Nurly Zhol connects continents

President Nursultan Nazarbayev defines transport infrastructure of Kazakhstan as a "blood circulatory system" of its industrial economy and society. The fall in demand and prices at the world markets negatively impact our economy. Mr. Mamin, how is it reflected on transport sector in general and KTZ's activity? How does your company plan to overcome the global challenges?

Transport sector serves the internal and international cargo turnover and, as a result, is influenced by market demand for producers' goods. Global economic and geopolitical tendencies directly impact its activity. The economic slowdown in the region, deterioration of pricing environment and trade volume reduction led to cargo turnover decrease in transport sector from 493 bln 2 mln tonnes per km in 2013 to 487 bln 4 mln tonnes per km in 2014. Meanwhile, transportation volume grew by 3.7% and reached 3 bln 6 mln tonnes. Cargo transportation via pipelines remained at the same level as in 2013. In road transportation sector this index rose by 7.4%, while air shipment sector reported 21% decrease. As for freight cargo turnover, this index lowered by 6.4%. Despite the cargo turnover decline, Kazakhstan Temir Zholy got KZT 163 bln 5 mln profit from its operations in 2014. The net profit exceeded the key performance indicator by 73.5% due to several factors: additional volumes of transportation, increasing the share of commercial transit cargo flow, spending reduction by KZT 56 bln 5 mln as well as implementation of KTZ's performance improvement programme (with an economic effect at KZT 39 bln 5 mln). The additional volume of container transportation by China-Europe-China route in 2014 boosted the company's profit from transit transportation by 13.7% compared to the previous year. As a result, the share of transit transportations in the company's general income reached 25%. We plan to raise this indicator up to 50% in a mid-term outlook. Downtrend is recorded in 2015 too. Along with this, we continue to upscale cargo transportation in new transport communications. By the end of the year we plan to transport 42 thousand containers en China-Europe-China route that is 40 times higher against 2011. The transportation boom in new segments of market proves the rightness of the company's strategy aimed at development of new multi-modal competences Do you mean the establishment of a world-level transport-logistics company on the ground of KTZ in the context of Kazakhstan's formation as an international transport hub and the Silk Road project revival? Absolutely right. On the instruction of the Head of State, Kazakhstan Temir Zholy company was selected the transport-logistics operator of the project. The goal is to unite overland, water transport and aviation and transform them into a world-level transport and logistics company. For this reason, transport and logistics assets were integrated to the holding functioning on the ground of KTZ. To date, the company ensures railroad and sea transportation of goods; it offers harbor, airport and logistics services. It serves also as a provider of terminal infrastructure for various transport vehicles. The company is actively developing new competences in partnership with such international operators, as Dubai Port World, Zurich Airport International and Swissport International. The company's strategy targets on the Eurasian market of transport-logistics services and reorientation of cargo flows from sea to overland routes via Kazakhstan territory. For this purpose the company is establishing international transport-logistics chains in alliance with the global and local participants of the market and offers integrated transport services successfully competing with the alternative proposals. KTZ has already started to form a network of terminals and logistics centers on the coasts of the Pacific and Indian oceans, Persian Gulf, Baltic and Black seas. The first external network logistics terminal was launched in China's Lianyungang Port in 2014. This is the main place of consolidation of cargo flows from/to Kazakhstan and a key transit port for cargo transshipment from/to the Central and South-Eastern Asia and domestic ports of China. The project has already proved its effectiveness: within January-June 2015 the terminal processed 142 thousand TEU (twenty-foot equivalent) units and stored 318 thousand tonnes of bulk cargo. By the end of this year we expect the volume of cargo will increase up to 250 thousand TEU units with further twice increase by 2020. Due to the availability of transportation by regular container trains crossing the territory of Kazakhstan at 1,119 km per day speed, we can strengthen our positions at the market of transit transportations and successfully compete with the global transport and logistics operators. Upon the purchase of sea bulk carriers the company could provide transportation services on the Caspian Sea integrated with railroad transportation and transshipment in Aktau port. The company plans to develop transportation on the water parts of the East-West and North-South transport corridors of the Caspian Sea and Indian Ocean water areas. We develop innovative transport-logistics decisions in mixed multi-modal communications ("railroad-sea" and "railroad - air") on a one-stop-shop principle ensuring also suitable "price-quality" proportion. Does the implementation of Nurly Zhol New Economic Policy impact such intensive development of Kazakhstan's transport-logistics infrastructure in recent years and new projects planned under this strategy? Yes, it does. Since we plan to increase the volumes of transit transportations up to 1 mln -1 mln 500 tonnes per year, we need appropriate development of main-line and terminal transport-logistics infrastructure of all types of vehicles in the Republic of Kazakhstan and its integration into the global network. The construction of the Western Europe-Western China trans-continental corridor is coming to an end. New railroad lines have already been built: Zhetygen-Korgas connecting Kazakhstan with China with the second border-crossing point; Uzen-Bolashak connecting Kazakhstan with Turkmenistan and Iran; Zhezkazgan-Beineu and Arkalyk-Shubarkol optimizing both internal and international routes in North-South and East-West directions. The construction of the three terminals for transshipment of general cargo, containers and grain will allow increasing transshipment volumes in Aktau port. Infrastructure development is a core point in the President's Nurly Zhol policy. This program provides for implementation of such projects as construction of second tracks on Almaty-Shu section; construction of Borzhakty-Yersai railroad line and a ferry complex in Kuryk village; development of "Horgos-Eastern Gates" Free Economic Zone logistics hub; and reconstruction of a passenger terminal at Astana International Airport on the threshold of EXPO-2017. The Infrastructure Development Plan provides for also development of highways on a radial principle: from Astana to the main directions: Center-East, Center - South, West and North. As per the above mentioned document, the