Riding the Waves, or How Overland Uzbekistan found Access to the Sea with the Help of China

January 5, 2019

Uzbekistan, Tashkent - NA Podrobno.uz.

Throughout its short, but dynamic history of independent development, Uzbekistan has constantly faced a serious problem in the formation of foreign trade relations.

Besides the fact that the Republic has no direct access to the sea, it is also one of the only two states in the world (like Liechtenstein) that border the countries that also do not enjoy access to the sea. Absence of coastline seriously affects the movement of freight traffic, forcing the republic to seek new forms of cooperation with neighboring countries to ensure optimal logistics and transport chains with uniform preferential transit tariffs.

Therefore, the Chinese "The Belt and Road" initiative and other infrastructure projects facilitating emergence of additional opportunities to expand its presence in the global market are so important for Uzbekistan.

A point on the map

In the face of rising protectionism in world trade and instability in global markets, many countries of the world, including Uzbekistan, which are remaining aloof from major international transport corridors, are trying to fit themselves into new transport routes and initiate projects that can realize their foreign trade ambitions.

In this regard, the transport and logistics initiative within the framework of the Shanghai Cooperation Organization (SCO) is of particular importance. For example, the President of Uzbekistan, Shavkat Mirziyoyev, during his speech at the SCO summit in Qingdao, suggested considering the possibility of establishing an International Transport and Logistics Association of the SCO, as well as holding the first meeting of the heads of railway administrations of SCO member states in Uzbekistan.

In addition, the President of Uzbekistan believes that especially now it is necessary to pay attention to the effective use of transport and transit potential of the SCO space.

In his opinion, within the framework of the "The Belt and Road" initiative, the implementation of inter- regional transport projects is relevant. Countries of the organization need new shortest routes to the largest world markets. Therefore, Uzbekistan supports the construction of the Mazar-i-Sharif-Herat railway lines, Uzbekistan-Kyrgyzstan-China.

In this context, for Uzbekistan, the logistics terminal in the port of Lianyungang in the northeastern part of China on the Yellow Sea coast is playing an increasingly important role, which just became one of the centers of the reviving economic belt of the Great Silk Road. The choice of this port is of great geostrategic importance. Today it is one of the 25 largest seaports in the world.

Lianyungang occupies an important position between East and West and represents the eastern beginning of a new Eurasian transcontinental corridor. In May 2014, the construction of the first joint Kazakh-Chinese terminal was laid on its territory, with an area of 21 hectares. Moreover, already in December 2014, ahead of schedule, the terminal in Lianyungang began its work.

The total cost of the project exceeded 99.4 million dollars. The main purpose of the terminal construction was concentration of cargo from South-East Asian countries in the direction of Kazakhstan, Uzbekistan and other Central Asian countries, as well as Russia and the European Union.

After three years of operation, from 2015 to 2017, the volume of exports and imports passing through the terminal in Lianyungang exceeded eight million tons. At the same time, the volume of cargo transportation reached 500 thousand containers per year. Moreover, the second stage of the project has already begun, within the framework of which the international logistics zone of the Shanghai cooperation organization is being created here. Its structure will include areas for handling railway containers, customs clearance and storage, and a shopping center for large cargo.

Cargo flow

The first regular cargo transportation from the Lianyungang terminal to Uzbekistan began in the second half of 2015. At that time, five container trains were sent from China to Almaty and Tashkent on a weekly basis. They were mainly used to transport household appliances and consumer goods purchased by Kazakh and Uzbek importers, as well as component parts, and export agricultural and other products and natural resources from Central Asia.

However, in the period from 2015 to 2017, cargo traffic between the countries was unstable and did not grow as fast as desired. And there were explanations for this: there was a lapping and dynamic discussion of transportation conditions, transit rates and opening opportunities. But then things started moving – in March 2017, representatives of the terminal agreed with Uzbekistan to transport the produced cars to Lianyungang by rail and deliver them from the port to northeast Asia by water transport.

As a result, in April 2017, the first train with 50 containers loaded with cars assembled in Uzbekistan arrived at the Lianyungang logistics terminal. At that time, experts noted that the use of this new Eurasian continental bridge will help reduce logistics costs and increase the competitiveness of Uzbekistan's products on the international market.

To date, Uzbek products have almost completely "captured" Lianyungang. From January to October 2018, the port handled more than 13 thousand wagons with export and import cargo for Uzbekistan. To understand how serious these figures are, we should note that the Republic currently occupies about 72% of all wagons processed at the port. Kazakhstan is in second place with a large gap (21%), followed by Kyrgyzstan (4%), Tajikistan (1%) and other countries.

According to Darkhan Esingulov, Director of the international transportation Department of the China- Kazakhstan international logistics company Lianyungang, this dominance of Uzbek cargo is due to several factors.

"First of all, in the past year, Uzbekistan has been undergoing major reforms, the flow of investment has intensified in the country, and there has been an explosive growth in the construction market. As a result, Uzbek companies purchase large volumes of modern equipment and construction materials. In addition, the export of agricultural and other products from the Republic is also actively increasing. For example, only last year more than 1,500 wagons with cotton fiber were sent for export," the expert told the correspondent Podrobno.uz.

Also, he added, Lianyungang by its geographical location and integration into the railway system of the PRC and international transport corridors is the most optimal place for transshipment of sea cargo to Uzbekistan, providing, importantly, preferential transit rates.

"If in the first half of 2018 we sent a maximum of 20 trains of 50 cars per month to Uzbekistan, then after June-July this figure increased to about 40 trains. And I think, given the potential, this is not the limit. For example, active negotiations are underway with the Uzbek automobile industry, which plans to use preferential tariffs within the SCO for the transportation of its component parts, which will make the cost of cars cheaper," Yessingulov said.

Another promising initiative that can double the volume of Uzbekistan's exports through Lianyungang is the supply of green mung. Now representatives of the "China-Kazakhstan international logistics company Lianyungang" are discussing this issue with all interested parties.

"The potential of this project is truly huge, the volume of deliveries can be huge, since this is the billion- dollar market of China plus the entire Southeast Asia. We have already made preliminary agreements, found the necessary volumes of green mung in Uzbekistan at the first stage, we know where to send them, and are now conducting additional marketing research, " Darkhan Esingulov said.

Experts are confident that Uzbekistan, which already occupies a significant position in some commodity groups on the global market, will be able to not only strengthen them, but also expand them in the near future. The reason for this is the active policy of the country in the development and diversification of trade routes, as well as the consolidation of efforts in this direction with other States.