Page 49 - BNE_magazine_06_2020 Growers

bne June 2020 Southeast Europe I 49
be a “booster or brake” for the BRI. It finds that loans to BRI destinations were already slowing before the pandemic, which went on to put a huge strain on Chinese businesses and the economy.
“This means intense pressure on the domestic financial system, which is colouring the cost-benefit assessment of commitments overseas,” says the report. However, it adds: “At the same time, opportunities for China to play
a saviour role worldwide have boomed, and China’s money stretches further
as conditions around the world deteriorate and desperation sets in. There is obviously a foreign policy impulse for Beijing to make use of these circumstances, burnishing its investment portfolio at the same time as it bolsters China’s diplomatic image as a dependable development partner."
Meanwhile, Felix K. Chang, senior fellow at the Foreign Policy Research Institute (FPRI), writes of the “demand for demand”: If the world is plunged into a long period of low economic activity, that will negate the need for new BRI infrastructure.
“With global demand savaged for at least one year and, after a short recovery, perhaps dulled for several more, a quick return to booming global trade seems unlikely. But that is precisely what is needed to ensure that new BRI-financed infrastructure is sustainable. Otherwise, any new BRI-funded road, railway, port or airport would merely compete against existing transportation infrastructure, which could make both unprofitable. That, of course, would leave borrowers worse off,” Chang writes in a paper published by the FPRI.
He hones in specifically on Italy, as both the first European country to experience a huge COVID-19 epidemic (as of mid- May Italy had reported 223,095 cases and 31,368 deaths), and the first G7 member of the BRI. “Today, with a new recession likely, Italy may require some sort of help from the rest of the European Union to refinance its debts before it can generate any meaningful demand of its own. China may have hoped that Italy
– with Europe’s third-largest economy –
would be a cornerstone for the BRI. But for now, Beijing may have to be satisfied with Hungary, which remains keen on
a BRI-financed railway to Serbia,” argues Chang.
Six-month wonder?
However, Elen Twrdy, head of the Department of Transport Technology at the University of Ljubljana’s Faculty of Maritime Studies and Transport, points out in an interview with bne IntelliNews that infrastructure investment is a long- term game, and while it’s still unclear what the shape of the recession will look like and how long it will last, the current crisis, while deep, may not have a long-term impact. As a crisis caused by heath problems rather than problems in the financial or economic systems, some economists believe it will be followed by a rapid rebound once a vaccine is found.
Twrdy acknowledges that it’s difficult
to say how serious the impact of the pandemic will be, but once it's finally beaten, “we will forget about it and
the traffic will be normal again. Infrastructure investments are for the long term.” On the other hand, she warns, other issues that are slower to unfold could alter the case for investment in the longer term, in particular climate change that could affect both global trade and shipping routes.
On May 15, Twrdy’s prediction was at least partly realised as Slovenia became
Volume of cargo, tonnes
the first country in Europe to declare the epidemic to be over.
While it’s still very early days, developments such as this – together with passing the peak of the epidemic in Italy, and the easing of lockdowns in much of Central and Southeast Europe – give hope that an end to the crisis is in sight, and allow attention to turn to future plans and strategies.
Before the pandemic, throughput data from the North Adriatic ports showed total volumes steadily rising at Koper and Trieste since the international economic crisis a decade ago, and at Rijeka since Croatia finally emerged from recession in the mid-2010s.
The North Adriatic ports have sought to market themselves by pointing out that docking in the area then transferring cargo to road or rail can considerably cut journey times to Central and parts
of Northern Europe compared to sailing around the continent to the North Sea or Baltic ports, with associated cuts in costs and pollution. For example, the Port of Venice stresses that 97 kg/teu of carbon dioxide are saved by choosing the Port of Venice rather than a northern European port to transport containers from Asia
to Munich.
For China, initially the focus in the region was further south as China Ocean Shipping (Group) Company
Source: Ports' data/bne IntelliNews
www.bne.eu