reconstruction of more than 6 thousand km of highways is planned. KZT 2 trln 5 bln will be invested in this project in total. By the end of year we expect to repair about 600 km of roads. One more institutional reform is the commercialization of transport services and implementation of a fee-paid system on highways. For example, 211 kilometers of Astana-Borovoye section is functioning under this system. In 2014 the amount of the fees gathered made more than KZT 1 bln. Due to this measure, the number of road accidents on this highway lowered three times. By 2020 we plan to implement this fee-paid system on 7,000 kilometers of roads. In July, during the nationwide teleconference devoted to the Industrialization Day, President Nursultan Nazarbayev commissioned the first premium class transport-logistics center in Kazakhstan. What is its peculiarity? The premium class transport-logistics center of Astana, the largest one in Central Asia, sets strict requirements to the architecture of the warehouse, the width of spans, the height of storing shelves, the temperature, the location of storages as per transport multi-modality principle, plus strict fire safety regulations. The depots, equipment and vehicles meet the world's highest standards. The automation of infrastructure allows to maintain and observe the process online. The transport-logistics center meets also multi-modal transportation principle. Thus, goods are accepted and shipped from the railroad transport to trucks and vice-versa. Similar transport-logistics center will also be launched in Shymkent this year. In general, by 2020 we plan to open such transport-logistics centers in Aktobe, Uralsk, Atyrau, Kostanay, Pavlodar and Semey cities. A short time ago the Head of State proposed "100 concrete steps on five institutional reforms implementation", the Nation's Plan to join the club of thirty developed countries of the world amid new historical conditions. What measures are you going to take to realize the objectives set to your company? We should provide favorable "logistics climate" and institutional conditions for transcontinental transportations via Kazakhstan territory. For this purpose we have initiated some steps on improvement of regulatory-legal framework of mixed (combined, multi-modal) transportations. We offered to establish coordination committees (consortiums) within the transport corridors, to ensure the fulfillment of Kazakhstan's obligations on preliminary notification of customs bodies. We offered also to create a flexible tariff policy for railroad container transportations and provide tax preferential to the shipping companies as well as to improve the efficiency of the activity of the ports' marine administration. In general, the implementation of the projects on integration of Kazakhstan into the international transport-communication flows and establishment of a multi-modal transport corridor transiting cargo from Asia to Europe will give our country the following multiplicative benefits. First, the annual GDP growth will make 1%. Secondly, about 15000 new jobs will be created. And the third benefit is the increased transit transportations from 18 mln to 50 mln tonnes by 2030. The Head of State stressed the importance of integration of the two operators - KTZ and Air Astana under the 100 Concrete Steps Plan. How will it be realized? According to IATA reports, in 2014 the total volume of air cargo transportation in the world made 51 mln 300 thousand tonnes, 19.6% (10 mln tonnes) of which falls to Asia-Europe route. The volume cargo transit through Kazakhstan air space (23 thousand cargo flights in average) makes 1 mln 500 thousand tonnes per year, 90 thousand tonnes of which are handled in the country's airports. One should note here that almost all time-sensitive goods shipments are operated by foreign air freight companies. In this regard, one of the most promising decisions will be a multi-modal transportation (Rail-Air) through Kazakhstan. Last year we tested the Rail-Air scheme of goods shipment from China to Europe and offered "price-quality" suitable transport service. KTZ Express JSC jointly with Hewlett-Packard Company, DB Schenker logistics partner and KLM aircraft operator has launched a pilot project on shipment of cargo by Rail-Air scheme from Chungking to Amsterdam. KTZ Express used the specialized climate-control 45-foot containers for the shipment of expensive electronic equipment. The implementation of this project will ensure high speed of cargo delivery (9,900 km in 7 days) and reduction of transportation costs. KTZ targets on further increase of transportation volumes by Rail-Air system due to multi-modal decisions, competency building and purchase of own aircraft fleet. Currently KTZ JSC implements a Business Transformation Program initiated by JSC Samruk Kazyna National Welfare Fund. What does business transformation mean for you and what are its first results? Being guided by the best world practice we are transforming now the organization scheme of our activity (structures; administrative, production and secondary processes) and cultures through the development and change of the personnel's value system, technologies and modernization of production assets. Alongside, the operational model of KTZ aims at development of a rapidly growing business in the context of multimodal transportations based on traditional railway business of KTZ group of companies. We also plan to optimize freight transportation procedures, such as planning, sale, traffic management and maintenance of car- and train flows. For this we plan to implement the automated systems of management and transit from tonnage to point-to-point model of transportation. This method allows to offer more valuable transport product with a contract-based delivery time. The transformation in passenger transportation includes the improvement of ticket-sale processes, enlargement of high-speed sections, optimization of wagon turn-around, as well as reduction of non-productive expenses. Process automation and implementation of resource-saving technologies is also expected in infrastructure exploitation and maintenance. This measure is aimed at raising labour productivity. The company develops also its competences to meet modern requirements in such key indicators as service availability, safety, speed, quality, individual approach and competitiveness. Social programs, development of corporate culture as well as medical insurance are the important factors for the employees and their professional satisfaction. How do you assess the company's social policy and does KTZ perform all its obligations? The company follows the international principles of corporate management and social responsibility policy. KZT 11 bln 4 mln was allocated in total for the social programs in 2014, namely for benefits and funding various social programs (housing policy program, young specialists support, financial assistance and support of large families, single mothers, veterans, health safety programs etc. ) More than 3,000 flats have been allotted to our employees since 2008 under the housing development program.

