Finding a fast route to European nations

Trains along the New Silk Road offer alternative, but high costs may see them play second fiddle to sea transport

In recent years, DP World has been actively operating in the landlocked town of Khorgos, where the nearest ocean is hundreds of miles away. This may seem like an unlikely location for DP World, one of the world's largest port operators with 65 marine terminals across six continents, but its presence here is not without strategic calculation.

A remote Chinese town bordering Kazakhstan, Khorgos is set to become a visa-free special economic zone with simplified customs regulations.

With an inland container port under construction, the plan is to turn it into a logistics hub serving eastbound and westbound cargo for global companies such as Toyota along the overland New Silk Road, as China tries to improve inland connectivity between the country and Europe.

The historical route stretches from Xi'an and Urumqi in western China via Central Asia to countries such as the Czech Republic and Germany in Europe. The plan was rebranded by President Xi Jinping during a State visit to Kazakhstan last year.

"One of the oldest trade links in the world, the land route between Europe and Asia is not used to its full potential for large-scale intercontinental trade," says Mohammed Sharaf, CEO of DP World, which has branched out to become an operator managing different types of transport hubs including inland container depots and logistics parks.

Since last year, DP World has been providing management advisory services for developing Khorgos SEZ.

The revived Silk Road could well shake up conventional supply chains and open up new routes for Asian companies to access markets in Central Asia and Europe, although this ambitious roadmap will take time to realize.

In olden days, it would take months for Chinese silk traders to reach Europe on camels and caravans through the vast steppes of Central Asia, in exchange for spices, herbs and precious metals. Today, that journey is just 15 days - about two-thirds the time required for ocean freight, thanks to the Iron Silk Road.

The Chongqing-Xinjiang-Europe railway, the first to connect inland China to Europe, is seen as an essential part of the New Silk Road.

Since this year, trains have been running three times a week from Chongqing through Khorgos in Xinjiang to Kazakhstan, Russia, Belarus and Poland, winding up at Duisburg in Germany. The service is operated by Trans Eurasia Logistics, a joint venture between Deutsche Bahn and Russian Railways.

The 11,000-km "Iron Silk Road" is more than a land route with a rail option.

"Rail will clearly be the backbone, but we are learning to integrate other modes of transport such as air, sea and road," says Darryl Hadaway, former executive director of KTZ Express, a subsidiary of state-owned railway company Kazakhstan Temir Zholy.

KTZ Express is actively involved in building a freight network to improve connectivity with neighboring countries. On the ground, some $3 billion will be invested to improve rail infrastructure in Kazakhstan, a move to diversify the country's oil-reliant economy.

Kazakhstan is situated at the crossroads of Central Asia and is home to the longest section of the ancient Silk Road. The volume of transit goods passing through Kazakhstan is estimated to reach 170 million metric tons in 2020, up from the current 117 million tons.

KTZ Express will inject an additional $100 million to build a freight and logistics center in Lianyungang, a port in Jiangsu province, on China's eastern coast.

The absence of a centralized port for cargo consolidation in China has long frustrated shippers, particularly those carrying smaller volumes.

"Since different companies are using different ports in Shanghai and Tianjin, it can take up to one month to wait until sufficient cargo volumes are received to fill a container," says Kanat Alpysbayev, vice-president of logistics at KTZ Express.

On completion, the 21-hectare logistics center is expected to quicken the entire process. It will handle 500,000 TEUs (20-foot equivalent units), or standard-size containers, every year, and help shippers from Japan, South Korea and Southeast Asia to move cargo to Kazakhstan by rail.