UNITED NATIONS ECONOMIC AND SOCIAL COMMISSION FOR ASIA AND THE PACIFIC

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1 UNITED NATIONS ECONOMIC AND SOCIAL COMMISSION FOR ASIA AND THE PACIFIC Expert Group Meeting on Progress made by LLDCs in Implementing the Almaty Programme of Action 25 January 2011 Bangkok DRAFT DISCUSSION PAPER Promoting connectivity and creating fundamental transit transport infrastructure for the development of the LLDCs: Report on Progress in Priorities Areas 1 and 2 of the Almaty Programme of Action The views expressed in this draft paper do not necessarily reflect those of the United Nations or any other landlocked developing country mentioned therein. This draft discussion paper has been issued without formal editing.

2 Draft For comments only Promoting connectivity and creating fundamental transit transport infrastructure for the development of the LLDCs: Report on Progress in Priorities Areas 1 and 2 of the Almaty Programme of Action Introduction This document assesses the progress made on Priorities 1 and 2 of the Almaty Programme of Action which sets out the enabling environment that Landlocked Developing Countries (LLDCs) need to create and actions required in establishing efficient transit transport systems through partnerships. While some progress has been made in this regard, there remain various fundamental transit policy issues that need to be further addressed to promote connectivity including: further development of transport infrastructure including Asian Highway Network, Trans-Asian Railway network and dry ports, harmonization of legal regimes relating to transport and transit, adoption of an integrated approach to transport facilitation, elimination of physical and non-physical barriers to transit transport, and promotion of sub-regional cooperation. 1. Priority 1: Fundamental transit policy issues 1.1 Progress of Implementation Since the midterm review of the Almaty Programme of Action, substantive progress has been made in the region including LLDCs in the areas of accession to international conventions, subregional agreement, national coordination and application of tools and technology to monitor and improve transport facilitation and border crossing. International conventions provide frameworks for harmonization and simplification of formalities and procedures. In its resolution 48/11 of 23 April 1992 on road and rail transport modes in relation to facilitation measures, the Commission recommended seven such conventions. Table 1 shows the seven conventions and status of accession of LLDCs in the region. Kyrgyzstan and Uzbekistan have acceded to all conventions whilst Bhutan and Nepal have not acceded to any convention. 1

3 Table 1: Status of accession of LLDCs in the region to the international s listed in Commission resolution 48/11, as of 12 October 2010 LLDC on Road Traffic (1968) on Road Signs and Signals (1968) Customs on the International Transport of Goods under Cover of TIR Carnets (1975) Customs on the Temporary Importation of Commercial Road Vehicles (1956) Customs on Containers (1972) International on the Harmonizatio n of Frontier Controls of Goods (1982) on the Contract for the International Carriage of Goods by Road (CMR) (1956) Afghanistan x x Armenia Azerbaijan Bhutan Kazakhstan Kyrgyzstan Lao People's Democratic Republic Mongolia Nepal Tajikistan Turkmenistan Uzbekistan Notes: x acceded before adoption of resolution 48/11. acceded after adoption of resolution 48/11. Source: Subregional agreements relating to transport facilitation play a key role in subregional connectivity. Some countries commenced the process of formulating subregional agreements on facilitation of cross-border and/or transit transport by land in the mid-1990s with assistance from relevant international organizations/institutions. These agreements have created opportunities for subregional connectivity and simplification and harmonization of formalities and procedures. Progress has been observed in several subregions in developing subregional agreements. Shanghai Cooperation Organization (SCO) member States, including four landlocked countries Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan, have accelerated the process of the negotiation of the annexes to the Agreement between the Governments of the SCO member States on Facilitation of International Road Transport. It is envisaged that the Agreement will effectively eliminate nonphysical barriers to trade, facilitate the efficient movement of vehicles 2

