The meaning of a Chinese-Turkish freeway in Oman

Motorways do not often inspire. The recent exception came traveling on one through Oman: a new 130-kilometer highway connecting the coastal city of Sur with the capital of Muscat in the north. 

The first portion of the freeway was Chinese-built. The second half was Turkish, the handiwork of Istanbul-based Makyol. The two contractors’ bivouac areas for equipment and materials storage, while idle, piqued my thinking. From the freeway, the major difference appeared to be the fact the Turkish site was tidier and more well-organized; what was striking at the Chinese site were what looked like dormitories, implying an imported labor force.

The question that stuck with me, however naïve, is this: why did they build all this separately, working toward the middle, like the Chinese and Irish who constructed America’s 19th Century trans-continental railroad? Why not pair complimentary skills and competences and do it together?

The question returned to me this week as I worked through a fascinating new report on China, “Facing the Risks of the ‘Going Out’ Strategy,” by the European Council on Foreign Relations. Available at www.ecfr.eu, the report makes no mention of Turkey. But considered from the perspective of Turkey, the laundry list of challenges and problems imbedded in China’s transition from exporter of goods to exporter of investment echoes one opportunity: Turks and Chinese need to pair up and stop building from opposite sides toward the middle – as in Oman.

China’s management problems include ignorance of European legal norms, the chief cause of a multimillion-euro fiasco that led to the collapse of a Chinese road-building project in Poland. China has little agility in moving among radically different business cultures. She has essentially no competence at all in managing crises, despite the fact that China is increasingly moving into “high risk” markets like Afghanistan, Pakistan and Africa.

At the moment, there is modest evidence of emerging commercial collaboration between Turkish and Chinese firms. A promise of $400 million in industrial investment, mainly automotive, made last fall by Industry Minister Nihat Ergün is notable. The other is a preliminary accord signed last year by an İzmir firm for a $1 billion, five-year deal with China to develop a coal mine and open a coal-fired power plant. Not much to brag about when you consider China’s direct foreign investments total $2.5 trillion and her exchange reserves total $2.4 trillion. Still, daily Dünya did report yesterday that Transport Minister Binali Yıldırım has announced that China plans to invest $30 billion in Turkey’s railways.

The large dynamic addressed in the ECFR study is that China sits on a mountain of cash while Europe and America (like Turkey) sit on mountains of debt. China may have grown tremendously through exports, but those exports are now only marginally profitable and China’s labor costs no longer compete with scores of countries. The new role of global financier is China’s only logical exit from a host of long-term dilemmas.

What is not addressed is the fact that the new markets targeted by China are precisely those where Turkey’s new entrepreneurs have been focused in recent decades: the Middle East, Central Asia and Africa. They have skills; they lack deep financing.

An opportunity awaiting both? Read the EFCR report before you decide.