IFMR: interconnectedness of Central and South Asia - a new trend of economic development in Eurasia
Tashkent, Uzbekistan (UzDaily.com) -- A joint expert group from among the staff of the Institute for Forecasting and Macroeconomic Research (IFMR) and Uzbekiston Temir Yullari assessed the importance of the International Conference: “Central and South Asia: regional interconnectedness. Challenges and Opportunities”, which will be held on 15-16 July 2021 in Tashkent.
Initiative of the President of Uzbekistan Shavkat Mirziyoyev to hold the International Conference on 15-16 July: “Central and South Asia: Regional Interconnectedness. Challenges and Opportunities” is aimed at developing and strengthening constructive and mutually beneficial cooperation between two large, historically interconnected regions - Central and South Asia.
Relevance of the International Conference.
During the meeting, it is planned to consider the state and prospects for the development of interregional cooperation in Central and South Asia, the possibilities of developing transport and communication interconnection in Central and South Asia, including projects to expand existing and build new transport corridors, etc.
Considering the issue of practical interaction with regional partners, an important and fundamental role is assigned to Afghanistan, which acts as a transit country between the Central Asian and Southern regions.
Increasing the volume of trade between the Central Asian countries and the countries of South and Southeast Asia is impossible without the creation of reliable transport corridors that ensure timely delivery of goods.
According to domestic and foreign experts, the event will make it possible to develop concrete proposals for the accelerated advancement of the construction of a new railway line (Mazar-i-Sharif-Kabul-Peshawar, the so-called "Kabul Corridor") between Pakistan and Uzbekistan through Afghanistan, which is strategically important for the countries. two regions in the development of foreign trade.
Problems of interaction between Central South and South-East Asia
The countries of Central Asia do not have direct access to sea transportation and thus are cut off from the cheapest type of transport routes, in this regard, the development of transport communications in the region remains one of the key problems.
In the practice of forming international transport corridors, there are a number of problems, the main of which is the inconsistency of the regulatory framework of various countries participating in the transportation process:
- lack of a unified standard for a shipping document;
- various technical standards - lack of a unified railway track along the entire route.
The need to develop overland transcontinental trade routes is explained as follows:
- the exhaustion of the capacity of the Suez Canal. The recent blockage of the Suez Canal has shown the importance of promoting alternative transport corridors and raised questions in the expert community about the risks of the world’s over-dependence on this route;
- the congestion of the main world ports of Eurasia;
- dynamic development of the economies of Western China, India and Pakistan.
In turn, Russia is successfully developing its project in the region by forming a North-South transport corridor (EU-Russia-India). The transport corridor is designed to provide communication between the Baltic countries and India through Iran. The main advantages of the North-South transport corridor over sea routes are: a twofold or more reduction in the distance of transportation (7200 km) and a decrease in the cost of transporting containers in comparison with sea routes. The corridor is formed along the following routes:
- Russia - Kazakhstan - Turkmenistan - ports of Iran - ports of Pakistan - ports of India;
- Russia - ports of the Caspian Sea - ports of Iran - ports of Pakistan - ports of India;
- Russia - Azerbaijan - Iran - ports of Iran - ports of Pakistan - ports of India.
When implementing the construction of the Herat-Kandahar-Quetta (Afghanistan) railway line, the route can serve as an alternative for connecting Russia with India along the existing North-South corridors:
- Russia – Kazakhstan – Turkmenistan – Iran – Afghanistan – Pakistan – India;
- Russia – Caucasus – Iran – Afghanistan – Pakistan – India;
- Russia – Caspian Sea ports – Iran – Afghanistan – Pakistan – India.
The route through the Kabul corridor Russia - Kazakhstan - Uzbekistan - Afghanistan - ports of Pakistan - ports of India can serve as a competitive alternative, since it is 500 - 600 km shorter than the existing routes of the North - South corridor.
Estimates of the untapped potential of the countries of Central and South Asia
The Central Asian region today has a huge untapped export and transit potential, which, if used in the future, may increase trade between large regions of the Asia-Pacific region, South and Southeast Asia, Russia and Europe through the implementation of large transport projects.
The Asian Development Bank (ADB) predicts that emerging economies in Asia will grow by an average of 7.3% in 2021, despite the lingering threat of coronavirus. Experts note that the optimistic forecast is associated with hopes for the recovery of the world economy, as well as with progress in the dissemination of vaccines. ADB expects China’s GDP to grow by 8.1% and India’s GDP to grow by 11% in 2021.
According to the report of the international consulting campaign BCG "Investing in Central Asia: one region, many opportunities" ("Investments in Central Asia: one region, many opportunities") from 2018, the potential of Central Asia to attract foreign direct investment over the next 10 years is estimated in the amount of up to 170 billion US dollars, including 40-70 billion US dollars in non-resource industries.
