Kazakhstan is considering the privatisation of Kazakh Railways (KTZ). The company is not doing well financially, which has led the transport ministry to discuss alternative structures. Moreover, infrastructure management will likely be removed from KTZ’s portfolio.
Marat Karabayev, Kazakhstan’s transport minister, stated that officials are discussing a privatisation of KTZ. The Kazakh rail operator and infrastructure manager is financially deep in the red. Kazakhstan is now looking for a way to resolve the issues surrounding the company and find a financially viable future for KTZ.
“The once self-sufficient company KTZ, for the reason of ineffective and conservative management, is on the edge of survival”, the minister stated. “All lucrative services were transferred to private companies.”
Alongside privatisation, a transfer of infrastructure management tasks to a separate legal entity is also on the table. First, the transport ministry will likely create such a separate entity within the structure of KTZ, says Karabayev. This is likely to happen in 2025. From there onwards, Kazakhstan may separate the infrastructure manager from KTZ to become its own organisation. Earlier, the Kazakh parliament expressed the desire to make infrastructure management part of the transport ministry’s responsibilities.
Near bankruptcy
According to an official of Kazakhstan’s audit chamber, KTZ is close to bankruptcy. Reportedly, the company transports 73 per cent of all freight for fees below the cost price. “There is no common economic sense in this. Not a single entrepreneur is interested in executing their activities on the basis of charity”, the official commented.
“Today, KTZ is not capable of paying its dues. The company is in the red zone of financial risk”, he added. It has a debt of 5,8 billion euros, of which 45 per cent is used to pay off debt that the company took on earlier.
Fee hikes
In an attempt to cover its debt and financial losses, KTZ has applied for various fee hikes in order to generate more income. Kazakh businesses protested the possible fee hikes out of fear for their competitiveness. Whereas a proposed fee hike on energy product transports was rejected by the government, the ministry recently supported another application by KTZ, referring to the relatively low prices on the Kazakh network as a justification. However, it now seems that the government has bigger plans to resolve KTZ’s long-standing issues.
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