In 2014 we raised the average monthly salary of the employees of KTZ group of companies up to KZT 134,000, while in 2008 it was KZT 70,000.

Presently, JSC NC KTZ has turned into a powerful division of railway machinery. Kazakhstan has established its own machine-building cluster from a scratch. Could you tell about the prospects of development of this sector?

The government gives top priority to the development of the country's transport infrastructure and railway machinery. High level of wear and tear of the company's production assets resulted in high demand for renovated rolling stock and infrastructure facilities. We decided to modernize the assets through own production launch. Thus, together with such world leading companies as General Electric, Alstom, Talgo and others we have built the plants on production of diesel freight and passenger locomotives, electric locomotives, wagons and large cars casting. To date, production output at these plants makes KZT 200 bln. 5,200 units of railways products are planned to be mastered soon while production localization is expected to reach 50% by 2017. First Kazakhstan rail track meeting the requirements of the EEU technical regulations will be produced at Aktobe Rail and Beam plant. The products of our plants are exported to the markets of the Eurasian continent. In recent years KTZ has put into operation high-speed passenger trains manufactured by Tulpar-Talgo plant, which allowed to shorten the distance between Kazakhstani cities. What are the company's plans on further development of passenger transportation? In order to improve the quality of passenger services we have launched the Program on high-Speed Passenger Communication Development aiming at twofold reduction of travelling time. High-speed passenger trains are running now by eight routes: Almaty-Petropavlovsk, Astana-Aktobe, Astana-Atyrau, Almaty-Atyrau, Almaty-Aktobe, Almaty-Ust Kamenogorsk,. Astana-Ust Kamenogorsk and Astana-Kyzylorda. In the second half of 2015 we plan to launch additional trains en Astana-Uralsk, Almaty-Aktobe and Astana- Ust Kamenogorsk routes. We have also taken measures on improving the quality of the services in long-distance and suburban trains. We modernize and renovate the rolling stock and launch new routes. We also improve conditions for the transportation of disabled persons. We implement the up-to-date forms of passenger service such as selling tickets online, ticket vending machines and transportation by an e-ticket. In November 2014 the company introduced a new flexible pricing system depending on supply and demand. Thank you for the interview!