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Astana LRT: A Project or a Scam?

Astana LRT project has become widely known even beyond Kazakhstan not only for the controversial idea of the project but also for numerous scandals that accompany its implementation.


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Rail tracks of the “Astana LRT” project. Photo from the official site of the project clrt.kz

Construction of Astana LRT – Light Rail Transport – was launched back in 2011 and should have been completed by the end of June 2020, and the first electric train was going to be launched in August 2020. The overland transport project should have covered 18 stations, 19 light rail trains and a depot in the area of Astana international airport.

The Astana LRT project has become widely known even beyond Kazakhstan not only due to the controversial project but also due to the numerous scandals accompanying its implementation.

LRT lines cover 53 countries of all continents and transport 45 million passengers in 388 towns and cities every day in total. Back in 1950-1970, when some countries made a disastrous mistake by getting rid of tram lines under the pressure of auto mobilization, others started modernizing the rolling stock and/or separating tram lines. This is how LRT projects emerged.

Light rail in South Korea. Photo: wikiwand.com

The second wave of LRT development started in mid-1980s, when partially dismantled lines, especially in Europe and North America, were again put into operation.

70 new LRT systems were opened back in 2000-2015. 289 kilometers of lines were built in 19 countries of the world in 2016 alone. New systems were opened in Rio de Janeiro, Qingdao, Bydgoszcz, Kansas City, Seattle, and Washington.

Light rail in South Korea. Photo: wikiwand.com

Since early 2000s, LRT lines were also built in the Middle East, in Asian-Pacific Region and in Africa. Last year, two new lines appeared in Latin America: Medellin (Colombia) and between the cities of San Vicente and Santos (Brazil).

Light Rail Ontario, Canada. Photo: everest.ua

LRT can play a role of the traffic artery between mid-sized cities (200-600 thousand residents), but also can serve as a feeder line for metro systems with greater capacity or serve as the means of transportation for commuters.

The first stage of LRT construction in Astana is still in progress and there are doubts if it would be finished at all. Moreover, discussions about the reasonability of this project are happening.

The idea of light rail transport construction in the capital of Kazakhstan – the then Astana – occurred to the first president of the country, Nursultan Nazarbayev. As Astana was called the pet project of Nazarbayev from the very beginning, all infrastructure development projects of the republic’s central city were always the prerogative of the first president.

 Thus, the Astana LRT project started in 2005, when the akimat (mayor’s office) followed the order of President Nazarbayev and considered the need to create a new type of city transport to solve transport infrastructure issue of the fast-growing capital of Kazakhstan. In 2006, the then akim (mayor) of Astana, Umirzak Shukeev, submitted a feasibility study of the project.

However, the same year he was promoted to the post of governor of South Kazakhstan region.  In 2008, the new mayor of the capital, Askar Mamin, suggested to abandon LRT and implement BRT (Bus rapid transit) – a system of rapid buses. Once Mamin started implementing his project, Imangali Tasmagambetov was appointed to his place in the same 2008. 

New mayor Tasmagambetov resurrected the idea of LRT and even took a whole range of specific measures. He established the Astana LRT Limited Liability Partnership with 100% involvement of the akimat, which was the customer of LRT construction. The government of France provided a grant in the amount of 570 thousand euro for the project implementation.

French company Alstom and two Kazakhstan-based companies were selected as the contractor of the first phase of the project, probably as a token of gratitude.

Rail tracks of the “Astana LRT” project. Photo: clrt.kz

Just before the Capital Day in July 2011, Nursultan Nazarbayev took part in the capsule laying ceremony in honor of the beginning of LRT construction. The cost of the project was reported as 2.3 billion dollars.

However, these were not all project costs. Until 2013, additional sources of financing were sought. The Asian Development Bank, which was deemed as one of the financing options by Kazakhstan, issued a report about the high cost of the project and refused to take part. Nazarbayev ordered to abandon the expensive project and consider an alternative project.

In 2014, the mayor of Astana, Tasmagambetov, had to come back to BRT project, which, according to estimates, was much cheaper. However, in the same 2014, Imangali Tasmagambetov resigned from his office and was replaced by Adilbek Dzhaksybekov.

He suspended the BRT system and suggested to come back to the construction of light rail transport. Nursultan Nazarbayev approved it.

Rail tracks of the “Astana LRT” project. Photo: clrt.kz

A couple of months following the appointment of Dzhaksybekov, Nurali Aliev, the son of Rakhat Aliev and Dariga Nazarbayeva and the grandson of Nursultan Nazarbayev, became his deputy. He presented the project “The new transportation system of Astana”, in which the authorities of Kazakhstan again revived the idea of LRT construction.

Nurali Aliev speaking before the deputies of maslikhat, a representative body of the capital, justified the return to the light rail transport as follows: “The akimat had another task to accomplish: to build a modern line system of passenger transport that won’t have significant impact and load on the road network.

In the rapid-growing capital, LRT will minimize the impact on roads and road situations in the future,” N.Aliev said.

