Economy
EU Logistics In The BRI Maps: Synergy of BRI and TEN-T
Today, the logistics centers play an important role in the development of various formats of international interaction at the beginning of the new Millennium. At the present stage, their role is particularly high in the context of integration processes at the regional and global levels. The trends of globalization and regionalization led to the formation of the concept of “global region” and the increasing competition of integration associations for sales markets.
The current fight in the transit transport market in the regions of the world is becoming more complicated, as in modern conditions, competition for transit cargo flows is moving from offering more rational routes and cost-effective services to meeting the geopolitical and geo-economic interests of the main participants.
In this regard, initiatives by individual States or mega-partnerships to build new systems and channels of economic interaction between individual countries and subregions are emerging in regions of the world. It should be understood that the implementation of such projects requires the creation of a new architecture of international transport corridors. Thus, in response to the new challenges of developing economic relations between Europe and Asia, EU leaders began to take steps towards the development of logistics routes on the continent.
The Concept of the pan-European corridor was one of the first to appear as part of the concept of pan-European transport infrastructure and was developed for more than 8 years at the so-called Prague (1991), Cretan (1994) and Helsinki (1997) conferences. Its main goal was to increase the EU’s connectivity with its (back then) potential members – the countries of Central and Eastern Europe (CEE). After the Helsinki conference, the content of the pan-European transport and infrastructure network was formulated, which consists of : 1. Trans – European transport network in the EU (TEN-T); 2. 10 pan-European corridors in CEE; 3. 4 pan-European transport zones; 4. TRACECA Eurasian routes.
The implementation of the 10 pan-European corridors program (in 1995 – 2005) was closely linked to integration processes in Europe and the desire to develop pan-European cooperation. Nevertheless, the large number of States in Europe and the borders separating them, and differences in the rules governing international transport, significantly slowed down the cross-border movement of goods.
After the EU enlargement in 2005, a Program was developed to expand the main transport routes (5 logistic roads) to neighboring countries and regions, which were considered as an infrastructure framework for pan-European economic cooperation, which was linked to the future prospects of the EU .
Deepening integration processes within the Union and building up mutual economic and social ties have revealed bottlenecks in European logistics in the form of disparate national projects for its development, lagging in the introduction of intermodal transport technologies, and insufficient coordination of the development of individual modes of transport and improving their environmental friendliness. In order to eliminate these bottlenecks, the EU adopted the Trans – European transport network development program (TEN-T), designed up to 2050.
TEN-T consists of two subsystems: a comprehensive one that provides integrated transport development in the EU countries and a high-speed connection of about a hundred European urban agglomerations, all major seaports, airports and border checkpoints, and a basic one in the form of Trans – European highways, where international traffic is concentrated. There are 9 main logistics hubs: North sea – Baltic; Mediterranean ; Rhine – Danube ; Baltic – Adriatic ; North sea – Mediterranean ; middle East ; Atlantic ; Scandinavia – Mediterranean; Rhine – Alps.
The implementation of the program allows ensuring the smooth functioning of the internal market, economic, social and territorial cohesion of the EU, and improving transport accessibility throughout the Union.
Another EU project to strengthen logistics routes along the EU – Asia line was the TRACECA project created in 1993. Over the past ten years, more than 50 technical assistance and investment projects have been implemented under the TRACECA program, in which 14 States participate, and private investment has exceeded $ 1 billion. In particular, over the past five years, $ 25 million has been invested in the development of the ports of Baku and Turkmenbashi, $ 70 million in Amirabad (Iran), and about $ 100 million in Aktau.
As a result, a significant part of the cargo traffic passing through the Caspian region already goes through TRACECA. However, difficulties in the implementation of the project are also present and the deadline for the corridor to reach full capacity has been pushed back to the 2020s. This project provides for the reconstruction of logistics between Europe, the Caucasus and Central Asia.
