Transport and Communications in Kazakhstan: the Current Stage of Development
Birzhan Kaneshev, Head of Internal Policy Department, Administration of the President of the Republic of Kazakhstan
For any nation, sustained development and functioning of the transport and communications sector (T&C) is a prerequisite for economic growth, national security and better living standards. This is especially relevant to Kazakhstan, a vast country with very low population density, scattered raw material and industrial centres and, above all, an advantageous geographic position between the markets of Europe and East and South East Asia.
The reforms of 1991-1996 in Kazakhstan were implemented while the economy was struck by an overall crisis and a decline in investment activity. Existing T&C infrastructure required considerable investment, which the still-immature private sector was not prepared to provide, given the low return on investment rates and capital-intensive nature of T&C. In addition, the problem arose of unused production assets which proved inadequate in the new economic environment. The technical state of T&C called for large-scale modernisation.
All these problems resulted in excessive production costs, which hampered Kazakh exports and, ultimately, national economic development.
New problems required new approaches, and these were outlined in the Kazakhstan Development Strategy 2030, a document adopted five years ago. The Strategy was developed using a study of the condition, prospects and competitive potential of T&C. Upgrading T&C was included in the Strategy as one of seven long-term priorities.
In his address entitled Kazakhstan 2030: Prosperity and Security for All People of Kazakhstan (October 1997), President Nursultan Nazarbayev wrote that “Kazakhstan’s task is to make its transport and communications competitive internationally and to broaden trade flows across its territory”.
This task envisaged, at an early stage, modernising T&C transit infrastructure including the main road networks, switching to advanced forwarding technology, asset renewal in the transport sector, introducing efficient management systems and improving the legal framework.
In addition, the Strategy provided for a number of vital projects to be implemented, such as reconstruction of the Aktau seaport, modernisation of the Druzhba railway terminal and development of the Druzhba-Aktogay section, building a bridge across the Irtysh in Semipalatinsk, building the CPC oil pipeline, reconstruction of Astana airport, etc.
The first five years of the Strategy’s implementation have witnessed dramatic changes in T&C.
Both the pace and scale of modernisation of strategic transit networks have been boosted and this has been critical in establishing Kazakhstan as an active player on the international T&C market.
With the completion in 1999 of phase 1 of the modernization of the port of Aktau, handling capacity was doubled. Today Aktau conducts export and import transactions involving partners from Kazakhstan, Russia, the Caucasus, Central and South Asia. Aktau has ferry lines to Russia, Azerbaijan and Iran, and the national sea navigation company Kazmortransflot was formed.
The second phase of reconstruction and declaration of Aktau as a free economic zone will strengthen the port’s position as a key element of the new north-south international corridor.
Another example of successful Strategy 2030 implementation is the modernisation of the Druzhba railway terminal on the Kazakhstan-China border and the Druzhba-Aktogay section which is part of the Trans-Asia railway, the main Eurasian transport artery. Since reconstruction Druzhba is capable of handling up to ten million tonnes of cargo annually. In addition, electrification of the heavy-duty Chu-Almaty section has also been completed.
Special attention is now being given to building railways directly linking all Kazakhstan’s regions.
In 2001 the new Aksu-Degelen railway was commissioned, which provided a much shorter link between Pavlodar and East Kazakhstan. The same year, construction started on the Altynsarino-Khromtau railway, which will connect the Western, Central and Eastern regions. The launch of this railway will reduce route distance by nearly 1,600 kilometres.
In line with the tasks set forth by Strategy 2030, measures were taken to upgrade air navigation systems and create a network of international airports in Kazakhstan. These measures have facilitated more intensive use of Kazakh air space by international airlines offering flights between Europe and Asia. Over the last five years, the number of international transit corridors in Kazakhstan increased from 56 to 72, and their length now totals 49,000 kilometres. Airports in Astana, Karaganda, Taraz and Aktobe received major reconstruction. Construction of a new airport in Almaty is in full swing.
A milestone for the telecommunications sector was the completion in 1998 of the Kazakh section of a 1,750-km international fibre-optic line. As a result, Kazakhstan has expanded its telecommunications space to the Atlantic and Pacific oceans. This line also provides the country with an opportunity to address a number of internal problems. It connects the southern regions using state-of-the-art technology and has become the first Kazakh digital facility. After installation of the international satellite system Intelsat in the main Kazakh cities, satellite channels have started to provide communications with Europe, the Americas and Asia.
The development of Kazakhstan’s transit potential has been combined with pursuit of an active foreign policy. The country is now party to 166 bipartite and 33 multipartite international treaties and conventions regulating T&C activities.
A great deal of effort has been devoted to promoting the country’s transit potential in international business circles, for example by hosting the regular Trans-Eurasia international conference.
Kazakhstan has also enjoyed support from various international financial institutions and governments. For example, a broad package on preferential loans for the transport sector was signed with the World Bank, European Bank for Reconstruction & Development, Asian Development Bank and the Japan Bank for International Co-operation.
A number of projects have been implemented over the five years to upgrade communications infrastructure and road networks.
