HUG Magazine 2018 EN - Issue 3. (№11)

2018

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HUNGARIA N G EOPOLITICS

In our present, 11th issue, we are travelling along the linking lines of Eurasia, from the Pearl River Delta development zone to the Polar New Silk Road. We can read about the challenges of the new Eurasia: the links between China and Central and Eastern Europe, from the ecological civilisation to the Fourth Industrial Revolution. Within the territory of the New Heartland in space and time!

HUNGARIAN GEOPOLITICS

HUG 2018 3

2018/III.

ISSN 2498-647X

PEARL RIVER DELTA SHENZHEN – CHINA’S SUCCESS STORY POLAR SILK ROAD INDIA AND THE NEW SILK ROAD MEETING OF GOVERNORS OF THE 16+1 CENTRAL BANKS IN BUDAPEST CENTRAL EUROPEAN TIME THE ROLE OF GEOGRAPHY IN THE NEW WORLD ORDER OVERLAND VS MARITIME TRADE

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FOREWORD

The Dawn of Eurasia In the summer of 2018, the leaders of the EU and China gathered at a summit in Beijing to endorse the EU-China interconnection. China’s “One Bet, One Road” scheme – which is the greatest geostrategic programme of the 21 st century – includes the goal of linking the commercial, economic, cultural, educational, technological and knowledge worlds of Europe and East Asia, intertwining a currently evolving, vast Eurasia. There is a growing number of geostrategists who can see the key role of a coherent Eurasia in the evolving new world order.

In fact, Eurasia has never disappeared, and these thoughts are not new, either. More than a century ago, Halford John Mackinder, the father of geopolitics, placed Eurasia in the centre of international relations.

The new role of Eurasia is formulated in the most ingenious way by Robert Kaplan in his book The Return of Marco Polo’s World. As far as the American journalist can see, the new interconnections of Eurasia, in the forms of roads, railways, gas pipelines and optic cables, mean that old territorial categories such as Central or East or South Asia have less and less meaning. From the interaction between globalisation, technological development and geography, the Eurasian supercontinent is becoming a volatile but palpable unit. Eurasia has a meaning that it has never had before.

This is a world also known by 13 th -century traveller,

future. It is not a coincidence that the leaders of Shanghai’s Fudan University, ranked in the world’s best 50, signed a partnership agreement in the newly inaugurated the House of Wisdom in Budapest at the beginning of October, within the framework of which Fudan University, for the first time in Europe, will launch a dual MBA training programme with Corvinus University of Budapest, with the professional support of the Central Bank of Hungary.

A month later, the governors of the central banks of 16 Central and Eastern European Countries and China met in the House of Wisdom to create further partnerships.

In our present, 11th issue, we are travelling and can read interesting articles along the linking routes of Eurasia, from the Pearl River Delta development zone and the Polar New Silk Road to the challenges of maritime and overland transport and the railway links of China and Central and Eastern Europe, from the ecological civilisation to the Fourth Industrial Revolution – within the territory of the New Heartland in space and time!

Marco Polo – as the title of Kaplan’s new book suggests; now it has been published also in Hungarian

by Pallas Athéné Publishing House. China has recognised that trade is a better weapon than a sword, and this is the way it can rule the multicultural whole of Eurasia. Sovereignties have multiplied, and city states such as Shanghai, Singapore, Dubai, or in Marco Polo’s times Bukhara, are flourishing.

Yours faithfully,

Another recently published book, The Dawn of Eurasia: On the Trail of the New World Order by Portugal Bruno Macaes goes as far as claiming that the 21 st century will be the Eurasian century.

Macaes main message is that Eurasia is a complex world in itself but the new supercontinent still has a balancing force. For China, Central Europe, and Hungary in particular, is a priority on the map of the

Norbert Csizmadia Pallas Athene Innovation and Geopolitical Foundation Chairman of the Board of Trustees HUG Editor-in-Chief

Please, join us. Enjoy reading and exploring.

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TABLE OF CONTENTS 8

Pearl River Delta: Opportunities and Challenges

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The Integration of Cities in the Pearl River Delta: The Hong Kong-Zhuhai-Macau Bridge

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Shenzhen – China’s Success Story

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Hainan: The Place for Deepening the Reforms

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Hong Kong’s Past 20 Years – Promises and Realities

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Polar Silk Road

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India and the “New Silk Road”

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Chabahar: Which Way Are the Scales Tipping?

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Atlantic Council Silk Road 2.0

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Viktor Orbán’s Address at the Meeting of Central Bank Governors of China and Central and Eastern European Countries

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Central European Time

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The Significance of Geography in the Multipolar World Order of the 21 st Century

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Hungary as a Pioneer of the BRI

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Companies Managing Rail Freight Services between China and Europe

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Belt and Road Forum 2018

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New World Order Conference: Integration and Multipolarity

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“One Belt, One Road� Project

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Overland vs Seaborne Trade

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The Fourth Industrial Revolution and the Tasks and Opportunities of Developing Countries

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The Scientific Basis of The Ecological Civilisation

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Book Recommendations

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The Geopolitics of South Asia by Graham P. Chapman

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Pearl River Delta: Opportunities and Challenges

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Pearl River Delta: Opportunities and Challenges

Author: Viktor Eszterhai

In the past decades the Pearl River Delta has become the centre of the world’s processing industry. The Chinese government hopes that the cities in the region will develop into an integrated urban region in the near future that can turn into the centre of global economy. The present study points out the factors that facilitate the further integration of the cities of the Pearl River Delta, and also the factors that pose challenges to be addressed.

Introduction The Pearl River Delta – China’s industrial centre producing for export –comprises eleven cities: Hong Kong (Xianggang), Macao (Aomen), Guangzhou, Shenzhen, Zhuhai, Foshan, Zhongshan, Dongguan, Zhaoqing, Huizhou and Jiangmen. The total population of the eleven cities is 68 million, which is almost the population of the 20th most populous country, Thailand (68.9 million). The largest city of the region is Guangzhou with a population of 14 million people, followed by Shenzhen with 11.9 million, four other cities typically have populations of over five million people, while one of the most densely populated cities in the world is Macau (645 thousand people).

(Fig. 1) The nominal gross economic output of the region was over 1,387 billion USD in 2016. The economic power of the Pearl River Delta is best reflected by the fact that although the region’s population is 5% of that of China, it produces more than 10% of its economic output, which would in itself make the area the 12th most powerful national economy, surpassing the economic power of Russia (1283.2 billion USD).

The region’s per capita nominal gross domestic product was USD20,412 in 2016, which is approximately the same as in Saudi Arabia (USD 20,029 /person).

While the central question in the studies about China in the past few years has been whether China can avoid the trap that medium income countries fall into, the Pearl River Delta area has already reached the level of developed countries. There are of course

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huge differences among the cities of the region, the most developed ones are Macau (USD 69,370/person), Hong Kong (USD 43,742/person) and Shenzen (USD 25,206/person), at the other end of the spectrum there are Jiangmen (USD 8,036/person) and Zhaoqin (USD 7,706/person).

The study goes on to analyse those factors that stimulate the possible further integration of the Pearl River Delta cities and those that appear as challenges and hinder the deepening of relations.

Goals and political aspirations The initiative aiming at the convergence of the Pearl River Delta was first formulated in the 13th Five-Year Plan (2016-2020). In March 2017, the Prime Minister of the People’s Republic of China, Li Keqiang confirmed that the government handles the execution of the plan as a priority. Accordingly, in June 2017 the National Development and Reform Commission, which plays a key role in planning and execution, Guangdong Province, Hong Kong and Macau signed an agreement on implementation, the date of which can be regarded as the starting date of the initiative.

In fact, the grandiose plan is not without history. The background of the initiative is the National Reform Commission’s proposal of 2009, the “Outline of the Plan for the Reform and Development of the

Fig. 1 The eleven cities of the Pearl River Delta and their main data from 2016

Pearl River Delta Region (2008-2020)”, viiiand a 2011 study, “The Action Plan for the Bay Area of the Pearl River Estuary”, published by the experts of Hong Kong, Macau and Guangdong Province.ixBoth documents are intended to draw decision makers’ attention to the opportunities of cooperation.

The central element of this ambitious initiative is to promote cooperation among the cities of the region to create a world-class city cluster that by 2030 would obtain a leading role in the most advanced processing industry, innovation, transport as well as logistics, trade and finance. The defined goals seem easily attainable. Guangdong Province is currently China’s, and also the world’s most important processing industry centre. Considering freight transport, Shenzhen and Hong Kong are among the most important ports in the world, while Guangzhou and Hong Kong are hub airports of international significance. Finally, Hong Kong is one of the most powerful financial centres, and Shenzhen, the second financial centre of China after Shanghai, is already closely connected to Hong Kong (joint stock exchange).

The formation of the city cluster is supported by the significant specialisation of the cities, which means that cooperation among them creates economic advantage in principle.

•H ong Kong is one of the busiest financial centres in the world providing world-class services. It is a significant centre of higher education in Asia (university of Hong Kong, Chinese University of Hong Kong), and also has international importance in the sectors of creative industry, such as the film industry. Hong Kong’s financial institutions can play an important supportive role in the investments of the other cities of the cluster. The city has a well-travelled, highly educated and English-speaking layer of society that is indispensable for the Pearl River Delta to live up to the expectations. At the same time, the city had to face in the past years that it spends a relatively small amount on research and development (1.1% of the GDP), and lags behind Shenzhen and Guangzhou in this respect.

•M acau’s key sectors are gambling and tourism (e.g. conference tourism), but depends on imports in practically everything.

•G uangzhou, the capital city of Guangdong Province is traditionally the local political, economic and transportation centre. In its economic life, the most decisive role is played by the diverse industry, but the service sector is also gaining more significance.

Two of the leading universities of China, the Sun

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Fig. 2 The Pearl River Delta compared to the most significant city clusters of the world Pearl River Delta

Greater New York

San Francisco Bay

Tokyo Bay

Population

66,7

23,4

7,2

43,5

Economic output (million USD)

1.334

1.614,6

712,8

1.783,5

20.000

69.000

99.000

41.000

56,0

17,4

17,9

36,8

Per capita conomic output Land area thousand sq. km

The aim of the central plans is to grow the Pearl River Delta into one of the leading urban regions of the world.

When comparing the data of the Pearl River Delta and the most significant urban clusters, like San Francisco, New York or Tokyo Bay, it can be concluded that as regards population and economic performance it represents a similar volume, while the level of development remains far behind (Fig 2). However, thanks to China’s dynamic growth, the level of the economic development of the Pearl River Delta is expected to catch up with the rival clusters in the near future.

Yat-sen University and the South China University of Technology are located in the city.

growing significance as production background for companies of high added value.

• Shenzhen, as the first free trade zone, was the centre of exporting producers of the processing industry for a long time, but in the past period it has become the centre of Chinese high-tech services and processing industry, it hosts several internationally known companies like Huawei, ZTE, BYD etc. Shenzhen spent 4.1% of its gross economic output on research and development in 2017, which can be compared at state level only to the amount spent by South Korea.

In spite of all this there is still room for development in higher education and the health sector.

• Zhaoqing is a historical and cultural city, a centre of tourism.

• Zhuhai’s major economic field is processing industry (predominantly the production of electronic equipment and machinery). After the opening of the Hong Kong-Zhuhai-Macau bridge the city will probably develop faster, mainly in the service sector, part of which will relocate to Zhuhai from Hong Kong and Macau.

• Foshan is one of the most important export ports of China, especially in the transportation of electronic goods, household appliances, textile, plastic, leather and clothing. Its dominant industry is light industry.

• Zhongshan is a recreation and leisure centre. After the opening of the Hong Kong-Zhuhai-Macao bridge its accessibility will substantially improve.

Its central location will be further enhanced by the construction of the Shenzhen-Zhongshan bridge.

• Dongguan was once famous for small and medium-sized light industry companies, today it has

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• Huizhou is the centre of electronics manufacturing and petrochemical industry.

• Jiangmen is one of China’s leading textile and clothing industry centres.

Specialisation can in theory ensure better market access, improve company synergies and the more efficient flow of experts, research results and knowledge.

The aim of the central plans is to grow the Pearl River Delta into one of the leading urban regions of the world. When comparing the data of the Pearl River Delta and the most significant urban clusters, like San Francisco, New York or Tokyo Bay, it can be concluded that as regards population and economic performance it represents a similar volume, while the level of development remains far behind (Fig 2). However, thanks to China’s dynamic growth, the level of the economic development of the Pearl River Delta is expected to catch up with the rival clusters in the near future.

Real deepening of the relationship among the cities cannot happen without infrastructure that ensures connections. There’s no lack of grand infrastructure development plans requiring substantial central resources. The basis for the connection between the cities is ensured by a unified road and railway network.

Pearl River Delta: Opportunities and Challenges

From the aspect of establishing road connections, it is of crucial importance that the two sides of the bay should be connected with bridges. There are several large, multi-lane road bridges, the Hong Kong-Macau-Zhuhai bridge that will be opened in 2018 (in the value of 15.9 billion USD), the Shenzhen-Zhongshan bridge, the construction of which started in 2017 (with a planned cost of 6.6 billion USD). Additionally, the establishment of high speed railway connection of all the participating cities has also started –which is going to free substantial capacities for freight transport at the same time -, and there are also plans for joining the underground networks of the neighbouring cities.

Beyond the large infrastructural projects central support is provided for strengthening cooperation in the areas of innovation, advanced processing industry, logistics and finance. The planned Lok Ma Chau Loop Innovation and Technology Park that is under construction, or the new Qianhai quarter of Shenzhen are part of something that can be regarded a kind of “financial free trade zone”, and the Guangzhou Nansha New Area free trade zone all belong to these. The

success of all the above plans would be too early to try to predict in their current phase.

Besides all these, the project has a long term political goal as well, which is to support the full integration of Hong Kong and Macau into China.

After regaining control over Hong Kong in 1997, China promised to preserve the partial political independence and social-economic system for fifty years. Later this model set a precedent at the time of Macao’s return (1999), as a result of which the political principle of the “one country two systems” was applied in China. According to the agreement, the two cities are special administrative regions with a high degree of autonomy (e.g. independent legislative, and executive bodies, independent court system). Because of all this, certain circles in Hong Kong consider the project as a threat to their independence. The decision to end ticket control at the border on the Shenzhen-Hong Kong section of the high-speed railway caused serious tension, because some regard that the aim of this is to impair Hong Kong’s autonomy and not to reduce travel time. According to more optimistic opinions, the integration

Fig. 3 The major infrastructural investments in the Pearl River Delta

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of the Pearl River Delta is suitable to strengthen trust, hostile approach to it is not in the interests of Hong Kong or Macau.

The Beijing government stresses that the Pearl River Delta initiative complements China’s foreign policy flagship initiative “One Belt One Road”. This is because the region can become a natural hub for the maritime section of the “One Belt One Road”, the so called “Maritime Silk Road”, which would further enhance China’s relationships with the South Asian countries. However, it is not necessarily clear what this pursuit exactly means for the Pearl River Delta, because the region has had traditionally close relationships with South Asia, mainly through the Chinese minority living in the area. The region was regarded as the gate to China earlier as well, so the local companies see growth opportunities not necessarily in the foreign but rather in the domestic market because of the dynamically growing volume of consumption.

Challenges Although the Pearl River Delta belongs to one country, it is strongly divided, which seriously impacts the flow of goods, services, workforce, capital and information. First of all, there is undoubtedly a serious political division embodied by the “One Country, Two Systems” principle mentioned above. Second, three currencies are used in the region, besides the yuan there are the Hong Kong dollar and the Macanese pataka. Third, the free flow of capital is ensured in Hong Kong and Macau, while in the inland territories restrictions continue to be in effect. Fourth, Hong Kong and Macao are free ports, constituting a separate customs territory next to China. China wants to control the flow of information, which is a notable difference if compared with the practice of Hong Kong and Macau. Finally, there is still no unified and working administrative institution that would join the region, so the individual planning and decision making of the cities remain, which inevitably will result in a less effective coordination of necessary steps. There have been steps taken in relation to the issues listed above in order to realise certain projects (e.g. Qianhai, Nanshan etc.), but no attempts towards comprehensive political and regulatory unification have been made, basically because of the different standpoints and interests of Hong Kong and Macau.

Due to all these reasons, the Pearl River Delta cannot be compared to the competitors mentioned earlier,

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because those are not so much internally divided.

Division creates considerable obstacles in the way of the free flow of workforce ad capital, which would be indispensable for economic unity (as shown by the example of the EU).

According to other critical notions, the region would be capable of successfully fighting global competitors if it could become internationally attractive for talented and creative people. For foreign workers China is currently difficult to decipher, it has a legal system different from the Western one and its regulations lack transparency, all of which is seriously discouraging.

Better connectedness poses serious challenge to the poorer cities of the region. First, in cities with comparative disadvantage, underdevelopment may become constant. Second, those cities that have better wages and higher standard of living might attract innovative and young workforce, creating a kind of brain drain.

Thus, the economic concentration of the richer cities is expected to further increase the already significant differences among the cities. The central government has to find a solution for this problem.

Finally, the Chinese government has to justify why the investments that are aimed at deepening urban cooperation but require huge financial resources are made in one of the richest parts of China rather than in the central and Western regions that need it much more. This enhances the regional differences within China further, although overcoming such differences is exactly one of the central goals of the government.

Summary Concerning its size, the Pearl River region is already one of the most important city clusters in the world, and – due to favourable economic prospects – it is expected to strengthen further. The most important question from the region’s aspect is how successfully the integration of the cities can be deepened. Factors that support cooperation include the different specialisation of the cities, the significant infrastructural investments and political will, while challenges to be overcome are posed by strong internal division, differences among the cities and the deficiencies of the Chinese legal system that all create obstacles in the way of the free flow of services, workforce, capital and information.

Pearl River Delta: Opportunities and Challenges

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The Integration of the Pearl River Delta

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The Integration of the Pearl River Delta: The Hong Kong-ZhuhaiMacau Bridge

Author: László Gere, Alexandra Zoltai

Being one of China’s economic engines, the city agglomeration of the Pearl River Delta is considered by many people the largest megacity in the world by many people. Over the past decades, it has experienced an extraordinary economic growth and has become one of the key trading and industrial centers globally, and these tendencies are expected to continue in the future, too. According to the experts, international experience shows that one of the keys to the proper exploitation of economic opportunities can be closer cooperation among the cities and integration.

In this respect, considerable and progressive ambitions are taking shape, and the newest clear result will be the construction of the Hong Kong-Zhuhai-Macau Bridge.

THE PEARL RIVER DELTA In the late 1970s the reform and opening policy announced by Deng Xiaoping had considerably enhanced development and economic growth in China. This is the only country that has managed to maintain the two-digit annual growth over the past 30 years. Economic development, however, has not been unitary in the country; the first territories growing rapidly as a result of the reforms were the Special Economic Zones (SEZ). The first four cities were founded in the 1980s, three of them are situated in Guangdong Province, and two are in the Pearl River Delta: Shenzhen and Zhuhai.iv Source: HSBC – Pearl River Delta: Factbook, World Shipping Councilv ECONOMIC ROLE The Pearl River Delta is the southernmost of China’s three main coastal economic centers. The northernmost one is the Beijing-Tienjin-Bohai axis, which has

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ten cities as members, a total population of 100 million people and a GDP of USD 1,300 billion, while in the middle is the agglomeration of the Yangtze River Delta, led by Shanghai, having 130 million people and producing a GDP of 2,000 billion dollars annually.

Over one-fifth (21%) of the Chinese population lives in these 3 clusters, and 40% of the GDP is produced here.

For more than 30 years that elapsed since the opening, the Pearl River Delta as a “pilot area” has taken a leading role in the realization of the market-oriented reforms, has soon elaborated the framework of the Socialist market economy, and consequently, it has become the most significant trading region throughout China with the most complex market system of the country. Thanks to its geographical location, too, the Pearl River Delta is the most export-driven region with the highest export proportion. The backward agricultural region has become a manufacturing industrial center on a global scale and is currently the key

engine of China’s social and economic development.

Its GDP totals over USD 1,200 billion, which is higher than that of Indonesia, and its GDP growth has been 12% over the past decade. The 2020 Medium Term Development Review drafted for the region in 2008 outlines a vision of further development opportunities for the city agglomeration: there is still considerable potential in the advancement of industrialization, IT systems, urbanization, commercialization and internationalization. As a result, the explosive growth arising from the economic integration of Guangdong Province, Hong Kong and Macau (also modelled by the bridge under construction), and especially the development of the past decades gives considerable

Diagram 1: A sectoral breakdown of the GDP of the Pearl River Delta (1978-2013) billion USD

competitive advantages to the region at the regional market.

The competitive growth areas of the region at national level: Manufacturing industry: a highly competitive light industry and technology-based manufacturing industry; the assembly plants and the leading sites of high-tech electronic products can be found here.

Transportation: one of the largest markets of maritime and air transport at global level, primarily due to its leading industrial and exporting role.

Commercial services: the Greater Pearl River Delta Region (this definition officially includes Hong Kong and Macau, too) is one of the largest trading service centers of Mainland China: trading, procurement, freight forwarding, logistics, etc. are concentrated in this field; it is a rather attractive region for the purchasing and procurement offices of transnational companies.

Digital innovation: in this respect, we must mention the city of Shenzhen, China’s Silicon Valley or the Silicon Delta”: it aims to become a global innovation hub, having every chance of success. For instance, by far the most patent applications are submitted from here in China. It is the center for large companies such as Tencent, Huawei, OnePlus, BYD, TP-Link or ZTE. Although the industry and the settlement of assembly plants have played an important role in the rise of the region (primarily due to the considerable amount of cheap labor force), by today the third economic sector, i.e. the service sector has provided the greatest part of the GDP, and as for the growth pace, the tertiary sector takes the lead even more definitely (Diagram 1). The analysts point out that, besides the above-mentioned integration, the most significant factors of further growth are diversification and innovation.

Guangdong Province in terms of numbers: • a population of over 100 million people • most people speak the Cantonel language, which is also used in Hong Kong • it constitutes 11% of China’s GDP (with this figure, this Chinese province had had the highest economic performance for 26 years in 2016) • 26% of China’s trade is realized here and it serves as China’s largest export base • Shenzhen and Hong Kong have the third and fifth busiest harbors in the world, respectively • at global level, the Shenzen Stock Exchange ranks fifth; however, if we add it to the Hongkongese one, they take third place • by 2025, the Pearl River Delta and Hong Kong together will have become the largest urban bank cluster in the world, and their revenue generation potential will comprise USD 185 billion.

Source: HSBC – Pearl River Delta: Factbook, World Shipping Council

UrbanizATION PROCESSES In China the economic development has launched the process of urbanization, too: 190 million people (19.4%) lived in cities in 1980, and 636 million (47.0%) in 2010. The estimations suggest that this number will reach 1,038 million by 2050, which constitutes 73.2% of the population. China’s urbanization was reflected in both the rapid growth of urban population and the emergence of cities of central importance. One of the

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Diagram 3: Density of population and infrastructure of the Pearl River Delta based on the data available in March 2017.

Source: The Economist

most rapid urbanizations in history took place in the territory of the Pearl River Delta: the territory, which used to be an agricultural area in 1979, has become one of the centers of global trade by today.xiv In 2008 China announced its intention to turn the cities of Guangzhou, Shenzhen, Dongguan, Zhaoqing, Foshan, Huizhou, Jiangmen, Zhongshan and Zhuhai into a big megacity around the Pearl River Delta, and significant infrastructure projects were launched for this purpose all around the city.xv According to the study examining the Eastern Asian urbanization processes between 2000 and 2010, if the city agglomeration of the Pearl River Delta is considered one settlement (as the Chinese intent suggests), today it is the largest urban agglomeration in the world, taking the leading role from the Tokyo agglomeration, which had been Top1 for a long time.

When typifying the megacities, the study classifies the two city regions in the same category, legitimating

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the change in order in this way, too. (At the same time, it is worth mentioning that the World Urbanization Prospects, the UN report on urbanization trends, still deems the Tokyo agglomeration as the largest one) It is referred to as a fragmented urban area, which has no dominant central settlement in the agglomeration but can be characterized as a widespread city region, where none of the cities has a territory reaching 50% of the total area. Besides the Pearl River Delta, such typical multi-centered city regions include the Manila agglomeration at the Philippines (consisting of 85 municipalities) and the Tokyo agglomeration (with 240 municipalities from seven prefectures). The study prepared by UN-HABITAT on global urbanization in 2016 pays close attention to the so-called megaregions: to such regions evolving through the close cooperation of cities that offer unique opportunities of economic welfare and development through their intensive em-

The Integration of the Pearl River Delta: The Hong Kong-Zhuhai-Macau Bridge

ployment and knowledge-share networks and play a more and more significant role across the borders. For instance, we can mention the Pearl River Delta in São Paulo Brazil, Rio de Janeiro city pair, and the Mumbai– Delhi industrial corridor in India.

Diagram 2: The number of population in the cities of the Great Pearl River Delta in 1980 and 2015 (people). Source of data: population.city

The reforms have resulted in considerable development in China, mainly on the coastal parts though the inflow of foreign capital, which goes with the urbanization of the regions. China’s Open Door Policy has made one of the greatest influences on the Pearl River Delta, as both the population and the territory of the local cities have increased considerably. The plan of the megacity is expected to bring further growth. A remarkable change can be predicted at the western part of the Delta, where the Hong Kong-Zhuhai-Macau Bridge currently under construction will play a significant role.

The bridge, which has been planned since the 1990s but still has not been constructed, is now going to be built and may boost up the economy of the cities there.

PROJECT OVERVIEW

Diagram 4: The plan of facilities related to the HZMB project .

Source: http://www.hzmb.hk/eng/index.html

The central bridge (The Hong kong-Zhuhai-Macau bridge/HZMB) The purpose of the bridge is to connect the Hong Kong Special Administrative Region with Zhuhai in Guangdong Province, Mainland China and Macau Special Administrative Region. It primarily aims to ensure the flow of the travelers and commodities between Hong Kong, Mainland China and Macau by establishing a mainland transport link between the eastern and western banks of the Pearl River. The building of the bridge would make the economic connection of the three sites even closer and would contribute to the sustainable development of the territory.

The Hong Kong link road This link road would be the connection point between the central bridge and the planned Hong Kong Border Crossing Facility. The 12-kilometer long and 6-laned road section will spread between the Hongkongese border of the central bridge and the border crossing to be built in the northeastern part of the Hongkongese airport island. The project will include the construction of tunnels, dikes, transport hubs and other facilities, too.

The Hong Kong Border Crossing Facility Serving also as a transport hub, this facility mainly aims at the customs clearing of goods and the passing of

travelers by using the new bridge. To secure the site, a 150-hectare artificial island is built, which includes the border crossing of 130 hectares and the 20-hectare promontory of Tuen Mun – Chek Lap Kok link road, supplementing the northeastern part of Hong Kong International Airport. Thanks to its geographical location, it will become a convenient transport hub (airport, ferry, subway) in direct vicinity on the international airport and near the city lying in Tung Chung New Territories.

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The establishment of this hub will promote such cooperation that will promote the development of the current Hongkongese economy.

The Tuen Mun – Chek Lap Kok Link Road This link road provides a strategic connection with the northwestern part of the New Territories, the Hong Kong-Zhuhai-Macau Bridge, the Hongkongese Border Cross Facility, North Lantau and Hong Kong International Airport. The new link road is planned to be 9 kilometers long and divided into a northern and a southern part. The southern link road will provide the connection between North Lantau Highway (Tai Ho) and the Border Crossing Facility (the northeastern part of Hong Kong International Airport). The northern link road connects Tuen Mun in the New Territories with the border crossing facility. The link road reduces the temporal distance from 30 minutes to only 10 minutes between the New Territories and Lantau Island. Also, the road to be constructed will not only ensure smoother traffic but also offer an alternative route to the Hong Kong Airport.

Tuen Mun western bypass, which is also under construction, will grant a direct access to the northwestern part of the New Territories, between the Hong Kong-Zhuhai-Macau Bridge, Hong Kong International Airport and North Lantau.

Upon the completion of the project, Hong Kong will get even closer to the western part of the Pearl River Delta, which offers easier access to the main industrial and trading cities in Mainland China. Also, the bridge being built will exert a positive effect on foreign investments in the western Pearl River Delta, strengthening the role of Hong Kong as a tourism and trading center.

THE DEVELOPMENT OF THE INVESTMENT The idea of the grandiose project was conceived

by Gordon Wu magnate as early as in 1983. At that time the concept included no tunnel but bridges that would have connected the New Territories with the city of Zhuhai. During this period the Chinese city was in its early developmental stage, being one of the first cities to receive the Special Economic Zone (SEZ) status from China in the 1980s, which made the city more attractive to foreign investments.

Mainly for this reason, Zhuhai would have needed a faster and more efficient transport connection with Hong Kong; therefore, the concept of the bridge was also supported by the Mainland Chinese authorities. In 1993 the plans of the construction between

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Zhuhai and Tuen Mun were announced. In 1994 the China-UK Infrastructure Supervisory Board was set up to investigate the feasibility of the concept. After Hong Kong’s return to China in 1997, however, the concept of the bridge was neglected, and the establishment of an international airport was proposed on Lantau Island in Hong Kong, which would connect the three cities by air, and finally this idea was implemented. After a couple of years, in 2003 a group was set up by Guangdong, Hong Kong and Macau jointly to thoroughly investigate the implementation of a bridge overarching the Pearl River Delta. Following five years of research and study, in 2008 the three parties successfully elaborated the concept of the bridge and its implementation plan.

History of development after 2003: • 2003: Finally, the Hongkongese Government admitted the need for a mainland connection between Hong Kong and the western delta of the Pearl River, so they set up the Hong Kong-Zhuhai-Macau Bridge workgroup consisting of 9 specialists, 3-3 for each city, and they also agreed to jointly bear the costs of the preliminary works.

• February 2008: The Governments of Hong Kong, Macau and Guangdong agreed on how to share the costs arising from the investment: Hong Kong – 50.2%; Guangdong – 35.1%; Macau – 14.7%. In addition, they also entered into an agreement that each Government shall take responsibility for the border crossing facilities and link roads belonging to them • August 2008: A new cost-sharing agreement was concluded, according to which Guangdong Province assumed RMB 7 billion, Hong Kong RMB 6.75 billion and Macau RMB 1.98 with the help of Beijing. As a result, the percentage shares changed: Hong Kong – 42.9%; Guangdong and the Chinese Central Government. – 44.5%, Macau – 12.6%. The reason for the modification was that thus Guangdong, that is Beijing could have a control over the joint venture due to the share, which had been set up by the three Governments for the management of tenders related to the works of the bridge. In this way China fulfils the leading supervisory role and can pass decisions in the significant issues through Guangdong.

•2 009: The Bank of China was selected to be the creditor of the loan offered for the works of the central bridge. The Hongkong Environmental Protection Authority permitted the bridge project in the Hongkongese part, while the works were launched on the waters of Mainland China.

The Integration of the Pearl River Delta: The Hong Kong-Zhuhai-Macau Bridge

Diagram 5: The connection of the Hong Kong-Zhuhai-Macau Bridge with the western cities of the Pearl River Delta. Source: http://www.hzmb.hk/eng/benefits_transportation.html

2010: A Tung Chung resident (Hong Kong/New Territories) applied for judicial review regarding the approval of the environmental impact evaluation performed by the Government of Hongkong regarding the construction of the Hong Kong Border Crossing Facility and the Hong Kong Link Road, on the ground s that the Government ignored the issues of environmental pollution and applied a wrong methodology.

April 2011: the Hong Kong Court of First Instance annulled the environmental licenses; therefore, the construction works could not be started.

September 2011: The Supreme Court permitted the appeal of the Government, the environmental licenses remained valid, and the works began again. In the meantime, the construction of the artificial island to serve as the site of Hongkongese Border Crossing Facility was started.

2012: The works of the Hong Kong Link Road were started.

2013: The building of the Tuen Mun – Chek Lap Kok Link Road was started..

2014: The Hongkongese Government announced that an additional amount of 5 billion Hongkongese dollars were needed for the completion of the border crossing facility on the artificial island owing to the workers’ increasing wages, the material costs and the technology applied.

January 2015: The Hongkongese Secretary of Transport Affairs announced that the border crossing facility and the relevant works would not be finished by 2016.

March 2015: According to a Guandong official, the completion of the bridge in 2020 would also be a difficult purpose, while the costs had exceeded the amount of 132.9 billion Hongkongese dollars.

September 2015: The report of the Hongkongese Motorway Management Authority states that the artificial island to be constructed should be elevated 7 meters higher owing to the manufacturing technology applied in Hong Kong for the first time.

2017: The abutment of the Hong Kong-Zhuhai-Macau Bridge was completed.

EXPECTABLE RESULTS The completion of the project will have plenty of tangible results and long-term indirect effects. The homepage of the project highlights the integration of Hong Kong with the cities situated in the Pearl river Delta.

The cities lying in the western part of the Delta will be accessible from Hong Kong in one hour and a half.

Let us take two examples: from the city of Zhuhai, located on the western coast, we need to travel 200 km to reach Kwai Tsing Container Terminal of Hong Kong, which takes three hours and a half. Similarly, the 200

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km long journey from Zhuahai to the international airport of Hong Kong takes four hours. These distances decrease to 65 km (75 minutes) in case of the terminal and 40 km (45 minutes) in case of the airport, which means that the distance between the two cities decreases by more than 60 and 80%, respectively. Besides, the bridge enhances the further economic growth of Hong Kong, Macau and the western cities of the Pearl River Delta, increases the attraction of the region for foreign investments which facilitates the development of the whole sectoral structure. This kind of economic “background field� is also expected to encourage Hongkongese businesspeople to extend their activities in the territory of Mainland China. The growth forecast in the different sectors of the economy, from the project, the financial and trading sectors to tourism, consolidate the trading and logistics hub role of Hong Kong because its container port and airport will be more accessible from the mainland territories.

SUMMARY The construction of the Hong Kong-Zhuhai-Macau Bridge will be a new step in the integration of the cities situated in the Pearl River Delta. The city agglomeration has experienced rather dynamic development over the past few decades, and further growth requires closer cooperation. One of the key cornerstones of this approach will be the inauguration of the bridge, which will imply both direct benefits (improvement of transport access between the cities) and considerable economic opportunities. Also, the successful work share and effective cooperation between the cities can serve as an important international model for other regions in the future.

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Shenzhen China’s success story

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Shenzhen – China’s success story Author: Alexandra Zoltai

The former small hamlet of fishermen has now become one of the most dynamically developing cities of the world. The economic successes of Shenzhen, also dubbed as China’s Silicon Valley, are expected to catch up with those of the former role model, Hong Kong. The success story of the city’s development can be the engine of China’s economy and can also serve as a model to other Chinese cities. Chinese leadership wants to give the city a key role in the ’Greater Bay Area’ initiative planned in the Pearl River Delta.

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INTRODUCTION

SPECIAL ECONOMIC ZONE

After Mao Zedong’s death, China needed a dramatic change to take the path of development, a basic condition of which was economic growth.

Chinese leadership had to develop a robust reform plan, including the establishment of Special Economic Zones (SEZs). Shenzhen was among the first areas to become such special zones. From a perspective of almost 40 years, it is visible what an enormous success story has taken place in the city and how it has become one of the most successful SEZs. A well-developed strategy of city governance and city development was an imperative, to prepare the city for the fast-paced development of its spatial area, economy and population. When reforms started to exhaust – because, among others, entire China became open and the distinguished role of SEZs ended – Shenzhen was forced to change its strategy. There is no better indication of its success than the fact that it is dubbed nowadays as China’s Silicon Valley. The Chinese Communist Party also had to take action about the reform, therefore Xi Jinping identified deepening reforms as the next stage. The ‘Greater Bay Area’ was announced within this concept, melting the Pearl River Delta into a single metropolis of unprecedented size.

There was no concrete plan available for the implementation of Chinese reforms. They had to be developed in full detail, and the benchmark was their contribution to growth, and the main goal was to correct the flaws of the planned economy.

For the sake of success, Chinese leadership was even willing to allow economic operators to meet existing market demands and earn some extra income, even at the cost of side-lining the planned economy. These initiatives, however, could not affect the position of the elite. In this framework, the decision was made to set up Special Economic Zones and allow only them to open up in terms of foreign economy, let foreign capital in, and establish incubators and joint ventures.

The origin of development zones in China can be traced back to 1978, when the country’s leaders were searching for an adequate path to lift the country from poverty and bring about economic recovery. These special-function zones have become successful in China and still have an important role in its economy primarily because of the central Chinese government’s strong support and the relative autonomy of zone managers. Special Economic Zones were subject to unique econom-

ic regulations that differ from other areas in the same country. Their main aim was to create an attractive economic environment for the inflow of Foreign Direct Investment (FDI). in order to achieve this, economic incentives were used, primarily in the form of tax incentives and lower tariffs to attract foreign currency and technological advancement, boosting economic growth. Special Economic Zones essentially acted as liberal economic environments promoting innovation and development within the boundaries of China.

Chinese leadership was able to use SEZs to slowly implement national reforms that would have been otherwise impossible or extremely difficult, putting the country on the path to economic growth.

The development of Shenzen and the role of urban planning At the beginning of reforms, during the 1970s, none of the cities of the later four special economic zones (Shenzhen, Zhuhai, Shantou and Xiamen) could be classified a metropolis, or even a town. All these cities are located along China's south coast, near Hong Kong and Macao. Deng Xiaoping, the father of Chinese reform and opening-up, who launched China’s modernisation, vis-

ited Guangdong Province in 1977, where, among others, Shenzhen can be found. Two years after his visit, in July 1979, the then village was among the selected ones to become the venue of reform and opening-up, and they could start to depart from the plan-oriented economic system.

Since May 1980, when SEZs actually started their operations, people have been continuously arriving from all over China. Shenzhen, which used to be no more than a small fishing village with less than 30,000 residents, has made history as China’s first Special Economic Zone where foreign investments and private enterprises were allowed.

During his southern tour in 1992, Deng Xiaoping visited the city, where Shenzhen’s fast development also legitimised the success of the reforms and the necessity of continuing the reforms was confirmed. Today, Shenzhen has developed into a metropolis, with a population of almost 12 million and with China’s fourth largest GDP after Beijing, Shanghai and Guangzhou.

However, for a city that experienced the type of rapid growth, it was very fortunate to have had forward thinking city officials and planners to help manage its success. Shenzhen officials remarka-

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bly were able to implement a total of three master plans within the span of 25 years; each adding to the fuel and direction of growth. The first master plan of 1986 put in six “cluster cities” that concentrated growth and infrastructure along three highways. In the ten years to follow this, unprecedented growth and lack of zoning controls lead to major urban sprawl in Shenzhen. By 1996, the urban sprawl covered over 645 sq. kilometres of land (Budapest is 525.3 sq. km). The city was running out of land and most of the structures being built were low-density manufacturing and housing units.

City planners were also concerned about liveability and taking a page from more developed nations, created a new 1000 sq. kilometre growth boundary. “Periphery growth clusters” were also implemented around the existing six “cluster cities” to encourage growth and greater density while even more infrastructure, highways and a massive subway system began construction. By the mid 2000’s when a third master plan was being drawn up planners faced another dilemma entirely. The amount of space that could actually be used for development was dwindling, and quickly. Only about 100 sq. kilometres of legally developable land was left, and officials feared that without more space that

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the economic engine of Shenzhen would come to a halt. Eventually, instead of diminishing the green growth boundary, Chinese officials designated more than 200 square kilometres of occupied land as “urban regeneration areas”. The idea was to clear dilapidated low-density buildings and properties to build newer, higher density facilities.

The government opted to buy back occupied land from private stakeholders and would then build new facilities themselves or give large plots back to developers. This plan was reinforced by stricter building codes. This tactic proved to be successful; Shenzhen has added almost 3 million people since the last master plan was put in place. This unprecedented growth however did not come without its consequences. The city also symbolizes many of China’s most acute problems — overcrowding, corruption, pollution and the stark absence of accountability.ix Only a quarter of Shenzhen ‘s population hold urban identity cards (hukou); the other 9 million people are migrant workers, but there are also undocumented workers, residing here illegally.x In recent years, the city has become infamous for its poor working conditions. Chinese “urban villages” or slums popped up illegally almost overnight on the designated growth boundaries and open

Shenzhen – China’s success story

spaces, further aggravating the problem, and the government has yet failed to address the problem properly.

The State Council has recently approved the removal of the barrier that was set up more than three decades ago to mark to mark the boundary between the Shenzhen Special Economic Zone and the rest of the city. The boundary line set up in 1982 with wire fences that ran for 84.6 kilometres, marked the geographic boundary for China's first special economic zone inside Shenzhen in 1980. This announcement gives the city government of Shenzhen and the provincial government of Guangdong to take the opportunity to improve the city’s public transport and better protect the environment, and primarily to develop public services and renovate public buildings.

According to Qu Jian Qu Jian, deputy director of the Shenzhen-based China Development Institute, the removal of the line is due to the city's dazzling rapid development. Preferential policies such as a tax reduction for the Special Economic Zone in Shenzhen were gradually cancelled by the year 2000, and since that time the idea of

a special economic zone has no longer existed.

Yet the boundary line does have its unique historic meaning, as it marked China's first window, or trial run, for reform and opening-up. The line has resulted in heavy traffic jams during peak commuting hours, as today about 70 percent of the Shenzhen population works in the previous economic zone, but many of them live outside the zone. Qu Jian also highlighted the fact that the development plan for Shenzhen had originally envisioned a population of 1 million, but the population in Shenzhen reached 11.38 million in 2015. Urban facilities outside the line still lag behind those inside the Special Economic Zone, and the next key step after the boundary line is removed is to ensure a proper and balanced development for the whole city.

SILICON VALLEY In 2010, the 30th anniversary of Shenzhen’s conversion into a SEZ, then Chinese president Hu Jintao called the city a miracle. Today, the boomtown is one of the fastest-growing cities in the world.As the city had been given a free hand to introduce

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Top Shenzhen-based companies: · BGI – Beijing Genomics Institute华大基因 Founded in 1999, BGI is the first citizen-managed, nonprofit research institution in China. The firm owns 230 of the largest, high-throughput gene-sequencing machines, which can sequence 30,000 human genomes a year. This performance has helped the company to become one of the world’s largest genome mapping companies. · BYD – „Build Your Dreams” 比亚迪 Established in 1995, BYD specialises in IT, automobiles and renewable energy. The firm is the largest supplier of rechargeable batteries in the world and has the largest market share for nickel-cadmium batteries, cell phone batteries, chargers and keypads. · Z TE - Zhongxing New Telecommunications Equipment 中兴(通讯) ZTE, one of China’s largest telecoms equipment company, was founded in 1985. The company is well positioned to make heavy investments in innovative technologies, such as wireless charging, cloud computing and 5G. · Huawei 华为 Founded in 1987, Chinese telecom giant Huawei invested more than 190 billion yuan in research and development in the past decade. Alongside ZTE, it is China’s other important telecoms equipment maker and smartphone manufacturer. · Tencent 腾讯 Founded in 1998, Tencent offers all kinds of internet-based services, from games to search, software development, e-commerce and instant messaging. Tencent is one of the best performing stocks of the past decade. Tencent ’s messaging platforms are among the most popular in China, with more than one billion monthly active users. reforms and accumulate wealth, by 1980, many people in the village had televisions, fridges, stereos and electric cookers - all luxuries at that time.

While other Chinese citizens earned less than 100 yuan ($15) per month, the average annual household income in the Shenzhen exceeded 10,000 yuan. By 1985, the residents had started factories making clothes, watches and jewellery, encouraging traders of Hong Kong to invest. Huaqiangbei, a sub-district of Shenzhen's centre, used to be a collection of manufacturers. At first they made electronic devices. Shenzhen Electronics Group came into being in 1986. Following SEG, more companies were founded and Shenzhen started to

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take shape as a manufacturing hub. Then the Ministry of the Electronics Industry provided experts; the city government of Shenzhen gave land and exempted taxes. At the height of its prosperity, about 70 percent of the world's cell phones were made in China, while 80 percent of China's cell phones were from Huaqiangbei.

In 2012, Xi Jinping, general secretary of the Communist Party of China Central Committee, conducted an inspection tour of Guangdong. As a result, Xi said that China's reform had come to a juncture where it would be more complicated to tackle difficult issues, and the CPC had to exercise political courage and deepen reform in important areas. As entire China developed, SEZs practically lost their significance. In order for Shenzhen to retain its competitiveness and advantage, a new growth strategy was required, and, as the Chinese President had put it, reforms had to be deepened. Shenzhen officials hit on the idea of the city becoming China’s Silicon Valley, a centre of technological research, innovation and development. Those who believed in the suggestion have not been disappointed; the city spectacularly reinvented itself and is now a hotbed of private economic growth and home to tech giants such as Tencent, Huawei and ZTE. Incentives offered including tax, housing and funding are drawing global tech and science talents, with the goal of becoming the world’s innovation centre. The result and continuation of this development is manifested in the fact that since 2013, Shenzhen has been devoting more than 4 per cent of GDP to research and development.

The city can be regarded as the financial centre of South China, as it is the home of the Shenzhen Stock Exchange. Historically, state-owned companies, the old economy of China dependent on fixed asset investment for the past 25 to 30 years, are generally listed in Shanghai as it’s the oldest exchange and has a lot of the bigger companies. Mining companies, oil companies, banks and insurers tend to be on the Shanghai exchange. Whereas in Shenzhen, it tends to be what is called new economy – areas historically more accessible to private companies, like technology, export sectors, automation, manufacturing, healthcare, some internet companies. Now there is a massive transition in China toward more services and the consumer economy. Generally, the

Shenzhen – China’s success story

split between state-owned and new economy in Shanghai is probably like 70/30 and the reverse is true for Shenzhen. So this is why experts recommend Shenzhen for foreign investors. Beijing still boasts the greatest number of wealthy individuals in 2017 in the country, although runner-up Shenzhen is fast closing the gap, according to a report.

While Beijing had 11 fewer wealthiest residents, for a total of 300, Shenzhen gained 28, for a total of 223 of wealthy Chinese with a net worth of at least US$300.

Against this background, Western investors are more and more convinced that companies can

In addition to its significance in finance, the city has become an incubator hub for tech and startup companies. Shenzhen is increasingly attracting start-ups that may have previously only outsourced their manufacturing here; for example, it has become a global magnet for hardware companies. Thanks to relatively cheap parts, cheap labour, cheap shipping, cheap manufacturers and crowdsourcing, this city is often seen as a dreamworld by developers: you can build a prototype, craft a kickstarter campaign and, if it is a success, you are off the races. Haxlr8r (hack-cellerator), for example, is a hardware start-up accelerator focussing on robotics, portable or wearable

succeed more easily and have better prospects if they do business in China instead of California. The difference between Western and Eastern work ethics is also becoming increasingly obvious. Asian workers are famous for their commitment, and most of them work from early in the morning until late at night six days of the week.

technology and the Internet of Things companies. A 111-day programme has been developed, mostly taking place in Shenzhen, but the demo day is organised in San Francisco. Voltera, a company formerly based in San Francisco that makes circuit-board 3D printers, participated in the program, and then moved to Shenzhen to take

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control of its supply chain and manufacturing processes, and to have headquarters in the electronics capital of the world.

Greater Bay Area Urbanisation has never taken place so fast and to such a high degree as it has in the Pearl River Delta.

According to the Chinese government’s plan, urban elements of the area will be brought together into a huge megacity named the “Greater Bay Area”.

