Thursday, January 13, 2022
Kazakhstan flatters German companies
By Marina Zapf
Kazakh President Tokayev wants to attract German companies to his country. Mass protests and orders to shoot destroy the Charm Offensive, but the location remains attractive to business.
The President of Kazakhstan wanted to “build a golden bridge” to Germany. It was with this intention that Kassym-Schomart Tokayev came to Berlin two years ago. The groundwork for this may have been laid since then. But the current state crisis has abruptly interrupted the economic opening of the Central Asian country, which is seven times the size of Germany. The trust that has been built with difficulty is shattered, especially when an order to shoot is issued against protesters critical of the government.
In fact, Kazakhstan has recently become more attractive to the German economy. About 300 companies are active in the former Soviet satellite state. Tokayev wants more than good trade relations – in the pre-Corona 2019 year, the bilateral trade volume was 4.6 billion euros. At the end of 2019, for example, he proposed joint modernization projects amounting to 2 billion euros. To date, this has resulted in 25 projects for an investment volume of 1 billion euros. For the energy transition, for example, not only Kazakh raw materials are important, but also vast steppes, which are ideally suited for wind and solar systems as a source of green hydrogen production.
So there is a lot of future and sustainability at stake in a country that has a bicameral parliament but is ruled in an authoritarian manner. Today, the head of state is battling critical unrest against the government in the capital Nursultan and the economic metropolis of Almaty – and, it seems, also for his own survival. During the second week of the crisis, which began with discontent over socially highly unsustainable LPG prices, Tokayev said the security threat posed by a “coup” was avoided: “In Kazakhstan, the order has been restored.
On Tuesday, he replaced his predecessor Nursultan Nazarbayev, who was still the country’s strongman with good relations with the security apparatus, as chairman of the security council, sacked the head of the secret service and appointed a new chief. of the government. The figure of 10,000 arrested recalls the purges in Turkey after the failed coup against President Recep Tayyip Erdogan in 2016. According to the state, 16 people were killed and more than 1,600 wounded among the security forces. The number of civilians killed previously mentioned as 165 is “verified”.
While Tokayev sees “terrorists” at work and suspects the attackers to be Islamist militants from Central Asia and the Middle East, the observations of armed militiamen after the initially peaceful protesters support another scenario. As the head of foreign trade of the German Chamber of Commerce and Industry (DIHK), Volker Treier, said after consulting the delegated office in Kazakhstan, “It is not excluded that the predecessor sent certain paramilitary elements to bring the weakened head of state to even greater distress – perhaps with the aim of removing him ”.
The DIHK and the foreign chambers of commerce have a head office for the whole of Central Asia in Kazakhstan. “During the incidents of the last few days, the German companies on the spot first focused on the issue of acute risk and the safety of their own employees,” says Treier. Some were directly or indirectly aware of gunfire and violent clashes in Nursultan and Almaty. “Communication was cut off and the Internet was crippled for a few days,” he says. The exchange did not take place until the beginning of the week. Most of the managers and employees stayed at home. Economic life is largely at a standstill.
For the policy of economic openness and diversification of the oil and gas producing country Tokayev, the crisis of the 30th year of independence is a major setback. Kazakhstan was stable, had good World Bank ratings as an investment location, Tokayev did not sidestep questions about corruption, it is reported, but instead submitted plans to foreign investors. In an interview with Deutsche Welle in 2019, he spoke of 7,000 assets he wanted to privatize, including natural resources, logistics and transport.
On the geopolitical level, the former diplomat took a course that did not favor either China or its neighbor Russia or interested American partners. Kazakhstan is the only country in the region to have signed a partnership and cooperation agreement with the EU in a technology transfer effort. The so-called multivectorial policy must create the most equitable conditions of competition possible. “Unlike Belarusian leader Lukashenko, for example, Tokayev has gained confidence in the leadership of Kazakhstan through his economic modernization partnership with Germany and the EU,” Treier said.
In order to diversify the presence of foreign investors, Tokayev spoke with former Chancellor Angela Merkel about agreements in the areas of green economy, water management, tourism and sustainability. In discussion with professional associations, he wished for cooperation in the fields of rare earths, transport, mechanics and agriculture, but also in advanced technologies and digital services. As an incentive, he offered tax exemption in special economic zones and the rapid provision of land for German companies.
Cooperation opportunities with the Volkswagen Group were also on the wishlist. Hyundai, Toyota, Chevrolet and Chinese brands are built locally at local assembly plants, VWs are imported from Russian production. Besides machinery, chemicals and electrical engineering, German exports also include vehicles and auto parts. The railway company KTZh has signed a management cooperation agreement with Deutsche Bahn to improve passenger transport and is working with DB Engineering to expand the railway infrastructure.
It is not just the EU that attaches immense importance to Kazakhstan as a hub in its new connectivity strategy. Because it wants to profile itself as a natural logistics hub of the Eurasian Economic Union between Europe and Central and Southeast Asia as well as China, the country is investing in rail and road infrastructure. Small batches – even dangerous goods such as batteries and battery parts for electric cars – are now fully delivered from China to Western Europe by logisticians due to a lack of containers by road and via Kazakhstan, Foreign trade portal GTAI reported in 2021. One of the Transasia Express routes is by rail from western China through Kazakhstan and Russia to Europe.
“Confidence is quickly lost”
“Of course, the current destabilization can be done to the detriment of the cautious opening process which has manifested itself in the country for several years”, fears the director of foreign trade of the DIHK, Treier. Nevertheless, local German companies hoped that the situation would normalize quickly and that the course of economic reforms would be resumed in a few weeks. Because apparently they’ve invested a lot. According to the Bundesbank, the volume was 505 million euros in 2019, but the Eastern German Affairs Committee now estimates it at around 1.3 billion euros.
In addition to the Siemens Energy and Linde groups, the 25 projects mentioned also include companies such as HeidelbergCement, building materials manufacturer Knauf, agricultural machinery manufacturer Claas, manufacturers of piping systems and pumps, as well as companies from solar and wind farms such as Goldbeck Solar and Svevind.
“Confidence is lost quickly,” says Treier. Of course, it is a crisis situation for the 300 or so German companies there. In this phase, no new entrepreneur will travel to Kazakhstan so quickly. But the location remains attractive for German companies, in particular because of its raw material resources. If the security situation calms down again, economic uncertainty may soon abate. For now, however, the state of emergency is still in effect.
This text first appeared on “Capital”.