Once a part of the same monstrous Soviet economy, Ukraine and Kazakhstan as independent nations have retained strong economic ties with each other. Kazakhstan remains Ukraine’s third trade partner in the Commonwealth of Independent States, an association of some post-Soviet states.
Kazakhstan’s sales turnover with Ukraine reached $5.5 billion in 2012, double the 2010 level, while Kazakhstan’s investment in Ukraine reached $792 million in 2012.
Kazakhstan’s macroeconomic figures are in some ways superior to those in Ukraine. The nation with 17 million people had a gross domestic product of $200 billion in 2012 while Ukraine, with its 45 million people, had GDP of $176 billion in the same year.
The 2012-2013 Global Competitiveness Report produced by the World Economic Forum places Kazakhstan 51st on it list of 144 nations, with Ukraine trailing in the 73rd spot. Moreover, Kazakhstan has been clawing its way up the World Bank Doing Business ranking to the 49th place in 2013 while Ukraine sits near he bottom at 137th among 185 countries.
But despite poor business rankings in Ukraine, there are plenty of Kazakh companies venturing into the Ukrainian market.
Air Astana, Kazakhstan’s leading airline with $870 million in profits last year from its global operation, kicked off its operation in Ukraine in April. It launched direct flights from Kyiv to Almaty and Astana with good connections to many Asian and European countries. Prices start from $350 for a return trip.
“We’re the only company (operating in) CIS countries and Central Asia which is honored with four stars,” says Sergali Amirbekov, country manager of Air Astana in Ukraine. The high rating came from Skytrax, which reviews more than 681 airlines and 728 airports across the world and has put Air Astana on the list of four-star companies in 2012 alongside giants like British Airways and Air France.
Skytrax measures services on board and in airports as well as the quality of meals and planes. Five-star companies number only seven and all of them are Asian, Amirbekov says. His company’s flying stock is one of its great advantages, according to Amirbekov. It features Western-made aircraft Boeing, Embraer and Airbus no older than 5-6 years old.
Before Air Astana came, Ukraine International Airlines was the only company that offered direct flights to Kazakhstan from Ukraine. There were also just a few companies like Aeroflot, Turkish Airlines and Turkmenistan Airlines offering distant flights to Asian countries, after AeroSvit, Ukraine’s biggest airline, went bankrupt.
“We’re happy with passenger flow both on direct and transfer flights,” Amirbekov says, adding that average occupancy is about 70 percent. “If the occupancy is higher than 60 percent, then the company is profitable.”
Kazakhstan Temir Zholy, the national railway carrier, also has business interests in Ukraine. The company, one of the largest in Kazakhstan, employing close to 1 percent of the population, is one of the biggest clients of Ukraine’s monstrous metallurgy and heavy machinery industry.
These two sectors account for a major share of Ukraine’s exports to Kazakhstan, almost 50 percent, or about $1.5 billion in 2012.
Kazakhstan Temir Zholy has been operating a representative office in Ukraine since 2005, which has helped it supervise transportation of gas, oil, grain and iron ore to Ukraine and through Ukraine to Europe as well Kazakhstan’s imports via and from Ukraine.
“(In Ukraine) there are industries that have analogues neither in former Soviet Union nor in the world,” says Gaidar Abdikerimov, head of the railway’s representative office in the European part of the CIS. “We used to buy a lot of machinery (carriages, rail tracks and sleepers) here in (Soviet times) as our machinery industry wasn’t developed at that time and keep doing it now.”
The company has been buying around 5,000 carriages every year at about $85,000 each, according to Abdikerimov. Its major suppliers are Kriukiv Railcar plant, Azovelektrostal, Stryiskiy, Zaporizkyi and Dnipropetrovskyi plants.
But Kazakhstan has made an effort to wean itself off Ukraine’s suppliers since 2012, when several car building facilities were opened in the country, according to Abdikerimov.
Ukraine remains one of Kazakhstan’s biggest transit partners due to geography. Kazakhstan has no access to the sea, so 13 million tons of its cargo goes through Ukraine, according to Abdikerimov. By comparison, Ukraine’s northern neighbor Belarus ships 2 million tons of its cargo through Ukraine.
“Ukraine is unique in terms of its location. It has access to the sea and European Union, which Kazakhstan lacks,” Abdikerimov says. “This is a big problem for us. So we’re actively using transit potential of Ukraine.”
Kyiv Post staff writer Anastasia Forina can be reached at [email protected]
