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New Formula for Transit

The European and Asian States are more and more interested in the development of the new transcontinental routes. The results of the II International Transport and Logistics Business Forum «Kazakhstan – New Silk Road", show it clearly. According to the industry experts, this transport mega-project has the potential to become an alternative to a traditional cargo traffic.

Participation in the Forum, which was held on November 7 in Astana, was attended by approximately 300 delegates from the different countries. Among them there are the heads of the national railway companies of Kazakhstan, Russia, Azerbaijan, Belarus, Georgia, the top managers of the leading transport and logistics companies of the European Union and the CIS. The most discussed issue at the Forum was the decision to establish the Joint Transport and Logistics Company (JTLC) by the CES members. Delegates agreed that in the long term, this structure will enhance the effectiveness of the "New Silk Road" and make it truly "silky" from the viewpoint of the customs and border control procedures.

 New Point of Growth?

Opening the Forum, the Prime Minister Serik Akhmetov read the welcoming speech of the President. Naming such a large-scale transport and logistics forum as a milestone event for the revival of the Great Silk Road, Nursultan Nazarbayev highlighted that the unique geographical location among the main routes of Eurasian trade was the primary reason for the initiative to turn Kazakhstan into the largest transit hub. A successful implementation of this project will form a solid infrastructure foundation for Kazakhstan to join 30 most developed countries in the world.

The President noted out that the dynamic development of the Kazakhstan’s economy, large-scale industrialization and modernization of industries favours the strengthening of the economic connections and growth the transit and transport capacity. One of the significant steps in this direction is the establishment of the national transport logistic international company, being also the main program operator, "Kazakhstan – New Silk Road" at the basis of "Kazakhstan Temir Zholy”. In conclusion, the President expressed confidence that in a rapidly globalizing the transport industry is becoming a key driver of economic growth for both our country and the Eurasian region as a whole.

In turn, Serik Akhmetov underlined that the Government believes that formation of such principles of multilateral relations is important to consolidate all the stakeholders of the Eurasian transport and logistics system. "In the context of sustainable creation of the trade flow between the continents, the formation of transit infrastructure enables us to make a competitive advantage for Kazakhstan. That is why the Head of our State proposed the idea of the project «Kazakhstan-New Silk Road ".

In order to achieve this goal, the Government has developed the transport development programme for the infrastructure to 2020. The measures are taken to integrate the transportation and logistics assets into a single complex, including port and airport infrastructure. A great work on the construction of new roads and rail lines, optimizing the configuration of the international corridors along the East-West and North-South directions.

 Priorities of JTLC

The next speaker was the President of JSC “National Company “Kazakhstan Temir Zholy”, Askar Mamin, who said that in present the Republic implements the large-scale projects for modernization and development of the transport and logistics complex. Therefore, the total length of the newly introduced railway lines, as well as those that will be launched in 2014, will be 2500 km. By the end of the current year, a new maritime company, operating the dry freights will be created in Kazakhstan, and in December of the next year, the project on expansion of Aktau sea port will be completed. Airport infrastructure is also being upgraded.

As stated by Mr. Mamin, over the next two years the national network of transport and logistics centers of A and B class will be fully formed with the participation of the private sector. Along with it, a foreign network of such complexes is being created for consolidation and distribution of the Kazakhstan export and transit freight flows. "The terminal infrastructure at the port of Lianyungang, located in the Western part of China, is being commissioned. The projects in Central Europe, the Baltic and Black Sea regions are under consideration, as well as the projects in the Persian Gulf. A large-scale project for the construction of the motor road Western Europe-Western China, 2 787 km long is under implementation with completion date planned for 2015”.

It is expected that the total volume of the investments into modernization and development of transport infrastructure and logistics assets up to the year 2020, will exceed $60 billion. As a result, Kazakhstan will have a new integrated transport and logistics complex to transport the goods with high added value, which obligatory require a precise timing of delivery and security.

