REPORT | Assessing the Supply-Chain Performance in Central Asia

Field surveys point to low reliability of regional supply chains and to inevitably high costs and border and transit delays.

By The World Bank

REPORT | Assessing the Supply-Chain Performance in Central Asia

Image Attribute: Korday Border Crossing between Kazakhstan and Kyrgyzstan / Wikipedia

Establishing a sustainable supply chain and reliable trade and transportation connections is not just a matter of private demand, but is largely dependent on country factors such as infrastructure, services, or customs captured in the concept of logistics performance. Policy does affect national logistics performance. This outcome depends on government intervention in areas such as infrastructure regulation and focuses on services or customs border management and trade facilitation. Cross-border cooperation to harmonize logistics regulations and facilitate international supply chains is also essential, especially for landlocked countries such as those in Central Asia, which depend on each other to trade globally.  

In Central Asia, most physical links for regional and international trade are essentially available for trains and trucks. The breakup of the former Soviet Union left its member countries with the task of reconstructing seamless logistics systems across borders and over long distances to trade between themselves and with their eastern and western partners. The new supply chain, unlike those in the earlier systems, builds upon the delivery of logistics services according to market principles and modern trade- and transport-related institutions. Evidence shows that this transition is still not complete in Central Asia, because the countries experience high trade costs and comparatively low logistics performance.

Field surveys point to low reliability of regional supply chains and to inevitably high costs and border and transit delays. The quality of services is marred by operational constraints and fragmented local markets. Given their common history, countries share many similar institutional challenges in improving their connectivity.  

The efficiency of trade supply chains, or logistics performance, depends not only on infrastructure but also on the institutions and processes of trade— such as processing by customs—and the quality of services available for trade, which itself depends on regulation and competition. History has created an environment in the FSU countries that is not seen as conducive for efficient logistics and facilitation of trade. The disintegration of the Soviet Union meant that new institutions had to manage borders, and that the unified railway system became fragmented. These changes created several obstacles for further trade facilitation, which were especially detrimental to the smaller landlocked countries in Central Asia (similar to the ones in the Caucasus region) that have to trade in transit across many borders. Table 1 gives the most recent results of the Logistics Performance Index for Central Asian countries.

Table 1: Logistics Performance Index Results for the Central Asian Countries

Table 1: Logistics Performance Index Results for the Central Asian Countries

The most striking pattern in logistics performance in Central Asia is that the region as a whole is clearly lagging behind not only the most developed countries but also Eastern Europe, Turkey, and East Asia. Figure 1 compares the position of FSU countries, when adjusting for the level of development per capita. This means that the facilitation and logistics bottlenecks are indeed significant and the countries tend to lag behind in reforms. 

 Figure 1: Logistics Performance Score, by Gross National Income Per Capita, Central Asia and Other Countries, 2011

Figure 1: Logistics Performance Score, by Gross National Income Per Capita, Central Asia and Other Countries, 2011 

Additionally, it could be observed that (1) the countries that have a more European orientation, such as Georgia or Ukraine, tend to do somewhat better  and (2) Belarus, Kazakhstan, and Russia appear to perform better than the other countries in the Central Asia region.

The comparisons across countries and dimensions (figure 2) show that institutional issues are at least as binding as infrastructure-related issues. Border management tends to be highly problematic, especially in Azerbaijan and Russia. Institutional reforms in areas such as customs remain a high priority despite recent progress on the ground. 

Figure 2: Intra-regional Comparisons across Logistics Performance Index Dimensions, 2012

Figure 2: Intra-regional Comparisons across Logistics Performance Index Dimensions, 2012

In line with trade costs, the affordability of shipments tends to be lower in the smaller countries. Timeliness, as would be expected, is better in the countries closer to their main markets, which penalizes countries in Central Asia, but the tracking indicators (relevant for supply-chain reliability) are comparatively better in larger markets, where economies of scale allow for more productive and better infrastructure, especially in the railway sector. 

The trends in logistics performance appear to be positive overall and reflect the increased awareness of policy makers toward logistics constraints as well as progress on the ground (figure 3). Infrastructure improvement and better reliability seem to drive more overall improvements seen in logistics performance than improvements in customs or quality of services.

Figure 3: Country Scores as a Percentage of Highest Performer in the Overall Logistics Performance Index, 2012
 Figure 3: Country Scores as a Percentage of Highest Performer in the Overall Logistics Performance Index, 2012

Cite this Article:  

Cordula Rastogi, Jean-Fran├žois Arvis , “The Eurasian Connection : Supply-Chain Efficiency along the Modern Silk Route through Central Asia”  Pg: 27 -30 https://openknowledge.worldbank.org/bitstream/handle/10986/18779/888910PUB0Box300EPI199120June122014.pdf / http://dx.doi.org/10.1596/978-0-8213-9912-5   

This work is made available by the original publisher under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) http:// creativecommons.org/licenses/by/3.0/igo.  

 © 2014 International Bank for Reconstruction and Development 
The World Bank 1818 H Street NW, Washington, DC 20433

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REPORT | Assessing the Supply-Chain Performance in Central Asia
Field surveys point to low reliability of regional supply chains and to inevitably high costs and border and transit delays.
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