The government work report delivered by Premier Li Keqiang in March 2017 formally identified the Greater Bay Area as a key component of China’s strategic national development plan. Bringing together Guangzhou, Hong Kong, Shenzhen and Macau – as well as Zhuhai, Huizhou, Dongguan, Foshan, Jiangmen, Zhaoqing and Zhongshan – with more collaboration and physical, economic, social, cultural and no doubt political integration is on the cards in the coming years. With the opening of the Hong Kong-Macau-Zhuhai Bridge and the express rail link, these cities will be between 10 and 50 per cent closer together in travel time. If we compare present-day data to the plan, the combined area of the planned Greater Bay Area houses 66 million people and has a gross domestic product of US$1.4 trillion (HK$10.95 trillion). Compare this with the Greater New York’s 20 million people and GDP of US$1.5 trillion and the potential is immediately clear. However, the success model is by no means assured. The differences between these adjacent cities, especially between Hong Kong, Macau and the mainland cities, are evident from day to day.

This project is not about achieving overnight homogeneity, but providing larger business and social opportunities for all.

As China makes the transition from a labour-intensive, manufacturing-based economy into a services- and innovation-oriented society driven by a growing middle class, the Greater Bay Area will lead the country towards a new growth model.

Therefore they are working on upgrading the Silicon Valley to extend it over the entire region of the pearl River Delta in the Great Bay Area concept.

Several policies were adopted that are hoped to facilitate the plan, since they show their strong commitment to foreign capital and overseas companies. Their aim is to establish an open economy on a higher level and to make Guangdong Prov-

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ince, Hong Kong and Macau become the centres of technology and innovation. Hong Kong is still trying to redefine it role in the strategy. CCP has already developed the goal suiting them, namely, closer cooperation with Shenzhen and combining Hong Kong’s strength, which is highly skilled people, with Shenzhen’s highly industrial city. According to the city’s CCP Secretary Wang Weizhong, they just would like to provide a platform for Hong Kong’s young people to realise their dream of creating companies. China expects GDP in the Greater Bay Area to triple to US$4.62 trillion by 2030 from US$1.38 trillion last year, surpassing the Tokyo, New York and San Francisco metropolitan areas. This concept helps the cities shift from competition to collaboration. The market in China is considered big and still growing fast to attract foreign investments, which is very important for innovation. At the moment, the region is not open and attractive enough for foreign companies, since it mostly attracts companies from the domestic market. The US’ Silicon Valley, however, has companies from all over the world (India, China and Europe, etc.).

Guangzhou and Shenzhen could be the biggest economies in the “Greater Bay Area” by the end of 2018, estimates suggest, overtaking Hong Kong and forcing it into third place. Guangzhou’s GDP is expected to grow to 2.31 trillion yuan (US$354 billion) this year. It grew about 7 per cent to 2.15 trillion yuan in 2017, and its growth target in 2018 is about 7.5 per cent. Shenzhen’s GDP is estimated to be 2.32 trillion yuan, narrowly beating out a GDP of 2.28 trillion yuan projected for Hong Kong in 2018. In 2017, it overtook Hong Kong’s growth per cent (3.7), with its GDP exceeding 2 trillion yuan and a growth per cent of 8.8, and cemented its role as an engine of the Pearl River Delta. The gap in growth between the three will be even wider in the coming years if Shenzhen and Guangzhou keep up their remarkable expansion Spending on research and development has been recently classified as investment rather than an expense. Hong Kong needs drive and vision as it seeks to integrate with the Greater Bay Area, and is still trying to define its role in the strategy. This is also felt by Hong Kong’s leaders, and they plan to invest 4 per cent of its gross domestic product in research and development (R&D); the level of such investment in the city in 2016 was 0.73 per cent of GDP.

Shenzhen – China’s success story

As a backlash of the initiative, however, from 2004 to 2012, over 160 million peasants have lost their land. Furthermore, environmental pollution is an increasingly relevant issue, air quality is a hot topic of discussion among global leaders as a threat to the people’s quality of life, including in China. While the effects of air pollution may not be immediately visible, its long-term risk represents a severe problem. In the Pearl River Delta, there are considerable efforts currently in place to manage the problem, especially in light of President Xi Jinping’s national strategy on “ecological civilisation”. A the 19th Party Congress, Xi Jinping’s speech had 89 mentions of environment and just 70 of the Chinese economy. As there is huge freight traffic in the region of the Pearl River Delta, especially by sea, an agreement on the Prevention and Control of Air Pollution from Vessels was signed between the Mainland and Hong Kong in 2016, between Hong Kong’s Environment Bureau and China’s Maritime Safety Administration. The Greater Bay Area will not only present opportunities for economic growth, but is an important test bed and role model of sustainability collaboration for China and the rest of the world.

CONCLUSION This year is the 40th anniversary of China’s opening-up to the outside world and 38 years since Shenzhen became the country’s first special economic zone. Shenzhen is a microcosm of China’s success story. Its economy has grown 10,000fold in the 40 years since the nation’s economic opening to the world. In 2017 it became the biggest economy in Guangdong province and it is tipped to soon eclipse Hong Kong. The fence that once separated Shenzhen from the rest of the country is going to be scrapped. It restricted the movement of people and goods in and out of a zone that had special tax concessions. The model was Hong Kong; the city’s entrepreneurs played an instrumental role in the evolution of Shenzhen from a fishing village of a few thousand people to the metropolis of 12 million that it has become.

With the narrowing of the gap in development with the rest of Guangdong province, restricting migration and urbanisation through artificial barriers no longer makes sense. Deng Xiaoping set up the four special economic zones in China,

but Shenzhen was by far the most successful. The removal of the barriers is in line with the creation of the “Greater Bay Area”, announced in 2017, the integration of nine Guangdong cities and Hong Kong and Macau into an economic and business hub. Shenzhen can be the inspiration to other Chinese cities, just as Hong Kong was when it drove its northern neighbour to greater achievement.

The large-scale initiative planned in the pearl River Delta seeks to promote collaboration and not competition in the region as well as Hong Kong’s and Macau’s greater integration with mainland China. Due to its colonial past, Hong Kong has to redefine its role in the initiative, but seeing its economic data and the weakening of its trading position, Shenzhen has started to rise and taking over its place. There are signs of collaboration in several areas, but if Hong Kong fails to keep pace with Shenzhen, it will fall into second or even third place in the region, and will have a weaker position vis-à-vis Chinese leadership.

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Hainan

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The place where reforms are deepened 37

Hainan: The place where reforms are deepened Author: Alexandra Zoltai

Free Trade Zones are an elaborated form of special economic zones established under the reform and opening-up, and their number is increasing within China. Besides winning this special position, Hainan Island has also been allowed to establish a Free Trade Port. China’s President Xi Jinping is now working on the deepening of the reforms, and thanks to these measures, Hainan Province can become one of the main pilot areas to test the new reform measures.

INTRODUCTION Also called the Chinese Hawaii, this island was one of the first to receive the special economic zone qualification during the period of reform and opening in 1988. On its 30th anniversary the Communist Party of China and the State Council announced that a Free Trade Zone would have been established in Hainan Province by 2020 and a Free Trade Port by 2025.

Accordingly, the free trade system will have been finished on Hainan by 2035. China’s first free trade zone was announced in Shanghai in 2013, and then Fujian, Guangdong and Tianjin were also involved in 2015, followed by seven more cities in 2016. These territories benefit from the investments, reduced tax rates, accelerated administrative procedures and diluted investment restrictions to a large extent. These regions are pilot areas for the rules to be introduced later throughout the country. Hainan Province is significant because it covers a whole island; therefore, the Government of China has a broader area to test the reforms that the other free trade zones.

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The main line is the development of healthcare, tourism and trade. Thanks to these, the province can build healthcare facilities, import medical appliances, and produces and can receive licences to employ foreign doctors, which is a good cooperation opportunity for Hong Kong. According to certain opinions, some forms of gambling such as horse-race and football pools – which are only legal in Macau within China today - will be permitted in this territory. In his speech delivered at the Boao Forum for Asia, Xi Jinping also highlighted that Hainan lies in a place of strategic importance near the ASEAN countries, which makes it an important centre in the trade with Southeast Asian countries.

FREE TRADE ZONES (FTZ) A free trade zone (FTZ) is a specific form of special economic zones (SEZ), allowing for the importing, handling, production and exporting of commodities without customs proceedings. All these play an important role in the development of the Chinese busi-

in Shanghai. Taxes have to be paid only if the goods are delivered within China; however, in the case of transportation abroad, goods are exempted from the tax and customs clearance.

• Sector-specific liberalization: free trade zones have liberalized rules against foreign corporations and can provide opportunities that are rather rare within China. For instance, logistics corporations established within these free trade zones are allowed to have a foreign proprietorship over 51 per cent.

Hainan

Source: http://www.china-briefing.com/news/2017/09/21/ investing-in-chinas-free-trade-zones.html

ness environment and can serve as fields where authorities can experiment with corporate regulations.

The key incentives these Free Trade Zones can offer: special tax and customs proceedings, international commercial advantages and sector-specific liberalization.

• Tax: each FTZ endeavours to reduce corporate taxation or offer allowances to corporations that observe certain requirements. Most FTZs can import any machines or equipment of individual benefit of the corporation.

• Customs clearance: it is more up-to-date and transparent within the Free Trade Zones, especially with respect to customs declaration and payment This reduces the costs of customs clearances and increases the flexibility of corporate customs declarations.

• International trading centre: due to the companies settled in the Free Trade Zones and the well-established infrastructure, FTZs are at the head of the supply chain. For instance, goods can be transported and stored duty-free in the Free Trade Zone

Based on the discussions of the 19th Party Congress, China has to transform its rapid growth realised already to a superior development, which is well illustrated by Hainan. Officially, Hainan became part of the Chinese Administration under the Han Dynasty; at present approx. 8.7 million citizens live on the island. The tropical island of 35,000 square kilometres is located on the northeastern part of the South China Sea, bordered on the west by Vietnam and on the east by the Philippines. The island is significant because of its domestic tourism these days.

This region has been chosen because it is often neglected with respect to the inflow of foreign capital and tourism and in this way this role can be enhanced.

Since 1988 Hainan Province has been the largest Special Economic Zone within China, still, it lagged behind the others. According to the 2017 data, the province attracted foreign capital to the amount of 10 billion dollars, which is only 1.5 per cent of all FDI inflows into China.

Based on the decision passed in 2018, the Chinese leadership designates a great role to the southernmost province of the country: the tropical island was designated as the initial place for deepening the reform and the opening up. Hainan Province will be a pilot site for several reasons: it will become a national ecological zone, an international tourism and consumption centre, and a significant national strategic logistics zone. These grandiose plans were announced on the 30th anniversary of the foundation of the province and its becoming a Special Economic Zone. According to the plans, Hainan will be an excellent example of Chinese type socialism in the new era and an example to follow for the nation. China’s largest special economic zone keeps developing and

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working on its integration into the global economy.

Based on the decisions, Xi Jinping has announced that the Chinese Communist Party promotes the further development of the island so that it can become a Free Trade Zone, and for this purpose a Free Trade Port will be established with Chinese features. The Free Trade Port is one of the most open forms of economic zones, boosting up both Singapore and Hong Kong .

Therefore, China announced its support so that Hainan can improve itself in the international sectors such as international energy, shipping, raw materials, proprietary rights and shares. According to the plans,

ernor of Hainan Liu Cigui is entirely committed to the One Belt One Road Project and makes every effort to enhance economic cooperation in the South China Sea Region. The island will be a traffic connection point among the countries and regions in the New Silk Road; 100 international air and water routes are planned to be opened in a period of three years. The Boao Forum for Asia was organized in Hainan again between 8 and 11 April, 2018.

This forum has been held every year since 2001 and is often called the Chinese Davos because this Asian economic forum aims to promote regional economic integration and the economic development of certain countries in Asia. In this way China

the island should rather focus on tourism, the modern service industry and the high-tech sector than intermediate trade and production, while they also lay emphasis on the establishment of a more lenient regulation in order to develop an advantageous environment for trading.

proves to be open to the investors from all over the world so that they make investments and business in Hainan, take part in the establishment of the Free Trade Port, and get the opportunities and reforms in China’s development.

Hong kong AND Macau

Therefore, the above suggest that the province should develop in the field of new generation information technology and digital economy so that deep integration can be created between real economy and the internet, the internet of things, ’big data’, satellite navigation and artificial intelligence. According to the hopes, the province plans significant development projects both in space research and deep-sea science and technology.

Modern services such as medical care and finance must be the main pillars of Hainan economy, primarily as an international tourism destination. The island can only become a centre for international tourism and consumption if China develops a rule for offshore duty-free purchasing that is valid for all visitors. At present the island has only two duty-free shops. According to the Beijing Leadership, Hainan should exploit its unique resources in order to develop a tropical agriculture and water economy. Xi Jinping highlighted that the planned improvements should be performed in harmony with nature preservation so that the island can become the “garden” of the country.

Furthermore, the province should aim at the multilevel and multipurpose cooperation with countries and regions along the New Silk Road, and in the meantime, it would promote the cultural, educational, agricultural and tourism exchange. Gov-

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The implementation of the Free Trade Zone and the Port in Hainan, and the partial lifting of gambling restrictions will be great challenges for Hong Kong.

As for the deepening of the reforms, the province will need well-qualified labour force in various sectors such as catering, business life and tourism, and Hong Kong takes pride in such specialists. Therefore, it would be the interest of Hong Kong to support the development of Hainan because the island has a huge potential, let us take medical tourism for example. Hong Kong could play a considerable role in this process, thanks to its great traditions of private hospitals and high-quality healthcare. Consequently, they could facilitate the realisation of international norms and high-standard training courses in the Chinese province.

Another key stakeholder of Opening Up Hainan will be Macau because according to some information online gambling, lottery and sports betting will be permitted on the island. These initial steps may offer new opportunities to the casinos, too. This plan would probably have an adverse impact on Macau’s economy as in China casinos are only legal in Macau today, and gambling is permitted only here and in Hong Kong. In Macau the casino stocks started to drop right after the plan of the Beijing Leadership had been announced, according to which gambling would be permitted on Hainan Island, too. Galaxy Enter-

Hainan: The place where reforms are deepened

tainment, the operator of Macau Casino registered in Hong Kong, fell the most significantly, by 7.7 per cent, while Sands China and MGM by about 6 percentage points. The casino revenues has been increasing for four years, reaching 36.4 per cent in January 2018.

Today Macau is the largest gambling centre in the world, producing five times more revenues than Las Vegas, and 70 per cent of the visiting tourists are Chinese.

TOURISM Since a national strategy was set up on the development of tourism on the island in 2009, tourism has increased significantly. Statistics show that the province had revenues from tourism to the amount of 26 billion yuan? in 2010, and over 67 billion yuans in 2016. At present considerable efforts are made to deepen tourism in the rural areas so that not only big cities can receive the profits.

As a consequence of the strategy aiming to deepen the reforms, it has been announced that citizens of 59 countries are granted visa-free access on Hainan Island, which is a special step to enhance international economic growth and tourism. The countries receiving the beneficial measure include 11 Asian countries, such as South Korea an Japan, 40 European ones like Hungary, Russia and Great Britain, 6 American ones such as the United States of America and Canada, and Australia and New Zealand are also granted visa-free access. Vice President of the State Immigration Office Qu Yunhai said that the visa-free policy that is becoming effective is about expansion, extension and simplification. After the establishment of Hainan Province in 1988, the Chinese Government immediately simplified the visa administration of the visiting tourists. This most recent announcement is the expansion of a measure of the 2000s, which granted two weeks of visa-free stay to the tourist groups of 21 countries. This will increase the incoming international tourism, which will facilitate the development of the island so that the Asian Hawaii name can be worthier. However, more time has yet to pass before it can become an international destination. In 2017 the island was visited by 1 million foreign tourists, which is only 1.6 per cent of the 60

Source: http://www.scmp.com/business/china-business/ article/2142259/us-among-59-countries-granted-visafree-access-chinas-resort

million domestic tourists who had chosen this place as a destination. Bali, which is only one sixth of Hainan Island, got 5 million foreign tourists in the same year. However, the new list does not include the African countries, the Indian subcontinent or three important ASEAN Member States: Vietnam, Cambodia or Laos.

CONCLUSION The opening of the Free Trade Zone and the Free Trade Port on the island of Hainan is one of China’s actual measures to promote global trade and investments. Experts believe that the internationalisation of Hainan will not only imply the development of South China but also launch economic growth in the whole Asia-Pacific Region, and even in all parts of the world. At the same time, it is a great challenge for Macau and Hong Kong to define the right attitude to this new situation.

Besides being China’s paradise resort, the island is the starting point of the Chinese Navy and Air Force to reach the South China Sea. Therefore, it is a significant area in both economic and geopolitical terms.

Consequently, it can be understood why the Beijing Leadership starts to deepen the reforms here.

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Hong Kong’s past 20 years

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promises and realities 45

Hong Kong’s past 20 years – promises and realities Author: Alexandra Zoltai

After Hong Kong’s handover in 1997, in line with the policy of “One Country, Two Systems”, China was committed to non-intervention and acted accordingly. As years are passing by, however, it seems to be forgotten, and Beijing is assuming an increasingly stringent control over the former British colony. Hong Kong is also bursting of a myriad of internal problems, and is under pressure from above, China’s leadership. It would be task of the Chief Executive of Hong Kong to ease these situations, but she is lacking public support. The situation is escalating and requires urgent solution.

A BritISH COLONY Hong Kong’s history dates back to ancient times, but the significance of the city started to increase from the 1800s. Major powers, especially Britain, wanted to assert their commercial interests against enclosed China, by – among others – opening ports. In those days China was focussing mainly on exports, which resulted in a tremendous amount of silver flowing into the country, as Europe paid silver for Chinese goods. In order to prevent this and to replace silver, he East India Company started to ship opium to China. This triggered a crisis of the Chinese economy, as opium spread so widely and became so highly demanded that silver started to flow out of China.

The Chinese court banned opium imports and several thousands of tons of load was seized and destroyed. As a response, the British sent a fleet to make the Chinese court compensate them for the losses, and thus the first Opium War broke out, and the century of “humiliation” began. The Chinese emperor’s court, believed to be invulnerable, suffered a heavy defeat against modern British weapons, and was forced to make humiliating peace. On 29th August, 1842 the Treaty of Nanking was signed, later followed by the supplementary Treaty of the Bogue, in the terms of which China ceded Hong

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Kong Island, opened five of its ports to British traders, paid a high amount of reparations and acknowledged the extraterritoriality of the British.

The main aim of Britain was to guarantee its own commercial interests, which was accomplished thereby and, as a result, Hong Kong’s significance started to increase. Under the Convention of Peking, concluded in 1860, after the second Opium War, Britain assumed control also over the Kowloon Peninsula located opposite Hong Kong Island. Eventually in 1898, with its power waning, China leased the “New Territories” to Britain for 99 years, shaping the territory of present-day Hong Kong.iv During World War II, the city was occupied by the Japanese, and after the peace treaty was concluded, British rule resumed.

Its economic and commercial significance increased greatly after 1949. The People’s republic of China, led by the Chinese Communist Party, enclosed and turned away from the world, and Hong Kong was the “channel” to conduct most of its foreign trade, import technology and gain information about the external world. This helped Hong Kong become one of the world’s most significant commercial, financial and economic centres.

ONE COUNTRY, TWO SYSTEMS Deng Xiaoping, having returned to power in 1977, regarded the resumption of exercise of sovereignty over Taiwan, Hong Kong and Macao and create the unity of the country, failed by Mao, as his main goals. As a result, the concept of the “One Country, Two Systems” policy, an important element of socialism with Chinese characteristics, was born in the 1980s. This guiding principle regards national unity as the most important priority, which is explained by the following reasons. First, the fundamental national interest is highlighted: Taiwan, Hong Kong and Macao issues are all of historical origins and belong to China’s sovereignty and territorial integrity, and there is no room for compromise. Second, nationalist sentiments are emphasised: it is the people’s common desire that China should be reunified with these territories, this is the reason why the Chinese government firmly pushes forward with the tremendous efforts for national reunification and proposed the innovative notion of “One Country, Two Systems”.

Third, national revival: only by achieving complete national reunification, can China completely eliminate underlying threat to national sovereignty and territorial integrity, truly unite the Chinese nation as a whole and create national glory.

Thus Deng Xiaoping was right when he recognised that Hong Kong’s prosperity and capitalism could mean an advantage for China. He could see modernisation in it,

which would be beneficial for China in terms of finance, economy and governance. The lease of the “New Territories” was about to run out, and it was inevitable to arrange for British Prime Minister Margaret Thatcher and Deng Xiaoping to meet and discuss the future of Hong Kong in Beijing in 1982. On the previous day, the British head of government met the CCP’s Secretary General, Zhao Ziyang, who highlighted two important viewpoints about the fate of the city: sovereignty, and the prosperity and stability of Hong Kong, but he pointed out that if it came to a choice between the two, China would put sovereignty above prosperity and stability. Hong Kong’s political elite reflected to the British government that they would like an arrangement in which Beijing would allow the British to continue governing Hong Kong as a caretaker administration. They were also of the view that it was not viable for the Hong Kong Island and Kowloon peninsula to stand alone if the New Territories were to be returned to China, ripping the city into two.

Deng made it clear that China wanted full sovereignty and this was not for discussion, and also warned that if the two sides could not reach agreement for the transition within two years, China would declare its policy unilaterally.

After several rounds of talks, a Joint Declaration was signed in December 1984, stipulating that Hong Kong would become a Special Administrative Region of China, and not only the “New Territories”, but also Hong Kong Island and the Kowloon Peninsula returned to Chi-

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na on 1st July, 1997, under "One Country, Two Systems".

This system was first created for regaining Taiwan, but unification has not been achieved ever since.xi Hong Kong was not involved in the agreement, as it was made between Britain and China. Under the agreement, Hong Kong’s current social and economic systems as well as the people’s lifestyle would remain unchanged for 50 years after the handover. Rights and freedoms such as of speech, press and assembly would be insured by law.

Thus the Basic Law, also adopted by the Chinese National People's Congress, authorises Hong Kong to exercise a relatively high degree of autonomy, as it enjoys executive, legislative and independent judicial power, that is, its legislation may differ from China’s. However, China is responsible for defence and foreign affairs.

Residents of the city wanted to ensure that the Chief Executive and legislative councillors would be elected democratically, but Beijing did not let this right out of its hands. In 1992, Britain appointed Chris Patten, the last British governor of Hong, who was entrusted with the task of preparing the city and lay the fundamentals of its democratic future after Chinese take-over.

Beijing was celebrating the handover at Tiananmen Square, with the official ceremony being broadcast on giant screens. The ceremony in Hong Kong was at-

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tended Prince Charles, UK Prime Minister Tony Blair, UK Foreign Secretary Robin Cook and Hong Kong’s leaving governor, Chris Patten. China was represented by – among others – President Jiang Zemin, Prime Minister Li Peng and Foreign Minister Qian Qichen. During the event, Chinese soldiers crossed the border, and China re-took possession of Hong Kong ripped off several years before. Deng Xiaoping could not live until one of his greatest goals was achieved, as he had deceased just couple of months before the handover. governance and identity After the Joint Declaration had been made, the task of drafting the Basic Law, Hong Kong's mini-Constitution, began, involving 36 professional from mainland China and 23 from the city of Hong Kong. The pro-democracy members of the drafting committee tried but failed to ensure that the Chief Executive and legislative councillors would be elected democratically. As a measure of how far apart Beijing and Hong Kong were, those in Hong Kong who wanted full democracy felt the Basic Law betrayed the city's people, while the Chinese thought the city was granted far greater autonomy than any Western government would have done for any local area under its rule.

Hong Kong’s past 20 years – promises and realities

The administration, established under British colonial rule and long held responsible for the success story of the city, has now become obsolete and ineffective. The failure of governance can be diagnosed with respect to systemic defects, decline of state capacity, and the crisis of social cohesion. Some experts point out that the relationships between the executive, legislature and the bureaucracy a today are uncoordinated, poorly developed, and often dysfunctional. With a system neither parliamentary fish nor presidential fowl, the executive, the bureaucracy and the legislature each pursue

their own agendas punctuated by occasional skirmishes on the boundaries of their domains and by attempts to extend their jurisdiction on the detriment of the others. Colonial logic no longer worked after 1997 when the general public expected the government to be accountable for their actions. After returning to China, in the absence of universal suffrage of electing the Chief Executive and the Legco, it was difficult to gain enough political trust from the public as they do not have a sense of accountability. Hong Kong has come to a stage where a political culture of distrust is building

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up at a time when political trust is much needed for the different institutions to cooperate, and for enabling the government to lead society in major policy innovations and reforms.

On the surface, there was supposed to be no change in Hong Kong’s policymaking architecture after the handover. In practice, however, the actors occupying that inherited architecture, and their interests and thinking, and both the internal and external habitats, had all undergone subtle but significant changes, producing a highly differentiated polity for government. The former Hong Kong colony was an administrative state, with government by the bureaucrats under the rule of the British governor, supported by business and professional elites. Such administrative state became no longer sustainable after the handover, mainly because of the lack of cooperation between the executive and the legislature to help forge policy consensus based on agreements. Efforts to rebuild strong governance rely mostly on the bureaucracy and advisory committees, but in the absence of adequate institutional links, the overall system remains disjointed. As society becomes more differentiated and politicized, sometimes not

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just over conflicts in interests but also in values, and as new civil society activism emerges and escalates, the existing political base, together with the elites, proves insufficient to carry the public view and confer policy legitimacy.

Hong Kong’s society has been suffering from a crisis, especially in seeking a shared sense of common identity or fate. This crisis is a combined result of the lack of social cohesion, an economic crisis of production and a political crisis of representation. Old social and policy assumptions are no longer valid. Instead there is a widespread disarray in public sentiments and growing fragmentation of an originally fragile society cemented largely by economic success in the past. The Hong Kong identity had grown out of being different from and, as the city-dwellers felt, superior to mainland China – its economic success, relatively more freedoms and liberties, rule of law, and political pluralisms.

After 1997, such a Hong Kong identity has been called into question. Instead of leading China’s economic development, Hong Kong now turns around to the mainland for economic support. The political environment

Hong Kong’s past 20 years – promises and realities

has changes after the handover, and the government has to respond to increased demands from various sectors for assistance, intervention and regulation.

More critically, rapid globalisation has brought about a new international economic environment, which no longer favours small-scale, export-dependent economies like Hong Kong. The 1998 Asian financial crisis is the dividing line, since when Hong Kong has to map its developmental path within the context of a fast-growing Chinese economy, which necessitates economic rethinking and restructuring, in which the government should play an important role. Decolonisation has only just begun for Hong Kong, and it entails both a process of national reunification and iden-

Kong permanent presidents not just because they are economically more affluent or materially better endowed. Their pride ultimately lies in an institutional edge as represented by political pluralism, the rule of law, respect for human rights and civil liberties, accountable governance and democratic institutions.

The advent of globalisation and the rise of China are together rewriting the script for Hong Kong in the new century.

tification with China. The difficulty lies in the fact that two societies with distinct cultural identities have to reconstruct a common identity along the “One Country, Two Systems” policy, embracing the British colonial past of the people of Hong Kong, which has allowed them to develop an almost self-sufficient economic, legal and political identification.

in Hong Kong and allowed the HKSAR government to govern Hong Kong on its own, particularly from 1997 to 2003, under the first term of Chief Executive Tung Chee-hwa. China successfully built confidence in the “One Country, Two Systems” policy within the local population and the international community, effectively side-lining potential centre-periphery conflicts between Beijing and Hong Kong. Nevertheless, 2003 was a turning point and the conflict started to escalate. On July 1, 2003, the government’s plan to legislate on Article 23 of the Basic Law, outlawing any acts deemed to threaten national security, sparked a mass protest. The law has been widely viewed by most Hong Kongers as a

The anxieties and conflicts emanating from the cognitive gap between the mainland and Hong Kong community are as much a result of institutional differences as an outgrowth of decoupled cultural identities. Most Hong Kong citizens want to be proud of being Hong

20 years after the handover It was obvious that in the early years of the handover, Beijing largely adopted a position of non-intervention

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way for the communist Chinese government to assert its own interpretation of issues, allowing Beijing a political foothold in and total control over the city.

After 2003 Beijing decided to change its policy with regard to Hong Kong. Beijing has determined to bring Hong Kong under direct supervision from the central government. From a political perspective, the National People’s Congress Standing Committee (NPCSC) was to re-interpret the provisions of the Basic Law to control the pace and scope of Hong Kong’s democratic reforms. Second, Beijing strengthened the role of the central government’s Liaison Office as the “second governing team” in the HKSAR to direct the domestic political affairs of Hong Kong on the spot, such as coordinating the campaigns of pro-Beijing elites at different levels, from District Council to Legislative Council.

Economically, through the conclusion of various cross-border economic and regional cooperation agreements between the city and China, Hong Kong has been brought under Beijing’s economic control without raising suspicion roughly over a decade of economic integration. Ideologically, Beijing has promoted a single Chinese national identity throughout schools in Hong Kong. Nurturing a Chinese national identity has been adopted as one of the official learning goals for Hong Kong’s primary and secondary education, which is to be achieved through various subjects such as Chinese language, Chinese history, as well as mainland study tours and internships. Clearly, all these efforts represent Beijing’s attempts to foster Hong Kongers’ loyalty to the centre and to promote ideological homogeneity across the whole country.

The year 2017 was a very significant period for the city, as the new Chief Executive was elected in March, who, with her new cabinet, was inaugurated on 1st July, a day also marking the 30th anniversary of the handover. China’s President Xi Jinping also attended the event during a 3-day visit. The reunification of the Chinese nation is a key part of the “Chinese Dream” policy, announced by the Chinese President, in which Hong Kong also has an important role. His visit and his participation in the ceremony was a signal towards domestic politics and the Chinese people to prove that the situation was under Xi Jinping’s control and he was reassuring everyone that Hong Kong forms a part of China, legitimising his own power and the Chinese Communist Party, as the 19th Party Congress was to be held in October. For the people of Hong Kong, however, the situation is not so

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obvious., especially the young generation, who are suffering from an identity crisis and struggling with social problems, including housing in particular. Therefore, protests were organised for the day of the ceremony and Xi Jinping’s visit to express their disagreement.

In his speech delivered at the handover and inauguration ceremony, Chinese President Xi Jinping has warned Hong Kongers not to cross the “red line” of China’s sovereignty and the power of the Communist Party.xl Earlier, China’s No 3 state leader and the head of the National People’s Congress Zhang Dejiang had announced Beijing’s plans to tighten grip on Hong Kong and said, ‘The relationship between the central government and Hong Kong is that of delegation of power, not power-sharing.’

Chinese President Xi Jinping has also delivered his message on how Hong Kong could move forward under “One Country, Two Systems”. 1 To have a correct understanding of the relationship between “One Country” and “Two Systems”, to correctly handle the relationship between the HKSAR and the central government. 2 To always act in accordance with the Chinese constitution and the Basic Law of Hong Kong. 3 To always focus on development as the top priority to foster future growth.

4 To always maintain a harmonious and stable social environment. Furthermore, he also explained that making everything political or deliberately creating differences and provoking confrontation would not resolve the problems, it can only severely hinder Hong Kong’s economic and social development. Finally, he added that they are ready to talk to anyone who loves Hong Kong, and genuinely supports the principle of “One Country, Two Systems”, and the Basic Law, no matter what political views or position they may hold.

20th anniversary, in addition to a ceremony and the visit of China’s President, also coincides with the inauguration of the first female Chief Executive. She is facing the difficult task of easing the growing tension in the relationship between Hong Kong and Beijing, and to find a compromise mutually acceptable for both sides. In her inaugural speech, Lam vowed to repay the trust and support of the people and the central government’s support with diligence and achievements.

She promised to accurately and comprehensively fulfil her duties as chief executive, and to resolutely do everything within her ability to implement the ‘one country, two systems’ principle, uphold the Basic Law, defend the rule of law, and promote a deep and posi-

tive relationship between the central government and the Hong Kong SAR. She vowed in front of the guests, including Xi Jinping, that she would firmly take actions in accordance with the law against any acts that will undermine China’s sovereignty, security and development interests”. Thus, there is enormous pressure on the new Chief Executive, inclined more towards China than democratic Hong Kong. For the present, she is under more pressure from above, the central government than from below, the society of Hong Kong, which, however, could change later.

In order to prevent this change from happening, the largest military parade since the UK handed the city back to China in 1997 was organised during the visit of the Chinese President. A couple of days later, China’s first aircraft carrier entered Hong Kong’s waters.xlv On Beijing’s behalf, it was not just a demonstration of military power and a show of martial might but also an unsubtle message that if there were any mass protests threatening China’s sovereignty and interests, Beijing would not hesitate to call upon the army. conclUSION In the 1980s, Hong Kong took pride in that mainland China had to rely on Hong Kong for economic development and modernisation, and the city was held as a growth model for the rest of China. Nowadays, after nearly three decades of economic reform and opening-up, China no longer needs Hong Kong so much.

The relationship seems to be even turning around, with Hong Kong increasingly becoming dependent on the mainland market. The Basic Law has provided safeguards to the coexistence of “Two Systems” within “One Country”, and ensures a high degree of autonomy, it has limited say in the national policymaking process.

British colonial rule and institutionalisation had given the city a great opportunity to develop and modernise without being affected by Maoist influence. Now Hong Kong cannot continue to thrive on such an insular position. Hanging onto the past formula of success may hinder it from seeing new perspectives and new opportunities. With the legacy of the colonial rule, it is illequipped to face new challenges. At the moment, Hong Kong has yet to find constitutional, institutional and political answers to its myriad of governance problems.

These important changes, however, call for strong governance, which is barely supported and highly distrusted if it lacks legitimacy.

Thus, the most daunting task facing Hong Kong is to rebuild trust in governance, which could steer the economy and the society forward and redefine the identity and the future of the city. This is the only way to implement necessary changes, as it has no economic power to be able to either compete with China or assert its interests.

These internal problems are regarded as obviously dangerous by China’s leadership and are believed to be attempts to break away Hong Kong from the country.

Therefore, after the initial lenient policy, Beijing has been seeking to tighten relationships with Hong Kong and gain as much influence as possible in the city since the early 2000s. Since the presidency of Xi Jinping, it has taken an unsubtle form, and the new Chief Executive, loyal to Beijing, seems to be a partner. In the ever-tensing situation the crucial question is how Hong Kong’s society will react to these issues, whether they will resist or China’s show of military power will be sufficient for their resignation. One thing is sure: whatever path is chosen, the response given to it will create a new, common identity in the people of Hong Kong suffering from an identity crisis now.

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Polar

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Silk Road

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Polar Silk Road Author: Alexandra Zoltai

As an area rich in unexplored resources, the North Pole is fulfilling an increasingly important role in the relations among the great powers. Mostly thanks to this, new trade routes have emerged in the region, which saves energy and time as a considerable security and geopolitical aspect. China has been working on building its regional ambitions for several years and released china’s Arctic Policy in early 2018, according to which the country would like to integrate this region into the New Silk Road Project, too. As China has a far weaker power position in the region than America or Russia, it will need cooperation and economic investment to enforce its interests.

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the north pole The developing economy of the countries in the North Pole is mainly based on the infrastructure.

The Arctic is particularly rich in natural resources, over 20 per cent of the reserves on the Earth can be found here. Furthermore, the Arctic Ocean is a connection point among Asia, Europe and North America, and these continents are responsible for 90 per cent of international trade. Efficient transport on the Arctic Ocean is only possible if significant infrastructure investment is realized for the development and establishment of routes, which can mainly be beneficial to the countries of the region.

According to the U.S. Geological Survey (USGS), the Arctic, comprising about 6 per cent of the mainland, hides the largest unexplored oil and gas reserves in the world. It is assumed that 90 billion barrels of petroleum, 1669 thousand million cubic feet of natural gas and 44 billion barrels of liquefied natural gas can be found on the North Pole.

This amounts to 13 per cent of the unexplored oil sources, 30 per cent of natural gases and 20 per cent of liquefied natural gas in the world. Besides, a considerable amount of precious metal like gold, platina, iron, uranium, lead, zinc and rare earth elements can be found here. The melting of the polar ice makes it more probable that these energy sources and precious metals will be available in the near future if the infrastructure and technological background will be ensured for their exploitation.

The use of the Northern Sea Route would reduce the transportation from Asia to Europe through the Suez Canal by 10 days, and the transportation on the Panama Canal by 4 days. According to the estimations, the Transpolar Sea Route is expected to be suitable for transportation only in 2020, and only in the summer months for about 8 weeks.

In 1996 the Arctic Council was established for the relevant countries in the region, in order to provide a platform for the dialogue between the members. At present it has 8 full members: Canada, Denmark (including Greenland and the Faroe Islands), Finland, Iceland, Norway, Sweden, Russia and the United States of America, plus 6 participants representing the Arctic indigenous peoples.

It primarily focuses on the environment, science and economic cooperation; however, it never fulfils security tasks.

Source: Wishnick, Elizabeth: China’s Interests and Goals in the Arctic: Implications for the United States. Strategic Studies Institute, 2017. p. 9.

CHINESE AMBITIONS As a result of the global warming, new territories that used to be covered with ice have opened to navigation at the North Pole. Since shipping is the cheapest form of transportation, 90 per cent of world trade is still realized by water. These newly opening routes can not only play an important role in global trade but are also very rich in natural resources. Therefore, China aims to take part in the affairs of the region and have the lead role in making the rules concerning the region, because in this way it has an opportunity to get involved as a new great power, and not only the former rule-making great powers can form these affairs.

European and American experts have defined China’s regional purposes as follows: to have an access to the local precious metals, fishing goods and energy sources; new trade routes, which both shorten the transportation time and offer a new alternative against the Malacca Strait; to understand what climate change means to the region; a scientific interest (BeiDou Navigation Satellite System, space research, weather forecast); to participate in the governance related to the North Pole; to maintain the right of access to the region for countries other than the Arctic countries, so that they cannot be subjected by the Arctic countries. Chinese experts highlight the considerable strategic significance of the region as it can be an alternative in security political terms. China feels that the US presence is most

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threatening because the USA or its allies are even ready to block China’s way to the essential energy sources coming from the Persian Gulf through the Malacca Strait. Others emphasize that the Eurasian and North American continents meet here, and the US has such rockets in Alaskav that would be able to reach China.

According to Chinese ambitions, China started to build its policy related to the region several years ago. Some Chinese experts put China’s commitment to the North Pole as early as 1925, when China signed the Svalbard Treaty, which acknowledges that the Spitsbergen belongs to Norway. China has several research stations in this territory, including the Yellow River Station built in 2004 to be China’s first Arctic scientific research base. In his statement made in 2010, Yin Zhuo Chinese Rear Admiral highlighted that the North Pole is the property of all mankind, no state has sovereignty over it, and China, where every fifth man lives, has to be an unavoidable agent

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in its exploration. In 2013 China managed to become a surveillance state in the Arctic Council, which according to most Chinese officials means that China’s interest is legitimate in the region. By gaining the surveillance status, China has got access to the waters and air space of the North Pole, and it has also had the opportunity to get involved in the international governance related to the region. According to experts, the polar regions, together with the oceans, as well as the cyberspace and the outer space are strategic areas in which China has great ambitions and aims at grandiose roles.

In January 2018 China released China’s Arctic Policy, which includes the strategy related to the region.

A great role is devoted to the One Belt One Road, which was announced in 2013 and primarily aims to integrate the North Pole into the route of the New Silk Road and establish a Polar Silk Road. On this section of the “One Belt One Road” the primary role would imply the new routes created by the melting

Polar Silk Road

ice, which would serve the Chinese trade and the Beijing ambitions. This strategy, however, leads us to the conclusion that the term Near-Arctic State should be replaced by the term Stakeholder, which would increase its rights and commitments within the region.

Beyond the Silk Road, China has other great ambitions in this area, too, realizing considerable capital investments in the countries of the North Pole and conducting scientific research projects with a strategic purpose.

With reference to research findings, Chinese researchers state that the melting of the ice will largely affect China, where the sea level is going to rise and, consequently, 20 million citizens will have to be relocated, let alone the agricultural issues. Accordingly, Beijing intends to fulfil the greatest role possible in the region and act as a global power in the issue of climate change, with the current US Administration backed out. China envisages the Polar Silk Road along the Polar Road with Russian cooperation. In this way shipping can be 15 days shorter from China to Europe, as soon as the ice melts and the marine section becomes navigable for a couple of months. China, however, rather thinks in the long term and prefers using the Transpolar Sea Route, which will become navigable only in a few decades’ time depending on the melting of the ice, passing through the top of the Arctic in the middle.

This route will also be navigable only for a limited time of the year; however, China could save a lot of time and fuel, and it could also get around the waters controlled by Russia in this way. Therefore, if it grows into an economic power in the region, the US will have to make every effort to keep these new roads. China is increasing its presence in the region through raw material-oriented investments and the development of ports, because today the country largely depends on the oil and gas imports realized from the Persian Gulf and Africa, along the routes controlled by the US Navy. It started to diversify its energy dependence by realizing investments into Russian big company Yamal LNG as well as into the Norwegian gas and oil fields. This may not only mean an alternative for China but the country can also obtain experience on the Arctic infrastructure and technology, which can largely facilitate the control of trade routes. For similar reasons, China plans to realize investments in Alaska, Canada and Norway, as well as in mining and the ports of Northern European countries. China’s possible partners include

Yamal’s possible transportation routes Source: Novatek

Northern European countries that are members to the Arctic Council: Iceland, Denmark, Norway, Sweden and Finland, who mainly hope for financial support for their Arctic ambitions. Between 2000 and 2016 Finland received China’s fifth largest foreign working capital investment to the amount of 8.43 billion dollars, while in Norway this amount totaled 7 billion dollars during the same period. Iceland and Greenland became the main site of Chinese foreign capital investments.

China’s Arctic strategy is also constituted by scientific research in this field. Dozens of Chinese scholars working throughout the North Pole have conducted more than 30 polar expeditions since 1984.

At present the country has one ice-breaker. In 2017 the only Chinese icebreaking vessel Xue Long or Snowy Dragon took the route of the Northwest Passage. The 20,000-mile-long way took 83 days, which was 7 days shorter than the usual way from New York to Shanghai through the Panama Canal. This was the first Chinese ship to pass through all the three Polar routes. Navigability would be far more convenient for China both for strategic and temporal reasons, and even because of security since there are no Somalian pirates on the Arctic. While on the Malacca Strait and through the Suez Canal the road from Asia to Europe takes 35 days, the Northern Sea Route is only 22 days long. Allegedly, China is already building its second icebreaker Xue Long II, which is expected to set sail in 2019. Additionally, Chinese state-owned shipping company COSCO plans to launch 6 cargo vessels on the Northern Sea Route for commercial transportation. China has become one of the leading Arctic shipping countries, and COSCO considers itself a leading shipping company on the Northern Sea Route. In 2015 it took 55 days for Chinese shipping

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company COSCO to reach Rotterdam from the port of Dalian and get back to the port of Tianjin, China through the Northwest Passage.

China’s commitment towards the region is receiving increasing attention. The country is also of great global significance: during his visit to the US in April 2017, Xi Jinping paid a visit to Alaska and negotiated about issues related to the North Pole, paying special attention to the trade of liquefied natural gas.

According to the estimation of the Polar Research Institute of China, 5-15 per cent of the national trade will pass through the North Pole by 2020, and this proportion will only increase in the future provided that China builds partner relations with more and more countries of the North Pole. None of the five Northern European countries (Denmark, Norway, Finland, Iceland and Sweden) participate in the One Belt One Road Project, still, all five countries are founding members of the Asian Infrastructure Investment Bank, which is related to the Chinese initiative. However, China started to establish its Arctic strategy in diplomatic terms a long time ago, thanks to which relations with these countries have normalized and become tighter. The question is whether these five countries are ready to join the OBOR and thus get involved in the infrastructure investments or not.

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CHIna’S ARCTIC POLICY China announced the Policy of the Arctic Strategy on 26 January 2018. The core of this white book is based on the opportunities hiding in the North Pole, mainly with respect to the navigation routes, and the section of the One Belt One Road planned on the North pole was also announced officially. China classified itself as a Near-Arctic Country and an Important Stakeholder with respect to the region owing to the New Silk Road Project as well, determining respect, cooperation, mutual benefits and sustainability as the main pillars of its regional policy.

RUSSIA Therefore, the Chinese have mostly gained ground and influence in the region through investments, and the main winner seems to be Russia, especially because Russia was the only country of the North Pole to join the Chinese One Belt One Road Initiative. The Polar Silk Road, the first project to be realized, was an investment where the Silk Road Fund assumed a 9.9 per cent share in the Russian Yamal LNG Project, which carries out activities related to transportation, infrastructure and resources in the Eurasian part of the Arctic. Consequently, Chinese

Polar Silk Road

Basic principle Understanding the Arctic ·

· Understanding the Arctic ·

Utilization

· ·

Management

Cooperation and mutual Sustainability benefit Having respect for Chi- · Scientific cooperation, · Technological develna’s right to perform sharing various kinds opment for the benefit scientific research on of data of environmental the North Pole protection Increasing the understanding of the North Pole in China Having respect for the · International coopera- · Decreasing the pollutraditions and culture tion with respect to the tion coming from the of the local people. climate change mainland · Preserving the ecology of the Arctic · Responding to the climate change Having respect for · With joint investments · Improvements for the international law and cooperation, exppreservation of the Having respect for loiting the resources environment and conlocal law (mineral substances, version to clean energy oil) · Supporting responsible · Mutual distribution tourism · Assessing the fish stock living in the international waters of the North Pole and preparing for the common distribution Having respect for the · Polar Silk Road, region- · An active role in the current Arctic mechal and international global governing of the anism governing body and environment regarding equal dialogue for the the North Pole Arctic and other bilateral and multilateral institutions Respect

·

Source: The Diplomat: https://thediplomat.com/2018/03/china-commits-to-arctic-protections-but-development-threats-loom/

firms have a 29.9 per cent share in total within the project because the state-owned China National Petroleum Corporation has 20 per cent besides Novatek (Russia, 50.1%) and French Total (France, 20%). The financial part of the project is partly funded under a 12-billion-dollar loan agreement, which is provided by the Chinese Eximbank and the Chinese Development Bank. Among others, the development includes the establishment of a railway connection with the Port of Sabetta, connecting the region into the Eurasian railway system. This investment would total approx. 3.22 billion.

Mostly passing along the Russian coastline, the Northern Sea Route is receiving increasing attention. In 2016 the transit traffic exceeded 7 million tons, which is a 35 per cent increase as compared to the previous year. Prior to the G20 Berlin Meeting in 2017, Xi Jinping paid a visit to Russia, and the two countries signed a joint declaration, specifying the Polar Silk Road and the Northern Sea Route as the main venue of their cooperation. This part of the New Silk Road mainly builds on the navigation along this route and the exploitation of the local energy

sources because it intends to diversify China’s energy dependence. For this reason, one of Russia’s grandiose investments is the development of this route, aiming to allocate several dozens of billion dollars to vessels, vessel construction, navigation and ports along the route by 2030. However, China can only use this route as long as the two countries maintain good relations with each other. Russia regards the Northern Sea Route as its own territory, which is entirely Russian competence according to Article 234 of the UNCLOS. Another issue about the use of the route is the entirely different environment, which makes extra demands concerning the technology and construction of the vessels, and China has no appropriate specialists. China has to build vessels and icebreakers that can be navigated in the Arctic environment, too. Therefore, it is essential to this country that they foster good relations with Russia and Finland and thus obtain the appropriate technologies.

