Transportation Infrastructure in Kazakhstan

By: Steven Weirich

The Project on Prosperity and Development at the Center for Strategic & International Studies released a report last month on the ways which the global workforce will need to change and adapt regarding massive structural changes such as the Fourth Industrial Revolution.

The report emphasized the necessity of addressing infrastructure issues in developing nations. A lack of quality infrastructure can hold back economic progress and have implications for young people’s ability to attend school or job training. Specifically, the report brings up Kazakhstan as an example of a country where transportation infrastructure badly needs updating. They point out how crucial transportation is between the cities of Almaty and Astana, primarily because so much agricultural production occurs in this region of the country.

There is continued emphasis on infrastructure issues because of Kazakhstan’s unique geographic position in central Asia. It should be possible for Kazakhstan to access markets in Europe, Asia and, Russia. A 2015 paper by the World Bank looked at how transportation throughout the country could be improved in different sectors, including aviation, water transport, railways, and roads. The government of Kazakhstan has been looking for ways to gradually improve their critical infrastructure. The authors point to aviation regulation and institutional reforms related to road maintenance as examples. The paper surmises that these and other reforms are important steps in developing Kazakhstan as a critical transit point for goods traveling through central Asia.

It is important to understand how the future of Kazakhstan’s economic development is tied to their need for better transportation infrastructure. In an interview with the International Road Transport Union (IRU), Absatov Sembekovich, a director within Kazakhstan’s Ministry of Investments and Development, discussed the importance of the transport industry. Sembekovich pointed out that, in 2016, the industry made up 7.8% of the GDP, there was a 3.8% increase in the transport volume index, and a further 3.7% increase in volume for the first five months of 2017.

Despite their relative closeness to European nations, a substantial portion of Kazakhstan’s trade occurs with Russian and China. The data shows that in 2016, 11 percent of Kazakhstan’s exports went to Russia and 13 percent of exports went to China. On the import side, the numbers are even more dramatic. For the same year, 35 percent of imports came from Russia while 16 percent were from China. The further development of these markets is vital to the future of Kazakhstan’s economy. With this picture of Kazakhstan’s potential economic future, we can analyze what steps have been taken to stimulate that economic growth.

Political leaders in Kazakhstan are undoubtedly aware of the importance of these trade relationships, and they have taken steps within recent years to address their infrastructure challenges. Kazakhstan has been a member of the Central Asia Regional Economic Cooperation (CAREC) program since 1997. CAREC is made up of 11 different countries, which includes Azerbaijan, Mongolia, Pakistan, and China, as well as Kazakhstan. According to the website for CAREC, the program focuses on “Good Neighbors, Good Partners, and Good Prospects.” Primarily, the whole point of the project was to further integrate the central Asian countries and make their economies develop at a faster pace. One of Kazakhstan’s most important contributions to this program was their investments into a transport corridor known as CAREC Corridor 1. This logistics route begins in China, passes through Kazakhstan, and continues to Azerbaijan and then on to European countries. Having a large transportation corridor such as this one is vital to developing the country’s competitive advantage it already possesses in logistics. However, the program is ongoing, and there are a large number of projects still in the process of being implemented, it is tough to deliver a final verdict on whether CAREC has been a success.

What may be the most impactful partnership for Kazakhstan is their entrance into China’s “One Belt, One Road” initiative. Kazakhstan is a key part of this initiative, which is being spearheaded by the Chinese government. The construction of the Khrogos Gateway is perhaps the best example of this project. The Gateway is a specially designed port far away from any large body of water, where freight and cargo can be unloaded off trains instead of boats. What makes this particular infrastructure investment project so fascinating is that it is in the middle of the desert, and necessitated the construction of a brand-new town, Nurkent, used to house all of the new employees at the “dry port.” The Chinese government has been so aggressive with this investment because they desperately need new stopover locations along the revitalized Silk Road which they are constructing. An investment such as this certainly has its risks, but Kazakhstani President Nazarbayev has been a staunch advocate for the project since he and other leaders want to expand Kazakhstan’s position as a growing market power in the region.

While there has been quite a bit of analysis done on how Kazakhstan needs to update their transportation infrastructure to improve their economy, the wheels have been turning on this issue for years now. The government of Kazakhstan is well aware of how important the transportation industry is to their country, and they have pursued a variety of ways to tackle the issue. There is a decent chance that Kazakhstan is on their way to having an improved transportation infrastructure, but the state will need to take further steps. Although the most significant infrastructure projects turn heads, it may be more practical and efficient for Kazakhstan to work on improving already existing infrastructure rather than building new projects from the ground up. For instance, the  CAREC plans aimed to build upon infrastructure already in the country. This practical approach often proves to be less time consuming than attempting to develop massive new projects.

Another way the government of Kazakhstan could approach this challenge would be to attempt decentralization of the infrastructure funding. If they are committed to moving forward with piecemeal ways to improve upon existing transportation infrastructure, allowing local entities to have more control over funding decisions would be helpful. It can be difficult for a national government to respond effectively to local problems, and infrastructure issues are no different. These two steps together could prove to be an effective two-part strategy for improving transportation infrastructure at the local level.  

Lastly, ventures such as the Khorgos Gateway provide a challenge to Kazakhstan insofar as they force the country to make many concessions to the Chinese government regarding how these projects should proceed. China has significant control over decisions relating to anything constructed within their “One Belt, One Road” initiative, mainly because of their strength as a massive economic power. Kazakhstan’s leaders are going to have to make some hard choices on how they want to approach these challenges, and these decisions may start with how tightly they want to bind themselves to a rapidly growing power such as China.

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