US multinationals angle for inside track in Belt and Road push
While many American observers think Chinese companies will be the main Obor beneficiaries, some US giants such as Honeywell see opportunities to be tapped
A near-consensus view in the US is that China’s One Belt, One Road (Obor) initiative to build an integrated trade zone that connects Central Asia and Europe with Africa and the Middle East will benefit only Chinese companies.
The New York Times recently noted: “As China plans to build a raft of roads, rail lines, ports and airports across Asia, Africa and Europe, skeptics say Chinese companies will be the only real winners from the ambitious initiative.”
But the fact is some US players are well positioned to participate in Obor and are already teaming with Chinese partners in the very nations tapped for development under Belt and Road.
Honeywell International is one of them. The US maker of home thermostats and industrial controls provides a range of engineering and aerospace systems as well as consumer and commercial products.
Honeywell boasts 23 local units and more than 32,000 local employees in countries along China’s New Silk Road. The Morris Plains, New Jersey-based company has been immersed for years in supplying automation and other technology for oil and gas pipelines from Turkey to Uzbekistan to Chinese Central Asia.
It sells oil-refinery equipment and services in the Middle East, and participated in the construction of Dubai International Airport in the United Arab Emirates and India’s Delhi subway system.
China, moreover became Honeywell’s largest overseas market in 2013. It is also the company’s single largest growth contributor.
“The Belt and Road initiative can bring huge opportunities to Honeywell,” Shane Tedjarati, the company’s president for global high-growth regions, told Asia Times in an e-mail.
Why would China tap US firms for Obor? While Chinese companies have made huge technological strides in the past decade, there are still many areas where US companies lead. Pipeline automation — a Honeywell specialty — is one of them.
Much of the technology is churned out by local Honeywell units through joint ventures in China. They also use Chinese workers, enhancing Honeywell’s synergy with Obor.
In turn, Honeywell UOP, which sells oil and gas refinery technology in Central Asia and the Middle East, employs thousands of American workers in research and development, engineering and manufacturing sites across the US.
Other major stateside players keen on joining Obor are General Electric and construction-machinery maker Caterpillar. Multinational GE wants to sell natural-gas-powered turbines to Belt and Road countries, while Caterpillar wants to sell earth movers and other heavy equipment, though they face competition from Chinese rivals.
“No one with an Asian strategy or a Chinese one is going to ignore Belt and Road,” said Gary Kleiman, an emerging-market specialist who heads Kleiman International in Washington, DC. “The numbers and the project pipelines are just too big to ignore.”
But Peter Morici, a former economist with the US International Trade Commission, has an opposing view. “The Chinese just plan on using Belt and Road to benefit their own industry. They are refusing to have any transparency or open bidding,” said Morici, a professor emeritus of international business at the University of Maryland.
“These projects are so large that some US companies will benefit. But they should be open to everybody, and they are not.”
Honeywell notched a regional coup in 2009 when Chinese communications giant Huawei chose it as its automation provider to support the Uzbekistan-China gas pipeline A/B project. Huawei is participating in a massive Central Asia-China gas pipeline project whose main contractor is the state-owned China National Petroleum Corp (CNPC).
Honeywell was tapped again in 2012 for Huawei’s Line C Project, in another leg of the more than 7,000km pipeline network that supplies natural gas from Central Asia to western China’s Xinjiang region. Honeywell provided the software and hardware for the systems that allowed operators to access information and make decisions in managing the safety and integrity of the pipelines.
In another contract win in Kazakhstan in 2013, Honeywell technology was chosen by KazMunayGas’ Pavlodar Oil Chemical Refinery to boost the local production of gasoline and diesel fuel while meeting standards for reducing motor-vehicle pollution. The facility is Kazakhstan’s largest refinery. Honeywell UOP also signed a partnership agreement with China’s Wison Engineering on May 24 this year jointly to provide so-called methanol-to-olefin technologies and engineering, procurement and construction services for customers outside of China.
The joint venture is designed to help gas-rich nations that are participating in the Belt and Road Initiative to produce ethylene and propylene at lower cost.
Honeywell has been generally fast off the mark in exploring Obor’s opportunities.
It helped to host a meeting in Macau in June last year with more than 20 top Chinese engineering procurement and construction contractors during the seventh International Infrastructure Investment and Construction Forum. The forum, which draws delegates from more than 100 countries and regions, showcases support for Obor.
“Honeywell is well positioned to support the Chinese government’s One Belt, One Road initiative through its unique China growth strategy and portfolio,” Honeywell China president Stephan Shang said at the event, touting the company’s range of automation, energy efficiency, safety and security products.
But analyst Kleiman says US firms participating in Obor should exercise caution. He warns that China may shy away from financing the full costs of Belt and Road projects and rely on US companies to shoulder part of the financing through their vendor relationships.
This is possible given the lending and repayment issues Beijing has encountered in such nations as Venezuela and Pakistan.
“If they do have to provide the financing commitment, companies like Honeywell may want to proceed more cautiously on Belt and Road,” Kleiman said.