Situated in the center of Eurasia, Central Asia undoubtedly has high transit potential for current trade flows. At the same time, it is not fully utilized by states of the region due to a number of reasons, which significantly limit possibilities for its implementation. This is especially evident in the context of analysis of the key customs checkpoints, located on vital trade and economic pathways of Central Asia, and relevant transport hubs. Most of the economic cargo is delivered - and transported through the region by land (by road and rail) being considered feasible both in terms of economy and logistics.
Reasons affecting throughput capacities of key regional trade arteries lie both in natural-geographical as well as economic and political dimensions. So in this paper we attempt not only to study the current state of key Central Asian customs checkpoints and evaluate their impact on transit capacity, but also analyze how to overcome their negative impact (and also contribute to its regional and interregional growth).
It is worth mentioning that significant part of customs checkpoints used as foreign trade channels of Central Asian states with neighboring regions operate in rather difficult geographical conditions. So, key checkpoints, connecting countries of the region with the PRC, lie in the highlands - this applies to Khorgos region and Torugart pass, as well as Pamir Highway, connecting China through Alai Valley of Kyrgyzstan toTajikistan. In addition, a number of transport corridors connecting Central Asia with Iran and Russia (Eastern Europe as a whole) pass through arid desert and semi-desert regions with underdeveloped infrastructure.
All this significantly affects capacity of cargo transportation making it difficult both economically and logistically. In the latter case, they become less intense in certain seasons (in mountainous regions- during winters, in arid regions- in summer). Also, some major obstacles to development trade corridors, including transit, are large rivers - Amu Darya, separating Uzbekistan and Tajikistan from neighboring Afghanistan, linking trade between them to large bridges with high throughput.
Another factor affecting throughput capacity of Central Asia customs points with neighboring regions is specific features of region’s transport infrastructure. The issue is that for a long time it was looped (aimed primarily at developing economic relations within the USSR), and only after gaining independence does it gradually begin to reorient itself towards development of outer trade contacts (including transit freight transportation) with neighboring states, especially with China.
However underdevelopment of railway network and intensive use of road network in mountainous and difficult climatic conditions leads to rapid deterioration of highways roads. All these do not allow to fully utilize capacity of key trade corridors in Central Asia and gradually increase it. Although, in the past few years some positive steps have been taken in this direction - Khorgos-Almaty railway was opened (2012), roads connecting Kazakhstan, Kyrgyzstan and Tajikistan with the PRC have been partially restored. Construction of a new railway line to connect Kazakhstan and Turkmenistan with Iran along the Caspian Sea was completed (2014). However, development of transport system, especially railway lags behind the real needs of economy. In particular, there are few first-class roads, which impacts traffic speed.
In addition, ferry routes have been established to connect Central Asia with Azerbaijan. Kazakh port city of Aktau is of particular importance in this regard gradually turning into a large transport and logistics hub since 2015 when Chinese commodity products would reach Caucasus and further.
It should be mentioned here, however, that trucking is less cost-effective than rail freight. Therefore, poor development of railway network not only limits possibilities of transit trade in Central Asia, but also does not allow for large transshipment points of cargo flows, especially from East Asia to Western Europe.
Another set of factors that affect throughput of main trans-regional transport routes in Central Asia remain to be political. The fact that states of the region have been actually divided into two groups along the EAEU membership splits the region and creates difficulties in customs and logistics of cargo flows. Kazakhstan found itself in somewhat advantageous position, having large territory and relatively developed railway network, it can direct cargo flows up to the western borders of Belarus using EAEU membership. This also allows Kyrgyzstan to use Kazakhstan transit potential at least partially as its railway network has been tied to neighboring state since the Soviet period. Therefore, by combining road and railways, it is also able to use opportunities of EAEU transit cargo flows. Despite the fact that, within the EAEU framework, customs barriers have been minimized to date (although not completely overcome yet), nevertheless, economic interaction of EAEU member states with neighboring countries - PRC, for example, customs services are poorly synchronized. This creates difficulties in customs checkpoints operation that border China.
