Drafted by the T&C team in ECA East, supported by the CIIP Trust Fund Consultants: Emmanuelle Ganne, Anastasia Shegay, George Doborjginidze Core staff : Violane Konar-Leacy, Gaukhar Ospanova, Clayton Bryant Kerswell, Wolfgang Fengler (supervision) Practice Manager: Lisa Kaestner Outline • CHALLENGES AND OPPORTUNITIES .................................................................................................3 • Kazakhstan’s macro-economic rebalancing and diversification challenge....................................3 • Regional integration and WTO accession: challenges and new opportunities ...............................8 • Kazakhstan’s active strategy to promote growth and trade...........................................................12 • LEVERAGING NEW ECONOMIC OPPORTUNITIES TO FACILITATE TRANSIT AND TRADE ..............16 • Trade facilitation..........................................................................................................................16 • Infrastructure ...............................................................................................................................21 • Logistics ......................................................................................................................................23 • RECOMMENDATIONS ......................................................................................................................27 1 Acronyms 3PL Third Party Logistics ADB Asian Development Bank AEO Authorized Economic Operator ASYCUDA Automated System for Customs Data. CACO Central Asian Cooperation Organization CAREC Central Asia Regional Economic Cooperation CIS Commonwealth of Independent States EBRD European Bank for Reconstruction and Development EAEU Eurasian Economic Union ECI Economic Complexity Index ECO Economic Cooperation Organization ECU Eurasian Customs Union EDI Electronic Data Interchange EU European Union EurAsEC Eurasian Economic Community FMCG Fast Moving Consumer Goods GDP Gross Domestic Product ICBD International Centre of Boundary Cooperation ICT Information and Communication Technology IMF International Monetary Fund IT Information Technology KTZ Kazakhstan Temir Zholy OECD Organisation for Economic Cooperation and Development PPP Public-Private Partnership R&D Research and Development RCA Revealed Comparative Advantage SCM Supply Chain Management SEZ Special Economic Zone SMEs Small and Medium-Sized Enterprises SPS Sanitary and phytosanitary TBT Technical Barriers to Trade TFA Trade Facilitation Agreement TLC Transport and Logistics Center TRQ Tariff-Rate Quotas UNCTAD United Nations Conference on Trade and Development WB World Bank WEF World Economic Forum WTO World Trade Organization Summary • Infrastructure needs to be upgraded, Kazakhstan is facing its greatest economic and priority attention should be paid to challenge since the global crisis. With oil prices at enhance the competitiveness of the US$50 per barrel, the country urgently needs to logistics sector. adjust its economic model and find new sources of • Measures should be taken to develop economic growth. Kazakhstan main export has been crude oil, considered a low-complexity intermodal facilities and logistics centers, promote the use of modern mineral products, which has made the country extremely vulnerable to shocks. For Kazakhstan to logistics concepts and adoption of international best practices, develop the reach high income status it will need to move up the value chain and find new sources of growth. multimodal transport industry, and promote greater use of Information and However, new opportunities are arising. China’s Communication Technology (ICT) and new Silk Road initiative, renewed regional Electronic Data Interchange (EDI) systems. integration efforts through the Eurasian Economic Union, CAREC and WTO accession are opening up There are a number of important transport projects in preparation which will enhance connectivity new prospects for Kazakhstan to integrate more successfully with the region and the world and to between Astana and Almaty and the Western part of Kazakhstan. However, these investments will position itself as a key trade and transit corridor need to be complemented by reforms to reduce between Asia, Europe, and the Middle East. To support this goal, the Kazakh government also transit time to generate economic opportunities for Kazakhstan and economic operators located launched a series of ambitious reforms to enhance its business environment, diversify its economy and along or transiting through the corridors. These projects will help promote local economic promote growth and trade. While Kazakhstan outperforms its regional peers in terms of overall development through enhanced market access, the development of value-added services, and are business environment, it still ranks poorly in trading across borders. expected to have a positive impact on private sector development and job creation. Kazakhstan is embarking on an economic transformation at a time where new global trends are reshaping economic fundamentals. As countries in Asia and Europe enhance their living This policy note has been drafted with the support standards, opportunity costs will matter more than Kazakhstan quest to establish vibrant economic direct transport costs, resulting in increasing corridors and to generate new sources of growth in opportunities to transport goods from East Asia to a low-commodity price environment. The activity Europe and the Middle East overland – which is has been supported by the Competitive Industries substantially cheaper than air and faster than sea and Innovation Program (CIIP, TF015585). transport. However, the opportunity cost of delays also increases as storage, insurance and the • CHALLENGES AND OPPORTUNITIES upfront costs of purchasing goods become more Economic r ebalancing important. If Kazakhstan wants to achieve its ambitious goal of Kazakhstan is in the middle of a major becoming a regional transit, business and logistics economic rebalancing. Kazakhstan experienced hub, it will need to address three key reform areas a broad-based economic slowdown in 2015 due as a matter of priority: to falling export oil prices, which led to a large • Trade across borders hinges on terms-of-trade shock, and weaker external streamlining and expediting customs demand from Kazakhstan’s top export procedures, increasing transparency, destinations—China, the European Union (EU), and improving risk management, enhancing Russia. GDP growth dropped from 4.1 percent in freedom of transit and further harmonizing 2014 to 1.2 percent in 2015, and preliminary data procedures at the Customs Union level. suggest that the economy contracted by 0.2 percent in the first five months of 2016. Exports 3 decreased sharply in 2015, and are expected to expected to deteriorate further this year, and continue to contract in 2016, while imports are Kazakhstan’s GDP growth should remain close to affected by weak private sector demand due to zero under the baseline scenario (Table 1). lower consumer and investor confidence following Accelerating the pace of structural reforms to the depreciation of the Tenge in August 2015 diversify the economy and facilitate trade is, in this (Table 1). Although still positive, Kazakhstan’s trade context, crucial. Indeed, the reasons for surplus contracted significantly, from 13.5 percent Kazakhstan’s current economic difficulties are to be of GDP in 2014 to 3.95 percent in 2015, and after found in the structure of its economy and its high five consecutive years of running a positive current dependency on exports of mineral products. account balance, Kazakhstan saw its current account go into deficit in 2015. As growth prospects remain uncertain, Kazakhstan needs to accelerate its structural reforms to diversify its economy. With oil prices expected to remain low throughout 2016, modest growth in the EU, growth in China slowing down, and Russia, a major destination for Kazakhstan’s metal exports, expected to contract by 0.6 percent in 2016, Kazakhstan’s current account balance is Table 1. Kazakhstan’s economic challenges 2014 2015 2016 2017 2018 Projections GDP at constant market prices 4.1 1.2 0.1 1.9 3.7 Exports of goods and services -3.2 -3.6 -2.1 2.1 2.5 Imports of goods and services -4.0 -0.6 -1.0 3.0 4.0 Note: Baseline scenario oil prices: US$ 50.8 per barrel (2015), US$ 41.0 (2016), US$ 50.0 (2017), US$ 53.3 (2018); Source: World Bank. “Kazakhstan: A Long Road to Recovery.” Kazakhstan Economic Update No. 3 (Summer 2016) Kazakhstan’s increasing concentration of resource export base was slightly higher than that exports on low-complexity mineral products of the Russian Federation in 1996 it rapidly fell makes the country more vulnerable to shocks. below Russia’s level and has remained inferior Kazakhstan’s trade composition reflects poor since then. Kazakhstan’s non-natural resource diversification and low sophistication of its export base has been shrinking over time, and it is economy. Kazakhstan’s exports have concentrated now much smaller than its regional peers and considerably over the last 20 years making the countries with a similar income level per capita country more vulnerable to shocks. Mineral such as Turkey (Figure 1). On a per capita basis, products accounted for 75 percent of Kazakhstan’s Kazakhstan’s non-natural resource export base is exports in 2014, up from 56 percent at the turn of also narrower than Russia’s and Ukraine’s, and falls the century and 35 percent in 1996 (Table 2). well below that of countries with a similar level of Crude oil - Kazakhstan’s main export - is among the income per capita like Turkey (Figure 2) bottom five products by complexity, along with other raw minerals. While Kazakhstan’s non- 4 Тable 2. Since 1996, Kazakhstan’s exports concentrated significantly 1996 2000 2014 Pr oduct Shar e of Pr oduct Shar e of Pr oduct Shar e of ex por ts ex por ts ex por ts Mineral 35% Mineral 56% Mineral 75% products products products -- crude oil 19% -- crude oil 51% -- crude oil 58% Metals 30% Metals 26% Metals 11% Chemical 12% Chemical 5.9% Chemical 5% products products products Vegetable 9.4% Vegetable 4.4% Vegetable 3.2% products products products Machines 3.6% Precious 3.5% Machines 2% metals Textiles 3.1% Machines 1.4% Precious 0.96% metals Source: Observatory of Economic Complexity. http://atlas.media.mit.edu/en/ 5 Figure 1. Kazakhstan’s non-natural resource export base is much smaller than its regional peers (as a percentage of total exports ) Source: Observatory of Economic Complexity. Authors’ calculations. Figure 2. Kazakhstan’s non-natural resource export base per capita is narrower than Russia’s and Ukraine’s Source: Observatory of Economic Complexity. Authors’ calculations. 