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tv   The David Rubenstein Show Peer to Peer Conversations  Bloomberg  September 15, 2018 2:00pm-2:30pm EDT

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by anyone's measure china's belt and road initiative is a massive project. , oking china to the world road, rails, see and pipeline. europe,central asia and africa and the middle east, south east asia and india. upgrades to its ecosystem.
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welcome to the we continue to navigate china's belt and road initiative. we begin this program and mumbai, known as the gateway to india. not so welcoming to china's belt and road initiative. countries with massive economies accounting for more than one third of -- but with a long history of mistrust. think it's understandable india is nervous about having this giant neighbor growing so quickly. is nervousd india about this and doesn't want china to be planning the asia
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infrastructure. for india tontial benefit if china is financing good infrastructure projects around the region. >> amongst the neighbors -- that we canies become and the shift that can become highly indebted. they share a contentious border the question is should they be concerned about bri, i think they will be most concerned with countries that border them would have traditionally had their spare of influence -- their sphere of influence. port init was a bangladesh or a port intrigue longer, -- a port in sri lanka yes, they will be , absolutely concerned. haslinda: at the heart of india's opposition is the
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biggest single project of the belt and road initiative, the china-pakistan economic corridor , which makes its way through kashmir, all the way to the sea. >> to date, it is the biggest single component of bri. it is important to pakistan. china has, not overlie -- not overnight, but in a relatively short period of time reduced the electricity shortage. becauseportant to china pakistan has been an ally to china for a very long time. it gives them access to the arabian sea. it also borders more sensitive area of china. it is a port in for both parties to succeed. >> >> if i make an investment, i move on. as a government, my concerns are not only financial.
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i can in the case of sri lanka, have a 99 year lease on the port, which sits close to india and right next to a major shipping lane. billions investing pakistan and which is also not likely to be financially successful. i can get these commercial ports but it can have other uses as well. most of debt is owed to china. now it is used by the chinese as a military base. >> some of this is strategic. the corridor down to pakistan, it is hard to see this is over theomic, going himalayas to get to china from , that is not practical. i can understand why india would be worried that it is being surrounded as china's building that infrastructure in pakistan. haslinda: all of india's rail
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tracks back to back would circle the globe 1.5 times, 8 billion passengers a year. that is the official number. it is more if you add the people who travel for free across this vast nation. rush hour, 7000 crammed trains, a system that is antiquated and in need of upgrades. >> i see the mood in india changing. you will have strong investment from the aiib, investing in the mumbai metro. that is an example of cooperation around india's infrastructure. you don't have to call that the belt and road initiative. that could have happened without the belt and road initiative. >> the reason that belt and road has been taken up by sri lanka, -- has been so enthusiastically taken up by india's's neighbors, like sri lanka,
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nepal, and pakistan is partly a failure on india's part to deliver connectivity to its neighbors. india has been enabled to have meaningful infrastructure and an activity with nepal. -- been unable to have meaningful infrastructure and activity with nepal. bangladesh, we have little connectivity in terms of energy and goods. the same thing is true with sri lanka as well. haslinda: mumbai was one of the original stops along the ancient silk road. it's port remains the country's largest. accounting for almost half of container traffic. it is also home to the indian navy's western command, looking west across the arabian sea to pakistan and the middle east, and to the east and the riches of southeast asia, and ultimately china. ♪ >> some of the defaults are not surprising. especially sri lanka. you look at the economy, the
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-- at the size of the economy, the investment that has been made, and you also look at the projects. the port gets one or two bank ships every week, so it is not surprising the project has gone down under. i think something similar is likely to happen. >> if you are a recipient country in bri and china comes along and you negotiate appropriate terms for whatever the project happens to be, there aren't a lot of competitors eating down your door. -- beating down your door. this is to china's advantage. they bring the funding and expertise. that is a compelling package for a recipient country, but the recipients have to be careful of the financial terms. ♪ haslinda: so, from india to central asia, that is where we are traveling next as we continue to navigate china's belt and road initiative. ♪
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♪ haslinda: one of the countries that stands to gain the most in china's belt and road initiative is kazakhstan. it is the largest landlocked country between china and russia, and the center of a
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balancing act between geopolitics and economic advantage. this is an ultramodern city built in central asia's dominant economy. a city celebrating its 20th anniversary, and the birthdate of the countries one and only president. he has rolled kazakhstan since independence from the soviet union in 1991, seen here opening an international finance center, a bold move five years in the planning to link the region's capital markets, much like his country has embraced its key role as the overland pivot of china's belt and road initiative. >> the economic policy is towards creation new subsectors of our economy, different industrial dimensions. among these, financial services.
