EBRD to invest major funds in development of cargo flows along Middle Corridor - Huseyin Ozhan (Exclusive interview)

Kazakhstan Materials 27 February 2024 08:30 (UTC +04:00)
EBRD to invest major funds in development of cargo flows along Middle Corridor - Huseyin Ozhan (Exclusive interview)
Ali Gasimov
Ali Gasimov
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BAKU, Azerbaijan, February 27. The European Bank for Reconstruction and Development (EBRD) will make major investments in the development of cargo flows along the Trans-Caspian International Transport Route (TITR, or Middle Corridor), Huseyin Ozhan, the EBRD Director for Kazakhstan, told Trend in an exclusive interview.

Investment needs to significantly improve the Central Trans-Caspian Network

At the Second European Union (EU)-Central Asia Economic Forum, held at the end of May 2023, the European Bank for Reconstruction and Development (EBRD) presented a report on sustainable transport linkages between Central Asia and Europe. The European Commission funded the study, which identified country-specific needs and methods to cut transportation costs, improve operational efficiency, and promote private-sector engagement. These included digitizing transportation documentation, strengthening the public-private partnership (PPP) environment, easing trade, promoting market liberalization, and improving tariff-setting systems.

The study argued that the Trans-Caspian Corridor, which connects Central Asian countries, could be the ideal cargo transit route, complementing the geopolitical constraint on the Eurasian Northern Corridor through Russia. At the same time, it stated that upgrading and expanding this transport corridor will considerably help regional trade in Central Asia. With freight increasing along this route, the present Caspian Sea infrastructure may create a bottleneck. The report emphasized the importance of rehabilitating and modernizing rail and road networks, increasing rolling stock, improving border crossings, and constructing multimodal logistics centers and auxiliary network links throughout Central Asia. According to the Bank's estimates, the overall investment needs for 34 identified priority projects necessary to considerably upgrade the Central Trans-Caspian Network are in the region of 18.5 billion euros.

EBRD's investment to develop cargo flows across Kazakhstan and along the TITR

Kazakhstan is the world's ninth-largest country, covering an area of 2,700,000 square kilometers (the same size as Western Europe). Building new or improving existing infrastructure to accommodate increased cargo traffic is not a simple process. For many years, the EBRD has worked with key public and private sector enterprises in Kazakhstan, including KTZ (Kazakhstan Railways), to increase operational efficiency and optimize traffic patterns. Last year, the EBRD inked a number of projects in Kazakhstan that help to keep freight traffic moving across the country and along the Trans-Caspian International Transport Route (TITR).

Transit cargo through Kazakhstan often begins its journey in the town of Khorgos, on the Chinese border. It then has to pass through the country’s largest city, Almaty, with its congested traffic. This is home to Kazakhstan’s largest private rolling-stock operator, Eastcomtrans. An EBRD loan of US$40 million (36.9 million euros) will help Eastcomtrans expand its container handling capacity at one of the most congested junctions and ensure the uninterrupted operation of its railway park, which represents around 8 percent of the country’s total rolling stock. The funds will also be used to develop the Zhetygen logistical center, acquire up to 250 new rail cars, and maintain existing ones. Situated close to the border, the upgraded logistical hub will serve as an important junction on the Trans-Caspian Corridor.

In 2023, the EBRD also provided a 25 million euro loan to one of the fast-growing local logistics companies, Atasu Group, and a €2.8 million loan to Temirservice Astana, which operates last-mile railway infrastructure and railway tracks around the capital city. These are dynamic and rapidly developing private logistics companies. The bank’s funds will be used to increase their efficiency and will contribute to greater reliability in the supply and distribution of goods for regional and domestic needs.

The EBRD boosted the financial and operational resilience of Kazakhstan Temir Zholy (KTZ, or Kazakhstan Railways) by investing up to 100 million euros in its Eurobond. The investment will help Kazakhstan’s state-owned railway operator implement a range of crisis response measures, including the reorganization of its transit freight operations.

The Middle Corridor's capacity growth potential

The EU’s Global Gateway strategy estimates that the volume of cargo moving through the Central Trans-Caspian Network could increase from 18,000 20-foot equivalent units (TEUs) of cargo or containers currently to 130,000 TEUs by 2040.

For customers in Europe and Asia, it is important to know not only how long it will take their container to travel to their desired destination but also exactly when it will get there so they can better manage commodity stocks and plan trade cycles. Modern and efficient logistics and transportation methods are essential to achieving an optimal free-flow transit time of less than 2 weeks to cross Kazakhstan and the Caspian Sea, and with relevant investments, this is achievable.

EBRD's major investment to develop the Middle Corridor

Indeed, in January 2024, at the Investors Forum for EU-Central Asia Transport Connectivity in Brussels, the EBRD expressed its readiness to invest around 1.5 billion euros in Trans-Caspian Corridor-related infrastructure and associated transport solutions over the next 2–3 years.

At the Brussels Forum, the Ministry of Transport of the Republic of Kazakhstan and the EBRD agreed to cooperate on strategic initiatives in road, rail, port, and logistics infrastructure to develop the TITR. According to the memorandum of understanding signed by EBRD Vice President Mark Bowman and Kazakhstan Minister of Transport Marat Karabayev, the parties will work to facilitate the increase in freight traffic between Central Asia and Europe through Kazakhstan by implementing necessary reforms and securing the financing needed for sustainable multimodal transport infrastructure.
Priority projects will include the modernization of container handling equipment and the development of a container terminal at the Aktau Port, double tracking and the electrification of the national railway network, the development of the Shalkar-Beyneu road, and the rehabilitation of road sections along or adjacent to the TITR, such as relevant sections of Aktobe-Kyzylorda.

The Bank is also exploring a number of PPP initiatives and sustainable infrastructure projects in Uzbekistan and the Kyrgyz Republic related to the TITR.

EBRD's contribution to the development of the transport sector in Kazakhstan

Over the last decade, the EBRD has provided around 2.4 billion euros to support transport sector projects in Kazakhstan. Our current portfolio of infrastructure projects in the country is 1.38 billion euros through 41 projects. 82 percent of them are in the public sector.

Reliable transport and regional connectivity are vital for Kazakhstan. The EBRD has been supporting the national road operator, KazAvtoZhol, by financing the rehabilitation and upgrade of key roads between various regions of the country and by connecting Kazakhstan with neighboring countries.

The EBRD has played a major role in organizing financing for the construction of the 66-kilometer BAKAD ring road around the city of Almaty and brought the deal to a financial close, making this the largest public-private partnership (PPP) project in both Kazakhstan and Central Asia. It is also the first PPP project in the region to have been structured with the involvement of international advisers and through an open, international competitive process.

In 2021, the EBRD facilitated better regional and international connectivity for air travelers by arranging a loan to develop key infrastructure at Almaty International Airport. The biggest-ever private investment in airport infrastructure in Kazakhstan and the region will help boost operations at the busiest airport in Central Asia.

The Bank has helped the national airline, Air Astana, construct the first aircraft maintenance facility in the country and in the whole of Central Asia. It has also granted liquidity assistance to the national carrier, which has been impacted by the pandemic.

Various funding facilities granted by the EBRD to Kazakhstan's state railway corporation, Kazakhstan Temir Zholy (KTZ, or Kazakhstan Railways), aided in improving operational efficiency and implementing energy-saving measures throughout the railway network.