European Union, its Neighbourhoods and Eurasia – Kazakhstan is turning the BRI Eurasian Landbridge into a vital lifeline for Central Asia ‘s sustainable development and EU industry’s global value chains.
In September 2013, the announcement of the Belt
and Road Initiative (BRI) by Chinese President Xi Jinping in Astana was immediately
supported by President Nazarbayev. However, the proposed new transcontinental Eurasian
Landbridge announcement came just before the drastic fall of hydrocarbon and
raw material prices in 2014-15 that put severe strains on Kazakhstan’s economy
and could lead to believe that the project would be short-lived (Ref: 2). Many questions
were raised about this ambitious transcontinental project and the numerous
obstacles laying in front of its actual realisation.
instead put this vision precisely at the center of its Sustainable Development
Strategy. The “Nurly Zhol” Plan, approved in April 2015, set the main goal of
achieving the economic integration of the disparate regions of this immensely
large country through a modern transport network, linking effectively with
neighbouring countries in East-West and North- South directions.
Then-Foreign Minister Mr. Idrissov heralded the
new Eurasian Landbridge as a “Great Gain for all”, opening a new era on the
Eurasian Continent. Kazakhstan
‘s strong sense that the bold vision of
a new transcontinental connectivity was a unique opportunity for all partners
on the Eurasian Space to work together and make it a shared success was emphasised in the warm
invitation made to the European union to join in , at the
time of the signing of the new upgraded “Enhanced
Partnership and Cooperation Agreement” between The European Union and Kazakhstan -Astana
, December 2015 (Ref : 1).
At the same time, the authorities fully
realised the imperative to improve the country’s legal and socio-economic
framework to reap all the benefits of the new Eurasian connectivity and ensure
long term economic growth and prosperity of the population. Despite economic
hardships, the national modernisation reform agenda was stepped up, with far
reaching plans put in place to bring indeed the country among the top world 30
most competitive nations by 2050 (e.g. Plan of the Nation “100 Steps”, Third
Modernisation.4: Global competitiveness, Strategic development Plan 2025,
Digital Kazakhstan 2020).
Still, to embark on such a tremendous transcontinental undertaking, involving so many different states, legal and regulatory systems, infrastructure and technical capabilities, public and private stakeholders at an age of digital revolution could appear to many as an unlikely proposition. Could Kazakhstan really be up to the challenge? or “Is Kazakhstan ‘s rising star fading? “, as suggested by Central Asia experts Laruelle and Boomstra from IERES (Georges Washington University) and EU -CAM (Ref: 3).
Three years later, what has been actually achieved?
decisive engagement to realise the Eurasian route connection.
From results obtained so far, Kazakhstan is well underway to fully honor its pledge to turn the envisioned transcontinental transport link into a buoying competitive trade and transit route between East Asia and Europe. From latest EBRD Law in transition assessment (2018) The Belt and Road Initiative is the principal reason for the recent dramatic increase in Eurasian rail trade and this expansion has the potential to deliver a major economic boost to the countries crossed by these rail routes (Ref. 5).
2.1 The rapid modernisation of the national transport network
Rail and road modern links established across the country
The country’s leadership was early on convinced that improved connectivity across the Eurasian space would allow Kazakhstan to maximize the benefits from trade liberalization associated with the creation of the EAEU and Kazakhstan’s joining of the WTO in 2015. Authorities had already taken the initiative in early 2010s to sign a memorandum of Understanding with the European Commission to further strengthen cooperation on Transport.
Through the implementation of a major national infrastructure
investment plan and the notable acceleration of its national legal and economic
modernisation agenda, Kazakhstan is demonstrating to take on, in earnest, its vision
to become the decisive connectivity hub at the heart of Eurasian space needed
to ensure long term viability of the project.
Since 2015, the “Nurly Zhol” Investment Plan has dedicated three-quarter of its funds to transport infrastructure (over $ 8.4 bio) and established a modern rail and road network linking macro regions between them and with neighbor states- Transport and logistics constitute a key to diversifying the economy, given Kazakhstan’s landlocked position and vast territory (5). To improve accessibility and connectivity between local regions, 2500 km of new and modernized rail tracks have already been built (750 km in 2017), and further 1500 km are planned to 2020, in association with new multi-modal logistics centers, renewing rolling stocks and locomotives.
At Khorgos , a new large modern border crossing with China started operations in October 2016, with container handling capacity of 5 000 TEU/day, compared to only 760 TEU /day at older Dostyk border crossing . The East -West high speed rail route comprises now two branches running from the Chinese border up to Russia: North (through Dostyk/Astana) and South (through Khorgos/Almaty/ Atyrau-Aktube), while further southwards links to Kyrgyzstan, Uzbekistan and Turkmenistan/Iran, and through Caspian to Causasus and Turkey via new multimodal facilities at ports of Aktau/Kurkik. A new modern rail track is about to link both rail lines diagonally from Astana to West Kazakhstan- In addition, due to the Sino-Kazakh transit logistics base in Lianyungang, the Kazakh side for the first time gained access to the Pacific Ocean, Korea and Japan (See Maps below, from Brussels Embassy and Deputy-Foreign Minister R. Vassilenko, 4 July 2018- Eurativ ,Ref :20).
management upgraded to international standards
Kazakhstan authorities had meanwhile also the task to bring infrastructure up
to international standards, guaranteeing efficient linkages with the BRI Eurasian
corridor partners and ensuring smooth transit and trade flows. Indeed, thanks to the construction of the Belt and Road, from an
inland country Kazakhstan has turned into an important transport hub at the
heart the Eurasian continent connecting Europe with the Asia-Pacific region (Ref: 20 )
In parallel, Kazakhstan has advanced the restructuring of
its national railways KTZ to improve the management of trains, rationalize
transit flows with transborder logistics services, and upgrade technologically
the functioning of infrastructure and equipments, rolling stocks and locomotives.
