Alessia A. Amighini, Co-head of Asia Centre under Italian think tank -- the Institute for International Political Studies (ISPI), presents in her latest article on the Belt & Road Initiative (BRI) that the initiative will have a great regional and international development impact and shape the future wave of globalisation as well.
By facilitating landlocked countries’ access to the sea, Alessia believes the BRI has the potential to improve connectivity and therefore promote socio-economic development over vast areas of land extending from the inner and western provinces of China to countries in Central Asia and the rest of Developing Asia, but also to the Middle East and Eastern Africa.
All Central Asian countries except Pakistan are landlocked. In her view, this is a major disadvantage insofar as access to the sea and the existence of a direct maritime connection play an important role in determining trade costs.
As Alessia estimates, the absence of a direct maritime connection has been estimated to have the same impact on freight rates as an increase in distance between two countries of 2,612 km and maritime connectivity is particularly important because maritime transport is at the core of international trade in merchandise. According to UNCTAD, around 80 percent of the volume of goods traded in the world travels by sea.
“With the exception of China, developing countries are still far below their potential in terms of connectivity, particularly maritime connectivity, with only half of the average number of direct maritime connections (i.e. without transhipments) of developed countries. According to UNCTAD, this situation persists, despite their growing share in seaborne trade, which rose from 18 percent to 56 percent of the world total between 1970 and 2010.
Relevant research has recently found that the existence of a direct maritime connection (and not simply of maritime connectivity per se) plays an important role in determining trade costs. The absence of a direct connection is associated with a drop in exports value of 55 percent and any additional transhipment is associated with a drop in exports value of 25%.
The most unexploited potential trade seems to be between Central Asian countries and their largest neighbouring economies, i.e. China and Europe. Improving infrastructure along the Silk Road Economic Belt has the potential to contribute also to regional stability in Eurasia.
Moreover, the BRI is a potential game changer in international trade to the extent that it will rebalance the current dominance of Asia-Pacific on world trade flows in terms of both trading countries and trade routes.
Insofar as missing infrastructure acts as a major barrier to trade flows, the BRI most evident and direct impact will be on the volume of trade among the countries covered by the initiative.
Trade creation along the Belt and Road will occur through two major channels: on the one hand, through the expansion of trade ties between pairs of countries that are already important trade partners, facilitated by the decrease of transport costs and trade barriers; on the other hand, through new trade routes that will unlock potential trade ties among hitherto mutually isolated trading partners.
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(Alessia A. Amighini, Co-Head of Asia Centre, Institute for International Political Studies)
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