Opportunities in Asia
Implications of the OBOR initiative
Client: Ministry of Foreign Affairs, Netherlands
Rotterdam, 10 December 2016
Opportunities in Asia
Implications of the OBOR initiative
Client: Ministry of Foreign Affairs, Netherlands
Marten van den Bossche
Jochen Maes
Mitchell van Balen
Rotterdam, 10 December 2016
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Table of contents
1
Introduction
4
2
Perspectives on OBOR
2.1
Background and current status
5
5
2.2
7
7
Chinese perspective
2.2.1
Trade & connectivity dimension
2.2.2
2.3
2.4
3
4
8
10
10
2.3.2
12
Financial dimension
Conclusions
12
Eurasian trade & connectivity organisations
13
3.1
3.2
CAREC
EAEU
13
14
3.3
TRACECA
15
3.4
3.5
ASEAN
Conclusions
16
17
Eurasian rail & maritime transport
4.1
Eurasian Rail Transport
4.2
5
Financial dimension
European perspective
2.3.1
Trade & connectivity dimension
18
18
4.1.1
Connectivity developments
18
4.1.2
4.1.3
Potential impacts
Conclusions on rail connectivity
27
31
Eurasian Maritime transport
32
4.2.1
4.2.2
Connectivity developments
Potential impacts
32
35
4.2.3
Conclusions on maritime connectivity
38
Conclusion and recommendations
5.1
General impacts of OBOR
39
39
5.2
5.3
39
40
On the Eurasian land bridge
On the 21st Century Maritime Silk Road
Annex 1: Absolute trade flows with Central Asia
42
Annex 2: Trade with Central Asia – export per country
44
Annex 3: Trade with Central Asia – import per country
45
Annex 4: Dutch-Central Asian trade flows per sector
47
Opportunities in Asia
3
1
Introduction
The One Belt, One Road initiative (‘the initiative’ ) is a major endeavour by the People’s Republic of
China, primarily aimed to facilitate trade by rail and sea between China and its neighbouring
countries. In addition, the initiative aims to improve connectivity between Europe and Asia. The
Netherlands, as a major centre of logistics and trade, may be affected by the OBOR initiative in
several ways. This study shall elucidate how the initiative is likely to evolve, the impacts on the
Netherlands, and what measures can be taken to leverage opportunities and mitigate threats.
Chapter 2 provides an extensive analysis of Chinese and European perspectives on trade &
connectivity. Additionally, the financial framework that is put in place to materialise the initiative is
discussed. The chapter concludes with the main insights on how China and Europe perceive and
shape the initiative.
Chapter 3 elaborates on several existing Eurasian organisations that aim to facilitate trade and
connectivity in the region. Through the analysis it becomes clear how OBOR aligns and competes
with other regional ambitions.
Chapter 4 then discusses the land and maritime components of the initiative in detail. The cost and
time dimensions of the land bridge are evaluated, together with the development of different routes.
Also, there will be a focus on Central Asian trade with Europe and China in order to assess how the
land bridge could influence trade flows. The maritime component is analysed by assessing the
market structure of deep-sea shipping, both for liners and terminal operators. The potential impact
of Chinese investments in port infrastructure and hinterland connectivity on competition between
European seaports is also analysed. The combined outcomes of these analyses on rail and
maritime connectivity result into several conclusions on the initiative’s impact on the Netherlands.
Chapter 5, finally, elaborates on the impacts that the initiative can have on the Netherlands and
what measures can be undertaken to benefit from these developments.
4
Opportunities in Asia
2
Perspectives on OBOR
This chapter firstly outlines the background and current status of the OBOR initiative. It goes on to
address how the project is understood from Chinese and European perspectives. Particular
attention is given to the trade, connectivity and financial dimensions of the initiative. The objective is
to elucidate the respective interests, concerns and likely evolution of the initiative. The chapter
concludes with several of the main observations that are derived from the analyses.
2.1
Background and current status
The initiative was officially launched by President Xi Jinping in 2013. Building on the ancient Silk
Road analogy, he advanced the initiative as a major regional endeavour to promote peace and
development across Asia and Europe. Since then, a great number of policy papers have been
published on the initiative by Chinese government departments and numerous other (non-Chinese)
institutions 1. A comprehensive and insightful publication on OBOR was published in 2015: a highlevel vision document by the National Development and Reform Commission (NDRC), China’s
Planning Bureau 2.
The NDRC advances that the initiative has a land and maritime component. The Silk Road
Economic Belt focuses on the construction of a new Eurasian land bridge, and the ChinaMongolia-Russia, China-Central Asia-West Asia, and China-Indochina Peninsula economic
corridors. In addition, the NDRC finds the Silk Road Economic Belt closely related to two other
economic corridor projects, namely the China-Pakistan Economic Corridor and the BangladeshChina-India-Myanmar Economic Corridor. The maritime component of the initiative, dubbed as the
‘21st-Century Maritime Silk Road’, will promote greater sea connectivity between Asia, Africa, and
Europe. An overview of the corridors that are considered by the initiative are depicted in Figure 2.1
below.
Figure 2.1
Overview of the econom ic corridors under the OBOR initiative
Source: HKTDC, 2016
1
Holslag (2016), The Other End of the Silk Road
2
NDRC (2015), ‘Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road’
Opportunities in Asia
5
As set out in the NDRC vision document, the initiative entails an overarching vision towards the
regional integration of China’s wider neighbourhood 3. The initiative is considered to be emblematic
of China’s growing prominence in economic and political relations on the global stage, including its
strategic westward orientation 4. Importantly, the initiative distinguishes itself from previous regional
vision documents in terms of its broad geographic scope, undefined partner countries and limited
information on implementation practicalities. As such the initiative is open-ended, flexible and
evolutionary: as has been witnessed over the past few years 5. The initiative is therefore generally
understood as a strategic framework that integrates various Chinese foreign policies.
There are domestic elements embedded into the initiative, too. The economic growth that China
realised over the last decades predominantly benefited the populous coastal regions, resulting in a
growing income gap with inland provinces. Figure 2.2 shows that the average GDP remains
considerably higher in the coastal provinces. Inequality between the provinces has moreover grown
stronger over the past years 6. Connecting these provinces with neighbouring countries and
integrating them in global supply chains should alleviate poverty and promote shared progress
throughout China. In fact, some inland cities already attribute international investments and
economic growth to the OBOR initiative 7. The initiative thus aims to promote greater equality and
offset sluggish economic growth, which has a disproportionally large effect on the inland provinces.
Figure 2.2
China’s GDP per person (2015)
Source: The Economist
6
China’s financial engagements and initial investments in OBOR countries highlight the considerable
impact that the initiative may have on global, economic and trade relations. Caution is nevertheless
warranted when discussing the initiative’s impact because large sums that have been earmarked
for investment are, to a large extent, not yet disbursed. A clear distinction between actions and
visions should thus be made while discussing the initiative. Doing so leads to a more accurate
understanding on the initiative’s impacts and opportunities for the Netherlands.
3
4
5
6
7
6
EPRS (2016), China's regional integration initiativ e
Brookings Institute (2016), https://www.brookings.edu/blog/up-f ront/2013/01/31/march-west-chinas-response-to-the-u-srebalancing/
FT (2016), ‘China’s ambitions f or Asia show through in ‘Silk Road’ lending’
The Economist (2016) ‘Rich prov ince, poor prov ince’
FT (2016), ‘Chengdu casts itself as high-tech gateway of west China’
Opportunities in Asia
The following sections analyses the Chinese and European perspectives on the OBOR initiative.
Specific attention is given to trade and connectivity aspects, together with the financial framework
that is put in place to materialise the initiative. The objective is to elucidate the respective interests,
concerns and likely evolution of the initiative.
2.2
Chinese perspective
2.2.1 Trade & connectivity dimension
The 13th Five-Year Plan of the Communist Party of China sets out the goal to restructure the
Chinese economy in order to become a ‘moderately prosperous society in all respects by 2020’ 8.
The transition entails the evolution from a growth model driven primarily by exports and foreign
direct investments to one led by domestic consumptions and high value-added industries. Beyond
internal economic restructuring, it is noted that Asian economies are also transforming their value
and trade chains. New trade agreements, including the recently ratified Trans-Pacific Partnership,
rebalance economic relations between American and Asian signatory countries. These internal and
external trade developments compel China to reassess its traditional trade patterns 9.
The OBOR initiative is central to this comprehensive economic reform process. Rather than
focusing on trade agreements, the initiative intends to improve trade through infrastructure
investments, thus decreasing transport costs while tightly integrating the economies along the Belt
and Road 10.
In terms of export, the New Silk Road is considered an opportunity for China to preserve its labourintensive manufacturing industries. Especially in the poorer north-western and south-western
regions, manufacturing industries remain indispensable for job creation and economic growth.
Transport infrastructure and bilateral cooperation with China’s neighbouring countries will open new
markets for these firms. The Chinese manufacturing industries are equally encouraged to construct
production facilities in low-wage countries to optimise their business operations and gain global
presence 11. It is believed that this will not damage job creation in China as the OBOR initiative
enables Chinese plants abroad to be supplied by Chinese products with higher value added, thus
driving domestic production.
Another aspect of the manufacturing agenda is to facilitate the export of glut. National and
provincial administrator see the initiative as an instrument to deal with the country’s enormous
overcapacity in steel and construction materials 12. The Chinese Ministry of Industry and Information
Technology framed the initiative as a way to gradually transfer excess capacity oversees. Doing so
would mitigate the effects of policies aimed to close down ‘zombie companies’: organisations that
glut markets with products for which there is no demand 13. In addition to export, the overcapacity
would also be temporarily relieved by the massive infrastructure construction efforts within the
initiative’s framework.
A final link between the initiative and the Chinese manufacturing agenda 14 concerns the
development of strategic industries, including: aerospace equipment, ocean engineering equipment
and high-end ships, railway equipment, energy saving and new energy vehicles, power equipment,
8
9
10
11
12
13
14
National People’s Congress of China (2016), ‘13th Fiv e-y ear Plan’
ECFR (2016), ‘One Belt, One Road: China's Great Leap Outward’
NDRC (2015) ‘Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road’
Holslag (2016), The Other End of the Silk Road
Johnson / CSIS (2016), ‘President Xi Jinping’s Belt and Road Initiativ e’
National People’s Congress of China (2016), ‘13th Fiv e-y ear Plan’
Made in China 2025 (2016)
Opportunities in Asia
7
new materials, medicine and medical devices, and agricultural machinery15. These sectors are
defined in the “Made in China 2025” agenda, which aims to upgrade Chinese industry in terms of
efficiency, innovation, and competitiveness. The initiative supports the development of these
strategic industries by opening new export channels to other economies.
In addition to export, the initiative also bolsters China’s access to natural resources 16. To one
extent, this serves the diversification of import channels. Energy corridors are foreseen through
novel pipelines to Russia, Central Asia and the Indian Ocean. By doing so, China becomes less
dependent on transports through the strategically important Malacca Strait and South China Sea.
Beyond energy, the initiative will open up mineral rich regions and connect them to the Chinese
heartland.
A final note on the initiative’s trade impacts is that it aims to challenge the notion of the two main
trading blocs: the trans-Atlantic one and trans-Pacific one, both with the United States as the focal
point. OBOR advances the concept of a ‘multipolar’ world in which Asia and Europe are framed as
one economic space 17.
2.2.2 Financial dimension
The first phase of the initiative is estimated to cost 240 billion USD, although the exact figure
depends strongly on the chosen trajectory and the countries that are crossed. The Chinese
government therefore earmarked large sums of capital and established a financial framework
around the initiative. Multilateral development banks (MDBs), Chinese policy banks, and
commercial finance are all pivoted towards the initiative.
