Kazakhstan’s Logistical Network in Strategic Locations: Prospects and Possible Benefits

The diversification of the transportation routs and having a comprehensive network of the terminals in all strategically significant locations is increasingly important given the intensity of the economic development of Kazakhstan and necessity to enter the international markets. While articulating his Nurly Zhol – Towards the Future National Program, President Nazarbayev of Kazakhstan laid on the government the responsibility to consider the issue of building or leasing a number of terminals in the sea and inland ports of China, Iran, Russia and the other CIS countries in order to increase the cargo turnover through the territory of Kazakhstan to meet a strategic target to transform the country into the main transit hub between Europe and Asia.

The decision of Kazakhstan to have the terminals in the seaboard regions of China is prompted by the fact that a number of the world largest sea ports are located in this country. According the Russian’s TIS Logistics, five of ten world largest

ports are now in China (TIS Logistics, 2015). Moreover, the largest industrial centers are also located in these seaboard regions of China: more than half of the capital stock of the state industry in China are located in the major cities of the eastern coastal provinces of Jiangsu, Shanghai, Liaoning, Shandong, Guangdong, Zhejiang provinces: these are 13.1% of all enterprises, 9.6% of the food and mechanical engineering industries, 4.7% of the textiles, 2.4% of the oil and gas industries (UGL, 2015).

In April 2014, Kazakhstan began to build the first terminal in the eastern Chinese port of Lianyungang. The Lianyungang Port, located in the province of Jiangsu of East China, has an advantageous geographical position being connected by rail with other major Chinese ports, namely Qingdao, Tyantszyan, Dalian and Shanghai, and by sea with the Korean and Japanese ports of Busan and Osaka respectively.

Additionally, Kazakhstan shall consider building a number of terminals in the southern regions of China that would be situated either within or near the major commercial centers. Given the data provided by the Eurasia Logistics (2015) the following locations appear to be the most promising:

The Shenzhen Sea Port - with the TEU capacity of 23 million as estimated in 2013 – is situated near Hong Kong in the southern China's province of Guangdong. The port is divided into two by a peninsula with the western part for larger vessels as it has the deeper waterway.

Guangzhou on the Zhu Jiang (Pearl River) in the province of Huanan has the TEU capacity of 16 million as estimated in 2013. It is a major sea port and the city of international importance playing a leading role in the foreign trade of China. The port links China with 170 countries.

Fuzhou - with 2 million of TEU capacity as estimated in 2013 - is located in the southern part of the mainland China on the western coast of the

Taiwan Strait. It is the main sea port of the mainland China and the largest foreign trade center of Fujian province (Eurasia Logistics, 2015).

The implementation of the abovementioned projects will enable to maintain a steady transit via the railways towards Kazakhstan and felicitate its access to the markets of Japan, South Korea and Southeast Asia.

Expansion of the Kazakhstan’s logistical network to Iran is also worth thorough consideration. For example, Kazakhstan may take measures in order to reach the Gulf of Oman via the Iranian city of Chabahar, which has the status of a Special Economic Zone (SEZ). Investing in the Chabahar SEZ and having own terminals and “dry” ports there will not only enable Kazakhstan to increase the freight traffic but also to avoid the potential losses caused by the delays due to the instability in the Strait of Hormuz.

To date, Iran carries out 85% of the sea trade via the southern port of Bandar Abbas. However, it takes only the cargo vessels with the 100,000 ton deadweight. Since the bulk of cargo is transported on the 250,000 ton deadweight ships, they first

have to be unloaded in the United Arab Emirates, and then the cargo is transported on the smaller ships (Neftgas, 2014). This situation leads to substantial cost increases. Moreover, a possibility of a conflict between Iran and the United Arab

Emirates shall also be considered. In such a case, the transportation of goods will be interrupted. The Chabahar port, on the other hand, has the deeper waterway and lacks the abovementioned shortcomings. It is, therefore, more attractive for Kazakhstan in terms of investments.

The Iranian government has been actively promoting the Chabahar SEZ among both the domestic and foreign investors. The Iranian-Indian cooperation is the most visible in this context. The Indian logistics companies have expressed great interest in investing into the Chabahar port’s infrastructure as they expect significant reduce in the transport costs of the Indian exports to the countries of Central Asia. Currently, the bulk of the container cargo is delivered to Iran through Dubai.

The oil and gas industry is to play an important role in the future of the Chabahar SEZ. Iran is planning to build a petrochemical plant in Nagin- Mekran. The leadership of the Islamic Republic expects the implementation of this project in the Chabahar SEZ to accelerate the economic development in Southeastern Iran, to create new jobs and to make the Chabahar port an important commercial and industrial center of the country.

