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The Middle Corridor: How Kazakhstan is Carving its Niche in Europe-Asia Transport

In the aftermath of the pandemic and amid rising geopolitical tensions and sanctions – leading to the breakdown of traditional shipping and logistics chains – the need to develop new, alternative routes for trade has gained particular importance. One such route is the Middle Corridor, or Trans-Caspian International Transport Route, which has become a priority project for Kazakhstan and its neighbors. In this overview we look at the prospects for this multi-modal transnational route. The Trans-Caspian International Transport Route (TITR), or Middle Corridor, starts in China, passes through Kazakhstan, the Caspian Sea, Azerbaijan, Georgia and Turkey, before reaching Europe. Last year, more than 2.7 million tons of cargo was transported along the TITR, up 86% on 2022, whilst it is expected to carry 4 million tons this year. Drivers of growth This growth in volumes has been facilitated by the conflict in Ukraine and restrictions on the transport of goods through Russia, which previously represented the main land route connecting East and West. As a result, in 2022 the volume of container traffic via the TITR grew 33% year-on-year. In addition, amid the geopolitical tensions that have effected the safety of traversing the Suez Canal and the Red Sea – the central and shortest trade route between Asia and Europe – many shipping companies have been forced to go around the southern tip of Africa. This has led to an increase of 14-18 days in the delivery time of goods, as well as additional costs. Because of attacks by Houthi rebels, the number of container ships passing through the Suez Canal each week was down 67% year-on-year in 2023, according to the UN. Meanwhile, in the first two months of 2024, trade volumes along the route decreased 43%. According to data from the UN Conference on Trade and Development, last year the cost of transporting goods from Shanghai to European countries by sea roughly tripled. At the same time, shipping goods by rail from inland Chongqing to Europe was a third cheaper than by sea. Experts note that over the past decade, the total cost of transporting goods between China and Europe by rail has fallen 30%. All this opens wide opportunities for the further development of the TITR, which should be taken advantage of by countries along the route. Middle Corridor countries working together Today, to ensure safe and uninterrupted exports, as well as to attract more flows through Kazakhstan and other TITR countries, measures are being taken. Indeed, the route is considered a strategic initiative for the development of the entire region’s transport potential. During a recent visit to Azerbaijan, Kazakh President Kassym-Jomart Tokayev said that in the future the volume of cargo transported via the TITR should increase to 10 million tons, which is to be facilitated now by both existing demand and technology. At the end of 2022, a roadmap for 2022-27 was signed to eliminate bottlenecks along the route in Kazakhstan, Azerbaijan and Turkey, while to boost the volume of cargo transported by rail a...

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What Bank Loan Data Can Tell Us About Kazakh Business in 2023

After being severely tested by the pandemic in 2020-21, several thousand companies in Kazakhstan closed due to decreased demand and supply chain disruptions. Though the problems of local businesses began long before the pandemic, the two years of lockdown wiped out many good players and made those that survived more dependent on government orders and projects. Overall, Kazakhstan has a primarily commodity-driven economy (crude oil, metals and petrochemicals account for the majority of export earnings), and the country's economic fortunes have tracked the prices of a short list of major commodity exports. Thus, the government finds it hard to diversify the economy. Oil price volatility affects the national currency, and the ups and downs in the tenge exchange rate versus hard currencies make it difficult to be in a business with an investment cycle longer than one and a half to two years, as you have lower revenues amid dollar investments. This is one of the reasons why launching long-term projects in the country is difficult when there are no guarantees of sales, while currency risks can hit any project. The government has been active in attracting foreign investment, offering state support and protection, but only relatively recently did it begin to pay the same attention to the demands of domestic investors. However, this is only the beginning of a very long journey towards reducing dependence on imports and expanding the range of exports to stabilize the economy. A debt-driven economy The share of the private sector in Kazakhstan is difficult to measure. If we take SMEs (small to medium-sized enterprises) as the core of private business, in different years it fluctuates between a range of 20-30% of GDP. However, since state capitalism is entrenched in the country, even among SMEs there are contractors working for state and quasi-state structures, receiving funds from state companies and agencies. One-hundred-percent private companies that do not depend on government contracts finance their operations from their own or borrowed capital. This is why, in a transparent economy like Kazakhstan’s, looking at loan data can reveal the main trends in business and which niches have not yet been occupied and could be interesting for investment by both foreign and local players. It is best to look at the country's economy through the loan portfolio of banks that are subject to international banking regulation, whose indicators meet an easily understandable standard. There is a caveat: in Kazakhstan there is also the Development Bank of Kazakhstan, which is not included in the table below. It is technically not a bank, but rather a development institution financed from the quasi-public sector by Baiterek National Management Holding, which receives budgetary funds. In addition, most extractive-industry companies in Kazakhstan – due to their high capital expenditures and the shallowness of the country’s financial market – raise funds in the U.K., Switzerland, the U.S. and Russia. Chinese banks rarely lend to 100%-Kazakh companies, limiting themselves to trade credits (in the form of equipment) or loans to joint ventures with Chinese...

