Eurasian Industrial Association, the Effective Model of Integration
The Eurasian Industrial Association (EIA) was set up in February 2001 as a non-profit association of Kazakhstan largest mining, metallurgic, energy and coal enterprises. Assistance provided by the EIA to its members includes information and analytical support, practical help and legal, economic and organizational advice. It also represents the interests of its members at state bodies, and public and other domestic and foreign organizations. To support home manufacturers, the Association develops and submits to state bodies of Kazakhstan proposals on state policies and improvement of the legal framework related to the industrial development of the country. EIA takes an active part in developing freedom of entrepreneurship, economic, trade and scientific and technical co-operation, setting direct contacts between companies and creating a full-fledged market infrastructure.
Another function of EIA is to consolidate and co-ordinate efforts by manufacturers and businessmen aimed at creating an effective social partnership system. By holding seminars and conferences, EIA supports its members in training and improving skills of their managers and employees. A great attention is paid to public relations and charity activities of the EIA members.
Thanks to up-to-date management and comprehensive development programmes, EIA members not only overcame the economic crisis of the mid-1990s, but also became the leading manufacturers and suppliers to international markets. Of course, successful operation of Kazakh exporters would hardly be possible without considerable investment. In 1995-2000 alone, during the tough period of getting out of crisis consequences, capital investment in EIA enterprises made up $560m. As a result, a significant growth in production of commodities was achieved in 2001 (as compared to figures in 1997): ferrous alloys by 17.2%, chromite ore 13.9%, alumina 12%, ferrous ore raw materials 24.7% and electricity 12.5%. In money terms (US dollars), the output of ferrous alloys, chromite ore and alumina grew by 73%, 48% and 26.5%, respectively.
Around $142m were invested in the enterprises of the Association in 2001. The total sales came to 125.6bn tenge, and the taxes paid by the EIA members came to 23.99bn tenge with the average tax burden standing at 19%.
The Association comprises Kazchrome, Aluminum of Kazakhstan, EEC, SSGPO, Eurasian Bank, Transsystem and Shubarkol Komir.
The Transnational company Kazchrome, established in 1995, comprises the Aktyube and Aksu Ferrous Alloys Plants and the Donskoi Mining and Concentration Combine. Today Kazchrome has about 16,000 employees. The company’s facilities include 40 electric furnaces with the total installed capacity of 850 MVA. It produces more than 1 million tonnes of ferrous alloys and about 2.6 million tonnes of commercial chromite ore per year.
In terms of production output and sales the company runs second in the international ferrochrome market and third in that of ferrous alloys. The company markets include the USA, Europe, and Southeast Asia (Japan, South Korea and Taiwan). In addition to ferrochrome of all brands, the company produces high-silica ferrosilicon (65-75% Si, 1.0-2.0% Al), ferrochrome silicon, and low-phosphorous silicomanganese. In 2001, Kazchrome reported the sales of 59bn tenge. Each year Kazchrome pays over 6bn tenge to the budget and off-budget funds.
The Aktyube Ferrous Alloys Plant is the firstling of Kazakhstan’s ferrous metallurgy. Launched in 1943, the plant now is a modern enterprise producing high quality ferrochrome of different brands, a key component for producing stainless and alloyed steel. Over 3,000 employees work at the plant.
Over the past ten years the production of ferroalloys at the Aktyube plant grew by 40%, and sales more than doubled due to changes in product range and output. Over six months of 2002 alone the plant produced 11,700 tonnes of commercial ferroalloys.
Since the beginning of 2002, investment in reconstruction of the production facilities and purchase of new equipment made up over 560m tenge, and 5,091.2m tenge were invested in production development from 1999 to 2001.
Two years ago, the plant—first in Kazakhstan—launched production of chromium metal marketed now in a number of European countries.
The quality of the plant’s production is testified by the ISO-9002 international certificate which was received in October 2001, proving that the existing quality management system meets international standards.
The Aksu Ferrous Alloys plant is one of the largest and most unique enterprises producing ferrous alloys in Kazakhstan and worldwide. The plant was launched at the beginning of 1968. Its product range covers chromite, siliceous and manganese ferrous alloys, and the design capacity is 1 million tonnes of ferrous alloys per year.
