Tagged: Economic cooperation

The Economics of the Silk Road Economic Belt

By Sarah Lain and Raffaello Pantucci

First published by RUSI on November 27, 2015

On 20 October 2015, RUSI held a day-long workshop in Almaty, Kazakhstan, in collaboration with KIMEP University and the Friedrich Ebert Stiftung (FES). The focus of the workshop was the economics behind the Chinese Silk Road Economic Belt (SREB) and its impact in Central Asia. The key areas of discussion examined the potential benefits that the SREB could bring to participating countries, the integration of the SREB with other economic projects and the various funding mechanisms through which the SREB will be financed. The workshop brought together participants from Almaty, Astana, London, Beijing, Shanghai, New Delhi and Russia, including representatives from academia, the private sector and think tanks.

The first session discussed the real benefits of the SREB to both China and participating countries along the road. There is a risk that the SREB will simply turn Eurasia into a set of transport routes emanating from China, aimed at increasing the volume of Chinese goods going to Europe. Other than transit fees, China has not made it explicitly clear as to what other value participating in the SREB can add to economic development. Special economic and free-trade zones are one opportunity, such as that of Khorgos on the border of Kazakhstan and China, or those planned for Pakistan. However, the extent to which these are benefitting Central Asia is still unclear, and those for Pakistan are still under discussion. Kazakhstan’s side of this free-trade zone is noticeably less developed than that of China’s, highlighting that not all of these projects are implemented to meet maximum potential.

Furthermore, China’s emphasis on connectivity as a key goal of the SREB runs the risk of over-emphasising railway development as an end goal, since not all goods are cost-effective to transport by rail. High-value goods are the ideal product: one participant from Kazakhstan noted that Kazakhstan Temir Zholy, the national railway operator, had begun transporting Apple products from China, cutting down delivery time from sixty days (by sea) to eighteen days (by rail). For the SREB project to be successful, therefore, both Xinjiang, the northwestern Chinese province, and the countries along the Silk Road route need to increase their high-tech manufacturing capacity to produce these high-value goods for transport, neither of which are currently visible.
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