In November 2016, the China-Pakistan Economic Corridor (CPEC) was declared open as the first truckload of Chinese goods reached Gwadar Port for international shipment. CPEC is one of six economic corridors (ECs) Chinese president Xi Jinping has announced as part of the country’s Belt and Road Initiative. In response, India and Japan have teamed up to develop an ambitious economic corridor of their own: the Asia-Africa Growth Corridor. As Asia’s powers advance competing visions for connectivity, it is important to understand what this amorphous concept entails.
Generally speaking, an economic corridor is a geographically-targeted development initiative. It is a route along which people and goods move, and the efficiency of this movement stimulates economic growth. The concept gained popularity in the late 1990s through an Asian Development Bank (ADB) project to develop the Greater Mekong Subregion (GMS) in Southeast Asia. ADB officials, recognizing the relationship between improved infrastructure and increased economic activity, decided to focus investments in transport, energy, and telecommunications.
There is no single picture of an economic corridor. A corridor can be national, such as India’s East Coast Economic Corridor, regional like the GMS, or international, such as China’s New Eurasian Land Bridge, which extends across Eurasia. Corridors can also focus on either maritime or overland connections. While China’s much-publicized CPEC and New Eurasian Land Bridge focus on land linkages, Japan and India’s Asia-Africa Growth Corridor aims to develop new shipping routes between Africa and Southeast Asia.
Despite these variations, economic corridors typically feature three complementary components: a transport corridor, industrial production centers, and cities. The transport corridor is the backbone of the EC—it defines the geographical space of the corridor and facilitates the flow of goods and services. The industrial production centers produce these goods, both for consumption in the surrounding region and for international trade, and the cities present major markets for consumption. The corridor’s urban centers also provide a critical source of labor, technology, and innovation that is necessary to drive economic growth.
Some development strategies aim to create economic corridors. The process typically begins with creating transport linkages to connect the main economic nodes of a region—its cities, industrial zones, and international trade gateways. This can include the rehabilitation of rural roads, the construction of high-speed railways, and the expansion of ports. Also critical are policies that encourage business and facilitate the movement of people and goods. Common goals include streamlining customs procedures, reducing import tariffs, implementing tax exemptions in special economic zones, and easing the process of setting up and closing businesses. Over time, these improvements to both “hard” and “soft” infrastructure can foster economic activity.
This geographically-targeted development approach has received widespread support from multilateral development banks (MDBs), including the ADB, World Bank, Japan International Cooperation Agency (JICA), and African Development Bank (AfDB). Yet as with any economic concept, economists debate its proper implementation. As ECs proliferate and spatial development planning, rather than political borders, increasingly define economic boundaries, there will naturally be winners and losers. Governments and MDBs will need to work to mitigate the effects of freer trade on social inclusion. They will also need to seriously assess the impact of these large-scale infrastructure and industrial development efforts on environmental quality.
Moreover, there has been growing concern about the use of economic corridors as a geopolitical tool. Some note that lopsided arrangements between states with incommensurable economic might will impede reciprocity within a corridor. That is, the larger economic power will set the terms in a way that is not most conducive to constructing quality infrastructure and increasing economic efficiency. In Pakistan, for instance, Chinese workers have built the majority of CPEC projects, energy projects are more expensive than in neighboring states, and the government now faces a surging current account deficit due in part to Chinese machinery imports. Many worry that substantial debt burden will create a sort of economic and political clientelism that benefits donor countries to the exclusion of recipient and neighboring states. Thus, while widely supported by development economists in theory, some of the more recent manifestation of economic corridors have spurred significant debate. As the construction of an economic corridor can come at immense financial costs, its implementation must be carefully assessed from an economic perspective to spur the desired growth.
Stephanie Petrella is a Research Associate at the Foreign Policy Research Institute (FPRI).