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The state and prospects of economic cooperation with Central and South Asian countries

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The foreign policy of Uzbekistan, which is aimed at rapprochement and strengthening good-neighborly, friendly and mutually beneficial relations with neighboring states, has created a solid foundation for the development of trade, economic and investment cooperation between the countries of Central Asia (CA).

The CA countries cover a market area of 75.3 million people. In 2020, the total GDP of the CA countries amounted to $291.1 billion and foreign trade turnover was $142.5 billion. 

Macroeconomic indicators of CA countries

CountriesPopulation (mln.)Foreign trade turnover (US doll. bln.)GDP (US doll. bln.)GDP per capita (US doll)
 2021201920202019202020192020
Kazakhstan18,996,185,0181,7169,898129056
Uzbekistan34,541,836,357,957,717241686
Turkmenistan*6,113,913,946,848,077248074
Kyrgyzstan6,66,95,78,57,713231290
Tajikistan9,34,54,68,37,9873834
Total75,3168,2145,5303,2291,1  

Source: Statistical departments of the CA countries, * knoema.ru / atlas (2019)

In recent years, the economies of the CA countries have had high growth rates in the range of 5-7% and even in the crisis year of 2020, the growth rates were negative only in Kazakhstan and Kyrgyzstan. According to the forecasts of the World Bank, the CA countries in 2021 will be able to restore the positive dynamics of GDP growth and increase the growth rates in 2022.

Dynamics of GDP growth rates of CA countries (in %)

 20172018201920202021 (**forecast)2022 (**forecast)
Kazakhstan4,14,14,5-2,62,53,5
Uzbekistan4,55,45,61,64,34,5
Turkmenistan*6,56,26,31,8
Kyrgyzstan4,53,84,5-8,63,84,5
Tajikistan7,17,37,54,53,55,5

Source: Statistical departments of the CA countries; * knoema.ru / atlas; ** World Bank forecast

Favorable conditions for mutual trade have been created between the CA countries within the framework of the following trade agreements:

– all CA countries (except for Turkmenistan) are parties of «Agreement on a free trade zone of the CIS» from 2011, which the participating countries do not apply import customs duties to each other;

– Kazakhstan, Kyrgyzstan and Tajikistan are members of the WTO, Uzbekistan is actively negotiating on accession to the WTO, Turkmenistan in 2020 received observer status in the WTO;

– Kazakhstan and Kyrgyzstan as members of the EAEU are in a common customs space;

– the CA countries also have bilateral agreements to create favorable conditions for mutual trade.

Although CA countries are open to international and regional trade, labor and capital movements at various levels, they have great potential for building closer partnerships and integrated interactions with each other.

 In 2020, the total trade turnover (in goods, excluding trade in services) between the CA countries amounted to $12.2 billion, the total foreign trade turnover – $145.5 billion.

Thus, the share of intraregional trade in the total foreign trade turnover of the CA countries amounted to 8.4%.

Mutual trade (in goods) between CA countries in 2020 (US doll. mln.)

CA countriesKazakhstanKyrgyzstanTajikistanTurkmenistanUzbekistanTotalShare of trade turnover with CA countries in total trade turnover
(in %)
Kazakhstan796,2791,4128,02916,54632,15,5
Kyrgyzstan794,137,311,8341,31184,521,0
Tajikistan909,736,87,8333,81288,128,3
Turkmenistan*145,98,012,2440,3606,44,5
Uzbekistan2856,3878,6360,6342,44437,913,3
Total4706,01719,61201,5490,04031,912149,0 

Source: Statistic offices of Kazakhstan and Kyrgyzstan. Central banks of Tajikistan and Uzbekistan. Data on Turkmenistan for 2019 according to trademap.org

Note: Numbers in calculations of trade turnover volumes of Central Asian countries may differ depending on chosen calculation method by countries’ statistic offices

At the same time, it should be noted that the participation of CA countries in mutual intraregional trade is different.

Thus, the share of Kazakhstan and Turkmenistan in the volume of trade between the CA countries, their total trade turnover is the lowest and amounts to 5.5% and 4.5% respectively. The participation of Tajikistan and Kyrgyzstan in intraregional trade is the highest at 28.3% and 21.0% respectively. Uzbekistan occupies an intermediate position with an indicator of 13.3%.

