Moldir Shyngys | 03.11.2024
The Impact of BRI ( Belt and Road Initiative ) on Small and Medium Enterprises in Kazakhstan
The Belt and Road Initiative (BRI), led by China, is one of the most promising infrastructure projects in recent history, extending its influence across Asia, Europe, and Africa (World Bank, 2019). Kazakhstan, as a central nation on this "new Silk Road," plays a significant role in connecting China to Europe. The initiative’s emphasis on developing infrastructure, particularly transportation and energy, has brought substantial changes to Kazakhstan’s economy, creating both opportunities and challenges for small and medium enterprises (SMEs) within the country. While large-scale infrastructure projects may be the most visible aspect of the BRI, the initiative’s indirect effects on SMEs are equally transformative, impacting various sectors, altering the business environment, and shaping Kazakhstan’s economic growth (Zhang & Miller, 2020).
Kazakhstan’s strategic location on the Eurasian continent has positioned it as a key transit hub in the BRI (Shen & Kalyuzhnova, 2021). In recent years, the country has seen a surge in investments aimed at upgrading railroads, highways, and logistic hubs, with projects such as the Khorgos Gateway on the border with China highlighting the scale of these developments (International Union of Railways, 2020). This logistical transformation has reduced transport times across the region, with train routes from China to Europe now taking approximately 15 days, compared to the traditional 30–40 days by sea (UNESCAP, 2018). For Kazakhstani SMEs, this efficiency boost translates to quicker market access and more reliable supply chains, providing a crucial advantage for companies aiming to expand or enhance their service offerings (World Bank, 2019).
According to the World Bank (2019), transit trade revenues in Kazakhstan have doubled since 2013, driven by increased BRI-related activity. However, the economic transformation triggered by the BRI also presents challenges for local SMEs, particularly in terms of competition. As Chinese companies establish themselves in Kazakhstan, they benefit from larger capital reserves, advanced technologies, and global supply chain access—advantages that Kazakhstani SMEs find difficult to match, especially in manufacturing and retail sectors (Asian Development Bank, 2019). For example, the influx of affordable Chinese consumer goods has placed pressure on local producers, making it harder to compete on price. The growing presence of Chinese firms has also increased competition for resources, including skilled labor, driving up wages in cities like Almaty and Astana, where wages in sectors like logistics and construction have increased by approximately 20% over the past five years (Kazakhstan Bureau of National Statistics, 2021).
On the other hand, the BRI has opened up substantial opportunities for Kazakhstani SMEs in specific industries. Companies involved in logistics, for instance, have capitalized on the demand for transportation services across Central Asia. With the expansion of rail and road infrastructure, SMEs have extended their networks, often forming partnerships with larger firms to handle increased freight volumes and diversify services. In 2020, logistics SMEs in Kazakhstan saw a 30% increase in revenue, attributed to BRI-related activities (Kazakhstan Association of Freight and Logistics, 2021). Additionally, government support for SMEs in this sector through financial incentives and regulatory reforms has strengthened their ability to compete in an increasingly globalized market (Ministry of National Economy of Kazakhstan, 2021).
Despite the positive impacts, the BRI has prompted Kazakhstan to modernize its SME support policies, aiming to bolster resilience and competitiveness. The government has introduced several initiatives aimed at strengthening SME participation in BRI-related opportunities. For example, tax incentives for small businesses in logistics and manufacturing have been expanded, and subsidies for equipment modernization have been made available to help local firms stay competitive. Over 3,000 SMEs have benefited from these incentives, allowing them to purchase new machinery, adopt efficient production processes, and explore export possibilities (Ministry of National Economy of Kazakhstan, 2021).
Furthermore, the BRI has encouraged the development of special economic zones (SEZs) across Kazakhstan, providing a favorable environment for SMEs looking to expand. These zones offer reduced tax rates, simplified customs procedures, and access to modern infrastructure, enabling local firms to scale up and attract foreign investment. In the Khorgos SEZ, SMEs involved in light manufacturing and warehousing reported a 40% increase in production capacity (Kazakhstan SEZ Committee, 2021). These zones have also facilitated knowledge and technology transfer, as local employees gain exposure to advanced manufacturing techniques and management practices introduced by foreign firms, helping local SMEs become more competitive (Kazinform, 2020).
