Need for a digital, trans-Pacific 'Belt and Road'

Premier Li Keqiang and Chile's President Michelle Bachelet greet the media at La Moneda presidential palace in Santiago on May 5,2015. [Photo / Agencies]

Rather than slowing down, globalization is morphing. As a recent report from McKinsey Global Institute, "Digital globalization: The new era of global flows", tells us, that digital flows are now more economically significant than trade in goods.

In an ever-more-connected world, cross-border bandwidth use has grown 45 times in the past decade. The fiber-optic cables that criss-cross the world today are the modern-day equivalent of the 19th century railway tracks that made it possible to populate and develop vast swathes of the five continents.

Nowadays, 90 percent of the Internet traffic circulates on these submarine cables that link up the five continents, modern highways that allow us to communicate almost in real time. Over the past 25 years, a vast network of these cables has been built across the oceans and along the coasts, with dramatic effects on the lives of people of all conditions.

Yet a look at a world map with the layout of these fiber optic cables shows an anomaly. Though they connect much of the world, there is not a single one directly linking up Asia with South America (or Latin America, for that matter). Over the past decade-and-a-half, trade and investment flows between Asia and Latin America have soared, and China has been very much at the center of it, accounting for about half of these nearly $500 billion worth of trade.

Ironically, though, Internet communications between Latin American countries and China need to be routed through North America. At a time when South-South economic exchanges are more significant than North-South ones, this needs to change.

During his recent visit to China, Pedro Huichalaf, Chile's vice-minister of telecommunications, signed a memorandum of understanding with his counterpart at the National Development Reform Commission, Lin Nianxiu, that includes a commitment to a feasibility study of a trans-Pacific fiber optic cable that would link up China with Chile, perhaps from Qingdao to Valparaíso.

Chile is the country with the highest Internet penetration in Latin America (with over 70 per cent, and a 127 percent mobile penetration rate) and ideally positioned as a digital hub for the rest of the region.

China itself is making the transition from being the world's factory to that of a hub for these data flows, the driving force of the Fourth Industrial Revolution. It is now ranked 7th in the world in the McKinsey Global Institute's Connected Index, up from 25th a few years ago. It is thus well placed to drive such an ambitious project, which would entail laying 19,000 kilometers of fiber optic cable across the Pacific Ocean.

Such a project would also give a necessary impetus to links between Asia and Latin America, at a time when the end of the commodities super-cycle and the flattening of trade in goods more generally has put a damp on trans-Pacific trade (global trade in goods as a share of world GDP has declined from 26.6 percent in 2007 to 24.6 percent in 2014). As China prioritizes innovation and services as the drivers of its economy, Latin American countries should keep in mind the implications of this for their own way forward.

China's Belt and Road Initiative, the Asian Infrastructure Investment Bank and the BRICS New Development Bank are all projects that show China's commitment to infrastructure development in the Global South. Highways, railways and maritime routes have been highlighted until now as likely centerpieces of their initial project portfolio. But as important as physical infrastructure projects are, we must also consider the imperatives of globalization's new phase, with cross-border data flows as the main driver and digital infrastructure as its handmaiden.

By linking up Asia and Latin America, such a trans-Pacific fiber optic cable between China and Chile would do much to spur growth and development on both sides of the Pacific.

The author is the Ambassador of Chile to China.