Due to the Western sanctions against it, Russia increasingly depends on China. Therefore, it started improvements of strategic importance at the North

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Pole. Vladimir Putin said that the country constitutes an important part of Russia’ national security in military, political, economic, technological and environmental aspects, too. Therefore, Russia is the only Arctic country to be partner of the New Silk Road Initiative, so it is a committed member of the future Polar Silk Road Projects.

THE UNITED STATES OF AmeriCa The United States of America paid less and less attention to the Arctic even during the Obama Administration, the Trump Administration mainly concentrates on the Alaskan energy sources, and in recent years this region has not been represented in the Government. At present the country has two functioning icebreaking vessels. It was in 2014 that the US last released a report on the North Pole, which set the US’s interests and purposes until 2030. The main pillars are: to ensure the sovereignty and defense of the United States of America, to secure the Navy in case of a potential crisis, to maintain the free navigability of waters, and cooperation.

The melting of the ice on the North Pole has encouraged the US Navy to develop a new Arctic strategy recently. The US cannot ignore that the melting icecaps can not only open new trade routes, but they can also offer new opportunities for the exploitation of unexplored resources. Besides, China’s increasing role in the region also urges the United States of America to set up a new strategy in order to keep its interests in the region. Besides considering itself an important stakeholder of Arctic affairs and an inescapable participant of the regional affairs, China released China’s Arctic Policy three months before the US decision was passed.

The US Congress has often questioned the Russian military mobilization concerning the North Pole as well as the increasingly aggressive Chinese attitude and the enhanced military presence on the South China Sea. And the cooperation evolving between the two countries has been even more frightening.

Therefore, China’s presence creates uncertainty on the North Pole with respect to the US.

CONCLUSION When a Chinese vessel took the Northern Sea Route for the first time in 2013, Director General of the Polar Research Institute of China Yang Huigen said that according to optimist estimations 5-15 per cent of China’s trade will have been realized on this route by 2020. Nevertheless, Chinese ambitions might not be successful because the security dilemma caused by the Strait of Malacca is planned to be solved here, and the Bering Strait can raise similar issues. Furthermore, the survey conducted among Chinese shipping companies reveal that firms are rather interested in gaining access to the resources than in Arctic navigation, which implies high risks and costs. Unlike Russia and the US, that is the two powers of the region, China is in a relatively weak position at the North, so this country can only be an investor and a purchaser here. The main field of cooperation can be environmental protection and research, which are primarily the interest of Russia and China, while military cooperation can hardly be imagined.

As today the most navigable sea-lane passes along the Russian coasts at the North Pole, China can only achieve successes and realize its ambitions in cooperation with Russia. The North Pole is such an area of strategic importance for China where it is in a weak position against Russia and the US. Therefore, China has started to build good relations with the small powers of the region and gain influence. Before the annexation of the Crimea, Russia opposed the Chinese spreading in the region; however, after the introduction and influences of the Western sanctions it already defined China as an important partner at the North Pole Project in the fields of resources, research and technology. As long as Vladimir Putin is President of Russia and Xi Jinping is President of China, the two countries are expected to maintain good relations and be cooperative in the northern region, too. The reason for this is that Russia needs Chinese capital and investments in the energetics and infrastructure sectors, and China requires the Russian support and assistance for the navigation and possibilities at the North Pole so that they can enforce their economic interests in the region.

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INDIA AND THE “NEW SILK ROAD”

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INDIA AND THE “NEW SILK ROAD” Author: Ádám Róma

For the present, China’s New Silk Road, also known as the “One Belt, One Road” initiative from 2013, with numerous projects under construction, has been making uninterrupted progress towards implementation with more or less ease. However, China’s largest neighbour, India, to which Beijing would give a great role in its plans due to its very location, has categorically rejected it. We are presenting below the concerns raised by India against the positive, mainly economy-oriented narrative of the New Silk Road, and the possible alternatives it may have in fear of being isolated from its direct sphere of influence.

INTRODUCTION In his speech delivered at Nazarbayev University, Kazakhstan in September, 2013, Chinese President Xi Jinping announced the Silk Road Economic Belt, forming the continental part of the One Belt, One Road (OBOR)/ Belt & Road Initiative (BRI), within the framework of which China would link Asia, Africa and Europe again with overland trade routes just like the ancient Silk Road did. In addition to the network of large-scale infrastructure investments, developing trade and investment partnerships as well as cultural and people-to-people relationships are given a high priority. One month after Xi’s speech in Kazakhstan, the maritime route of the New Silk Road initiative was announced in Indonesia. The route named 21st Century Maritime Silk Road goes towards Europe along the South and Southeast Asian ports traversed by Admiral Zheng He in the 15th century while also passing through some African ports. Most of the financial background is provided by the newly-established Asian Infrastructure Investment Bank (AIIB), the Silk Road Fund (SRF) and the New Development Bank (NDB). In the official documents of the initiatives, the Five Principles of Peaceful Coexistence (Panchsheel), laid down jointly by Zhou Enlai and Jawaharlal Nehru in 1954, are used as a basic approach by China, and the goals of the cooperation such as harmonising regulations, promoting integration, cross-border free trade, financial integration and strengthening people-to-people relationships are named in this spirit. Although Beijing emphasises that the OBOR initiative will be beneficial for everyone, sev-

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eral criticisms have been made about that. The “New Silk Road” scheme – due to its vast dimensions and extension – implies numerous difficulties, not mentioning the questionability of the return on the economic investments in specific projects, but critics also claim that China seeks to increase its global influence and weight with this initiative, also keeping geopolitical advantages in view.

By controlling and linking strategic facilities in the Indian Ocean, China would be able to overcome the “Malacca Dilemma”, as currently 80 per cent of the oil imports of the country arrives through the Malacca Straits, which could easily become China’s weak point in case of potential conflicts. The initiative has other geopolitical connotations as well. As a result of the newly evolving Silk Road, the integration of the Eurasian areas, led by China, would rise to a new level, implementing both Halford Mackinder’s concept of ruling the Heartland and Nicholas John Spykman’s contradictory concept of ruling the Rimland. The dimensions of the grandiose initiative are well illustrated by the Belt and Road Forum held in Beijing in 2017, which saw the attendance of some 1,500 participants from more than 130 countries, including – without being exhaustive – António Guterres, Secretary-General of the United Nations, Jim Yong Kim, President of the World Bank, and Christine Lagarde, Managing Director of the International Monetary Fund. During the Forum, which was intended to give further impetus to the OBOR initiative, a series of agreements were made with the states participating in the initiative; 76 documents were signed on various investments and pro-

Map 1: The routes and corridors of China’s New Silk Road initiative on sea and land (Source: HUG 2016/3)

Legend ports cities major overland routes 21th Century Maritime Silk Road Economic Corridors China-Mongolia-Russia Economic Corridor New Eurasia Landbridge Economic Corridor China-Central Asia-West Asia Economic Corridor China-Pakistan Economic Corridor Bangladesh-China-India-Myanmar Economic Corridor China-Indochina Peninsula Economic Corridor

jects, China concluded agreements with 30 states on trade cooperation, and with 60 states on unimpeded trade.

However, the absence of one country was conspicuous in the event. Despite China’s expectations, India was not represented by any official delegation, articulating its concerns about Xi Jinping’s initiative. The New Silk Road is another source of conflict in the uneasy relationship between the two countries, India and China.

The strengthening and development of bilateral relationships have been impeded by the border dispute still existing today and the memory of the resulting border conflict broken out on 1962, but for China, the presence of the Dalai Lama and the emigrant government in India still counts as a sensitive point, while India is objecting to the trade balance deficit and is concerned about China’s growing influence in the South Asian region. Despite its concerns, India would have a significant role in the Chinese plans about the New Silk Road, in three areas in total. On the mainland, India is involved in two economic corridors, while most of the 21st Century Maritime Silk Road stretches through the Indian Ocean, concerning India and its immediate neighbours.

The purpose of the analysis is to present those parts of China’s New Silk Road initiative that directly concern India, also adding the related problems and possible solutions. After that, the other Silk Road alternatives

concerning India and the role of the New Silk Road initiative in the relationship between the two countries are considered.

THE CHINA-PAKISTAN ECONOMIC CORRIDOR Prime Minister Li Keqiang first proposed the construction of the China-Pakistan Economic Corridor during his visit in Pakistan in 2013, the aim of which is to link the city of Kashgar in Xinjiang Uygur Autonomous Region with Gwadar Port in Southwest Pakistan, mainly by building road and railway routes, logistics and industrial centres and power plants. The ambitious project has become one of the flagships of the New Silk Road initiative and received further support in a Memorandum of Understanding of a total value of US$28 billion on Xi Jinping’s visit in 2015.

However, the plan of the CPEC as well as numerous other investments and initiatives now forming a part of the economic corridor can be dated earlier. The plan of the economic corridor itself was presented to Islamabad by Li Keqiang five months before the official announcement of “One Belt, One Road”. The Karakorum Motorway, built between 1958-78, can be regarded as a forerunner of the economic corridor, but the building of the oil pipelines between the two countries can be also dated earlier; the plan of the pipeline between

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Map 2: The main direction of the China-Pakistan Economic Corridor (CPEC)

Gwadar and Kashgar was put forward together with the decision on the construction of the Gwadar deep-sea port in 2001. The necessity of the economic corridor is closely linked with China’s Western Development Programme, in which Beijing has set the goal of developing less developed provinces being far away from coastal centres, in the proximity of Pakistan.

Most of the investments forming parts of the CPEC are planned to be implemented by 2030 by the two parties, which, with a slowly unfolding free trade agreement added, is expected to further expand improving trade relations of recent years and to decrease the trade deficit of the Pakistani party. As a result of a successfully operating China-Pakistan Economic Corridor, Pakistan would become a gateway between China and Central Asia, and would considerably strengthen the economy of the country. This is reflected by, among others, a wave of rating upgrades by the Japan External Trade Organization (JETRO), Standards and Poor’s and Moody’s in 2016. For the present, however, this positive trend does not seem stable: between 2017 and 2018, the Pakistan Stock Exchange (PSX), Asia’s best

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performing stock market has regressed to become the worst performing one, accompanied by a significant drop in the exchange rate against the dollar. For China, the economic corridor would offer an alternative supply route to import oil, and the project would greatly facilitate the integration of the region.

Beside numerous positive aspects, there are also several challenges that both Beijing and Islamabad have to face. In the list of problems, the necessity of security measures about Chinese people working in Pakistan comes first. China requires of Pakistan to take more vigorous action to mitigate the threat of terrorism and to make efforts to protect Chinese nationals. As a response, Pakistan has announced to train 12,000 security personnel to protect Chinese workers on the Corridor. Pakistan’s regional division and its periodically occurring political instability, as well as the Sinophobia of Baloch separatists pose other challenges. Apart from these problems, the economic return of investments must be mentioned from a Chinese perspective, as it is still questionable whether Pakistan will be able to repay the loans taken out, and even if it is so,

INDIA AND THE “NEW SILK ROAD”

whether this is the best environment regarding the rate of return on Chinese investments. A new phenomenon occurring about the New Silk Road, China’s “debt-trap diplomacy” must be mentioned here. Sri Lanka’s Hambantota port, built in 2007 from Chinese loans, had proven to be economically unsustainable, as a result of which the port was handed over to a Chinese company for 99 years in 2017, turning the economic loss into a geopolitical asset. Although such actions are not likely to form integral parts of the OBOR initiative, Beijing does not refrain from using unorthodox opportunities.

Several other developing countries with significant loan burdens might be threatened with a similar way of repaying Chinese loans, including Pakistan and the CPEC discussed above, the amount of which has already exceeded US$62 million.

While Pakistan’s western neighbours, Iran and Afghanistan are supporters of the construction of the economic corridor, India is categorically rejecting it. If India were to support and join the Chinese initiative, the world’s largest democracy could gain considerable advantages, facilitating India’s often-mentioned but hardly realised fulfilment of its economic potential, but for reasons stemming from the past and the politics of the country, it is afraid of using this opportunity. On the one hand, India is anxiously watching the deepening of the security policy cooperation between its two neighbours along the CPEC, especially in the light of its still-existing territorial claims against both Pakistan and China, which have already caused several armed conflicts and wars. On the other hand, the China-Pakistan Economic Corridor under construction raises other problems related to India’s sovereignty.

The corridor traverses through Gilgit-Baltistan in Kashmir, a territory claimed by both India and Pakistan. In the Kashmir issue, India has taken a strong stance; it has been engaged in war with Pakistan thrice for the territory. In addition, both the upper and lower houses of the Indian Parliament adopted a resolution in 1994, declaring that the State of Jammu & Kashmir has been, is and shall be an integral part of India and India will firmly counter all separatist efforts by all means, and calling upon Pakistan to vacate the occupied territories. Although Beijing has put forward some proposals to resolve problems, including renaming the economic corridor, the conclusion of a new agreement on the cooperation, re-launching negotiations about a freetrade agreement between the two countries, resolving the border dispute and aligning China’s New Silk Road initiative and India’s Act East policy, but so far they have not born any fruit.

THE BANGLADESH-CHINA-INDIA-MYANMAR ECONOMIC CORRIDOR The plan of an economic corridor between China and India, first arisen on a regional level in the early 1990s, then on a state level as well, has a unique history of several thousand years. The Assam-Burma-Yunnan route, forming a part of the ancient Silk Road between India and China counts as one of the earliest routes, proven by archaeological artefacts from 15th century BC and historical records from 2nd century BC. The plan of the “new” economic corridor was devised at a scientific conference in Yunnan in 1999, where the delegates from the four countries signed the “Kunming Initiative”.

The conference and subsequent meetings focussed on feasibility and the study of economic and infrastructural opportunities from the perspective of the 3Ts – Transport, Trade, Tourism. Forums became regular between 1999 and 2003, and they enjoyed state support from 2004, and the initiative, becoming increasingly diversified, took its present shape of an economic corridor in 2013.

The BCIM Economic Corridor initiative may have considerable advantages for all four participants. The construction of a more integrated transport network would significantly cut journey time between the areas concerned, as well as transport and transaction costs, the importance of which is enhanced by the fact that Southwest Yunnan, Northeast India and Northern Myanmar are struggling with serious infrastructural problems and poverty. By deepening economic ties, Bangladesh and Myanmar can reach the Chinese and the Indian market more easily with their products, and technological transfers, accompanying foreign investments may further boost economic development. Another area where the implementation of the economic corridor has great potential is the energetic cooperation, as the territory of the planned economic corridor is rich in minerals, natural resources and energy carriers. In addition to considering these viewpoints, the touristic opportunities of the region must be also mentioned, which would be better accessible through infrastructure developments, and economic ties, deepening through the initiative, may have a soothing effect on the existing security policy mismatches and challenges of the region.

Although the implementation of the economic corridor would bring several benefits, there are certain problems that considerably hinder the initiative of a history of almost twenty years. One of such problems is the lack of regional representation. Although the initiative

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Map 3.: The main direction of the Bangladesh–China–India–Myanmar Economic Corridor (BCIM-GF)

initially had a regional nature, since 2013, negotiations have been led by institutions from New Delhi on behalf of India, while in China a turnaround in 2015 has brought about changes in this respect, when the BCIM Economic Corridor officially became a part of the New Silk Road, resulting in Beijing’s predominance in the negotiations. The above-mentioned security considerations also constitute a hindrance to the implementation of the economic corridor. The border dispute between China and India fundamentally thwarts the success of relationships and initiatives between the two countries, the hindering effect of which on the future of the economic corridor being discussed here is multiplied due to the proximity of the disputed border area to the economic corridor. In addition, the Rohingya crisis has also caused fissures in the relationship between Bangladesh and Myanmar. The greatest existing barrier to the realisation of the economic corridor, however, can be related to Beijing’s decision made in 2015. Since the tasks related to the BCIM Economic Corridor were taken over by the National Development and Reform Commission of China, the initiative has been handled and communicated together with the China-Pakistan Economic Corridor by the Chinese party. With this decision, the BCIM-EC has become uni-

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laterally a part of China’s New Silk Road. Therefore, India, due to its problems related to the CP-EC discussed above and its distancing itself from the whole initiative, is unwilling to be involved in this economic corridor, casting doubt on its feasibility and success.

THE 21ST CENTURY MARITIME SILK ROAD AND INDIA The purpose of the maritime route of the New Silk Road is to connect China’s coastal areas with Southeast and South Asia, traversing towards Western Asia and finally reaching Europe via the Persian Gulf and the Mediterranean Sea. This initiative of unprecedented size is expected to enable the evolvement of effective transport routes, linking developed ports to maritime and overland routes. The ports in which China’s state-owned companies have acquired significant stakes in recent years, such as Antwerp, Piraeus, Lomé, Suez, Djibouti, Gwadar, Karachi, Colombo, Hambantota, Chittagong and Kyaukpyu, form integral parts of the maritime section of the New Silk Road. Views on China’s plans in the Indian Ocean vary according to two main narratives. One of them emphasises the economic benefits of China’s New Silk Road project, while the other highlights its political-strategic

INDIA AND THE “NEW SILK ROAD”

significance and its adverse effects on India – this theory has become known as the String of Pearls. Beijing claims that China’s port construction activities in the Indian Ocean focus on shared economic growth. The initiative composed of new ports, logistics hubs, warehouses and free trade areas, would be supported by a Chinese financial background, already detailed above, which – in addition to its win-win nature, that is, being economically beneficial for all, could lay the foundation for new production and distribution chains. According to the String of Pearls theory, however, China is implementing a strategic plan by building ports, within the framework of which it would ensure Sea Lines of Communication (SLOC) by building naval bases, and would be potential-

frequently appearing Chinese submarines in the region and the presence of the Chinese People’s Liberation Army in Djibouti’s Obock port, and similar opportunities in, among others, Gwadar, Hambantota and Kyaukpyu.

Alfred Thayer Mahan’s connection between the navy and a great power status is still prevailing in both China’s and India’s strategic thinking, conjuring up the vision of another “great game” for the Indian Ocean between the two countries. Nevertheless, the development costs and the open location of the ports in question as well as India’s obvious geographical advantage in the region cast doubts on the viability of this concept.

ly capable of obstructing trade routes, thus it could become such a dominant maritime power of the ocean as the USA and England used to be, encircling India with its new bases. This interpretation, which is, not surprisingly, rather wide-spread in India is grounded by ever more

INITIATIVE

ALTERNATIVES TO CHINA’S NEW SILK ROAD

In addition to the initiative promoted by Beijing and enjoying significant political-economic support, however, several other plans to facilitate infrastructural and re-

Map 4: String of Pearls

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gional connections along the ancient Silk Road have been proposed, each giving a considerable role to India, like the maps of the Chinese Silk Road. One of such plans goes back as far as 2009. The main purpose of this “New Silk Road”, which can be related to the USA, was to stabilise Afghanistan after the withdrawal of US troops, linking South and Central Asia. This US initiative received greater attention during Hillary Clinton’s visit to Central Asia in 2011, but was pushed into the background during the second Obama administration, while it has been recently given new impetus under Donald Trump’s presidency.

Another corridor in which India has a more active role is the North-South Transport Corridor (NSTC) between India, Russia and Iran, first arisen in 2000. The core of the Transport Corridor is a 7,200-kilometre-long corridor, linking Russia to India through the Indian Ocean, the Persian Gulf, the Caspian Sea and Azerbaijan. Plans and pilots suggest that the Transport Corridor would cut transport costs by 30 per cent, while required time would be reduced to half, and the corridor is expected to boost low volumes of trade between India and Russia, in which participants can see a greater potential.

The most recent plan, partly serving to counterbalance Chinese plans, is the Asia Africa Growth Corridor (AAGC). The plan, which greatly overlaps with the 21st Century Maritime Silk Road, would link Northeast, Southeast and South Asia through the Indian and Pacific Oceans. The goals of the document signed by Prime Ministers Narendra Modi and Shinzo Abe include establishing new production channels, promoting economic and technological cooperation, strengthening people-to-people relationships and long-term, sustainable development. Although the concept linking Africa and Asia is still at an embryonic stage, it has become a dominant element of deepening India-Japan relations and cooperation, serving the interests of both countries.

INDIA AND THE FUTURE OF THE NEW SILK ROAD China claims that the New Silk Road is the result of globalisation and its own economic needs, which will be implemented as an open, inclusive and mutually beneficial international cooperation, in compliance with the goals and values of the UN Charter. For India, the OBOR initiative would promote bilateral trade,

Map 5: The direction of the North-South Transport Corridor

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INDIA AND THE “NEW SILK ROAD”

Map 6: Planned direction of the Asia Africa Growth Corridor

investments and people-to-people relationships, the transport and communications infrastructure would develop, and it would provide new fundamentals for the strategic cooperation between the two countries and the resolution of disputed issues. From China’s perspective, the benefit of good bilateral relationships is illustrated by the fact that 21 of 39 major Chinese air corridors are located above the Indian Ocean or that two-thirds of the Chinese crude oil imports arrive in the country on routes passing through the ocean.

The security policy interpretations detailed above, however, make India cautious and resistant to the initiative. It is fuelled by the issue of Chinese bad debts, already described in relation to Sri Lanka and Djibouti, where the People’s Liberation Army established its first permanent naval port outside China and which is also accumulating considerable Chinese loans, thus, India is seeking other alternatives and cooperation opportunities, counterbalancing Beijing. However, the plans of economic corridors in various countries and the parallel “Silk Road” plans cannot be handled completely separately in reality, they are inevitably interrelated and interdependent, creating the “New Silk Road”, of which the initiative announced by Beijing is only one, al-

though undoubtedly the most important, part. Despite India’s resistance, the construction of “One Belt, One Road” continues, New Delhi is going to be presented with a fait accompli in the Indian Ocean, regarded as its own exclusive sphere of influence.

Although earlier some experts in India have proposed a more pragmatic approach to Chinese relations, and the OBOR initiative in particular, akin to Japan’s recent foreign policy, this has not been reflected in New Delhi’s policy until very recently. In recent months, however, as a member not only of the Asian Infrastructure Investment Bank but also of the Shanghai Cooperation Organisation, a turnaround seems to have taken place in Prime Minister Modi’s policy. The summit held by heads of state Narendra Modi and Xi Jinping in Wuhan in May, 2018 has brought about a change in India’s attitude towards the New Silk Road.

Although New Delhi is still consistently distancing itself from official participation, as the sovereignty issue of the China-Pakistan Economic Corridor fundamentally prevents any efforts in this direction, but an agreement has been made on China-India cooperation in Afghanistan in projects related to the New Silk Road, envisaging a certain degree of normalisation in their relations.

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Chabahar

WHICH WAY ARE THE SCALES TIPPING? 74

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CHABAHAR: WHICH WAY ARE THE SCALES TIPPING?

Author: Alexandra Mogyorósi

In recent years, Asia’s coastal countries have made considerable efforts to have the largest slice possible of the economic benefits deriving from regional connectivity by developing ports, with China and India being the most glaring examples of this phenomenon. By triggering the so-called Great Game, they have shaped Gwadar and Chabahar into maritime hubs. India has invested US$500 million in Chabahar, which it also calls as the Golden Gate, situated in Southeast Iran, on the shores of the Gulf of Oman and in the gateway of the Strait of Hormuz. New Delhi believes that with the help of the port it can introduce resource-rich Afghanistan and Central Asia into the economic bloodstream of the country, while it can also limit China’s expansion in the region. Donald Trump’s decision to withdraw from the Iran nuclear deal may cloud India’s ambitions, and may even tip the scales in China’s favour.

PRIORITIES OF INDIA’S FOREIGN POLICY UNDER NARENDRA MODI

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For decades after achieving independence in 1947, the official foreign policy of India was non-commitment, that is, nonalignment with major powers and military blocs. With the change of the world order, however, the political aspirations of the country accounting for almost 18 per cent of the world’s population, has also transformed. On its way to a major power position, becoming a regional major power has become its most important pursuit. Although strategic goals have never been summed up in one single document, there are several official statements available that, combined with the nature, timing and results of Modi’s diplomacy, present a clear picture of India’s foreign policy priorities. They can be summarized as follows.

neighbours and the island nations of the Indian Ocean. This is an attempt to implement a higher-level of connectivity and deeper integration with these countries, serving India’s economic development. With this, New Delhi wants to promote a model of India-led regionalism, also acceptable for its neighbours. After coming into office, Modi actively started to develop his “Act East” policy, renaming the “Look East” policy launched by Narasimha Rao in 1991. The name change indicates the strategic goal of the new foreign policy: India’s extended influence on Asia, and to create a stable, multi-polar balance of power in the Indo-Pacific region. This “old-new” priority of foreign policy is driven by fears of a growing Chinese influence, to which India is responding by expanding its footprint in Asia. The two components of the effort are boosting trade relationships and creating and enhancing defence cooperation.

Within the framework of the “Neighbourhood First” policy, New Delhi seeks to pursue closer political, economic and diplomatic ties with its immediate

The China factor is one of the major elements not only of the “Act East” policy but of India’s foreign policy in general. The relationship between the two

The route of China’s “String of Pearls” policy

countries is ambivalent. As one side of the coin, the relationship between New Delhi and Beijing can be characterized by increasingly diversified bilateral cooperation and the increase of trade volume. China is India’s number one trading partner, and Beijing has invested significant amounts into India’s industry and high-speed railway infrastructure. Despite this growing cooperation, however, the other side of the coin is that the relationship between the two countries is full of tension, rivalry and hostility.

Apart from mutual distrust, the territorial disputes over Aksai Chin and Arunachal Pradesh remain unresolved, and border skirmishes – for example, over the Doklam plateau or Ladakh – are frequent.

China’s continuously growing presence in the Indian Ocean is another source of tension, making India feel surrounded by Beijing. China’s strategy is based on the hypothesis that the one who rules entire Asia can dominate the Indian Ocean. The basis of this assumption is the fact that 70 per cent of the world’s oil trade transported on sea routes and 61 per cent of the world’s container traffic passes through this region. As the Chinese economy is heavily dependent on the trade routes of the Indian Ocean, it is self-evident that China – even by military force – seeks to ensure the security of these routes. In order to increase its presence, China pur-

sues the String of Pearls policy, which means establishing a military, commercial and communications network from mainland China to Port Sudan.

As part of the New Maritime Silk Road, Beijing has spent US$20 billion within a year on purchasing foreign ports and has been investing a significant amount in infrastructure development itself. Despite China’s claim that the ports serve exclusively as logistics bases, a warship always tends to appear in the region. Without being exhaustive, the most expensive pearls include Gwadar in Pakistan, Hambantota and Colombo in Sri Lanka, Malé in the Maldives, Payra in Bangladesh and Kyaukpyu in Myanmar. Gwadar is the shiniest of all, playing a key role in shaping China’s maritime dominance. If the port once becomes a naval base, the Chinese People’s Liberation Army will not only rule the Indian Ocean, but can keep an eye on the oil-rich Persian Gulf and the Strait of Hormuz.

Thus, China’s increasing presence in the Indian Ocean itself poses a serious security challenge to India, which is further aggravated by the China-Pakistan relationship. China is working on building the US$62-billion China-Pakistan Economic Corridor (CPEC), a flagship project of the Belt and Road Initiative (BRI), which seeks to link China’s Xinjiang province to Pakistan’s Gwadar port through roads,

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railways, oil and gas pipelines and optic networks in order to facilitate Beijing’s regional connectivity.

As a section of the corridor traverses through the disputed territories of Gilgit-Baltistan and Kashmir, currently controlled by Pakistan, India, on the ground that Pakistan is challenging its sovereignty and breaching its territorial integrity, objects not only the project but – out of fear of Chinese influence – the entire BRI. This was expressed by Modi at the summit of the Shanghai Cooperation Organisation in June, 2018.

China’s investments in Pakistan, however, are is just the tip of the iceberg in the relationship between India and Pakistan. The relations of the two countries have been volatile since their independence, but are basically very hostile. Delhi and Islamabad can sit down at the negotiating table, if necessary, but high-level negotiations result in tranquillity in the short term only and do not prevent Pakistani rebels from engaging in armed conflict in Kashmir,

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over which the two countries have already fought four wars. On the ground of another serious source of conflict, the support of terrorism by the government in Kabul, India seeks to isolate Pakistan, and for this end, tries to make strategic partnerships with Iran and Afghanistan following the “my enemy’s enemy is my friend” logic.

Establishing relationships with various countries and building social capital can be interpreted as the fourth priority of India’s foreign policy. In recent years, India has been undoubtedly pursuing closer ties with the United States of America and its allies, Saudi Arabia and Israel, while also fostering good relationships with Russia and Iran on the other side.

In the relations, political rapprochement as well as security considerations play an eminent role. It is embodied not only in defence and military agreements, but also in arms sales, which is used by the USA as a tool of choice to build partnerships, and which is accepted happily by India to counterbal-

CHABAHAR: WHICH WAY ARE THE SCALES TIPPING?

ance the “China threat”. In the last five years, the number of weapons imported from the USA grew by 550 per cent compared to the previous period of 2008-2013. Although Israel has also become an important arms supplier of India, two-thirds of the arms are still imported from Russia, standing on the side of another alliance, by New Delhi.

Armaments are an element of achieving a major power status, which is India’s fifth foreign policy priority. For the present, the country is not a shaper of the rules of the international system, and despite its efforts and economic might, it is not a permanent member of the UN Security Council, either. However, it takes steps to be an increasingly significant actor on global governance platforms.

Summing up its foreign policy, India, on its path towards achieving a major power status, seeks to be recognised as a regional power that is the guarantor of security in the Indian Ocean region. However, there are several limits to its strategic vision. These include China’s growing economic and military presence, its constructions in India’s neighbouring countries, the issue of Pakistan isolating India from Central Asia, and the insufficiency of India’s trade integration. In this context, the question as to what role Chabahar may play in overcoming the limits and achieving the goals arises.

CHABAHAR’S ROLE IN INDIA’S FOREIGN POLICY The significance of the location of Chabahar port in reaching Afghanistan and Central Asia

The strategic location of Chabahar makes its role more valuable, and enhances the chances of realizing several, inseparable foreign policy priorities in certain contexts. The deep-sea port means a direct link with the Indian Ocean, and since it is situated near landlocked Afghanistan and Central

Asian countries, it is a key element of the “Neighbourhood First” policy, aiming at connectivity and integration.

Pakistan, due to which India has no common border with Afghanistan and Central Asia, keeps New Delhi isolated from the region, which is sometimes consciously played up by Pakistan with temporary border closures – the one in 2017 for example, lasted for 50 days. India has high hopes for accessing these areas through Chabahar, evading Pakistan’s isolating policy. The only way to get India more involved in Afghanistan's economic development is through Chabahar, Barnett Rubin, a former advisor to the United Nations argues.

Creating connectivity has geostrategic and economic considerations. The former one is aimed at isolating Pakistan and counterbalancing China, and the latter one is aimed at, the world’s fastest growing economy, India’s need for markets, sources of raw materials, that is, more effective and integrated trade relations. Chabahar – especially after lifting sanctions – gives India greater access to Iran’s economy and Afghanistan, with which bilateral trade has not by far reached its full volume yet, despite its geographical proximity.

India lags far behind China, Russia, and Turkey in trade volumes with Central Asia because of access limitations. As an essential node of a multi-mode transport network, Chabahar will result in a 60-per cent reduction in shipment costs and a 50-per cent reduction in shipment time from India to Central Asia. By the last phase of developments, the port is expected to be capable of handling 20 million tons of trade, compared to the present capacity of 2.5 million tons, as a result of which India has the potential to reap up to US$450-500 billion in trade.

New Delhi would primarily export cars, computers, IT-related and agricultural products, mainly rice and sugar, to Iran, Afghanistan and Central Asia. Import would mainly focus on energy sources as Chabahar allows India, the world’s third largest energy consumer, to access Iran’s crude oil reserves of 150 billion barrel and gas reserves of almost 34 trillion cubic metres. Turkmenistan and Kazakhstan could also be considerable sources of these two raw materials; the latter one also holds uranium and coal reserves.

India can hope for iron ore from Afghanistan and natural gas from Russia through Chabahar.

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International North-South Trade Corridor vs. traditional trade routes

India, by promoting energy security, could thereby cut its dependence on the Trans-Afghanistan pipeline and ultimately from hostile and unstable Pakistan. According to plans, the pipeline will transport natural gas from Turkmenistan via Afghanistan and Pakistan to India, but New Delhi is concerned about the safety and predictability of supply, as the prosperity of India’s economy conflicts with Islamabad’s interests, and it has no unquestionable capacity to guarantee the security of the pipeline.

Chabahar and the related transport routes, however, could diversify India’s supply, and New Delhi would have the opportunity to keep an eye on the Strait of Hormuz, through which the shipments of its oil importers, Iran, Iraq and Saudi Arabia, also pass on their way to India.

Chabahar’s strategic importance is increased by the fact that it makes trade with Europe easier by bypassing the Suez Canal and alleviating dependence on it. In the long term, the port is a key node – and also the starting point – of the new International North-South Trade Corridor, being constructed now, which is an alternative to routes traversing through the Suez Canal, the Mediterranean and Baltic Sea. The objective of the multi-mode network connecting India, Iran and Central Asia with Russia and Eastern Europe, and encom-

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passing road, ship and rail routes is to cut transport time of goods to Europe by 40 per cent and their transport cost by 30 per cent, and to increase connectivity between states. For India, it means new chains of integrated economies, that is, a new market of Indian export and faster access routes to energy resources.

Road Transport and Shipping Minister Nitin Gadkari claims that Chabahar will be a gateway to golden opportunities, providing a direct route to and export opportunities with Russia. The International North-South Trade Corridor, and its vital part, the port may rekindle the long relationship between India and Russia as Moscow has recently expressed its dissatisfaction about the US-India cooperation becoming closer. Furthermore, Chabahar represents a kind of message conveying that Pakistan cannot be any longer a hurdle to India’s economic growth, and also a signal to China that India is ready to develop its own regionalism model, as an alternative to “One Belt, One Road”.

Thus, Chabahar is an important element of the strategic competition with China. Although it is denied on higher levels, the port can be interpreted as a rival to and as a rivalry with Gwadar port, developed by China and lying at a distance of only 72 kilometres. Chabahar serves to limit the coop-

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eration between China and Pakistan, to counterbalance China’s String of Pearls policy, to promote regional stability and to increase India’s influence.

The port is a good example of how India seeks to underpin its regional leader’s role positioning itself as a leading lender of South and West Asian infrastructure projects.

CHABAHAR’S SIGNIFICANCE TO AFGHANISTAN AND IRAN For landlocked Afghanistan, the most important thing is to cut Kabul’s dependence on Pakistan in seaborne trade. Until now, every trade route from or to Afghanistan have passed through Pakistan’s port, Karachi. Islamabad, however, tends to intervene in other affairs of Afghanistan, may it be the reconciliation with the Taliban or trade with India.

An example is the introduction of new customs tariffs and the closure of trade routes, which are usually used as an asset by Pakistan. The situation has deteriorated to such an extent that Afghan President Ashraf Ghani has threatened Pakistan with blocking Islamabad’s access to Central Asia if Afghanistan is not allowed to trade with India through the Wagah-Attari border.

In this environment, Chabahar, as an alternative route, offers an excellent opportunity to Kabul to cut its dependence on Pakistan and build capacities and develop its connectivity with the region.

Afghanistan has redirected 80 per cent of its maritime trade in goods from Karachi to Chabahar and Bandar-Abbas. Analysts claim if Chabahar starts to feed the International North-South Trade Corridor, Afghanistan will direct sea trade of a value of US$5 billion into the port. Kabul, taking advantage of Chabahar and the infrastructure investments implemented by India, may initially export agricultural produce, such as pomegranates and grapes, and later minerals. Thomas Lynch, a former advisor to the Joint Chiefs of Staff Committee on South Asia Policy claims that for Afghanistan, the lifeline runs through Chabahar.

Proceeding to Iran, the port has a symbolic significance for Teheran. Since it has launched a shared project with several other countries, it conveys the message to the international community that the country cannot be isolated any more. On the other hand, Chabahar helps to transform Iran’s geostrategic position by promoting trade and an economy

that is less vulnerable to international pressure.

One of Iran’s strategic weaknesses is its lack of deep-water ports. Bandar Abbas port, which handles 85 percent of Iranian seaborne trade, can only receive 100,000-ton cargo ships. Since most shipping is conducted via 250,000- ton cargo vessels, cargo must first be offloaded in the United Arab Emirates and then sent on smaller ships which can dock in Bandar Abbas. Aside from the millions of dollars lost, Iran is also vulnerable to a UAE closure of its seaborne trade in the case of conflict between Iran and the UAE or its GCC and Western allies.

Chabahar, located further east of the Straits of Hormuz, subject to constant US naval patrol, means a way out of this disadvantageous situation, and is the only Iranian port with direct access to the Indian Ocean. Chabahar is Iran’s first and only deep-water port that meets modern shipping standards and can receive 250,000-ton cargo vessels. By also increasing its own trade, Iran can turn into the key transit link for trade between Central Asia and the Indian Ocean as well as between Europe and the Indian Ocean, especially if new transport routes ensuring a link between the International North-South Trade Corridor and Afghanistan and Central Asia, with Chabahar as their outlet, start their operation.

In addition, industrial development around the port strengthens the economy subjected to sanctions. It is particularly needed in Sistan-Baluchestan Province as – with regard to the fact that 90 per cent of the Iranian population is concentrated in the Western part of the country – this region is the least developed. The project in Chabahar is not limited to port development, but includes other infrastructure investments, the construction of roads, railways, schools, power grids, petrochemical complexes and the establishment of a free trade zone, which raises high hopes for Iran’s economic growth.

For the petrochemical industry, for example, the government has designated an area of 1,100 hectares, which is expected to expand to 3,000 hectares and include sixteen complexes which will produce urea, ammonia, methanol, polypropylene, olefin and dimethoxyethane by the end of the third phase of development. The successful implementation of this US$80-billion project and the entire Chabahar project – almost irrespectively of who the investors are – is Iran’s number-one interest.

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THE COOPERATION BACKING CHABAHAR

The route connecting Chabahar and the Afghanistan Ring Road

Since the 1990s, when Iran engaged Indian companies to develop the port, India has a central role in the project. Currently, Chabahar has two port complexes, Shahid Kalantari and Shahid Beheshti. The two countries first agreed on their development in 2003, for the reasons already detailed, that is, to have access to landlocked Afghanistan and Central Asia. Sanctions, which have limited trade, investments, business activities and financial transactions with Iran and been continuously renewed and expanded since the Iranian Revolution, have prevented the development of the port.

On 6th May, 2015, however, when India’s Minister for Shipping and Road Transport & Highways visited Tehran, negotiation on the construction begun between the two countries despite the fact that sanctions against Iran had not been lifted then. A memorandum of understanding (MoU) on equipping and operating Chabahar’s two berths was signed a year later, during Modi’s visit to Iran. It is financed by a capital investment of US$85.21 million and an annual expenditure of US$22.95 million deriving from the incomes from a ten-year lease.

The implementation of the first phase of the project – which, under the agreement, must start within 18 months after the MoU was signed – will be executed by a joint venture company consisting of Jawaharlal Nehru Port Trust and Kandla Port Trust in partnership with several other Indian and Iranian companies, with approval from the Iranian Ports and Maritime Organisation (P&MO) in the latter case. Under the agreement, India will equip the port with a 640-metre container-handling facility, which, following a ten-year or extended lease, will be transferred to Iran. Tehran has turned to EXIM Bank for a US$150 million credit line, which has been extended to 30 billion Indian rupees (approximately US$441 million) to import steel rails and build the port. India’s total commitment to develop Iranian infrastructure amounts to about US$635 million In addition to bilateral cooperation, a trilateral partnership between Iran, India and Afghanistan is in place to promote regional connectivity. The trilateral agreement on the trade and transport corridor, with Chabahar being its gateway, was also signed in May, 2016.

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India has already implemented several remarkable infrastructure projects to set up a multi-mode transport network, including a 217-km-long motorway, which connects Zaranj near the Iran-Afghan border to Delaram in Farah province; it was opened in 2009, and joins the 2,200-km-long, two-lane Afghanistan Ring Road passing through sixteen provinces and Afghanistan’s two largest cities, Kabul and Kandahar. The motorway, implemented from an investment of approximately US$88 million, seeks to connect the Indian subcontinent with Afghanistan and Central Asia via Chabahar. Plans include the construction of a railway used also for freight transport from Chabahar to Zhedan, close to Zaranj, as part of the International North-South Trade Corridor. India started to supply steel rails to Chabahar in July, 2016, so that the Indian Railway Construction International Ltd. (IRCON) could commence the project estimated to amount to US$1.6 billion. An extended version of this railway line is the 900-km route stretching from Chabahar to mineral-rich Hajigak, which provides India with a direct link with Afghan iron ore mines. Seven Indian companies have already been granted mining rights, thus it is not a coincidence that the Indian government has promised an infrastructure development of a value of a US$2 billion in addition to the US$11-billion mining project.

Apart from this kind of infrastructure investments, a free trade and industrial zone is being constructed around the port, for the development of which India promised Iran an US$8-billion investment. 26 per cent of the area, divided into nine functional regions, is targeted to trade and the services sector, 49 per cent on industry and 25 per cent on hous-

CHABAHAR: WHICH WAY ARE THE SCALES TIPPING?

ing and tourism. In addition to developing the petrochemical industry, India is considering investing in the automotive, the pharmaceutical, the textile industry and food processing, but a strong need for investments in education, in IT and business management in particular, has also arisen.

As a result of efforts, the first consignment of 13,000 tons of wheat dispatched from Kandla, India arrived in Afghanistan via Chabahar on 29th October, 2017. After that, in December, India’s President announced at a ceremony attended by the representatives of seventeen countries that the first phase of the port construction had finished. Chabahar’s annual capacity is expected to grow from the current goods traffic of 2.5 million tons to 20 million tons. India has guaranteed handling a container traffic of 30,000 TEUs by the third year of operations of Shahid Beheshti and aims to eventually handle 250,000 TEUs. The latest news is that India Ports Global Private Limited was given the operational rights of the port terminal for eighteen months in February, 2018.

CONSEQUENCES OF THE CHANGES IN GEOPOLITICAL DYNAMICS In recent years, the development of Chabahar, on which India has spent more than US$500 million, has accelerated. Timing was right for the work, as signing Iran’s nuclear agreement and the lifting of sanctions have given new impetus to the progress of the project. Furthermore, India’s efforts have been

in line with the Trump administration’s new strategy on Afghanistan, which encourages an increased Indian presence in the country, especially in economic development initiatives. Donald Trump’s decision to pull the United States of America out of the Iran nuclear accord and to re-impose sanctions against the regime, is a source of great concern for New Delhi. Despite former United States Secretary of State Rex Tillerson’s remark that Washington will not impede legitimate business activities between Iran and India, by reinstating sanctions the USA is exerting intense pressure on India to reduce investments. This could undermine India’s geopolitical interests and efforts to build an economically dominant role in Central and South Asia, even if leadership seeks to separate themselves from sanctions.

At his meeting held with Iran after the withdrawal from the nuclear deal, India’s External Affairs Minister Sushma Swaraj said that India’s would not make its foreign policy under pressure from other countries, therefore India abides only by UN sanctions but not country-specific ones. In June, at the Iran-India meeting held on the sidelines of the 18th summit of the Shanghai Cooperation Organisation, India’s Shipping Minister announced that they would start interim development operations of Chabahar Port despite the reinstatement of sanctions. Nonetheless, the leadership perceives that President Trump’s decision has put New Delhi in a vulnerable position. As a senior Indian diplomat said, the US president had brought New Delhi back

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to the drawing board and India would have to renegotiate terms and conditions on using Chabahar.

Regarding concerns about the port, the sanctions may make Iran face its greatest financial crisis ever. While under the deal Iran gained access to more than US$100 billion in frozen assets, doubled its oil export and stabilized its foreign currency market, now the riyal is facing considerable loss of value, financial and trade transactions are limited, economic growth seems to be slowing down, and unemployment, especially among young, college-educated people, is around 36 to 50 per cent.

Owing to measures imposed on shipping, the operators of ports and the transactions of the central bank, Chabahar is also concerned by the issue.

This has led many analysts to wonder if India will be able to invest more in the port to alleviate cost bearing. India, however, is busy with its own economic growth, and does not have a satisfactory economic structure to be able to support sanctions-stricken Iran financially. New Delhi is seeking to attract foreign investors for its own infrastructure projects; its industrial park has been built form a US$20 million Chinese investment and its

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Mumbai-Ahmedabad high-speed railway, together with other infrastructure projects, was funded from a loan of US$35 billion from Japan. Doubts have been raised whether India has enough capacity to support the port with considerable capital, especially if oil prices continue to rise due to US sanctions.

The withdrawal from the nuclear deal jeopardise not only the viability of the port, but also the implementation of projects promoting connectivity with Afghanistan and Central Asia, and India’s access to them. The United States will not let Iran use the multi-mode network, as the USA is aware that trade with Central Asia facilitates Tehran’s nuclear programme and the development of ballistic missiles, and contributes to Iran’s increased military footstep in Syria, Iraq, Lebanon and Yemen.

The USA’s policy on Iran, owing to increasing inflation and unemployment, is likely to compel people to protest against the government in Tehran – as they did in last December – and the United States will extend support to the protesting people to create political instability and weaken the

CHABAHAR: WHICH WAY ARE THE SCALES TIPPING?

power of the regime. Furthermore, some anti-Iranian hawks, such as National Security Adviser John Bolton, have advocated a military attack on Iran.

Although this kind of scenarios must be handled with reservation, the possibility of proxy wars – for example in Syria – should not be ignored, not only because of the United States, but because in the case of such confrontation Israel and Saudi Arabia are very likely to increase efforts to curb Iran’s influence in the region.

This geopolitical game is also threatening India’s strategic autonomy. Although New Delhi has been successfully manoeuvring between the United States, Israel and Saudi Arabia and Iran and Russia, the region’s current geopolitical turmoil makes strategic partnerships maintained simultaneously with the two opposing blocks difficult. This reduces confidence in India, which makes Chabahar a delicate issue. Despite developments, India is not given a privileged place in Iran’s foreign policy, which is becoming ever more obvious with the attempt to adapt to changes in the geopolitical environment.

In order to prevent Pakistan from pivoting openly to the regional block led by hostile Saudi Arabia, Tehran has assured Islamabad that it will not let New Delhi or any other country use the port against Pakistan. Furthermore, the possibility that Pakistan could join the project in the future has also been raised. In May, 2016, the same year as Iran signed a trilateral agreement on Chabahar with Afghani-

stan and India, Iran’s ambassador to Islamabad said that the agreement had not been closed, that is, it was open to other states. Then he added that Iran regarded Pakistan as its friend, and China was also welcome. During his three-day visit to Islamabad in March this year, Iranian Minister of Foreign Affairs Javad Zarif invited the two countries to participate in the Chabahar project.

Iran’s offer to the two countries that are hostile towards India to join Chabahar reflects its trust deficit with New Delhi. On the one hand, Iran is afraid that India will cease developments under US pressure, which is a likely scenario if the USA forces New Delhi to choose. On the other hand, even if this did not happen, Iran seeks to prevent India, enjoying support from the USA, from obtaining any kind of monopoly, therefore it tries to dilute New Delhi’s influence by inviting Pakistan and China.

Islamabad has been pleased to receive the offer, which also suggests linking the two ports with sea and land routes. The Chairman of Gwadar Port Authority said that the two countries are already discussing a new ferry service that would link Chabahar and Gwadar, and there is a memorandum of understanding to promote the further convergence of the two “sister” ports, the objective of which is to make better connectivity and the economic cooperation under the umbrella of the China-Pakistan Economic Corridor mutually beneficial for both countries.

