integration of sswa countries: key issues in rail … usd 9.8 billion İstanbul usd 76.2 billion...

tepav Economic Policy Research Foundation of Turkey

Integration of SSWA countries: Key issues in rail transport

Yakup Peker

New Delhi, 16 March 2017

Outline Industry is better for inclusive growth

Industry requires collaboration: Look for value chains

Connectivity for industrial development

Increasing connectivity fosters integration

Istanbul– Islamabad Railway: long-time forgetten links

Big picture: Modern Silk Road

Missing links in Trans-Asian Railway Connectivity

A national example (GTI)

Conclusion

Connectivity makes regional integration easy Slide 2

At TEPAV, we care about regional integration & connectivity The Economic Policy Research Foundation of Turkey

A private, nonpartisan, nonprofit “think- and do-tank” devoted to independent research and project implementation

Established in 2004, with the support of the Union of Chambers and Commodity Exchanges of Turkey

now only 30% of the budget is through TOBB

Four programs

Innovation, Macro, Region, Cities

Regional Integration projects

Integration by providing good investment climate

• Special Economic Zones in the West Bank, Yemen and Mauritania

Transport corridor projects

• BALO: Connecting Turkey to Europe

• Istanbul– Islamabad Railway: long-time forgetten links

• Moden Silk Road


The connectivity matters for the market orientation: The case of inland v. Coastal Turkey

Source: TURKSTAT, TEPAV calculations

Bursa USD 9.8 billion

İstanbul USD 76.2 billion

Kocaeli USD 6.5 billion

Konya USD 1.3 billion

Gaziantep USD 6.4 billion

İzmir USD 8.4 billion Kayseri

USD 1.5 billion


EU-28 71%

MENA 11%

East Asia 4%

Others 14%

EU-28 51%

MENA 25%

East Asia 4%

Others 20%

EU-28 53%

MENA 18%

East Asia 7%

Others 22%

EU-28 31%

MENA 38%

East Asia 5%

Others 26%

EU-28 27%

MENA 42%

East Asia 6%

Others 25%

EU-28 18%

MENA 56%

East Asia 3%

Others 23%

How would you send your cargo from Istanbul to Karachi or Mumbai? Maritime?

Istanbul

Karachi

Mumbai

Rotterdam


Istanbul

Karachi

Mumbai

How would you ship your cargo from Istanbul to Karachi or Mumbai? Railway?


0

1,000

2,000

3,000

4,000

5,000

6,000

0 10 20 30 40 50

Maritime

Railway is fast between coastal areas, fast & cheap between inland areas

Source: Astra Logistics, TCDD, TEPAV Data

Cost

($ /

40 f

t)

Time (day)

0

1,000

2,000

3,000

4,000

5,000

6,000

0 10 20 30

Time(day)

Ankara - Lahore İstanbul - Karachi

Ground

Railway

Ground

Railway

Maritime


Railway freights are increasing in India, Iran and Turkey

How to integrate more?

0

50

100

150

200

250

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

India

Iran

Pakistan

Bangladesh

Turkey

Railway Freight Index in SSWA Countries

(2000 Level is 100 for each)

50

100

150

200

250

50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 210 220 230 240 250 260

South Africa

USA

Romania

World

Russia

Mexico

Bulgaria

Afghanistan

Laos

Saudi Arabia

Argentina

Cyprus

Italy

Croatia

Australia

South Korea

Bhutan

UK

Spain

Brunei Poland

Colombia

Bangladesh

Maldives

India

Vietnam

Thailand

Turkey

Pakistan

Nepal

Sri Lanka

Cambodia

Philippines

Brazil

China

Singapore

Indonesia

Malaysia

Total Export 2015, (2008=100)

Lithuania

Tota

l G

DP 2

015, (2

008=

100)

Latvia

Ireland

Low growth Low export growth

New markets gain importance in the post-crisis world


Source: World Development Indicators, TEPAV calculations Note: Myanmar is excluded as an outlier with export index in 2015 as 35027 (2008=100)

