9 Nov, 2007

$18 Billion to Build New Central Asian ‘Silk Roads’

Imtiaz Muqbil

Eight Central Asian countries have agreed to an $18 billion strategy to improve the regional network of roads, airports, railway lines and seaports to make the region a vital transit route for trade between Europe and Asia.

In this dispatch:

1. $18 BILLION TO BUILD NEW CENTRAL ASIAN ‘SILK ROADS’: Eight Central Asian countries have agreed to an $18 billion strategy to improve the regional network of roads, airports, railway lines and seaports to make the region a vital transit route for trade between Europe and Asia.

2. GLOBAL CEREAL PRICES WILL REMAIN HIGH, UN AGENCY FORECASTS: The latest forecast of the UN Food and Agriculture Organization, which should be of considerable interest for food & beverage managers, says that world cereal prices are expected to stay high during the next year because of low global stocks, production problems and continued strong demand.

3. UKINBOUND RUES FALL IN MARKET SHARE: Stephen Dowd, Chief Executive, UKinbound, says the key third quarter of 2007 has seen a fall in UK visitor numbers of 4.5% compared with 2006 and forward bookings dropping by 4.2%.

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1. $18 BILLION TO BUILD NEW CENTRAL ASIAN ‘SILK ROADS’

DUSHANBE, TAJIKISTAN, Nov 3 2007 (Asian Development Bank) – Eight countries today agreed to an $18 billion strategy to improve Central Asia’s network of roads, airports, railway lines and seaports to make the region a vital transit route for trade between Europe and Asia – a modern-day equivalent of the ancient Silk Road. The plan was agreed at a meeting in Dushanbe, Tajikistan attended by Ministers from Afghanistan, Azerbaijan, People’s Republic of China, Kazakhstan, Kyrgyz Republic, Mongolia, Tajikistan and Uzbekistan, and supported by ADB and five other multilateral institutions.

“Central Asia is becoming a pivotal region in Eurasia, a vital land-bridge linking Europe, Russian Federation, People’s Republic of China, South Asia, and the Middle East,” the Ministers said in a joint declaration at the end of the 6th Ministerial Conference of the Central Asia Regional Economic Cooperation (CAREC) Program. “The strategy will establish competitive transport corridors across the CAREC region, facilitate movement of people and goods across borders, and develop safe, dependable, effective, efficient, and fully integrated transport systems that are environmentally sustainable,” the statement said.

Even though Central Asia lies at the center of the Eurasian continent, less than 1% of all trade between Europe and Asia currently goes through the region. Inadequate transport infrastructure and cumbersome border processes have resulted in nearly all trade going by sea. The plan calls for $18.7 billion investment over the next decade in six new transport corridors, mainly roads and rail links. About half of the funds are likely to come from multilateral organizations like ADB, while the rest will come from the countries themselves.

“This is a large and ambitious strategy. It encompasses dozens of projects and will require more than $18 billion in investments over the next decade,” ADB President Haruhiko Kuroda said in a speech at the conference. “The active implementation of this strategy has the potential to transform the region’s economic prospects and the lives of its people.”

The plan also calls for the improvement of border crossings to speed trade flows. Customs and immigration procedures are currently bottlenecks for trade in the region. Historically, Central Asia was braided by multiple routes linking east and west, known as the Silk Road and dating back more than 2,000 years. It was an important economic artery that stretched more than 10,000 kilometers (6,000 miles), from the Mediterranean to China’s Yellow River Valley.

The proposed new transport corridors do not follow the exact routes taken by the Silk Road and will not only be orientated east-west, but also north-south, connecting the Central Asian Republics, Russia and China with South Asia and the Gulf. Titled the Transport and Trade Facilitation Strategy, the plan was proposed by the CAREC Program, which is an ADB-supported initiative to encourage economic cooperation in Central Asia and was established in 1997.

“Creation of safe and reliable transport corridors, together with measures on simplified trade relations as indicated in the CAREC Transport and Trade Facilitation Strategy, will provide an opportunity to improve the general investment climate and to increase the rate of economic development of the region,” Tajik President Emomali Rakhmon said in his speech at the conference.

