Kazakhstan has a long history as a trading bridge between Europe and Asia – the Silk Road passed this way, after all. It’s a role that the country is eager, after its decades in the Soviet wilderness, to re-establish.
Since independence in 1991, Kazakhstan has enthusiastically embraced capitalism. Its GDP has increased 16-fold in the past two decades, the economy growing at an average of 7 per cent annually for the past 15 years, while GDP per capita has grown from US$700 in 1993 to US$12,000 today.
Much of this is down to the country’s vast reserves of oil and gas. That industry has attracted more than US$170 billion of investment and, while fluctuating oil prices have had an effect here as it has everywhere, this supply is unlikely to run out any time soon. The Kashagan field alone, discovered in 2000, was the largest find in the world in the past 30 years.
Still, Kazakhstan wants to diversify beyond a reliance on oil and gas, and it’s looking for trading partners. The UK is one of them.
In 2013, David Cameron became the first British prime minister to visit the country and, this year, Kazakhstan’s prime minister, Karim Massimov, visited the UK.
There are already about 600 British companies and joint ventures in Kazakhstan – big players include British Gas and BAE Systems – and the UK has been granted visa-waiver arrangements to encourage further business.
Nicholas Bridgen, chief executive of Ferro-Alloy Resources, has been here since 1998, mining gold, then vanadium and potash. “Kazakhstan has the world’s largest deposits of uranium and plenty of gold, zinc and copper,” he says.
“In fact, apart from a few gemstones, it’s got just about everything on the periodic table. In the Soviet era, there was a great deal of exploration but no development. When independence came, everyone knew where the deposits were. We’re now at a transition stage and it’s time to start exploring again.”
REGIONAL HUB
It’s not the only area with potential. The Silk Road may be long gone, but Kazakhstan’s geographical position could be key to its future.
The ninth-largest country in the world, its border with Russia is almost 7,000km, while China is to the East and Kyrgyzstan, Uzbekistan and Turkmenistan to the south.
Jordan Karamalakov, area manager for aviation trade body IATA, came here from his native Bulgaria three years ago with the aim of improving safety, security and air passenger satisfaction across the region.
“Many airlines in this region are problematic,” he says. “They don’t see the need for a safety audit. In comparison, Air Astana is a diamond in the aviation industry in central Asia. With it, Kazakhstan has an excellent opportunity to become the regional hub of Central Asia, both for passengers and cargo.”
Air Astana is only 14 years old, set up by BAE Systems and Kazakhstan’s national wealth fund as a joint venture with US$8.5 million each – a sum Richard Ledger, the airline’s vice-president of sales, describes as “a bit of loose change in the airline industry”.
It now turns over US$1 billion a year, linking London and Frankfurt not only with Kazakhstan but connecting on to places such as Urumqi in Western China.
“Before we started making these regional connections in 2009, there was no transfer traffic in the region – 13 per cent of our passengers now connect here internationally,” Lester says. “We’re opening new routes all the time. We’ve just started Astana to Seoul, Tbilisi and Paris.”
FUTURE CITY
The airline is named after the country’s new capital, Astana. Before 1997, it was a small town (Akmola) in the north of Kazakhstan’s vast steppe.
Now it is home to about three-quarters of a million people and futuristic architecture on a grand scale. World-renowned architects involved include Kisho Kurokawa, who devised the city plan, and Norman Foster, who contributed the largest “tent” in the world – the Khan Shatyr entertainment centre (pictured above and on our cover), a tribute to Kazakhstan’s traditional yurt.
The president lives in an enlarged version of the White House, topped by a blue dome and a spire. There’s a glass pyramid (another Foster), golden twin towers (the salt and pepper pots), a cycling helmet-shaped velodrome, a Greek temple-style opera house, a tower representing a Kazakh “tree of life”, and a mechanical golden eagle (the country’s symbol) in the National Museum of Kazakhstan that “flies” every day to the accompaniment of rousing patriotic music.
The new capital is very much the brainchild of President Nursultan Nazarbayev. Some questioned a city in the steppe with winter temperatures of -40°C, but it is now home to the government, universities and foreign embassies, and in two years it will host Expo 2017, themed “Future Energy”.
There’s a new government department, Kaznex, dealing with the anticipated Expo surge in foreign investment and business interest, and it will also offer advice to businesses looking for a local partner, and deal with bureaucracy and corruption issues.
In Transparency International’s 2014 Corruption Perceptions Index, the country ranked 126 out of 175 – Kaznex is a sign the government is serious about changing that.
