Land bridge must address challenges along the way to become fully operational

During the past decades, governments and businesses in Europe and Asia have been investing a lot in developing the Eurasian Land Bridge, which is expected to benefit trade between the East and West.

The continental rail is expected to be much cheaper compared with air transportation and save almost half the time taken by ocean freight.

There have been two Eurasian "land bridges" operating. The first one, from Vladivostok, Russia to the port of Rotterdam, the Netherlands, was put into commercial operation in 1971. The second, starting from Lianyungang, China via Kazakhstan and Russia to Rotterdam, began rolling out in 1992.

Last June, a freight train fully loaded with Chongqing-made laptops and other products started from the southwestern municipality, crossing six countries and traveling more than 10,000 kilometers in two weeks, and arrived in Duisburg, western Germany. That was the beginning of the Chongqing-Xinjiang-Europe railway.

The railway is now said to have normalized operations.

The news is encouraging because this is the first Eurasian Land Bridge being commercially operated from China's western inland region. It is a major achievement in China's logistics industry, offers important business value and is of great strategic significance to China.

But China should provide more support to help overcome the challenges encountered in the development of the Eurasian Land Bridge.

Reports have pointed to the difficulty of having enough goods to transport from Germany to China. During its initial operational stage, when the trains returned from Germany, the rail often carried little cargo, which squandered capacity and increased operating costs. These pushed up freight rates and offset the competitiveness of the railway.

But any point-to-point, direct intercontinental rail line, when put into initial operation, encounters the same problems.

Solutions should therefore include: establishing an operating mechanism based on bilateral or multilateral cooperation, developing rational container freight rates and optimizing transport systems, attracting large customers, and involving more multinational companies. To that effect, preferential policies for the return freight might be a wise move.

There are many other measures that should be considered. These include establishing a cargo transportation information platform, strengthening logistics infrastructure in the departure and destination cities, setting up a public rail transport network with extra unscheduled freight trains to reduce the scale of freight train marshaling, increasing the number of stopover stations and related logistics infrastructure, streamlining customs procedures and formalities, reducing government control, and strengthening inter-governmental collaborations.

These measures can effectively improve the appeal and cohesiveness of the departure and destination ports to canvass more cargo, and help the destination port to expand its distribution capacity so that the railway can truly take root in Eurasia and radiate to the hinterland. Otherwise, it could lead to an extended transportation period, increased costs, reduced stability and reliability, loss of competitiveness and, ultimately, the failure of efforts to normalize and commercialize this ambitious project.

There are other serious, broader challenges for the operations of the Eurasian Land Bridge, including the coordination of government relations, the balance of interests and control of operational risks.

First, the railway linking Chongqing and Europe crosses six countries, whose customs, inspection and quarantine, transportation, security and other government departments should all be expected to exercise their rights and interests on the railway.

As countries such as Kazakhstan have not joined the World Trade Organization, the trade facilitation and liberalization of trans-border transportation cannot be implemented, which could increase the costs for multilateral cooperation in standardizing policies, procedures and management, and lower the possibility of integrating government resources. This will increase uncertainties over the operation of the railway.

Second, balancing the interests of all parties involved is also a challenge. The Eurasian land bridge involves the interests of many countries, businesses, organizations and individuals. Issues such as the freight rate, collection of fees, cost and profit sharing, reduced procedures and resources integration all loom large. These to a large extent also relate to national security, environmental protection, market access and other concerns.

Any enthusiasm from the parties involved can only be mobilized when their respective interests are met and when business and government resources are effectively integrated.

Avoiding operational risk is another major concern. The six countries along the continental railway have different natural and geographical conditions, so natural risks cannot be avoided. They are also at different economic and social development levels, while their management and technical standards and technical requirements vary.

Cultural difference is also a potential risk factor in the normal operation of the Eurasian Land Bridge. More importantly, the six countries have different political systems, with the political situation in some of them unstable - all of which may in turn affect the continuity and stability of railway operations.

Efforts to address these risks should depend on effective cooperation with governments concerned, unified technical standards and a commercial credit system, a solid business credit system and an entrepreneurial spirit.

If these issues are effectively addressed, the normalization, commercialization and large-scale operation of the Eurasia Land Bridge will be possible.

The author is the dean of the School of Business, Beijing Technology and Business University.

(China Daily 06/08/2012 page7)