OBOR and EU
By: Amit Bhushan Date: 15th May 2017
There seems to be a lot of media hype around OBOR. What is broadly portrayed as a network of connectivity projects and energy linkages towards production in Central Asia center going all the way to consumption center in Europe. What is tom-tommed much is that the regions in which a chunk of projects would be based are likely to grow faster on the back of investments mainly from China, although would benefit from their overall connectivity with other consumption centers as well. An increased shift towards consumption in China as opposed to present export bias would further benefit the linkages as this give opportunities of value addition within the not-so-well-off countries, at least that’s the hope. For organizer’s the earlier perchance for a globalized currency seems to have waned and even currency manipulation charge has come off. This seems to have brought in many partners even from the developed world which might have been skeptical earlier.
However a free flow of outward investment and a rising consumption at the same time seems a bit counter intuitive over the longer run and at some point pressures to globalize currency would come up. It is here the behavior of the collaborative consumption centers might get tested. The strategic stakes in key sectors, especially energy, steel etc. as well as developed trade relations might allow for the currency to enjoy a higher weightage as compared to some others. For present, though denominating trade and loans in globally accepted free currency ensures much lesser political resistance to a degree of support. It also allows smoother deployment of the reserves and allows domestic manufacturers struggling with over-capacity to continue to push exports in a rather sluggish global market. For the international investors it creates a temporary environment of buoyancy where they may feel more comfortable to balance their investments in a much more even manner rather concentrating these to select few countries, sectors or regions, subject to opportunities and current risk perception.
What would perhaps be interesting is how the countries try to develop their domestic capabilities in their industrial and service sectors when the pressures of value addition and local employment develop again. It is here that the infra must help to able to produce goods and services competitively not only for the domestic population but also for exports as these would be vital to pay for the infra loans as well as other imports such as energy and other primary goods whose cost may have risen. It is then the demand level in the consumer markets would be tested depending upon the position of the currency relative to where they are tagged presently. The access to demand within regions hitherto known for exports is going to be a question although some model is being attempted whereby the economy moves up on engineering and project exports while continuing to import light manufacturing goods which might be labour oriented. This again would demand a continuous flow of capital which may stoke currency crisis and resultant tumult. That OBOR is not a political forum but an economic one seems to be mis-placed however it would be a greater challenge to the current order while current concerns in India regards its own development and ensuring a growth of its domestic manufacturing might be much less impacted in part due to limited dependence on exports. However over the term it may need to develop markets for its manufactured wares as well as services and that may perhaps require taking into account competition from all kinds of projects elsewhere.
By: Amit Bhushan Date: 15th May 2017
There seems to be a lot of media hype around OBOR. What is broadly portrayed as a network of connectivity projects and energy linkages towards production in Central Asia center going all the way to consumption center in Europe. What is tom-tommed much is that the regions in which a chunk of projects would be based are likely to grow faster on the back of investments mainly from China, although would benefit from their overall connectivity with other consumption centers as well. An increased shift towards consumption in China as opposed to present export bias would further benefit the linkages as this give opportunities of value addition within the not-so-well-off countries, at least that’s the hope. For organizer’s the earlier perchance for a globalized currency seems to have waned and even currency manipulation charge has come off. This seems to have brought in many partners even from the developed world which might have been skeptical earlier.
However a free flow of outward investment and a rising consumption at the same time seems a bit counter intuitive over the longer run and at some point pressures to globalize currency would come up. It is here the behavior of the collaborative consumption centers might get tested. The strategic stakes in key sectors, especially energy, steel etc. as well as developed trade relations might allow for the currency to enjoy a higher weightage as compared to some others. For present, though denominating trade and loans in globally accepted free currency ensures much lesser political resistance to a degree of support. It also allows smoother deployment of the reserves and allows domestic manufacturers struggling with over-capacity to continue to push exports in a rather sluggish global market. For the international investors it creates a temporary environment of buoyancy where they may feel more comfortable to balance their investments in a much more even manner rather concentrating these to select few countries, sectors or regions, subject to opportunities and current risk perception.
What would perhaps be interesting is how the countries try to develop their domestic capabilities in their industrial and service sectors when the pressures of value addition and local employment develop again. It is here that the infra must help to able to produce goods and services competitively not only for the domestic population but also for exports as these would be vital to pay for the infra loans as well as other imports such as energy and other primary goods whose cost may have risen. It is then the demand level in the consumer markets would be tested depending upon the position of the currency relative to where they are tagged presently. The access to demand within regions hitherto known for exports is going to be a question although some model is being attempted whereby the economy moves up on engineering and project exports while continuing to import light manufacturing goods which might be labour oriented. This again would demand a continuous flow of capital which may stoke currency crisis and resultant tumult. That OBOR is not a political forum but an economic one seems to be mis-placed however it would be a greater challenge to the current order while current concerns in India regards its own development and ensuring a growth of its domestic manufacturing might be much less impacted in part due to limited dependence on exports. However over the term it may need to develop markets for its manufactured wares as well as services and that may perhaps require taking into account competition from all kinds of projects elsewhere.