6 The deterioration of Kazakhstan’s economic exports more of a particular product than the share complexity of exports means that Kazakhstan of total world trade that the product represent. is missing the opportunity to move up the While the number of products with a RCA value chain. Kazakhstan’s increasing increased slightly in Kazakhstan in recent years, concentration of exports has resulted in a from 55 and 60 in 2010 and 2013 respectively, to deterioration of its overall complexity of exports 78 in 2014, it remains well below that of Russia after 1996, with some ups and downs since 2008 (131), Belarus (200) and Ukraine (221). In fact, (Figure 3). By comparison, Russia, which started at even in sectors where Kazakhstan would be the same level as Kazakhstan – or even slightly expected to have a comparative advantage, such lower according to the ECI calculated by the Atlas as oil and agriculture, it has failed to create value- of Economic Complexity - and Turkey, which added products. More than 70 percent of started well below Kazakhstan, rapidly Kazakhstan’s crude oil was refined in 1991. Today, outperformed Kazakhstan and still do. Kazakhstan the figure stands at 17.5 percent, and Kazakhstan has a revealed comparative advantage in a imports around 40 percent of its gasoline and fuels relatively low number of products - meaning that it from Russia. Figure 3. Kazakhstan’s economic complexity declined significantly after 1996 ECI as calculated by the Observatory of ECI as calculated by the Atlas of Economic Economic Complexity Complexity Source: Observatory of Economic Complexity Source: Harvard’s Atlas of Economic Complexity. http://atlas.cid.harvard.edu that only highly skilled and productive economies On the other hand, Kazakhstan’s main imports can produce. are highly complex products. Machines, such as computers, large construction vehicles, pumps and In addition to a lack of product diversification, centrifuges, account for 26 percent of Kazakhstan’s Kazakhstan’s export markets are highly imports, transportation (cars, trucks and spare parts) concentrated making the country’s growth for 15 percent, and chemical products for 8.7 prospects dependent on its three main trading percent. Most of the imported machinery partners. More than 55 percent of Kazakh exports equipment is supplied to the oil and gas go to EU countries - a large part of which transit via companies in the Caspian region that specialize in Russia making them vulnerable to geopolitical upstream activities such as exploration, drilling and tensions. China comes second with 12.5 percent – bringing oil to the surface. Machinery and up from 7.7 percent in 2000 - and Russia third with chemicals products are the most complex products 6.6 percent. Taken together the EU, China and 7 Russia represent more than 74 percent of longer. Because of the many borders to be crossed Kazakhstan’s exports, making the country when coming from the South, transit time from vulnerable to economic conditions in its three Turkey to Kazakhstan takes around 20 days, twice trading partners. With EU growth expected to as much as from the EU to Almaty or Astana. As for remain modest in 2016, China’s growth slowing sea transit from Asia to Europe, it generally takes down and Russia facing a recession, Kazakhstan’s about 40-60 days. The new Silk Road overland route through Kazakhstan should allow delivery exports are expected to decrease again in 2016. time to be reduced from 40–60 days to 13–14 days. However, shortcomings in trade and logistics are making today’s Silk Road an expensive one. Regional integr ation and WTO accession: Improving trading across border, infrastructure and challenges and new oppor tunities logistics is essential if Kazakhstan wants to capitalize Renewed regional integration efforts provide on the new opportunity that the New Silk Road enhanced opportunities for Kazakhstan to project offers. The New Silk Road project is giving new impetus to some regional integration initiatives position itself as a key trade and transit in this regard, in particular in the infrastructure area. corridor between Asia, Europe, and the Middle Among the Organizations called on to play a role East. A large number of regional organizations and in the implementation of the New Silk Road project fora were set up following the collapse of the is the SCO. At the July 2016 SCO summit, member Former Soviet Union to promote regional states agreed to support joint infrastructure integration. Yet, their overlapping memberships development in the region and called for a and mandates, their lack of funding, their weak common SCO transport system to be put in place. organizational structures and the limited Because of its strategic position between Europe commitment of national leaders limited their ability and Asia, Kazakhstan should be among the to decisively improve the way in which Central primary beneficiaries of such initiatives. Asian countries cooperated in the economic sphere. Several recent developments, however, On-going efforts to strengthen the CAREC can seem to be shuffling the deck, opening up new help accelerate regional economic integration and strengthen Kazakhstan’s position as a opportunities for Kazakhstan to better integrate trade and transit corridor between Asia and regionally: China’s new Silk Road initiative and its Europe. Launched in 2001, CAREC is an informal intention to make greater use of the Shangai forum that promotes regional cooperation and Cooperation Organization (SCO) to promote better integration among CAREC countries in four regional economic cooperation, the on-going areas: transport, trade facilitation, energy, and efforts to strengthen the Central Asia Regional trade policy. While CAREC has many strengths, Economic Cooperation (CAREC), and the recent being an action-oriented, pragmatic alliance of creation of the Eurasian Economic Union. countries and institutions, with a clear focus on a few key priority sectors, the lack of country China’s New Silk Road project: a new ownership, insufficient linkages between regional opportunity for Kazakhstan to become a and national plans, the weakness of the CAREC regional trade and transit hub. Announced in Institute and lack of planning have undermined its 2013 by China's President Xi Jinping, China’s New effectiveness. Efforts are on-going as part of the Silk Road Economic Belt - also known as the "One CAREC Strategic Framework 2011-2020 to address Belt, One Road" - aims at reviving historic trade ties some of these issues. CAREC’s greatest area of among Central Asian countries and China with a engagement has been the transportation sector. view to accelerating and reducing the cost of Six priority transport corridors traversing Central Asia goods delivery between China, Europe and the east to west and north to south were identified, four Middle East. Given its strategic location between of which go through Kazakhstan. As of 2015, more Europe and Asia, Kazakhstan plays a central role in than US$8.27 billion had been invested in China’s New Silk Road strategy. The New Silk Road Kazakhstan through CAREC for projects that have project offers Kazakhstan an opportunity to position improved transport, trade, and energy itself as a bridge between Europe, Asia, and the infrastructure. With its strategic location at the heart Middle East, and to become the key transit hub of of Central Asia, Kazakhstan is to benefit directly the New Silk Road. Indeed, of all the trade routes from improvements resulting from CAREC’s projects that join Asia and Europe, the one through along the new Silk Road network. Kazakhstan is the shortest. Alternative routes, via sea or via the South through Turkey take much 8 The creation of the Eurasian Economic Union: legal framework. A Eurasian Economic Commission a promising but challenging development. In was established in replacement of the Customs 2010, under the leadership of the Russian Union Commission. The Commission enjoys Federation, the Eurasian Customs Union (ECU) extensive regulatory power in areas such as between Belarus, Kazakhstan, and the Russian customs tariff and non-tariff regulation; customs Federation entered into force. Customs duties on administration; technical regulations; sanitary, goods traded within the Union were eliminated and veterinary and phytosanitary measures; allocation a Common External Tariff, mainly based on the of import duties; competition policy; industrial and Russian tariff, was put in place, resulting in agriculture subsidies; internal trade in services and significant tariff increases in Kazakhstan. Economic investment; transport and transportation; and integration was further deepened in 2012 with the intellectual property rights. In January 2015, the establishment of the Single Economic Space or Union was enlarged to Armenia, and in August Eurasian Economic Space – a single market 2015 to Kyrgyzstan. The creation of the Union was providing for the free movement of persons, goods, presented as a tool to promote economic services and capital. On 1 January 2015, the development and boost regional trade. However, Customs Union and the Single Economic Space Kazakhstan’s gains from the Union have so far been were superseded by the Eurasian Economic Union limited. (EAEU), which incorporated both the customs union and the single economic space into the EAEU’s Establishment of the Eurasian Economic Union: Key Dates • January 1995: Agreement on the Customs Union of the Republic of Belarus, the Republic of Kazakhstan and the Russian Federation. Kyrgyzstan joined in 1996, followed by Tajikistan in 1997. • February 1999: Agreement on the Establishment of the Customs Union and the Single Economic Space between Belarus, Kazakhstan, the Kyrgyz Republic, the Russian Federation, and Tajikistan - terminated on 1 January 2015. • October 2000: Agreement on the Establishment of the Eurasian Economic Community between Belarus, Kazakhstan, the Kyrgyz Republic, the Russian Federation, and Tajikistan (EurAsEC). • 2006: Divergences among EurAsEC members led Russia, Kazakhstan and Belarus to establish a customs union on their own. • October 2007: Treaty on the Establishment of the Common Customs Territory and the Formation of the Customs Union between Russia, Belarus and Kazakhstan (Eurasian Customs Union-ECU) • 1 January 2010: The ECU Commission starts working. • 1 July 2010: The common customs territory becomes effective. The ECU Customs Code enters into force. • 2011: Internal physical border controls are eliminated. • January 2012: entry into force of the Single Economic Space or Eurasian Economic Space. • 1 January 2015: entry into force of the Eurasian Economic Union (EAEU), which terminates the EurAsEC and incorporates the ECU and the Single Economic Space into the EAEU’s legal framework. • 2 January 2015: Armenia becomes a member of the EAEU. • 12 August 2015: Kyrgyzstan becomes a member of the EAEU. 9 The creation of the Eurasian Customs Union with its Customs Union partners is to be found in led to an increase in tariffs and non-tariff Kazakhstan’s trade structure. The country has little barriers, thereby undermining the trade to offer other than its natural resources. According potential of the ECU. By joining the Eurasian to some estimates, Kazakhstan’s participation in the Customs Union, Kazakhstan effectively adopted the Customs Union saves the country some US$ 500 mn Russian tariff and had to raise tariffs on some 5,400 in customs duties, but if Kazakhstan is to benefit tariff lines. The number of tariff lines with zero tariffs more fully from the opportunities created by the dropped from 1,164 in 2009 to 641 in 2012. Customs Union, it urgently needs to diversify its Kazakhstan also introduced tariff-rate quotas (TRQs) economy and move up the value chain. for imports of beef, poultry, and pork, as required by the ECU. A series of regulatory changes, Membership in the EAEU increases including the introduction of more restrictive non- Kazakhstan’s exposure to economic tariff measures were also adopted, most of them developments in ECU partners, in particular based on Russian regulations. Sanitary, Russia. The creation of the EAEU, and with it the phytosanitary and technical standards, in removal of internal trade and capital barriers, particular, became much more stringent - more makes mitigating shocks from Russia more restrictive in fact than those used in other major complicated. The entry into force of the Union markets. Regulations on import licensing were also coincided with a contraction of Russia’s economy toughened, and new mandatory requirements, following the sharp drop in oil prices and Western which were meant to facilitate trade, are in fact sanctions over Ukraine, which had direct increasing transaction costs. This is the case, in repercussions on Kazakhstan. The depreciation of particular, of the new Certificate of State the Russian Ruble against the Tenge in 2014 made Registration for goods subject to sanitary and imports from Russia cheaper, putting Kazakh epidemiological surveillance. companies under strain, while exports were hit by the trade sanctions imposed on Russia. In this Establishment of the Union increased regional context, WTO membership presents a unique trade, but caused trade diversion in favor of opportunity for Kazakhstan to diversify its trading Russia and Belarus, thereby inhibiting Kazakh relations, and through it its economy. gains in the Union. The entry into force of the Customs Union in January 2010 did lead to an increase in bilateral trade between Kazakhstan and its two Customs Union trading partners, the Russian Federation and Belarus, but this increase was mainly the result of a surge in imports. After 2010, Kazakhstan’s trade balance