Foreign trade of Kazakhstan and Turkmenistan is less focused on the regional market due to the predominance of hydrocarbons in their exports, which are mainly supplied to non-CIS countries (European countries, China, Russia) and most of the imports also go to these countries.

Indicators of share distribution in total trade turnover of Central Asian countries by countries and regions in 2020

 Share (in %) of total trade of the country
CA countriesRussiaChinaEU
Tajikistan28,321,310,421,6
Kyrgyzstan21,027,613,823,8
Uzbekistan13,315,517,736,4
Kazakhstan5,521,418,136,8
Turkmenistan*4,55,165,710,0

Source: According to the data of statistic offices of CA countries,    

* Data on Turkmenistan for 2019 according to trademap.org

Despite the fact that the majority of the commodity exports of the CA countries are fossil natural resources, regional trade with each other to a much lesser extent than they sell them outside of the region.

In particular, in 2020, the share of gold in total exports of Tajikistan amounted to 58.1%, Kyrgyzstan – 50.2% and Uzbekistan – 38.3%, which is supplied to Switzerland or Great Britain. About 66% export of mineral products are supplied mainly to the countries of the European Union in the total export volume of Kazakhstan. The main share of Turkmenistan’s exports, almost 70-80% falls on China, where Turkmen natural gas is mainly exported.

In this regard, the share of mutual trade between CA countries will be much higher if their exports of raw materials (oil, gas and precious metals) to third countries are not taken into account.

At the same time, the CA countries have great prospects for increasing the volume of intraregional trade in finished products, which meets the interests of all countries in the region.

The creation by CA countries of regional value chains, including industrial and agricultural clusters, will contribute to an increase in the number of joint ventures for the production of finished products that can be exported to third countries.

Regional integration will help reduce the costs of producers and promote the production of products that are competitive on foreign markets. In addition, when the CA countries carrying out trade operations within the region, they have the shortest distances for the delivery of goods, which gives them advantages in saving on transport costs.

The interests of the CA countries also meet the joint creation of international transport corridors and international transport infrastructure in the region, which will help to reduce transport costs in the supply of export products from CA countries to world markets.

It should be noted that all the countries of the CA region are interested in increasing export volumes and diversifying their foreign trade, entering new foreign markets, as well as creating and using new transport routes.

Currently the main trade routes of the CA countries are laid in the northern direction, encouraging area of ​​economic cooperation is the southern direction, including South Asian countries, which geographically lies on Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan, India and Sri Lanka.

Economic cooperation potential between the Central and South Asian countries

Uzbekistan

The total volume of Uzbekistan’s foreign trade with the countries of South Asia in 2020 amounted to 1.38 billion dollars or 3.8% of the total foreign trade.

The commodity turnover of Uzbekistan with the countries of South Asia, the largest volume falls on Afghanistan – 56.2%, India – 32% and Pakistan – 8.9%. Trade with the Maldives and Nepal is insignificant, while there is practically no trade with Bhutan.

Foreign trade turnover (FTT) indicators of Uzbekistan with the countries of South Asia in 2020 (US doll. mln.)

Trade turnoverShare in total FTT (in %)ExportImport
Total, including:36 299,8100,015 127,721 171,5
Afghanistan776,92,2774,62,3
India442,61,219,6423,0
Pakistan123,30,398,524,8
Bangladesh37,90,122,315,6
Shri Lanka1,80,00,31,5
Overall1 382,83,8915,5467,3

Source: State statistics office of Uzbekistan

In the trade with Afghanistan, the main share (99.7%) is taken by the export of Uzbekistan, which makes Afghanistan a profitable trade and economic partner. The main share of Uzbekistan’s exports to Afghanistan is electricity (30% of exports), wheat flour and legumes (24.1%), as well as metallurgical products.

It is also planned to implement the investment project “Construction of a 500-kW power transmission line «Surkhan – Puli-Khumri» on the territory of Afghanistan. The length is 260 km and worth about $150 million, through loans from ADB and Uzbekistan will finance $45 million. This transmission line will allow connecting the power system of Afghanistan to the unified power system of Uzbekistan and Central Asia.

In November 2020, the President signed two important documents concerning Afghanistan – the Decree «On measures to further expand and strengthen economic cooperation with the Islamic Republic of Afghanistan» and the Decree «On measures to further develop the activities of special economic and small industrial zones in the Surkhandarya region and the city of Tashkent», which create new legal conditions for strengthening economic cooperation with Afghanistan.

