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1.0 IntroductionThis chapter examines the influence of the trade relationship between Chain and Uzbekistan under one belt and one road. The introduction chapter gives an overview of the one belt one road initiative that is set to be establish. The background of the study also examines the assumption behind the one belt and one road project. Thus, it also seeks to examine the economical and financial impact of the one belt and one road initiative. The problem statement also reveals the challenge and gaps for the study.
This chapter also includes the research question and research objectives. The significance of the study, the scope and organization of the study are discussed in this chapter. 1.1 Background of the studyIn the 21st Century, the world is facing slow and permanent breakdown in economic growth, social growth and steady development in most countries after the global financial crisis. This has affected the growth and development of trade and investment for several years. According to Wolff (2015), the reason for decline in trade and investment appears to be structural rather the cyclical.
The implication is that the inability of policies, structures, infrastructures and systems to function effectively is most part of the world has general affected trade and investment globally. Wolff (2015), further stated the monetary and fiscal policies in most countries are facing limitation of effectiveness. This has also affected the growth and development of emerging market. According to Kawai and Nag (2012), for improvement in development and growth, policies and structure in most countries should be develop to foster investment in industry and service, creating employment and building an enabling environment, infrastructure to improve trade and investment.
Infrastructure and trade investment are becoming a strategic pathway to lit global growth, solve employment issues and ensures sustainable development. According to Asian Development Bank report (2010), there exist gap in infrastructure and about UBD 8 trillion needs to spend between 2010-2020 to fill the infrastructure gap to improve trade and investment within cities and across countries. In addition, Wolff (2015), revealed that China’s Belt and Road initiative has gain much attention and interest. The one belt and one road initiative has been considered as a strategic vision for development and improving the flow of trade and investment between countries from Asia and Europe and beyond. The introduction of one belt and one road has a potential benefit foe intensifying regional supply network to sustain competitiveness, lower tariff and non-tariff barriers. Kawai and Nag (2012), stated that one belt and one road initiative also decrease the cost of importing inputs and improve participation of value chains among countries. According to OECD (2015), the China’s Belt and Road initiative has been considered as a shift of the economic policy from macroeconomic to structural policies. Thus, the one belt and one road has been considered as a process for fostering development and promote innovation to sustain growth in productivity. The one belt and one road initiative was introduced in 2013, when China unveiled it as their ambitious global. According to Qoraboyev (2018), the one belt and road was lunched as a trillion-dollar infrastructure initiative to redefined trade and economic relations between countries. The initiative is also considered as a blend of globalism and reshaping the world by improving existing tries and building new network between countries in Africa, Asia and Europe. According to National Development and Reform Commission (2015), the Chinses government issued an official document on March 28, 2015, laying out the major principle and priorities for one belt and one road. The one belt and one road initiative could help promote economic prosperity and regional cooperation, strengthen exchange and mutual learning between different civilization and promote world peace and development. Moreover, Chung (2015), mentioned the Chinese government came up with such strategy to expand globally and transformed from a regional power into a global power through the implementation of one belt one road. Research indicates that the motivation for one belt and one road can be viewed for economic, domestic and strategic dimension. Wang (2012), mentioned that the lunching of one belt and one road is supposed to have an impact on 55% of world gross national product and will also have a positive impact on 70% of the world’s population. Johnson (2016), also indicates that the lunching of one belt and one road is to create new incentives for building more infrastructures and facilities which will promote trade and investment among countries. In addition, Qoraboyev (2018), indicate that both China and Uzbekistan are important forces in global stages and in the world market. With Uzbekistan having experienced peacefully political transition in the last decade and achieving comprehensive social and economic reforms. With China also have significant improvement in world market and benefiting from current international position as most powerful and responsible country that has so much to offer. Thus, to say bother countries have showcase their developmental objective, their abilities in the world market and their international desires. With difference level of drivers between the two countries, their approaches to development may create new opportunities for further consolidation. According to Lopez (2017), the one belt one road will have a lot of influences between the two countries. Thus, the initiative will enable China to exercise its soft power activities in Uzbekistan. This will promote China investment in the country. China have been investing in Uzbekistan in energy and transportation sectors within the framework on one belt and one road initiative. This help China to development and improve their trade relationship and Uzbekistan will also benefit through developmental projects and economy development. Moreover, Shaku (2016), revealed that the initiative has a will benefit Uzbekistan as China will bring more workers and also employ people in Uzbekistan to support the project. This will help reduce the unemployment rate in both countries. Also, the one