 million tons per year three to four years after it enters production in the first half of 2011.

Vale in 2009 acquired stakes in three copper projects, in Zambia, Africa’s largest producer of the metal, and the Democratic Republic of Congo. In April this year, the company agreed to pay $2.5 billion for iron ore deposits in Guinea, including assets the country confiscated from the Rio Tinto Group.

“We saw the same phenomenon with American and European companies 50 to 100 years ago as they went global,” said Shane Oliver, head of investment strategy at AMP Capital Investors, which manages about $95 billion in Sydney. “Emerging-market companies are now big enough and they have the choice of going to developed countries where they may be more constrained or to the emerging world where the growth potential is.”

Competition Rises They are also jostling with each other. Brazil’s Empresa Brasileira de Aeronautica SA, or Embraer, is braced for increased competition from new Chinese and Russian rivals.

In December 2009, 32 percent of the backlog of orders for Embraer’s medium-range E-Jet airliners was from emerging markets, up from 1 percent in 2005. Over the same period the company’s backlog of orders from North America and Europe fell to 53 percent of the total, down from 91 percent.

“We are selling less, on a proportional basis, to the U.S. and Western Europe, and we have a growth in sales in Latin America, Asia and Asia-

Pacific,” said Paulo Cesar, Embraer’s executive

vice president-airline market, in a telephone

interview.

Embraer is braced for new competition from

Russia’s Sukhoi Co. and the Commercial Aircraft

Corporation of China, or Comac, particularly

in their home markets, Cesar said. Both

companies are developing civilian airliners.

Middle East Link Royal Bank of Scotland’s Simpfendorfer, whose

book “The New Silk Road: How a Rising Arab

World is Turning Away from The West and

Rediscovering China” was published last year,

says the trade ties between China and the

Middle East alone make for a modern Silk Road.

The original was more than 4,000 miles (10,200

kilometers) of trade routes crossing Asia and

into southern Europe and north Africa. Based

around China’s silk industry and once traveled

by Marco Polo, the commerce it enabled also

helped power the growth of civilizations from

Egypt to Rome.

Governments are seeking to take advantage of

the modern version. India said in May that it

will open an economic division at its embassy

in China’s capital as the two countries seek to

increase bilateral trade to $60 billion this year

from $43 billion last year. Since taking office

in 2003, Brazilian President Luiz Inacio Lula da

Silva has visited about 68 developing nations,

more than any of his predecessors.

With trade nevertheless comes tension.

Developing economies in Asia and the Middle

East accounted for about 45 percent of new

anti-dumping investigations reported to the

WTO in 2009, up from 22 percent in 1998.

Trade Tensions China said in May that India shouldn’t

discriminate against Chinese telecommunication products, a month

after people with knowledge of the matter

said contracts for products from Huawei

Technologies and ZTE Corp. were vetoed

by India’s government on national security

grounds.

MTN Group Ltd., Africa’s largest mobile-phone

company, in June halted talks to purchase $10

billion of assets from Orascom Telecom Holding

SAE after Algeria’s government blocked a sale

of the company’s local unit, the most profitable

in the portfolio. Orascom, the biggest mobile-

phone company by subscribers in the Middle

East, also operates in Bangladesh, Pakistan

and Egypt.

There is still scope for ties to strengthen. In

a study released last week, the Washington-

based Inter-American Development Bank

concluded “massive bilateral trade” could

develop between Latin America and India if

tariffs are cut.

Gene Grossman, who succeeded Federal

Reserve Chairman Ben S. Bernanke as head of

Princeton University’s economics department,

sees a repeating pattern of what he called the

“home market effect,” in which countries at

similar income levels increasingly trade because

their consumers have similar tastes and

spending power.

India’s Tata Group was the second-largest

investor in sub- Saharan Africa in the six years

through 2009, according to the Organization for

Economic Cooperation and Development.

“Once an Indian firm enters and develops

expertise based on its sales to its local market

it now sees profit opportunities in serving

markets elsewhere,” said Grossman.

