Murat Baimukhanbetov. Status and Prospects of Creating Dry Port in Khorgos – Eastern Gates SEZ

Murat BAIMUKHANBETOV,

CEO of Khorgos – Eastern Gates

Special Economic Zone (SEZ)

Status and Prospects of Creating Dry Port in Khorgos – Eastern Gates SEZ

Trans-loading of containers at Khorgos – Eastern Gates SEZ

The Khorgos – Eastern Gates Special Economic Zone (SEZ) is part of the territory of the Republic of Kazakhstan with defined boundaries which is subject to the special legal regime of a special economic zone for implementation of priority activities (Law of RoK “On special economic zones of the Republic of Kazakhstan" No. 469-IV dated July 21, 2011).

Khorgos – Eastern Gates SEZ is considered as a strategic facility to create a logistics hub connecting China, Central Asia, the Middle East and Europe.

The total area of the SEZ is 4,591.5 hectares that includes three main areas: logistics and industrial zones, as well as dry port transport and logistics facility.

In November 2016, the basic infrastructure of Khorgos – Eastern Gates SEZ was put into operation (warehouses, office building, shopping areas, etc., in general, 108 facilities). The construction cost of the infrastructure amounted to 36.8 billion tenge (US$101.9 million). Since commissioning, the total amount of disbursed private investments has reached about 40 billion tenge (US$101.8 million).

The dry port is a key element of the SEZ and ensures its connection with the Altynkol station, whose main task is to maintain the Khorgos International Centre of Boundary Cooperation.

The dry port is based on the same principle as any seaport, except the goods in containers are delivered not by ferries, but by trains. The containers are unloaded, stored and sent in different directions. They are delivered to different train platforms from China and then they are trans-loaded onto the Kazakh platforms or road transport, which carry the cargo onto Kazakhstan, Russia, Central Asia and Europe.

In the logistics area of the port, logistics companies or producers of goods build warehouses. The SEZ stores containers with goods – clothing, electronics, construction materials and other goods arriving from the dry port, which are then distributed by road transport to the destinations in accordance with the instructions of the customer.

In the industrial zone, we carry out construction and installation works of industrial facilities. The delivered commodities, materials, spare parts, components and semi-finished products for production of finished products are exempt from the payment of customs duties. Finished products to be sold in the countries of the Eurasian Economic Union (EAEU) are not subject to duties in the event of conclusion of a special investment contract (SIC) with the Ministry for Investment and Development of Kazakhstan; if the finished products have a foreign component, SEZ participants are exempt from the import duties in the EAEU for the sale of these products. This is a perfect solution for manufacturers who are planning the sale of products on the EAEU market. Kazakhstan also gets benefits in the form of new jobs and significant expansion of the domestic market.

Khorgos – Eastern Gates SEZ JSC has identified the following priority activities:

-warehousing and auxiliary transport activities;

-food production;

-manufacturing of leather and related products;

-manufacturing of textiles;

-manufacturing of non-metal mineral products;

-manufacturing of chemicals and chemical products;

-manufacturing of fabricated metal products, except machinery and equipment;

-manufacturing of machinery and equipment not included in other categories;

-construction and commissioning of facilities designed specifically for implementation of priority activities;

-construction of buildings for exhibitions and museums, as well as warehousing and administrative offices.

An important task for Khorgos – Eastern Gates SEZ is attracting investors and investments. To date, the investment portfolio includes 14 projects with schedules of implementation until 2023 with a total value of 485 billion tenge (US$1.3 billion). This year, there are plans to master investments totaling more than 58 billion tenge (US$160.7 million) and to commission five trading and investment projects of our partners: East Gate Partners, Hubei Kelison, KIF Warehouses, Phoenix Feed Mills and Zarya Ltd.

It is safe to say that Khorgos – Eastern Gates SEZ is one of the most interesting and successful special economic zones operating in the territory of our country. This is achieved by a number of factors.

The first factor is strategic location. Being in the heart of the Great Silk Road, Khorgos – Eastern Gates SEZ plays a key role in the implementation of the plan for cooperation and convergence of the Nurly Zhol New Economic Policy and construction of the Silk Road Economic Belt between the Government of the Republic of Kazakhstan and the Government of the People's Republic of China. Today, the path from east to west via Khorgos is the shortest and quickest; the goods sent from China to Europe and from Europe to China can be delivered within 15 days by the New Silk Road.

