“New Silk Road” opportunities await multinationals in new ground route between Europe, China

Call it the Marco Polo Turnpike.
 
Some 22 centuries after the original Silk Road smoothed the path of Chinese silk merchants to Europe, a new effort is beginning to build a new 21st century highway between Europe and the burgeoning economy of China, now the world’s fastest-growing market.
 
Unlike the original Silk Road, which began during the Han dynasty (207 BC to 220 AD) and eventually resulted in the building of the Great Wall of China, this new Silk Road is being planned by some of the world’s largest trade and transportation organizations.
 
The allure is the possibility of nearly $1 trillion of new freight hauled annually by surface transportation providers, both rail and over-the-road, following a rugged overland route made popular ages ago.
 
Officially called the “Trans-Caspian East-West Trade & Transit Corridor,” this 4,500-mile surface transportation route would follow a route traveled by Marco Polo and other traders in the 13th century. But it would be equipped with all modern-day highway navigational tools and would enable surface transportation providers to traverse the route in mere days, rather than the weeks and months currently offered by ocean container transport.
 
The World Bank, U.S. Chamber of Commerce, Boeing Corp. and other officials met with scores of high-level transportation and trade representatives in Washington April 28-29 to discuss and solicit interest. These executive level public and private meetings described the opening of the highway freight corridor between China and Europe, possibly within the next decade.
 
This highway corridor, compared to maritime shipping, could dramatically reduce freight charges and delivery time by more than two weeks the shipping of freight between Europe and China, officials said.
 
Kanat Alpysbayev, Vice president of KTZ Railways, the largest railroad in Kazakhstan, told LM that the robust attendance at the Washington conference confirmed there was a lot of interest from the governments and the business community.
 
“I believe just developing this corridor’s freight infrastructure can change the entire supply chain in this region,” Alpysbayev told LM. “We have local initiatives under way in the region to improve the transportation infrastructure. All these projects should be aligned to develop the infrastructure to bring attention to the logistics society for development to the region. We will continue to work for improvement in cargo preference choices, which now is mainly deep sea transport.”
 
Kazakhstan Railways already operates in 11 provinces in China and runs nearly daily unit trains between there and Europe. Alpysbayev said there is a goal of increasing surface transportation trade of $100 billion between Turkey and China and a whopping $800 billion between China and Europe.
 
“It is a huge, huge number,” he said. “If our railway could get between 8 and 10 percent of that growth, we would be very happy to do that.”
 
The new Silk Road promises to shave weeks and perhaps thousands of dollars off each shipment, both ways, from western Europe to China and Hong Kong. Currently by ocean that 28,000-mile round trip typically takes upwards of 30 days. Usually east-bound shipments leave European ports such as Hamburg and Rotterdam heading west to the Atlantic Ocean, through the Suez Canal to the Indian Ocean, stopping in Sri Lanka, Malaysia, Hong Kong and, finally Shanghai on the China Sea.
 
Ocean traffic already is stalling on that lane. The port of Hong Kong, for example, saw an 11 percent drop in containers last year, handing the equivalent of 20 million TEUs, compared to over 22 million TEUs in 2011, its best year. Chinese imports from the 28 European Union countries fell 14 percent last year while Chinese exports were off 3 percent.
 
It’s not much better in the EU. The major Belgian port of Zeebrugge, for example, cargo volumes have dropped precipitously by more than 50 percent in the past 15 months. The Hamburg, Germany, port has seen its slowest year since 2009.
 
Of course, the slowdown in China, recession-like economies in some EU countries, persistent economic woes plaguing Greece’s troubled economy, the slowdown in Spain, the refugee crisis in Syria and terrorist attacks in Brussels and France have all been cited as reasons for the shipping slowdown.
 
But experts say not all these conditions will continue. If economies improve around the world, this could result in considerable surface transportation opportunities for multinational surface transportation providers around the world, including those based in North America such as UPS, FedEx and others.
 
Presentations from dignitaries and others from Azerbaijan, Georgia, Kazakhstan and Turkey explained the considerable accommodations underway for freight carriers.  The two-day event was co-organized by the embassies of Azerbaijan, Georgia, Kazakhstan and Turkey to the United States of America.
 
Besides the World Bank and the U.S. Chamber, other institutions involved included the Business Council for International Understanding, Central Asia-Caucasus Institute, United States-Azerbaijan Chamber of Commerce, AmCham Azerbaijan, America-Georgia Business Council, U.S.-Kazakhstan Business Association and AmCham Kazakhstan, among others.
 
The appeal of this largely underserved area is understandable. The Central Asia, Caspian, South Caucasus and Black Sea regions together form a strategically important transit corridor between China and Europe. Connecting trade, people and economies, the modern trans-Caspian trade and transit routes from China to Europe, envisages an extensive and integrated network of infrastructure, special economic zones, harmonized customs, cross-border procedures and more along this route.
 
Expanding regional transport grids along the Caspian Sea opens new opportunities for transcontinental shipments, and innovative services. Azerbaijan, Georgia, Kazakhstan and Turkey combine to a market of more than 110 million consumers. These countries are able to offer customized and integrated solutions to companies with highly sophisticated supply chains.
 
Today, ambitious regional infrastructure projects are already under way in the region. These include such projects as Baku International Sea Trade Port in Azerbaijan; expansion of the Poti Sea Port and the construction of Anaklia Deep Sea Port in Georgia; the completion of the Marmaray under-Bosphorus tunnel in Turkey; the Baku-Tbilisi-Kars railway; and Kazakhstan’s “Khorgos: Eastern Gate” SEZ.
 
Officials explained all these projects are designed to ensure swift and efficient shipments of all types of goods. They say these projects will connect Asian and European transport networks, significantly shorten delivery time and save transportation costs for delivering goods from Asian to European markets.
 
The goal of the recently two-day forum in Washington was to introduce projects and investments along the modern Silk Road to U.S. business leaders across a variety of multinational industries. Participants discussed how multinational companies can benefit from greater cooperation with the region. Both public and private senior executives from regional countries and businesses discussed regional opportunities and how significant benefits from cooperation could be achieved.
 
Specifically, there were breakout sessions on regional infrastructure, and harmonization of trade and transit routes. There was also dialogue on opportunities for multinational business within the integrated network of transit, logistics, and infrastructure. And there was a frank discussion on immediate and long-term transit, logistic needs and investment opportunities in the region.