Benchmarks of Success
We are at the tip of the iceberg as we move forward to incorporate the projects already in the global pipeline under BRI.
The Green Growth Forum is an important global effort that has been endorsed by all U.N. member countries as vital for our planet.
The Belt and Road Initiative (BRI) and the importance of Climate Risk embedded in Green Investment Principles (GIP) complement each other in supporting infrastructure that in itself is critical for economic development. The strategic geographical location of Kazakhstan is the gateway between Europe, the Far East, and the Middle East via Pakistan’s ports. To ensure that Central Asia extracts value and achieves success in economic development, we must overcome the challenges of global uncertainty and volatility we face on a daily basis as well as the geopolitical tensions and upheavals that are a daily phenomena that impact us all. Such uncertainties do not bode well for financial markets and economic development. However, one long-term constant retains its consistency in support of global economic growth and development for all participating countries and that is the Belt and Road Initiative (BRI). It provides access for capital to enter developing countries on a scale never before available in history for their long-term economic development.
As a former central banker, I would like to highlight two key themes: 1) The importance of BRI/Central Asia and Pakistan going forward, for economic integration and development, and 2) Climate Risk with Sustainability for the new Central Asia GIP Chapter, its role, and road map going forward, to make this region a robust and vibrant one. It must set a benchmark of success for others to follow.
Regional integration being critical for success, I would like to cite a successful analogy. As an integrated region, ASEAN countries have established RCEP (Regional Comprehensive Economic Partnership) comprising 16 countries, as of 2020. RCEP countries together account for one third of global domestic product (GDP) and nearly half the world’s population. Within RCEP, 10 countries comprise the ASEAN region.
To bring economic trade in perspective, trade within the ASEAN countries comprises approximately 25% of their total trade. On the other hand, the European Economic Community (ECC) and NAFTA (North America Free Trade Agreement) comprises 63%. Corrective steps obviously need to be taken by ASEAN to achieve optimal intra-regional benefits.
Supply chains are shifting in ASEAN as the region works on connectivity across South East Asia and China and concurrently will hasten implementation of BRI as these countries’ infrastructure is enhanced with increased business activities and better investment opportunities. Leading logistics firms in Singapore are rapidly shifting gears to adapt and adjust to serve client needs in a cost-effective manner.
In contrast, Central Asian Republicsand Pakistan is the least integrated region in the world and is exposed to exogenous shocks experienced globally from the 2008 GFC (Global Financial Crisis). Global and regional integration requires uniformity, equality, and common attributes in financial markets which we do not have. I should point out that Pakistan is the largest single recipient country under BRI with $62 billion and has already developed some of the largest infrastructure projects, particularly in power. The country can be an important pivot between China, Central Asia and Middle East/Africa.
The importance of Central Asia under BRI centres on two of the six economic corridors under construction that run through the region: 1) the China-Central Asia-West Asia Economic Corridor and 2) the New Eurasia Land Bridge.
These two Central Asian BRI economic corridors could merge and connect with the northern route of the China-Pakistan Economic Corridor (CPEC) and enter China. The land locked countries would have access to the favoured port of Gwadar, opening a wider corridor to the Middle East/Africa and vice versa. The current CPEC projects in Pakistan emphasize the projects that will benefit these economic corridors in connectivity, information network, infrastructure, energy, industry and industrial parks, and agricultural development projects.
Trade currently within the Central Asian Republics and Pakistan is limited and the following areas have the potential to increase exponentially:
• Hydrocarbons (crude oil and natural gas) and metals are the leading items exported by the Central Asian States. Setting up of oil pipelines will allow for more efficient movement of these products.
• Pakistan’s SEZs, once fully functional for the industrial sector, will enhance the country’s productive capacity and provide a major impetus for economic and social development through new supply chains.
• The agriculture sector should be mechanized with technological advancement that would increase both productivity and quality of the output produced. Logistic hurdles, once removed, will make regional trade within Central Asia and with M.E./Africa more economically feasible.
• Finally, cultural integration will open new tourism opportunities and expand this segment towards socio-economic growth.
In order for regional integration to succeed, government policies in conjunction with GIP can play an important role with well-coordinated leadership to implement principles in support of BRI with over 100 countries that emphasize ESG standards. This in itself is GIP’s strength as opposed to embarking on an individual and fragmented ad hoc approach.
However, we are at the tip of the iceberg as we move forward to incorporate the projects already in the global pipeline under BRI. Investment consultants estimate the ESG market globally to comprise more than $40 trillion. As such, we need to educate, elevate knowledge, monitor and influence the urbanization of developing nations as well as the demographic trends to ensure that ESG standards are met with sustainability.
The writer is Chairman of GIP Central Asia/Pakistan. He is a former governor of the State Bank of Pakistan.