Tag: Regional Cooperation and Integration
Progress in Trade Facilitation in CAREC Countries: A 10-Year Corridor Performance Measurement and Monitoring Perspective
Dialogue on Regional Cooperation in Promoting Digital Economy: Challenges and Way Forward
Digital economy comprises a broad range of economic activities that use digitized information and knowledge as key factors of production. The internet, cloud computing, big data, fintech, and other new technologies are used to collect, store, analyze, and share information digitally and transform social interactions. Digitalization of the economy creates benefits and efficiencies as digital technologies drive innovation, productivity, and fuel job opportunities and economic growth. The digital economy also permeates all aspects of society, influencing the way people interact and bringing about broad sociological changes.
Coronavirus (COVID-19) pandemic, geopolitical tensions, and fragility of global values chains have accelerated the sharp expansion of the digital economy in Asia with rapid innovations and broad applications across all sectors. The recent phenomenal growth of e-commerce in Asia is a case in point, where many Asian countries have become important buyers and sellers of goods and services online. Digital connectivity also offers a lot of potential in reducing trade costs by using ICT to link up markets and enter global value chains. In the area of finance, digital technology promotes financial inclusion in many developing Asian countries. As a result, investment in financial technology in Asia has expanded in various sectors such as payments, mobile, data and analytics, and regulatory technology.
Despite the many opportunities offered by digital economy, Asia has yet to fully realize the potentials of harnessing digital technology for sustainable development. The lack of national regulations and policies to support cross-border commerce and finance, and imbalanced digital economic development including ICT infrastructure, trade facilitation and logistics, and skills development remain key challenges. Concerted regional-level actions—through cooperation—can accelerate the realization of benefits from national efforts, as countries build synergies and complement one another. Harmonizing regulations, aligning documents with international standards for interoperability, developing a regional broadband ecosystem, pooling of human and financial resources, and exchange of innovative ideas are but a few examples. The role of digital economy in the post-pandemic sustainable development is a priority of most countries and cooperation to promote is part of various regional initiatives. The Central Asia Regional Economic Cooperation (CAREC) Digital Strategy 2030, endorsed in 2021, aims to be a catalyst for regional cooperation on digital technologies among its member countries, to promote regional competitiveness and growth. The Greater Mekong Subregional program is considering a proposal for enhanced cooperation on digital economy, leveraging upon the GMS cross-border e-commerce cooperation platform.
This dialogue brings government officials, and experts from multilateral institutions, regional think tanks, and private enterprises to share challenges, insights, and experiences related to promoting the digital economy. It aims to facilitate discussions to build a resilient digital economy particularly in the Greater Mekong Subregion and the East and Central and West Asia regions, where all stakeholders can work together to achieve the long-term goal of more sustainable and inclusive economic growth.
Agenda:
| Time | Program |
|---|---|
| Chairperson: Hao Zhang, Deputy Country Director and Office-In-Charge, ADB Resident Mission in the PRC | |
| 15:00 – 15:10 | Opening Remarks • M. Teresa Kho, Director General, East Asia Department, ADB • Lu Jin, Deputy Director General, Department of International Economic and Financial Cooperation, Ministry of Finance, the PRC |
| 15:10 – 15:40 | Keynote Presentation • Research on Digital Economic Cooperation under Regional Frameworks, Xiaoqing Ji and Chong Liu, Shanghai University of Finance and Economics • Building Digital Connectivity in GMS Sub-Region, Guanqi Zhou and Lei Zhang, Yunnan University • Digital Divide and Policy Reforms for Promoting E-commerce in the CAREC Region, Qaisar Abbas, Chief of Research Division, CAREC Institute |
| 15:40 – 16:55 | Panel Discussion on Regional Cooperation in Promoting Digital Economy Moderator: Marzia Mongiorgi-Lorenzo, Principal Economist, East Asia Department, ADB Subregional Programs • Saad Paracha, CAREC Secretariat • Yi Hong, Chief Expert, Yunnan Cross-border Digital Commerce Engineering Research Center Private Sector • Wei Liu, Senior Sustainability Scientist, Luohan Academy, Alibaba • Yutong Zhang, Research Director, Institute of JD Economy and Development, JD • Augustine Chiew, Global Senior Public Services Industry Expert, Huawei • Xiaogang Zha, Director, International Policy Center, Tencent Research Institute, Tencent • Jamie Ko, Director, Regional Public Affairs and Policy, Grab, Singapore |
| 16:55 – 17:00 | Closing Remarks Safdar Parvez, Advisor, East Asia Department, ADB |
Analyzing the Factors that Constrain Trade Efficiency in CAREC
This study examines the impediments and gaps that hinder the growth of regional trade and ways to reverse declining trade efficiency.
