Representatives of Hewlett-Packard (HP), one of the world leaders in the field of information technology, have recently been learning about work underway at the Altynkol railway station, the “dry port” in the Khorgos-Eastern Gate special economic zone and the Khorgos International Centre for Cross-Border Cooperation (ICBC).
Transit opportunities are not the only thing of interest for investors at Khorgos. The special economic zone (SEZ) is becoming very attractive for various industries that could cut distribution times by distributing from the zone, especially in light of the upcoming commissioning of a “dry port” at Khorgos-Eastern Gate, which will include logistics and industrial zones.
Until very recently, HP office equipment manufactured in Japan, China and countries in Southeast Asia was being delivered to the market in the Commonwealth of Independent States (CIS) via a roundabout route that had it carried by sea to Europe and from there sent in the opposite direction to Russia and Kazakhstan. Only in the fall of 2012 was the first container train from Chongqing to Duisburg, Germany, launched, taking office equipment by rail.
“It is better to immediately deliver to Kazakhstan, and then transport to the territory of Russia and to other countries in the region,” HP representatives said on a visit
Establishing production at Khorgos would be even more interesting, as would delivering items from China and assembling them in the SEZ. In the future, this will enable the quick production and delivery of goods to the market, they expect.
The potential of this market is huge. For the global giant it is an easy market to which they can deliver more office equipment at a cheaper price. It was no surprise, then, that HP representatives, having covered thousands of kilometres of sand dunes to reach Khorgos and the nearby town of Altynkol, very carefully reviewed the Khorgos-Eastern Gate SEZ project, examining in detail the facilities already built.
Tax holidays, exemptions and preferences that the SEZ is legally providing for the next decade are also attracting interest. Over the next decade, HP will be able to launch assembly work in the SEZ, making it possible for them to quickly produce and deliver goods to this market. All these issues require careful consideration, and HP representatives have asked for legal advice to provide a complete assessment of the tax system applied in Kazakhstan and the SEZ.
What opportunities can Khorgos provide, taking into consideration the context of the Eurasian Economic Union (EAEU)? How profitable is it that the value added tax rate in Russia is 18 percent and in Kazakhstan 12 percent? What would it mean for HP to assemble in the Khorgos-Eastern Gate SEZ? These are the kind of questions they are looking to have answered.
Above all, HP representatives were interested in the multi-modal capabilities of the Kazakhstan Temir Zholy (KTZ) national railway company, which provides all of Kazakhstan’s transport logistics, from railways to airports to sea routes to a network of terminals.
Representatives of Kazakhstan’s businesses are also eyeing Khorgos’ prospects.
Baltabai Tasshabayev, director of AlmaSnabResurs LLP of the Farna trading network, is exploring the possibility of opening an elevator here for storing and processing cereals. He has been familiar with this region for long time: in 2011, his company Tektum JV opened a concrete production facility on the Chinese side, producing up to 700,000 units per year of flat slate. Two years later, however, it was forced to mothball production because of logistical problems. Before the opening of Altynkol they had to carry the products to Dostyk station, which was very unprofitable and problematic.
The Capital Gate Central Asia company has already begun implementing investment plans. Gregory J. Vojack, chairman of its board of directors, signed an agreement with President of Khorgos ICBC Askhat Khamitov to lease 120 hectares of land for building construction-related facilities.
HP’s Director for Logistics in Europe and Central Asia Ronald Kleijwegt was also very impressed by what he saw at Khorgos. “The growth of the area is very obvious. The favourable location of Kazakhstan between China and Russia [is obvious], as it has openings to Turkey and Europe. The region is geographically very suitable for work on the logistics of the delivery of goods. If it develops further, it will be very beneficial to all,” he said in an interview with this reporter. “We will work together with KTZ, as well as with our Chinese partners. And we plan to cooperate actively till 2020. Today, we are trying to see how a profitable situation for all will develop. The project is supposed to be very interesting.”
On the container site of Khorgos-Eastern Gate, representatives of HP, KTZ and the SEZ managing company agreed to meet again in five years to take stock of what they have achieved.