Eurasian Industrial Association: the Effective Model of Cooperation
In February 2005 the Eurasian Industrial Association, an association of Kazakhstan largest mining, metallurgical, energy and coal enterprises, turns four years old. Through their joint efforts, EIA's enterprises have created a unique model of integration that has proved in practice not only to be highly effective, but also very significant socially. This is best illustrated by the fact that the EIA enterprises currently employ over 53,000 persons.
We will review the mid-1990s in order to appreciate the results attained by the EIA members in full. At that time most domestic enterprises were practically on the verge of bankruptcy and, with their increasing debts, employees did not receive their salaries for months. For example, the debts of the Aksu ferrous alloys plant exceeded its fixed and current assets. The fact that in 1994 the Donskoi GOK's former management decided to flood the Central mine seems unbelievable today. At present the mine, as the pride of the plant, fittingly bears the name "10th Anniversary of the Independence of Kazakhstan".
Or another fact may be remembered: it was calculated in 1994 that the Pavlodar Aluminium Plant would have to wind up in 5-6 years since it had been provided with a stock of bauxite sufficient only for this period, if processed under the technology existing at that time. A solution was found at the research and development centre which had been established at the Plant through investors' support. It developed and implemented a new technology for processing low-grade bauxites which had never been utilised in any country before. At present, the Pavlodar Aluminium Plant produces as much as a third more alumina than in 1995, though this had seemed impossible before.
There are many similar examples in the stages of EIA development … Thanks to investors, up-to-date management and comprehensive development programmes, EIA members not only overcame the economic crisis of the mid-1990s, but also became leading manufacturers and suppliers to international markets.
The EIA's enterprises also achieved considerable results in 2004. Total sales grew by 65% in comparison with last year, making up 276 billion tenge. While tax paid by the EIA members in 2003 came to 30.7 billion tenge, at the end of 2004 it is expected to exceed 50 billion tenge and the net profit is planned to be over $497 million.
At present the average salary at the EIA enterprises is about 47,000 tenge, and the total number of employees has grown by 1,114 during the year. 6,226 manual workers and 930 office workers have improved their qualifications. 4,593 employees have been educated for new and additional professions.
Of course, such achievements would hardly have been possible without considerable investment. From 1995 to 2003 capital investment in the development of production and environmental programmes of EIA enterprises made up $923 million. Investment over the last three years came to $360 million, including $55 million allocated to environmental measures. The amounts to be allocated in 2004 for implementation of the investment programmes of the enterprises will exceed $200 million.
The major capital-intensive projects are aimed at implementing modern ore concentration methods, improving raw material quality and manufacturing new product types. These measures will allow changes to working conditions, reducing environmental discharge and the size of production refuse heaps.
Human resources are the main potential of the Eurasian Industrial Association. The EIA enterprises owe recreation centres and children's health camps. Close attention is paid to the professional training of personnel, which is a key to sustainable industrial growth. Each year, the enterprises provide about 100 million tenge for educational purposes. As a result, between 10 and 30 percent of the total number of EIA employees undergo training courses and seminars annually. Through the Association of Higher Education Establishments the EIA members cooperate with leading schools in the country that train specialists for the industrial sector: Kazakh National Technical University, Karaganda Metallurgical Institute, Almaty Institute of Power Engineering and Telecommunications, Kazakh Academy of Transport and Communications and others. Presently 853 employees study at universities under the financial support of the Association's enterprises; 325 students have received educational grants. Under the framework of the special Keleshek ("Perspective") programme sixty children of the best employees of EIA are trained in specialties in high demand at the enterprises.
Environmental openness is one of the leading development principles of EIA. Its members have come up with an initiative to create a permanent working group for environmental regulation issues in which users of natural resources would take part. Efforts are under way to implement quality control and environmental protection systems in accordance with the requirements of international standards. The EIA enterprises hold four ISO 9000 and two ISO 14000 certificates issued by the international audit companies SGS and TUF.
Charity and sponsor aid is also a strategically important direction of EIA activity. In the last few years alone, EIA has sponsored the redecoration of the Palace of Miners, which has become an educational and entertainments centre, construction of a new Ice Sports Palace in Pavlodar and the extremely popular therapeutic mud-baths in Khromtau.
Founding enterprises of EIA
Transnational Company Kazchrome
Established in 1995, the transnational company Kazchrome comprises the Aktyube and Aksu Ferrous Alloys Plants and the Donskoi Mining and Concentration Plant. Today Kazchrome has about 16,000 employees. The company's facilities include 42 electric furnaces with a total installed capacity of 1,000 MVA. It produces more than 1 million tonnes of ferrous alloys and about 2.5 million tonnes of commercial chromium ore per year.
In terms of production output and sales the company is third in the international ferrochrome market after Samancor and Xtrata companies. The company's products are distributed in the major ferrous alloys markets including the USA, Europe, and South East Asia. Since 2004 the company has been exporting rutile, zirconium and ilmenite concentrates produced by the new dressing works at the Aktyube Ferrous Alloys Plant. The raw material for this promising product is mined at the local Shokashski titano-zirconium ore deposit.
Aluminium of Kazakhstan JSC
Aluminium of Kazakhstan was established in 1996 on the basis of the Pavlodar Aluminium Plant. Today, besides the Pavlodar Aluminium Plant, the integrated technological complex comprises Torgaiskoye and Krasnooktyabrskoye Bauxite Ore Sections, Keregetas lime pit and the Pavlodar No. 1 heat and power plant. The company employs over 11,000 persons.
