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Economic cooperation between India and Kazakhstan. Unrealized potential of partnership.

22 June 2014
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Since February, 23, 1992 when diplomatic relations between India and Kazakhstan were established, close cooperation in many fields have been proceeding. Since January, 24, 2009 our relations have been characterized by the level of strategic partnership. Taking into account the global processes occuring in the modern world, the special attention should be paid on bilateral cooperation and economic interaction. Economy is a key to development of international relations.

Kazakhstan is rich in mineral resources; it is the largest trading partner of India in the Central Asia. The most perspective spheres of bilateral cooperation are the power, manufacturing sector, metallurgy, agriculture, petrochemistry, pharmaceutics, IT-technologies, tourism, science, technical and military — technical cooperation, bank sector and other spheres of economy. Our country is interested in expansion of the Indian business presence in the economy of Kazakhstan. First of all, it concerns the branch of high technologies.

Our Government is aimed to diversify cooperation in energy sphere. The deepening interaction with India carries huge potential in this area; it is perceived mutually advantageous. The Republic of Kazakhstan adheres to a multivector policy. Today its basic directions include cooperation with Russia, the USA, the EU and the PRC. We welcome, promote and hope, India became the fifth vector in our policy. With respect to strong regional leader status of India, and also its growing global influence, activity on this direction is the wise decision.

On the Kazakhstan’s territory there are deposits of 99 elements of the Periodic table. It opens a huge field for cooperation in a raw sector. Taking into account, that bilateral trade between Kazakhstan and China compounds 25 billion dollars (predicting growth up to 40 billion dollars by 2015), on this background 600 million dollars trade level between India and Kazakhstan is inadequate and modest.

India is one of the largest importers of power resources, in view of growing economy, internal demand for energy carriers in India will grow. According to nongovernmental sources, up to 50% of Kazakhstan’s oil-and-gas sector belongs to Chinese companies in this respect, purchasing by ONGC Videsh Limited 25% share in project «Satpayev» has got significant support in Kazakhstan. Moreover, ONGC Videsh Limited has expressed desire to acquire share of ConocoPhilips (8,4%) in the largest project «Kashagan».

The similar situation is observed in the sphere of nuclear power. Kazakhstan is the second richest state in the world on uranium explored reserves. But almost all export of this resource flows in China, providing growth of its nuclear power industry. India plans to increase fivefold energy production by nuclear power plants (NPPs), achievement of this aim needs nuclear fuel. India requires up to 8 thousand tons of uranium annually, according to expert forecast, demand of the country for nuclear fuel will increase tenfold by 2020. Thus, obligation of Kazakhstan to supply two thousand tons of uranium to India till 2014 within the framework of the Agreement on cooperation in the sphere of peaceful use of nuclear energy possessing great importance for both sides. But, it is obvious that the potential of cooperation in the field of nuclear power is not fully realized. In fact, deliveries of a uranium concentrate from Kazakhstan to China compound more than 25 thousand tons. Considering, that Kazakhstan plans to build nuclear power plant, cooperation with India in this area possesses great prospects.

Bilateral cooperation in financial sphere is also conducted. For example, Punjab National Bank has a control share holding Kazakhstan «Danabank». The competition in bank sector always was the positive factor for economic development. Expansion of Punjab National Bank’s activity on the Kazakhstan financial market would have mutual advantage for both parties.

The joint space exploration is another potential direction for cooperation. In 2004 our Government initiated the program of space exploration; it is known that Indian space program is strong enough and able to give Kazakhstan necessary knowledge and technologies. Recently India became one of the most promising global leaders in the field of the space industry where three powers (the USA, Russia and China) appreciably lead.

Cooperation in pharmaceutics sphere also represents the great interest for Kazakhstan. India is the second largest manufacturer of medicines, and Kazakhstan imports medicines for the amount over half billion dollars. The joint venture is already functioning in the south of Kazakhstan.

IT-technologies are the most actual branch of cooperation. Indian companies such as 3i-Infotech, Tata Consultancy Services, NIIT, Larsen and Toubro, Punj LLoyd are represented in Kazakhstan. The Memorandum of mutual understanding between the Indian and Kazakhstan groups of rapid response to infringement of computer security was signed to establish cooperation in the field of cyber-security. India is the world leading developer of computer programs; Kazakhstan needs technological know-how for creation of innovative economy.

Furthermore, it is necessary to pay attention to multilateral cooperation within the framework of such international platforms as the SCO (Shanghai Cooperation Organisation), the CICA (Conference on Interaction and Confidence-Building Measures in Asia). Astana also appreciates support of India in the accession of our Republic to the WTO (World Trade Organisation). Membership of Kazakhstan in the Customs Union opens attractive prospects for transit of Indian goods. The transit potential of our state which is located in the center of Eurasia, could open new markets for Indian business. Considering the aforesaid, we underline the necessity of the transport corridor project «North — South» development.

