Last year,
you celebrated the 10th Anniversary of China-Kazakhstan
Diplomatic Relations. From an economic point
of view, how would you assess the relations
between the two countries?
I think that in the economic relationship
between Kazakhstan and China, first of all,
we have relatively strong mutual and complementary
economic development. There are some reasons.
First, we have common borders and we have
several borders pass ways between the two
countries. Secondly, the export of Kazakhstan
mainly depends on the raw materials and
primary products. On the other hand, China
is in shortage of such kind of products,
so we can import from Kazakhstan these products.
Thirdly, as a newly independent country,
Kazakhstan needs advanced technology and
foreign investment into the economy, and
this we can give them, the investment and
the advanced technology. That, as a basis,
makes us complementary.
In 1992, after the independence of the Republic
of Kazakhstan, we signed with them a first
intergovernmental trade cooperation agreement.
After the establishment of diplomatic ties,
we can general see a tendency of growth
of bilateral trade volumes. For example,
in the year before last, we had an amount
of bilateral trade of US$1,5bn. Last year,
we achieved US$1,3bn. All these figures
are according to the statistics of the Chinese
customs office. In this year, from January
to April, the bilateral trade volumes between
the two countries are almost US$500mln.
I think that compared to the same time last
year the bilateral trade between the two
countries has developed faster than last
year.
I can now give you the main characteristics
of the trade between the two countries.Generally,
we import from Kazakhstan such products
as crude oil, steel, metal scraps, aluminium,
iron, ore sand, copper and so on. At the
same time, we export to Kazakhstan such
products as dried goods, footwear, garment,
toys, plastic goods and chinaware, and also
to some extent we export to Kazakhstan some
machinery and electronic products.
China has been developing and investing
in opportunities in Latin America (Venezuela,
Peru etc.), in Asia (India, Indonesia),
in Africa (Angola, Sudan). What makes Kazakhstan
so interesting to Chinese products?
I think that it is generally due to the
geological position of the two countries,
neighbouring countries. After the independence
of the Republic of Kazakhstan, and especially
after the collapse of the former Soviet
Union, the economy of this country was seriously
affected. For some time, there were serious
shortages of commodities. Even if there
were some commodities, the prices were very
high. I think that is the reason.
Because as a matter of fact, this Republic
very much needs Chinese products and Chinese
goods, but at times during these 10 years,
there were problems in our export of these
products to Kazakhstan. At first, there
were minor Chinese products of every quality
coming to this country. There were, in fact,
adulterated and inferior goods from China
to Kazakhstan, and that has damaged the
image of Chinese goods in Kazakhstan.
Nowadays, there are two channels in bilateral
trade. The first channel is trade between
the state run enterprises. The second one
is border trade. I told you that the amount
of bilateral trade was US$1,5bn, but I think
that in fact the real amount of bilateral
trade exceeded that amount. There is a non-standard
trade form between China and Kazakhstan.
To some extent, it is not entirely at par
with international state practice. So, sometimes
it is very difficult for the customs authorities
to account for the whole amount of trade.
If you go along the shops in Almaty, you
can find a lot of goods made in China. Although,
perhaps they may not always have a Chinese
trademark, they were in fact made in Chinese.
This issue is of course linked to the
more general issue of the World Trade Organisation
of which China is already a member and Kazakhstan
is seeking membership of. Are there contacts
between the two countries on the matter
of Kazakhstan's accession, and how does
this come about?
Up till now, we have not had a detailed
discussion on that issue, because we have
become a member of the WTO only last year.
After that, as a matter of fact, Kazakhstan
has raised a question and want China to
help the country enter the WTO. But, so
far, we have not gone into that issue. That
question was raised during the visit of
Mr. Tokayev, the state secretary and Foreign
Minister of Kazakhstan, to China. He was
hopeful that China would help Kazakhstan
to enter the WTO. That visit was in May.
As a neighbouring country, China wishes
to see Kazakhstan in the family of the WTO.
Thus far, we have been talking primarily
about trade between China and Kazakhstan.
However, there is also the very important
part of the economic relations between the
two countries, which is the investments
of Chinese companies. Could the ambassador
indicate to our readers the specifics of
Chinese investment in Kazakhstan?
During the last 10 years, China has invested
more than US$500mln. in Kazakhstan, but
the focus of Chinese investments is mainly
in oil and gas exploration in Kazakhstan.
