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New Silk Road - a ray of sunlight on a gloomy horizon?

Unlike other recent projects, China's One Belt, One Road is inclusive and has potential to renew optimism

The 21st century began with seemingly bewildering opportunities as a new global business horizon unfolded.

For half a century or more, the international economy had been divided into predominantly autonomous worlds: the "First World", the rich countries of the Organisation for Economic Cooperation and Development; the "Second World", composed of the state-dominated economies adjacent to and affiliated with the former Soviet Union; and then the "Third World", all the rest of humanity, living in different stages of autarchy, with many pursuing import substitution industrialisation.

Then in the turn of the century, four major simultaneous discontinuities occurred.

The first and probably most impactful were the reforms carried out by China. As the thought leader Zheng Bijian noted: "The most important strategic choice the Chinese made was to embrace economic globalisation rather than detach themselves from it."

For almost two centuries, China, the world's biggest country by population, had been exploited by imperialist powers and then ostracised from the global market economy. Now the situation changed radically as China's steep and rapid ascension to great global economic power status took place.

The second was the profound revolutionary transformations occurring in information and communications technology (ICT). As the late business guru Peter Drucker commented: The ICT revolution is not an industrial revolution, nor is it "just" a scientific or technological revolution; though it combines these, it is, in essence, an intellectual revolution. It radically redefines the parameters of information and knowledge.


ST ILLUSTRATION : MIEL

The third was what may be termed a global market revolution. The erstwhile "three worlds" of the international economy dissolved into one global market with only a few nations opting to stay out. This trend also gave rise to a stupendous increase in the amount of South-South economic activity, including both trade and investment, with China being a major driving force.

The fourth consists of the multiple aspects of the demographic transformations. Two stand out: the massive urbanisation occurring throughout much of the planet, though once again overwhelmingly so in China, accompanied by a dramatic decrease in poverty and equally dramatic rise in the new middle classes. This has profound business implications as new and highly lucrative markets open up.

However, as the late former director-general of the World Trade Organisation (WTO) Renato Ruggiero noted: "We have gone from a divided world to an integrated world - and an integrated world is much more difficult to manage!"

PESSIMISM AND MISTRUST

Indeed, who could have believed that within less than a decade of the great new promises of the dawn of the 21st century, we would be in such a mess! It is not just that since the financial crisis of 2008, we have experienced shocks, some of seismic proportions, and that now one increasingly hears how the world economy has entered a "new normal" of low growth and secular stagnation.

More worrying than the figures is what lies behind them.

Indeed, the New Silk Road and Maritime Route is the most ambitious and exciting business and economic project of the 21st century. It stretches across the Eurasian continent from Xi'an in China to Rotterdam in the Netherlands, and across the Pacific and Indian Oceans from Indonesia and into the Mediterranean to Venice - the European destination of the old Silk Road and the city from which Marco Polo hailed.

There is a deep mood of mistrust and lack of confidence - indeed pessimism. Global economic governance is failing - the most vivid illustration being the lamentable failure of the Doha Development Round and the state of stasis of the WTO. This is in part caused by a strong populist backlash against globalisation in a number of countries, notably the United States, but more alarmingly by the intensification of centrifugal forces.

On the trade policy front, the rules-based multilateral agenda has been jettisoned in favour of exclusive bilateral, regional or indeed mega-regional agreements. Trade has become geopoliticised. Having gone from a divided world to an integrated world, there is a strong risk that we are returning to a divided world.

This trend is reinforced not only by the mistrust noted above, but also by rising protectionist sentiment and policies driven by a deep mood of business pessimism.

In contrast to the apparently tremendously sunny dawn that rose in the beginning of the century, the perspectives are increasingly of dark days ahead.

The world is in a rut which it needs to get out of.

RENEWING OPTIMISM

Hence the immense significance of the New Silk Road and Maritime Route initiative, dubbed by Beijing as the One Belt, One Road. This project has the potential to renew a sense of optimism and excitement in the global business environment. It is truly visionary.

Indeed, the New Silk Road and Maritime Route is the most ambitious and exciting business and economic project of the 21st century. It stretches across the Eurasian continent from Xi'an in China to Rotterdam in the Netherlands, and across the Pacific and Indian oceans, from Indonesia and into the Mediterranean to Venice - the European destination of the old Silk Road and the city from which Marco Polo hailed.

Of course, the road to realising the New Silk Road is paved with hurdles and challenges: geographic, environmental, financial, technological, economic, political and geopolitical. Dreams can dissipate or indeed turn into nightmares. Yet no serious aspiring business leader of the 21st century should fail to have the project firmly on the radar screen.

Arguably, the project's greatest distinction is that in contrast to many recent initiatives that are meant to be contained and exclude "outsiders", the New Silk Road project is inclusive. Sixty-five countries are engaged, across western, central and eastern Europe, the east coast of Africa, and western, central and eastern Asia. It brings into the orbit of global business a number of countries, particularly in western and central Asia, that have been marginalised economic actors. While it primarily reinforces the historic links across the Eurasian continent and the Indian Ocean, it offers potential entry opportunities to other continents, including not only Africa, but also Latin America.

The overriding business emphasis at the initial stages of the New Silk Road will be of course infrastructure. This evokes parallels with the development of the railway in the 19th century that transformed the world in so many tangible, but also intangible, ways.

Business is of course predominantly about making money, but it is also about vision, ambition, creativity, innovation and dreams. Indeed these were all part of the "old" Silk Road.

The New Silk Road and Maritime Route opens up vistas on a world that faded half a millennium ago. Therefore, while business opportunities will include, and initially be dominated by, "hard" sectors - railways, roads, ports, hotels, telecoms - there will increasingly be scope for "softer" business strategic options in areas including culture, environment, education, entertainment and tourism.

Having in many ways missed and mangled the great opportunities that presented themselves with the transformations of the early 21st century, and having fallen into a despondent rut, we must ensure that this new set of opportunities arising from the New Silk Road and Maritime Route are seized with entrepreneurial verve and that the dreams materialise into financially, socially, environmentally, and culturally gainful opportunities.


The writer is emeritus professor of international political economy at IMD business school, with campuses in Lausanne and Singapore; and visiting professor at Hong Kong University. 

This article is based on a speech the writer gave at the recent Silk Road Chamber of International Commerce business summit in Xi'an.

A version of this article appeared in the print edition of The Straits Times on September 13, 2016, with the headline 'New Silk Road - a ray of sunlight on a gloomy horizon? '. Print Edition | Subscribe