The second factor is multimodality. Participants of the SEZ, in addition to the delivery of goods by rail to the dry port, use the Western Europe – Western China highway, which passes through the SEZ. For example, the cargo can be delivered on the territory of the SEZ by rail and transhipped onto trucks or vice versa and then sent to its destination.

The third factor is the preferences and privileges that the Government provides to participants of the SEZ. Namely:

-exemption from land tax;

-exemption from property tax;

-exemption from corporate income tax;

-free rent of land plots for SEZ participants through 2035;

-exemption from value added tax if the goods sold are consumed by SEZ participants;

-exemption from customs duties. In the case of signing the special investment contract, imported raw materials in finished products are also exempt from customs duties.

Within the widespread digitalisation of the markets, we have created an information system called NOMAD, which has no analogues in the country. NOMAD is a transparent electronic control and data collection system for all participants of the process, which prevents corruption.

The main function of NOMAD is to ensure communication between all stakeholders and automating daily business processes in the SEZ. In fact, it is an electronic reflection of the SEZ. All participants in the logistics process work and interact within this platform.

NOMAD reads the information when the transport enters and then collects all the information on the route and, in the end, creates an electronic log for the customs service with data on the size and weight of the vehicle, radiation monitoring, etc. We take steps these steps to be integrated into the global ports system. This is to ensure a safe supply chain and solving problems in transport delays at borders through the active introduction of green customs technologies based on the electronic document flow.

NOMAD is the only system in the country that allows simplifying and accelerating the work of all SEZ participants and participants of the logistics process, improving the performance of checkpoints and saving time in the delivery of services for the import of goods. The system also facilitates the automation of business processes; the inspection time has been reduced from 24 hours to 30 minutes.

The Agreement signed with Dubai Trade provides for integration of NOMAD into the information port community system, which brings together participants in the international supply chain and is represented in 77 terminals across six continents of the world (ports, terminals, shipping and transport companies). It is important to note that NOMAD has been fully developed by employees of Khorgos – Eastern Gates SEZ.

On June 15, 2017, on the margins of the Astana Economic Forum, we signed a Memorandum between Kazakhstan Temir Zholy National Company JSC, the State Revenue Committee of the Ministry of Finance and DP World on the implementation of a port community system called Kazakh Trade in Kazakhstan. DP World is one of the world's largest port operators and the main consultant of Khorgos – Eastern Gates SEZ.

The port community system is an electronic platform which connects the multiple systems operated by various organisations engaged in foreign trade. Participants engaged in foreign economic activity related to the receipt of goods will no longer need to go through bureaucratic procedures – physical visits to all regulatory bodies, including the sanitary, veterinary, border and customs services, etc.

Today, we are working on the creation of a joint venture between Khorgos – Eastern Gates SEZ and Dubai Trade. The purpose of the new joint venture is to ensure implementation and subsequent operation of the Kazakh Trade port community system in Kazakhstan. The total amount of the initial investment is $8.4 million and we will create additional jobs with preference for domestic experts.

In the first stage, there are plans to introduce this system in Khorgos – Eastern Gates SEZ in the Dostyk station and in the Aktau seaport on the Caspian Sea, thereby creating a transport corridor between the eastern and western gates of Kazakhstan to ensure the unhindered flow of transport and goods. Further, there are plans to integrate other transport centres of our country and to provide access to the international level with the accession of Kazakhstan to the International Port Community System Association, connecting eastern and western countries of Eurasia.

This year, the SEZ will additionally create over 200 permanent jobs. By 2023, there are plans to create more than 3,000 permanent jobs; by 2030, more than 10,000.

Development of transport infrastructure and transit-transport routes through Kazakhstan from west to east and back is of strategic importance for our country in both political and economic dimensions and determines our competitiveness in the international arena. According to the published research on the LPI (Logistics Performance Index) index of the World Bank, considering the ease of supply of goods and the state of trade logistics at the national and international levels, Kazakhstan has improved its position in logistics and has taken 71st place among 160 countries in 2018, moving up by six positions in comparison with 2016.

Created at : 14.09.2018, 17:30, Updated at : 14.09.2018, 17:30