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Dynamics of One Belt One Road

Muhammad Abdul Mazid | Published: January 12, 2019 20:57:05 | Updated: January 12, 2019 20:59:28


The Kunming Initiative, which is known as "BCIM (Bangladesh-China-India-Myanmar) Economic Connectivity Forum for Regional Cooperation" began its journey in August 1999 in Kunming, capital of China's southwestern province of Yunnan. After 14 years of intense dialogue, today BCIM Forum has become an important sub-regional cooperation mechanism aimed at greater integration of trade and investment among the four countries. Subsequently, to facilitate and consolidate the process of regional economic cooperation and create cross-border trade and investment opportunities, an organisation named "China Kunming International Logistics & Finance Association (ILFA)" has been set up in Kunming with the support of the Chinese government.

The BCIM Forum reached the consensus on establishing non-governmental financing mechanism for China-South Asia International Finance Opening and Cooperation. The Forum will also research on how to promote International Finance Opening and Co-operation, creating and marketing innovative financial products suitable for the objectives. Decisions of all meeting of the Forum shall be submitted to quarterly meetings of BCIM governmental working group, China-Bangladesh governmental working groups, Greater Mekong Sub-region (GMS) leadership summit and other bilateral and multilateral economic forums participated by China. The forum will work together on promoting BICM Economic Corridor building, China-Bangladesh Economic Corridor building and China-South Asia International Finance Opening and Co-operation.

 A preeminent method to enhance regional cooperation in the region could be the creation of regional fund or regional banks to finance aid projects, crisis prevention and financing the private sector. South Asia could take lessons from the experience of ASEAN states in trying to attract intra-regional investments. Mobilising foreign exchange reserve for development projects and crisis prevention could play an important role.

Cooperation could be more successful if there is much scope for market driven integration. In South Asian region, transaction costs are high due to high share of raw materials, high transportation costs, weak infrastructure and fragile financial service. The lack of scope for direct investment has been another obstacle in market driven cooperation. Non-tariff barriers, inefficient border procedures, excessive documentations, burdensome custom procedures, inefficient port operations add significantly to the transaction costs of intra-regional trade.

South Asian economies, under the current scenario, have to play a greater and firmer role in the regional cooperation process. They have to avoid periodic provocations such as terrorist attacks or random economic shocks. Member states have to be willing to grant unilateral concessions. The common approach towards cooperation should be creation of a functional platform having common space for confidence building.

The move for regional cooperation and development came from the Chinese President Xi Jinping with  the initiative of jointly building the Silk Road Economic Belt and the 21st-Century Maritime Silk Road when he visited Central Asia and Southeast Asia in September and October of 2013. According to this Chinese move, the 'belt' essentially includes countries situated on the original Silk Road through Central Asia, West Asia, the Middle East, and Europe. The initiative calls for the integration of the region into a cohesive economic area through building infrastructure, increasing cultural exchanges and boosting trade. Apart from this zone, which is largely analogous to the historical Silk Road, another area that is said to be included in the extension of this 'belt' is South Asia and Southeast Asia. Many of the countries that are part of this 'belt' are also members of the China-led Asian Infrastructure Investment Bank (AIIB). The Maritime Silk Road, also known as the "21st Century Maritime Silk Route Economic Belt"  is a complementary initiative aimed at investing and fostering collaboration in Southeast Asia, Oceania, and North Africa, through several contiguous bodies of water - the South China Sea, the South Pacific Ocean, the wider Indian Ocean area and Bay of Bengal in particular.

The Silk Road was a network of trade routes, formally established during the Han Dynasty. The road originated from Chang'an (now Xian) in the east and ended in the Mediterranean in the west, linking China with the Roman Empire. As silk was China's major trade product, German geographer Ferdinand von Richthofen coined it as the Silk Road in 1877. It was not just one road but rather a series of major trade routes that helped build trade and cultural ties between China, Myanmar, Bangladesh, India, Persia, Pakistan, Iran, Arabia, Greece, Rome and the Mediterranean countries. It reached its height during the Tang Dynasty, but declined in the Yuan dynasty, established by the Mongol Empire, as political powers along the route became more fragmented. The Silk Road ceased to be a shipping route for silk around 1453 with the rise of the Ottoman Empire. At the heart of One Belt, One Road lies the creation of an economic land belt that includes countries on the original Silk Road through Southeast Asia, Central Asia, West Asia, the Middle East and Europe, as well as a maritime road that links China's ports with the African coasts, through the Suez Canal into the Mediterranean.

The One Belt, One Road (OBOR) project aims to redirect China's own domestic overcapacity and capital for regional infrastructure development to improve trade and relations with the ASEAN, Central Asian and European countries. It could have as much impact on China's internal economy as it will have internationally. China's top priority is to stimulate the domestic economy via exports from industries with major over capacity such as steel, cement and aluminum. Many will be build-transfer-operate schemes in which large SOEs will lead the way, but smaller companies will follow. The domestic plan divides China into five regions with infrastructure plans to connect with neighbouring countries and increase connectivity. Each zone will be led by a core province: Xinjiang in the Northwest, Inner Mongolia in the Northeast, Guangxi in the Southwest and Fujian on the coast.

Dr Muhammad Abdul Mazid is former Secretary to GoB and Chairman, NBR.

mazid.muhammad@gmail.com

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