belt one road will improve the relationship between both countries, as it will increase export of natural gas to China. Baidarov (2017), further mentioned that the relationship between China will help Uzbekistan to gain power like South Korea and Japan. This help improve the developmental level of Uzbekistan and improve their economy. The introduction of one belt and one road initiative is to improve business between Asian countries and global growth by increasing trade and investment development. With the one belt and one road, there will be an increase in trade integration in most part of Asia with the Association of Southeast Asian National (ASEAN). In Central Asia, trade integration has been taking a slower pace and this a negative influence on the development and growth of economic, but with one belt and one road there will be stability in commodity prices and improve market performance. Moreover, Huang and Li (2016), mentioned that the belt and road is a Chinese foreign policy initiative promoted by president Xi Junping. The one belt which also known as silk road will stretch from China through Central Asia and the one road refers to a maritime road, which is to connect the South East Asia, Middle East, Europe and the East coast of Africa. The one belt and one road seek to include 65 countries which are eligible to join, however, the Chinese government mentioned that any country which aspires to be part is welcome to participate. Huang and Li (2016), further mentioned that the amount of total investment estimated in a first phase of the belt and road initiative is estimated to amount to about 240 billion. However, most of the total cost the project will depend on the number of countries to participate. This paper attempts to give an overview of one belt and one road, some of the opportunities of the initiative, its policy consideration, its benefit to the countries involved and challenges of cross borders connectivity. 1.2 Problem statement The belt and road initiative seek to put Asia and countries in the Middle East, Europe and Africa on new trajectory of higher growth and human development through improving trade, investment, infrastructure and increased connectivity. One belt and one road are combination to concept to promote economic engagement and investment within two main routes. The one belt and one road initiative is said to conceptualize a fundamental change in China’s economic development. Thus, China will embrace a new sustainable level of growth and also distribute benefit more evenly. Hu (2015), stated that the new initiative will improve quality of life of most people in the world and the world will final become a global economy. Despite the benefits associated with one belt and one road initiative, an effective and proper assessment of the challenges and the involved countries need to be taken into consideration. Thus, most financial institution needs to be aware of the range and amount of credit risk that will be presented in one belt and one road countries, the operation risk of the construction firms and other enterprise presence in the initiative countries. There exists operational risk in most of the countries that are involved in the one belt and one road system. Thus, Afghanistan and Iraq are beset by conflict and war which threaten the project. Moreover, the central Asian countries which includes Tajikistan and Uzbekistan, where the one belt and one road initiative push to be strong very close behind infrastructure and with low economic and social development, government effectiveness, political instability and lack of infrastructure in most of the developing countries will have a negative influence of the initiative. According to Economist Intelligence Unit (2015), one of the major political risk a challenge that will affect the one belt and one road initiative. Political risks influence the progress and development of one belt and one road initiative. Most of the projects are scheduled to be high-profile construction project, which needs the involvement of the destination countries government. Political changes need to be anticipated as a change in government will influence the outcome of the project. Also, political stability in countries such as Kazakhstan and Ukraine will negative affects the project. In Kazakhstan for instance, there a risk of mass protest which as a result of corruption, social issues and income disparities. With an increase in conflict in most countries, there a potential for protest to influence themselves in anti-business aspect. This will have a negative effect on foreign direct investment. In addition, different legal and regulatory risk affects the development of the one belt and one road system. Complexity of the laws, inconsistent and open to interpretation, contracting rule of law among different countries serve as a pitfall. Also contract negotiations and obtaining project approval from various government is often delayed. All these factors affect the development of the one belt and one road initiative.1.3 Research objectives The main research objective to examine the influence of the trade relationship between China and Uzbekistan under one belt and one road. 1.3.1 Specific objective 1. To assess the impact one belt and one road on China’s and Uzbekistan’s economy. 2. To examine the various opportunities that will presents itself under the one belt and one road initiatives. 3. To examine the challenges involved in one belt and one road initiative.4. To examine the factors that influence one belt and one road initiative. 1.4 Research question 1. How will one belt and one road influences China’s and Uzbekistan’s trade relationship and investment development?2. What are the opportunities involved in development of one road and one initiative? 3. What are the risks and challenges involves in development of the one road one initiative?4. How will the one belt and one road initiative promote the relationship China’s and Uzbekistan’s1.5 Significant of the studyThe study will assess influence of the trade relationship between China and Uzbekistan under one belt and one road. China has entered a new stage of its development. The one belt and one road have a fundamental goal of creating transport system which will facilitate access to foreign
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