From chokepoints to bridges: a different look at the world map

In the midst of geopolitical storms and supply disruptions the focus of analysts and observers has been on the geographical chokepoints in the world economy such as the Suez canal (nearly 22% of global seaborne container trade passed through the canal in 2023[1]), the Straight of Hormuz (about a fifth of the volume of the world’s total oil consumption passes through the Strait on a daily basis[2]), the Straight of Malacca (ships passing through the Straight carry around 30% of all traded goods globally[3]) and the Panama canal (5% of total global container trade and nearly 46% of the trade from the US East Coast to East Asia[4]). But while looking through geopolitical prisms at these chokepoints may be a reflection of the times we live in, a different perspective at the world map reveals a set of critical locations in the world economy (sometimes positioned in the neighborhood of the chokepoints) that serve as bridges connecting the largest economies in their respective regions. Some of these “bridge hubs” have already transcended their regional realms to take on a connectivity role that is global in scale.    

In what follows I refer to “bridge economies” as countries, regions or platforms that perform the role of connecting other national economies, regions or platforms in various segments of the economy ranging from transportation to financial intermediation. In this sense serving as a bridge already presupposes a certain degree of openness of the economic system. And while every economy to a varying degree serves as a bridge, being also a source of positive economic spillover effects, there are some unique cases in the world economy where small open economies deliver a disproportionately large “bridge effect” at the regional and global levels. In this respect, what the world map shows is that in the major regions/regional blocs of the world economy there is an intriguing combination of two of the largest economies being connected by a small economy that serves as a bridge between these two regional heavyweights. These small countries serving as regional bridges also exhibit the features of being neutral and among the most economically advanced in their respective regions:

  • UAE: situated between the two largest economies of the MENA region (Saudi Arabia and Iran), the country plays a crucial role in the regional integration initiatives of the Gulf Cooperation Council (GCC), while also bordering one of the key global chokepoints – the Straight of Hormuz. The country is also an important re-export hub that is targeting further increases in receipts coming on the back of the growing intermediation of trade flows[5].
  • Switzerland: this small landlocked country in Western Europe connects not two, but three of the region’s largest economies – Germany, France and Italy. Switzerland plays a critical role in the north-south connectivity in Europe – the 2,500 km-long north-south corridor between Rotterdam/Antwerp & Genoa is one of Europe’s main freight routes, with Switzerland supplying its critical New Rail Link through the Alps (NRLA) link[6]. The NRLA comprises the Lötschberg Base Tunnel (34.6 km), the Gotthard Base Tunnel (57.1 km – the longest railway tunnel in the world) and the Ceneri Base Tunnel (15.4 km). 
  • Singapore: situated between the two ASEAN heavyweights – Malaysia and Indonesia – the city-state borders another chokepoint – the Straight of Malacca. In the ASEAN region there is no land border between its two largest economies – Indonesia and Thailand – but a lot of the trade connectivity between the two largest ASEAN economies is intermediated by the port of Singapore. Singapore shares maritime borders with Indonesia and Malaysia, while Thailand controls the land route in the Malay peninsula via Malaysia to Singapore.
  • Uruguay: situated in between the two largest economies of South America – Brazil and Argentina – the country is also a crucial driver of the integration within the MERCOSUR regional integration bloc. It is one of the regional leaders in digital economy, trade openness and financial sector development.  

The country list above is not an exhaustive one and could be expanded to include other countries and geographies. For example, in Europe a similar case of a bridge economy that borders Switzerland is Austria that is not only an intermediary between its neighbors Germany and Italy (the first and the third largest economies in Western Europe), but is also a key bridge to Central and Eastern Europe. Austria has the highest number (8) of bordering countries in Europe after Germany (9). The Austrian authorities have on many occasions declared their intention to make Austria the bridge-builder between the eastern and western members of the European Union[7]. Other European economies positioned between the largest regional countries include the likes of Luxembourg and Belgium or the wider region of Benelux to include the Netherlands as well. In the Middle East, a similar geographical profile to that of the UAE could be accorded to Bahrain and Qatar.

What are the ways to gauge the impact of such “bridge economies” on the international arena and how could one quantify their economic contribution to connectivity in the global economy? One possible guide is to look at the scale of exports of transport services (in absolute terms and on a per capita basis) and on that count the World Bank data suggests that in 2021 economies such as Switzerland, Singapore and UAE were among the global leaders. In particular, Switzerland was 15th in the world, just behind the Netherlands and Spain, with nearly USD 39 bn in exports. UAE was 19th with nearly USD 31 bn, while Singapore was 23rd with USD 23 bn in transport exports[8]. UAE and Switzerland separately export more transportation services than all of South Asia combined. On a per capita basis the scale of transport exports within the Switzerland/UAE/Singapore triad was among the highest for the top 30 economies in the absolute ranking. In fact, on a per capita basis Switzerland is the leader across the largest exporters of transport services in the world. Switzerland despite being a landlocked country was higher on a per capita basis than the Netherlands as well as Belgium that in turn relied on the ports of Rotterdam and Antwerp for their transportation export proceeds.   

