Ministers of Central Asian Regional Co-operation (Carec) nations have announced 68 transport projects worth US$23bn, designed to improve trade facilitation in the region.
The ‘Wuhan Action Plan’ was created by the 10 Carec member countries (Afghanistan, Azerbaijan, China, Kazakhstan, Kyrgyzstan, Mongolia, Pakistan, Tajikistan, Turkmenistan, and Uzbekistan) and will be delivered over the next five years.
Carec (an initiative supported by the Asian Development Bank [ADB]) members prioritised the projects that would boost its international trade most effectively. The projects include expanding and rehabilitating road networks, boosting railway links, building warehouses and creating single-window cross-border systems.
The projects will all be undertaken along Carec’s six designated ‘corridors’: transport links which connect the region’s key economic hubs. The corridors will connect, for instance, northern Kazakhstan with the port of Karachi, and resource-hungry eastern China with the resource-rich Caucuses. Each corridor will improve access for Carec countries to at least two large Eurasian markets.
The structure of the financing will be decided on a project-by-project basis, with much of it coming from Carec’s six multilateral partners, the ADB, the European Bank of Reconstruction and Development (EBRD), the International Monetary Fund (IMF), the Islamic Development Bank (IDB), the United Nations Development Programme (UNDP) and the World Bank.
However, Klaus Gerhaeusser, director of the ADB’s Central and West Asia department, has confirmed to GTR that there will be opportunities for commercial banks to get involved in the projects on a co-financing basis. Gerhaeusser says the funding from Carec’s partners will come in the form of loans and grants, and that the individual countries will be heavily involved in deciding how the finance is raised and structured. Some of the finance must come from the countries’ transport budgets.
The loans will be structured on a case-by-case basis, and are expected to vary from middle-income countries such as Kazakhstan and poorer ones like Tajikistan.
Gerhaeusser explains: “Lending from the ADB can be either in the form of non-concessional funding from the ADB’s Ordinary Capital Resources (OCR) – typically for up to 20 years duration with four to five years grace period, and an interest rate based on six-month Libor plus 40 basis points spread; or concessional funding, from the ADB’s Asian Development Fund (ADF) resources – duration of 32 years, with eight years grace and current interest rate of 1% during grace period and 1.5% thereafter. The use of ADF is based on specific criteria such as per capita gross national income, thus geared towards countries with lower per capita income.”
While Gerhaeusser claims it’s unfair to generalise the current state of Central Asia’s transport links, he says that “in some cases, it might be necessary to put four lanes on a highway instead of two or to expand a country’s railway capacity”. He also speaks of the need for co-operation: “It’s not useful for international trade if one country improves its railway network but its neighbouring country doesn’t.”
Since 2001, Carec has invested more than US$19bn in 120 projects, including almost 4,000km of roads, 3,200km of railways, and more than 2,300km of power transmission lines. Carec hopes that these and the latest round of funding will improve access to the region’s plentiful natural resources.