The importance of multimodal logistics
centers has also been recognized for using better the potential of the new
rapid rail transport routes to the development of
local economic and export activities. Four
multimodal centers /economic zones of major importance have been established-
on the Chinese border at Khorgos – which entered in operations in October 2016,
, in Astana, Almaty, Shimkent (on the Uzbek border), Kostanai , Atyrau and Aktau
on the Caspian coast . An all-weather highway network has also been established
throughout the country that brings new opportunity for multi-modal efficient
transport and trade between the economic poles and neighbouring countries.
ADB study demonstrated that innovation in transport infrastructure is not only relevant for
supporting and attracting transit trade to Kazakhstan, but also for improving
efficiency in industrial production. Thus, improving the country’s transport is
integral part of a transformation policy to foster industrial development and
diversify the economy (ref: 5 and 6).
2.2 Acceleration of national economic reforms
2.2.1 Attractive conditions for economic
activities to take advantage of the transcontinental links
Being able to offer favourable investment and
business climate in combination with improved efficient transit and trade
conditions was equally essential for the success of the project and to realise
the considerable development potential embedded in connecting directly the two world
largest markets. Kazakhstan has therefore engaged in
determined actions to overhaul its national business and trade policies so as to
attract foreign investment, to spur the diversification of the economy and
expand trade. New measures to foster economic activities were put in place,
e.g. through “single window” facility, access to finance or human capital
development for priority sectors at regional level. Special economic zones with
favorable conditions are developed , directly liaising with the
transcontinental transport corridor routes.
Much progress was demonstrated on respect of
the rule of law and consolidation of an independent transparent judiciary, strengthening
defense advocacy, liberalizing penal law, notably with High Justice Council
reforms and the Judicial
Modernization Concept for 2018–20. With advice from the Council of Europe and EU Member states, a new code
of criminal code and probation law were adopted in 2017; administrative
procedure and justice code draft was finalised in 2018 marking further advances
in setting Kazakh justice system up to European and international standards. In
2017, Kazakhstan was invited to join CEPEJ (European Commission for efficiency
of justice). In mid-2018, the Astana International Financial Center was opened
offering recognized legal common law guarantees to secure foreign investors and
resolve civil and commercial disputes in accordance with highest international standards,
as expressed by Lord Woolf, Chair of the Court of the International Financial
Center-( Brussels Times,8 Dec. 2018).
The significative economic reforms undertaken
by Kazakhstan have gained international recognition. To mention inter alia:
Kazakhstan set the standards of OECD as benchmarks for its reforms and joined
the OECD Investment Committee in 2017.
World Bank Doing Business Report 2019 has put Kazakhstan at the 28th
position (ahead of some major EU countries) up from rank 41 in 2015, with
similar positive trend noted on World Logistics Indices. EBRD Transition Report
2018 in its PPP Laws Assessment has placed Kazakhstan among the countries highly compliant on account of their sophisticated legal
frameworks, transparent procurement practices, easy access to justice
(including arbitration), and the fact that a range of security instruments are
available, all of which facilitate financing (Réf: 5,6).
2.2.2 Promising rapid response by economic
actors and foreign business
Kazakhstan’s goal to turn the transcontinental
links as a boost for its national development through diligent implementation of the national
reform plans is already proving a good choice .
Investments are on the rise in processing
industries ($ 5 bio in 2018), which are quite profitable due to competitive
access and improved prices for exported products in the world markets. While about half investment in
the manufacturing industry are still gasoline , diesel production and other refined petroleum products and
coke, other sectors like metallic
products, machinery and particulary food industry – a focus in the state programme of
accelerated industrial and innovative development, are
very significatively increasing their place in foreign investment (Ref :
A number of sizeable green field investments generating employment have materialized, plus 50% in 2018,
concerning notably processing of agriculture products, raw materials and
minerals for exports (see for instance $
1.2 billion worth contracts signed at Kostanai Investment Forum in 2017 and
2018 (Ref: 4 ). Special agreements on
phytosanitary and sanitary standards have also been concluded with China on a
series of processed agriculture and food products (2017). Results have been
quickly forthcoming. Kazakh exports in agricultural products to China have
jumped 50% in 2018. Similar agreements were
concluded concurrently with Iran, Gulf states and EAEU.
More generally, EBRD President
Suma Chakrabarti indicated at the recent BRI-Central Asia Investment Forum in
Beijing (14 Nov. 2018) that countries along the Eurasian Landbridge could
increase GDP growth prospect by 4 to 6 % in adopting corresponding facilitating
legal and economic reforms. The corridor was not only a transport line
infrastructure but a powerful vector of economic and social development.
