COVID-19-Future of BRI and CPEC?
COVID-19 has put whole world on halt. Fear has grappled everyone and sector economy. Panic is widespread. Stock exchanges across the world are on the course of fall. World is expecting and trying to be ready for a multifaceted impact of COVID-19. National economies and wellbeing of common citizens would be major losers along with health and life of people. Countries are trying to fight on three fronts, 1) allocating resources to strengthen the fight against CPVID-19, 2) minimize the impact on common people, 3) designing stimulus packages to revive the economy, once the epidemic is over.
The choices are very difficult, as world economy was already under stress. The projected world growth rate was low, 3.3 percent, which is 0.1 point lower than earlier estimates (IMF, 2020). COVID-19, will further lower the growth. Although the extent is not clear at this point of time, but negative impacts are certain for every country. Conservative estimates suggest that it can bring down growth by 1 percent.
By anticipating the future, countries have started to devise tool to combat the impacts. Emergency allocation of budget has risen many folds during the last few weeks. China has allocated US$ 16 billion to implement the required instruments to prevent the spread of COVID-19 and fight it. President Trump has signed US$ 8.3 billion emergency spending bill. Italy has allocated US$ 5.6 billion. Japan’s total allocation is now US$ 19.6 billions. South Korea has announced the US$ 9.6 billion for fighting COVID-19. Many other countries are also following the suite. Multilateral institutes are also coming forward to help developing and poor countries. World Bank has announced that it will provide US$ 12 billion to poor and less developed countries. International Monterey Fund has established a window of US$ 50 billions to advance loans to countries. The contribution by IMF and WB will provide cushion to poor and countries in need of urgent cash. Iran already requested for US$ 5 billion.
he best option for world is to start cooperating and combat the challenge. BRI and CPEC provide us an excellent opportunity and world should benefit from it
The second stage would be allocation of resources for recovering from the impacts of COVID-19. Many industries are already going through crises and projecting huge losses. IATA has projected that total losses to aviation industry would be around US$ 63-113 billion. Wall Street has already come down along with many other stock markets across the world. Financial sector, especially banks are also feeling pressure. Financial sector investors are looking for safe places to invest, even at the negative interest rate. However, the biggest loser would be common people during and after the COVID-19 crises. As many workers have started to loss job due to lock down of countries. Norwegian Airline already announced to shelf half of its employees on temporary base. The real impact can be calculated after the recovery from COVID-19, most probably after June.
Countries with good financial resources has started to prepare. Many countries have already announcedstimulus packages. China has designed a package of US$ 80 billions worth. Italy has announced it will pump 25 billion Euros (US$ 28.3 billion) to recover from the impacts. Australia has announced stimulus of US$ 11.4 billion. President Trump has come up with the idea of deferring tax payments and it is expected that it will add US$ 200 billion to economy. USA also working on stimulus package so that business can recover and there should be minimum impacts on jobs. UK came up with a figure of 30 billion-pound, which include health, social and economic spending. Moreover, 12 billion-pound will be dedicated to fight COVID-19. Germany has given permission of Kfw to extend support up to 550 billion Euros (US$613 billion) to business. Switzerland has extended help of US$ 10.5 billion for business community and society to combat the challenge at hand. European Union has announced US$ 28.3 will available. Hong Kong has announced a stimulus of US$ 20 billion. The count is still going on.
The amount of allocation and efficiency of governments show that the task of recovery will gigantic. Further, the required resources will be well beyond from these allocated resources. Right now, world is worry about the job loss, job creation in future, supply chains and investment. The frequent question is being asked these days, will world have enough financial resources to come out this crisis? The answer is yes but with conditionality of “if world learn to cooperate” and pool resources. The one of the best available opportunity is Belt and Route Initiative (BRI), which is already operational by China. BRI has all the instruments which can provide substantial support to world to recover the economy. The statement can be qualified by the findings of three reports of World Bank. World Bank, 2019 conducted a series of studies including Common Transport Infrastructure, A Quantitative Model and Estimates from the Belt and Road Initiative, The Belt and Road Initiative Economic, Poverty and Environmental Impacts, The Belt and Road Initiative Economic, Opportunities and Risks of Transport Corridors, which clearly put forward that BRI will give boost to GDP, Economy and wellbeing of people.
Reports highlights that world GDP will get substantial boost. It will benefit without discrimination, either they are members or not, to BRI. The increase in GDP will be 3.4 percent for BRI countries and 2.6 percent for non-BRI countries. It will also help to create jobs at mass scale, if investments are being supported by good reforms. This is also true for Pakistan, rather, Pakistan will be one of the major beneficiaries of BRI. As we know Pakistan is home to CPEC, therefore, the country would be major beneficiary. It was predicted that the GDP increase for Pakistan would be 6.43 percent. Reforms, to improve business environment and governance can increase GDP up to 14.03 percent. It will also help Pakistan to create 4 million jobs. These calculations were made before the outbreak of COVID-19 and at a time when USA with help of its allies was running an all-out campaign against BRI and CPEC.
Now the world is facing a major epidemic and going through serious economic pressure. The relevance of BRI and CPEC has enhanced. However, the pre-requisite to accrue benefit is cooperation, which is lacking at the moment, rather rivalries are on gong among many countries. Now thequestion is, “will world leaders learn to cooperate, or will they continue to fight”? The benefits of cooperation would be enormous. It will help to generate require financial resources. As China has already committed US$ 1 trillion for investment across the world. It is also being mentioned time and again by many experts and also Chinese official, the total spending through BRI US$ 8-9 trillion till 2030. These resources will help world to recover soon from the impacts. The good news is that China is already to build cooperation and looking forward for everyone. It has reiterated its desire for cooperation time and again.
If world chose “not to cooperate” the cost will also be huge and may be beyond the capacity of world to face. Joblessness will increase which would have severe implications on livelihoods and well-being of common citizens. It would be really a huge task for financial sector to recover, soon. Economic recession will start to emerge, which has been predicted by many experts. Some experts believe that if the epidemic continue till June then it will be accompanied by economic recession. This time, the impact would be very severe may be more than 1930’s economic recession. The worst impact of this recession would on poor citizens and poor countries.
Therefore, the best option for world is to start cooperating and combat the challenge. BRI and CPEC provide us an excellent opportunity and world should benefit from it. USA should reactivate its instruments of cooperation like Trans-Atlantic Trade and Investment Partnership (TTIP) and Trans-Pacific Partnership (TPP) by refining and making these more inclusive. We need to be very clear that “cooperation” is only wayout and instrument to combat the challenges.
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The opinions expressed in this article are the author's own and do not necessarily reflect the viewpoint or stance of SDPI.