National Report Kazachstan /
CENTRAL ASIA TRADE AND TRANSPORT FACILITATION AUDIT
NATIONAL REPORT
KAZAKHSTAN
Initiated by:
The Worldbank, USA
Written by:
NEA Transport research and training, The Netherlands
Our reference:
(D20020447\23060)
March 2003
CONTENTS
page
1 Introduction 3
1. Trade trends, and perspectives 5
2 Transport and infrastructure 7
3 TRADE ENVIRONMENT 15
4 Trade, transport and BORDER practice 17
5 CUSTOMS CLEARANCE AND MISCELLANEOUS CHECKS 24
6 Key impediments in trade and transport 27
7 Trade and transport action plan 32
Annex 1 Major technical assistance and investment projects
2
D20020447.doc
7 June 2002
Central Asia Trade & Transport Facilitation AuditNational Report Kazachstan /
1 Introduction
The study
This is the country report for Kazakhstan in the framework of the Central Asia Trade and Transport Facilitation Audit. The project has been financed by the World Bank and commissioned to NEA Transport research and training in The Netherlands.
Main objectives of the study are to:
· Identify and describe the main impediments in the domain of trade and transport facilitation to increased international trade for Central Asian countries;
· Formulate priority actions to be taken by Central Asian governments to remove these impediments.
During the project three experts on transport and logistics of NEA have been traveling through Central Asia, visiting Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan and Turkmenistan. Each country has been visited by one expert for at least one week. During this week numerous meeting have been arranged with the Government and the business circles.
The project has resulted into one Synthesis Report and a Country Report for each of the Central Asian states. The result was only possible thanks to the excellent support of the World Bank including its regional offices, and the people whom contributed during all the meetings that were organised in Central Asia. This draft report vastly benefited from guidance and comments from the World Bank TTFCA team. The report however, reflects the findings of the consultants and is not to be seen as the views of the World Bank.
We are grateful that we were able to work with them. This report has been elaborated by Arthur Gleijm (team leader), Harrie de Leijer, Menno Langeveld and René Meeuws, in co-operation with experts from NIIT in Kazakhstan.
This report
After this introduction this Country Report consists of a chapter on trade trends, transport flows and the infrastructure. The third chapter is devoted to the ongoing reform process. Chapter 4 introduces the country’s trade, transport and customs practice. Key impediments in trade and transport are presented in chapter 5. The Country Report is finalised with a trade and transport action plan. In annex 1 the interviewed stakeholders are listed while Annex 2 consists of the major technical assistance and investment projects.
With its natural resources, including enormous resources of all type of mineral fuels, Kazakhstan has considerable potential for economic growth, provided it is able to develop efficient corridors to world markets. Kazakhstan’s geographic position in the region also gives it the opportunity to play an important role in the development of regional trade and social stability in Central Asia, and benefit from transit trade. However, both poor transport infrastructure and non-physical barriers increase the costs of shipping, and may well discourage the development of these activities.
1. Trade trends, and perspectives
Table 1 presents the indicative trade trend in recent years. The Russian crisis in 1998 showed the vulnerability of the Kazakh trade balance with a high dependence on the world market of raw materials. Along with the decrease of foreign trade, total freight flows also went down. However, recovery started in 2000, with a growth of 35% of the international freight flows, continuing in 2001 with almost 10%, due to the expansion of the Russian economy. (Export and import growth rates in 2000 and 2001 respectively were: Exports, USD 9,615 million and 9,000 million; Imports, USD 6,850 and 6,400.)
Table 1:
Kazakhstan – Trends in trade between 1995-19991 2
China / Russia / Europe / USA / Intra-regional / Caucasus 3Imports / / ¯ / / / ¯ / ¯
Exports / / ¯ / ¯ / / ¯ / ¯
Source: World Bank, Extended Concept Note, Original data from UN COMTRADE; IMF Direction of Trade Statistics.
