Reviving the Great Silk Road in Structure and Administration

Since the time of Alexander the Great, trade has played a crucial role in the development of the Eurasian continent. The web of trading routes called the Silk Road helped spread religions and scientific knowledge in addition to trading numerous goods between Europe and Asia. The Silk Road played an important role in the governing of empires, including the Roman, Mongolian and Ottoman, for thousands of years. The times of Alexander the Great, Marco Polo and the golden ages of the buoyant transcontinental trade in silk and spices are now deep under the ashes of history. The development of sea transport in the 17th century made the land routes traversing Eurasian steppes, valleys and deserts redundant.

As often happens in history, however, the situation seems to be reversing itself. We live in an astonishing age, when the great Silk Road, once abandoned, is now entering a new era. Modern geopolitical and geo-economic imperatives dictate that Central Asian countries and their neighbours revitalise the land-based Eurasian transit corridor.

Kazakhstan, like other key states in the region, is keenly committed to the development of land-based trade routes. In his Jan. 17 state-of-the-nation address, President Nursultan Nazarbayev emphasised the importance of developing transport routes. He said, “Transport infrastructure is at the heart of the industrial economy and society. I have said many times that it is impossible to reach the level of a developed country without modern, high-quality highways. Situated between Europe and Asia, between the North and the South, transportation remains of great importance to Kazakhstan.”

The wisdom and rationality of this vision cannot be overestimated. Developing transportation infrastructure will bring multiple benefits both direct and indirect, short term and long term, to Kazakhstan and the region. Among the main benefits is socioeconomic growth. Developing the physical infrastructure required and improving the administrative sphere, including tax and customs procedures, will bring import prices to much more affordable levels, while exporters will find more efficient ways to reach international markets. Opening new markets and efficient export routes will give an important impetus to the production of ready goods in Kazakhstan. Moreover, the construction of transcontinental roads will connect the sparsely located cities of Kazakhstan and provide easier transit for goods within the country.

President Nazarbayev in his address noted the importance of internal roads. “We have initiated construction oа highways between Astana, Karaganda and Almaty; Astana, Pavlodar and Ust-Kamenogorsk and Almaty, Kapchagay and Ust-Kamenogorsk. Double-speed trains already use these routes,” the President said.

In addition to the political wishes of the leaders of key regional countries and their commitments to transportation construction, many powerful institutions, including the World Bank, the European Bank for Reconstruction and Development (EBRD) and the Asian Development Bank (ADB), are championing transcontinental trade and providing substantial funds for the development of infrastructure. According to the World Bank, a $2.125 billion loan has been allocated for the South-West Roads Project. Total funds provided by other international organisations including the ADB, EBRD and Islamic Development Bank, amount to $3.5 billion.

A major impetus for the development of the Western China-Western Europe project is provided by neighbouring China. A few years ago, Wang Jisi, a prominent Chinese academic, suggested the “March westwards” strategy aimed at developing the historically underdeveloped western provinces of Xinjiang and Tibet. The Chinese central government has undertaken a series of measures to develop its western regions by allocating a share of the county’s gross domestic product and staff to work in those regions. Moreover, the government has undertaken a number of infrastructure development projects and encouraged investment in the western provinces. All these efforts are directed, among other crucial goals, at securing the stable transportation routes so vital to the Chinese economy: the volume of hydrocarbons coming through the pipelines traversing the country’s west is projected to increase in the coming years.

Not only West-East energy supply routes determine the growth of transportation activity on the borders between Central Asian states and China. A gradual growth in activities along the transport routes passing through the Western China-Western Europe route is also stipulated by recent changes in the business supply chains of many producers.

Major computer manufacturers are being forced to transfer their production facilities deeper into China, pushed by the pressure of surging labour and land costs in traditional coastal centres. They are in the process of establishing new factories and development and logistics centres in the cities of Chongqing and Chengdu in western China. Hewlett-Packard (HP), Acer and Asustek’s vast manufacturing centres are now in Chongqing. Dell and Lenovo chose Chengdu, the capital of the western province of Sichuan. Foxconn, a company that serves HP, Dell, Apple and Sony, has set up facilities in both cities.

According to experts, conditions are ripe for the development of transportation routes from China to Europe via Central Asia. With this surge in production in the western part of China, manufacturers will provide both motivation and support for the development of transportation routes to Western Europe, one of their main markets. HP was a pioneer in probing the rail shipment of its made-in-Chongqing computers to Europe.

A section of a modern-day Silk Road stretching from Chongqing to Western Europe will allow increasing commerce while reducing transportation costs. The manufacturers operating in China now have the choice of using the existing trans-Siberian railway, which is costly, or sea routes, including passing through the Suez Canal, which cost less but take up to three times longer. The Eurasian corridor will allow shipping from China to Europe in as few as 10-15 days. An HP executive said the company planned to shift more shipments from sea routes to rail. According to him, the rail route to Europe takes 18-19 days.

There is no doubt that the construction of roads and railways through Central Asia presents multiple beneficial prospects for the transit countries and their businesses. The mere physical existence of transit routes is not sufficient, however. A substantial challenge lies in the revitalisation of the Silk Road. The transit countries need to surmount the challenges of long delays on the borders, excessive customs duties and in some cases the imposition of non-official charges. Central Asian governments need to improve their customs procedures by increasing their effectiveness and coordination between national authorities of different countries in the region. In this respect, President Nazarbayev has a clear view. “It is necessary to reduce the customs clearance time for goods, increase the capacity of border checkpoints, strengthen the efficiency of the Aktau seaport and simplify exporting and importing procedures,” he said in his Jan. 17 address.

There is also the huge, not-yet-unleashed potential of the private sector. As in the case of HP, businesses may take all possible measures to support the government bodies of the transit countries in improving border procedures with management and technological expertise. Large economic integration initiatives put forward by governments may allow businesses to contribute to the process. There are many companies in the Central Asian region that are eager to embrace commercial operations connected with transporting goods from the East to the West. However, it is still difficult for them to do so in the face of excessive customs fees, tight trade controls and other obstacles.

The New Silk Road is possible. Nations and businesses are already trying to build it, and there is no lack of commitment or interest from countries in both the East and the West. Yet creating the necessary institutional frameworks will require just as much effort and focus as actually building roads and infrastructure.