Geopolitical changes on the world map and the strengthening of the PRC as one of the main actors in international relations not only in the region, but also in the world, attracted the attention of European political and business circles to a new project put forward by the PRC in 2013 – Belt and Road Initiative (BRI)
According to the Chinese side, the BRI concept should not be considered an integration structure, international or regional organization. This is an initiative of mutually beneficial cooperation and joint development of China and neighboring countries.
The main goal of the project is to redirect the flow of exports of goods and capital to those countries with which China has begun to develop cooperation in the last decade, primarily to countries in Africa and Central Asia and Western Europe. The project’s focus on solving China’s long-term Eurasian problems is clearly visible. After solving numerous political, organizational, financial and other issues, the communication basis of the project should be implemented in the current logistics.
According to the initiators of the project, the New Silk Road should include land and sea components. The land-based silk road, as it was a thousand years ago, will start in Xian (Shaanxi province), then pass through China to Lanzhou (Gansu province), Urumqi district, and cross Central Asia, Iran, Iraq, Syria, and Turkey. Then, passing through the Bosphorus Strait, it will go to Moscow (Russia), continue to Rotterdam and end in Venice (Italy), where it will meet the sea component.
The Maritime Silk Road will start in Quanzhou (Fujiian province), pass through the major cities of southern China, Guangzhou (capital of Guangdong), Beihai (Guangxi) and Haikou (Hainan), reach the Strait of Malacca with a stop in Kuala Lumpur (Malaysia), cross the Indian ocean with calls in Kal-Kutta (India), Colombo (Sri Lanka) and the Maldives, and reach Nairobi in Kenya. Then it will pass through Djibouti, the Red sea and the Suez canal to Athens (Greece) and then to Venice (Italy), where it will connect with the land route.
Control over two Silk Road routes ensures China’s energy security and helps protect its investments in strategically important regions. In addition, the implementation of the project allows to reduce logistics costs. Thus, it is important for China to ensure the security of East, Central and South – East Asia, on which political and economic stability depends the well-being of a number of border regions of the PRC, as well as the stability of its trade.
The emergence of the Belt and Road Initiative has become the embodiment of a competition of development models that challenges the former role of the EU as a global model of regional integration. “Belt and road” partnerships of ASEAN with major international players (USA, China, Russia, Japan, South Korea), as well as the Trans – Pacific partnership are a set of new initiatives, “significantly different from classical integration schemes, which are formulated in the theory of international relations based on the experience of the EU, and “new regionalism” relying on non-state actors and transnational processes that occur “apart from” state” .
China’s ability to respond with interest to new plans for regional cooperation has become an advantage against the background of the EU’s wary attitude to the BRI, which has led to the involvement of the interests of Central Asian and Eastern European countries in the initiative. Thus, as a consequence of the involvement of the Eastern partnership countries in the Chinese investment zone of influence, the EU and China decided to combine their logistics routes.
Analyzing the Sino – European relations, it can be noted that the current relations between the EU and China are characterized by a comprehensive content of the bilateral agenda. In an effort to strengthen a common foreign policy line in relations with China, in 2015 The EU has developed a document“Elements of a new EU strategy towards China”. A new “Connecting Europe & Asia: The EU Strategy” was adopted in 2018, which specified the European policy towards Asian countries as part of the “connectivity” approach, providing a forum for coordinating EU and Chinese infrastructure investment relating to TEN-T and the BRI.
A key objective of the “Connectivity Platform” is to ensure that investment takes place within a framework of fair and undistorted competition based on regulatory convergence, while promoting cooperation in areas such as technology, engineering, construction and the development of standards.
An important initial area of work for the “Connectivity Platform” is the financing of investment on priority transport corridors. The Sino – EU summit 2016 in Riga (Latvia) provided further confirmation of an increasing focus on BRI – related projects and initiatives. At the closure of the summit, participants declared that they would make concerted efforts to develop synergies between the BRI and relevant EU initiatives such as the Trans – European Transport Network, more generally support the development of transport routes between Europe and Asia, and establish multimodal logistics centres throughout the area of the New Eurasian Land Bridge. They also committed to improving the international supply chain and border crossing rules on key transport corridors and the connection from the Port of Bar (Montenegro) to the railway network in Central and Eastern Europe.