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Creation of Kazakhstan–Azerbaijan “Supreme Interstate Council” Marks New Era of Cooperation

Diplomatic relations between Kazakhstan and Azerbaijan have developed dynamically since they were first established in August 1992, and have increased over the past 20 years, and grown especially since 2017. Over the last decade, the number of high-level visits in both directions have been rising to the point where they are now regular occurrences at an inter-ministerial level. That said, President Kassym-Jomart Tokayev’s state visit to Baku on March 11–12 represents yet another new phase in the two countries’ strategic partnership with a focus on trade, economic investment, and international cooperation. This new era is marked by the creation of their bilateral Supreme Interstate Council (SIC), a qualitatively recent development that will institutionalize and drive cooperation in new ways. (Readers should note here that the connotation of “Supreme” in this case signifies “high-level” rather than “having sovereign or autonomous power”. This is exactly the difference, respectively, between the Russian-language adjectives vysshii - literally “high-level” or “highest” - and verkhovnyi - the USSR’s Supreme Soviet, its highest legislative body, was verkhovnyi. This is a matter of choice of terms for translation. “Supreme” has been adopted following the usage of the countries concerned in their English-language public discourse, but it should not be misunderstood.) Although the Kazakhstan–Azerbaijan SIC has only just held its first meeting and is not yet fully institutionalized, it would seem from diplomatic indications that its activity is likely to resemble that of the Strategic Partnership Council (SPC) between Turkey and Azerbaijan. This latter forum was created in 2019 to subsume the two countries’ bilateral Strategic Cooperation Council, which was founded in 2010. Cooperation organized by this bilateral SPC broadly covers four issue areas: military-political and security issues, military and military-technical cooperation, humanitarian issues, and economic cooperation. These areas are listed in order of priority, meaning that the SPC and the SIC’s first focus is on cooperation related to military and security issue areas, plus other relevant issues that these may indicate. Nevertheless, cooperation in the humanitarian and economic spheres, which has been ongoing for some time, is sometimes folded into these top-priority areas within the existing consultative structures. The agreements signed at the November 2021 presidential summit between Kazakhstan and Uzbekistan had foreseen the formation of a bilateral SIC between them as well. Now that both these parties have ratified their Treaty of Allied Relations, also signed at that time, this SIC’s first meeting is scheduled for August of this year. Following the pattern of what is known about the SIC with Azerbaijan, it will be formally chaired by the two heads of state and organized by their respective foreign ministries. The speakers of their parliaments’ lower houses and representatives of security councils may join in the work as necessary. Thus, security and foreign-policy issues will be the main concern in the first instance. Nevertheless, like the SIC between Kazakhstan and Azerbaijan, the one between Kazakhstan and Uzbekistan is likely in the medium term to develop organizationally along the lines of the Turkish-Azerbaijani Strategic Cooperation Council, eventual transformation...