Kazakhstan is well engaged on this path and
could represent a convincing model. By integrating its national reform agenda
with the aim to best foster the considerable economic potential brought by the
new transcontinental links, Kazakhstan has actually managed to generate a major
boost towards achieving its long term sustainable development goals (Ref: 15)
2.2.3 Kazakhstan, becoming an engine of growth for its neighborhood region The achievements accomplished by Kazakhstan to upgrade its national transport network and the connections made to its neighbourhood is also a game changer for the whole region , as the new proximity to markets opens bright new opportunities for exports, diversification of economic activities and employment. Khorgos dry port at the Chinese border is for container cargo only four days away from all China major cities and ten days from European Union principal capitals and industrial centers.
multiplier effect on neighbouring partners is already at work:
in efficient transport and trade connections between Kazakhstan and Uzbekistan,
including the establishment of joint logistics operators in 2017 and efficient
transport connections up to Chinese border/ Khorgos and to the North at Russian
borders have already triggered an impressive surge of Uzbek trade, including by
Uzbekistan is also
engaged in an ambitious national strategy reform plan encouraging investments
business activities and employment. As Kazakhstan, Uzbekistan has embarked on
establishing Special Economic Zones in each province, associated with
specialized technical and professional colleges, to bolster investments and
economic activities focused on the specific local natural, industrial and human
resources. Initial promising results are already showing, like in Navoy Special
Economic Zone connected with a multi-modal transport and logistics platform.
Uzbekistan has also agreed with China in 2017 on a number of food products standards for exports. Illustrating well the powerful multiplier effect of the Eurasian Landbridge connections in the region, a $ 250 mio project was just signed in November 2018 between Uzbekistan and ADB to establish two large agro-logistics centers in Samarkand and Andijan (Ferghana) that would install respectively 15 and 12 processing lines for agricultural and horticulture products: total output of 1, 45 tons, 85% of which destined to exports. Storage facilities, quality certification and safety, on-line market information, banking, logistics and customs services would be made available (ADB press release, 16 nov 2018). Kazakhstan, engaged since years to promoting intra-regional cooperation and good neighbourghly relations in Central Asia, is now providing efficient operational tools to its partners in the region for increasing their trade and investment. Central Asia intra-trade is strengthening as well as access and exports to world markets that will foster long term sustainable development in the region. Kazakhstan is now becoming a powerful engine of growth , and the Eurasian transcontinental rail route , a lifeline for development of the whole region.
3.1. The Eurasian Rail Landbridge increasing importance for EU- East Asia-Europe container trade
The Eurasian Rail Landbridge , since its actual launch in mid 2010s, against
all odds, has been rapidly carving its own specific and expanding competitive niche
in the Western Europe- East Asia containerisable trade flows. The Belt and Road Initiative is the principal reason for the recent
dramatic increase in Eurasian rail trade. This expansion of container trade has
the potential to deliver a major economic boost to the countries crossed by
these rail routes (Ref : 5). Transportation transit and trade positive prospects are further
strengthened by the operational links being established from the Eurasian main
corridor to landlocked countries at the heart of Eurasia, as their economies and
products accede for the first time quickly and
in commercially viable terms to large affluent regional and global markets.
In a nutshell, since mis-2010s, the
transcontinental container rail cargo transit between East Asia and Europe has
been on a constant steep rise, doubling every year in terms of TEU containers or
cargo trains – Container rail transit traffic has become the dominant mode of
land transport between China and Europe. comprising 90 % and 75% of rail cargo
exchanges respectively. With the considerable improvements in rail transport
operations and the productive cooperation established among key stakeholders,
the China-Europe-China transit container cargo flows have surged and are
expected to continue to growth sharply both ways in the next years .
From 2013 to 2016, UNECE estimates that share
of rail transport in total EU-China containerisable trade volume has more than
doubled from 0,45 % to 1,0% total, to reach over 1 million tons in 2016. In
this short period, share in the value of corresponding trade quadrupled to $
11,1 billion from $ 2,7 billion, about 3 % total trade value. By end 2018,
these estimates should have more than doubled, with transcontinental rail cargo
close to reaching 2 % of volume and 6% in containerisable trade value (Ref: 9)
rail routes have to accommodate a corresponding higher frequency of cargo container
trains. From 2014 to 2016, transit train Pol/ Belarus crossings on China- EU -China
link have reportedly increased from 5 in 2015 to 9 trains per day in 2018- over
3250 convoys for the year. As a result, the rapid expansion of traffic is
reportedly putting high strains on the handling and management capacity at the EU
main entry point Malaszewicze in Poland -(ref:
10 and 11)
facilities at Malaszewicze are said be able to process 450 000 TEU, much above
280 000 TEU expected for 2018, the difficulties currently encountered on Polish
border to absorb smoothly the rising flows of traffic is signalling a relative
lack of preparedness on the EU side to the success of the Eurasian Rail
Landbridge. Recent estimates put actually the flows of containers trains
East-West above 5 000 convoys a year before 2020, i.e. 14 container trains/day
on the average on EU border crossings.