Expansion of the telecommunications network was initiated. This includes the National Information Super-highway, which will connect all provincial capitals. The 2,520-km western section of information highway linking Shymkent, Aktyubinsk and Atyrau to Russia, and the 137-km northern (Petropavlovsk) section are already operational. In addition, the national satellite project DAMA, which will extend communications services to rural and mountainous areas, is being implemented successfully.
Modern GSM technology has been introduced in Kazakhstan, including a 140% increase in mobile communications services provided by Kazakhtelecom, a principal provider of long-distance and international communications with a market share of 16%. This is, however, only the beginning of commercial use of the national radio-frequency spectrum.
On the whole, modernisation affected all levels and components of the national telecommunications sector. Long-distance communications are now fully digital. Provision of telecommunications services has tripled since 1998, now totalling 90 billion tenge.
The issues of pipeline system development have been addressed with the same degree of efficiency and priorities for the export pipeline system were determined. The completion of phase 1 of the Caspian Pipeline Consortium in 2001 provided Kazakh oil producers with an additional export outlet. Accordingly, conditions have been created to boost oil production in the Caspian region in future.
Agreements were signed with Russia on more than doubling transit quotas for Kazakh oil. As a result, export of oil via the Atyrau-Samara pipeline increased by 1.5 times. In 2002 building of the Keniyak-Atyrau pipeline began, which is intended to connect promising fields in Kazakhstan with existing export systems and, as a more distant prospect, to become part of the transcontinental pipeline West Kazakhstan-China. The country’s export potential was also strengthened with the commissioning of oil terminals in Atasu and Atyrau.
During the last five years transit of gas grew by 6.5 billion cubic metres and gas exports quadrupled. Revenues from gas transit and export increased by 2 and 13 times respectively. Largely due to these developments, investment in the sector has increased by more than 40 times. At the moment projects are underway to develop the Amangeldy gas deposit in the Zhambyl region, and processing/transportation of associated gas from oilfields.
Both economic and population growth have increased demand for water, which is an emerging problem in areas with scarce water resources. Therefore, a long-term programme Potable Water was designed to expand water supply systems and enhance the availability of quality water as a key requirement of public health. At present the programme covers 3,700 rural townships (with a total population of 4 million) and several big cities (about 3 million people). A conduit from the Irtysh-Karaganda Canal to Astana has been constructed in response to growing demand from the capital.
In 2000 a new bridge across the Irtysh was built in Semipalatinsk. This bridge has unlocked the vast potential of direct motor transportation routes to highly industrialised regions in Russia and China.
In 2001 the Kyzylasker-Kirovsky road, featuring a 5-bridge cascade, was commissioned in South Kazakhstan. Thus the problem was solved of accessing the Makhtaaral district of the region without passing through Uzbek territory.
In Atyrau, a new bridge across the Ural river was recently inaugurated, enhancing the transit of cargoes from Central Asia to Russia and Europe.
The highway between Astana and Almaty is under reconstruction. It is expected that this link will contribute substantially to increasing and improving transit across Kazakh territory.
The year 2001 was a turning point for the road sector. The State Motor Road Development Programme was adopted, envisaging that by 2005 a total of 16,000 kilometres of roads will be repaired using a government allocation of 254 billion tenge. As a general goal, the Programme will allow transport costs in price composition to be reduced by 10-20%.
Tangible results were achieved in introducing advanced forwarding technology and renewing the asset base of the national transport sector.
At the initial stage of transition to a market economy the different branches of the transport industry often acted as rivals rather than allies. Today, with the appearance of professional forwarding agents, this is no longer the case: distribution of work between various kinds of transport requires smooth and efficient interaction.
Currently large transport centres, such as the seaport Aktau and railway terminals, are successfully coping with complex export/import, transit and domestic shipments using various means of transport. Their door-to-door delivery services are based on efficient co-operation of railway networks and motor transport.
In 1998 the World Bank implemented a project to renew the public bus fleets of Astana, Almaty, Karaganda and Shymkent.
Since 1998 the railway industry purchased over 4,600 brand-new freight cars and facilities for repairing passenger cars in Almaty were reconstructed. Manufacture of spare parts and equipment was launched at repair depots in Atbassar, Shu and Kazalinsk, which has eliminated the practice of sending cars and locomotives abroad for major repairs. At present new fast trains are being prepared for use on the Almaty-Astana route.
Efforts were made to improve government regulation of T&C.
Particularly, regulation of passenger services in the road transport sector was made a function of local administrations. Some regions are initiating local road development programmes. Many airports were made communal property and are supported by local budgets. Throughout the transport sector state-owned facilities have been reorganized into joint stock companies, and thereby a real market environment has been created.
The purposeful government policy in the oil and gas sector is best illustrated by the merger of the National Companies Transport of Oil and Gas and Kazakhoil in 2002. The resulting entity, national company Kazmunaygaz, was tasked to supply domestic needs for oil products and to secure the provision of crude oil to Kazakh refineries.
Now Kazakhstan has an adequate legal framework for T&C functioning in modern market conditions.