The documents provide for the signing of an agreement on preferential trade between Uzbekistan and Afghanistan and bringing the annual volume of mutual trade to $2 billion by 2023.

For these purposes, a free trade zone «International Trade Center Termez» is being created on the territory of Termez with Afghanistan, with an appropriate logistics infrastructure and a special visa-free regime.

On February 2, 2021, a meeting of the trilateral working group was held in Tashkent with the participation of the government delegations of Uzbekistan, Pakistan and Afghanistan on the implementation of Mazar-i-Sharif – Kabul – Peshawar railway project. As a result of the meeting, a joint “Road Map” was signed for the construction of the Mazar-i-Sharif – Kabul – Peshawar railway.

The construction of this railway will significantly reduce the time and cost of transporting goods between the countries of South Asia and Europe through Central Asia.

This railway will provide access to the Pakistani seaports of Karachi, Qasem and Gwadar and will connect the South Asian railway system with the Central Asian and Eurasian railway systems and significantly increase the transit potential of Central Asia.

India ranks second in terms of Uzbekistan’s trade with the South Asian countries. At the same time, Uzbekistan’s export volumes lag significantly behind imports, which are mainly represented by pharmaceutical products in demand in Uzbekistan.

Uzbekistan’s exports to India mainly consist of textile products (13.6% share), base metals (8.4%), food products (5.8%) and etc.

Imports of Uzbekistan from India are growing mainly due to the growth of purchases of “pharmaceutical products”, the share of imports is 47%.

At the same time, investment cooperation in the pharmaceutical sector is successfully developing with India, joint ventures have been created on the territory of the «Andijan-Pharm FEZ». Branches of the Indian universities «Amity» in Tashkent and «Sharda» in Andijan were opened to train IT specialists.

In recent years, trade and economic cooperation of Uzbekistan with Pakistan has begun to develop actively, the volume of exports of finished and agricultural products has increased.

In the structure of Uzbekistan’s exports to Pakistan: food products make up 81%; textile products – 10.5%; services – 3.5%.

In the structure of imports from Pakistan: pharmaceutical products account for 37%; food products (potatoes, citrus fruits, rice, etc.) – 36%, transport services – 10%; chemical products – 4.5%.

Furthermore, Uzbekistan is interested in expanding cooperation with Pakistan in the transport sector and joint implementation of the above project for the construction of the «Mazari – Sharif – Kabul – Peshawar» railway line.

Kazakhstan

Foreign trade of Kazakhstan with the countries of South Asia mainly falls on Afghanistan, India, Pakistan, less on Bangladesh and Sri Lanka. In 2020, the volume of foreign trade amounted to more than $2.3 billion or 2.3% of Kazakhstan’s total foreign trade turnover.

Foreign trade turnover (FTT) indicators of Kazakhstan with the South Asian countries in 2020 (US doll. mln.)

 Trade turnover (TT)Share in total FTT (in %)Export  Import  
Total85 031,1100,046 949,738 081,4
India1865,41,91572,8292,6
Afghanistan401,80,4399,02,8
Bangladesh36,30,01,734,6
Pakistan27,10,01,925,1
Shri Lanka8,30,03,25,1
Overall2338,92,31978,6360,2

Source: National Statistics Bureau of Kazakhstan

At the same time, the largest volume of trade between Kazakhstan and the countries of South Asia falls on India – 1.9 billion dollars. (80% of trade with the countries of South Asia) and Afghanistan – 401.8 million dollars (17%).

Kazakhstan mainly exports oil (about 50% of the export volume), chemical elements and their compounds (ferroalloys, titanium, phosphorus), as well as silver in the form of powder to India.

Kazakhstan’s imports from India are represented by medical equipment, medicines, textiles, tea products, etc.

Kazakhstan is also interested in the development of the North-South transport corridor and the use of the Iranian port of Chabahar to increase trade with India and other countries of South Asia.

Kazakhstan is a major supplier of food products to Afghanistan, like grain and flour products.

Kyrgyzstan

Among the Central Asian countries, Kyrgyzstan has the lowest indicators of foreign trade with South Asian countries – $61 million or 1.0% of its foreign trade turnover, which is mainly (84%) represented by imports from India.