4 and goods, utilize the existing transit transport potential and further developing transport infrastructure. The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) secretariat has been extending technical and financial assistance towards the formulation of an Agreement between the Governments of the SCO member States on Facilitation of International Road Transport, including the preparation of a study on draft annexes to the Agreement and comparative analysis of the proposals by the member States. The study and analysis as well as possible contents of the draft annexes were discussed at the consultation meeting (Beijing, June 2010). The meeting reached consensus on the basis for formulation of the draft annexes to the Agreement on the basis of the ESCAP study. Subsequently, the meeting results were consolidated and draft annexes prepared, and discussed at a negotiating meeting (Astana, November 2010). Experts of the SCO member States reached consensus on most of the draft annexes, and requested the ESCAP secretariat to assist in consolidating the lists of routes and border crossings for negotiation. At the 9th Prime Ministers' meeting of the SCO (Dushanbe, 25 November 2010), the Prime Ministers instructed responsible ministries to accelerate the process of the negotiation of the annexes to the Agreement. In Association of Southeast Asian Nations (ASEAN) and Greater Mekong Subregion (GMS) subregions, sub-regional agreement has created new opportunities for international transport and trade for Lao People s Democratic Republic, the only LLDC in ASEAN and GMS subregions. In June 2009, the transport ministers of the Lao People s Democratic Republic, Thailand and Viet Nam officially opened trilateral cross-border land transport operations along the East-West Economic Corridor at Mukdahan in Thailand, Savannakhet in the Lao People s Democratic Republic, and Lao Bao in Viet Nam. The secretariat is continuing to assist the countries of the GMS and Asian Development Bank (ADB) with the arrangements for implementation of the agreement, as well as with the operation of the Customs Transit and Temporary Admission System in the GMS. The ESCAP secretariat provided technical assistance for the implementation of the ADBsupported Agreement for Facilitation of Cross border Transport of Goods and People in the GMS. Four policy and technical studies on cross-border charges in Cambodia and the Lao People s Democratic Republic and pricing of customs documents for the East-West Economic Corridor and the North-South Economic Corridor were undertaken. In 2008 and 2009, the secretariat assisted ADB in organizing meetings on the exchange of traffic rights and capacity building for operators and customs officials. The secretariat is continuing to assist the countries of the GMS and ADB with the arrangements for implementation of the agreement, as well as with the operation of the Customs Transit and Temporary Admission System in the GMS. ESCAP member states including LLDCs have made substantial progress in forging coordination mechanism of the relevant government ministries/agencies and the private sector in order to 3

5 address transport facilitation challenges effectively. Such collaboration is crucial for the formulation and implementation of various facilitation measures. The ESCAP secretariat published a study on national coordination mechanisms for trade and transport facilitation in the ESCAP region in 2007 to provide global and regional overviews, good practices and recommendations for the establishment or strengthening of national committees for trade and transport facilitation in the region. 1 Following earlier national workshops in Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, the Lao People s Democratic Republic, Mongolia and Tajikistan, the secretariat organized national workshops and provided advisory services in: Islamabad (August 2007), Tehran (October 2007), Ulaanbaatar (July 2009), and Almaty (August 2009), to assist the countries in strengthening or establishing their national coordination mechanisms. The secretariat also provided advisory services to the national committee in Kyrgyzstan and provided information to the committees in the Lao People s Democratic Republic and Mongolia. The secretariat is preparing a publication on trade and transport facilitation to provide a guide to institution-building that can assist member countries in strengthening inter-ministerial cooperation, with the participation of the private sector. The time/cost-distance methodology has been widely recognized as an important tool to identify and address the major bottlenecks impeding smooth and efficient cross-border transport. Many countries in North-East Asia, Central Asia and South-East Asia have applied the methodology and some international organizations and financing institutions have assisted the member countries in applying it. The methodology has also been promoted by the Economic Commission for Africa and the Economic and Social Commission for Western Asia. In response to requests from member countries and other organizations, the secretariat prepared a toolkit with a more user-friendly template and a user guide, and translated it into Arabic, French and Russian to ease its application in non-english speaking countries. The toolkit has been disseminated to a large number of national organizations and some international organizations and financing institutions, including the World Bank, ADB and the International Road Transport Union. During the biennium , the secretariat will upgrade the toolkit to enable it to be used for the analysis of transport corridors. In parallel with efforts to improve the application of the methodology, the secretariat also undertook training and cooperated with other organizations in its application. The secretariat provided training and advisory services on the practical applications of the methodology in Mongolia in October 2008 and, in cooperation with the United Nations Conference on Trade and Development, the secretariat assisted the Lao People s Democratic Republic and Thailand in applying the methodology to transit routes between the two countries. The secretariat, in cooperation with ADB, organized a subregional policy 1 ESCAP, Study on National Coordination Mechanisms for Trade and Transport Facilitation in the UNESCAP Region (2007), available from 4