At the meeting in Dushanbe, the Ministers also agreed to a shared vision for their region for the next decade. It included the aspiration that by 2018 all countries will be members of the World Trade Organization. “Our shared objectives are to significantly increase official trade among CAREC countries as well as with non-CAREC countries and to facilitate and improve the quality of transit trade so as to better integrate with global markets and foreign investors,” the statement says. “We remain unanimous in our view that regional cooperation is vital to achieving rapid, sustainable economic growth, and to accelerating our progress in reducing poverty and generating greater prosperity for all of our people.”

The vision also says that by 2018, governments aim to “fulfill Central Asia’s potential as an energy hub” to ensure no community is without reliable and affordable electricity. “We envision greatly increased cooperation among CAREC countries, drawing on the vast petroleum, natural gas, coal, hydropower, and other energy resources of the region,” it says.

It says that by 2018, CAREC countries will be cooperating extensively to deal with regional challenges, such as environmental problems, communicable diseases like bird flu or HIV/AIDS, and disaster management and preparedness. The eight countries attending the Dushanbe conference were joined by senior representatives of an alliance of multilateral institutions that also participate in CAREC, namely, the European Bank for Reconstruction and Development, International Monetary Fund, Islamic Development Bank, United Nations Development Programme, and World Bank – in addition to ADB.

Ministers at the meeting also endorsed a plan to establish the CAREC Institute, which is intended to act as a focal point for policy discussion to further the process of regional cooperation and integration in Central Asia. It will also help CAREC government officials better engage in regional cooperation processes and to plan and implement regional cooperation projects.

US$ 79 MILLION IN FUNDING FOR NEW CENTRAL ASIAN ROAD

Initially, the ADB will provide $79 million in loans and grants to cover most of the funding needs of the CAREC Regional Road Corridor Improvement Project, which is estimated to cost $116 million. ADB will extend a $40.9 million loan and a $12.5 million grant to Tajikistan, while Kyrgyz Republic will receive a $25.6 million grant for the project. The balance will be covered by the governments of the two countries.

In addition, ADB will extend a $500,000 grant to help prepare the cross-border agreement among Kyrgyz Republic, Tajikistan and PRC that will facilitate smooth trans-border movement of people and goods and remove barriers to regional trade and transport.

The project involves the rehabilitation of 263 kilometers of the 550-kilometer road corridor linking China, Kyrgyz Republic and Tajikistan. The road corridor is a key transport artery for the two landlocked countries to trade with China and is also an integral part of the regional road network in Central Asia. More broadly, it forms part of the Asian highway network connecting, through Afghanistan, the ocean ports of Iran and Pakistan to Kazakhstan and the Russian Federation.

Kyrgyz Republic and Tajikistan face increasing demand for regional access and trade as they are strategically located to serve the transit needs of their rapidly growing neighbors, such as Kazakhstan and PRC. Both countries, however, are mountainous, landlocked and suffer from frequent natural calamities and their respective transport sectors operate inefficiently with minimal maintenance due to lack of funding.

“To realize their full potential as channels of regional trade, Kyrgyz Republic and Tajikistan must remove barriers to regional trade and cooperation, build efficient and integrated transport systems and catch up on the shortfall in sector financing and investment,” said Rustam Ishenaliev, transport specialist of ADB’s Central and West Asia Department.

Trade volumes in the Central Asian Republics have more than doubled in recent years, from $17.7 million in 1999 to $44.5 million in 2005. China has emerged as a major trading partner for the region, but so far only as an exporter. Most of the traded goods are carried by rail, which is inexpensive but circuitous and slow.

The biggest increase in trade with China has been with Kyrgyz Republic and Tajikistan. In 2005, trade with PRC accounted for $1.05 billion, or 35.4%, in Kyrgyz Republic and $158 million, or 6.7%, in Tajikistan, representing a 15-fold and 20-fold increase, respectively, compared with levels in 2001. But in both countries, the rise has been mainly on the import side. It is expected that once the road corridor and associated border infrastructure and procedures are improved, the road share of imports by China will grow significantly and the proportion of exports by Kyrgyz Republic and Tajikistan will pick up gradually.

The rehabilitation of the road network is a priority under the Transport Sector Strategy of the CAREC Program, which seeks to promote economic growth and raise living standards in Central Asia by encouraging economic cooperation. To date, the Program has focused on financing infrastructure projects and improving the region’s policy environment in the priority areas of transport, energy, trade policy, and trade facilitation. CAREC participants are the China, Afghanistan, Azerbaijan, Kazakhstan, Kyrgyz Republic, Mongolia, Tajikistan, and Uzbekistan.