Foreign trade turnover (FTT) indicators of Kyrgyzstan with the South Asian countries in 2020 (US doll. mln.)

 Trade turnoverShare in total FTT (in %)Export  Import  
Total5648,6100,01964,53684,1
India48,60,96,841,8
Pakistan7,40,11,95,5
Bangladesh1,90,00,01,9
Shri Lanka1,60,00,01,6
Afghanistan1,50,01,30,2
Overall61,01,010,051,0

Source: National Statistics Committee of Kyrgyzstan

At the same time, Kyrgyzstan together with Tajikistan, is interested in the implementation of a project for the delivery of electricity from Central Asia to South Asia through the CASA-1000 (Central Asia – South Asia) transmission line. The project plans to supply annually from April to October 2 billion kWh of electricity from Kyrgyzstan and 3 billion kWh from Tajikistan to Afghanistan and Pakistan.

In February 2021, Kyrgyzstan planned to begin construction of power lines on its territory within the framework of this project.

It should be noted that the total cost of the CASA-1000 project is about $1 billion.

Tajikistan

The foreign trade turnover volume of Tajikistan with the South Asian countries amounted to 185.2 million dollars or 4.0% of its total turnover in 2020.

Tajikistan’s main trading partners are Afghanistan, Pakistan and India in South Asia.

Foreign trade turnover (FTT) indicators of Tajikistan with the South Asian countries in 2020 (US doll. mln.)

 Trade turnoverShare in total FTT (in %)Export  Import  
Total4 523,7100,01 174,43 349,3
Afghanistan98,12,297,90,2
Pakistan56,31,210,445,9
India24,30,50,124,2
Bangladesh6,30,14,22,1
Overall185,04,0112,672,4

Source: National bank of Tajikistan

Due to its geographical position, Tajikistan is interested in the development of alternative transport routes, including through the countries of South Asia, in particular, Afghanistan and Pakistan.

The shortest seaport for Tajikistan is the Pakistani port of Karachi (2.7 thousand km), while the distance to the Iranian seaport of Bandar Abbas is 3.4 thousand km.

Another important project for Tajikistan in South Asia is the CASA-1000 transmission line project to export electricity from Tajikistan and Kyrgyzstan to Afghanistan and Pakistan. Within the framework of the CASA-1000 project, Tajikistan plans to export 75 billion kWh of electricity within 15 years.

In 2021, Tajikistan plans to complete the laying of power lines on its territory within the framework of this project. Currently, Tajikistan annually exports to Afghanistan up to 1.5 billion kWh. electricity.

Turkmenistan

Turkmenistan is also actively developing trade and economic ties with the countries of South Asia. In 2019, the trade turnover amounted to $462.3 million or 3.4% of its total turnover. The main trading partners of Turkmenistan are Afghanistan, India and Pakistan among the countries of South Asia.

Foreign trade turnover (FTT) indicators of Turkmenistan with the South Asian countries in 2020 (US doll. mln.)

 Trade turnoverShare in total FTT (in %)Export  Import  
Total13849,8100,010826,13023,7
Afghanistan410,93,0410,00,9
India42,00,33,738,3
Pakistan9,40,16,72,7
Overall462,33,4420,441,9

Source: trademap.org

The main share (70%) of Turkmenistan’s exports to Afghanistan consists of mineral products (oil products and natural gas). In October 2020, the following agreements were signed between Turkmenistan and Afghanistan:

– Memorandum of Understanding between Turkmengaz and Afgan Gaz Enterprise on the creation and development of a natural gas market in Afghanistan;

– Agreement on the purchase of electricity by Afghanistan within the framework of the Turkmenistan-Afghanistan-Pakistan power transmission line (PTL) project.

An important project of Turkmenistan with the participation of South Asian countries is Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline with a capacity of 33 billion cubic meters of gas per year.

The consortium for the construction of TAPI includes the state concern Turkmengaz (owns a controlling stake), as well as Afghan, Pakistani and Indian gas companies.

Turkmenistan planned to complete the construction of the TAPI gas pipeline on its territory in 2020 and in 2021 to begin laying the pipeline in Afghanistan.

Prospects for economic cooperation with Central and South Asian countries.