Even now the KTZ company ensures the transit freight traffic in the territory of Kazakhstan with the container trains with the velocity over 1000 km per day. “We offer the businesses a new transport product. Its special feature is the regular traffic of container trains according to the schedule. The container batch is formed by arrival of the platforms, unlike the existing principle, when a platform is waiting for the container”.

This innovation is intended to optimize the logistics, to minimize the formation and idle time of a rolling stock. At the moment, 14 transit shuttle-trains are functioning already in the direction Europe – Asia. At the beginning of next year, as part of an agreement with the Chinese partners, the KTZ plans to launch two more trains between Sian – Uzbekistan and Sehzhen – Europe.

According to Mr.Mamin, the container business development with eliminating the customs formalities at the internal borders, will create the conditions for realization of joint business projects between the member countries of the Common Economic Space. The key project in this area is the creation of the JTLC, which will be an operator for the container transport and terminal processing. "In the framework of JTLC activities, the railway administrations of three countries – Kazakhstan, Belarus and Russia, will provide an integrated service, based on the principles of a ‘single counter’, integrated technology, quality standards and pricing policies. And, as a consequence, it allows the coordination of the main and terminal development of technological infrastructure corridors".

Mr. Mamin stressed that our country considers the JTLC as the principal instrument for implementation of the strategic objectives for reorientation of the container traffic from marine to rail type. "The joint company is charged with the task of developing a target volume of container cargo flows between Asia and Europe (via territory of Kazakhstan) in the amount of 1.5 million 20 foot-equivalent by the year of 2020".

However, the implementation plans for the strategy of "New Silk Road" suggests the development of cooperation with the railway and maritime administrations of Azerbaijan, Georgia, Turkey, Iran and the Balkan peninsula countries. "The potential of transport corridors, crossing the territory of these countries, shall increase significantly with the implementation of the construction project of Zhezkazgan – Beineu, expansion of Aktau port, completion of the construction of Kars – Akhalkalaki railway section, as well as commissioning of the tunnel across the Bosphorus Strait. The dynamics of trade relations in the region has an influence too. In particular, the trade turnover between China and Turkey will increase from $24 billion in 2012 up to $100 billion by the year of 2023.

It should be noted out that in the framework of the Forum, an agreement was signed for creation of the Coalition Committee, whose main task will be the development of Trans-Caspian International Transport route between rail and maritime administrations of Kazakhstan, Azerbaijan and Georgia.

Another strategic component of the "New Silk Road" will be the transport corridor, which will connect China, Turkmenistan, Iran and Gulf countries via Uzen – Gorgan, a new railway line. According to the preliminary estimates, the potential of this area exceeds 15 million tons of freights per year.

Transit Potential of the CES

In his speech, Vladimir Yakunin, President of “Russian Railways” focused the attention to the fact that the strategic role of railway transport is increasing in the current conditions. "We all live in a world that is getting smaller and smaller due to the development of communication means. Therefore, the creation of new transport systems, capable to provide with high speed delivery of goods with a high degree of security, ensures the leading position of the rail transportation in terms of creating the new transport corridors.

He highlights that the JTLC establishment is fully compliant with the policy, conducted by the CES in the area of economic, transport and political integration "with purpose of achieving the synergy effect, important for each participant”. Moreover, the JTLC should be seen as the first of the integration projects, implemented within the CES.

According to the Head of the Russian Railways, last year the volume of foreign trade in the CES with third countries amounted to $940 billion, which is 3.2% increase compared with 2011. As for the members of the Customs Union, their mutual trade turnover doubled since it started functioning.

According to Mr. Yakunin, these indicators confirm the urgency of creating the Common Economic Space and, in particular, the joint transport and logistics company. "We expect that by attracting the prospective Eurasian freight traffic, which, according to the most pessimistic estimates, could make up to 1 million standard containers per year by 2020, we will be able to get a very serious synergy effect."