Three MDBs are designated to finance OBOR projects. The fittingly named Silk Road Fund was
established in 2014. The Chinese government aims to assign 40 billion USD to the fund which is
concerned with improving connectivity along the OBOR route. To date, the first instalment of US$10
billion occurred. The investment portfolio goes beyond infrastructure projects and also concerns
Chinese acquisition financing (e.g. tire manufacturer Pirelli) and investment in energy infrastructure.
The Silk Road Fund is a purely Chinese initiative, financed by the State Administration of Foreign
Exchange, China Investment Corporation, Export-Import Bank of China, and the China
Development Bank
The Asian Infrastructure Investment Bank (AIIB) is an international finance institution, founded in
2015 by 57 founding members and headquartered in Beijing. Member countries include most Asian
states and a number of European ones, including the Netherlands. Capitalised with US$ 100 billion,
the bank is not formally part of OBOR, but recent investments (in Pakistan, Tajikistan and
Uzbekistan) indicate its relevance for the initiative 18.
The New Development Bank (NDB), as the last MDB, was founded by the BRICS states (Brazil,
Russia, India, China and South Africa) in 2015 with US$ 100 billion in authorised capital. Like the
former banks, the NDB is a recently established institution and is also expected to contribute to
financing OBOR related projects. China’s influence in the NDB, when compared to the Silk Road
Fund and AIIB, is however relatively small, so the Bank’s involvement in OBOR is expected to be
smaller as well.
15
16
17
18
8
PwC (2016) ‘Prosperity f or the Massess by 2020’
Holslag (2016), The Other End of the Silk Road
The Economist (July 2016)
The Economist (July 2016)
Opportunities in Asia
Considering the scale of the investments, resource limitations of MDBs, and the Chinese novel
emphasis on market-based resource allocations, private firms are expected to contribute towards
closing the financing gaps. At the same time - at least in the initial stages – China’s state-owned
enterprises will lead the way due to viability gaps 19. These include the Agricultural Development
Bank of China, China Development Bank, and the Export-Import Bank of China. The China
Development Bank, for example, indicated that it shall invest a considerable part of its lending
capacity in OBOR related projects. Importantly, the lending of policy banks surpasses that of most
MDBs and are thus decisive players when it comes to the successful financing of the initiative.
China’s State-owned enterprises (SOEs) also evidence a strong interest in financing the initiative. A
case in point is the CITIX conglomerate, which stated that it will invest US$113 billion to finance
projects in areas such as infrastructure, energy, and agriculture through its local branches along the
OBOR route 20.
Financing opportunities and the Netherlands
The financing of OBOR infrastructure projects is foreseen to rely strongly on Public Private Partnerships
and the involvement of various MDBs. The need for blended financing solutions also might bring chances
to the Netherlands to invest in projects w ith strategic relevance, whilst leveraging the opportunities that are
provided by the greater OBOR financing framew ork. Especially those projects and finance issues
connected to strong international sectors like dredging might have business opportunities.
While few projects are explicitly earmarked as OBOR related investments, there is an undeniable
shift in the geographic focus of loans by Chinese policy bank. The figure below illustrates that in a
two-year time frame, the focus of policy banks shifted from Africa to Asia.
Figure 2.2.
Aggregate am ounts lending (%) by Chinese policy banks per continent
Source: Grisons Peak , FT 2016
21
In line with the previous figure, these are a growing number of loans provided by Chinese policy
banks to projects in Silk Road Countries (see figure 2.2). Combined together, the figures suggest
that the initiative is already having an impact on financing decisions.
19
20
21
Johnson / CSIS (2016), ‘President Xi Jinping’s Belt and Road Initiativ e’
Reuters (2016), ‘China's CITIC to inv est $113 billion f or "Silk Road" inv estments’
FT (2016), ‘China’s ambitions f or Asia show through in ‘Silk Road’ lending’
Opportunities in Asia
9
Figure 2.3.
Num ber of loans by Chinese policy banks to Silk Road Countries
Source: Grisons Peak , FT 2016
Observers add that China’s foreign direct investment (FDI) in OBOR countries rose twice as fast as
the average increase in total FDI. Also, China’s new engineering projects in OBOR countries, as a
percentage of total projects, was 44% in 2015, rising to 52% in the first five months of 2016 22.
These developments align with China’s growing role as a global emerging investor 23.
A final remark however is that these projects are currently (November 2016) only to a limited extent
directed towards rail and maritime connectivity projects. Of the 14 approved or proposed AIIB
investment projects, seven are focused on energy infrastructure. Only one project is focused on rail
connectivity and one on port infrastructure: both in Oman. The same applies to the Silk Road Fund
that mostly invested in Energy related projects. In fact, investments in the OBOR project from a
connectivity perspective are most apparent when looking at Chinese maritime SOEs. Notably the
investments in terminal and port infrastructure are clear examples, as discussed in Chapter 4.
2.3
European perspective
2.3.1 Trade & connectivity dimension
The European Trade Strategy24 spells out the EU’s approach towards Asia. The focus is put on
bilateral agreements with ASEAN member States (notably Malaysia, Thailand, Myanmar, the
Philippines, and Indonesia) and deepening and rebalancing the trade relationship with China. Part
of this rebalancing act is the negotiation of a bilateral investment agreement. Doing so would
facilitate China’s participation in the EU’s investment plan for Europe, as well as the EU’s
involvement in China’s OBOR initiative.
These goals were detailed at the 2015 High Level Economic and Trade Dialogue (HED) in Beijing.
The European Commission and Chinese government signed a Memorandum of Understanding on
launching the EU-China Connectivity Platform, which is set to promote cooperation on
infrastructure, equipment, technologies and standards. Importantly, it aims to achieve synergies
between the Trans-European Transport Network (TEN-T) policy and the OBOR initiative, thus
promoting coherent transport networks. An overview of the TEN-T corridors is provided below.
22
23
24
10
The Economist (2016)
OECD (2015), ‘A Silk Road For The 21st Century : Initial Ref lections On New Opportunities For Partnerships’
EC (2015) Trade f or all – Towards a more responsible trade and inv estment policy
Opportunities in Asia
Figure 2.4.
European TEN-T Corridors
Source: EC, TENtec
The TEN-T network is a policy and investment framework to promote seamless transport across
Europe by water, rail and road. The European transport ministers emphasised that the full
implementation of the TEN-T network is critical towards a well-functioning internal market and to
facilitate trade in goods and services 25. Aligning the OBOR initiative with the European TEN-T
network is therefore of importance. The EU-China “Connectivity platform” had its first meeting in
January 2016 and continues its work on aligning the respective transport frameworks. It is important
to mention that current rail traffic between the EU and China links with the North-Sea/Baltic corridor
(indicated with red), crossing the Polish-Belarussian border at Terespol. The southern corridor
would link with the Orient/East-Med corridor, whilst the hypothetical Central corridor would connect
with none. A comprehensive analysis on the current and potential OBOR rail corridors is provided in
section 4.1.
Concerns regarding asymmetric investment opportunities, and the export of China’s glut are
explicitly addressed within the forum. That being said, there is limited information on a European
level what objectives are being pursued beyond the overall objective of promoting trade. This can
be partially explained by the mentioned flexible and evolving nature of the initiative. It is expected
that more concrete positions shall be taken when the initiative matures. The same expectations
also count for the Netherlands. In a letter to Parliament 26, the Dutch government acknowledged the
existence of both opportunities and threats without explicitly identifying these.
25
Minsiterial declaration (2016), ‘Implementing the Trans-European Transport Network’,
26
Kamerbrief (2016), ‘Gemeenschappelijke mededeling EU-strategie ten aanzien v an China’
Opportunities in Asia
11
2.3.2 Financial dimension
Several sources for financing transport infrastructure exist in Europe. First, the European
Commission provides financing through the Connecting Europe Facility (CEF), with a budget of
€24billion between 2014-2020 for transport projects. The funds are pivoted towards co-financing
infrastructure and transport projects that promote the full implementation of the TEN-T network.
CEF funds thus carry relevance for connectivity projects in EU Member States and therefore carry
partial relevance for the initiative.
The European Investment Bank (EIB), particularly the European Fund for Strategic Investments
(EFSI), offers an additional source of financing within and beyond the borders of the EU. The
relevance of EFSI for infrastructure investments was emphasised at the HED meeting, where an
expert group was established (comprising representatives of the EC, EIB and China Development
Bank) to develop joint financing options for EU and OBOR related projects. The recent opening of
an EIB office in Beijing follows from these developments.
Collaboration between the EU and China in infrastructure financing is also evidenced by China
joining the European Bank for Reconstruction and Development (EBRD) in 2016. The new capital is
expected to contribute to increased investments into EBRD countries of operations that are also
part of the OBOR initiative.
While China is the principal shareholder in the AIIB, there is a significant European influence with
14 EU Member States holding shares in the bank. As was mentioned before, the AIIB, contrary to
the SRF, is not specifically established to finance OBOR related projects. The European
shareholders in collaboration with the other members could, however, direct loans towards projects
that fall under the initiative’s framework.
A final comment is that European stakeholders place an explicit emphasis on projects that are
bankable, compatible and represent win-wins 27. Concerns are expressed that this focus may be at
odds with Chinese interests.
2.4
Conclusions
The following conclusions can be drawn based on the previous digression.
•
The OBOR initiative is a China led endeavour to foster regional economic integration through
extensive infrastructure investments;
•
The European Union has expressed interests in aligning its infrastructure policies with the
OBOR initiative. The cooperation is formalised within the ‘EU-China connectivity platform’;
•
Also the EIB and EBRD took steps to intensify the collaboration with Chinese banks on
•
infrastructure investments;
Amongst Chinese policy banks, shifts in investments towards OBOR countries are observed,
and trade flows between China and its neighbouring countries are evolving;
•
At the same time, the initiative stays primarily a vision, rather than an operational blueprint,
causing many uncertainties to remain;
•
Considerable capital is earmarked to realise the initiative, although financing gaps pertain;
•
Additional worries exist whether investments can be market-led, necessitating a deep analysis
of land and maritime connectivity along the OBOR routes.
27
12
EBRD (2016), ‘How China’s Belt and Road Initiativ e could boost south-eastern Europe’
Opportunities in Asia
3
Eurasian trade & connectivity organisations
The Eurasian landmass covers a great number of economies at various stages of development.
Evidently, the trade impacts of the initiative are widely different for each of the involved countries.
Not in the least sense whether the country is involved in the land and/or maritime component of
OBOR. China has great ambitions towards promoting trade with Eurasian countries, which, as
President Xi expressed, are hoped to climb to $2.5 trillion in 10 years 28. Yet OBOR is not the only
initiative that aims to facilitate trade. The stakes and strategies of other regional trade & connectivity
organisations are therefore important to consider: especially in light of existing worries amongst
neighbouring countries concerning Sino-centric trade and investment. The following sections
elaborate on four such organisations, indicating potential synergies and opposing interests.
We take note of four important regional initiatives that impact the initiative, namely the Central Asia
Regional Economic Cooperation program (CAREC), the Eurasian Economic Union (EAEU), the
Transport Corridor Europe Caucasus Asia (TRACECA) and the Association of Southeast Asian
Nations (ASEAN).
3.1
CAREC
The CAREC program was initiated in 1997 and currently brings together 10 countries to developed
projects in the fields of transport, trade facilitation, energy and trade policy. As of 2015, a total of
166 CAREC-related projects worth around $27.7 billion were implemented. Six multilateral
institutions are financing the work of CAREC, namely the Asian Development Bank (ADB),
European Bank for Reconstruction and Development, International Monetary Fund, Islamic
Development Bank, United Nations Development Programme, and the World Bank. The program
ultimately aims to develop six transport corridors across the partner countries, as depicted in the
figure below.
Figure 3.1.
