The transition of power in Kazakhstan has for a long time been a much debated issue among experts. It’s now taking place in a smooth manner. What are the next steps in the transfer of power?
Indeed, on March 19, the First President of Kazakhstan, Nursultan Nazarbayev, announced his resignation. In line with our Constitution, the President’s duties were transferred to the Chairman of the Senate, Kassym-Jomart Tokayev. Nursultan Nazarbayev will continue to lead the Nur Otan ruling party and will remain the Chairman of the country’s Security Council. Kassym-Jomart Tokayev was sworn in as President on March 20 and will remain the head of state until the next presidential election. The First President explained that his decision to step down comes at a time when the world is undergoing major changes, and bringing not only opportunities, but technological and demographic challenges, which calls for a new generation to step up and offer solutions. Nazarbayev said the challenge of his presidency was to build a market economy, dismantle the Soviet totalitarian system and modernise the institutions of society, all at the same timr. He explained that his new task is to ensure continuation of the transformations in Kazakhstan, adding that the future of Kazakhstan must be one of “a country with a strong economy, the best education and health care, where citizens are free and equal, where the power is just and where there is the rule of law”. Tokayev, in his first speech as President, confirmed that the strategic course of the First President, both in internal and foreign relations, will continue. Kazakhstan will continue to build relations with states on the basis of mutual respect and equality. Kazakhstan will preserve the peaceful foreign political course based on the principles of the multi-vector policy, balance and pragmatism, with observation of all international obligations. Relations with all the states will continue to be built based on mutual respect, equal rights and regard for each other’s interests. The improvement of the investment climate in the country, in particular the protection of the rights and interests of foreign businesspeople, will also continue.
Our Observatory will focus on the new dynamics taking place in Central Asia and what this could mean for business opportunities for our companies. How do you reflect on the results achieved so far between Kazakhstan and its neighbours, specifically Uzbekistan? What is the goal – regional integration or just improved cooperation?
According to forecasts, in the next 10 years, Central Asian countries will face an urgent need to move away from commodity models of the economy and search for new sources of growth, while major powers (Russia, China, and West, including Europe and the United States) will continue to play an important role in the Central Asian economies. At the same time, insufficient integration of the Central Asian countries into the global trade impedes the accelerated economic development of the countries of the region. In the near future, existing trade barriers, infrastructure problems and lack of access to water trade routes will have a negative impact. The main goal of Kazakhstan is to promote regional cooperation in Central Asia. We believe this coopeartion will positively affect the development of the regional economies and will give impetus to the development of large transport and logistics projects. In addition, trade liberalization and integration can improve the investment climate in Central Asia and attract large international capital to the region. It should be noted that for our country, the economic development of Uzbekistan is important for the joint development and promotion of regional integration, as well as for export of Kazakh products. Overall, experts are pleased with the positive development trends in Central Asia, which is very important for the entire region. A significant event in this regard was the Working (Consultative) Meeting of the Heads of Central Asian States in Kazakhstan’s capital, Astana, in March last year. This year, a second such meeting is planned in Tashkent (Uzbekistan). In this regard, we believe that trade liberalization, developing regional partnerships in the field of rational and equitable use of water resources, sharing transit-transport potential of the Central Asian countries will contribute to enhancing the integration processes in the region.
Equally important was the recent agreement on the legal status of the Caspian Sea, which should facilitate links and transit to the benefit of Central Asia. What are the prospects for the Aktau port, potentially a key location along the new corridors?
Last year Nursultan Nazarbayev identified priorities for the development of Kazakhstan, including further industrialization, the development of resource potential, basic industries, the introduction of new digital technologies in the construction and utilities sector, the development of the agriculture sector, and improving the efficiency of the transport and logistics infrastructure. A historic milestone was the Summit of the heads of the Caspian states in Aktau last year, and the signing by the presidents of Kazakhstan, Azerbaijan, Iran, Russia and Turkmenistan of the Convention on the legal status of the Caspian Sea. Negotiations on this document lasted for 22 years since 1996. Nursultan Nazarbayev described this document as the “Constitution of the Caspian Sea”. An effective legal framework has thus been created for the cooperation of littoral countries in a variety of areas. The convention will contribute to political stability, sustainable economic development of the Caspian region and its countries, and the preservation and enhancement of natural wealth. In this regard, effective development of the Aktau International Sea Port is of great importance for Kazakhstan. To further enhance the development of Kazakhstan, an agreement was reached with the global port operator, DP World, to improve the management efficiency, infrastructure facilities and the development of freight at our international intermodal logistics hubs, including the Khorgos-Eastern Gate special economic zone on the border with China and the seaport of Aktau. In addition, one of the most important operational projects for Kazakhstan is the Trans-Caspian International Transport Route “East-West”, which connects China with Europe through Kazakhstan, Azerbaijan, Georgia and Turkey. The route combines railway, sea and road transportation. The Aktau port plays an important role in the operations of this route. March 2017 marked the launch of the railway ferry terminal of the Kuryk port in Aktau with an annual capacity of 4 million tonnes, through which almost 1 million tonnes of cargo has been trans-shipped. The terminal is an important link in the transport and logistics system of the Trans-Caspian international corridor. The commissioning of the ferry complex in the port of Kuryk will triple Kazakhstan’s existing capacity for trans-shipment of ferry cargo, while the annual volume of cargo traffic through Kuryk will amount to more than 4 million tonnes. It also strengthens the Kazakhstan section of the international transport corridor “Western China - Western Europe”. As a result, domestic exporters will have additional opportunities to supply their products abroad. The construction of this ferry terminal clearly is in line with the priorities of Kazakhstan’s infrastructure development programmes as well as China’s Belt and Road Initiative (BRI). It ensures transit cargo transportation from China to Iran, Turkmenistan, Azerbaijan, Turkey and further to Europe. According to experts, it will give a powerful impetus to the development of the transit-transport potential of Kazakhstan.
