Natalia Jakubowska, Trans.iNFO: Transport volumes on China’s Silk Road are declining, and countries struggle to repay loans from the One Belt One Road Initiative. Additionally, China’s economy is in crisis. Do you believe there’s still a future for the Silk Road?
Heinrich Kerstgens, Corporate Representative, Director Board Projects, Rhenus: The Chinese initiative, active since 2013, has faced major problems. However, despite challenges, China remains active in Asian countries, even as progress on large infrastructure projects becomes more difficult. Does the project still have a future? I believe so.
How much is Russia’s war against Ukraine affecting the Silk Road?
The Silk Road comprises three corridors. Currently, transporting dual-use goods through Russia and Belarus isn’t possible, resulting in a significant volume decline. This impact is noticeable in Duisburg, where the New Silk Road ends or begins. Volumes have halved this year, despite a previous sharp decline.
Looking at the middle corridor, there’s increasing demand, but the required capacities are lacking. Currently, a maximum of 100,000 TEU can be transported on the middle corridor with considerable effort. While expansion is planned, transit times are non-competitive due to insufficient capacity, locomotives, and wagons at junctions. This leads to complications, errors, and, in some cases, goods being forced onto trucks. Another option for delivering goods to Central Asia from the EU is by sea, but this adds an additional 10,000 to 12,000 kilometers, making it neither faster nor better.
In certain transport constellations between Western China and Eastern Europe, the sea route is relatively expensive compared to rail transport. Money is not even the main concern at this point; the focus is on ensuring delivery.
Could the middle corridor, with significant effort, replace the northern corridor in the medium or long term?
I firmly believe that, in 10-12 years, 1 million TEU can be transported via the middle corridor in the medium term. It’s a viable option, especially for companies in western China. However, it should be seen as a complement to the northern corridor, just as the northern corridor complements the sea route. The Silk Road needs to increase its capacities due to the rapidly growing economies in Central Asia, crucial for Europe in diversification and resilience strategies for raw material supply and future markets.
For which industries is Central Asia particularly interesting?
Central Asia is appealing for agriculture, agricultural machinery, building materials, mechanical engineering, and chemistry. According to the ILO, child labor in the region has recently decreased significantly. However, there are challenges such as a prevalent shadow economy and corruption.
Currently reviewing a contract from my Central Asian partner, I notice at least two pages dedicated to anti-corruption rules. Legal environments, especially in Uzbekistan and Kazakhstan, have evolved positively. In Kazakhstan, the Astana International Financial Center (AIFC) with a court governed by English law and judged by international judges has made investing in Central Asia more manageable for German companies.
Are there benefits for companies in the form of special economic zones?
The number of special economic zones is numerous, offering investors substantial tax advantages in Central Asia. Additionally, energy costs are sometimes very low. While China is a significant investor in the region, the Global Gateway project also targets these countries, potentially creating areas of tension that may affect logistics companies.
Is the Global Gateway project purely an anti-Silk Road initiative?
Certainly, it’s a competitor. Countries must decide whether to accept Chinese investments with fewer conditions or work with the EU, meeting socio-economic criteria like equality or sustainability. The Silk Road needs to expand its capacities to accommodate the rapidly growing economies in Central Asia.
Where do you see room for improvement in the Global Gateway?
There’s a lack of a visible coordinating body in the European Union for the Global Gateway. The project, built from existing programs, lacks clarity on project submission procedures, requiring extensive research. Economic and transport ministries in countries like Germany, the Netherlands, or France, reportedly struggle to understand the project.
Is there significant interest from companies in this project?
The bureaucratic effort is so high that participation becomes worthwhile only when the project reaches a certain size, usually in the state sector. Sums of around 10,000,000 euros are involved, making it less optimal for companies needing smaller amounts.
What are your thoughts on the US initiative to build a transport network from the USA to India?
I find it challenging to understand how the Americans plan to connect to India and other Asian countries, given the geographical obstacles. A break in the transport mode across the Arabian Peninsula makes the project expensive and inefficient. While India may not replace China as a sales and production market, it remains an interesting market with potential for growth in international trade chains.
How would you rate the status of the Turkish logistics market?
Turkey has become a crucial logistics hub on the Silk Road, benefiting from the trend toward nearshoring. Despite the industry’s high dependence on imports and geopolitical risks, economic ties between Europe and Turkey are close. The market serves as a bridge to Central Asia.
Is the industry’s high dependence on imports a deterrent?
Germany, too, is dependent on imports, yet investments are made. Despite challenges and Erdogan’s rhetoric, Turkey has proven reliable as a NATO and economic partner. Distinguishing rhetoric from reality is crucial. Turkey’s young generation is well-educated, and recent infrastructure investments demonstrate the country’s commitment to development.
Photo: Semen1966, CC BY-SA 3.0, via Wikimedia Commons