Notes:
1. Biggest increase in exports is to China and Iran, and for imports, USA. Biggest partner, by value: Russia and Europe
2. Biggest increase in imports to Russia, and for exports, USA. Biggest partners by value: Russia, Kazakhstan
3. Poor unreliable data; the volume of trade is very small.
Though Russia is still the most significant partner for Kazakhstan (over 50 percent of foreign trade), a downward trend is apparent. Medicines/ pharmaceutical products constitute almost 80% of imports from Pakistan. Trade with Iran and the Caucasus (Azerbaijan, Georgia, and Armenia) is still small and the trends are not so clear.
Kazakhstan’s imports from the US reflects a dramatic increase from US $64 million in 1995 to US $349 million in 1999 while imports from Europe doubled during the same period. Though growth in exports to the US are not nearly of the same magnitude, there is a substantial increase ($44 million in 1995 to 81 million in 1999). Exports to Afghanistan increased by almost 4 times between 1995 and 1999, with exports of cereals showing a marked increase in 1998 and 1999 (over 40% of total trade).
Exports from Kazakhstan are largely medium value, bulky, non-perishable commodities, such a non-ferrous metals, iron/steel and petroleum based products. Kazakhstan’s export of oil and other petroleum related products, second only to non-ferrous metals, has increased from $75 million in 1995 to $100 million in 1999. Kazakhstan’s exports to China increased from US $ 284 million in 1995 to US $472 million in 1999, though over 80% continued to be iron and steel, ferrous and non-ferrous metals and petroleum related products.
An indication of recovery is that world energy consumption is growing and for 80% it will be covered by mineral fuel – oil, natural gas and coal - up to 2020, which is an important factor for Kazakhstan. Although the consumption of coal will slightly slow down in the CIS, China and India, the neighboring worlds’ leading consumers, will increase their demand. The major mines for coal and ferrous and non-ferrous minerals are situated in the center and east of the country, around oblasts such as Karaganda, Pavlodar and Kostanai. The steel market is expected to be stable for the coming two years, but Russia will increase its production volume and the diversity of products.
Kazakhstan is the sixth producer of grain in the world, although exports went down last year, due to the fall in world prices. Grain is grown in the North of Kazakhstan, and transported via Almaty to the West of the country.
2 Transport and infrastructure
Easy access to seaports of the Baltic and Black seas and the Persian Gulf is crucial not only for the oil and gas industry in Kazakhstan, but also because of the significance of the Russian market. Most of the transport is by rail, pipeline transport takes the second place, road transport comes third, and maritime transport is fourth.
Rail
Mining and metallurgical products account for over 85% of the total freight traffic on the railways in Kazakhstan. Most of the grain is transported by rail, until recently to the port of Muuga in Estonia, but now also via Aktau to Iran. However, 40 to 50% of the grain is still shipped through the Black Sea and Baltic ports, as the capacity of the port of Aktau is limited to 350,000 tons a year.
Transportation by rail depends heavily on an ageing infrastructure that has a total of 14,400 kilometers of track, excluding industrial lines. There are 5,500 kilometers of double track, and about 4,000 kilometers of track is electrified. However, the volume of transportation by railway transport increased by almost 10% in 2001, but, due to expected pipeline development, oil transport by rail over the coming 10 to 20 years is expected to drop dramatically.
Until 2009 USD500 million is expected to be spent on the renewal of the rolling stock, of which 70% is depreciated. There are currently discussions with EBRD, but no decision has been taken yet about financing the program. The major technical assistance and investment projects are mentioned in Annex 2 of this Report.
Pipeline
The current pipeline (oil and gas) infrastructure is fragmented and aimed at supplying Russia. The most important pipeline is 2,896-kilometres long in western Kazakhstan, and runs from Uzen to Samara via Atyrau; it carries most of Kazakhstan’s oil exports.
The present capacity is far from sufficient to carry the growing supply of oil. It has been decided to go ahead with three multi-billion US dollar pipeline projects, the Trans-Caspian, the Baku-Ceyhan, and the Blue Stream pipeline. There are also hopes to build an export pipeline to China. In the long run, oil transport through a pipeline to Bandar Abbas is considered as the shortest, cheapest, and safest way to move oil and gas from the Western region of Kazakhstan to the open seas.
Pipeline traffic increased by 35 percent in 2001.