CAREC corridor m ap
Source: Carecprogram.org
28
JOC (2016), ‘Inv estment f loods into China’s One Belt, One Road strategy ’
Opportunities in Asia
13
When the CAREC 2020 vision was finalised in 2012, the OBOR initiative was yet to come into
existence. The CAREC secretariat acknowledges the emergence of mega frameworks (OBOR,
EAEU) for regional cooperation, but no position papers were drafted by CAREC. It is however
apparent that the CAREC initiative carries relevance for three corridors within the OBOR initiative 29,
highlighting again that China deliberately seeks alignment with existing frameworks 30.
Given the overlap between the CAREC Corridors and the OBOR economic corridors, it is likely that
financing synergies are strived for 31. In fact, the ADB estimates that the Asian infrastructure
financing gap is around $750 billion per year for energy, transport, water and sanitation between
2010-2020 32. It is within this context that the OBOR initiative is often welcomed as a promising
additional way to close the financing gap.
3.2
EAEU
The EAEU was formally launched in 2015 and is the offshoot of deepening economic cooperation
between five CIS countries (Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia). The Union entails
an integrated market with free movement of goods, services and people. In addition, it aims for
policy alignment in several fields, including transport and investment. Whilst the EAEU does not
have the explicit intention to develop pre-defined transport corridors, it does actively seek alignment
with the OBOR initiative (see Figure 3.2 below).
Figure 3.2.
Eurasian Econom ic Union countries and the Eurasia Land bridge
Source: EAEU (2015) Transport strategy
The EAEU aims to contribute to the development of transport links and the creation of international
logistics centres along the route. In addition, the EAEU commission engages with the PRC to
harmonise policies in order to eliminate administrative, technical and economic burdens related to
cross-border transport 33.
29
The China-Pakistan Economic Corridor, the new Eurasian land bridge Economic Corridor, and the China-Central AsiaWest Asia Economic Corridor.
30
NDRC (2015), ‘Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road’
CAREC (2016), ‘CAREC 2020 Midterm Rev iew’
ADB (2010), ‘Financing Asia’s Inf rastructure: Modes of Dev elopment and Integration of Asian Financial Markets’
31
32
33
14
Eurasian Economic Union (2015), ‘Transport Agenda’
Opportunities in Asia
The EAEU has a specific interest in making the new Eurasia Land bridge competitive. At the same
time, concerns exist that the land bridge acts as an alternative to the Russia centred EAEU,
incentivising Central Asian countries to reorient their economies towards China 34. Also, the EAEU
can be expected to actively disapprove the development of alternative rail corridors that go around
EAEU member countries.
3.3
TRACECA
TRACECA, established in 1993, is an international programme aimed at improving trade and
transport between 13 Asian and European countries. In addition, the programme is looking for
financing from several MDBs, notably the Asian Development Bank (ADB), the EBRD, as well as
European development funds. The map below provides an overview on the partner countries and
routes.
Figure 3.3.
TRACECA Countries and routes
Source: traceca-org.org
Where OBOR and CAREC focus on corridors, TRACECA identifies routes that require investments.
The routes mostly concern road and rail transport sections, but also concern several maritime
connections through the Caspian and Black Sea. Beyond improving cross-border infrastructure,
TRACECA is also concerned with liberalising trade and removing institutional barriers for the
transport of goods through legal harmonisation. The programme frequently referred to the
restoration of the historic silk route prior to the launch of the OBOR initiative. In fact, when the
programme was founded it was framed as realising ‘The Silk Road of the 21st Century’. Yet, as it
stands, few references are made to the OBOR initiative and overlapping interests, which may be
explained by the limited resources and activities that are currently undertaken by the programme.
34
Johnson / CSIS (2016), ‘President Xi Jinping’s Belt and Road Initiativ e’
Opportunities in Asia
15
3.4
ASEAN
ASEAN, finally, is a regional organisation bringing together 10 South-East Asian countries (see
figure below). Similarly to the EAEU, the goals of ASEAN go beyond promoting trade, also including
domains such as regional security, agriculture, and research collaboration. Importantly, the ASEAN
countries aim for highly integrated and cohesive economies, as set out in the ASEAN Economic
Community Vision 2025. These steps are anticipated to have a decisive impact on trade relations
between the countries and China, likely restructuring manufacturing value chains. From the
perspective of the OBOR initiative, the importance of ASEAN relates particularly towards the
development of the China-Indochina Peninsula economic corridors and the Maritime Silk Road 35.
Figure 3.4.
Overview of ASEAN Member States
Source: ibanet.org
ASEAN also expressed its willingness to explore ways of improving connectivity between its
member countries and China 36. Synergies between the Master Plan on ASEAN Connectivity 2025
and OBOR are of the organisations are analysed over the coming years and the active involvement
of multilateral financial institutions shall be encouraged. The stronger integration of the ASEAN
economies with China is supported by trend data on Intra-Asia trade. For instance, raw and finished
textile imports grew by over 16% annually between 2010-2015, which is driven by China’s ambition
to shift manufacturing of low-value industries to locations where labour is cheaper 37. According to
many observers, this economic restructuring process lays at the basis of the OBOR initiative and
China’s cooperation with other regional organisations 38.
35
NDRC (2015), ‘Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road’
36
ASEAN (2016), ‘Joint Statement Of The 19th ASEAN-China Summit To Commemorate The 25th Anniv ersary Of ASEANChina Dialogue Relations’
BCG (2016), ‘The New Normal in Global Trade and Container Shipping’
37
38
16
Carnegie Europe (2016), ‘China’s Belt and Road: Destination Europe’
Opportunities in Asia
3.5
Conclusions
Based on the desk research on the Chinese, European and Eurasian perspectives on the OBOR
initiative the following brief conclusions can be drawn:
•
Several initiatives predate OBOR in its objective to improve land connectivity in Central Asia,
notably CAREC and TRACECA;
•
Other regional economic integration organisations (EAEU, ASEAN) have both common and
•
competing objectives;
Overall, OBOR is expected to lead to additional funds for co-financing infrastructure projects
that are desired by these organisations.
Opportunities in Asia
17
4
Eurasian rail & maritime transport
This chapter analyses both the land and maritime components of the OBOR initiative. The current
situation for both modes is assessed, after which several developments are analysed on their
likelihood and impact on connectivity and trade flows.
4.1
Eurasian Rail Transport
In this section, the Eurasian rail connectivity options will be further assessed. In order to set up a
reliable railway connection between Asia and Europe, a thorough investigation of operational
aspects is necessary. This implies aspects such as access to less accessible Eurasian markets,
transport time/costs, and availability of commercial transport services. The section ends with
conclusions on the most likely routes for Eurasian trade, both from a short and long term
perspective.
4.1.1 Connectivity developments
Eurasian rail freight transport takes the middle ground between maritime and air freight transport
options. Transport costs are lower when opting for maritime transport, though transport time is a
main disadvantage. Furthermore, this is only true for regions with a reasonable access to port
terminals, which exclude distant inland regions and landlocked countries. Air freight transport is the
fastest transport option, however this comes at a high cost. It is also not considered in the OBOR
initiative. The different market segments of the three modes are shown in the figure below, in which
Eurasian rail freight transport is proposed as an alternative to both long distance air freight, mid- or
long distance road transport and maritime transport.
Figure 4.1.
Position Eurasian rail freight compared to m aritime and air freight transport
Transport time
An advantage of Eurasian rail transport over maritime is the shorter transport time between
Eurasian markets. This is specifically true for reaching the central Asian countries. Compared to
maritime transport, rail freight transport is offering shorter routes and faster transport. The
landlocked rail transport does not require an additional transhipment at a foreign port terminal,
before goods are shipped to Europe. Transport time and handling costs are thus saved.
18
Opportunities in Asia
Trans Eurasia Logistics (TEL), organising Eurasian rail transport, published index figures on the
transport time differences between the available modes, as shown in the following figure.
Figure 4.2.
Transport time level transport from China to Europe (days)
air freight
3
rail freight
18
sea freight
30
0
5
10
15
20
25
30
35
Source: Trans Eurasia Logistics (TEL), 2016 I Sea f reight is terminal to terminal transport time
TEL states rail freight to be considerably faster than sea freight, but six times slower than air freight.
Confirmation is found in recent maritime schedules, as offered by MSC. The schedule below shows
the time needed to ship freight between the coastal regions of Asia and Europe. MSC container
ships enable the trip between Shanghai and Rotterdam in 28 days or slower, without considering
transport time within China, nor hinterland transportation from a port to the final destination.
Figure 4.3.
Current MSC liner schedule Shanghai - Rotterdam
Source: MSC website, retriev ed 1 Nov ember 2016
Hence, Eurasian rail services carry a competitive advantage versus maritime transport in terms of
travel time. The minimum rail transport time between Eastern-China and Western-Europe is
estimated at 18-20 days 39, including the break of gauges and customs formalities. The various
border crossings are still a main reason for delays, and the limited network capacity and/or network
state in certain countries slows down operations.
39
Port of Rotterdam (2016), ‘Goederenv erv oer naar China met de trein: een aantrekkelijke optie?’
Opportunities in Asia
19
Transport costs
Maritime transport enjoys a competitive advantage in terms of transport costs. Containerisation,
larger vessels and low fuel prices make that in terms of costs it is reckoned as the most optimal
transport mode. Rail transport is in essence more costly, considering that the train services operate
on a smaller scale, have technical challenges, and should take account of infrastructure costs while
maritime transport uses the oceans at no expense. The consequent cost differences for Eurasian
transport are published by TEL (see the figure below). TEL states that rail freight costs less than
half of air freight, but is five times more expensive than maritime transport. However, this, all
depends on the location where the goods are transported to; a destination located in inland China is
easier to reach by rail than a destination at the coastal regions.
Figure 4.4.
Price level transport from China to Europe (index)
sea freight
1
rail freight
5
air freight
11
0
2
4
6
8
10
12
Source: Trans Eurasia Logistics (TEL), 2016
The OBOR initiative aims to reduce transportation costs across a large geographical area through
infrastructure construction and various supportive components, including bilateral agreements and
private sector involvement. Recent efforts already show the effects of reducing transport costs on
logistical operations.
Over the course of the past decade, China set several steps to develop an integrated transport
system. A network totalling 4.9 million km in length and 42 intermodal transport hubs were set to be
developed in 2007. At the same time, several ministries and agencies were restructured to form the
Ministry of Transport, which as of 2013 also has jurisdiction over the country’s railways 40. These
efforts did not only decrease national transport costs significantly, but the rail freight rates to
Northern Europe allegedly dropped from 13 to 5 times the price of ocean transport. 41 At the same
time, these developments put forward questions on whether further price reductions can be
achieved.
To explore the future developments of Eurasian rail transport, the various potential routes under the
OBOR initiative are explored in greater depth. The current state of affairs on Eurasian rail freight
transport is sketched so that conclusions can be drawn on the most likely transport routes on the
short to medium term, and the volumes being carried thereon.
20
40
UNESCAP (2015), ‘Rev iew of Dev elopments in Transport’
41
Olaf Merk, ITF/OECD (2015)
Opportunities in Asia
Current and potential rail freight transport routes
Eurasian rail transport does not follow one specific railroad. Railroads are structured in corridors, a
way of linking the individual rail stretches to one long distance rail network. Three main corridors
can be distinguished (as shown in the next figure):
•
The Northern corridor stretching from Western-Europe, Poland, Belarus via Moscow and then
further Eastwards through Russia. The Chinese border crossing is at Manzhouli, and the
European border is crossed at Brest (Poland – Belarus).
•
The Central corridor is linking East and West Eurasia but does not pass Moscow. This one
transits Ukraine, then Russia (via the Volgograd connection) to pass Kazakhstan and arrive at
the Kazakh/Chinese border in Alashankou. The European border can be crossed at Przemyśl,
•
Werchrata, Hrubieszów or Dorohusk.
