In 2013, Chinese President Xi JinPing unveiled the One Belt One Road Initiative, an unprecedented infrastructure development strategy to create a network of railways, roads, pipelines linking China, Central Asia, West Asia and parts of South Asia. Similarly to the Silk Road, it is set to boost trade and financial relations for the countries located along its land and sea routes.
We sit down with Jean-Romain Roig, Head of Freight for Asia, to talk about the potential challenges and opportunities the One Belt One Road Initiative presents for Louis Dreyfus Company (LDC).
– Could you tell us more about this historic initiative?
The project is part of what is referred to as the “China dream”. Its aim is to create international channels at an unprecedented scale to facilitate economic cooperation.
The scale of it is truly epic. We are talking about 1.3 billion people and their needs are vast. They trade energy, goods, materials and much more. It’s important that their logistical corridors are safe, fast, and efficient. This project will be a game-changer – for China and for everybody trading with and within China, including LDC.
– Why is this initiative significant for global trade and more specifically, for Asia?
The answer is short and simple – the scale! It will disrupt old trade flows that have been in place for centuries. It will connect regions that were never connected before. For example, we now have a direct railway between China and the UK, offering a reliable transport route for medium value-added products. This 7,500-mile route is already competing with the fast but expensive airborne routes and with cheap but slower seaborne ones too.
Similarly, the China-Pakistan Corridor, offers a land route from the Middle East into Pakistan and the center of China. This new route replaces seaborne routes via the Straits of Malacca. It will significantly reduce the travel time between China and the Middle East. It will also cut costs in both directions too. The vision is big.
– How would you describe LDC’s current Freight business position in Asia and globally?
Asia has been our fastest growing source of business, especially for freight. In Singapore, our team has grown from 3-4 members in 2013 to 25 at present, reflecting the rapid growth in the region. We also manage a fleet of ships to service our external clients.
In terms of internal volumes, our largest growth has been the transport of soybeans from the Americas – especially South America – into China.
We also export sugar and rice from Asia and transport goods for third-party clients including steel mills, mining companies, and power stations.
Asia is undoubtedly one of our most active and highest growth regions. We have two freight offices in the region – in Singapore and Beijing. A presence in China is obviously mandatory. And of course, we must also be in Singapore, the world’s top shipping hub and the headquarters for many of our third-party clients. In general, we see this initiative opening plenty of growth opportunities especially in the third-party client segment.
– What would you say are the challenges & opportunities of this initiative for LDC?
It is not clear yet but we can be sure it will have impact. This initiative is not going to happen overnight and so for LDC, it is all about adapting to the new realities as they emerge and translating them into opportunities.
We are still at the very early stages of the initiative. Many of the proposed corridors are not yet active and will take years to be built.
Given our global presence and trade flows, we are looking closely at the implications of every project in order to remain competitive.
In our over 165-year history as a leading merchant and processor of agricultural goods, we have successfully navigated many disruptions and changes in our industry so we’re confident that we will continue to do so in future and translate this development into success.