How can Kazakhstan benefit from increased engagement in North-South Transport Corridor
The route, which is 7,200 kilometers long, connects India and Russia through Iran and Azerbaijan. The project was established in 2000 by Russia, India and Iran to create a corridor shorter than the maritime Suez Canal transportation route in an effort to reduce the time and transportation costs of trade in goods. Later on, Belarus, Kazakhstan, Tajikistan, Oman, Armenia, Azerbaijan, Ukraine, Kyrgyzstan and Türkiye joined the project. Turkmenistan’s participation in the INSTC agreement was reaffirmed during Turkmen President Serdar Berdymukhamedov’s visit to Astana on October 14-15, when he said that Turkmenistan is ready to work with Kazakhstan to create a North-South corridor to the Indian Ocean and the Persian Gulf, along the eastern coast of the Caspian Sea.
The growing importance of the North-South transport corridor is underpinned by the fact that some countries in the Eurasian Economic Union (EAEU) reorientate their foreign trade and develop new logistics.
The countries are eyeing to boost investment in the corridor’s transport infrastructure. According to the Eurasian Development Bank (EDB) experts, more than 100 projects worth more than US$38 billion are expected to be implemented by 2030.
Addressing the sixth Caspian Summit in Ashgabat on June 29, President Kassym-Jomart Tokayev said the breakdown of traditional logistical chains transport interconnectivity is becoming a key factor for sustainable growth and strengthening economic ties between states, where the role of the corridor has significantly increased.
«Special attention should also be paid to the further development of the promising North-South corridor. To this end, we can make maximum use of Kazakhstan - Turkmenistan – Iran railroad, which is the shortest route between East Asia and the Persian Gulf countries,» he said.
In August, customs authorities of Azerbaijan, Iran, and Russia signed a memorandum of understanding on simplification of cargo transit, while in July a new Russia–India container service through Kazakhstan, Turkmenistan and Iran using the corridor’s Eastern Route was launched. Carrying 39 containers, the Russian transit train left Chekhov station on July 6, traveling 3,800 kilometers through Kazakhstan and Turkmenistan to enter Iran. The cargo was transported to Bandar Abbas port in southern Iran through a 1,600-kilometer rail route to be sent to India's Nhava Sheva Port via sea.
What are the advantages of the North-South corridor?
In the October report published by the EDB, experts highlight the corridor is the shortest route for commodity transportation between EAEU countries and South Asia, East Africa and the Middle East.
It provides a logistical choice of three routes for shipping containers, grain, metals, wood products, and food, among other commodities. Three routes include the Western (via Azerbaijan), Eastern (via Kazakhstan and Turkmenistan) and Trans-Caspian (via Caspian seaports).
The corridor is of multimodal nature, enabling road, railway, and maritime transport, and combined river-sea navigation vessels.
The main advantage of the corridor compared to the other routes, including the sea route through the Suez Canal, is that it halves delivery times. «For example, it takes 30 to 45 days to deliver cargoes from Mumbai to Saint Petersburg by the traditional route through the Suez Canal, while the North-South land route delivery times may vary from 15 to 24 days. Moreover, using the Eastern route of the corridor that runs through Kazakhstan and Turkmenistan can reduce delivery times to 15–18 days,» said EDB experts.
Obstacles to the development of the corridor
Though the corridor is operating, it has not yet reached its full transcontinental potential. EDB experts indicated there are more than 40 non-tariff barriers that impede the effective functioning of the corridor.
These are missing links and critical infrastructure bottlenecks, lack of harmonized border crossing procedures, paper-based transport documents and lack of an effective coordination mechanism for managing the corridor, including tariffs as well as freight and vehicle insurance.
Addressing these bottlenecks was discussed during the visit of Kazakh Deputy Prime Minister - Minister of Trade and Integration Serik Zhumangarin to Tehran on October 31. At the meeting, officials from Kazakhstan, Iran and Turkmenistan agreed to adopt a trilateral road map on the removal of infrastructure bottlenecks and development of the North-South route capacity for 2022-2025 by the end of 2022.
The roadmap will include the creation of a special visa regime for truck drivers involved in international transportation, optimization of customs clearance processes of the two countries, including the introduction of a unified tariff, a single transport document and a unified information system, launching a pilot project for the transportation of goods by the road along Kazakhstan - Turkmenistan – Iran route with the use of navigation seals, following the example of Kyrgyzstan - Kazakhstan – Russia route.