The continued expansion of the Eurasian container transport and trade could eventually
be jeopardised if remediating actions are not urgently taken to ensure that
container train schedules are respected without delays and undue costs on the
Polish border crossings (ref: 11) On the occasion of the Second Eurasian Connectivity and Industrial
Cooperation Forum, on 21-22 November 2018 in Brussels, the EU railways
stakeholders renewed their call to the Commission for an urgent revision of the current too extensive
EU TEN-T Priority Corridors towards a more selective EU Core Backbone Rail Network focused on linking the main industrial and
logistics areas and the principal sea ports of the EU with a Eurasian outlook
,i.e. approximately 6,000km- see Map Main Eurasia FERRMED below – ref: 12) .
3.3 Container cargo rail traffic doubling every year in Kazakhstan ( since 2014)
Kazakhstan plays a key role in the land
connectivity between the EU and China, providing the shortest route, with a 1000 to 2000 km advantage over
alternative routes and much improved rail transport and logistics services. The Eurasian route going through
Kazakhstan has become the most competitive land transport option for the
expanding trade flows between West Europe and Central China. 70% of all containers by rail
between China and the European Union travels through Kazakhstan [ Ref: 7; 9).
Concerning Kazakhstan, the number of containers transiting through Dostyk and Khorgos rail border crossings with China has doubled every year since 2014 to date and in 2018 are expected to reach over 400 000 TEU, or close to 3 500 container trains(Ref:20) The steep rise in container transit is not only directed to the European Union but concerns as well Kazakhstan’s neighbourhood region in Central Asia and emerging destinations through Caspian Sea to Turkey or through Turkmenistan to Iran and the Gulf states. Releasing gradually the heavy burden on main border station Dostyk /Alashankou, handling also bulk cargo trains, the new modern containers dry port Khorgos is recording positive dynamics, demonstrating the boosting effect of the Eurasian Southern route on regional trade : in the first 10 months of 2018 , a total of 102.2 thousand TEUs have been overloaded through the Khorgos – Eastern gate dry port, 36% more than in the same period of previous year, with notably high growth of Uzbekistan container rail traffic to/from China and to Russia, as well as on the China- EU -China transit with 20 862 TEUs and 508 trains, 4 times more than in the same period of 2017 (Ref : 13).
To sum up future prospects, revising upward Berger 2016 study (ref 11), KTZ President Kanat Alpysbayev announced that estimates of Kazakhstan’s transit potential is at 2 million TEU by 2020 annually, and 5 mio TEU by 2030”, provided infrastructure and logistics services follow the upwell trend from one end to the other end of the transcontinental route (Astana Times, 9 oct 2018).
The Eurasian Landbridge successful taking off owes
much to the remarkable progress achieved to make it a competitive and most
valuable transport option for Europe -East Asia trade, of central strategic importance in their future economic
The Eurasian route is particularly geared at West and Central China regions where significant industrial and manufacturing sectors have been relocating, creating new poles of dynamic economic activities, also involving a number of large EU producers and business, and thereby give access directly to very large affluent urban markets. Since the first “block container trains “moved from Central China to Western Europe in early 2010s, duration of most journey is down to 12-15 days, undercutting maritime transport by twenty days or more, roughly three times faster for freight originating from the industrial poles of Central China. The daily “Chinese Express” from Chongqing- Central China reaches Duisburg – Germany in 12 days – (door to door in 14/16 days). 4.1.1 The Transit time was drastically shortened firstly with rationalisation and simplification of previously lengthy procedures and technical handling at border crossings.
The drastic shortening of time spent for inspection and customs checks of the sealed cargoes at borders has been achieved by adoption of new customs code and border inspection methods in the Eurasian Economic Union and China broadly in line with EU approach, notably introducing electronic, mandatory prior declaration of goods and risk management for load inspections.
Further important modernisation improvements, notably concerning digitalisation of procedures and logistics services are currently under way (Ref 14). The Customs Code of the Eurasian Economic Union , which came into effect on January 1, 2018, stipulated notably : automation of all customs systems; transition to e-declarations (discontinued use of paper declarations); limitation of the list of documents submitted for customs declaration purposes to e-declarations (other documents are to be furnished only in special circumstances); use of the “single window” system. 4.1.2 The use of a single CIM/SMGS common consignment note since May 2017, now in electronic format, for all transcontinental container freight traffic between China and European Union on the model adopted by the International Rail Transport Committee jointly with the Organisation for Cooperation of Railways, made it possible to greatly simplify border crossing procedures and reduce cargo delivery times and. It is no longer necessary to switch between the two transport legal systems and electronic format enables to process data on-line ; ( note : main advantages of the CIM/SMGS common consignment note: • idle time at border crossing points is reduced; • freight costs are reduced by the cost of drawing up a new set of documents; • customs procedures are significantly simplified, as the CIM/SMGS common consignment note is recognised as a transit customs and bank document, and also as a document that can be used for combined shipping (for dispatching route trains, car groups, individual cars and containers ).
The digitalisation of the common consignment notes
coupled with that of the customs procedures is prompting a much greater
efficiency in transit and container freight management all along the routes (Ref:
4.2.1 Increased speed
of container trains:
Container trains travel on a standard target of 1000 km/day aiming at 1500
km/day in 2020 in the Eurasian Economic Union leg. In China West bound “high speed” cargo train
on electrified tracks, i.e to 200 km/hr, arrive up to Urumqi and their extension
to Kazakh border should be completed by 2025.
