3 Signs that Point to Kazakhstan as the Next International Logistics Hub
Less than three decades since declaring its independence, the Republic of Kazakhstan has experienced significant change in its political climate and economic growth. With new governing bodies, emerging industries and increased recognition among world leaders, Kazakhstan boasts the second-largest economy in the Central Asian region and ranks 36th by the World Bank for Ease-of-Doing-Business. Benefitting from a steadily climbing gross domestic product (GDP), trade expansion in the region and a country pledged to invest in infrastructure and assets, this nation aspires to become a key market in the logistics and transport segment. Three signs point to it being well on its way.
1) Location, Location, Location: Prime Paths and Partnerships
As the largest land-locked nation in the world, Kazakhstan is a prime corridor connecting China, Russia and neighboring countries to points in Europe. With its optimal location, power exporters and importers are keeping their eye on continual development of transport lines and cargo centers in the region. Road-development projects such as the Belt-Road-Initiative seek to connect Western China and Western Europe through Kazakhstan and the CIS, Eastern Europe, South Asia and the Middle East will further solidify the nation as a logistics-location leader.
The Belt-Road initiative (BRI), commonly referred to as “The New Silk Road,” includes both an overland route known as the Silk Road Economic Belt, and a sea route known as the 21st Century Maritime Silk Road.
As transport routes develop, positive results are already being realized. Eurasian traffic saw a significant increase in traffic eastward, with cargo movement through Kazakhstan to China, according to Kazakh Temir Zholly (KTZ) railway. In fact, rail freight volumes in the eastbound direction have increased 38%, reaching nearly 14,000 tons in 2018. Projections are even higher volumes for 2019. This is a welcomed volume update since historically, cargo movement has generally flowed westward.
In addition to its location, strengthened relationships with key players in the industry and new trade policies on the horizon, Kazakhstan is anticipating even more growth. Agreements for port operations with Dubai, simplified customs processes through their Eurasian Customs Union membership and its status as the only country in the region to sign the Enhanced Partnership Agreement with the EU can only benefit Kazakhstan’s rise to a logistical giant.
2) Emerging Workforce and a Growing Region
The rise in Millennial and the upcoming GenZ-aged workers is a strong factor to consider in Kazakhstan as we explore its industry growth. With over 50 percent of its population under 30 years old, and 25 percent under age 15, the country is setting its sights on developing its future workforce. In May, Kazakh leadership outlined crucial tasks aimed at improving education and training, and labor policies, all in an effort to ensure that the working population will be ready to support the growing economy.
Agreements between the EU and Central Asian nations like Kazakhstan are also focused on supporting youth population across the region. And with more than half the population residing in cities, leaders also cited improving urban conditions, such as goals already in place to progress the development of Astana, the capital of Kazakhstan by the year 2020 as another strong indicator.
Domestic travel and international visitors have also increased steadily since 2009, with an 18% increase in tourism from abroad in 2017, suggesting that Kazakhstan is fast becoming a sought-after destination.
With all of this growth comes the need for increased availability of resources and products, corporate building and relocation services, hospitality and housing accommodations and more. All of which require a substantial investment in global logistics and supply chain management.
3) Investments in the Industry
Over the past 10 years, Kazakhstan has invested $30 billion in the development of transport infrastructure, logistics assets and competencies. Plans for railway construction, new ports and freight way terminals to the tune of nearly $40 billion will position the region to manage hundreds of thousands of cargo containers and 35% of sea trade at premier trade points with China and on the Caspian Sea.
Kazakhstan’s potential as a logistical hub is also attributed to its status as an oil and gas producer. Currently ranked at 11th in the world for oil reserves is also seen as an up-and-coming natural gas producer, Kazakhstan has benefitted from millions of dollars in foreign investment in this energy sector. This includes interest from multiple industries, due to the equipment that is required to recover and refine these natural resources and the need to store and transport the materials.
This is evidenced by the port city of Atyrau. Situated on the northern Caspian sea at the delta of the Ural River, Atyrau has often been referred to as the oil capital of Kazakhstan due to its location near the largest oil fields in the region. As a result, global oil giants and domestic organizations have built up its infrastructure to accommodate an expanding population and to keep stride with its reputation as the “energy capital of Kazakhstan.”
The continual development of Atyrau, the improvement of port locations in Aktau and Kuryk for oil trade, and the European Union agreements have all been contributing factors for investment growth in the region, while also serving to pique international business interest in the area as well.
Continued development with promise
As with any rising market, there will be challenges to address on the road to becoming a worldwide logistical hub. Studies indicate that success is predicated on a variety of factors including infrastructure, service quality, and technology implementation in the area.
Political influence and government change can also play a significant role. In early June of this year, Kazakhstan elected Kassym-Jomart Tokayev president. The previous leader, Nazarbayev, will stay on in a leadership capacity, signifying a level of continuity during the transition following this election. The election has come under some scrutiny by those questioning the electoral process. In response, President Tokayev, conveyed an interest in serving as a “reformer” - in an effort to be able to move forward and continue to build upon the economic transformation and growth Kazakhstan has experienced since its independence.
Concerns aside, the focus on growth and return on investment in the region is already evident. Kazakhstan as a tourist destination is rising, with rail and truck freight increasing. A young workforce with renewed interest in education and training will be poised to take the reign in managing industry demands and continual development.
It’s certainly refreshing to witness a country reborn from constraining circumstances now stepping onto the world economic stage as a potential major player in a highly complex industry segment.
With its unique position on the map, Kazakhstan could prove to be in the right place at the right time.