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Port of Chabahar

Inviting China is even more important than cashtrapped Pakistan, especially in the light that Indian developments and the amounts promised have been continuously in delay in recent years, and New Delhi is unable to give a completion date. There is also a two-year dispute over whether India would pay US$30 million of excise duties on port equipment imported into Iran. Moving closer to China makes sense for Iran, which wants to ensure Chabahar is an economic success. Beijing is Iran’s number one trading partner and largest foreign investor, filling the funding vacuum caused by US sanctions. China has already implemented several infrastructural projects successfully: it has built the metro network in Tehran, provided US$1.5 billion for the electrification of the Tehran-Mashhad railway line, provided a US$10 billion credit line to Iranian banks, and the China Development Bank signed preliminary deals with Tehran for US$15 billion in infrastructure and production projects. Iran is an important player in the almost US$1 trillion “One Belt, One Road“ initiative, thus it is not surprising that Beijing seeks to increase its presence in the country. The Asian giant has already indicated its intention to cooperate with Tehran despite sanctions, as it is interested in replacing American products with Chinese ones.

Although China has not as yet given an official response to the invitation, which also includes par-

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ticipation in the construction of free trade zones and the Zahedan-Chabahar railway line, it is known that China, Pakistan and Iran have already started discussions about the Chabahar project through trilateral dialogue, which was attended by diplomats, scholars and officials. If realised, it will lead to the weakening of India’s position, since Chabahar’s role in gaining access to Central Asia may diminish for New Delhi, especially if Tehran joins the China-Pakistan Economic Corridor, in which it has been taking growing interest. India would lose influence not only in Chabahar but also in the Indian Ocean region, from Sri Lanka and the Maldives to Nepal and Bhutan. India can hardly compete with Chinese investments and expansion, and Beijing, which is aware of New Delhi’s emerging claims for power, is playing into that. Although the Chinese economy is well ahead of the Indian one, the Asian giant seeks to bring New Delhi under supervision – even though not to keep it away from Central Asia – by involving it in the “One Belt, One Road initiative dominated by China.

Those who can see Chabahar as a rival to Gwadar are possibly too optimistic. Gwadar’s natural layout and depth enable the ships of such sizes to dock there which Chabahar is unable to receive.

There are significant differences regarding goods traffic: whereas the maximum planned capacity

CHABAHAR: WHICH WAY ARE THE SCALES TIPPING?

of Chabahar is 20 million tons per annum, that of Gwadar will be 400 million tons once it reaches complete capacity, outstripping all of India’s 212 ports that collectively handle 500 million tons a year. In order to develop the capacity of the port, China plans to equip the port with 100 berths till 2045 – by comparison, Chabahar currently has ten. Developments are not limited to the port itself; without being exhaustive, the construction of an oil refinery, a floating liquefied natural gas facility, a hospital, an international airport and the Gwadar Special Economic Zone have been already completed or are currently underway. China invests much larger amounts into Gwadar, an important hub of the CPEC, than India does in Chabahar.

In addition, the port has been officially leased to China until 2059, which does not only mean that China can ensure its energy import more easily, but can also observe the naval manoeuvres of the USA and India in the Indian Ocean and the Persian Gulf.

By contrast, there are no signs of military presence or an Indo-Iranian naval cooperation in Chabahar.

Two other aspects of the changes in geopolitics, also working to Beijing’s advantage, are worth highlighting. One of them is the relations between Russia and China, and Russia and Pakistan. In recent years, Russia has tried to pursue closer ties with Beijing by several strategic agreements, although it would be of key importance for India that Moscow should stand with them in a dispute with China. Moving closer to Beijing involves selling weapons systems, which is much more dangerous than selling natural gas for thirty years and poses an imminent and direct threat to India’s security.

Moscow and Islamabad’s security partnership is becoming an increasingly visible phenomenon in the South Asian geopolitical environment. In addition to the sales of weapons and anti-terrorism military operations, the two countries have also held a joint military exercise, and Pakistan happens to support Afghan peace talks intermediated by Moscow.

This leads to the other issue, Afghanistan. This is not only about the cynics’ claim that the Zaranj-Delaram motorway, built by India, is now being mainly used by the Taliban, and Afghanistan’s political and security instability poses a threat to the success of developments, but also about Pakistan’s footstep increasing in Afghanistan due to the withdrawal of the nuclear deal. It is very possible that Iran will put more pressure on the Afghan government to bow down to the regional vision of

a power-sharing deal with the Taliban to end the Afghan conflict. In addition to the Taliban’s support, economic sanctions threatening the success of Chabahar are also favourable to Islamabad, which means that Afghanistan will have to lean on Pakistan again to gain access to the international market. Under such a scenario, Kabul is not likely to perceive enough economic benefit from Chabahar to retain its interest also in this project amidst Chinese temptations and the CPEC. Thus, Chabahar’s success depends on a more complex geopolitical game, thus India is in a very difficult position to make use of the port to serve its own geopolitical interests and major power aspirations.

CONCLUSION Creating connectivity and economic integration with landlocked Afghanistan and Central Asia is a cornerstone not only for India’s economic growth, but also for its stability, New Delhi’s regional major power aspirations and a counterbalance to China.

India sees a potential opportunity in Chabahar to bring about fundamental changes for its benefit in achieving foreign policy objectives. Its realisation, however, depends on a multi-player, broader geopolitical game, in which the United States does not back India. Donald Trump’s decision to withdraw from the Iranian nuclear deal has put New Delhi in a vulnerable situation, in which the assumption that Chabahar, by offering an India-dominated alternative, will once counter China’s influence exists only on paper. Although it is not worth drawing far-reaching conclusions, the withdrawal from the nuclear deal is expected to accelerate – even though not to trigger in itself – a process in which India is losing ground to China The invitation of Pakistan and China to participate in the project reflects India’s diminishing strategic extension. Although New Delhi’s developments implemented so far should not be underestimated, rivalry with Gwadar mostly remains speculative.

Although Tehran has not expressed the wish to join the CPEC yet, if once it decides so, Chabahar could also become part of the China-dominated corridor.

This does not mean that India could not profit from the port and its benefits, but it would need some political fine-tuning. It would need a shift in which its geopolitical and geoeconomic goals complement rather than replace each other.

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THE AMERICAN STRATEGY AND THE NEW SILK ROAD 88

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THE ATLANTIC COUNCIL SILK ROAD 2.0 A summary of the analysis entitled US Strategy toward China’s Belt and Road Initiative Author: Ádám Csenger

The analysis of the Atlantic Council, a US think tank with a history of almost sixty years, written by Gal Luft and published in October, 2017, explores the USA’s relationship with China’s “One Belt, One Road” initiative, the reasons why this relationship is wrong, the effects the initiative may exert on American interests, and what the United States should do. The analysis argues that the USA’s ignorance of the BRI is a mistake; instead, the United States should participate in it in accordance with its own interests, so that it could shape the Eurasian economic development, yielding benefits also for the USA. Beyond that, cooperation in the field of infrastructural development would also serve the improvement of relationships between the USA and China.

FOREWORD BY JOSEPH NYE In his foreword, American political analyst Joseph Nye writes that the balance in Eurasia is shifting and the global order is changing. China confidently seeks to achieve its ambitious goals, and its impact is global. The rest of the world reshuffles to find its place and guesses at the United States’ new role in the world. The importance of Asia to US interests grows all the greater.

Launched in 2013 by President Xi, the One Belt and Road Initiative (BRI, also called One Belt, One Road, or “OBOR”) is more than an infrastructure-development plan: it aims to connect China to Europe while promoting economic development and growth, and, importantly, enhancing Chinese influence. The BRI confirms the belief of many analysts that conflict between the United States and China is inevitable; Nye, however, argues that it is not. If China’s rise remains peaceful, this promises great benefits to China itself and others across the globe. Increasingly, the task for the United States will be to organize coalitions that can be mo-

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bilized to effectively address new transnational problems; trying to isolate China would make this even more difficult.

Nye argues that Xi’s grand China strategy, including the BRI, is based on the British geopolitical theorist, Halford Mackinder’s theory: according to that, whoever controlled Eurasia would control the world. US strategy, in contrast, has been based on the geopolitical theory of the nineteenth-century Admiral Alfred Mahan, who argued that the keys to world domination were sea power and the rimlands. The USA still favours Mahan’s concept, paying scant attention to Central Asia, but could nonetheless welcome China’s BRI positively.

Overall, the attitude of United States towards the BRI defines the nature of US-Chinese relations for decades to come.

SUMMARY The Executive Summary following the Foreword reveals that the BRI is an initiative with a game-changing nature and relevancy to almost every region where the

collective GDP of more than $20 trillion and the price tag is from $1-6 trillion over the next two decades. The paper, again, emphasizes that the United States can no longer sit on the sidelines while its allies become increasingly closer to China. An “America First” policy means that US companies should be best positioned to benefit from any business opportunity worldwide, and the BRI is no exception. This entails US participation in the BRI, to be able to influence the initiative and its institutions from within.

MAJOR GOALS OF THE BRI In addition to boosting the economy of the countries concerned, the BRI serves several important purposes for Beijing. One of the most important ones is to develop China’s less-privileged provinces, where the spectacular development of recent decades, the so-called “Chinese Dream” is not within reach. According to the government’s plans, the BRI would primarily connect the manufacturing industry in the second-tier provinces to both domestic and international markets. This would also serve the purpose of positioning China as the hub of global supply and manufacturing chains.

United States has vital interests. The administrations of both Barack Obama and Donald Trump, however, have ignored it, and so have the US Congress and the US-China Economic and Security Review Commission.

But shunning the BRI is a strategic mistake. The United States should rethink its approach toward the BRI, and chart a new course that is conducive to Eurasian growth, yet protects vital US interests. The United States would be better off engaging with the BRI and trying to influence its design and mechanics from within, rather than staying on the sidelines and witnessing its allies gravitating toward China. The United States neither reject nor fully embrace the BRI; instead, it should adopt a strategy of constructive participation.

It means that the United States will publicly embrace the overall vision of the BRI; however, it will only actively support projects that correspond with its geopolitical rationale and ideological worldview. This approach would position the United States as a pragmatic team player while also allowing it sufficient flexibility.

INTRODUCTION The figures characterizing the BRI reveal an initiative of a gigantic scale: the BRI territories make up twothirds of the world’s landmass, and the BRI could affect almost 4.5 billion people in sixty-five countries with a

The Chinese government is also under pressure to address the excess capacity of its numerous state-owned enterprises, which requires new projects and markets.

It is all the more a burning issue as national companies are an extremely important part of China’s economy and socio-political fabric. China’s banks would also benefit from the BRI, allowing them to boost the usage of the renminbi (RMB) as a vehicle to raise capital in overseas financial centres.

Furthermore, the BRI is China’s mechanism for reallocation of its large foreign-exchange assets from buying US debt to investment in foreign economic development. For a long time, US debt was good investment for China, but the world’s new economic and geopolitical conditions have triggered new thinking and China now wants to unshackle itself from US debt. The only way to do so is to create sufficient alternative markets for its goods, and this is what the BRI aims to achieve.

Finally, the BRI is an essential element of China’s foreign policy and, as such, it will determine China’s strategy for the twenty-first century. The BRI fits in the process in which China has given up its traditional policy of isolationism, and wishes to take a more active role in world politics. The country promotes the BRI at numer-

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ous international conferences and forums, which reflects an understanding in Beijing that the success of its flagship project depends on its ability to forge friendly relations and economic interdependencies with all the BRI countries. The flurry of Chinese diplomatic activity also serves the purpose of ensuring the stability of the territories participating in the BRI. THE US RESPONSE With the BRI countries accounting for 70 percent of the world’s energy reserves China’s plan stands to significantly impact the US position abroad. Curiously, to date, Washington has more or less ignored the BRI: the Trump administration has issued a statement that the US “recognizes the importance” of the BRI, and sent a last-minute delegation to the Belt and Road Forum in Beijing in 2017. In the US Congress, not one hearing has been held to examine the BRI, and the same is true for the US-China Economic and Security Review Commission. And unsuccessful lobbying against the

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formation of the Asian Infrastructure and Development Bank (AIIB) ended up being a blunder, as most US allies joined the bank, which demonstrated that US allies are torn between their traditional strategic allegiance to the United States and their dependence on Chinese capital. As countries are increasingly likely to opt for the latter, ignoring BRI or trying to undermine it is counterproductive from the USA’s perspective. Pursuing such a path, the United States is not only missing an opportunity to take part in drawing the contour lines of the geopolitics and geoeconomics of the emerging international system, but also denying American businesses and investors the opportunity to partake in the creation of what could be one day the world’s biggest economic bloc.

The analysis reflects on the impact American military, diplomatic, economic, and environmental policies have had on China’s thinking, and their contribution to the genesis of the BRI. The Obama administration’s policy known as the Pivot to Asia, the exclusion of China from

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the Trans-Pacific Partnership (TPP) and US influence in multilateral development banks (such as the World Bank and the International Monetary Fund). Quite understandably, China perceived these as restrictions against it, and the USA’s indifference to matters related to Asia’s infrastructure and energy requirements created a need for an alternative financing mechanism, which eventually resulted in the establishment of AIIB. The election of Donald Trump has brought about changes in several fields, including the US contribution to global economic development. If one is to judge from the administration’s 2018 budget proposal, Trump’s “America First” approach to foreign policy will

one way: as China’s cash reserves dwindle, there will be less money available for Beijing to continue to finance US debt. Furthermore, such a failure would depress the Chinese economy as well as the global economy and it would also kill any hope for the United States to reduce its trade deficit with China.

The paper also calls attention to the fact that several components of the BRI are based on projects and infrastructure existing before the announcement of the BRI, and that not every project China announced with great fanfare will actually happen (for example, the Altai gas pipeline to connect western Siberia and China, announced in 2015, has already come to a stand-

result in deep cuts in the funding for economic development in numerous countries, many of them in the BRI territories. With fewer US development resources, China may spearhead the global development agenda, and shape the future of Eurasia in ways that may be detrimental to US interests. History shows that transnational infrastructure projects can evoke hostility, and can even trigger war at times.

still). It is also a fact that not all the projects that will materialize will be truly related to the BRI, as several companies – Chinese and foreign ones alike – have labelled their projects as “BRI-related projects” in the hope of gaining political support, as well as more favourable financing.

To avoid all these dangers, and to improve US-China relations, the two countries must seek areas of cooperation, even as they agree to disagree regarding areas of conflicting interest. Throughout the Obama administration, climate change served as a bonding factor between the two countries, but it can no longer be treated as one, as climate change is not a priority, for the Trump administration. The two countries should find new areas of cooperation, and the BRI – or, more generically, the theme of infrastructure development – can be one. The BRI can also reduce the tension around trade, as it would allow to broaden the conversation on trade, and the infrastructure allowing trade to take place (pipelines, ports, energy terminals, etc.) could become the subject of negotiations, helping integrate US corporations into the emerging vast Eurasian economic bloc.

The exact lines on the map as they were published by the Chinese government should not be taken as given, as they reflect the current thinking on the architecture of the BRI as its execution will depend on the partnerships China will manage to forge with other countries. The USA’s involvement in the initiative will enable it to leave its imprint on the final configuration of the BRI, in a way that makes it more advantageous to US interests.

One argument for stronger US engagement with the BRI is that the cost of the initiative’s failure for the United States could outweigh the risks associated with its successful execution. In the coming years, China will need hundreds of billions of dollars to finance the BRI, but it is far from certain that China will be able to raise so much money and that the BRI will produce the desired stimulating economic effect. Thus, it is only prudent that a failure scenario is taken into account, but, such a scenario will hurt the United States in more than

THE BRI’S IMPACT ON US INTERESTS

Twenty-First Century Maritime Silk Road (Msr) The MSR aims to connect the littoral Chinese provinces with Eastern Africa and the Mediterranean and its European ports via the South China Sea and the Indian Ocean. The MSR offers a new maritime architecture, which facilitates regional trade and aims to promote freedom of navigation, and stronger Chinese naval presence in the high seas can improve collective energy security, maritime safety, antipiracy efforts, and protection of critical infrastructure (such as the world’s “Internet backbone”, which more or less corresponds with the path of the MSR). On the other hand, the MSR challenges the existing order in many of the waters in which the US Navy has enjoyed undisputed hegemony since World War II. Given the increased tensions in the South China Sea China might be tempted to continue to change the status quo in the region, by framing its island building and construc-

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tion activities as MSR projects. This is likely to prompt regional countries to strengthen their alliances with each other and with the United States, and to bolster their maritime capabilities in order to balance China’s expansion.

Another challenge is the Indian Ocean, which is believed by many to be the central theatre of global competition in the twenty-first century. The Indian Ocean carries half of the world’s container shipments, one-third of its bulk cargo traffic, and two-thirds of its oil shipments. The ocean’s shores are littered with lawlessness, piracy, and terrorism, and its waters require strong international policing and maritime cooperation. To date, this job has been carried out mainly by the US and Indian navies, but a Chinese naval expansion in this region is inevitable. China’s port construction (in Sri Lanka, Bangladesh, and Maldives) has already alarmed New Delhi, which has taken steps to enhance its maritime power. Hence, the United States could find itself caught in the middle of a strategic competition at sea between China and India.

China also has completed construction of a naval base in Djibouti, in Northeast Africa, where it is soon expected to deploy thousands of troops. As this base is situated only 250 miles from the Strait of Hormuz, the United States and its NATO allies, whose hegemony in those waters has so far been unchallenged, will have to learn to accommodate the new maritime player and establish new rules of engagement to ensure China’s presence augments security in those regions, rather than undermines it.

China-Pakistan Economic Corridor (CPEC) This economic corridor aims to link China’s westernmost city of Kashgar in Xinjiang Province to the Port of Gwadar on the Pakistani shore of the Arabian Sea. According to plans, this corridor will include an 1,800mile highway, rail lines, and oil and gas pipelines, and from several perspectives, it can yield several benefits for the USA. By creating a direct trade corridor from the Arabian Sea to western China, the CPEC would also reduce traffic in the Strait of Malacca—and, hence, reduce the dependency of Asian countries on this strategic choke point. Down the road, CPEC would also provide access to the sea for landlocked countries (e.g.

Afghanistan, Tajikistan, and Uzbekistan), which will significantly enhance their trade and improve their economic development. As for Pakistan, the corridor would create a lot of jobs, adding 2.5 percentage points to the

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economic growth rate of the country during the period 2015-2030. Pakistan is projected to become, by 2030, the sixth-most-populated country, thus its economic and political well-being is critical for the stability of South and Central Asia, and for the fight against radical Islam.

These gains are all consistent with US interests. However, the CPEC poses several challenges, as it passes some of the most dangerous grounds in Pakistan, inviting conflict with insurgents waging guerrilla war against the government of Pakistan. Furthermore, Chinese-Pakistani relations, with growing economic interdependency between the two countries, may cause Washington to lose some of its influence in Pakistan on critical matters like Afghanistan, nuclear proliferation and counterterrorism. Chinese-Pakistani relations could also disrupt the delicate balance of power between India and Pakistan, while the Port of Gwadar – if it becomes a Chinese naval base in practice – would change the balance of naval power in the Indian Ocean.

Finally, there is a threat that China would integrate Iran into the CPEC architecture, increasing Iran’s strategic role in Central Asia.

Bangladesh-China-India-Myanmar Economic Corridor (BCIMEC) The planned massive Chinese push into Myanmar will no doubt advance the economy, but it also risks turning Myanmar into a Chinese vassal state, while inculcating Chinese business culture and norms. This may fly in the face of Washington’s efforts to steer Myanmar in the direction of improved transparency and rule of law.

China-Indochina Peninsula Economic Corridor (CICPEC) ASEAN (Association of Southeast Asian Nations) member states participate in the CICPEC. ASEAN has a population of 600 million and is connected by land to China, therefore the CICPEC is perhaps the most significant of all the BRI corridors not only for China’s economy, but for global economic development. However, the CICPEC has the potential to erode the current security architecture in the region, allowing China (to use its economic leverage) to accumulate inordinate geopolitical power in its immediate neighborhood.

Since the introduction of the BRI, many ASEAN countries have amended their China policies, in the hope of being on the receiving end of China’s investments. The Philippines and Thailand are good examples, but also Vietnam is shifting toward China.

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Eurasia

All of those anglings toward China have much to do with a growing sense, shared by many countries, that the United States can no longer be trusted as guarantor of their security. Washington has also failed to internalize the region’s urgent need for investment in physical infrastructure to fight poverty. Instead, it has focused on issues of less importance in the region such as the enforcement of environmental policies, women’s rights, child-labor regulations, democracy promotion, and anticorruption measures. Washington has also failed to grasp the depth of the relations between Chinese diasporas in Southeast Asia and the mainland, also known as the “bamboo network,” and the influence of this network on regional foreign policy. Washington will need to do much more than it has to reassure its allies (particularly the Philippines and Vietnam) that the BRI will not undermine their secu-

rity. The USA also has to ensure that China would not use the BRI as a mechanism to change the status quo in the region.

Another area for Washington to watch is Southeast Asia’s looming water crisis. Approximately three thousand miles long, the Mekong River is Southeast Asia’s main source of water, food, and energy. China’s construction of dams on the upper Mekong in Yunnan Province, has compromised water supplies for irrigation and fishing in the downstream countries. Currently there are twenty-five dams in planning or under construction on the river, partly within the BRI framework. Water conflicts in the greater Mekong The Eurasian supercontinent would add a new layer of insecurity to a region that is already quite volatile. If unchecked by the United

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The Eurasian supercontinent States, China’s needs will always come first—at the expense of its weaker neighbours.

China-Central and West Asia Economic Corridor (CCWAEC) The CCWAEC, like the CPEC, it has the potential to elevate the role of Iran as a conduit for trade between China, Central Asia, and Europe. Naturally, that would be a negative point for the United States, which, with its allies, is seeking ways to contain Iran. In addition, Russia considers Central Asia to be part of its own sphere of influence and may view the CCWAEC as an attempt to undercut the implementation of its Eurasian trade scheme (e.g. the Eurasian Economic Union).

Furthermore, Beijing will be forced to become more involved in Abkhazia, South Ossetia and Karabakh, which may not always please Moscow. China insists that its vision for Central Asia is compatible with Russia’s, but this will only be tested as BRI projects begin to take shape.

Of all the BRI land corridors, the CCWAEC is perhaps the most consequential one. It touches the interests of all the major powers in the Eurasian landmass, and it could have a profound impact on US policies in the Middle East, Central Asia, Europe and Russia. It is not easy for the USA to decide which approach to take: support for the CCWAEC would undermine the United States’ own efforts to contain Iran, while adding a whole new

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layer of tension to Washington’s relations with Moscow.

Yet, it would bolster the sovereignty of Central Asian nations in light of potential Russian expansionism, while serving another US goal—the reduction of Europe’s dependency on Russian gas.

New Eurasian Land Bridge (NELB) The NELB aims to facilitate the shipment of Chinese goods by rail in the shortest transit time possible by fostering uninterrupted connections between Chinese and Western European cities. The NELB is a gigantic enterprise, and its implementation is far from being certain. The success of the NELB depends on many factors, including European political and economic developments. The US view on the NELB would be tied to the prospects of its overall relations with Russia. As it is very likely that the NELB will be a slow-moving project, that will allow Washington enough time to assess its position on it.

China-Mongolia-Russia Economic Corridor (CMREC) The CMREC would be a great opportunity for Mongolia, which has been one of the prime casualties of the slowdown in the Chinese economy (in 2017, international development banks were forced to bail it out to the tune of $5 billion). Since the United States has long sought to assist Mongolia’s movement toward democracy and market-oriented reform, for the United States

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to reject a project so critical to the country’s economic development would be morally problematic. The corridor should be viewed in the context of China-Russia relations, and there are no implications for US strategic interests.

IMPLICATIONS FOR TRANSATLANTIC RELATIONS

Cold War way of thinking, and the relations between the United States and China will end up in small wars, weapons proliferation, cyber warfare, and currency wars. In addition, the strategy to reject and resist will create unnecessary tension between Washington and its allies, most of whom are in desperate need of China’s investment.

Europe has been struggling with serious economic and other issues. The Transatlantic Trade and Investment Partnership (TTIP) would have been one of Washington’s main tools for stimulating European growth, but under the Trump administration TTIP has effectively died. Consequently, the BRI may be the only practical

The United States can jump on the bandwagon and assume a productive role in the initiative as a full-fledged partner. The United States would be in a good position to influence Eurasia’s development, and also would present the United States as a productive and responsible team player genuinely concerned about economic de-

idea on the table to boost European growth. China has established cooperation platforms and development funds in Europe, has embarked on a buying spree, seeking distressed assets and controlling stakes in national infrastructure (e.g. airports and ports). Europe, however, seems ambivalent about China’s growing involvement. The main problem is that Western European countries, which are less in need of Chinese investments, think that China’s direct investment in Central and East European countries may cause rifts within the EU.

velopment. However, this strategy has its pitfalls: considering the United States’ declining foreign-aid programs and congressional control over the budget, the United States risks playing second fiddle to China. In addition, China might use US cooperation and goodwill to advance its own ascendance. Furthermore, this approach will risk alienating India, as New Delhi is concerned about the BRI and China’s increasing presence in its region. The strategy may also upset the delicate balance in the Middle East (as the BRI assigns an important role to Iran), and might also complicate Washington’s relations with ASEAN members. Finally, Finally, it is worth considering that China itself may not be keen on US embrace of the BRI as China might feel that it would no longer be able to steer the initiative as it plans.

From a US perspective, China’s entry into Europe poses a serious dilemma. In the light of Europe’s dire financial straits, it is understandable that the continent needs China, but China is taking advantage of Europe’s economic despair, and this will cause new rifts between the United States and the EU. Washington will need to closely monitor China’s role in Europe, and to strengthen its coordination with its European allies in a way that balances Europe’s urgent need for foreign investment with upholding the common interests and common values embedded in the transatlantic alliance.

ELEMENTS OF THE US STRATEGY TO FOLLOW The Trump administration needs to understand, acknowledge, and respond to the BRI in one of following possible ways: To reject and resist: The premise of this response is that the BRI constitutes a real challenge to US interests and should be disrupted, even at the expense of regional economic development. The USA would take active measures to derail the BRI, using diplomatic and commercial tools. This option would elevate the role of transit countries like Kazakhstan, Sri Lanka, Pakistan and Iran. It would drag the United States into a

Constructive participation: that would be the most prudent option. The United States would embrace the vision of regional connectivity and energy security, but would only actively support projects that correspond with its geopolitical rationale and ideological worldview (be it directly or indirectly, via multilateral development banks in which it plays a dominant role), while resisting those elements of the initiative that undermine US strategic interests. This strategy would position the United States as a pragmatic but sufficiently flexible team player, and Washington would be able to build on the BRI, and augment it by developing its own homegrown projects especially in territories that are not covered by the BRI ( e.g. Latin America and certain parts of Africa).

FIVE PILLARS OF CONSTRUCTIVE PARTICIPATION Acknowledge, Adjust, Engage Currently, the US government is not well set up – organizationally, strategically, and intellectually – to

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deal with the BRI, therefore mechanisms should be established within the US government to understand the BRI, monitor it, and assess its progress on an ongoing basis, and Congress should also increase its engagement. It would enable Washington to respond to developments that concern US interests. Once such a bureaucratic refocusing is done, the next l step is for the United States and China to seek a proper forum to discuss the BRI. As the two presidents are expected to meet frequently, much coordination on the BRI can be done at the presidential level.

Articulate Red Lines Washington should be alert to potential misuses of the BRI initiatives to advance agendas that do not serve its interests or the interests of its allies. In such cases, The USA should articulate its reservations and concerns and oppose (either explicitly or implicitly) initiatives that are of a geopolitical nature. Furthermore, Washington should ensure that the BRI is not used as a cover for policies that are detrimental to its values (such as democracy promotion, human rights, anticorruption, etc.). Nor should it support projects that could bolster rogue regimes (like Iran or North Korea), or projects that aim to salvage failed Chinese investments by “internationalizing” them, or tagging them as BRI projects. Such clarity is not only needed toward China, but also toward US allies – particularly in Europe, as China’s presence in Europe is neither about geopolitics nor about ideology; it is about geoeconomics. China sees Europe as one big distressed asset, into which it can inject its surpluses, and from which it can draw technologies and knowhow. Washington should strive to work with Europe to establish common understandings on policy toward the BRI, common policies on privatization of state assets, and guidelines on the type of assets that can be sold to China and under what conditions. The goal should be to create the most hospitable investment environment for China in Europe, without compromising the security architecture the United States and Europe have been labouring to build over the past half-century.

Carve a Role for the United States The United States should be an important factor in the economic development in the BRI regions. With superior force projection, homeland security, and cyber-defense capabilities, the United States can play a vital role in protecting critical infrastructure along the BRI corridors. The United enjoys comparative advantage in what can be called “soft infrastructure” (consulting,

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legal services, research, etc.), therefore it could play an important role in this field; additionally, the United States can share best practices regarding environmentally friendly design and engineering of infrastructure projects, waste processing, and energy-efficient transportation hubs, etc. The United States can also facilitate increased private-capital participation, since US engagement in the BRI would instill confidence in private investors to deploy some of their capital in infrastructure.

The United States can also contribute to the success of the BRI by leveraging its position in international organizations and multinational development banks (MDBs; like the ADB and the World Bank) in which it plays a dominant role, encouraging them to be open to BRI projects and institutions. The United States should also rethink its position on the AIIB, as attempt to undermine it was a fiasco, the bank (which has 70 members) has demonstrated its commitment to operate in a transparent and fiscally responsible manner, and its bylaws, procedures, and governance are no different from other MDBs (additionally, the AIIB works in collaboration with other MDBs rather than go it alone).

The United States could not join the bank as a member, as it would difficult to obtain the required congressional appropriation of funds, but joining as an observer is a realistic goal. It would also signal to private-sector players that it is safe to invest in projects co-financed by the AIIB. Integrate the BRI into the Framework of Overall US-China Relations The BRI provides the United States with a platform on which it can deepen its cooperation with China, for example in the fields of critical-infrastructure protection, energy security, maritime security, and poverty reduction. Currently, the single bonding issue in US-China relations is North Korea. Cooperation could be extended over security relations, the rebuilding of the Middle East and energy security.

• Enhance Security Cooperation with China China fully realizes that the BRI’s Achilles heel is instability and lack of security in the regions it is striving to develop. Consequently, China wishes to develop its security capabilities in the BRI territories: in recent years, it has pledged a total of $170 million of military aid for the African Union and Afghanistan, sent a peacekeeping force in South Sudan, deployed frigates to fight piracy off the Somali coast, etc. The question is what the US response should be to China’s increasing military

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power and role? The BRI will increasingly compel China to project military power, creating ever-growing friction points with the armed forces of the United States and its allies.

Instead of being entangled in an economically ruinous arms race, to maintain its hegemony over the world’s oceans and maritime trade routes, the United States should seek ways to incorporate China’s naval and ground forces in international alliances, joint sea patrols, and antipiracy, antismuggling, and counterterrorism operations. the United States and China should create a Joint Maritime Command and Coordination Center for the Indian Ocean, which should also include other naval forces from major maritime powers with interests in the Indian Ocean, such as India, Japan, Pakistan, Indonesia, Pakistan and Australia. Enhanced security cooperation is consistent with President Trump’s demand for more equitable burden sharing when it comes to security costs.

• Join Forces in Rebuilding the Middle East Connecting Asia, Europe, and Africa cannot truly succeed without a stable Middle East; yet, the region is currently anything but stable. How long this state of

instability will last depends, to a large extent, on the focus and determination of the great powers to work together toward a lasting solution. Reconstruction, akin to the Marshall Plan to aid the post-World War II reconstruction of Europe, will require comprehensive and complex activities. China and the United States should agree to include the reconstruction of the Middle East in their overall framework of cooperation, as the BRI and its institutions may contribute to speedy reconstruction.

• Make Energy Security the New “Glue” China and the United States are the world’s top energy consumers, and therefore they both have a keen interest in addressing shared energy security challenges, such as the near total dependence on petroleum fuels in the global transportation sector, concerns about crude supply from the Middle East, energy poverty, and the mounting concerns about cyber threats to critical energy infrastructure.

In contrast to the Obama administration, the Trump administration is more sanguine about coal, holding that coal plays an important role in the global energy portfolio, and will continue to do so for many years to come, since the demand for coal in the developing world is on

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the rise. China has taken significant steps to reduce the growth in its coal use, but, it would be unrealistic to expect drastic changes in the foreseeable future.

The United States and China should, therefore, focus on improvements in the way coal is produced, transported, and used, rather than on the unrealistic goal of crowding it out altogether. In addition, the two countries should expand the scope of their existing collaboration on clean fuels and vehicle-emissions-control technologies to include coal-derived fuel options, such as methanol and dimethyl ether. The cooperation can emerge also in other fields, such as electrification of rural communities, decentralised energy, renewables, critical-energy-infrastructure protection, etc.

Present America’s Own Vision for Infrastructure Development The United States should not let China “own” the task of international economic development, but it should articulate its own vision for Asia’s economic development, and, in collaboration with its allies, offer homegrown initiatives. The United States has to conceive a handful of regional-connectivity projects that correspond with its diplomatic priorities, bring together allies and sources of capital to support them, and – most importantly – stay the course until they come to fruition.

The United States should focus on areas which are not or just slightly concerned by the BRI, e.g. Latin America and Central and West Africa; thus, the USA should not conflict with the BRI. The United States should act with its allies like India, Japan, South Korea, and the countries of the Gulf Cooperation Council (GCC). All of

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those countries have been ambivalent toward the BRI, yet all of them have expressed interest in embarking on major infrastructure and connectivity projects. This is in line with the intent of the Trump administration to maintain some leadership role in global infrastructure.

CONCLUSION: BETTER IN THAN OUT Together, the United States and China are responsible for half of the world’s GDP growth. This places considerable responsibility on the two countries to seek ways to jointly lead the world development agenda, instead of stepping on each other’s toes. The USA must accept the fact that it is not willing to rival China as the world’s leader in financing and executing infrastructure projects, therefore it should rethink its approach toward the BRI. The sooner Washington begins to engage with the BRI, the sooner it can leave its mark on it. Although it is unlikely that all that is pledged will actually materialise, and among those projects that do materialize, some may not deliver the expected social and economic benefits, and there may be some failed attempts as well, China is today the only country offering a meaningful and creative remedy to global economic stagnation. Washington’s attitude toward the BRI will no doubt impact US-China relations, which are marred by disagreements and tensions. Therefore, it is important that the two countries establish common purposes and areas of collaboration, to sustain the relations during the difficult times that will no doubt come. Infrastructure building can be one of those areas.

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Meeting of Central Bank governors

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Prime Minister Viktor Orbán’s address at the meeting of the central bank governors of China and Central and Eastern European countries Good morning, I have just been given permission to speak in Hungarian.

Allow me to welcome you all, Before I start my address, I would like to say that I’ve just come back from Shanghai, where I witnessed a moment in world history which I would like to call your attention to. If, say ten years ago, anyone had said that we would be able to attend a conference where the Chinese, the World Bank, the head of the World Trade Organization and the head of the IMF, would seek to defend free trade and multilateralism against an unspecified, important player in the world economy, if anyone had told us this ten years ago, we would have had laughed out loud. It clearly indicates the scale of changes taking place in the

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world that today perhaps only we Eastern and Central Europeans would find this somewhat intriguing, as China has become such an established player of the world economy that today its role as a champion of multilateralism and free trade does not surprise us at all.

I also warmly welcome the Governor of the People’s Bank of China, because next year will be the seventieth anniversary of the establishment of diplomatic relations between our two countries. This is not a world record, but it puts us among those countries which earlier than yesterday began to recognise that one day China would have world economic and world historical importance.

This cooperation and friendship over the course of seventy years is a major advantage in Chinese-Hungarian relations. And please excuse my bias when I extend a

special welcome to my friend Mr. Isărescu, the Governor of the National Bank of Romania, and who reminds us of the heyday of our youth back in 2000, when the central bank governor was prime minister of his country, in parallel with my premiership. Welcome back to Budapest.

Ladies and Gentlemen, Allow me to welcome you all here to the Castle District of Buda, which is an ancient spiritual and political centre of the Hungarian nation. You can see that our ancestors did not lack shrewdness: this site on which they chose to build – which for several centuries was where the most important thoughts and decisions were conceived – has views not only to the West, but also to the East. It has a complete panoramic view, which has encouraged those working here to gather information from every direction before adopting decisions which are important for Hungary. This is of particular significance today, because if someone only looks in one direction, they will be unable to make decisions which enable them to position themselves appropriately in the currently unfolding world order. And, Ladies and Gentlemen, the Central European countries and the closely associated Balkans region have the firm commitment, plan and optimistic vision for this region – Central Europe and the Balkans – to be winners in the decade to come.

Ladies and Gentlemen, This is the first time that the central bankers of our sixteen countries and China have held a joint conference.

We have already done a great many things, but we have never met in this configuration. This is despite the fact that we have long suspected that, sooner or later, we would reach a level at which it would no longer be enough to concern ourselves solely with trade and investment issues: that the moment would come when we would also need to seek cooperation in the field of finance.

Ladies and Gentlemen, The fact that this has happened is due in large part to the prominent, initiating and decisive role played by György Matolcsy, the Governor of the Hungarian National Bank, who has organised this conference. We are grateful to him for this.

If we look around at ourselves, Ladies and Gentlemen, we can see what a widely diverse group we are. I’m not just talking about the fact that a variety of governments operate in our sixteen countries, but also about the diversity of currencies we use for payment and in settling transactions. Here we have Estonia, Latvia, Lithuania, Slovenia and Slovakia, who are members of both the European

Union and the eurozone. Here we have the Czech Republic, Poland, Romania, Bulgaria, Croatia and Hungary, who are members of the European Union, but are not in the eurozone. They have diverse positions on whether or not to become members – and if so, when. You are well aware that Hungary is one of the more cautious of these: we want to become an integral part of the European community, whilst at the same time remaining open to other regions and communities, and this approach must also form part of our decision regarding the euro. And then we also have here with us our friends from Albania, Bosnia and Herzegovina, Macedonia, Montenegro and Serbia.

They represent an extremely rapidly developing region, but they are neither members of the European Union nor the eurozone. Here I would like to make it clear that the Central Europeans – including Hungary – are the most firmly committed to the cause of the countries of the Balkans region gaining EU membership. We would like to see a rapid and vigorous enlargement, with the lead being taken by Serbia and Montenegro, whom I believe are the closest to becoming EU members. And this diversity is brought to a peak by the fact that with us here we also have China – the currency of which will in the future also be a force to be reckoned with.

If I’ve understood the Honourable Governor’s request correctly, my task this morning is to somehow open this conference, but not from the point of view of a central banker – there are enough of those here today. So my task is to attempt to call your attention to a few things that seem to be important from a political perspective.

The first thing I would like to mention is that at the time of the financial crisis in 2008 it became clear that we were heading towards a new economic world order.

Some had already made this claim earlier, but it was the 2008 financial crisis that made it clear that we were on the cusp of a new era. Ten years have passed since then, and here we are now in 2018. With due modesty, I think we may venture to say that we can now see the outlines of the world we will live in over the next ten to twenty years. Already at this point in time we can categorically predict that the unipolar world order will be replaced by a multipolar world in which new players, new cooperation schemes and new values will emerge and gain ground.

The second thing I would like to draw your attention to is that both Hungarian and other EU politicians think that globalisation will continue, but its internal balance of power will shift: ever more power centres will rise, cutting increasingly large pieces for themselves from the world economic pie. First among these rising new centres is China. I say to the Honourable Governor that if he reads Western European analyses on China, he will fre-

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quently see claims that the country’s success is merely temporary. It is difficult to determine how much of this is sober analysis and how much is wishful thinking, but I believe that the past ten years have proved that the rise of the Chinese economy is not a temporary phenomenon. China will be a fixed star in the period ahead, and will be a major player in the world economy for a very long time. This is how we, too, should perceive China – and this is how we should approach it in the future.

Among the shifts within globalisation’s internal balance of power I must mention the fact that in Europe, too, a new centre has emerged: Central Europe. God willing, it will be joined by the Balkans region, meaning Central Europe and the Balkans together: in other words, us. In Western Europe there is a consensus that over the next five to ten years the Central European region will be the growth engine of the European economy. We will be the economically fastest growing group of countries in Europe. Our advantages are not cyclical, but structural.

These countries are innovative, have low taxation, and their workers have excellent abilities and qualifications.

We are an important part of the European economic engine. This is particularly true of Hungary, and we feel that we have reason to look forward to the coming years with confidence. I would also like to draw your attention to the fact that, in addition to historical relations and geographical relations, economic relations will also clearly come into being between the two rising power centres: China and Central Europe. The two regions will be increasingly connected to each other. The Chinese de-

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clared as much when they announced that they would like to create a single economic area through the “One Belt, One Road” programme. To our ears the term may sound strange, but we are talking here about building Eurasia. Whenever we talk about the future of Europe, there are three concepts on the table: Eurasian, Euromerican and Eurabian. Each of these has a lot of truth in it, but undoubtedly it is the Eurasian concept which is the most novel and most attractive from an economic point of view. This involves no less than China and Central Europe forming part of a single contiguous geographical region. By rail it may be possible to travel and transport any goods between China and Central Europe in two weeks. If we are able to build a rapid rail link from the Greek ports to Europe, this journey will be even faster.

What I mean by all this is that in the future we should consider Eurasia not only as a clearly existing geographical fact, but also as an economic area.

Ladies and Gentlemen, Naturally one may argue that the countries of the European and Asian parts of Eurasia stand on different ideological foundations. If I look back on the past ten years, however, I have to say that this is not important. The western half of Europe is learning more slowly than its Central European half, but eventually everyone will realise that we must adopt an approach to China that is free from ideology. We must accept that we are different, we organise our lives differently and we lead our countries in different ways. The task is not to judge – we should leave

Prime Minister Viktor Orbán’s address at the meeting of the central bank governors of China and Central and Eastern European countries

that to the pen-pushers. The job of decision-makers is to seek the common interests which we can find in a joint system of relations.

Ladies and Gentlemen, There is a reason why in the new era one can see relations between China and Central Europe as a success story.

The Honourable Governor was kind enough to mention that our trade volume is close to 70 billion dollars, and its rate of growth is staggering, standing at an average of 10 per cent; and – if I’ve understood the data correctly – trade between China and Hungary grew by 18 per cent in the first three quarters.

Ladies and Gentlemen, I would also like to draw your attention to the fact that, in this new world order, a prominent role will be played by knowledge, talent and creativity. Everyone has two possibilities: the first is to produce knowledge; the other is to buy knowledge. Among regions there is increasingly fierce competition for outstanding specialists. This “brain drain” will create winners and losers. The Central European countries have never been famous for seeking to attract highly qualified workers from elsewhere. Throughout its entire history, every Central European country has believed that its independence and national sovereignty have cultural and intellectual foundations, and a country which is unable to produce the knowledge needed to be competitive in the modern world does not deserve to exist as a nation. In my view, this conviction is shared by the countries of Central Europe; and so we want to produce knowledge rather than buy it. And everything is in place for us to produce this knowledge: Central Europe has highly qualified, intelligent young people. And – without wishing to offend any of my contemporaries – if I compare my generation with the young generations coming after us who have now entered adulthood, they are clearly better qualified and more competitive than we were, and they will become more competitive than we are. We have no shortage of intelligent and highly qualified young people, we have creative enterprises, and we also have political systems which support research and development. In Hungary, for instance, the goal is for spending on R+D to reach 1.8 per cent of GDP by 2020: approximately 1,000 billion forints. By Hungarian standards this is an enormous sum.

Ladies and Gentlemen, I would also like to draw your attention to a possibility.

We do not know whether it will happen, but it seems increasingly likely that we will need to prepare ourselves

for the dollar losing its monopoly in world trade. Today it is no longer alone on the scene. It seems that the world will be more diverse than it is today not only in a political dimension, but also in a financial one. In the future the importance and strength of the new trade centres will not necessarily be expressed in dollars. The yuan is an investment and trade vehicle which we Hungarians, too, must take account of. It is no accident that Hungary has already issued yuan-denominated government bonds, and will do so in the future – although we primarily want to finance our public debt from domestic Hungarian savings. But when we do issue bonds abroad, we will do so in the direction of the East, and we shall work on creating the possibility for the yuan to be the currency in which bilateral trade is settled. This is dramatic, and we are witnessing enormous changes. It is well worth looking at this as not only a threat, but also an opportunity – indeed more as an opportunity than a threat.

I would also like to say a few words, Ladies and Gentlemen, about how I think that the role of central banks will change in the new world order. Of course it is extremely dangerous for prime ministers to talk about this, because in the West today the doctrine is that prime ministers are not allowed to say anything about central banks. On the other hand, one can generally say that if central banks say something about governments, the latter must immediately take notice. It is extremely dangerous for a prime minister to give an opinion on central banks. Yet at a conference like this we can perhaps grant ourselves this luxury. All the more so because I would like to agree with the Governor of the Hungarian National Bank, who stressed that, in the present era, cooperation between national banks and governments is of the utmost importance. The task of central banks is to provide financial stability, while the task of politics is to provide political stability. We must not pursue separate paths: if the financial system and the political system are both stable, we can defend ourselves against the crises which repeatedly emerge in the world economy. And if there is cooperation, and we both achieve stability in our respective fields, we shall not experience a crash of the kind seen in 2008.

Ladies and Gentlemen, I also believe that national banks could play a more active role in the development of trade and the economy.

They have the means and authority to do so, but perhaps I will say a few words about this later. And lastly, I would like to call your attention to the fact that another crisis cannot be ruled out. Naturally, no one is able to speak with certainty on this – and regrettably neither can I. What I can say is that the analyses I see – part-

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ly Hungarian and partly international – mention a 70 per cent probability of another approaching crisis. They claim that we should expect an economic decline of unspecified nature: smaller than 2008, so not on that scale, but almost certain to take place. No one knows whether this will be the case, but I repeat: international analyses mention a 70 per cent probability. This is underlined by what the Honourable Governor said, and this is also true of Hungary: we must have two plans, a Plan A and a Plan B. We must not find ourselves in situation in which the Hungarian government does not have to hand a plan which has been prepared for this economic eventuality.

Ladies and Gentlemen, Due to lack of time, I would like to say just three sentences about migration. It will transform our lives. First of all it will transform the lives of Westerners: this is beyond doubt, and this process is already under way. Western Europe will never again be what it was. The process seems to be unstoppable. It seems that in Western Europe the emergence of parallel societies is inevitable – especially in large Western European cities. We do not yet know whether Western European governments will be able to cope with the problems caused by this process, and to turn the inherent opportunities to their advantage. But we know for certain that they will have different problems from those faced by us in Central Europe, who have

Ladies and Gentlemen, Among the causes of the crisis, everyone mentions the debt burden. Indeed, a significant proportion of EU Member States are deeper in debt today than they were at the time of the 2008 crisis. It is sad that the era of cheap money is over. We are also embroiled in trade wars. The Hungarian language is more direct than the Chinese language, and in our language “trade disputes” translate into “trade wars” – but that is the nature of the Hungarian language, Honourable Governor. And there is also the issue of migration, which I believe will affect our lives more than we think. With regard to the issue of trade war, for a long time we Hungarians have taken the view that the United States is seeking to preserve its dominant role in the world economy, and is therefore attempting to transform relations in world trade. We understand this.

