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Belt & Road initiative to establish Asia-Europe economic zone: expert

Updated: Mar 21,2016 9:52 AM     Xinhua

WASHINGTON — China’s Belt and Road Initiative will establish a large Asia-Europe economic zone, providing opportunities for dozens of countries along the “Belt and Road” routes integrating into the global economy, a former World Bank official has said.

The initiative, proposed by President Xi Jinping in 2013, refers to the Silk Road Economic Belt that links China with Europe through central and western Asia by inland routes, and the 21st-Century Maritime Silk Road connecting China with southeast Asia, Africa and Europe by sea routes.

“I think the main rationale (for such initiative) is to link Asia and Europe basically to one large economic zone,” Simeon Djankov, visiting fellow at the Washington-DC based Peterson Institute for International Economics and former chief economist on finance and private sector affairs at the World Bank, told Xinhua in a recent interview.

Djankov said the links between the Europe and Asia could be “significantly weakened” and some parts of Asia, central Asia in particular, could be isolated, as the United States is advancing two mega-regional trade agreements that feature the United States as the economic center but treat Asia and Europe separately.

The United States formally signed the Trans-Pacific Partnership (TPP) deal with 11 other Pacific Rim countries last month, and stepped up efforts to push forward negotiations on the Transatlantic Trade and Investment Partnership (TTIP) with the European Union (EU) in recent months, in a bid to establish new trade rules and reshape the global trading system.

“So we think that the Belt and Road Initiative is helping Europe and Asia to come together,” said Djankov, who served as former deputy prime minister and minister of finance of Bulgaria from 2009 to 2013.

“If it succeeds, the initiative will reestablish Eurasia as the largest economic market in the world and may effect a shift away from the dollar-based global financial system,” he said.

Unlike the politically directed Marshall Plan, an American initiative to rebuild western European economies after World War Two, Djankov said, the Belt and Road Initiative is “much more comprehensive” in terms of the time period and the number of participating countries, with a goal of promoting regional trade integration and making these countries becoming a part of the global economy.

“A big plus for the Belt and Road Initiative that did not exist in the Marshall Plan is that a number of economies will benefit greatly from being integrated into the Eurasian economy and the global economy,” Djankov said.

The Belt and Road Initiative has gained wide popularity among 60-plus countries, and most of them are in the process of industrialization and urbanization, according to China’s Ministry of Commerce.

The initiative is a response to the need for development and cooperation among Asian and European countries, and it shows that China is in a rapid transition from a mere participant in the international system to a provider of public goods, Foreign Minister Wang Yi said earlier this month.

“The Initiative is China’s idea, but the opportunities it has created belong to the world,” Wang said.

Djankov suggested it is good to start with infrastructure under the Belt and Road Initiative, as there are huge infrastructure needs along the “Belt and Road” and China “has a lot of expertise” in both constructing and financing of infrastructure projects.

“China has a large comparative advantage in infrastructure. It is also a way to link these economies together, later then you can go to other sectors,” he said.

Djankov believed European countries that are not members of the EU would benefit more from the Belt and Road Initiative at current stage, as these countries have large infrastructure needs but don’t have sources of financing from the EU.

“That’s where we have seen some already successful Belt and Road infrastructure projects, Serbia, Macedonia,” he said, adding that Greece, Bulgaria, Slovakia and other EU member states are also interested in being part of this initiative for the sake of better connecting with high-growth Asian markets.

Compared with the TTIP trade talks that cover a number of more controversial areas, Djankov said European countries view it “more natural” to have “a potential stronger economic link” with China because of the existing significant trade volume between Europe and China and expanded trade opportunities from the Belt and Road Initiative.

“This is a lot easier for European politicians to first understand and then tell to their electorates,” he said. “The TTIP is not easy to understand, I think that’s the reason why support for the Transatlantic Partnership has been relatively small in Europe.”

“Odds are slim” that the TTIP negotiations will be completed before the end of the Obama administration, according to a new study by the Center for Transatlantic Relations at Johns Hopkins University released on March 17.

“Some of the most intense transatlantic disagreements have arisen over differences in regulation policy. Issues such as food safety or environmental standards have strong public constituencies and are often extremely sensitive in the domestic political arena,” the study said.

As European politicians and businessmen are also looking for ways to attract investment and expand trade to boost recovery in Europe, Djankov believed the Belt and Road Initiative can be “a significant contributor to economic growth in all Europe” in the next three years.

Statistics released by the Chinese Ministry of Commerce showed Chinese enterprises directly invested a total of $ 14.82 billion into 49 countries within the cooperation framework of the Belt and Road Initiative last year, up 18.2 percent compared with the previous year.