The unfinished section of Rasht–Astara railway in Iran on the Western route is a key infrastructural barrier.
«Double transshipment from railway cars to trucks in this section raises costs and delivery times to a point where delivery of cargoes becomes nearly economically unviable,» say experts.
The type of terrain where the new railway is to be placed is one of the major difficulties in building the Rasht-Astara section. Additionally, property along the Caspian Sea shore from Anzali to Astara is privately owned. Because the land has recreational potential, its acquisition will require significant funding.
Funding
Funding, in general, is a key obstacle. Experts note the significant capital intensity needed to develop INSTC land infrastructure, especially roads and railways, that account for more than 86 percent of total investments.
The western route of the corridor is estimated to receive 69 percent of investments to receive its full potential, compared to the eastern route and the Trans-Caspian route getting 12 percent and 19 percent.
Countries also direct their state budget to finance the corridor. The share of public investment in INSTC development reaches almost 80 percent in Azerbaijan and Kazakhstan and 76 percent in Russia.
Projects to upgrade the fleet and rolling stock or develop roadside and logistics infrastructure can be implemented using the public-private partnership mechanism. This, in turn, promotes the involvement of private investors and multilateral development banks in their implementation.
Expert recommendations moving forward
In their report, EDB experts provide recommendations on how to enhance soft infrastructure, such as fostering an environment favorable to international freight movement, standardizing border crossing procedures, and establishing a coordination framework for administering the corridor.
They categorize the measures to eliminate barriers into seven groups. These include legal harmonization in customs clearance, information exchange and facilitation of border crossing procedures, development of a coordinated tariff policy, the establishment of payment and settlement mechanisms between transport stakeholders, freight and vehicle insurance, digitalization of transport documents and procedures, and establishment of a coordination mechanism for managing the INSTC.
How can Kazakhstan benefit from the corridor development?
With the global reformatting of transcontinental cargo flows taking place, Kazakhstan seeks to strengthen its status as a regional logistics hub, said Lydia Parkhomchik, expert at the Astana-based Institute of World Economics and Politics. The North-South Corridor, therefore, corresponds to the country’s strategy for the development of its transport and logistics potential.
«At present, there are 13 international transport corridors passing through the country, including 5 railway corridors and 8 automobile corridors, among which the North-South International Transport Corridor is also significant. Kazakhstan's accession to this route opens up access to the seaports of the Persian Gulf, providing an opportunity to build transit traffic routes in the direction of India, the world's largest consumer market,» she said in an interview for this story.
She cited EDB forecasts that indicate that under an optimistic scenario, the volume of goods turnover on the route, which is supposed to connect the Baltic states with India through Russia, Kazakhstan, Azerbaijan, Turkmenistan and Iran, may reach up to 24.7 million tons.
«In this case, the volume of container traffic could be up to 662,000 containers of the twenty-foot equivalent (TEU), of which 21.2 percent will be loaded with food products and another 16 percent - with metals,» she said.
The development of the North-South corridor opens up additional opportunities for Kazakhstan to expand regional trade, as 75 percent of the potential volume of container shipments will account for the EAEU member states.
«Grain crops may become the key commodities to be transported within the route. At the moment, in terms of transportation volumes, it is the grain that is the main commodity delivered via the North-South corridor,» she said.
According to forecasts, the flow of grain cargo along the corridor may be from 8.7 to 12.8 million tons by 2030. By the end of 2021, Kazakhstan exported 7 million tons of grain. Increasing export cargo flow in the southern direction will allow Kazakh producers to diversify supplies by reducing transportation costs.
Parkhomchik said the Kazakhstan-Turkmenistan-Iran railway line should play a key role in fulfilling this task. The launch of a 900-kilometer-long Zhanaozen-Bereket-Etrek-Gorgan railway line, which connected the railway systems of the three countries, in December 2014 became an important step for the development of the corridor.
«This rail artery became part of the eastern route of the corridor. It is expected that rail traffic along the eastern coast of the Caspian Sea through Kazakhstan will account for about 24 percent of all cargo flows within the corridor. At the same time, the volume of container shipments may be up to 160,000 TEU,» she said.
She also sees the importance to consider the possibility of linking the North-South corridor with other transcontinental routes, including the Trans-Caspian International Transport Route, also known as the Middle Corridor.
Written by Assel Satubaldina