- Current political and economic issues succinctly explained.
On the sidelines of the Group of Twenty (G20) Leaders’ Summit in New Delhi in September, Prime Minister Narendra Modi announced the India-Middle East-Europe Economic Corridor (IMEC), a planned new trade route running from India to Europe. Involving Saudi Arabia, the United Arab Emirates, France, Germany, Italy, the European Union, and the United States in addition to India, IMEC aims to build trade and infrastructural networks and foster economic development and connectivity among these nations. The corridor will strive to reduce production costs, secure supply chains, improve trade efficiency, create jobs, and lower greenhouse gas emissions. Implicitly, IMEC is expected to be a counter-economic corridor to China’s Belt and Road Initiative (BRI). The Israel-Hamas war has now thrown the future of IMEC into jeopardy. But even prior to the outbreak of the conflict, IMEC faced significant challenges, one of which is that—as India has repeatedly found—economic corridors are difficult to set up and sustain.
Economic corridors are integrated networks of roads, ports, and railways that connect crucial centers of production to facilitate the movement of both goods and people efficiently and cost-effectively. They are generally created to encourage trade and promote infrastructural and industrial development within and between target countries. There are different conditions that need to be in place for them to be successful, not the least of which is the strength of member countries’ economies, allowing for competitive yet free entry into and exit from the market. Additionally, successful corridors promote vertical as well as horizontal network integration—allowing for multiple points of contact between trade centers of member nations—and connect technology with local and regional institutions. For example, the Greater Mekong Subregion (GMS) and its three associated corridors were largely successful both because the region, with its rich resources and high levels of tourism, was conducive to setting up corridors, and because it had specific “hubs” that could be networked together and developed infrastructurally.
When corridors fail they often do so due to a lack of extant social, economic, or political cohesion within member countries or the region as a whole, undermining attempts to create networks. The China-Pakistan Economic Corridor (CPEC) failed largely due to Pakistan’s political and social instability, which posed a security threat and created a leadership void in the project. But even in countries with strong political cohesion, other factors can matter: neglecting to link smaller, cross-border roadways in addition to major highways, high costs on exports, overly complex logistical processes, and inadequate information-sharing can all doom success.
India’s track record on economic corridors is mixed at best. Past corridors that India has been involved in, such as the Bangladesh-China-India-Myanmar Economic Corridor (BCIM) and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), have been hampered by inter-regional conflict and lack of agreement on trade guidelines.
BCIM, initially started in 1999, intended to connect landlocked parts of southwest China with eastern India as well as Bangladesh and Myanmar. Severe conflict in the region prevented the formation of strong, cross-border trade networks. Furthermore, as two rivals in the same corridor, China and India struggled for power within BCIM.
BIMSTEC, an economic corridor created to foster socioeconomic growth in the Bay of Bengal region in the wake of the failed South Asian Association for Regional Cooperation (SAARC), has been largely unsuccessful due to its inability to produce a Free Trade Agreement (FTA). Without a defined framework or economic plan, the corridor remains stagnant and unable to make progress on initiatives such as its Master Plan for Transport Connectivity. In twenty-four years, the corridor has held only four summit meetings and done a poor job of connecting domains such as energy, infrastructure, and trade.
Though all members except Bangladesh signed a Free Trade Area Framework Agreement—which created forums through which to discuss trade issues—in 2004, this has not yet produced an FTA. In March 2023, BIMSTEC Security General Tenzin Lekphell announced that member nations were in the final stages of creating an official FTA, but no further information has been released since.
It is hard to predict whether IMEC will fall into the same trap as India’s past corridors. If completed, the project will establish India as the Asian authority on trade instead of China. Chinese experts thus far doubt the infrastructural proposals that IMEC is proposing, critiquing the United States’ pattern of making empty promises. While it is difficult to compete with China’s BRI, which was established over a decade ago and includes about 150 countries, IMEC—in line with the United States’ commitment to friendshoring—could theoretically enable a small number of ‘technologically and financially capable’ countries like the United States and India to do so.
To be proactive, IMEC is already planning to address some problems that commonly befall economic corridors. For one, minor, missing cross-border roads are being noted so that they can be built under IMEC to achieve higher network connectivity. IMEC also aims to include private sector investment in its projects, something that the GMS neglected to do, to promote job creation. However, the main issue—whether the project will get off the ground given the current instability in West Asia—remains to be seen.