According to forecasts of domestic experts, by 2025 the volume of traffic between India, Pakistan and European countries, with even the smallest hypothetical redistribution (3%) of a part of the traffic from the existing India-Pakistan-EU sea corridor and back to the Mazar-i-Sharif-Kabul-Peshawar route, will be 5.5 million tons. Revenues from the transportation of transit goods by railways of Uzbekistan are expected to be US$595 million by 2025.
Transit in 2020
The maximum involvement of railway transport in the transportation of goods during the pandemic in 2020 led to a significant expansion of the geography of international transport in Uzbekistan and showed a huge potential that needs to be worked on and developed on an ongoing basis, developing practical measures to increase the transit potential of the republic.
As a result of active management measures, in 2020 the volume of international traffic by rail amounted to 40 million tons (42% of the total volume of traffic by rail).
The volume of transit cargo transported by the railways of Uzbekistan over the past few years has reached the value of 2013 for the first time - up to 8.2 million tons (from 2013 to 2019 the average annual volume was 7.7 million tons) with the intensification of work on the formation of transport profitable for the republic corridors.
A special role is played by the growth in the volume of transit of oil products from Turkmenistan to Afghanistan (461%), as well as from Russia to Tajikistan (123%). In addition, the transit of milling products from Kazakhstan to Afghanistan has significantly increased (116%). Also, the growth of transit traffic was facilitated by agreements on tariff preferences concluded between the countries participating in "Kyrgyzstan - Uzbekistan - Turkmenistan - Azerbaijan - Georgia" and Turkey. This agreement was signed during the meetings of the heads of the railways of five countries - Azerbaijan, Georgia, Kyrgyzstan, Turkmenistan and Uzbekistan in Tashkent on 19-20 December 2019. Within the framework of the meeting, the participants agreed to develop the international multimodal route "Asia-Pacific countries - China - Kyrgyzstan - Uzbekistan - Turkmenistan - Azerbaijan - Georgia - Europe" and vice versa, with the development of common approaches to the accelerated passage of container trains and the use of unified, competitive tariffs.
As a result of agreements on the sections of the multimodal route, more than a thousand containers have been transported since the beginning of 2020.
Prospects for interaction with Southeast Asia
Currently, 93% of all cargoes from / to China to / from Europe, from / to India to / from Europe, 96% are transported by sea. The mutual trade turnover of the two most economically advanced countries of Southeast Asia - India and Pakistan with the EU countries shows stable growth, which leads to the emergence of demand for alternative modes of transport: air, road and rail. The accession of these countries in 2017 to full members of the SCO contributes to the search for solutions aimed at developing international trade.
In his message to the Oliy Majlis, the President of the Republic of Uzbekistan Sh. Mirziyoyev set the task to bring "the transit potential of our country from the current 7 million tons to 16 million tons per year."
Thus, the search for other alternative land routes by which it is possible to deliver goods to Europe and in the opposite direction is an urgent task.
The project for the construction of the Mazar-i-Sharif-Kabul-Peshawar railway line is a logical continuation of the constructed railway Hairaton-Mazari Sharif, which will form a new and shortest transit corridor with access to the Pakistani and Indian railways, as well as to the ports of the Arabian Sea (Gwadar, Karachi, Mumbai, etc.).
By creating a unified railway infrastructure of the CIS countries with the countries of South Asia (Afghanistan, Pakistan, India, Bangladesh), this project allows, without additional costs, to ensure the fastest transportation of goods along the North-South corridor, connecting the largest markets of South Asia with the markets of the CIS countries and Europe.
Chronology of the development of the "Kabul Corridor"
Let’s list the main events related to the results achieved in the formation of the "Kabul Corridor".
On 20 September 2018, at the International Conference "Central Asia in the System of International Transport Corridors: Strategic Prospects and Unrealized Opportunities", for the first time, scientifically substantiated research results and the advantages of forming the "Kabul Corridor" were presented.
On 3-4 December 2018, a multilateral meeting of the heads of the railway administrations of Russia, Kazakhstan, Uzbekistan, Afghanistan, Pakistan was held in Tashkent. As a result of the meeting, a Protocol was signed on the establishment of a joint working group and financial consortium between the railway administrations of Uzbekistan, Russia, Kazakhstan, Afghanistan and Pakistan. The chairmanship was delegated to the Uzbek side.
In March and September 2019, the first and second meetings of the multilateral Working Group on the construction of transit railway lines through Afghanistan were held in Tashkent.
In February 2020, with the support of the World Bank, the First Meeting of the Central Asia-South Asia Transport Platform was held in Tashkent, with the participation of the delegation of Afghanistan, Tajikistan, Pakistan, Uzbekistan, etc. At the same time, the World Bank noted that the route "Peshawar - Kabul - Mazar-i-Sharif” is the crossroads of Pakistan’s promising routes connecting the Indian Ocean with the countries of Central Asia, China, Russia, the Caucasus and the European Union.
