Kyrgyzstan and China Move Closer to Joint Railroad Construction

Bishkek and Beijing may soon sign a long-anticipated agreement on the construction of the “China-Kyrgyzstan-Uzbekistan” railroad. Kyrgyz Prime Minister Almazbek Atambayev will travel to China to discuss the project’s details. The Kyrgyz government considers the railroad to be an important component in the country’s economic strategy during the next few years.

At a meeting with the China Communications Construction Company (CCCC) representatives in July, Kyrgyz Deputy Prime Minister Omurbek Babanov said the railroad has a strategic role for Kyrgyzstan. Babanov expressed his optimism that the new transportation corridor will contribute to the country’s social and economic development. In return CCCC representatives said that the railroad would boost cooperation between China and Kyrgyzstan (www.respublic.kg, July 25).

In the mid-1990s the Chinese government opened official talks with Kyrgyzstan and Uzbekistan on the construction of a railroad that would connect all three countries. The idea was born almost simultaneously with the Shanghai Five when the organization was formed in 1996. The railroad project has been repeatedly discussed in subsequent Shanghai Cooperation Organization (SCO) meetings. Although a timetable for the railroad’s construction is still unclear, the project is likely to proceed in the foreseeable future.

The project’s estimated price has increased from $1.34 billion to over $2 billion, and it will take roughly 12 years to become profitable (www.geo.gov.kg, September 12, 2009). In 2009, Beijing and Bishkek agreed that China’s National Machinery Import & Export Corporation would be responsible for constructing the railroad, with the Chinese side providing equipment and labor. However, it still remains uncertain how the project will be financed. According to Babanov, China might provide Kyrgyzstan with a credit or exchange its services with Kyrgyzstan’s mineral resources. China has already agreed to grant 30 million Yuan ($4.69 million) for initial exploration work.

The 268 kilometers (km) railroad would considerably shorten the current 900 km connection between China and the rest of Central Asia and provide access to the sea for the landlocked Central Asian countries. Potentially, Iran and Turkey might also join the project. The railroad would help connect East Asia with Europe, since it would take about one week to transport cargo from the Chinese Pacific coast to the European market instead of several weeks to even a few months. Babanov visited China in April this year. “We have received an explicit confirmation on the construction of ‘China-Kyrgyzstan-Uzbekistan’ railroad and have won the PRC’s support. Already this year, in three to four months, we will sign a general agreement with the Chinese side,” Babanov explained after returning from China (www.kyrtag.kg, April 14).

The major obstacle is to standardize the track width for all three countries. The Chinese insist on building a narrow track to meet international, rather than Russian, standards. Uzbekistan has already begun adapting its rail tracks to meet international standards, and it is now up to Kyrgyzstan to comply with Beijing’s request. Unlike Bishkek, which fully relies on Chinese investment, Tashkent agreed to pay for its own segment of the railroad. While negotiations on the railroad project continue, Babanov has also been the Russian-led Customs Union’s most ardent supporter, which could potentially decrease Kyrgyzstan’s ability to serve as a transit zone for Chinese goods. Although to date the Russian government has not voiced any direct criticism of the railroad, Moscow has repeatedly said that the China-Central Asia railroad is unlikely to become a serious rival to the Trans-Siberian line.

Due to its membership in the World Trade Organization (WTO) since 1998, Kyrgyzstan has become an important transit zone for Chinese goods reaching neighboring countries. Kyrgyzstan is the only Central Asian state in the WTO. Despite Bishkek’s new status as an important player in Sino-Central Asian relations, however, Sino-Kyrgyz economic ties grew mostly in the trade sector, while direct investment and financial cooperation remain insignificant. Since the mid-1990’s, Beijing has provided soft loans to Kyrgyzstan. That is, the Chinese government allocates low-interest credits to the Kyrgyz government on the condition that Chinese employees lead most of the related construction projects. For example, in 1994 China invested $7.4 million in a paper manufacturing plant in which the majority of workers were Chinese. But despite an additional $14.7 million Chinese investment in 1998, the factory still declared bankruptcy. China also invested $70 million to build a cement plant in southern Kyrgyzstan. The plant is expected to produce up to 2,500 tons of cement daily and export its products to neighboring countries (https://www.ifri.org/?page=contribution-detail&id=5257&id_provenance=97).

According to estimates by the Kyrgyz research institute “Poekt Buduschego,” the number of traders in Kyrgyzstan benefiting from re-exports has reached 800,000 (the total population is 5.5 million). Russia and Kazakhstan are the primary markets for roughly 90 percent of such traders (https://ictsd.org/i/news/bridgesrussian/76721/). Lacking its own efficient railroad system, Kyrgyzstan would greatly benefit from this project. The railroad would connect Naryn oblast with Osh oblast and possibly also Issyk-Kul. In addition, Kyrgyzstan would profit from cargo transit levies.