Turkmenistan found itself in similar situation after commissioning railway from Kazakhstan to Iran along the Caspian Sea. For quite a long time, being distant from international agreements, he had significant work to do since 2014 to resolve customs contradictions with both Kazakhstan and Iran, but they have not been solved completely either.
Uzbekistan and Tajikistan experience a number of difficulties in cross-border trade and (not being members of the EAEU) had to resort to a number of agreements with this organization to achieve some economic priveleges. They have also tested similar strategy with neighboring Afghanistan.
So, taking into account all the listed factors affecting development of trade and economic corridors passing through the territory of modern Central Asia, it is easy to see that main customs checkpoints throughout Central Asia operate under their direct influence. There are possibilities for using regional transit capacity as well as conditions for gradual increase in volume of international cargo flows within its framework.
The largest customs checkpoints (along external regional borders) in Central Asia differ both in terms of throughput capacity and working conditions. But before diving into this topic it makes sense to list and briefly describe them.
In Kazakhstan the following check points bordering China are considered most important: between Altynkol - Khorgos and Dostyk - Alashankou, which also possess sufficiently developed and modern railway and logistics structure. No less important in transit trade are railway and road checkpoints on the Kazakh-Russian border (Aksai, Zhaysan, Alimbet, Taskala, etc.) linked to road and rail transport hubs. As mentioned above, the port of Aktau is becoming increasingly important in transit trade. In Kyrgyzstan, road customs checkpoints on the border with China are important: Torugart in Naryn region and Sary-Tash - Irkeshtam in Alai valley. In Uzbekistan, the largest transport and logistics hub is Termez border with Afghanistan connected by railroad in addition to roads. It is somewhat more complicated for neighboring Tajikistan, which, despite its common border with the PRC, has infrastructure exits only to neighboring regions of Afghanistan, with which it is connected by several road bridges in western part of the country (checkpoints Lower Pyanj and Kokul) and GBAO ( Tem, Ruzvay, etc.). Although road construction works are underway to connect the country directly with the PRC through the Kulma Pass. Turkmenistan has railway and highway customs and access route on the border with Iran - Etrek - Gorgan. The country is also connected with the latter by several highways with customs checkpoints Gaudan and Serakhs, which, unlike railway, do not have sufficient access and logistic capabilities. In addition, in Turkmenistan, Turkmenbashi port on the Caspian Sea is increasingly used for foreign trade and cargo transit.
The majority of external customs checkpoints of the Central Asian region are quite actively used by the PRC to transport various industrial products to European countries as part of its One Belt - One Road initiative, and especially as its most important section of the Silk Road Economic Belt. So, for instance, trans-Eurasian railway Chongqing (China) - Duisburg (Germany) passes through Altynkol - Khorgos and Dostyk - Alashankou customs points, through which goods have been actively supplied since 2013.
Moreover, they reach their destinations in just 15 days. An alternative route through Kazakhstan is also used as part of the SREB: goods are delivered first to Aktau port and then via Caspian Sea are sent to Azerbaijani port of Alat further to Western Europe. Cargo from China reaches Alat port in just six days. The most important highways, in particular, through Torugart and Alai Valley in Kyrgyzstan, are actively used by Chinese for cargo flows to Central Asia. But unlike the railway network, the bulk of commodity output is consumed within the region itself – with only small portion of it being exported.
The railway and partly road networks of Kazakhstan are used quite intensively for supply of mainly Russian and, to a lesser extent, Belarusian goods, from where they are further sent to other countries of the region, including Kyrgyzstan (as EAEU member). At the same time, it is through the railway network that Kazakhstani products (mainly industrial ones) are exported to Russia and Western Europe in favorable customs regime conditions. Moreover, due to relatively well-developed railway network, goods from Kazakhstan reach European countries in just week's time. With completion of Caspian railway construction project, connecting Kazakhstan and Iran via Turkmenistan, the exchange of goods between these countries is gradually increasing. At the same time, since 2016, the supply of Chinese products has also been increasing along this highway, opening access for Chinese goods to Middle East and its largest ports in the Indian Ocean through Central Asia. Delivery from Kazakhstan to these ports takes only 6 days, and transporting goods from China to Iranian port of Chabehar - 14. Economic relations with Afghanistan are also of particular importance in the context of trade and transit corridors for Central Asia. So, large portion of goods from Central Asia goes through Uzbek Termez that has sufficient infrastructure. For example, a significant portion of food products from Kazakhstan is delivered through this customs checkpoint.