While the BRI presents significant growth opportunities for SMEs, it also underscores the importance of overcoming regulatory and financial challenges. To capitalize fully on BRI-driven infrastructure, SMEs need access to financing options that support expansion efforts. However, many small businesses struggle to secure loans at favorable terms, which limits their ability to invest in new projects or upgrade facilities. According to a report by the Asian Development Bank (2020), less than 30% of Kazakhstani SMEs have access to affordable credit, which could hinder their ability to leverage BRI investments. Addressing this issue may involve fostering partnerships between local banks and international financial institutions, ensuring that SMEs have the capital needed to compete in an evolving business landscape.
In conclusion, the BRI’s impact on SMEs in Kazakhstan is multifaceted, offering both opportunities and challenges. The initiative has transformed Kazakhstan into a logistical hub, allowing SMEs to benefit from improved connectivity and new market access. However, increased competition, resource pressures, and financing limitations highlight the need for continued government support and policy innovation. By addressing these challenges and capitalizing on BRI-induced opportunities, Kazakhstan’s SMEs can play a pivotal role in the country’s economic transformation, contributing to a more diverse and resilient business environment.
References
Asian Development Bank. (2019). Impact of the Belt and Road Initiative on Small and Medium Enterprises in Central Asia.
Asian Development Bank. (2020). SME Financing in Kazakhstan: Barriers and Opportunities.
International Union of Railways. (2020). BRI Transport Efficiency Report.
Kazakhstan Association of Freight and Logistics. (2021). Annual Logistics Report 2020.
Kazakhstan Bureau of National Statistics. (2021). Labor Market Trends in Kazakhstan.
Kazakhstan SEZ Committee. (2021). Special Economic Zones Development Report.
Kazinform. (2020). Impact of BRI on Local Industry and SMEs in Kazakhstan.
Ministry of National Economy of Kazakhstan. (2021). Economic Development and SME Support Policies.
Shen, X., & Kalyuzhnova, Y. (2021). The Belt and Road Initiative and Its Impact on Central Asia. Eurasian Development Journal, 12(3), 125-143.
UNESCAP. (2018). BRI Infrastructure and Efficiency Gains: A Regional Overview.
World Bank. (2019). Belt and Road Economics: Opportunities and Risks of Transport Corridors.
Kazakhstan’s strategic location on the Eurasian continent has positioned it as a key transit hub in the BRI (Shen & Kalyuzhnova, 2021). In recent years, the country has seen a surge in investments aimed at upgrading railroads, highways, and logistic hubs, with projects such as the Khorgos Gateway on the border with China highlighting the scale of these developments (International Union of Railways, 2020). This logistical transformation has reduced transport times across the region, with train routes from China to Europe now taking approximately 15 days, compared to the traditional 30–40 days by sea (UNESCAP, 2018). For Kazakhstani SMEs, this efficiency boost translates to quicker market access and more reliable supply chains, providing a crucial advantage for companies aiming to expand or enhance their service offerings (World Bank, 2019).
According to the World Bank (2019), transit trade revenues in Kazakhstan have doubled since 2013, driven by increased BRI-related activity. However, the economic transformation triggered by the BRI also presents challenges for local SMEs, particularly in terms of competition. As Chinese companies establish themselves in Kazakhstan, they benefit from larger capital reserves, advanced technologies, and global supply chain access—advantages that Kazakhstani SMEs find difficult to match, especially in manufacturing and retail sectors (Asian Development Bank, 2019). For example, the influx of affordable Chinese consumer goods has placed pressure on local producers, making it harder to compete on price. The growing presence of Chinese firms has also increased competition for resources, including skilled labor, driving up wages in cities like Almaty and Astana, where wages in sectors like logistics and construction have increased by approximately 20% over the past five years (Kazakhstan Bureau of National Statistics, 2021).
