Central Asia: $19bn plan provides new threads for Silk Road

The construction work, which started in late 2004, is testimony to the efforts under way to upgrade landlocked Tajikistan’s poor road system, which still bears the marks of the lengthy civil war that followed the collapse of the Soviet Union.

Indeed, eight countries last month signed a much more ambitious and broader agreement to spend $18.7bn on roads and railways running through central Asia, thereby reviving and expanding the old Silk Road that connected China and Europe.

Even though the European Union overtook the US this year as the main destination for Chinese goods, less than 1 per cent of the $1,000bn-plus of trade between Europe and Asia passes through central Asia, a region once at the heart of trade between the two continents.

The agreement was seen as a political breakthrough in an often splintered region, bringing together the central Asian countries of Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan with their eastern neighbours China and Mongolia, Afghanistan to the south, and their fellow former Soviet republic of Azerbaijan to the west. The eight countries are members of the Central Asia Regional Economic Co-operation (Carec) programme.

The economic benefits of the transport project are massive, according to its backers, and having a common political objective will help ensure the money gets channelled where it can bring the highest return.

Azil Gezen, a consultant working on the project for the Asian Development Bank, says: “This is no longer a patchwork, where you are building or adding something here and there and perhaps wasting money. This [agreement] gives real structure.”

The modern version is not an attempt to mirror the old Silk Road, which was itself a series of roads and trails along which caravans carried China’s and central Asia’s silks by camel towards medieval Europe. Instead, the target is to create six road-rail corridors, due to be finished by 2018.

On the European side, there will be corridors ending in Turkey in the south and Russia in the north. On the eastern side, the corridors will join the improved road and rail network that China is already committed to providing to its poorer, western provinces.

In fact, Beijing is expected to provide a substantial amount of the overall $19bn financing, since almost a third of the investment is expected to take place on Chinese soil. Russia, meanwhile, has been invited to join the scheme but has yet to do so.

But a large part of the project is also about adding or improving north-south routes that will connect into south Asia and the Middle East. And while the new roads and railways should revive central Asia’s importance in the transit of goods, officials say a better transport network is essential for some of the countries to maintain their rate of economic development, which has accelerated on the back of the worldwide commodities boom.

Oil-rich Kazakhstan, for example, has recently averaged annual growth of 10 per cent. Mr Gezen warns: “There is a risk of stifling the growth of some of these countries if the transport system cannot serve their needs.”

The ADB is backing the plan, along with the European Bank for Reconstruction and Development, the Islamic Development Bank, the International Monetary Fund, the United Nations Development Programme, and the World Bank. Such multilateral institutions are expected to fund just under half the project.

Illustrating the push for more international co-operation, the new stretch of road that is being completed north of Dushanbe draws on expertise and manpower from several countries.

The project has been masterminded by SMEC, an Australian consulting engineering firm, while construction has been in the hands of Sinohydro of China. In fact, 120 Chinese workers have been brought in to build the Tajik road. Many are machine operators, working alongside 360 locals who are often assigned more basic tasks.

But over the coming decade, the real challenge could come not so much from building such infrastructure as from managing it efficiently. Even now, obstacles such as excessive and unpredictable bureaucratic procedures at border crossings can prove more of a deterrent to travelling across central Asia than poor rail or road infrastructure, experts say.

Haruya Koide, an infrastructure finance specialist working for the ADB, says: “Constructing railways can be challenging because of the topography in a region like this, but it is not rocket science. What is really critical is to then have good railway management, which can be a very difficult business.”

Similarly, some of the 80 projects already earmarked will require genuine usage commitments from the countries to justify the investment. A case in point cited by Mr Gezen is a rail link crossing Uzbekistan and Kyrgyzstan into China. He says: “This project could become very attractive, provided that China commits the tonnage. The traffic has to come from China. If you don’t utilise the asset, it gets very, very expensive.”

Furthermore, despite the agreement signed last month, officials remain wary about the possibility of a dogfight when it will come to deciding which of the 80 projects should be given priority. The risks were underlined in the European Union, whose member nations spent years squabbling over how to allocate €20bn ($29bn) to a list of 30 trans-European networks, three-quarters of them involving rail transport.

Mr Gezen recognises that “every country will want their project first” and that political rather than economic considerations might come into play.

But the hope is that, given their huge financial involvement, the multilateral institutions will at least control the overall direction of the transport scheme, even if some governments try to break ranks.

As Mr Gezen says: “We can decide what to do with our money, but we have no way of telling a government what to do with their money.”

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