6 workshop in Bangkok in November 2008 on the applications of the methodology to the corridors linking the six countries of the GMS. 1.2 Issues and Challenges Although acceding to seven international conventions in the field of international land transportation facilitation, as listed in the resolution 48/11, is a cost-effective prerequisite step towards enhancing road and rail transport routes throughout the region, some contiguous countries have not acceded to all of the conventions. There is a territorial discontinuity in their application, which significantly affects their functioning in the region. Although subregional agreements have provided a solid basis for simplification and harmonization of formalities and procedures, most subregional agreements are not being fully implemented; in some cases, the negotiation of the operational and technical annexes or protocols has not been completed. Harmonization of documents and simplification of formalities and procedures for international railway operations need to be placed on the agenda of transport and other control authorities. Also there is a need to jointly discuss the ways to open or expand international railway services. In such discussions, it is advantageous to also reach agreement on harmonized documents and simplified formalities to avoid more complicated and difficult processes that may need to be changed after operations commence. New technologies, such as Information and Communication Technologies (ICT) and electronic customs seals, have provided tremendous opportunities for the improvement of inspections and clearances for cross-border formalities and procedures. Concrete action plans are required to promote the use of new technologies. 1.3 The way forward The ESCAP member countries including LLDCs might consider the following possible actions on fundamental transit transport issues. (a) (b) (c) Ratify or approve the signed subregional agreements and implementing the agreements in their territories; Accede, as appropriate, to international facilitation conventions, including those recommended by the Commission in its resolution 48/11; Accelerate the formulation of subregional agreements under negotiation; 5

7 (d) (e) (f) Incorporate into national legislation, as appropriate, the requirements of international treaties on transport facilitation to which the countries are Parties; Establish or strengthen national facilitation coordination mechanisms; Adopt new technologies available for the control of cross-border and transit transport. 2. Priority 2: Infrastructure development and maintenance 2.1 Progress of Implementation In order to integrate regional transport networks in Asia, all transport links (including railway, road and waterway) and transport nodes (including seaports, dry ports and intermodal interfaces) need to be fully developed. Amongst other transport infrastructure, seaports have developed rapidly and many large seaports have emerged in the region. Table 2 shows that amongst the top 30 container ports in the world, 19 are located in Asia. Table 2: Top 30 container ports in the world (million TEUs), 2009 Rank 09 Port 2009 Rank 09 Port Singapore Los Angeles Shanghai Port Tanjung Pelepas Hong Kong Long Beach Shenzhen Xiamen Busan Laem Chabang Guangzhou Dalian Dubai Brement/Bremerhaven Ningbo - Zhoushan New York/New Jersey Qingdao Jawaharlal Nehru Port Rotterdam TanJung Priok Tianjin Tokyo Kaohsiung Valencia Antwerp Ho Chi Minh Port Klang Salalah Hamburg Port Said 3.47 Source: Containerisation International, March, 2010 Following the entry into force of the Intergovernmental Agreement on the Asian Highway Network and the Intergovernmental Agreement on the Trans-Asian Railway Network, the transport infrastructure networks have been put in place. The implementation of the Asian Land Transport Infrastructure Development (ALTID) project led to the identification of the Asian Highway and Trans-Asian Railway networks comprising 142,000 km of highways and 114,200 km of railway lines. The two networks have now been formalized in two related intergovernmental agreements. The Intergovernmental Agreement on the Asian Highway 6

