Outdated Cross-Border Trade Processes Hamper Central Asian Regional
With the reemergence of Central Asia as a hub for inter-continental trade between Europe and Asia, Central Asian leaders should take note not only of the importance of enhancing transcontinental links, but also of bolstering regional connectivity. Despite its role in East-West trade, Central Asia is one of the least integrated regions in the world, impeding its ability to capture the full benefits of global trade. However, Chinese Belt and Road Initiative (BRI) projects have renewed interest in facilitating regional collaboration. In addition, heightened U.S. involvement in the region and Europe’s desire to harness the region’s vast hydrocarbon deposits have provided the impetus for leaders in the region to institute new policies that seek to alleviate cross-border congestion, simplify customs processes, and promote intra-regional exchange. Central Asia is emerging as a battleground region for regional and global powers. Its leaders must capitalize on this interest by promoting collaborative policies to sustain Central Asia’s viability as a hub for both inter- and intra-regional commerce.
The focus of China’s economic activity is shifting west, away from its East Asian neighbors and closer to its land neighbors in Central Asia. In 2013, Chinese President Xi Jinping launched the Belt and Road Initiative to revive historic trade routes that spanned Central Asia and the Middle East in past centuries. The overland component, the Silk Road Economic Belt, depends on the participation of its Central Asian neighbors. Although China has not released any official statistics on Central Asia’s involvement in the BRI, there are an estimated 261 active Chinese-sponsored projects in the region. Yet, China’s ambitions to resurrect ancient Silk Road transit routes through its various infrastructure projects will not reach their full potential without the renovation of Central Asia’s cross-border trade mechanisms.
The largest border checkpoint in Central Asia, linking Nur-Zholy, Kazakhstan with Khorgos, China, reported extensive delays and notable corruption just days after introducing a modernized IT system for cross-border transit. The Kazakhstani Finance Ministry had emphasized that the modernization project would increase the daily capacity for cars to transit through the border by 30 times, up to 2,500 cars, while the number of people permitted to pass through was projected to increase by 18 times, up to 15,000 people daily. Businesses have complained that long wait times result in late deliveries and annulled contracts. Long wait times at the China-Kazakhstan border will anger Beijing and could threaten needed investment flows from China to Kazakhstan.
Similarly, Kazakhstan has reported issues concerning cross-border trade with Uzbekistan and the Kyrgyz Republic. Along the Kazakhstan-Uzbekistan border, truck drivers have reported waiting for six days to acquire permission to transit the border, generating a long line of trucks unable to promptly transport goods. In addition, despite both Kazakhstan and the Kyrgyz Republic being members of the Eurasian Economic Union (EAEU), the Kyrgyz Republic has accused Kazakhstan’s inspection regime of clogging up border checkpoints. Hundreds of trucks often sit idle in the Kyrgyz Republic for days until they were allowed through by Kazakhstan. While the EAEU’s inaction to resolve the conflict has served as a bottleneck to the issue, Kazakhstan and the Kyrgyz Republic are unable to concur on new terms for cross-border trade. Furthermore, the Kyrgyz Republic is struggling to digitize its customs system. The Kyrgyz Republic relies on Kazakhstan to transport its goods to markets in Russia and the European Union. However, delays and complications impact the Kyrgyz Republic’s ability to access these critical markets.
Other countries in the region have successfully resolved some cross-border trade complications. Tajikistan removed regulatory and procedural barriers, allowing for companies that trade in the country to apply to become an “Authorized Economic Operator” (AEO). This status grants companies priority in obtaining customs clearance and control processes. The new mechanisms are designed to align with the WTO Trade Facilitation Agreement and WTO regulations. Moreover, in alignment with his market forms, Uzbek President Shavkat Mirziyoyev signed a decree to simplify his country’s customs procedures, including reducing the required registration time for cargo customs and implementing risk management systems at border crossings. These changes will increase the transparency and efficiency of border crossing procedures in an effort to enhance regional trade and collaboration.
International partners have also expressed interest helping to simplify customs processes. For example, in 2017, Germany launched its Trade Facilitation in Central Asia (TFCA) project to simplify customs processes for Kazakhstan, the Kyrgyz Republic, Tajikistan, and Uzbekistan. The project yielded positive results; hundreds of people were trained in maintaining quality standards and key issues were resolved to facilitate more efficient trade. The project also facilitated subsidiary programs, such as an agreement between Germany and Tajikistan to revise border management systems.
Central Asian countries are emerging as vital transit countries for large powers, such as China, Russia, the European Union, and the United States. Regional governments should implement simplified customs procedures to sustain this level of interest from powerful actors and augment regional connectivity. Existing cross-border trade procedures are outdated and hamper the ability of businesses and countries to conduct efficient transactions. Central Asian countries must digitize and modernize their customs procedures to incorporate greater transparency and quicker mechanisms, bolster bilateral cooperation to address any divergent policies, and institute reforms to eliminate barriers and restrictions to trade. While it is crucial that Central Asia advance its transit lines with the European Union and Asia, the five republics will greatly benefit from enhanced intraregional cooperation. In order to reap the full benefits of Central Asia’s role as an overland trade hub, the region’s governments must ease the processes for border crossings. By working together to trim down on bureaucratic procedures and red tape, Central Asia can boost both its inter- and intra-regional trade prospects.