Overview
Despite having reached a certain level of consensus, Central Asian countries still face challenges in regional trade cooperation. Trade efficiency is generally low and even declined from 2001 to 2020.
Analyzing trade efficiency and influencing factors in the Central Asia Regional Economic Cooperation (CAREC) region using the stochastic frontier gravity model(link is external) showed that 56% of the 11 member countries have a trade efficiency score lower than 0.2. The study considered not only the countries’ economic scale, population size, and influencing factors, such as geographical distance and border condition, but also political barriers, differences in digitalization, and institutional distance.
Conducted under the CAREC Institute CTTN Research Grants Program 2021, the study found transportation costs and trade barriers among the major factors constraining the growth of regional trade, while interconnectivity serves as an important driver of trade. A widening gap in digitalization may also affect regional trade prospects.
Governments should reduce regulations and allow market forces to allocate resources more effectively. Policy makers should also give attention to differences in informatization—how much information and communication technologies contribute to national development—among CAREC members.
Analyzing Trade Efficiency
CAREC is a crucial organization promoting trade cooperation. It involves many of the countries situated at the border of the European and Asian continents. However, the study showed that despite some progress, the current level of actual trade is far from ideal, and trade resistance is high.
Results of the study showed that Afghanistan and Tajikistan—because of their low economic level in the world— are generally inefficient in export trade and have not formed close trade relations with other CAREC members.
The Kyrgyz Republic and Pakistan also posted low trade efficiency levels with other CAREC countries. Kazakhstan, even with its membership in the Eurasian Economic Union, showed low trade efficiency.
Mongolia and Uzbekistan both showed high trade efficiency with the People’s Republic of China, but their trade volume with other CAREC countries is far from ideal.
Kazakhstan and Turkmenistan have high trade efficiency with other CAREC countries.
Azerbaijan and Georgia were the most efficient. However, their main export destination countries are outside CAREC. Majority of Azerbaijan’s exports go to Italy and Turkey, while Georgia’s exports go to Turkey and Russia.
Key Findings
Regional trade efficiency is generally in decline. Most CAREC countries became independent after the collapse of the Soviet Union and focused initially on national stability and reconstruction.
Since the 21st century, some countries showed strong willingness to develop foreign trade. However, because of high trade costs, intra-regional trade development did not keep pace with the expansion of the trade boundary. From 2000 to 2020, the CAREC regional trade inefficiency factor resistance increased rather than decreased.
Trade integration can play a huge role. The low trade efficiency in the region shows that actual trade is far from the ideal level. Actively promoting trade integration is one of CAREC’s priorities. Other donors and multilateral agencies can also support this regional trade cooperation initiative.
Transportation cost is a main constraint factor. The impact of transportation cost is significantly higher than that of other control variables, indicating that regional trade is still limited by backward transportation infrastructure. The transport network inherited from the Soviet Union cannot meet the development requirements of globalization, and countries in the region encounter various problems in restarting their economies in the wake of the COVID-19 pandemic. There are not enough funds for infrastructure maintenance, let alone for the construction of a new transport network.
At present, major powers, multilateral institutions, and nongovernment organizations are actively involved in infrastructure construction in the region. The integration of transportation infrastructure in the region—which will effectively reduce transportation cost—can promote the development of export trade. Further efforts to promote regional connectivity in Central Asia remain an important focus in driving trade development in the region.
Trade barriers of exporting countries hinder efficiency. In the trade freedom index, a country’s restrictions and obstacles to import and export trade reflect the political barriers to trade. Political barriers of exporting countries have a significant effect on the efficiency of export trade in the region. These include export subsidies, voluntary export restrictions, sanitary and phytosanitary standards, and other nontariff trade barriers.