This, for instance, is why the US is imposing customs duties on European Union products and on our most marketable sectors, thereby seeking to significantly change the trade that is the engine of the world economy. Export-oriented regions – and our Central European and Balkans region is an export-oriented region – must find the right policy in this situation. This is not easy. All I dare to say here is that this war is not our war. This is perhaps the starting point, with the aid of which we can determine how we should act in such a period of trade conflict. This war is not our war, but it has an impact on us. So we must guide our economic policy in a way which enables us to simultaneously maintain good relations with the various parties with their opposed interests, and we must be able to build good trade and economic relations with each of them separately. I believe that we – not only Hungary, but the entire region – are able to develop an economic policy which ensures that China, Germany and the United States all have an interest in making Hungary and the Central European region successful. This is not an easy operation, but it is feasible.

so far successfully defended ourselves against migration. When economic conditions balance out – because trends seem to indicate this – and if Schengen and free movement survives, then we too shall have to respond to the problems with which they are struggling today. Fortunately, this is not a challenge that is expected to emerge during this term of government: there is time before subsequent governments have to deal with it, but it is wise to prepare ourselves intellectually for this situation.

Ladies and Gentlemen, The fact that the first migration wave has passed does not mean that we should not look at the Asian and African demographic indicators which forecast – with absolute certainty – ever more waves of migration.

Ladies and Gentlemen, We must work on ensuring that the region remains as it is today: a safe, strong and fast-growing region which has influence – indeed substantial influence – over what the future of Europe will look like.

Ladies and Gentlemen, In conclusion, I would like to say a few words about the possibility of cooperation between central banks and governments. If we are serious about building Eurasia, we must implement major developments, primarily infrastructure developments, because we must link China, Central Europe and the Balkans to a single network: a network on a global scale. This requires capital. In my view, central banks should take on a more active role in making recommendations to governments regarding raising the types of capital required, and they could even play a part in that process.

The second thing that I think governments should consider – and in which it would be good for them to receive assistance from central banks – is launching programmes

which would enable central banks to take part in the development of businesses. Central banks – including in Hungary, though here we can see successful examples from credit programmes – should perhaps play a more active role than earlier, particularly in the development of the sectors that will shape the future and innovative enterprises.

And, Ladies and Gentlemen, if what I’ve said about knowledge is true, it is also true that it will be hard to win the future without modern education. I think that when it decided to play a part in the training of economists and engineers for the future, the central bank, the Hungarian National Bank, moved in the right direction – though it could be even bolder. So I believe that, in addition to governments, central banks could play a greater role in education than has been customary over the past thirty to forty years. I would specifically encourage central banks to consider this possibility.

And finally, Ladies and Gentlemen, what is it that national governments can offer in return? I don’t think that central bank governors will be unable to agree on this. The greatest gift that governments can offer central banks is political stability. It is necessary to create a political atmosphere free of major shocks, so that the economy can function in a predictable manner. We need the political system to be just as predictable and stable as the economic system that we expect from central banks and our financial institutions. In this respect Central Europe has no cause for complaint: Central Europe is a stable

place, free from major shocks. In order to avoid diplomatic complications, I will not mention by name those Western European countries which find themselves compelled to struggle with continuous problems in forming governments, where coalitions are formed and then fall apart. And I will also not name countries where the prospect of early elections looms large. With due modesty, all I would like to say is that there is Hungary, for instance: the first free elections were held in 1990 – twenty-eight years ago – and since then not once has there been the need for early elections. This shows that in Central Europe we understand that political stability is important, and that it is also a precondition for economic success.

So what we are able to promise central bankers, bank governors and managers in finance and business is that we are doing everything we can to build political systems which are at least as stable as the economic systems that we expect from financial leaders.

Ladies and Gentlemen, Once again I would like to greet the 16+1 central bank governors’ meeting. We are grateful to the Governor of the People’s Bank of China for attending this meeting in person. I again welcome our friends from the Balkans and Central Europe. I hope that you can produce ideas and cooperation schemes which will enable us to build a truly unitary Eurasia, which in the period ahead will also operate successfully in economic terms. I wish you every success in your conference.

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CENTRAL EUROPEAN TIME

Presentation by Gyรถrgy Matolcsy, Governor of the Central Bank of Hungary at the 58th Itinerant Conference of Economists

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CENTRAL EUROPEAN TIME

Presentation by György Matolcsy, Governor of the Central Bank of Hungary at the 58th Itinerant Conference of Economists

I warmly welcome our honourable hosts, Presidents, Mr. President, Madam Secretary, Mr. Minister, Mr. Secretary of State, and of course everybody else. Please let me start with a personal – and partly family-related – experience: my family moved from Zilah to Debrecen 400 years ago, then 250 years later they moved farther to Kecskemét. But my personal experience is that at the beginning of the 1990s, my friend, Mihály Patai said very laconically – but it turned out later, extremely concisely and very well – that with the decision that Audi had chosen Győr as a location for investment, Hungary was destined to belong to the West.

With the decision that BMW, another very significant global player and a leader of the automotive industry, chose the city of Debrecen after lot of previous successes, Debrecen has been destined to be the eastern capital of Hungary, and it has become and will be the natural economic, then financial and political hub of a region of 3 million people and a geopolitical centre.

Please let me proceed with saying that in my presenta-

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tion I want to argue that the time of Central Europe, and, from another angle, the eastern part of Central Europe, has come. The time of the Visegrad countries has come, the time of the Carpathian Basin has come and the time of Hungary’s rise has come. Perhaps not in this order, but it could begin from within.

In the coming decades – after a significant turnaround in economic history, implemented in the last eight years – our task is to keep Hungary on the trajectory of sustainable convergence. We went through a growth turnaround five years ago and 11 other great turnarounds, and we started the 13th (which is a very good number in this case) one last year: the competitiveness turnaround. All this is aimed at fulfilling our historical responsibility so that the generations living in present-day Hungary, the Carpathian Basin, the Visegrad Group countries, East-Central Europe and Central Europe should achieve the convergence of this region with Western Europe. For us, Hungarians, the goal is Austria, but Germany, too, and the Western European

standard of living and quality of life as well. This will be a historical success. We are going down this path, and I think a particularly special historical situation has evolved since 2010. Under the leadership of Viktor Orbán, Hungary’s Prime Minister, a geopolitical balance has been achieved in the network of five major, global centres of political power, i.e. Berlin, Washington, Moscow, Beijing and Istanbul. A balance of centres of global, political power has been achieved within Hungary, the Visegrad Group countries and Central and Eastern Europe. Permanent convergence requires a political, a geopolitical balance.

Similarly, a reserve made up of four resources, a convergence reserve, political stability, a correct economic policy, and a favourable monetary policy have been achieved, and we are on the path toward a smart, geopolitics-inspired and -centred development policy, and I am certain that the new ministry and Mr. Minister will have a dynamic and central role in it.

Ladies and gentlemen, I want to argue that in addition to the Hungarian and the regional balance achieved between five major, global centres of political power, the future can be determined by ten regional economic and financial centres and their cooperation. Yes, Warsaw and Krakow are centres of power, and so are Prague and Bruno, Bratislava and Košice, Ljubljana and Zagreb, Budapest and Debrecen. The cooperation of these regional economic and financial hubs will be the key to winning the future. The 21st century is the success of cities, megacities and city states; and yes, at least from an economic perspective, the Carpathian Basin is a city state. The construction of this city state, and of course the joint cooperation of the V4 and V6, V8, V10, and who knows how many V countries are the key to the future.

Ladies and gentlemen, One of the 10 cities listed here may seem an odd-oneout. One of them does not seem to be necessarily a part of the other nine on this list of ten. the future is almost as uncertain as the past is. It is not a coincidence that this group of 10 cities includes Debrecen as well.

It is not a coincidence that I dare to say that Debrecen makes the region of three million people in and around Debrecen belong to the future and the success of the future, in the same way as Győr makes all of Hungary belong to the West.

Debrecen’s past is profound and successful; not just because of being the Calvinist Rome (although as a Calvinist, I very much agree with that) but if we take a look at this cloud here, we can see that Debrecen has

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been operating as a regional centre in the last 500 years. Naturally, first Oradea, but after that comes Debrecen. If we take a look at how deeply the leading phenomena in the region of the Carpathian Basin, such as gold mines, salt supplies, the monetary innovations of Charles I of Hungary, or Protestantism itself are rooted in Debrecen, we can see that the last 400-500 years significantly project the success of Debrecen, eastern Hungary, Hungary and the Carpathian Basin.

If we also look at how fortunate the geopolitical and geographical situation of Debrecen is, we can see that Debrecen is situated at the point of intersection and in the zone of four geopolitical macroregions.

This is an enormous success and the vision and chance

through Germany and the European Union. Debrecen is here, Debrecen is part of this circle. Moreover, the whole of the Carpathian Basin and Hungary within that is a very fine area, and has excellent opportunities for economic integration, considering the entire Central European and European region. Where are Europe’s innovation and creative centres located? We can see, that we are in it, we are on it. According to a very smart forecast, working independently from us, Hungary, the whole of the Carpathian Basin and Debrecen are among Europe’s innovation hubs, they are included in that network. I want to argue that it is not Debrecen alone or Budapest or Hungary or the Carpathian Basin alone but the Visegrad Group together that has earlier

of an enormous success, since not only cities will be megacities and the engines of success in the 21st cen-

headed for and is now on its way to historical success.

If we look at where it started: it started a very long time ago – with Béla IV, I think, but visibly it started with the Congress of Visegrad in 1335. A political integration started. Then, as it happened also later, economic and financial integration started with a political integration. Hungary then was extremely rich in minerals; the Central European region, and the Carpathian Basin in particular, had astonishing, European significance.

We are talking about an era 700-800 years ago, and history tends to repeat itself, even if not in the same

tury, but also regions and macroregions will. Being intersected by four macroregions offers prospects of major benefits. Similarly, the success of Budapest and the whole Carpathian Basin depends on what extent Hungarian cities located within the one- and two-hour agglomeration of Budapest will be able to develop and extend their antennae beyond national borders, first in the Carpathian Basin, over the area of the V4, to the east through the Silk Road, and to the west

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way, never in the same way. What meant rich mineral reserves and presence in global trade zones for the whole Carpathian Basin, what meant gold and precious metals then is today the ability of innovation, creativity, talent, diligence – all that is discovered in us (and is not always discovered by ourselves) by our foreign friends, Audi, Daimler, BMW and many other foreign investors. Yes, the raw material of our age is data, but the gold, silver, copper and precious metal reserves of our age are talent and creativity.

It is not only a long line of our Nobel laureates but also foreign capital raised in everyday business life or the domestic entrepreneurial profit or loss that shows that at the end of the second decade of the 21st century, Hungary, the Carpathian Basin and, to my mind, the entire region is rich in this capital. Once more: we used to be rich once; very rich. In terms of the quality of life and the standard of living, we will be once again rich and more developed, at an equal level with or even at a higher level than our more fortunate historical mates in the Western part of Central Europe and in Western Europe. Perhaps it is worth looking at the fact that we were a significant, developed and dynamic region not only in the Anjou age (and before that, at the end of the age of the House of Árpád kings) but also during the Monarchy. We have historical depth. In monetary markets they say depth is needed; not just a very thin “summer” monetary market situation, but depth is needed. Hungary, the Carpathian Basin and the entire region has depth for historical success.

And another memory from the recent past. Again, a political gesture starts political integration, continued by the deepening of economic and financial relationships. The alliance of the Visegrad Group has proven to be successful in the past three, rather turbulent decades. If we overview the political events, with their underlying economic and financial processes, we can apparently find an evolution. The three or four Viseg-

rad players have found each other again. Political integration as a prerequisite is in place. Let’s admit: political stability, political integration and political benevolence are essential requirements for any economic success. By now, the “Visegrad countries” have become a success story and a regional growth engine of the European Union.

If we glance at the growth map of the European core countries, the four southern countries of the Eurozone, that is, the Club Med countries and that of the Visegrad countries, we can see a rather puzzling picture, which is, by the way, extremely promising. Our growth surplus compared to developed European countries is two per cent. And what do we tell about ourselves?

The same. If we are able to achieve two per cent higher GDP growth than the average of more developed Western European countries and the European Union in the next couple of decades, we will catch up. If we are able to achieve two per cent higher GDP growth compared to Austria and Germany, we will catch up.

Economic performance is the basis for any turnaround in the standard of living and the quality of life, and I want to send the message to us again, which we communicated and recorded last year and before, that we are on the trajectory of convergence. It does not take another turnaround or another fiscal consolidation or a turnaround in monetary policy – these have all taken place. A continuous competitiveness turnaround is needed, but we are on the trajectory.

Ladies and Gentlemen, Not only was the GDP growth of the Visegrad Group countries higher than the average growth of the European Union, or the growth of core countries, and not only was it way better than the GDP figures of Club Med countries, but growth was balanced. If we look at the structure of this growth, i.e. the structure of consumption, investment, stock changes, net export,

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we can see that the GDP, our economic performance has grown more, and it has been healthy. We are on a historical convergence trajectory that has a healthy structure and is not financed from loans. Consequently, the economic weight of Visegrad countries has been continuously growing in Europe. Our weight within Europe has increased from three per cent to around six per cent. We have doubled it. This is a very promising event in our economic history. We doubled it in the period between 1995 and 2017 while Club Med countries – which are comparable with us from certain, but naturally not all, perspectives – use euros, have historical advantages (although it can be so hot here as it is in the south), have accumulated historical advantages before 1990. They have kept their share, and we have doubled it. Perhaps the most exciting thing in term of our historical success is that we cannot decide only on the transformation of the coherent economic space of the Carpathian Basin.

Not only on the reconstruction of East-Central, Central and Eastern Europe, but we have built a very special relationship with Germany, Europe’s leading economic power. If we glance at the total share of the Visegrad Four in foreign trade in Germany’s foreign trade, a very exciting picture is outlined, since it is higher than the share of the Club Med countries, which have closer ties historically, and it is higher than the share of nearby France or the share of the increasingly distant United Kingdom; the Visegrad region seems to be continuously working off historical disadvantages here as well. Perhaps the fact that the Visegrad Group countries, four countries, have could increase their share in global foreign trade while the share of Club Med countries has been decreasing is of comparable importance. Not only have we increased our share in foreign trade within Europe, where Club Med countries maintained their levels, but our global share has been increasing.

It means that – although we were subject to a shock after 1990, we used Heide shock therapies, we used a lot of incorrect shock therapies, against which we fought together – today the Visegrad Group countries is winning in globalisation. This chart is obviously the chart of winners. Ladies and Gentlemen, Meanwhile, the Visegrad Group countries has achieved price stability, and each member state of the Visegrad Group countries, and maybe Hungary to the greatest extent, has executed a complete taxation turnaround in the past 8 years.

In its personal income tax system, the significance of which should not be underestimated, it has taken the

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lead and gained advantages in the European Union, and Hungary has obviously ranked among the best in the region. There is a great turnaround also regarding labour tax. I am taking this as an example because this turnaround has taken place in every Visegrad country, although in Hungary a little bit later. We are together in all positive trends, as Visegrad countries have been going along exactly the same line in whitening the economy. We are trying to take advantage of the same historical opportunity, with the same resources and tools.

The region is at the forefront in crisis management.

Maybe this is our most illustrative result: let us imagine that the Visegrad Four not only has restored the pre-crisis level but achieved a surplus of over 25 per cent, around 30 per cent in the midst of budgetary crises, debt crises, bank crises, disruptions of labour markets following the global financial crisis. By contrast, Club Med countries have not reached the pre-crisis level due to the orthodox, incorrect austerity-based economic policy adopted by them or forced onto them.

Additionally, the performance of the Visegrad countries is better than that of the United States of America and the European Union. This is rather strange, though.

It can be contributed to many factors. Definitely, one of the factors is that we have not adopted the crisis management methods recommended by our friends and allies. Economic convergence has been continuous for five years in the Visegrad countries, we are the red line full of life, we are coming upwards, and we are likely to, discreetly and modestly, reach the level of performance of Club Med countries by 2020, there is no visible threat that this convergence would cease.

We are on the historical trajectory of sustainable convergence. We are on it together. The productivity of the region exceeds the pre-crisis level. We are often criticised because productivity cannot keep up with something: the number of employees, real incomes, but yes, productivity has increased in the four Visegrad countries, and exceeds the pre-crisis level. Naturally, I will move on to reserves in a minute. In employment processes, or labour market processes, the Visegrad region is obviously at the forefront. Professor Kopåcsi, now a young man, has been teaching I cannot say for how many years, but let’s say, for at least thirty years that there are a lot of important things, you can focus on anything, even the stock exchange, but labour is the most important thing; thus, it is labour, it is jobs.

Evidently, each member of the Visegrad Group countries has executed a labour market turnaround, and they rank the best in one or two segments, such as

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the unemployment rate of 15-60 year olds. What else counts more than the unemployment of young people? Actually, it must resort to the workforce of 15 year olds. Someone should pay taxes, don’t they? Yes, the Visegrad Group is at the forefront, has got to the forefront regarding the labour health rate of 15-64 year olds, and within that, I will move on to that now, young people. Once again: it is not one country, the whole region is together. They can be treated together, not only from a geopolitical perspective, but also from the perspective of economic policy.

The region has seen the most significant wage growth, which is natural on a convergence trajectory, and the Visegrad region is characterized by uninterrupted fiscal discipline; in fact, we caught up a little bit later, after 2010, but by today, the entire region is one disciplined, consolidated government budget and budgetary situation. A tremendous asset.

There is no growth without balance and balance cannot be maintained without growth. Let’s see it in an unconventional way: Club Med countries have not reached this level; they have been very far from it. In the Visegrad Group countries gross government debt has been decreasing since 2013, which is a huge result, indicating that the growth path funded earlier from

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debts, and foreign currency-based debts in particular, for example in Hungary, has been replaced in the entire region by a healthy, balanced path reducing government debt.

And the balance of the current account also demonstrates significant improvement. We can reassure everybody that a positive balance of the current account will remain in the coming years, we should not frighten each other with a turnaround, it will be fine, and the other macroeconomic trends will remain on the correct course. The net external debt of Visegrad countries is even more positive, thus it seems lower.

This specifically indicates the extent and the quality of the turnaround that has taken place in the economic policies. Corporate lending has been expanding in a healthy manner: after an earlier minus five per cent change in loans, i.e. a decrease, we can see an increase after 2013, thanks to the Funding for Growth Scheme introduced within the frameworks of a Hungarian monetary policy turnaround. These are the good news – there are a lot of them.

We are facing some challenges, though. I would mention ten of these, because I think the government and we all, and I even look at Mr. Minister, have a task in them and have a strategy. As our ten backlogs com-

central european time

pared to Western Europe or the western half of Central Europe, which I will show in a minute, are real. This is our real convergence reserve. One of them, for example, is that we are doing well at some of the 21st-century entry points, and we do not at some others. We have a huge backlog of some of them. All entry points are required for the ultimate historical success. One cannot win with one or two of them. Similarly, the application of the new technology in Hungary, its roll-out and possible further development is essential for success.

Everything is important within that. Everything can be important. No one can tell by 2050 which one was the most important.

I think that rapid robotization is an inevitable and indispensable source of success. We seem to be doing better, but it is not necessarily Hungarian businesses where we are doing better. Therefore, it is also a convergence reserve. Similarly, education and especially elevating the level of low qualifications is an essential source of convergence. One cannot catch up successfully on today’s level of knowledge, with today’s structure, with current gaps.

The proportion of university graduates is low, especially in Hungary, but, with one exception, it is true for the entire region. That must be changed, and I am sure that government bodies have already been focussing on this. Regarding top universities, we are doing poorly.

We need a complete turnaround. We must aim at getting into the top 100 with a Hungarian university. The situation of capital stocks is similar. They are extremely low in Visegrad countries, in each country, including Hungary.

Capital stock is a product index. Without capital, technology, political stability, geopolitical balance convergence is not possible; a turnaround is required here as well. The seventh one I mention is productivity; what we know about it is true. It is low. A turnaround is needed. This cannot be achieved at once, but with all that is included in these ten items together. It is particularly low; in all European comparisons, there are two other groups of countries before domestic value added in exports, but it is the lowest in the Visegrad Group countries.

Ladies and Gentlemen, We need success stories, and fortunately there are some in Hungary: OTP, Mol, MVM, Richter, Waberer, and some more. As there are some among cities: Budapest, Debrecen, Kecskemét, Győr, and I could, fortunately, go on listing the examples. But we need many more success stories, because a great success is made of

many small ones. Finally, yes, what we used as a base in the Central Bank of Hungary when formulating our 180-item proposal on competitiveness is true: we have a huge backlog in certain areas of competitiveness.

Ladies and Gentlemen, Finally, I want to tell that for Hungary, Debrecen, Budapest, Eastern Hungary, the Carpathian Basin and the Visegrad Group countries, the emergence of a new Eurasia is one of the greatest opportunities. Throughout the past 500 years our historical situation has been not only turbulent, but disadvantageous. Well, this can be turned into an advantage by building the New Silk Roads; let’s just briefly glance at historical turnarounds and centres. They are not empires any longer but they used to diffuse in empires, along great trade routes. Yes, there still are great, global routes, yes, a new Eurasian trade route network is emerging.

This is an enormous opportunity. I suggest using it. The Central European part, and the eastern part of Central Europe can become a bridge region. The data which show the goods traffic of the New Silk Roads on the level of ports and transshipment facilities – I will not project them now but they can be found in our various publications – would outline an astonishing picture.

Bits and pieces of them are working, and Debrecen, once again, is situated not only at the intersection point of four macroregions, near Záhony, but also very near the New Silk Roads. The system of Eurasian economic corridors is working, which will entail, as history has demonstrated, a West-East integration and not an East-West one. Finally, the construction of transport infrastructure is a very big opportunity for Debrecen as well as Hungary and the entire region – a historical success is not possible without transport, shipping and human infrastructure. The Via Carpatia is such a North-south corridor. The same way as a very busy and well-constructed Eastern European, Central European, North-South transport network worked on the cutting-edge technological level of the time 400 years ago, as early as the 16th-17th century, we need new, completely new transport infrastructure passing downwards from Poland, the Baltic region through the V4 region and, naturally, the Carpathian Basin and Hungary.

Ladies and Gentlemen, Thank you for your kind attention. The next presentations will reveal how we are going to utilise everything that constitutes reserves.

(Thursday, 6th September, 2018)

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THE SIGNIFICANCE OF GEOGRAPHY IN THE MULTIPOLAR WORLD ORDER OF THE 21ST CENTURY

Geofusion – Mapping of the 21st century Author: Norbert Csizmadia

What are our maps like in the 21 st century? How has our world changed in this new, 21st-century world order? What is the role of Central Europe on the world’s geopolitical map? Why is it important to understand the current economic and political changes of the 21st century through geography? We are at the dawn of a new world order. While the period 1980-2010 was defined by globalisation, new cooperations, new players, new ways of thinking, new value systems have started to evolve resulting from the economic crisis of 2008; since 2010, globalisation has entered a new era, the era of technology and knowledge.

NEW MULTIPOLAR WORLD ORDER – REDISCOVERING GEOGRAPHY In this new era, we are talking about the rise of geography and economic geography; geopolitical processes are being replaced by geoeconomic ones, and there is a competition for markets in lieu of territorial expansion. This is the age of networks and fusions; a complex approach is becoming the most important thing in an interconnected world. The pole of world economy is shifting towards east again. While the 19th century was the century of the British Empire, and the 20th century was the century of the United States, the 21st century is obviously the century of Asia. We can witness the rise of the Eurasian continent, with China playing a leading role, and Central and Eastern Europe, dubbed as a buffer zone until now, may become a bridgehead region. As the eastern gate of the New Silk Road, as the eastern gateway to the most developed region of the European Union, technolo-

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gy-led Baden-Württemberg, Bavaria and Lombardy, and as the mid-section of the former ancient Roman Amber Road (where the most important projects of the automotive industry in Central and Eastern Europe can be found now), Central and Eastern Europe is a meeting and a connection point between the West and the East.

Connection points are extremely important in the 21st century. By connecting geography, geoeconomics, geopolitics and the global economy we can approach our world in a complex way. With the help of maps and geography, in this fusional era we are seeking the answer to the question as to who the winning nations, communities, leaders of this era will be. How can we understand the global political geographical, economic and economic geographical processes going on around us? How can we redefine and redraw our maps? How are former peripheries becoming centres again?

The financial crisis of 2008 has created a new world order, a new value system, with new players, new cooperations, new places; former centres have got to the periphery and former peripheries could become centres. Former recipes and dogmas have failed; we need a new way of thinking and new methods. The 21st century is the era of knowledge, talent, technology and innovation, and genuine ideas and innovation are its currency. After the age of globalisation, the age of technology has come, and one of the main questions is what role places will have in this technology-led age. If we coin technology, knowledge and geography into one term, we get tech-knowled(ge)ography, that is, knowledge in the geographical world of the age of technology. This is the geography of knowledge and fusions, “Geofusions”, which become the meeting point of complex knowledge and geography in the age of networks.

GEOGRAPHY IS A TOOL OF EXPLORING THE WORLD Geography is a tool of exploring the world, as geography is not just memorizing places on our maps, but a complex exploration of the world is inherent in familiarity with and the knowledge of geography. There are

some, however, who think differently: at the beginning of the 1990s, Richard O’Brian wrote his book Global Financial Integration: The End of Geography, which is about the role that geographical space has in our globalized world. He argues that, thanks to modern information technology, one can transfer millions of dollars from one corner of the Earth to the other within seconds. The future when ‘geographical location no longer matters in economic development’ is not far. Well, we can definitely claim now that O’Brian has not proven to be right.

A decade later, Stratford’s geopolitical guru, Robert D. Kaplan focussed on recognizing the decisive role of territoriality in global processes in his book, The Revenge of Geography, which can be read as a response to O’Brian. In his book, Kaplan writes, we might forget about the power of geographical factors, but they still do not cease to exist. Even technological advancement is unable to do so, and although many believed, technological advancement has not cancelled geography but increased its significance. The author of the great book The World is Flat, Thomas L. Friedman is in a similar opinion, adopting a slightly different approach, who said in 2013 that in today’s world the big divide is no longer between developed and developing countries but rather between high-imagination-enabling coun-

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tries and low-imagination-enabling countries. It is high-imagination-enabling countries that will count in the future.

WHY ARE MAPS IMPORTANT? To understand the processes of this new era, we need maps. Maps are important! Maps are continuously changing, developing, but there meaning and significance remain unchanged. Maps were important in the past, are important in the present and will be important also in the future. In the 8th century A.D., the Polynesians drew a map with the help of which they got to more than 1,000 islands within the triangle anchored

by New Zealand, Hawaii, and Easter Island. They knew the stars, the ocean currents, the sea routes. They made their maps by hand and they placed seashells on the junctions, representing islands, and this is how they navigated for centuries. But portolan charts made

by European sailors were just as important maps; they described major places and ports in as many details as possible, and these maps meant the cartographical basics of the European explorations one and two hundred years later. Or the mosaic map found in the city of Madaba, Jordan, made of two million mosaics in the 5th or 6th century A.D., containing the complete geographical description of the globalized world of the time, and the map itself was discovered in 1884.

But what are our maps like today? What can we see and read on maps: countries, marked with different colours, national boundaries, dividing countries of different colours so that they can be more visible, continents and oceans. This is the political map of today’s world like: almost 200 countries on five continents and three big oceans. And what can strike us on maps is that there is always Europe in the middle, and there is Asia to its east, and the American (the North American and the South American) continent to its west is divided by the Atlantic Ocean. Yes, we, Europeans live in a Eurocentric world, and we see the world through a Eurocentric world map. This new way of thinking is supported by maps because if we look at the world from a different angle, we can adopt a new kind of viewpoint: what does our world map look like viewed from the perspective of Asia or the Pacific?

But let us just imagine what our maps would look like if we did not draw countries on our maps but the routes of the world’s 182 airlines, or the results of international research cooperations and scientific collabora-

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THE SIGNIFICANCE OF GEOGRAPHY IN THE MULTIPOLAR WORLD ORDER OF THE 21ST CENTURY

tions; or the map of connections of Facebook used by 2 billion people. They are all network maps, with lines and connection points at their nodes which outline the power lines of the 21st century and its centres, the cities. And what does our world map look like if it depicts cities instead of countries, without national borders, or the network map of the world’s almost 400 most significant cities connecting to each other, or the world’s 50 most important airports? The population number of cities, the size of our cities would be illustrated on the map by spots: the more populous the city was, the bigger the spot would be. Exactly the same way as on Benjamin Hennig’s world map, who, on his internet site Views of the World, has completely recreated the world map. His starting point was that the more significant a city or country is in a given category, the more it bulges from the map, thus the world maps he created show the spatial processes taking place on our Earth in a completely different light, for example on the population map of the word.

More than 7.4 billion of us lived on the Earth in 2017; interestingly, nearly 50 per cent of the Earth’s landmasses is populated by 0.5 per cent of the population, while more than 90 per cent of the world lives on an area of 5 per cent (China, India). Can you imagine what it looks like on a world map drawn by using this fresh approach?

The same is outlined on the map of the global economy: the spatial distribution of some US$80 trillion shows that there are three bulging, or rather rounding, regions – the United States, Europe and China. It is even more interesting to see these maps both in space and time.

However difficult it is for us to imagine in the new, technological world order, our maps do start moving. With the help of GIF animations, we can see how the world’s population changed between 2000 and 2010, as well as the spatial distribution of annual GDP growth, where East Asia is growing bigger and bigger. We are living in a dynamic world in the age of dynamic maps.

The 21st century is the century of knowledge and creativity, in which genuine ideas and innovations are the most important currencies, and the countries who do not have sufficient knowledge yet can do nothing but purchase it, and knowledge will be more and more expensive.

We are witnessing the rise of geography, and geoeconomics, the combination of economy and geography, is becoming ever more important. Sir Paul Tucker, the former Governor of the Bank of England was asked within

the framework of the Tacitus Lectures held in London in March 2016 who the winning countries, nations and leaders of the 21st century will be. He answered that those countries will be winners who coordinate their finances, that is, their monetary policy, their economic policy and their geopolitics.

THE AGE OF GEOECONOMICS It is a major geo-political element of the 21st century that a new, multi-polar world order is emerging from the former, mono-polar one. It has three main protagonists: the United States, China and Russia; and two supporting characters: Germany and Turkey. Geo-economics, as a fusional meeting point of economics, social sciences and geography, determines the processes of world economy. Today, we are witnessing the rise of geo-economics; a competition taking place in the language of commerce but according to the logic of wars. Geopolitical competition transforms the global economy, the global balance of power and governance.

Before the financial-economic crisis, geopolitics had a local role; in these days, however, conflicts between major powers have flared up again. The conflicts between the West and Russia, China and its neighbours, as well as the crisis in the Middle East, becoming increasingly manifold and multi-faceted, are the most prominent ones. There is an invisible zone on the map of this multipolar world order between the 30th to 36th parallel north– and there are five turning points along this line: between Mexico and the USA, at Gibraltar, between Europe and Africa, at the Levantine ports, at Kashmir and the South China Sea, where conflicts arise.

Although several wars are being fought in the world, from Damascus to Ukraine, nowadays economy is considered to be the most important battlefield. Military strikes are replaced by economic sanctions, military alliances by competing commercial systems. Currency wars are much more probable now than territorial conquest, and manipulating the price of certain raw materials (such as oil) proves to be more effective than a conventional arms race. These reveal that we are witnessing the rise of geo-economics; a competition taking place in the language of commerce but according to the logic of wars. Geo-economics means at once the antithesis of globalization and its greatest victory. Countries are so inter-dependent and interconnected that the opportunity of exclusion amounts to the gravity of an armed conflict. Geo-economic challenges highlight the powerful trends that are reshaping

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the world and change the circumstances of the competition between countries. All these outline a world in which the possession of power will be as important as the pursuit of profit, accompanied by an intensifying participation of the state; economic warfare will undermine economic integration; multilateral systems, instead of becoming global, will regress onto a regional level; the price of oil will be low and volatile, therefore competition will take place for markets and not for resources.

CONNECTIVITY – THE IMPORTANCE OF CONNECTING LINES There is one more cartographic element on the map exploring the 21st century which is even more important than borders, and this is the lines extending beyond and linking locations and continents. These are infrastructural lines. In a TED talk, Parag Khanna claimed we have less than 500,000 kilometres of borders, one million kilometres of Internet cables, two million kilometres of pipelines, four million kilometres of railways and 64 million kilometres of roads. These networks will be the most important lines on our maps. It is not a co-incidence that China’s long-term geo-strategy is to shift the axis of the world economy from oceans to the mainland again.

China launched the New Silk Road or the “One Belt, One Road” initiative in 2013. The main point of China’s long-term scheme is to regain Eurasia’s former histori-

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cal, cultural, economic and commercial significance by rebuilding the New Silk Road. The New Silk Road comprises railway lines, the development of sea and inland ports, the construction of motorways, the establishment and the development of logistics hubs; networks which are realised through economic corridors. Since the announcement of the programme in 2013, considerable financial investments and plans have been made on behalf of China to ensure that the economic belt extending over the new Eurasia will become operational. The China Development Bank has set aside some US$900 million for hundreds of projects.

The main nodes of infrastructure networks being built within the framework of the New Silk Road are reshaping the significance of specific regions, and new hubs appear. The dry port in Khorgos, Kazakhstan – which is also dubbed as the world’s largest dry port and which is the main gateway and a major logistics hub of China’s most important land route – also affects the development of Central and Eastern Europe. The same is true for the China-Pakistan Economic Corridor, which links China with the Arabian Sea via Gwadar port through the highest paved international road of the world, the Karakoram Highway. Gwadar’s significance lies in, among others, that Chinese goods can reach the European continent faster through it than traditional transport routes passing through the Strait of Malacca. One of the main distribution centres of goods is the Port of Piraeus, Greece, from where goods are expected to

THE SIGNIFICANCE OF GEOGRAPHY IN THE MULTIPOLAR WORLD ORDER OF THE 21ST CENTURY

reach Hungary on the Belgrade-Budapest railway line, and there they are dispatched to the ports of Rotterdam and Hamburg. It is not a co-incidence that up to date 64 countries have joined the One Belt, One Road initiative, and it is not a coincidence, either, that China provides Hungary with a considerable role: three Silk Road networks meet at Hungary. Therefore, our country is a key country of the New Silk Road, and the Central and Eastern European region may become a new bridgehead region.

The former Silk Road was always important throughout history; it connected four empires, and transported the most important products, technological innovations and knowledge of the given eras, and quality products were exchanged. The Silk Road does not comprise only infrastructure networks but also knowledge sharing, people-to-people relationships, cultural and financial cooperation.

In May, 2018 26 European ambassadors wrote a joint petition (the Hungarian ambassador was the only one who did not sign it), in which the ambassadors denounced the concepts of the New Silk Road for lacking transparency and being of ad hoc nature. It is no wonder, as even the most accurate map from a European perspective (MERICS) indicates only economic belts and one or two investments on maps, which then European decision-makers receive. That is why it is necessary to prepare as accurate and detailed maps as possi-

ble; it is unknown what goods, in what volumes and with what frequency are exchanged and where transport cooperations are in place.

As a total of 3,673 trains have been running between 38 Chinese cities and 36 European ones since 2013, which has created more than 180,000 new jobs. The Port of Piraeus may cut the time of maritime transport by twenty days, and the Xi’an-Duisburg railway line covers the route in 24 days instead of the previous travel time of 42 days. The hubs of railway transport may include Duisburg, Germany; Brest, located at the Belarus-Polish border; Łódź, Poland; Port of Piraeus, Greece; and Budapest. As a result, a new development axis is emerging, which is, on the one hand, has an eastwest direction in the north, and has a northwest-southeast direction on the south branch, connecting Piraeus with Rotterdam or the port of Hamburg. A north-south belt evolves from the Baltic Sea to the Adriatic and the Black sea. The 16+1 member countries represent an important link with China.

It is not a coincidence that the emergence of two centres is envisaged in this region: one of them is a northern centre, with Warsaw as its centre, where mainly transport, logistics, energy industry investments are located, while in the southern belt Budapest is the location of financial services, cultural and scientific cooperation (the European centre of the Bank of China can be found in Budapest, and the Chinese Academy of Sciences opened its Centre for Social Sciences here in the autumn of 2016).

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WE LIVE IN THE AGE OF FUSIONS AND NETWORKS We live in the age of knowledge, in the age of geo-economics, in a world of fusions. We can find fusions in gastronomy, music, science, architecture; fusions are important because something completely new can be born from encounters in the most unexpected places.

In terms of gastro-fusions, we can talk about a fusion if the East meets the West. And in this fusional age, in this geo-fusional age big data will be the raw material of the 21st century; knowledge, creativity, experience will be the services; with new participants and from new co-operations the small ones become giants, as start-up companies, start-up cities and start-up nations have demonstrated. In a new Cambrian moment, we are witnessing a new technological-entrepreneurial revolution. If we had to highlight one map from the 21st century, we would say that this would be the map of the internet – with its networks and hubs.

In addition to the interconnectivity of networks, the most important component is measuring complexity.

The atlas of economic complexity was first published by the researchers at MIT in 2012. Ricardo Hausmann, who delivered his keynote address at the annual conference of the Regional Studies Association (RSA) in Dublin in June, 2017, presented the latest results of his research. The most important factors of measuring economic complexity include what product a given

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country exports, and how this exported product is interconnected in the global product space. The indices and how the ranks of various countries in a given period of time change have been monitored since 1974. Two things count, Hausmann claims: one of them is knowledge and highly skilled workforce, and the other is the exported product, that is, the share of industries with high added values should be as high as possible in the export structure of the given country. In this new kind of complex competitiveness, Japan tops the list, followed by Germany, and the TOP 10 includes countries from three regions: Southeast Asia (Korea, Singapore), Scandinavia (Finland, Sweden, Norway) and central and Eastern Europe (Hungary, Austria, the Czech Republic, Poland and Slovakia). That is another reason why the share of innovation should be as high as possible in the new era of technological knowledge, and the region should be a growing and prospering region in the 21st century through interconnectivity.

GEO-MANIFESTO – THE IMPORTANCE AND RISE OF GEOGRAPHY IN THE 21ST CENTURY “If it is geopolitics that makes you hit the bottom, it is geopolitics that gets you out.” The famous saying

by George Friedman has become a motto to be followed by each leader in this century. Decision-makers of the 21st century are the ones who will be able to view the world from a geopolitical perspective, and dare to re-draw the maps. Philip Zimbardo, the

THE SIGNIFICANCE OF GEOGRAPHY IN THE MULTIPOLAR WORLD ORDER OF THE 21ST CENTURY

father of the Stanford Prison Experiment said, ‘if one person withstands the world, he is mad; if three or four people do the same, it is a standpoint’. If one of our maps is incorrect, it is useless, might probably mislead us, but it is not a typical construction error, though; but if three or four of them are, it is the first sign of a paradigm shift. Leaders of the most dynamically growing multinational companies, professors of most successful universities and politicians with extensive international networks of relationships have already discarded their incorrect maps, and they are drawing their own system of targets and interpretations onto a blank sheet.

the Faculty of Social Sciences of the National University of Singapore, Asia’s best university, economics is complemented by geography, communications theory, psychology and political science. Similar processes have commenced at Hungary’s Corvinus University.

The world’s leading economic, political and knowledge centres intend to redraw the maps of the world, adding their own interpretation kit and legend to them. These metropolitan areas and regions (Boston, San Francisco, Bangalore, Singapore…) intend to become such hubs that are inalienable from the data, knowledge and innovation networks influencing the decisions of the world.

Leading companies of the world are building an ever closer network with Eastern Europe, India and Southeast Asia to refresh their portfolios with the creativity of small start-ups. In the meantime, China is building the modern Silk Road crossing the Asian continent from the east. The directors of technological giants pay more and more attention to global social issues, putting pressure on such international political decisions such as space race, global warming or migration.

Science has also turned towards geopolitics: urbanism, territoriality, sustainability and social geography are also included in the economic and leadership studies of the University College London. In 2015, Stanford launched its global executive programme of US$700 million USD, seeking answers to economic-social questions, globalization and technological challenges. At

Ultimately, it is always people and the decisions of people that are behind geopolitical turning points. And those will be the decision-makers, economic, political, scientific and technological leaders of the 21st century who are able to comprehend global connections and create hubs of creativity and information flow around them. Those who are brave, curious and creative enough to draw strength from crises and to reconsider the role of spatiality in global decision-making. Those who are seeking fusions and new border areas, may they be physical, natural or scientific. Those who build personal networks with other creative hubs and draw strength from the exchange of experiences with other cultures. They will be real explorers, global leaders, pilgrims of dynamic maps who, adopting a geopolitical viewpoint, will reshape the world.

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HUNGARY, AS A PIONEER

OF THE “BELT AND ROAD” INITIATIVE 131

HUNGARY, AS A PIONEER OF THE BRI Author: Alexandra Zoltai

According to an analysis published by the HKTDC (Hong Kong Trade Development Council), our country counts as one of the major pioneers of the New Silk Road cooperation. Hungary is dubbed as the champion of Chinese investment in Central and Eastern Europe (CEE), which has long been an important partner for China in the latter’s “Going out” Strategy. Hungary is home to the first renminbi (RMB) clearing centre in CEE – which has played a prominent role in RMB internationalization –, it has also been the first European country to sign a memorandum of understanding (MoU) on the Belt and Road co-operation with China, and it is also active in promoting inter-cultural and people-to-people exchanges with China in fields such as tourism and the arts.

PARTNERSHIP AND ECONOMIC RELATIONS WITH CHINA

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Our country is by far the largest recipient of Chinese outbound direct investment among CEE countries. The “Opening to the East Strategy” was launched in 2010 by Hungarian Prime Minister Viktor Orbán as a way of opening new markets in Asia.

China’s economic and cultural cooperation with Hungary has been considerably enhanced ever since the official launch of the “16+1” framework in 2012 and the announcement of the BRI in 2013.

Within the “16+1” co-operation framework, nearly 30 per cent of China’s total stock of Chinese investment was directed to Hungary in 2015.

In 2013, Hungary was the first CEE country to sign a currency swap agreement with the People’s Bank of China (PBoC), and in 2015 the Central Bank of Hungary launched the Budapest Renminbi Initiative in conjunction with its Renminbi Programme to foster Chinese-Hungarian economic partnerships related to the RMB-HUF (Hungarian forint) market. Hungary is home to the regional headquarters of the Bank of China (BOC), and in October 2015, Hungary was selected by BOC to launch its first RMB clearing centre in CEE, and in January 2017 the bank launched its first Chinese RMB and Hungarian forint debit card in Europe. In April 2016, Hungary became the first CEE country to issue an RMB-denominated sovereign bond.

Hungary has long been one of China’s key trading partners. Among CEE countries, Hungary accounted for the largest share of China’s imports (US$3.5bn, some 23 per cent of the region’s total Chinese import) in 2016, and it was behind only Poland and the Czech Republic as a CEE destination for Chinese exports (US$5.4bn, which accounts for 12.3 per cent of the total for the region).

This good relationship set the stage for Hungary to become the first European country to sign a memorandum of understanding (MoU) on the Belt and Road initiative in 2015. This agreement is on the construction of a 350-km high-speed railway between Budapest and the Serbian capital Belgrade, which would reduce the travel time between the two cities from the current eight hours to about

China’s ODI Stock in 16 CEECs (US$ Million)

2011

2012

2013

2014

2015

Hungary

475.35

507.41

532.35

556.35

571.11

Romania

125.83

161.09

145.13

191.37

364.80

Poland

201.26

208.11

257.04

329.35

352.11

Bulgaria

72.56

126.74

149.85

170.27

235.97

Czech Republic

66.83

202.45

204.68

242.69

224.31

Slovakia

25.78

86.01

82.77

127.79

127.79

Serbia

5.05

6.47

18.54

29.71

49.79

Lithuania

3.93

6.97

12.48

12.48

12.48

Croatia

8.18

8.63

8.31

11.87

11.82

Bosnia and Herzegovina

6.01

6.07

6.13

6.13

7.75

Albania

4.43

4.43

7.03

7.03

6.95

Slovenia

5.00

5.00

5.00

5.00

5.00

Estonia

7.50

3.50

3.50

3.50

3.50

Macedonia

0.20

0.26

2.09

2.11

2.11

Latvia

0.54

0.54

0.54

0.54

0.94

Montenegro

0.32

0.32

0.32

0.32

0.32

Source: 2015 Statistical Bulletin of China’s Outward Foreign Direct Investment

China’s Trade with 16 CEECs in 2016 Country

Total Exports

Total Imports

Total Trade

US$ Mn

% Share

US$ Mn

% Share

US$ Mn

% Share

Total

44.016

100.0

14.890

100.0

58.907

100.0

Poland

15.247

34.6

2.531

17.0

17.778

30.2

Czech Republic

8.055

18.3

2.947

19.8

11.002

18.7

Hungary

5.425

12.3

3.463

23.3

8.887

15.1

Slovakia

2.868

6.5

2.407

16.2

5.275

9.0

Romania

3.474

7.9

1.441

9.7

4.916

8.3

Slovenia

2.293

5.2

436

2.9

2.729

4.6

Bulgaria

1.065

2.4

584

3.9

1.649

2.8

Lithuania

1.300

3.0

163

1.1

1.463

2.5

Latvia

1.079

2.5

132

0.9

1.211

2.1

Croatia

1.028

2.3

161

1.1

1.190

2.0

Estonia

967

2.2

211

1.4

1.179

2.0

Albania

518

1.2

130

0.9

647

1.1

Serbia

434

1.0

162

1.1

596

1.0

Montenegro

109

0.2

33

0.2

142

0.2

Macedonia

90

0.2

45

0.3

135

0.2

Bosnia and Herzegovina

64

0.1

44

0.3

108

0.2

Source: China Customs

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three, significantly upgrading infrastructural connectivity.

Hungary’s active participation in the BRI has been welcomed by investors such as China’s leading electric automaker BYD, which opened its first bus plant in Europe in Komárom in April 2017. On the Hungarian side, Hong Kong selected building information modelling software developer Graphisoft as a partner to cooperate within the Belt and Road framework.

AN IMPORTANT NODE ON THE NEW SILK ROAD Hungary’s location has been playing a major part in its economic development. On the one hand, it is on the eastern border of the Schengen Area, on the other hand, it provides excellent connections with other CEE countries, and it has close economic relationships with many of its direct and indirect neighbours. Although Hungary is landlocked,

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it has overcome this disadvantage by developing major inland ports along the Danube River, creating an advanced infrastructure and access to the Black Sea. Furthermore, two corridors of the Trans-European Transport Network (TEN-T) traverse the country. The increasing number of direct air cargo connections with Belt and Road economies such as Hong Kong, Qatar and Turkey, makes Hungary’s a trans-shipment hub in CEE, from where goods can flow toward other CEE countries. As a result, the amount of cargo being handled by Budapest Ferenc Liszt International Airport has been increasing for years; in 2016, for example, this share grew by 23 per cent from the year before to a total of more than 112,000 tonnes. In order to meet increased demand, the BUD:2020 programme has been launched, the amount of which reaches HUF50 bn (€160 mn). Within the framework of this development project, a new logistics centre will be set up at Terminal 1, dedicated specifically to cargo traffic and companies engaged in

transport, but it also includes extensions related to passenger traffic.