Analysing the logistics along TEN-T, it should be mentioned that the EU has ports on the Black Sea, Mediterranean Sea (including the Aegean, Adriatic, Tyrrhenian and Balearic Seas), North Atlantic Ocean, North Sea and Baltic Sea, providing a wide range of access points for shipping from outside the EU.
Also should be taking into the consideration the possible approaches to the EU by land and sea and the TEN-T core network corridors. Thus rail services between China and the EU currently operate mainly on the route through Russia, Belarus (where they transfer from the Russian, broad gauge (1,520mm) to the standard UIC gauge (1,435mm) at Brest) and Poland, using the North Sea – Baltic TEN-T Core Network Corridor (CNC) at least as far west as Warsaw. In the course of this research, various rail routes from the Far East to the EU were assessed to determine the most likely ones for carrying rail freight in the future. To that end, the attractiveness of the time of the shipment was considered. Based on the above assumption, it was found that, with shipping times to the North Sea up to one week longer than to the Mediterranean Sea, rail would be most attractive for transport to Europe north of the Alps, including to EU Member States bordering the North Sea and Baltic Sea.
Containers carried by rail, therefore, would primarily be those previously shipped to North Sea ports, and would travel along the route from Moscow (Russia) through Brest (Belarus) and Warsaw (Poland) to Berlin (Germany). Containers carried by sea would first pass or call at ports in Southeast Europe, such as Athens/Piraeus in Greece, where they could in principle be transferred to rail for travel further north. However, most freight of sufficiently high value to justify the additional costs of rail across the Balkans would already have switched to overland rail travel across Asia. It would therefore be more cost-effective for the remaining containers at Athens/Piraeus to continue by sea to ports in the north Adriatic Sea, such as Venice and Trieste in Italy, Koper in Slovenia and Rijeka in Croatia.
Assuming that sufficient end – to – end capacity is available between China and the EU, the focus of future rail freight flows, including those attributed to the BRI, is likely to be the North Sea – Baltic TEN-T CNC from Brest to Warsaw(Poland).
Some freight trains through or around Warsaw (Poland) currently continue to Berlin and Duisburg in Germany, but, by 2040, services may diverge to a range of destinations: south via Katowice in Poland to Hungary and Austria, Slovakia and the Czech Republic, and onwards to southern Germany, Switzerland and France; southwest via Łódź and Wrocław in Poland to Germany; west, as at present, via Poznań (Poland) to Germany, and onwards to the Netherlands, Belgium, the United Kingdom and Ireland, and via Hamburg to Denmark and Sweden; and northeast along Rail Baltica to Lithuania, Latvia, Estonian and Finland.
The routes to the west and to the northeast form part of the North Sea – Baltic Core Network Corridor of the TEN-T, which extends from Warsaw west to Berlin, Amsterdam and Rotterdam and north to Tallinn and Helsinki. The North Sea – Baltic Core Network Corridor Study includes estimates of rail freight tonnage crossing the border between Belarus and Poland in 2025. While it is difficult to compare estimates of tonnages and TEUs, the estimates in the Corridor Study appear to be small compared with the potential volume of BRI – related traffic by 2040.
Despite wide range of synegration of TEN-T and BRI, the analysis showed, that the geographical and project scope of the BRI are not clearly defined and that they continue to evolve.
The analysis of potential future traffic flows in this study suggests that the first study should focus on the New Eurasian Land Bridge Corridor connecting with the North Sea – Baltic Core Network Corridor of the TEN-T. This would require dialogue with other organisations already engaged in the development of rail transport routes in Eurasia, in particular CAREC. It would also require engagement with organisations such as UNIFE, representing manufacturers of rail equipment, with an interest in the promotion and application of EU standards beyond its borders.