The change of train track gauge at EAEU border
crossings was causing enormous problems for freight transfer to other
platforms. With container mode, the
transfer handling has been enormously rationalised and now takes only a couple
hours: at the Khorgos gateway between China and Kazakhstan, two trains are
lined up side by side and the containers can be transferred less than two hours,
from one to the other (Shepard, 2016a in Ref: 9). The loading of container trains has
been further optimised since mid-2017 with the practice of transfer to
“elongated” XL container trains at EAEU borders according to the “3-2”
principle: trains with a length of 57 conventional wagons with full container
loading. This allows reducing the service of one locomotive traction and
increasing the composition of the train, which, accordingly, reduce the costs
for the operation of rolling stock and infrastructure.
4.2.2 The prioritisation of transcontinental containers trains over normal rail traffic is
now possible thanks to modernised
logistics services and enhanced coordination between rail companies and logistics
firms is bringing substantial additional time-saving (ref: 9 and 14).
Kazakhstan Railways Company has established the United
Transportation Logistics Company – Eurasian Rail Alliance (UTLC ERA) with
Belarus and Russian railways to coordinate all related work for this purpose. Some
European railways and logistics companies are adopting same approach and
closely working with such transcontinental bodies.
4.3.1 “Blocked “ container
transcontinental trains : Firstly, the launch of new routes with “block containers trains” prompted
by business brought an estimated 30-20% improved efficiency and cost gains over
regular shipments. As related
transcontinental logistics chains gradually established themselves, as well as
the number of origins and destination terminals were expanding both in China
and Europe, rail container trade flows have grown rapidly. Tariff
rates for railway transportation on the New Silk Road are now transparent, highly
competitive in relation to sea transportation. The difference in tariffs
between container transportation from Central China to EU by rail and
transportation by sea was less than 1000 US Dollars per 40-foot container in
2018. This was concluded by the United Transport and Logistics Company –
Eurasian Railway Alliance (UTLC ERA), referring to transit traffic going through Russia, Belarus and Kazakhstan (Ref:
Now regular rail container services, daily or
several times a week, have been established from 41 major Chinese cities connected
by a dozen designated modern multimodal logistics Chinese platforms to all European
principal destinations. The composition of containers is increasingly flexible,
accommodating a wide range of goods with adapted containers types: bulk or
liquid (tanker containers); refrigerated, for special goods or machinery /cars;
special goods and dangerous products (chemicals, minerals) or adapted to e-commerce,
LCL, parcels and parts shipments. These
possibilities are also actively promoted by the operators, mostly working in
tandem at each end of the train routes, with the driving objective to stimulate
and enhance the export trade by rail from the EU to China.
4. 3. 2 : The East-West container transit flows are growingly more balanced,
with flows from Europe reaching 40% of total traffic in 2017, compared to 30%
two years earlier, thereby reducing expenses for returned empty containers (which
alternatively can also be brought back at low cost by maritime transport
companies). With time, many schedules of rail convoys are well established and
gained in frequency. As a result, the East and West container flows are more balanced.
On the first regular “China Express” rail route from Chongqing with Duisburg inaugurated
in April 2015, the freight traffic from Europe to China has exceeded traffic in
westbound direction in 2018, reaching 728 freight trains, out of a total of
1,442 in both directions (ref: 8). Container trains from Chongqing now
run every day to the Polish border Malaszewicze, three times a week to Minsk and
to Warsaw every Sunday in each direction according to Smile Logistics.
4.3.3 Reduction of container rail transport
cost : Although
subsidisation by Chinese local governments at origin destination has been an important
incentive in starting the process, the sweeping growth of containers rail transport,
increasing balance in freight directions, as well as the logistics, operational
and procedural improvements along the rail route are continuously reducing shipment
cost for containers by rail. The increase in eastbound traffic supports the
return of locomotives, rolling stock as well as container equipment. For
example, a 40-foot container from Chongqing to Duisburg costed around $7,000 in
2011; by 2016, this had fallen to around $4,000 (Shepard, 2016b in Ref: 9)
“The cost of rail freight is decreasing by each
percentage increase in eastbound traffic” noted GETO, Group of European TransEurasian Operators
and Forwarders. According
to GETO, the general understanding is that container train services should be able to operate without
subsidies once the balance of export and import is there.
To note also that EU container rail
tariffs are much higher (double) than on EAEU and China legs of the transcontinental
link. In this regard, the European Commission has just approved in November
2018 a first important measure to substantially reduce EU container rail
tariffs: the new German aid scheme TraFöG ‘price support for freight traffic” is
meant to support rail freight operators in Germany and effectively encourage a
shift to rail. The track access charges will be reduced by more than 45 per
cent in Germany from 1 July 2018, retroactively. To this end, the German
Transport Ministry supports the sector with a budget of 375 million Euros per
calendar year (a fund available until 30 June 2023 and to be evaluated in 2021).
EU Commissioner Margrethe Vestager
endorsing the scheme noted that: “Promoting the shift of freight transport from
road to rail is one of many measures that Europe needs to take to help improve
reduce our environmental footprint – this shift ensures benefits are passed to
customers and will contribute to meeting the EU’s environmental and transport
objectives, without unduly distorting competition”.
