19-25 April 2013 #652

The New Silk Roads

Reviving the old India-Nepal-China connectivity
Pradumna B Rana
After a 1,500 year history connecting Asia to Europe, the Silk Road lost out to the sea route, but there are now signs of its revival. Connectivity between India-Nepal-China should be an important part of this new trade corridor.

Actually there were two Silk Roads: the northern one that began in present day Xian in China and which branched into two routes which converged in Kashgar in Central Asia, before continuing westward. And there was the lesser known south-western Silk Road which began in Yunnan province of China and traversed Burma, Vietnam, and Thailand with two overland routes via Tibet and Nepal to India.

The Silk Routes were at their peak during the Mongol Empire in the mid-13th century when political stability fostered trade. It was during this time that Marco Polo travelled to China. Trade on the Silk Road declined after the collapse of the Mongol Empire in the 14th century and the isolationist Ming and Qing dynasties in China were not conducive to trade.

The Europeans, therefore, used the new sea routes across the Indian Ocean. The invention of the steam engine brought down costs and led to a further increase in Europe’s maritime trade with Asia along the Southern Ocean Corridor from the Mediterranean, past South Asia, through the Straits of Malacca, and up the East Asian coast to Korea and Japan.

Now, the importance of the Silk Road has once more been revived. Maritime Asia is starting to become more continental with expanding road networks, railways, and pipelines. The Qinghai-Tibet Railway will reach Xigatse this year and is to be extended soon to reach the border with Nepal. The Beijing-Lhasa expressway has been completed until Xining, the halfway point. Connectivity within the Greater Mekong Subregion has also improved.

Chinese strategists have written about the ‘Malacca Dilemma’ with the Straits being a natural choke point and the need to find an alternative route. In May, an 800km gas pipeline from Kyauphyu port in Burma to Kunming will be operational. Next year, an oil pipeline will open along the same route with highways and trains following. Work on the Kaladan Multimodal Project seeking to connect Kolkata with Sittwe in Burma by sea and then India’s north-east by river and road transport is on-going.

Under the traditional theory of comparative advantage, developing countries produced labour intensive goods which they then exchanged for capital and skill intensive ones produced by the more advanced countries.

All separate tasks involved in producing an item, however, were done entirely in one country. Now, production is sliced into separate fragments in production blocks around the world which are linked by efficient service links. While sea freight is still the most cost effective way of moving goods for bulky items, road transportation is quicker among neighbouring countries and air transport is necessary for perishable items.

The Master Plan on ASEAN Connectivity of 2010 seeks to promote physical, institutional, and people-to-people connectivity among its 10 member countries and emphasises the importance of ASEAN’s connectivity with neighbouring countries such as India, China, and the other members of the East Asia Summit (EAS). The Economic Research Institute for ASEAN and East Asia (ERIA) has come up with two projects for ASEAN-India Connectivity, namely the Mekong-India Economic Corridor and the Trilateral Highway connecting India and Burma with Thailand. While the first project focuses on connecting production blocks in Southeast Asia with those in India specially the automotive industry in Bangkok with those in Chennai by sea, the second project focuses on the development of the north-east region of India.

What has been lacking so far is an effort to promote the China-ASEAN-South Asia Connectivity by reviving the Southern Silk Road. ERIA should consider a Yunnan-Burma-India-Nepal-Tibet-Yunnan Economic Corridor or a Circular Economic Corridor in Asia and sensitise the project concept and its feasibility. Such a project would lead to a win-win situation for all countries including shared prosperity between India and China in which Nepal could serve as a land bridge and production hub between Asia’s two giants.

Pradumna B Rana is Associate Professor at the S Rajaratnam School of International Studies (RSIS), Nanyang Technological University (NTU).

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