The Hungarian rail network is also undergoing considerable expansion and re-organisation, the main focus of which is on the modernisation of the Budapest-Belgrade railway line. It is designed to improve Hungary’s connections with seaports in the Adriatic and Mediterranean Seas, including the Greek Port of Piraeus co-operated by China’s COSCO Shipping. Additionally, Záhony must be mentioned, which is a major railway junction on the Trieste-Budapest-Kiev-Moscow-Khorgas transport corridor.

PIONEERING ON THE CULTURAL FRONT Hungary is also active in promoting inter-cultural and people-to-people exchanges with China in fields such as tourism and the arts. In terms of tourism, the China-CEEC (CEE Countries) Tourism

Coordination Centre, opened in Budapest in 2014 and the China National Tourism Administration (CNTA)’s first CEE-based tourism office, opened in Budapest in 2016, should be highlighted. Both are good examples of the success of the Sino-Hungarian touristic co-operation.

From the first Chinese Film Festival in Hungary in 1953 to the official premiere of Kung Fu Yoga, at the city’s Urania National Film Theatre in April 2017 (also attended by Hong Kong action star Jackie Chan), films and arts have proven to be an important way for China to connect with the Hungarian people. The first Sino-Hungarian co-production film, China, Hungary and the Soccer, made a successful debut at the opening ceremony of the Beijing Hungarian Cultural Institute in Budapest in 2013. The funding of the film was provided by the Hungarian National Film Fund, which has given an impetus to the co-operation between the two countries also in the film industry.

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COMPANIES MANAGING RAIL FREIGHT SERVICES BETWEEN CHINA AND EUROPE Author: Katalin Miklós

The expansion of rail links is one of the priority infrastructure plans to improve trade relationships between China and Europe. There is a growing number of freight trains running between the eastern and western end of the Eurasian continent; below, we are introducing the companies managing them.

THE TRANSPORT COORDINATING COMMITTEE OF CHINA-EUROPE FREIGHT TRAINS The “One Belt, One Road“ initiative, announced by China’s leadership, seeks to create closer links in several different fields in the Eurasian region. One element is the development of infrastructure links, which includes, among others, the development and expansion of existing rail and road networks, and the establishment of logistics hubs, industrial parks, and other transport facilities. The initiative is a grandiose concept, which, however, lacks one single central management organisation; developments conceived in different fields fall within the competence of different and often not easily identifiable bodies.

The expansion of rail links is one of the priority infrastructure plans to improve trade relations between China and Europe. The number of trains called China-Europe freight trains in Chinese and CR Express in the English translation used by the Chinese (CR stands for China Railways) has been rapidly growing in recent years, and an increasing volume of goods arrive in Europe in this way, but it is hard to see which companies organise and operate these services. In

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May, 2017 a committee dedicated to carrying out coordination tasks, the Transport Coordinating Committee of China-Europe Freight Trains, was set up in Beijing. The establishment of the Committee was initiated by China Railway Corp., responsible for the railway strategy of the BRI, and, in addition to the China Railway Container Transport Corp., Ltd., consists of companies of seven large logistics centres: • Yuxinou (Chongqing) Logistics Co., Ltd. • Chengdu International Railway Service Co., Ltd. • Zhengzhou International Hub Development and Construction Co., Ltd. • Wuhan Hanou Logistics Co., Ltd. • Suzhou Zongbao Tongyun International Freight Forwarding Co., Ltd. • Yiwu Tianmeng (Timex) Trading Co., Ltd. • Xian International Inland Port Multimodal Transportation Co., Ltd. The goals set for 2018 suggest that the number of freight trains travelling between China and Europe is intended to be increased up to 4,000. Currently, there are considerably more trains running from China to Europe than in the other direction; the goal is that

2011 2012 2013 2014 2015 2016 2017

China-Europe Europe-China China-Europe Europe-China China-Europe Europe-China China-Europe Europe-China China-Europe Europe-China China-Europe Europe-China China-Europe Europe-China

Trains 17 0 42 0 80 0 280 28 550 265 1,130 572 2,399 1,274

TEU 1,404 0 3,674 0 6,960 0 23,804 2,266 47,132 21,770 97,400 48,394i 212,000 105,930

the number of freight trains travelling from Europe to China should reach 60 per cent of those travelling in the other direction. To this end, the coordination of services must be improved, costs must be cut and transit at border crossing points must be accelerated. They wish to develop the southern branch of the railway line to Europe, and the lines toward Lithuania, Latvia and Ukraine. The committee’s tasks include the assessment of foreign rail and transport companies, and providing Chinese companies that want to cooperate with a foreign partner with information.

The safety of transport, electronic anti-theft systems along the full line and traceability are important issues. By setting up a standard container platform, a refrigerated transport chain would be provided; the containers of both China Railway and the members will be used.

lines run from China to Europe and 19 run into the other directions. Unfortunately, there is no standard information on these lines, the links between Chinese and European cities; incomplete data on the different services can be collected from the homepages of railway companies and news items on the “One Belt, One Road” initiative.

Priority tasks include the development of digitalisation, setting up an information platform, and the development of information exchange between the railway companies, customs authorities and transport companies of participating countries.

Yuxinou (Chongqing) Logistics Co., Ltd. is a pioneer of rail freight transport between China and Europe. The name of the company has been coined by combining the former name of Chongqing (Yu), the first syllable of the name of the Uyghur Autonomous Region (Xin) and the first syllable of Europe’s Chinese name (Ou).

We can encounter such Chinese names of various lines in other services, too; they are used as brand names and appear on containers and packaging.

The statistics published on the homepage of the China Railway Container Transport Corp. reveal that the number of freight trains travelling between China and Europe, and Europe and China changed in the period 2011-2017 as shown by the data of the table.

The information of the China Railway Container Transport Corp. reveals that currently 43 Chinese cities are linked with 42 cities in 14 European countries by the freight trains running between China and Europe. Since 2nd April, 2018, freight trains have been travelling on 65 designated routes, 46 of these

YUXINOU (CHONGQING) LOGISTICS CO., LTD. Situated in Sichuan province in southwest China, Chongqing has been the one of the first Chinese cities to establish rail freight connections with Europe: the service was mainly used by automobile factories and electronics manufacturers to manage logistics between business premises located on two different continents.

Yuxinou (Chongqing) Logistics Co., Ltd was established on 11th April, 2012 by five related companies.

Its members include DB Schenker China Ltd., China Railway International Multimodal Transport Co., Ltd., the Transport Holding of Chongqing, Kaztransservice (the container fleet operator of the Kazakhstan Railways) and RZD Logistics (the logistics operator of Russian Railways). The management of the company

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2013 2014 2015 2016 2017

China-Europe Europe-China China-Europe Europe-China China-Europe Europe-China China-Europe Europe-China China-Europe Europe-China

includes a European member, too; its President is Thomas Lindy Sørensen, CEO of DB Schenker North/ Central China.

DB Schenker offered tailor-made rail logistics services to manage freight transport between China and Europe already in 2013. It operated regular block trains from Chongqing to Duisburg for a leading electronics manufacturer, its regular train service from Leipzig to Shenyang was used by a prestigious car manufacturer, another one from Qingdao to Moscow was used by a European component manufacturer, and it also transported cosmetics from China to Kazakhstan.

As a pioneer of China-Europe rail trade, Yuxinou launched a pilot service to Moscow in 2011, and transported components from Europe for the Changan Ford automobile factory in 2013. By the end of 2017, 1,500 runs had been made. In 2016, 420 runs were made, 278 of them travelled from China to the west, and 142 were inbound. The cargo mix transported to the west mainly included IT articles, machinery and equipment, automobiles and parts, and coffee beans, whereas mainly automobiles and parts, machinery and equipment, cosmetics, beer and milk powder were imported from Europe.

The main route is the Chongqing – Duisburg line, which enters the territory of European Union via the Brest-Małaszewicze border crossing point. The average running time is 13 to 15 days; this line provides connection with several further countries, such as the Czech Republic, Ukraine, Lithuania, Latvia, the Netherlands, Belgium, France, Italy, Switzerland, Hungary, etc.

Another route links China with five Central Asian countries and Russia via Dostyk and Almaty.

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Trains 31 0 45 0 72 31 291 169 541 324

Total 31 45 103 460 865

CHENGDU INTERNATIONAL RAILWAY SERVICE CO., LTD. The Chengdu International Railway Service Co., Ltd. was founded on 28th March, 2018. Its members include the Chengdu Rongou Investment and Development Co., Ltd. and the Chengdu Sinorailway South-West International Logistics Co., Ltd. The Chengdu Rongou Investment and Development Co. is a spearhead of the “One Belt, One Road” initiative; it is a subsidiary of the Chengdu Industrial Investment Company, which has a subscribed capital of 600 million yuan.

The number of services launched from Chengdu in the period of 2013-2017 can be seen in the table.

Additionally, they also have an extensive logistics network domestically, trains are operated together with 11 cities, including Shenzhen and Ningbo.

Trains leaving from Chengdu are called Rongou trains – a combination of Chengdu’s former name and the first syllable of Europe’s Chinese name.

Main routes are as follows: Chengdu – Łódź, Chengdu – Tilburg, Chengdu – Nurnberg, Chengdu – Moscow, Chengdu – Vienna, Bratsk – Chengdu, Lesosibirsk – Chengdu, Chengdu – Alashankou, Chengdu – Khorgos.

Routes are divided into three groups: the middle line is the Chengdu – Łódź service, which stretches farther toward Kutno, Nurnberg, Tilburg, Prague, and other European cities. The southern line runs from Chengdu

COMPANIES MANAGING RAIL FREIGHT SERVICES BETWEEN CHINA AND EUROPE

to Istanbul, covering areas in Central and Western Asia as well as Southern Europe. The northern line goes to Moscow, and introduces CIS countries and Eastern Europe into the rail bloodstream.

In addition, the first Milan – Chengdu service was launched on 28th November, 2017, carrying machinery, quality furniture and tiles to China.

The company has a customs terminal suitable for receiving meat imported from Europe, with a reefer terminal and a cold storage depot of a capacity of 3,000 tons.

It transports colour television parts for TCL from Chengdu to the assembly plant in Poland.

ZHENGZHOU INTERNATIONAL HUB DEVELOPMENT AND CONSTRUCTION CO., LTD. Zhengzhou is one of the centres of the New Silk Road.

Since it is situated at the intersection point of the north-south and east-west railway lines, it is an ideal logistics and warehousing hub. Zhengzhou International Hub Development and Construction Co., Ltd. was established on 26th June, 2013. The collective name of services from Zhengzhou, like in other cities, is Zhengou freight trains. The main railway link to Europe is the Zhengzhou – Hamburg service, which reaches its destination via Alashankou or Erenhot, taking 10,214 and 10,484 kilometres respectively.

Another important line links Zhengzhou with Munich, again, via Alashankou or Erenhot; the distance here is 10,650 and 10,920 kilometres. The average running time is 15 days, which is 22-27 days shorter than ocean shipping time, and cost is 20-80 per cent cheaper than air freight, depending on weight.

Since 18th July, 2013, when the first service was launched, a total of 1,187 freight trains have carried goods between China and Europe (683 outbound and 504 inbound ones), with a total value of US$ 6,277 billion and a total weight 605,000 tons.

The warehousing hub in Zhengzhou receive shipments from the Yellow River and the Pearl River Delta, the Bohai Bay and the north-eastern industrial region – that is, three quarters of Chinese provinces. Korea, Japan and Taiwan are easily accessible by sea. It is connected to 121 cities of 24 countries abroad and cooperates with 780 foreign companies.

Zhengzhou International Hub Development and Construction Co., Ltd. maintains relationships with some 50 European, Russian, Central and East Asian logistics companies, and Polish, Kazakh, and Belarus railway companies. Negotiations have begun with railways in Turkey, Luxemburg, Bulgaria and Lithuania

on establishing a shared centre of collection, the development of the southern European line, the construction of logistics hubs, etc.

The company has developed a customs clearance platform for online trading companies, and operates its own online trading site named Banliego. In addition to online trading, they are present also “offline” in many supermarkets with their own display stores, and imported goods can be looked at in a central display room in the Zhengzhou development area.

WUHAN HANOU LOGISTICS CO., LTD. Wuhan Hanou Logistics Co., Ltd. was founded on 25th March, 2014. Europe-bound trains leave China either at Alashankou (Hanxinou trains) or Manzhouli (Hanmanou trains), reaching Europe within 14-17 days on average. Trains leaving from here reach 60 cities in 28 countries. Transported goods tend to be aircraft, automobile and bicycle parts, machinery components, electronics, textiles and chemicals, food, etc.

A rail freight service between Wuhan and Europe was launched in 2014, with only 23 trains. This figure increased to 92 in 2015 and 122 in 2016; in addition to this westward direction, trains are operated returning from Europe, importing timber from Russia, dairy products from Belarus, wine from France, automobile parts, and meat products from Germany to China. Railway lines running across Wuhan link the Southeast Asian region with Russia and Central Asian countries.

SUZHOU ZONGBAO TONGYUN INTERNATIONAL FREIGHT FORWARDING CO., LTD. Suzhou Zongbao Tongyun International Freight Forwarding Co., Ltd. was established on 2nd April, 2011; it is a subsidiary of Suzhou Gaoxin Free Zone and Logistics Co., Ltd. Trains running from Suzhou to Europe cross the Chinese border at Manzhouli (Sumanou trains),

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and several train services are operated in cooperation with Russian Railways. The main route that leaves from here is the Suzhou – Warsaw line; the journey of 11,800 kilometres takes 14 days on average.

In five years, 346 trains ran between Suzhou and Europe, carrying goods of a total value of US$2.98 billion. In the first ten months of 2017, 104 trains were running along the line, carrying goods worth US$925 million. 45 of the trains ran from Europe to China, the value of such imported goods amounted to US$162 million.

Through Suzhou’s Taicang port, Japan and Southeast Asia can be linked to the Eurasian railway network, and the multimodal logistics hub smoothly forwards shipments arriving by sea.

YIWU TIANMENG (TIMEX) TRADING CO., LTD. Yiwu Tianmeng (Timex) Trading Co., Ltd., founded on 28th February, 2012, is the operator of Yixinou trains leaving from Yiwu. The company has several agencies abroad, in Madrid, Duisburg, London and Paris.

The main route is the Yiwu – Madrid line, which was launched in 2014, and reaches the Spanish capital via Małaszewicze and Duisburg. Apart from Madrid, freight trains leave from Yiwu for London, Tehran, Chelyabinsk, Minsk, Riga, Prague and Mazar-i-Sharif.

In addition to eastward traffic, trains run on their way back, too: the western and eastern ends of the Eurasian continent have been linked by the Madrid – Yiwu service since 2015 and the Prague – Yiwu and London – Yiwu services since 2017.

XI’AN INTERNATIONAL INLAND PORT MULTIMODAL TRANSPORTATION CO., LTD. Established on 11th October, 2016, Xi’an International Inland Port Multimodal Transportation Co., Ltd. is the operator of international freight trains leaving from Xi’an (Changanhao trains).

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The main Europe-bound routes run from Xi’an to Hamburg, Budapest and Kouvola. The Xian – Hamburg line is 9,547 kilometres long, the journey takes 16-18 days, and the train reaches the German port city via Alashankou, Iletsk in Kazakhstan, Brest and Małaszewicze.

The Xian – Budapest line is 8,767 kilometres long and reaches Hungary via Iletsk, Kazakhstan, Suzemka, Russia and Chop, Ukraine in 13-15 days.

The Xian – Kouvola line is 9,110 kilometres long, the journey takes 13-15 days and arrives in the Finnish capital via Kazakhstan and Buslowskaya, Russia.

At the end of 2017, a return train service left from the Finnish city, carrying timber, machinery, work clothing and ship components to China. The service was organised by Kazakhstan’s KTZ Express along with Xi’an International Trade & Logistics Park and Kouvola Innovation Ltd. OTHER COMPANIES COORDINATING RAIL FREIGHT SERVICES One of the major difficulties of mapping the rail infrastructure development unfolding within the framework of the “One Belt, One Road” initiative is the lack of comprehensive information on projects. In addition to the companies and routes detailed above, there are several other links; from a Hungarian perspective, the Changsha-Budapest-Changsha service is significant. It is operated by Xiangou Express Logistics Co., Ltd., and apart from Budapest, there are services to Duisburg, Hamburg, Moscow and Minsk as well.

Freight trains running from Changsha to Budapest and vice versa are coordinated by a Chinese-Hungarian trading company and a related Hungarian logistics company. Transport capacity is booked in China, the trains reach Hungary via Kazakhstan, Russia, Ukraine and Dobra, Slovakia. On the Kazakh-Chinese border, where gauges are switched, the most critical factor is not the speed of transshipment, but the availability

COMPANIES MANAGING RAIL FREIGHT SERVICES BETWEEN CHINA AND EUROPE

of wagons. They are ordered from Russian TransContainer.

In addition to the Hungarian example, there are several news items about further Chinese and foreign logistics companies transporting goods from China to Europe on the new railway Silk Road. Automobiles and automobile parts account for a significant part, some 15 per cent, of the cargo – Volvo, for example, moves S90 vehicles made at its plant in Daqing, China, to Zeebrugge, Belgium. The service is managed

by Beijing Changjiu Logistics and HAO International Logistics. But automobiles and parts are transported between China and Europe also by APL Logistics and Russian Railways-owned Gefco; and these are just some examples.

The number of routes is increasing rapidly, too. The Eurasian rail bridge links China as well as surrounding countries to Europe. Japanese Nippon Express logistics company has launched a new service recently: it provides transport through maritime or air transport from nine Japanese cities to Chinese railway hubs, where cargo hits the rails to Europe. The products of the Japanese company arrive by sea in Dalian and

by air in Chongqing, and in both cases the European destination is Duisburg.

CONCLUSION On the basis of the information above, it can be concluded that rail freight services between China and Europe form a complex, intricate, extremely dynamically expanding, multi-stakeholder network. China Railway, the Chinese companies comprising the Transport Coordinating Committee of China-Europe Freight Trains, the Russian and the Kazakh railways all take part in operating the trains, and transport is coordinated through countless logistics companies.

However, there are opportunities for not only Chinese but also foreign companies to enhance their trade relations, as these trains run in both directions.

The quality of service is continuously improving, temperature-controlled transport chains, tailor-made solutions, door-to-door transport and end-to-end monitoring are available for customers. As in previous years, rail links are expected to be further expanded; they will be worth exploring and analysing at a later stage.

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Belt and Road Forum 2018

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Belt and Road Forum 2018 Author: PAIGEO

The second international conference on the Belt and Road Initiative (BRI), i.e. the One Belt One Road Initiative was organized by Pallas Athene Innovation and Geopolitical Foundation at Café Gerbeaud on 15 May. Boasting plenty of visitors, this professional event has provided an opportunity for excellent international experts to present their recent research in this topic and exchange their views and opinions.

In the opening speech of the event, President of PAIGEO Norbert Csizmadia argued that we are living in the world of complexity and connectivities.

In this world relations are highly important at the level of regions, countries, as well as institutions and people because they have or can have an influence on our multipolar world. The President briefly introduced the issue of the Hungarian Geopolitics (HUG), the journal of Pallas Athene Geopolitical Research Institute on the One Belt One Road Initiative, published in both Hungarian and English, and the Central and Eastern European Geopolitical study written by Ágnes Bernek and published by the Foundation.

The opening speech was followed by two introductory presentations. Ágnes Bernek geopolitical analyst and expert of the Hungarian National Trading House spoke about the position of Central and Eastern Europe in the world. Geographical location not necessarily equals geopolitical position, and our region can be considered a buffer zone between the West and the East, with dozens of current or future natural and artificial corridors connecting Central and Eastern Europe with the surrounding regions (Western Europe, the Mediterranean region, Asia): for instance, the pipelines from Russia, the elements of the Trans-European Transport Network (TEN-T) or the infrastructure elements to be established under the One Belt One Road Initiative. However, this buffer zone role is rather disadvantageous to the region, so a geopolitical strategy is needed for the exploitation of the opportunities offered to the region by the

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New Eurasia built along the One Belt One Road Initiative.

In the second presentation Matt Ferchen, nonresident scholar at the Carnegie-Tsinghua Center for Global Policy and Associate Professor at Tsinghua University presented two rivalling theoretical frameworks that help us understand China and the One Belt One Road Initiative better. The first approach can be called the concept of peaceful development, which is China’s official narrative in relation to the One Belt One Road Initiative. In this political and economic framework, economic development and peace interact with each other: economic development means the basis for global peace and stability, and the peaceful circumstances allow economic growth, which is in the interest of everyone.

One of the key elements of the concept is infrastructure: China has the capacity to provide infrastructure development with plenty of economic opportunities for other countries. This may increase the living standards, bringing about political stability and further economic growth, too. This means that Chinese infrastructure investments are beneficial to both parties, so it is a win-win situation.

The other approach is the geo-economic or mercantilist narrative, which – although it already existed before Trump’s election in several countries - is basically the official American approach today regarding the One Belt One Road Initiative. This approach deems the BRI as China’s neo-mercantilist

ambition. Accordingly, the Asian giant endeavors to gain a geopolitical influence with economic devices, so the agreements that seem to be solely economic cooperation facilitate the building of China’s power. The geo-economic narrative rejects the win-win approach because it in this view it is a zero-sum game with one winner and one loser.

Although the representatives of the two approaches will not give up their standpoints in the near future, the two narratives might help certain geopolitical actors comprehend the whole situation and judge whether they need what China offers.

China has a vision and a strategy; however, the nation-states and regions often have no definite concepts about how to fit into these plans and exploit the benefits of the Chinese initiative.

The conference continued with three sessions. A the first one, the speakers examined the relationship of the European Union and China in the context of the One Belt One Road Initiative. The participants were Liu Chunrong, Co-director of Fudan-European Centre for China Studies at the University of Copenhagen, Marek Hrubec, Director of the Centre of Global Studies at the Czech Academy of Sciences, Li Zhen, President of the European Institute for One Belt One Road Economic and Cultural Cooperation and Development, and He Zhigao, Assistant Professor of the Institute of European Studies. The session was moderated by Anton Bendarzsevszkij, Director of PAIGEO. According to Liu Chunrong, a new narrative is needed in the China-EU relations due to the different views of the two parties. Marek Hrubec emphasized the importance of regional and macroregional institutions, while Li Zhen and He Zhigao suppose that diplomacy and cooperation

should take an important role in the improvement of the Europe-China relations.

The second session focused on the infrastructure systems to be established under the One Belt One Road Initiative, including railway links as well as their economic, political and social influences. In this session, David Blundell, Professor of Asia-Pacific Studies at the National Chengchi University in Taiwan, Viktor Eszterhai, Senior China Scholar at PAIGEO, Jakub Jakobowski, Senior Fellow at the Centre for Eastern Studies and Péter Bucsky for Rail Cargo Hungaria Zrt. The moderator was Tamás Baranyi, Head of Research at Antall József Knowledge Centre. David Blundell highlighted the historical background of the Eurasian relations, while Viktor Eszterhai, Jakub Jakobowski and Péter Bucsky focused on the Eurasian railway links and their significance for the Central and Eastern European Region and Hungary The final, third session of the conference was about the Eurasian economic corridor as well as the role and opportunities of Central Asia, including Kazakhstan. Speakers included Charles Sullivan, Assistant Professor at Nazarbayev University in Kazakhstan, Pál Gyene, Assistant Professor at Budapest Business School and Anton Bendarzsevszkij. The debate was chaired by László Vasa, Deputy Director for Operations at the Institute for Foreign Affairs and Trade and Research professor at Széchenyi István university. Charles Sullivan and Pál Gyene highlighted Kazakhstan’s key role in the “One Belt One Road” Initiative, while Anton Bendarzsevszkij spoke about a new and ongoing project of PAIGEO Research Institute, aiming to map the Northern branch of the New Silk Road.

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New World Order conference

integration and multipolarity

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New World Order conference: integration and multipolarity Author: PAIGEO

PAIGEO’s New World Order international conference was held for the second time this November, and on this occasion it examined the issue of integration and multipolarity. Geopolitical reality has changed in the 21 st century: whereas during the previous decades the world had been unipolar with the US as the leading power, today its dominance is being questioned in many aspects by various actors – such as China, India or the ASEAN countries – who all seek to play a larger role in global affairs.

The conference aimed to find answers to the following questions: can the bipolar world order return (with new actors), or are we witnessing the rise of a multipolar world order? Can smaller countries become rivals of the US by forming integration blocs? We summarize the event’s most important thoughts.

The conference was opened by Norbert Csizmadia, president of the Pallas Athene Innovation and Geopolitical Foundation’s board of trustees.

He explained that there is a new geopolitical reality in the 21st century, and instead of the previous unipolar world, we are witnessing the rise of Asia. In order to get to know the new world, we need new maps and new viewpoints.

The first keynote speech of the conference was given by Yukon Huang, senior fellow in the Carnegie Asia Program and formerly the World Bank ’s country director for China. In a compelling presentation supported by a wealth of data, he examined what the trade war between the US and China is really about.

He refuted claims that form an important part of the US government’s reasoning in the economic confrontation between the two countries. One of his main arguments was that, despite the

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widespread belief, there is no relationship between America’s trade deficit and China’s trade surplus – in other words, the former is not the consequence of the latter –, since the American trade deficit is currently increasing, but the Chinese trade surplus is decreasing (and will become a deficit over time). Huang asserted that the real cause of the US trade deficit is America’s enormous budget deficit, while the real cause of the Chinese trade surplus is Chinese household savings – and the two are not related.

Huang also refuted another widespread claim: that there is too much American investment in China, which hurts the US economy. In reality, only one per cent of American foreign investment goes to China. On the other hand, European investment in China is much larger, which is due to European export to China, since European companies invest in China in order to expand the country’s market. At the same time, American

export to China is comprised mainly of products and product groups (such as waste or agricultural products) whose consumption might not be possible to increase even with local investment.

Huang said the trade war is part of a geopolitical contest between the world’s two leading powers.

One aspect of this relates to global finance: in contrast to trade, China’s power in terms of the global financial system is nowhere near that of the US; America is the sole dominant power in this field. This could change if China could make its own currency (the RMB) global, but this is not realistic in the near term.

What is realistic, however, is for China to become a powerhouse in R&D, and this is indeed its stated aim. One of the US government’s grievances is precisely that China is not going about this ethically, since it steals technology from foreign companies.

This is a further important cause of the trade war.

There is also a subjective side of the hostility, namely the Western world’s irrational uncertainty regarding China. According to a poll, America is considered the world’s leading economic power everywhere in the world – except for the US and Europe, where China is. However, China is decades away from becoming a real great power, which is clearly illustrated by the fact that the gap between American and Chinese income per

capita is not decreasing but increasing – and this index is more important in terms of being a great power than the size of the economy.

The second keynote speech of the conference was given by János Martonyi, former foreign minister of Hungary. At the beginning of his comprehensive presentation, he explained that the main driver of history is culture, which is the major influence on demographics and technology, the two most important factors in terms of geopolitics.

In addition, human nature’s competitiveness greatly affects the development of history, which is true on the level of individuals and collectively as well. As a result, competition is constant in the fields of commerce, economy, technology, politics etc. In contrast to earlier eras, however, numerous previously unrelated fields are now connected. Accordingly, Martonyi described our world with a word stemming from neurology, heterarchy: this means the current world is not characterized by vertical hierarchical relations, but relations without specific rankings.

Martonyi believes the cause of the trade war between the US and China is not trade but geopolitical rivalry, of which trade war is only one dimension. Due to the geopolitical contest between the two great powers, the risk of real wars breaking out in the world is increasing.

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An important question for Hungary is how the trade war affects the European Union. There are opinions that the EU benefits from it, but in reality the conflict harms everyone in the long term.

Overall, it can be said that in our uncertain world, the EU seeks to present its own vision to the world as an example. This includes, for example, an order based on rules and multilateral agreements, and the EU thereby sets an example of how a world order based on global cooperation could function.

Following the keynote speeches, the topic of the first panel was the geopolitics of integration blocs. The presenters were György Szapáry, advisor to the governor of the Central Bank of Hungary and former US ambassador, Darwis Khudori, associate professor at the University of Le Havre, Anton Bendarzsevszkij, director of PAIGEO and analyst of the post-Soviet region, and Tamás Csiki Varga, research fellow at the Center for Strategic and Defense Studies, National University of Public Service, Hungary. The chair was Viktor Eszterhai, senior China analyst at PAIGEO. György Szapáry’s presentation examined what factors are required for a country or an integration to become a geopolitical power. According to him,

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a large enough population, area, GDP, military power, reserve currency and natural resources are indispensable, as is having access to an ocean and the ambition to become a world power.

Taking account of the world’s largest countries and integration blocs, Szapáry stated that while Europe is an economic powerhouse, it could hardly play a role like the US or China since it is not unified; moreover, Europe is more comfortable with supportive roles. Ambition to become a global power is not something Russia lacks, but its economy is too weak for this role. Regional integration blocs like ASEAN, CPTPP and others will remain relevant only at a regional level. Only China meets all the criteria mentioned, therefore it will be the only superpower besides the US in the future. In summary, we can expect a bipolar world order, but one in which the US will keep playing a leading role for a long time.

Darwis Khudori’s presentation sought to answer the question whether the rise of Asia will lead to a new world order. He gave a historical overview of the mechanisms of colonization by Western powers, as well as the principles of the Bandung conference, held in 1955 by countries newly

New World Order conference: integration and multipolarity

independent from their colonial masters. Khudori outlined how Western domination continues in our post-colonial age in the fields of science and technology, information and communication, financial systems, weapons of mass destruction and access to natural resources. Since Asian countries are following the Western development model, he believes that peaceful development in Asia cannot be expected due to this model’s destructive past and exclusive nature.

Anton Bendarzsevszkij talked about the Eurasian Economic Union’s (EAEU) present and perspectives. Following the collapse of the Soviet Union, several economic cooperation formations were created, but they do not represent a linear developmental arch. There are serious tensions within the customs union which forms a part of the EAEU. In reference to György Szapáry’s presentation, it can be said that Russia is unable to become a world leader even through the integration organized around it.

In the first panel’s last presentation, Tamás Csiki Varga looked at integration blocs from a little examined viewpoint, the perspective of small

countries. He examined the benefits and disadvantages of integration for countries with small areas, and found that the benefits can be grouped into the following categories: socialization (e.g. the period after joining the EU), easier articulation of interests, benefits of structural power (the EU is a good example again), defence (e.g. NATO membership), and increased capacity to fill potential power vacuums. An integration will be attractive to a small country if it offers at least one of these benefits. At the same time, small countries must be careful to safeguard their interests when power relations between big countries change – like in today’s changing world order.

The topic of the second panel was the place of the Visegrad Group (V4) countries in the changing world order. The panel included a roundtable discussion instead of separate presentations.

The discussion was led by Dániel Bartha, director of the Centre for Euro-Atlantic Integration and Democracy, and the participants were Michal Kořan, president of the board of the Global Arena Research Institute in the Czech Republic, Márton Ugrósdy, director of the Institute for Foreign Affairs and Trade in Hungary, Michal

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Bogusz, analyst at the Centre for Eastern Studies in Poland, and Tomáš Strážay, senior analyst at the Slovak Foreign Policy Association in Slovakia.

Tomáš Strážay believes the V4 is an ideal formation for Hungary. The Czech Republic, on the other hand, is increasingly turning inwards, paying little attention to its neighbours. Poland has created other regional formations too, which can complement the V4. For Slovakia, the V4 is of strategic importance, since it is the only member state with a shared border with all three other members. As far as cooperation between the V4 and other countries is concerned, cooperation with Russia cannot be expected, since Russia prefers bilateral relations. For China, the V4 is too small, therefore it has chosen the 16+1 formation for cooperation. The V4 has made attempts at unified relations with the US, but the way this will progress is up to America.

Márton Ugrósdy explained that the V4 member states, being small countries, could not accomplish a great deal in foreign relations on their own. A further reason for this is that they have given up a substantial part of their sovereignty

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with the EU accession. However, the EU’s set of rules results not only in restrictions, of course, but also provides protection. One example is Hungary’s relationship with China: as an EU member state, Hungary is in a better position than if it negotiated with China on its own; furthermore, community rules prevent a potential situation like the Chinese debt trap in Africa.

Michal Kořan stated that the V4 is not competitive globally and its position keeps deteriorating.

The countries in the region have lost their economic edge that cheap skilled labour gave them after the collapse of communism, and they are not prepared for the future. Education and technology are crucial for the future, but the V4 countries are not competitive in these fields and the quality of their education is inadequate. Kořan believes it is a misconception that Chinese capital is required for the development of these countries. He argues that the capital is available locally, but it cannot be invested due to the lack of necessary innovation potential and talents produced by the education system. The few technological developments that do take place usually serve the interest of state power, for example through

New World Order conference: integration and multipolarity

the more efficient surveillance of citizens. While public affairs are dominated by topics such as the EU’s excessive powers and Russian and Chinese influence, we are not discussing and dealing with what really matters: preparing for the future.

Michal Bogusz talked about the relationship between China and the V4, as well as the wider Central and Eastern European region. He believes China wishes to do business in the region according to its own conditions, not to EU rules.

The reason it invests heavily in the Balkans is because it can set the conditions there. Bogusz argued that the 16+1 cooperation between countries in the region and China is not working because the member states’ interests are too divergent, and also because for China this region is just a “stop” towards Western Europe. In fact, we attach more importance to Chinese presence in our region than China does. Accordingly, the V4 is not important for China, and we are only fooling ourselves if we believe we can be a bridgehead between China and Western Europe.

Africa was also discussed: Strážay believes the continent may become the battleground for a conflict between the West and China. China seeks to increase its economic and political clout with its

Belt and Road Initiative, as well as spread its own business practices. In order to counter that, several West European countries are now paying more attention to Africa. Ugrósdy said the relationship between Africa and the EU will be complicated, since EU member states will leave solving problems in Africa to the EU. According to Bogusz, the EU’s situation is made more complicated by China pointing to Brexit, the presidency of Donald Trump and the various crises besetting the West and saying to developing countries that the Western political model is bad, unlike the Chinese model which works fine and is therefore worth following.

The question arose how the V4 member states could cooperate in various fields. In the case of Africa, this is already given, since the V4 countries belong to the most generous supporters per capita in the EU – however, this should be propagated more widely. On the other hand, Kořan said it makes no difference that there are large-scale plans (e.g. about digitalization in the Czech Republic) if the bases for their realization are missing.

In summary, the audience witnessed an exciting conference this year too, with lively debates about a current topic. You can view pictures taken at the event here.

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PAIGEO EXPEDITION THE “BELT, AND ROAD” PROJECT

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THE “BELT, AND ROAD” PROJECT The Eurasian Corridor Author: Anton Bendarzsevszkij

In the period of five years that has elapsed since the announcement of the New Silk Road (the “Belt and Road Initiative”, hereinafter referred to as BRI) considerable financial investments and plans have been made to actually set up an economic belt extending over the new Eurasia. The China Development Bank has set aside some $900 million for hundreds of projects.

THE BRI PROJECT Although the major BRI projects seem very distant to Europe, the study of the major nodes and economic corridors of the new infrastructure network being established within the framework of the scheme has an important lesson also for Hungary. The Kazakhstan-Khorgos dry port, which has set the ambitious goal of becoming the world’s largest dry port, is the most important Eurasian gateway and a major logistics hub on China’s overland trade route. In the context of the construction of the Budapest-Belgrade railway line, constituting an element of The New Silk Road concept, it can be treated as a kind of example for Hungary, which cherishes similar ambitions. The other one is the China-Pakistan Economic Corridor, which links China with the Arabian Sea via Gwadar port through the highest paved international road of the world, the Karakoram Highway. Gwadar’s significance lies in, among others, that Chinese goods can reach the European continent faster through it than on traditional transport routes passing through the Strait of Malacca.

The Port of Piraeus in Greece will be one of the main distribution centres of goods, from where they are expected to reach Hungary on the Belgrade-Budapest railway line.

EURASIA’S MAIN ARTERIES The project is planned to be implemented in several phases, resulting in economic corridors linking Europe with Asia. During the implementation of the project, we start to review these corridors consistently and in full

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detail, completed by field work, to achieve a detailed and scientifically grounded picture of the Belt and Road initiative, its current results and its future.

In the first phase of our research, we are studying the Eurasian Economic Corridor, and our choice can be justified by two reasons. First, this is the corridor that links China with Europe via Kazakhstan, Russia, Belarus and Poland, which is a network based on an already functioning rail link. Second, the Eurasian corridor has also symbolic significance, as the launch of the BRI project was announced by Xi Jinping in Astana, Kazakhstan – one of the key states of the corridor – in 2013.

The introduction of the project will be continued by the exploration of the other economic corridors, during which the economic corridors passing through Pakistan, Central Asia as well as Mongolia and Russia, along the Trans-Siberian Railway line will be examined.

10,000 KILOMETRES OF FIELD WORK Preparations for the first phase of the project started in January, 2018. During the months that have passed since, we have prepared field work, collected information on major players and nodes, held meetings with the most important companies and market players. In the first phase of field research, our researches left from Beijing to go along the route in China and Kazakhstan from 28th July to 23rd August. Then came Russia, Belarus and Poland in the second phase of field research, completed between 9th -23rd September, 2018. This field research is completed by another one, conducted in two railway nodes that have major importance

for Hungary, in Dobra, Slovakia and at Záhony, on the Ukrainian-Hungarian border. The first results of the research are planned to be presented in December, 2018.

The next phase of the research is expected to start in the second half of 2019.

RESEARCH PARTICIPANTS The backbone of research work is done by the researchers of PAIGEO’s Research Institute. Ádám Gbúr, a professor at Budapest Business School, is involved as a research fellow in the field research part. Ádám Gbúr travelled 35,000 kilometres by motorcycle along the route of the ancient Silk Road with his Chinese fellow-traveller in the summer of 2016, passing through those important hubs that form parts of the Chinese New Silk Road initiative. In addition, the multimedia documentation of the field research was prepared by a filmmaker colleague, Dániel Bori; he was responsible for recording interviews, cutaway shots, films and drone footages. Furthermore, the preparation of a documentary on the project will also be his task. Researchers of PAIGEO have also been involved in the different phases of field work.

Additionally, students at Corvinus University also contributed to the implementation of the project.

A practical course was launched in February, 2018, within the framework of which 13 students could dedicatedly work on the preparation of the project, and then on the collection and organisation of background data.

A UNIQUE RESEARCH The BRI project builds on several deficiencies: appropriate, detailed maps of BRI corridors and their functioning routes are still unavailable. The international media coverage of the BRI is just as vague and obscure as the lack of exact maps: plans and opportunities are mentioned, while the project was launched five years ago.

There is little known about specifics. It cannot be seen what goods move – or can move – on corridors linking Europe with Asia, and the exact volume is not known, either. The official regulations and economic policies of countries where the infrastructure project traverses are unknown. The existence and operations of logistics hubs and industrial parks along the route are not completely clear, either.

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The infrastructure corridors of One Belt, One Road and the planned routes of field research.

The project would endeavour to present specifics, trade projects already implemented within the initiative, seeking answers primarily to questions that are important also from a Hungarian perspective: what benefits does Khorgos Dry Port offer for goods transport? Why is rail transport worthwhile to companies in spite of the fact that its price is about threefold of that of maritime transport? What goods are transported by rail by China? What benefits does it offer compared to maritime transport? What competitive situation does rail freight transport create and what new questions does it raise in China-Europe relations? What benefit does the implementation of the Pakistan-China Economic Corridor represent in terms of international goods transport? Which projects have been already implemented, and how do they contribute to the acceleration of goods traffic? What capacity/utilisation do major logistics hubs/ports operate at? How is the rationality of the project seen by locals? What problems have arisen about the project? Assessing China’s regional level of infrastructural development. What does the implementation of the above-mentioned project mean to Hungary, how can it position itself in the context of the above projects?

The research aims at highlighting and documenting the answers given to these questions from several different angles. The above questions have not been

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addressed or documented on an international level, therefore a considerable interest in the results is expected. The research greatly differs from scientific analyses based on sources; its aim is a practical approach, which draws a written conclusion on the topic not only from on-site research and experiences but brings research results closer through social media – which is more easily digestible and attracts a more widespread interest – with the help of film documentation and a photo series, even to those whom would be never reached through a written from. The BRI has not yet been processed in such a detailed, scientific form combined with field research.

THE “BELT, AND ROAD” PROJECT

EXPECTED RESEARCH OUTCOMES · The series of academic publications, focussing on the questions detailed above, is expected to draw attention in both Hungary and Europe. · Research results will be presented on an interactive homepage, which is planned to be launched in December, 2018. · Making a documentary on the existing or planned corridors of the BRI. · Awareness-raising articles és reports (HUG, major Hungarian media).

·D eveloping international relationships during the implementation of the project. ·W riting a collection of scientific essays, which may be part of a series (to be continued at later stages of the project). ·P reparing an educational material and curricular development (for the PhD programmes of Corvinus, UP, BBS). · Photo exhibition. · Media coverage, continuous communications. · Raising PAIGEO’s international prestige.

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OVERLAND VS SEABORNE TRADE

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OVERLAND VS SEABORNE TRADE Authors: László Gere, Ráhel Czirják, Eszter Pálvölgyi-Polyák

Since the diffusion of container shipping, considerably emerging from the latter half of the 20th century, most of global trade takes place by sea regarding both the volume and the value of goods. In the 21st century, however, more and more special needs arise increasingly encouraging also the promotion and development of modes of overland transport. The question is as to whether there will be a real economic rationality to the advance of modes of overland transport or the dominance of maritime transport will continue to prevail.

INTRODUCTION

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Movement is as old as mankind, but we can talk about transport in its current sense since antiquity: transport activities evolved along the development of the division of labour, after the production of goods had appeared and ancient societies had been formed. We can talk about modes of land and water carriage from the dawn of the history of transport – the wheel was invented in the 4th millennium BC, around 2000 BC travelling by horse diffused, and rowing and later sailing boats appeared on water –, which were able to cover increasing distances with increasing efficiency as technology was developing. Maritime shipping is a fine example; initially, it was coastal, then, thanks to an invention of the Chinese, the compass, crossing seas and oceans became possible.

– such as the construction of motorways and the development of control systems – in addition to technological innovations related to vehicles. After World War II, “the development of high-speed vehicles started in rail transport, passenger cars became widespread in road transport, and tankers and container ships appeared in maritime shipping, while in air transport the first turboprop aircrafts then turbo jets appeared.”

The development of transport was given great impetus by the industrial revolution, initially with the utilization of steam power – both on land and water –, then, from the latter half of the 19th century, through the application of the combustion engine.

Air transport is likely to have evolved a bit later, when, after failed attempts of airships, the Wright brothers managed to fly a powered aircraft successfully in 1903.

During the 20th century, transport continued to develop rapidly, through infrastructure developments

MARITIME TRANSPORT

This study paper focusses on a narrower segment of transport, i.e. goods transport, and its overland and maritime branches in particular. It aims at providing a starting point to decide whether land infrastructure developments are relevant while the dominance of maritime transport prevails.

Modern container shipping evolved in the 1950s, and its capacities have been growing steadily ever since.

80 per cent of global trade is still conducted at sea, thus seaborne trade obviously constitutes the backbone of the exchange of goods and globalisation. In the latter half of the 20th century, the volume of goods transported by sea grew continuously, parallel with global GDP production and

the value of trade in goods (this trend was shaken considerably only in 2009, with the outbreak of the world economic crisis). The need for seaborne trade, however, is fundamentally influenced by economic growth, related to real production; its level has been permanently low since the economic crisis, which has an adverse effect on the sector. OECD’s Interim Economic Outlook issued in September, 2016 goes as far as saying that these figures, being well below past norms, imply that globalisation as measured by trade intensity may have stalled.

Another, simultaneously published OECD policy document claims that since the financial crisis the contribution to world trade from global value chains and trade liberalisation has plateaued and with creeping protectionism has gone into reverse (it is particularly relevant in the context of the trade war currently going on between the USA and China). The document concludes that substantial policy action is required to return to former growth rates.

The greatest advantage of maritime transport is that it is the ideal way to move big volumes of cargo relatively cheaply. In addition, it is a safe way of goods transportation as losses caused by incidents during transport have been very rare in recent decades. In comparison with road transport, the maritime industry is less dangerous for the environment, since this industry, moving 80 per cent of merchandise is responsible for only 12 per cent of the total of pollution generated by human economic activities.

The slowness of maritime transport, however, is a disadvantage; it is not suitable for carrying perishable goods and cannot always keep the pace required by global economic transactions. Besides, with the emergence of e-commerce, this way of transport is impractical for moving goods ordered with a short delivery time.

Basically, the greatest difficulty of containerised transport is to organise the loading of goods into containers, about which both the buyer and the seller may have different needs. In addition, empty containers owned or rented by a shipping company may mean various extra costs to freight customers. Due to the bankruptcy of South Korean Hanjin Shipping, a company also dubbed as shipping’s Lehman Brothers, several vessels of the company were stuck at sea for several months. This case highlights one of the potential problems of maritime transport: in a crisis situation, huge volumes of goods can be lost due to delays.

The profitability of maritime transport caused an enormous growth of capacities in the 2000s. The decline in demand after 2009, however, stopped growth for the first time in the history of the industry, which started a domino effect, extending beyond maritime transport. Insolvent companies were unable to service their bank loans, and this led many of the banks in the container industry to bankruptcy.

The crisis could show an example that excessive trust in the growth of a successful industry may do harm more widely. Another counterargument – or rather an issue to be resolved – on maritime shipping is the environmental aspect. “Green routes” drawn on the Baltic Sea, the Balearic Sea and the

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Structure of international maritime trade, 2014. UNCTAD Grain 4% Gas & chemicals 9%

Crude oil 16%

Petroleum products 9%

Containerized 14%

Other dry 9%

Coal 12%

Minor bulks 14% Iron ore 13%

Ionian Sea and the reduction of allowed navigation speed may contribute to preserving the integrity of marine life, but would impose additional coasts on maritime shipping. This may make maritime transport disadvantageous on certain routes, but it is important to take into careful consideration whether it is the financial burden resulting from additional shipping costs or the environmental damage that poses a problem in the long term.

The most important argument for maritime shipping may be the fact that even if infrastructure development plans include road and rail routes, high-speed railways are still awaiting construction in most places. Port and other infrastructure based on maritime routes is very well-developed, and the construction of newer ports contributes to increasing trade volumes more easily than the difficult construction of a cross-border, standard railway system. Because of ambitious railway development plans and the more developed land infrastructure being built also in developing countries, however, it is worth having an overview of the potential of rail and road transport.

RAIL TRANSPORT Overland transport was revolutionised by railways, emerging as a result of the industrial revolution.

Freight transport, and the growing need to make raw materials, processed goods and consumer products available for anyone from ever longer distances, was therefore the first “raison d’être” for railways.

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THE BRI PROJECT In the period of four years that has elapsed since the announcement of the New Silk Road (the “Belt and Road Initiative”, hereinafter referred to as BRI), considerable financial investments and plans have been made to actually set up an economic belt extending over the new Eurasia.

The China Development Bank has set aside some $900 million for hundreds of projects. The project is planned to be implemented in several phases, resulting in economic corridors linking Europe with Asia. During the implementation of the project, the Research Institute of PAIGEO will start to review these corridors consistently and in full detail, completed by field work, to achieve a detailed and scientifically grounded picture of the Belt and Road initiative, its current results and its future. In the first phase of our research, we are studying the Eurasian Economic Corridor, and our choice can be justified by two reasons. First, this is the corridor that links China to Europe via Kazakhstan, Russia, Belarus and Poland, which is a network based on an already functioning rail link.