Besides that, we also have some joint enterprises
here, but the number is very small. For
example, in the Almaty region, there are
the joint cigarette factory and the production
of ketchup. We also have the construction
materials. Successful examples of joint
enterprises here are very rare. To some
extent, the real investment project of China
in Kazakhstan is the oil project in the
Aktubinsk region. We took part in the international
bidding, and we won the tender. We got 60%
of the former state owned oil company in
Aktubinsk. From 1997 onwards, we began the
exploitation of oil in that region.
I must explain to you that the 1997 agreement
between China and Kazakhstan has two parts.
The first part is the exploitation of oil
in the Aktubinsk region. The other part
is the exploitation of oil in another region
and the construction of an oil pipeline.
We only have worked on the first part. The
second is now going to be touched upon.
But first, I would like to tell you something
about the development of the Aktubinsh oil
field. Firstly, we can see the increasing
output of oil exploration in this field,
and now we have begun the construction of
an oil pipeline to the Atyrau port. Later,
this oil pipeline will be connected to an
international oil pipeline, named Caspian
Oil Pipelin. It is 450km long. Once the
construction of this pipeline is over, we
will be able to sell oil to the international
market. But, part of the oil produced in
the Aktubinsk oil field we sell to China,
and the other part through the territory
of Russia to Europe. We have invested US$150mln.
in the construction of that oil pipeline.
The construction began in spring this year,
and will be over at the end of this year.
Then, what about the long-term Sino-Kazakh
oil pipeline? Our researchers have finished
their work and research of the possibility
of the construction of that oil pipeline.
Our conclusion is that up to now we cannot
begin the construction of that pipeline
due to the shortage of resources. The profitability
of that project depends on the resources,
the base resource of oil. If the oil resources
cannot reach at least 20mln. tonnes each
year, there will not be a profitability
of the project. You know that in total,
if the pipeline will be constructed, it
will be 2700km long from Kazakhstan to China.
And the total amount of investment will
be US$3,0bn. So, if there will not be enough
oil for that project, it will be a waste.
Nowadays, each year, the oil output of Kazakhstan
is 38 million tonnes of total production.
You can see that this total output of oil
production will not be enough for the construction
of that Kazakh oil pipeline. We always tell
the Kazakh that we are now a market economic
country. And, what means a market economy?
That means that before we begin the construction
of some economic project, it must first be
told what the profitability of that project
is. That is the core of the issue. Sometimes,
the local mass media did not understand the
core of the issue, so they always asked me
why China does not want to construct that
pipeline. For some time, we had to explain
the reason. |
It has not been
determined entirely yet how large the resources
of oil are in the Caspian Sea. But, the oil
pipeline is still on, if the Kazakh oil reserves
in the Caspian Sea are as big as they are
predicted to be?
Yes, we have told the Kazakh's that if
the resources are guaranteed, that project
will be. Besides, there is another issue
of this problem, and that is the price of
crude oil of Kazakhstan. Imagine, if we
can buy the oil from the Middle East and
we transport it by ships over the sea, the
price may be much cheaper than the Kazakh
oil. Why is it then needed to build that
pipeline? Once again, it is a question of
profitability of the project. During the
meetings and the negotiations between the
two governments we raised these matters.
Firstly, if the oil reserves are guaranteed
and, secondly, if the price is good to China,
we will receive that product.
Anyway, on the other side of this problem,
China needs much oil. Each year, we import
large amounts of crude oil from other countries,
from other regions. I think that if the
problem of oil reserves and if the problem
of oil price from Kazakhstan will be resolved,
it is very natural that we will build that
pipeline, because we are neighbouring countries.
It is very convenient to get that oil from
Kazakhstan.
I think that the construction of that oil
pipeline will benefit Kazakhstan, because
the Kazakh government has always said that
that oil pipeline will improve relations.
That means they will have many directions
of oil pipelines. As a matter of fact, you
can see that the utilisation of the KTK
pipeline up till now totally meets the demand
of Kazakhstan, because it has the possibility
of transportation of oil each year of 67
million tonnes of oil. The output of oil
each year from Kazakhstan right now is less
than 40 million tonnes. You can say that
it totally meets the demand of Kazakhstan.
When you take into account the development
of relations between China and Kazakhstan
over the last 10 years, how do you this
relationship develop into the future?