8 Network entered into force on 4 July There are now 28 Parties to the Agreement and one signatory yet to become a Party. Meanwhile, the Intergovernmental Agreement on the Trans- Asian Railway Network, which entered into force on 11 June 2009, has been signed by 22 member States, of which 15 have already become Parties to the Agreement. Tables 3 and 4 respectively shows the LLDCs which have signed and/or become parties of Intergovernmental Agreement on Asian Highway network and Intergovernmental Agreement on the Trans-Asian Railway network. Table 3: The LLDCs in the region which have signed and/or become parties of Intergovernmental Agreement on Asian Highway network LLDCs Date of signature Date of Definitive Signature (s) Ratification, Acceptance (A), Approval (AA), Accession (a) Afghanistan 26-Apr Jan-2006 Armenia 26-Apr Jun-2005 Azerbaijan 28-Apr May-2005 Bhutan 26-Apr Aug-2005 Kazakhstan 26-Apr November 2007 (AA) Kyrgyzstan 26-Apr Aug-2006 Lao People's Democratic Republic 26-Apr Apr-2008 Mongolia 26-Apr Jul-2005 Nepal 26-Apr September 2010 Tajikistan 26-Apr Apr-2006 Uzbekistan 26-Apr April 2004 (s) Table 4: The LLDCs in the region which have signed and/or become parties of Intergovernmental Agreement on the Trans-Asian Railway network LLDCs Date of signature Date of Definitive Signature (s) Ratification, Acceptance (A), Approval (AA), Accession (a) Armenia 10 Nov 2006 Azerbaijan 10 Nov 2006 Kazakhstan 10 Nov 2006 Lao People s Democratic Republic 10 Nov 2006 Mongolia 10 Nov September 2008 Nepal 10 Nov 2006 Tajikistan 10 Nov February 2008 (AA) Uzbekistan 10 Nov July 2009 Both networks, as well as their feeder roads and rail lines, and the region s ports have substantially contributed to the development of the region s economies and enhanced their competitiveness by allowing access to existing markets, opening new markets and facilitating economic integration. Meanwhile, the two projects continue to assist member countries in identifying future initiatives and projects that are required to boost Asian transport connectivity, support intra-asian trade, sustain economic growth and ameliorate the welfare of the citizens of the region. 7

9 The noticeable progress being made to upgrade the Asian Highway in LLDCs in the region includes: (i) reconstruction of AH5: Baku-Alat-Kazak-Red Bridge, AH8: Baku-Guba-Samur and Alat-Astara in Azerbaijan; (ii) construction of AH3, AH4 and AH32 and a further plan to upgrade AH3 to Class I standards in Mongolia; (iii) progress in the construction of two bridges along the AH3 in Chiang Kong-Houayxay, and along the AH15 in Thakhek-Nakhon Phanom between the Lao People s Democratic Republic and Thailand; (iv) planned reconstruction of AH82: Yerevan-Ashtarak section in Armenia; and (v) reconstruction of AH82 from the Islamic Republic of Iran to the Armenian and Georgian border. Substantial progress has been made in the planning and construction of missing links in the Trans-Asian Railway network in LLDCs in the region. The Government of Mongolia had approved the expansion of its rail network through the construction of 1,040 km of new routes, especially to support the exploitation of mining resources in the south of the country for export to other countries. In Lao People s Democratic Republic and Thailand, the extension of the rail network in Thailand across the border to Thanaleng in the Lao People s Democratic Republic is the first stage of a project to provide rail connectivity to Vientiane. In the Lao People s Democratic Republic, following the inauguration of a short cross-border link with Thailand, in March 2009, the feasibility study for a 420-km section from Vientiane to Boten, Luangnamtha Province, on the border with China would be completed in December In Uzbekistan, the line between Tashguzar and Boysum has also been inaugurated. In addition, other projects are being implemented across the region. Thus, work is in progress on the missing link between Astara, Azerbaijan, and Qazvin, Islamic Republic of Iran, to complete a land-based corridor that will extend from Saint Petersburg to Bandar Abbas with a junction at Bafq permitting travel to India and Dhaka. Meanwhile, in Cambodia, track work commenced to put in place the 48-km missing link between Sisophon and Poipet that will allow for direct rail services between Cambodia and Thailand. In the Caucasus region, the missing link between Akhalkalaki, Georgia, and Kars, Turkey, that will give landlocked countries in the Caucasus region access to Turkish ports on the Mediterranean Sea (Iskenderun and Mersin) and the Aegean Sea (Izmir) is being constructed. Finally, a memorandum of understanding was signed recently between the Governments of China and the Lao People s Democratic Republic to build the line from Vientiane to Boten at the border between the two countries (approximately 570 km), which is a major connection in the Singapore-Kunming Rail Link Project. Completion of the link between Akhalkalaki, Georgia, and Kars, Turkey, will open additional transport routes for landlocked countries in the Caucasus region and access to southern Europe when the Marmaray project is completed. The secretariat has continued to work to foster synergies among member States, international financing institutions and other stakeholders, including the private sector, to explore financing opportunities in priority infrastructure projects along the Asian Highway and Trans-Asian 8

