Chinese One Belt One Road StrategyIntroductionThe first part of this paper will assess effect of infrastructure availability and efficiency on multinational firms. There on, Chinese ‘One Belt One Road Strategy’ will be explained. Finally, environmental perspective of the One Belt One Road Strategy will be discussed.Effect on Infrastructure and Efficiency on Multinationals firmsInfrastructure and efficiency are vital consideration for multinationals cross border investment decision. Enhanced infrastructure and efficiency is would play paramount role on ensuring competitive position in a global market through reduction production and / or operation cost and enhancing value optimization of stakeholders. Consequently, the availability of infrastructure would promote foreign direct investment owing to greater accessibility and reduced distribution cost. Yet the cost of doing business for multinationals will be reduced while enhancing profit (Khadaroo and Seetanah, 2008).The absence of infrastructure would however, would expose multinationals to operate with less efficiency dictating them to furnish the critical infrastructure by own resource leading to duplication and wastage of resources (Erenberg, 1993). Such inadequacy in infrastructure would also limit multinational firms access to both local and international market. Thus efficient infrastructure development should be performed in line with commercial principle. More on, infrastructure could also be furnished through management contract, full privatization, and build operate transfer approach that would attract foreign direct investment from multinationals for the nation or trading blocs (Mlambo, 2006).Inline with study conducted by Iwanow and Kirkpatrick (2006), there is significant relationship between investment on enhanced infrastructure and a nations performance in export. The quantitative result of the study also indicated that export performance has shown improvement by eighty percent of every dollar investment on infrastructure of developing nations. Yet the improvement in infrastructure would enhance foreign direct investment owing to higher return on investment by multinationals looking for optimization of shareholders profit, notwithstanding prudent management of power and interest of stakeholders too.In light of contribution to attraction and sustainability of foreign direct investment, Soft infrastructure representing extent transparent institution and commitment to sound reform is vital than commitment to hard infrastructure that represent road, highways and communications. The study conducted by Fung et al. (2005) indicated that financing investment on soft infrastructure will yield twice return on investment that enhance economic reform attracting higher inward foreign direct investment in emerging economies.Effect of investment on infrastructure is different between developing and developed economies. The significance of infrastructure development in developing economies is immense in inward flow foreign direct investment. Furthermore, infrastructure development significance in affecting foreign direct investment inflow in developing economies does outweigh importance of the transparency and enhanced investment climate (Sekkat and Varoudakis, 2007). Infrastructure development in developed countries, however, indicates that effect on foreign direct investment to have promotional role only (Bae, 2008).Thus in light of the brief review stated herein above, commitment to development of infrastructure would enhance efficiency that would create conducive operating environment for multinational firms. The importance of infrastructure development is vital for multinational firms for higher return on investment attained owing to reduced cost of doing business or transaction cost. On the other hand, the host economies would also rip the benefit emanating from enhanced export performance.Chinese One Belt One Road StrategyThe One Belt One Road Strategy is an initiation set to improve existing and establish new trading routes and business opportunity between china and countries across Asia, Europe, Middle East and Africa, in the continuum of which there are more than 60 countries. The imitative is launched in 2013 with two elements: the one belt as to the silk economic belt and one road as to the maritime Silk Road.The Silk Road economic belt is aimed with enhancing and developing land routes that are logistic chain that bridges east cost China all the way to Western Europe. In between are economic corridors connecting china to Russia, Central Asia and South East Asia. The one road maritime Silk Road on the other hand, is on developing the sea route that runs from western China Sea coast through South China Sea and Indian Ocean to Europe, aimed at developing prosperity for underprivileged and developed western part of China through development of new partnership opportunity for Chinese firms with developed and developing countries along route.The initiative is scoped to include connectivity, free trade, policy integration and coordination. This would encourage the countries along the belt and road to have broader economic inclusiveness and balanced regional economic cooperation (Swaine, 2015)The One Belt One Road Strategy is backed by substantial financial resource from China investment corporation, The Export Import Bank of China, and China Development Bank of China, which become effective as of 2015 with objective of financing infrastructure, resource and industrial and financial projects (Ng, 2015).One Belt One Road Contribution to Economic Development Given the principal aim of the initiation that focus on financing infrastructure, the link between infrastructure development in China and Countries along the Belt and Road could significantly improve the economic development of nations bound within the framework. Hereafter attempts are made to assess contribution of the initiative in light of industrialization, productivity, transaction cost, employment, and overall