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we want to be the financial hub of the region and help the region to develop their economies, and this puts kazakhstan on a good track to deliver. >> we are the first country with china as we go towards europe. we built our own if a structure before the initiative has launch. we built 2500 kilometers of railroads to connect east and west of the country, so when the initiative was launched, the infrastructure was handy. we were prepared. we are helping the chinese implement numerous projects. 61 projects worth $28 billion in kazakhstan jointly with the chinese. they are related to the belt and road initiative, but not exclusively. >> one of the keys for us is we
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are a transit country. transit is a very good way of making money and doing business. in our country, for example, we have finalized the kazakhstan part of the china-europe superhighway, 3000 kilometers long. that cost is $3 billion. that goes to the russian border. another route takes us to the caspian sea. we have built a new port on the shores of the caspian sea. that route takes is across the caspian, azerbaijan, georgia, then from georgia to turkey, and from turkey to the mediterranean and the west. another one is the railroad that takes us from the caspian sea through iran to the gulf. we have diversified our transportation routes, and we have provided for various
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alternatives not only north, west, but also south. haslinda: on kazakhstan's border with china are plans to build the world's largest dry port. built not far from what is known as duration point of inaccessibility, the furthest point honored from an ocean, nearly everything is brought in by rail from china. >> the chinese invested into that 50-50 with us. we have a trained now that can travel from the east of china, through china, through kazakhstan to istanbul in about two weeks.
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we want to decrease the traffic time -- the transit time to 10-12 days. >> this part of the world is to be the heart of the silk world for centuries in the past. right now as we re-create the soak road in asphalt and rail and steel, kazakhstan again is recovering its place as the key crossroads in the heart of eurasia. haslinda: give us a sense of the sectors that will benefit in kazakhstan. >> when the maritime communication came in, it still the show. now gradually land communications are taking hold. the industries that stand to benefit the most our construction, processing, retro -- pedro chemistry, the products chemistry, the products of petrochemicals, but also agricultural and food processing. already i can tell you that the volume of container trucks across kazakhstan from china to europe grows twice every year for the past seven years, and it
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will reach 2 million containers by 2020, so kazakhstan stands to gain $5 billion in transit fees every year. haslinda: justin down the road from the port is what kazakhstan and china are calling an international free trade sound, -- trade zone, dual cities on either side the border, a plan strategic super city that for all intents and purposes now lies in a no man's land. during the cold war, this area was a controlled military zone. the two towers behind me represent the borderline. i am on the kazakhstan side. the chinese site is almost fully developed. kazakhstan says it has big plans to catch up. >> it is a gateway to the chinese market, so we agreed between two governments, china and kazakhstan, to develop the special economic zone which will help us develop the trade hub. the idea is during the soviet union time it was one way and
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-- was economic, and now we are going to increase the rates and capacity for goods coming in both directions. haslinda: but, five years after it was first proposed on the cause arc -- on the kazakhstan side, at least, this project remains a work in progress. some people have said kazakhstan will be the buckle of the belt, but there are challenges before that can happen. >> as i said, we have built the infrastructure. we have also worked hard with our neighbors, such as russia and belarus, to establish the eurasian economic union. we have prepared in terms of synchronized customs and railroad tariffs and so we have not only built hard infrastructure, those 2500 kilometers of railroads, but also created infrastructure removing barriers for trade.
