Kazakhstan occupies a vast surface in north and centre Eurasia, neighbouring with Russia, China and Central Asia countries in the south-west (Kyrgyzstan, Uzbekistan and Turkmenistan). A large part of the country opens to the Caspian Sea.
Along the years, as an independent country, Kazakhstan maintained a sustainable economic growth, due to the private initiative and entrepreneurship development, foreign trade and investments. In the last 10 years, the country’s Gross Domestic Product (GDP) increased from USD 22 Billion to USD 135 Billion.
According to World Bank, Kazakhstan is part of the group of countries with average revenues. GDP per capita exceeds USD 8.000. Also, the country holds the 20th position in the classification of investment allocation. Ever since Kazakhstan became an independent country in 1991, over USD 100 Billion were invested, which represents 80% of the foreign capital invested in Central Asia.
The country’s foreign assets, including the National Fund, amount to tens of billions of dollars and foreign trade has known an incredible boom, reaching USD 80 Billion. Kazakhstan signed economic and trade agreements with over 140 countries.
According to Bakhyt Sultanov, Minister of Economic Affairs and Budget Planning, “in 2010, the GDP is expected to increase by 1.5 – 2% and the level of inflation may reach 6 – 8%. We have come up with
several measures to help boost economy”, he stated for the central press. To that end, the government will implement two important measures related to maintaining macroeconomic stability and consolidating the positive economic trends. The second measure will help create a favourable environment for post-crisis development and sustainable economic growth.
Kazakhstan, the largest ex-Soviet country, excluding Russia, has enormous fossil fuel reserves and abundant quantities of minerals and metal. That is why the industrial sector focuses mainly on natural resource extraction and processing.
Due to these resources, Kazakhstan has significantly contributed to the global energetic security, as the seventh country in the world in terms of oil resources and gas and uranium reserves. It was estimated that, by 2017, Kazakhstan will become one of the ten largest oil suppliers in the world.
Having successfully achieved all the stages of economic development, Kazakhstan has now become one of the 150 most competitive nations in the world.
Kazakhstan is a strategicpartner for the EU
Based on the country’s foreign policy, the development of multilateral cooperation with the European Union is of strategic interest. Even though the potential for a bilateral cooperation with Europe in terms of technology, energy, transport and trade hasn’t been fully achieved, EU countries focus a great deal on the cooperation with Central Asia, and especially with Kazakhstan. The position of these countries is reflected in the document entitled “EU and Central Asia: A New Partnership Strategy”, adopted during the EU Summit in June 2007. This strategy focuses on increasing cooperation between EU, Central Asia and Kazakhstan. At international level, the government in Kazakhstan reacted positively to the challenges imposed by introducing incentive schemes in order to ensure financial sustainability, support the construction sector and small and medium-sized enterprises (SMEs) and increase investments in innovative projects and in the infrastructure. The government also revised the country’s financial policy, encouraging foreign investments in order to boost economy by financing SMEs. “In order to ensure long-term economic sustainability, we will promote the development of competitive export sectors and we will continue to encourage foreign investments in the economic sector. We will especially focus on public-private partnerships”, said Bakhyt Sultanov, Minister of Economic Affairs and Budget Planning.
Economic growth and the implementation of measures related to business climate development are the reasons for which Kazakhstan holds the 63rd position in the World Bank “ease doing business” classification of 2010, one position higher than in 2009. Hence, Kazakhstan is now an attractive country for the companies looking to sign long-term contracts.
Last but not least, the projects initiated by the authorities in every sector benefit from financial support and assistance from international banks. To that end, in April 2010, Philippe Maystadt, President of the European Investment Bank (EIB), and Nursultan Nazarbayev, President of Kazakhstan, signed a loan frame agreement. “Kazakhstan is an important partner for the European Union, just as it is stipulated in the EU – Central Asia Strategy and it’s only natural for EIB to play its part in consolidating the relations between these two parties. The agreement will allow us to allocate financial support for the eligible projects developed in Kazakhstan”, said Maystadt.
The European Bank for Reconstruction and Development (EBRD) is also involved in the development of various fields of activity in Kazakhstan. EBRD focuses mainly on promoting domestic and foreign investments, by supporting the financial sector, SMEs and the public infrastructure sector.
In December 1009, EBRD increased the loan rate for economic financing by an additional EUR 50 Million, which went to the SMEs sector. “Through this transaction, EBRD brings significant funds in the country’s economy and contributes to the development of the private sector. This project also outlines the bank’s strong commitment to support the financial sector in Kazakhstan”, said EBRD President Thomas Mirow. Through this transaction, EBRD financed the financial sector in Kazakhstan with EUR 1 Billion. EBRD has allocated over EUR 2.3 Billion for various economic sectors in Kazakhstan.