Overall, China is using most of the transit capacity and related customs checkpoints with corresponding logistics infrastructure. Although significant portion of this infrastructure is used internally within the EAEU framework - mainly for supply of Russian products to the region and, on a lesser scale, local products - to Russia and partly Belarus (hereinafter to countries of Europe). It should be noted, however that partial intersection of the EAEU and One Belt - One Road projects has its say in such goods mobility.
This allows for the active use of transport and railway infrastructure - especially for channel trans-Eurasian goods flows not only in the western, but also in eastern and northern directions. Stable transit flows through Central Asia are also being established in southern direction, which is why Chinese products here are supplemented by Iranian and gradually Central Asian. The latter also travels to neighboring Afghanistan.
In case of further successful establishment of trade and economic cooperation between Central Asian states and India, an increase in the flow of industrial and other products can be expected from this country through Iran to our region.
As can be seen from the above analysis, not all Central Asian states can actively use their transit capacity due to geographical location. We are referring here to Uzbekistan, which currently actively supports railway construction project that could connect it with the PRC through Kyrgyzstan. This would make it possible to implement an alternative transit corridor in the region, which would pass through its southern part and further through Turkmenistan, and would connect trade flows from China to the Near and Middle East. This, in turn, can become the basis not only for expanding the throughput capacity of Central Asia transit corridors, but also an important condition for establishing and further development of modern infrastructure associated with this transit highway.
Tajikistan does not have direct access to transport system of PRC - its most important external trade and economic partners - due to high mountain conditions of the Pamirs and is forced to use the transport highway through Alai Valley, allowing goods delivery to Dushanbe and other cities via Pamir Highway or through Karamyk Pass. But given that Tajikistan is not a member of the EAEU (unlike Kyrgyzstan, with which it has quite complicated relations due to border incidents), this situation complicates development of trade relations with China.
However, development of modern Central Asia transport system still lags significantly behind the actual demands of trade and economy as a whole, which inhibits its further development. This affects throughput of key regional external customs points, which in most cases are not fully or almost completely devoid of modern infrastructure that would intensify transit flows.
It is reflected in the fact that due to insufficient infrastructure capacities (when loading or unloading transit trade products), there are noticeable delays at the customs and checkpoints, which causes delayes, and in some cases even leads to cargo loss, resulting in noticeable economic losses.
Another challenge to increasing Central Asian transport corridors capacity is the difference in goods’ inspection and clearance procedures. And if in the EAEU countries they are relatively aligned and strengthened, then in other cases they can take considerable time. In some cases, they can be artificially complicated as a result of political tensions between countries. This also leads to prolonged delays at borders and, accordingly, causes significant losses, especially when it comes to perishable products.
For these reasons, in order to increase throughput capacity of customs and checkpoints of Central Asian states through which international and transit trade takes place, not only further development of transport (railway network and related logistics) infrastructure is necessary, but also simplification of customs control via diplomacy to unify interregional customs systems.
This material has been prepared as an introductory material for government agencies, the expert community and business associations within the framework of the project: Ready4Trade Central Asia
The 4-year EU-funded Project is a trade component of a larger EU-funded programme which aims to support Investment, Competitiveness and Trade in Central Asia, thus contributing to sustainable and inclusive economic development in the region. The Project will support the development of intra-regional and international trade in five Central Asian (CA) countries. This will be done by enhancing the transparency of cross-border requirements, removing regulatory and procedural barriers, strengthening business capability to comply with trade formalities and standards, as well as by improving cross-border e-commerce. The Project will be implemented by the International Trade Centre (ITC) in close collaboration with national partners. The Project will target selected sectors / value chains in each country based on the export potential and accounting for participation of women in the labour force in the sector. Each intervention will be customized to meet specific needs of the beneficiary countries. A 6-month inception phase will be carried out to calibrate the project approach and customise it to each country individual needs.