SPECA Forum in Baku: roadmap for Eurasian logistics Reducing costs, increasing turnover

This year marks the 25th anniversary of SPECA, a special UN programme for Central Asia (CA), Afghanistan and Azerbaijan economies, aimed at strengthening sub-regional cooperation in transport, trade and business cooperation. Amid conflicts and complex changes going on in the Eurasian region, the SPECA programme takes new meaning and goals. Current and perspective tasks of this structure were discussed in Baku, where the 18th meeting of the working group on trade was held within the SPECA week along with "Turning the SPECA region into a global communication hub".

On the initiative of SPECA member states, the UN General Assembly adopted a draft resolution to celebrate the 25th anniversary of this regional programme: the resolution entitled "Transforming our World: 2030 Agenda for Sustainable Development" highlights the important role of SPECA in promoting mutual understanding, economic cooperation and regional development of the member states.

It should be reminded that SPECA, a special UN programme, was established in 1998 to develop the economies of countries that do not have direct access to open sea spaces: at present this structure unites Kazakhstan, Turkmenistan, Azerbaijan, Uzbekistan, Kyrgyzstan, Tajikistan and Afghanistan.

It is noteworthy that the first three states on the list have been positioned as the most important regional suppliers of hydrocarbons for more than two decades. However, the structure of exports of other SPECA members was dominated by other types of commodities - cotton, grain and various mineral resources.

But in recent years, against the background of the development of non-oil production, the share of products with a high level of added value - food, fuel, mineral fertilisers, semi-finished products for the chemical industry, products of ferrous and non-ferrous metallurgy, vehicles, textiles, etc. - has increased significantly.

Moreover, along with the growth of mutual trade turnover and exports to the Middle East and Europe, the SPECA region states in the last few years have become involved in a potentially huge transit space originating in China and South-East Asia and extending to Türkiye and European countries.

These processes began to intensify five years ago with the launch of the Azerbaijan-Kazakhstan initiative - the Trans-Caspian International Transport Route (TITR), which connects the logistics of Central Asian countries with Türkiye and is actively used by China within the framework of the "Belt and Road" project mainly for transhipment of container multimodal block trains. The LapisLazuli route realised by Azerbaijan, Turkmenistan and Afghanistan since 2019 is also very promising for the implementation of SPECA initiatives.

It is noteworthy that the above-mentioned and other routes included in the Middle Corridor logistics have acquired a qualitatively different significance in the last two years, against the background of the Russian-Ukrainian conflict and virtually complete breakdown of transport communication between Europe and the Russian Federation. In light of these circumstances, the goal-setting for SPECA programme participants has also changed: the initial local tasks of a regional nature are to be transformed into a qualitatively high international level.

The new goals are to be discussed in Baku, where an economic forum entitled "Turning the SPECA region into a global communication hub" was launched within the SPECA week. The prospects for transforming the UN programme into a strategic regional platform, developing new transport and logistics strategies, and addressing common problems of member states, including the establishment of a trust fund within the programme, were discussed during the forum.

Within the framework of the Forum and the 18th meeting of the working group on trade, in which the heads of economic departments of the countries of the region, representatives of the UN profile structures, the Organisation of Turkic States (OTS) participate, it is also planned to discuss joint work in the sphere of digital transformation of data and their exchange in the supply chain and transport communication, development of "green" initiatives in the SPECA region, to outline the prospects of the Middle Corridor development against the background of new global challenges.

"Enhancing the capabilities of the railway infrastructure of SPECA countries, as well as accelerating the process of digitisation of documents between the participants of this programme can tangibly increase the volume of freight traffic in the region," said Dmitry Maryasin, UN Deputy Executive Secretary for Economy, during the SPECA 2023 Baku Forum.

He added that the elimination of deficiencies in the administration of the supply chain can reduce transport costs by up to 30 per cent, in turn, by 2040 container transportation through TITR can grow four times and reach 200 thousand.