During the transition process, Kazakhstan faces many strategic challenges, which have been stressed by the economic and financial crisis. The crisis has outlined the excessive dependency of the country as far as primary industries and raw material exports are concerned. To that end, according to the EBRD strategy approved on January 1, 2010, it is necessary to diversify the economy towards industries with added value provided by the diversification based on rational economy. The financial sector, which was affected by the economic crisis, requires a reform, as well as the support of the private sector through financing.According to the “Kazakhstan 2030” strategy, the government is developing measures to create the necessary development conditions for the domestic and foreign business climate. However, in order to do so, aside from increasing state involvement, the business sector has to participate with innovative projects. “Most efforts in terms of research and project development should come from the private sector”, said Nursultan Nazarbayev, President of Kazakhstan, during the presentation of the strategy.
Cooperation with international companies boosts the railway industry sector
Due to its economic and geographical characteristics, Kazakhstan focuses more on transport than most countries in the region, except for Russia. In Kazakhstan, having an efficient transport system is essential for the development of domestic and international trade. Kazakhstan occupies a vast territory, but the population density is low. This makes transport a decisive factor for the entire economy. The most important mode of transport is railway transport.
The main rail links which connect Russia and the European countries with the Asia – Pacific, Central Asia and Middle East region cross Kazakhstan. The borderline railway network is connected to the networks in Uzbekistan, Kyrgyzstan, Azerbaijan and China. Due to this fact, the railway market in the region is attractive for European countries. According to UN ESCAP, the Central Asian corridor which crosses the western region of Kazakhstan is “the most important route which provides transport links between Central Asia and Europe”. The Western Corridor (Aksaraiskaya II – Makat – Beineu – Aktau), the Northern Corridor and the Central Corridor (Dostyk – Aktogai – Almaty – Arys – Sary-Agach) – TRACECA, attested by all the documents in the field as one of “the main links for Eurasian unity” are also very important for railway transport. TRACECA links Europe, the Black Sea area, Caucasus, the Caspian Sea and Central Asia. The project is financed by the European Union.
Due to the major role of railway transport, the “Kazakhstan 2030” strategy stipulates the strategic development of the infrastructure through public-private partnerships, as well as quality management improvement, which contributes to the implementation of major projects.
“We urged the government to elaborate an infrastructure development plan in order to integrate the railway network within the international infrastructure. We have to implement technological systems for the integration of various modes of transport, as well as develop regional centres”, states President Nursultan Nazarbayev on the official website of the Ministry of Public Finance. In order to increase transport efficiency, Kazakhstan Temir Zholy (KTZ) plans to rehabilitate, upgrade and expand the railway network. “We have to make use of the country’s transit potential and that is why it is necessary to integrate our network within the international railway system”, shows the “Kazakhstan 2030” strategy. In this context, the authorities plan to reorganise the railway system in order to improve competitiveness. “It is crucial to launch and expand the logistics network so as to meet future demands. The railway sector has to comply with the international standards on safety, speed, product delivery and the tariffs should meet the demands of the international sector”.
In order to implement these projects, EBRD, together with the Asian Development Bank (ADB), will allocate financial support and provide assistance for the elaboration of the feasibility and pre-feasibility studies. Also, improvements related to the legislation framework and trade provisions have been promoted.
“Developing an investment programme will allow the company to meet economic demands in terms of increasing the annual freight transport turnover by 5%. Currently, KTZ is implementing a series of investment projects for the construction of new railway lines of international interest”, said Askar Mamin, President KTZ.
Cooperation in the railway sector is vital for project implementation, seeing as Kazakhstan wants to become involved in the finalization of the international railway networks by creating a unitary system to ensure transport on the Europe – Asia axis.
In November 2009, the president of Kazakhstan Railways – KTZ, Pier Francesco Guarguaglini, President Finmeccanica, and Mauro Moretti, CEO Ferrovie dello Stato, signed a memorandum of understanding (MoU) for cooperation in the development of Kazakhstan railway sector. “This agreement represents a major opportunity for the Italian transport industry and railway companies, because they can offer their technologies and products to countries such as Kazakhstan, who are involved in major railway projects”, said Pier Francesco Guarguaglini. Temir Zholy also signed an agreement with Ansaldo STS for railway signalling, electrification systems and the creation of control-command centres in railway stations in Kazakhstan and its neighbouring countries.
The telecommunications network will be upgraded based on a contract signed between KTZ and Alcatel-Lucent, who will supply solutions for the development of a fast WAN infrastructure, which will allow KTZ to extend its services.
