High Risk for Companies Investing in One Belt One Road Projects (OBOR)?

One-Belt-One-Road

According to Beijing, The One Belt One Road Initiative (OBOR) is expected to bring in much more profits than the risks for the investing Chinese companies. The One Belt One Road Project (OBOR) is slated to be highly profitable even though it comes with its own share of legal risks for the investing companies. Will the risks outweigh the benefits for Chinese companies?

Why is India Nervous with Chinese Investments in Iran’s Chabahar Port?

According to a foreign trade specialist, possibilities for compliance-related risks associated with the One Belt One Road Project are much higher than Chinese domestic projects. There could be legal disputes of many kinds for the One Belt One Road project including, the delay or the inability to make payment to the supplier of the equipment, incomplete projects as a result of political disputes, difference in work and cultural ethics, inability to follow set procedures and contracts, and more.

SOEs Equipped with One Belt One Road Risks

The state-owned companies in China or the SOEs own the major construction share and are prepared for the risks that come with it. The other nations involved in the One Belt One Road project may not potentially recognise these state-owned companies as a part of the government and this means these companies need to be extra careful and even more efficient in their workings to avoid legal disputes and lawsuits against them.

China has already faced a cultural working disparity with the Middle East and thus must take all necessary steps to avoid a similar situation. It is integral to document the processes and ensure everything is stated to avoid chaos and confusions at a later stage. China-Saudi Arabia have also faced One Belt One Road related disparities, and thus all measures need to be taken to avoid such a problem.

Also Read: Is Growing Chinese Influence Hampering Pakistan FDI and Turning Investors Away?

One Belt One Road Must Account for Political Instability

The current and probably instability in the political affairs must also be accounted for. The unstable geopolitical conditions in many parts of the world could add to the risks for the One Belt One Road investing companies. However, as stated in the South China Morning Post, a partner from DLA Piper stated that:

“Lots of companies go into those countries knowing [they are politically unstable], and they take that risk because there’s a price and opportunity differential”

Many projects under the One belt One Road initiative are already underway and the SOEs are willing to take on the risks that come with it.

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