China's ambitious new 'port': Landlocked Kazakhstan

Work underway at the Khorgos Gateway dry port, where China is building a rail hub and town in a Kazakh desert. The gateway gambit is not only reshuffling global transport routes, but also shaking up Kazakh and global politics as China inserts itself
Work underway at the Khorgos Gateway dry port, where China is building a rail hub and town in a Kazakh desert. The gateway gambit is not only reshuffling global transport routes, but also shaking up Kazakh and global politics as China inserts itself deeper into a region that Russia considers squarely within its area of influence.PHOTOS: NYTIMES
Children heading to school in Nurkent, a town near the Khorgos Gateway in Kazakhstan. The town was built to house workers and officials working on the gateway, part of China's Belt and Road Initiative.
Children heading to school in Nurkent, a town near the Khorgos Gateway in Kazakhstan. The town was built to house workers and officials working on the gateway, part of China's Belt and Road Initiative.

KHORGOS (Kazakhstan) • China's largest shipping company has poured billions into buying seaports in Greece and other maritime nations, but the location of its latest foreign investment has given a curious twist to the expanding ambitions of the China Ocean Shipping Co - the nearest ocean is more than 2,570km away.

The state-owned Chinese shipping giant, known as Cosco, became the 49 per cent owner last year of a patch of frost-covered asphalt bisected by railway tracks and lined with warehouses in Kazakhstan - close to the border with China and near the Eurasian Pole of Inaccessibility, meaning nowhere on the landmass of Europe and Asia is more distant from the sea.

But it is here, where huge Chinese-made cranes load containers onto trains instead of ships, that China and Kazakhstan are embracing what they see as the new frontier of global commerce.

The place is a central link in Chinese President Xi Jinping's US$1 trillion (S$1.3 trillion) Belt and Road Initiative, which aims to revive the ancient Silk Road and build up other trading routes between Asia and Europe to pump Chinese products to foreign markets.

The gamble is not only reshuffling global transport routes, but also shaking up Kazakh and global politics as China inserts itself deeper into a region that Russia considers within its area of influence.

Not least, it is testing the economic logic of China's ability to carry out its grandest of ambitions.

GOOD ODDS

Businessmen count their money. If they invest money here, they know that in five or 10 years they will get their money back with a profit.

MR ZHASLAN KHAMZIN, chief executive of the company operating the dry port with help from DP World of Dubai, on prospects for the Khorgos Gateway.

Creating a transport hub - the Khorgos Gateway, a "dry port", or terminal without water for handling cargo for trains rather than ships - in one of the world's most remote places has involved an expensive exercise in social engineering.

A new town, Nurkent, has been built from scratch - with apartment blocks, a school, kindergarten and shops to serve the railway workers, and crane operators, Customs officials and other staff needed to keep the dry port running.

Free housing is provided. The town has only about 1,200 residents, but there are plans to expand it for more than 100,000.

Mr Zhaslan Khamzin, chief executive of the company operating the dry port with help from DP World of Dubai, acknowledged that the place seemed inhospitable but still described it as an "oasis".

"Businessmen count their money. If they invest money here, they know that in five or 10 years they will get their money back with a profit," he said.

It was President, Nursultan Nazarbayev, Kazakhstan's sole ruler since the country broke from the imploding Soviet Union, who first proposed reviving old Silk Road trade routes.

The idea was later expanded by Mr Xi, in a 2013 speech in Kazakhstan's capital Astana, and figured prominently in his speech to an October party congress in Beijing.

It takes 45 to 50 days to send goods from China's factories to Europe by sea, but less than half that time by train through Central Asia.

Transporting a shipping container overland costs about 10 times as much as by sea, but it is quite speedy and still much cheaper than airfreight - making it an attractive option for high-value, Chinese-made goods like computers, which need to get to market quickly.

To keep the trains running and encourage manufacturers to build factories in less developed areas, local governments in western China and elsewhere offer hefty subsidies that cut the cost of transporting a container by train by 30 to 40 per cent.

Jittery about Chinese ambitions but anxious about being left out, Russia has both helped and hindered the project.

Russian President Vladimir Putin gave a big boost to what China calls the "Silk Road economic belt" by pushing to establish the Eurasian Economic Union, a Russian answer to the European Union.

Starting in 2015, Mr Putin's union has allowed cargo trains and trucks from Kazakhstan to pass into Russia without laborious Customs checks.

At the same time, Russia put up a serious obstacle when, in retaliation for Western sanctions over its 2014 annexation of Crimea, Moscow banned the import to and even transit through Russia of many European goods, particularly food.

Mr Khamzin said this problem, though initially serious, was now easing as Russia lifts transit restrictions on various European products, including wine and meat.

Building a business amid such shifting political and economic sands, Mr Khamzin said, is a gamble. But, he added: "If you don't take risks, you won't drink champagne."

NYTIMES

A version of this article appeared in the print edition of The Straits Times on January 03, 2018, with the headline 'China's ambitious new 'port': Landlocked Kazakhstan'. Print Edition | Subscribe