To contact the reporters on this story: Simon

Kennedy at skennedy4@bloomberg.net

Matthew Bristow in Bogota at Mbristow5@

bloomberg.net Shamim Adam in Singapore at

sadam2@bloomberg.net

Central Asia’s economic, civil and political well-being as an emergent region of strategic significance is an imperative. As the West increasingly appreciates the ascendency of the East, so Central Asia plays a pivotal role as a multi-directional ‘land-bridge’ between powerful regions. Recent endeavours by both the UK and Central Asian states have recognised and prioritised the need for renewed impetus to deepen the relationship, although some key figures remain unconvinced of the priority the United Kingdom attaches to these relationships.

Engagement is essential. The mutual economic benefits, the need for Europe to be a recipient of much needed gas, the need for stability sustained in an environment of appropriate governance and a growing realisation that solutions to Afghanistan’s internal affairs lie within Central Asia are paramount. Unfolding events in Kyrgyzstan demonstrate the necessity of special attention by the West to assist not only that country, but also Tajikistan, with economic development and capacity. Failure to do so will come to haunt British global policy.

The foundations for the ‘land-bridge’ are in place but the block-building is still a project in process. Central Asia could play a crucial role in security and co-operation that would enhance regional stability and prosperity and assist in the fight on drugs, extremism, illegal migration and organised crime, as well as major environmental problems with serious implications. Whilst much has been done, challenges do remain. The development of Central Asian legal systems, whilst positive, does lack uniformity in interpretation and application of laws. Investment laws should also be clear and unequivocal if targets are to be achieved.

Kazakhstan’s 2010 chairmanship of the Organization for Security and Cooperation in Europe (OSCE) is being successfully handled with many advocating a concluding summit. The priorities of Afghanistan and Nagorno-Karabakh, together with advancing dialogue on European security through the Corfu process, beyond the political, military and economic dimensions are consistent progressing step by steppe with promoting a theme of inter-ethnic and religious tolerance. Similarly, Uzbekistan’s presidency of the Shanghai Cooperation

Organization (SCO) has achieved considerable results in developing the international contacts and legal framework, as well as implementing initiatives to strengthen security and stability. The joint declaration on co-operation between the UN and SCO secretariats, and the rules on admission of new members, were signed. All this, together with the helpful engagement on Afghanistan and the large-scale energy and business opportunities that Turkmenistan presents, make Central Asia a vibrant region to which the UK must react. A missing link to our bilateral relationships has been the lack of parliamentary interaction. Kazakhstan, Kyrgyzstan and Tajikistan have signed a Memorandum of Understanding (MOU) and Turkmenistan and Uzbekistan are actively considering doing so. This would be unusual in so far as only few common documents have been signed by all Central Asian states.

The MOU sets out guiding principles recognising the desire to strengthen co-operation and commitment to political, economic and social understanding, and development: (1) Facilitate inter-parliamentary dialogue; (2) Foster contacts, co-ordinate and exchange experience among parliamentarians; (3) Promote the ideals of democracy and good governance; (4) Recognise the need to defend and promote human rights and the rule of law; (5) Contribute to enhanced understanding of representative institutions and their further development; (6) Work for regional security and stability; (7) Consider questions of bilateral and regional interest; (8) Encourage regular high level governmental and sector exchanges; (9) Contribute to awareness of climate change and the environment; (10) Highlight the importance of regional and global energy and water security; (11) Deepen economic development, trade and inward investment; (12) Promote cultural and educational exchange.

The region has caught the attention of forwardthinkers as a key actor. The launch of inter-parliamentary initiatives is strengthening the framework for dialogue and relationship building; and given Central Asian states have completed their transition stage from independence, 20 years on it is now a ‘New Game’ and a positive one.

Progressing Step by Steppe Article published in The House Magazine, 21 June 2010 by Lord Waverley

The New Silk Road Forum Limited is a non-profit organisation. It is a company limited by guarantee registered in England and Wales under number 07633743. Copyright © 2011 The New Silk Road Forum Limited.

www.nsrforum.com

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