The main trading partners of the CA countries among the South Asian countries are Afghanistan, India and Pakistan. At the same time, the most active trade and economic cooperation of the CA countries is with Afghanistan, due to the geographical proximity, as well as the great dependence of the Afghan domestic market on imports of food and industrial products.

The Central Asian countries are actively cooperating with India and Pakistan also within the framework of the SCO. In addition, India is negotiating a Free Trade Agreement with the EAEU, which includes Kazakhstan and Kyrgyzstan and with Uzbekistan to conclude a Preferential Trade Agreement.

At the same time, the increase in trade with Pakistan and India largely depends on the creation of reliable routes for the delivery of goods. The project for the construction of the Mazar-i-Sharif – Kabul – Peshawar railway occupies a special place and will significantly reduce transportation costs for delivery cargo between the countries of the region.

Thus, the main promising areas of cooperation between the countries of Central and South Asia are new transport corridors that provide access to the Central Asian countries to the southern seaports, cooperation in the energy sector (export of electricity), encouragement of mutual investments, as well as the expansion and diversification of foreign trade.

It should be noted that Afghanistan, which is a bridge between the two regions, will contribute to the further development of economic cooperation between the countries of Central and South Asia.

In this regard, the implementation of transport and energy projects on the territory of Afghanistan will create conditions to expand opportunities for building up trade, economic and investment ties, strengthening transport and communication interaction between the countries of Central and South Asia.

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How Bangladesh became Standout Star in South Asia Amidst Covid-19

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Bangladesh, the shining model of development in South Asia, becomes everyone’s economic darling amidst Covid-19. The per capita income of Bangladesh in the fiscal year 2020-21 is higher than that of many neighbouring countries including India and Pakistan. Recently, Bangladesh has agreed to lend $200 million to debt-ridden Sri Lanka to bail out through currency swap. Bangladesh, once one of the most vulnerable economies, has now substantiated itself as the most successful economy of South Asia. How Bangladesh successfully managed Covid-19 and became top performing economy of South Asia?

In March 1971, Sheikh Mujibur Rahman declared their independence from richer and more powerful Pakistan. The country was born through war and famine. Shortly after the independence of Bangladesh, Henry Kissinger, then the U.S. national security advisor, derisively referred to the country as a “Basket Case of Misery.” But after fifty years, recently, Bangladesh’s Cabinet Secretary reported that per capita income has risen to $2,227. Pakistan’s per capita income, meanwhile, is $1,543. In 1971, Pakistan was 70% richer than Bangladesh; today, Bangladesh is 45% richer than Pakistan. Pakistani economist Abid Hasan, former World Bank Adviser, stated that “If Pakistan continues its dismal performance, it is in the realm of possibility that we could be seeking aid from Bangladesh in 2030,”. On the other hand, India, the economic superpower of South Asia, is also lagging behind Bangladesh in terms of per capita income worth of $1,947. This also elucidates that the economic decisions of Bangladesh are better than that of any other South Asian countries.

Bangladesh’s economic growth leans-on three pillars: exports competitiveness, social progress and fiscal prudence. Between 2011 and 2019, Bangladesh’s exports grew at 8.6% every year, compared to the world average of 0.4%. This godsend is substantially due to the country’s hard-hearted focus on products, such as apparel, in which it possesses a comparative advantage.

The variegated investment plans pursued by the Bangladesh government contributes to the escalation of the country’s per capita income. The government has attracted investments in education, health, connectivity and infrastructure both from home and abroad. As a long-term implication, investing in these sectors helped Bangladesh to facilitate space for businesses and created skilled manpower to run them swiftly. Meanwhile, the share of Bangladeshi women in the labor force has consistently grown, unlike in India and Pakistan, where it has decreased. And Bangladesh has maintained a public debt-to-GDP ratio between 30% and 40%. India and Pakistan will both emerge from the pandemic with public debt close to 90% of GDP.

Bangladesh’s economy and industry management strategy during Covid-19 is also worth mentioning here since the country till now has successfully protected its economy from impact of pandemic. At the outset of pandemic, lockdowns and restrictions hampered the country’s overall productivity for a while. To tackle the pandemic effect, Bangladesh introduced improvised monetary policy and fiscal stimuli to bring them under the safety net which lifted the situation from worsening. Government introduced stimulus package which is equivalent to 4.3 percent of total GDP and covers all necessary sectors such as industry, SMEs and agriculture. These packages are not only a one-time deal, new packages are also being announced in course of time. For instance, in January 2021, government announced two new packages for small and medium entrepreneurs and grass roots populations. Apart from economic interventions, the government also chose the path of targeted interventions. The government, after first wave, abandoned widespread lockdown and adopted the policy of targeted intervention which is found to be effective as it allows socio-economic activities to carry on under certain protocols and helps the industries to fight back against the pandemic effect.

