Expert: Kyrgyzstan ‘fitting in’ in China's gigantic plans

On December 27 in Tashkent, tripartite talks at the ministerial level on construction of the China-Kyrgyzstan-Uzbekistan railway. The day before, President of Kyrgyzstan, Sooronbay Jeenbekov, charged Minister of Transport and Roads Jamshitbek Kalilov to establish an expert group, since "the railway project is very important for Kyrgyzstan to allow it entering foreign markets." Jeenbekov stressed that the early start of construction will help increase attractiveness of Central Asia as the most profitable and efficient transit corridor in the region.

The initiative on construction of the China-Kyrgyzstan-Uzbekistan railway has been periodically voiced since the beginning of 2000s, but it practically stays on paper. According to 2012 calculations, it will require $6-6.5 billion to lay the railway.

It should be noted that before construction of the railway from China to Uzbekistan, a similar motorway was almost completed. The road is called in Kyrgyzstan the "Alternative North-South Road", hiding the de facto Chinese transport project under this neutral name. What is the significance of this highway, why will not the implementation of the China-Kyrgyzstan-Uzbekistan railway project actually begin? Independent economist Kubat Rakhimov answers these questions to EADaily.

It's probably worth starting from afar. In the Soviet years, the issue of linking the northern and southern parts of the Kirghiz SSR could not be acute, since everything was taking place within a single national economic complex. There was one country, and the task of carrying, say, cargo from the north of Kyrgyzstan to the south through some areas of the Tajik SSR or the Kazakh SSR or along the Bishkek-Osh road, did not really matter. The first president of Kyrgyzstan, Askar Akayev, immediately assessed the problem of interconnection of the regions of the country after the collapse of the USSR; he took care of reconstruction of the Bishkek-Osh road. This is the key vital artery of today’s Kyrgyzstan. That includes military logistics or law enforcement logistics.

Two revolutions of 2005 and 2010 showed that special troops of the interior ministry, special services, troops can be promptly relocated only by air. There is a term OBON in everyday life in Kyrgyzstan, i.e. " special purpose women detachment." This "detachment" clearly knows how to paralyze the country if necessary - where to put yurts to block the traffic, where to block routes. Within a few hours, the trade, passenger communication and everything connected with it, begins to take on appearance of a crisis. In addition to this, the road itself gets overloaded, the pavement wears out quickly, and traffic jams are created on the Töö Ashuu Pass. All this does not allow making the traffic sustainable.

Kyrgyzstan was facing a twofold task at that time: to ensure the coherence of the country, but at minimal costs. The first option is to overhaul relations with the neighbors, Uzbekistan, Tajikistan, and Kazakhstan, and ensure an absolute and unhindered transit for goods that would travel along their roads. But, apparently, the Kyrgyz diplomacy considered this task too hard. The second option is the construction of a railway that would connect the north of the country with the south and simultaneously become a transit route for China, Asia, and Southern Europe.

They in Bishkek believe that only the Chinese can do this. But construction of a railway is a long-term project. Therefore, a third option appeared, the most acceptable one for the authorities. This is an additional road route between the north and the south, called the "Alternative North-South Road." This idea was readily answered by China, having kindly offered a soft loan from Eximbank. It contains a high proportion of the so-called grant support. The loan was seized with joy and the first tranche was quickly put to good use. But soon, either the appetites increased, or some other problems arose, but today the successes in building the road are modest.

They won’t abandon the project they have already launched, will they?

Kyrgyzstan cannot afford much borrowing now. That includes the completion of this road. The situation is not simple. Early write-off of Kyrgyzstan's debt to Russia in the amount of $240 million or 3.8% of the total external debt of the country will be spent on a new borrowing. Bishkek will take a new loan from China for completing the road. By the way, half of the road has already been built.

How does China profit from these combinations?

In Beijing, they realized that it won’t be easy to build the railroad in Kyrgyzstan for several reasons. First, Bishkek has nothing to put up as collateral, and without state guarantees, China does not want to give money. The railway requires $6-7 billion, and the automobile route along almost the same route - no more than $1 billion. Secondly, the country is unstable, from the point of view of governance: high personnel turnover, constant changes in the governing bodies, one does not have enough time to remember our prime ministers. The third point is a troubled local population.

And laying a railway usually involves sensitive points - it's pastures, it's agricultural land, it's a possible demolition of houses, and even settlements. In the south of Kyrgyzstan, the land issue is considered highly sensitive. And, finally, to build such a large transcontinental road is meaningful only if there is a cargo base, that is, there is something to transport, and Kyrgyzstan has little to offer. Therefore, China took a pragmatic approach, an automobile road is easier to build.

Firstly, Kyrgyzstan easily takes loans; secondly, the construction is easily broken down into sections; thirdly, the loan has a high proportion of grants, which makes the project extremely attractive for elites. And perhaps the most important thing: the pragmatic logic of the Chinese is that this alternative North-South road, which will connect the directions from Kashgar (China) via Turgart (China) towards the Fergana Valley, will show the future cargo base and show payback parameters for the future rail road.

That is, China still needs the railway, doesn’t it?

The population of Urumqi, the capital of the Xinjiang Uyghur Autonomous Region, exceeded the entire population of Kyrgyzstan. There are already more than 7 million, and there are 6 million people in Kyrgyzstan taking into account those who have left the country in search of work. Important growth points also exist in Kashgar. A powerful industrial zone was built around Kashgar. There, China has been deliberately moving a serious industrial base within the last 10 years. By moving the industrial base to the West in Xinjiang, the Chinese solve the problem of industrialization of Xinjiang and the transfer of the anthropocentric point.

For example, the Han people must move to the western region to "dilute" the local population - the Uighur and other small peoples. These are all elements of one big Chinese game. Not forgetting the economic aspect which is profitable for Beijing. Banks give loans not to the state, but they receive guarantees from a foreign state; hardly any money leaves China, 80-90% of it remains with the Chinese road companies that build this road, they pay wages to their own workers in Yuan; the building materials they buy are made in China.

What is the economic meaning of the automobile "Alternative North-South Road"?

In ensuring the future cargo base of a potential railway project. In the strengthening of China's commodity expansion in the densely populated area of the Fergana Valley. In the development of cross-border routes from China through the territories of Central Asia to Afghanistan, Iran, and Turkey. In the capacity of Chinese companies to provide uninterrupted logistics of joint ventures, which they have already opened in Uzbekistan, Tajikistan, and Kyrgyzstan.

I would also like to draw your attention to the fact that the Chinese have reached such a level of costs that it is normal for them to transport ore from Kyrgyz deposits by road. China proceeds from a long-term development strategy for those deposits to which they did not have access for a lack of communications. But now there is such an opportunity. And after the development of deposits begins, there will be a stratification into profitable, medium-profitable, or highly profitable deposits. From then on they are highly likely to actively promote the construction of a railway for large-scale export of ore or logistic support of their ore processing plants in the territory of Central Asia.

As for Kyrgyzstan, it has less ambitious tasks. After the road is ready for operation, it should be paid for, so that all revenues from its use are purposefully spent on repayment of loans, for maintaining the infrastructure in an appropriate condition for active transit use. Under the normal circumstances this road becomes the first stage for the formation of a freight base for the construction of the railway. That is, if it ever gets built.

EADaily's Central Asian Bureau