with the Russian Federation and Belarus, which was already in the red, deteriorated sharply (Figure 4). The main reason for Kazakhstan’s negative trade balance 10 Figure 4. After 2010, Kazakhstan’s bilateral trade with Belarus and the Russian Federation increased, but its trade balance with its two EAEU partners deteriorated sharply Kazakhstan’s bilateral trade with Belarus (in Kazakhstan’s bilateral trade with the Russian US$ mn) Federation (in US$ bn) Kazakhstan’s trade balance with Belarus Kazakhstan’s trade balance with the Russian Federation (in US$ bn) (in US$ mn) Source: UNComtrade WTO accession can help Kazakhstan diversify guarantees of fair competition and of a its trading relations. On 30 November 2015, predictable and more liberal environment in which Kazakhstan joined the WTO after 20 years of to operate. With greater stability, predictability, intense negotiations. WTO membership gives and fairness, and a more open business Kazakhstan access to the markets of all WTO environment, investment is encouraged. According Members on a most-favoured nation basis, making to Jensen and Tarr, 70 percent of the gains from it easier for Kazakhstan to enter new markets. WTO accession - estimated at 3.7 percent of GDP Membership in the WTO should stimulate in the medium term and close to 10 percent in the economic growth and investment. WTO longer run - are expected to come from the accession sends a strong signal of commitment to liberalization of foreign direct investment in business economic reform, stability and opening. The services. transparency and non-discriminatory obligations, along with the binding commitments that come Kazakhstan’s tariff commitments can be a with WTO accession offer foreign investors catalyst for greater competitiveness, but are 11 likely to impact sectors differently. The tariff reforms to further improve the business reductions negotiated during the WTO accession environment, logistics, and infrastructure, and process will lower the costs of imports for both facilitate trade is essential to attract investment, national producers and consumers and encourage improve competitiveness and further support domestic competition. Companies’ resulting easier Kazakhstan’s integration into the global economy. access to affordable inputs and technology should boost innovation and competitiveness, and provide further impetus for Kazakhstan’s integration into the K azakhstan’s active str ategy to pr omote global economy. As a result of WTO accession, gr owth and tr ade tariffs on agricultural products will be reduced from Kazakhstan has been pursuing an ambitious 16.7 percent to 7.6 percent, and tariffs on non- reform agenda to enhance its business agricultural goods will be bound at 5.9 percent - environment, diversify its economy and well below the levels negotiated by the Russian promote growth and trade. Over the past few Federation, i.e. 10.8 percent for agricultural goods years, Kazakhstan launched a series of structural and 7.3 percent for non-agricultural products. In reforms with a view to improving its business climate their study on the impact of WTO accession, and stimulating economic development. In Jensen and Tarr had estimated the gains from a 50 December 2012, President Nazarbayev percent tariff liberalization at 0.4 percent of announced the Kazakhstan 2050 Strategy, which household consumption. A more recent World Bank sets a series of economic, social and political paper, foresees gains of 0.3 percent (as percent of objectives with the aim of turning Kazakhstan into consumption) per year, based on the Russian tariff. one of the 30 most developed economies by 2050. To create the foundations for growth and Membership in the WTO is expected to lead to industrialization, infrastructure constraints have to a positive rebalancing of Kazakhstan’s trade be removed. This is particularly true for a country of flows with its Customs Union trading partners. the size of Kazakhstan. To address these constraints, According to a 2014 World Bank study, the government launched the Infrastructure membership in the WTO should lead to a strong Development Program Nurly Zhol (or “Bright Path to rebalancing of imports to pre-Customs Union the Future”) in November 2014. This US$9 billion patterns, thereby mitigating the negative impact of program aims to develop and modernize the Union on Kazakhstan’s economy. transportation and logistics infrastructure, industrial infrastructure, energy infrastructure, public utilities, WTO accession can help mitigate the negative housing, social infrastructure, and SMEs. Finally, in regulatory impact that followed the creation of May 2015, President Nazarbayev launched the the Customs Union. As noted above, a series of “100 Concrete Steps, A Modern State for All” to more stringent regulations were adopted in the help implement the 2050 Strategy. The 100 wake of the creation of the Customs Union and Concrete Steps cover five institutional areas: (i) gave rise to intense discussions during accession professionalizing public administration, (ii) enforcing negotiations. A unique aspect of Kazakhstan’s the rule of law, (iii) increasing state transparency accession package is the fact that a number of and accountability, (iv) fostering economic Kazakhstan’s commitments are binding on the EAEU diversification and growth, and (v) uniting the and its member states, in particular those related to nation. The 100 Concrete Steps include several key SPS, TBT, and import licensing, and require both reforms aimed at attracting strategic investors in Kazakhstan and other EAEU member states to various sectors, including tourism, energy, and ensure conformity with WTO rules. agriculture, and at modernizing and simplifying customs procedures. These reforms indicate a To take full advantage of WTO membership, strong commitment to building a more diversified, Kazakhstan needs to deepen its structural innovative and competitive economy. reforms. WTO accession can be a powerful tool to promote economic diversification and bolster A series of measures were also taken to competitiveness provided pro-active measures are improve the business environment for taken to seize the opportunities that WTO investors. In 2009, President Nursultan Nazarbayev membership opens. A deepening of structural 12 launched the State Program of Accelerated and the “one shop” principle was introduced to Industrial-Innovative Development of Kazakhstan assist investors. These changes bore fruits: The for 2010-2014 (SPAIID). This program marked the manufacturing sector attracted 2.9 times more transition to an active industrial policy in foreign direct investment over five years of the Kazakhstan. A new law on investment was passed SPAIID than in the five years preceding the SPAIID to give greater confidence to investors and the and for the first time in recent history, the National Agency for Export and Investment manufacturing sector of Kazakhstan began to grow “KAZNEX INVEST” was established. An Ombudsman at a faster pace than the mining sector (Figure 5). was created to investigate complaints by investors Figure 5. Kazakhstan’s manufacturing sector has started to grow at a faster pace than the mining sector (growth of industrial production, index of physical volume, percentage) Source: Alibek Konkakov and Gulaikhan Kubayeva, “Progress in diversification of the economy in Kazakhstan”, Maastricht School of Management, Working Paper 2016/8, August 2016. As a result, Kazakhstan has been a top However, Kazakhstan’s performance in reformer in recent years and significantly Trading across borders remains weak. Along improved its overall business climate. After with “getting credit”, “trading across borders” is the having moved up 12 ranks in the Doing Business area where Kazakhstan’s performance is the Index of the World Bank in 2016, Kazakhstan weakest. In 2015-2016, Kazakhstan made moved up another 6 ranks this year, from 41st in exporting less costly by removing two export 2016 to 35th in 2017. In 2015-2016, the Kazakh documents required for customs clearance, which government implemented business regulation enabled it to move from the 122nd to the 119th reforms making it easier to do business in seven of position in the 2017 Doing Business ranking. the ten areas examined: starting a business, However, Kazakhstan still remains well behind most dealing with construction permits, getting countries in the region in the Trading across borders electricity, protecting minority investors, enforcing indicator (Figures 6 to 7). Kazakhstan’s regulatory contracts, resolving insolvency, and trading across border management processes and policies lack borders. This makes Kazakhstan the top reformer in simplicity, transparency, reliability and efficiency, Europe and Central Asia, the second top reformer and negatively impact trade costs. in the world, a top-10 reformer for the second year in a row, and the country introducing reforms in the most indicators. 13 Figure 6. Despite recent progress on Doing Business indicators, Kazakhstan’s trading across borders performance remains weak* Note: The Trading Across Borders Methodology changed in 2017. As a result, the two lines cannot be compared directly, but merely reflect the individual rankings in 2016 and 2017. *The numbers in the diagram indicate Kazakhstan’s rank. Source: World Bank. Doing Business Indicators Figure 7. Kazakhstan’s trading across borders performance lags behind regional peers (distance to frontier) Source: World Bank. Doing Business Indicators 2017 14 High trade costs affect the competitiveness of Becoming a competitive trade hub: an Kazakhstan as a trade and transit hub. ambitious medium-term project. Moving goods Kazakhstan and other Central Asia countries tend between Asia and Europe via Kazakhstan will to have higher costs between themselves than only deliver limited benefits unless they stop on European or Asian countries between themselves the way and value is added in Kazakhstan. and sea transport between Asia and Europe Measures to ease border procedures and remains more than two times cheaper than rail improve infrastructure and logistics are essential transport via Kazakhstan. As a result, if trade costs to facilitate transit. They also contribute to are taken into consideration, the EU is as “close” to lowering trade costs and to promoting China as Kazakhstan. Measures to facilitate trade trading activities. However, such measures and transit procedures and to improve are not sufficient to turn Kazakhstan into a real, transportation infrastructure and logistics competitive regional trade hub. Other connectivity are essential if Kazakhstan wants reforms to promote industrial activity, become a competitive transit corridor between investment, innovation, firms’ access to credit, Asia, Europe, and the Middle East and a regional and conformity with international standards, trade hub. among others, are key. Diversification processes usually span from 25 to 35 years. Kazakhstan’s first priority should be to ease trading across border and improve infrastructure and logistics to create the foundations to facilitate transit and trade, while keeping in mind the more ambitious goal of turning the country into a regional trade hub that delivers diversified economic activities and jobs. 15 • LEVERAGING NEW ECONOMIC Kazakhstan’s customs formalities need to be OPPORTUNITIES TO FACILITATE further streamlined. Kazakhstan scores poorly in TRANSIT AND TRADE the OECD Trade Facilitation Indicators in terms of Tr ade facilitation customs formalities (Figure 8). The number of documents required for import/export clearance While the country continues to make progress should be reduced and document requirements in trade facilitation, more needs to be done to streamlined, which would help decrease the time speed up and streamline procedures, in line and cost associated with customs clearance. with Kazakhstan’s international obligations and Kazakh traders need to prepare six customs best practices. In fact, Kazakhstan falls short of documents in order to export a product to China, several of its future obligations under the WTO twice as many as those needed to import, as well Trade Facilitation Agreement (TFA) – an agreement as additional forms