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The Road to Holland The Road to Holland The Belt and Road Initiative: implications and opportunities of rail freight transport between China and the Netherlands Study at the request of the Netherlands ministry of Infrastructure and Water Management Chris Wensink, Adriaan Roest Crollius, Wouter van der Geest, Tianang Li, Bastiaan van Berne and Ke Li Zoetermeer , 1 June 2018 The responsibility for the contents of this report lies with Panteia. Quoting numbers or text in papers, essays and books is permitted only when the source is clearly mentioned. No part of this publication may be copied and/or published in any form or by any means, or stored in a retrieval system, without the prior written permission of Panteia. Panteia does not accept responsibility for printing errors and/or other imperfections. Table of contents Management summary 5 1 Introduction 7 1.1 Reader’s guide 8 2 Why rail? 9 3 The intercontinental rail freight corridor 13 3.1 Routes, capacity, bottlenecks and investments 13 3.2 The legal framework: customs procedures 18 3.3 Running the trains: Chinese decision makers 20 3.4 Rail freight services between China and the Netherlands 21 4 Current and future freight flows 23 4.1 Overview 23 4.2 Import from China to the Netherlands 24 4.3 Export from the Netherlands to China 25 4.4 2030 Forecast: import from China to the Netherlands 26 4.5 2030 Forecast: export from the Netherlands to China 26 5 Impact on the Netherlands 29 5.1 Impact on the Netherlands: distribution centres 29 5.2 Impact on the Netherlands: mainports 31 6 Strategic considerations 35 6.1 Long-term implications 35 6.2 Scenario 1 – Corridor investments 37 6.3 Scenario 2 – Investments in South European seaports 38 6.4 Scenario 3 – International interdependency 40 6.5 Strengths, Weaknesses, Opportunities, Threats 41 7 Policy options 43 7.1 Active role for Ministry of Infrastructure and Water Management 43 7.2 Improve corridor quality 43 7.3 Unified railway law 44 7.4 Establish Platform with the BRI states 45 7.5 European policy towards BRI 46 7.6 The Road to Holland: the Netherlands as an integral part of BRI 46 7.7 Support Dutch businesses and regions that are interested in BRI 47 8 Methodological note 48 8.1 China-Europe trade relations 48 8.2 Database transport flows 48 8.3 Panteia Terminal Model 49 8.4 Stakeholder-based research 50 3 C12084 4 C12084 Management summary The Chinese Belt and Road Initiative (BRI), also referred to as the ‘New Silk Road’, comprises two key elements. On the one hand, development of the ‘Maritime Silk Road’ is aimed at maritime connectivity between coastal regions and their hinterlands in Southeast Asia and the Middle East. The ‘Silk Road Economic Belt’, on the other hand, is to bring about economic integration and remove infrastructure bottlenecks in Central Asia and Southeast Asia. This includes expansion of rail freight connections between China and Europe. From 2015 onwards, a substantial increase in rail freight flows between China and Europe has been witnessed. The potential of intercontinental rail freight lies in its middle position between ocean and air. Other important factors are large-scale Chinese government subsidies, occasional capacity shortages in the other modalities, ongoing economic development in the Chinese hinterland, a global trend of curbing costs for capital use, and the availability of an alternative and flexible modality. However, important challenges remain. These include infrastructure shortfalls, inefficient customs and transhipment procedures at border crossings and brake-of-gauge, delays and congestion at arrival terminals in the EU, and the accompanying uncertainties and planning issues. Also, impediments for the use of temperature-controlled containers, import sanctions in place between the EU and Russia, free-trade limitations vis-à-vis China, and a lack of control over the transport process are seen as obstacles for European shippers. The most important railway corridor between China and Western Europe, now and in the foreseeable future, runs through Poland, Belarus, Russia and Kazakhstan. Under normal circumstances, lead times from inland China to Western Europe stand at 15 to 16 days, which would allow for a time saving of some 14 days compared to ocean. However, currently experienced delays are seen to increase lead times to 18 to 19 days or even more. Brake of gauge takes place on the Polish-Belarusian border (typically Malaszewicze/Brest) and on the Kazakh-Chinese border (typically Dostyk/Alashankou; Khorgos). Customs procedures also take place on these border crossings, with Russia, Belarus and Kazakhstan being members of the Eurasian Economic Union (EAEU) customs area. The Malaszewicze/Brest border crossing is identified by all stakeholders as the most pressing bottleneck, notably