Today the Aksu plant comprises four ferroalloy smelting shops, 26 electric furnaces with three of them featuring the capacity of 63 MVA, two furnace feed preparing shops, and road transport, railway and repair shops (a total of 42 subunits). Over 6,000 persons are employed at the plant.
In 2001 the company sold a 35,263.5m tenge worth of products (110.6% of the level of 2000) and earned the net profit of 3.5bn tenge. By 2005 it is planned to invest $80m in the Aksu plant which will be used for the major overhaul, construction and modernisation of the enterprise. A programme for developing the plant’s resource base is being implemented. For instance, a $20m investment project for developing the Tur manganese deposit is expected to complete by 2005.
The Aksu ferrous alloys plant promotes urban development and has a crucial social importance for the city of Aksu and the entire Pavlodar region. From 1998 to 2001 the enterprise paid 12.5bn tenge in taxes to the budget and off-budget funds. The Plant has the ISO-9001 certificate.
The Donskoi Mining and Concentration Combine (GOK) was set up in 1938. Some 6,000 are employed at the enterprise. The combine includes two mines and two concentrating mills, the world’s largest in terms of annual production and processing of chromite raw materials. Since 1999 Donskoi GOK produces every year over 2m tonnes of commercial chromite ore per year, about 20% of the worldwide output.
In 2001 the enterprise produced 2,045,700 tonnes of commercial ore. Sales came to 10,794m tenge. Over six months of 2002 these indicators stood at 1,173,100 tones and 5,872m tenge, respectively.
Donskoi GOK is commissioning new facilities step-by-step. The first starting complex of the 10th Anniversary of Kazakhstan’s Independence Mine with the capacity of 600,000 tonnes of ore per year has been put into operation. After reaching the designed capacity, the new mine will be the world's largest and unmatched in terms of chromic oxide content (50%). Its estimated service life will exceed 100 years. So far, over $130m have been invested in the construction of the mine, and another $35.4m will be drawn down within the next five years. The Combine has the ISO-9002 certificate.
Aluminium of Kazakhstan is the successor of the Pavlodar Aluminium Plant which was established in 1964.
Aluminium of Kazakhstan comprises five enterprises: the Pavlodar aluminium plant, Torgaiskoye and Krasnooktyabrskoye Bauxite Ore Departments, Keregetas lime pit and the Pavlodar heat and power plant no. 1. The company employs over 11,000 persons.
The core business of Aluminum of Kazakhstan is extraction and deep processing of bauxites with the purpose of producing furnace alumina. Auxiliary fields are production of gallium metal and sulphuric aluminium.
A comprehensive re-equipment programme was developed at the enterprise in 2000. It provides for increasing production of alumina to 1.5m tonnes by 2005. The design capacity of the plant is 1.05m tonnes per year. In all, investment in Aluminium of Kazakhstan came to $80.52m in 2000-2001. The total cost of the programme for 2002-2006 is estimated at $99m. Aluminium of Kazakhstan annually exports 1.2m tonnes of furnace alumina to Russian electrolysis plants and 20 tonnes of high-purity gallium metal to Europe, the USA and Japan. Over 25,000 tonnes of sulphuric commercial aluminium are supplied to Russian and Kazakh consumers each year.
The Sokolovsko-Sarbaiskoye Mining and Concentration Association (SSGPO) was set up in 1954 on the bases of the Sokolovskoye and Sarbaiskoye magnetite ores deposits. SSGPO is the largest iron ore processing enterprise in Kazakhstan and CIS. More than 17,000 persons are employed there. The main products are fluxed iron ore pellets and iron ore concentrate. The total balance reserves of iron ores in the deposits run by SSGPO make up 3,411m tonnes (as of 1st January 2002). The company’s sales in 2001 came to 25.1bn tenge (108.1% of the level of 2000). In addition to iron ore, SSGPO produces dolomite, Chegan clay, construction detritus and therapeutic mud. The current investment programme provides for $119m to be invested in the development of SSGPO in 2002-2006.
