Nurly Zhol Connects Continents

Kazakh transport workers celebrated their professional day on Aug. 2. On the eve of the big day, The Astana Times talked to Askar Mamin, chairman of the Kazlogistics transport workers union and president of Kazakhstan Temir Zholy (KTZ), the national railway company, to discuss the development of the transport industry and Kazakhstan’s integration into the global market of transport and logistics services.

Photo credit: kazpravda

Photo credit: kazpravda.kz

As stated by Kazakh President Nursultan Nazarbayev, “the transport infrastructure is the circulatory system of our industrial economy and society.” The drop in demand and prices on world markets has surely had a negative impact on our economy. How has this affected the transport sector in general and the work of KTZ? How does the company plan to cope with global challenges?

The transport sector provides services for domestic and international trade and as a result is affected by market demand for manufacturers’ products. The global economic and geopolitical trends have a direct impact on its activities.

The slowdown in economic growth of the region, deterioration of the pricing environment and reduction in the trade turnover have led to a decrease in the total cargo turnover of the transport industry from 493.2 billion tonne-kilometres in 2013 to 487.4 billion tonne-kilometres in 2014. In addition, the scope of traffic increased by 3.7 percent, or 3.6 billion tonnes.

With the general decline in cargo turnover, KTZ managed to close 2014 with a profit from operating activities of 163.5 billion tenge (US$872.2 million) and 73.5 percent higher net income than the planned target by attracting additional volumes and increasing the share of commercial transit cargo, as well as reducing consumption to 56.5 billion tenge (US$301.4 million) and implementing programmes enhancing the effectiveness of the KTZ group of companies.

Additionally, container traffic attracted to and from China to Europe provided the opportunity to increase revenue traffic to 13.7 percent in 2014. As a result, the share of transit traffic in the company’s total revenue reached 25 percent. Our task now is to increase this figure in the medium term up to 50 percent.

The downward trend in turnover is being observed in 2015, too. At the same time, we continue to increase the capacity of transit cargo in new operations.

By the end of the year, we plan to carry 42,000 containers in the China-Europe-China direction, which is almost 40 times greater than in 2011.

Growth in new segments of the market confirms that the company has been on the right track in recent years in implementing development strategy of the new multimodal competencies.

 

Do you mean the creation of a transport company of international standards based on KTZ in the context of Kazakhstan becoming an international transit hub and renewal of the Silk Road?

Exactly. On instructions of the President of Kazakhstan, KTZ is appointed as transport and logistics operator of the project with the goal of combining land, sea and air modes and transforming the company at the international level. Therefore, assets including the seaport and airport infrastructure and transport and logistics centres were integrated into a single transport and logistics holding based on KTZ.

Today, the company provides rail and sea transportation of goods, as well as services for ports and airports, logistics operation and terminal infrastructure for different types of transportation. The company is developing new competencies in partnership with leading international operators such as Dubai Port World, Zurich Airport International and Swissport International.

The strategy is aimed at the market of transport and logistics services in the Eurasian continent and the reorientation of freight traffic from sea to overland routes through Kazakhstan.

In this matter, the company forms an international transport and logistics chain in alliance with global and local market participants and offers integrated transportation services which are successfully competing with alternative proposals.

The company has started the formation of a network of terminals and logistics centres on the coasts of the Pacific and Indian oceans and gulfs of the Baltic and Black seas. In 2014, the first external logistics terminal network started operating in the Chinese port of Lianyungang. It has become the main point of consolidation of cargo flows to or from Kazakhstan and a key transit port for transshipment of cargoes to and from Central and SouthEast Asia, as well as inland ports in China.

The project has already shown its effectiveness in the first six months of 2015. The terminal has processed 142,000 20-foot container equivalents (TEUs) and storage of 318,000 tonnes of bulk cargo and by the end of 2015 the amount of cargo is expected to increase up to 250,000 TEUs, followed by a two-fold increase in 2020.

Because of the supply of transportation services in the market that allow regular container trains to go through Kazakhstan with the speed of 1,119 kilometres per day, we are strengthening our market position and successfully compete with global operators.

