It’s Time for Rail Systems to Lead Central Asia’s Growing Cross-Border Trade

ADB

Regional cooperation in railway development in Central Asia can help increase interregional and intraregional trade.

The Central Asia Regional Economic Cooperation, or CAREC, program is helping countries in the region link rail systems by upgrading infrastructure and tackling complex commercial and legal challenges.

In Central and West Asia, most exports flow to the European Union or the People’s Republic of China. Trade between countries in the region is also robust. Import figures tell a similar story.

The countries that make up the Central Asia Regional Economic Cooperation (CAREC) program want rail to be a mode of choice for trade. They want to build a rail network that is quick, efficient, accessible for customers, and easy to use throughout the region.

An integrated railway system can boost trade

“Regional cooperation in railway development can contribute to increased interregional and intraregional trade in the subregion,” according to a railway strategy for the region, Unlocking the Potential of Railways: A Railway Strategy for CAREC, 2017–2030.

“There is common recognition by member countries, industry, and the general public of the benefits that an integrated CAREC railway system can deliver: expanding trade and improving economic development of CAREC economies.”

“Railway development is a long-term undertaking and by adopting this strategy the CAREC countries have shown their commitment to making it happen.”

The CAREC program, which brings together Afghanistan, Azerbaijan, the People’s Republic of China, Georgia, Kazakhstan, the Kyrgyz Republic, Mongolia, Pakistan, Tajikistan, Turkmenistan, and Uzbekistan, has supported growing trade and connectivity in the region since 2002. More than $22 billion has been invested in recent years to upgrade a 24,000-kilometer road transport corridor system that links the CAREC countries and connects them to external markets.

The program is now setting its focus on railway development to further improve trade and transport efficiency.

Matching rail networks to trade patterns

“Currently about 25,000 kilometers of main railway corridors in and outside the CAREC region connect the countries within the region,” the strategy states. “However, the existing rail network does not necessarily match the changing trade patterns it is meant to serve. Growing export and import activity with the People’s Republic of China and Europe are not currently being served.”

To modernize their transport systems, it is estimated that countries in the CAREC region need to spend about 2%–3% of gross domestic product for development and maintenance of existing assets.

The strategy outlines six designated rail corridors and details $38 billion in investments needed to upgrade the region’s rail system. This includes the need to build an additional 7,200 kilometers of rail line to fill in missing links that will make the system regionally inter-connected.

There are other challenges as well.

Establishing commercial, legal arrangements

“While limitations in infrastructure cause some bottlenecks along CAREC transport routes, commercial limitations, political conflicts, and inefficient institutional arrangements create bottlenecks, too, making transit trade more difficult,” notes the strategy. “These also need to be addressed for the rail sector to achieve its potential and attract new trade flows, enabling regional economic growth.”

One key issue is the difficulty in conducting commercial transactions for international freight movements. Such arrangements often require dealing with several different railway operators for a single international shipment.

Governments in the region are committed to making it easier and more efficient to use rail transport. They are working on improvements in a range of areas including paying tariffs, making pre-payment arrangements with multiple railways, finding freight wagons, handling customs issues, making security arrangements, tracking shipments, making claims for loss and damage, and arranging for final delivery options.

“The development of a range of commercial responses to these complex and overlapping problems can make rail transport more comprehensible and easier to arrange,” states the strategy.

There is also a host of legal challenges associated with integrating Central Asia’s rail systems.

Moving from landlocked to land-linked

“Railways across the CAREC region are organized in many different ways—some as government departments, some with their own railway ministry, and several have restructured the national railway into a state-owned company,” the strategy states. “Often, many different laws define and regulate various components of the rail sector.”

Countries in Central Asia are working together to address these myriad complex challenges by using Unlocking the Potential of Railways: A Railway Strategy for CAREC, 2017–2030 as a blueprint, says Ko Sakamoto, a transport specialist at the Asian Development Bank who coordinates the CAREC transport committee.

“Railways have the potential to transform the region from being landlocked into being land-linked,” says Sakamoto. “Railway development is a long-term undertaking and by adopting this strategy the CAREC countries have shown their commitment to making it happen.”