10 Railway routes. As part of this effort, the secretariat organized the Asian Highway Investment Forum in November 2007, which provided an opportunity for participating countries, international financing institutions and the private sector to discuss investment priorities and prospects and different approaches to finance projects as well as to exchange experiences related to the financing, development and operation of major highways. The Expert Group Meeting on Financing for Transport Infrastructure was held on 16 December It further encouraged member countries to give high priority to projects that aim to improve cross-border connectivity and operationalization across the Asian Highway and Trans-Asian Railway networks. Given the investment requirements, the Meeting also encouraged governments to pursue policy measures to create an enabling institutional environment for the development of public-private partnerships. To assist the secretariat in pursuing the issue of investment in the Asian Highway and Trans- Asian Railway, member countries were asked to inform the secretariat of their priority investment projects on a regular basis using the ESCAP template. On the issue of future assistance from international financial institutions, the Meeting noted that ADB was placing increased emphasis on projects seeking greater modal integration and offering reduced impacts on the environment through, for example, the induction of a modal shift from road transport to rail transport or inland waterways. In continuing its efforts to promote support from development partners and the private sector for investments in priority routes along the Asian Highway network, the secretariat formulated a new project, entitled Promotion of investment in the Asian Highway network: pre-feasibility studies of priority sections. In addition to conducting pre-feasibility studies, the project encompasses regional and subregional training workshops and seminars to enhance the capacity of transport officials to prepare investment studies and proposals, as well as another session of the Asian Highway Investment Forum. ADB has commenced a project on promoting regional infrastructure development (RDTA ), with an overall budget of $2.175 million for the period July 2010-December Under that project, there are plans to undertake pre-feasibility studies focusing on sections of the Asian Highway and Trans-Asian Railway, to prioritize investment and update project pipelines, develop a framework to facilitate linkages between trade and transport, and establish a regional project development facility. In July 2010, the secretariat initiated a project on promoting the use of the Trans-Asian Railway through improved awareness of commercial requirements in order to enhance the role of railways in the movement of freight along international corridors. In this respect, a regional meeting is planned for the middle of 2011 for shippers active in international trade between North-East Asia, Central Asia and Europe, and for managers of railway organizations offering transport services along the relevant routes of the Trans-Asian Railway network. This interaction will allow railway managers to promote services that already exist and to foster greater awareness among them of international trade patterns arising from globalization, especially as regards recent growth in intra-asian trade. Meanwhile, the business community will be in a 9

11 position to explain which service requirements need to be put in place before they increase their use of rail transport. At its core, the project seeks to allow targeted countries, including landlocked countries, to take advantage of the increased use of rail transport for the international movement of goods while achieving sustainable growth and reducing the impact of transport on the environment. With the formalization of the Asian Highway and Trans-Asian Railway networks as the two major building blocks of the international integrated intermodal transport and logistics system for Asia and the Pacific, activities are now aimed at integrating the networks, through the development of dry ports. These dry ports would: support the development of intermodal corridors; create new opportunities for growth at inland locations including the 12 landlocked developing countries in Asia and provide new opportunities for international trade, ensuring wider spatial distribution of growth benefits; secure a more inclusive development approach; and support a modal shift to rail transport and inland waterways to reduce the environmental impact of transport. The importance of dry ports as a means of integrating regional transport networks has long been recognized by ESCAP member countries. A series of ministerial meetings including the Ministerial Conference on Infrastructure held in Seoul, November 2001, the Ministerial Conference on Transport held in Busan, November 2006, and the Forum of Asian Ministers of Transport held in Bangkok, December 2009 have acknowledged and reiterated the important role of dry ports in realizing the long term vision of an international integrated intermodal transport and logistics system. As requested by the Commission through its resolution 66/4 of 19 May 2010, ESCAP is working towards developing an intergovernmental agreement on dry ports. Formalizing the development of dry ports through an intergovernmental agreement would (a) promote international recognition of dry ports, (b) facilitate infrastructure investment and (c) define operational services for a more harmonized approach to the development and operation of dry ports in the region. 2 In the broader context, there is a need to consider the most effective means of moving towards an international integrated intermodal transport and logistics system. One approach to this is to focus efforts on a set of strategic international corridors integrating the Asian Highway, Trans- Asian Railway and other modes of transport through dry ports, identify the issues and challenges on these corridors, then make concerted efforts to fully operationalize the corridors by removing the various physical and non-physical barriers. 2 For details on the formulation of an intergovernmental agreement on dry ports and a proposed structure for such an agreement, see E/ESCAP/CTR(2)/3. 10