Other Emerging

World

G20, others

ASEAN

SSWA

High growth Low export growth

Low growth High export growth

High growth High export growth

Country Groups

Increasing trade volumes within SSWA (1)


0%

2%

4%

6%

8%

10%

0

2

4

6

8

10

12

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

4 countries' share in Turkey's total exports (Right axis)China, billion $ (Left axis)Iran, billion $ (Left axis)Pakistan, billion $ (Left axis)India, billion $ (Left axis)

Turkey’s export to India and the countries in the route

Source: UN Comtrade, BACI, TEPAV

calculations


Turkey’s import from India and the countries in the route

Source: UN Comtrade, BACI, TEPAV

calculations

0%

5%

10%

15%

20%

0

5

10

15

20

25

30

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

4 countries' share in Turkey's total imports (Right axis)

China, billion $ (Left axis)

Iran, billion $ (Left axis)

Pakistan, billion $ (Left axis)

India, billion $ (Left axis)

Increasing trade volumes within SSWA (2)

Modes of regional integration

European Union

Integration by design

Nation states are bind by acquis communautaire of 700k pages

Independent fiscal and monetary policy euro crisis

ASEAN

Integration by interaction

Private-sector driven integration, joining international supply chains is the key

No higher level political project, policy reforms in each country enable integration

South and Southeast Asia (SSWA)

Integration?

Fragmented efforts so far: ECO, SAARCH, APTA

Post-financial crisis opportunity?


Different modes of integration, different levels of convergence

Source: World Development Indicators


Luxembourg 101.4

Ireland 61.1

Netherlands 44.3

Austria 43.8

Finland 42.3

Germany 41.3

Belgium 40.3

France 36.2

Italy 30.0

Spain 25.8

Cyprus 23.2

Malta 22.6

Slovenia 20.7

Portugal 19.2

Greece 18.0

Estonia 17.1

Slovakia 16.1

Lithuania 14.1

Latvia 13.6

Turkey 9.1

Maldives 8.4

Sri Lanka 3.9

Bhutan 2.7

India 1.6

Pakistan 1.4

Bangladesh 1.2

Nepal 0.7

Afghanistan 0.6

Iran -

Singapore 52.9

Brunei 30.6

Malaysia 9.8

Thailand 5.8

Indonesia 3.3

Philippines 2.9

Vietnam 2.1

Laos 1.8

Myanmar 1.2

Cambodia 1.2

GDP per capita of Eurozone (current thousand USD)

GDP per capita of ASEAN (current thousand USD)

GDP per capita of SSWA (current thousand USD)

SSWA is the least integrated among these experiences with different modes

Share of manufactured inputs that are provided from the region countries in regions total

manufactured inputs import (%)

Source: BACI Database, UNCTAD TEPAV Calculations


0

10

20

30

40

50

60

70

MENA ASEAN EU SSWA

2015 2005 2010 2000

Within SSWA, India & Turkey diverge with their manufacturing sophistication

Export sophistication (Economic Complexity Score) of SSWA countries, 1995-2014

Normalized between 0 and 100


Bangladesh

India

Iran

Pakistan

Sri Lanka

Turkey

5

15

25

35

45

55

65

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

Source: Harvard Atlas of Economic Complexity TEPAV Calculations

Mo

re s

op

his

tic

ate

d e

xp

ort

ers

Turkey and India also diverge in the manufacturing exports performance (1/2)

Manufacturing exports in MENA, CIS, and SSWA regions, 1996

(bubble size = volume of exports)


0

5

10

15

20

25

30

35

40

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

Share of manufacturing in country’s total exports (%)

Algeria Pakistan

Turkey

Kuwait Kyrgyzstan Nepal

Russia

Saudi Arabia

Moldova

Tunisia Kazakstan

Oman Morocco Qatar Bahrain Egypt

Ukraine

Yemen Georgia

India

Israel

Co

un

try’s

sh

are

in

to

tal m

an

ufa

ctu

rin

g e

xp

ort

s

of th

e r

eg

ion

(%

)

Source: UN Comtrade, WB, TEPAV calculations

Turkey and India also diverge in the manufacturing exports performance (2/2)