In February 2021, the Uzbek-Afghan-Pakistani summit talks were held with the participation of the heads of key international financial institutions. As a result of the negotiations, the Road Map was approved for the construction of the Mazar-i-Sharif-Kabul-Peshawar railway with a length of about 600 km.
On 13-17 March 2021, the delegation of the Republic of Uzbekistan visited the Islamic Republic of Pakistan in order to study the infrastructure of the Pakistani ports "Qasim", "Karachi" and "Gwadar" and organize bilateral negotiations.
An agreement was reached to intensify work on the effective use of the Uzbekistan-Afghanistan-Pakistan route using the ports of Pakistan.
In May 2021, the World Bank expressed its readiness to support the project for the construction of the Mazar-i-Sharif - Kabul - Peshawar railway, in particular, to provide funding for field research and to assist in the development of design estimates. The Mazar-i-Sharif-Kabul-Peshawar railway project is estimated at $ 5 billion. It involves the construction of a highway with a length of 573 km and a transit potential of up to 20 million tons of cargo per year.
The construction of a new railway line is of interest to Russia, the EU and other countries, to move the Eurasian Economic Space to the south and increase transit traffic. So, in May 2021, at a meeting with the head of Russian Railways, the issue of joint promotion of the project for the construction of the Mazar-i-Sharif - Kabul - Peshawar railway with the involvement of international financial institutions was separately considered. An agreement was reached on the participation of Russian Railways in carrying out work on the comprehensive preparation of the project, including the development of technical documentation, and the early start of construction.
The mutual trade turnover of the two most economically advanced countries of Southeast Asia - India and Pakistan with the EU countries (trade turnover between India and the EU in 2019 - 37 million tons, in 2020 - 24.5 million tons; Pakistan-EU - for 2019 - 6.3 million tons, 2020 - 5.9 million tons) shows stable growth, which leads to the emergence of demand for alternative modes of transport: air, road and rail. For comparison, in 2019, the trade turnover between Uzbekistan - India and Pakistan amounted to 72 thousand tons, which indicates a great potential for regional development.
Along with this, it should be noted that in 2017 India and Pakistan became full members of the SCO.
The development of transport corridors across the territory of Central Asia leading to the formation of a unified transport system serves as an impetus for the search for additional exits to the international markets of Southeast Asia.
China and India have long been interested in reaching Europe along the shortest land routes. In addition, today these two great countries are not connected with each other by rail, in China it is the western part near the city of Kashgar that is developing economically and industrially, and Indian railways do not have access to the railways of Central Asia and other regions.
The favorable geographic location of Uzbekistan allows for the smooth implementation of foreign trade transportation along alternative routes. In these conditions, it becomes necessary to use alternative transport corridors to Southeast and East Asia: the "Kabul corridor" (Uzbekistan - Afghanistan - Pakistan) and China - Kyrgyzstan - Uzbekistan.
In order to increase the competitiveness of domestic corridors and reorient transit cargo from alternative to domestic railways, experts propose the earliest possible formation of corridors:
Uzbekistan - Afghanistan - Pakistan and China - Kyrgyzstan - Uzbekistan with the organization of road transport of goods on the existing international highways from Kashgar (China) to Andijan (Uzbekistan) and Peshawar (Pakistan) to Galaba (Uzbekistan) with charging a tariff as for rail transportation.
The new land transport corridor will connect the European Union, Russia, China, Uzbekistan, Afghanistan, Pakistan, India and further the states of Southeast Asia. The development of these routes will lead to an increase in the transit potential of the countries of the Central Asian region, including Uzbekistan, and the formation of new transit corridors: "India - Pakistan - Afghanistan - Uzbekistan - Kazakhstan - Russia - Belarus - European Union", "China - Kyrgyzstan - Uzbekistan - Afghanistan - Pakistan - India ".
Based on the foregoing, the International Conference being held is a logical continuation of the measures being implemented in the republic to develop the transport and communication industry and foreign trade of the regions, strengthen interregional interconnection, as well as restore the economy and establish peace in Afghanistan. This event will facilitate a detailed discussion of issues to attract the business community to the implementation of projects.
The modern geographic location of Uzbekistan sets the task of forming promising transit transport corridors. Thus, in the future, Uzbekistan can become a crossroads between North - South and West - East, where the entire territory of the republic and the whole of Central Asia will be considered as a single large logistics hub - a market of global importance.
And already in the short term, with a properly built strategy for the development of the transport industry, its integration with the global network of railways and highways, the main indicators in the field of transport will be achieved, such as a potential increase in freight turnover, speed of delivery of goods, volume of transit goods; passenger turnover and, along with this, the flow of transit tourists. And this, in turn, will lead to an increase in the attractiveness to the Central Asian region and the competitiveness of transport routes in the region due to the further growth and development of multimodal transportation.
W.N. Ibragimov - Ph.D. (PhD), Senior Researcher, Uzbekiston Temir Yullari JSC
D.T. Ibragimova - Institute for Forecasting Macroeconomic Research