The Asian Development Bank (ADB) is providing $125 million in its first ever loan to Turkmenistan for a rail link that will expand economic opportunities at home and support increased trade in Central Asia and beyond.

The ADB Board of Directors 2011-03-15 approved the financing for the North-South Railway Project which will be used to fund power, signaling, and telecommunication systems on 311 km of the 934 km-long planned North-South Railway Corridor. The line will improve Turkmenistan’s access to neighboring Kazakhstan, as well as Persian Gulf Countries, the Russian Federation and South Asia.

The track itself is being financed by the Government of Turkmenistan and the Islamic Development Bank and is expected to become an important part of a transcontinental transport corridor being developed under the Central Asia Regional Economic Cooperation Program, supported by ADB.

“This line will become the region’s main rail route for transporting bulk goods such as oil, agricultural products and textiles, which will give regional trade a significant boost and provide new sustainable economic growth and opportunities at home,” said Shakeel Khan, the ADB project officer.

Turkmenistan, which is bordered by Afghanistan, Kazakhstan, Uzbekistan and Iran, has large reserves of oil and gas and the new line is expected to cut the current distance for transporting goods from Central Asia to Persian Gulf ports by about 680 km. Along with reducing travel time and costs it will provide direct employment, support the development of small businesses, and open up opportunities for tapping coal, gold and other minerals in areas alongside the route.

As well as power and communication systems, the project will fund track maintenance and safety equipment. Support will also be given to help the Ministry of Railway Transport develop the capacity to effectively manage the project and its overall assets and finances.

The loan from ordinary capital resources will make up 75% of the total project cost of $166.7 million, with the Government of Turkmenistan funding the balance. The loan will have a 25-year term, with a five year grace period, and ADB is considering two options for the pricing of the funds. The Ministry of Railway Transport is the executing agency for the project which is expected to be completed by September 2012.