The analysis of BRI – related traffic flows in the EU suggested that the BRI could generate additional rail freight of approximately 3 million TEU (equivalent to 50 – 60 trains per day or 2 – 3 trains per hour each way) between the Far East and the EU by 2040. Subsequently, it was concluded that the most likely TEN-T corridor to be required to accommodate this traffic would be the North Sea – Baltic Core Network Corridor.
It is not expected that the BRI changes patterns of shipping traffic materially other than to reduce slightly the volume of freight entering the EU via the North Sea Ports. Any effect might be offset by a growth in the shipment of BRI – generated freight across the North Sea to the UK. Nevertheless, it should be noted that maritime trade between China and the EU is already well-established, and that it is not possible to forecast possible changes in related trade patterns as a result of the BRI.
Given these results, and taking account of the uncertainties surrounding the definition and evolution of the BRI, recommendations to address particular constraints or bottlenecks on TEN-T beyond those already highlighted by the corridor studies would be premature. In the absence of greater clarity on the scope and priorities of the BRI, there is a risk that the development of specific investment projects designed to accommodate more traffic on the North Sea – Baltic Core Network Corridor, for example, would prove either inadequate or redundant.
It is also worth noting the issue of stabilization of subsidies for infrastructure and logistics projects of the PRC through the EU – Asia line.
At the same time, the TEN-T Corridor Studies should be reviewed and developed periodically as the work of the “Connectivity Platform” progresses and the BRI is defined more clearly. This would require TEN-T policy to become more outward-looking, with an explicit requirement to take account of major policy initiatives sponsored by countries outside the EU. It could also be facilitated by the development of periodic forecasts of BRI – related traffic, following the model of the European Commission’s Reference Scenario, with forecasts developed under the framework of the “Connectivity Platform” and jointly approved by participating countries.
Despite the presence of problem areas in the development of logistics ties between the EU and China, partners (especially the EU) note that the development of the logistics is greatly influenced by the geopolitical considerations of countries, in particular the desire to strengthen their foreign policy influence through modern infrastructure, reduce the geopolitical risks of entering major markets, and diversify options for communication with world markets. In other words, the dynamics of the developing of the EU – China logistics is a reflection of technological progress in transportation, the progress of globalization and regionalization of the world economy, geopolitical and geo-economic interests of participating countries in the development of international communications.
It should be understood that one of the key advantages of continental cooperation in the Eurasian space is the possibility of developing transport potential and related infrastructure. Work in this direction will lead to a number of positive effects, the main of which are the use of the transit potential of countries, localization of industry along the Trans – Eurasian transport corridors, export development and increased connectivity of inland States and regions.
Constructive interaction between the EU and China on the development of logistics routes in Eurasia shows that participation in the Eurasian cooperation can help the participants of the initiative “consolidate the strategic rear”, provide a basis for the rise of countries and influence the restructuring of the world structure, become a useful platform for global governance and international policy building.
In negotiations, bargaining power is the capacity to exert influence or negotiate. A country or multinational corporation (MNC) has a stronger position than others in certain circumstances. The ability of a country to control market access and provide additional incentives to encourage market participation are just two of the many factors that influence a country’s strong bargaining position. A country’s position in the value chain, economic development, labor, and ties to major corporations are just a few factors that can affect its bargaining power in the context of global production networks. Doz & Prahalad (1980), note that product differentiation, economies of scale, and technology influence the bargaining leverage of multinational corporations.
The parent company of Uniqlo fashion retail, Fast Retailing Co., Ltd., is headquartered in Yamaguchi Prefecture, Japan. In another study by Coe & Yeung (2015) on global production networks, they see that a fashion retail company controls a global production system by collaborating with partners who supply finalized products according to product specifications requested by export-oriented nations. In addition, the finished products are distributed and marketed with strong trademarks and access to large consumer markets, such as shopping center outlets and online retail. Uniqlo is taking measures to establish partnerships with countries in various regions of the globe, including the Asian region. Uniqlo’s expansion in the Asian region is a manifestation of the company’s economic interest in broadening the scope of product marketing, increasing competitiveness by prioritizing innovation, and establishing a variety of facilities that cater to the requirements of consumers. Under PT Fast Retailing Indonesia, Uniqlo continues to expand in Indonesia.
