Usen Suleimen. Central Asia and ASEAN: Convergence through Belt and Road

Usen SULEIMEN, Ambassador Extraordinary and Plenipotentiary of the Republic of Kazakhstan to the Republic of Singapore

Central Asia and ASEAN: Convergence through Belt and Road

(Akorda.kz)

Modern international relations have a trend to change their focus rapidly from a political to an economic dimension. This is clearly reflected in the actions of the world powers competing for economic influence through the improvement of integration processes and creation of regional economic and trade platforms and trade routes. The shift in developing countries towards the Fourth Industrial Revolution can be described as the process demanded by the spirit of the times.

To date, more than 90 percent of freight transport in intercontinental trade between Asia and Europe is carried out by sea. However, according to experts, in the medium term a certain percentage of such impressive volume will be taken over by land, when the transit-transport potential of Central Asia, in particular Kazakhstan, must play a significant role. Thus, in the current geopolitical reality Central Asia has considerable potential and opportunities to become an important transit corridor between Europe and China.

As known, the initiative to create the Silk Road Economic Belt (SREB) was announced for the first time by President of China Xi Jinping in September 2013 during his visit to Astana. A month later during his visit to Jakarta, the Chinese leader invited member states of the Association of Southeast Asian Nations (ASEAN) to consider joint construction of the Maritime Silk Road of the 21st century. Then, both initiatives were merged into a common strategic vision of China called One Belt One Road, which was later renamed as the Belt and Road Initiative.

It is noteworthy that the announcement of the SREB initiative in Astana was a clear signal that Kazakhstan would play a major role in the implementation of this megaproject. This, in turn, coincides with the strategic objectives of Kazakhstan on great modernisation and transformation into a regional transport and logistics hub, connecting Europe and Asia.

In this context, implementation of the Nurly Zhol Programme initiated by President of Kazakhstan Nursultan Nazarbayev and its synergy with SREB have great potential and are already playing a decisive role in economic and infrastructural development of Kazakhstan. The strategic objectives of Nurly Zhol and SREB are very similar in content. The main focus of the two programmes is on the development of transport and logistics infrastructure. There is a reason why at the outset of the Nurly Zhol Programme the head of state focused attention on the importance of increasing investments in transport infrastructure projects, which in turn correlates with the plans of China for revitalisation and financing of the transport infrastructure along the entire route of the Belt and Road Initiative.

Transformation of Kazakhstan into a regional transit hub opens significant opportunities for the region to become one of the most important transport and logistics hubs on the territory of the Eurasian continent. Moreover, it will give the entire region the opportunity to diversify trade routes in all directions, including Southeast Asia.

Another important factor is the shift of the foreign economic vector of Tashkent towards strengthening regional integration, which would increase the competitiveness and unity of Central Asia.

A united and strong Central Asia is beneficial to all stakeholders. This makes the region attractive to investors and competitive in terms of SREB.

The economic growth potential of Central Asia and ASEAN is tremendous. Central Asia has a vital role in the implementation of terrestrial routes and Southeast Asia maritime routes. For a long period, the interaction between the regions was at low levels. At present in light of the Belt and Road Initiative and the technological revolution, both regions have substantial opportunity to grow closer to each other.

The active involvement of Central Asia in the implementation of SREB offers the region opportunities to work with ASEAN, which is the sixth largest economy in the world with a total GDP of $2.4 trillion. According to experts, ASEAN will be in fourth place in terms of GDP by 2050.

ASEAN is composed of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. Their economic performance and development levels differ significantly. For example, according to the International Monetary Fund (IMF), by the end of 2017 the GDP of the largest economy in ASEAN, Indonesia, amounted to over $1 trillion. Then, in a distant second, comes Thailand – $483 billion. Malaysia takes third place with $364 billion. Singapore is in fourth place with $349 billion. At the same time, it is noteworthy that the city-state ranks first in GDP per capita – $57,700. Then the Philippines – $332 billion. Sixth place is taken by the rapidly growing economy of Vietnam – $240 billion. Myanmar, Cambodia, Laos and Brunei come in a distant seventh, eighth, ninth and tenth – $70 billion, $24 billion, $18 billion and $14 billion, respectively. As the figures show, the differences are substantial.

It is noteworthy that the same discrepancy is seen among the countries of Central Asia, whose multilevel economies differ from one another. In this context, strengthening of regional integration in Central Asia will contribute to further development of the advanced countries and laggards of the region.

The main cause of low trade and economic cooperation between Central Asia and Southeast Asia is their geographical distance from each other. The main partners of ASEAN are the countries of the Asia-Pacific region and, traditionally, the major players that have a direct impact on the region are the U.S. and China. Washington's role focuses more on military and political dimensions and Beijing's – on economic and trade relations. However, due to the geographical proximity of ASEAN and China, as well as the similarity of cultures of most peoples in East Asia, the influence of China in the region prevails.

In the process of pairing the two regions, close strategic cooperation of Central Asian countries and ASEAN with China is beneficial to all parties. Here, the importance of the Belt and Road Initiative plays a decisive role.