regional integration and cooperation, of course, notwithstanding risks associated with implementation emanating from the fact that it is Trans- boundary and likely political and economic nonalignment. Contribution to industrialization Industrialization and enlargement of market hinges on availability of critical infrastructure and efficient macroeconomic land escape. This would also lay the foundation for sustained economic growth and economic development. More on furnishing infrastructure would improve domestic regional development imbalance leading to social stability through reduction in inequality. Thus, the principal aim of the initiative that focus on financing infrastructure development domestically and overseas, would advance infrastructure based development and industrialization (CSIS, 2015) Contribution to ProductivityThe relationship between investment in infrastructure and economic performance shows positive significant correlation in light of study conducted by Aschauer (1990) that also indicated existence of positive relationship between infrastructure improvement and labor and multifactor productivity. The implication is that enhanced multifactor productivity is associated with higher economic output and growth. From the initiative perspective, the focus on infrastructure investment locally would contribute to economic development through enhancement of productivity and efficiency. Yet financing infrastructure on nations along the one belt one road would foster overall economic performance through improvement in productivity and efficiency. The Chinese government strategy to committee to such financing would enhance productivity, efficiency, and hence economic development boosting competitiveness in Chinese economy those along the belt (Aschauer, 1990).However, investment on infrastructure need be well designed to result in sustained economic development. Prudence on investment critical for over-investment can lead to low return inefficient project financing that would improve neither productivity nor sustained economic development to all involved. Thus, for the initiative to be effective, prudent coordination on infrastructure investment locally and along the belt is vital (Prudhomme, 2004).Contribution to Employment As discussed herein above, the initiative contribution to economic growth and development would pave the way for creation of entrepreneurs locally and within regions scoped in the belt and road that leads to significant employment opportunity. Thus, given proper implementation of the one belt one road strategy, will improve the standard of living of nations with the belt through creation of Job. More on, the reduction in transaction cost emanating from investment on infrastructure would enhance optimization of firm’s profits that can lead to enhancement of employment opportunity. Furthermore, this will improve human capital access to market and integration within markets along the belt and road of the initiative.Regional IntegrationPrudent implementation of the one belt one road project would indisputably contribute the sustained economic performance through determination of economic activity and sector of the economy attuned to a given economy with the belt and locally. Strategic designed and coordinated investment on infrastructure will enhance integration of market by reducing the effect of regions and nations with the belt and road through connectivity to low cost market in the nation and regions scoped under the initiative. More on the effective implementation of the initiative will significantly reduce inequality of income through improvement of economic growth. Such integration would pave the opportunity for the access of less-develop communities to core economic activities leading to overall economic development. The strategy would also lay sound foundation on enhancing the strategic partnership of China and European Union members linking the European economic integration plan with the One Belt One Road project through integration platform in policy, trade, human capital and transportation. To this end, the project implementation would require dialogue between China and countries within belt and road project in central and Eastern Europe. Consequently, the One Belt One Road project would enhance European Union global influence owing to the initiative compliance with environmental standards adopted by European Union and its contribution to sustained inclusive development. The initiative would also generate paramount experience sharing brought by economic cooperation with European Union economies. The experience-sharing factor is significant for nations along the belt and road colonized by Europeans in the past. Owing to Europe’s historical and cultural influence in economies in West Africa and Central Asia, cooperation with Europe is highly valued opportunity for effective implementation of the One Belt One Road strategy of Chinese government that is promoted in line with principle of trust, equality and mutual benefit (Europeworld.org, 2004). It is believed that the initiative would open a new integration of economic and cross border trade built on Sino oriented trade and infrastructure framework throughout regions and nations along the drawn belt and road. This would have multifaceted strategic advantage to China in its region and globally by enhancing diplomatic advantage. Yet the investment geared into infrastructure development and financing regional economies would reduce the risk of overreliance on import of overseas commodities to sustain Chinese economic performance domestically and globally through strategic partnership and trade liberalization and integration within countries bound in the initiative. In light of the size of Chinese economic size, the initiative would have substantial effect in changing pattern of trade between regions and countries scoped within the project. The project would facilitate trade based on improvement in infrastructure that pave the opportunity to