from other government adopted by WTO Members in December 2013 to agencies, depending on the product and market. facilitate and expedite the customs release of Among the required documents, the certificate of goods and reduce trade costs and ratified by radiation test requires a special inspection, an Kazakhstan in May 2016 (see Annex 1 for an expensive and potentially lengthy procedure. As a overview of the TFA provisions that Kazakhstan has result, the time and cost associated with complying notified as Category A – i.e. provisions that with customs regulations and documentary Kazakhstan will implement by the time the requirements necessary to export far exceed Agreement enters into force – and those that it will regional and best practice averages (Table 3). implement at a later stage). Full implementation of Between 2016 and 2017, the gap between the TFA is expected to bring significant benefits. Kazakhstan and Europe and Central Asia related to According to OECD estimates, the Agreement the cost to export even increased slightly. should lower trade costs by 10 to 14.5 percent. Figure 8. Kazakhstan scores poorly in terms of customs formalities Source: OECD Trade Facilitation Indicators 16 Table 3. Time and cost to export Indicator Kazakhstan Europe & OECD high Central Asia income Time to export: Border compliance (hours) 133 28 12 Cost to export: Border compliance (USD) 574 195 150 Time to export: Documentary compliance (hours) 128 27 3 Cost to export: Documentary compliance (USD) 320 111 36 Source: World Bank. Doing Business Indicators 2017 The high transaction cost of processing and High opportunity and inventory costs caused clearing goods poses a major obstacle to by lengthy customs procedures are serious business as it substantially increases barriers to supply chain efficiency. It is opportunity costs. Recent changes in the Doing estimated that on average, a one-day delay Business methodology removed transportation costs reduces the export value of most goods by one from being counted in the ranking. One would percent. Opportunity, inventory and warehousing have expected Kazakhstan to improve significantly costs caused by lengthy customs procedures and in the ranking, given its landlocked position, vast lack of reliability in the supply chain by importers land mass and long distances. The fact that are estimated at US$ 273 million p.a. (based on Kazakhstan’s ranking on trading across borders 2014 data). Time spent by goods imported from remained unchanged signals that transportation non-EAEU in clearance procedures at borders costs were not a bottleneck responsible for the represents an opportunity cost estimated at US$ 47 poor trading across borders performance. Instead, million and the cost of temporary storage in the businesses face documentary and regulatory customs warehouse is valued at US$ 120 million compliance obstacles. Lowering trade transaction (Table 4). This makes the logistics corridor costs would expedite the movement, release and uncompetitive. As a result, local shippers maintain clearance of goods, including goods in transit, thus 90 to 180 days of inventory on hand (of consumer benefitting all parties involved in the supply chain. goods) versus 15-30 days for Western consumer goods distributors and retailers. Table 4. Opportunity cost (OC), cost of customs warehousing (WHC) and cost of capital (COC) in million US$ (2014) Commodities OC WHC COC Total Other bulk commodities 2,4 11,6 - 14,0 Machinery 6,2 22,5 - 28,7 Vehicles 1,5 5,4 - 6,8 Iron & steel 0,8 3,7 - 4,5 Oil & oil products 0,7 3,6 - 4,4 Plastics 0,7 3,5 - 4,3 Electronic equipment 18,4 33,6 40,3 92,3 Food & Beverage 5,8 14,1 22,6 42,5 Pharmaceutical products 5,6 10,2 12,3 28,1 Apparel and footwear 1,4 3,4 8,3 13,1 Detergent and cosmetics 0,6 1,4 3,4 5,3 Other containerized goods 3,2 7,7 18,5 29,3 Total 47,2 120,8 105,3 273,3 Source: World Bank’s staff estimates based on UNCOMTRADE data 17 formalities and respond to requests of traders for Documentary formalities are further required forms and documents. As a result, fines complicated by a continued reliance on and additional delays for improperly following the paper-based processes and lack of full procedures are common, and inconsistencies in automation. Kazakhstan introduced electronic the interpretation and application of procedures customs and transit declarations as early as 1997. by border control agencies frequent. In many These documents were subsequently modified to cases, depending on the type of goods, Customs be harmonized with ECU partners. However, while require importers to produce additional permissions customs control is computerized and declarations and licenses, on top of the standard set of can be lodged online by the broker, the clearance documents required, which adds time and cost to process is still paper-based. There is a 100 percent the clearance procedure (Table 5). The customs manual check of documents for completeness and clearance process of consumer goods, for consistency, and the electronic example, requires a minimum of two additional documents to be submitted by the importer. At calculation of duties is manually rechecked. least two days are needed to clear the goods if the Electronic payment of duties, taxes, fees and importer has obtained the documents in advance. charges is not yet possible. Companies have to If Customs request additional documents that could submit an electronic declaration to customs not be obtained in advance, it might take up to 10 authorities, and get a confirmation, but once at the to 15 days to obtain them and complete customs border, a hard copy of the declaration is still clearance. Establishing an online trade portal that required. In addition, automated processing is not would make available all information on customs available full-time and the use of e-documents is clearance requirements and procedures from all hindered by interoperability problems. The customs agencies involved in the customs clearance administration uses several connected systems to process, and that would act as an enquiry point as perform various functions but is not able to perform required under the WTO Trade Facilitation electronic data exchanges. Implementing Agreement, would help enhance transparency of UNCTAD’s customs management system (ASYCUDA customs clearance. World) would improve customs automation. The new system is expected to be operational by mid- Ensuring that border agencies hold regular 2017. However, the planned ASYCUDA project only consultations with traders and stakeholders covers customs. Other services, such as those would enhance transparency and promote performing sanitary and phytosanitary controls, will mutual trust between Customs and the not have access to the system. business community. There is limited evidence that some level of consultations between the government and traders takes place before laws The lack of transparency in customs and regulations related to the movement, release, procedures and fees creates uncertainty and and clearance of goods enter into force. However, unpredictability in the supply chain and affects regular consultations do not seem to be the norm. the development of Kazakhstan as a transit The establishment of a National Trade Facilitation corridor. While there is an official customs Committee as required under the Trade Facilitation website, online information on customs procedures Agreement could be used as an opportunity to remains scarce. Information on fees and charges institutionalize a public private sector dialog. imposed on or in connection with importation and exportation, for example, is only available in paper publications. In addition, there is no enquiry point established to provide information on customs 18 Table 5. Number of additional documents and time needed for customs clearance of imported goods by commodities Commodities Number of Time needed Additional Documents Required additional for customs documents clearance in needed days Machinery 2 3 Certificate for compliance Import license Vehicles 1 1 Certificate for compliance Iron & steel 3 1 N.A. Oil & oil products 4 1 N.A. Electronic equipment 3-4 2 Certificate for compliance Import license Permission from sanitary epidemiological authority Permission from National Security Committee Food & Beverage 3 2-3 Certificate for compliance Import license Permission from sanitary epidemiological authority Permission from National Security Committee Pharmaceutical products 4 3 N.A. Apparel and footwear 2 2-3 N.A. Detergent and cosmetics 2 2-3 N.A. Source: World Bank staff based on interviews with traders The lack of transparency in customs time and cost. Although not formally required procedures also hampers the development of under the TFA, the creation of a Single Window that the logistics sector by providing disincentives enables traders to submit documentation and/or for entry by additional players. Currently data requirements for importation, exportation, or international logistics companies are discouraged transit of goods through a single entry point to from providing third party logistics (3PL) services in regulatory authorities or agencies is instrumental in Kazakhstan due to the lack of clarity and consistent facilitating procedures and reducing the time and application of trade and customs clearance cost of customs clearance. The establishment of a procedures. The entry of international 3PL service Single Window is one of the 100 Concrete Steps providers could have a significant impact on the announced in May 2015 by President Nazarbayev. quality of logistics services in Kazakhstan, in Efforts are underway to create a Single Window particular through the transfer of logistics know- environment, but the tight timeframe set will limit the how, and lead to further improvement of functionality of the system. Kazakhstan’s competitiveness and better integration of the country into the global logistics The lack of contemporary border network. management practices further delays the release of goods. A number of international The establishment of a Single Window would practices commonly used to facilitate border simplify customs formalities and help reduce clearance are not yet adequately implemented. 19 These concern: the capacity for (automated) pre- for selective customs controls, i.e. only arrival lodgment and processing of documents – all consignments deemed at high risk of non- documents are manually checked at the border compliance should be subject to screening and/or prior to the final determination and payment of physical examination. However, in reality, the customs duties at inland terminals; the separation principle of selective control does not appear to be of controls undertaken in ‘real-time’ from those that fully implemented and discretion results in can be completed ‘post-transaction’ (such as excessive interventions. The “green channel” exists valuation or conformity) and the separation of on paper, but is not used. In reality, all release from final determination of customs duties; consignments are subject to manual documentary the absence of accelerated controls for perishable checks. Pre-arrival processing of customs goods; simplified clearance procedures and other documents is not implemented: all documents are benefits for Authorized Economic Operators – i.e. systematically checked at the border. Customs traders who present a low risk of non-compliance; officials estimate that around 24 percent of goods and expedited release of ‘express consignment’ crossing the border are physically inspected, which goods entered through air cargo facilities under contrasts with best practices whereby only 1 special conditions (“expedited shipments”). There percent to 5 percent of goods are inspected. are no Authorized Economic Operators in However, according to traders, up to 50 percent of Kazakhstan, to a large extent due to the fact that goods are actually subject to physical inspection. the CU Code requires a level of guarantee for the Furthermore, the principle of selective control does payment of customs payments and taxes that most not seem to be applied consistently throughout the Kazakh companies, in particular SMEs, consider national territory. Systematic physical