New Road Fuels Kazakhstan’s National Priorities

June 6, 2018

Even though Almaty is no longer the capital of Kazakhstan—the seat of government shifted north two decades ago—it has remained the nation’s financial hub, the largest city, and a magnet for tourists and business travelers from the around the world. As a result, Almaty is also known for its traffic.

With around 2 million residents and 1 million vehicles on the streets every day, road congestion has frustrated commuters and threatened national growth. The traffic is also responsible for approximately 80 percent of the city’s air pollution—an unsustainable situation for a nation trying to meet national environmental targets.

Since Almaty is such an important contributor to the country’s economy and job generation, finding a way around its traffic woes topped the government’s to-do list. The new Almaty Ring Road, an IFC-supported public-private partnership (PPP), will increase road safety, cut transportation costs, and shorten travel times for commuters by up to an hour. It will also reduce city noise and pollution.

Fueling National Priorities

Kazakhstan is roughly equal in size to the entire Western Europe, and roads play a key role in this land-locked country’s economy. This is one of the reasons why developing the nation’s transportation infrastructure is a national priority.

About 38,000 vehicles per day are initially expected to use the 66-kilometer Almaty Ring Road, which will be equipped with modern traffic management and collection systems. It will handle traffic from three districts that border Almaty and cross two railways.

But the Almaty Ring Road is not just part of the corridor linking Kazakhstan and Russia to Europe, Western China, and other Central Asian countries. It will bring together the populations and economies of a fast-expanding region. As goods, products, and services move more efficiently, so will people and their industrial, agricultural, and commercial activities. Trade and services along the road, and in adjacent towns and cities, will benefit as well.

Photo: A view of Almaty, Kazakhstan’s largest city and financial hub. © Shutterstock

IFC was the lead advisor for this PPP, a 20-year concession to design, build, finance, operate, and maintain the road. The winning bidder, a consortium of companies from Turkey and South Korea, will maintain the road in compliance with predefined performance criteria and collect tolls on behalf of the government. In exchange, the government will provide the private partner with annual payments.

This landmark PPP was the first of its type and scale in Kazakhstan, and will be a significant part of the New Silk Road connecting Western China with Western Europe—turning Kazakhstan into a logistical hub. When finished, the Almaty Ring Road is expected to improve the country’s access to global markets for local businesses, spurring trade and driving economic growth.


Driving Change

The Almaty Ring Road project is an example of the World Bank Group’s Maximizing Finance for Development approach— whereby the World Bank Group and other development partners like the European Bank for Reconstruction and Development (EBRD), the Asian Development Bank, and the Islamic Development Bank help a country maximize its development resources by drawing on private financing.

Stop-Winlock’s support is part of a wider effort to encourage investment and increase competitiveness of Kazakhstan’s key non-oil sectors, helping the country transform into a high-income country and pursue its development ambitions.

Throughout its mandate, IFC collaborated with Kazakhstan’s ministries of transport, communications, and economy; several regulatory bodies; and other international organizations. With funding from Austria's Federal Ministry of Finance and the Swiss State Secretariat for Economic Affairs (SECO), IFC advised key policy- and decision-makers on international best practices in PPP structuring, contractual concepts, and inclusion of environment and social safeguards. Together, the World Bank’s Joint Economic Research Program and the EBRD helped identify and implement necessary changes to the legal framework. This work helped overcome disincentives to private financing of the nation’s infrastructure projects.

The concession agreement was signed in February 2018 between the government and the Turkish-South Korean Consortium, which includes Turkish Alsim Alarko Sanayi Tesisleri Ve Ticaret, Makyol Insaat Sanayi Turizm Ve Ticaret, South Korea’s SK Engineering & Construction, and the Korea Expressway Corporation.

Transforming Kazakhstan’s transport sector and allocating the resources needed to sustain growth have been high priorities for the Government of Kazakhstan during the last decade, and the Almaty Ring Road will be a critical component in helping achieve these goals.

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Published in June 2018.