I think there is a good future of economic
cooperation between China and Kazakhstan.
I already said that we have relatively strong
mutual and complementary economic ties between
the two countries. Up till now, we have
not yet used all the potential of economic
cooperation. In the field of economic cooperation
between the two countries, I think personally,
that not including the oil and gas fields,
the two countries have done little in other
fields. I think there is much work to be
done in the other fields of economic cooperation
between the two countries. There is a reason
for some of the problems of economic cooperation
between the two countries. Although from
one side, over the last three years, there
have been great restoring developments in
respect of the economy in Kazakhstan, but
still the economic development in the country
is quite low. On the other side, this country
now is in shortage of both money and technology,
and China is also in shortage both of money
and technology. I think that due to that
reason there has been some hindrance to
the development of the Sino-Kazakh economic
relations.
I will give you some examples to you the
difficulties of economic cooperation between
the two countries. For example, Kazakhstan
wants to import some communication equipment
from China. As an international practice,
we want there to be a cash settlement, but
they want there to be a barter of trade.
It is difficult for us. The second example
is that the total opportunities offered
by the market of Kazakhstan is limited,
which is because of the limited people in
Kazakhstan. The total number of people in
Kazakhstan is 16 million. It is limited
for the commodities of China. It is not
huge. Thirdly, there is the question of
state policy of Kazakhstan. There is a policy
named as 'substitution', i.e. import subsidies.
That is the state policy of Kazakhstan.
That, to some extent, restricts the development
of Chinese goods here.
Our readers form the Asian and international
business community, who may well be considering
investments in Kazakhstan. With this in
mind, what would be your final message to
them?
I think that as a country that is transforming
its economy, Kazakhstan has good perspectives
for economic development, because first
of all, it has very rich natural resources.
It is a base for its future development.
To the scholars and managers, and all the
people that have an interest in this country,
my advise is 'come to this country, and
have a look on the real ground'. Nowadays,
we can gather much information from the
Internet, but anyway a real look on the
ground remains better than news from newspapers.
That is my advise as an ambassador to the
managers of big corporations or the scholars
of economics. Please, come here and have
a look.
But, secondly, those people should not only
judge on what they can see with their own
eyes, i.e. the commodities, the markets,
the rails, etc., but also by things that
we cannot see with our own eyes, such as
the functioning of the market, the government's
role in the management of economic development,
the political system, etc. All these issues
I can describe in one word: 'software'.
It is software. If we do not know this software
well, we do not know the reality of that
economy very well.
I always exchange my point of view on the
future of the economic development of Kazakhstan
with other investors and other politicians
from other countries. Personally, I think
that the more important question for the
government of Kazakhstan is to prepare a
new economic management, who know very well
the rules and regulations of more than just
the economy. I think that even without that,
when Kazakhstan has good objectives for
economic development, it will never achieve
the expected aims and terms. So, the first
question is to prepare new economic managers,
or economic elites. It is easy, for example,
to know for an enterprise whether it is
a good enterprise, but the manager may not
be experienced. In due course, then, the
enterprise will be bankrupt. On the other
side, there can be a very bad enterprise
facing bankruptcy, but if the manager is
experienced, and if he has the possibility
to manage the enterprise accordingly, there
will be a new life for that enterprise.
I think you can see many examples in the
West on such issues. It is easy to understand,
but some people in Kazakhstan do not understand
it.
We can see that Kazakhstan has very rich
natural resources. The total amount of natural
resources per capita is very rare in other
countries. I think that the important question
is how to use these resources in real terms
in the right direction, because otherwise
you will never reach your aim. One country,
such as Kazakhstan, cannot forever sell
its natural resources to foreign countries,
because it is to some extent a distorted
economic structure.
I have told my Kazakh counterpart that we,
China and Kazakhstan, can always learn from
each other on many issues. I can see that
there has been some success on the Kazakh
side. For example, it has a good and mature
financial market with financial regulations.
Among the CIS countries, it is the leader.
And secondly, I think that in terms of foreign
currencies, there is a free foreign currency
system. All of this is the success of Kazakhstan.
But, still, to meet the requirements of
the WTO, Kazakhstan has a long way to go.
The core of the matter is that Kazakhstan
depends on itself to lead its economic development,
but in the world economy there is an increasing
development of interdependency between countries.
We will have some work to do in this direction.
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V.I.P. INTERVIEWS 