examination prohibitive. of consignments seems to be the norm at certain checkpoints. As physical inspection is carried out Enhancing advance rulings procedures would manually, resulting delays can be significant. improve certainty and predictability of cross border trade transactions. Determination of the Inconsistent application of customs clearance value of goods, classification of goods, and procedures can considerably distort determination of rules of origin are common transportation flows. Operations of customs in sources of disputes between Customs and traders. different locations vary considerably (speed of Advance ruling provisions aim at setting up a clearance, physical inspection, administration of transparent and formal process for traders to customs value, classification of goods, unofficial obtain, upon request, rulings from Customs prior to payments, etc.). Companies importing goods into the transaction with a view to improving Kazakhstan tend to bring goods to one customs predictability of cross border trade transactions clearance location near their main headquarters and facilitating trade. While Kazakhstan’s Customs and make distribution throughout Kazakhstan after do issue advance rulings, measures could be taken customs clearance. It is not uncommon to see to enhance transparency and accessibility of the companies such as Procter & Gamble or Metro system and ensure Kazakhstan’s conformity with the Cash & Carry bring goods from the EU all the way WTO Trade Facilitation Agreement. In particular, down to Almaty by either rail or trucks and then procedural rules on advance rulings should be shortly after clearance send them back by trucks to further developed and online request procedures Northern or Western Kazakhstan. should be made available. Ensuring full freedom of transit should be a Although a risk management system was put priority if Kazakhstan wants to become a in place in 2010 to facilitate customs regional transit hub between Asia and Europe. clearance, physical inspection remains high, While Kazakhstan committed to apply most trade delaying customs clearance. Risk management facilitation measures related to freedom of transit represents a modern, effective and efficient way to under the WTO Trade Facilitation Agreement upon deploy customs resources more effectively and to entry into force of the Agreement, it did not commit facilitate customs clearance. Kazakhstan to implement three specific provisions: the creation introduced a general risk management system of separate infrastructure for trade in transit, the covering all operators in 2010. The system provides possibility to provide guarantees for multiple 20 transactions for the same operators or renewal of Better external border agency cooperation guarantees without discharge of subsequent with non-ECU neighbors would improve supply consignments, and the appointment of a national chain flows and further facilitate cross border transit coordinator to which enquiries and proposals trade. Kazakhstan’s efforts to improve cross border relating to the good functioning of transit trade would be usefully complemented by operations could be addressed. Implementing measures to enhance interagency cooperation at these provisions as a matter of priority would the main border crossing points between expedite the movement of goods in transit and Kazakhstan and non-ECU neighbors, in particular help consolidate Kazakhstan’s position as a China. Such measures could involve: aligning regional transit hub. working days and hours with non-ECU neighboring countries, aligning customs procedures and Further streamlining and harmonizing formalities, developing joint border checkpoints, procedures is needed at the ECU level to fully interconnecting information systems to permit reap the benefits of the Union. The Customs exchange of information, performing joint customs Union intended to ease trade facilitation and controls, and establishing a one stop border post supply chain at the Kazakh-Russian border by control. abolishing customs control within the ECU territory and by providing for common customs procedures, and common rules for customs declaration, Infr astr uctur e valuation of goods and customs clearance. The Road, rail and pipeline are the three main customs checkpoint at the Kazakh-Russian border modes of transportation in Kazakhstan. There is was dismantled in July 2012. However, the no significant freight by air or sea. Bulk establishment of the Customs Union also led to commodities are generally transported by rail or additional non-tariff restrictions and new pipeline, given their relatively low-value, non- documentary requirements, such as the perishable, and less prone to theft in transit nature. Certification of State Registration. In addition, the Rail transport offers a relatively lower cost option impossibility for Kazakh traders to clear their goods over road transport on long distances (more than in Belarus or the Russian Federation forces them to 1,500km). Road transportation is used mainly for rely on Belarussian or Russian customs brokers to distributing fast moving consumer goods (FMCG) clear their goods, thereby increasing costs and and non-FMCG durable products within complicating customs clearance. As noted above, Kazakhstan. Most multinational companies deliver the ECU Code also made it more difficult to obtain imported goods to Almaty, and then further deliver the status of Authorized Economic Operators. In them by trucks to various parts of Kazakhstan. It is addition, interagency coordination within the ECU estimated that 99.98 percent of freight by truck in territory remains limited and information systems Kazakhstan is domestic. are not well interconnected. Finally, risk Most exports are transported by pipeline or management approaches at the level of the rail, reflecting the composition of trade in Customs Union are not well integrated, thereby Kazakhstan. Kazakhstan’s exports consist mostly of limiting the benefits of the system. Although ECU oil, gas and bulk commodities, which are best rules provide for customs control to be based on transported by pipeline or rail. As a result, export the principle of selective control and for the sharing and import movements represented only 0.01 of information on risks, the typologies of risks are percent and 0.02 percent of all freight transported defined nationally and the risk management by trucks in 2013, while transit traffic by truck systems of the three partners differ significantly in through Kazakhstan could be assumed to be terms of management techniques and degree of practically zero (Table 6). automation. 21 Table 6. Shares of freight transported by rail and road (2011 data) Total (mln Export Import Transit Domestic tons) (percent of (percent of (percent of (percent of total) total) total) total) Total 2,974.9 4.17 0.62 3.24 91.97 Road 2,475.5 0.01 0.02 0.00 99.98 Rail 279.7 35 6.41 5.39 53.2 -incl. 41.1 19.01 14.82 18.91 47.26 containers Source: World Bank. “Improvement and Further Development of Kazakhstan’s Logistics System” (2013) Kazakhstan’s infrastructure needs upgrading focus on the development of transportation to meet Kazakhstan’s aspirations to become a infrastructure and logistics at the local level, the transit hub between Asia and Europe. The Programme will improve accessibility and increase quality and density of infrastructure facilitates the connectivity throughout the country, thereby movement of goods, services and people, and as promoting development of Kazakhstan’s regions. such impacts economic activity. Kazakhstan ranks only 107 out of 140 in terms of quality of road In the aviation sector, the Programme foresees infrastructure in the WEF Global Competitiveness the renovation of airports and the gradual Index 2016. Kazakhstan’s road network consists liberalization of air transport regulation. By 2020, mainly of Class III sections of local and 75 new international air routes should be opened. international road networks, most of which are in need of repair. Moreover, the road network in rural In the water transport sector, the Programme areas is underdeveloped and in poor condition, provides for the renovation and expansion of the thereby increasing transportation costs and country’s only seaport, Aktau, located on the undermining economic development. Caspian Sea. The addition of three dry cargo Transportation costs are estimated at about 10 terminals should increase the port’s capacity from percent of the cargo value, well above the 4 16.5 million to about 20 million metric tons, making percent average of developed economies. the transport of goods to Europe via the Caspian Kazakhstan is also lagging behind in terms of port Sea without transiting via Russia an economically and air transport infrastructure –114th and 85th rank attractive alternative. respectively - but it scores better in terms of quality of railroads (27th rank). If Kazakhstan wants to In the road and railways sector, the Programme capitalize on its location and become a transit hub calls for the renovation of thousands of kilometers between Asia and Europe, it will require high of roads and railway, and the upgrade of railroad quality, efficient infrastructure, combined with engines, trucks and passenger cars. Highways will efficient border processes and logistical services. connect the capital, Astana, with regional transport hubs, such as Aktau (Center-West Corridor) and Kazakhstan’s current efforts to upgrade its Almaty (Center-South Corridor). Both corridors are infrastructure are key to the success of co-financed by the World Bank. Under the Kazakhstan’s development strategy. The State Programme, 81 percent of state railroads should Programme for Infrastructure Development up to be assessed as “good” by 2020 and the rest as 2020 (Nurly Zhol or “Bright Path to the Future”), “satisfactory.” A major reform in the railway sector is which was launched in November 2014 and whose the functional separation between infrastructure core goal is to create an efficient transport and development and rail transport, also known as logistics infrastructure in Kazakhstan, will be “unbundling of functions”, which should allow for instrumental in strengthening Kazakhstan’s potential an increased participation of the private sector in as a transit hub. In addition, by putting a particular the provision of railway services. The National 22 Railway Company “Kazakhstan Temir Zholy” (KTZ) defines itself as a “national logistics operator” that Efforts are also underway to promote Public- provides transportation and logistics services for Private Partnerships (PPPs) and private freight transit, imports and exports, in line with the sector’s participation. In November 2015, country’s 2050 Strategy’s target of doubling transit Kazakhstan adopted a new law on PPPs. Together traffic through Kazakhstan by 2020 and increasing with the new decrees and amendments to the it 10-fold by 2050. 