The digital future of transport corridors running through the Far East: international experience and Russian realities

5 September 2019

The digital future of transport corridors running through the Far East: international experience and Russian realities

CONCLUSIONS

Far Eastern infrastructure may play key role in increasing cargo flow between Russia and Asia-Pacific countries

“Far East is currently a key link of transport and logistic chains between Asia-Pacific countries and Russia. It has incredible potential for increasing both transit and export/import capacity. <…> At the moment, we see great potential for attracting additional cargo flow both from China to Europe and from other countries such as Japan and South Korea – up to 10% of their cargo flow to Europe. <…> Digitalization <…> can provide solutions to the problems that the infrastructure cannot solve,” Pavel Chistyakov, Vice President, Infrastructure Economics Centre.

“Transport corridors that involve the Trans-Siberian Railway are very demanded by Japan,” Isao Takahashi, President, Toyo Trans Inc.

Digitalization significantly improving shipment efficiency

“With digitalization, we are planning to make the most efficient decisions online to optimize internal workflows. Our goal is to enable cargo shippers and other stakeholders to see online what is going on in the Russian Railways, where the cargo will be, how much is the shipment, how can one optimise the workflow,” Oleg Belozerov, Chief Executive Officer – Chairman of the Executive Board, Russian Railways

“The digital future of transport corridors is a joint digital effort of the customs service and our counterparts from abroad, our carriers and business in general,” Vladimir Bulavin, Head, Federal Customs Service of the Russian Federation.

“Reduction of supply chain barriers provide a 5–6% increase in the GDP, that’s USD 80 billion,” Alexandrs Isurins, Chairman of the Executive Board, President, Eastern Shipping Company (FESCO).

PROBLEMS

Far East’s potential not fully used

The current condition of the Far Eastern transport corridors can be briefly described with one phrase – unused potential. Despite significant progress it is still not fully used. This can be said both about providing Northeast China with the outlet to the sea through our lands, and about increased volume of shipments in large Trans-Eurasian scale,” Sergei Ivanov, Special Presidential Representative for Environmental Protection, Ecology and Transport.

Insufficient digitalisation

“Every year, we survey about 1.5 thousand executives of the world’s largest companies, including those from the transport sector. More than 90% of executives from the transport sector said that digital technology was important. About 20% described the level of digitalisation at their companies as advanced. In other areas, this value is around 45%,” Mikhail Bazhenov, Partner, Capital Projects & Infrastructure, Debt Advisory Leader, PwC Russia.

“It’s not that investments will lose their value without digital technology and without electronic media. We’ll simply fail to make ship processing or cargo transportation around the port or communication with customs control at the speed the customer wants,” Sergey Shishkarev, President, Delo Group of Companies.

Overregulation and no incentives

“The Japanese party, a Japanese company has to fill in a huge amount of papers, which we are supposed to execute. <…> We are still facing a lot of troubles and we have a lot of expectations from the Russian party in terms of digitalization,” Isao Takahashi, President, Toyo Trans Inc.

“The transport corridor is a high-tech transport system which is most effectively used in a preferential regime. It isn’t enough just to refer to a route as a ‘corridor’. Certain preferences must be established for it,” Anton Zamkov, General Director, RT-Invest Transport Systems; Director, Digital Transport and Logistics Association.

Legal framework is not ready for digital technology

“Trusted execution environment shared by the participants of the shipment process is generally established based on bilateral agreements. Blockchain, or distributed ledger, technology provides a trusted execution environment for all participants of the shipping process not only in Russia, but also for our partners abroad. At the present moment, however, there is no legal framework that would make blockchain recognized as a certification authority for establishing a trusted execution environment,” Alexandrs Isurins, Chairman of the Executive Board, President, Far Eastern Shipping Company (FESCO).

“There will be no development without a new legal framework based on digital technology. It is important for us not to keep up to date, because it’s a global trend, and we must follow it,” Sergei Ivanov, Special Presidential Representative for Environmental Protection, Ecology and Transport.

SOLUTIONS

Transition to digital document flow

“Digital technology is the area that is supposed to be the most effective in all respects. <…> Digital format helps avoid a lot of outdated functions,” Oleg Belozerov, Chief Executive Officer – Chairman of the Executive Board, Russian Railways.

“If we talk about digitalisation and document flow issues, the major trends are reduction and harmonisation of references, cutting expenditures on document processing, that is time expenditures and costs, in the first place,” Mikhail Bazhenov, Partner, Capital Projects & Infrastructure, Debt Advisory Leader, PwC Russia.

“Export, without oil and gas and arms, adds up to USD 143 billion. This 143 billion includes 18–20% worth of logistics expenses. If digitalisation helps reduce the logistics expenses by, at least, 2% our importers might save USD 3 billion,” Alexandrs Isurins, Chairman of the Executive Board, President, Far Eastern Shipping Company (FESCO).

Drafting regulatory framework for digitalisation

“The Russian President has set the task for the Government and the Federal Assembly to swiftly adopt regulations on digital technology. <…> I think, the decision will be made before the end of the year,” Andrey Kutepov, Chairman of the Committee on Economic Policy, Federation Council of the Federal Assembly of the Russian Federation.

Synchronising activities of shipment participants

“The level of communication has increased, it’s high now. However, we will have to implement certain projects not only inside – we need to go big and synchronise with other market players,” Vyacheslav Saraev, Chief Executive Officer, Head of the Executive Board, TransContainer.

The digital future of transport corridors running through the Far East: international experience and Russian realities

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