ANALYSIS

Building regional connectivity key to China’s ‘Silk Route’ projects

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BANGKOK (IDN): China is keen to demonstrate that its “One Belt, One Road” initiative, dubbed “New Silk Route” by the media, is not geared to exclusively serve China’s economic interests, but to build connectivity in the region and beyond for the benefit of all.

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This was the message from a high-powered Chinese team taking part in a “side-event” organized by China at the 72nd UN Economic and Social Commission for Asia and the Pacific (ESCAP) sessions here on May 17 – 19. It is also an idea that ESCAP is strongly endorsing as it embarks on promoting a new development paradigm for the region.

In an opening address to the event, China’s Deputy Foreign Minister Qian Hongshan said that the “Belt” is designed “to form synergy between the development strategies of various countries, draw on their respective strengths and unleash the huge development potential of this region to achieve common progress.”

He said more than 70 countries and international organizations have expressed their readiness to take an active part in it and around 30 countries have reached cooperation agreements with China. “(China) aims to forge partnerships through dialogue and discussion with a focus on connectivity,” he told the audience of ministers and senior officials from Asia and the Pacific.

More than two millennia ago, the diligent and courageous people of Eurasia (Central Asia) explored and opened up several routes of trade and cultural exchanges that linked the major civilizations of Asia, Europe and Africa, which was collectively called the “Silk Road” by later generations. In Oct. 2013, Chinese President Xi Jingping invoked this spirit of adventure and civilizational connectivity to propose the building of the Silk Road Economic Belt and the 21st Century Maritime Silk Road.

Now known as the One Belt, One Road (OBOR) initiative, China is currently aggressively embarking on turning it from a vision into action. In April 2016, China and ESCAP signed a Letter of Intent on promoting regional connectivity under this initiative. It will bring together ESCAP’s own initiatives in promoting the Trans-Asia Railway Network, the Inter-Government Agreement on the Asian Highway Network and the Inter-Government Agreement on Dry Ports.

“The Belt and Road will bring a range of socio-economic benefits to rural and under-served areas in China, as well as to its neighbors in Central Asia, Southeast Asia and beyond,” said Dr. Shamshad Akther, executive secretary of ESCAP in an address to the seminar. “(The Initiative) is premised on the right principles, as an inclusive and substantive initiative with respect for national sovereignty,” she added.

“The ‘Belt’ aims at promoting a multimodal network, connecting road and rail routes with seaports, expanding fuel transportation networks through oil and gas pipelines, transforming regional power grids and extending ITC fiber-optic links from China through Central Asia to ultimately reach Europe,” noted Akther.

However, she sounded a note of caution, pointing out that at least 10,000 kilometers of the Asian Highway Network needs upgrading, while cross-border trade need multilateral regulatory frameworks to iron out bottlenecks at border crossings and ports for regional trade, and development should not be driven by natural resource extraction with minimal social and environmental concerns which, she said, “are intrinsically unsustainable.”

The Chinese government has drawn up the vision and action plan to jointly build the OBOR and has allocated massive financial resources to the project, including the setting up of the Asian Infrastructure Investments Bank (AIIB), a $40-billion Silk Route Fund and a New Development Bank. The available capital from these institutions is designed to help leverage private investors and lenders to contribute to the required infrastructure financing.

The initiative proposes to build six economic corridors linking China through Southeast Asia, South and Central Asia to Iran, Turkey and Europe—through both land and sea. Another will link China via Mongolia to Russia.

Speaking at the seminar, Russia’s Ambassador to Thailand Kirill Barsky explained how the link via Mongolia will bring together the Eurasian Economic Community—which Russia is developing with its Central Asian neighbors—with East and Southeast Asia. “If we can join hands it will create a bright future for all,” he said.

Mongolia, which organized a side-event of its own on the same topic, expressed strong enthusiasm for the project as a land-locked country. Mongolia’s State Secretary of the Ministry of Foreign Affairs Gankhuyag Damba said that in July 2015, Russia, China and Mongolia signed a Memorandum of Understanding to develop connectivity among the three countries. “A landlocked country like Mongolia has a historic opportunity to link our economies,” he said.

Manlaibayar Yondon, director-general of the Department of Economic Cooperation, in Mongolia, pointed out that this project brought together the Presidents of the three countries for a summit in Sept. 2014, and another was held last year. He pointed out that such meetings have never happened before.

Yondon explained that in 2011 Mongolia had the highest GDP growth rate in the world at 17 percent due to its mining sector activities, where 68 percent of the exports went to China. But the drop in commodity prices and China’s economic downturn brought Mongolia’s GDP growth down to 2.3 percent last year.

“We need to diversify our economy and this (OBOR) initiative will help us to adjust our policies to meet the needs of China and Russia to expand our economy,” he said. Through three rail connections, road networks and power lines, Mongolia hopes to benefit to reach third markets via the two giant neighbors.

Susan Stone, chief of the Trade and Investment Division of ESCAP, warned that the ability of OBOR to expand trade to a wider area depends on the policy environment. “Policy and regulatory environment must be matched with infrastructure expansion,” she argued.

AIIB’s Wang Yanning said that the region is not necessarily short of cash because the saving rate is very high. What is needed is to mobilize these savings resources. “This bank was created so that China can share its economic success with the region,” he said. “There is a huge infrastructure gap in the region.”

One of the participants in the seminar, Afghanistan’s Economics Minister Abdul Sattar Murad, warned that his region is observing a high degree of insecurity and, “if the security situation is not controlled, all these efforts will be impeded.” Nevertheless, he pointed out, economic corridors are being built with neighboring Tajikistan to China and Iran, but he called on Russia and China to build security cooperation into this project.

“We need to counter terrorism and security,” agreed Shen Bing, of the Academy of Microeconomic Research in China. “In the China-Pakistan economic corridor project, it includes security cooperation.”

INTERNATIONAL PRESS SYNDICATE

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