ERLAN ATAMKULOV President of Kazakhstan Temir Zholy INTERVIEW

raffic by rail could soon put Kazakhstan squarely on the map of global exports. The border checkpoint at Dostyk-Alashankou is China’s second-largest by volume. In 2004, cargo turnover there exceeded 9.4 million tons of freight. Kazakhstan Temir Zholy, the state-owned railroad company, has recognized the extraordinary market potential next door. President Nazarbayev’s vision is to build standard-gauge tracks linking China to Western Europe, a project known as the Trans-Kazakhstan Trunk Railway (TKTR). Differences in gauge width have been a historic obstacle to transcontinental trade. Work on the first 1550 miles of tracks began last March.

“Our number crunchers show that a container loaded in eastern China can reach Europe within eight to nine days. By sea, this would take 45 to 60 days. We can thus increase our transit potential five to seven times,” says Erlan Atamkulov (INTERVIEW), President of Kazakhstan Temir Zholy. Even 220 miles of standard gauge would make cargo turnover at Dostyk-Alashankou jump to 30 million tons. The containers would initially consist of consumer goods, machinery, building materials and metallurgical products. “Until now, we had not yet presented the idea of the European standard gauge line in public,” says Mr. Atamkulov. But China has signaled its approval. President Nazarbayev will open negotiations with Russia and Ukraine, the other two winners in the transit deal.

New rail systems would reduce transit time from 50 days to 8 days.

TKTR has many upsides. In the world of logistics, the maxim is to ship merchandise as quickly as possible at the lowest possible rate. TKTR would reduce delivery times by less than half. Physical distance is also greatly reduced by shipping from western China. Furthermore, TKTR will create demand for trunk extensions to the emerging markets of Southeast Asia. Overall, there would be fewer intermediaries in the shipping process, thus lowering costs. In this late stage in history, the country seems to have regained its mythical status as a crossroads civilization between Europe and Asia. Centuries of trade along the Silk Road built khanate economies around the caravanserai, mudbrick inns for camel-loaded traffic. In today’s world of inter-modality, only the names have changed.

Kazakhstan Temir Zholy is not the loss-making state-owned enterprise that economists love to hate. Revenue in 2005 was $2.4 billion and annual transit loads are growing 45 percent per year. From a bloated staff of 128,000, the number of employees has been reduced to 79,000 after restructuring. Average salaries are among the top 10 percentile in the industry. The TKTR project will require significant investment capital, however. Mr. Atamkulov puts the figure at $6 to $8 billion.

“We are using our own finances, money from private investors and our pension funds,” he says. To issue $1 billion worth of Eurobonds, Kazakhstan Temir Zholy is sharpening its corporate profile. It adheres to Western European best practices for accounting, and the company laid down 435 miles of fiber-optic cable to monitor cargo traffic on their computer screens. Another 2,500 miles of fiber-optic cable is in the pipeline. “It’s important for us to show that our IT capacity meets world standards,” says Mr. Atamkulov.