China’s One Belt One Road Initiative (OBOR) – Opportunity or threat for the logistics sector?
On 7 March 2017, the Luxembourg Chamber of Commerce in partnership with the China-Luxembourg Chamber of Commerce (ChinaLux) and the Luxembourg Cluster for Logistics held a seminar entitled “Down the Road – Logistics and China’s One Belt One Road Initiative”. This seminar was the second in the event series on the OBOR initiative*, an intercontinental trade and infrastructure project focused on forging new economic corridors between China and Eurasia. Focused on the logistics sector, the event included a panel discussion to explore the potential opportunities for Luxembourg in that field. More than 120 participants attended the event.
In his opening speech, Jeannot Erpelding, Director of International Affairs at the Luxembourg Chamber of Commerce, introduced the subject and claimed that, in his opinion, Luxembourg is undoubtedly an early bird and active player on the OBOR initiative. Indeed, Luxembourg is not only the first European founding member of the Asian Infrastructure Investment Bank, but Cargolux and CFL Multimodal are also already connecting the continents and playing the important role of transporting goods between China and Europe.
François Bausch, Minister for Sustainable Development and Infrastructure, reminded the audience about the importance of the European market for China, since Europe remains its biggest export market. He stressed the economic ties between China and Luxembourg that have been developing steadily in the recent years, especially in the logistics sector, amongst others, thanks to the successful collaboration between HNCA and Cargolux established in 2013. Logistics is one of the key sectors for the Luxembourg government. Therefore, the government is continuously striving to improve its regulatory and administrative framework. For Minister Bausch, infrastructure projects are one of the most important activities of the OBOR initiative and in this context, he insisted that an intelligent coordination between the OBOR initiative and the Juncker Plan is needed. There is a fierce competition in Europe to attract Chinese freight trains, but the Minister is convinced that Luxembourg has a card to play, the ultimate challenge being to put Bettembourg on the map.
Then, Daniel Liebermann, Director of Logistics at the Ministry of the Economy, delivered a keynote speech where he explained in more detail what the OBOR initiative exactly means as far as the logistics sector is concerned. The initiative is in fact the centerpiece of China’s long term strategy to establish international cooperation between all countries on the route of the “new Silk Road”, Europe and China being the end of lines. Daniel Liebermann emphasised that China is no longer a new market, as Luxembourg is indeed celebrating 45 years of bilateral relations with China in 2017.
Malik Zeniti, Cluster Manager of the Luxembourg Cluster for Logistics moderated the panel discussion with 4 experts from the logistics sector in Luxembourg: Barbara Chevalier, Director Strategy & Business at CFL Multimodal, Christoffel Niel, Vice-President of Sales at Cargolux, Axel Quadt, Managing Director at Schenker Luxembourg and Ludger Evrart, Managing Director at Creactive Studio and China Digital Branding. After brief companies presentations, each panelist described the potential opportunities and threats linked to the development of the new Silk Road. There are 3 main types of long-distance transportation for goods: airways, waterways and railways. Each of them has advantages and disadvantages in terms of delivery time, price, and volume. Since one of the objectives in the framework of the OBOR initiative is to improve the railway infrastructure between China and Europe, it will certainly make the freight train option more competitive compared to the other alternatives, knowing that currently 88% of all the goods in the world trade are transported by sea.
The questions for the panel ranged from the demand on the Luxembourg amd the Chinese markets and their future developments (e.g. expected growth of number of trains per year) to the obstacles and challenges the panellists are facing in terms of customers, infrastructures, etc. The panellists were also asked what kind of support they expect from the government. Barbara Chevalier sees it as an opportunity rather than a threat, since it means CFL multimodal will be able to welcome more trains from China provided that the infrastructures are improved. With regard to warehousing capacities in Luxembourg, many more containers from China can be accommodated, and via Bettembourg, CFL Multimodal can connect to most of the major European cities. Also, with the growing middle class in China, she hopes that exports from Europe to China will increase which might in turn benefit the activities of CFL multimodal. According to Christoffel Niel, the competition for Cargolux will of course increase, but competition is healthy for the business. The goods valuation and the delivery timeframe requested by the customers will be key in differenciating service providers. Even with improved infrastructures in railway, the airfreight will remain the fastest mode. As of today, 2800 trains circulate yearly between China and Europe and the objective of the OBOR initiative is to increase this number to 5000 trains. Yet, according to Axel Quadt, this will be a real challenge as infrastructure is currently not ready for more trains, especially at the border with Belarus and Poland. Moreover, in the coming years, Poland announced important works on its railway network, which will make it difficult to grow the train capacities simultaneously. Major investments will be required to further expand the railway network and meet the proposed increased capacity. Another major risk pertaining to the project pertains to the political stability in some countries that the New Silk Road is crossing.
After the panel, participants had the chance to ask a few questions that animated the debate and which kept going during the networking cocktail that concluded the event. Dirk Dewitte, President of ChinaLux, delivered a closing address, and welcomed the seminar participants to join the upcoming seminars in the OBOR event series on ICT and finance.
For Luxembourg Logistics key players interested in China, the next important event is already programmed with the trade mission to Zhengzhou and Hong Kong that will be organised in the second semester 2017.
For further information about this event or the activities organised by the Luxembourg Chamber of Commerce related to China, feel free to contact: Na Shi/Violaine Mathurin – asia(at)cc.lu – T: (+352) 42 39 39-364/481.
*Full Event Series: Throughout the course of the One Belt One Road (OBOR) event series, ChinaLux and the Chamber of Commerce will endeavor to introduce and explore the opportunities for Luxembourg under the OBOR initiative, with events to follow the launch of the initiative, highlighting opportunities and experiences in the Luxembourg logistics, ICT and finance sectors. To hear about the upcoming events, please sign-up to the ChinaLux mailing list (http://china-lux.lu/enewsletter), and watch the ChinaLux and Chamber of Commerce events announcements for more details.