Merit comparison between Indonesia and Uniqlo
With a population of 278 million, Indonesia has a large and expanding labor force that can encourage the acceleration of production in the Indonesian garment or apparel industry. In addition to its large and productive workforce, one of Uniqlo’s primary advantages is its low labor costs. It is not surprising to see that the Uniqlo brand has collaborated with 17 apparel supplier partners and retail center outlets in Indonesia. The domestic market in Indonesia can also be advantageous for Uniqlo, as the country’s high population will continue to generate demand for clothing.
Considering product differentiation, economies of scale, and technology, Uniqlo has a superior bargaining position. Based on Yuan (2023) research, by cultivating a strong “comfort and simplicity” brand image and actively collaborating with other brands, Uniqlo is able to increase its bargaining power. These strategies have helped Uniqlo achieve success in the fashion industry, increase its capacity to attract and retain customers, and distinguish its products from those of its competitors. According to Bisnis.com (2023), Uniqlo has also achieved economic success in the fashion industry, with a total net profit of IDR 83,2 trillion. By signing an agreement with the International Labor Organization (ILO), Uniqlo enhances its relationship of trust with its production partners and promotes the well-being of workers. Furthermore, Alexandra Santiago (2021), through YCP Soliadiance, reveals that Uniqlo also owns software for supply chain management called Global One (G1) SCM System, which it requires all of its suppliers to implement, and that this digitalization can enhance production planning and reduce production lead times.
Uniqlo’s bargaining position is strengthened in the negotiation process because the company has a great deal to offer Indonesia. For instance, PT Fast Retailing, the parent company of Uniqlo, signed a cooperation agreement with the International Labour Organization (ILO) to promote employment and social protection in Indonesia, funding the program with $1.8 million. One of the goals of this program is to ensure the minimum wage, assist workers in this industry in regaining employment, and enhance their abilities and skills. Uniqlo also collaborates with BUMN to support the development of Indonesia’s renewable energy sector by procuring Renewable Energy Certificates (RECs). In 2019, Uniqlo became the first fashion retailer in Indonesia to use renewable energy from the Geothermal Power Plant (PLTP) in Kamojang, West Java, by signing a Renewable Energy Certificate Sale and Purchase Cooperation agreement with PLN. Based on Antaranews.com (2023), Uniqlo facilitates Indonesian small and medium enterprises (SMEs) by providing SME training and marketing curated products through the “Neighborhood Collaboration” program, so that local Indonesian products are better known.
The outcome?
PT Fast Retailing Indonesia has a greater bargaining position than Indonesia. Indonesia’s bargaining position is quite weak due to the fact that it offers only a ready-to-work population and personnel resources, with no other bolstering factors. The garment industry in Indonesia still faces a number of issues, ranging from the need to import raw materials, which drives up production costs, to labor demonstrations demanding wage increases. This has caused many businesses to relocate to inexpensive nations, such as Vietnam. Indonesia must address its deficiencies create a more business-friendly regulatory environment because a nation’s bargaining position will be enhanced if it meets the requirements of the Global Production Network’s major corporations. If Indonesia has everything required by multinational corporations, it is not inconceivable that many companies from diverse industrial sectors will build facilities in Indonesia.
Overall, both Indonesia and Uniqlo benefit from their respective bargaining positions. Uniqlo provides a variety of benefits to Indonesia, including the protection of labor in production partner companies, the use of Indonesian renewable energy in its production to support the sector, and the promotion of small and medium-sized enterprises (SMEs) through training and the marketing of its products through the Neighborhood Collaboration program. By assisting the SME sector and promoting the use of renewable energy in its partner countries, Indonesia also benefits Uniqlo in terms of human resources that support accelerated production and a positive corporate image. Indonesia can make improvements to increase its competitiveness and attract multinational corporations to produce there.
