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China has summitted huge sums of money for investments in Kazakhstan.On March 2015 at Boao Forum, Kazakh Prime Minister Karim Masimov and Chinese Premier Li Keqiang signed off some 33 deals worth US $ 23,6 billion. These varied from projects in then steel, non-ferrous metals, sheet glass, and auto industries to the more usual oil refining, and hydropower industries. Li praised the deals as a sign of the complementary nature of the Chinese and Kazakh economies.Kazakhstan itself is also committing serious sums of money to its own infrastructure and development.This is partly driven by the need to decrease economic reliance on Russia, particularly as the Russian economy suffers under Western sanctions.
This program, titled ‘Bright Road’, will see Kazakhstan fund US $ 3 billion worth of infrastructure projects each year fort he next three years, and includes plans for extending high speed rail from China through to Russia. Qazaqstan Temir Zholy, the national rail company of Kazakhstan, has awarded a contract to oversee the design and construction of a high-speed line from Astana (country’s capital) to Almaty .The line is expected to be 1.011 km long, and will travel via Karaganda and Balkash , and include a 10 km viaduct across Lake Balkash. The trains are expected to be built by Tulpar-Talgo (a joint venture established in 2011 between Qazaqstan Temir Zholy and Spanish manufacturer Talgo), and when finished will complete the journey in five and half hours. The system will use Russian gauge, the same as used by Kazakhstan’s existing conventional lines, and will become a crucial rail link between Beijing and Moscow.
The China-Kazakh Pipeline consists of several lines, with the gas pipeline a feeder across Kazakhstan from the huge fields of Turkmenistan. Oil pipelines also run the length of the country and integrate oil supplies from Siberia and Kazakhstan fields. The oil pipelines are operated by China National Petroleum Corp (CNPC). These pass through into China at the border crossing at Alashankou in North-West Xinjiang, which has recently become China’s largest inland port of entry-demonstrating that where oil and gas flows across borders, subsidiary industries develop and create wealth.
The New Silk Road –a unique opportunity. Few anticipated the revival of the ancient trade routes that once spun the Eurasian continent. In the15 th century, the discovery of new sea routes and development of modern vessels by European empires all but extinguished a network that atone point crossed all of Eurasia. Even less envisaged what the One Belt One Road initiative entailed after it was announced by President Xi Jinping in Astana in 2013. Slowly but surely,the governments of 65 states currently partaking in the initiative, have grasped the importance and the development opportunities that trade and infrastructure investment present.The network connects Asia, Europe and Africa, and promises to further integrate the 4.4 billion people in its sphere into a global network, facilitating the exchange of goods and ideas.
As the 9th largest state in the world, and the largest landlocked one, Kazakhstan has not benefitted as much from the rise of transcontinental trade followed by the industrial revolution as other nations. The Soviet Union’s political ideology and Southern borders also presented little opportunity for commerce in the 20th century. The rapid revival of the Silkroad, and massive infrastructure spending over the next decade, however, forebode there-emergence of Kazakhstan as a trading hub in Central Asia. With trade between China and Europe increasing yearly, and the distinct trend of smaller, high tech goods increasing in value, the balance of trade seems to be shifting towards faster, albeit costlier, railways. More than 90% of trade between China and Europe occurs by ships, and only less than 5% passes by rail. Continuing investment of political and financial capital can increase trade by rail to 10% by 2025. Kazakhstan is set to gain significantly as the geographic centre piece of the land part of the New Silk Road. Opportunities for trade and industry are countless as local businesses can benefit from cheaper costs of exports and imports, and by providing services to freight forwarders and railway carriers.
The key to fully exploiting the opportunity presented to Kazakhstan is to adapt its biggest stakeholders and their business model to the One Belt One Road initiative. This means focusing on international transit and the client.It also means developing a digital culture, capable of adjusting to new challenges and possibilities given an adequate infrastructure. For now, Kazakhstan is falling behind its partners on the New Silk Road in terms of digitizing and the benefit it entails. But still Kazakhstan has a window of opportunity and needs to act fast.
In September of 2013, President Xi Jinping presented China’s vision for engaging the world in re-creating the historic ‘Silk Road’ during a speech in Kazakhstan at Nazarbayev University. This effort is alternatively known as ‘One Belt, One Road’ (OBOR) or ‘Belt and Road Initiative’. The aim is to develop closer economic ties, deepen cooperation, and expand development in the Euro-Asia region. This speech and subsequent announcements officially set the stage for the establishment of a sprawling network of railroads, highways, gas and oil pipelines, ports, cities, and investments in modern infrastructure to recreate successful ancient Silk Road trade routes but with a 21st-century strategy. By early 2015, Beijing’s specific strategy began to emerge as China’s leadership laid out a plan for OBOR. The land strategy runs through Central Asia—with Kazakhstan playing a keyrole.
Significant investments have been made in Kazakhstan to strengthen its capabilities as a transit corridor. This includes over $3,5 bln in Khorgos Eastern Gate, a dry port on the Eastern border with China. COSCO Shipping, one of the world’s largest logistics service providers, and Lianyungang Port Holding, have recently acquired stakes in the project, making it a transnational endeavor and allowing the Kazakhstani side to benefit from the immense experience of its counterpart.
Other significant investments include the Shalkar-Beineu railroad, the Zheskazgan-Saksaulskaya railroad, and the Kuryk ferry terminal. The resulting increase in corridors and capacity will cement Kazakhstan’s role as a transit region. Samruk Kazyna estimates that infrastructure investments will contribute between 0.1 % and 0.2 % annually to Kazakhstan’s economic growth over the next decade.
As is the case with most supply chains, OBOR is only as strong as its weakest link. For Kazakhstan’s national railway operator and its parent company, it means moving at an equal pace with the modernization of their infrastructure and business model as their foreign counterparts.
KTZ’s role in this should be focused on improving processes to create a reliable platform for transiting car go through Kazakhstan, while Samruk Kazyna should support the long term objective of developing a multimodal transport system, which includes significant investments in energy distribution and transportations infrastructure, as well as using its influence to cut regulations to ease the bureaucratic processes necessary for transiting Kazakhstan.
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