for westbound transport. The organisation and planning of rail freight transport between China and Europe is carried out by Chinese intermodal operators, who act by order of city or regional authorities. Competition for subsidies and freight between Chinese cities and regions from which the trains depart is intense. Although economic rationality is certainly the foremost guide in establishing new services, other factors such as networking contacts (government to government, business to government), city bonds and operational circumstances also come into play. Chinese decision makers are well aware of the practicalities of rail freight transport to and from Europe and the positioning of end terminals in the European hinterland. However, specific knowledge of the Netherlands and its leading position in infrastructure and transport, including the extensive distribution centres in the country’s southeast and the high-capacity dedicated rail freight infrastructure between the ports of Rotterdam and Amsterdam and the German hinterland (Betuweroute), is less apparent. Essential points of departure and arrival for containers from and to the Netherlands are Duisburg and Tilburg. Duisburg has myriad connections with Chinese destinations, such as Chongqing, Beijing, Dalian, Harbin, Qingdao, Shenyang, Shilong, Tianjin, Wuhan, Yingkou and Yiwu. Tilburg currently offers triweekly services to and from Chengdu, with expansion of the rail terminal creating capacity for greater numbers of trains and destinations. A Nunner Logistics run shuttle linking the port of Amsterdam to Yiwu (via Duisburg) is being started, aiming for several services per week. 5 C12084 Rail freight volumes between China and the Netherlands have strongly increased over the past years and are estimated at some 25.000 TEU for import and export in 2018, with the inland provinces of Jiangsu, Chongqing and Yunnan being the top 3 Chinese origins and Sichuan province (Chengdu) the vital destination. Towards 2030, rail freight potential for import from China to the Netherlands stands at some 297.000 TEU per annum (making up for 10 to 15 trains per day). Potential for export equals some 28.000 TEU per annum (roughly 7 trains per week). Impact on the Dutch transport economy is mild but significant. Distribution centres in the southeast of the country will become modestly more competitive, whereas the port of Rotterdam will likely see a limited share of its future growth in container turnover curbed. So far, European countries have reacted to BRI in different ways. Generally, Central, Eastern and Southeast European countries, some of them struggling with high unemployment and limited financial means for infrastructure development, appear to have embraced the initiative. To be sure, Chinese infrastructure investments in European countries generally appear to process slow, with some countries only moderately interested in attracting financing. Also, EU internal market rules as well as rules and funds associated with European TEN-T policy seem to put a brake on Chinese investments. Western and Northern European countries, on the other hand, have been more reticent although not dismissive. At the European level a discussion is taking place concerning BRI’s wider strategic implications and Chinese infrastructure investments in the EU and its neighbourhood. A communication from the European Commission detailing infrastructure investment options in the EU and Eastern Partnership countries, with the aim of improving transport connections between TEN-T and countries to the East, is expected in summer 2018. Stakeholders indicate that actively taking stock in BRI is in the interest of the Netherlands and other European countries. Being involved in upgraded and new infrastructure and services in the EU and beyond, including on government level, brings a measure of shared control, whereas the opposite leaves the risk of loss of influence. An active role for the Dutch Ministry of Infrastructure and Water Management brings a number of important advantages. The Netherlands has a clear interest in furthering the quality and efficiency of rail freight connections to the EU-EAEU border and beyond, whilst simultaneously addressing strategic challenges in a European context – both matters requiring ministerial involvement. In addition, coordinating and consolidating promotional actions towards Chinese stakeholders with regard to the Dutch leading position in transport would allow for an effective approach, both in terms of concrete actions and in terms of attaining access to the appropriate levels of decision making. As mentioned already, on the Chinese side BRI is ultimately managed at the governmental level, thus requiring involvement from the Dutch government as counterpart. Improve corridor
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