Almas Tangister is supplying the heating, cooling and waste management systems for the Expo and hopes to build the site’s main hotel and congress hall – up to five million visitors are anticipated over three months.
He believes international companies and foreign investors are not much affected by corruption, although it is a different matter on a local level. He compares it with the US 200 years ago.
So are we talking Wild West here? “In the 1990s there were some unfortunate experiences with corruption,” he says, “but the situation has changed dramatically. We are a young country. We need time and our future is not so defined. But we are expecting a lot of business from the Expo and there are many possibilities for investors”.
LAND OF OPPORTUNITY
Surprisingly, Tangister identifies one of these as farming. There has already been considerable Australian investment in cattle, and the Kazakh government donates 30 per cent of the cost of every animal imported.
Land is available and cheap – a fraction of Australia’s per hectare – while halal meat, milk and cheese would be in demand in Malaysia, Indonesia and the Gulf states.
It’s back to being that regional hub – and with good reason. Kazakhstan’s 2.7 million sq km are home to only 17 million people. This brings its own problems for business. If a paucity of both workers and customers means some things just won’t work, then you need to expand your market.
This was another of Nazarbayev’s big ideas. In 1994, he envisaged a Eurasian Economic Union and, this year, it became a reality, with Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia establishing an integrated market for goods, services and people – 176 million people with a GDP of more than US$4 trillion.
CHALLENGE AHEAD
Nazarbayev has been president since independence, and first secretary before that in Soviet times. He was re-elected in April for a fifth term.
There has been some international criticism about the lack of a credible opposition but among foreign investors, the lack of a clear succession plan is a bigger concern – there is no obvious next-in-line.
Another is bureaucracy. Roger Holland is chief executive of property company Scot-Holland, and arrived 20 years ago. “When I came it took me six months to set up a bank account. Fortunately, I have a local partner in the business and he was my right-hand man, steering me through the bureaucracy. You need to use professional services to set you up legally and financially – you can’t coast it here.”
Credit is another problem. Interest rates are a punishing 25 per cent, so businesses need a positive cash flow or outside investment. Language is tricky, too. While English is taught in schools, it is still not widespread. The two main languages are Kazakh and, for business, Russian.
The president believes English is key to making Kazakh citizens global players – perhaps the reason for another British success story. In Hertfordshire, Haileybury public school has 770 pupils. In Kazakhstan it has more than 1,000.
The project was set up in the country’s biggest city, Almaty, by the Kazakh parent of a child at the UK school.
Kathryn Walsh, who has been involved in the project since 2007, says: “They knew our system, our name was prestigious – they would provide funding and building and we would provide the education. We had a big launch party in 2008, nearly 1,000 parents attended and many signed up on the spot.”
Two years later, at the request of the president, a second school opened in Astana.
WELCOMING THE WORLD
Astana is the new capital, but the business, financial and cultural centre is still the old one, Almaty. It was a major stopping point on the Silk Road, but don’t expect a Tashkent.
Almaty lies on the same fault line as Nepal – one of the reasons for establishing Astana – and an earthquake in 1887 destroyed most of its architectural splendours.
What the earthquake couldn’t take away was the glorious backdrop of the Zailysky Alatau mountains, which rise over 4,000 metres and are snow-capped most of the year.
Only 30 minutes from the centre of town, they could be hosting the 2022 Winter Olympics (Beijing is the only opposition). Distances rule out Almaty as a ski centre for Western Europe, but it could be a regional one – perhaps for those newly middle-class citizens of Urumqi, just an hour and a half away.
Besides British Airways (which serves Almaty) and Air Astana, Lufthansa flies to Almaty and Astana via Frankfurt and Munich. Marriott and Rixos hotels are present in both cities, Hilton Garden Inn and Radisson Blu in Astana, and Ritz-Carlton in Almaty, with an Astana property opening in 2017. St Regis will come to Astana and Hyatt Regency to Almaty in the same year.
Given the distances, most travel is by air, with 18 regional airports. City public transport is patchy so hire a driver or take taxis – they’re cheap, and airports are about 30 minutes from city centres.
Beyond Expo and the Olympics, joining the World Trade Organisation is on the cards. Some see Almaty as a Singapore-style financial centre, with Astana as a “Dubai of the Cold Steppe”. With no sea, no tax-free shopping and those winters, it’s a long shot.
But given the story so far, you can’t rule anything out when it comes to Kazakhstan.
British Airways flies from London Heathrow to Almaty three times weekly. ba.com