In the Central Asian context, a key role is given to Kazakhstan, as the country has a more developed economy and infrastructure, the Khorgos transport and logistics hub on the border with China and an international highway from Western China to Western Europe, as well as a seaport in Aktau. It is obvious that today, Kazakhstan has created the necessary infrastructure enabling in the medium term to deeply connect the trade routes of Asia and Europe through Central Asia. Using these advantages, Kazakhstan can act as a nexus between the other regional states in the process of interaction with the countries of Southeast Asia.

In this context, Singapore, being one of the key marine hubs in the framework of the Belt and Road marine route (Maritime Silk Road) and taking a leading position in ASEAN, is highly interested in engaging in SREB and considers the Chinese megaproject as an additional corridor to expand existing export networks and get access to new markets.

Given the developed infrastructure of Singapore, the island nation can contribute to three key areas of the Kazakh segment of SREB: infrastructure connectivity, transport connectivity and financial services.

As for infrastructure connectivity, Singaporeans are focused on providing services in urban planning, industrial parks and smart city systems, which can be useful in the construction of Nurkent city, which is a part of the cross-border economic cooperation between Kazakhstan and China.

Speaking about transport and logistics connectivity, there is great potential for the cargo transportation by railway and sea routes, delivery of services in project evaluation and project financing, as well as trade.

In terms of financial services, there is an opportunity for future interaction in the framework of the Astana International Financial Centre, which can be positioned as a financial nucleus within SREB.

In light of the Nurly Zhol Programme, the Government of Kazakhstan set the task to increase volumes of transit traffic up to two million containers by 2020 and to raise food exports by 40 percent by 2021, as well as non-resource-based exports more than two times by 2025. The synergy of Nurly Zhol with SREB can integrate transport and logistics systems of Central Asia with China and ASEAN countries, thereby contributing to shaping the new architecture of transcontinental corridors.

In particular, great opportunities for trade and economic integration are put in the hands of exporters of the two regions thanks to the Kazakh logistics terminal in Chinese Lianyungang, which can help to deliver goods in both directions by sea. This port, one of the top 25 largest ports in the world, has an important geo-strategic meaning for Kazakhstan and is an advantage for the whole of Central Asia. For example, delivery of cargoes from the maritime port of Singapore by sea to the port of Lianyungang takes on average 12-14 days and then by rail to Western Europe through Kazakhstan, from 14-18 days. This route is at least twice as fast as transportation of goods by the Indian Ocean. In the medium term, Lianyungang port can become an important connecting hub in the consolidation of cargo flows from China and Southeast Asia towards the countries of Central Asia and further to the markets of the Caucasus, Turkey and Europe.

Transportation of cargoes on the Khorgos – Lianyungang port route, then by sea to the ASEAN countries, is convenient in terms of saving time and money because it reduces the time of delivery of goods, which is an advantage when transporting food and other time-sensitive goods from Central Asia to the markets of Southeast Asia.

ASEAN previously did not have a specific route for export of their products to the markets of Central Asia, with the exception of the Iranian trade port in Bandar Abbas. Now, the Khorgos transport and logistics hub in Kazakhstan, as well as the cargo terminal in Lianyungang, open new opportunities for increased trade and wider transport networks that will certainly have a positive impact on the pace of development of transit potential in Central Asia.

The interconnection of Central Asia with ASEAN can be also considered through the prism of Greater Eurasia, implying the pairing of the economic areas of the European Union (EU) and the Eurasian Economic Union (EAEU). In this context, the idea of President Nazarbayev to expand the boundaries of Greater Eurasia to the East in the framework of the Belt and Road Initiative, including towards ASEAN, seems very far-sighted and can provide significant potential for the development of the entire Eurasian continent.

Of particular importance is the implementation of a number of proposals, which President Nazarbayev put forward at the high-level Belt and Road Forum for International Cooperation held in May 2017 in Beijing. In particular, the President noted the importance of consistent facilitation of commodity flows by improving the level of services and elimination of administrative barriers; development of agricultural cooperation to ensure food security of the countries located along the new SREB, which, of course, can strengthen interaction between the regions and enhanced cooperation in the field of innovative and scientific-technical development, as well as joint funding of projects, establishment of R&D centres and transfer of technologies, innovative companies and venture funds.

Meanwhile, to strengthen its position, Kazakhstan needs in the medium term to expand the geography of trade routes in the central and southeast regions of China by opening up additional cargo terminals, for example, in Chongqing, Guangzhou or Hong Kong. Alternative routes, certainly, will reinforce the connectivity of Central Asia with ASEAN.

Moreover, despite active trade between China and the EU, a cargo train on the way back from Europe to China will not go fully loaded. In turn, the low load on the way back from Europe to Asia may allow the Central Asian exporters to add to the load and thereby reduce the cost of transporting their goods to the countries of East Asia. This route also provides the same opportunities to ASEAN importers.

Thus, by harnessing the existing transport and logistics potential of Kazakhstan and further strengthening regional integration in Central Asia, we can assume that in the medium term, Central Asian countries will not only strengthen cooperation with the rapidly growing ASEAN market, but also will be integrated into a global network of international trade.

Created at : 8.06.2018, 11:00, Updated at : 8.06.2018, 11:00