Another pivotal key to success was the management of migrant labor force and keeping the domestic production active amidst the pandemic. According to KNOMAD report, amidst the Covid-19, Bangladesh’s remittance grew by 18.4 percent crossing 21 billion per annum inflow where many remittance dependent countries experienced negative growth rate. Because of the massive inflow of remittance, the Forex reserve of Bangladesh reached at 45.1 billion US dollar.

Bangladesh’s success in managing COVID19 and its economy has been reflected in a recent report “Bangladesh Development Update- Moving Forward: Connectivity and Logistics to strengthen Competitiveness,” published by World Bank. Bangladesh’s economy is showing nascent signs of recovery backed by a rebound in exports, strong remittance inflows, and the ongoing vaccination program. Through financial assistance to Sri Lanka and Covid relief aid to India, Bangladesh is showcasing its rise as an emerging superpower in South Asia. That is why Mihir Sharma, Director of Centre for Economy and Growth Programme at the Observer Research Foundation, wrote in an article at Bloomberg that, “Today, the country’s 160 million-plus people, packed into a fertile delta that’s more densely populated than the Vatican City, seem destined to be South Asia’s standout success”. Back in 2017, PwC (PricewaterhouseCoopers) report also predicted the same that Bangladesh will become the largest economy by 2030 and an economic powerhouse in South Asia. And this is how Bangladesh, a development paragon, offers lessons for the other struggling countries of world after 50 years of its independence.

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Build Back Better World: An Alternative to the Belt and Road Initiative?

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The G7 Summit is all the hype on the global diplomatic canvas. While the Biden-Putin talk is another awaited juncture of the Summit, the announcement of an initiative has wowed just as many whilst irked a few. The Group of Seven (G7) partners: the US, France, the UK, Canada, Italy, Japan, and Germany, launched a global infrastructure initiative to meet the colossal infrastructural needs of the low and middle-income countries. The Project – Build Back Better World (B3W) – is aimed to be a partnership between the most developed economies, namely the G7 members, to help narrow the estimated $40 trillion worth of infrastructure needed in the developing world. However, the project seems to be directed as a rival to China’s Belt and Road Initiative (BRI). Amidst sharp criticism posed against the People’s Republic during the Summit, the B3W initiative appears to be an alternative multi-lateral funding program to the BRI. Yet, the developing world is the least of the concerns for the optimistic model challenging the Asian giant.

While the B3W claims to be a highly cohesive initiative, the BRI has expanded beyond comprehension and would be extremely difficult to dethrone, even when some of the most lucrative economies of the world are joining heads to compete over the largely untapped potential of the region. Now let’s be fair and contest that neither the G7 nor China intends the welfare of the region over profiteering. However, China enjoys a headstart. The BRI was unveiled back in 2013 by president Xi Jinping. The initiative was projected as a transcontinental long-term policy and investment program aimed to consolidate infrastructural development and gear economic integration of the developing countries falling along the route of the historic Silk Road. 

The highly sophisticated project is a long-envisioned dream of China’s Communist Party; operating on the premise of dominating the networks between the continents to establish unarguable sovereignty over the regional economic and policy decision-making. Referring to the official outline of the BRI issued by China’s National Development and Reform Commission (NDRC), the BRI drives to: “Promote the connectivity of Asian, European, and African continents and their adjacent seas, establish and strengthen partnerships among the countries along the Belt and Road [Silk Road], set up all-dimensional, multi-tiered and composite connectivity networks and realize diversified, independent, balanced, and sustainable development in these countries”. The excerpt clearly amplifies the thought process and the main agenda of the BRI. On the other hand, the B3W simply stands as a superfluous rival to an already outgrowing program.