Currently, the Chabahar SEZ attracts the investments from such countries such as India and China as well as numerous Iranian companies. Their interest in the Chabahar projects is also promoted by the benefits of its petrochemical

industry outside the narrow Strait of Hormuz. The other reasons are the SEZ legislation and the proximity to the export markets of India, China and Central Asian countries. In addition to the two seaports and the international airport, there has been a railway built in the Chabahar SEZ and a modern hospital and an university as well as recreation facilities.

For Kazakhstan, the most attractive are the projects of the Chabahar SEZ to expand considerably the container transport routes. Back in 2012, the news agencies in Iran (2014) reported the plans to launch a number of shipping lines, namely Chabahar-Singapore-China, Chabahar-Dubai, and Chabahar-Oman. Participating in these projects will enable Kazakhstan to enter the markets of Southeast Asia and the Middle East in the future (Iran.ru, 2014).

Alongside with China and Iran, Russia is a very promising direction of further development of the Kazakhstan’s logistical network. The access to the Black Sea has strategic importance for diversifica tion of the export routes for Kazakhstan. In total, the cargo turnover in the Azov-Black Sea ports is the second largest after the Baltic Sea.

A significant volume of maritime traffic through the Black Sea is the tankers exporting oil and oil products from the ports of Russia (primarily Novorossiysk and Tuapse) and the ports of Georgia (Batumi). In addition to the existing Kazakhstan terminal in Batumi, it appears sensible to consider the possibility of building a terminal in Novorossiysk.

Novorossiysk Commercial Sea Port (NCSP) is one of the largest transport hubs in Southern Russia. In 2013, its turnover reached 141 million tons (NCSP, 2013). According to the Russian Sea Ports Association, in terms of the cargo turnover, the NCSP is the largest in Russia and the fifth larg est in Europe. The port is located on the northeast coast of the Tsemess Bay and is open for navigation all year round.

Being the largest in Russia, according to Stein- weg Handelsveem (2015) the NCSP provides a full range of stevedoring services for transhipment of the liquid, bulk and container cargoes. The NCSP has 45 wharfs (with total length of over 8.5 km); 32 of these are the cargo ones, 10 are auxiliary, and 3 are the passenger quays. 22 cargo berths are used by dry cargo vessels, 8 by for oil tankers, and 2 are used for handling wine and vegetable oil in bulk. The one of the auxiliary berths is used for the fuel bunkering and in the other one the vessels are supplied with water. The rest are the harbor craft parking (SH, 2015).

The port of Novorossiysk is a very important in terms of the providing a steady transit of cargo to Europe with its wide underground railway network. The NCSP is the final destination for the

Russian section of the North-South International Transport Corridor and a part of the TRACECA. The Novorossiysk railway station and the NCSP are the single hub for transshipment functioning on the basis of the constant information exchange as well as joint daily planning. Having the terminal there will reduce the costs of Kazakhstan’s exports making the domestically produced goods more competitive.

To sum up, building terminals abroad is of key importance for the economy of Kazakhstan as it may facilitate considerably the further development of its transport potential and, ultimately, increase its export. Moreover, a comprehensive network of terminals may enhance traffic through

the territory of Kazakhstan and help transformation of the country into a major transit hub between Europe and Asia. In this regard, such a network, being a part of the transport and logistics infrastructure of Kazakhstan, will enable the country to resist the negative trends of the global economic development. More importantly, it will increase the capacities of Kazakhstan to benefit from being a genuine integral part of the global economy as it has been articulated as the first priority of the Nurly Zhol – Towards the Future National Program.

 

REFERENCES:

C. Steinweg Handelsveem. B.V. 2015. Ports of the Black Sea (Морские порты Черного моря), [online] Available at: <http://www.steinweg.ru/port-novorossiysk.

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Eurasian Logistics. 2015. Ports of China (Порты Китая), [online] Available at: <http://eurasia-log.ru/info/ports-of-china> [Accessed 10 June 2015].

Iran.ru. 2014. Iran and Central Asia: Is New breakthrough Possible? (Иран и Центральная Азия: возможен ли новый транспортный прорыв?), [online] Available at: <http://www.iran.ru/news/economics> [Accessed 16 May 2015].

Neftegaz.ru. 2014. Iranian Port Chabahar Opens Oil Terminal (В иранском порту Чабахар состоялось открытие нефтяного терминала), [online] Available at: <http://neftegaz.ru/news> [Accessed 16 May 2015].

NCSP Group. 2013. NCSP cargo Turnover in 2013 (Грузооборот Группы

НМТП за 2013), [online] Available at:http://www.nmtp.info/holding/press-centre/

news/news_> [Accessed 16 May 2015].

TIS-Logistics. 2012. Largest Ports in the World in 2011 (Рейтинг крупнейших портов мира по результатам 2011 г.), [online] Available at: <http://www.tis-

logistic.ru/info/articles> [Accessed 16 May 2015].

UGL Corporation. 2015. Industry of China (Промышленность Китая), [online] Available at: <http://uglc.ru/china-business/industry.htm> [Accessed 16

May 2015].

Year: 2015
City: Almaty