Before the world exhibition EXPO 2017 held in the capital of Kazakhstan, in 2016 deputy akim of Astana, Nurali Aliev, presented a program of modernization of the city transport system for 2015-2019. According to this program, the study of the global experience revealed that LRT will become “a perfect solution for the capital”. 

“This is a light metro system using high line tracks, over the ground, which almost excludes any load on the conventional transport system. Besides, LRT will ensure safety, mobility, the comfort of passenger traffic, and also decrease significantly the travel time,” Nurali Aliev said.

Rolling stock of the Astana LRT project. Photo: clrt.kz

LRT was promised to be launched by the time of EXPO. The total length was again reduced to 22.4 kilometers (initial length was 61.1 km, then 41.8 km). The overhead road was to connect the international airport of Astana, EXPO exhibition, multifunctional complex Abu Dhabi Plaza, which is still in progress, and the new railway station NurlyZhol.

In March 2016, Nurali Aliev resigned from the office of deputy akim of Astana. And in May of the same year, the Panama Papers, which contained the name of Nurali Aliev, his father, late Rakhat Aliev, and his mother, Dariga Nazarbayeva, became available to the public.

After the grandson of President Nazarbayev resigned office in the akimat of Astana, one of the deputies of akim said LRT won’t be constructed by the time of EXPO.

Depot of the project “Astana LRT”. Photo: clrt.kz

The events of 2013-2014 suggest that return to LRT project was a prepared measure. When funds were sought for the project financing, in 2013 the chairman of China Xi Jinping was on a visit to Astana and met Nursultan Nazarbayev and the then prime minister of Kazakhstan Karim Masimov.

At the end of 2014, a new akim of the city Dzhaksybekov announced the revival of the LRT project. In 2015, Prime Minister Karim Masimov visited Beijing and arranged for the cooperation under LRT project with the consortium of Chinese companies.

After long negotiations in 2015, the president of Kazakhstan Nursultan Nazarbayev and chairman of China Xi Jinping signed the first part of the EPC contract (Engineering-Procurement-Construction) and loan agreement for the project financing. The EPC contract provides for project implementation on the terms of contractor’s engineering, procurement, and construction.

The consortium of Chinese companies should have carried out works in the amount of 1.6 billion dollars, i.e. 80 percent of the project cost. The China Development Bank provided this amount for 20 years at 2.5 percent per annum under the loan agreement. The remaining 20 percent (over 200 million dollars) should have been paid by Kazakhstan.

The idea of a prepared return to LRT project can be confirmed by the fact that light rail transport construction in the capital of Kazakhstan is included in the list of priority foreign projects in the Chinese program “One Belt One Road” along with other 11 projects in various countries.

State programs of China are known for their fundamental preparation. As to the financing of LRT construction in Astana, it’s interesting to note that a quasi-public company (Astana LRT LLP with 100 percent involvement of the akimat) was the first to obtain the state guarantee. Also, the China Development Bank transferred money to a Kazakhstan-based company (the same Astana LRT LLP).

This is a remarkable precedent as China has a tacit yet strict principle – “all the money should be kept within the country”, i.e. usually Chinese banks transfer money under international loan agreements to Chinese companies involved in projects. Thus, payments under the loan agreement between Kazakhstan and China should have been transferred to the accounts of Chinese companies that are members of the LRT construction consortium. However, it was otherwise in this project.

As mentioned earlier, the LRT project was accompanied by scandals related to financial breaches from the very beginning.

Back in 2014, the National Bureau of Corruption Prevention revealed that Astana LRT LLP, established by the akimat of the city, transferred over 300 million tenge (about 2 million dollars, at the rate 150 tenge/dollar) of budget funds to the account of one of contractors and exceeded the limit by 125 million (833.3 thousand dollars at the rate 150 tenge/dollar). One year later, financial breaches were revealed for 9 billion tenge (48.7 million dollars at the rate of 185 tenge/dollar).

Back in 2017, deputy prime minister Askar Mamin took care of the project. When he was the akim of Astana, he suggested another transport project, Bus Rapid Transit (BRT). Mamin established Directorate for LRT Construction in the form of state LLP, which began the construction.

The new akim of the capital, Aset Isekeshev, reported the revision of the key clauses of the agreement – amendments to the cost of the project, widening of the track gage, and decrease of the depot area. Isekeshev first issued a reprimand to the director of Astana LRT LLP, Talgat Ardan, and then discharged him from his post.

Legal proceedings were initiated due to the outstanding liabilities of the previous management. Prejudicial inquiry was initiated on a criminal case against Talgat Ardan. He was issued an international arrest warrant.

Chinese contractors complained to Nursultan Nazarbayev that new terms of the contract are unacceptable, and the actions of Directorate for LRT Construction are taken as obstruction of construction. They called the terms unacceptable and threatened not only to break the contract, but also to apply punitive damages. Nevertheless, the construction was launched.

The consortium of Chinese companies engaged 1,414 employees to Astana, including more than a half of ordinary workers. As of October 17, 2017, they managed to build 1,974 augured piles, 143 foundation grilles, 38 supporting structures and six prefabricated girders.