In 1997-2001 a substantial body of law was adopted, including the acts On Communications, On Railways, On Commercial Navigation and On Motor Roads. The government also adopted the concepts of state transport policy, development of international corridors, gas industry development, and telecommunications development, and approved programmes of railway sector restructuring, mail sector development, etc.
The goals of T&C development in the first years of the Kazakhstan 2030 Strategy have largely been achieved. Progress in this sector provides impetus for an upsurge in related industries and socioeconomic life of the country.
The construction and reconstruction of the main transport lines fosters growth of industrial production, creates new jobs and solves other social issues. Upgrading the internal network of roads and constructing railways has improved trade and economic relations between the country’s regions. Development of transit capacities also facilitates expansion of Kazakhstan’s export potential.
The positive results of the preparation stage of implementing the Kazakhstan 2030 Strategy have helped build a system of planning the development of T&C in the first decade of the 21st century.
In December 2001, the Strategic Plan for Development of the Republic of Kazakhstan to 2010 was approved by a presidential decree.
This document defines new targets of the sector’s development in the next few years: further expansion of export and transit potential and formation of an effective and upgraded T&C complex fostering speedy economic growth.
Therefore the plans for development of these sectors above all aim to increase economic profits from realizing transport potential and redistributing resources for forming a fully-fledged transport and communications infrastructure in Kazakhstan.
The main challenges in the field of developing transit potential:
Firstly, it is necessary to activate foreign transport policy, targeting equal integration of the country with the international T&C system. This requires reaching mutually beneficial agreements with other countries on distribution of international freight flows, and on setting tariffs for freight shipment to meet the interests of all countries. In future it will be necessary to create associations and joint forwarding companies of various states.
Secondly, an important area of work will be diversification of transit and export routes for transporting hydrocarbons from Kazakhstan’s oil and gas fields. The stage-by-stage implementation of projects for constructing oil and gas export pipelines is of special importance in this regard.
Thirdly, creation of effective leverage for fostering transit freight flows via Kazakhstani sections of international transport corridors. This above all concerns the Trans-Siberian main line and southern direction of TRACECA. Efforts are required to boost the attractiveness of domestic sections by introducing end-to-end information systems for accompanying transit shipments via Kazakhstan’s territory.
Fourthly, an important task of the Strategic plan is development of industrial transit and improvement of services infrastructure. Plans are in place to create processing enterprises along the transit main lines and to set and develop services: a system of motels, camping facilities, fast food outlets, etc.
Forming a T&C infrastructure to satisfy the internal demands of the country requires the following tasks to be completed.
Above all, creating an effective network of transport infrastructure and renewing and upgrading the vehicle fleet. This will lower the cost of cargo shipments by cutting shipment distances and introducing new, modern equipment.
The second task is development of transport logistics and improvement of infrastructure at key points of direct interaction between various types of transport. These measures will aim to ensure the effectiveness of the shipment process by organizing interaction between all types of transport. Today multimodal shipments are very popular internationally, transforming competing transport modes into co-operating ones. This experience needs to be used in Kazakhstan also.
The third task is developing and introducing more up-to-date mechanisms of state regulation of the market in private shipments. This involves above all arranging effective interaction between central and local executive authorities and private forwarders to foster fuller realization of the powerful potential of the private sector.
Ultimately, one of the most important tasks will be defining and introducing social standards of transport services for the population and effective mechanisms for implementing them. In particular, to activate participation of transport sectors in solving social problems, including targeting support to the most vulnerable groups of the population.
Therefore, the T&C of Kazakhstan has received a powerful impetus for development since the beginning of implementing the long-term Strategy of the country’s development to 2030.
The ongoing success in achieving these goals is testimony to the appropriateness of the path our country has embarked on. This success makes us stronger and more confident in reaching the main goal: making Kazakhstan a strong and flourishing state.
Table of contents
Invest in Astana! Adilbek Dzhaksybekov
Activities of Maersk Oil Kazakhstan GmbH Svend Andersen
Embamunaigaz: Still Up to the Mark Malik Omirzak
Oil Insurance Company: Cornerstone in Protecting Your Future! Zharkyn Alzhanov
Altynalmas: Marriage of Experience and Professionalism Nurlan Makulbekov
Helios Means First! Shukhrat Danbai
Brief Analysis of Draft Law ”On State Regulation of Production and Turnover of Certain Types of Petroleum Products” Olga Chentsova, Angelika Novozhilova
Kazakhstan and International Law Implications of the Proposed Law “On State Regulatory of Production and Turnover of Certain Types of Oil Products” Thomas C. O’Brien, Alyia M. Suleimenova
Outlook and Necessity for Developing Small Hydrocarbon Fields Elvira Dzhantureyeva
New Rules for the Purchase of Goods, Work and Services in the Performance of Petroleum Operations in Kazakhstan Olga Chentsova, Natalia Brainina
Certain Environmental Aspects of the Activities of Subsoil Users Aigul Kenjebayeva, Yuliya Mitrofanskaya
Issiue Deductibility of Interest on Foreign Currency Loans Bill J. Page, Gaukhar Iskakbayeva
Leasing in Kazakhstan: Legal Aspects of Development Tatyana Issyk