Bridges for Economic Growth

878

BRIDGES FOR ECONOMIC GROWTH

What’s in a bridge?

Fresh off the announcement that Egypt and Saudi Arabia are working on the construction of a bridge between the two countries, we thought it would be a good time to look at what the benefits of bridge-building can be on an economy (via example), as well as some bridge projects which make us excited.

The Saudi-Egypt Bridge has been in discussions since at least 2005 when Hosni Mubarak was a big advocate for the construction of a bridge. Prior to President El-Sissi taking power, President Morsi had made significant headway towards this project.  The project makes a lot of sense for both countries.   For Egypt, it is a way to boost investment from Saudi Arabia into the Egyptian economy (Saudi Arabia is the 5th largest source of FDI for Egypt).   Saudi Arabia will provide funding for Egypt’s energy exploration as well as strong investment in a variety of industries.  For Saudi Arabia, Egypt represents the most populous Arab nation, which strategically Saudi Arabia wants to remove from the sphere of influence of both Turkey and Iran.

Economically, this bridge would provide a direct route for pilgrims of the Muslim Hajj to Saudi Arabia and also enable Saudi-Egyptian trade to avoid land access which necessitated transport through Israel.  The bridge is expected to cost ~$4bn and have a very significant impact on trade and GDP though we were unable to find much in terms of quantitative numbers.  It would be the only land connection between Africa and Asia that is not subject to the geopolitical issues of transporting goods via Israel.

Bridges that generate an economic impact

Bridges and tunnels have long led to significant and material economic benefits for either regions, cities, or countries being linked.  What follows below is a few examples of bridges/tunnels around the world that have had a material impact on the economic well-being of both countries.

Afghanistan-Uzbekistan Friendship Bridge

Afghanistan and Uzbekistan are divided by the Amu River.  A bridge was built by the USSR in 1982 as a way to supply and arm their troops waging an invasion of Afghanistan.  Regardless of its shady history, the bridge today supplies approximately 70% of all goods that enter Afghanistan.  It provides a critical and reliable road and rail lifeline for a country that has some of the most challenging geographies of any country.

Chirundu Bridge

The first Chirundu Bridge was built in 1939 but was single-lane only.  In 2002, the second bridge was built.  Both bridges were the only link between the banks of the Zambezi River until 2004.  The bridge results in a fairly seamless connection between Zimbabwe and Zambia.  The two countries are fairly significant to one another.  For Zambia, in particular, this bridge provides the most reliable connection to a port (Durban).  Over 200 trucks use the bridge on a daily basis and this number was much higher when Zimbabwe had a vibrant economy (pre-Mugabe).  This bridge has allowed Zambia to sell various products such as coffee and peppers to the South African market.  Absent this bridge, it is unlikely that these products would be economically viable.

Puente de la Amistad

The bridge between Brazil and Paraguay was built in 1965 and is fairly important to both sides, but in particular to Paraguay.  It is built across the Parana River and on the Paraguayan side you have the tax-free zone of Ciudad del Este.  This city caters to Brazilians and may be responsible for up to 50% of Paraguayan GDP. Yes, much of this is Brazilians arbitraging the taxes between Paraguay and Brazil, but it still results in significant economic activity.

Johor Causeway

The primary link between Malaysia and Singapore is always in the headlines in both countries for some sort of perceived offense or another by either Malaysia or Singapore.  Despite the heightened and often nonsensical sensitivities between these two countries, they share a tremendous mutually beneficial relationship.  Malaysia offers a steady supply of a variety of commodities to Singapore, as well as cheaper labour costs and abundant land.  Singapore for its part offers Malaysia significant investment and over half of its foreign visitors arriving via the Causeway.

The best-case scenario is the Ambassador Bridge between Canada and the United States.  The bridge linking Detroit, Michigan and Windsor, Ontario transports over $400bn in annual goods between the two countries, an absolutely massive sum.

Bridges we await

There are a number of bridge projects around the world that are under discussion at any given time.  They require several factors; economic rationale and/or geopolitical rationale, strong or stable relations between the two countries, and stable governments in both jurisdictions and/or a system of government that is not sensitive to changes in power.

Several of these bridges may never be built in the foreseeable future, but they represent the desire and ambition of countries to be better and achieve more economically.  For that reason, bridges very obviously and clearly benefit an economy like few other infrastructure activities.  It is rare that a bridge benefits both countries equally; it is usually for the primary benefit of one, and enough benefit for the other to go along with the project.

Aside from the Saudi-Egypt Bridge, here are some bridges which make us excited.

Kazungula Bridge

The Kuzungula Bridge will link Zambia and Botswana, avoiding Zimbabwe and Namibia.  Zambia is a more recent economic success story whereas Botswana has long been considered an ‘economic miracle.’  This bridge will replace a ferry that has long been the focus of traveler’s nightmares.  The bridge has long-suffered from one crisis after another, but construction has continued to proceed and for now the expectation is that the bridge will open in 2018.  We think it will probably be 2020 before anyone ever drives from Botswana to Zambia.  When built, this will go a long way towards improving the economic vitality of the region, by cutting Zimbabwe out of the Botswana, Zambia, Tanzania connection.

Sri Lanka-India Tunnel

This is in its early days, but we think it makes a lot of sense, so we thought it was worth highlighting.  SAARC (South Asian Association for Regional Cooperation), on its good days, imagines itself as a future ASEAN.  Connectivity, however, has been an underlying issue for increasing the integration and mutual growth in the region (aside from various geopolitical issues).  However, this the second largest population cluster in the world and could tremendously benefit from having full connectedness amongst its members.  Given where discussions are today, 2030 would be the earliest that we would ever see this project come to fruition.

The Darien Gap

While not a bridge in the traditional sense, this is one of the sore points of global travel.  There is really no justifiable reason why an individual cannot drive from Alaska to Argentina.  The Darien Gap between Panama and Colombia remains the only gap in the otherwise contiguous Pan-American Highway.  Originally this gap was actually created by the United States.  The United States was worried about North American cattle getting foot and mouth disease that was prevalent in Latin America at the time.  That is no longer the case, but since then, this area has become a national park, taken over by drug gangs, and sparked concerns about damage to the indigenous lifestyles in the area and the environmental toll of creating a road.  All of these concerns can be mitigated and a road should be built.  We think the economic impact would be huge for Latin American countries.

 

 

Leave a Reply