The Southern corridor, which is known for the use of ferries. This option, often referred to as
the Traceca option, crosses different countries and needs to pass many border crossings. This
reflects negatively in the corridor’s competitiveness. The European border is crossed at
Uzunkopru or Kapikule.
Figure 4.5.
Available options for Eurasian rail transport: Three main corridors
Northern corridor
Central corridor
N1
N2
N3
Southern corridor
Northern corridor
The Northern corridor is the main Eurasian land transport relation as this one is already operational
and passes main logistical and economic nodes like Moscow. Notably the Trans-Siberian railroad is
the vein of the Northern corridor.
Three key routes can be distinguished within this rail corridor. The three routes are grouped in the
Table below, and are shown as N1, N2 and N3 in the figure above.
•
Both N1 as N2 are routes within the corridor using branches of the core Trans-Siberian: option
N2 going via Mongolia 42 and option N1 going via Kazakhstan. The latter option is going partly
by the Trans-Siberian railroad, however crossing Kazakhstan instead of Mongolia to end in
China. N1 is well developed, and provides capacity to tranship at the Chinese Kazakh border.
Option N2 is less favourable as a large part of the Mongolian stretch is single track, and not
electrified.
42
The Trans-Mongolian line, running between Ulan-Ude at Lake Baikal's Eastern shore and the Chinese capital Beijing is the
f irst. From the Russian city Ulan-Ude the tracks go South towards Mongolia, crossing the large Gobi desert and f inally
ending up in Beijing. This route is no less than 7,867 kilometres long (Moscow till Beijing). This one is passing Ulan Bator,
the capital and by f ar the largest Mongolian city .
Opportunities in Asia
21
•
The third option within the Northern corridor (N3) goes via the Mongolian border, however not
crossing it. The route passes Manchuria, a large Northeast Asian geographical area, and is
therefore referred to as the Trans(-Siberian) Manchurian 43. This route is currently used by
manufacturers as BMW, transporting car parts from Leipzig (Germany) by rail to Shenyang
(China), where the parts are assembled to cars for the Chinese market 44.
Table 4.1.
Three routes within the Northern Eurasian rail transport corridor
Origin/
Destination
N3
Western-Europe
N2
Western-Europe
N1
Western-Europe
Origin/
Destination
⇄
⇄
⇄
Russia
Russia
Russia
⇄
⇄
⇄
Moscow
Moscow
Moscow
⇄
⇄
⇄
China
Mongolia
Kazakhstan
⇄
⇄
China
China
Regardless of the route, Russia is the key country in this Northern corridor. On average, no less
than 130 mln tonnes of cargo are transported over the Trans-Siberian per year, about 500,000 –
600,000 containers with import/export cargo and on average 250,000 – 300,000 domestic
containers. As such, the Trans-Siberian railroad handles approximately 50% of the total volume of
import- and export cargo of Russia 45. Several capacity limitations apply to the northern corridor,
which determine the development potential of Eurasian rail traffic.
As
Russia and Kazakhstan are
Figure 4.6.
Bogie exchange at Polish-Belarus border
crossed by default, the smooth linking
of broad and narrow gauge is also
important to assess. The rail gauge
difference between China and former
Soviet States and Europe is tackled
at the respective border crossings.
Russian tracks are wider (1.520 mm)
than European/Chinese (1.435 mm).
Containers on the border station are
transhipped via cranes onto other
wagons. If the transit wagons are
equipped
with
adaptable
or
replaceable bogies, the freight is not
transhipped, but the bogies are
changed. Both procedures take considerable amounts of time and occurs at the ChineseKazak/Russian Border and at the Brest/Terespol border. Currently, the transhipment time needed
dropped from 2 days to 2 hours. Given the availability of two waiting tracks (one narrow, the other
broad gauge) at the Brest/Terespol border and one crane, a total of around 10 trains per day can
be transhipped. Given the average load of 80 TEU (twenty foot equivalent unit) per train, this brings
the current annual capacity to approximately 300.000 TEU 46.
43
The Trans-Manchurian line, coincides with the Trans-Siberian as f ar as Tarskay a, a f ew hundred kilometres East of Baikal.
From Tarskay a, the line heads Southeast into China near Zabay kalsk and makes its way down to Beijing. This route is a
9,000 kilometres long (Moscow till Beijing).
44
The route inv olv es a total length of around 11,000 km and crosses f rom Leipzig Germany , Poland, Belarus, Russia and
China (Sheny ang). The train reaches the BMW Brilliance plant in Northern China af ter a 23 day s (DB Cargo, 2016)
Lukov (2008)
45
46
22
Belintertrans (2016)
Opportunities in Asia
After the planned modernisation, see below for more details, the Trans-Siberian, feeding into the
Brest/Malaszewicze border station will be able to handle more than 1 million TEU per year; national
as international container transport 47. Yet it is important to emphasize that only a small share of the
containers complete the China – Europe route. Transit traffic is estimated by Russian railways RZD
to have a potential between 250.000 and 400.000 TEU per year. Previous forecast studies by RZD
and A.T. Kearney48, highlight that the share of Eurasian transit traffic is and remains probably well
below the 400.000 TEU capacity.
This throughput potential is currently not at all reached. The tracks are heavily used for national
transport purposes. TransContainer, the Russian intermodal rail freight monopolist working within
the RZD group 49, estimates that in 2015 a total of 81.000 TEU rail made the China-Europe transit.
Though the volumes are low, this volume in transit from Europe to China over the Russian rail
system increased by 83 percent from 2014 to 2015 50.
Am bitious m odernization plan for the Russian rail network
Ratified by the Russian government in June 2008, the Strategy for Developing Rail Transport in the
Russian Federation up to 2030 envisages a large expansion of Russia's rail netw ork; in tw o stages. The
first involved a period of modernisation (2008-15) to ensure capacity, renewal and upgrading of existing
infrastructure and construction of high-priority lines. Around 13,800 route-km has been upgraded for heavy
axle loads, helping to reduce the cost of bulk freight shipments. The second stage from 2016 to 2030
involves large-scale expansion. There are tw o versions of the strategy, known as minimum and maximum.
The minimum version envisages the construction of 16017 km of new network by 2030, w hile the maximum
scenario calls for 20,730 km.
The investment needed for rail development betw een 2008 and 2030 is put at 11,448 bn roubles as
minimum version, roughly 165 bn EUR (5,120 bn roubles for the initial period from 2008-15 and a further
6,328 bn roubles from 2016-30). In the maximum version, the total investment amounts to 13,812 bn
roubles.
Spending in the first stage (2008-15) was slightly higher than in the minimum version at 5,219 bn roubles
and the current allocation over 2016-30 is significantly greater at 8,594 bn roubles 51. Funding for the
strategic development of general rail transport comes from Russia’s national budget, regional budgets and
private investors, including the railw ay company RZD itself. Specific projects and specialised services will
be fully funded by private investors.
These plans encompass the modernization of the Baikal-Amur Mainline and the Trans-Siberian Railw ay.
The freight capacity of both lines is insufficient to accomplish this goal. The Trans-Siberian is overloaded
already. According to the Institute of Natural Monopolies Research, or IPEM, more than 20 sections
measuring 3,500 kilometres in total of Trans-Siberian and BAM have deficiencies in transport capacity.
Modernization costs for these projects were estimated to be 562,4 bn rubles. Nonetheless, in August 2015,
Mr. Oleg Belozerov, w ho has been in charge of Russian Railw ays, has mentioned that there is an ongoing
47
48
49
50
51
Vinokurov , et. al., (2008)
A.T. Kearney (2010)
The company 's major shareholder with 50% +2 shares is United Transportation and Logistics Company , established by
Russian Railway s, FESCO Transportation Group (24.12%), the Pension Fund BLAGOSOSTOY ANIE (13.15%). The rest of
shares f orms Company 's free f loat. From November 2010 till July 2015, the European Bank f or Reconstruction and
Dev elopment was one of the shareholders of TransContainer (9.2%). TransContainer website (Nov 2016)
TransContainer, 2016, Retriev ed f rom: http://www.trcont.ru/f ileadmin/content/Documents/Annual_Reports/
English/AnnualReports/TC-AR-2015-eng-160607.pdf
All prices are in January 2007 prices, excluding VAT and the purchase of land.
Opportunities in Asia
23
w ork over optimization of the modernization costs, and the final amount might be significantly low er than
the proposed budget. 52
To accommodate this growth, investments in hard infrastructure and supporting tools are needed.
Several other improvements are made to improve rail connectivity with road, and to increase
network capacity and trade flows. Especially the integration and modernization of different national
networks (China, Kazakhstan and Russia), customs, IT and investments in key transhipment
locations (on the borders and in the hinterland) continues to attract significant funding.
Some recent examples are the Dostyk-Alashankou border-crossing and the Zhetygen-Korgas line,
where special economic zones were established to attract business.
•
The Western rail border crossing between Kazakhstan and China is located between Dostyk
(KAZ) and Alashankou (CN). This border crossing dates back to the agreement between the
Soviet Union and China from ‘54. In ’59 the Russian (Kazakhstan) part was build. At the
Chinese side, the connection towards Urumqi was finished in ’62. Nevertheless, it took China till
1990 to fully construct the line towards the coastal areas. The Eurasian development bank
estimated in 2009 that Dostyk can annually tranship 306,000 TEU. According to
Kaztransservice, the official container operator owned by Kazakhstan’s national railway Temir
Zholy (KTZ), the Dostyk station transhipped 109,677 TEU in 2007 53 (74k TEU from China and
35k TEU to China). Volumes grew to 140.000 TEU by 2014.
•
The construction of the Zhetygen-Korgas railway line, officially opened the 22nd of December
2012, between Kazakhstan and China offers extra capacity, should the Dostyk-Alashankou
border crossing be congested. The railway is composed of a 292 km section in China and the
remaining 293 km section in Kazakhstan, giving access to the Southern regions of Kazakhstan.
The border crossing will also help the border city of Korgas to become a key logistics hub as a
network of highways, railways and pipelines cross there.
Comparing transport time and costs routes within Northern Corridor
The following table compares the costs and travel distances between Shanghai and Berlin, via the
Trans-Siberian rail network (option N1) and via Kazakhstan (option N3). The maritime option is
equally shown as reference.
The total travel distance of a coastal destination as Shanghai to Berlin is around 13,750 km via the
Trans-Siberian railway, or 12,500 km via Kazakhstan. The Maritime option is around 20,000 km
sailing distance. The travel cost is estimated in the magnitude of 3,750 EUR for the Trans-Siberian,
3,200 EUR for the Kazakhstan route and 1,000 EUR for the Maritime route (indicative). The
Maritime route is confronted with fluctuating tariffs. Owing to the current over capacity in the market,
lower tariffs might be possible. In any case, the maritime option is the least expensive option.
Though it requires almost double the transport time. The rail options require transhipment of cargo
firstly at the Russian - Chinese border or Kazakh - Chinese border and secondly at the Belarus –
Europe border. Russia, Belarus and Kazakhstan have broad gauge railways in contrast to the
Chinese and European railway networks.
Table 4.2.
Overview of routes for the corridor West Europe - Coastal China (indicative)
OD Shanghai Rotterdam
Trans-Siberian via
Kazakhstan via
Maritim e via
Moscow (N3)
Moscow (N1)
Rotterdam
Travel distance
13,750
12,500
20,000
Transport costs (EUR / container)
3,750
3,200
1,000
Total transport time (days)
15-22
15-22
28-35
Source: Own assessment consultant based on VIL (2013), Retrack (2012) and JICA (2007)
24
52
Transsiberianexpress (2015), ‘Modernization plan of Bam and Transsiberian Railway s has been approv ed’
53
VIL (2003)
Opportunities in Asia
Different conclusions can be made when comparing a transport route between inland China (e.g.
