Shipment by all types of transport, mln tons

Total Railway Pipeline transport Trucking Other

Natural gas13%

Non-ferrous metals3%

Iron ore3%

Construction materials6%

Coal and chark20%

crude oil and oil products25%

Other 30%

Main products of shipments in 2018, tons

2015 2016 2017 2018 2019* 2020* 2021* 2022*

341 339387

398

416

436

456

477

215 206233

281

294

306

319

333

3,174 3,322 3,4213,691

3,9824,296

4,635

3,181

3,734 3,729 3,946

4,1044,404

4,728

5,075

5,449

* Baker Tilly's calculations

During the recent years Kaz- akhstan has actively expan- ded its potential as the tran- sit passage connecting Eu-

rope and Asia with noticeable develop-ment in automobile and air transpor-tation. This mainly happened due to

the limited capacity of railway tran-sportation in Kazakhstan.

The results of 2018 indicate the overall transportation volumes via all channels of 4,104 mln tons, 82% of that volume is related to automobiletransportation, railway comprises

9.7% and pipeline transport – 6.9%.

Average annual increase in ship- ment volumes during the last fouryears comprised 3%, with forecasted growth of 7% in 2022.

Shipment by all types of transport, mln tons

Gross income from railway, auto and air shipment amounted to KZT 938 bln in 2018, including 772 bln generated by railway , 149 bln by au-to and 7 bln by air. Despite highest income brought by railway, we still observe larger growth in automobile shipment: 33% growth in 2018 com-

pared with 12% increase in railway shipment. In addition, air transpor- tation is expected to have dynamic average annual growth with 16% projected growth during the 5 years span vs. 8% in auto shipment. Analysis of shipment in terms of volume (4,104 mln tons) by region in 2018 shows larger share of transpor-

Income from shipment by channels, KZT bln

1,400

1,200

1,000

800

600

400

200

02013 2019* 2020* 2021* 2022* 2023*

RailwayAir transportation

Trucks

* Baker Tilly's calculations

2014 2015 2016 2017 2018

tation in Karagandy region (20%) and East-Kazakhstan region (15%). This is is attributable to mining industry in these regions, which also demonstrates low level of own national production.

In addition to that, only 3 regions conduct air transportation, with Nur-Sultan being the leader (88% from total volume), followed by Almaty and West-Kazakhstan region with 9%

and 3%, respectively. Kazakhstan has a strategically bene- ficial location which leads to high transit potential. Warehouse logistics is another important factor

TOP-5 Shipment volumes by regions in physical terms

<2%2-5%>6%

20% 15%

7%

6%

Nur-Sultan

Almaty

6%Shymkent

North Kazakhstan Region

Kostanay Region

Akmola RegionPavlodar Region

Karaganda Region

West KazakhstanRegion

Atyrau RegionAktobe Region

Mangystau Region

Kyzylorda Region

South KazakhstanRegion

Jambyl Region

Almaty Region

15%

East Kazakhstan Region

Source: Statistics Committee of the Ministry of National Economy of the Republic of Kazakhstan

Source: Statistics Committee of the Ministry of National Economy of the Republic of KazakhstanSource: Statistics Committee of the Ministry of National Economy of the Republic of Kazakhstan

3PL-THE DRIVER OF RETAIL DEVEPOMENT

attributing to transit passage deve- lopment. It is crucial to have an ade-

quate supply of 3PL operators which will provide a wide range of services in line with international standards.

Warehouse logisticsWarehouse construction relates to

65th step of “Nation plan – 100 steps"– “Integration of Kazakhstan interna-tional transport & communication streams”. According to Baker Tilly ana- lysis, the overall area of storage facili- ties comprises 4.17 mln sq.meters. Thecoefficient of population provision wi- th storage facilities is 227 sq.meters per 1,000 people, which is much lower of Europe’s coefficient of 420 sq.m. There is an apparent shortage of 3PL operators which could provide the full spectrum of logistic services in Kazak- hstan, especially in northern regions of the country. The highest demand is for “A” class storages. During the last year, the overall volume of A class warehouses comprised 562 thousand sq.m., with 426 thousand sq.m. locat- ed in Almaty city. The other 20.6%

and 3.6% are located in Nur-Sultan and Shymkent cities, respectively. Potential market for warehouses is

7.73 mln.sq.m. Therefore, we observe a deficit of high-quality warehouses in Kazakhstan. Large storage complexes provide their services only for domes- tic market and do not engage in tran- sit stream servicing as there is no such need. Transit streams’ servicing is limi- ted to container processing at cross-border terminals and shipment. A-class warehouses are expected to gradually implement 4PL services and B-class warehouses – 3PL services in the near- est future. Logistics sector is somewhat an indicator of country’s economic de- velopment. Warehouse capacity indi- cates the level of trade as import and export are strongly connected to it. Despite approximately equal rent rates, an average occupancy of A class ware- houses in Almaty during 2015-2019 comprised 76%, while those located in Nur-Sultan showed only 57%. Rent rates varied from KZT 1,442 per palett spot in Almaty to 1,433 in Nur-Sultan.

Currently it is important to develop warehouse logistics in Kazakhstan in order to service production retail which will further contribute to growth of trade network in regions and decrease disorganized product trade. In 2018 around 50% of warehouses in Kazak- hstan were occupied by products of distributor companies, while Russia has much lower ration of 35%. Therefore, exis- ing logistic operators mainly target distribu- tors and wholesalers, with turnover of 40-45 days. In more developed counties 3PL operators mainly focus on work with product retail and companies engaging in e–comcommerce. Currently, logistic e expenses in Kazakhstan are relatively high and significantly exceed those in developed countries. The share of logistic expenses may sometimes reach 25% of finished good’s price, while average world indicator is at 11%. The main problem of A class warehouses is that the most of them provides a relatively limited range of services, which does not cover all 3PL.

"A" class warehouses

Source: Baker Tilly's analysis

Source: Baker Tilly's analysis

Almaty426,000 м2

Occupied76%

Empty24%

Nur-Sultan116,000 м2

Occupied57%

Empty43%

Shymkent 20,000 м2

This results in higher logistics expenses incurred by companies which in turn inflate prices on finish- ed goods. Also, Kazakhstan expe- riences a shortage of high class ware- houses almost in all regions of the country. Despite that, Kazakhstan still successfully follows its strategy

“Kazakhstan-New Silk way”. The successful project realization and strong potential for further industry development is supported by higher level of shipment during the latest years

This analysis was prepared by Baker Tilly Qazaqstan Advisory in the scope of project marketing development for one of largest participants in 3PL logistics.

Werehouse clients in Kazakhstan Warehouse clients in Russian Federation

Дистрибьюторские компании Розничная торговляМестные производители Транспорт и логистика Прочие

50 %

7 %20 %

3 %

20 %

35 %

6 %

10 %25 %

24 %

Дистрибьюторские компании Розничная торговляМестные производители Транспорт и логистика Прочие

50 %

7 %20 %

3 %

20 %

35 %

6 %

10 %25 %

24 %

Distributor companies Local producers

Retail trade Transport & Logistics Other

50 %

7 %20 %

3 %

20 %

35 %

6 %

10 %25 %

24 %

office 201, Block 2B, BC “Nurly Tau”, Al-Farabi Ave., Almaty, 050059, Kazakhstan+7 (727) 355 47 57, marketing@bakertilly.kz, www.bakertilly.kz

Baker Tilly Qazaqstan Advisory LLP trading as Baker Tilly is an independent member of Baker Tilly International. Baker Tilly International Limited is an English company. The name Baker Tilly and its associated logo is used under license from Baker Tilly

International Limited. www.bakertilly.global