2006 Law on Concessions, which allows long-term lease concessions to be awarded to private sector Several new international corridors have been operators over a range of state-owned assets built or are under construction, which will outside the oil and gas sector, the new PPP law strengthen Kazakhstan’s transit position broke new ground by expanding the scope for between Asia, Europe, and the Middle East. A PPPs and allowing government financial support to key project is the construction of the international a wider range of projects. The new law is part of “Western Europe–Western China corridor”, which the government’s efforts to bolster investment and starts from Orenburg in the Russian Federation and promote economic development. However, it ends at Khorgos in China – about 85 percent of remains to be seen whether the implementing which is cofinanced by the World Bank and other regulations that are now being prepared will IFIs. The Chinese city of Khorgos, which is expected provide the adequate framework to permit the to develop quickly into what some believe will be successful implementation of PPP transactions, a the Western Shenzhen, is seen as a key transit hub sector in which Kazakhstan’s record has so far been between China and Europe under China's New Silk rather disappointing. Road strategy. A special economic zone (SEZ) was established in Khorgos-Eastern Gate, which Logistics includes a logistics and industrial zone, a railway station and the Kazakh-Chinese Khorgos While Kazakhstan’s logistics performance has International Centre of Boundary Cooperation improved since 2007, it remains below that of (ICBC). In July 2015, Kazakhstan’s first dry port was its regional and income level peers. launched in the SEZ. Another major project was the Kazakhstan’s logistics performance has improved construction of a railway link Uzen-Turkmenistan significantly since 2007 on all six dimensions of the along the international North–South corridor to LPI index: 1) Efficiency of the clearance process connect China and Iran via Kazakhstan and (i.e., speed, simplicity and predictability of Turkmenistan. The new container train service was formalities) by border control agencies, including launched on February 1, 2016. The 9,000- customs; 2) Quality of trade and transport-related kilometre route reduces transit time between China infrastructure (e.g., ports, railroads, roads, and Iran from 25-30 days (when transported by information technology); 3) Ease of arranging sea) to 10 days. competitively priced shipments; 4) Competence and quality of logistics services (e.g., transport These efforts are bearing fruit, but more could operators, customs brokers); 5) Ability to track and be done to further improve intermodal trace consignments; and 6) Timeliness of shipments infrastructure. Containerized cargo transiting from in reaching destination within the scheduled or Asia to Europe via Kazakhstan increased 34 expected delivery time (Figure 10). Ranked 133rd in percent to roughly 47,000 TEUs in 2014, and the 2007, Kazakhstan moved up to the 77th position in number of container trains transiting via Kazakhstan 2016. However, it still lags behind its regional peers increased 57 percent to 1,290 from 2014 to 2015, (Figure 11) and was one of the most according to the national railway operator. underperforming non-high income countries in Kazakhstan is gradually becoming one of the 2014. The level of port and airport fees and biggest transit hubs between Asia and Europe and charges is high, the quality of infrastructure low, the the Gulf countries. However, improving the competence and quality of logistics services (e.g., interconnections between road, rail, and water transport operators, customs brokers) weak, and transport could further enhance the efficiency of the efficiency of the customs clearance process the transport network and increase competitiveness insufficient. As a result, the share of logistics costs in of the transit corridor. Kazakhstan is estimated at more than 25 percent 23 of the cost of production, which is much higher and limits Kazakhstan’s competitiveness. If it wants than the world average - which stands at 11 to become a regional transit and logistics hub, percent. Kazakhstan’s poor logistics performance Kazakhstan needs to improve its logistics reliability represents a serious impediment to trading and reduce logistics costs. activities, increasing the cost of doing business, Figure 10. Kazakhstan’s logistics performance improved since 2007 Source: Logistics Performance Index 2016 Figure 11. Kazakhstan underperforms compared to its regional peers Source: Logistics Performance Index 2016 24 Diverse factors impact the competitiveness of further complicated by the lack of legal framework. Kazakhstan’s logistics system. First, the lack of There is no legislation on the occupation of quality storage facilities in Kazakhstan and modern Multimodal transport operator, making it impossible logistics centers has long been a recurring to offer multimodal transport services under a single complaint of traders in spite of the relatively contract, and information on legal and technical dynamic development of logistics centers in the requirements is lacking, hampering trading country. Logistics facilities in Kazakhstan are not activities. optimally operated – there is room for improvement with regard warehouse layout, management and Greater use of logistics Information and service levels. Second, the provision of logistics Communication Technology (ICT) will help services is fragmented, in particular at the border. improve logistics performance in Kazakhstan. Border transit usually involves several transport ICT tools are underutilized among transport providers, a change of transportation mode, and and logistics firms. Automation systems in information flows across different systems. Third, the warehousing and inventory planning are limited legacy design of the supply chain from the and warehouse management systems (WMS) are breakup of the Soviet Union, which implies the not widely used. Because of an absence of obligation of going through a bonded warehouse, integration and compatibility of existing IT systems, is a major rigidity in the supply chain. Finally, the information sharing and information exchange slow pace of the transport sector’s liberalization between supply chain participants is limited and efforts, the lack of competition and insufficient leads to delays of shipments, overstocking of number of third party logistics (3PL), which drive up inventories, suboptimal load factors and inefficient costs, and the lack of qualified professionals are trucking operations. Development of ICT systems in also frequently mentioned. Putting aside customs Kazakhstan would improve the efficiency and clearance issues, Kazakhstan scores the lowest in coordination of supply chain processes. The terms of “competence and quality of logistics continuous improvement of the ICT infrastructure in services” in the WB Logistics Performance Index, the logistics sector will allow transport and logistics with a modest score of 2.57 (out of 5). The low firms to replace paper-based and manual reliability of supply chains and high transaction processes with automated processes that speed costs that result from these weaknesses acts as a the flow of information and goods in the supply key constraint on Kazakhstan’s competitiveness. chains. The limited capacity of logistics service Kazakhstan’s poor logistics performance must providers, lack of transparency, lack of be understood and addressed within the competition, and regulatory constraints regional context. As a landlocked country, hamper the development of an efficient Kazakhstan is dependent on its neighbors for cross multimodal transport industry. There are over 70 border trade. The poor quality of logistics services enterprises offering logistics services in Kazakhstan, and infrastructure in Eurasian countries negatively including express and courier companies, customs impacts Kazakhstan’s logistics performance. brokers and freight forwarders. However, only a few Addressing logistics deficiencies at the regional freight forwarders - most of them branches of level must be a priority if Kazakhstan is to become foreign companies - offer integrated multimodal an efficient regional transit, logistics and business services. Most local forwarders are not familiar with hub. Various infrastructure and trade facilitation modern logistics management methods and projects supported by international organizations services and are poorly integrated in global such as the Asian Development Bank (ADB), the logistics network. The lack of competition and European Bank for Reconstruction and limited access of private operators to the railway Development (EBRD), the International Monetary system and intermodal transportation negatively Fund (IMF), and the World Bank (WB) already put a impact Kazakhstan’s competitiveness as a transit large emphasis on the regional dimension in an country. Kazakhstan’s recent accession to the WTO effort to better integrate the markets of the region and the liberalization of transport services that will and expand regional trade opportunities. The result from it may help to increase competitiveness creation of the EAEU is, in this respect, a positive in this area. The provision of multimodal services is development as it will lead to EAEU-wide initiatives. 25 Indeed, the Eurasian Economic Commission has position the country as a regional transport, competence in freight transport and logistics. While logistics and trade hub. These initiatives the legal framework for logistics services is still demonstrate the strong commitment of the Kazakh being developed, benefits brought by the Customs government to develop its logistics infrastructure Union are seen very positively by the private sector. and services. However, the absence of integrated planning limits infrastructure productivity and leads Kazakhstan has embarked on an ambitious to fragmentation of the supply chain and loss of plan to improve its logistics infrastructure. An synergies between stakeholders. Interagency Committee for the development of Kazakhstan’s logistics system, chaired by the To become a competitive logistics hub, Deputy Prime-Minister, was established in 2011, Kazakhstan needs to find ways to provide and Kazakhstan’s national Railway company more value added services to its transit flows. “Kazakhstan Temir Zholy” (KTZ) was appointed as Given its level of development, Kazakhstan needs the country’s integrated logistics operator. As part to find ways to compete on value added services of the infrastructure development programme Nurly rather than on price. Raising competitiveness and Zhol, a series of transport and logistics centers (TLC) further improving the quality of logistics services by will be established by 2020 to modernize bringing in new investment and attracting 3PL Kazakhstan’s logistics infrastructure. The most providers, developing training in logistics and notable projects are the Khorgos-Eastern Gate supply chain management to enhance skills both Special Economic Zone (see above) and the at a practical and strategic level, developing Astana TLC, which opened last year. The Astana specialized storage, providing repair and return center is Kazakhstan's first premium class logistics, and taking a leading role in sustainable logistics center. It provides for multimodal rail-road transport and logistics issues would enable transportation services. It includes a container Kazakhstan to position itself as a quality logistical terminal and special gas chambers for long-term hub. To achieve this, Kazakhstan should develop a storage of fruit, and is equipped with modern comprehensive national logistics strategy and plan loading and unloading apparatus. It is semi- of action for domestic and international logistics automated. Further TLCs will be built in Aktau, covering the entirety of the supply chain, from Aktobe, Almaty, Atyrau, Kostanai, Pavlodar, Semey warehousing, to loading, handling and transport, and Uralsk, in an effort to equip Kazakhstan’s rather than looking at each activity separately. regions with modern logistics facilities and to 26 • TRADE FACILITATION • Implement pre-arrival processing of import documentation and establish a Green Channel for low-risk goods. • Customs formalities • Further develop and refine risk • Simplify document requirements for management procedures and establish customs clearance. Review documents a common approach to risk required to import and export and reduce management across all border documentary requirements to a minimum. agencies to ensure consistent application • Review the requirement to present throughout the national territory and hard copies of documents on top of e- reduce “red channel’ cases, i.e. goods documents. subject to physical inspection. • Develop Standard Operating • Establish a central body responsible for Procedures for officers to enhance developing and overseeing the transparency and predictability of the implementation of the common approach system and ensure consistency of at all border crossing points and inland application throughout the territory. terminals. • Review fees and charges and reduce • Separate good release from final their number wherever possible. determination of customs duties, taxes • Streamline and simplify ECU customs and fees and charges, which allows procedures, in particular those related to importers to obtain release of their goods imports of sanitary and phytosanitary under a guarantee, if required, prior to the products, to goods subject to import and final determination and payment of export licensing under the ECU Unified Lists, customs duties. and to the issuance of the Certificate of • Introduce accelerated controls for State Registration. perishable goods and preferential treatment concerning the separation of release from customs clearance. • Tr anspar ency • Review the requirements for the • Develop an online trade information Authorized Economic Operator portal that would make available all Program and adjust them so that they can information on customs clearance constitute the basis for a functional AEO requirements and procedures from all program in Kazakhstan. Begin with a pilot agencies involved in the customs program, for example, for exports. clearance process, and that would act as an enquiry point where traders can • Develop procedural rules for advance obtain authoritative information, as rulings and make online request required under the WTO Trade facilitation procedure available online. agreement. • Improve external border agency • Prepare guides/manuals explaining cooperation with non-ECU neighboring procedures governing customs clearance countries, in particular China, by (documents required, various steps, etc) aligning customs procedures and and the use of e-documents, and make formalities, aligning working days and them available online. hours with non-ECU neighboring countries, performing joint customs controls, interconnecting information systems to • Customs clear ance and r isk permit exchange of information, and management establishing a one stop border post control. 