$18.5bn needed for Middle Corridor infrastructure in Central Asia, says EBRD expert

$18.5bn needed for Middle Corridor infrastructure in Central Asia, says EBRD expert
Route connecting China and Europe via Central Asia has becoming increasingly popular since Russia's invasion of Ukraine. / bne IntelliNews
By Clare Nuttall in Yerevan May 30, 2024

The short-, medium- and long-term infrastructure investment needs for the Central Asian part of the Middle Corridor are around €18.5bn, European Bank for Reconstruction and Development (EBRD) director and head of infrastructure Eurasia, Ekaterina Miroshnik, said in an interview with bne IntelliNews

The Middle Corridor, which links Central Asia to Europe, has become a viable alternative to the Northern Corridor, predominantly controlled by Russia due to its extensive passage through Russian territory, and the traditional sea route via the Indian Ocean. Known as the Trans-Caspian International Transport Route (TITR), this route connects nations including China, Kazakhstan, Azerbaijan, Georgia and Turkey.

Infrastructure investment needs in Central Asia for the Middle Corridor span the road, rail, ports and logistics sectors, said Miroshnik, quoting EU-funded research by the EBRD. 

A separate study by the World Bank looking at Central Asia, the Caucasus and Turkey, estimates short-term needs at around $7bn. 

“The needs are huge and of course we expect the governments to contribute and to fund, but also others – like the EBRD, other international financial institutions (IFIs) but also commercial banks and private investors,” Miroshnik told bne IntelliNews on the sidelines of the EBRD annual meeting in Yerevan earlier this month. 

“In the short term there is a lot to be done in expanding rail capacity, port capacity, and of course lots of logistics in the private sector,” Miroshnik added. 

The Middle Corridor has been under consideration for years, but interest spiked after Russia’s invasion of Ukraine in 2022, followed by the imposition of sanctions that further disrupted trade routes and supply chains. 

That prompted China and the Central Asian republics to look at new routes to increase their exports to Europe, without going through Russia. Another advantage of the Middle Corridor is that it reduces transport times both compared to shipping goods from Asia to Europe, and compared to the Northern Corridor via Russia.

“There is more demand for this Middle Corridor. That’s why it has become a very hot topic,” according to Miroshnik. 

However, she points out, currently “if you send goods along the Middle Corridor, you have to change the mode of transport. At the moment it’s not the most efficient way to send goods from Central Asia to Europe, from China to Europe.

“The whole idea behind [developing the Middle Corridor] is to to make it more certain, to make it faster, now the dates range from 14 to 60 days and you never know where your goods are. Idea is to speed up and also to digitise the corridor so you know where your container is.” 

Miroshnik points out that many governments across the region are committed to developing the corridor. Steps taken include an agreement signed recently between Kazakhstan, Azerbaijan and Georgia to establish a logistics operators along corridor. She describes this as "a great step in the right direction” and expects more efforts to support the Middle Corridor.  

The infrastructure needs along the Middle Corridor come in the context of a global infrastructure gap that will be as high as $8.3 trillion between now and 2040, according to data from the Global Infrastructure Hub. 

While the global gap is both huge and growing, according to Miroshnik, the EBRD’s region of operations, spanning Emerging Europe, Central Asia and the Southern and Eastern Mediterranean (Semed), “suffers from poor infrastructure”, she told an EBRD panel earlier in May. 

While the gap varies widely between countries and region, it is estimated at between 1.7% and 4.3% of GDP for each country in the region. “Without infrastructure investments, many economies within the region might not be able to develop their economic potential,” the banker commented.