CMQIP exemplar of B&R industrial cooperation

By Chen Qingqing in Qinzhou Source:Global Times Published: 2018/5/14 18:08:40

Industry growth hindered by financing gaps, slow project progress

A sign at the China-Malaysia Qinzhou Industrial Park in South China's Guangxi Zhuang Autonomous Region Photo: Chen Qingqing/GT


South China's Guangxi Zhuang Autonomous Region has been working with Singapore on the Southern Transport Corridor (STC) since the beginning of 2017. The project, which is also playing a complementary role in the China-proposed Belt and Road initiative, aims to tie up Guangxi's Beibu Gulf areas with Southeast Asia in both transport and industrial cooperation. Global Times reporter Chen Qingqing last week visited a major port and industrial park in the area to find out how the STC is influencing China-ASEAN economic ties. This is part two of a two-part story.

An 88,000-square-meter facility stands in a spacious construction site in the China-Malaysia Qinzhou Industrial Park (CMQIP), which is expected to generate billions of yuan every year after it is put into operation.

"So far, there have already been 10 companies, both domestic and foreign-owned, set up in this facility to process raw edible bird's nests shipped from Malaysia to China," said Li Minglong, an employee at local investment firm Jin'gu, which is located in the park.

Since China and Malaysia inked a deal in 2016 to start exporting raw edible nests from the Southeast Asian country to China, CMQIP has been accelerating the construction of this processing plant, with a total investment of 690 million yuan ($108.93 million), according to local official data. 

Malaysia is one of the main countries where edible nests originated from. With an annual output of 200 tons, its businesses of bird's nest export is worth more than $1 billion.

"China consumes about 90 percent of all bird's nests worldwide, so the Chinese market gives Malaysia high potential," said Huang Qidang, another Jin'gu employee, who is in charge of the construction of the plant.

Firms that have come to process raw edible nests at the facility have already spent millions of yuan on purchasing equipment such as water filters, as well as on operation areas and time-consuming production steps such as cleaning and selection.

"Although nobody works here yet, we have got everything ready apart from the export approval granted by the Malaysian government," said Wu Wanrong, an employee of Jing Yan (Guangxi) Birdnest Ltd Co, a firm invested in by Malaysian shareholders.

Investors of the edible bird's nest project have been watching closely in recent days for the results of the latest Malaysian general election, which may hinder the approval process of the exportation of the unique product.

As a highly anticipated project at CMQIP, the edible nest processing plant in Qinzhou, South China's Guangxi Zhuang Autonomous Region is also part of an industrial cooperation agreement between China and Malaysia.

The park, along with its sister park the Malaysia-China Kuantan Industrial Park in eastern Malaysia, is known for its "two countries, twin parks" scheme and is also a pioneer project that was launched in 2012 under the China-proposed Belt and Road (B&R) initiative.

Located in the southern suburbs of Qinzhou, CMQIP has been built from scratch in a remote mountainous area. It aims to serve as a platform for further cooperation between China and the Association of Southeast Asian Nations (ASEAN), covering various sectors including healthcare, electronics, food processing as well as new-energy vehicles.

Innovative ways

The development of the industrial park is capital-driven, and with the help of the central and regional governments, several funds have been set up to support its expansion, Xie Donggang, a senior official of the CMQIP Administrative Committee, told the Global Times.

So far, the park has established five funds with a total scale of 4.2 billion yuan, the CMQIP committee said in a statement provided to the Global Times. And investors include local State-owned enterprises, securities companies and banks.

In the coming years, the park will also try out yuan-denominated cross-border payments, Xie said. 

Under the "two countries, twin parks" scheme, both sides have also established a dialogue mechanism on several issues concerning trade, cross-border finance, science and technology cooperation as well as infrastructure.

"China and Malaysia are also exploring possibilities in setting up a joint venture bank in the park, which will also facilitate foreign investment," the official noted.

Trucks have eaten up fugitive dust from dirt on the park's roads, where dozens of farmers have planted flowers.

At some crossroads within the park, safety signs and project planning drafts are displayed in front of construction sites, as more companies are expected to come to invest in the park in the coming years.

From 2012 to 2017, the park accumulated a total of 11 billion yuan in fixed-asset investment, within which 4.3 billion came in last year, an increase of 226 percent year-on-year, the CMQIP statement showed. And the investment is expected to reach 10 billion yuan in 2018. 

The park has also been operated by a joint venture (JV) company invested in by both Chinese and Malaysian investors, which is innovative in the world of corporate management, Xie said.

Existing gaps

Mooi Mok Sang, CFO of CMQIP (Guangxi) Development Co Ltd, the JV that develops infrastructure projects in the park, said the rapid growth of the park is a good sign for investors, but not many companies have actually established operation facilities yet despite the fact that a slew of memorandums of understanding have been signed.

"All companies are looking for profits, what we call upstream and downstream support," Sang said, noting that the park is still in lack of that support, especially in terms of logistics and raw materials.

The shortage of funding is also another reason for some firms halting their projects there.

One of the major projects promoted by the commission was a halal food processing production line that could help companies expand their presence in the Muslim world. However, there has been no concrete progress on this project because one of its Malaysian investors has become entangled in financial problems.

In the next three years, the total investment in the park is estimated to exceed 50 billion yuan. However, its rapid expansion will make funding gaps much more obvious.

Government-backed investment platforms have relatively small scales, and had assets worth about 6.5 billion yuan by the end of 2017, and within that, net assets were 3 billion yuan. As some projects are still at the early stage of development, they won't be able to generate a significant amount of local revenues for further development.

"Here, [the park] needs more time to develop," said the CFO.


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