In order to release the region’s trade potential, CAREC countries should optimize their respective trade policies, reduce government regulation, and gradually transition to using market forces to achieve effective allocation of resources.
Differences in digitalization (informatization) have a negative impact on trade efficiency. Due to the COVID-19 pandemic, the gap in digitalization may further widen and become a new factor hindering trade development. Countries with weak digital infrastructure and insufficient digital development talent are more likely to slow down the application of digital new technologies because of the decrease in technology investment funds. The pandemic, however, has also indirectly promoted the spread of digital life and accelerated digital transformation in various fields, including international trade.
References
Y. Wang and B. Yan. 2021. Trade Efficiency and Influencing Factors in the CAREC Region: Based on the Stochastic Frontier Gravity Model. Central Asia Regional Economic Cooperation Institute. Xinjiang.
Author
Yue Wang
Canvard College, Beijing Technology and Business University
This blog is reproduced from Development Asia.
How Trade via Rail in Central Asia Can Mitigate the Energy and Climate Crises
Trade via rail in Central Asia has proven highly effective in recent years. It needs further support to take it to the next level.
In a world where 90% of global trade is moved by sea, the landlocked economies of Central Asia almost exclusively rely on rail and road transport for trade. Much of the long-distance cargo moves via existing rail networks, which have substantial potential to facilitate trade in the region and beyond, including between European, Middle Eastern and South/East Asian markets. Rail transport is also cheaper, safer, and less prone to border delays.
However, trade via rail faces structural obstacles. For example, the differences in railway gauges between the former Soviet states, the People’s Republic of China and Europe, Pakistan and India present a fundamental challenge. As a result, tracks are interrupted and need the transfer of freight at border crossing points – a time-consuming and labor-intensive task.
Long-distance trade in and across Central Asia was unappealing for years due to a lack of effective trade agreements and changing national trade laws that increased costs and unpredictability of rail transport, as well as weak service coordination, and cumbersome border crossings.
Despite these challenges, the number of express container trains traversing Central Asia has skyrocketed from 17 in 2011 to over 15,000 in 2021. This has been achieved on the back of political will, regional cooperation, and rail reform. Rail transport within the region has also thrived, facilitating trade flows between the People’s Republic of China and Central Asia while contributing to dialogue and transboundary cooperation.
This impressive growth can be attributed to simplified processes, including single window and single stops, reduced border inspections, improved platform companies, and competitive pricing. Central Asian governments have actively implemented ambitious reforms over the last years to facilitate trade. Uzbekistan’s Yallama border crossing is an example of this trend.
Most recently, rail transport benefitted from the COVID-19 pandemic as border closures and movement restrictions forced truck drivers to stay home. For example, Turkmenistan closed its border to foreign trucks, while Kazakhstan and Uzbekistan required foreign truck drivers to present negative COVID-19 test results and vaccination certificates. Mongolia faced such a severe supply chain disruption via road that food was temporarily unavailable, leading to increased prices.
Rail transport is cheaper, safer, and less prone to border delays.
As a result, truck operating costs surged, forcing some carriers to exit the industry, leading to a substantial drop in road transport capacity for both international and domestic shipments. Unsurprisingly, a significant percentage of cargo shipments quickly shifted from road to rail.
It became simpler to clear customs for one train driver operating a 40 container unit-train than 40 truck drivers operating 40 separate trucks. Rising fuel and energy prices, which impact the cost of road transport a lot more than rail where single trains move dozens of containers also explained the soaring rail business.
Moving forward, to maintain this shift, it is important that governments provide quality infrastructure for onward distribution, particularly to remote areas. Initiatives like Uzbekistan’s, which has actively supported an expansion of its road carriers’ truck fleets, are a good example of policy support for both rail and road to play to their own strengths.
The environment also matters in this shift. As it uses less energy per ton of goods moved, transport via rail is more climate-friendly. This is an important consideration for European Union (EU) members that are aligning their operations with the EU taxonomy and supply chain legislation, mandating greener and more sustainable ways of doing business.
Such measures can also be a blueprint for more sustainable short distance trade within the region. It will be up to the governments of Central Asia to create the right enabling environment to heave their transport and trade network into a more sustainable future. Subsidies to kickstart greener transport or pilot projects for alternative fuel options can go a long way to inspire change and ultimately policies, making the sector internationally more competitive.