There are a number of advantages to the presence of multinational corporations in a country, including the following: the presence of multinational corporations in a country can facilitate the creation of new jobs and reduce unemployment rates in the country; there is an increase in expertise for the workforce in a country as a result of the transfer of new technology and management systems, which are unquestionably more effective; and the presence of multinational corporations in a country can i) improve the quality of life in the country; ii) promote economic development.
China will hold the third edition of the Belt and Road Initiative Global Forum in October 2023. The Chinese Belt and Road Initiative aims primarily to stimulate and encourage global trade infrastructure. China began its Belt and Road Initiative more than 10 years ago, and it is a global strategic initiative to develop infrastructure, to connect with Asia, Africa, and Europe by land and sea. The “Belt and Road” project, or “One Belt – One Road”, is an international initiative previously presented by China with the aim of developing currently operating commercial transport corridors and establishing new corridors linking more than 60 countries around the world in the regions of Central Asia, Europe and Africa, and it is designed to enhance the development of the trade relations between them, and this in turn leads to the development of trade relations between them and China.
The idea of forming a “Silk Road Economic Belt” was proposed by Chinese President Xi Jinping, and was announced for the first time during his speech in the city of Astana, the capital of Kazakhstan, in September 2013. The first forum was held in 2017, while the second one was held in 2019.
The third Belt and Road Forum for International Cooperation will be held in Beijing in October 2023, and it is expected that three high-level forums will be held on connectivity, green development and digital economy, and six other forums on trade connectivity, people-to-people connectivity, think tank exchange, the Clean Silk Road, and Sub-national cooperation, that is, with other economic blocs such as BRICS and others, and maritime cooperation, in addition to holding a conference for CEOs of major companies and projects around the world. With China officially confirming that the tenth anniversary of the Belt and Road Initiative is an important platform for all parties to research and develop high-level cooperation within the framework of the initiative.
The Belt and Road Initiative is of great importance to Egypt and the countries of the region, given its economic benefits and the investments and various economic benefits it brings. Relations between Egypt and the countries of the region and China have witnessed great development and an important shift in recent years, within the framework of the Belt and Road Initiative as an entry point for developing these relations and establishing more diversified relations between China and the countries of the region. The initiative also provides a great opportunity for cooperation between Egypt and China in the maritime field, because the Suez Canal is part of the maritime component of the Chinese Belt and Road Initiative, and Egypt has extensions with the Indian Ocean and the Mediterranean Sea that facilitate the opening and establishment of new projects between China and Egypt. The Chinese presence in the (Suez Canal Economic Zone) also contributed to transforming it into an industrial zone, with the Egyptian side planning, based on China’s role in transferring technology and expertise to the Egyptian side. The Belt and Road Initiative also gave great importance to the issue of interaction between peoples, especially in the tourism sector, with Egypt expecting an increase in the volume of Chinese tourism during the coming period.
Egypt and all countries of the region also interacted with the Chinese Belt and Road Initiative in a very large way, whether by attending Belt and Road forums or opening the way for Chinese investments in our countries. In addition to the role of the Suez Canal in establishing major partnerships with the Chinese side regarding international navigation and trade through the maritime component of the initiative. The interaction of Egypt and the countries of the region with the Belt and Road Initiative has been positive, and Egypt has benefited greatly from financing institutions within the framework of the Chinese Belt and Road Initiative, such as the Asian Infrastructure Investment Bank, which contributes to financing important projects in Egypt, including: the huge Benban project in Aswan to generate electricity and the solar energy.
China has already announced the participation of 110 countries in the Third Belt and Road Forum in October 2023, in addition to the invitation of the Chinese side to many international economic forums and gatherings. The most important thing for me is the official Chinese media’s confirmation that China did not invite the heads of some Western countries to attend the Belt and Road Forum, given their interference in China’s affairs and obstruction of the growth of its interests. This is precisely what was confirmed by the Chinese newspaper “Global Times”, which is close to the ruling Communist Party in China, by confirming that the vast majority of invitations to attend the forum were sent to leaders of developing countries, while the heads of some developed countries were not included to attend the Belt and Road Forum in 2023. With the Global Times confirming that this was done, because the main goal of the forum is development cooperation between countries, so a number of Western countries in particular were excluded. Knowing that Russian President Putin intends to visit China, and this coincides with the holding of the Belt and Road Initiative Forum in October 2023.