The major determining factor in the appeal of transcontinental containers rail shipment on the China-Europe-China transport over air or maritime can be attributed to the very nature of goods transported and the new specific role which the transcontinental rail transport link is now able to perform in the development of global and regional value chains. For a number of trade cargo freights, transportation cost comes relatively as a secondary consideration compared the value of the products or the high importance attached to timeliness, predictability and punctuality of goods delivery to serve customer needs (1. The high level of performance achieved by the Eurasian rail transport enables it to serve major business clients involved in global and regional production chains as well as those focused on high value products, considering East Asia and Europe are reciprocally their world largest markets-
A first indication is provided by the increasing value of rail container freights. A dramatic change has been underway in this regard. In 2011, train and maritime container cargo between Asia and Europe had equivalent value per ton, i.e. about $ 5000 /ton, 16 times less than air borne cargo. By 2016, value of rail cargo per ton had doubled to $ 10 000 /ton, or two and half times that of maritime cargo transport, and only 7,5 times less than air cargo [ref: 9]. As a result, transportation expenses have sharply declined in relation to load value and would now account to 3 % or less on average of the value of container rail cargo between Europe and China.
(Box) Note 1 : Origin of “ Express China-Europe-China “
Important to recall: The catalyst for the Eurasian Land Bridge rail services were car and electronics firms seeking to reduce their trade costs, inter alia between German plants and component suppliers and VW, Audi, and BMW assembly plants in China; and between Apple, HP, and Acer assemblers in China and consumers of their electronics products in the EU. Production along these global value chains relies on minimising the need for inventories by securing just-in-time delivery of components to the next-stage producer and prompt delivery of the final product to distribution centres and final retailers. Trade costs are evaluated in terms of money, time, and certainty. At current transport costs, auto components and laptops fit into an intermediate category of goods for which airfreight is too expensive, but firms are prepared to pay for the time-saving and financial savings that rail transport offers over maritime transport. “The business model of railway transportation within the described supply chains was based on the “corporate” scheduled block trains serving individual shippers and operating from plant to plant (or from the plant to logistic centre). These trains support constant guaranteed industrial cargo flows of the selected customer (Ref : 9 & 11) .
4.5.1 An essential comparative
advantage for rail container transport is punctual delivery service door to door. Rail transport logistics are gaining an upper
hand when specialized in servicing global or regional value chains that operate
on efficient, constant flows manufacturing, minimum storage and management
processes that put high premium on punctual delivery of the parts or final
products to manufacturing units, distribution centres and final retailers. In brief, viability of the Eurasian rail
route is relatively less attributable to direct transportation cost than to the
quality of services provided, where timeliness, flexibility, safety and speed
of delivery to final destination or client are predominant consideration.
To advance in this important dimension, KTZ -Kazakh
Railways Company, has been assigned the role of National Integrated Trans-Logistical
Operator in 2016. Several Terminal and Logistics Infrastructure Centers have
been established as part of a comprehensive multi-modal logistics plan, e.g in
Astana, Almaty (Kyrgyzstan), Khorghos(China border) , Aktau/Kuryk on the
Caspian, Atyrau Aktobe, Shimkent (
towards Uzbekistan). KTZ activities
within the Eurasian Rail Alliance- ERA with Russian and Belarussian railways continue
to advance competitive transport services with regularity, security, increased
speed and competitive tariffs. Similarly, KTZ has joined a joint undertaking
for facilitating transit transport over the Caspian to Turkey in 2016.
4.5.2 The role of multimodal logistics platforms is essential as they enable to feed or dispatch
without delay from original to final destination and it has been highlighted as
a critical element for preservation of the value of the cargo for the
customers, be it due to its perishability, commercial needs or tightly timed
production supply chains. Multimodal logistics platforms constitute an
essential component of the connectivity. About hundred such logistics platforms
located along all European freight corridors, belonging to nine different European
countries have formed the EuroPlatform-
European Economic Interest Grouping, precisely for that purpose (Ref: 9 and 11).
Several alliances and
joint ventures between major EU, EAEU and China operators on the Eurasian land
bridge are being created for that purpose, aiming at forming smart logistics
service platforms and end-to-end on-line internet service for modern e-commerce
and trades- such as with DB Logistics,
Siemens Logistics or recently Nunner, Tiedada and Fesco (Dec. 2018). In April 2017,
Germany signed an important
agreement with Poland, Belarus, Russia, Mongolia and China on the “
Chine -Europe intermodal rail freight services” to facilitate the operations of
transit and trade along the transcontinental
rail routes .
In November 2018 in Brussels FERRMED (Promotion
du Grand Axe Ferroviaire de Marchandises Scandinavie-Rhin-Rhone-Mediterranee
Occidentale) reiterated its call for more EU support in this endeavour also
within the European Union , as “a key objective in developing the
Trans-Eurasian Land Bridge is to provide the basis for a fully synchronised
manufacturing system between China and Europe with ‘just-in-time’ deliveries
that minimise inventories in transit and in intermodal terminals” (Ref: 12).
Conclusions: The Eurasian rail route as lifeline for Central Asia and the European Union : future challenges and prospects for cooperation.
The successful establishment Eurasian
Landbridge has brought about a drastic transformation of East-West long-distance
transportation: from previous mainly bulk and raw materials, the establishment
of a high speed, reliable modern rail transport of goods in containers is
triggering immediately new economic prospects on the Eurasian space, of major
strategic importance for all countries concerned, including the European Union.