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2. GLOBAL CEREAL PRICES WILL REMAIN HIGH, UN AGENCY FORECASTS

New York, Nov 7, 2007 – Here’s some valuable information for food & beverage managers. World cereal prices are expected to stay high during the next year because of low global stocks, production problems and continued strong demand, according to the latest forecast of the United Nations Food and Agriculture Organization (FAO), released today. The Food Outlook report warned that these high cereal prices are driving domestic food inflation across much of the world, sparking price increases for such retail staples as bread, pasta, milk and meat.

The analysis found there was “such a widespread and commonly shared concern about food price inflation, a fear which is fuelling debates about the future direction of agricultural commodity prices in importing as well as exporting countries, be they rich or poor.” It also noted that record freight rates – driven up in part by soaring petrol prices – and high export prices mean many countries will pay more for importing cereals than they did in previous years, even though they are importing less.

For most cereals, “supplies are much tighter than in recent years, while demand is rising for food as well as feed and industrial use. Stocks, which were already low at the start of the season, are likely to remain equally low because global cereal production may only be sufficient to meet expected world utilization,” the agency said.

But the report added that at least one cereal crop, wheat, may experience a price fall next year thanks to indications that some countries are considering planting more wheat for harvesting next year, thus increasing the supply on the international market. The price of maize, which reached a 10-year high in February, is also starting to come down in response to this year’s record crop reaching the market.

By contrast, the price of barley is soaring, due to a combination of supply problems in Australia and Ukraine and the tighter availability of other feed grains. The greatest jump, however, is in the price of dairy products, which are rising by between 80 per cent to more than 200 per cent. Further details about the report: [http://www.fao.org/docrep/010/ah876e/ah876e00.htm]

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3. UKINBOUND RUES FALL IN MARKET SHARE

[With the World Travel Market set to kick off next week, the following statement was released in London earlier this week by Stephen Dowd, Chief Executive, UKinbound]

September proved to be another difficult month for inbound tourism with visitor numbers flat and a fall in forward bookings. Overall the key third quarter of 2007 has seen a fall in visitor numbers of 4.5% compared with 2006 and forward bookings dropping by 4.2%.

A recent survey by IPK International estimates that global outbound travel increased by 5-6% in the first 8 months of 2007, which means that as an international destination the UK continues to lose market share. This survey also indicated that the so-called ‘credit crunch’ will reduce European demand while the sub-prime mortgage crisis will further dampen US consumer confidence.

This was confirmed just a few days later when the USCB Consumer Confidence Index, a highly respected gauge of US household sentiment, fell sharply in October to its lowest level in over two years. With the US Dollar falling below $2.10 to the Pound today, and likely to fall still further, we can expect demand from the US to be markedly curtailed.

With global oversupply of tourism products and demand from our two biggest markets almost certain to fall in the short term, our members face stiff competition in the coming months. Of course we have some of the most compelling tourism products in the world to sell and we are lucky to have innovative, dedicated tourism professionals who will continue to market, sell and deliver their products to the high standards international travellers demand in this highly competitive business.

It is such a pity that we do not have the same level of competence and commitment from our Government. Is it too much to ask that in return for the £2.5Bn a year in tax revenue generated by inbound tourism our Government could just do the two things we cannot do for ourselves; destination marketing and statistics.

Successful businesses, especially exporters, rely on accurate data, but this Government has continuously failed to provide the robust statistics we need. Indeed, the March 2004 Allnutt Report into Tourism Statistics, commissioned by DCMS, made it clear that the UK was not even meeting the EU minimum standard. The report made 14 fully costed recommendations that were endorsed by the entire tourism industry. To date not one of these recommendations has been implemented.

Now the Secretary of State for Culture Media and Sport, James Purnell, has decided that our national tourist board will have to make-do with less money for international marketing after 11 years of stand still funding. He repeatedly says that VisitBritain does a good job but then demands they make “efficiency savings”. We wonder whether the rest of the DCMS portfolio, or their own staff, have been asked to make 18% efficiency savings from their budget.

We find it more than a little ironic that in the USA, where inbound tourism has been in decline been for the last 5 years, the US Congress has just agreed to set up a federal National Tourism Office, reversing decades of responsibility being devolved to individual states. And one of the reasons cited for this change of direction is the excellent return on Government investment in the UK achieved by VisitBritain.

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