Sino-MENA: BRI diversification continues

China’s East Hope Group is considering investing USD 10B in the UAE’s Khalifa Industrial Zone Abu Dhabi (Kizad) in three phases over 15 years. An alumina facility is planned in the first phase while a red mud (bauxite) research centre and recycling project will be part of phase two. The final phase would bring large upstream and downstream facilities for the processing of nonferrous metals.

East Hope is a Shanghai-based manufacturing giant, privately-owned by Yongxing Liu, one of China’s richest men, with diversified business portfolios. 

More than 15 Chinese companies have invested in Kizad, including China’s COSCO Shipping, which opened a terminal last year at Khalifa Port. Prior to East Hope Group, other privately-owned Chinese conglomerates have been exploring opportunities in MENA, but some mega projects have not materialised. This includes Haite Group’s USD1B plan to build a manufacturing and technology hub (Mohammed VI Tangier Tech City) in Morocco in partnership with BMCE Bank. However, Haite withdrew from the scheme last year, reportedly over problems with its scale and a dispute over who would own the completed city. Likewise, talks between Egypt and Chinese developer Fortune Land (CFLD) for a USD 20B development in the new administrative capital have fallen through over disagreements on how to share revenue from the project.

We believe the new Kizad venture is more likely to succeed, primarily because: 

1. Abu Dhabi and North Africa offer different policy, economic and market conditions to investors.

2. The nature of business is also different. While East Hope Group focuses on heavy industries, Haite and CFLD were building an industrial park and a new city, respectively, which require further coordinating efforts.

Meanwhile, China Communications Construction Company signed an MoU with the Moroccan government in April 2019, to replace Haite.