Five Ways the "New Silk Road" Could Transform the Global Economy
"New Silk Road", connecting all parts of the vast Asian continent with Africa and Europe, is becoming a powerful influence on the global arena. Afshin Molavi, an Iranian-American geopolitical risk and business analyst, examines the changes happening now across this region, and the impact they may have on the world's future.
The "New Silk Road" is fundamentally transforming our world. The relations and the geo-commercial trade between the Middle East, Africa, and Asia are not only the fastest growing trade corridors in the world but also the fastest growing foreign direct investment corridors. They are fundamentally altering geo-economic patterns, and potentially geo-political patterns.
Five key topics define the New Silk Road.
1. West Asia vs. Middle East
The term "Middle East" was popularised by Alfred Thayer Mahan, an American naval strategist, in 1902 when he was trying to define the land mass between India and Europe . He came up with the term "the Middle East" and it stuck. But geo-commercially, it doesn't make as much sense as "West Asia". The Persian Gulf states are arguably far more geo-commercially Asian than they are Middle Eastern.
When you look at the departure and arrivals section at Dubai International Airport, you will see a 'map' of this New Silk Road. There are more flights from India to Dubai than there are from India to the rest of the world combined. Africa is another extremely popular destination. Emirates Airlines alone flies to 25 destinations in Africa direct. In many ways Dubai has become the Miami of Africa and the Hong Kong of India.
Outside the airport there is Dragon Mart, a massive shopping mall and wholesale retail complex for Chinese goods. It's about the size of seven football fields, and you can buy everything – from one teddy bear to 10,000 teddy bears. When you're there you really feel this New Silk Road. Why? Because of all the Iranian, Syrian and African traders who come to Dragon Mart. They're buying from the largest wholesale market for Chinese goods outside of China, right there in Dubai. So, in many ways Dubai has become the hub of this New Silk Road, this West Asia-East Asia nexus.
Global Middle Class
billion people – today.
billion people – by 2030.
2. The Future of the Global Middle Class
There are about 2 billion people in the global middle class today. By the year 2030, it's forecast that there's going to be about 5 billion. The vast majority of those new entrants into the global middle class are going to hail from the emerging world, particularly Africa and Asia. Right now, almost three out of four people on earth live in Africa or Asia, and according to future demographic trends, that's only going to accelerate. While populations in Europe are declining, populations in Africa are accelerating. So, when looking at the future of the global middle class, you need to be looking at Africa, Asia and the Middle East. That's another reason why this New Silk Road matters so much.
3. Cities: The Core of the New Silk Road
Worldwide, 1 million people per week are moving from rural areas to urban areas. We have surpassed the 50 percent mark in China, in terms of urban versus rural. We have far surpassed that in most of the emerging world, and in many ways cities are a much better barometer and a much better economic engine for the future than countries are, per se. So if somebody asks "Do I want to invest in Indonesia?" the answer may be: "Well I'm not sure about Indonesia, but I like Jakarta."
4. "It's all about Shanghai, Mumbai, Dubai or goodbye."
This is something I heard from an investment banker: "It's all about Shanghai, Mumbai, Dubai or goodbye." In this new geo-commercial world, this new geo-economic world, you really need to have a presence in the hubs of the New Silk Road, in the big countries like India and China and the emerging markets. Without that presence you're missing out on the biggest growth story the world has today.
Although there is a lot of concern about emerging markets' equities, about emerging markets' currencies, about volatility in emerging markets, when you add up the urbanisation, the demographics, the population, the growth that we're seeing in terms of south-south trade and emerging to emerging trade, I think we will still see considerable growth in emerging markets, and particularly considerable growth along this New Silk Road that connects the Middle East, Africa and Asia.
5. Change Is Inevitable
We're living in a world in which change is inevitable, and change is at a new velocity. All we have to do is look at the Arab uprisings. Vladimir Ilyich Lenin, the Russian revolutionary, once said that sometimes decades pass and nothing happens, and suddenly weeks pass and decades happen. I think Lenin was presaging the age of social media and the internet and Facebook, because we do see decades happening in a matter of weeks and a matter of months. It's not just political changes, but technological changes too.
It does make strategic planning more difficult, but then it also reminds us to go back to the basics. Demographics is one thing I keep going back to. Urbanisation is another. And when you follow those big geo-economic tectonic plates, I think that one investment approach might be to chase that global emerging middle class that we just described, which is forecast to go from 2 billion to 5 billion by the year 2030.
I'll let smarter people than I, who invest for a living, figure out a way to chase that middle class, but this is a significant, world changing geo-economic event.