International Transport:Problems and Outlook
By Makhsat Saktaganov, President of the Union of International Road Carriers (KazATO, Member of the International Transport Academy
President of Kazakhstan Nursultan Nazarbayev focused the Home and Foreign Policy Blueprint for 2004 on transport development, with international transport being one of the objectives. Eight years ago Kazakhstan acceded to four international and three European conventions regulating international road traffic and established the Union of International Road Carriers of Kazakhstan (KazATO).
Having joined the International Road Transport Union (IRTU), KazATO acceded to the TIR Convention in 1996. Over 1997–2002, international road traffic under the TIR procedure increased by 8.1 times, KazATO membership rose from 20 to 129, and the number of motor vehicles used for transportation increased by 7.5 times. The geography of international carriers’ activity has expanded to include all regions of Kazakhstan.
Meanwhile, the international traffic market needs to be improved, since 60% of its capacity is still filled by foreign carriers.
The largest obstacle is the lack of bilateral intergovernmental agreements with Kazakhstan’s main trade partners, such as Great Britain, Austria, Slovenia and other European countries. As a result, domestic carriers cannot enter most of these states, while carriers based in these countries freely transport cargoes to and from Kazakhstan. The advantage of foreign operators undermines the national economy; therefore the situation must be counterbalanced.
Mostly, traffic is operated by carriers from third countries, such as Belarus, Russia, Ukraine and the Baltic countries, which transport over 100,000 tonnes of imported and exported cargoes a year.
Another problem is that most of Kazakhstan’s rivals are members of the European Conference of Ministers of Transport (ECMT), which grants multiple permits for transportation of cargoes and to which Kazakhstan has not yet acceded.
The relations with the Russian customs need to be harmonized so that numerous barriers, which hinder transit of cargoes along the main corridor East-West are eliminated.
A raise in domestic traffic is also halted by the current approach to the solution of transport problems. For instance, the upgraded sea port of Aktau has a ferry line to the port of Baku, which opens the way for Kazakhstani trucks to Transcaucasia, Turkey and onward to Europe. However, this way is closed for carriers due to poor the condition of several road sections, especially from Beineu to Oporny and from Aralsk to Irgiz. This route, if used properly, would save time, taxes and duties as compared with the operating line through Uzbekistan and Turkmenistan (the port of Turkmenbashi). Moreover, this route is very important for TRACECA. In addition, authorized service and stations and chains of repair and maintenance stations need to be established.
The system of allocating foreign permits is also far from perfect. First of all, it must become more transparent and meet the actual needs of carriers. Second, the financing of the system has not yet been finalized. International experience shows that such systems are usually financed from the funds gained from issuing foreign permits.
International transport practice demonstrates the need for visa procedures to be simplified for international truck drivers. The existing procedures result in loss of time and orders, and even loss of clients. We believe that drivers, who have obtained a permit to enter a foreign state and have TIR cornets in hand, must be granted a visa without any problems. We address the Foreign Ministry for assistance in this regard.
Since Kazakhstan is not a member of the international motor insurance agreement (the Green Card system), domestic carriers have to obtain motor insurance certificates from intermediaries without any guarantee that they will be given help in case of an accident in a foreign state. We hope that the National Bank will facilitate Kazakhstan’s accession to the Green Card system.
Domestic road carriers face stiff competition with foreign operators and will be able to withstand it only if adequate conditions are created.
This is why KazATO pays special attention to increasing the competitiveness of domestic carriers.
The Union has done a great deal of work to have VAT on import cancelled, and road vehicles with the capacity over 20 tonnes as well as trailers and semi-trailers, both new and used, included in the list of importation on which VAT is credited. In addition, used heavy trucks were included in the leasing list, and customs duties on imported semi-trailers were reduced. KazATO’s specialists also participated in the discussions of the new Customs Code.
Meanwhile, national transport operators are disadvantaged by Articles 106, 110 and 113 of the Tax Code, which limit depreciation of vehicles, thus making impossible the purchase of new trucks. Under the aforesaid articles, Kazakhstani carriers will depreciate only 59% of the net book value of a truck in a decade of its operation. Depreciation is the main source for renewing the fixed assets irrespective of the form of payment—cash, credit or leasing. By limiting the depreciation rate, Kazakh law narrows the self-financing ability and competitiveness of national carriers.
National operators also disagree with Articles 113 and 108 of the Tax Code, which set restrictions on deductible expenses incurred for the repair of the fixed assets. Since a 15% limit is established for the depreciated value of trucks, deductible expenses for repair reduces as the service life nears its end, while the need for repair rises. Imposing this limit, lawmakers seem to have worried whether production enterprises would be able to operate in conditions set by Articles 106, 110 and 113. This is why additional deductions from the aggregate annual income were provided for a certain group of tax payers, namely foreign investors importing fixes assets under investment projects.
To cease the use of third countries’ road vehicles, at least 2,000 additional trucks are required. This problem may be partially solved by creating favorable conditions for soft lending to motor transport enterprises.
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