Umberto de Pretto: Middle Corridor needs to be optimized as unified economic zone

The Middle Corridor stretching between China and Europe is increasing its strategic importance for international cargo transportation. Geopolitical changes and restrictions on traditional routes have brought this corridor to the forefront of the global trade and logistics sector. Many international companies are now turning to the Middle Corridor as an alternative route. However, several challenges and issues are waiting to be resolved to realize the corridor's full potential.

In his interview with Report, Umberto de Pretto, Secretary General of the International Road Transport Union (IRU), discussed the current challenges, development prospects, and solutions for the Middle Corridor.

- How do you currently assess the volume of cargo transportation between Europe and China through the Middle Corridor?

- Geopolitical developments over the past few years have redefined trade routes. Many logistics actors have turned to the Middle Corridor as a viable alternative to traditional routes, which have been impacted by bans and limitations.

Freight volumes along the Middle Corridor have grown exponentially: 1.5 million tons in 2022, followed by 2.8 million tons in 2023. This is a substantial increase compared to just 586,000 in 2021.

These development indicators have further increased the importance of the Middle Corridor as a strategic transport corridor between China and Europe.

- What are the challenges in this regard? How do you currently assess the level of countries' transition from paper documents to digital information exchange on transit, transport and customs procedures, permits and visas?

- A major challenge for the Middle Corridor lies in the uneven digital development among the countries along its route. While some still depend on paper-based documentation, others have advanced considerably in implementing digital systems for customs, transport and commercial documentation. Additionally, burdensome transit and trade procedures contribute to congestion at border points, leading to inconsistent and unreliable crossing times.

Investments in both hard infrastructure and soft procedures, services and tools are needed to keep up with increasing traffic at congested border crossings. But to maximize the potential of the Middle Corridor and build resilience, our strategic focus must shift towards soft trade and transit solutions.

Tried-and-tested tools, such as the proper use of the TIR system, can significantly streamline trade flows and unblock congested border crossings. Furthermore, risk-based facilitation allows customs authorities to separate traffic flows and prioritize low-risk cargo.

Central Asian countries, which are at the heart of east-west connectivity, are establishing dedicated TIR lanes for secure transport. Their customs authorities are also receiving advance information for risk management via TIR’s electronic pre-declaration system (TIR-EPD).

Building on the progress made in digitalizing TIR processes, the goal is to achieve the widespread implementation of eTIR in the coming years. eTIR will not only further boost TIR’s benefits by eliminating time-consuming paper-based processes, but it will also make it much easier to bring the benefits of TIR to the service of intermodal transport, opening new opportunities for the efficient combination of different modes of transport.

The Middle Corridor is facing several challenges, including a lack of transparency, with pricing often described as both high and unpredictable. Transit times across the corridor also vary significantly – while some crossings are completed quickly, shippers rely on consistent and reliable timings for planning purposes.

These issues are attributed less to infrastructure shortcomings and more to a lack of rolling stock and challenges in interoperability between different transport modes. Despite these obstacles, there is considerable potential to address these bottlenecks by improving the corridor's operational efficiency and strengthening coordination.

- What needs to be done to increase cargo flow in the Middle Corridor?

The Middle Corridor has seen record growth in transit volume in recent years.

The interest is not only commercial but political from China all the way to the EU. I have participated in countless governmental forums in recent years where the middle corridor was the primary focus.

As mentioned, to maximize the potential of the Middle Corridor and build resilience, our strategic focus must shift towards soft trade and transit solutions.

Logistics actors are also reporting that current transit costs along this route are high, but what is more important is the fact that their supplies are not stable. Additionally, unpredictable and nontransparent pricing and scheduling, combined with rough Caspian Sea conditions, can result in a truck being stuck at the seaport for a week or even longer.

Despite these challenges, over 19,400 vehicles traveled along this route in 2022, while only 3,000–5,000 vehicles did so in 2015. In the future, the potential capacity can go up to 40,000 vehicles. However, the passage of freight vehicles would largely depend on the availability of RO-PAX ferries.

The Middle Corridor could triple its trade volumes by 2030 compared to 2021, reaching 11 million tons, while also halving travel times, according to the World Bank.

However, realizing this potential depends on the establishment of a cross-border institutional framework capable of efficiently developing and optimizing the corridor as a unified trade route and economic zone. Achieving this requires the active involvement of multiple stakeholders, including the public and private sectors, as well as international financial institutions and development partners.

Without improvements to the corridor, transport demand would fall 35% short of the anticipated growth.

Beyond serving as a landbridge for containerized freight between Asia and Europe or as a route for accessing global markets for various types of cargo, the corridor holds significant potential as an intra-regional trade route.

If these steps are taken in time, the Middle Corridor will become an important hub not only for the region but also for the global trade network. States and companies should work together to increase the corridor's attractiveness and further strengthen its strategic importance.

- What problems are currently facing the transportation sector in the world? What countries should do to facilitate freight transportation around the world?

- Road transport companies worldwide are grappling with three major challenges: driver shortages, decarbonization, and digitalization.

The industry is facing a chronic shortage of professional drivers. Governments and industry stakeholders must collaborate to improve access to the profession while enhancing its appeal. The global shortage of truck drivers is projected to double by 2028, with over 50% of operators already struggling to recruit skilled personnel. However, the real issue is not merely the lack of drivers but the shortage of qualified, professional drivers.

With the right legislation, incentives, and enabling environment, the road transport sector can already cut its carbon footprint by 50% through efficiency improvements alone.

Decarbonization efforts should focus on efficiency measures in the short term, alongside a long-term strategy for adopting alternative fuels, which depends heavily on the availability of the necessary infrastructure.

Digitalization offers transformative potential for the industry. Amidst all the new technologies hitting the market (automation, AI, etc), we should not forget about the basics. There is still too much paperwork. Tools such as eTIR and e-CMR can streamline customs and transit processes, reduce paperwork, and enhance trade transparency, all while meeting increasing transport demand.

The implementation of these measures will not only increase the efficiency of transport operations but will also ensure the sustainable development of the global trade network.

- Decarbonization of the transport system was one of the main issues discussed at COP29 held in Baku. Would you share your thoughts on the outcomes of this conference?

From our industry’s perspective, the well-hosted COP29 showed promising signs that governments are listening to IRU in terms of taking pragmatic decarbonization action. We worked very closely with the Azeri government on COP29 in supporting its two flagship transport initiatives: sustainable Middle Corridor and green cities.

Ahead of COP29, we, together with the Federation Internationale de l'Automobile (FIA), also initiated eco-driving awareness sessions for bus and taxi drivers who drove COP29 delegates in the city of Baku. Conducted in partnership with Baku’s leading bus and taxi operators, the initiative trained 5,000 drivers on how to make sustainable decisions on the road, covering braking, heating, idling and other emission-intensive behaviors. Our training reduced, on average, fuel consumption by 11%, with the top performer reducing emissions by 32%.

At COP29, the decarbonization potential of the Middle Corridor was also discussed. The development of this corridor has strategic importance not only for the countries of the region but also for the global transport network.

In this regard, supporting IRU's Green Compact approach, as well as promoting digitalization and transition to alternative energy sources was at the forefront.

In general, cooperation between governments, industry partners, and international organizations is essential to solve problems in the transport sector.

Azerbaijan's proactive role within the framework of COP29 showed that concrete measures towards sustainable development of transport can have a significant impact not only on local but also on global issues.