Thus, priority directions in our relations should become:

  • Mining industry. Development of cooperation in this way is mutually advantageous, because Kazakhstan is capable to give India necessary resources of hydrocarbonic raw, and India is able to make Kazakhstan assistance in development of refining industry;
  • Power industry. Our land is rich in the uranium which is necessary for functioning Indian nuclear power plants. Moreover, India could assist us in realization of the project on construction of the nuclear power plant in West Kazakhstan; we are also interested in cooperation on production of nuclear fuel for NPP. Indian alternative power industry possess rich experience, green energy production from clean sources represents great interest for our country, it is especially actual in view of the tasks, which were put within the framework of EXPO-2017 carrying out in Astana;
  • Non-commodity cooperation, especially in the field of high technologies. Cooperation with India can help Kazakhstan to diversify its economy. In particular, the most perspective spheres for joint projects are computer technics, information technologies, outer space exploration, biotechnologies, telecommunications, chemical industry and construction;
  • Agricultural sector. Considering, that deficiency of the foodstuffs accrues worldwide, it is expedient to create the joint agricultural enterprises of a full cycle, to develop and optimize means and methods with the purpose to increase efficiency;
  • Social sphere. Kazakhstan pursues an active social policy. Our Government has emphasized the importance of education and public health services. The Indian science is one of the leading, the Indian medicine and pharmaceutics also have obtained a global recognition. Hence, the Indian experience and knowledge possess great value for development of our country. It is necessary to create the Indian medicine centers in Kazakhstan, to develop joint scientific and educational programs (on a sample of the Indian Technical and Economic Cooperation (ITEC)).

There are some obstacles on a way of bilateral trade and economic relations’ intensification.

  • The main problem is logistics. Distance between our countries is relatively small, it can be overcome in three and a half hours on a plane, which is comparable with Russia and China, but trade with India doesn’t reach the proper level. We believe that the main obstacle in trade relations is a problem of transportation. Because of the inconvenient transport route, runs through China or Iran’s port Banderabas the logistic transforms the Indian export to Kazakhstan into uncompetitive goods. Thus, the cost of shipping a container from India to Kazakhstan through China is 6500 dollars; through Iran delivery cost is same but the time is delayed up to 2 months, it is also reflects on quality of products, especially food. Transport problems have reflection even in human exchanges between the two countries. For example, the direct aircraft service does not exist between Astana and New Delhi; you have to get one or two transfers. As result flight takes 11 or 15 hours.
  • Instability in Afghanistan and Pakistan also obstructs the traffic flow.
  • Another obstacle for India is the economic competition with Russia and China.
  • The existing base of bilateral agreements on branches of cooperation is insufficient.
  • Finally, the excessive caution of Kazakh and Indian business community also prevents the development of economic cooperation. It is of the reasons explaining low level of mutual investment flows.

So, what have we undertake first of all to intensify economic cooperation between our countries?

  • Develop transport corridors within the framework of the «North-South» project to solve the logistical problems. Or, if there was an agreement between Pakistan and India on the transit of Indian goods through the Pakistani Karakorum Highway and further to China and to Kazakhstan (this route has been successfully approved by Pakistan), the flow of Indian goods to Kazakhstan would be much larger and competitive.
  • Expand a share of Indian companies in development of oil-and-gas deposits of the Caspian Sea.
  • Work together to solve the problems of oil transportation infrastructure.
  • Intensify cooperation in the development of peaceful nuclear energy.
  • Promote cooperation on the level of small and medium businesses.
  • Involve Indian companies in Kazakhstan’s financial market and vice versa.
  • Increase the level of confidence-building measures for the Indian business in Kazakhstan.
  • Develop the bilateral legal framework for industry collaboration.

Relations between India and Kazakhstan have a steady trend for further strengthening and expansion. India is an important participant in the implementation of such significant initiatives of N. Nazarbayev, as the CICA and the Congress of Leaders of World and Traditional Religions. But, economic relations should be a basis of bilateral cooperation. Kazak-Indian Business Council has already been operating for nearly 19 years making efforts in this direction. Kazakhstan regularly hosts Kazakhstan-India business forums, exhibitions, fairs, etc. Mittal Steel Temirtau is an example of successful economic cooperation between our countries; the company has been operating in Kazakhstan since mid-1996.

Our governments signed the Joint Plan of action on development of strategic partnership «Road map». We hope that its implementation will intensify cooperation between our countries.

Makubayev Yu.

Master of Humanitarian Sciences

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