27 • Automation • Complete the pr ocess of establishing and putting into oper ation ASYCUDA • Infrastructure and Logistics Wor ld and pr ogr essively ex tend to all agencies involved in customs • National str ategy clear ance. Make access and • Establish a public-private dialogue on information/risk sharing available and transport and logistics to identify issues operational for other border agencies. faced by shippers and service providers that affect transit time, cost and reliability, and discuss measures to address them. • Develop a national transport and • Single Window logistics strategy and action plan to • Review and str eamline business support the sustainable development of the transport and logistics sectors and set pr ocedur es in all agencies involved in out measures to be taken over a 3-5-year international trade, including the period. The strategy should also ensure the development of a shared vision and setup of the necessary regulatory and blueprint for the implementation of a institutional framework of the transport and national single window. logistics sectors, which will be needed for • Develop a single window for tr ade the successful implementation of planned interventions. oper ations , a one-stop shop for traders, which connects all agencies involved in • Finalize the implementing regulations international trade, and where permits and for the November 2015 law on PPPs to declarations can be requested, uploaded, make the law operational and facilitate processed and received. the implementation of PPP transactions. • Fr eedom of tr ansit (as required under • Inter modal infr astr uctur e and logistics the WTO Trade Facilitation Agreement) • Develop intermodal infrastructure by • Create separate infrastructure for improving the interconnections between trade in transit. road, rail, and water transport in order to further enhance the efficiency of the • Provide guarantees for multiple transport network and increase transactions for the same operators or competitiveness of Kazakhstan as a transit renewal of guarantees without discharge corridor. In particular, develop intermodal of subsequent consignments. facilities and logistics centers and improve • Appoint national transit coordinator to integrated planning to enhance synergies which enquiries and proposals relating to and increase efficiency in the transactions the good functioning of transit operations between manufacturers, traders, 3PLs and could be addressed. freight forwarders. • Improve market access for private intermodal operators by removing • Gover nance market access restrictions and • Establish a National Tr ade Facilitation establishing equitable conditions and Committee to institutionalize a public- common rules to increase competitiveness, private sector dialog (secretariat, IT improve of intermodal services and reduce transportation and handling fees. infrastructure, technical assistance) and oversee implementation of the WTO Trade Facilitation agreement. 28 • Entr y of inter national 3PLs and SCM professionals. These should be based on international standards. • Create a solid framework for attracting international 3PLs to the local logistics • Encourage practitioners to obtain market to promote transfer of logistics international certification. know-how and improve the quality of logistics services available, and to enhance the country’s competitiveness as • Infor mation technology a transit corridor and integration into the • Encourage business leaders to make global logistics network. greater use of ICT and EDI systems in • In cooperation with industry associations, transport, logistics and SCM to improve identify potential investment projects inventory management, vehicle fleet and market them to international 3PLs utilization and routing, and track-and- and their investors. tracing. • Per for mance metr ics, standar ds and • Tr aining cer tification • Improve education and professional • Support local research institutions and training in logistics and SCM to ensure related organizations to introduce that skills developed match future market supply chain performance requirements. Lack of knowledge of measurement metrics and develop a modern logistics and SCM constrains national baseline of performance logistics sector development, limits use of benchmarks to measure future logistics IT and adoption of best practices. improvements in the supply chain. • Support advanced training in ICT and • Provide support to business associations EDI through the national education and educational institutions to establish institutions to promote their use. standards and certification for logistics 29 Annex 1 Table 1: Provisions of the WTO Trade Facilitation Agreement that Kazakhstan will implement by the time the Agreement enters into force (notified as Category A Commitments in document WT/PCTF/N/KAZ/1 dated 1 March 2016) Provision Summary of main requirements Article 2: Opportunity to Comment, Information before Entry into Force and Consultations 1. Opportunity to Comment · Traders and other interested parties must be given an opportunity and and Information before reasonable time to comment on proposals for new trade-related and customs Entry into Force laws and administrative regulations, as well as any amendments thereto. · New or amended laws and regulations must be made publicly available, as early as possible before their entry into force. Article 4: Procedures for Appeal or Review Members shall provide traders with the right to appeal decisions made by Customs in an administrative and/or judicial proceeding. Article 5: Other Measures to Enhance Impartiality, Non-Discrimination and Transparency 1. Notifications for · For countries that have such a system, the conditions under which notifications Enhanced Controls or or guidance may be made and maintained on the system, and the actions Inspections taken as a consequence of the notification or guidance, shall be subject to certain disciplines 2. Detention · If Customs or other border authority detains imported goods for inspection, it shall inform promptly the carrier, the importer or his agent (such as the customs broker, acting on the importer’s behalf). 3. Test Procedures · Members may grant traders the right to a second test, where test results on a sample of goods taken upon arrival of goods declared for importation are adverse to the trader · Members shall publish the contact information of laboratories where confirmatory tests can be carried out or provide this information to the importer. (They may be regional or international laboratories, if there are no national accredited laboratories) · Members shall consider the results of the second test. Article 6: Disciplines on Fees and Charges Imposed on or in Connection with Importation and Exportation and Penalties 1. General Disciplines on · The amount and purposes of any fees or charges imposed on imports or Fees and Charges Imposed exports must be consistent with the GATT Article VIII restrictions. on or in Connection with · Members must: Importation and Exportation - publish specified information about such fees and charges - publish any new or amended fees or charges an "adequate time" prior to their entry into force - periodically review their fees and charges in order to reduce the number and diversity "where practicable" 30 2. Specific Disciplines on · Customs fees and charges must be limited in amount to the approximate cost Fees and Charges for of the services rendered. Customs Processing · Fees not linked to a specific import or export operation must be closely Imposed on or in connected to the customs processing of the goods. Connection with Importation and Exportation 3. Penalty Disciplines · Members who apply civil or administrative customs penalties shall: - impose penalties only on the person(s) responsible for the violation - ensure that the amount of such penalties are proportionate to the degree and severity of the violation - avoid conflicts of interest - avoid creating an incentive for the assessment of a penalty that is not commensurate with the circumstances of the case - provide the person with a written explanation - consider a "prior disclosure" as a potential factor to mitigate the penalty amount Article 7: Release and Clearance of Goods 1. Pre-arrival Processing · Traders shall be permitted to submit the import documentation and other information required for release of imported goods, in electronic format where appropriate, prior to arrival of the goods in order to expedite release 3. Separation of Release · Members shall allow importers to obtain release of their goods, under a from Final Determination of guarantee, if required, prior to the final determination and payment of customs Customs Duties, Taxes, Fees duties, taxes, fees and charges where the final determination is not done prior and Charges to, upon arrival or as rapidly as possible after arrival · Any required guarantee shall be limited in amount to the equivalent of duties, taxes, fees and charges to which the goods may be liable, as determined by Customs · If the importer commits an offense, Customs may require a guarantee for the potential fine or penalty as a condition for release of the goods (however, release of goods in cases of violations of law or fraud shall be determined by each Member’s law) · Customs shall discharge the guarantee without delay when no longer required for its intended purposes/when all requirements have been met 4. Risk Management · Members shall apply risk management to customs control in connection with import, export and transit of goods · Members shall concentrate customs control on high risk consignments and expedite the release of low-risk goods · Members shall use appropriate selectivity criteria in applying risk management 5. Post-Clearance Audit · Members must use post-clearance audit "with a view to expediting the release of goods" and, wherever practicable, to inform risk management 31 · Audits must be transparent and the persons subject to audit should be notified with information about audit results 9. Perishable Goods15 Members shall adopt or maintain procedures for the importation of perishable goods that: · allow release within shortest possible time; · provide for release, where appropriate, outside Customs normal business hours; · give priority to such goods when scheduling examinations; · allow such goods to be stored in appropriate conditions for their conservation, where facilities approved by the relevant authorities are available; · where practicable, and upon request, allow release to occur at these storage facilities; and · require Customs to give a written explanation to the importer, on request, when there is a significant delay in the release of the goods. Article 8: Border Agency Cooperation · National border authorities/agencies shall cooperate and coordinate border controls and procedures to facilitate trade · Countries with common land borders shall, to the extent possible and practicable, cooperate and coordinate procedures to facilitate cross-border trade Article 9: Movement of Goods Intended for Import under Customs Control · A declarant should be able to move goods from a customs office of entry to another customs office within the same customs territory (under customs control). Article 10: Formalities Connected With Importation, Exportation And Transit 1. Formalities and · Members must periodically review formalities and documentation Documentation requirements with a view towards simplifying or reducing them Requirements · Documentation requirements or formalities should be as fast and efficient as possible. They should not be adopted if a less trade-restrictive solution is available. They should be eliminated or modified if no longer necessary 2. Acceptance of Copies · Border agencies shall endeavour to accept copies of supporting documents that may be required for import, export or transit formalities. · If the original document has been provided to one government authority, other government authorities shall accept a copy authenticated by the agency holding the original. · Neither an original nor a copy of the export declaration issued by authorities in the country of export shall be required for importation of the goods. 