BrazilThe New Silk Road means big opportunities for Asia and MENA
The ‘New Silk Road’ – encompassing Asia, the Middle East, and North Africa – is home to a population of 4.9 billion people and represents more than 40% of the global economy. Growing ties between the nations in the region will see big opportunities unfold in the coming decade.
Growth in the New Silk Road region is a major opportunity not to be missed. That is the take away from a new report by global management consultancy Oliver Wyman, which explores the increased trade among the New Silk Road economies.
There is huge growth expected from the increasing connection between Asia and the Middle East, which mirrors the Silk Road of the ancient world that brought the precious silk over land from China to Europe and the Near East for centuries.
Some of the opportunities noted by the report include more connected payment networks, multi-currency cross-border banking, and further internationalization of the Chinese Yuan for payments.
Those same global trade routes, now dynamized by increased interconnectivity and globalization, are becoming just as important in modern times. In fact, the authors of the report believe a new phase in the relationships have begun, driven by intraregional flows of capital, talent, and technology.
The Asia and Middle East corridor
Asia and MENA’s share of the world’s GDP is on the rise. Previously averaging below 30%, the share is now over 40% and is expected to continue to grow as the post-oil energy transition takes hold, mostly in MENA, where it will translate into huge economic expansion.
Geopolitics has also played a major role in this story: China, now more sidelined than ever by the US, has put much focus on fostering ties with regional neighbors. Supply chain issues, too, are changing the game. More and more Asia and MENA countries are signing up to free-trade agreements and countries like Vietnam, India, and Indonesia are picking up where China left off in the manufacturing sector.
The New Silk Road countries are leading the way in IC and other components, electronics, textiles, telecom equipment, and clothing. The Middle East, of course, dominates in the energy sector, where it dominates 31% of the world’s fuel exports.
“We envisage a region where energy ties will grow tighter, clean technology will play a greater role, and where manufacturing supply chains will spread out across a wider set of countries as companies build resilience,” said Ben Simpfendorfer, partner at Oliver Wyman.
“The flow of private wealth will expand, and cross-border payment solutions will improve. Investments into aviation and transport infrastructure will support the rising flows of people and goods. Finally, a young population of early adopters will drive digital disruption.”
The next generations
Indeed, South Asia, Central Asia, and the MENA region lead the way in having the world’s youngest populations. In just South Asia, there are approximately 845 million people under 30 years old.
Younger populations in these countries are more connected than ever. With the increasing proliferation of internet and smartphones (especially in some parts of these regions where that is relatively new), technology uptake is booming and new tools like AI are being used at a higher rate than in the US and Europe. With that, productivity is on the rise.
“The countries that are part of the New Silk Road region are powering ahead with economic opportunity being driven by three major triggers: The energy transition, global supply chain disruption, and geopolitical tensions and regionalization,” said Adel Alfalasi, partner at Oliver Wyman.
“Each of these core shifts are reshaping and generating opportunities in a region that accounts for over 40% of the global economy.”
The New Silk Road is another name for what is commonly known in the West as the ‘Belt and Road Initiative’, a global infrastructure development strategy sought by the Chinese government that is greatly expanding both land and sea routes from the Chinese mainland to… virtually everywhere else in the world.
While the initiative will certainly boost productivity and collaboration, it has also been criticized as a Chinese scheme for debt entrapment and has been likened to ‘neocolonialism’. There have also been environmental concerns about the major new transportation infrastructure that is planned.