SSGPO exports up to 5m tonnes of iron ore concentrate (66-67% Fe) and 8m tonnes of fluxed pellets per year. In addition to metallurgic enterprises of Kazakhstan, the production of SSGPO is supplied to Russia and China.
The Eurasian Energy Corporation (EEC) is one of the largest energy enterprises of Kazakhstan. EEC is a fuel and energy complex with a closed production cycle. It employs 6,000 persons.
The company was set up in 1996 and comprises three structural units: the Aksu heat power plant, Vostochny coal opencast mine and a production and repair department.
The Aksu heat power plant is a support junction connecting the energy systems of West Siberia, the Altai and Northeast Kazakhstan. The Aksu ferroalloys plant, SSGPO and Ispat Karmet are among the major consumers of electricity. Currently negotiations are under way with Omskenergo in order to establish a joint Kazakh-Russian company for supplying electricity to Russia.
The Vostochny opencast coal mine is located in the Ekibastuz coal basin. It is a unique mining enterprise producing coal by the opencast method. The coal is sold to companies of Kazakhstan, Russia and Kyrgyzstan. The largest consumers are Aluminium of Kazakhstan, SSGPO, the Pavlodar TETs-3 heat power plant, and the Aksu ferroalloys plant. In 2001 the Corporation signed a five-year agreement with Omskenergo on annual supplies of 6m tonnes of coal. The agreement is being successfully implemented.
The production and repair department was founded in 1999 on the basis of the Sevkazenergoremont company. The enterprise repairs boilers, turbine and electrical equipment, electric engines and transformers. The main clients are the Aksu heat power plant, Pavlodar TETs-1, Energoteploservis (Ekibastuz), SSGPO and heat power plants of Ust Kamenogorsk, Semipalatinsk and Karaganda.
In 2002 the Corporation plans to spend over $20m for production development. Reconstruction of power unit #4 of the Aksu heat power plant and purchase of mining equipment for the Vostochny opencast mine have been included in the list of priority investment projects.
The Eurasian Bank, established in 1994, has three branches in Kazakhstan: two in the Pavlodar and Kostanai regions and one in the city of Aktobe. Successful operation in the finance market for over seven years has brought the Eurasian Bank the reputation of a dynamically developing financial institution.
The equity capital of the Bank in 2001 increased by 354m tenge coming to 4,200.1m tenge as of 1st January 2002. In 2001 alone the assets grew by 5,107m tenge and came to 12,606m tenge. Net profit in 2001 made up 354m tenge, tripling the figure of the last year. Since the beginning of the Bank's activities, its assets have grown by 11,421m tenge.
In 2001 the Bank retained a high level of capital adequacy, staying among the top ten largest banks of Kazakhstan. Judging by the stable financial indicators and the good business reputation of the Bank, foreign and domestic financial institutions approve and increase its credit lines for interbank transactions. In turn, the Eurasian Bank which operates in the home and foreign markets enjoying the status of a reliable partner has confirmed setting of limits for over 35 banks.
Transsystem is a 100%-privately owned Kazakhstani forwarding company. It was established in 1991. The main advantage of the company’s strategy is that it combines the functions of a railway operator and an international forwarder.
The head office of Transsystem is located in Almaty. The company has branches, representative offices and shares in joint companies in Astana, Aktau, Atyrau, Tashkent and Bishkek. Transsystem runs an extensive network of regional agents and partners, with large transport and forwarding companies such as Blue Water Shipping, Shenker, Agis Aweca, KLASCO and others, to name a few. More than 200 customers of the company include Aluminium of Kazakhstan, SSGPO, Kazchrome and others.
In 2001 the cargoes shipped by Transsystem came to 43.5m tonnes, including 3.8m tonnes of transit cargoes shipped by CIS railways. In 2000 in Madrid Transsystem received two international awards for quality and service: the prize of the 3rd Transport Forum and Gold Award for Commercial Prestige. In 2001 the company received an international prize at the 4th Transport Forum in Paris, the Best Forwarder Prize at the Transport Business Forum in Amsterdam and the Quality Gold Star in Geneva.