The upward trend of rail transport will most likely continue over the coming decades as demand grows, fuel costs rise, and reducing the carbon footprint becomes a more important consideration for suppliers and end-consumers.
Future policy and regulatory challenges include fostering a commercial orientation for Central Asian railways, putting them on a solid footing for financial sustainability, improving the reliability and speed of service and filling in the missing links to enhance the performance of the rail network in supporting trade.
The recently announced China-Kyrgyzstan-Uzbekistan Railway, which will facilitate trade between the People’s Republic of China, Central Asia, Europe, Turkey, and the Middle East, will be an important addition to regional stability and cooperation on a global level. Importantly, peace and cooperation are natural effects of trade.
For land-locked countries or regions, rail transport infrastructure is the basis to stabilize economies and foster transboundary dialogue and cooperation.
Author
Zulfia Khamitovna Karimova
Principal Regional Cooperation Specialist, ADB
This blog is reproduced from Asian Development Blog.
Supply Chain Connectivity and Resilient Border Operations in the Central Asia Regional Economic Cooperation (CAREC) Region
The roundtable will discuss challenges in supply chain connectivity and border operations, and outline prospects, medium- to long- term strategy, and trade policy directions to enhance cross-border movement of people and goods, mitigate risks of supply chain disruptions, and promote sustainable economic recovery.
Register via Zoom.
Agenda:
Forum on Developing Sustainable Economic Zones in the Central Asia Regional Economic Cooperation (CAREC) Region
The forum will discuss a new generation of economic zones, best practices experience from the region and beyond, and mechanisms to attract investments while promoting economic, social, and environmental sustainability. The forum will highlight emerging special economic zones’ approaches and international cooperation to address global and regional challenges such as the COVID-19 pandemic, climate change, and supply chain disruptions.
Register via Zoom.
Agenda:
Developing the Services Sector for Economic Diversification in CAREC Countries
E-Commerce in CAREC Countries: Laws and Policies
Developing the Trans-Caspian Transport Corridor to Increase Trade Opportunities
Harmonization of transportation and customs policies will boost the corridor’s potential as an alternative trade route between Asia and Europe.
Introduction
Each year, the PRC—the biggest trading entity of the Central Asia Regional Economic Cooperation (CAREC) 1 framework—ships about 10 million containers of cargo over sea and more than 400,000 containers over the New Eurasia Land Bridge—a rail link that connects it with Kazakhstan, Mongolia, the Russian Federation, and Belarus. On average, trade between the PRC and Europe averages at over €1 billion daily.
The Trans-Caspian CAREC Corridor 2 network offers an alternative route to move goods between Asia and Europe. It is expected to reduce travel time for cargo shipments to 2 weeks from a month by rail, and to 2 weeks from 45 days by sea—with potential to revitalize local economies. However, lack of harmonization and coordination of transportation and customs policies along the corridor countries dampen this opportunity unless these challenges are addressed.
Linking Transport Corridors
CAREC’s transport corridors link the region’s key economic hubs to each other and connect landlocked countries to other Eurasian and global markets. The Trans-Caspian CAREC Corridor 2 is a wide-ranging multi-modal corridor that links PRC’s Lianyungang seaport in the east and the Georgian Black Sea ports in the west—passing the Caspian Sea.
Corridor 2 is a complex corridor with various road, rail, and water crossings. It also links partially with the Trans-Caspian International Transport Route, Western Europe–Western China International Transit Corridor, and Lapis Lazuli route.
From the PRC–Kazakhstan and PRC–Kyrgyz Republic borders, the sub-corridors move through the Uzbek Fergana valley, Kazakh steppe, Turkmen steppe, and end up in the Aktau, Kuryk, and Turkmenbashi ports at the Caspian Sea.
After crossing the Caspian Sea, all sub-corridors converge in Azerbaijan and continue to Georgia using either the 836-kilometer (km) Baku-Tbilisi-Kars railway or a road network. After which, cargo can go further to Europe either from Georgian or Turkish ports.
CAREC Corridor 2 countries have strong rail sectors with large rail networks—about 3,000 kilometers in Azerbaijan, over 2,000 km in Georgia, 21,000 km in Kazakhstan, over 5,000 km in Turkmenistan, and nearly 7,000 km in Uzbekistan—and most of them are expanding these networks extensively. The rail network is complemented with the countries’ over 365,000 km of roads.
