Ascendas Group, a portfolio firm of Temasek Holdings, has entered into a joint venture (JV) agreement with China’s state-owned industrial and trading enterprise, China Machinery Engineering Corporation (CMEC), for strategic collaboration in pan-Asian industrial/business park investments and developments.
As part of the JV, the two companies will jointly explore opportunities in key Asian countries under China’s One Belt One Road (OBOR) initiative: China, India, Vietnam, Indonesia and Malaysia. It could also represent a convergence of interests regarding greater transport and logistics connectivity in Southeast Asia.
It is envisioned that Ascendas, a member of the Ascendas-Singbridge Group, will leverage Hong Kong-listed CMEC’s extensive network of Chinese firms to broaden its customer base for business space solutions in Asia. Meanwhile, CMEC can capitalise on Ascendas’s expertise and regional presence to facilitate ventures by Chinese firms beyond the Greater China market.
“The partners will also jointly explore opportunities to co-develop industrial/business parks in these markets to serve the needs of international corporations and Chinese companies venturing overseas,” a joint statement said.
With Chinese firms pursuing infrastructure projects abroad, they will need to adapt to new legal landscapes and phenomena like restrictions on foreign equity participation in certain sectors or on foreign entity operation of public utilities.Literacy and familiarity with these operating terrain, as well as ensuring compliance, will heighten the chance of successful outcomes, given the challenges the OBOR initiative will encounter.
However, the JV will have to contend with the OBOR initiative facing the risk of failure. Financing difficulties have plagued a number of infrastructure projects- for instance, the release of funds for the construction of the Altai gas pipeline to connect western Siberia and China has been delayed indefinitely. According to The Diplomat, the OBOR also represents a speculation by China on new export markets in unstable regions (e.g. Pakistan).
Rather than growing domestic consumption, the overcapacity of Chinese state-owned enterprises is unaddressed and exported abroad through the OBOR. In fact, the OBOR initiative at a larger level may be inhibiting Beijing’s ability to “…overcome the structural crisis of the Chinese growth model”, in the words of The Diplomat.
As part of the larger OBOR initiative, which has faced a lack of partners to date, the newly established JV represents the involvement of Singapore in the new initiative, as well as reflecting its key position on the Maritime Silk Road.
However, CMECs’ position as a state-owned enterprise and China’s increasingly aggressive foreign policy – exemplified in their assertive approach in the South China Sea territorial disputes – may create difficulties down the line. The partnership may represent an attempt by CMEC to leverage of Ascendas’ brand and the brand strength of Singapore firms to overcome these issues.