For centuries, the rule of thumb in trade was that land divides, water unites. It took years and gradually months to follow an overland trading route from Europe to China, as opposed to months and eventually weeks by boat. But speed-trains are changing the global logistics map. These speed train connections are the “hardware” of the overland Silk Path road project that connects Europe to China.
In effect, the “Silk Path” corridor from China to Europe was obsolete for 500 years. Ships took over. The Atlantic economy thrived from the moment the Portuguese Caravelas reached China. Five centuries later, speed trains are bringing this corridor back to life.
Many in Europe do not yet know what the Silk Road is about. But they will. Recently, I travelled to Beijing and addressed the Asian Political Parties’ Conference on the Silk Road. There, I met with high-level Chinese government officials to discuss the unique opportunities that Georgia offers to the stakeholders to this project. A few days later, the Georgian government hosted the first Silk Road Forum (16-17 October). The event was attended by around 1,000 participants, government representatives from 30 countries, officials from 20 international financial and donor organizations and envoys from 300 Chinese mega-companies. Co-hosted by the Asian Development Bank (ADB), the objective of the Forum is to bring together the movers and shakers that will materialize a gigantic vision: to connect 65 countries, which produce 55% of the world’s GDP, have 70% of the world’s population, and 75% of known energy reserves.
That is not simply “a vision.”
On November 18, 2014, in Yiwu City, in China’s Zhejiang province, a train carrying 82 containers weighing more than 1,000 tons left a massive warehouse complex heading for Madrid. It arrived on December 9. Today, it takes nine days from China to Tbilisi, 16 to Warsaw, 21 to Madrid. This is faster than overland and sea connections.
At this point in time, the challenge is cost. A railway container costs $7,000, compared to $2,000 for a sea container. Reducing cost will require innovation, investment, and scale. It is then for good reason that China became the biggest foreign investor in Georgia in 2014. By November 2016, the construction of a 178 km, $600 million Baku-Tbilisi-Kars railway will be complete. That will increase speed.
But, there is something to be said about the sea. In June 2016, Georgia begins the construction of a deep-sea port in Anaklia which, in full capacity, should be able to handle 100 million metric tons. That port, will extend to a free economic zone where cheap energy, labour, world class infrastructure, market access, and a business-focused regulatory system will allow Georgia’s integration into the global manufacturing value chain. That should bring down cost.
By interconnecting the road to Central Eastern Europe, South-Eastern Europe and the Middle East, Georgia is poised to become a logistics hub. But, this is not about Georgia alone. What is happening to places like Anaklia, will happen to many countries, regions, and cities from Central Asia to the Baltic Sea, especially, as in the case of Georgia, where the infrastructural hardware meets the regulatory “software.”
This part of the world is now becoming interconnected in terms of “hardware infrastructure.” But, Georgia is no longer selling merely location, location, location, but also important for what it is. Georgia has signed free trade agreements with Europe, the European Free Trade Area and we are on preparatory stages for an agreement with China. Georgia is no. 15 in the World Bank’s Ease of Doing Business Index. In Georgia, “hardware” meets “software.”
Rapid economic growth is moving to a part of Asia and to a part of Europe that was for centuries excluded from the Atlantic economy. As Europe pivots to the Pacific and China to the Mediterranean and the Black Sea, we are following Marco Polo’s trail. Only this time, China is discovering us.
Europe’s geography is changing. The Baltic coast is no longer in the periphery of Europe; it is Scandinavia’s gate to Asia and Europe, an interconnected landmass. The Black Sea is no longer the periphery, but Europe’s bridge to Asia and the Middle East. From Anaklia to Klaipėda, from Gdansk to Constants, changing trade routes will soon reflect on investment patterns. From the Baltic to the Black Seas and thereon to China, land unites again.