Aluminium of Kazakhstan exports 1.3 million tonnes of alumina annually to Russian electrolysis plants and 20 tonnes of high-purity gallium metal to Europe, the USA and Japan. Over 25,000 tonnes of sulphuric commercial aluminium are supplied to Russian and Kazakh consumers each year.
A comprehensive re-equipment programme was developed at the enterprise in 2000. It provides for increase in alumina production to 1.5 million tonnes by 2005. The total cost of the programme for 2002-2006 is estimated at $99 million. The set of research and commissioning work envisaged by the programme is planned to be nominated for a national award in 2005.
The major objective of Aluminium of Kazakhstan for the coming decades is to build an electrolysis plant in Pavlodar that will provide guaranteed sale of the company's products. The total amount to be directed into construction of the facility with its design output capacity of 240,000 tonnes of primary aluminium per year will make up $851 million.
SSGPO JSC
The Sokolovsko-Sarbaiskoye Mining and Concentration Association (SSGPO) was set up in 1954 on the bases of the Sokolovskoye and Sarbaiskoye magnetite ore deposits. More than 17,000 persons are employed there.
The total balance of iron ore reserves in the deposits run by SSGPO make up 3,411 million tonnes. The current investment programme provides for $119.5 million to be invested in the development of SSGPO in 2002-2006.
SSGPO manufactures up to 5.2 million tonnes of commercial iron ore concentrate and 7.3 million tonnes of fluxed pellets per year. In addition to metallurgical enterprises in Kazakhstan, the production of SSGPO is supplied to Russia and China.
The Eurasian Energy Corporation JSC
The Eurasian Energy Corporation (EEC) is one of the largest energy enterprises in Kazakhstan. EEC is a fuel and energy complex with a closed production cycle. It employs 6,000 persons.
The company was set up in 1996 and comprises three structural units: the Aksu heat power plant, Vostochny coal opencast mine and a production and repair department. The Aksu ferrous alloy plant, SSGPO and Ispat Karmet are among the major consumers of its electricity. Today the production of electricity at the Aksu heat power plant is as much as twice that of any other electric power plant located on the Irtysh river.
The Vostochny coal mine is a unique mining enterprise producing coal by the opencast method. The conveyer continuous flow process technology has been implemented for the first time ever in the world under tilted attitude of strata of limited horizontal thickness. The overall length of belt conveyers totals 17 km. Over 300 million tonnes of coal have been produced since mining began. In 2003 the investment in developing and improving the technological state of the coal mine totalled over $7.7 million. The plan for 2004 envisages the investment of $22.5 million. 17.5 million tonnes of coal will be produced at the Vostochny mine this year and it is planned to reach a production volume of 20 million tonnes by 2006. In 2001 the EEC concluded a five-year contract with Omskenergo under which the company will supply 6 million tonnes of coal annually to Russia.
Shubarkol Komir JSC
The development of a unique deposit of Shubarkol low-ash coal began about 20 years ago; the operator of the opencast mine was transformed into the Shubarkol Komir company in 2002. The Shubarkol loading and transportation department was included in Shubarkol Komir along with the mine to ensure stronger development. Today it is one of the most promising coal enterprises in Kazakhstan, employing 1,400 persons.
Since 1986 over 43 million tonnes of coal have been extracted, the high quality of which is well known not only in Kazakhstan, but also abroad. A unique combination of the Shubarkol coal properties, such as high heating value, and a low ash and sulfur content, makes it very important for public everyday needs, and for the industry and power generation sector. Consumers of Shubarkol coal are Aluminium of Kazakhstan, Ispat Karmet and industrial complexes in former USSR and non-CIS countries.
Transsystem Ltd
Transsystem is a 100%-privately owned Kazakhstani forwarding company, established in 1991. The strong point of the company's strategy is that it combines the functions of a railway operator and an international forwarder.
The company has branches, representative offices and shares in joint companies in Astana, Aktau, Atyrau, Tashkent and Bishkek. Transsystem runs an extensive network of regional agents and partners, with large transport and forwarding companies such as Blue Water Shipping, Shenker, Agis Aweca, KLASCO, to name just a few.
The company has been granted international awards and come top in the Choice of the Year National Competition several times.
Table of contents
The National Bank of Kazakhstan Strikes the Balance Anvar Saidenov
LUKOIL Overseas: a Record-Breaking Year of Business in Kazakhstan Boris Silbermintz
IMSTALCON: in Word and Deed! Vladimir Khoroshilov
Matrix Agritech, Your Partner in Agribusiness Robert Asscheman
DHL: We Go Wherever the Business Is! Yuri Shevchenko
The Investment Climate Needs to be Warmer Dinmukhamet Idrisov
Draft Law on Offshore PSAs: Merits and Drawbacks Daniyar Tenelov
Secondment Arrangements in Kazakhstan – How Do They Work? An Overview of Key Secondment Issues in the Republic Abai Shaikenov, Anthony G. Cioni
Recruiting the Right Personnel Vladimir Sidorenko
A Tiger Trap Or How to Hire the Best of the Best Alexander Vysotsky
Administrative Technology Is Coming to Kazakhstan Yevgeniya Teryukova