At the same time, the President of Russian Railways expressed a regret that the share of the CES countries in total container turnover between China and EU countries does exceed 0.2% yet. "Even today the undeveloped potential is estimated at 285 thousand containers, in financial terms, it comes to a billion dollars that could be obtained only from such operations.

The Coalition Committee on developing the transit container traffic from China to Europe via the transport systems of member countries of the CES shall resolve this problem. But it will be quite difficult. "Today we do not compete on pricing with the deep-sea operators and will never be able to achieve this level, so we can compete only regarding time of delivery”.

Until recently, the problem of delays in transportation was also related to the incompatible train gauges between the European standard (1520), which differs from those of the CIS countries and the Baltic States (1435). However, it has been resolved by introduction of a single consignment note. "It's a great simplification for the customs procedures. Therefore, we will make further efforts for such implementation.

In addition, according to Mr.Yakunin, the use of electronic forms for the preliminary declaration of goods and customs procedures for the inspection of container transit in territory of the CES countries will favour the expansion of the transit potential. "This is done in order to increase the competitiveness of the rail transport, and this is our competitive advantage in terms of delivery, which must be implemented in full."

As shared by the Head of Russian Railways, our countries made a considerable work and arrived to the practical implementation of the JLTC formation. "It is important that all the participants, including Russia, Kazakhstan and Belarus, originally agreed to create this company on a parity basis. This means that we have to ensure an access to the business of each company, being the part of JTLC. Equal share, equal conditions, equal income for maintenance of the transit flows. These are truly economic integration processes that are implemented within the framework of the coordinated transport policies of the member countries.

At the same time, he stressed out that the transport syndicate should be seen not only as a profitable enterprise for railway companies, but also as a factor of efficiency of the railway system in the CES as a whole.

Control of key transport assets of the CES will allow the JTLC to reach the business level, comparable with global industry leaders. "It's a certainly economic project. It would have a positive effect for all the CES countries. It is extremely important that each participant will receive a substantial increase in the revenue, which we lacked before. By creating a unified system, we attract new cargoes and get money at the expense of common technologies. "

According to the Boston Consulting Group, as a result of the JTLC establishment, Russia alone can increase the contribution of the transport sector to the GDP by $5 billion by 2020.

Speaking of the JTLC plans, Mr. Yakunin said that the company intends to create the transport routes in the direction East-West and North-South. "All of these corridors has enormous growth potential. The dynamics of the freight transportation along the Trans-Siberian railway is important for us. Now we implement the project – ”Seven days by Transsiberian", while the schedule of freight trains include not only the container trains. We believe that the future prospects allow us to count on the increased transportation of goods".

The Head of Russian Railways cited the statistics, according to which in 2003–2012, the volume of traffic along the Transsiberian corridor has reached 111.2 million tonnes. "No one could have predicted it. It increased on the export direction by 85.3% and for the import it grew up in 2.3 times”.

According to Mr. Yakunin, the potential of a new Eurasian transport corridor "adds 20.5 million tons of cargo, with delivery period from 12 to 14 days from the Far East to Vienna inclusively, then the goods will be distributed over the Europe by all means of transport.

He drew attention to the fact that the development of transport corridors in the Eurasian space means the growing competition between the countries. "We are not the only companies, mentionning it. According to our Chinese colleagues, this is also indicated by the Europeans. The terminology of "corridor-a corridor of development" is becoming a common formula to describe the development of cargo transportation by rail. Therefore, the market operations will not be free for long, and if this niche will not be taken now, tomorrow it will be occupied by other countries."

Later, during the press briefing, Askar Mamin and Vladimir Yakunin shared the KTZh, RR and the Administration of Belarus Railways have already signed the Schedule, stipulating the sequential steps for realization of the JTLC project. It is planned that the company will start working already in the first quarter of 2014.

