Challenges

The railway corridor between Kazakhstan, Turkmenistan and Iran (KTI) was constructed with a total cost of around US$1.4 billion, of which the Islamic Development Bank (IsDB) contributed US$370 million. Examining the potential for commercialization, railway transport is particularly important for landlocked developing countries because of the cost-effectiveness of railways in carrying bulky goods over long distances and in providing access to seaports.  The potential of the KTI and other linked railway corridors has not yet been fully harnessed. Identifying and addressing the issues with physical and non-physical barriers would be key factor for increasing traffic along the KTI railway corridor.

 The existing volume of railway freight traffic along KTI corridor is below its potential. Also, cargo traffic is unevenly distributed and unbalanced (with much higher traffic on northern KTI section and running in direction from north to south). Linkages of KTI railway corridor with larger economies (e.g.  China, Europe, India and  the Russian Federation) could increase railway transport volumes along the KTI corridor.

A commodity and trade flow analysis along the corridor is needed to articulate the commodity structure of the current and expected trade flows along the route. A clear and agreed upon legal basis for cooperation among railways, an intergovernmental agreement for commercializing the KTI corridor is also needed

Toward a Solution

The KTI railway is considered a major step towards seamless transit transport connectivity, enhanced transit trade, economic growth, and better access for all countries. It aims at transforming the present KTI railway corridor into a competitive, vibrantly developing economic corridor with all the necessary prerequisites to provide a livelihood, vital employment, and cumulative benefits for multiple users in the Member States. While enhancing the return on investments made by the IsDB, the commercialization of the railway corridor studies will also promote the railway as an environmentally friendly and energy-efficient mode of transport.

Quality and cost of transport have a significant impact on economic growth, businesses’ ability to compete, freight, and personal productivity. Efficient transport (transport activity, logistics chain, reduction of trade barriers) is fundamental for an effective economy, particularly for developing countries, hence achieving SDG 8 “Decent work and economic growth.” The project interventions aligned with SDG 17: Partnerships for the goals. It enhances the international cooperation between recognized partners (ECO, UNESCAP, and IsDB) to boost regional integration between beneficiary countries and central Asia.

The project’s objectives are: (a) to improve the corridor management and support efficient operations along the corridor, (b) to prepare an action plan for commercializing the corridor, and (c) to promote the railway services along the corridor. These objectives are realized by developing two evidence-based studies on trade flows and commodity analysis, which also addressed physical and non-physical barriers along the KTI corridor, in addition to a marketing plan for the railway corridor, a corridor management mechanism, and its features.

The structure of the project’s outputs is as follow:

1.       Study on enhancing freight flows along the KTI railway corridor

• Current freight flows and their projections
• Linkage of KTI with transport corridors
• Connection on KTI corridor with dry ports/seaports
• Identifying optimal routes, commodities, sea and dry ports connections
• Tariff structure

2.       Study to address physical and non-physical barriers along KTI corridor

• Existing railway infrastructure and rolling stock along the corridor
• State of technical, legal, and operational interoperability along the corridor
• Linkages of KTI corridor with other transport routes
• Mapping performance of KTI railway corridor to identify bottlenecks
• Ways to address physical and non-physical barriers along the KTI corridor

3.       The Marketing Plan for the KTI corridor

• Identifying market segments
• Developing a market strategy for each segment
• Revenue projections
• Preferred marketing setup for the corridor

4.       The Corridor Management Mechanism

• Existing corridor mechanisms in the EU
• Eurasian railway corridor experience –UTLC
• CAREC Railway Strategy
• Options to formalize corridor management mechanism
• Drafting an Intergovernmental agreement or an MOU

The beneficiary countries finalized all the studies through 3 virtual meetings in 2020. The meetings were attended by senior officials from Railways of Iran, Turkmenistan, and Kazakhstan, representatives from the ECO, IsDB, and international consultants.The aim was to assess the studies’ initial outcomes on physical, non-physical barriers and freight flows along the KTI railway corridor and seeks views on the KTI en-route countries and proposals for a corridor management mechanism. All KTI en-route countries agreed to coordinate closely to operationalize the corridor and support the draft Corridor Management Mechanism to consider signing MoU and set up an institutional mechanism for the KTI corridor.

The nature of this intervention supports the sustainability of investments made by the railways of en-route countries to make this route physically feasible. This project’s outputs guide different stakeholders in maximizing their benefits from utilizing the existing asset. It also identifies the road map that will ultimately convert KTI into an economic corridor.

Landlocked Developing Countries (LLDCs) are in a difficult position because their imports and exports have to transit through neighbouring coastal states to reach seaports. Transport corridors are coordinated transport networks that enable such access and facilitate faster, smoother, and efficient transit that enhance regional connectivity.

This corridor approach is increasingly employed globally to provide designated and efficient transport and logistics routes between landlocked and coastal neighbours. The spread and replication of such corridors will require raising awareness of countries’ practical transport corridor development and management experiences. These experiences include many successes but also challenges that can be deployed as both learnings and warnings. These relate to legal, financial, and regulatory frameworks, infrastructure construction and maintenance, harmonization and implementation of transport facilitation systems, and corridor management institutions’ establishment.