Urumqi) and Rotterdam. This inland located Chinese destination requires a 3,500 km inland
transport for reaching a maritime terminal. The time won by heading westwards via rail is reflected
in lower transport costs. Even though the distance is shorter and the cost is still higher than via
maritime, rail for these kinds of destinations is still quite competitive.
Table 4.3.
Overview of routes for the corridor West Europe - Inland China (indicative)
OD Urum qi Rotterdam
Trans-Siberian via
Kazakhstan via
Maritim e via
Moscow (N3)
Moscow (N1)
Rotterdam
Travel distance
16,500
10,000
20,752
Transport costs (EUR / container)
4,000
2,800
1,500
Total transport time (days)
18-26
15-18
30-40
Source: Own assessment consultant based on VIL (2013), Retrack (2012) and JICA (2007)
Potential goods
The Eurasian rail connection offers a viable transport option in betw een the expensive but fast air cargo
solution and the slow er and very competitive maritime solution. Some of the goods traded betw een the
Eurasian countries are expected to shift to the rail solution. Examples are consumer electronics, chemicals,
pharmaceuticals, food stuff, industrial machinery, automotive parts etc. Current Eurasian trains link
industrial production processes, and are part of a simply chain concept. All commodities w ith a medium
time pressure which are unable to bear air cargo fees show potential. China’s transition to a middle income
economy, including the shift from a manufacturer of low er end goods to more complex products, many of
w hich value speed over price when it comes to logistics, and the increase in consumption of European
luxury goods are also expected to drive grow th in China-Europe international rail shipments.
Central corridor
The Central corridor is currently a non-existent alternative for Eurasian rail transport. It is proposed
to pass Ukraine, Russia, Kazakhstan and China. Even though the RZD, Russia’s incumbent rail
operator, has made a priority of the Trans-Siberian infrastructure and developed Moscow as a rail
hub, it is unlikely that significant funding will be directed towards the development of this corridor.
The Russian investment plan for railways does not mention investments on this corridor. In
addition, ongoing tensions between Russia and the Ukraine will make collaboration in the short
term improbable. The central corridor is not a viable option in the short run, and will therefore not
be discussed in further detail.
Southern corridor
While no clear route is defined, it is clear that the corridor crosses various countries between
Turkey and China. The main options are shown in the previously mentioned figure by CAREC
(figure 2.5). A total of 6 potential corridors were sketched, of which the red line is the most
important connection (Azerbaijan, ferry – Turkmenistan – Uzbekistan – Kazakhstan – China).
Importantly, CAREC does not explicitly consider Iran. Yet as the Iranian railways regained access
to the international market, they are expected to take up a role in the Eurasian rail transport on the
Southern corridor.
The Southern corridor is also a hypothetical corridor that should be considered as a less
competitive option for Eurasian rail freight transport for the following reasons:
• Completing the Southern corridor is challenging due to the many countries (and thus crossborder facilities) that need to be crossed.
Opportunities in Asia
25
•
Currently no direct links exist (yet) between Europe, Turkey and Eastern countries like Iran. The
feasibility of rail vessels to cross the Caspian Sea and the Van lake also need to be considered
for Eurasian traffic.
In order to assess the feasibility and likelihood of a southern rail corridor, it is important to analyse
the current logistics performance of countries that need to be crossed. The following table provides
an extract of the World Bank Logistics Performance Index for 2016. It shows the ranks of countries
on the southern corridor on various logistics indicators and their absolute scores. The numbers are
illustrative of the difficulties that may be encountered when developing a complex, multi-country
logistical project along this corridor. In addition, the performance of countries along the other two
Timeliness
International
shipments
4,19
0,12
3
2
6
3
6
5
27
3,66
0,17
31
23
12
27
28
31
Tracking
& tracing
x
Infrastructure
x
4
x
Netherlands
Customs
Poland
LPI Score
2016
x
LPI Rank
2016
x
Southern
corridor
China
LPI Score
change '10-'16
Country
Central
corridor
World Bank Logistics Performance for selected countries
Northern
corridor
Table 4.4.
Logistics
competence
corridors are mentioned for illustrative purposes.
33
3,43
-0,01
33
45
33
31
37
37
Turkey
x
34
3,42
0,20
36
31
35
36
43
40
Bulgaria
x
72
2,81
-0,02
97
101
67
52
80
72
Serbia
x
76
2,76
0,07
87
85
90
69
66
79
77
2,75
-0,08
86
65
82
92
71
92
x
Kazakhstan
x
x
Ukraine
80
2,74
0,17
116
84
95
95
61
54
x
96
2,6
0,03
110
72
88
82
111
116
99
2,57
-0,04
141
94
115
72
90
87
Macedonia, FYR
x
106
2,51
-0,26
127
79
116
120
123
89
Azerbaijan*
x
125
2,45
-0,19
82
68
113
149
148
143
Iran, Islamic Rep.
Russian Federation
x
x
x
Belarus
120
2,4
-0,21
136
135
92
125
134
96
Georgia
x
130
2,35
-0,26
118
128
131
146
112
117
Turkmenistan
x
140
2,21
-0,28
142
103
126
145
154
142
Source: World Bank, own elaboration. Rank scores for 160 countries. * Azerbaijan figures for 2014
Besides the general logistics profile it is illustrative to consider current railway operations, in
countries along the southern corridor. The next table summarises current data on rail freight
transportation in some of the key countries on the Southern corridor. It becomes clear that the
transit by rail is almost non-existant in Kyrgyz Republic, Tajikistan and Turkmenistan, if compared
to the volumes transited trough Kazakhstan (almost 300 million tonnes, or 235 million ton km).
Table 4.5.
Volum es by rail Southern Eurasian rail transport corridor
Million tonnes
Kazakhstan
Kyrgyzstan
Tajikistan
Turkmenistan
Uzbekistan
(2012)
(2015)
(2008)
(2012)
(2008)
Domestic
158,7
-
0
-
54,2
Export from
100,9
0,62
0,9
13,33
5,1
Import in
18,78
5,72
4,5
2,71
8
16,3
0
9
4,02
11
294,7
6,34
14,4
20,06
78,3
Transit through
Total
Source: Rastogi and Arvis (2014) The Eurasian Connection
This table emphasises the importance of Kazakhstan not only for the Southern corridor, but also for
one of the options in the Northern corridor. This is also shown in the figure below, depicting tonnes
on the corridors. The chart clearly illustrates that south-bound flows are, to date, almost nonexistent and a big future uncertainty.
26
Opportunities in Asia
Figure 4.7.
Traffic density shows preference for Northern Eurasian rail corridor
Source: ADB 2014 (Central Asia regional economic cooperation corridor performance measurement and monitoring: A ForwardLooking Retrospective) based on data TERA International Group
Finally, besides logistical problems that may emerge it is important to emphasize that many OBOR
projects are reckoned to be high-profile construction projects, implying the heavy involvement of the
beneficiary country’s government. For several politically unstable countries along the route, this
may imply that construction works are postponed or even cancelled 54. Chinese concerns in this
regard are currently tangible in Pakistan, Myanmar and Thailand. The combination of these factors
ensure that the southern corridor is unlikely to be a viable alternative in the near future for Eurasian
rail transport.
Whilst investments in the southern corridor are unlikely to facilitate rail traffic between Europe and
China, it can promote stronger connectivity between China and Central Asia. The recent launch of
the first direct cargo train from China to Iran is a case in point 55. Investments in improving the
infrastructure and logistical operations along the southern corridor thus improve regional
connectivity in (Central) Asia. The southern corridor may thus be of lesser importance from a
European perspective, but not necessarily so for China.
4.1.2 Potential impacts
Based on the previous digression, we note that the Eurasian land connectivity component of the
initiative is very likely to only concern the northern railway corridor, which is already operational and
enjoys continuous growth. In this section, we expand on the future impacts of this corridor on two
levels, namely trade with Central Asia and rail services from and to the Netherlands.
Trade with Central Asia
Rail freight transport can be considered as a critical transport mode for the Eurasian continent
simply because 12 out of 48 landlocked countries globally are situated in the Eurasian geographical
54
Johnson / CSIS (2016), ‘President Xi Jinping’s Belt and Road Initiativ e’
55
The Diplomat (2016), First Direct Train f rom China Arriv es in Iran
Opportunities in Asia
27
area. The landlocked countries of Central Asia, meaning Kazakhstan, Kyrgyzstan, Tajikistan,
Turkmenistan, and Uzbekistan, are the countries under consideration here.
Figure 4.8.
Landlocked countries
Source: Ecory s
Being landlocked implies that Asian maritime ports often are 1,000 kilometres away and maritime
transport requires significant administrative and logistic costs. In addition road transport over long
distances is challenging, due to the network quality and transport reliability and costs. The road
network in the Eurasian region (especially in the centre) is in an inferior state and a challenging
natural environment is encountered. Air freight is an option for only a niche segment of trade, given
the high costs of air transport. Landlocked countries are thus limited in their capacity to conduct
international trade. Rail freight is believed to alleviate this problem. However, when assessing the
potential of OBOR to unlock Central Asia to Europe, notably the Netherlands, there are several
elements to take into consideration. As depicted in the figure below, there has been a steady rise of
import and export between Europe and Central Asia. The figure equally shows that trade with China
grew significantly stronger. Geographical proximity should be considered as a key explanatory
variable on why trade with China grows faster. In addition, the figures also indicate strong
infrastructure investments that connect China with Central Asia, such as the China-Turkmenistan
pipeline that commenced operations a few years ago. The absolute values of the trade flows are
provided in Annex 1. Annex 2 and 3 also provide information on the relative share and evolution of
trade with the respective Central Asian countries. The analysis shows that Kazakhstan is and stays
the main trading partner of both China and the EU.
28
Opportunities in Asia
Figure 4.9.
Development of total trade value with Central Asia for China and EU-28 , 2005 = 100
900
800
700
600
500
400
300
200
100
2005
2006
2007
EU-28 (imports)
2008
2009
EU-28 (exports)
2010
2011
2012
China (imports)
2013
2014
China (exports)
Source: UN Comtrade
In addition to the evolution of trade flows, it is important to consider the goods that are being traded.
Annex 4 zooms in on trade between the Netherlands and Central Asia. As illustrated by the figure
below trade with Central Asia mostly concerns mineral fuels. The volatility follows from the oil price
and the cost of importing mineral fuels from Central Asia. Strong drops in absolute numbers of
imported mineral fuels indicate that Central Asian oil is only imported when prices are high, hinting
at a relative cost disadvantage.
Figure 4.10.
Share of m ineral fuels (HS chapter 27) in total im ports, % of total trade
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2005
2006
EU-28
2007
2008
2009
China
2010
2011
2012
2013
2014
Netherlands
Source: UN Comtrade. HS Chapter 27 is defined as “Mineral fuels, mineral oils and products of their distillation;
bituminous substances; mineral waxes”
When looking at other product groups (Annex 4), there is a limited amount of trade in goods that
can be containerised, and are thus likely to be transported by rail to or from Europe. To date, limited
information is available that this situation will alter in the medium to long-term. Considering as well
that the transport of mineral fuels and products by rail is suboptimal compared to transport by
pipeline, it is unlikely that the OBOR initiative will have a strong impact on trade relations between
Europe and Central Asia. Trade relations with China, on the other hand, are expected to grow
Opportunities in Asia
29
stronger and go beyond natural resources as the trade trends (as provided in the annexes)
suggest.