Askar Mamin said that it is the first project that will bring the dividends for the economy of our countries in the short term from the viewpoint of attracting the transit capacity and additional transit volumes via their territory. Citing the expert estimates, the Head of KTZh noted out that such projects are capable to stimulate the economic growth. "According to our calculations, the logistics business and additional flows of transit goods can provide with minimum 1% to GDP”.

 Strategically Important Country

The prospects of Kazakhstan as "a home for the longest section of the Silk Road" are highly optimistic, as it was said by the foreign guests of the Forum. So, Ahmed bin Sulajm, Chairman of the Board of DP World stressed out that the location of Kazakhstan has a great strategic importance. "But given the reorientation of the global production, with an emphasis on China, a transfer from traditional maritime trade routes to the other ones, makes the project very feasible because it would shorten the distances”. The "New Silk Road" will contribute to the business development, creation of added value and employment. "We believe that once the project becomes operational, it will benefit not only Kazakhstan but also all the countries, participating in the project. This is a revolution in transportation”.

The Head of DP World also expressed confidence that the "New Silk Road" will be able to rival with the maritime routes. "Today we say that the freight transportation by railway requires a lot of time, that the maritime transport makes it cheaper. However, we can achieve the economies of scale, and then, the rail transport will cost less. "New Silk Road" is an excellent infrastructure solution. It will attract new large-scale investments and will become the project, turning Kazakhstan into a transport and logistics hub of the Eurasian continent.

Tony Profit, Senior Vice President of Hewlett-Packard has also no doubt in the good prospects for the project. He reminded that five years ago his company began to transfer their manufacturing operations to the coast and into the territory of the People's Republic of China. Now more than half of the laptops, computers and most laser printers HP are produced in the Western China. "The Chinese economy is developing to the West, the European one-to the East, and in between there is the developing economy of Kazakhstan and our Russian partners. We see this as an opportunity to become a new logistics hub."

According to Mr. Profit, the "Silk Road" is not just a promise, it has already become a reality for his company. In order to prove it, he cited the following examples: "With our partners from the Russian Railways and KTZh, as well as the Chinese Ministry of Railways, we worked on 79 trains, each consisting of 40 containers. Now, taking into account the seasonal deviations, we use one train per week. However, our goal is at least, to increase this indicator twice, and in five years to increase in five times. 

 Competitor or Partner?

In his turn, the President of the Azerbaijan railways Arif Askerov suggested to consider the Azerbaijan's territory as a possible continuation of the "New Silk Road". In his speech, he emphasized that his country, like Kazakhstan, lies at the crossroads of the major international transport corridors.

At present, the Azerbaijani Government has already identified the priorities for the transport industry. As an example, he cited the Baku – Tbilisi – Kars railway project, involving three States: Azerbaijan, Georgia and Turkey. This railway with total length exceeding 800 km, will be part of the high-speed Europe – Caucasus – Asia Corridor, and hence, it will be a serious competitor for the "New Silk Road".

According to Mr. Askerov, under the Bosporus the rail connection between Europe and the Asian region is already established. Its total length is 13 km, including 1.4 km under the sea. It is planned to ensure the passenger service until 24:00 and the freights shall be forwarded from 0 to 4 a.m. As a result, Azerbaijan opened the new transit opportunities, therefore, its Government approved the Plan for the Railway Development for the period of 2010–2014”. The main section is the Baku-border with Georgia route. For the development of this corridor, a new sea port is under construction in 60 km from the capital of Azerbaijan, where the ferry and other naval operations will be provided. The port is scheduled to be comissionned in three phases, the last of which will be completed in 2015. The project will carry up to 25 million tons of cargo.

Summing up his speech, Arif Askerov made it clear that Azerbaijan in the future also pretends for a role of logistics and transit hub, with provision of all conditions for the cargo transportation.

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It Is Early to Beat the Drums  Sergey Zelepukhin 
Drivers of New Economy  Editorial 
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· 2001 №1/2  №3/4  №5/6
· 2000 №1  №2  №3

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