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Religion in the Cities of Kazakhstan – Opinion by Gulmira Ileuova

The research discussed in this article was conducted in July-August 2023 by the Strategy Center for Sociological and Political Studies Public Foundation in collaboration with the office of the Rosa Luxemburg Foundation in Central Asia. A total of 1,604 people were surveyed in six cities. Since the goal of the project was to study atheism and atheistic views, the choice of where to conduct the survey was made based on the latest census data, according to which the following regions/cities had the highest proportions of nonbelievers: Kostanay Region (4.84%), Mangystau Region (4.38%), Almaty (4.32%) and Shymkent (3.65%), versus an average across the whole country of 2.25%. Table 1. Religion of the population of Kazakhstan (%; census data) Muslim Orthodox Refused to answer Nonbeliever Kazakhstan overall 69.31 17.04 11.01 2.25 In cities 64.45 20.45 11.84 2.81 Of course, the term “nonbeliever” is not necessarily equivalent to the concept of “atheist,” but nevertheless we decided to start with these statistics with the goal of understanding the religious identities of city residents in the given areas and identifying the reasons contributing to the increased share of nonbelievers, including atheists. This study was conducted in cities at three administrative-territorial levels: so-called “cities of republic significance” (Almaty and Shymkent); regional capitals (Kostanay and Aktau); small towns (Rudny and Zhanaozen). The survey in these six cities showed that 72% considered themselves Muslim, 10% Orthodox and 4% atheist (Rudny 5.6%, Almaty 4.7%, Zhanaozen 4.5%, Kostanay 3.0%), while about 1% named other denominations (“protestant movements,” “Baptists,” “Jehovah’s Witnesses,” “New Life”). Twelve percent refused to answer the question, while 1% could not answer. Analyzing the responses to this question by age, we see that there are more atheists in the youngest age group of 18-24 years old at almost 5%, while in this same cohort, as well as in the 31-49 age group there is a higher proportion of Muslims (77% each, versus 65% in the 50+ group). A higher share of people over 50 are Orthodox Christians, while in this oldest group more people also refused to the question (17%). Thus, 87% of city dwellers who took part in the survey reported that they were followers of one religion or another. However, if we use the Dawkins spectrum (of theistic probability) – which we slightly modified for the purposes of this study – we see that among those surveyed only 77% were believers. Overall, only 48% were strong theists, absolutely convinced that God exists. Another 29% were uncertain that God exists but still assume so. Twenty percent classified themselves as agnostics – lacking a clear position on whether God exists or not – while 3% are atheists, strong or uncertain. Table 2. Which statement best reflects your position? (% of total respondents) Statement Share, % Decided theist (I am convinced that God exists) 47.9 Uncertain theist (I do not know for sure that God exists, but the probability is high, so I believe that he does) 29.4 Agnostic (I do not know whether God exists...

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Nurturing Global Partnerships – Opinion by the Minister of Science and Higher Education of the Republic of Kazakhstan, Sayasat Nurbek