Road
The classified inter-city road network is 87,841 kilometers long and includes 17,380 kilometers of national roads (93% paved) and 70,461 kilometers of regional roads (57% paved). Due to the distances road transport is basically used for the shipment of urgent deliveries and temperature controlled transport. In 2001, the volume of international road transportation decreased by 20%. Most of the road cargo is transported through Russia and Byelorussia. About 80% of the international road transport business is between Kazakhstan and Europe.
The major technical assistance and investment projects are mentioned in Annex 2 of this Report.
Maritime
As a result of the reconstruction of the port of Aktau and the beginning of the Caspian railway ferry operations, the volume of international transport by sea increased by 69% in 2001.
Route preference
For most shippers, reliability of the route, both is terms of safety and expected transportation costs, is the main factor for the choice of a mode of transport and itinerary.
The most reliable routes are via the Russian territory, to the Baltic and Black Sea ports. Railway operations through the Russian territory are considered to be very reliable. The Baltic ports are preferred because of their better quality, regardless of visa difficulties encountered by drivers, and although they are more expensive. (Even more so that Russian ports are providing discounted services.) To reach the EU, and even Southern Europe, the main rail and road route is through Russia (Almaty – Karaganda – Astana – Petropavlovsk – Ekaterinburg – Nizhny Novgorod – Moscow – Minsk – Warsaw – Berlin). Cargo originating from or destined to the US is shipped via ports in the Baltic States or St. Petersburg.
There are two major options for traffic to Japan, the Trans-Siberian railway line, or the road through China. The former has the advantage of a tracking system but it is more expensive (especially port handling cost), while the china route is considered reliable as the latter.
Road transport through Iran is considered to be difficult. There are many obstacles encountered in dealing with the Iran Customs, allegedly to protect the Iranian transport sector. Most of the business is therefore carried out by Iranian carriers. There is little rail transport, because of lack of tracking of freight, and long border crossing delays.
Another possible corridor is through China, India and Pakistan. A multilateral agreement was signed between Kazakhstan, Kyrgyzstan, China and Pakistan, to de-enclave the port of Karachi. although the road is good, it involves crossing mountain passes as high as 4,500 meter. So far the corridor only exists on paper.
The Caucasus is usually avoided, as it is considered unsafe, and involves numerous border crossings. Ukraine is avoided, also for security reasons.
Table 2:Kazakhstan – Transport mode
Source: TRACECA Statistics
Cost effectiveness: Rail compared to road
For both railway and road transport, 60 to 80% of the freight rate is related to the actual cost of transport. Especially handling costs in ports and terminals are often high, partly because of lack of sufficient price competition for certain services.
For road transport, the rest of the amount consists of costs incurred at border crossings, terminals, delays, customs charges, and international road user charges.
The composition of freight rates in road transport is as follows:
Transport costs: 60%
Terminal costs: 5-10%
Border crossing costs: 3-10%
Customs costs: 5%
Road user costs: 2-5%
Insurance costs: 3-5%
Hidden costs: 2-10%
In railway transportation the rest of the amount is due to the cost of returning empty containers and the cost of transporting the goods by road to the railway terminal, etc.
The composition of freight rates in rail transport is as follows:
Transport costs: 50 - 80%
Return of empty container: 30 - 12%
Road transport to/from terminal: 15 - 20%
Terminal costs: 2 - 3%
Customs costs: 2%
Hidden costs: 2%
Other charges that are not directly related to any services (hidden costs) are about 2% in railway transport and 2% to 10% in road transport.
Depending on the world market prices of the commodities, for certain goods transportation costs may amount up to 50% of the value of the goods. For example, it was estimated that, due to transportation costs, a ton of grain from the US delivered in Novorossiysk is cheaper than a ton of grain originating from Kazakhstan.
Overall, given the bad condition of the road network in Kazakhstan, the long distances that have to be covered and the international experience of the railways in the rest of the CIS, compared to road transport, railway transportation is the cheapest and most attractive option for international transport.
Issues
Kazakhstan now faces three categories of issues in the area of transit:
· Geographical. It is a landlocked country, and while it can derive significant benefits from transit originating in other enclaved countries, it is also dependant on policies imposed by neighbors. Although most of the traffic is going through the north (Russian) route, the need for diversification will impose the development of new corridors, as well as the improving of the existing ones.