TBY talks to two executives in the construction sector on the characteristics of the industry and the main markets.
How would you characterize the performance of your company in recent years?
AMANGELDY YELGONOV In 2011, the company grew by 30%. However, in the coming two years we expect growth to be slower as a reflection of the cyclical nature of our business. This is not solely inherent to Kazakhstan; the same occurs in Europe and the US. Our business is not retail, and we do not expect to grow continuously. Road construction is not constant, but repair work is fairly stable. We had plans to participate in a concession project that did not materialize. Instead, this project is being carried out through a public-private partnership (PPP) model. For such projects to be carried out, the appropriate legislation needs to be implemented. Because traffic volumes remain inadequate, we are wary of the risks associated with returns.
DASTAN URAKOV We have completed eight or nine state-led projects, a number of which are of national importance, such as a metro station, sports palace, and tennis court. There is interest in building a sports palace in a different region as well. We also started the construction of the Nazarbayev Intellectual School in Astana. Furthermore, MAG is building a car park on Saina Street in Almaty and a series of children’s health clinics, and the company frequently constructs roads in free economic zones. Additionally, we have completed the design of a sports complex and two kindergarten schools. MAG has contacted a Saudi Arabian company to form a partnership agreement as part of our strategy to collaborate with enterprises in the Middle East and attract investment to our construction sector.
How can the Customs Union increase the traffic volume in Kazakhstan?
AY The Customs Union will increase the traffic volume in the country, but we cannot predict how much to expect. The Western Europe-Western China project is an example of an important initiative to boost Kazakhstan’s transit potential. This project also increases the use of concrete in road construction. One of the new projects we are currently involved in is the Astana-Almaty route, a motorway that will run parallel to the high-speed train. This project is slated to start in 2014 or 2015. A 35-kilometer bridge is planned to cross Lake Balkhash, which will reduce the length of the road by 200 kilometers.
What are some of MAG’s residential development projects?
DU We have three real estate development projects in the pipeline. One is the development of a small suburb with 24 homes. Additionally, we are working on a residential complex, which is at the design stage and will be constructed in the center of Almaty. We are looking into establishing a consortium with Turkish companies for a residential project called “Revival,” which would see the construction of 1,000 units. If all goes well, we hope to start building in 2012. Additionally, we are building a shopping and entertainment complex on Rozybakiev Street in Almaty, which will cover an area of 110,000 sqm. We believe that this state-of-the-art complex will compete with the MEGA Center.
In which road construction-related segments do you expect movement?
AY The most rapidly developing segments will be in concrete and bridge building. In 2012, new cement plants opened in Kazakhstan; in the coming years we expect more to open, meeting the increased demand for cement.
Where do you see demand emerging from in the construction market?
DU We are working to meet existing demands; otherwise our business would be very risky. Currently, the demand in Almaty is there, but growing very slowly. The completed projects are selling gradually. The middle class cannot buy houses, largely because of the lack of favorable funding schemes. Therefore, the majority of construction in the country is associated with the state. Financial institutions have a funding framework that not all developers are willing to comply with.
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