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haslinda: from kazakhstan in central asia to southeast asia, that is next as we continue to navigate china's belt and road initiative. ♪
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♪ haslinda: china's belt and road initiative offers massive where infrastructure is key to economic growth. even in asia, the philippines, malaysia to thailand, projects worth hundreds of billions of dollars are underweight to improve connectivity. >> we can have the physical, high-performance connectivity, then we can see that would help spur activities in terms of commerce and investment. >> this is one of the backbones of the economic outlook for indonesia. i am sure next year that the gain from the infrastructure developed will start to kick in and affect our economic growth.
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>> we are not building airports and hoping they will come. we are in proving how are currently congested. we are improving our ports because they are congested. we are improving our roadways to help us achieve our build, build, build program. second because it promotes, not only connectivity within our country, but also outside of our country. haslinda: like many of its neighbors, thailand is betting big on the belt and road, investing tens of billions of dollars with the help of china to turn its eastern provinces into an economic corridor. and billions more on projects like this. from bangkok all the way to china. the mega station will serve as bangkok's rail hub for fast trains north to china, laos, and south to singapore and malaysia,
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although that part of the journey is now in jeopardy. it will also link the three main airports to thailand's eastern economic corridor. >> we have planned it to be a catalyst, so to speak, of connectivity, not just in thailand, but also with other countries, such as neighboring countries. china is to the north of us, so it is natural we can link up with the belt and road initiative. it is a corridor running from china south through thailand, and to asean all the way. >> each country has to look at their own interests, has to make sure that what ever loans they incur are affordable, not only to this generation, but to
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subsequent generations. the two loans we have negotiated, the first one is for a dam, a $62.5 million, and the second one is for the development of a municipal water project. that is around $200 million. we are currently negotiating a larger loan, and this will be approximately $2.8 billion, and this will be for a railway project. again, improvement of the railway project, now in a state of banff repair. >> we have set up in indonesia infrastructure projects, and based on that, we identify which project we feel we can then propose to be included in the bri. the biggest challenge is the execution.
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out of the 50 at the moment, we were only able to utilize nine, so we are still far to go, so while the funding is there, the number of requirements we have to follow in order to get that. haslinda: other risks, unmanageable costs? >> there are definitely many, right? as you know, indonesia at the moment is in a reform process. a lot of the infrastructure prof in -- infrastructure projects have regulatory issues, licensing. we have manpower. we have land acquisition issues. there are a number of local issues that we also have to solve in order for this to be maximized. haslinda: another of the key routes for china will be a corridor through myanmar.
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local issues throw up all kinds of questions. the country borders china, india, and bangladesh, providing a channel to the indian ocean, but also over land to the indian subcontinent. >> their concerns are over many aspects. large infrastructure projects incur indebtedness him and there is concern in this government over the risk of over indenting the country and passing that on to the next generation. that is a positive thing to worry about, the fact that we are not just going all out and building things without regard for budget position. haslinda: after years of strict military rule, myanmar's infrastructure is in urgent need of development, making it a prime target for the belt and road initiative. >> the other concern will be how the construction of these projects will pass on in terms of technological know-how, as well as human resources come into the country.
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unfortunately for many years china has been supporting myanmar, sometimes in ways where the people feel they have not really gained very much. haslinda: so there you have it. the views of india, central asia, and southeast asia on china's belt and road initiative. i am haslinda amin. thank you for watching. ♪ xfinity mobile is a new wireless network
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jonathan: from new york city, for our viewers worldwide, i'm jonathan ferro. this is "bloomberg real yield." coming up, treasuries gearing up for higher rates, a one-month t-bill breaking 2%. emerging-market central banks tightening policy, russia the latest to hike rates. and 10 years since the lehman collapsed. the markets have a liquidity problem? has the story of divergence become a story of convergence? >> it has been a year of divergence. >> united states and the rest of the world. >> in the u.s., we are not taking ri

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