Having gained the marine dry cargo, competence was achieved and transportation on the Caspian Sea was organised. They were integrated with transportation by rail and through the port of Aktau.

The company plans to develop east-west and north-south marine transportation segments and transport corridors with cooperation in the Caspian Sea and Indian Ocean.

We develop innovative transportation and logistics solutions in the multimodal mixed communications rail-sea and rail-air according to the “one-window” principle that has the optimal price-quality ratio for the targeted market segments.

The presence of consolidation and distribution of international traffic in the centre and offering competitive transport products provides geographic expansion of key international transport corridors passing through Kazakhstan from various countries.

 

How are the intensive development of the Kazakh transport and logistics infrastructure and the projects planned within the framework of the Nurly Zhol new economic policy connected?

The plans to increase the amount of transit traffic to 1-1.5 million containers a year and the corresponding development of the long distance and terminal transport-logistics infrastructure of all modes of transportation in Kazakhstan are necessary, as well as its integration into the global network.

The formation of a Western Europe-Western China transcontinental road corridor is almost finished. New railway lines, such as Zhetygen-Korgas, have also been built connecting Kazakhstan with the second railway border crossing with China, as well as Uzen-Bolashak, which connects Kazakhstan’s railway network with lines in Turkmenistan and Iran. We have also built the Zhezkazgan-Beineu and Arkalyk-Shubarkol lines that are optimising domestic and international routes going north-south and east-west.

The completion of the three terminals for general cargo types, containers and grain will increase the capacity of the port of Aktau.

The core of Nurly Zhol is the development of infrastructure. Within the programme, the company is implementing projects such as construction of the second track on the Almaty–Shu line, the Borzhakty-Yersai railway line and a ferry complex at the Kuryk village on the Caspian Sea, development of the Khorgos-Eastern Gate logistics hub and reconstructionof the Astana International Airport passenger terminal on the eve of EXPO 2017.

The plan also provides for a significant amount of work on developing the road network in the main directions from Astana. It involves reconstruction of more than 6,000 kilometres of roads. The total investment will amount to 2.5 trillion tenge (US$13.3 billion), with plans to put about 600 kilometres of roads into operation by the end of the year.

A separate issue is the commercialisation of transport services and introduction of the toll system. Nowadays, the 211 kilometres of the Astana-Borovoe road are operating as a toll road. In 2014, fees collected on the road amounted to more than 1 billion tenge (US$5.3 million). As a result, the quality of service has improved and the number of traffic accidents decreased three times. The toll system is expected to cover about 7,000 kilometres of roads with maximum traffic until 2020.

There are plans to create 260 objects of roadside service by 2020. The national operator will be assigned to coordinate the development and implementation of the national standards for roadside services.

 

The first Class A transport and logistics centrein Kazakhstan was launched in Astana in July during the national teleconference with the participation of the President. Which characteristics does it have?

The largest Class A transport and logistics centre (TLC) in Central Asia meets strict requirements for the architecture of the warehouse, width of span, height of shelving storage, temperature and location of the warehouses on the basis of multimodal transportation, plus strict security requirements including fire safety.

Everything, including warehouses, equipment and technology meet the highest international standards. Automation of infrastructure accompanies the process in real time. The system automatically displays information about filling the warehouses; for example, where and what goods are situated, shelf life, when and to whom to give them andthe priorities when moving. In addition, the system provides commands to operators, such as which products need repackaging or when to ship.

The TLC in Astana stands on the principle of multimodal transportation: receipt and shipment of goods from the train to cars and back is organised. There are five kilometres of direct drive-up railway lines to the warehouse.

This year, there are plans to launch a similar TLC in Shymkent. In the framework of the Nurly Zhol programme,transport and logistics centres will be built until 2020 on the main Kazakh transport corridors in Aktobe, Uralsk, Atyrau, Aktau, Kostanai, Pavlodar and Semey.

Thus, a chain of hubs will be created in key centres. The central hub of the region is planned to be in Astana.

We are working on attracting potential investors to participate in the above-mentioned projects.

 

Not long ago, the President declared 100 Concrete Steps to implement the five institutional reforms of the Plan of the Nation for joining the 30 most developed countries. What measures will be taken to implement the tasks assigned to the company?

