Moveable feast

The New Silk Road is a vast network of interconnected, complementary initiatives to further develop, enhance and integrate economies of the Eurasian landmass, from the east of China to the west of Europe. It covers 70% of the world’s population, 75% of energy resources and 70% of GDP. 

This trans-continental integration is multi-faceted, including physical, political, financial and social elements. Physically, it is an emerging network of highways, railways, pipelines, logistics hubs, special economic zones and commercial centres. Politically, it consists of bilateral and multilateral trade deals, transportation pacts and customs agreements, as well as the further informal interlinking of preexisting unions such as the EU, Commonwealth of Independent States (CIS) and Association of Southeast Asian Nations (ASEAN) with China. Financially, it is a playground for the likes of the Asian Development Bank, World Bank and the newly formed, China-led Asian Infrastructure Investment Bank. Socially, it is a mechanism that will create new jobs, education opportunities and “human-to-human” exchanges by connecting parts of the world previously isolated from each other.

The New Silk Road is not an economic union, treaty organisation, trade pact or even a free-trade area. It is a network of complementary development initiatives spearheaded by countries whose mutual interests align over the deeper integration of markets from China to Europe. The idea of reviving the ancient Silk Road trading routes has been around for at least 20 years. The Chinese Ministry of Science and Technology held a conference on the topic in 1996; Kazakhstan’s president Nursultan Nazarbayev has been talking about silk roads and land bridges throughout his 27-year reign; Azerbaijan held a Silk Road revival conference in 1999; while Terespol, on the Poland and Belarus border, has been printing maps showing the town directly connected to Beijing by a bold red line for the past 20 years. 

But the biggest development for the New Silk Road concept came in 2013, when China’s President Xi Jinping announced plans for two complementary trade initiatives: the Silk Road Economic Belt and Maritime Silk Road. “The potential result of OBOR [One Belt, One Road] is an intensification of trade flows across Eurasia to a level of significance not seen since the decline of the original Silk Road more than 500 years ago,” says Frans Paul van der Putten, Senior Research Fellow at Netherlands-based thinktank the Clingendael Institute.

Creating a win-win situation

This initiative promises the funding and political will to turn the dream into a reality. It would essentially become a political and economic framework to guide more than $1tn of Chinese investment across a network of land- and sea-based trade corridors from China to the north, west and south. What separates China’s vision from the others is it has the appropriate level of financial backing; the political will and international clout of a superpower behind it; and it combines other related initiatives and absorbs existing projects retroactively.

These initiatives are ultimately complementary, as the new roads, railways, logistics hubs, special economic zones, customs agreements and transportation pacts can often be seamlessly plugged into each other and used by participants throughout the network. 

“The [New] Silk Road is going to create a win-win situation because of its inherent interdependence,” suggests Taleh Ziyadov, director general of New Port of Baku at Alat, Azerbaijan – and phase one is now open. “If I have good roads, good rail, good ports, and if Turkmenistan or Kazakhstan or Georgia doesn’t, then I’m in trouble. All these developments are going to further harmonise our processes, our infrastructure, and all steps will be taken to incorporate Eurasia with us.”

Development is now booming along the New Silk Road (see interactive map). Activity in the west of China is meeting that of central Asia – which, in turn, is linking with projects in the Caucasus and Europe. A giant free-trade zone on the China/Kazakhstan border at Khorgos is open for business. The Western Europe-Western China Highway from the east coast of China to St Petersburg, is nearing completion. Work continues on the China-Pakistan Economic Corridor. Sri Lanka’s big development projects, which include a deep-sea port and an entire financial district, are being integrated into the Maritime Silk Road. Upgrades to the railway line from Baku, through the Georgian capital Tbilisi to Kars in Turkey, commence in early 2017. The Anaklia deep-sea port in Georgia will soon break ground. Meanwhile, facilities in Poland, Belarus and Germany are being expanded with additional trans-Eurasia capabilities. The New Silk Road is happening – for real, this time. 

However, even as the infrastructure is being built, hundreds of billions of dollars are being invested and dozens of inter-governmental trade agreements are being signed, there are still road blocks. The first is that there remain glaring political bottlenecks along the trade corridors between China and Europe. The ongoing territorial dispute between Azerbaijan and Armenia is a cause of trepidation that is limiting investment in the region. The Russian-backed breakaway state Abkhazia in what was once western Georgia severs what would otherwise be a prime north-south trade route. China’s partnerships with Pakistan, Bangladesh and Sri Lanka have not gone down well in India, which has stifled the participation of Asia’s second-largest emerging market. Russia’s ongoing standoff with Ukraine has resulted in sanctions that have been one of the largest barriers to trade along the most established routes of the New Silk Road. All this is in addition to the fact that essential corridors of the initiative traverse insecure terrain in countries such as Afghanistan and Pakistan. 

“Stability in Eurasia is the Achilles’ heel of the initiative,” says Moritz Rudolf, Research Associate at Germany’s Mercator Institute for China Studies. “Beijing is neither willing nor capable to protect its investments abroad or guarantee stability in the region.”

A second obstacle is whether the countries of the New Silk Road have the patience and ongoing financial backing to engage in mass-infrastructure building, which tends to present long-term returns on investment. Because much of this development is financed via loans, some countries may find their efforts to build up their economies leading them into a debt trap. This was the case in Hambantota, Sri Lanka, where loan repayments on billions of dollars of infrastructure kicked in before the projects started producing adequate returns, which led to a deep-sea port and airport being handed over to Chinese companies in exchange for debt relief.

“Infrastructure investment has low and slow returns. It takes at least three years to build a 100km highway with three or four bridges,” says Ong Keng Yong, former Singaporean Ambassador. “Political developments are fluid and quick-changing. It is a challenge to hold things steady and tap the positive yield.”

The third issue is that a drastic paradigm shift will be required to motivate the private sector to jump into the New Silk Road endeavour. While governments can pump billions of dollars into building roads, railways and special economic zones, if private firms cannot be convinced of their profitability, then it is all for nothing. Foreign investors need to be assured that Azerbaijan and Kazakhstan are serious about logistics and are no longer mere mono-faceted oil states; that trans-Eurasian rail transport is just as punctual and secure as shipping by sea or air; that the Caucasus region is secure and the threat of war minimal; and that Russia and China will abide by the rule of law in the event of disputes.

Part of enacting such a shift, of course, is whether the above parameters prove to be true – and if they do, if anybody is willing to believe it.