Azerbaijan, Kazakhstan, and Turkmenistan, which border the Caspian Sea, as well as Uzbekistan play a big role in the corridor. They are rich in mineral fuels, and revenues from mineral fuels allowed them to invest substantially in port, road, and rail infrastructure. Among those investments are the three new Caspian ports in Azerbaijan, Kazakhstan, and Turkmenistan that opened in 2018.
Azerbaijan’s Baku International Sea Trade Port (Alat Terminal) has a capacity of 15 million tons per year of bulk cargo freight and 100,000 twenty-foot equivalent unit (TEU) containers. Construction of the port’s Phases 2 and 3 is ongoing.
The Kuryk port in Kazakhstan took in all the rail–ferry operations. The government also introduced public-private partnership models, revised the railway law, and implemented an automated system for customs data.
Meanwhile, the Turkmenbashi International Seaport increased its cargo handling capacity to about 26 million tons a year from about 18 million tons (excluding oil products). A 564-km toll road connecting Ashgabat to the Turkmenbashi seaport was also completed in 2018.
Trade and Transit Potential
While infrastructure investment around the Caspian area shows a strong dynamic in 2018–2021, the share of intra-CAREC trade (except for the PRC) in the region’s trade with the outside world remains quite modest. It averaged only 6.8% in 2003–2019. In contrast, the PRC’s share increased to 23.2% in 2019 from 7.6% in 2003.
In 2019, CAREC countries traded $87 billion within the region. The PRC alone exported $47 billion to the other CAREC countries, while they in turn exported $29 billion worth to the PRC—$19 billion of which in mineral fuels. Removing the PRC from the equation, the 10 CAREC countries traded $11 billion in 2019 among themselves, with mineral fuels accounting for $3 billion.
Given the industrial and service structures and production capacity of CAREC members (excluding the PRC), the prospects for growth look good in transit trade since the Trans-Caspian transport corridor can become a viable and competitive trade route alternative between Asia and Europe.
Recommendations
The following are recommended to achieve efficiency along the trans-Caspian transport corridor:
- Develop a clear legal supranational framework to harmonize transportation tariffs along the corridor and address the issue of supply chain disconnectedness.
- Speed up development of joint customs procedures to prevent duplication of customs operations and achieve optimal use of human and technical resources.
- Speed up development of free trade zones, which can attract important value-added enterprises that contribute to promotion of new industries.
- Refine legislations related to free trade zone and the privatization of state-owned enterprises.
- Address legal loopholes in railway laws.
- Prioritize development of single windows.
- Speed up development of inland dry ports and container terminals.
- Deploy cargo tracking technologies and enhance the integration of information and communications technology into transport operations.
- Facilitate efficient handling and standardization on break-in-gauge and wagon quantity issues, chargeback arrangements, wagon repair standards, settlement of repair charges, shunting, marshalling, and loading and unloading, among others.
- Deploy gauge change innovation at various border-crossing points to achieve efficiency.
- Increase railway capacity to handle long Chinese trains that can accommodate 42 to 44 forty-foot containers.
- Alleviate the visa bottleneck.
- Create transport–expeditor associations.
1 CAREC is composed of Afghanistan, Azerbaijan, People’s Republic of China, Georgia, Kazakhstan, Kyrgyz Republic, Mongolia, Pakistan, Tajikistan, Turkmenistan, and Uzbekistan.
References
Asian Development Bank. 2014. Central Asia Regional Economic Cooperation Corridor Performance Measurement and Monitoring: A Forward-Looking Retrospective.(link is external) Manila.
D. Azhgaliyeva and Y. Kalyuzhnova, ed. 2021. Unlocking Transport Connectivity in the Trans-Caspian Corridor.(link is external) Tokyo: Asian Development Bank Institute.
H. Holzhacker. 2020. Intra-CAREC Trade: Business as Usual or About to Change?(link is external) Xinjiang: CAREC Institute.
United Nations. UN Comtrade Database.
Author
Tamar Berdzenishvili
Senior Knowledge Management Specialist, CAREC Institute
This blog is reproduced from Development Asia.
