Published:  01:59 AM, 23 April 2017

Dynamics of 'One belt one road' idea of China

Dynamics of 'One belt one road' idea of China

A preeminent method to enhance regional cooperation in the region could be the creation of regional fund or regional Bank to finance aid projects, crisis prevention and to provide finance to the private sector. South Asia could take lessons from the experience of ASEAN countries trying to attract intra -regional investments with the help of ASEAN investment area. Even, mobilizing foreign exchange reserves for development projects and crisis prevention could play an important role. Secondly, initiating regional bodies to manage size, directions and perpetual effect could be an effective dose to boost regional economic cooperation in South Asia. Regional institutions are not only outcome of negotiation processes but also drivers of negotiation processes.

Good examples of regional bodies in other regions of the world are European Commission (EC) and European Central Bank (ECB) in EU, Chiang Mai Initiative Multilateralisation (CMIM) in East Asian and ASEAN+3 Macro-economic Research Office (AMRO) and very recently ,in the offing BCIM-EC. A possible solution to increase financial cooperation can be the building and implementing the mechanisms like Asian Clearing Union (ACU). However, the idea did not provide enough incentives because of limited coverage of products and limited scope of agreements. The Kunming Initiative, which is currently 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 province.

After 14 years of intense dialogue and cooperation, today BCIM Forum has become an important sub-regional cooperation mechanism in the region, aimed at greater integration of trade and investment between the four countries. Subsequently, to facilitate and consolidate the process of regional economic cooperation and create cross border trade and investment opportunities both at public and private sector level, an organization named "China Kunming International Logistics & Finance Association (ILFA)" has been set up in Kunming at the support of the Chinese Government.

The Forum reached the consensus about establishing non-governmental financing mechanism for China-South Asia International Finance Opening and Cooperation. The Forum will also research on how to promote the 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 major obstacle to cooperation is that it included state of a low -level of development and similar resource endowment though there is much scope for intra industry specialization between member states of South Asia region. Cooperation could be more successful if there is much scope for market driven integration. In South Asian region transaction cost are high due to high share of raw material, high transportation costs, weak infrastructure and fragile financial service. The lack of scope for direct investment has been another obstacle in the market driven cooperation. Non-tariff barriers, such as 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 current scenario, have to play a greater and firm role in the regional cooperation process. They have to avoid periodic provocations such as terrorist attacks or random economic shocks. Member states have to enhance their stance by willingness to grant unilateral concessions. The common approach towards cooperation could be and must be, responsible that might create a functional platform making comparable connections of interdependence having common norms and confidence building.

Again , in this context, South Asia Sub-regional Economic Cooperation program (SASEC) that was started in 1996 between Bhutan, Bangladesh, India and Nepal for sustainable economic development ,under the banner of Asian Development Bank ( ADB) could be extended to other areas of cooperation and states of the region .Furthermore, governments need to initiate a plan and negotiate with their counterparts on the one hand, and with domestic political lobbies on the other . To prevent the conflicts in South Asia it is necessary to give a big push to the process of regional cooperation both within and beyond the agenda of the SAARC. As establishment of peace and financial consolidation was a primary reason in war affected Western Europe to start regional cooperation process in the 1950s.

Civil societies can act as catalysts in the initiation of regional cooperation initiatives as they generally have a significant voice in the policy-making processes of their respective states and are recognized across borders for their academic, research as well as philanthropic activities. Civil societies could therefore influence the regional cooperation process by providing a vision, interpreting and explaining that vision to different stakeholders , especially multilateral  parties in their respective nations. They can inform, educate and advocate the agenda of  different  groups, to achieve a consensus on several  regional issues having economic importance.

Move for the regional development the Chinese President Xi Jinping came up 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, essentially, the 'belt' 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 broadening 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.

More intimately the China-Pakistan Economic Corridor (CPEC) and the Bangladesh-China-India-Myanmar(BCIM) Economic Corridor are officially classified as "closely related to the Belt and Road Initiative. The Asian Infrastructure Investment Fund (AIIB) was founded by China in 2014 with the participation of 56 other countries is a development bank dedicated to lending for projects that are part of the initiative. In November 2014, Xi Jinping announced plans to create a 40 billion USD development fund, also known as Silk Road Fund, which will be distinguished from the banks created for the initiative. As a fund its role will be to invest in businesses rather than lend money for projects.

The Karot Hydropower Station in Pakistan is the first investment project of the Silk Road Fund, and is not part of the much larger CPEC investment. Along with this the Leading Group for Advancing the Development of One Belt one Road  was formed sometime in late 2014, and its leadership line-up publicized on February 1, 2015. This steering committee reports directly into the State Council of the People 's Republic of China and is composed of several political heavyweights, evidence of the importance of the program to the government. In March 2014,  the Chinese Premier called for accelerating the "One Belt One Road" initiative along with the Bangladesh -China-India -Myanmar Economic Corridor and the China -Pakistan Economic Corridor  in his government work report presented to the annual meeting of the country's legislature.

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 China's silk was the 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 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, whose rulers opposed the West. 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 South east Asia ,Central Asia, West Asia, the Middle East and Europe, as well as a maritime road that links China's port facilities with the African coast, pushing up 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 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 overcapacity 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 neighboring 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.

However, very recently the Economist Intelligence Unit (EIU) has indicated that up to 60 countries may be included in OBOR with stops across three different continents. In addition to political objectives, OBOR brings a strategic focus which encourages Chinese firms to go abroad in search of new markets or investment opportunities. Led from the highest levels of the government the OBOR push is backed by substantial financial firepower, with the government has launching a $50bn Silk Road Fund that will directly support the OBOR mission.

While the strategy promises opportunities for domestic companies, the route is unlikely to be an even one. The proposed countries range from Singapore to Syria. The companies involved could be heading into territories that may be strategically important for China's foreign relations, but challenging to navigate. Some worry that China may move for naval expansion and energy security. The writer is former Secretary   and Chairman NBR





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