Manufacturing exports in MENA, CIS, and SSWA regions, 2015

(bubble size = volume of exports)


0

5

10

15

20

25

30

35

40

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

Egypt Kazakstan Algeria

Israel

India

Georgia Kyrgyzstan

Bahrain Kuwait Pakistan Oman

Turkey

Morocco

Moldova Nepal Yemen Tunisia

Qatar

Ukraine

Russia

Saudi Arabia

Share of manufacturing in country’s total exports (%)

Co

un

try’s

sh

are

in

to

tal m

an

ufa

ctu

rin

g e

xp

ort

s

of th

e r

eg

ion

(%

)

Source: UN Comtrade, WB, TEPAV calculations

Traditional shipping connectivity does not help intra-regional integration (India & Turkey are at EU levels)

UNCTAD Liner Shipping Connectivity Index for SSWA countries and EU


0

10

20

30

40

50

60

70

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Bangladesh

Turkey

India

Maldives

Pakistan

Sri Lanka

Iran (Islamic Republic of)

EU Average

Source: UNCTAD

What are the problems in border crossing by rail transport?

Hard connectivity

Gauge breaks

Soft connectivity

Procedures

Lack of standardization & harmonization

Incompatible systems


UZBEKISTAN

TAJIKISTAN

KYRGYZSTAN

KAZAKHSTAN

TURKMENISTAN

AFGHANISTAN

IRAN

PAKISTAN

TURKEY AZERBAIJAN

ARMENIA

GERORGIA

RUSSIA

INDIA

IRAQ

SYRIA

LEBANON

ISRAEL

SAUDI ARABIA

Tahran

Ankara

Quetta Zahedan

Kerman

Tebriz Malatya Kayseri

Taftan

Esfehan

İstanbul

Islamabad

Connecting Europe/Turkey to the Subcontinent: Istanbul – Tehran - Islamabad Train

Zahedan

Railway conversion Taftan

Customs

Kapıköy

Customs

Van Lake

Ferry

Taftan – Quetta

Old rails


ANKARA SİVAS

MALATYA

ELAZIĞ

TATVAN

KAPIKÖY

ZANJAN

YAZD

KERMAN

MİRJAVEH TAFTAN

QUETTA

LAHORE

0

50

100

150

200

250

300

350

400

0 1000 2000 3000 4000 5000

Tim

e (

ho

ur)

Distance (km)

total wait time: 47 hours



Time – distance analysis of a test run Ankara – Lahore: ~15 days

PAKISTAN 11,6 km/h

TURKEY 8,6 km/h

IRAN 17,6 km/h 16

14

12

10

8

6

4

2

days


Big Picture: Modern Silk Road


İslamabad

Kashgar

Karachi Gwadar

Istanbul

Tahran

America

Europe

«Hard connectivity» issues


Infrastructure Scores (LPI, 2016)

Source: World Bank, Doing Business 2017

«Soft connectivity» issues


Cost to Export: Documentary Compliance (USD, 2017)

Source: World Bank, Doing Business 2017

Next step: Istanbul-Tehran-Islamabad-Delhi-Kolkata-Dhaka integrated railway corridor


Customs coordination and standardization is a must for connectivity

26

Coordination in customs and security

Public – private partnerships in gate modernization and management

Integrated Check Points, Single Windows

Opportunity to evaluate each institution in the customs seperately

Kapikule (Before) Kapikule (After)


Sarp (Before) Sarp (After)

Conclusion Asian integration model is different from the EU

Regional connectivity is a critical catalyzer

Policy reforms are enablers

Istanbul-Islamabad train could be an opportunity for SSWA countries integration

Access to EU market fast and cheap for SSWA

Alternative way for the landlocked countries

Software connectiviy can solve hard border crossing issues

Establishing a coordination unit for Asia-Pacific countries

A regional transport infrastructure development fund to catalyze cross-border cooperation in provision of finance

Corridor management agencies to ensure coordination between national agencies and regulators


integration of sswa countries: key issues in rail … usd 9.8 billion İstanbul usd 76.2 billion...

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