China proposed the Belt and Road Initiative (BRI) in 2013 to improve connectivity and cooperation on a transcontinental scale.

Quantifying impacts for a project as vast as the BRI is a major challenge, which is why the World Bank Group conducted this independent analysis of the risks and opportunities of Belt and Road transport corridors. Supported by empirical research and rigorous economic modeling, Belt and Road Economics aims to help participating countries choose the kinds of investments and reforms that will best meet their development needs. The study also aims to inform the public debates surrounding BRI, by grounding the discussion in data and analysis.

Main Findings

Summary:

belt and road asean transport corridors have the potential to substantially improve trade, foreign investment, and living conditions for citizens in its participating countries—but only if China and corridor economies adopt deeper policy reforms that increase transparency, expand trade, improve debt sustainability, and mitigate environmental, social, and corruption risks.

1. Infrastructure and policy gaps in Belt and Road corridor economies hinder trade and foreign investment. New infrastructure can help close these gaps, but it is costly—and investments are occurring in the context of rising public debt. 

  • Trade in BRI corridor economies is estimated to be 30 percent below potential, and FDI is an estimated 70 percent below potential.

2. BRI transport projects can expand trade, increase foreign investment, and reduce poverty—by lowering trade costs. Yet, for some countries, the costs of new infrastructure could outweigh the gains.

  • If fully implemented, BRI transport projects could increase trade between 1.7 and 6.2 percent for the world, increasing global real income by 0.7 to 2.9 percent.

3. Complementary policy reforms can maximize the positive effects of BRI transport projects and ensure that the gains are widely shared. For some countries, reforms are precondition to having net gains from BRI transport projects.

  • Real incomes for corridor economies could be an estimated two to four times larger if they implement reforms to reduce border delays and ease trade restrictions. 

4. The BRI presents risks common to large infrastructure projects. These risks could be exacerbated by the limited transparency and openness of the initiative and the weak economic fundamentals and governance of several participating countries.

  • Debt Sustainability Risks: Among the 43 corridor economies for which detailed data is available, 12—most of which already face elevated debt levels—could suffer a further medium-term deterioration in their outlook for debt sustainability.
  • Governance Risks: Moving toward international good practices such as open and transparent public procurement would increase the likelihood that BRI projects are allocated to the firms best placed to implement them.
  • Environmental Risks: BRI transport infrastructure is estimated to increase carbon dioxide emissions by 0.3 percent worldwide—but by 7 percent or more in some countries as production expands in sectors with higher emissions.
  • Social Risks: An influx of workers related to an infrastructure project could create risks of gender-based violence, sexually transmitted diseases, and social tensions. 

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