The New Silk Road, currently home to eight of the world’s top 20 economies, will see its share of global gross domestic product (GDP) rise to 48 percent by 2040, according to the latest report from Oliver Wyman titled ‘The New Silk Road – Growth, Connection, Opportunity’. The report identifies multiple priority economic opportunities in the New Silk Road region that stretches across Asia, the Middle East, and North Africa.
Oliver Wyman identifies six key areas that have emerged in the increasingly interwoven economies of Asia and the MENA region. Moreover, it believes that a new phase has begun in the relationship between the countries due to intraregional flows of capital, talent and technology. In addition, business activity is expanding beyond trade and construction into a range of new sectors, including automotive, clean technology and artificial intelligence.
Assertive role of GCC countries
Oliver Wyman states in their report that one of the major factors reshaping the economies of the New Silk Road is the increasingly assertive role of GCC countries. Hence, Gulf countries are leveraging high energy prices to diversify their economies and secure their post-oil futures through investment in multiple non-oil sectors.
“The countries that are part of the New Silk Road region are powering ahead with economic opportunity being driven by three major triggers: energy transition, global supply chain disruption, and geopolitical tensions and regionalization,” stated Adel Alfalasi, Head of the UAE at Oliver Wyman, partner in the Government and Public Institutions Practice and a co-author of the report.
Supply chains and trade
The New Silk Road is an essential component of global supply chains. Thus, it holds 86 percent global export share for semiconductors, 65 percent for clothing, and 40 percent for oil. In addition, it features some of the world’s largest export manufacturers, including China and Japan, and emerging contenders such as India and Indonesia. Moreover, almost 60 percent of total trade activity in the region is currently taking place with other modern Silk Road economies.
Notably, two of the world’s three largest regional free-trade agreements now focus on the New Silk Road region:
- The Comprehensive Economic Partnership (RCEP)
- The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
Moreover, the number of bilateral agreements between Asia and the Middle East is rising.
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Future outlook
If the New Silk Road region manages to navigate critical geopolitical and environmental issues, it will see greater collaboration, connectivity, and capital growth.
“We envisage a region where energy ties will grow tighter, clean technology will play a greater role, and where manufacturing supply chains will spread out across a wider set of countries as companies build resilience,” says Ben Simpfendorfer, Asia Pacific Lead of Oliver Wyman Forum, a Partner at Oliver Wyman, and a co-author of the report.
The report also states that the flow of private wealth will expand and cross-border payment solutions will improve. In addition, investments in aviation and transport infrastructure will support the rising flows of people and goods. “Finally, a young population of early adopters will drive digital disruption,” added Alfalasi.
To capitalize on the increasing connectivity, countries across the New Silk Road need to adopt new strategies, operating models, value propositions, and mindsets, the report states. “To capture the opportunities, private companies should establish cross-market strategies, align with national priorities, and find the right partners. Governments, on the other hand, should deploy and leverage resources, such as sovereign wealth funds, to facilitate trade, investment, and technology flows and support private sectors,” added Alfalasi.
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