5. Pre-shipment Inspection · If a Member presently requires pre-shipment inspection of imports in relation to tariff classification or customs valuation, it shall end such requirements 32 · Members are encouraged not to introduce any such pre-shipment inspection requirements in the future. 6. Use of Customs Brokers · Members shall not introduce the requirement for the mandatory use of customs brokers. · Measures on the use of customs brokers, or any subsequent modifications thereof shall be notified to the Committee and published promptly. · Any broker licensing rules shall be transparent and objective. 7. Common Border · Customs shall apply uniform documentation requirements and uniform release Procedures and Uniform and clearance procedures Documentation Requirements 8. Rejected Goods · The importer shall have the right to return to the exporter, or any other person, imported goods that have been rejected by competent authorities due to failure to comply with prescribed sanitary and phytosanitary regulations or technical regulations 9. Temporary Admission of · Members shall adopt customs procedures for the temporary admission, Goods and Inward and inward processing and outward processing of goods. Outward Processing A temporary admission procedure allows goods to be imported for a limited period of time (six months, one year, etc.) for defined purposes (e.g., goods to be displayed at trade exhibitions; shipping containers imported to be filled; tools needed for a domestic manufacturing operation; traveller’s personal effects; foreign-registered automobiles used by visitors to the country, etc.) without payment of import duties and taxes. Manufacturers use the inward processing procedure for goods that have been returned to them for repair or for parts, materials, or other production inputs they use in their processing operations. Under the procedure, the goods may be imported without payment of duty or taxes provided the manufacturer exports the repaired or finished product within a specified period. Or duty may be refunded under a duty drawback scheme once the goods are exported. Outward processing allows persons to send domestic or previously- imported/duty-paid goods abroad for purposes of repair (for example, goods returned to the manufacturer under warranty) or for other processing, and re- import the repaired or processed goods within a fixed period of time without payment of import duty or taxes, with the exception of duty or tax assessed on the value-added by the foreign processing operation. Article 11: Freedom of Transit · Regulations or formalities on transit shall be eliminated or reduced if no longer required or a less trade-restrictive solution becomes available, and they should not be applied in a manner that would be a disguised restriction on trade · Charges that may be imposed on transit only for transit administrative procedures entailed or transit services provided, and shall be limited in amount to the expense of such procedures or cost of such services · Members shall not seek, take or maintain voluntary restraints or similar 33 measures on traffic in transit Strengthened Non- · Treatment Preceding Transit: A Member shall not treat goods that will pass in Discrimination (Paragraph transit through another Member’s territory to the final destination less favourably 4) than if the goods were shipped to the destination without passing through that other Member’s territory Transit, Procedures and · In processing and control of transit movements, a Member: Controls (Paragraphs 6-10) o shall allow pre-arrival declaration o shall not apply formalities, documentation requirements or controls other than those necessary to identify the goods and ensure compliance with transit requirements o shall not apply customs charges, formalities or inspections other than at the offices of departure and destination (and not en-route) o shall not apply technical regulations and conformity assessment procedures on goods in transit o shall promptly terminate the transit operation once goods reach the office of exit, if all requirements are met Cooperation and · Members must endeavour to cooperate and coordinate to enhance freedom Coordination (Paragraphs of transit 16) Article 23: Institutional Arrangements Each Member shall have a national trade facilitation body to oversee implementation of the WTO trade facilitation agreement 34 Table 2: Provisions of the WTO Trade Facilitation Agreement that Kazakhstan did not notify as Category A commitments, i.e. provisions that Kazakhstan will not implement upon entry into force of the Agreement Provision Summary of main requirements Article 1: Publication and Availability of Information 1. Publication · Members shall publish the general trade-related information listed in the proposal · Members shall publish such information "promptly" and in a "non- discriminatory and easily accessible manner" that will allow other governments, traders and interested persons to become acquainted with them. 2. Information Available · Members shall prepare practical guides to their import, export, and transit Through Internet procedures including appeal procedures · Members shall publish on the internet: (i) the practical guides, (ii) the forms and documents required for import, export or transit, (iii) relevant trade laws (where possible), and (iv) the enquiry point contact information. 3. Enquiry Points · A Member shall establish one or more "enquiry points" to respond to "reasonable" questions about the matters listed in Article 1.1 (procedures for importation, exportation, and transit; rates of duties; fees and charges; rules for classification and valuation of products; laws and regulations; import/export/transit restrictions, etc) , and to requests for required forms and documents. - If a member of a customs union or involved in regional integration, a Member may opt to participate in a regional enquiry point, rather than establishing a national enquiry point. · The Member shall respond to such enquires and requests within a "reasonable" time. · Members are encouraged not to charge fees for answering basic enquiries. Any fees charged for enquiries or for providing forms or documents shall be limited to the approximate cost incurred. 4. Notification · A Member shall provide the Committee with the names of the official publications and the address(es) of the website(s) where the information required by Article 1.1 and 1.2 has been published · A Member shall provide the Committee with the contact details of its enquiry point(s) Article 2: Opportunity to Comment, Information before Entry into Force and Consultations 2. Consultations Border agencies must hold "regular consultations" with traders and stakeholders 35 Article 3: Advance Rulings · Customs shall provide a written ruling on request of a trader concerning the tariff classification or origin of his goods (or any other matters described in paragraph 9(b) prior to their importation) · The ruling shall be binding on Customs and remain valid for a reasonable period of time · A trader shall have rights to be notified if Customs takes certain actions adverse to his interests (such as a refusal to issue a ruling or a decision to revoke or modify a ruling) · Customs must publish certain information about the ruling process Article 7: Release and Clearance of Goods 2. Electronic Payment To the extent practicable, Members should allow electronic payment of duties, taxes, fees and charges. 6. Establishment and · Members are encouraged to measure and publish, on a periodic basis and Publication of Average in a consistent manner, the average time it takes to release goods Release Times · Members are encouraged to share their experience in carrying out these measurements with the WTO trade facilitation committee 7. Trade Facilitation · Members shall provide certain additional trade facilitation benefits to Measures for Authorized "authorized operators," or those traders who Customs has determined present Operators a low risk of non-compliance with legal requirements. · Members shall publish the qualification criteria · Members’ are encouraged to base authorized trader schemes on international standards, unless inappropriate or ineffective · A Member shall afford other Members the possibility to negotiate a mutual recognition of their respective authorized trader schemes 8. Expedited Shipments · Members shall establish special facilitative procedures (as described in paragraph 8.2, e.g. minimize the documentation required) to allow expedited release of at least those goods entered through air cargo facilities · Members may permit only those persons or firms who fulfil the criteria listed in the subparagraphs of 8.1 to apply for expedited release treatment · Criteria for application for expedited release treatment shall be published Article 10: Formalities Connected With Importation, Exportation And Transit 3. Use of International · Members are encouraged to use "relevant international standards" as the Standards basis for their import, export and transit formalities and procedures. · Members are encouraged to take part in preparation and periodic review of standards through the "appropriate" international organizations. 4. Single Window · Members shall endeavor to establish a "single window" to which a trader can submit all documents and/or data required by customs and all other border or licensing authorities for the import, export or transit of goods, and from which the trader will receive all notifications. · "One-time submission:" where a trader submits required data and/or 36 documents to the single window he/she shall not be asked again for the same information other than in exceptional cases. · Members shall use ICT to the extent possible and practicable. Article 11: Freedom of Transit 5. Members are encouraged to make available, where practicable, physically separate infrastructure (such as lanes, berths and similar) for traffic in transit. 13. Each Member shall, in a manner consistent with its laws and regulations, allow comprehensive guarantees which include multiple transactions for same operators or renewal of guarantees without discharge for subsequent consignments. 17. Each Member shall endeavor to appoint a national transit coordinator to which all enquiries and proposals by other Members relating to the good functioning of transit operations can be addressed. Article 12: Customs Cooperation One Member shall provide another, upon request and subject to conditions, information and/or documents concerning specific import or export declarations. 37