Kazakhstan, a sprawling and culturally diverse nation nestled in Central Asia, has strategically embraced a multi-vector policy across its foreign relations, economic strategies, and governance. At the heart of this strategy lies Kazakhstan's multi-vector policy in education, a forward-thinking initiative that underscores the nation's commitment to diversification, international collaboration, and educational modernization. International partnerships form a cornerstone of Kazakhstan's educational framework, enriching its academic landscape and fostering innovation. The country has established strategic alliances with prestigious universities, research institutions, and governmental bodies worldwide. Through collaborative endeavors such as joint research ventures, student and faculty exchanges, the implementation of international educational programs, and the establishment of branches of foreign universities within Kazakhstan, the nation endeavors to harness global expertise and best practices to elevate the caliber of its education system. Multi-Vector Policy in Education Over the past year alone, Kazakhstan has witnessed the opening of eight foreign branches, bringing the total to twelve. The first foreign university established its branch is British De Montfort University. This university opened its doors for its students in 2021, offering educational programs for more than 500 students in such fields as finance, design and business. This branch attracted 16 million US dollars from foreign investors. Noteworthy among these initiatives is Kazakhstan's adoption of a strategic partnership model, which has yielded tangible outcomes. Kozybayev University's collaboration with the University of Arizona in 2022 is a prime example. With 589 students enrolled across ten specialties – spanning pedagogical, biotechnological, and IT domains – this partnership, supported by 1200 full scholarships from the government, signifies a concerted effort to enhance educational opportunities and foster interdisciplinary learning. Similarly, the formation of a consortium in 2022 with renowned German universities, operating under the auspices of the Caspian Engineering and Technology University named after Sh. Yesenov, underscores Kazakhstan's commitment to excellence in engineering education and technological innovation. Offering a diverse array of programs encompassing engineering fields, data management, artificial intelligence, and beyond, this consortium exemplifies Kazakhstan's proactive approach to equipping its citizens with cutting-edge skills and expertise. Established in 2023 at Zhubanov university, the Heriot Watt University branch offers an array of programs in vital fields such as petroleum engineering, electrical power engineering, and computer engineering, boasting an impressive enrollment of 286 students from 13 Kazakhstan regions. The Luban Workshop initiative at Serikbayev University exemplifies Kazakhstan's commitment to advancing its automotive education and training capabilities. This initiative, supported by foreign partners, aims to establish state-of-the-art laboratories specializing in automotive transport. These facilities will serve as a platform for incorporating modern Chinese technological advancements into the curriculum, thereby enhancing the quality of education for future automotive specialists. The project also seeks to foster academic and research collaborations with esteemed Chinese educational institutions, paving the way for the development of dual-degree programs, joint research projects, and other collaborative efforts that will enrich the automotive sector's expertise and innovation. The advent of artificial intelligence (AI) has sparked discussions about its potential impact on the workforce and society at large. In response to this...

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The Development and Drivers of Transport and Logistics in Kazakhstan

The challenging geopolitical situation in the region, combined with sanctions pressures, has ruptured traditional transport and logistics chains. Finding itself sandwiched, Kazakhstan has had to actively build new routes for transportation and freight, and to diversify its own suppliers. Measures previously taken to develop the transport and logistics industry has made it possible to solve these problems to some extent, though it still faces many challenges ahead. Kazakhstan’s transport and logistics industry plays an important role in the country’s economy and attracts cargo flows. To transform the country into a transport and transit hub – one of the government’s declared strategic objectives – a number of large-scale measures are being taken today, with investments in the industry of about KZT1.8 trillion (U$4 billion), which are already bearing fruit. Last year, about 29 million tons of freight passed through Kazakhstan, up 21% year-on-year, the lion's share of which was transported by rail. Indeed, railways are slated to lead the country’s transit development. To further increase cargo flow, boost efficiency and, most importantly, expand the capacity of railroads, three large-scale projects were launched in Kazakhstan last year: the construction of a railway line bypassing the Almaty station, as well as two other lines – Darbaza-Maktaaral and Bakhty-Ayagoz. Over the next three years, more than 1,300 km of new rail lines will be laid. The projects aim not only at increasing transit traffic through Kazakhstan, but also expanding the country’s export potential and removing existing bottlenecks. Besides modernizing infrastructure, the industry faces many other tasks to spur transit traffic, including updating rolling stock, putting in place modern digital services, establishing competitive tariff rates for the transport of transit freight, etc. To support cargo flows by road, the most used option, the construction and reconstruction of federal and local highways continues. In 2023, over 10,000 km of road was built or repaired. Such large projects as the BAKAD (Almaty ring road) and the Kandyagash-Makat and Usharal-Dostyk highways were completed. In the coming years, several road projects along federal and regional networks are planned, comprising a total length of about 9,000 km. More attention is to be paid to the quality of the roads under construction, which has been known to raise questions among motorists. Kazakhstan’s maritime transport industry has also seen much development. In this regard, in the near future the creation of a container hub is planned at the Aktau seaport, along with the reconstruction of its docks and an upgrade of handling equipment. Dredging work is also to be done. The port of Kuryk is also being developed through the construction of a multi-functional terminal. Taken together, this will boost the throughput capacity of Kazakhstan’s seaports by 10 million tons, with container capacity rising to 300,000 TEUs per year. This is especially important in the context of the active development of alternative trade routes, in particular the Trans-Caspian International Transport Route (TITR) and the International North-South Transport Corridor (INSTC), for which both seaports will be used. The potential of these routes is...