Valdai Club

One can see heightened global competition, gradual de-globalisation, hedging of market economy, denial of technology, rise of state and nationalism. The word appears to be moving back to the era of bloc politics, writes Ambassador Raza Muhammad, President of the Islamabad Policy Research Institute. This article was prepared for the Valdai Club’s 13th Asian Conference.

The world around us is changing. Technology and connectivity are the driving forces. Asia is leading from the front in this change. The vast natural resources, good human capital, geographical endowments and geo-political significance in world affairs have blessed Asia with a unique edge over other continents. This is confirmed from the rising of, at least, two powers on the Asian horizon of i.e., China and Russia.

Connectivity has become important in the recent years. Trade and investment, liberalization and facilitation are the underlying pillars for strengthening regional integration, especially to achieve sustainable growth and equitable development. 

Regional cooperation and integration (RCI) have played an important role in helping Asian countries in their development over the past 50 years. It can be improved further by peace and stability; old silk roads thrived during times of peace.

Asian Century

According to “The Global Connectivity Report 2022,” seven thematic aspects, strengthened the connectivity. These include 1) infrastructural development, 2) increasing affordability, 3) financing by countries and major powers, 4) the cooperation during pandemic, 5) de-regulation to soften trade barriers, 6) availability of intelligent and hardworking youth, and 7) data compilation and sharing for common good. Asia has made great strides in all of these areas, and has improved connectivity more than any other continent.” 

China and Russia have broadened their foreign policy outlook to accommodate all and sundry, regardless of alignments and politics. This is helping to connect with new states. Asia is the world’s largest manufacturer and one of the largest markets too. Seven of the top 10 countries in terms of foreign reserves are Asian. Asia is now the largest foreign direct investment destination and is likely to contribute 50% to the world’s trade growth by 2030.

Last few years testify that Russia has resurged and China is emerging as the next biggest economy of the World. Belt and Road Initiative (BRI) is seen by the USA as a means for reorientation of the world economic system to the East.

Russia has reconnected to Central Asian, African, South Asian, Middle Eastern and Far Eastern, as well as European countries for forging mutually beneficial relationship in trade and investment.

Multilateralism and Asia

Initiatives such as Eurasian Economic Union (EAEU), Belt and Road Initiative (BRI), BRICS, SCO, ECO, ASEAN, AEC, CAREC, GMS, BIMSTEC and SAARC etc are examples of multilateralism. These forums can surely contribute in mutually beneficial economic integration of Eurasia. 

Great Power Rivalry: The US has established an Arc of security through its Indo-Pacific Strategy, QUAD, AUKUS; ANZUS, I2U2, Abraham Accords and IPEF etc. 

These security and Economic Forums are in line with the US National Security Strategy 2022 issued by President Biden in which China and Russia have been declared as main competing states. 

In most of US strategies India is termed as the strategic partner. Pakistan and Afghanistan are almost out of the sight in US calculus. This situation raises concern for many in Asia and Eurasia.

Intraregional Trade in Asia 

• Asia and the Pacific’s trade grew 29.6% in the first three quarters of 2021, compared with global trade growth of 27.8%. 
• According to the Asian Economic Integration Report (AEIR) 2022. Trade within the region rebounded by 31.2% during the same period.
• Intra-regional trade made up 58.5% of the region’s total trade in 2020, the highest share since 1990.

 
The global economy is currently undergoing a significant rebalancing. Asia may be able to play a central role in sustaining global growth. 

Russia seeks new markets and China also looks for newer markets for its affordable commodities. 

Russia has become a top market for Chinese companies, filling the vacuum left by departing Western brands. China was already Russia’s largest single trading partner. It accounted for 16% of its total foreign trade. 

Transportation and Logistics

The transportation and logistics play a crucial role in keeping the global economy going. But like all other industries, transportation and logistics are facing tremendous challenges, due to increasing costs, because of technological changes, complex regulations, rising fuel prices, and expensive shipping. 

Successful logistics management calls for consistent innovation and leveraging available technology. 

The Asian Development Bank estimated that developing transport infrastructure in Asia will need $1.5 trillion per year, through 2030. This amount increases to $1.7 trillion per year due to climate change mitigation requirements.

New Financial Realignments

A new financial mechanism is emerging in Asia. Major currencies like the yuan, the ruble and the yen are establishing their place. These are in competition with the US dollar, which is the currency in vogue for trade, especially for oil and gas. Moscow has been steadily pursuing a policy of de-dollarization of foreign trade. It is negotiating to conduct trade in regional currencies with India, China, Iran, and Turkey. 

The launching of a digital ruble, and currency settlements with China may help reduce the dollar’s hegemony. The ruble's resiliency will mean that Russia is partly insulated from the economic sanctions.

Pakistan and the new finances: To diversify its trade basket and currency, Pakistan is also entering into the new financial nexus with the ruble and the yuan. It has entered into Memorandum of Understanding (MoU) with China to pay-off in rupee and accept the yuan. Islamabad has also initiated a proposal to sign a pact on a currency swap with Russia. 

Pakistan and Regional Initiatives: BRI and EAEU have potential to contribute strengthen Eurasian connectivity. Pakistan’s location can be very helpful in this regard.

Way Forward

Few suggestions are offered here:

• Efforts be made to liberalise trade and investment and facilitate goods flows through sub-regional markets.
• Promotion of regional FTAs can contribute to the multilateral trading and help build up an inclusive and sustainable global trade system.
• There is a need to complement hard infrastructure with “soft” and efficient cross-border connectivity.
• Greater cooperation is needed in conservation and management of shared natural resources such as rivers, oceans, and forests.
• The agricultural sector generates income, employment and taxes. It also plays an important role in food security and environmental sustainability. Russia can help smaller countries in this regard.
• For human resource development, the Asian countries may share experiences and policies covering technical education and training, systems of universal health coverage and social protection.
• An integrated approach of transports corridors including roads, rail, and sea routes within Asia is considered critical. This can be done by creating quality logistics, dry ports, industry clusters and economic zones along these corridors.
  
• Financing modalities with various sources of financing call for judicious combination of various sources of financing. Innovative structures which make the projects bankable and attractive to the private sector and private sector financing will be helpful in this regard. 

Conclusion
 
Climate, agriculture, water management, poverty alleviation, health and education are the areas that can help connect Asia immediately. 

Mutually beneficial connectivity for trade and socio-economic development for the people of Asia are of significance, where countries like China and Russia can help greatly. 
Facilitation in resolution of bilateral disputes can also help speed up the process of Eurasian integration for a prosperous future of the people. 

Pakistan looks forward to become a useful and responsible partner in Eurasian connectivity projects for trade and socio-economic development for the people and the countries. 

One can see heightened global competition, gradual de-globalisation, hedging of market economy, denial of technology, rise of state and nationalism. The word appears to be moving back to the era of bloc politics.