In regards to the improvement of the railway infrastructure, in 2008, Kazakhstan Ministry of Transport and Bombardier Transportation signed an agreement for railway development. According to Bombardier officials, the railway market in Kazakhstan was valued at EUR 400 Million and its value may increase to EUR 600 Million by 2016.
In cooperation with GE Transportation, Kazakhstan managed to build a locomotive facility in Astana. GE Transportation will handle the maintenance of KTZ locomotives.
Another memorandum was signed with Transmashholding, through which Kazakhstan will benefit from the creation of two rolling stock manufacturing companies. Over 100 passenger cars will be manufactured. The two companies will diversify their production portfolio and Alstom Transport may become involved in these projects as strategic partner.
Strategic agreements are vital for the development of a single railway network
When it comes to the development of the international railway network, Kazakhstan has a strategic role due to its geographic location: a bridge between Europe and Asia. In this context, agreements and memorandums have been signed and continue to be signed for the construction of new railway lines that facilitate freight traffic between the two regions. Efforts to initiate freight transport projects and to develop a single infrastructure focus on creating and consolidating foreign relations and financing, which are vital for stimulating the transit potential and for encouraging export through transport services. The globalization process imposes the development of transit corridors between Europe and Asia and a great deal of importance is given to the development of the Western Europe-Poland-Belarus-Russia-Kazakhstan-China international transport corridor.
In 2009, Korea and Kazakhstan signed a memorandum for the construction of a rail link between Korea and Western Europe, which would cross Kazakhstan. The document also stipulated the elaboration of joint feasibility studies for the development of containerized freight transport links between the two countries, the tariff policy and simplification of customs procedures etc. This agreement will allow Korea to become involved in the elaboration of railway projects in Kazakhstan.
In 2009, Kazakhstan initiated the construction of a 677 km rail link with Turkmenistan, Iran and the Persian Gulf. From the total length, Kazakhstan will have to build 137 km of track, Turkmenistan – 470 km and Iran – 70. In Iran, the rail link will be connected to the railway network leading to the ports and the Persian Gulf.
The project was implemented simultaneously in the three countries. The rail link will enter service at the end of 2011. According to estimates, this rail link will increase freight traffic to a value of USD 10 Billion.
“KTZ is also interested in the Baku – Tbilisi – Kars railway line because, once it is finalized, it will carry over 10 million tonnes of freight per year. “”This gives us the possibility to estimate the development of the transport infrastructure, especially seeing as this line connects Europe and Asia. The implementation of this project will bring many economic benefits and new work places”, said Ziya Mammadov, Minister of Transport in Azerbaijan, after several talks with officials from Kazakhstan and China, which is also interested in this route.
Kazakhstan has also developed bilateral relations with Russia in several sectors. In 2009, KTZ President and his homologue Vladimir Yakunin (RZD) signed several agreements in the field of railway transport. One of the memorandums concerns the development of cooperation in establishing tariffs for railway freight transport. Both parties were interested in reducing the import-export and transit tariffs stipulated in the tariff policy of CIS countries to the level recorded in 2008. This measure will help put an end to the current decreasing trend of the freight volume carried, supporting the efforts made to maintain international traffic at the level recorded in 2008. The other memorandum concerns freight transfer in terminals.
KTZ has finalized a massive investment plan (EUR 24.7 Billion) for the modernisation of railway services. These investments will be used to turn Kazakhstan into a major partner in the field of freight transport between China and Europe.
The investment plan will be developed until 2020 and it includes the modernisation of 14.500 km of track and the acquisition of passenger/freight cars and locomotives. Four new freight traffic lines, which will be finalized by 2015, will reduce the travel time between the port of Aktau and the Chinese border by two days. Another line connecting Kazakhstan, Turkmenistan and Iran will open new markets in the south region. According to KTZ President Askar Mamin, this programme will help improve railway transport performance, increase safety and transport capacity and raise service quality to international standards. The authorities also plan to initiate works in order to raise traffic speed by 22% for freight trains and 82% for passenger trains.
The investment plan will be implemented with the support of EBRD, who will provide financing and also identify priority projects. Some of the projects will be developed with the help of the state and national banks, while others will be implemented through concessions and public-private partnerships.
In order to achieve the target of “modern and diversified economy”, integrated in the global economy, Kazakhstan is well-aware of the importance of developing foreign cooperation and finalizing agreements with international banks, which finance mostly projects related to railway transport and economic recovery. The authorities’ interest in developing the railway system strengthens cooperation and facilitates financing, thus creating a favourable climate for the development of the business sector.
by Pamela Luică
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