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Report Card for the India-Middle East-Europe Corridor
Context:
The India-Middle East-Europe Corridor (IMEC), announced at the G20 summit in September 2023, promises a major shift in global trade by connecting India, the Middle East, and Europe. Expected to reduce transit time by 40% and costs by 30% compared to the Suez Canal route, IMEC could enhance connectivity and supply chain resilience.
The mixed Report Card:
- Delayed Progress Due to Regional Conflicts
- The announcement of IMEC brought optimism, but the project faced delays.
- The October 7 escalation of the Israel-Palestine conflict stalled progress, especially affecting West Asia.
- Saudi Arabia and Jordan have not advanced their work, as they are wary of the optics of working closely with Israel during heightened tensions.
- Slow Development in the Western Corridor
- The corridor’s northern segment in West Asia is likely to progress slowly until regional stability improves.West Asian governments may avoid direct cooperation with Israel while the conflict continues.
- This delay impacts key stakeholders like Saudi Arabia and Jordan, who need stable conditions for smooth project implementation.
- Eastern Corridor Moving Forward
- The eastern section, linking UAE and Indian ports, is progressing rapidly.
- India-UAE relations have strengthened, with bilateral trade nearly doubling from $43.30 billion in 2020-21 to $83.64 billion in 2023-24.
- Non-oil trade between India and the UAE has also increased, showing a positive diversification of the trade basket.
- Standardisation and Trade Facilitation Efforts
- India and the UAE launched the Virtual Trade Corridor to streamline trade processes, reducing time and administrative costs.
- This platform aims to make trade easier and may serve as a model for other IMEC countries to facilitate cross-border trade.
- Connectivity Advances, Energy and Digital Delayed
- Currently, progress is mostly on connectivity and trade facilitation.
- Key elements like clean energy export, undersea fibre-optic cables, energy grid linkages, and telecommunication infrastructure are on hold.
- These projects will resume once conditions in West Asia stabilise, allowing a fuller integration of energy and digital components in the IMEC.
What India Should do to strengthen IMEC:
- Strengthen Port Infrastructure and Connectivity: Developing special economic zones (SEZs) along IMEC connectivity nodes can create dedicated hubs for export and trade.
- Boost Digital Integration in Logistics:Expanding the digital footprint in logistics will reduce costs and transit time, making Indian exports more competitive.
- Enhance Manufacturing Competitiveness for Global Supply Chains: IMEC provides an opportunity for India to emerge as a global supply chain alternative, but this requires a stronger manufacturing base.
- Establish an IMEC Secretariat: India should advocate for an IMEC Secretariat to organise the project’s structure and streamline operations.
- Develop Regional Interest and Participation: Broader participation would strengthen the corridor and expand economic opportunities across regions.
- Leverage IMEC as a Strategic Positioning Tool: With IMEC, India aims to position itself as a critical player in global trade networks. Strengthening infrastructure, manufacturing, and logistics now will allow India to capitalise on IMEC’s full potential as a trade and supply chain hub.
About IMEC
Participating Countries and Global Leaders
- The IMEC agreement was signed by leaders from the United States, United Arab Emirates (UAE), Saudi Arabia, European Union (EU), Italy, France, and Germany.
Vision and Commitments
- IMEC represents a strategic alliance, with partners committing to long-term infrastructure development, energy cooperation, and digital connectivity. The White House describes it as an initiative that could reshape trade across three continents.
IMEC Design and Route
- Route Details: The IMEC spans over 3,000 miles, including:
- Eastern Corridor: Connecting India to the Arabian Gulf.
- Northern Corridor: Extending from the Arabian Gulf to Europe.
Key Components: The corridor includes:
- Ship-to-Rail Network: To improve transit efficiency and reduce dependence on traditional shipping routes.
- Energy and Digital Connectivity: Plans for electricity and digital cables, as well as clean hydrogen pipelines, are integrated to support renewable energy efforts along the route.
Economic Benefits of IMEC
- Reduction in Shipping Costs and Transit Times – IMEC is estimated to:
- Reduce Transit Times: By around 40% compared to the Suez Canal.
- Lower Shipping Costs: By approximately 30%, making trade more cost-effective.
- Benefits to Low- and Middle-Income Countries: IMEC aims to facilitate trade for low- and middle-income countries, strengthening Gulf Cooperation Council (GCC) economies, and supporting job creation.
Challenges Facing IMEC
- Trade Agreements and Political Stability: Establishing deep trade agreements and securing political stability in sensitive areas is crucial. The Memorandum of Understanding sets forth initial commitments, but no legally binding agreements have been made, and success depends on resource allocations and cooperation among founding countries.
- Coordination Among Diverse Regulations: Effective implementation requires strong collaboration across countries with differing regulations and standards, adding complexity to IMEC’s development.
Geopolitical and Global Economic Implications
- Economic Integration and Global Influence: IMEC has a combined economic weight of nearly half the world’s GDP and 40% of its population. The corridor could transform global trade by improving supply chains, creating jobs, and supporting environmental goals.
- Strengthening U.S. Influence in the Region: The U.S. envisions IMEC as part of its broader strategy to build secure, high-quality infrastructure, asserting its influence in the Middle East while fostering regional cooperation and security
IMEC as an Alternative to the Belt and Road Initiative (BRI) and Suez Canal
- Counterweight to China’s BRI: IMEC offers an alternative to China’s Belt and Road Initiative (BRI), positioning the U.S. and India as leading infrastructure partners. It challenges BRI’s influence by presenting a distinct trade and infrastructure investment framework.
- Reducing Reliance on the Suez Canal: The corridor bypasses the Suez Canal, introducing competition to traditional shipping routes and potentially reducing congestion in this heavily trafficked pathway.