Second, the Eurasian corridor has also symbolic significance, as the launch of the BRI project was announced by Xi Jinping in, Astana, Kazakhstan – one of the key states of the corridor –in 2013.

The project will be continued by the exploration of the other economic corridors, during which the economic corridors passing through Pakistan, Central Asia as well as Mongolia and Russia, along the Trans-Siberian Railway line will be examined.

The BRI builds on several deficiencies: any appropriate, detailed maps of BRI corridors and their functioning routes are still unavailable. The international media coverage of the BRI is just as vague and obscure as the lack of exact maps: plans and opportunities are mentioned, while the project was launched five years ago. There is little known about specifics. It cannot be seen what goods move – or can move – on corridors linking Europe with Asia, and the exact volume is not known, either. The official regulations and economic policies of countries where the infrastructure project traverses are unknown. The existence and operations of logistics hubs and industrial parks along the route are not completely clear, either.

The project would endeavour to present specifics, trade projects already implemented within the initiative, seeking answers primarily to questions that are important also from a Hungarian perspective.

OVERLAND VS SEABORNE traDE

In the 20th century, globalisation brought raw materials to ports at lower cost; furthermore, with the development of road infrastructure, road transport was expanding. Thus, in spite of market growth in industrialised countries, the volume of freight transported by train has declined overall. Of all modes of freight transport, rail market share currently stands at 18 per cent in Europe (that means approximately 2,400 billion tonne-kilometres annually). In the 21st century, however, the share of rail freight transport may see an increase again, largely due to the fact that the need for optimising transport provides an ever wider scope for using combined, multimodal ways of transport, in which rail transport, as a complementary way of transport, is given a significant role.

Rail is an ideal way of transport for products the life-cycle of which is too short for maritime transport, and for low-margin products, the transport of which would be too expensive by air.

– the cargo on the terminal territory is guarded by the security personnel; – armed guards are present at terminals and stations and also on some of the trains.

The mode of transport is determined by the value of goods: the more expensive a product is, the more it is worth transporting it by air. No other mode of transport can be competitive with the maritime transport of low-value mass products, such as clothes. Rail transport can be competitive in the transport of mid-value but heavy products such as motor vehicles and automotive parts. More sensitive electronic components, which would be expensive to be transported by air due to their size – such as servers, special equipment – may be better transported by rail because salty air may damage them during maritime shipping, and these avoidable losses may make rail transport cost-effective.

ROAD TRANSPORT

In short, three major factors can be highlighted from the advantages: – it is faster than maritime transport (as a result, it reduces the capital costs of customers significantly). It takes only 15-18 days, depending on the route, which is half of shipping time. Thanks to faster transport, certain industries can adapt faster to changing market needs, which may be an important viewpoint. Furthermore, faster transport allows for faster rotation, it is unnecessary to maintain large storage capacities (accumulate stocks), which reduces capital costs.

Transport costs depend on a lot of things, but, as a rule of thumb, rail transport is twice as expensive as maritime transport, and it costs a quarter of air transport – which is partly contributable to the fact that the Chinese government keeps rail transport costs artificially low; – it is cheaper than air transport; – currently, it is the most environmentally friendly way of transport after maritime transport.

Furthermore, rail transport has several safety benefits: – modern terminal facilities have qualified staff and are fenced in (the railway police are mostly located directly at terminals); furthermore, they are under video surveillance; – entry to the terminal is allowed with an access card only, under strict control;

The role of road transport has come to the forefront since the 1990s, with the decline of rail transport. On the one hand, it was contributable to the fact that speed had become the primary consideration in the economy, in which road transport still overtakes railways; on the other hand, infrastructure aspects also played a role, as not all logistics centres, factories or shop networks have industrial tracks, which is essential for rail transport. Although transport policies seek to shift overland transport to railways due to the considerable environmental impact of road transport, it still has a significant share.

Road transport traditionally has a dense network, as one can get to practically anywhere by road, while railway lines usually pass through only major settlements. As road transport offers door-to-door transport, it will always have a key role in global freight transport, even as a complementary to maritime or rail transport, as in most cases goods get to consumers from large distribution centres by road. The opportunities of road transport cover a wide range of cargo types as well, and even the routes can be easily modified in certain cases (as opposed to rail vehicles), therefore this mode of transport is the most flexible.

Apart from its advantages, road freight transport also has disadvantages. Over a certain distance

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OVERLAND VS SEABORNE traDE

Advantages

Disadvantages

Table 1: Characteristics of modes of transport Rail Road Water transport – the cheapest of all modes to – faster than maritime trans- – flexible: door-to-door transport transport goods in the largest port → adapts faster to changing needs – extensive network volumes – cheaper than air transport – a suitable mode for trans– the most environmentally porting almost any kind of friendly mode of transport cargo currently – creates a stable link between connected areas – capable of significant speed over long distances – inflexible transport (due to – smaller carrying capacity – slow → primarily suitable for fixed tracks) than rail transporting materials that – its specific transport cost – more specific energy are not time-sensitive, bulk is the double of seaborne consumption (compared to commodities, fuels, raw matetrade rail) and more hazardous to rials, building supplies, finished – slower than air transport the environment products – construction of rail tracks – slower than rail transport – high shares of fixed costs (port, is expensive – barriers: traffic congesmaintenance of vessels) – spatially limited (doortions, ban on lorries, tolls to-door transport is not possible)

(over 750 km, according to literature), or in the case of bulk haulage, it is not cost-effective to choose this mode. Long waiting times (e.g. at border crossing points, due to ban on lorries, or accidents, road congestions), the diversity of extra fees added to haulage (tolls, vehicle entry permits) may also pose a problem, and it is also an important factor that this mode of transport is the most labour-intensive.

SUMMARY: A COMPARISON OF THE MODES OF TRANSPORTATION Different modes of transportation have different characteristics, and certain attributes may constitute both an advantage and a disadvantage. Thus, the appropriate mode is chosen depending on the given product or cargo.

In the case of railways, for example, we can say that they are one of the most effective modes of transporting goods in long distances and in large volumes. It is faster than maritime transport – also suitable for transporting large volumes of goods – and it consumes approximately ten times less energy than road transport, therefore rail freight transport is significantly cheaper than transporting goods from one place to the other by trucks.

Fixed-track transport allows for a high degree of predictability – as there are no traffic congestions, for example – and it is also safer than road transport. But a fixed track is also a disadvantage, as it

does not allow flexible, door door-to-door transport. By contrast, road transport is rather flexible, thanks to, on the one hand, an extensive road network, and, on the other, the fact that vehicles van be used at any time, which allows for door-to-door transport, also flexible in terms of time. Its capacity, however is more limited than in the case of vessels or trains, and its specific fuel consumption is higher than that of the other two modes of transportation.

Shipping is considered to be the cheapest mode of transportation – it is not a co-incidence that shipping is still responsible for 90 per cent of world trade – but there are several other features that must be considered in transportation for an optimal delivery of cargo. Vessels have the largest carrying capacities, but they represent the slowest mode of transport. Thus, shipping is primarily suitable for transporting materials that are not time-sensitive, bulk commodities, fuels, raw materials, building supplies, finished products.

Overall, it can be concluded that the selected mode of transportation basically depends on the characteristics of goods – value, volume, best before date, fragility, etc. –, but also transport routes can be determinants. Nevertheless, the distribution of global trade is very uneven, in favour of maritime transport. Thus, it is exciting to examine whether overland infrastructure developments are relevant while the dominance of maritime transport prevails.

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THE FOURTH INDUSTRIAL REVOLUTION AND THE TASKS AND OPPORTUNITIES OF DEVELOPING COUNTRIES

Author: Pál Belényesi

Within the framework of the debate series GeoDebates, organized by Pallas Athéné Innovation and Geopolitical Foundation, a public discussion on the relationship between the Fourth Industrial Revolution (hereinafter referred to as Industry 4.0) and catching-up of developing countries was held on 22nd March, 2018. As a central issue, the question as to whether the latest industrial revolution could narrow the gap of inequalities between developing and developed regions was arisen, and if it could, what conditions were required. As an invited guest, I argued for the positive effects exerted on developing countries by Industry 4.0, and altogether, I claimed that the latest industrial revolution could offer more economic opportunities than dangers to developing regions in the mid- and long terms. The realization of opportunities, however, depends on several conditions, and the execution of some of them requires a regional cooperation between developing regions. The article below organizes my major comments made during the debate, summing up some of them and going beyond some others.

The starting point of the opinion expressed below is that the question asked is incomplete, and after its clarification, it can be much better answered by further questions and policy proposals than an accurate statement. Primarily because the latest industrial transformation is a “new topic”, a bulk of unfinished processes, analyzable data are not available in large volumes, the response of developing countries is unknown, and developed countries are also in the reflection period.

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The starting point of the analysis is that the dear reader is familiar with earlier industrial revolutions, and their effects on the labour market, therefore they are presented only by being mentioned. Similarly, the analysis does not aim at drawing parallels between developed and developing countries, therefore I acknowledge as a fact that developed economies based on export have recently outsourced a part of their labour-intensive production processes into developing

countries, and that most of the economic development of developing countries is contributable to this outsourcing.

the Third Industrial Revolution, although certain developing regions (e.g. China, India, Southeast Asia) also started to gain strength in trade independently.

BACKGROUND “Industry 4.0” is the abbreviated name for the Fourth Industrial Revolution. The transformation is characterized by the diffusion of automatized technologies, smart computing, the Internet of Things (IoT), cloud computing and cognitive computing. Its central element is that human-controlled labour processes will become machine system-controlled production processes. Parallel with the Fourth Industrial Revolution, the so-called “Society 5.0” appears, that is, a super smart society, which means a human-centred society in which cyber and physical spaces are intertwined. Artificial Intelligence, IoT, Big Data, robot technologies are combined. Society 5.0 seeks solutions for global problems, in a gender-, age- and social status-neutral way.

From a historical perspective, we can conclude that during industrial revolutions those high-income countries (HICs), with high productivity and GDP, gained grounds in trade that made their sectors of production successful in an export-oriented way (the majority of Western countries). It is true, however, that some countries exploiting a natural resource or building on tourism could also become rich (e.g. Venezuela, certain Arab countries, some nation-states of southeast Asia).

From the viewpoint of the labour market, the existing balance was usually upset during industrial revolutions, and demand and supply suddenly parted on the labour market. Old jobs became redundant or disappeared, and demand for new ones rose sharply and rapidly. During the first and second industrial transformation, the key to the development of manufactories (sectors of production) was the involvement of unqualified workforce in production processes. Developed countries took advantage of masses of unqualified workforce of underdeveloped or developing countries in outsourcing processes, with production bonus and positive effects to be realised in global trade. In other words, the ability of developing countries to attract FDI manifested in cheap labour. This phenomenon was enhanced by

WHAT ASPECTS OF THE LATEST INDUSTRIAL REVOLUTION ARE DIFFERENT FROM EARLIER INDUSTRIAL TRANSFORMATIONS FROM THE PERSPECTIVE OF DEVELOPING COUNTRIES? The dangers of Industry 4.0 lie in such innovations that make the local labour market in developing countries face the fact that there is no locally employable workforce with adequate technical qualifications or high-level technological infrastructure, which could support the transformations resulting from the latest developments. The majority of developing countries are outsourcing-dependent, and without high-level local technological adaptation they are less attractive (with the exception of centres of productions, such as China). Without digital competencies, which can be massively and cheaply employed, they can lose their competitiveness on the international market, and a part of outsourced businesses return to their country of origin, that is, a developed country ([re] shoring). According to a recent study of the World Bank, two-thirds of existing jobs in the developed world are in danger. As a result of robotization and smart technological advancements, developed countries are better off reshoring a part of cheap and labour-intensive processes into their home countries due to research & development processes, infrastructure and costs. Retraining the workforce, however, is not always reasonable; producers’ cost effectiveness can be better realised by (re)shoring – at least, in the short term. Some of the globally present enterprises, especially owing to national reshoring initiatives, follow this strategy.

Second, the so-called Industry 4.0 strategies were and have been devised by developed countries (Nordic Council, 2016; Germany, 2016-17; Norway, 2016; Sweden, 2016; USA, 2016), with the original aim of counterbalancing the increasing economic might of developing countries. For the present, developing countries lack regionally handled strategies, although 2063 – The Africa We Want, which covers economic transformation, has been published within the UN framework.

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However, this is a far cry from practically realizable goals and action plans. On an international level: the Industry 4.0 strategy was included in the goals published in January, 2018 by the G20 presided by Argentina, although only in terms of agriculture and the digital sector.

Third, income deriving from the manufacturing industry peaked much lower in developing countries than in developed ones (they did not reach en masse the level of development of rich countries).

The latest transformation has started and these countries do not have either any stable industrial sectors or a more educated social stratum, typical of welfare societies. Under such circumstances, the shock to the labour market shock can be felt to a much greater degree.

Fourth, industrialization processes reversed in developed countries in the 1980s, which led to job losses in manufacturing industries. The so-called manufacturing economy has turned into a service-based one. Research has shown that demand for products increases less proportionally with the increase of per capita GDP than the demand for services does in economies originally producing for export, thus the transformation in the structure of the economy has also led to a social transformation. However, a pre-requisite was that purchase power parity had to allow for that. The low “production peaks” of per capita GDP of developing countries, however, did not allow for the development of a service-based society.

According to a study published in October, 2017 by the World Bank, the global trend is combining production processes with services (servicification), and combining automatization with Big Data, which leads to independent data production and data accumulation. The strengthening of a service-based economy is important not only for the economies of scale, but also for sophisticated and automatized production. Combining and tapping smart technologies to such a degree is not typical in developed regions.

Furthermore, research results of the World Bank emphasise that the presence of robot technology, smart technologies, R&D abilities and the qualifications required for 3D printing is the most important aspect of the location of a “modern”

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enterprise. Advanced manufactured goods (autonomous vehicles, biochips, biosensors, smart clothes) are produced near areas with intensive R&D capacities, where the expert- and infrastructure-intensive elements of development processes are also close. And this is provided primarily in high income countries (HICs): the United States (Silicon Valley, Austin), Finland, Japan, Sweden, Estonia. Due to the R&D intensity of industrial transformation, for the present “new” production processes are not likely to move to less developed countries, because of low levels of qualifications and the lack of local advanced infrastructure.

Furthermore, one of the expected impacts of the latest industrial revolution will be felt in the transformation of traditional production processes in developing regions, since the countries that will be able to adopt more advanced technologies will become more competitive in traditional production (comparative advantage).

Finally, one of the opportunities of developing countries lies exactly in the diffusion of ITC technologies, which can reduce trade and coordination costs and can also approximate production processes regionally. The diffusion of smart tech can further improve the correlation between supply and demand. Larger and “more developed developing” countries (e.g. Brazil, India, Turkey, Mexico, Thailand) are already witnessing the emergence of technology-intensive sectors and an inflow of related foreign capital, as technical and engineering talent is available at competitive wages.

OPPORTUNITIES Below, I will highlight some opportunities based on which developing countries can hope that the innovations of the Fourth Industrial Revolution will be felt positively in their regions: the analogy of earlier transformations, the potential in infrastructure developments, and the role of policies supporting the economic policy. To sum it up: 1) I t has been proven that more jobs were created than lost by the technological renewal resulting from specific industrial revolutions. If developing countries can ensure that smart technologies are not used by only a tiny fraction of the population but broader sections of society have

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access to more efficient achievements (food safety, education, healthcare), improvements in the standard of living can be felt across the society.

2) U sing technology, and in particular, “using it well” can contribute to lifting out of poverty.

There is evidence that the developing world will leapfrog the construction of traditional, “fixed” ICT lines and the use of desktops, and will build mobile networks directly and encourage the diffusion of mobile devices on a governmental level. The main reason is that the diffusion of mobile devices improves access to education, especially in developing countries. Developing countries, however, must cope with some phenomena, also typical in (to a lesser extent) developed countries. Such problems include the difference in the Internet use of urban and rural populations, the age- and gender gap in Internet use, and the generally low level of digital literacy. Finally, let us take a look at these and the opportunities inherent in them. There were 3.7 billion mobile phone users (GSMA, 2017), but 10 per cent of 7.2 billion people did not have access to the most basic voice-and text-based services, and one-third of them did not have access to 3G or 4G. The majority of this crowd means the – primarily rural – population of Asia and sub-Saharan Africa. Broadband mobile internet reaches 84 per cent of the world’s population (ITU, 2015), and 67 per cent of rural population can connect. The difference in 3G coverage is even more remarkable: 29 per cent of the rural population (3.4 billion people), and 89 per cent of the urban population (4 billion people) had 3G access. The gender gap can also be felt: globally, there are 14 per cent less female mobile phone owners than male ones. This rate is 38 per cent in South Asia, and is over 20 per cent in sub-Saharan Africa, with the exception of South Africa. In developing countries, mobile devices are required for using banking services, but it is also a healthcare device, and an essential part of the information flow between small enterprises. In the developing world, a remarkably higher number of men has mobile accounts than women (World Bank, 2016). As for Internet use by age groups: according to ITU’s data from 2017, 94 per cent of 15-24 year olds use the Internet in developed

countries, while this rate is 67 per cent in developing countries, and 30 per cent in the least developed ones. Overall, nine of ten young non-internet users are from Africa, Asia or the Pacific region. To sum it up, it is essential to narrow geographical and gender gaps to develop the rural population and increase the share of female workforce. In order to provide them with opportunities beyond traditional agricultural work, the construction of broadband mobile networks is required. In addition, the diffusion of mobile phones, smart phones and mobile internet gives women a sense of safety, and helps keep in touch with family members. It helps users save time and money, enables financial services, makes healthcare services available, and provides educational opportunities. Labour market opportunities of young people are expanded by their use of mobile internet. The above prerequisites are indispensable for the development of digital skills and literacy.

3) T he role of global companies is increasing, while that of nation states is decreasing. Facebook, Google, Amazon, Apple and the ecosystem emerging around them have more influence on economic processes than specific national policies do. To balance this, a competition law regime facilitating regional/national economic policies and a more relaxed intellectual property policy may prevent the concentration of economic might, and make the achievements of smart technology more widely available and open up the opportunity for masses to join economic processes.

CONCLUSION The example of developed countries cannot be fully applied to developing countries. The opportunities of developing countries primarily lie in the “opportunities for mobility from the bottom to the top”.

A publication of the Global Forum of National Advisory Councils issued in December, 2017 argues that the impact of the achievements of the Fourth Industrial Revolution can be either positive or negative, depending on how the countries concerned respond to arising challenges.

Developing countries want to maintain their high annual GDP growth (at least 5 per cent), but they

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must recognise that the key to GDP growth is their development from an input-based economy into a productivity-based one. This export-led productivity can be achieved only through planned and implemented policies.

Developing countries must be much better prepared for Industry 4.0 than their current state.

Traditional outsourcing of labour-intensive production processes provides less and less countries with an opportunity to catch up. The problem is graver in countries where the earlier labour-intensive industry can be replaced by a smart-technology-led industry.

The plans of developed countries and the frequently identified dangers of the latest industrial revolution reflect a static way of thinking, and focus on opportunities opening up in a longer term.

In more developed developing countries, however, robotization, the diffusion of smart technologies as well as the arising need for social efficiency can be as expected as in developed countries.

The realization of opportunities, however, is subject to certain conditions: to innovation policies revamped on national and regional levels, implemented educational and development programmes, infrastructure developments, social programmes, locally developed and implemented cluster measures. Furthermore, regional cooperation and a more assertive and massive presence in global trade require the development of information and communication technology (ICT) networks and large-scale improvement in digital literacy, noticeable in a short term. Furthermore, the sustainability of changes can be ensured by regionally coordinated trade policies and a supporting competition policy. National pioneer programmes lead to regional differences, social dissatisfaction and potential risks of conflict.

Developed countries must continue donor programmes through technological and infrastructure developments.

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A negyedik ipari forradalom és a fejlődő országok feladatai, valamint lehetőségei

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THE SCIENTIFIC BASIS OF THE ECOLOGICAL CIVILISATION

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THE SCIENTIFIC BASIS OF THE ECOLOGICAL CIVILISATION

Author: Dr. Attila Grandpierre

It is a basic pursuit of mankind to live the best and fullest possible life. In our article we call attention to the two basic types of civilisations: the life-centric and the material-centric civilisations. It was not only in ancient times when man lived in a life-centric civilisation. After our birth, we all have perceived and understood the world around us with a life-centric approach. Later, newer civilisational layers, received from our family, then school and society, have built on our original, natural being, alienating us from it in the material-centric civilisation. Due to alienation our human creativity is reduced to a fraction. The science of life can provide substantial help to cope with alienation. With the help of the new, exact biology we arrive at the first comprehensive, substantially complete science. The basic principle of exact biology is encouraging us, as the most fundamental natural law of the Universe, in achieving the fullness of life and complete health. The first principles of the comprehensive science provide the ground the comprehensive scientific worldview, which can be called healthy, because it is comprehensive, balanced, and corresponds to the essence of reality. In the comprehensive science, the most comprehensive and fundamental characteristic of the Universe is that it is alive. Due to life’s fundamentally cosmic nature, our life has fundamental communal, social and cosmic dimensions.

And if it is so, then understanding life is the key to understanding the whole world and to the success of the ecological civilisation. In our essay, we will show how.

TWO BASIC TYPES OF CIVILISATIONS: NATURAL AND MODERN Fundamentally, two kinds of civilisations can be distinguished in the history of mankind: the ancient, Nature-compatible, life-centric, communal civilisation and the modern, materialistic, material-centric, individualistic one. The division of civilisations into these two basic types – among others – is supported by the surviving ancient traditions of mankind and its historical memories of earliest times; the history of religion; the history of mythology; the study of folk tales; and history.

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A natural civilisation is characterized by the harmony of man and living Nature. Man is born of the creative powers of Nature (see below in the section The First Principles of the Universe), he is their human embodiment. Man is fundamentally just as much of a natural being as any other living being on Earth. Human nature – homonymy is not a coincidence here – and Nature are consubstantial. For millions of years, man lived in Nature’s lap, in unity with Nature. In the nature religion of the ancient civilisation, man conceived Nature as filled up with the most awe-inspiring force, the cosmic life force. The man of a natural civilisation feels gratitude towards Nature, greatly appreciating its gifts. He

is extremely sensitive to the mystery of the energy lying dormant in all beings of Nature. He regards frankness, honesty and purity as moral virtues resulting from the natural order, and shows the highest respect for the fascinating and awe-inspiring law of natural order, the perfection of the life processes of Nature.

The natural civilisation is sacral; for it, the order of Nature is sacred, life is sacred, reason is sacred, and they are all held in the highest respect. The man of a natural civilisation aims at cooperation with Nature. In modernity, none of them is sacred. Modern man uses its environment, and does not seek cooperation. The natural civilisation regarded life as the most fundamental existence, therefore life was held in the high-

verse. The man of an ancient, sacral civilisation bravely takes responsibility, for example, for taking part in the creation of the world, creating his own world, ensuring the life of plants and animals, etc. This kind of responsibility is, however, different from the one we, modern people regard as real and valid: it is responsibility in a cosmic dimension. The man of the pre-Western, natural civilisation takes part in such a cosmic sacrality that manifests both in the animal world and the vegetable world. For ancient man, the Cosmos is a living and arranged unit.

est esteem; that is why it was life-affirming and harmonious, that is why it could persist for an extremely long time. The basic experience of mankind, the experience of the sacredness of life saturating Nature has been overshadowed by the increasing dominance of materialism. The experience of the sacredness of life and Nature has been replaced by the experience of a nihilistic, profane civilisation.

parts of Europe and in most parts of Asia until 1200s AD, and still lives on in Confucianism, Taoism, Shintoism and the archaic traditions of the peoples along the Silk Road. With the birth and the conquests of Western civilisation, this Eurasian, life-affirming civilisation has been replaced by an increasingly materialistic civilisation lacking respect for values inherent in life and Nature. Albert Schweitzer argues that in the Middle Ages, the archaic European worldview was replaced by an approach denying life and the world, focussing on the supernatural. Life-affirmation, relying on the creative powers of initially “barbaric”, that is, “pagan” peoples, arriving from the East in Europe in the Middle Ages, with a worldview akin to Zoroastrianism and Chinese philosophy, was reborn again from the 1300s, but has been gradually overshadowed again since the 1800s. It is the tragedy of modern European thought that the bonds that originally existed between lifeand-world-affirmation and a moral worldview were slowly loosening and finally broke, and there was a tragic rupture in European history.

The decay of civilisation seems to have begun with the ancient Greeks, the founders of Western civilisation, in the centuries around 800 BC. Referring to Homer, Strabo, the most significant ancient Greek historian, writes, ‘our way of life has encouraged a change for the worse for nearly all people, introducing truph and pleasures and fraudulent dealings and much greed besides. (…) Although these things ought to incite them to civilisation, instead they corrupt the morals and introduce an embroidery instead of the frankness(…).’

These signs of moral corruption are all characteristics of a materialistic approach. Civilisation is closely related to material-technological achievements, which have often led to shifts in our way of life, and repeatedly entailed the belittling of traditions, profanation, and the gradual strengthening of materialism. Groups of people pursuing a traditional way of life and preserving a pure source of a legacy of million-year-old knowledge both in their lifestyle and their worldview, that is, in a more complete way, may play an important role in building an ecological civilisation.

As Mircea Eliade, a prominent historian of religion pointed out so convincingly, the profane, Western civilisation, ‘the completely profane world, the wholly desacralized cosmos is a recent discovery in the history of the human spirit’, and in all other eras and regions man has always attempted to remain in a sacred uni-

This archaic, life-affirming, sacral world order persisted in nature religions in the central and eastern

BREAKING THE LIFE-CENTRIC VALUE SYSTEM AND THE CREATIVE POWER IN INFANCY In the first years of our individual life – just like in the archaic, natural civilisation – our value system is based on the appreciation of life. This is the natural value system, the value system of life. In our infancy, as years go by, a second value system, learned in the family (nursery, kindergarten) is being built upon us with increasing weight. When this second, family value system clashes with the first, life-centric value system, our personality becomes ambivalent. American psychologist Gordon W. Allport pointed out that in the West, family and social effects overcome the original, natural self of children at the age of 3-5

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years; by that time, ‘the I of Western people sticks out [from their inner world] like a stubbed thumb.’ Remarkably, the independent, original perspective and creativity of children is simultaneously fading. In ages from three-to-five years old, the creativity of 98 per cent of children reaches the creative genius level. By the age of 25-30 years this rate drops below 2 per cent. Why does it happen? it is a fact that from the age of 6, a third value system is built on the second one: the value system of school education and the curriculum. Modern, compulsory school education has a materialistic worldview, its curriculum forcing children to memorise boring data supresses free will and interest, it is distant from life, substantially alien

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from the original interest and natural motives of children, enhances nihilism and takes the creative genius out of children.

Human creativity is the main driving force of civilisation. A civilisation that retains our original, innate human creativity, interest, curiosity and motivation, in harmony with man’s nature, the natural forces and skills inherent in us, would not only provide mankind with a much higher joy of life but, at the same time, would also gain a vast surplus of the civilisational diving force compared to the volume conventional in a materialistic civilisation.

In the materialistic worldview characterizing modern civilisation, the integrated unit of life, reason and the

material world, i.e. Nature does not seem to be more than matter: and life and reason do not seem to be more than side-phenomena of the material world, lacking independent causal power. Consequently, in the modern world life and reason are subordinated to the material world, and, alienated from its very nature, it is forced to follow materialism. As Leo Strauss outlined in his impressive criticism, the essence of modernity is the pursuit to “liberate” human will from all factors regarded as “external”, such as God, Nature or history. The successfulness of modernity, however, undermines modernity itself, because modern western man, left without any compass, does not know what to want, and has lost his faith in the rea-

son that would have confirmed his higher purposes.

Losing his original, natural orientation, western man is easy prey for materialism. History has left its natural banks, the time is out of joint, as Shakespeare put it in 1602. Under natural circumstances, human will to live and the faith in reason are the primary driving forces of human creativity. The crisis of modernity entailed that modern civilisation has downgraded its greatest resource, the internal motivation that drives human creativity, and put it on hold. Our conclusion is underpinned by Niall Ferguson, Professor of History at Harvard University, who claims that in recent decades westerners have lost their faith in their own civilisation.

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THE CORRELATION BETWEEN HEALTH AND THE ECOLOGICAL APPROACH The fact that man is fundamentally a natural being means that our self-identity is basically consistent with Nature. It is only possible if Nature is a living organism. By Nature, we mean the Universe here, that is, the integrated whole of all living beings. If the Universe is alive, its life is unimpeded as there is no living being external to it. If we, as natural beings, are consubstantial with the Universe, our life is in a personal relationship with this unimpeded, extraordinary, cosmic life. Due to our natural being, we are one with the Universe living a cosmic life, organized on a higher level – the Whole. Therefore, our being is extremely profound and it is integral only if it is not alienated from this Whole. And if our self-identity is fundamentally consubstantial with this infinite Universe, living in celestial freedom, it belongs to the integrity and health of the human spirit.

Ecology is the science of living organisms and their relations, interactions and relationships. If Nature is alive, then ecology encompasses the Universe, and thereby becomes the most comprehensive science.

Within the frameworks of materialism, the human being is limited to its individual body.

According to the definition of the World Health Organization (WHO), health is ‘a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity’. By mental well-being, we mean a high level of emotional and cognitive well-being. In order to comprehend the full significance of health, a notion crucial for the health of our civilisation, the WHO’s definition of health must be clarified and extended over the most fundamental level of life, our natural self, and the relationship between man and Nature. Considering the fact that mankind can appreciate Nature if it is comprehended as something having its own, internal value, the basic task of ecology is to be able to regard the Universe as a living organism. The scientific basis of ecology, appreciating Nature, requires exact biology, extending life over the whole Cosmos. Distinguished from the materialistic concept of health, limited to physical health, the notion of health obtained this way is called complete health when it is required for understanding. Thus, our definition of health is as follows: health is a state of complete physical, mental, spiritual, social

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and natural well-being of our individual, social and natural self, including the well-being of the relationship between man and Nature.

Complete health is not merely the absence of disease but the absence of any kind of effects damaging our physical, mental and spiritual health, and it is being charged with all kinds of physical, mental and spiritual power, complete power of life, enthusiasm and discernment. It includes a complete harmony of our natural self with the living Universe. This complete health is accompanied by the full and high-level unfolding of spirit and mind, happiness and discernment.

If we want to highlight these characteristics, we can also call complete health life-fullness, the prime of life. To preserve our mental and spiritual integrity, we need a healthy, life-affirming, reason-affirming and world-affirming civilisation. In the definition by Nobel laureate physician and philosopher, Albert Schweitzer, world- and life-affirmation is an inner conviction of man that life is a real being, the world and life have great, internal value, life is infinitely valuable to everyone, the human spirit can encompass the whole world and man should never give up its fight. This life-affirming and world-affirming civilisation is typical of two regions of the world; these are Europe and China. ‘It was nowhere but in Chinese philosophy the problem of world-and-life-affirmation has been felt in so elemental and comprehensive a fashion.’ Our previous study paper indicated that the Silk Road had created a cultural unity of these two regions in pre-historic and ancient times, persisting as long as until 1200 AD. Western civilisation, with the increasing dominance of materialism, has left this path. China, however, preserved its life-and-world-affirming worldview until Mao’s term. In recent decades, the ancient ecological worldview is being reborn in Central and Eastern Europe as well as in China.

Health is a fundamentally ecological notion because life in the Universe has a communal and fundamentally interdependent nature. In ancient Hungarian mythology – just like in comprehensive ecology – the Universe is the highest level of the organisation of cosmic life, the Highest Being. Similarly, the Universe is perceived by Chinese philosophy as a living organism. In our times, astrobiology and anthropic cosmology unexpectedly created a fundamental link between the Universe and life sciences. This relationship is confirmed by the universal law of nature, discovered

by Ervin Bauer, a biologist of Hungarian origins, the

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Gaia theory, developed by James Lovelock, which is the theory of the Earth as a living organism, the Helios theory, which is the theory of the Sun as a living organism, and the theory of the Living Universe. These mutually reinforcing trends constitute the modern scientific substantiation of the ancient Hun-Hungarian and Chinese life-centric philosophies.

THE THEORETICAL BASIS OF CIVILISATION One of the major branches of metaphysics is ontology, the study of being and its basic types. Materialism regards matter as the only being, and does not attach ontological importance to life and reason. A life-centric worldview contributes ontological importance to matter, life and reason as well, and of these three, it regards life fundamental. In a life-centric worldview, matter, life and reason make up an integrated whole, and for this reason – at least under natural circumstances – these three kinds of reality are in harmony.

A natural civilisation is metaphysical, sacral and harmonious; a materialistic civilisation is anti-metaphysical, profane and alienated. Although the emergence of a mechanic ethos based on new, materialistic metaphysics played an initiating and decisive role in the development of modern science, modernity tried to downgrade metaphysics. And this is detrimental to its

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own survival, as the fall of the first version of western civilisation, the Greek-Roman civilisation in the early Middle Ages was caused by the fall of its own worldview based on “pagan” metaphysics. The materialistic worldview of Western civilisation is based on the extremely doubtful metaphysical assumption that physics, the science of matter can describe all aspects of the entire Universe, that is, the behaviour of both living and lifeless beings. This assumption is made on an ontological level, meaning that all changes can be contributable to only physical causes, that is, all changes are brought about by physical forces. But physics, which is extremely successful at anticipating the behaviour of lifeless objects, fails miserably in anticipating the behaviour of living organisms. It flatly contradicts everyday experience as well, as human behaviour is fundamentally governed by instincts, feelings and thoughts and not by physical forces. In addition, as we will show below, today the materialistic worldview of Western civilisation is being disproved by its major tool, science.

Since the relative significance of matter, life and reason is an ontological question, civilisation is regarded as a fundamentally ontological position. This ontological position is so profound that it counts as an almost completely unexplored world for our thinking, which is burdened by everyday problems, accustomed to less-

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er questions, and overwhelmed by these. And exactly this extremely profound nature enables civilisation to guide our way of thinking imperceptibly into the direction of its own ontological position, for example, to steer it into a materialistic framework. Furthermore, the ontological position of civilisation enters our inner world without criticism in our early years. After we have got used to it, it guides us unnoticed. Therefore, it is extremely effective at creating our everyday conduct of life, and can exert an effect on a significant part of mankind. That is exactly the reason why the dominant ontological position is regarded as the essence of civilisation. If the impact system of the dominant ontological position affects a multitude of peo-

these questions. What we call thinking is usually not more than applying our already existing worldview to a particular situation. Worldview is fundamental in science, too, usually without our knowledge. Fundamentally, it depends on our worldview what we think about science. The worldview has greater practical significance than science. The unconscious development and application of the worldview is one of the major reasons why we are unaware of the immense significance of the worldview. The worldview is immensely significant because its three layers – the innate one, the one received from the family and the one received from society – develop in every person at a young age, and usually determines the whole conduct of life. In

ples and a historically significant period, we can talk about civilisation.

addition, very few people recognise the role their worldview has in their lives even in adulthood, exactly because the immense significance of the worldview dissipates. Still, if there is awareness, we can become capable of rendering our worldview healthy and guiding our life into a rising direction.

THE ESSENCE OF CIVILISATION AND ITS MOST EFFECTIVE TOOL: WORLDVIEW The Universe is an integrated whole of all living beings, that is, an integrated reality. An ontological position forms an opinion on the essence of the whole world, therefore it is necessarily philosophical. A worldview is a form of an ontological position applicable in everyday life, a coherent system providing fundamental explanations to every phenomenon in the world. A worldview is a coherent system, the essential foundation of interpreting, evaluating and perceiving the world; it is the way we comprehend and evaluate the world. The worldview is the most effective tool of civilisation, because it is incorporated in children through their families and the system of social effects in their early childhood, and determines their understanding of the world, before the development of critical thinking available for adults. If we do not become aware of it later, it remains unnoticed. It also remains unnoticed that the worldview has crucial significance in determining the fundamental direction of our conduct of life. Therefore, being aware of the significance of the worldview is essential. In other words: the worldview is a coherent system of our thinking and value system, upon which our decisions are based, and thus it is the most fundamental drive of our actions.

The way we perceive the world is of key importance because we can use all our experiences to improve the quality of our life, our emotions and thoughts – or to increase material wealth, to gain more money or power. It is the worldview that determines which questions are important to us, and what answers can be given to

The significance of the worldview lies in the fact that it sums up the Universe in a nutshell, and knowledge summed up in a nutshell is incorporated into the thinking of each member of the civilisation. The next level of our thinking is the effect of science and education.

We have already indicated above that the natural, primary level of our thinking is seeing the world in a natural, life-centric way. In the Western world, the value system, which determines the second level of our thinking and is learned in the family, and is usually more or less consistent with the value system of the society and the civilisation due to the dominant role of parents and their inclusion into society, is built upon the primary level. In the materialistic civilisation, parents usually acquire a materialistic worldview, and therefore the second level of our thinking becomes a materialistic worldview in Western civilisation. The first two levels affect us unconsciously, imperceptibly.

The third level is conscious thinking. In today’s world, a significant part of conscious thinking is characterized by the effects of science. Both parents and school children consider scientific truths relevant when deciding what is true and what is not. If science is of a materialistic nature, which is the case for modern science, which acknowledges the exclusivity of physics, the third, conscious level of our thinking is – usually without being noticed – guided into the framework of materialism. And if this third level is fundamentally in line with the second, family-led worldview, they enhance each other’s effect, and overshadow even more

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effectively our innate, life-centric worldview and our spiritual and mental and health. Alienation becomes even greater.

All three levels of our thinking are extremely significant for building an ecological civilisation. In order to be able to preserve the natural health of our children’s mind, these three worldviews must be in harmony. Since the life-centric worldview is innate, our mental health cannot be complete unless we receive a life-centric worldview from our family and the civili-

of school education is life-centric and adequate attention is paid to physical, mental and spiritual well-being by harmonizing them. As long as one single exact science exists, the science of matter, i.e. physics, and the authority of this exact science is attributed to materialistic metaphysics, which can be at best considered as a hypothesis, the worldview of school education remains fundamentally materialistic. Consequently, adopting the Western educational system in Central and Eastern Europe and Asia fundamentally transforms the thinking and the worldview of children leaving school. Children graduating from the Western educational system go out into society with a Western type of thinking, irrespectively of lo-

sation. It is a fundamental task for a society seeking a healthy approach to prepare parents for life-centric child-rearing, based on a healthy worldview. Getting familiar with the parenting habits of peoples still preserving the child-rearing traditions of the ancient Eurasian civilisation may provide important help.

The worldview of our children can remain healthy on the second level of thinking if parents consciously strive to acquire an adequate level of the healthy worldview. The worldview of our children can remain healthy on the third level of thinking if the approach

cal traditions and cultures. The emergence of exact biology, which is not deductible from physics and has its own, independent laws, can change this situation.

Since the basic principle of the new, exact biology, upholding and developing the best traditions of modern physics, provides guidance for our conduct of life at both individual and community level, it enhances schoolchildren’s natural interest and love of life both individually and at community level. A life-centric life science also brings physics much closer to students, because it allows for deeper understanding more eas-

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ily, quickly and effectively owing to its first principles.

Therefore, it can raise their interest, turn the school curriculum attractive, inspiring and motivating instead of being the conventional boring, unrelatable, encyclopaedic knowledge, place emphasis on understanding relationships and the evolution of independent thinking, and develop children’s soul and mind in a healthy direction. The goal of healthy child-rearing is to preserve and develop the integrity of our self to the level of succeeding in today’s civilisation, being able and ready to act independently for the health of our individual, community, social and natural self. The goal of healthy education is to answer and summarise the fundamental questions of human existence in a coherent system of basic knowledge encompassing the whole word, in basic literacy. A coherent vision of the world allows for the most effective development of general cognitive skills. Since it is a life-centric curriculum, the education of the science of living organisms and their interaction, i.e. ecology also becomes simple at a stroke. The life-centric, substantially complete and therefore healthy ecological worldview, completing our system of interpreting and evaluating the world, enables the generations finishing school to build a balanced, healthy civilisation. If the ecological worldview does not provide for a scientific basis the significance of which is at least akin to that of the sci-

entific basis of the materialistic worldview, it may be placed at competitive disadvantage. In our opinion, the most important tools required for building a viable ecological civilisation are a science encompassing the entire Universe in its full extent and depth, which includes the science of life and reason in addition to the science of matter, and the healthy worldview based on this comprehensive science. This task requires the development of such biology that promotes life-affirmation, the increase of the vital force and the quality of life, and which has such exact foundation as physics does, but is not subordinated to physics. An important task of building the ecological civilisation is to establish a scientific basis for life-affirming biology and reason-affirming psychology.

THE FIRST PRINCIPLE OF PHYSICS A developed industry based on physics and the materialistic worldview based on physics are the most effective props of modern Western civilisation. To solve our task, the first step is to recognise that the most effective tool of physics is the principle of least action. The principle of least action can be regarded as the first principle of physics, because all basic equations of physics can be deducted from it. It is a fact that the most elegant, most concise and most

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explicit wording of the basic equations of classical physics can be deducted from the principle of least action, as in the case of the theory of gravity or quantum physics. The principle of least action, which comprises all the basic equations of physics, can be regarded as the definition of physics. Physics is the science of lifeless matter; it is lifeless matter the behaviour of which is determined by the principle of least action. The content of the principle of least action is illustrated by the fact that the inertia is manifested in the changes of physical objects.

definition of the essence of life. It expresses that the essence of life is action, work done to elevate life to the highest possible level. Since it is an eternal law of nature, life in the Cosmos is necessarily destined for victory. A law of nature cannot be defeated. There is no such earthly power that could impede the victory of life at least in the long term. Thus, the essence of life does not lie in survival, as it could be seen through the lenses of physics, but in elevating the quality of life, perfecting life, making it increasingly valuable, happy and meaningful.

THE FIRST PRINCIPLE OF BIOLOGY

BIOLOGY IS MORE FUNDAMENTAL THAN PHYSICS

Living organisms, however, are not inert, thus their behaviour is described by a fundamentally different law of nature, the law of maintaining the ability to act. Living organisms have to restore their own ability to act, their own viability in their actions because biological actions require energy and time as well.

If living organisms did not take care of maintaining their viability, their energy, their mobility would soon vanish. The universal law of living organisms was discovered by Ervin Bauer, and it is named the Bauer principle after him.

The Bauer principle provides that ‘living and only living systems are never in equilibrium, and, on the debit of their free energy, they continuously invest work against the realization of the equilibrium which should occur within the given outer conditions on the basis of the physical and chemical laws. A living system always converts its entire free energy content into work done against the realization of the expected equilibrium.’

The A Bauer principle can be regarded as the first principle of life because Bauer deducted all basic equations of life, including metabolism, reproduction, growth, and all the basic phenomena of life from it.

Therefore, the Bauer principle can be regarded as the first principle of Nature. It provides an energy-related

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The significance of the Bauer principle requires a comparison with the most important component of theoretical physics, the principle of least action. As the principle of least action is the law on the changes of inert objects, and living organisms have a substantial surplus, the ability to act, I was looking for a way to biologically generalize the principle of least action.

The principle of least action prescribes the trajectory requiring the least energy and time consumption between the current, given starting point and the future endpoint of an action or event. The principle of least action is ideal for the role of the “postman” because it links the starting point with the endpoint with a straight line. If we generalize the principle of least action, and we omit the “least” constraint, and we consider the fact that the endpoint, the purpose of the action is determined by the living organism itself because – in accordance with the Bauer principle – it spends all available energy on elevating its ability to act onto the highest level, we get to the basic principle of biology. A falling stone falls to the ground in a straight line and not in a zig-zag pattern, because that would take more energy and time. “Effect” is the combined measure of the energy input and the time commitment. Physical objects complete their trajec-

tories with the least energy expenditure and within the shortest period of time; this is what the principle of least action expresses. However, the opposite is true for living organisms. We aim at living with as much energy and for as long as possible. We select the endpoint of our actions to benefit from it, to elevate our life onto the highest possible level and this should last as long as possible. That is how I have got to the principle of most action (PMA). The mathematical form of PMA includes the Bauer principle as the principle of greatest vitality, and also the principle of the most efficient use of time, that is, the principle of greatest wisdom. I have defined “wisdom” in a biological sense: a decision that is made in favour of life is a wise one.

Reason belongs to life. Its purpose is to make the decision that is the most favourable to life as quickly as possible under the given circumstances. Reason was created by life to make wise decisions, so that life could move forward to fulfil its highest potential. The principle of most action includes, as a close case, the principle of least action, should the most action be extremely small, as it is in the micro world. This is the principle of the smallest degree of action, the principle of inertia, which is typical of elementary particles and the material world. Since the PMA is the generalization of the principle of least action, it is as valid in the entire Universe as the principle of least action is. Since PMA includes the principle of greatest vitality for the whole of the universe, the Universe – as a whole – is a living organism. Since PMA includes the first principle of physics, the laws of physics derive from the law of life. Life is more fundamental than matter. The Universe lives on a deeper level of reality than its material surface. The causality between biology and physics is remarkable. The biological cause exerts an effect first, sets the goal, and deploys the biological energies required for the achievement of the goal. Thereby a whole series of specific physical causes, necessary for the physical achievement of the goal, are generated. As soon as the goal is set biolog-

ically, the required physical processes are created as economically as possible because the principle of inertia is also the principle of economy, the principle of the least energy and time expenditure. Nature gives biological reasons priority over physical causes and the ability to dispose of them. The civilisation based on the science of life has a more efficient scientific basis than the materialistic civilisation does because the principle of most action is a further developed, extended, more far-reaching version of the principle of inertia, promoting the elevation of life. While the civilisation focussing on the consumption of material wealth aims at creating more and more convenience, a life-centric civilisation, retaining the aspect of material well-being, fundamentally aims at improving the quality of life.

THE LIFE PRINCIPLE ENCOURAGES US TO HAVE COMPLETE HEALTH As the principle of most action comprises only quantities existing also in physics, time and energy consumption, I have further generalised it to biology’s own drives. Every living organism is a sentient being, and every living organism must decide how to act in a given situation. In physics, changes are caused by a physical force. Biological changes are caused by motivation. There are two basic types of motivation: emotional and intellectual motivation. That is how I have arrived at the most general, most fundamental principle of biology, which I have named the life principle. The life principle states that every living organism deploys all their energy, enthusiasm and wisdom to elevate their vitality, emotions and thoughts to the highest possible level at every moment.

Familiarity with the life principle may facilitate a conscious conduct of life because it states that, as living organisms, our life task is to deploy all our spiritual and intellectual energies at every moment to discover

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and perform actions done in favour of a complete life.

According to the principle, we live our lives as much as we do for everything to elevate life. If do not do that, we are vegetating in a state of suspended animation; our life passes by without using the real opportunities life offers us, the opportunity of elevation. Thus, if we want to live a substantially full, that is, healthy life, we must do everything to make life prosper.

ticles are generated in living organisms by biological causes with the help of biological energies. The scientific significance of the comprehensive natural science is reflected by the fact that, on the one hand, it can define a systematic aspect of the behaviour of living organisms, but, on the other, remedy both defects of modern physics without any further assumptions.

LIFE IS A REALITY EXISTING ON ITS OWN POWER

It does matter to living organisms what they feel, whether they feel good about themselves. It does matter to intelligent creatures whether they have a correct understanding of the world. The life principle encourages us to have the best emotions and thoughts, complete health and to achieve the prime of life. It is worth considering as it is about our life.