While the measure of exports of transport services may be informative for our purposes, it is far from being an exhaustive and precise indicator on how connectivity works across countries. Indeed, the “bridge dividends” may also include the leading role that the country is playing in advancing regional integration as well as such factors as “digital intermediation”/serving as data hubs, financial intermediation/financial services exports, FDI hubs and a key role in FDI inflows into the region. In this respect, a wider measure of the contribution delivered by a “bridge economy” could be roughly approximated by the scale of services exports, including transportation, financial and IT services supplied to other economies.

Using this wider measure of exports of services across countries the “bridge economies” fare even better in absolute and relative terms. In particular, in 2022 Singapore (8) is in the top 10 in absolute terms exporting USD 291.3 bn worth of services – placing third in Asia after China and almost on par with India[9]. Switzerland is 12th with services exports of USD 151.6 bn, just ahead of Luxembourg – another small country locked between two largest Western European economies. Austria ranks 23rd with services exports of more than USD 83 bn; and while Uruguay is 83rd globally in absolute terms, it ranks 5th in South America and well ahead most of its regional peers on a per capita basis. Singapore and UAE are in the top-5 of developing countries’ services exports in absolute terms, Switzerland is in the top 10 in the developed world[10].

The high ranking of Switzerland and Austria in the above rankings is particularly impressive given the country’s landlocked status and the fact that nearly 80% of trade flows in goods are transported via sea shipments[11]. In fact, Switzerland and Austria are the only landlocked economies in the top-25 of the country list of the largest exporters of transportation services. The cases of UAE and Singapore are easier to explain on the basis of the role that the countries’ ports play in the regional and global flows of goods. As regards the port of Singapore, it is the largest transshipment port in the world – at any one time, there are about 1,000 vessels in the Singapore port. The Sea Transport Industry is a key pillar of the Singapore Maritime Cluster, which accounts for nearly 7% of the nation’s Gross Domestic Product (GDP) and employs 170,000 people[12].

In the United Arab Emirates the port of Dubai (Jebel Ali) is the largest cargo port in the Middle East. The country’s transport and storage sector is not only the second-largest component of GDP (after wholesale & retail trade and ahead of financial & insurance activities), it has also featured as the fastest-growing sector since the end of the Covid pandemic and the most significant contributor to Dubai’s GDP growth in recent quarters[13]. The UAE is aiming to further strengthen its position as the key transportation hub in the global economy with plans to build the largest airport in the world[14] and the announcement of a rail and shipping corridor linking the UAE with India and the EU.

The port of Montevideo while currently only 9th in South America (15th in Latin America) in terms of its throughput, is demonstrating the fastest growth rate of nearly 50% in the past 5 years among the top-20 ports of the Latin America region[15]. The port is also receiving sizeable financing from the financial sector to expand its operations[16]. As stated by the World Bank, “Uruguay is geographically well positioned to act as a gateway for regional trade and as a regional transit hub. The Port of Montevideo, Uruguay’s principal port, is centrally located in the River Plate Basin and is a central gateway to the south-eastern and central markets of South America. It further serves as the entrance point to the Paraguay-Paraná river system, which not only connects with the hinterlands of Argentina and Uruguay, but also the landlocked countries’ Paraguay and Bolivia, as well as interior parts of south-western Brazil. Due to its geographic location, the port of Montevideo has been a strategic access point to these markets from the end of the 19th century”[17].

In the end, some of the most successful small countries in their respective regions have not only benefitted from their unique in-between/bridge geography, but also from the creation of regional ecosystems that propagated superior economic policies and cooperation across the region. In this sense, the rise of the small “bridge economies” was the result of a virtuous circle between the in-between geography, the economic policies pursued at the national level and the improvement in the regional conditions associated with regional integration and the creation of advanced integration blocs such as ASEAN and GCC.

The important point, however, is that absolutely any country has the potential to benefit from its connectivity/bridge status – indeed, a “bridge strategy” of connecting regional neighbors, participating in regional integration initiatives, contributing to financial and digital intermediation should be part of the national economic development strategy of any economy. There may also be more scope for such “bridge countries” to join international alliances/networks/platforms – indeed, the small open economies singled out above could benefit from building a platform that provides scope for exchanging best “bridge practices”, connecting their respective regional arrangements, as well as expanding the network effects of the respective national “bridge platforms” to other parts of the globe.  

Going forward in addition to the likes of Switzerland, Austria, Singapore, UAE and Uruguay there may be the potential for the emergence of a new generation of “breakout bridge economies” that would benefit from the growing economic interaction among some of the largest economies of the Global South. In particular, greater economic cooperation and trade between the two BRICS giants – India and China – could benefit such in-between economies as Nepal, Bhutan, Myanmar, Bangladesh. Stronger growth impulses and a high intensity of trade between Argentina and Brazil could benefit not only Uruguay, but also the landlocked economies such as Paraguay and Bolivia. Mongolia is seeking to capitalize on the sizeable rise in the trade flows between another BRICS pair – China and Russia[18]. Climate change could also be a factor in the longer term rendering the largest ports vulnerable to rising sea levels, disrupting the operation of key canals and potentially raising the relative importance of in-land bridge economies. With global chokepoints increasingly encountering capacity constraints and disruptions, the world economy needs a rising number of alternatives as well as regions/countries/sub-regions/municipalities serving as “bridge economies” to overcome limitations to growth.  

Yaroslav Lissovolik, Founder, BRICS+ Analytics

Image by Kanenori via Pixabay