It should be noted that necessary steps are being taken in this direction: for example, in November last year, the relevant structures of Kazakhstan, Azerbaijan, Georgia and Türkiye adopted a five-year road map aimed at synchronous expansion of the transport infrastructure of the route and identification of bottlenecks to eliminate delays in transit traffic. In particular, the parties agreed to jointly reduce the time of cargo delivery, improve the process of informing about the location of rolling stock, eliminate administrative barriers, etc.

Another goal is the digitalisation of cargo traffic passing through the TITR, which will simplify and speed up logistics and expand the multimodal component of freight transport. A virtual dispatch centre is functioning between the ports of TITR to ensure smooth and accelerated passage of cargo traffic and prompt resolution of arising issues.

SPECA participants are also implementing mechanisms of simplified customs procedures, exchange of customs risk analyses has been established by ensuring a preliminary exchange of information. Once customs risk analyses become available for all countries of the region, there will be no need for duplication of control measures, and it will significantly reduce the loss of time when cargo passes through the borders.

"Trade turnover between Azerbaijan and SPECA member countries for 10 months of the current year totalled $1.2 billion, which is 16 per cent more than the same period last year. The growing dynamics of mutual trade between our countries should be noted: last year's trade turnover totalled $1.3 billion, which is 3.6 times more than in 2021," Azerbaijani Economy Minister Mikail Jabbarov said.

The minister noted that the countries participating in the UN programme have considerable potential and resources for the development of regional cooperation in various directions, and along with the formation of transport and logistics infrastructure, it is necessary to develop cooperation in the spheres of tourism, agro-industry and ecology.

"It is necessary to pay attention to the environmental sustainability of transport networks by investing in "green" sustainable systems, by integrating renewable energy sources (RES) and reducing carbon dioxide emissions," Jabbarov said. The minister stressed that in the context of the SPECA programme, energy interconnection is to be developed, "and it is not only the transmission of electricity or oil and gas supply, but it is also the key to unlocking the region's full potential as a global hub".

Within the framework of the 18th meeting of the SPECA Working Group on Trade, the issues of facilitating trade turnover between SPECA member states, aspects of expanding the multimodal component in transport, simplification of customs procedures and digitalisation of logistics were discussed, as well as outlined the priority tasks to be implemented by the working group over the next 2-3 years.

A key role in SPECA reform processes is assigned to Azerbaijan, which has invested billions of dollars in transport infrastructure development and is currently implementing new ambitious projects. In particular, Azerbaijan is financing the modernisation of the Baku-Tbilisi-Kars railway, and next year freight traffic on this road will be increased from 1 million tonnes to 5 million tonnes. At the same time, the capacity of the Alyat port is being expanded, and during its modernisation, cargo handling at the harbour will increase from the current 15 to 25 million tonnes.

Given that most SPECA member countries are landlocked, their participation in international and regional transport corridors is of utmost importance to improve the efficiency of national economies. "Azerbaijan, which has established strong friendly and business ties with SPECA countries, performs the role of a trade and transport hub between East and West for other participants of this programme, and we are focused on expanding cross-border cooperation," Minister M. Jabbarov noted.

This cross-border cooperation is rapidly developing, and not only with neighbours on the eastern shore of the Caspian Sea - Kazakhstan and Turkmenistan, which for the third decade have been engaged in large-scale transhipment of hydrocarbon raw materials and non-oil goods in transit through Azerbaijan. Recently, the participation of such SPECA participants as Tajikistan and Kyrgyzstan in the Middle Corridor projects has intensified, in particular, Bishkek together with Beijing is building the China-Kyrgyzstan-Uzbekistan railway with access to the Caspian ports of Kazakhstan.

In turn, Baku and Tashkent, which have significantly increased trade turnover, have agreed to provide Uzbek companies with a site for the establishment of their terminal at the Baku International Sea Trade Port (BISTP), which will be used for transit shipments of sugar to Uzbekistan, as well as for other export-import operations with our country.