You may have read about the huge debate in Italy on the Memorandum on the Silk Way, which was eventually signed last Saturday during the visit of the Chinese President. As we know the Belt and Road initiative was formally announced in Astana by President Xi Jinping in 2013 and Kazakhstan plays an important role in its implementation. How would you evaluate the results of your cooperation with China as part of the Belt and Road project, and how do you combine it with your membership of the Eurasian Economic Union?
Over the past five years, the trade turnover between China and Belt and Road countries amounted to more than $5 trillion. The volume of direct investments of China in foreign countries exceeded $70 billion. With the participation of Chinese companies, more than 80 trade zones have been established. Over 200,000 jobs have been created. During this time, a number of large infrastructure projects have been commissioned in Kazakhstan and other countries in the region: the dry port of Khorgos on the border with China; the port of Aktau on the Caspian Sea; a new railway corridor Kazakhstan-Turkmenistan-Iran with a total length of about 900 km, connecting the countries of Central Asia with the Persian Gulf and the port of Bandar Abbas in southern Iran; international transit corridor Western Europe–Western China. Goods can now be delivered from China through Kazakhstan to Europe in approximately 15 days, while the delivery by sea takes more than twice as long. After 5 years since the Belt and Road initiative was announced in Astana, it is clear that this initiative has become a major driver for stimulating international cooperation and global economic growth. More importantly, the project is becoming an effective platform for peaceful, mutually beneficial international cooperation between countries with a total population of 4.4 billion people. By 2020, we want to increase the number of container traffic from China to Europe and back passing through Kazakhstan to 2 million TEUs annually. Kazakhstan is successfully integrating its Nurly Zhol project, a large-scale infrastructure development programme, with the Belt and Road Initiative. Particularly noteworthy is the fact that Kazakhstan-China cooperation through BRI is not limited to the transport sector. Our partnership also focuses on developing production capacities. Currently, 55 joint projects are being implemented totalling $27.4 billion. The launch of these programs is expected to create about 20,000 jobs in 16 regions of Kazakhstan. Other areas of cooperation include the automotive industry, agriculture, chemical, mining, oil and gas, construction, metallurgy, light industry, production of mineral fertilizers, energy, transport and logistics, and new technologies. This cooperation mechanism fully meets the internal priorities of Kazakhstan in the field of diversification and industrialization of the economy. Our experts have calculated that our participation in the Belt and Road Initiative will add 1% to our annual GDP growth by 2021.
Kazakhstan was frequently consulted about the EU Strategy for Central Asia, which will be adopted soon. In your opinion, what are the benefits of the EU activity in the region and what could we improve?
Since Kazakhstan’s independence, the EU has played an important role in strengthening the economies of Central Asia, as one of the region’s key investors, trade partners and donors. Kazakhstan fully supports the existing interregional cooperation with the EU, and regards it as a key tool in ensuring the sustainable development of our country and the region. The initial EU Strategy for Central Asia, adopted in 2007, plays an important role in advancing regional agenda in cooperation with the EU. The EU supports the implementation of programmes aimed at ensuring efficient border management, improving the business and investment climate and private sector development, as well as promoting the rule of law and good governance, and developing human capital through education and training. Our cooperation also covers tackling the growing threats to the environment and the serious challenges posed by climate change, regional cooperation in water management, and cooperation in the security sphere, including counter-narcotics and border security, ensuring peace and stability in Afghanistan, conflict prevention and crisis management. In a few months, a new EU Strategy for Central Asia will be adopted, which is aimed at developing comprehensive, effective and mutually beneficial cooperation. Kazakhstan, along with other Central Asian states, has submitted its concrete proposals for the new Strategy to the EU. In our opinion, the success of the new Strategy will largely depend on three key elements: 1) ensuring the integrity of cooperation in the EU-Central Asia format; 2) creating more flexible tools for the practical implementation of the Strategy; 3) increasing its visibility. From our perspective, the priorities for the future Strategy are the following: continuation of the development of human capital through education, strengthening the rule of law and good governance, the development of private entrepreneurship and small and medium-sized businesses with a particular emphasis on women’s entrepreneurship, introduction of technological innovation into all spheres of life and supporting the region’s digitization, improving connectivity and developing transport and logistics infrastructure, promoting energy efficiency and the adoption of green technologies, strengthening environmental protection and the rational use of water resources and, finally, helping to improve security and the stabilization of Afghanistan. We believe these priorities cover the entire range of relations between the European Union and Central Asian countries and are relevant to all the states in our region. We would like the new Strategy to become a new driver for cooperation and strategic partnership.
