There is some debate as to how many countries are part of the Belt and Road Initiative, which sprawls across the Middle East as far as eastern Europe and Egypt. ICBC Standard Bank’s Belt and Road indices track 65 countries (including China).
One of the smaller nations along
the way is Armenia, a landlocked state in the Caucasus, bordered not by
China but by Turkey, Georgia, Azerbaijan and Iran. Armenia’s GDP is
$10.55 billion; China’s, $11.2 trillion. How is such a country, more
than 1,000 times smaller than its partner, affected by being named part
of Belt and Road?
The first thing to realize is that there is no
formal process of notification: no big ceremony when China tells a
country it is part of the Belt and Road.
“There is no formal
invitation to the country,” says Hrant Abajyan, Armenia’s trade
representative to China in Beijing. Armenia heard about it like
everybody else did, when Xi Jinping made his speech at a Kazakhstan
university in 2013.
Regardless, Armenia is delighted to be part of the club.
are convinced this project will play a very important role in the
development of relations among the countries participating in it,” not
just in terms of economic development “but culturally, in the
cultivation of tourism and in people-to-people relations,” says Abajyan.
“From the very beginning, Armenia has been deeply convinced it can and
must be an integral and indivisible part of this initiative.”
is easy to see why. Armenia is one of the weaker economies on the road,
ranking 50th for economic health, 54th for macroeconomic performance and
42nd for risk outlook among the 65 members in ICBC Standard’s ranking.
It has clear needs for infrastructure and will welcome China’s help in
Armenia is, in the best possible sense, in the way:
inserting itself in both east-west and north-south trade flows will be
very much to its benefit.
“We have an opportunity to act as a regional transit hub, for transport, freight and communications,” says Abajyan.
big examples are the North-South road corridor, a highway that will go
from the border with Georgia in the north to Iran in the south, and the
Southern Armenia Railway, a potentially important supply route into
Europe from Iran. Abajyan names both in relation to Belt and Road;
Chinese companies have been involved as both investors and contractors
in the first three tranches of the road’s development, are negotiating
to be part of the fourth and will no doubt be part of the final fifth.
The railway is still at the negotiation stage, but China Communicating
Company has already developed a feasibility study.
So how does it
work? Does a country go to China and suggest a project be part of Belt
and Road? Or does China come in and offer to build something it thinks
is practical? In Armenia’s case, it is more the former. Armenia’s
government has developed 50 investment projects around the country, some
of which will suit international capital, and through Armenia’s
diplomatic corps in Beijing, it has been making sure China is aware of
But is there a compromise in accepting Chinese funding? What’s expected in return?
are no compromises because there are no problems,” says Abajyan. “There
are no issues that don’t match each other. China has
always been a friendly nation for Armenia. We are in a great
It is a relationship tilted in one direction, but then again so is pretty much every country’s relationship with China.
says it is too early to talk about knock-on effects in other areas of
the Armenian economy, such as its banking or legal systems, but it is
expected that countries on the BRI will feel the influence beyond
Infrastructure is obviously a catalyst for
economic growth across a range of sectors, but further still, it may
prompt the development of local currency bond markets to fund that
infrastructure, and perhaps prompt the development of foreign investment
laws and a legal services industry that may have greater utility beyond
Belt and Road.
“The mechanism here is simple,” Abajyan says.
“The more investment you receive as a country, the more developed you
become, and the more you get integrated into the regional, sub-regional
and international markets for projects. And the more the economy grows.”
A small country in this position is naturally going to welcome Chinese investment with open arms.