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The Beginning and Future of ASEM: The Potential of the Silk Road Project and the AIIB

Published on 03 Nov 2015

By Mr Romano PRODI, Former President of the European Commission

For almost twenty years the Asia-Europe Meeting (ASEM) has sought to deepen and foster cooperation between the Old Continent and what I believe will be one of the key regional areas of the future. The gradual enlargement of ASEM, from 26 to its current 53 members, is the strongest evidence of its success so far. And the recent inclusion of states like Norway, Switzerland, and Kazakhstan is the certitude of its lasting future.

International politics and global economics are often described as a game between states, in which international organizations play a marginal role. Today, in particular, world politics and economics are viewed as a competition and partnership between the United States and China. Although in the next decades there might be such an evolution, this is not how the world works today. The geographical, political and economic space between Europe and Asia, for example, is still of fundamental importance. The on-going crises in Ukraine and in the Middle East are evidence of the current significance of this area.

In this changing and unstable international system, both European and Asian partners of ASEM are facing challenges and great opportunities. Here I would like to discuss two projects that, though Chinese in origin, could benefit many ASEM countries and their respective societies: the New Silk Road and the Asian Infrastructure Investment Bank (AIIB).

The on-going project of the New Silk Road between China and Europe is a novelty with potentially far-reaching consequences. Indeed a great physical integration is taking place between central Asia and Europe. China has already invested in the New Silk Road a huge amount of dollars. And this huge amount of money is only the beginning of larger and larger financial investments. Like the ancient Silk Road, it will involve land and maritime routes.

The interest of China and Europe in the Silk Road are clear. With the EU being China’s biggest trading partner, a logistical route that improves economic integration between the Chinese industrial base and the European one is not in need of a sophisticated explanation. With this transcontinental logistical project, China is also trying to develop industrial hubs in the interior of the country, which is an area with great economic potential and will likely be the future engine of growth. While trains now take less than two weeks to go from Chongqing in central China to Duisburg, with the new Silk Road, the journey time will be further reduced.

The new terrestrial link between Europe and China is not going to benefit only the “extremities” of the logistical route, but it is likely to have positive effects for the countries in between, some of which are also members of ASEM. Indeed, the new Silk Road will bring widespread regional benefits and will increase the importance of the lands between the two economic giants. Thus, many Asian states should maximize their unique geographical position. With the right strategy their position can be transformed into an economic and political asset.

The weak point of the new Silk Road is that any state between Europe and China can block the project. But since there are gains for everyone concerned, I believe that this opportunity will be exploited cooperatively. In case of emerging friction, ASEM is one of the key international fora in which to openly discuss and solve disputes. Accordingly, ASEM needs to invest its institutional capabilities and diplomatic skills in the new Silk Road and foster a cooperative environment not only between the EU and China, but especially with the countries situated between these two continental poles.

The newly created Chinese investment bank is another project with significant consequences for a number of Asian and European countries. The Asian Infrastructure Investment Bank, or AIIB, is an alternative both to the World Bank and to the Asian Development Bank (ADB). However, the Chinese-led bank is not simply a financial alternative to existing institutions. The AIIB, indeed, will employ more flexible and less exclusive criteria in its financing operations towards recipient countries than the ones currently used by the World Bank and the ADB. In particular, the AIIB will try to establish at the level of financial institutions the so-called “Beijing consensus”. But in order to be competitive with the World Bank and the ADB, the AIIB must create an efficient bureaucracy, managed according to high standards of governance. From this viewpoint, for China the AIIB is not merely an economic instrument with clear political goals, but it is also an intellectual and organizational challenge.

The membership of the new bank is also meaningful. A variety of developed countries such as Britain, Australia, France, Germany, and Italy joined the AIIB and many developing countries from all over the world have done the same, especially ASEM members like India, Malaysia, Philippines, Thailand, Vietnam, and many others. Since infrastructure in some of these developing economies is greatly needed, the new financial institution is not only welcome, but it is an opportunity that must be capitalised. If long term financing of major useful infrastructure projects takes off, rising economies might be strengthened and new poles of growth are likely to emerge.

In these new political and economic conditions, ASEM has the unique opportunity to contribute to a cooperative environment within Asia and between Europe and Asia, which is a key condition for peace and prosperity. Moreover, the success of ASEM will not be only an Asian and European success, but a positive development for international order and world economic growth. Let us, therefore, wish long life and success to ASEM.

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This article is part of the ASEM 20th Anniversary Book on “20 Years of Asia-Europe Relations”. The publication is a collection of articles by leaders and experts from Asia and Europe on the past, present and future of ASEM. Selected articles from this collection will be compiled and published as a book by the Asia-Europe Foundation (ASEF), which will be distributed at the 11th Asia-Europe Meeting (ASEM11) Summit in 2016 in Mongolia.