Development of the transport and logistics infrastructure in Kazakhstan and formation of global supply networks using our infrastructure have created basic conditions for maximising the transit potential.

But it is also necessary to create a favourable climate of logistics and institutional conditions of transcontinental transport passing through Kazakhstan. To this end, under the 100 Concrete Steps we have proposed initiatives such as improving the legal framework for mixed transport, creating coordinating committees within transit corridors and enforcing Kazakhstan’s obligations regarding the decision of the Eurasian Economic Commission for preliminary informing of customs bodies, as well as the creation of a flexible tariff policy in railway container transportation and provision of tax incentives for shipping companies.

Overall, implementing the projects for Kazakh integration into the international transportation and communication flows and the creation of a multi-modal transport corridor to move goods from Asia to Europe will add 1 percent to the GDP growth, create about 15,000 new jobs inlogistics and increase transit by all forms of transport from 18 to 50 million tonnes in 2030.

 

Within the 100 Steps, the President announced the need to integrate KTZ and Air Astana. How will a synergy of two types of transport be accomplished?

According to IATA data, in 2014 the total amount of world cargo transportation by air was 51.3 million tonnes, including 19.6 percent along the Asia–Europe route.

The cargo transit through Kazakh airspace (an average of 23,000 freight flights) is 1.5 million tonnes per year, of which about 90,000 tonnes was handled at the country’s airports.

Since much of the time-sensitive transit cargo is transported by foreign airlines, one of the most promising solutions is rail-air transportation via a Kazakh transportation scheme. In the past year, we have tested cargo delivery from China to Europe to ensure optimum cost and delivery time.

KTZ Express, in cooperation with Hewlett-Packard, as well as logistics partners DB Schenker and KLM, has conducted a rail-air pilot project from Chongqing to Amsterdam. For transportation of expensive electronic equipment, KTZ Express purchased specialised 45-foot containers with climate control.

This project will increase the speed of delivery of goods (covering 9,900 km in seven days) as well as reduce the cost of transport in comparison to rail transportation.

The goal of KTZ is to further increase the amount of traffic using the rail-air system through the creation of coherent multimodal solutions, building competencies and the acquisition of its own fleet.

Currently a feasibility study is being done on a joint venture in the area of air transportation.

 

KTZ is implementing a business transformation programme initiated by the Samruk-Kazyna National Welfare Fund. What is the business transformation for you and what are the first results?

Focusing on the best international practices, we carry out the transformation of the entire organisation (structure, management, production and support processes) and culture through the development and change of the personnel’s attitudes, technology and modernisation of production assets. At that, the KTZ operating model involves development of a rapidly-growing new business in the segment of multimodal transportation based on the traditional railway business of the KTZ group of companies.

The sphere of cargo business provides optimisation of the planning process, sales, traffic management and maintenance of carriages and trains with the introduction of automated control systems, as well as the transition from tonnage to a scheduled model of transportation-process organisation that allows us to offer a valuable product with a contract period of delivery. Transformation of passenger traffic includes measures to improve the process of ticket sales, expanding ranges of highspeed, optimisation of structures and schemes and reducing unproductive expenditures.

The automation of processes and introduction of saving technologies are also provided in the area of ​​operation and maintenance of infrastructure and are aimed at increasing productivity.

The strategic performance of the KTZ company was developed and approved as part of the transformation. The criteria include are added economic value, customer satisfaction, corporate governance rating, transport safety, rating of social stability and the impact on the environment.

 

Guarantee of social programmes, development of corporate culture and health insurance are important factors for the employees and their satisfaction level. How do you assess the current social policy of the company? Does KTZ implement all its obligations as an employer?

In accordance with international principles of corporate governance, the company is guided by the policy of social responsibility towards employees and society as a whole. Spending on social programmes in 2014 amounted to 11.4 billion tenge (US$60.7 million). The funds are being allocated as various kinds of financial aid to the employees. There is financing of social programmes in the following areas: housing policy, support of young professionals, material support of large families, single mothers, pensioners and veterans, health care and promotion of physical culture and sports in the workplace, as well as various charity events and projects.