On the other hand, the BRI has opened up substantial opportunities for Kazakhstani SMEs in specific industries. Companies involved in logistics, for instance, have capitalized on the demand for transportation services across Central Asia. With the expansion of rail and road infrastructure, SMEs have extended their networks, often forming partnerships with larger firms to handle increased freight volumes and diversify services. In 2020, logistics SMEs in Kazakhstan saw a 30% increase in revenue, attributed to BRI-related activities (Kazakhstan Association of Freight and Logistics, 2021). Additionally, government support for SMEs in this sector through financial incentives and regulatory reforms has strengthened their ability to compete in an increasingly globalized market (Ministry of National Economy of Kazakhstan, 2021).
Despite the positive impacts, the BRI has prompted Kazakhstan to modernize its SME support policies, aiming to bolster resilience and competitiveness. The government has introduced several initiatives aimed at strengthening SME participation in BRI-related opportunities. For example, tax incentives for small businesses in logistics and manufacturing have been expanded, and subsidies for equipment modernization have been made available to help local firms stay competitive. Over 3,000 SMEs have benefited from these incentives, allowing them to purchase new machinery, adopt efficient production processes, and explore export possibilities (Ministry of National Economy of Kazakhstan, 2021).
Furthermore, the BRI has encouraged the development of special economic zones (SEZs) across Kazakhstan, providing a favorable environment for SMEs looking to expand. These zones offer reduced tax rates, simplified customs procedures, and access to modern infrastructure, enabling local firms to scale up and attract foreign investment. In the Khorgos SEZ, SMEs involved in light manufacturing and warehousing reported a 40% increase in production capacity (Kazakhstan SEZ Committee, 2021). These zones have also facilitated knowledge and technology transfer, as local employees gain exposure to advanced manufacturing techniques and management practices introduced by foreign firms, helping local SMEs become more competitive (Kazinform, 2020).
While the BRI presents significant growth opportunities for SMEs, it also underscores the importance of overcoming regulatory and financial challenges. To capitalize fully on BRI-driven infrastructure, SMEs need access to financing options that support expansion efforts. However, many small businesses struggle to secure loans at favorable terms, which limits their ability to invest in new projects or upgrade facilities. According to a report by the Asian Development Bank (2020), less than 30% of Kazakhstani SMEs have access to affordable credit, which could hinder their ability to leverage BRI investments. Addressing this issue may involve fostering partnerships between local banks and international financial institutions, ensuring that SMEs have the capital needed to compete in an evolving business landscape.
In conclusion, the BRI’s impact on SMEs in Kazakhstan is multifaceted, offering both opportunities and challenges. The initiative has transformed Kazakhstan into a logistical hub, allowing SMEs to benefit from improved connectivity and new market access. However, increased competition, resource pressures, and financing limitations highlight the need for continued government support and policy innovation. By addressing these challenges and capitalizing on BRI-induced opportunities, Kazakhstan’s SMEs can play a pivotal role in the country’s economic transformation, contributing to a more diverse and resilient business environment.
References
Asian Development Bank. (2019). Impact of the Belt and Road Initiative on Small and Medium Enterprises in Central Asia.
Asian Development Bank. (2020). SME Financing in Kazakhstan: Barriers and Opportunities.
International Union of Railways. (2020). BRI Transport Efficiency Report.
Kazakhstan Association of Freight and Logistics. (2021). Annual Logistics Report 2020.
Kazakhstan Bureau of National Statistics. (2021). Labor Market Trends in Kazakhstan.
Kazakhstan SEZ Committee. (2021). Special Economic Zones Development Report.
Kazinform. (2020). Impact of BRI on Local Industry and SMEs in Kazakhstan.
Ministry of National Economy of Kazakhstan. (2021). Economic Development and SME Support Policies.
Shen, X., & Kalyuzhnova, Y. (2021). The Belt and Road Initiative and Its Impact on Central Asia. Eurasian Development Journal, 12(3), 125-143.
UNESCAP. (2018). BRI Infrastructure and Efficiency Gains: A Regional Overview.
World Bank. (2019). Belt and Road Economics: Opportunities and Risks of Transport Corridors.