The new Eurasian connectivity is
becoming a core pillar of Kazakhstan economic diversification and sustainable
development. By accelerating its economic and legal reforms, Kazakhstan has set
the conditions for developing diversified economic activities in services and manufacturing,
attracting foreign investments, promoting trade and generating employment (Ref:
5). In helping to establish a high tech performing rail transport corridor,
Kazakhstan is also strengthening its transition to a modern economy, in line
with its Green Economy targets.
Kazakhstan is also establishing itself as an effective connectivity hub
at the heart of the Eurasian space, connecting communications routes East-West
and North-South. The new proximity provided by the trunk
Eurasian rail routes to huge affluent markets and the proven performance of the
transcontinental land bridge are unleashing unprecedented new trade and
investment opportunities not only for Kazakhstan but also for the neighbouring
economies of Central Asia as they can also effectively connect to the Eurasian space
and embark on major economic and legal reforms attracting investments and trade,
as in Uzbekistan and Kyrgyzstan.
5.2.1 The new rail link is also proving to be
of core strategic interest to the European Union. In the next coming years, the importance of the Eurasian links will be
ever more crucial for
the major players of European industry and services, as they seek to develop operations
and markets in East Asia and China essential for their future. This crucial importance concerns in particular the EU automotive
industry and related services which is engaging in a dramatic re orientation
towards electric mobility of far reaching implications. Currently in the
European Union the
automotive industry and related sectors represent the first among EU
manufacturing sectors, accounting for over 6% total EU employment , 6% EU GDP value
added in 2015 (-above 9% in four countries including Germany), and for 13% of total
EU exports of goods. Maintaining the automotive sector competitivity at highest
level through the momentous accelerated transformation it is undergoing at the
moment, is of vital importance also for the whole EU economy (Ref:17). With
about half of the sales of EU automotive firms in China, the transcontinental rail links are becoming
also a new lifeline for the EU industry in this respect.
5.2.2 An accelerating
EU and China industrial restructuration : Driven by the EU engagements to the Paris
International Climate Change Treaty/COP 21 and subsequent COP Fora, the Green
Economy policy measures are precipitating far reaching restructuring of
industry, notably in the energy and automotive sectors. Both China and the EU
are fixing strict emission reduction targets. The EU Council just agreed in November
and December 2018 on new measures to meet the emission reduction targets to
2025 and 2030, notably more severe standards for vehicles. In parallel, Chinese
authorities are pursuing an equally ambitious policy on climate change and to
reduce emissions (ref: 16). There, the
automotive sector is undergoing an ever-faster mutation with immediate stringent
market targets fixed for electric vehicles already set at 10% total new car
matriculations in 2019 and 12 % in 2020.
leading automotive companies and all related business have an imperative to
meet above requisites in China of the European Union and China, their two
larger markets (respectively 18% and 35% matriculation of world new vehicles in
2017). As whole sector has entered into crucial accelerated restructuration
towards production of electric vehicles, the reset, renewing and optimisation
of their production global chains across the Eurasian space have become vital
According to Reuters analysis (January 10,
2019) of investment and procurement budgets by the global automakers made
public over the past two years, they are planning an unprecedented level of
spending, at least $300 billion over the next five to 10 years to develop and
procure batteries and electric vehicles. More than 45 percent of these planned
EV budgets investments and for EU industry majors, are earmarked for China: German
automakers are planning to invest in Electric vehicles US $ 139.5 billion,
almost half of which will be used in Germany and the other half aimed at
investing in China. Actual spending by vehicle manufacturers on research and
development, engineering, production tooling and procurement likely will be
The Eurasian transcontinental rail links are
therefore coming at a crucial juncture in this dramatic transformation process.
Transit and trade flows are bound to expand considerably and very fast in next
5.3.1 Strengthening coordination : While a number of important obstacles have been
overcome in a short period on the way of this world longest land transport link
(over 12 000 km from China to West Europe), strengthening coordination would greatly facilitate efficient
implementation of the measures taken and to deal with still pending or urgent
operational issues. More importantly, an established dialogue mechanism
would be essential to
address the upcoming challenges of a buoying traffic and trade , and to keep up
with all the rail Landbridge promises .
To avoid bottlenecks to build up, further
investments are already needed in transport infrastructure and other facilities,
notably at some borders crossing/gauge change points, efficient multimodal
logistics platforms, new or upgraded tracks, better rolling stock , locomotives
, containers. Reliability of transit
times and information sharing between railways and customers need to improve.
The former concern particularly transit on European railway links where
reliability is lowered by changes of traction, priority to passenger trains,
and track possessions for maintenance. The need for better information sharing
include reliable forecasts of expected time of arrival (detailed
recommendations see also: FERRMED and Roland Berger ‘s report for UIC – ref 11 and 12).
for effective connectivity : On the logistics and management side, the digitalisation process need
to be completed and strengthened, notably also to be able to follow in real
time the containers (ref: 14). Services
comprehensive, end-to-end coverage of the complete supply chain – ranging from
consulting and both strategic and tactical planning to transparent and reliable
management of supply chains and global logistics networks are still in early
stages and would ensure more efficient performance of the connectivity – Much
common work between the key stakeholders for further harmonisation of standards
and legal aspects as well as to
facilitate collaborative endeavours to
handle eventually shortcomings and to improve planning and operational
interactions for future development of the routes is called for, particularly at a moment when
new crucial challenges might arise to
sustain success. Ultimately, there is much to gain in efficiency, quality and performance
along the corridor by enhancing the coordination and cooperative mechanisms among
the key parties.