Rail connections and the Netherlands
Another element under consideration is how OBOR will alter rail connectivity between the
Netherlands and the rest of Europe. The figure below provides the weekly number of departures by
shuttle container train from the Netherlands to other European countries. Shuttle trains transport
containers on weekly intervals to achieve sufficiently high load factors. The figure below highlights
the large number of connections with both Germany and Italy, whilst showing that the number of
connections with Eastern Europe are marginal. Rail connectivity with South East Europe is nonexistent and not expected to alter due to OBOR, considering that the southern rail corridor was
evaluated as unviable. In addition, competition with other maritime regions comes into play in that
region, as shall be discussed in greater depth in the upcoming sections. One likely evolution,
however, is the growth of connections with Poland considering that it is the entry or departure point
for Eurasian trains at Terespol.
30
Opportunities in Asia
Figure 4.11. Intermodal destinations from the Netherlands (in weekly number of trains)
2
5
75
34
503
64
361
7
48
Source: Intermodallinks.com – schedules August 2016
A final note on rail connectivity is that the final destination of a train does not necessarily equal the
final destination of the cargo. It is common practice to combine cargo loads at hinterland hubs for
further transportation. It may thus occur that goods are handled in Poland, prior to being sent
further East. The incidence and scale of such operations are, however, considered to be small.
4.1.3 Conclusions on rail connectivity
Based on the previous deliberations the following can be concluded:
•
Rail transport is found to be faster, albeit considerably more expensive than maritime transport;
•
The OBOR initiative identifies three potential railway corridors, broadly defined as the northern,
central and southern corridors;
•
The Northern corridor (routes N1/N2/N3) are all in operation and growing. Yet total Eurasian
traffic entails just over 81.000 TEU (2015), roughly the equivalent of four large container
vessels. The total potential is estimated at 250.000 – 400.000 TEU per year, but the border
station cannot accommodate this growth yet;
•
Modernisation of the Northern Corridor increases annual capacity to 1 million TEU, including
prioritised Russian and EAEU flows, casting worries on remaining capacity for Eurasian transit
flows;
•
The main bottleneck for Eurasian traffic occurs at Polish-Belarussian border (Terespol), where a
gauge change occurs, and which serves as the exclusive gate for all rail transport between
Europe and Asia;
•
The Central corridor is unlikely to be developed due to Russian interest on northern stretch and
the unstable relationship between Russia and Ukraine;
•
The Southern corridor is unlikely to be developed due to the large number of countries that
need to be crossed, their suboptimal logistical performance, and the non-existence of large
stretched of the required infrastructure;
Opportunities in Asia
31
•
Rail freight transport between Europe and Central Asia is expected to be of minor importance,
due to the distance, stable demand for European products, underdeveloped export
industries(besides the oil and mineral industries), and a stronger regional integration.
4.2
Eurasian Maritime transport
In this section maritime container transport is specifically discussed, considering that it is the most
competitive and footloose cargo type, as it is easily handled by almost all European ports. Maritime
transport of wet and dry bulk requires specialised facilities, so that shifts and competitive dynamics
are considerably different. In addition, container transport concerns the only type of cargo where
competition between Eurasian rail and maritime modes comes into play. In the following sections a
short overview on Eurasian maritime trade is provided, followed by an analysis of ongoing
developments in the liner and terminal operator industries. We argue that OBOR, and the Chinese
government in general, have a major influence on these dynamics and should therefore be
reckoned with. The potential impacts of shifts in the maritime sector are consequently considered,
with an explicit focus on what it implies for the Netherlands.
4.2.1 Connectivity developments
Maritime trade grew considerably over the last decades. Catalysed by opening economies and
more efficient transport operations, annual maritime trade capacity now covers 10.3 million TEU
between Asia and Europe (see figure below). Of major importance are also the emergence of socalled ultra-large container ships: Vessels that can carry up to 22.000 TEU. To put this into
perspective: four ultra-large container ships carry more containers that all trains that travelled
between China and Europe in 2015. In fact, the 81.000 TEU moved by rail constitute less than 1%
of total Eurasian container traffic.
Figure 4.12.
Annual m aritime trade capacity
Source: OECD/ITF (2015)
32
Opportunities in Asia
Deep Sea container ships call several ports in various European maritime regions. The figure below
provides an overview of the six main maritime regions, where ports compete for a shared
hinterland. As it stands, the largest share of Eurasian container ships call at the North Sea region
(57% of total in terms of throughput), followed by the Mediterranean region (28%). The market
share of other regions fluctuates between 2 and 5%. The fact that the North Sea region, including
Europe's largest Port of Rotterdam, has such a dominant position can be explained by its extensive
and efficient hinterland connections, combined with economies of scale.
Figure 4.13 European maritime regions and their hinterlands
Source: Ecorys
Yet competition between ports and regions is fierce. Investments in hinterland connectivity, port
modernisation and the dynamics in maritime industries have decisive effects on future container
flows. Within this context it becomes particularly important to consider Chinese maritime interests
and the '21st-Century Maritime Silk Road' under the OBOR initiative. One important reason to
consider Chinese maritime firms is because the largest are State-Owned Enterprises. These
enterprises are both guided by economic logic, but also - at least partly - shaped in function of or by
building on the strategy of the state 56. Such was recently confirmed by the Chinese liner and
terminal giant China COSCO Shipping that explicitly stated its ambition to develop ‘a global
terminals portfolio by capitalizing on the opportunities from the “One Belt, One Road” 57.
In order to assess the impact of China’s maritime ambitions in the framework of the OBOR initiative,
we focus on three main pillars that shape maritime trade flows: liner operations, terminal
operations, and hinterland connectivity.
56
Merk/Shippingtoday (2016), ‘One Belt One Road’
57
China COSCO Holdings Company Limited (2016), ‘Annual Results Presentation’
Opportunities in Asia
33
Liner operations
The container liner industry has changed dramatically over the last decade. Historically numerous
national and private carriers were running operations. Yet lower margins, greater investments for
new vessels and growing market power of a few players moved container liners to form alliances
and acquire competitors. These developments enabled liners to optimize schedules, increase load
factors, and purchase larger vessels, all leading to lower costs and higher margins. The table below
provides a quick insight in the development of the largest 20 liners between 2010 and 2017.
Table 4.6.
Overview Top 20 Ocean Liners – Alliances in 2010 and now ( x = no alliance)
Alliance
Liner
2010
MOLa
NYK Linea
a
K Line
HMM
b
Hanjin
c
Hapag-Lloyd
UASC
Alliance
Alliance
Market
2016
2017
Share
NWA
The Alliance
Grand Alliance IV
The Alliance
CKYH
The Alliance
NWA
CKYH
The Alliance
7,1%
X
2M
2,2%
The Alliance
X
3,1%
The Alliance
The Alliance
7,5%
Grand Alliance IV
c
X
OOCL
Grand Alliance IV
Ocean Alliance
Ocean Alliance
3,0%
Yang Ming
CKYH
The Alliance
The Alliance
3,0%
COSCO d
CKYH
China Shippingd
Ocean Alliance
Ocean Alliance
8,1%
X
MSC
X
2M
2M
14,3%
Ocean Alliance
Ocean Alliance
12,0%
2M
19,5%
ef
CMA CGM
X
e
APL/NOL
NWA
Maersk Linef
X
2M
Hamburg Süd
X
X
Evergreen
X
Ocean Alliance
Ocean Alliance
4,9%
PIL
X
X
X
1,7%
Zim
X
X
X
1,8%
Wan Hai
X
f
Source: Own elaboration & alphaliner.com
f
Acquisition (2017)
X
a
Merger (2017)
b
Bankruptcy (2016)
X
c
1,2%
d
Merger (2017) Merger (2016)
e
Merger (2016)
The market concentration increased significantly since 2010, putting the power in the hand of three
alliances with fewer and stronger liners. Importantly, through the consolidation of COSCO and
China Shipping, who merged their business operations in 2016, the fourth largest container liner
was formed. Chinese power in the liner industry thus became more concentrated and larger.
Terminal operations
Container terminal operators are in the business of loading and unloading container ships in ports.
Terminal operators are commonly closely tied to container liners - either as part of a wider
conglomerate or through stakes in each other's firms. Similarly to the liner industry, the terminal
operating industry experienced strong growth and consolidation waves.
In addition to the liner industry, the market power of Chinese enterprises also rose. The OBOR
initiative, as indicated earlier, now provides Chinese firms with opportunities to access fresh capital
and grow even further. Maritime economists concluded that because of the strong growth and
merger of COSCO and China Shipping, the new enterprise will be the world’s largest terminal
operator by 2020.
34
Opportunities in Asia
Table 4.7.
Terminal operators, 2016 and 2020
Operator
2016 rank
2020 rank
4 &8
1st
2nd
2nd
PSA International
rd
3
3rd
Hutchinson Port Holdings
1st
4th
DP World
5th
5th
Terminal Investment Ltd
th
6
6th
CMA CGM
9th
7th
Cosco-China Shipping
APM Terminals *
th
th
Source: Drewry Maritime Research (2016) - *Grup TCB included in 2020 **APL included in 2020
With respect to Europe, it is important to underline that Chinese maritime firms adopt a focused
investment strategy, concerting efforts on selected ports. The ports of Piraeus (Greece) and, more
recently, the port of Venice (Italy) act as the main hubs for Chinese investments. The port of
Piraeus, as a case in point, has seen China COSCO Shipping in operations since 2009 with a 35year concession agreement. Container throughput has grown since from 880.000 TEU in 2010, to
3.36 million TEU in 2015 58. No major new economic activities or hinterland connections were
established, underlining the considerable impact of the changed port ownership structure on
container throughput. Looking forward, growth may even accelerate because of ongoing
investments in port and hinterland infrastructure.
Hinterland connectivity
Beyond the growing market power of Chinese liner and terminal operators, it is important to notice
the investments that are made to improve the hinterland connectivity of ports with Chinese
interests. Recent examples are the Ethiopia-Djibouti Rail link 60 or the Belgrade-Budapest Rail link,
to improve the connectivity of the port of Piraeus. Investments in hinterland terminals, rail and road
infrastructure make that regional or transhipments ports transform into gateway ports.
Consequently these ports achieve economies of scale and influence inter-port competition. Ports
with shared hinterlands may thus be competitively disadvantaged by infrastructure investments that
primarily integrate one port with the broader economic hinterland. In the upcoming section these
developments and potential impacts on the Dutch ports are assessed.
4.2.2 Potential impacts
The impacts of China's maritime strategy within the context of OBOR's '21 st Century Maritime Silk
Road can be estimated by applying Ecorys' Port Competition Model. The model estimates the
impacts of changes in cost structure on market share between individual ports and regions as a
whole 61. Several scenarios are developed in which port or hinterland costs of the Mediterranean
ports (including the ports of Piraeus and Venice) are decreasing. Such effects can occur, for
instance, through capital investments in more efficient terminal machinery or modernised railway
infrastructure. As European ports share a common hinterland, transport flows may alter due to
changes in transport cost structures. The following table provides figures on the market shares of
the respective maritime regions when port or hinterland costs of the Mediterranean ports drop by
either 5 or 15%.
58
60
61
Hellenic Shipping New (2016), ‘Greek President Hopes f or more Inv estments Following Pireaus Port Authority Deal’
Xinhua (2016), ‘Ethiopia-Djibouti railway -- the Tazara railway in a new era’
The model has been consulted f or v arious maritime inf rastructure inv estments projects, including the Tweede Maasv lakte
and the Gran Canal de Nicaragua
Opportunities in Asia
35
Table 4.8.
