China’s Belt and Road initiative presents opportunities and risks to companies in Asia

SINGAPORE
– Media OutReach – 10 April 2019 – The investment
and infrastructure development opportunities generated by China’s
multibillion-dollar Belt and Road Initiative are not without risk, according to
new research from Aon, the leading global professional services firm providing
a broad range of risk, retirement and health solutions.

 

Aon’s
2019 Risk Maps, developed
in partnership with Continuum Economics and The Risk Advisory Group, examine
political risk, terrorism and political violence around the world. This year
findings show that businesses looking to take part in BRI, which aims to boost
connectivity and reduce trade costs between Asia and Europe, need to be aware
of the risks associated with the project.

 

Stephen Taylor, Head of Credit Solutions,
Asia, Aon said: As the BRI investment
trend continues, the use of credit and political risks insurance will grow,
either where the lender is covering non-payment of debt or where corporations
insure their assets and equity investments against risks such as currency
inconvertibility and expropriation.

 

Key findings include:

• The Asia Development Bank
  estimates the infrastructure gap across 25 developing Asian economies amounts
  to USD 469 billion annually, meaning significant opportunities for development.
• Businesses in East Asia and the
  Pacific currently take an average of 100 days to import/export, in stark
  comparison to the 10-15 days taken by firms operating in G7 countries. The BRI
  could help to drive down the time taken to do business.
• The regulatory and
  institutional framework of many countries within the proposed BRI exposes
  investors to potentially significant risks, including sovereign non-payment,
  supply chain disruption and political interference. 

 

The report also emphasises that
government decisions have the potential to impact both regional trade and
development. Businesses investing across borders should closely monitor the
political situation in the host countries in which they are transacting and
consider their insurance coverages in response to changing exposures and the
potential for volatility caused by politically motivated decisions.

 

A positive will be the ripple effect
from the infrastructure investment, particularly in the emerging economies of
Southeast Asia and Africa, as we expect to see a rise in the companies
investing across the supply chain, including manufacturing hubs being
established in free trade zones.  These companies will be turning to
credit solutions to secure risk, support finance and accelerate growth.

 

Notes to editors

 

Aon’s Risk Maps, developed in collaboration with Continuum Economics and The Risk Advisory Group, are
designed to help firms better understand and navigate evolving exposures
created by political risk, terrorism and political violence. In today’s complex
geopolitical and economic environment, the maps enable clients to identify and
track the different sources and degrees of risk, assisting businesses in
planning and protecting assets, contracts and loans that could be adversely
affected.

 

For more
information and to access the interactive maps and full report please visit our
dedicated Risk Maps site.

About Aon

Aon
plc (NYSE:AON)
is a leading global professional services firm providing a broad range of risk,
retirement and health solutions. Our 50,000 colleagues in 120 countries empower
results for clients by using proprietary data and analytics to deliver insights
that reduce volatility and improve performance.

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