On Monday 22 June, a high-level EU-Kazakhstan business meeting took place in Brussels. It revolved primarily around the Middle Corridor. A long list of senior officials shared their thoughts on the China–Europe route’s development. Both on the EU and Kazakh side, speakers saw tangible benefits to developing it. There is much anticipation for fast commercial growth in the coming years.
More than 15 attendees from the Kazakh authorities, Kazakh Railways (KTZ) the European Union, the private sector and financial institutions took the floor during the conference. Nearly all noted the well-known challenges associated with the Middle Corridor: capacity bottlenecks and reliability above all.
It is clear that the China–Europe route needs work. Yet, the EU and Kazakh representatives both see attainable mutual benefits, were the corridor to be developed further. For the EU, as became clear through the various European contributions, the key word was diversification.
The search for raw materials
While not explicitly mentioned by anyone during the conference, the Middle Corridor could provide an alternative to maritime corridors or overland ones through Russia. This offers the EU some risk management benefits and new partners to engage with.
The EU’s worldwide infrastructure programme, the Global Gateway Strategy, accordingly also focuses on the Middle Corridor. The ambition is not only to reduce the transit time to 15 days, but also to secure European access to critical raw materials. Rich in financial terms but poorly endowed in natural resources, the EU is looking to use its financial wealth to guarantee the supply of the latter.
Value creation and stable prices
For Kazakhstan, the benefits are equally as significant. “The Kazakh vision extends beyond transit”, commented the country’s Deputy Head of the Presidential Administration, Asel Zhannasova. The core argument: goods can not only pass through Kazakhstan, but can (and should) be manufactured in the country as well. Improved connectivity with the EU will help exert downward pressure on transportation costs. A similar position is taken by Kazakhstan’s neighbour Uzbekistan.
Multi-billionaire and controlling shareholder of KTZ Air Cargo Timur Turlov added that Kazakhstan’s opening of the economy has to be supported by infrastructure. Trade logistics is key, especially now with booming e-commerce. A well-developed Middle Corridor could facilitate cheaper imports and open new opportunities for Kazakhstan. The freight corridor to the European Union will help stabilise prices, according to Turlov.
A rapidly maturing commercial proposition
The mutual interest in developing the Middle Corridor further bodes well for the route. The Central Asia and Mongolia Managing Director of the EBRD, Huseyin Ozhan, highlighted that much progress has been made already. “We see that it [the Middle Corridor] is a commercial proposition that is maturing rapidly. It is not just a geopolitical project.”
Transit times are down (from 50-60 days down to below 20), and digital technologies are replacing paper. However, gaps still remain. Ozhan identifies three points for improvement: capacity, predictability and private sector involvement.
The EBRD believes that infrastructure needs to be expanded to boost capacity. For that reason, it signed a 230 million euro agreement for road upgrades in western Kazakhstan on 23 June. In terms of predictability, the private sector needs clearer regulatory frameworks and pricing to venture onto the Middle Corridor.
Lastly, the Middle Corridor will only reach its potential when the private sector sees it as a first-choice route, according to Ozhan. Public investments are not going to cut it, the private sector needs to be involved to develop the route to its potential.