Let’s now turn to bilateral economic relations. Your energy and agriculture sectors have always attracted investments. Which other sectors should our companies consider, taking also into account your drive towards diversification of the Kazakh economy?
Kazakhstan pays special attention to relations with Italy as one of our most important strategic partners. Nowadays, Kazakhstan and Italy are actively developing political dialogue, multifaceted economic and cultural relations, and contacts at the interregional level. We have established trusting relationships in the realm of international organizations such as the UN and OSCE. Kazakhstan is the 9th largest country in the world, the size of the whole of Western Europe. Its sheer size means that more than 80% of its land, 220 million hectares, is used for agricultural production making Kazakhstan the 5th biggest exporter of wheat globally. Italy is one of the biggest importers of Kazakh durum wheat in Europe, accounting for 51% of the total exports to the European Union. Italy is also the second largest trading partner of Kazakhstan, ranking first among the EU countries in terms of foreign trade, and one of the largest investors in our economy. According to our statistics, trade turnover in 2018 amounted to USD 13.232 billion, which is 37% more compared to 2017. The volume of direct Italian investments in Kazakhstan amounted to USD 5.824 billion from 2005 to 2018. I want to emphasize the positive experience of Italian investors in Kazakhstan. Today, there are 164 joint ventures with Italian participation in Kazakhstan, including in the mechanical engineering, light, construction, mining and metallurgical sectors. At the same time, the industrial potential of Italy is not fully consistent with the current level of presence of Italian industrial technology in Kazakhstan and is not reflected in the structure of Italian investments in the country. Kazakhstan is greatly interested in cooperating with Italy in the food industry, where Italy continues to maintain its leading position. I also want to point out that ENI is implementing a project which involves the construction of a shipbuilding and ship repair plant in port Kuryk. In addition, Inalca (Cremonini) is constructing in the Almaty region a feed yard with the production of processed meat products. I believe that the machinery engineering sector, as well as food production and agricultural machinery sectors also offer high potential for cooperation and realization of joint projects. Italian automotive companies are also of interest as partners in organizing car assembly in Kazakhstan. Kazakhstan is also interested in continuing cooperation with the Federation of the Italian Associations of Mechanical and Engineering Industries ANIMA. Cooperation in the field of pharmaceuticals and biomedicine, as well as homeopathic and dietary products, can also be very fruitful. Furthermore, of particular importance is the renewable energy sector, and we were happy to have Italy among some of the most active participants of EXPO 2017. Italian companies from all of these industries have the opportunity to implement investment projects and transfer advanced technologies. I would like to note that according to the World Bank’s 2019 Doing Business report, Kazakhstan climbed 8 positions and now ranks 28th in the overall ease of doing business ranking. Kazakhstan is first out of 190 countries for “protecting minority investors”. In the latest World Economic Forum’s Global Competitiveness Index, Kazakhstan ranks 59th. A number of priority sectors have been identified for attracting investment: agriculture, deep processing of oil, gas and minerals (metallurgy, chemistry and petrochemistry), engineering, information and communication technologies, tourism and finance. Furthermore, Kazakhstan has a simplified tax regime, national legislation is constantly being improved, and a package of investment preferences is expanding. Investors implementing investment projects in priority sectors of the economy are guaranteed tax legislation stability. The Astana International Financial Center (AIFC) was established in Kazakhstan, which seeks to become a financial hub in our region. The AIFC covers the following areas: capital market, asset management market and its expertise, wealth management, and alternative financing (private equity funds, hedge funds, venture capital). We invite Italian companies to participate in the AIFC which already has almost 90 companies registered to work on its platform. In addition, we invite our partners to implement joint projects in the field of digital and transport and logistics infrastructure, technologies and competencies of Industry 4.0, and the development of data centres. Finally, the launch of the International Centre for the Development of Green Technologies and Investment Projects, as well as the international technology park of IT start-ups, provides a good opportunity to implement joint initiatives in priority areas.