In order to attract highly-qualified personnel, KTZ provides an attractive environment for potential and existing employees, as well as ensures social protection, professional development and personal growth.

As part of the housing programme, our employees have been provided with more than 3,000 apartments since 2008.

From 2008 to 2014, the average monthly wage of workers in the KTZ group of companies has doubled from 70,000 tenge (US$373.03) to 134,000 tenge (US$714.10).

In addition, the company pays great attention to workers’ health care. KTZ organised three medical trains,Salamatty Kazakhstan, Zhardem andDensaulyk, which have visited 97 stations since they were initiated.

 

A powerful division of railway engineering has been formed in KTZ holding and an engineering cluster was created from scratch in Kazakhstan. What are the prospects for the development of this sector?

The government attaches the highest importance to the development of transport infrastructure and railway engineering. The accelerated formation of a world-class transport and logistics system, which is supported by the creation of a knowledge-based economy in Kazakhstan, is one of the strategic directions for achieving the national goal of becoming one of the top 30 developed countries.

Historically, the production of machine-building products for the railway transport of the Commonwealth of Independent States (CIS) countries was developing in the territory of Russia and Ukraine.

The high level of wear and tear obsolescence of the company’s production assets formed a significant need to update its rolling stock and infrastructure-producing resources.

Given the public policy of industrialisation and import substitution, as well as the backwardness of the producers of the CIS technology, our company has taken the path of asset modernisation by means of organisation of its own manufacturing.

In conditions of high investment barriers in creating new engineering industries for private business companies, KTZ, as one of the largest economic entities and consumer of products, has managed to establish the production of machinery products.

In partnership with world leaders such as General Electric, Alstom, Talgo and others, plants to manufacture freight, passenger and electric locomotives, wagons, large car casting and hardware infrastructure were built and are operating.

Today, the volume of production is 200 billion tenge (US$1.1 billion). Domestic enterprises are assimilating new production and localisation of manufacture has increased. A total of 5,200 railway product items are planned for production, while the level of localisation of manufacture should reach at least 50 percent by 2017.

By the end of the year, the first Kazakh rail certified in accordance with the technical regulations of the Eurasian Economic Union will be released by the Aktobe plant.

The products of our plants have considerable export potential and are already being delivered to the markets on the Eurasian continent.

At the same time in accordance with a comprehensive privatisation plan developed by the Samruk Kazyna Fund and approved in the past by the Kazakh government, our company’s production facilities are subject to transfer into the competitive environment through the implementation of the auction in 2018.

 

In recent years, KTZ has launched high-speed passenger trains based on the Tulpar-Talgo cars, which significantly reduced the travel time between Kazakh cities. There is improvement not only in speed performance, but also in service. What are the plans for the further development of passenger traffic?

To improve quality of passenger services, a development programme of high-speed passenger services has been implemented, resulting in the reduction of travel time of trains on the average of two times.

Currently, high-speed passenger trains composed of Tulpar-Talgo cars travel eight routes: Almaty-Petropavlovsk, Astana-Aktobe,Astana-Atyrau, Almaty-Atyrau, Almaty-Aktobe, Almaty-Ust-Kamenogorsk, Astana-Ust-Kamenogorskand Astana-Kyzylorda.

Work is also continuing on the launch of additional high-speed trains and in the second half of 2015 there are plans to launch additional high-speed trains: Astana-Uralsk, Almaty-Aktobe, and Astana-Ust-Kamenogorsk.

We are also working to improve the level of comfort and services on the long-distance trains and commuter trains. The rolling stock is being renewed, new routes are introduced, the range of branded trains is being increased and conditions are being provided for passengers with disabilities.

In addition, modern forms of passenger service are actively being introduced, such as ticket sales through the Internet and terminals as well as transportation with electronic tickets. Since November 2014, a system of flexible pricing for travel on Talgo high-speed trains that depends on the depth of sales and demand has been functioning. This innovation allows high-speed trains to attract more passengers from alternative trains and other modes of transport by providing an opportunity to buy cheaper tickets for the majority of passengers, including pensioners, students and other individuals.

 

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