The Shubarkol Komir company. Development of Shubarkol low-ash coals began in 1985; the operator of the opencast mine was transformed into the Shubarkol Komir company in 2002. Today it is one of the most promising coal enterprises in Kazakhstan, employing 1,400 persons.
In 2001 Shubarkol Komir extracted 3,174,100 tonnes of coal, surpassing the indicators of 2000 by more than 1.5 times. Since 1986, over 39m tonnes of coal have been produced at the Shubarkol opencast mine.
This well-equipped and constantly technology-upgrading enterprise increases coal production by 4-6m tonnes per year. In 2001-2002 investment in technology at the mine came to over 1bn tenge.
The Shubarkol loading and transporting department was included in Shubarkol Komir alongside the opencast mine to ensure stronger development. The 145-km railway track is the sole transport artery connecting the Shubarkol-Tengiz area with the general rail network of Kazakhstan.
Consumers of Shubarkol coal are large industrial complexes, including Aluminium of Kazakhstan, Ispat Karmet and others. Currently work is under way to begin using Shubarkol coal at the TETs-1 heat power plant in the city of Almaty.
Some 60,000 Kazakh citizens work at the enterprises of the Eurasian Industrial Association. Therefore fostering a constructive dialogue between employees and employers is a priority for EIA. Trade unions comprising around 90% of all employees operate at EIA enterprises. Being a national union of employers, the Association signed a general agreement with the government of Kazakhstan and trade unions for 2002. A sector-specific tariff agreement was signed with the trade union of workers of the mining industry and metallurgy. The Association was an initiator of Kazakhstan’s Law on Employers.
In general, the EIA aims to spur up tripartism, timely constructive resolution of arising problems and prevention of social tensions in the community. For example, in 2001 SSGPO spent 238.7m tenge for occupational safety purposes, Aluminium of Kazakhstan 175.8m tenge and the Aksu Ferrous Alloys Plant 67.2m tenge. To prevent and treat occupational diseases, personnel of EIA companies regularly pass free medical examinations and receive low-cost tickets to spas and recreational centres maintained using funds provided by the employers.
The Association pays a close attention to sports and cultural events. Annually, 0.15% of the wage fund are directed by EIA companies to trade union committees for this purpose.
Charity aid to the most vulnerable social groups, children’s hospitals, schools, kindergartens, retirement homes, as well as sponsoring of sport and cultural events and religious institutions are a strategically important direction of EIA activity. Each year, the EIA companies render 5-20m tenge for this purpose. The Association sponsored the Paralympics Games (Astana, 2001), Boztorgai 4th international children’s art contest (Almaty, 2002), and the International Kurultai of Native Kazakhs in Turkestan. EIA also took part in the My Kazakhstan special train project dedicated to the tenth anniversary of independence. The train travelled through remote districts of the country.
Environmental openness is one of the leading development principles of EIA. Work is continued on introducing the ISO-14000 international standards at Kazakhstan’s enterprises. EIA members spend considerable sums on funding environmental protection. For instance, a five-year programme for re-equipment of Aluminium of Kazakhstan provides for the $17m environmental protection spending. From 1995 to 2000 a total of $55m was directed to implementing nature conservation programmes, approximately $100m to community projects and $30m to sponsorship and charity measures.
EIA enterprises stepped forward with an initiative to create a permanent working group for environmental regulation issues. Contacts are also constantly maintained with the international environmental protection community.
Table of contents
Bogatyr Access Komir, the Power of the Land Dennis C. Price
Ispat Karmet, a Leader of the Steel Industry of Kazakhstan Nawal Kishore Choudhary
Factors Influencing the Growth in Tax Revenues from the Oil and Gas Sector in 2001 Janat Berdalina, Inna Alkhimova
Distribution of Powers with Respect to Oil Operations Between State Agencies and KazMunaiGas National Company Kanatbek Safinov
Means of Performance Guarantee Anatoly Didenko
The Environmental Aspects of Subsoil Use in Kazakhstan Vasily Skolsky
