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Analysis: Keep Iron Silk Road on track

Analysis: Keep Iron Silk Road on track

Analysis
Kunlio Senga

TWO thousand years ago the world’s most famous trade route was being forged between the heart of Asia and the doorstep of Europe. At its peak, southern strands of the grand Silk Road extended into Southeast Asia, forming a transcontinental trade route from the Mekong to the Mediterranean Sea.

Asia is once again emerging as a global economic force, but infrastructure bottlenecks are choking the region’s development. Asia desperately needs new silk roads – road, rail, air and water transport networks – to fully unleash its economic capacity.

Railways are the weak link in Asia’s connectivity puzzle. The region’s rail networks actually contracted between 1996 and 2005, with many rail lines falling into disrepair.

In Cambodia, homemade bamboo trains still zip along parts of war-ravaged rail line between Phnom Penh and the border with Thailand, which have not seen conventional rail traffic for some years. But the situation is rapidly changing.

Today in Cambodia, the first leg of a modern railway system has become operational. The country’s new railway should be complete by 2013, and Cambodia has already entered into an agreement with Vietnam to construct a rail connection between the two Mekong nations.

Once work on the railways is finished – possibly as soon as 2015 – a contiguous Iron Silk Road will stretch from Singapore to Scotland, bringing with it the potential for new levels of prosperity for those living along the route.

All over Asia, railways are making a comeback. Nowhere is this more evident than in the People’s Republic of China, which recently approved the equivalent of US$292 billion in new railway investments.

Rail is a more cost-effective way of transporting heavy cargo than roads, particularly in an age of high fuel prices, and railways are less carbon-intensive and more environmentally friendly than other overland alternatives. Modern railways also bolster countries’ economies by stimulating foreign direct investment inflows.

Railways are particularly a boon for inland areas and landlocked countries, where transport costs can run 50 percent higher than coastal areas. As land and labour costs push production centres in Asia further inland, railways present an ever-growing value and a pathway out of isolation for many remote communities.

There are still many impediments that may prevent the Pan-Asian railway from realising its full promise. One challenge is rooted in hardware. The People’s Republic of China utilises standard gauge rail, while other Southeast Asian nations utilise 1-metre gauge. These gauge breaks cause transport delays, though this situation is mitigated by the fact that the breaks mostly occur at border points, where trains must stop for inspections.

The greatest challenges extend far beyond nuts and bolts. Renowned industrialist Warren Buffet has noted that, “there’s nothing ... better than a long, long train,” and there is certainly good money to be made by investing in rail freight and passenger service operations, rolling stock facilities and infrastructure maintenance in Asia. For these investment opportunities to provide good value for the private sector, however, more robust, reliable and transparent rules, regulations and procedures must be put in place. To make rail networks truly cost-effective, border procedures also need to be streamlined, tariff and freight rates need to be lowered, and transport and logistics networks need to be better integrated.

Regrettably, this soft-sector development in Asia is not keeping pace with the rapid growth of infrastructure.

Forging agreements on these measures is no easy undertaking, particularly in a world still smarting from the sting of the global financial crisis. The magnitude of the challenge should not dissuade Asian nations from action, however, as there is much to be gained from closer integration and better cooperation for each and every country along the Pan-Asian railway. For ASEAN nations, better connectivity means better access, and therefore a greater ability to compete in leading markets from the People’s Republic of China to the European Union. Conversely, stronger transport and economic linkages provide other nations with greater access to ASEAN’s growing market – 500 million people strong and with a combined GDP of some $ 1.5 trillion, placing it among the world’s 10 largest economies if viewed as a region.

Much like the Silk Road of yesteryear, closer connectivity also provides new conduits for better understanding among people and nations. If these Asian neighbours have already found a way to move beyond their conflicts of the past, these current challenges should be imminently surmountable.

Still, it will take dedication and good will on the part of all to help the Iron Silk Road make good on its potential. To paraphrase the illustrious Robert Frost, there are many promises to keep, and miles to go before we sleep. So let us begin – full steam ahead.

Kunio Senga is director general of the Asian Development Bank’s Southeast Asia Department.

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