Prospects For The Development Of Logistics Routes In Central Asia – Analysis
The military conflict between Russia and Ukraine, skirmishes in the Middle East, and other complex situations in the world inevitably affect the geopolitical transformation on the Eurasian continent. Russia’s exchange of mutual restrictions and sanctions with a number of Western countries has led to logistical disruptions that are very painful for the entire Eurasian region. At the same time, armed attacks on maritime vessels have reduced transportation through the Suez Canal, one of the world’s main trade arteries.
Due to these trends, the development of transportation corridors plays an important role in an unstable geopolitical situation. The global logistics route of the Belt and Road Initiative connecting East and West is a truly significant project for the entire world economy. This project will halve the time of cargo delivery and significantly reduce transportation costs.
At the international forum of cooperation One Belt, One Road in Beijing, Kazakh President Kasym-Jomart Tokayev said that over the past 15 years, Kazakhstan has invested about $35 billion in the development of transit transportation. “The implementation of 52 joint projects with an investment volume of $21 billion continues,” noted President Tokayev during talks with Xi Jinping.
At current growth rates, the One Belt, One Road project could increase Kazakhstan’s GDP by 21%. The Republic of Kazakhstan has about 1,783 kilometers of common border with the People’s Republic of China. More than three thousand kilometers of the more than ten thousand kilometers of the route pass through its territory. The route through Kazakhstan also provides access to a regional market of about 680 million consumers, including the market of western China with 300 million inhabitants, the Eurasian Economic Union with 180 million people, the countries of the Caspian coast with 150 million citizens, as well as the markets of Central Asia with 50 million participants.
The Trans-Caspian International Transport Route (TITR) project, known as the Middle Corridor, which is a strategic logistical axis connecting China to the European Union, is increasing transportation volumes. In 2022, traffic growth doubled from 2021 to 1.7 million tons of cargo. According to the plans for the development of transport and logistics potential in Kazakhstan, TITR by 2030 is estimated to be up to 20 million tons of cargo per year. This direction can be considered one of the key development priorities for the member countries of the UN Special Program for the Economies of Central Asia (SPECA), which directly or indirectly participate in its functioning.
According to Peter Frankopan, Director of Byzantine Studies at Oxford University, Kazakhstan has two paths in the One Belt, One Road project: positive and negative. The positive one is the changes Kazakhstan has to go through, and huge ones at that. Airports are being built, educational institutions are being built, clusters are being developed, etc. There are dynamics, ambitions, and a desire to cooperate with neighbors. The negative side is that these relationships have complex components, for example, disputes over water resources.
“Kazakhstan should not just remain a corridor linking China to Europe, but, as a corridor, maximize the benefits of its geographical position for its citizens,” the Oxford University professor emphasized.
Relations between Kazakhstan and other countries should be built on a friendly basis; it is necessary to develop collaboration, interaction, and cooperation. “Kazakhstan now does not need to make decisions and take sides. But it is necessary to constantly observe, monitor, and see what is happening and what is right and beneficial for the people of Kazakhstan in this situation,” Frankopan said.
Andrei Grozin from the Russian Academy of Sciences expressed the opinion that now there are issues of competition and rivalry between large, strong countries, and it is very difficult for the republic to pursue a multi-vector policy, constantly balancing. “Kazakhstan, as the economic leader of Central Asia, finds itself at the center of the main pressure. The collective West would like Kazakhstan to be more actively involved in the process of implementing this sanctions pressure,” the Russian expert says.
However, Kazakhstan is interested in developing its economy while complying with Western sanctions against Russia. “There is no serious tension along the line of relations between Brussels and Astana, Washington and Astana, London and Astana, on the one hand, and Moscow and Astana, on the other,” Grozin added.
A new model of globalization of the world economy, the Digital Silk Road (DSR), is being developed within the framework of logistics projects. It is a digital version of the One Belt, One Road initiative. Trade expansion strategies in the Eurasian Economic Union and Central Asia, high-tech expertise, and its extension beyond China are key practical elements of this project. The model includes a strong IT component based on the deployment of digital infrastructure such as logistics platforms, artificial intelligence, e-commerce, etc.
The potential for e-commerce is obviously huge. According to Shopify, Statista, and GrandView Research, it had a market share of $6.3 trillion in 2023. The global B2C e-commerce market is projected to reach $8.2 trillion by 2026. Kazakhstan, located at the crossroads of the Silk Road, will try to capitalize on this.
The Ministry of Trade and Integration of the Republic of Kazakhstan has developed an e-commerce growth strategy that includes the establishment of sorting centers and bonded warehouses. Training centers for e-commerce are being established to educate businesses on the skills necessary for conducting digital commerce. A digital trade agreement is now being formulated with Central Asian countries, etc.
Meanwhile, China is among the five largest investors in Kazakhstan’s economy. The total volume of investments is more than 23 billion dollars. Economic relations are based on a purposeful increase in bilateral trade turnover, bringing the volume of trade up to 40 billion dollars.
However, there are currently a number of administrative and legal barriers. In the agricultural sector, it is necessary to remove veterinary and phytosanitary restrictions on Kazakhstani products in order to develop trade in animal and plant products.
In the transport and logistics sector, it is necessary to implement as soon as possible the construction of a Kazakh terminal in Xi’an dry port, use the potential of the terminal in Lianyungang and the possibilities of the Ayagoz-Tacheng railway line within the framework of TMTM, invest in the Kazakh seaports of Kuryk and Aktau, develop multimodal transport cooperation, and modernize existing checkpoints.
Based on the emerging relations between these countries, it can be concluded that trade and investment ties will be liberalized and investment and industrial projects will be implemented. A simplification of tariff conditions and administrative and customs procedures is expected.
At the moment, China is interested in increasing imports from Kazakhstan of high-quality, environmentally friendly agricultural products and non-resource goods, as well as in the development of joint projects in the oil and gas industry and “green energy.” Plans include the development of the machine-building industry, the deep processing of raw materials, the creation of logistics hubs, etc.
Although China has a huge economy, all relations should be based on the principles of fairness. Central Asian countries need to take the initiative and raise strategic cooperation to a new level. At the same time, they need to protect their common interests, jointly oppose the interference of destructive elements from outside, and pursue their own independent course.