By Yaroslav Lissovolik

Continued from Part 1: https://brics-plus-analytics.org/bridge-economies-taking-a-broader-view-part-1/

Indeed, from the point of view of our “bridge theory” nearly all BRICS economies may be considered as bridges/entry points into their respective regions/regional blocs as well as the wider BRICS/BRICS+ platform of the Global South. Within the expanded BRICS core, two new members stand out in terms of their “bridge capabilities” – Egypt and the UAE. In the case of the UAE, Dubai serves as a key global financial center as well as a key port that ranks among the global leaders of the world’s best shipping hubs. In the case of Egypt, nearly 30% of world’s shipping container volume and around 12% of global goods trade transits through the Suez canal. More generally, within the global connectivity framework, BRICS economies may deliver the most important of contributions in reducing the gravity of distance in international trade, given that these are large emerging economies that at times are separated by extreme distances (as in the case of Brazil and China).

In terms of gravity model indications, the active role of bridge economies in intermediating trade/investment between two partners may serve to increase the intensity of trade turnover and/or investment – Mexico serving as a gateway for Asia’s exports and FDI into the US being one case in point. The existence of such bridges or regional “bridge networks” improves the competitiveness of the broader regional ecosystem (much like the RTAs/FTAs) in attracting trade and investment flows. There is also scope to explore the impact of digital bridges in boosting trade flows via the gravity model by accounting for digital economic agreements (DEAs) – the relevant dummy variable in the gravity regression may shed light on the “bridge dividends” of digital economic accords. In a way, from the point of view of the gravity model, the presence of bridge economies in intermediating trade and investment may be seen as a factor that cuts the distance (not only in terms of geography, but also in terms of cultural distance), with some of the recent research arguing in favor of the involvement of “bridge economy partners” in inter-organizational triads for foreign market entry.

Another important aspect of the “bridge economy” concept is the role of such bridges in building up the momentum for a revitalized globalization effort in the world economy. In particular, bridge economies can develop bilateral economic ties that facilitate the subsequent efforts directed at building alliances between the broader regions on the basis of “integration of integrations”/economic cooperation between regional blocs/RTAs. Indeed, the presence of well-connected bridge economies serves to improve the bridge capabilities of the broader region/regional bloc – as Singapore improves the international positioning and prowess of the ASEAN regional bloc. Rather than attempting to build an RTA-to-RTA alliance outright, regional blocs could use bilateral trade/economic ties between the respective bridge economies to facilitate their “integration of integrations” project. Such a pattern of combining bilateral accords and regional trade agreements (as well as micro-regional accords at the level of sub-national entities) may serve to bring together the various drivers of economic integration in a coherent fashion, creating a more sustainable globalization momentum in the world economy.

In quantifying the effects of the various segments of the global “bridge economy”, one of the important reference points are the figures on the revenues obtained by “bridge economies” from the operation of key trade arteries such as the Suez canal and the Panama canal. In 2024 the Panama Canal Authority’s revenue reached USD 3.38 billion (equivalent to nearly 4% of GDP), despite unfavorable drought conditions, and revenue posted increments every year since 2017. At the same time, according to the estimates of IDB (Inter-American Development Bank Group), the total effect of Panama canal operation for Panama’s GDP that includes direct, indirect and induced effects amounts to 7.7% of GDP and accounts for nearly 16% of total annual exports and nearly 3% of total employment. Furthermore, IDB also notes that “according to projections on the demand of the Canal, it is estimated that its activity will increase Panama’s GDP by 3.45% in 2030, compared to 2022”. Such a contribution to higher GDP may have accounted for what the World Bank referred to as Panama’s “remarkable economic growth”, with annual GDP growth averaging 5.7% in the period from 1990 to 2023 (much higher than the regional average of 2.5%).

But just like the operation of the Canals may be a source of crucial revenues, it can also induce volatility due to factors such as regional instability and geopolitics. A case in point is the Suez Canal that has generated USD 153.4 billion in revenues and facilitated the transit of approximately 1.1 million ships since the waterway’s nationalization in 1956 to date. At the same time, Egyptian President Abdel-Fattah al-Sisi declared in March 2025 that the Suez Canal was losing approximately USD 800 million in receipts each month due to the situation in the region. The IMF stated in its 2025 Article IV Consultation document that “trade disruptions in the Red Sea since December 2023 have reduced foreign exchange inflows from the Suez Canal by US$6 billion in 2024 relative to 2023, while transit trade volumes remain at about a third of pre-conflict levels”.

What this suggests is the need for alternative bridge routes and bridge economies to expand the array of logistical back-up options in the global supply network. Recent developments suggest the emergence of such projects as the Northern Sea Route as an alternative to the southern routes that among others frequently involve the Suez Canal (the Northern Sea Route offers significant days-saving for shipping between East Asia and Western Europe compared to the Suez Canal, with potential reductions of 10 to 15 days or more); there is also a rising number of proposals on the bi-oceanic corridors via Colombia, Nicaragua or Brazil-Peru as a back-up to Panama Canal disruptions. Indeed, the key message from the optimization simulations of bridge economy networks (based on graph theory) with respect to the resilience and sustained growth of the global economy is the importance of key logistical arteries/connections being backed up by alternative routes or bridge platforms.

Another crucial segment of the global bridge economy, namely re-exports, is experiencing growth that notably outstrips that of global trade. In the case of some of the bridge economies such as the Netherlands, re-exports are starting to exceed or rival the scale of national goods exports. According to the Dutch statistical agency, “in 2022, the Netherlands exported 731.4 billion euros worth of goods, of which 368.3 billion euros were accounted for by re-exports. In 2022, the value of re-exports was nearly 58 percent higher than in the pre-pandemic year 2019… As a result, the value of re-exports exceeded the export value of Dutch-made products…”. These trends are further confirmed by the OECD that observes with respect to the Dutch economy that “in 2023, about 49% of total exports were re-exports with most of them destined to EU member states. Particularly to close neighbours like Germany, France and Belgium the shares of re-exports are high, at 60%, 63% and 55%, respectively, highlighting the Netherlands’ function as a European trade hub”.

Overall, bridge economies could serve as key nodes of connectivity among national economies as well as between regional integration blocs. The very concept of a bridge economy could serve to transform economic policy in the direction of cooperative “win-win” outcomes by explicitly incorporating into the national economic strategies approaches to building economic connectivity and to reaping the corresponding “bridge rewards”. Explicitly targeting higher “bridge dividends” may also serve to intensify international efforts to measure/quantify cross-country spillover effects (both positive and negative) as well as to send a credible signal to actual and potential partners on the benefits of concluding alliances and economic cooperation agreements with such a country/regional bloc. Lastly, the bridge economy policy approach also renders economic strategies more focused on longer term planning, contributing to longer time horizons and the evolution of economic cooperation.

Yaroslav Lissovolik is Founder of BRICS+ Analytics.