At the recent EU Central Asia Foreign
Ministers Conference (Brussels, 24 November 2018), Mr. Abdrakhmanov, the Kazakh
Foreign Minister made a very important and timely proposal, illustrating concretely President Nazarbaev ‘s
call for enhanced dialogue made a month earlier at the ASEM Summit: Kazakhstan was ready to provide a platform
for the start of a dialogue on EU, the Eurasian Economic Union and China interactions
dedicated to further improvement of the
performance of the Eurasian Central Asia Landbridge transport and trade corridor.²
” The interaction of the EU and Central Asia with the largest
economic projects in the Eurasian space, namely the Eurasian Economic Union and
the Belt and Road initiative, can make Central Asia an important link in global
economic relations”. Closer cooperation would include the introduction of a new
technological paradigm and digitalization elements, interfacing the transport
and logistics infrastructure of the sides, financing mechanisms, sharing
experience in energy efficiency and introducing green technologies (Kazakh. Embassy,
Brussels, Press release, 23 Nov.2018).
The proposed dialogue and
coordination platform would be a major value-added for the continued success of
the new EU CA Strategy, with a unique ownership by the CA partners.
Foreign Minister Mr. Abdrakhmanov highlighted indeed specifically transport and
logistics, among the top priorities proposed by his country for the new EU
Central Asia Strategy currently under finalization for approval by the EU
Council in 2019. The growing involvement of Central Asia in global economic
processes also requires, in the opinion of the Kazakh authorities, closer
cooperation between the two regions.
This novative approach should be most welcomed on the EU side as it would
perfectly match the spirit and key orientations given by the EU in its new
« Strategy for Connectivity with Asia », notably concerning transport
corridors. The transcontinental Eurasian Land bridge is indeed turning into a new
vital lifeline for Kazakhstan and Central Asia, but also for the European Union
and the future of its major industrial sector. It requires indeed the EU highest
attention and support.
A modern efficient Eurasian link from China to the European Union carries a huge potential, crucial for the sustainable prosperity, security and stability at the heart of Eurasian Space region, but equally much beyond, to the entire Eurasian Space, including in particular the European Union – as clearly chartered recently by Prof.Hartmut Marhold (Ref: 18) and Yerzhan Saltybayev (Ref:19).
For further information:
new Era heralded on the Eurasian Space” , Pierre Borgoltz, 15 Dec 2015- EU
(3) “Is Kazakhstan ‘s rising star fading? “, Laruelle and
Boomstra , EU- CAM and IERES (Georges Washington University), Feb. 2018,
(4) « Kazakhstan boosts exports and increases investments in
processing industries »- Yerbolat
Uatkhanov, Astana Business, 16 Oct.2018
(5) Transition Report 2018- EBRD, 18 March
(6) ADB Report:
Accelerating Reforms – role of transport and logistics:
Kazakhstan: Accelerating Economic
Diversification ADB (August 2018)
“Price of railway on New Silk Road closer to ‘sea level’ “- RailFreight.com,
Published on 28-12-2018 at 08:15.
(8) « New Silk Road
milestone: more traffic eastbound to Chongqing in 2018”- RailFreight .com Published
on 08-01-2019 at 08:00.
Report on Phase III of the Euro-Asian Transport Links Project, ITC (2018) n°8, Feb.
(10) N. Stepanova Deputy Sec. gen. CCTT,
Workshop on Railways, Intermodal transport and computerisation of transport document,
27 Nov. 2017.
Roland Berger- “Report: Eurasian rail corridors: what opportunities for freight
stakeholders? “, UIC , 2017.
(12) “Trans-Eurasian One Belt One Road: A business-oriented
approach to rail development”, Joan Amorós President FERRMED- (Promotion du
Grand Axe Ferroviaire de Marchandises Scandinavie-Rhin-Rhone-Mediterranée
Occidentale), Global Railways Review-Tuesday, 11 December 2018.
and more trains through Kazakhstan this year”, RailFreight.com-business,
Published on 02-08-2018 at 08:00.
(14) Report: Railways role in intermodality
and the digitalization of transport documents 2018.ECE/TRANS/262, UNECE- August 2018.
(15)” Kazakhstan is set to benefit enormously from China’s
Belt and Road initiative as an equal partner”, Kate Mallinson of Chatham House,
5 June 2018.
(16) EP Briefing – China’s climate policies
with an emphasis on carbon trading markets, Li & Healy – PE 626.077
European Parliament, October 2018.
“Is the European Automotive industry ready for the global electric vehicle
Tagliapietra, Veugelers, Policy contribution n°26, Bruegel , 20 Dec.2018.
(18) *, Europe-Asia Connectivity – A Dramatic Shift in
Global Relations”, Hartmut Marhold, CIFE Policy Paper N°79, December 17, 2018.
permanent home for Eurasia -Wide Dialogue”, Yerzhan Saltybayev (Institute of
World Economy and Politics), The National Interest,25 Dec.2018.
“China’s Belt and Road Initiative, explained by Kazakhstan”, G. Gotev,
Euractiv, 4 July 2018.
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