'New Silk Road' to Link Europe, Asia

MANILA, PHILIPPINES- The Asian Development Bank (ADB) is extending $700 million to Kazakhstan to help improve a major road that will transform the country's economy.

The new "Central Asian Regional Economic Cooperation (CAREC) Transport Corridor I" will run 2,715 kilometers, from the city of Khorgos on Kazakhstan’s border with the People’s Republic of China (PRC), through Almaty and Shymkent, and to the western border with the Russian Federation.

"This new silk road will boost trade between Beijing and Brussels, and create extraordinary economic opportunities for the people of Kazakhstan and their neighbors," said Juan Miranda, Director General of ADB’s Central and West Asia Department.

The northern branch of the ancient Silk Road ran through today’s Kazakhstan, placing the region at the heart of trade between the PRC and Europe – and bringing the region immense prosperity.

The new road, spanning the world’s largest landlocked country, is expected to be comparably transformative.

By 2020, the road is expected to increase Kazakhstan’s gross domestic product (GDP) by 68 percent above the 2010 baseline, and to increase the GDP of neighboring Central Asian countries by 43 percent.

The PRC, Russia, and the European Union (EU) will also reap significant gains from the road project. By 2020, the PRC’s GDP is expected to grow 6 percent over 2010 baseline levels, while the GDP of Russia and the EU are expected to grow an additional 4 percent.

“This road, combined with wide reaching reforms the government has already initiated in the transport and communication sectors, will provide families in Kazakhstan with greater opportunities for advancement, while significantly contributing to the nation’s sustainable economic development,” said Mr. Miranda.

In Kazakhstan, roads play an important role in providing access to rural areas, and facilitating transit traffic and in-country transport movement.

However, the Kazakh road sector has experienced long-standing operational and institutional constraints that raise the cost of doing business. The road network is incomplete, many sections of road need repair, travel times are long, and cumbersome cross-border procedures increase the burden on trade and traders.

These constraints have led to higher-than-average transport costs, hampered regional cooperation and integration opportunities, and impeded Kazakhstan’s competitiveness.

ADB financing will contribute to the removal of these constraints.

The improved road will increase travel speed 40 percent by 2015, while reducing freight transport costs by half. It will also shorten travel distances, improve road safety standards and lead to a decline in accident rates.

ADB will partner with the Islamic Development Bank (IDB) and the Japan International Cooperation Agency (JICA) to handle a 480 kilometer section of the road network in the southern part of Kazakhstan.

The overall investment for the road project is approximately $6.7 billion, of which the ADB section and that of its partners amounts to about $1.48 billion. ADB will provide a $700 million multitranche financing facility, while IDB will provide $414 million and JICA $150 million.

Other financiers behind the overall corridor development plan include the Government of Kazakhstan, the private sector, the World Bank, and European Bank for Reconstruction and Development.

The road forms the first link in the CAREC Transport and Trade Facilitation Strategy, which will be discussed at the CAREC Ministerial Meeting in Baku, Azerbaijan on 21 November 2008.

FAST FACTS - KAZAKHSTAN

  • Completing the CAREC Transport Corridor project will lead to a potential 68 percent higher real GDP for Kazakhstan by 2020.
  • Both Russia and China will gain significantly from the project through trade linkages, with potential real GDP gains of 4 and 6 percent, respectively, by 2020 and fully 12 and 17 percent by 2030.
  • Exports and imports are potentially 32 and 33 percent higher, respectively, by 2020, and 63 and 64 percent higher by 2030.
  • Compared with pre-project activity, the project adds 61 percent to total trade and transport activity in the country by 2020.
  • The new transport corridor will run at 2715km, of which 2237km will be constructed or reconstructed. The total investment is $6.7 billion.
  • The new road will run along some of the route of the Great Silk Road - the popular name given to the system of caravan trade routes that lasted for many centuries and linked Eastern and Western civilization between the Ancient and Middle Ages. The Silk Road was not static – the routes changed over time changed over time.
  • The road first operated in 2 B.C. as a route between China and the capital of the Roman Empire. It was approximately 7000 kilometers long. The most valuable commodity imported from China was silk, thus … The Silk Road.
  • Silk, satins, wool, porcelain, musk, jade, tea, wine, paper, gold, silver, rubies, diamonds, pearls, horses, lions, peacocks, elephants, camels, colored glass, dates, saffron powder, pistachio nuts, alfalfa, grapes, flax, pomegranates, walnuts and cucumbers, were just a few of the commodities transported.
  • Traveling the standard route of the Silk Road took about 200 days with an average of 50 kilometers traveled per day.
  • The ancient Silk Road helped to integrate the old Chinese, Indian, Persian, Arabian, ancient Greek and Roman cultures and promoted the exchange of the Western and Oriental civilizations.
  • The Silk Road had a long life -1500 years. The opening of the world's sea-lanes in the 16th and 17th centuries was the end of the overland caravan and the beginning of the end for the Silk Route.