The life principle is the natural law of health and life-fullness. Raising our awareness of the life principle enhances vitality, wisdom and the development of our best abilities, and encourages us to regain our creativity revived as an inner, pristine force of nature.

If we live consciously according to the life principle, we are filled with elemental power, eternal vital force and obtain an enormous surplus of vital energy. Therefore, understanding the life principle is essential for a healthy civilisation.

THE THREE FIRST PRINCIPLES OF NATURE The three first principles of Nature are the principle of matter, life and reason. The ontological One-trinity of matter, life and reason corresponds to the trinity of physics, biology and psychology in science, the trinity of body, mind and soul on the level of the individual, and the trinity of atom, emotion and though on the level of ultimate components. In the theory of the living beings’ ability to act I have shown that biologically controllable energies belonging to motivations can create pairs of virtual particles in the quantum vacuum that are suitable for the physical realization of their inherent goal. According to quantum-electrodynamics, all physical forces are carried by virtual particles. Thus, biological motivations can generate and implement physical processes corresponding to biological causes in living organisms. Modern physics suffers from two fundamental defects, and these are the infringements of the universal law of conservation of energy and that of causality. In the quantum vacuum, pairs of virtual particles generated spontaneously, without physical causes, happen to violate both at once. According to exact biology, pairs of virtual par-

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Life, consistently with its fundamental nature, focusses on creating life. Life recreates itself over and over again. Life is more than mere existence, because it acts and creates. Life is a reality establishing, creating and realizing itself. Cosmic life is an extraordinary, completely unique example of causality because it represents such a cyclic teleology through which a living being setting the goal can cause their own further becoming. Cosmic life is an omnipotent reality creating itself in its full connections, in its full existence and its complex of being, which is independent from anything else in its existence. The material being cannot be the first being because its being must be created, which needs an ability to create. As an ability to create must be created, it can exist if it creates itself, if it is the ability to create. There is only one such thing, and this is cosmic life. Thus, cosmic life is an absolute being, being through and by itself. Cosmic life is a reality being and acting by itself. Life is more than being, because it is also acting; it is self-creating through its acts, and therefore it is the basis for any existence. Life is a reality creating itself through its acts. If a reality can be ultimate without a cause external to itself, that is, creating itself, then cosmic life is the ultimate reality. Thus, the ultimate reality is the Living Universe creating itself and its changes by itself. There is nothing greater than cosmic life. Life is filling and embracing, and even continuously creating, moving and developing the Universe. Life is the only, ultimate reality coming into being by itself, by its own power, continuously creating and perfecting itself.

Life lives on seven levels In exact biology, the individual is a “psychogenic� notion, it is not involved in the life principle. The notion of individual derives from self-reflection. An individual cannot live without their cells, cannot live without ascendants, cannot life without a species, a species cannot live without the biosphere, and if life is the ultimate reality, all life originates from life, and therefore the biosphere on Earth originates from cos-

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mic life. Life cannot be put in a box. The life principle is universal, is ubiquitous and its fruits are various life forms on different levels. The essence of life lies not in its substance, but in leading its changes, its behaviour, and its life-elevating nature. This behaviour manifests simultaneously on an the level of the individual and the community as well as on the level of our cells.

The same universal life principle governs the lives of individual people and the lives of cells, of the human species, the biosphere, the Universe. The life principle links the life of an individual with the life of cells, the life of the species, the life of the biosphere and the Cosmos. Ecology, as the study of living organisms and their relations, links the world of cells with the life of

also complies with Albert Schweitzer’s ethics based on respect for life. ‘Ethics grow out of the same root as world- and life-affirmation, for ethics, too, are nothing but reverence for life. That is what gives me the fundamental principle of morality, namely, that good consists in maintaining, promoting, and enhancing life, and that destroying, injuring, and limiting life are evil.’

Since being alive is the fundamental essence of the Universe, the fact that it is good belongs to its fundamental essence. Since the life principle comprises the principle of matter, spirit and reason, it can be regarded as a coherent theory encompassing all three fundamental realities. Hence, it comprises the essence of the whole Universe. All three first principles of Nature

individuals, species, the earthly world and the cosmic world. We have arrived at the ecology embracing the whole Universe. In this comprehensive, cosmic ecology, we differentiate between seven fundamental levels of life, for which we are responsible, for which we must act, on which our life happens. These seven levels are cells, the individual, family, nation, mankind, biosphere and the cosmic community. Our life is the union of these seven lives. Our true self is present simultaneously on all seven cosmic levels of life. The fact that the man of the archaic, sacral civilisation voluntarily takes the heavy responsibility for ensuring a life for plants and animals and in a cosmic dimension indicated that our moral commitment to the earthly and cosmic levels of life was known in the ancient Eurasian civilisation. The comprehensive science enhances this ancient knowledge. Our life is more profound than the material world, thus, necessarily, our self, our intelligence, as well as our life principle, are of cosmic nature. A life-and world-affirming ecology is unfolding before us. We have come to the Earth to act as a local centre of action of the Living Universe throughout our life. These seven levels of life are the basis for the universal moral world order. The universal moral world order is the law of acting for the benefit of all lives on all seven levels of life. In addition to our individual life, the seven levels of life also comprise our community and natural self. The moral world order based on the exact science of life provides the basis for harmonizing the life of families, nations and mankind with the natural, earthly and cosmic living world. An exact, independent biology adds value to science. Of all values, life is the most fundamental and the greatest value, since all values are values for the lives of living beings. Acting for the benefit of life is good for life, therefore a scientific basis can be provided to the moral notion of “good”. Our conclusion

are more profound than the laws of physics, and they also cover the world of life and reason, thus the worldview of the comprehensive science is both wider and more profound than the modern physical worldview.

Compared to the worldview of the comprehensive science, the physical worldview is one-sided and shallow.

Since the function of a worldview is to give a picture of the whole world, and physics gives a picture of only one side of the world, the material one, the physical worldview is one-sided, mutilated, misleading because in reality it is not a worldview, only a material-view, it is only the view of the material world and not the whole world. Since the worldview of the comprehensive science comprises all three circles of life of reality, i.e. the material reality, the world of life and the world of reason, it can be called substantially complete. Since it is substantially complete, it gives a realistic picture of the whole world, and therefore it can be called a healthy worldview. The comprehensive science covers the whole world; therefore it can be regarded as the essence of the scientific worldview. As it comprises both the essence of the whole world and the natural law of life-fullness, it may ensure that our individual conduct of life is in harmony with Nature and reality.

Since it encompasses all mankind, it provides the fundamental law and the main goal of civilisation. As the dominant worldview of a civilisation is its source, drive and most effective tool, familiarity with the healthy worldview is of historical importance because it lays the foundations for building a healthy civilisation.

THE SIGNIFICANCE OF THE SEVEN LEVELS OF LIFE TO OUR LIFE 1 The significance of the world of cells We are responsible for the health of our cells. Our life entails the natural moral commitment to do

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everything we can for the health of our organisation and the world of our cells within. It is worth acknowledging that our sells are living, and as such, sentient beings. The emotions of our cells are closely related to our environment. The human organisation consists of 60,000 billion cells, which is a greater number than the number of stars in the Milky Way. How can we form a non-mechanic picture of the life of our cells?

Every cell implements hundreds of thousands elementary biochemical processes per second; for example, thermal motion to and from, the appropriate molecules must be transmitted to the appropriate receptors. Both the structure of the cell and the whole of the cell take part in controlling the molecules of our cells. The whole of the cell can intervene in processes on molecule-level with biological motivations.

Our cells contribute to ensuring their appropriate life functions with their emotional energies. In a metaphor: our cells help the molecules reach their goals with emotional energies, their passionate love of life.

My calculations suggest that the cells use their full thermodynamic potential, all their energy for biological purposes. Cells work extremely effectively; they almost always transmit their molecules perfectly appropriately. In this respect, they far exceed human performance. The almost perfect cooperation of cells is even more remarkable. They cooperate so harmoni-

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ously that they ensure almost perfectly the activities required for our human life, from our brain functions to moving our limbs, happening in cosmic heights compared to their lives. Such cooperation of our cells enables us to move our body extremely easily through our will, for a hundred years or even longer. They seem to function in accordance with the principle of “one for all, all for one”, although it is not easy for us to comprehend how powerful, cosmic being is the “one” they act for. The basis of their agreement is the respect for the life principle keeping all lives alive, including human life taking place in a cosmic distance from them. Such perfect cooperation can be a model for the cooperation between nations and mankind. The fact that there are cells that use their independence for abuse, asserting their interests to the detriment of community values illustrates that this cooperation is not mechanic at all. These are called “cheating” cells by biologists. This individualist, anti-social behaviour, however, is so rare that it does not impede the life of our organisation taking place with fascinating ease and in almost perfect harmony. Much can be learnt from considering that our organisation consists of cells pursuing extremely effective life activities. It is time to grow to live a similarly perfect life. If the key to this is a passionate love for life, and an active commitment to it, we cannot be strangers to that, as we

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are living organisms, too, and the more fully we live our lives, the happier we live. More precisely, the unusual efficiency of the lives of cells and their communal cooperation is contributable to the fact that their decisions – with an unusual commitment and frequency – are in line with the life principle. Let us illustrate the life of cells with a metaphor! Let us regard the life principle as a shaman horse, the cells as the princes of fairy tales, and our organisation as an army of princes, each member of which does their best for the cause with all their life and spirit every day. Lying on the backs of their shaman horses, they are dashing on their most attractive, most pleasing course of life, becoming one with their horses, in perfect unity, for a common goal of promoting their own life and the life of a higher living organism. The prince is rushing with the speed of a whirlwind because he agrees with the shaman horse; the main point of their decisions is ‘Forward’! If he told his shaman horse, ‘stop, I want to get off, because I need freedom, because I want to achieve everything from my own powers, completely independently from reality’, he could only walk, much more slowly, and it is very doubtful whether he is going forward or backwards. Compared to our cells, in cosmic heights we live our human life as celestial beings.

Our organisation is a kind of macrocosmic world beyond the micro cosmoses of our cells. We can bridge this distance with our actions, emotions and thoughts, since our emotions and thoughts are biological drives.

In this sense, our physical, emotional and intellectual activities count as “divine” events to our cells. To our cells, we are actually acting “gods”, higher beings. We can act as benevolent, compassionate gods, if we eat healthily, if we do exercise on a daily basis and we generate happiness hormones through exercise, if we act for the beauty and elevation of life. And we will also benefit from it!

2 The significance of our individual path of life to our conduct of life In our actions, we should always keep the full path of our earthly life in mind so that the end-result, that is, the whole of our life, should be as great as possible. If we look back at the other end of the path of our earthly life, as if on our death bed, and rack our brain on what we can do for our life while we are here on Earth and able to act can have a very mobilising effect. Fundamentally, we have received our life and our mind from Nature. The cosmic mind, saturating Nature, is the one that knows why we are here. Our task is to find out what this goal set by Nature is. That

is why it is significant if we try to look at our life goal and our life through the eyes of Nature, a cosmic living being. All efforts of this kind bring us closer to discovering and realising the goal of our life, to living the life we were born for. Every single day we can take further the cause of our life, because, if we live a healthy life, no one and nothing can stop us from dedicating our emotions and thoughts to striving for this goal. No one can stop us from living an increasingly healthy life, either. There is an old aphorism: seize the day. In the film entitled Dead Poets’ Society, the teacher says to his students, ‘Seize the day, boys. Make your lives extraordinary.’ We should add: seize the week, the month, the year, the decade and first of all, seize your whole life.

Make your life extraordinary. Your life should be extraordinary because the Living Universe itself found your earthly life great enough to take you to the Earth. Seize the goal of your life, the meaning of your life, and your quality of life will multiply. Every single day we can start our day by deciding at the moment of waking up, by completely mobilizing our abilities, and by proclaiming as a resolution in our organisation, ‘I will elevate my life’. Before falling asleep, at the end of the day, we can ask ourselves, ‘What have I done today for elevating my life? What great, elevating experiences have I gone through? What great, elevating thoughts and decisions have I come to? What have I done today for becoming a better man, for my development? What great, elevating deed have I done?’ In the world, we are the person who is the most responsible for shaping our life.

We are responsible for our worldview, we are able to take actions for it, we are able to acquire a healthy worldview because the life principle, and the principle of greatest vitality and greatest wisdom therein, helps us do so. The life principle states that the goal of life is to live and enforce the most wonderful, valuable and meaningful life possible on Earth. We all are working on solving this same task. We are life-colleagues. Martin Seligman, a researcher of the psychology of health, says that happiness has three levels. The first one is short-term pleasures and delights, such as eating. This level also has an important role in our life. The second, more profound level of happiness is the joy surplus released during passionate activities during which we feel that greater forces join us in realizing our goal, for example, when one gets an elemental feeling, our goal is almost realised by itself, and we act almost perfectly. We can experience the third, most profound level of happiness when we feel that our whole life

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has a meaning, and is related to a life greater than our individual life. This happiness is permanent, is related to our whole life and is even more-far-reaching, as it is related to an intelligence higher than our earthly life. It has been proven that until the first two levels of happiness do not imply an improvement in the quality of life, the third, most profound level of happiness, feeling the meaning of our life improves our health permanently, and to a remarkable extent: it increases our quality of life by five hundred per cent, that is, fivefold. It is worth dedicating time and energy continuously to the achievement of the most profound happiness, because our investment will bring a multiple return. The life principle encourages us to do so.

3 The significance of improving family life to our quality of life The most personal, most fundamental level of our life is family life. From our early childhood until we become parents, and then again, now as parents, our private life takes place in a family, intertwined by many intimate ties. Our self is not limited to our individual self. Our emotions naturally connect us with the natural emotions of our family members. That is why the best, the healthiest possible family atmosphere has immense significance to all of us. The level of happiness of family life is an important component of our quality of life. If we actively seek to improve our family

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life, we can significantly increase our individual quality of life. Exactly because of our close co-habitation, our family life requires the development of our personality the most. In the United Kingdom, a survey of some 160,000 people conducted by the National Statistics Office concluded that above a certain level of income, a happy marital relationship is twenty times more important to our quality of life than a high salary.

Good family relationships are of key importance also in the case of low incomes. Dedicating some hours every day to the well-being of our family life improves our quality of life much more than spending the same amount of time on earning money. Improving our family relationships is a life-long pursuit. The life principle spurs us to do everything we can for the happiness of our family. It is up to us how much part we take in this soul-refining task.

4 The significance of culture, nation and society to our quality of life From an ecological perspective, all nations are cohabitation communities of individuals, and the life of every nation takes place on the same level of life, in cohabitation communities of nations. History is determined by the activities of nations and their relations to each other. The life principle represents the fundamental law of comprehensive ecology. According to that, it is the natural goal of all nations to provide

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the nation with the highest possible level of material, emotional and intellectual well-being. On the basis of the life principle it is the natural life goal of all nations to cooperate with each other for the highest possible level of health of mankind and all life on Earth. On the basis of the universal ecological worldview, it is easy to notice that the fundamental interests and values of nations are common.

The seven levels of cosmic life form a single coherent order, a moral world order. Fundamentally, the life of nations is interpreted and evaluated in this world order. As all of the seven cosmic levels of life follow the same universal value system, the value system of cosmic life, by Nature, nations are not enemies and

operation of nations becomes predominant on Earth, the life of mankind will start to flourish dramatically and beyond all expectations. Cosmic creative powers lend mankind’s world of emotions and thoughts wings. Mankind’s world of emotions and thoughts will become much more effective and will produce much greater results if it becomes harmonious with Nature, that is, reality. The unhindered manifestation of cosmic creative powers gives mankind a world of cosmic emotions and thoughts. Positive psychology has shown that the greatest and most magnificent experience, a peak-experience of human life is the experience of cosmic unity. In the past millennia, this peak-experience has appeared only rarely and in short

opponents but cooperating colleagues of each other and mankind. The primary interests of any nation are the elevating values of universal life. The material, spiritual and intellectual well-being of a nation is the stage where our life unfolds and an essential component of our individual quality of life. Loving our nation belongs to our mental health. The existence of a moral world order and an ecological worldview are essential to the elevating prospects of nations.

periods of certain people’s lives. As soon as mankind regains their complete health, the experience of cosmic unity will become commonplace and conventional. In a healthy civilisation living in harmony with Nature, cosmic sympathy, known from ancient times, becomes an important part of the culture of mankind.

Understanding the essence of the Universe, unfolding the inner creative powers of life, preserving and further developing a high level of human creativity in adulthood raise the intelligence of mankind to a qualitatively higher degree. The process of becoming human achieves its goal, the full unfolding of man’s abilities to elevate life.

5 The significance of a moral world order to mankind The life of mankind takes place in cohabitation communities on Earth. From Nature’s perspective, the life task of mankind is to ensure the complete health of the cohabitation community on Earth and to improve their quality of life. It is a fundamental interest of mankind to enrich the integrity ad beauty of our home on Earth and the cohabitation community of earthlings. What makes humans human is human compassion, generosity and goodwill for all forms of life. Since all forms of life are invigorated and driven forward by three cosmic creative principles, they are the manifestations of cosmic life and intellect. These creative principles become active parts of our lives as the three basic instincts of living organisms. These three instincts focus on sustaining individual, community and cosmic life physically, mentally and spiritually at the highest possible level. With their activity, mankind can contribute to an even richer prosperity of the living world. In the archaic history of mankind, there are several examples that justify mankind’s practical activity to enrich Nature. These include, for example, the ancient Hungarian floodplain water management, which provided fish with such living conditions that in the Middle Ages there were more fish than water in our waters. A comprehensive ecological worldview forecasts that as soon as an ecological, constructive co-

6 The significance of a moral world order to the living Earth, Gaia On the basis of a moral world order, the natural life task of Gaia is to contribute to the evolution and perfection of the life of the Living Universe on Earth and exercising a life activity that is valuable and meaningful to the Universe.

7 The significance of a moral world order to the Living Universe As soon as mankind becomes a healthy member of the cosmic world order unusual processes are expected to take place on a cosmic level. It is a fact that mankind has a unique role on Earth, which is related to their high level of consciousness. The unique role of mankind on this cosmic planet may be a sign of mankind’s essential role and responsibility in the Universe, as it is taught by ancient Chinese philosophy. Now, let us regard mankind as an important centre of the brain of the Universe. Under current circumstances, this centre of the brain is ill, as its components, the nations, instead of cooperating for a higher cause, often turn against each other. If the cells in our brain turned

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against each other, our brain functions would break down. Seeing it from the level of cosmic life, this cosmic brain centre is like a confused anthill that suffers from an internal decay. Since one of the centres of its brain is ill, the Universe is not completely healthy, either. But when mankind regains their complete health, the Living Universe will become healthy again. Having achieved this healthy state, the life forces of the Universe will completely saturate man again. Cosmic creative powers inherent in mankind will be stimulated by human intelligence and spirit, harmonious with them. Since the Universe regains its healthy centre of the brain, the cosmic mind will get into a higher, healthier, more complete and happier state of mind.

of the Universe’, … ‘the ontological source of the Universe’. The exact verification of the existence of the life principle will provide a scientific explanation for the existence of ’qi’.

The two arms of cosmic life, matter and intelligence will achieve a qualitatively higher level of harmony, get closer to each other and life, and their fundamental nature will become qualitatively more refined. In this state of fulfilment, matter responds to the effects of mind and emotions more easily. Mind and soul will become capable of governing matter on a qualitatively higher level. The Universe may enter its life stage of fulfilment, unfolding its complete abilities.

opment of a life- and-world-affirming curriculum, and makes it attainable that the school system should not put out generations with an ecological worldview and not a materialistic one for building an ecological civilisation. A comprehensive science is the science of matter, life and consciousness. While paradigm shifts have so far meant advancements within physics, with the emergence of a comprehensive science our whole worldview will progress and arrive at a substantially complete, healthy worldview, thus it may mean an advancement more significant than any paradigm shift so far. The previous worldview shift took place at the dawn of the Early Modern Times, and represented an advancement to material growth. ‘Initiators and representatives (…) called this chaos new philosophy, which we call scientific revolution today.… Their cosmic speculations and researches (…) demolished the medieval concepts of a closed universe and an unchangeable social order, the fixed system of moral values, and they transformed European societies, culture, habits and the entire structure of civilisation to such extent as if a new species had appeared on the planet.’ (Koestler 1959, Sleepwalkers, 13). As a result of the successes of exact physics, the medieval vision of the world was replaced by a materialistic approach.

This turnaround was called “scientific revolution”. Its consequence is the achievement of material well-being. The emergence of the next exact science may bring the exploration of the nature of life and its social application. Its consequence is the achievement of mental and spiritual well-being. Thanks to exact biology, the scientific substantiation of a life-centric worldview has become possible. In the scope of civilisation, a life-centric worldview can be adopted by everyone, as the materialistic worldview was in the past centuries. The diffusion and a growing consciousness of a healthy worldview can represent advance-

ON THE SEVEN LEVELS OF LIFE In terms of an ecological worldview, we think that harmony and balance between the three spheres of existence and the seven levels of our lives is the basis of a healthy conduct of life by mankind. It is worth mentioning that Chinese philosophy has preserved similar views. “The context of life is created by a whole person, nation or all mankind or the fullness of the Universe, all elements and participants of which enter into the most intimate and harmonious relationship with each other” (Fang 1957, The Chinese View of Life, 249). For the ecological civilisation the extraordinary advantage of the comprehensive ecological view is that it renders us personally interested in the complete health of all seven levels of life. The most basic resource of civilisation is human creativity. No civilisation can survive without it. If unimpeded, the main path of life is health on all seven levels. Creating a healthy, ecological civilisation is the key issue of our quality of life. Our results show fundamental matches and similarities with the remaining traces of the civilisation along the Ancient Silk Road. The most written records of the ancient Eurasian high culture have been preserved by the Chinese civilisation. in Chinese philosophy, ‘qi’ is the life force, from which everything is created, the ‘ultimate fundamental of the existence

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THE SIGNIFICANCE OF COMPREHENSIVE ECOLOGY TO THE ECOLOGICAL CIVILISATION What dimensions are outlined by comprehensive ecology, emerging from exact biology? A comprehensive science and a healthy worldview may play a key role in one of the most important factors of building and maintaining an ecological civilisation, i.e. school education. A comprehensive ecology enables the devel-

THE SCIENTIFIC BASIS OF THE ECOLOGICAL CIVILISATION

ment to all mankind. Let us not be afraid of considering the expected consequences of the comprehensive ecology. The motto of the Hungarian, Nobel laureate biologist, Albert Szent-Györgyi is as follows, ‘one can compromise everything but one’s goals’. And if the most fundamental characteristic of the Universe is that it is alive, as it is supported by a growing number of scientific arguments, life is the ultimate reality, and the scientific resolution of the question of life may be the key question that opens the gate to the understanding of the whole world. If the most comprehensive and profound essence of the world is that it is alive, and if we understand this cosmic life, it may provide a key to understanding the whole world.

The exact formulation of the first principles of Nature allows for cultivating philosophy on a scientific basis, the revolution of philosophy. Discovering the moral significance of the life principle may contribute to the revolution of social sciences. As Ernst F. Schumacher highlighted, ‘the conclusions and prescriptions of economics change as the underlying picture of man and his purpose on earth changes’. According to a comprehensive ecology, man’s task on Earth is to promote a richer flourishing, beauty and cosmic value of the living world. A healthy civilisation focusses on completing this task.

Discovering a moral world order may contribute to a healthier national identity, the constructive coop-

eration of nation, world peace, the rebirth of mankind’s unity, a recovery of the relationship between man and Nature, the revolution of world history. ‘ War is a judgment that overtakes societies when they have been living upon ideas that conflict too violently with the laws governing the universe’ (Dorothy L. Sayers, ‘Why Work?’, Chapter 6 in: A Christian Basis for the Post-War World (S.C.M. Press), 46-63).

A substantially complete, healthy worldview can contribute to the revolution of a healthy conduct of life, the revolution of reason, or to be more accurate, of wisdom, the revolution of mental integrity, the revolution of creativity, the revolution of the quality of life, the building of an ecological civilisation.

It can harmonise natural and social sciences, which have been moving away from each other for centuries. Through its scientific substantiation, a sacral moral world order can remedy the misunderstanding between science and religion. By introducing the science of life into the school curriculum, science and life can be drawn closer. The comprehensive ecological worldview can draw our worldview closer to reality. The fact that a life-centric, comprehensive ecology, encompasses the whole Universe and is coherent attributes fundamental significance to the science of ecology. A focus on ecology can eliminate man’s alienation from his self, society, mankind and Nature, and harmonise civilisation with Nature once again.

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BOOK RECOMMENDATIONS

"WE ARE ALL FAST-FOOD WORKERS NOW": THE GLOBAL UPRISING AGAINST POVERTY WAGES

BY ANNELISE ORLECK In her book, Annelise Orleck, a professor at Darthmouth College, calls attention to the negative consequence of globalisation, as seen through the eyes of workers and activists. Placing the problem in a historical perspective, she presents the efforts made by low-wage workers, various trade unions and associations representing workers’ interests from across the globe to improve the quality of life of the masses.

The book is based on extensive research, drawing on dozens of interviews with fast-food servers, airport workers, hotel housekeepers, home-healthcare aides, teachers and small farmers around the world, including Bangladesh, Mexico, South Africa, and the Philippines. The book is a useful reading for those interested in history, ethnography and sociology, and depicts the real significance of bottom-up social movements with dignity.

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THE RETURN OF MARCO POLO'S WORLD: WAR, STRATEGY, AND AMERICAN INTERESTS IN THE TWENTY-FIRST CENTURY

BY ROBERT D. KAPLAN In the thirteenth century, Marco Polo travelled along the main trade route between Europe and Asia known as the Silk Road, and China is dedicating vast energies to its twenty-first-century revival. In addition to the Silk Road, today’s transforming global balance of power is also very similar to the world order of the late thirteenth century.

In his latest collection of essays, Robert D. Kaplan analyses this transforming global system, presenting Europe’s cultural and migration crisis, Eurasia’s systems of conflicts, China’s New Silk Road initiative, India and Iran’s ambitions, and most importantly, the United States’ diminishing global influence.

The conclusion of the renowned author is that the USA, for its own interest, should respect the limitations of democracy, divide superpower interests and values, and when it comes to deploying military power, its psychological implications must be clear.

HAS THE WEST LOST IT?: A PROVOCATION

BY KISHORE MAHBUBANI The Singaporean professor argues that the United States is increasingly losing its influence in the emerging new world order and can no longer presume to impose its ideology on the world, and it must stop seeking to intervene, politically and militarily, in the affairs of other nations. He examines the West's greatest follies: the humiliation of Russia at the end of the Cold War, which led to the rise of Putin, and the invasion of Iraq after 9/11, which destabilised the Middle East.

Yet, he argues, essential to future world peace are the Western constructs of democracy, and they must continue to promote their value system, but by diplomacy, via multilateral institutions. Only by recognising its changing status, he warns, can the United States continue to play a key geopolitical role.

THE THIRD REVOLUTION: XI JINPING AND THE NEW CHINESE STATE

BY ELIZABETH C. ECONOMY The main aim of the book is to give a detailed analysis of the reform processes characterizing China today.

After Chinese president Xi Jinping came into power, the power of the head of state has been reinforced, the Communist Party's role in Chinese political, social, and economic life has been expanded, while the leadership has also extended control over society. Beijing has been openly pursuing great power ambitions, seeking to create a system of international norms that better serves its geostrategic objectives.

Deng Xiaoping's "Second Revolution", advocating greater political and economic opening, as well as low-profile foreign policy, has ended.

While in her book the author assesses Xi Jinping’s first five years in office, giving an account of the substantial elements of the reforms, she also takes particular interest in debated issues, such as fighting corruption, managing the Internet, the future of the state-owned enterprise sector, air quality, the country's innovation capacity and elevating China's presence on the global stage.

RIVAL POWER: RUSSIA IN SOUTHEAST EUROPE

BY DIMITAR BECHEV

HUNGER AND FURY: THE CRISIS OF DEMOCRACY IN THE BALKANS

BY JASMIN MUJANOVIC

Western politicians and commentators claim that Russia tries to undermine the US and European efforts to promote stability in Southern Europe, while seeking to draw the region into its sphere of interest again.

The author, however, argues that both Russia and the Balkan countries and Turkey are driven by pragmatism and opportunism.

Moscow continues to regard itself as a prominent player of security policy on the European continent, also pursuing major geopolitical goals through establishing alternative routes for uninterrupted oil and gas exports. Southern European states – due to their own geopolitical interests – are allowing Russia to reinsert itself to serve their own goals. The book gives a detailed analysis of the responses of regional NATO members, particularly regarding the annexation of Crimea and the causes and consequences of the Putin-Erdogan rift over Syria.

Two decades after the Yugoslav Wars ended, Western-type democratic systems in the Balkans still cannot be regarded as stable. The persistence of authoritarian tendencies can be partly explained by the fact that power has been held by the region's entrenched elites since the early 1990s, who – to be able to retain their influence – have not been interested in a successful democratization agenda. This is the reason why there is a widely held assumption that the region is on the verge of a new bout of ethnic conflict.

But the author argues instead that the Balkans are on the cusp of a historic socio-political transformation, during which grassroots social movements will be able to remove the ruling elite, and instead of pursuing ethnic strife, make a genuine revolution and democratic transition happen. Naturally, the future of the region depends on external factors at least as much as internal processes, since the region is still an active stage of the struggle of great powers for influence.

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THE GEOPOLITICS OF SOUTH ASIA BY GRAHAM P. CHAPMAN

Author: Ádám Róma

Graham Chapman gives a comprehensive account of the geopolitics of the South Asian region and its changes, covering its almost entire history in a chronological order. Although the author emphasizes the introductory nature of his work, it shows how geological movements moulded the land of this major cultural cradle of the world, its characteristic features and their consequences, and how the great Hindu, Mogul and British empires impacted on the geography, culture and political structures of the region. In four major parts, supplemented by several figures, maps and contemporaneous quotations, the author shows how the organization of territory of various states, empires and democracies affected the cultural and economic development of the region. It is the third edition of the book, further regions have been added, reflecting the political changes of our times.

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PART I – INTRODUCTION

PART II – THE BRITISH RAJ

The first part consists of three chapters. Chapter 1 recalls how the Deccan Peninsula was formed throughout millions of years, and the significance of the mountains and rivers that have emerged – suffice it to remember such names as the Himalayas, the Rives Indus in the west, or the Ganges and the Brahmaputra in the east. Then the peoples and empires living or having migrated here are introduced: from the Veddoid and the Dravidian peoples and tribal groups to the Indus Valley civilisation, Asoka and various Hindu empires.

The next two chapters dwell on Hinduism and the Islam in the context of the subcontinent. These chapters provide a detailed description of the Hindu caste system and civilisation the Islamist conquerors encountered, exploring in relevant chapters the various Muslim empires and the Mogul Empire founded by Babur – a descendant of Timur the Lame and Ghengis khan – and its heydays and decline. Finally, the author covers the Islamic tradition and the characteristics of Hindu-Muslim relationships, including the potential sources of risks. Rulers and politicians have often taken advantage of the gravest problem, communal conflicts, as the author remarks.

The fourth chapters of Part 2 present the long years of British rule, starting from the appearance of the British East India Company until the dependence and dissolution of India. The first chapter shows how the “British” notion of nation was formed, and the expansion of the empire, then gives a short account of early merchants and adventurers appearing in India. After that, we can follow how the Company was expanding on the subcontinent, and, with the diffusion of trade, becoming, deliberately or not, a political and military factor. It is followed by the history and the consequences of the Sepoy Mutiny, when the British Crown took over direct control from a heavily regulated Company deprived of many of its privileges. Then – in accordance with historical events – the author guides the reader through the geography of the “North-West frontier” of India, its geopolitical role, and the events of the Afghan Wars, paying special attention from a geopolitical perspective to the changes of the frontier. This effort was based on the British attempt to establish borders considered to be the best – for them – “on scientific grounds”, as a result of which they engaged in conflicts with several local tribes and ethnic groups and intervened in local

II (number 7 in number) gives a comprehensive picture of the Hindus’ and Muslims’ independence movements on the subcontinent, paying special attention to the dynamics of these two large communities, the impact of World War II, and the role of the British in establishing constitutional functions and in the partition of India.

PART III – THE SUCCESSOR STATES Part III starts with a parallel by introducing the self-determination efforts of post-war Europe, for a better understanding of South Asian events. Then the author reviews the processes leading to independence and the partition, and the people and groups influencing it. In

politics, the contemporary implications of which are also discussed in the context of the Soviet occupation of Afghanistan and the later war against terrorism. The author illustrates the significance of the North-West frontier by a quotation by geographer Halford Mackinder, ‘In all the British Empire there is but one land frontier on which war-like preparation must ever be ready. It is the north-west frontier of India.’

The next chapter describes how people mould nature and its impact on the subcontinent. In that age, it means the infrastructure developments of the British, from new railway networks and cities to the telegraph network and the vast irrigation system, which has become a sensitive issue between India and Pakistan in the twentieth century, giving a detailed account of economic and political implications in the background and their subsequent impact not only on India’s economy or administration but also on society, taking the emergence of a new caste engaged in operating railways as an example. On the closing pages of the chapter, the author sums up the effects of changes, such as the new regional economic hubs ignoring cultural or linguistic regions, the linguistic changes brought about by the appearance of the English language, or the characteristics of the emerging middle class of India, but in a self-reflective chapter he dwells on – as a criticism of the mainly British-centred narrative of the book – India’s civilisation impact, which almost unavoidably affected European expatriates. Finally, Chapter 3 of Part

addition, the chapter gives a detailed account of the circumstances under which power was transferred, the role of Mountbatten and his balancing between Nehru and Jinnah. After Jinnah had achieved his goal, and the decision on dividing India had been made, there was only one more task left: to draw borders. This, however, – as history has shown – was not completely successful, because of different interest groups, the short period of time available and the economic intertwining of various ethnic and religious groups.

Chapter 9 describes this process, giving a detailed account of the operations and challenges of Sir Cyril Radcliffe’s Boundary Commission, and the history of the division of specific areas, the nominally independent princely states in particular. It is not surprising that the chapter also pays special attention to the issue of Kashmir, as it is still a relevant one today. Not completely independently from the British political aspirations in the 19th century, which were fundamentally determined by rivalry with the Russians, Kashmir had become a part of the Empire, but, from the point of view of the later division, not without ambiguity. In addition, the ruling Maharaja and the elite were Hindus, while the majority of the population were Muslims. In this difficult situation, the Maharaja sought to achieve independence, but both states intervened again, due to conflicts and ethnic cleansing flaring up during the partition, establishing the still existing conflict-ridden situation.

Chapter 10 presents the partition of Pakistan in 1972 and the birth of Bangladesh, adding all the causes and social-economic conflicts that have led to the present situation despite their shared religiousness, which also has a role in how these states are organised. Chapter 11 focusses on the internal organisation of successor states, in which regionalism has had a prominent role.

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In the context of India, the – often military – integration of theoretically independent princely states and areas is presented, as well as the effects of linguistic tensions moulding provinces. In relation to Pakistan, the author focusses on the negative effects of the Centre-Province conflict, adding the consequences of the resolute founder of the state, Jinnah’s untimely death, which, beside other reasons, has contributed to the now traditional, excessive political influence of the military.

The next chapter, number twelve in number, which forms a new part of the third edition, gives an overview on the history, role and geopolitical significance of the north-eastern (frontier) areas. Assam and the north-eastern region, which had not been incorporated into any South Asian empires until the arrival of the British thanks to its barren mountains and the countless, diverse tribes living here, first became important because of the production of tea, but have been home to numerous conflicts since the beginning of the twentieth century, including Japan’s invasion attempts into India during World War II, the China-India War in the Cold War years, the origins of which go back to the border arbitration attempts of the British and still determines the relationship between the two countries, but the separatists movement in Nagaland also cause a recurring problem to the Indian government.

Then the author returns to the issue of irrigation and river training systems, which has caused problems to both Pakistan, and Bangladesh and India after its dis-

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solution. The water management debate between India and Bangladesh is described here as well, as the Farakka barrage built near the Bangladesh border has an adverse effect on the water quality and quantity of the River Ganges arriving in the country, exacerbating floods in the flood-prone country, as some experts claim.

Chapter 14, entitled as Greater Game by the author, is a summary of post-war South Asian relations in geopolitical terms. Here, in sub-chapters, the author gives an account of the foreign policy situation, goals, existing or potential challenges of the countries he believes to be relevant, introducing the Soviet Union/ Russia, the USA, the China-Tibet issue with the Himalayan War in 1962, Pakistan, Afghanistan, Kashmir, Bangladesh, India, and briefly dwells on Sri Lanka, Nepal and Bhutan, and regional organisations. He places them into the same geopolitical background, regarding the subcontinent as an independent geopolitical region like Mackinder and Cohen did, but questions their relevance with a view to the changes brought about by the war against terrorism. After an introduction into the relations of specific countries, recognizing their entanglement, he attempts to interpret these relationships and alliances with a triangular method, with the analysis of the politics of triangles, examining their possible future changes.

In the conclusion to the chapter, Huntington’s The Clash of Civilizations is referred to as it is considered to be relevant in the context of India-Pakistan relations and their internal political developments.

THE GEOPOLITICS OF SOUTH ASIA BY GRAHAM P. CHAPMAN

PART IV – CONCLUSIONS The closing chapter of the book gives an overview of the history, the present and the future of South Asia.

Drawing on the work of previous researchers, the author identifies the traditional subunits or core areas of the subcontinent and points out that the history of South Asia can be best described by the unification attempts of various depth and extension by these core areas, until the appearance of the British, whose integrating and nature-moulding activities eliminated the relevance of traditional historical-geographical regions. In this respect, he draws a parallel between the post-independence history of South Asia and the European Union; while in Europe, the latter half of the twentieth century was the history of integration, in South Asia it was the history of disintegration. On these grounds, it should be noted that the secession of the South Deccan, despite historical events, would have been more likely than the division of Bengal and Punjab. The next subchapter covers the issue of an all-Indian identity, the emergence of the idea of self-determination, regional-pan-South-Asian issues and problems that still exist despite new borders.

The author gives a short account of the economy and population of the major states, India, Pakistan and Bangladesh, in the last seven decades, and tells a few words on possible civilisational differences, referring to Huntington again.

Finally, the last subchapter of the book sums up the theory of politics of reactions, which often explains the

history of the region after the Sepoy Mutiny, and which basically states that the power has always yielded too late and too little (the British to Nationalists, the Indian Congress to Jinnah and the Muslim League, West Pakistan to East Pakistan) but he does not see this alternative interpretation of history underpinned. Although he is laconic about the future of the region, he highlights the risks of the Pakistan-India opposition, which he contrasts with the cohesion of the South Asian civilisation, and the potential of the organisation symbolizing it, SAARC (South-Asian Association for Regional Cooperation).

CLOSING REMARKS The book reviewed above counts as essential both for professionals and laymen interested in the region or geopolitics. On the one hand, the book is a coherent overview, but the narrative, encompassing great historical eras, does not compromise minor details; on the one hand, it is done in a form that is rare today, by integrating several perspectives, approaches and methodologies. The book draws parallels at several points between the empire-building efforts of various eras, adopting an interdisciplinary approach, using, among others, geographical, hydrographical, economic and theological viewpoints. As a criticism, the relative neglect of Sri Lanka, Tibet and Bhutan should be highlighted, which is, unfortunately, not a characteristic of this book only; the role of Nepal and Bangladesh, however, receives more emphasis than usual, which is definitely a positive point.

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http://www.geopolitika.hu/hu/2017/03/10/az-afrikai-vasutfejlesztes-kilatasai-a-kinai-szerepvallalas-fenyeben/ https://hu.wikipedia.org/wiki/Vas%C3%BAt KALGORA, B. and CHRISTIAN, T. (2016) „The Financial and Economic Crisis, Its Impacts on the Shipping Industry, Lessons to Learn: The Container-Ships Market Analysis.” Open Journal of Social Sciences, 4, p. 38-44. http://www.scirp.org/journal/PaperInformation. aspx?paperID=62786 NIETSCH Tamás „Konténeres szállítmányozás folyamata,” Nietsch.hu, 2006. július 11.

OECD: Cardiac arrest or dizzy spell: Why is world trade so weak and what can policy do about is? 2016. szeptember. http://www.oecd-ilibrary.org/docserver/download/5jlr2h45q532.pdf?expires=1475580890&id=id&accname=guest&checksum=F8225AF6E398402D3FB5E5935C38540D OECD: Interim Economic Outlook – Global growth warning: Weak trade, financial distortions. 2016. 09. 21. http://www.oecd.org/eco/outlook/OECD-Interim-Economic-Outlook-September-2016-handout.pdf OLÁH J. (2015): A közúti áruszállítás és szállítmányozás kihívásai napjainkban. Jelenkori társadalmi és gazdasági folyamatok, (2015) X. évf. 2. pp. 103-120.

Reugebrink, Freddy (2016): Container transport by rail to and from China. DSV Experts Insight, UIC (2018): Freight at UIC. International Union of Railways, June 2018. p. 3. https://uic. org/IMG/pdf/brochure_freight_2018_h_web.pdf UNCTAD: Review of Maritime Transport 2017. http://unctad.org/en/PublicationsLibrary/rmt2017_en.pdf VAN DER PUTTEN, Frans-Paul – MEIJNDERS, Minke: China, Europe and the Maritime Silk Road. Clingendael report, March 2015, 33. https://www.clingendael.nl/sites/default/ files/China%20Europe%20and%20the%20Maritime%20Silk%20Road.pdf www.geopolitika.hu/hu/2016/10/21/valsagban-a-tengeri-szallitmanyozas/ http://geografus.elte.hu/web/tananyag/3/ipar/gy/kozlfoldrajz.pdf http://www.rubicon.hu/magyar/oldalak/1903_december_17_eloszor_szall_fel_a_ wright_testverek_repulogepe/ The fourth industrial revolution and the tasks and opportunities of developing countries Belényesi Pál, PhD. (MOME, Budapest; KGRE, Budapest; Brussels Consulting, Brussels) Book recommendations Annelise Orleck: "We are all fast-food workers now": The global uprising against poverty wages.

Robert D. Kaplan: The return of marco polo's world: war, strategy, and american interests in the twenty-first century.

Kishore Mahbubani: Has the west lost it?: A provocation Elizabeth C. Economy: The third revolution: xi jinping and the new chinese state Dimitar Bechev: Rival power: Russia in Southeast Europe Jasmin Mujanovic: Hunger and fury: The crisis of modern democracy in the Balkans Graham P. Chapman: The geopolitics of South Asia Chapman, Graham P.: The Geopolitics of South Asia – From early empires to the nuclear age (Third Edition). Ashgate, Anglia, 2008.

LIST OF PICTURES AND FIGURES Pearl River Delta: Opportunities and Challenges Figure 1. figure: KPMG Figure 2. KPMG Figure 3. YAU, Cannix: „Is Hong Kong’s giant bridge a road to nowhere or path to new opportunities?” In: The South China Morning Post July 11, 2017. http: //w w w.scmp.com/news/hong-kong/economy/article/2102213/ hong-kongs-giant-bridge-road-nowhere-or-path-new (30.03.2017.)

The Integration ott he Pearl River Delta – The Hong Kong-Zhuhai-Macao Bridge

Figure 2. Novatek Figure 3. The Diplomat: https://thediplomat.com/2018/03/china-commits-to-arctic-protections-but-development-threats-loom/ India and the “New Silk Road” Figure 1. HUG 2016/3. Budapest, PAGEO, 2016.

Figure 2 – 6.: Saját szerkesztés, carto.db Chabahar: which way are the scales tipping?

Figure 1. HSBC Pearl River Delta: Factbook, 2016.

Figure 2. Population City Figure 3. The Economist Figure 4. The project official website: http://www.hzmb.hk/eng/index.html Figure 5. The project official website. http://www.hzmb.hk/eng/benefits_ transportation.html

Picture 1. XINHUA: China to speed up construction of new Silk Road: Xi. In: Khmer Times, 2014. november 7 Picture 2. CHAKRAVORTY, Maj Gen: Chabahar Port: Strategic Neccesity for India. In: Bharat Shakti, 2017. május 29.

Picture 3. SRIVASTAVA, Mahek: An Alternate route: Chabahar Port for India.

In: Construction Business News, 2017. december 4.

Picture 4. Chabahar Port: Its Development and Strategic Importance. In: 2thepoint, 2017. szeptember 22.

Hainan: The place where reforms are deepened

Hungary, as a pioneer of the “Belt And Road”

Figure 1. http://www.china-briefing.com/news/2017/09/21/investing-inchinas-free-trade-zones.html Figure 2. http://www.scmp.com/business/china-business/article/2142259/us-among-59-countries-granted-visa-free-access-chinasresort

Figure 1. 2015 Statistical Bulletin of China’s Outward Foreign Direct Investment Figure 2. China Customs

Polar Silk Road Figure 1. Wishnick, Elizabeth: China’s Interests and Goals in the Arctic: Implications for the United States. Strategic Studies Institute, 2017. p. 9.2. kép: iurii, Shutterstock.com, https://www.shutterstock.com/image-illustration/ future-city-on-coast-384057364 (2017.03.13.)

Overland vs seaborne trade Figure 1. OECD Figure 2. OECD Figure 3. UNCTAD

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credits EDITOR-IN-CHIEF Norbert Csizmadia MANAGING EDITOR Anton Bendarzsevszkij EDITORAL BOARD Anton Bendarzsevszkij László Körtvélyesi Géza Salamin Péter Szatmári György Szapáry István Szilágyi Ákos Vajas COPY EDITOR Szilvia Kálla

AUTHORS Pál Belényesi Anton Bendarzsevszkij Ráhel Czirják Ádám Csenger Norbert Csizmadia Viktor Eszterhai László Gere Attila Grandpierre György Matolcsy Katalin Miklós Alexandra Mogyorósi Viktor Orbán Eszter Polyák Ádám Róma Alexandra Zoltai

ART EDITOR Gyula Nagy PUBLISHED BY: Pallas Athéné Innovation and Geopolitical Foundation H-1014 Budapest, Úri str. 21, Hungary DATE OF PUBLICATION November 2018

ABOUT HUG

LEGAL & PRIVACY STATEMENT

Hungarian Geopolitics (HUG) is a Pallas Athéné Innovation and Geopolitical Foundation, which relies on Hungarian and foreign authors to present the most recent and the most interesting values, achievements and changes seen in the current Hungarian and global geopolitical and geostrategic scene, as well as in other related fields of science (social science, economics). HUG aims at inspiring the community interested in geopolitics, in addition to the fields of science, to create new value through extensive knowledge.

HUG (Hungarian Geopolitics) Magazine is a free publication, and not intended for sale. All information and content published in HUG is the intellectual property of Pallas Athéné Geopolitical Foundation (PAGEO).

No content of the publication may be copied, distributed, published or used in any way, in whole or in part, without prior written permission from the foundation.

CONTACT Please send your questions, comments and feedback to our staff at hug@pageobudapest.hu.

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An essential selection of

book workshops consisting of 4 titles

(SCENARIOS OF THE FUTURE) George Friedman and György Matolcsy

“expect the unexpected” “see the events of the world through the eyes of decision-makers”

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HUNGARIA N G EOPOLITICS

In our present, 11th issue, we are travelling along the linking lines of Eurasia, from the Pearl River Delta development zone to the Polar New Silk Road. We can read about the challenges of the new Eurasia: the links between China and Central and Eastern Europe, from the ecological civilisation to the Fourth Industrial Revolution. Within the territory of the New Heartland in space and time!

HUNGARIAN GEOPOLITICS

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