Linking southern Asia by rail is a better alternative to China’s fanciful One Belt, One Road project

China launched its One Belt, One Road initiative with much fanfare. Most commentators seem to see many implications of it. Some are just wishful and many fanciful. I, too, have written about it and have debunked its supposed geo-strategic and geo-economic implications as sheer bunkum.

The manner in which One Belt, One Road has been conceived, on the face of it, seems to be linking production centers in Asia with marketing and supply bridgeheads in Europe. The plan has not been really fleshed out, though, and so far the only major initiative is the China-Pakistan Economic Corridor, which will link Kashgar in troubled Xinjiang to Gwadar in equally troubled Baluchistan. I see nothing transformational in this. It will only end up as another Hambantota, which lies unused and forlorn, with Sri Lanka having to pick up the bill.

The economic viability of an overland route from eastern China to Western Europe is questionable given the much lower cost offered by the existing shipping routes. Once the Artic route opens fully, the transportation costs by sea will become even lower.

It is estimated that by 2030 Asia will account for about 60% of the world’s GDP. Since most of the fast growing territories in Asia are in its south, any transport link up of southern China, Vietnam, countries in the Association of the Southeast Asian Nations and South Asia will integrate a region that accounts for the bulk of the world’s population and, in due course, the bulk of its GDP. These countries have huge manufacturing capacities and their integration into one seamless market promises to make the region the fulcrum of world economic growth. Thus, there can be few questions about the desirability of a Southern Trans Asia Railway network, or STAR.

It will entail relatively small infrastructure costs, given that most countries in the region already have good transportation systems. Only links across countries such as Myanmar and Bangladesh need to be provided. This will be just the project the Asia Industrial Infrastructure Bank, another Chinese initiative, can finance. The region also has the technical skill and experience to build and manage such projects. China has demonstrated its engineering skill by building the Xining-Lhasa railway and India is doing likewise by building the Jammu-Baramulla line that requires building bridges across high mountains and deep gorges at altitudes of over 16,000 feet and depths of over 2,000 feet. As only about 1,800 km of this network needs to be built, STAR is mostly ready-made, and neither the geography nor commercial feasibility would pose any major challenges.

New world order

India is poised to become one of the world’s three biggest economies in the next few decades. See the Goldman Sachs projection of major GDPs in 2050. This is, in fact, a conservative estimate; many economists estimate that the GDP growth of India and the United States will be much more robust because of their favorable demographics. This is predicated on the projection that they will continue to have more advantageous dependency ratios even after 2025 when China begins to rapidly mature with a much larger dependency burden, much like what Japan, Western Europe and Russia face today.

Whatever be the outcomes in 2050, one thing is certain: India and China will be among the Big 3 world economies. This means that India-China trade will keep growing and might even become one of the world’s great trading partnerships, like the US-China trade relationship now. India-China bilateral trade is worth about $50 billion now and is poised to grow at a steep rate. The combined GDP of India and China at present is in the region of $15 trillion. By 2030, it would be near about $40 trillion and over $55 trillion in 2050. Even in the foreseeable future, it will be potentially much more than the Asia-Europe trade.

So, in effect, STAR will be more of an Asian economic pathway to mutual prosperity. It is, therefore, important that it be developed to do just this. Linking all of India’s great markets with all of China’s great markets is central to this. At present there are few easy and direct linkages between the two countries. The sea route is too long, and the Straits of Malacca will become an increasingly difficult and expensive chokepoint unless the new Sethusamudram passage in the Palk Straits can lead into a new passage cutting through the Kra Isthmus into the Gulf of Siam.

One can argue that just as China, under the proposed STAR, offers a gateway, so should India. But geography acts against this: the pass through India on the way to the western terminus is inescapable. Thus what is being suggested is simply this: instead of terminating at Kunming in southern China, STAR should extend to Shanghai and Beijing and to Mumbai, Chennai and Kolkata in India, and Pakistan and Iran further to the west. It goes without saying that similar linkages must be made to Thailand and Vietnam, both of which by virtue of being part of the Asian continental landmass, offer link up facilities.

Making it work

Now a bit about the kind of STAR system this writer envisages. A container, say, from Kunming will travel up to the Myanmar border on the Chinese system and will be handed over to Myanmar’s railway authorities after being subject to the usual inspections. From there, it will transit to the Indian border where Indian authorities will likewise subject it to inspections and put it on the Indian network until it reaches the next border, and so on. These inspections will cause unnecessary delays and add to costs like demurrages and insurance premiums. To be successful, STAR must provide a far better alternative.

One plausible alternative would be to set up a joint stock company with a long-term right to operate the system. The participating countries would contribute to its shareholding and the company would make all the investments required to complete the project, including providing linkages in less developed areas of Myanmar and other regions.

The criteria would be to finance linkages where the local cost benefit ratios do not justify an investment by the host country. The STAR company should own all the containers and handling systems and the handling areas required should be provided by the host nations. The rolling stock, tracks and their maintenance should be the responsibility of the rail network concerned as it is now. In other words, STAR will have a client relationship with all its network service providers.

STAR has more than just the potential to link two of the world’s three big economies to be. It could transform a potential rivalry into a great partnership. Then, it will truly be a new STAR over Asia.