Some Western pressure also came on Italy in particular, despite its previous strong enthusiasm for the Chinese Belt and Road Initiative, with the Italian Foreign Minister Antonio Tajani’s assertion that cooperation within the framework of the Belt and Road “did not achieve the results that the Italian side expected, and his confirmation that many Italian parties It opposes Italy’s participation in the Belt and Road Forum in China in October 2023. Here came the Chinese response to the Italian Foreign Minister, through Chinese Foreign Minister Wang Yi, stressing that the “Belt and Road” plan is a huge infrastructure program similar to the ancient Silk Road of roads. Eurasian trade, and this initiative has borne fruit for Italy, which is the only economy in the “G7” that has signed a memorandum of understanding regarding the agreement to implement a number of Chinese projects in Italy in relation to the Belt and Road Initiative, to end in March 2024.
I believe that the Belt and Road Forum, in its third edition scheduled to be held in October 2023, will be different from previous years, especially with China’s introduction of the economic corridors project, in light of American and Western pressure on it. Before the Belt and Road Forum began in October 2023, China officially announced the signing of cooperation documents related to the Belt and Road Initiative with more than 150 countries and more than 30 international organizations. With Belt and Road cooperation achieving economically fruitful results, such as implementing 3,000 cooperation projects and stimulating investments worth a trillion dollars. Also, since the proposal of the Belt and Road Initiative, the project to build China’s economic corridors has achieved great results, which serve the direction of development for the countries participating with China in those six economic corridors, the most prominent of which are:
The New Economic Corridor for the Eurasian Continental Bridge, which relies on high-speed railways between China and Europe.
The China-Pakistan Economic Corridor, which has entered the second phase of implementing its projects, after the completion of the first phase of the Pakistani Gwadar Port Free Zone project to attract investment, and the cross-border optical cable project between China and Pakistan was completed and opened.
The economic corridor between China, Mongolia and Russia
Indochina Peninsula Economic Corridor
The economic corridor between China, Central Asia and West Asia
The Economic Corridor between Bangladesh, China, India and Myanmar, which is making slow progress
We find that the strongest projects of these six economic corridors are the China-Pakistan Economic Corridor and the China-Mongolia-Russia Economic Corridor, which has achieved many international cooperation plans for its parties. The China-Pakistan Economic Corridor has established a bilateral joint committee as a mechanism for international cooperation for coordination.
On the other hand, the American pressure on China, especially since the beginning of the Biden administration period, has considered China its biggest competitor. Not only did the United States of America pursue a policy of containment against China, but it also attracted allies to Washington to launch the Supply Chain Alliance and the Technological Alliance, which faces major objections from the Chinese, because it imposes many checks and balances in the form of huge challenges facing China. These measures taken by the United States of America, as well as the period of global embargo during the outbreak of the Corona epidemic, exacerbated many geopolitical contradictions along the Belt and Road, due to American pressure on China’s projects in those six economic corridors.
On September 1, President of Kazakhstan Kassym-Jomart Tokayev delivered an address that outlined the nation’s priority areas for development. Primarily focusing on Kazakhstan’s economic trajectory, the President’s remarks have a significant impact on the activities and initiatives of public authorities, including quasi-public sector companies like Samruk-Kazyna, a sovereign wealth fund of Kazakhstan, which owns several major companies in the country.