Market share of Eurasian maritime trade in different scenarios
Maritime region
Current
5% low er port
15% low er
5% low er hinter-
15% low er hinter-
costs
port costs
land costs
land costs
North Sea
57,35%
56,34%
54,24%
56,33%
53,98%
Mediterranen
27,93%
28,93%
30,98%
29,01%
31,47%
Adriatic Sea
3,55%
3,69%
3,97%
3,64%
3,81%
Black Sea
4,39%
4,43%
4,50%
4,43%
4,52%
Atlantic Coast
5,08%
4,94%
4,69%
4,94%
4,67%
Baltic Sea
1,69%
1,67%
1,61%
1,65%
1,55%
Source: Ecorys
The lowering of port and hinterland costs can, for instance, be achieved by more efficient port
handling operations due to new cranes and the construction of missing cross-border links,
effectively opening up new markets and decreasing transport time. Such would make it cheaper to
transport goods from the port to the hinterland directly, rather than transhipping it to a different port
(e.g. Rotterdam). Southern European ports do currently have a strong transhipment incidence, also
highlighting their limited hinterland connectivity. The Port of Piraeus has a transhipment incidence
of 82% compared to 31% for Rotterdam 62. Efficient hinterland connections can push this rate down.
Whilst the cost reductions largely depend on the current status of port equipment and quality of
hinterland infrastructure, a 5 to 15% range is considered plausible for scenario planning purposes.
The outcomes indicate that the Mediterranean region would gain a 3% higher share of the container
market to the detriment of the North Sea ports. The market gains occur in regions where the cost
level of Mediterranean flows becomes competitive, such as in Southern Germany and Austria. In
fact, these effects are likely to emerge from improvements in the West Mediterranean ports (e.g.
Port of Venice) than the Eastern Mediterranean (e.g. Port of Piraeus), which serves markets that
mostly do not overlap with those of the Dutch ports. The table below provides details on which of
the largest North Sea ports will be most impacted.
Table 4.9.
Seaport
Im pact on North Sea ports in different scenario’s (current = 100)
Current
Index 5% low er
Index 15% low er
Index 5% low er
Index 15% low er
port costs
port costs
hinter- land costs
hinter-land costs
index
Antw erp
100
98,14
94,25
98,23
94,74
Zeebrugge
100
98,10
94,18
98,16
94,10
Bremen
100
98,36
95,02
98,24
94,76
Hamburg
100
98,48
95,39
98,29
94,83
Le Havre
100
97,23
91,71
97,50
92,89
Rotterdam
100
98,46
95,22
98,44
95,32
Source: Ecorys * index compared to current container volumes (100)
The table indicates that the impact is slightly stronger felt by the Belgian and French ports than by
the port of Rotterdam. The reasoning behind this is that these ports have a stronger shared
(Southern) hinterland with the Mediterranean ports. The burden is not fully carried by Dutch ports.
However, it is also important to consider various types of indirect impacts. For instance, lower
overall throughput for the North Sea ports may increase inter-port competition within the HamburgLe Havre range as ports want to maintain their market share. Also, growing competition between
North Sea ports due to shifting hinterland flows may lead to stronger negotiation power for terminal
operators and liner companies versus port authorities and increased pressure on harbour dues.
62
36
Drewry (2015), ‘Container Forecaster & Annual Rev iew’ – transshipment incidence estimates 2013
Opportunities in Asia
A few comments should be added to correctly assess the impacts of stronger competition. Firstly,
container traffic is only one of the cargo types that are handled by ports. In the case of the Port of
Rotterdam, container traffic amounts to 27% of all throughput 63. Secondly, the figures indicate shifts
in market share, which does not necessarily imply that total throughput decreases in the case that
total maritime trade grows. Thirdly, the shifts assume that the Mediterranean ports enjoy a relative
cost advantage of 5% to 15%. In reality, this implies considerable bigger efficiency gains, as the
North Sea ports continuously invest in smarter port logistics. Also, the Port of Rotterdam, as the
biggest European ports, enjoys economies of scale which are unmatched by Mediterranean ports,
now and in the foreseeable future. The cost savings that follow from these economies of scale
explain why it is and is likely to remain more efficient to ship goods from Rotterdam to many other
European destinations. Finally, the figures concern intercontinental container flows, which is only
part of total container flows. Besides Deep Sea operations, the initiative may also alter Short Sea
flows to and from the Netherlands. As indicated in the figure below, a large number of vessels
depart weekly from the Netherlands to ports across Europe where they deliver and gather
containers (see figure below).
Figure 4.14.
Intermodal destinations from the Netherlands (weekly number of vessels)
20
94
49
3
4
13
8
52
136
5
5
22
8
24
1
4
39
35
13
6
13
3
Source: Intermodallinks.com – schedules August 2016
The figure shows that the Netherlands acts as a major node for short sea services to the United
Kingdom, Ireland, Norway, and Russia. The Dutch ports thus primarily act as a hub for Northern
Europe. It is not expected that this position is affected by Chinese OBOR-related investments in the
Mediterranean region: these ports cannot equally efficient serve Northern Europe.
Yet a stronger position for the port of Piraeus could result in more services between Greece and the
Netherlands, whereas some Mediterranean feeder services (notably to the Iberian peninsula) may
shift away from the Netherlands. These effects are however expected to be small as most loops
between Rotterdam and Asia already call Mediterranean ports (e.g. Marsaxlokk in Malta) and
feeder operations are optimised.
63
Port of Rotterdam (2015), Port Statistics
Opportunities in Asia
37
Finally, the impact of the OBOR rail strategy on deep and short sea connections should also be
considered. As indicated earlier, currently less than 1% of Eurasian container transport occurs by
rail. The considerable and persistent cost advantage of maritime transport, combined with pertinent
rail bottlenecks (e.g. different gauges and limited routes) renders it unlikely that rail transport will be
a major mode for Eurasian transport in absolute terms. Transport to countries along the OBOR
route, like Russia, may however be effected to a bigger extent. Short Sea services to Russia may
therefore be influenced by more efficient Sino-Russian railway connections. This entails both fewer
containers towards Saint Petersburg, as well as more that initially originate from Saint Petersburg.
4.2.3 Conclusions on maritime connectivity
Based on the previous deliberations, the following can be concluded:
•
Eurasian maritime flows have a capacity of 10.3 million TEU in 2015, more than 127 times the
number of containers that were transported by rail (i.e. 81.000 TEU in 2015).
•
The maritime sector undergoes major developments where fewer players gain more market
power.
•
One of the players is China COSCO, a state-owned enterprise that aims to leverage the OBOR
initiative to grow its market share in the liner and terminal operation business.
•
The '21st-Century Maritime Silk Road’ within the OBOR initiative focuses on key nodes within
Europe (e.g. Piraeus, Venice).
•
Chinese investments in port infrastructure and hinterland connectivity are focused on these
ports.
•
Consequently these regional or transhipment ports may transform in gateway ports that
•
compete with North Sea ports for a shared hinterland.
Although the impact is not primarily pivoted towards the Dutch ports, it may increase
competition between ports in the Hamburg-Le Havre range, decreasing margins and putting
•
port authorities under pressure.
Modal shift effects, from sea to rail, may occur for Sino-Russian transport flows, which may alter
the number of short sea services between the Netherlands and Russia.
•
38
Yet the dominant position of the Dutch ports as Deep Sea and Short Sea hubs are not expected
to be considerably affected by the OBOR initiative.
Opportunities in Asia
5
Conclusion and recommendations
In this final chapter a recap is provided on the main findings of the report together with
recommendations on how the Netherlands can leverage the opportunities and mitigate threats that
follow from the OBOR initiative.
5.1
General impacts of OBOR
The OBOR initiative is a China led endeavour to achieve a range of domestic and foreign
objectives, including regional economic integration through extensive infrastructure investments.
The initiative aims to improve both land and maritime connectivity along six economic corridors.
OBOR thus goes far beyond Eurasian rail connectivity. The initiative should ultimately result in a
restructuring of global value chains in which China aspires a greater, more value-added role.
The effects of Chinese foreign and manufacturing strategy already result in shifting trade flows
between China and its neighbouring countries. Chinese firms are constructing manufacturing plants
in low-income countries, effectively shifting away low value added activities abroad. Investment
figures from Chinese policy banks equally indicate a positive trend on outward loans to OBOR
countries.
At the same time, the initiative stays primarily a vision, rather than an operational blueprint.
Uncertainties regarding the ultimate impacts of the OBOR initiative will therefore continue to exist.
The long timespan that it will take to fully develop the economic corridors, combined with
uncertainties on the financial feasibility of many infrastructure projects, may moreover cause that
some elements of the OBOR initiative will not materialise. To a large extent, the final shape of the
initiative will be determined through collaboration between China and those countries along the
OBOR corridors. From the Dutch perspective it is important to emphasize the forums where the
future of the initiative is shaped and where the Netherlands is involved.
On a policy level, the European Commission and the Chinese government discuss at the ‘EU-China
Connectivity Platform’ the alignment between the initiative and European transport policies. On the
financial side, the EBRD and EIB have recently intensified contacts with Chinese financial
institutions and MDBs to better align investments in countries along the OBOR routes. While
cooperation between these institution is still nascent it can have a decisive impact on materialising
Eurasian transport infrastructure projects. As such the actions made by those institutions deserve to
be carefully monitored. When discussing the initiative the following insights into land and maritime
connectivity may be considered.
5.2
On the Eurasian land bridge
An extensive logistical and economical analysis of Eurasian rail connectivity was provided. The
growth potential of the existing northern rail corridor was determined, alongside the feasibility of
developing the central and southern rail corridor. The Northern corridor allows for future growth, but
capacity is limited by Russian and Kazakh domestic rail transport. Additional efficiency gains in
travel time, beyond those that were made during the past years, will be limited. It will therefore
remain an attractive additional route for the transport of high-value goods between Europe and
Asia, but it will not act as a game-changer for most Eurasian trade flows. The central and
Opportunities in Asia
39
southern rail corridors will be even less so: developing these rail connections relies on aligning the
interests of a great number of states, many of whom or low performers in the World Bank Logistics
Performance Index. This is not to say that no new rail infrastructure will be constructed as a result
of the OBOR initiative. China-backed rail investments are indeed effectively occurring in Pakistan,
Africa, and South-East Asia. These rail connectivity initiatives are however pivoted towards
integrating China with its direct neighbourhood, rather than developing a competitive rail product
towards Europe.
Unlocking trade between the Netherlands and countries along the OBOR land route also seems of
minor importance. The analysis on trade between the Netherlands and Central-Asia highlighted the
predominance of fossil fuel imports and volatile exports. On the whole, the trade balance has not
evolved substantially beyond the drop of energy imports in response to the lower oil price.
Trade between China and Central-Asia grew however significantly. Chinese export value grew
fivefold, whilst imports multiplied by six between 2005 and 2014. These developments indicate that
Chinese products are finding a larger audience in Central-Asia, which may ultimately lead to
competition with Dutch products.
For the Netherlands, rail connectivity initiatives within the OBOR initiative carry therefore limited
direct relevance. Admittedly, a few direct rail shuttles to China are indeed established between the
Netherlands and China. The potential and added value of these projects should be recognized.
These flows are, however, of relatively limited economic importance and growth is limited by
capacity, price and logistical limitations. Therefore Eurasian rail connectivity is considered to remain
of limited logistical and economic relevance for the Netherlands.
5.3
On the 21st Century Maritime Silk Road
Whilst receiving relatively limited attention, the 21 st Century Maritime Silk Road may be of far
greater economical significance than the Eurasian land bridge projects. Analyses on the current
and future position of Chinese liners and terminal operators showed their increasing prominence on
the world stage. These firms are state-owned enterprises that explicitly aim to leverage the initiative
to finance the purchase of new terminals and vessels. Consequently the influence of Chinese
enterprises on global logistics increases substantially.
This is already visible on the European continent. The COSCO group took an interest in the port of
Piraeus (Greece) in 2009 and has increased its share since. At the same time, the port’s throughput
grew substantially. Currently, Chinese policy banks invest to improve the port’s infrastructure and
its hinterland connectivity, too. The competitiveness of such ports is thus improved, potentially
leading to increased competition with North Sea ports on shared hinterland connections. Scenario
analyses show that these impacts are likely to affect the Dutch seaports. In addition, the fact that
logistics are controlled by increasingly fewer firms, including a Chinese state-owned enterprise,
does present challenges to the Dutch ports: especially for footloose and highly competitive cargo
types like containers. It deserves considerable attention how Chinese and Dutch logistical interests
can be aligned and secured in the Dutch ports.
