Ivan Liew at Belt and Road Pioneer Forum

3 November 2017, Friday

Secretary General Alimov, ambassadors, ladies and gentlemen.

Good morning, I am Ivan Liew representing Kaisun Energy Group Limited to share with you our journey on being a pioneer in the Belt and Road from the perspective of an Independent and Non-Executive Director. I hope to give a glimpse of the hardship and difficulties Kaisun has endured over the years to get to where we are today. This is not to say we are painting a rosy picture of our accomplishments. No, it is far from that but I can say for certain we are constantly making improvements and we are now at a much better position than we were 6 years ago when we first invested in Belt and Road.

But first, let me take a couple of minutes to talk about Kaisun’s operations. We are a Hong Kong GEM board listed company, and before we diversified into Belt & Road operations and investment portfolio which includes Mining & Machineries Manufacturing; Agriculture; supply chain Management; and some New

Economy business, we started out as a minerals and energy company with our coal mining operation in Inner Mongolia of China back in 2008. But in 2010, there was a nation wide consolidation of coal industry so we had to make the decision of either acquiring more coal mines and to continue mining coal in Inner

Mongolia or we could sell our coal mine and look for other opportunities.
At that time the Board decided it would be best to take profits on investment as we do not see further growth potential in the coal mining industry within China for at least in the next 5 years and we made a good move as we were proven correct with that decision. What happened next was that the Group then acquired the mining rights of a few coal mines in Belt & Road countries. This occurred because we believed in the “going-out strategy” of China – which is actually the predecessor of the Belt and Road Initiative. A few Board members who are experts in minerals and energy assisted the Company on the investment due diligence. After visiting the sites, they were really impressed with the Coal quality and resources. One of the coal mines was actually a world class anthracite mine with a potential 158 million tonnes of resources. Having that knowledge, everybody was excited with the potential of making a lot of money. Unfortunately, that plan did not work out and instead became a very costly and painful move for Kaisun.

But before I continue with that story, allow me to explain the role of an Independent Non-Executive Director. As an INED, we add value to the company by providing expertise and input from an external and independent point of view in order to protect the interests of the shareholders. In other words, we are internal gatekeeper that do not interfere with day to day operations but serve as a monitoring role to make sure strategic directions, values, and standards are being followed, and to ensure goals and objectives are met while risks are properly managed.

But, as an INED, we share the same duty of care as any other Board member. The Stock Exchange of Hong Kong made sure we knew about it and by putting it in black and white in the Corporate Governance Code, stating INED have the same legal responsibilities as the executive directors of the company. So as an INED, going into the Belt & Road is not something that I am totally comfortable with as the company treads on unfamiliar territories and it is something the regulators had little idea about.

Hence, for the growth and future of the company the Board decided to journey into Belt and Road. In the first instance, all seemed well and the Group was very eager to have feasibilities studies completed and constructions underway because we were all eager to see the production in place asap. But, as more and more financial and human resources were invested, the more problems and difficulties the Group encountered.

The biggest problem we encountered was language because the locals spoke both their local language and Russian language while our team were mostly English and Chinese speakers. So communication presented a huge issue. And to rectify this problem we quickly hired translators but that caused other problems because there was no way we could have known if the messages have been delivered properly or even worse is that if information were being misrepresented. From this, the Group has learnt to establish a local team and hired our own in-house experts to ensure proper communication flows. That was one of the major lessons in the Belt & Road - effective communication. And we are not just talking about communication but we also need our people to understand the culture because only by respecting the local culture, then can we succeed in achieving our goal.

A year in and the Group was still experiencing problems but we have learnt to deal with them one at a time. We never really felt we were in total control of the whole situation and felt very reactive as we could only deal with new problems whenever they arose. One fine example is a lawsuit in regards to our anthracite mine. This mine is actually located at very high altitude and we needed expertise and financial help in developing it. So we invited one of our mining peers from Xinjiang to co-develop this coal mine. We have entered into a non-binding memorandum of understanding for Kaisun and our peer to co-develop the mine. To avoid any confusion, the announcement of this memorandum clearly stated that this was non-binding and will require a further agreement to make this into a proper contract.

However, once the invested country saw this announcement they immediately requested us to pay a very hefty sum of Taxes based on a potential deal. This tax was not justifiable and we thought it was simply a huge misunderstanding because that was the first time we have heard about paying taxes based on a MOU.
So naturally, we hired a lawyer to represent us. Through the local lawyer, we tried to explain the situation but the tax department did not listen and took us to court. By that time, no local lawyers were allowed to represent us because they were all afraid to fight against the authorities, so we were forced to hire Russian lawyers.

Management of the Group were very disheartened as we had made conscious efforts to promote the country, we created jobs for the locals, educated the locals and in return we were treated worse than criminals. We were disillusioned and desperate for intervention. We then realized we could turn to our Country to seek help for a way out. But despite going through all this, Kaisun still believes in the potential of Belt and Road and til this day we are still actively promoting it and doing business in the region.

The court case was one of the hardest and most costly lesson for the Group to truly learn how to survive in the Belt and Road. So through this lesson we realized it was important that we take matters into our own hands and be proactive instead of waiting for things to change. So the Group decided to spread our investments into a diversified portfolio in the Belt & Road. Now, as a result, the Group has businesses and investments, in Central Asia, Xinjiang, Shandong, Shenzhen, Macau, Vietnam, the U.K. and of course Hong Kong.

Given our knowledge and experience gained over the years, maybe we should have taken extra considerations on managing the investment risks in Belt and Road. But from an objective perspective, the Board understands that Belt & Road development is the only way forward especially for Hong Kong. Since it is a national strategy promoted by the government, we are now faced with a new dimension of global business opportunities through connectivity and cooperation.

Hong Kong is in the best position to capture these opportunities as we are an international financial center in a strategic location.
Despite the hardship we have been through over the years, we count ourselves very blessed that we have built many strong and opened relationships with both local and international partners. We have met many talented, intelligent and wonderful people along the way and I hope our collaborative efforts, will help us all to share the potential impact on growth and prosperity together.














       哪怕我們遇到如此多的事故和問題,凱順依然希望借助「一帶一路」倡議來進行擴展。這次事件是本集團在「一帶一路」投資中最困難,最昂貴的教訓之一。通過這一教訓,我們意識到我們要把事情掌握在自己手中,而且要積極主動,而不是等待事情的改變。因此集團決定將投資分散到一帶一路的多元化投資組合。 現在,集團在中亞,新疆,山東,深圳,澳門,越南,英國,當然還有香港,都有企業和投資。