Rethinking Tariff Policy
President Tokayev emphasized the necessity of reforming the tariff policy and introducing adequate market tariffs for entities subject to natural monopolies. This marks an important shift from the existing approach, which has reached its limits. Adopting a cost-plus principle for tariffs will enable us to discontinue subsidies to the economy. This, in turn, will facilitate timely preventive maintenance, thereby reducing the risk of industrial disasters. This policy overhaul will ensure break-even in the areas of activity, bolster the investment attractiveness of our companies and a number of industries, and ultimately lead to increased dividends and social payments. We have already been collaborating with the Government to systematically increase tariffs, taking into account the 10-12% inflation corridor set by regulators to ensure social stability.
Focusing on Exploration
Tau-Ken Samruk, our national mining company, is currently engaged in exploration projects with leading international companies like RioTinto, Fortescue Metals Group, and others. With Kazgeology joining the structure of Tau-Ken Samruk this year, the number of exploration projects has increased from 15 to 45, expanding the exploration area from 1887.7 km² to 13,609 km². Notably, we are focusing on copper, gold, lead, and zinc, as well as rare metals like tungsten, molybdenum, and yttrium. Joint ventures registered in Kazakhstan will own the extraction rights to these minerals if confirmed. Geological exploration work will be carried out not only by Tau-Ken Samruk, but also by the world’s largest uranium producer Kazatomprom, national oil and gas companies KazMunayGaz and QazaqGaz in their areas of activity.
Energy Goals for the Next Five Years
The President has set a goal to commission 14 GW of new energy capacity over the next five years. This includes the Samruk-Kazyna projects aimed at restoring the first unit of Ekibastuz GRES-1, a coal-fired thermal power station, expanding GRES-2, and constructing GRES-3. These initiatives focus on traditional coal energy.
In addition, the Fund’s portfolio features gas generation projects, the largest of which involve the reconstruction of Almaty CHPP-2 and CHPP-3, as well as the construction of a combined cycle power plant in the Turkestan region.
Special emphasis is being placed on the development of renewable energy sources, particularly hydroelectric power plants. Plans include constructing wind farms with a capacity of up to 5 GW in collaboration with foreign partners such as Total Eren, Acwa Power, Power China, Masdar, and China Power International Holding. The projects also encompass the construction of counter-regulators for Kapshagai HPP and Shulba HPP.
According to forecasted data, a capacity increase of approximately 9 GW is expected by the end of 2028.
Transport and Logistics
Strategic upgrades are in progress to improve our existing transport infrastructure and eliminate bottlenecks. Several significant infrastructure projects are currently underway, including the construction of second lines on the Dostyk–Moiynty section, and the development of new railway lines: Bakhty–Ayagoz, Darbaza–Maktaaral, as well as a bypass line around Almaty.
Alongside the widespread modernization of railway infrastructure across the country, the North–South transport corridor stands out as a promising focus area. Plans are in place to upgrade railway sections leading to the Bolashak station, which is located at the border with Turkmenistan.
Simultaneously, initiatives to boost terminal capacity are in the works both within Kazakhstan and abroad. Noteworthy projects include establishing a container hub in Aktau, constructing a terminal at Xi’an port in China, and creating a dry port at Bakhty station, among others. Kuryk port is receiving special focus; the construction of its ferry complex is nearly complete, and activity along the Trans-Caspian International Transport Route is ramping up.
The expected economic impact of these initiatives is substantial, with freight traffic projected to increase by an estimated 50 million tons annually. These efforts aim to transform Kazakhstan Temir Zholy, Kazakhstan’s national railway company, into a comprehensive transport and logistics enterprise.
Top of Form
Economic development on horizon
Kazakhstan is at a historically significant crossroads. The President’s address underlines a multitude of opportunities that we are keen to seize. For decades, Samruk-Kazyna has collaborated with international entities, and we firmly believe that collective business efforts are the most effective approach for the 21st century.
To attract major long-term investors, stability and clear profit plans are essential. In line with the President’s recommendations, we are refining our tax policy to make it more investor-friendly, among other initiatives. These comprehensive efforts not only offer us a robust toolkit for economic development but are already yielding tangible results. I have immense faith in Kazakhstan’s economic potential and am confident that the global business community will recognize and appreciate the favorable conditions being nurtured in our nation.
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