12 2.2 Issues and Challenges Although significant progress has been made in developing and upgrading the Asian Highway network in conformity with the Agreement s classification and design standards, there are still about 11,500 kilometres (8 per cent of the network) of roads that need to be upgraded to Class III or higher standards. In the railway sector, despite the progress made in developing and upgrading the Trans-Asian Railway through, among other projects, double-tracking, gauge conversion and the introduction of modern signalling, there remains about 8,000 km of missing links (7 per cent of the network). The transport link between sea port and LLDCs has not been fully developed. Amongst the 19 leading container ports in Asia, as shown in Table 1, by and large only Tianjin and Qingdao in China have effective transport link with LLDCs in Central Asia, whilst Port of Laem Chabang has been acting as gateway for international transport and trade of Lao People s Democratic Republic. This can partly explained by the fact that for various historical, political and topographical reasons, the land transport networks of many Asian countries are orientated towards coastal areas. Underdeveloped land transport infrastructure has further hampered the penetration of international trade to inland locations and markets. As a result, inter-country land transport flows of goods tend to be relatively small. One noticeable example of effective transport link between sea port and LLDCs is the port of Lianyungang in China which has been acting as the main gateways for several landlocked countries in Central Asia. Currently, two blocked container trains, one train for each direction, run daily between Alashankou (near the border between Kazakhstan and China) and Lianyungang port. Each train has a carrying capacity up to 96 Twenty-foot Equivalent Units (TEUs). 3 By 15 November 2010, 48,000 TEUs were carried by China Railway Container Transport Co., Ltd. 4. Another noticeable example is the transport link between Port of Tianjin and Mongolia. As a landlocked country, international import and export of Mongolia rely heavily on the seaports either in Russian Federation or China. Port of Tianjin has long been serving as the gateway for 3 Source: in Chinese. 4 Source: in Chinese. 11

13 Mongolia, especially for bulk cargoes. According to Business Mongolia, a memorandum of understanding was signed between the Ministry of Roads, Transport, Construction and Urban Development and the Government of Tianjin in order to further promote collaboration between Port of Tianjin and Mongolia. 5 In view of the evolutionary nature of the Asian Highway, Trans-Asian Railway and dry ports, there is a need to develop or update and maintain their databases which will provide a reference point for their current status at any given time. 2.3 The way forward In order to promote development of transport infrastructure, the following possible actions should be considered by the member states on infrastructure development and maintenance issues. (a) (b) (c) (d) (e) (f) Accede to the intergovernmental agreements on the Asian Highway and Trans-Asian Railway Networks; Actively participate in the regional initiative to develop an intergovernmental agreement on dry ports; Periodically revise the national road and rail networks relevant to the Asian Highway and Trans-Asian Railway and proposing additions or deletions, as appropriate; Plan and implement projects that support overall regional connectivity and initiatives, such as: (i) upgrading standards of the Asian Highway, completing missing links on the Trans Asian Railway, and developing dry ports; (ii) installation of road signs along the Asian Highway; and (iii) prioritizing road maintenance; Periodically collect infrastructure and traffic data on the Asian Highway, Trans-Asian Railway and dry ports and providing it to the secretariat; Developing an administrative, legislative and regulatory environment conducive to public-private partnerships and foreign direct investment. 5 Source: 12