Asian Development Bank Continues Investment in Supply Chain Architecture

The Asian Development Bank (ADB) has been a long-time investor in roads, road transport, rail transport, and ports projects around Asia. These investments often target under-developed areas within specific countries and under-developed links between countries that lack essential funds. As I discussed in a post on China's planned stimulus package aimed at accelerating the development of transportation infrastructure, roads and road transport are often the "first rung on the ladder" for individuals who seek to establish a supply chain for their existing small business, or perhaps a new small business. Without this most basic of supply chain architectures, many goods and services businesses in under-developed regions fail to either get off the ground or expand beyond immediate surroundings.

Let's take a look at projects recently highlighted in the ADB press releases below:

• 11/13: "New Silk Road" to Link Europe, Asia
• 11/18: ADB's Railway Loan to Boost Economic Link in Western PRC
• 11/18: ADB Supports Key Central Asia Transport Corridor

The common link here is these are directly or indirectly linked to ADB's CAREC Project, described as follows:

"The Central Asia Regional Economic Cooperation (CAREC) Program was initiated in 1997. CAREC’s goal is to improve living standards and to reduce poverty in CAREC countries through more efficient and effective regional economic cooperation. To date, the Program has focused on financing infrastructure projects and improving the region's policy environment in the priority areas of:

• transport
• energy
• trade policy
• trade facilitation

"These areas are critical to improving the region’s economic performance and livelihoods of the people, especially of the poor.

"Spanning nearly 4,000 kilometres across Central Asia, the CAREC Program includes 8 countries in the Central Asia region, namely:

• Afghanistan
• Azerbaijan
• People's Republic of China (focusing on Xinjiang Uygur Autonomous Region)
• Kazakhstan
• Kyrgyz Republic
• Mongolia
• Tajikistan
• Uzbekistan"

Drilling down into the transport section of the project, the ADB clearly emphasizes how important this physical architecture is in supporting the flows of economics, people, security and legislation and/or regulations. Let's take a look at the strategies set forth that will be supported by the actual infrastructure investments (highlights mine):

"The CAREC Transport Sector Road Map (2005–2010) aims to develop an integrated and efficient transport system in CAREC countries in support of sustainable economic growth and poverty reduction. The Road Map sets six strategic priorities:

1. Harmonization and simplification of cross-border transport procedures and documentation among CAREC countries to facilitate the movement of passengers and freight across borders.
2. Harmonization of transport regulations among CAREC countries to create a level playing field for transport operators and promote efficiency and better services.
3. Development and improvement of regional and international transport corridors to link production centers and markets within CAREC countries and to enhance CAREC countries’ access to neighboring regions and markets.
4. Restructuring and modernization of railways to provide quality and efficient services through private sector participation and improved corporate governance.
5. Improvement of sector funding and management to ensure that the regional transport network is developed, operated, and maintained properly.
6. Incremental approach to liberalization of civil aviation, focusing on the adoption of bilateral agreements using common legislative clauses, with a view to expanding sub-regional agreements among neighboring countries, and potentially more widely in the long term. Enhancement of external inputs from all stakeholders, especially business and tourism, in aviation policy making."

The ADB also provides some maps, which offer a visualization of the project's expanse. The first provides a view of the focus countries:

The second provides a view of how this region fits into the bigger picture of an Europe-Asia link:

The CAREC project is really emphasizing what Tom Barnett calls "The Non-Integrated Gap" which the ADB is obviously trying to get "integrating" again. Below is my overlay highlighting the "Gap" region in the above map--notice how this encompasses essentially all of the non-Russia linkages between Asia and Europe: 

Although China is not necessarily considered a Gap country, much of its Western region bordering Central Asia is quite underdeveloped, and so I include as part of the Gap targeted by the ADB.

Considering that the country risk levels in the Gap are high, the challenges for these ADB projects are quite significant and extend beyond simply the physical challenges of building roads and laying rail. Corruption, terrorism, and a significant black market in trade will also largely take advantage of this new infrastructure until the full range of ADB's strategies are realized. In particular, developing common regulatory and security systems across borders that ensure development is safe and beneficial will be critical in order to positively impact a wider range of communities. The rewards will be great if these projects are successful.