Initially known as One Belt One Road (OBOR), the BRI has since expanded in the infrastructural niche of the region, primarily including emerging markets like Pakistan, Bangladesh, and Sri Lanka. The standout feature of the BRI has been the mutually inclusive nature of the projects, that is, the BRI has been commandeering projects in many of the rival countries in the region yet the initiative manages to keep the projects running in parallel without any interference or impediment. With a loose hold on the governance whilst giving a free hand to the political and social realities of each specific country, the BRI program presents a perfect opportunity to jump the bandwagon and obtain funding for development projects without undergoing scrutiny and complications. With such attractive nature of the BRI, the program has significantly grown over the past decade, now hosting 71 countries as partners in the initiative. The BRI currently represents a third of the world’s GDP and approximately two-thirds of the world’s entire population.

Similar to BRI, the B3W aims to congregate cross-national and regional cooperation between the countries involved whilst facilitating the implementation of large-scale projects in the developing world. However, unlike China, the G7 has an array of problems that seem to override the overly optimistic assumption of B3W being the alternate stream to the BRI. 

One major contention in the B3W model is the facile assumption that all 7 democracies have an identical policy with respect to China and would therefore react similarly to China’s policies and actions. While the perspective matches the objective of BRI to promote intergovernmental cooperation, the G7 economies are much more polar than the democracies partnered with China. It is rather simplistic to assume that the US and Japan would have a similar stance towards China’s policies, especially when the US has been in a tense trade war with China recently while Japan enjoyed a healthy economic relation with Xi’s regime. It would be a bold statement to conclude that the US and the UK would be more cohesively adjoined towards the B3W relative to the China-Pakistan cooperation towards the BRI. Even when we disregard the years-long partnership between the Asian duo, the newfound initiative would demand more out of the US than the rest of the countries since each country is aware of the tense relations and the underlying desperation that resulted in the B3W program to shape its way in the Summit.

Moreover, the B3W is timed in an era when Europe has seen its history being botched over the past year. Post-Brexit, Europe is exactly the polar opposite of the unified policy-making glorified in the B3W initiate. The European Union (EU), despite US reservations, recently signed an investment deal with China. A symbolic gesture against the role played by former US President Donald J. Trump to bolster the UK’s exit from the Union. As London tumbles into peril, it would rather join hands with China as opposed to the democrat-regime of the US to prevent isolation in the region. Despite US opposition, Germany – Europe’s largest economy – continues to place China as a key market for its Automobile industry. Such a divided partnership holds no threat to the BRI, especially when the partners are highly dependent on China’s market and couldn’t afford an affront to China’s long envisaged initiative.

Even if we assume a unified plan of action shared between the G7 countries, the B3W would fall short in attracting the key developing countries of the region. The main targets of the initiative would naturally be the most promising economies of Asia, namely India, Pakistan, or Bangladesh. However, the BRI has already encapsulated these countries: China-Pakistan Economic Corridor (CPEC) and Bangladesh-China-India-Myanmar Economic Corridor (BCIMEC) being two of the core 6 developmental corridors of BRI. 

While both the participatory as well as the targeted democracies would be highly cautious in supporting the B3W over BRI, the newfound initiate lacks the basic tenets of a lasting project let alone standing rival to the likes of BRI. The B3W is aimed to be domestically funded through USAID, EXIM, and other similar programs. However, a project of such complex nature involves investments from diverse funding channels. The BRI, for example, tallies a total volume of roughly USD 4 to 8 trillion. However, the BRI is state-funded and therefore enjoys a variety of funding routes including BRI bond flotation. The B3W, however, simply falls short as up until recently, the large domestic firms and banks in the US have been pushed against by the Biden regime. An accurate example is the recent adjustment of the global corporate tax rate to a minimum of 15% to undercut the power of giants like Google and Amazon. Such strategies would make it impossible for the United States and its G7 counterparts to gain multiple channels of funding compared to the highly leveraged state-backed companies in China.

Furthermore, the B3W’s competitiveness dampens when conditionalities are brought into the picture. On paper, the B3W presents humane conditions including Human Rights preservation, Climate Change, Rule of Law, and Corruption prevention. In reality, however, the targeted countries are riddled with problems in all 4 categories. A straightforward question would be that why would the developing countries, already hard-pressed on funds, invest to improve on the 4 conditions posed by the B3W when they could easily continue to seek benefits from a no-strings-attached funding through BRI?