Beyond these domestic challenges it is observed that the Chinese Maritime agenda foresees many
large investments in ports along the OBOR route in Africa, Asia and Europe. This presents
opportunities to Dutch dredgers and maritime consultants. It is true that concerns exist that large
projects are delegated towards large Chinese SOEs. So while the OBOR initiative is positioned as
a mainly market-led endeavour, it remains necessary to regularly assess the extent to which OBOR
40
Opportunities in Asia
projects are open for the involvement of foreign enterprises and the extent to which Dutch maritime
expertise can be leveraged.
In addition, an assessment should be made on the ports that are prioritized by the OBOR initiative
for investment and whether these ports carry strategic relevance for Dutch ports and enterprises.
Considering the evolution in which large ports and enterprises acquire stakes in foreign ports it is of
interest to see whether Dutch and Chinese ambitions overlap. Dutch ports or enterprises could
consequently invest in selected ports to diversify their business and reinforce trade relations. In light
of the expected financing gaps and the need for blended financing solutions, it is worthwhile to
consider whether the objectives of Dutch ports and enterprises can be advanced by leveraging the
OBOR initiative.
Opportunities in Asia
41
Annex 1: Absolute trade flows with Central
Asia
Table A1.1.
Export flow s from EU Mem ber States to Central Asia, in m illion USD
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Austria
217
250
409
517
417
382
428
507
518
630
413
Belgium
139
191
225
272
212
254
319
364
523
410
270
Bulgaria
15
33
70
47
43
42
49
82
81
102
86
Croatia
13
13
12
14
14
15
18
19
26
64
52
Cy prus
1
1
2
3
2
2
2
3
3
3
2
Czech Rep.
123
151
192
258
206
240
299
461
517
544
422
Denmark
30
38
65
96
51
68
71
93
67
72
42
Estonia
63
53
90
123
114
207
139
227
212
199
136
Finland
246
321
514
670
422
320
334
338
256
273
27
France
736
1.008
786
937
1.001
711
720
966
1.257
1.305
569
Germany
1.784
2.452
3.421
3.299
2.853
2.978
3.760
3.774
4.210
3.569
1.786
Greece
13
12
18
19
63
15
22
18
20
22
9
Hungary
119
201
333
460
189
222
277
254
413
284
165
Ireland
11
19
32
23
30
29
45
52
71
83
72
Italy
630
887
900
1.168
1.941
1.696
1.734
1.418
1.316
1.404
774
Latv ia
31
39
65
83
77
68
122
113
166
172
142
Lithuania
172
267
421
387
357
432
671
675
929
934
762
Luxembourg
14
8
13
12
23
24
17
16
15
14
0
Malta
10
16
4
9
6
2
0
4
5
18
8
Netherlands
402
471
650
666
644
637
743
849
777
769
367
Poland
296
464
597
605
575
561
743
785
873
830
534
Portugal
2
2
4
2
3
4
4
7
13
12
10
Romania
65
98
182
168
126
130
212
136
87
136
71
Slov akia
48
72
94
77
60
61
95
96
139
150
102
Slov enia
52
79
84
98
97
104
122
152
173
174
122
Spain
52
60
102
121
117
99
232
272
469
339
287
Sweden
199
271
288
286
201
183
409
208
246
126
-73
United Kingdom
359
486
721
494
538
535
1.031
1.354
1.109
853
494
EU-27
5.840
7.858
10.309
10.981
10.334
9.992
12.225
12.918
14.055
13.252
7.412
China
5 229
7 738
12 693
22 596
16 670
16 531
18 585
21 305
23 240
24 055
18 827
Source: UN Comtrade. Central Asia is def ined as Kazakhstan, Ky rgy zstan, Tajikistan, Turkmenistan, Uzbekistan.
42
Opportunities in Asia
Table A1.2.
Im port flows to EU Mem ber States from Central Asia, in m illion USD
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Austria
775
844
1.139
1.634
1.393
1.163
1.956
1.826
1.768
2.177
1.402
Belgium
72
117
210
244
46
77
80
437
336
474
402
Bulgaria
213
48
203
697
485
41
152
102
145
104
-109
Croatia
2
18
19
12
1
4
6
7
417
69
67
Cy prus
2
5
6
6
2
5
19
32
16
2
0
Czech Rep.
220
322
268
600
296
439
597
495
546
701
481
Denmark
47
55
19
53
46
75
39
21
31
28
-19
Estonia
77
161
157
225
116
158
191
144
71
99
22
Finland
225
374
431
782
397
242
444
427
635
692
467
France
2.329
2.630
3.074
3.407
3.638
4.620
7.390
6.966
7.293
5.787
3.458
Germany
3.279
4.272
5.064
6.631
3.320
5.241
6.347
5.395
6.166
6.166
2.887
Greece
499
763
1.166
1.650
890
1.437
1.303
1.707
1.998
3.264
2.765
Hungary
422
368
281
458
183
109
120
92
54
41
-381
Ireland
0
1
1
0
0
1
5
2
2
5
5
Italy
2.663
3.873
3.433
4.353
1.973
3.404
5.430
6.625
5.436
3.879
1.216
Latv ia
37
59
67
142
35
63
51
92
64
56
19
Lithuania
47
73
107
236
59
81
94
172
244
751
704
Luxembourg
0
1
1
0
2
2
0
0
0
0
-0
Malta
0
0
0
0
0
3
0
47
0
10
10
Netherlands
340
480
875
1.672
417
1.239
2.013
1.715
1.259
509
168
Poland
767
950
1.106
1.685
535
486
563
428
623
1.761
994
Portugal
340
439
453
576
237
874
1.212
999
747
1.091
751
Romania
1.470
1.829
1.584
4.075
1.933
1.825
3.245
2.920
2.387
3.104
1.634
Slov akia
156
77
50
47
12
26
31
22
19
18
-139
Slov enia
22
58
43
42
9
25
27
37
18
11
-11
Spain
674
1.086
876
1.129
386
459
1.115
1.053
2.008
2.230
1.556
Sweden
49
71
87
193
51
42
19
16
17
17
-33
United Kingdom
403
1.741
778
1.225
549
461
775
1.099
976
498
95
EU-27
14.830
20.134
21.160
29.248
16.517
22.353
33.254
32.982
32.865
32.789
17.959
China
3 498
4 320
6 969
8 227
6 897
13 582
21 021
24 639
27 033
20 957
17 459
Source: UN Comtrade. Central Asia is def ined as Kazakhstan, Ky rgy zstan, Tajikistan, Turkmenistan, Uzbekistan.
Opportunities in Asia
43
Annex 2: Trade with Central Asia – export per
country
Figure A2.1.
Shares of individual CA partners in Chinese export flows
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2005
Kazakhstan
Figure A2.2.
2010
Kyrgyzstan
Tajikistan
2014
Turkmenistan
Uzbekistan
Shares of individual CA partners in EU-27 export flows
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2005
Kazakhstan
Figure A2.3.
2010
Kyrgyzstan
Tajikistan
2014
Turkmenistan
Uzbekistan
Shares of individual CA partners in Dutch export flows
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2005
Kazakhstan
44
Opportunities in Asia
2010
Kyrgyzstan
Tajikistan
2014
Turkmenistan
Uzbekistan
Annex 3: Trade with Central Asia – import per
country
Figure A3.1.
Shares of individual CA partners in Chinese im port flows
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2005
Kazakhstan
Figure A3.2.
2010
Kyrgyzstan
Tajikistan
2014
Turkmenistan
Uzbekistan
Shares of individual CA partners in EU-27 im port flows
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2005
Kazakhstan
Figure A3.3.
2010
Kyrgyzstan
Tajikistan
2014
Turkmenistan
Uzbekistan
Shares of individual CA partners in Dutch im port flows
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2005
Kazakhstan
2010
Kyrgyzstan
Tajikistan
2014
Turkmenistan
Uzbekistan
Source: UN Comtrade
Opportunities in Asia
45
Annex 4: Dutch-Central Asian trade flows per
sector
Table A4.1.
Export flow s from the Netherlands to Central Asia, in million EUR
Food and liv e animals
Bev erages and tobacco
Crude materials, inedible, except f uels
Mineral f uels, lubricants and related
materials
Animal and v egetable oils, f ats, and
waxes
2008
2009
2010
2011
2012
2013
2014
2015
Δ 08-15
16
15
22
27
32
39
50
45
29
1
2
1
2
3
5
6
4
3
14
21
28
34
50
39
39
39
25
3
3
4
4
7
5
6
5
2
0
0
0
0
0
0
1
0
0
Chemicals and related products, nes
59
54
67
75
104
110
110
97
38
Manuf actured goods classif ied chief ly
by materials
54
62
39
43
47
36
38
33
-22
271
253
275
307
332
278
261
240
-31
38
53
44
50
88
71
75
105
66
Commodities and transactions nes
1
0
0
2
1
3
1
1
1
Unknown
5
0
0
0
0
8
0
0
-5
462
463
481
544
664
594
585
570
108
Machinery and transport equipment
Miscellaneous manuf actured articles
Total exports
64
Source: CBS Statline . Central Asia is def ined as Kazakhstan, Ky rgy zstan, Tajikistan, Turkmenistan, Uzbekistan. Sectoral
classif ication based on SITC 1 digit codes.
Table A4.2.
Im port flows to the Netherlands from Central Asia, in m illion EUR
2008
2009
2010
2011
2012
2013
2014
2015
Δ 08-15
Food and liv e animals
6
5
7
12
10
11
11
6
0
Bev erages and tobacco
0
1
2
2
1
1
0
0
0
11
4
12
20
22
11
21
2
-9
706
238
791
1.358
1.259
771
247
94
-612
-
-
-
-
-
-
-
-
-
Crude materials, inedible, except f uels
Mineral f uels, lubricants and related
materials
Animal and v egetable oils, f ats, and
waxes
Chemicals and related products, nes
13
0
0
0
1
0
0
1
-12
Manuf actured goods classif ied chief ly
by materials
*
*
*
*
*
*
*
*
*
Machinery and transport equipment
7
1
2
9
10
0
9
23
16
Miscellaneous manuf actured articles
1
2
2
1
1
4
2
0
-1
Commodities and transactions nes
0
0
0
0
0
-
0
0
0
Unknown
0
20
11
0
0
157
90
70
70
744
271
827
1.402
1.304
955
380
196
-548
Total exports
65
Source: CBS Statline . Central Asia is def ined as Kazakhstan, Ky rgy zstan, Tajikistan, Turkmenistan, Uzbekistan. Sectoral
classif ication based on SITC 1 digit codes. *Empty as no data f or Kazakhstan av ailable f or this product group af ter 2012.
64
65
CBS Statline (in Dutch); Internationale Handel, in- en uitv oer naar SITC (1 digit) en landen.
http://statline.cbs.nl/Statweb/publication/?VW=T&DM=SLNL&PA=81266NED&D1=01&D2=a&D3=121,123,181,224,236&D4=12,25,38,51,64,77,90,103&HD=161022- 1404&HDR=G 3&S TB=T,G2,G1
CBS Statline (in Dutch); Internationale Handel, in- en uitv oer naar SITC (1 digit) en landen.
http://statline.cbs.nl/Statweb/publication/?VW=T&DM=SLNL&PA=81266NED&D1=01&D2=a&D3=121,123,181,224,236&D4=12,25,38,51,64,77,90,103&HD=161022- 1404&HDR=G 3&S TB=T,G2,G1
Opportunities in Asia
47
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