China and Kazakhstan have signed many agreements for the Belt and Road Initiative but tangible projects have yet to materialise. Chinese investors blame red tape, while Kazakhs express concern over land reforms and the environment, as Nikkei Asian Review contributing writer Naubet Bisenov reports.

Xi Jinping and Nursultan Nazarbayev

Xi Jinping and Kazakh president Nursultan Nazarbayev

China’s president, Xi Jinping, chose the Kazakh capital of Astana to announce his grand plan for a “new Silk Road” in September 2013. Nearly five years later, the investment push ­– now known as the Belt and Road Initiative (BRI) – has produced plenty of announcements, but not much new business for the central Asian nation.

According to the Kazakh government, the two countries have drafted 51 BRI projects totalling $27bn in the chemical, mining, infrastructure, energy and agriculture sectors to be carried out by Chinese investors in Kazakhstan between 2016 and 2022. Some projects envisage moving industrial enterprises from China to Kazakhstan, but so far few details of such relocations have been released.

“The BRI’s impact on the Kazakh economy is limited at the moment because there has not yet been significant investment in specific projects. It has only been intention in the form of memoranda signed,” says Kassymkhan Kapparov, director at the Almaty-based Bureau for Economic Research. “The investment supposed to come from the newly established Asian Infrastructure Investment Bank has not materialised yet and we don’t see new production facilities appearing in Kazakhstan.”

Chinese commercial banks accounted for a mere 0.3% of total loans in Kazakhstan in 2017, according to a study by think tank The situation may change, however, when Kazakhstan’s Halyk Bank finalises the sale of a 60% stake in its subsidiary Altyn Bank to China Citic Bank and China Shuangwei Investment.

Kazakhstan overview

Different perspectives

Ahead of a state visit to Kazakhstan in June 2017, Mr Xi said in an article that China’s investment in the Kazakh economy had exceeded $42.8bn. But this figure included railway and pipeline projects carried out by Kazakhstan before the announcement of the BRI initiative. 

Some $10bn of Chinese loans were granted in 2009 as part of an agreement with Kazakhstan that allowed Chinese state companies to hold a large stake in the Kashagan oil project. The funds financed a gas pipeline, completed in 2015, from the landlocked country’s west to its population centres in the south.

Only a few months after Mr Xi’s article, Chinese investors operating in the country complained that red tape and problems with bringing Chinese staff to Kazakhstan were major obstacles to developing business. As a result, only a handful of projects have been implemented, despite a package of government perks such as the reimbursement of up to 30% of investment and tax exemptions. The Chinese businessmen said they did not know a single investor who had obtained these incentives since being enshrined in legislation three years ago.

Local sentiment

Despite the Kazakh government’s enthusiasm about bringing Chinese investment to the country, there is significant anti-Chinese sentiment among many Kazakhs who have seen no real benefits from the relationship and fear Chinese labour and environmental standards. Kazakhstan’s significant infrastructure investment has yet to translate into tangible benefits for the population, especially after the raw materials-based economy was badly hit by the latest slump in global commodity prices.

In 2016, Kazakhstan was engulfed by a wave of protests against proposed land reforms, which the population feared would encourage Chinese expansion into the country. As a face-saving gesture, president Nursultan Nazarbayev postponed the reforms, which would permit foreigners to lease farmland for 25 years – up from the current 10.

“The protests against the land reforms were caused by the population’s concerns over potential government corruption in distributing farmland,” says Mr Kapparov. He adds that agriculture, namely animal breeding, generates great interest from Chinese investors – reflecting China’s rising consumption of protein, and beef in particular.

The Kazakh government hopes BRI projects will bring production facilities to the country that will become part of Chinese companies’ global production chains. But so far there is no evidence that this will happen, according to Luca Anceschi, lecturer in central Asian studies at the University of Glasgow. “The government, insisting with its rhetoric of presenting Kazakhstan as a bridge between East and West, has merely reduced Kazakh territory to a conduit for goods produced elsewhere and bound for other markets,” he says.


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