The B3W, despite being a highly lucrative and prosperous model, is idealistic if presented as a competition to the BRI. Simply because the G7, majorly the United States, elides the ground realities and averts its gaze from the labyrinth of complex relations shared with China. The only good that could be achieved is if the B3W manages to find its own unique identity in the region, separate from BRI in nature and not rivaling the scale of operation. While Biden has remained vocal to assuage the concerns regarding the B3W’s aim to target the trajectory of the BRI, the leaders have remained silent over the detailed operations of the model in the near future. For now, the B3W would await bipartisan approval in the United States as the remaining partners would develop their plan of action. Safe to say, for now, that the B3W won’t hold a candle to the BRI in the long-run but could create problems for the G7 members if it manages to irk China in the Short-run.

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Economy

COVID-19: New Dynamics to the World’s Politico-Economic Structure

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How ironic it is that a virus invisible from a naked human eye can manage to topple down the world and its dynamics. Breaking out of CoronaVirus, its spread across the globe and the diversity of consequences faced by the individual states all make it evident how the dynamics of the world could be reversed in months. Starting from the blame games regarding coronavirus to its geostrategic implications and the entire enigma between COVID-19 and politics, COVID-19 and economies have shaken the world. Whether it is the acclaimed super power, struggling powers or third world states or even individuals, the pandemic has unveiled the capability and credibility of all, especially in political and economic domains. Wearing masks in public, avoiding hand shake and maintaining distance from one another have emerged as ‘new normal’ in the social world of interaction.

Since the pandemic has locked its eyes upon the globe, world politics has taken an unfortunate drift. From the opportunities for leaders to abuse power during state of emergency (which is imposed in different states to limit the spread of novel Coronavirus) to the likelihood of rise of far-right nationalists to the emergence of ‘travel bubbles’ between states (such as New Zealand and Australia) and the increased chances of regionalism in post-pandemic world to the new terrorist strategies to gain support and many others, all are result of the pandemic’s impact on the political world, one way or the other. Since the end of WWII, the United States has taken the role of global leadership and after the Cold War, it became more prominent as it was the sole superpower of the world. Talking ideally, pandemics are perceived to bring up global cooperation but in the COVID-19 scenario it has started a whole new set of debates, sparkled nativism versus globalization and the sharp divide in global politics has drifted the focus from overcoming the global pandemic through global response to inward looking policies of leaders.

Covid-19 has impacted every sphere of life, be it social, political, health or economic. The pandemic itself being the result of a globalized world has affected globalization badly. It is the best illustration of the interrelation of politics and economics and how the steps in one sector impact the other in this interdependent, globalized world. Political actions such as restricting travel had drastic economic impacts especially to the countries whose economy is largely dependent on tourism, foreign investment etc. Similarly, economic actions such as limiting foreign products’ access had political implications in the form of sudden unemployment and downturn in living standards of people.

For the first time in history, oil prices became negative when its demand suddenly dropped when industries were shut down almost everywhere. Russia and Saudi Arabia’s oil clash which led to increased oil production by Saudi Arabia further complicated the situation. This unprecedented drop in oil demand and consequently its price would only help in the economic recovery of countries. Covid-19 has impacted three sectors badly. First of all, it affected production as global manufacturing has declined due to decrease in demand. Secondly, it has created supply chain and market disruption. Finally, lockdowns affected local businesses everywhere. Bad impact aside, pandemic has led to the change in demand of products. Instead of investment and foreign trade, states having strong medical and textiles industries have got the opportunity of increasing exports. This is because there are requirements of face masks everywhere to avoid contagion. Need for medical instruments have also increased such as ventilators in developing countries specially. 

The only positive impact of Coronavirus is that it fostered environmental cleanliness. It is said that it can avert a climate emergency but the fact is that, as soon as the lockdown will be eased and businesses will begin returning into functioning, economic growth and prosperity will be prioritized over sustainability and we might even witness, more than ever, carbon emissions into the atmosphere.

Novel coronavirus has brought new dynamics to the world’s politico-economic structure. While the world has the opportunity to come close for cooperation and consensus to fight it, we might witness increased regionalism in the post-pandemic world as a cautious measure and alternative where crisis management would be more cooperative and quick. There is a likelihood of the emergence of an international treaty or regime to ban bio-weapons. While the prevalence of political optimism is not assured in the post-pandemic world, we are likely to see the interdependent economic world, as before, to overcome the economic slump and revive the global economy. 

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