Designs of the Astana LRT project installed to date. Photo CABAR.asia

On June 26, 2018, the national budget of Kazakhstan allocated 16.2 billion tenge (over 87.5 million dollars at the rate of 185 tenge/dollar) to the construction of LRT. And on June 27, 258 million dollars of budget funds, including Chinese loan, were reported to “stuck” on the deposit of Astana Bank, whose license was revoked by the National Bank due to financial problems.

According to Astana LRT LLP, on August 1, 2019, the China Development Bank allocated 343 million dollars. 15 percent of construction and installation works were completed.

The consortium of Chinese companies provided services in the amount of 313 million dollars in total, of which only 86 million dollars were paid.

Thus, the indebtedness to contractors is 203 million dollars. Moreover, by order of President Kassym-Zhomart Tokayev, the anti-corruption agency of Kazakhstan checked if project expenses were reasonable.

The reported damage to the budget was over 5 billion tenge (about 13 million dollars at the rate 386 tenge/dollar). The investigation revealed the billion tenge fraud scheme organised, according to the Agency of Corruption Prevention, by the director of Astana LRT LLP, Talgat Ardan, who is already put on the international wanted list, and former deputy akim of Astana, Kanat Sultanbekov (10.2009-12.2014).

Designs of the Astana LRT project installed to date. Photo CABAR.asia

The fraud, according to the investigation authorities, also involved former chief of passenger transport and road department of Astana, Rashid Amanzhulov, and former chief of the economy and budget planning department of Astana, Zhanat Nurpiisov. The said officials approved LRT construction costs that were overcharged by 24 billion tenge (almost 130 million dollars at the rate 185 tenge/dollar).

In 2017, Kanat Sultanbekov, being the chairman of the board of national company Kazakhstan Engineering, a subordinate organisation of the Ministry of Defence of Kazakhstan, was sentenced by court to 10 years of imprisonment for bribery.

Later on, the prison sentence was replaced with penalty in the amount of more than 2 billion tenge (more than 6 million dollars at the rate 322 tenge/dollar), which was paid by Sultanbekov in February 2018. Rashid Amanzhulov, being the intermediary of bribery, was arrested with regard to the case of Sultanbekov in April 2017. However, no information about the verdict regarding him is available in open sources.  

Rashid Amanzhulov was again arrested on a case of embezzlement during LRT construction. Zhanat Nurpiisov, who was elected as secretary of the maslikhat of Nur-Sultan (an elected representative body of the capital) since March 2016, was arrested together with him. Kanat Sultanbekov and Talgat Ardan were issued an international arrest warrant.

The government of Kazakhstan and akimat of Nur-Sultan (today’s name of the capital of Kazakhstan) decided to seek other sources of project construction financing and rejected the loan of the China Development Bank. To do so, Astana LRT LLP issued bonds in the amount of 1.5 billion dollars. The securities in the amount of 525 million dollars are already placed on the AIX (Astana International Exchange). The People’s Bank of Kazakhstan purchased these securities in the amount of 400 million dollars after selling 5 percent of its shares on the market.

The remaining bonds were offered to Baiterek National Management Holding, which involves all Kazakhstan-based development institutions such as Development Bank of Kazakhstan, Investment Fund of Kazakhstan, etc. The loan of the China Development Bank in the amount of 343 million dollars was fully repaid out of 420 million dollars received after the placement of bonds.

Moreover, one of the three Chinese companies in the project contractors’ consortium, to which the Kazakhstan party had claims regarding the quality of works, was replaced with the Kazakhstan-based Integra Construction LLP (former Zhol Zhondeushi LLP, a subsidiary of ENRC Logistics). The founder of the Kazakhstan-based construction company is PRIME System KZ LLP, which was founded by Orifdzhan Shadiev and Sadyr Makhmutov.

Orifdzhan Shadiev is a nephew of the citizen of Belgium, Patokh Shodiev, one of the shareholders of ENRC (Eurasian Natural Resources Company, now ERG, Eurasian Resources Group), a partner of Alexander Mashkevich and Alidzhan Ibragimov. Until July 2019, Orifdzhan Shadiev was the owner of 100 per cent of Kazakhstan-based banks: Asia Credit Bank and Capital Bank. In July 2019, both financial institutions merged with Tengri Bank, whose strategic partner is Indian Punjab National Bank. Orifdzhan Shadiev holds a share in the joint bank.

Designs of the Astana LRT project installed to date. Photo CABAR.asia

It seems that measures taken by the government of Kazakhstan and akimat of Nur-Sultan will allow completing the 1st phase of LRT construction, although in a scaled-down form.

However, no one dares to forecast the time of completion. The “construction project of the century” is frozen now and only ugly structures on the left bank of the capital, which are called “gallows poles” by local residents, remind of the “wonderful future” of Nur-Sultan.

 


This article was prepared as part of the Giving Voice, Driving Change – from the Borderland to the Steppes Project. The opinions expressed in the article do not reflect the position of the editorial or donor.

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