enhanced integration and diplomatic relation that would reduce the pervasive trade hurdles. Thereon, the integration will benefit the participating economies from enhanced trade and consequent economic development for citizens. The project would attract enhanced foreign direct investment creating immense job opportunity whilst offering new ground for local firms to complement the stimulated economy and support.As stated in discussion herein above, the successful implementation of this ambitious project would be a breakthrough that would foster integration through financing the sought after infrastructure development project in critical energy and advanced manufacturing projects of nations neighboring Chinese and those along the belt and road, financed through Asian Development Bank (MFA & MCPR of China, 2015)The project would outreach overseas investment that will be implemented with ceding strategic technology and infrastructure to the developing countries withheld from such critical cooperation necessary for development to alleviate the nations from vicious poverty holding back their effort to offer competitive product to global market. Most nations covered under the initiative developing countries rich in energy resource that require funding and technological input will have the chance to joint exploration and development. China’s advance in information technology, contemporary technology and developed manufacturing would indisputably serve as stepping stone to successful implementation of the One Belt One Road strategy(MFA & MCPR of China, 2015)Implementation Risks and Challenges Albeit the project is promising as to its contribution to economic development within countries with the belt and road project, it is free of hurdle emanating from Chinese own overreaching risk and uncertainty as to the process of the project. More on, financing and leadership perspective the initiative is based on giving notion. In addition there is risk that the investment would end up leading to loss and opposition owing to completion from contentious Chinese neighbors and domestic aggregated project outward shift contrary to Chinese pervasive trend. The scoping of the project to Western development horizon could also blur the commercial viability, given geopolitics difference along the belt. Yet the Chinese initiative is believed to emanate from its geopolitics that aim at exporting its immense capacity on infrastructure building. This sector is however appear to be loss making domestically let alone offer enhanced value overseas. Further raising the uncertainty of effectiveness of the strategy is existence of huge geological difference and infrastructural building development comparable to or surpassing the offer by the Chinese proposal. Implication is that huge financial commitment to infrastructure development in low return projects and risky economies along the belt and road (European Council, 2015)In addition, the rise of Chinese through economic and geopolitics influence over region and countries along the initiatives route is perceived by regional powers as strategy to challenge their regional power position and influence. Yet, most of nations included within the maritime Silk Road project are in territorial dispute. Albeit china could outline an appealing persuasive strategy to submit the will of disputing nations through use of its growing economic strength and joint development project financing, those countries in dispute with china may not find the offer and growing economic influence of the initiative as appealing as proposed by Chinese (The Economist, 2015)Environmental Perspective of One Belt One Road StrategyThe effect of the strategy appear to have both environmental pros and cons. In line with action plan 2015 issued by Chinese government, focus is geared to law carbon infrastructure construction and operation, notwithstanding prudent management of environmental footprint of construction projects. Yet, the strategy is viewed as an opportunity to enhance institutional capacity of developing nations with proposal that includes environmental impact assessment guidelines.On the hand, the environmental concern of the one belt one road strategy emanate from inherent nature of the strategy that in part set to absorb Chinese overcapacity in steel production to support its economy. Consequently, this would extend Chinese dependence on heavy industry. More on, the focus is on developing fossil fuel infrastructure and coal fired power plants in South East Asia. Furthermore, some Chinese projects in the past have been compromised owing to pollution and detrimental environmental footprint. (Chatham House and DRC Report, 2015)The recent environmental policy of the Chinese government is portraying its leadership by allocating substantial sum committed to the strategy whilst supporting countries institutional capacity in light of national commitment set under Paris agreement. In line with this, there are instances of green investments committed overseas. The vital environmental concern is however, the lack of overriding guideline as to One Belt One Road Strategy project sustainability requirement. Thus, given the pervasive environmental perspective of the strategy will not vividly stipulate a framework under which environmental business projects are assessed to ensure business sustainability.In a nutshell, Chinese One Belt One Road Strategy would enhance integration of economies of developing and developed nations along the route from china, Eurasia to Africa through financing investment on infrastructure development and cooperating in setting advanced manufacturing that will foster economic development, notwithstanding the requirement to establish environmental footprint of the initiative to ensure sustainable development.References Aschauer, D. A(1990) “Why is infrastructure important?” Federal Reserve Bank of Boston, New England Economic Review, January/February, pp. 21-48, 1990. 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