Kazakhstan

Government's Strategy in Transport Sector

World Bank Activities

Because of the very unusual geographic and economic features of Kazakhstan (vast space, low population density, rich mineral resources hauled over long distances, trade patterns inherited from the former Soviet Union, key location between Europe and Asia, etc.), the economy of Kazakhstan is among the most freight intensive, and therefore, the most dependent on efficient transport in the world. On a per capita basis, it uses transport services much more than the economy of the few countries to which it can be compared (Canada and Australia), even though those are considerably more developed. Per US$ of GDP, it uses transport services about twenty times more than the economies of Western Europe (about 6 Ton-Km compared to 0.3 Ton-Km).

The Kazakh transport sector made important progress in the mid 1990s. The road transport sector and the road construction industry were rapidly privatized; competition was introduced.  Ministry of Transport with a clear mandate to focus on policies and regulations was established. Bold reforms were introduced in urban transport aimed at the competitive supply of services on the basis of bus route franchises. However, there has also been much instability in sector policies and frequent changes in senior staff, and Government strategies have not been fully implemented. As a result, some important inefficiencies remain, and the transport sector serves the needs of the economy and the population to lesser extent than it should.

On the whole, the asset base in the transport sector, although large in quantity, is of unequal quality. The sector has indeed been starved for resources since early 1990s, so that assets (especially roads, railway infrastructure, and rolling stock) have not been well maintained and not replaced as and when necessary. This has produced capacity shortages in some cases. Technologies used in the transport sector are also often outdated and inefficient; it results in high resource cost (especially fuel cost) and negative environmental impact.

The legal and regulatory framework in the road and air transport sectors, although greatly improved, has shortcomings with either gaps or overlaps in regulations and inadequate allocation of responsibilities for enforcement, which has made the development of the private sector more difficult than necessary, increased transport costs, and created opportunities for abuse by enforcement authorities. This, in particular, has a negative impact on international trade, as well as for countries, such as the Kyrgyz Republic, which need to use Kazakhstan's transport network to reach foreign markets.

Institutions need strengthening as well as more stability in senior staff and systems, and procedures adapted to the requirements of a market economy. The road administration, for example, has gone through several radical changes over the past five years and has never been in a position to develop the planning, procurement, and implementation capability that the new organization of the sector required. Throughout the transport sector, expenditure planning and budgeting capability need to be improved; large, visible investments should be implemented only if there is a sound economic justification. In addition, the relationship between the State and State-owned enterprises is rightly being rationalized so as to avoid either excessive interference or loose supervision, especially in the case of the railways and the national airline.

Financial policies should promote the efficient use of resources and ensure that State owned commercial enterprises are sustainable. Rail passenger tariffs should not be cross-subsidized by freight tariffs. Air transport fares should reflect actual costs. The taxation of gasoline and diesel oil should be increased to the level, where State would be able to recover the cost of maintaining and rehabilitating the road network from road users.

Transport safety, especially on roads, has become a major problem in Kazakhstan, affecting different segments of the population. There are about 3,500 people killed each year in the road accidents.  Over the last five years, the annual increase of road accidents has been about 10-15%.  Indicators show that transport safety is at a critical level and continues to worsen. If current situation continues, the number of road fatalities will reach 10,000 per year by 2015. A wide-ranging set of measures is required, including upgrading infrastructure and strengthening enforcement. 

Finally, as in other Central Asian countries, the facilitation of international trade and transport is of key importance for economic growth. Numerous measures are needed for promoting trade and for Kazakhstan to benefit from its cross roads position, including improving the performance of customs and other border agencies, implementing international transport agreements through the Kazakh legislation, developing the freight forwarding industry, harmonizing transport regulations with those of the neighboring countries, and better interregional coordination of rail transport.

Updated February 23, 2006