Kunaka, Charles; Liu, Xingjian; Derudder, Ben
This article published by the World Bank examines under which conditions the new Belt and Road Initiative (BRI) led by China will benefit countries involved and what opportunities emerge as a result of participating in the initiative.
The Belt and Road Initiative, first defined in 2013 by the President of China, is the single largest initiative to enhance global connectivity. It encompasses some 65 countries that contain between them more than half of the world’s population, 40% of world GDP, and could cost more than one trillion dollars to build.
It is admitted that there is need for detailed and objective analysis of the initiative to guide countries on investments and to find out how multilateral institutions like the World Bank should respond. In fact, there is strong demand both in World Bank client countries and within the World Bank itself for detailed analytics to support and inform how the One Belt One Road (OBOR) will impact trade and investment flows between China and BRI partner countries.
Methodology and Results in short
Ultimately, an initiative such as the BRI should result in an increase in interactions, productivity, competition, and market opportunities deriving from lower transport and logistics costs between connected economic centers. The paper therefore seeks to enhance the general understanding of interactions between economic centers along the BRI corridors.
The underlying hypothesis is that the ability of countries to maximize the benefits of BRI will depend on the position of each country in the new connectivity maps that are emerging. Ultimately, an initiative such as the BRI will change the way economic centers, as the most productive nodes in each country, are connected. Productivity, competition, market opportunities, and transport and logistics costs are all likely to be impacted. However, the magnitude of the effects will depend on where along the Belt corridors a city is located relative to all other countries and economic centers. Ultimately, the difference in outcomes will depend on whether a center intermediates trade flows in the network or serves as an end node that generates inbound and outbound flows. Centers that are not well connected in the new BRI maps may not experience much positive impact.
Policy recommendations for the future development of the BRI’s corridors are given in order to avoid a possible disequilibrium between the different networks. Emphasis should therefore be on investing in the weak links within the networks to enhance the development of the different connected cities, countries and regions as a whole.