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OBOR will bring benefits to Eastern Europe but will face region-specific challenges

Eastern Europe is not an obvious region for inclusion in China's One Belt One Road (OBOR) plans, since it is geographically, politically and culturally removed from China and from many of the other countries in the OBOR project.22 Aug 2016

This is part of our series analysing China's One Belt One Road infrastructure investment programme. For more, sign up to request Pinsent Masons detailed region by region guide to OBOR.

That said, much of the region is in need of infrastructure investment and Chinese funding will bring opportunities both for the countries involved and for Western European businesses who take the opportunity to get involved.

Eastern Europe includes wealthier countries like Poland and the Czech Republic as well as poorer and much less developed areas in Macedonia and Serbia that lack basic infrastructure. Politically, it's a very diverse area, with some instability as several countries attempt to establish democracy. 

The OBOR project has really only recently begun, and it will be some time before we know details of what work will be funded by Chinese investment. It is likely to involve a 'jigsaw' of many smaller, relatively modest projects, including the maintenance and upkeep of existing infrastructure as well as more high profile road and rail developments.

There will be work around logistics, in terms of warehousing and depots for distribution, and then there is the 'one road' aspect of the plan, which refers to sea routes, where we will see work around ports including dredging and other infrastructure work to make them usable.

There has been some talk of private-public partnerships in the region, rather than solely Chinese investment. If that is the case, it will create opportunities for Western European businesses to provide both funding and experience in these types of project. I would expect to see joint venture arrangements with one Chinese partner, one local partner and a third party that specialises in either the work to be done or the funding arrangements needed. The Chinese are particularly good at these arrangements, choosing partners with the right technologies or skillsets to get things done,

Western companies may want to begin investigating opportunities now, by developing relationships with potential partners in Eastern Europe and keeping up to date with any announcements.

Eastern European countries are relatively 'western' compared to other countries in the OBOR plans, and expectations are likely to be higher in terms of building standards and ways of operating than in other regions. This will create challenges for any OBOR projects, as contractors adjust to what is expected.

One project to build a highway across Poland, linking Germany to Russia, for example, was abandoned in 2012 when the Chinese contractors failed to perform to the expected standards.

But the Chinese have learned quickly and adapted well, and the learning curve over the past ten years has been a dramatic one so it is unlikely that the same issues will recur.

OBOR has been described as another phase in the opening up of China, part of a conscious decision to connect with the rest of the world, and the country's contractors have learned to work with different cultures.

Mark Harris is an infrastructure expert with Pinsent Masons, the law firm behind Out-Law.com.