INDUSTRIAL LOGISTICSHUB

SEZ “KHORGOS – EAST GATE”

• Аstanа 2012

KAZAKHSTAN TEMIR ZHOLY

Background of SEZ “Khorgos –East Gate”

Strategic background of SEZ “Khorgos – East Gate” development

• Strategic Plan for Development of Kazakhstan till 2020•State program of forced industrial-innovative development of Republic Kazakhstan for 2010 - 2014•The program on investments attraction, development of special economic zones and export stimulation in RK for 2010-2014•President of RK signed the Decree № 187 of November 29, 2011 "On creation of free economic zone" Khorgos - East Gate "

Head of State tasked to ensure by 2016 the establishment of

Kazakhstan as a trade, logistics hub of the region

• Creating a Hub "Khorgos" by technological coordination SEZ "Khorgos- East Gate" with the railway line "Zhetygen-Korgas", highway "Western Europe - Western China" and in the long run with the airport•International consultants LLP "Deloitte TCF" and AECOM are attracted, which develop the concept of further SEZ development, feasibility study adjustment, master plan and business plan for SEZ

Components of SEZ:• International Center for Boundary Cooperation (ICBC)• Dry Port (Inland Port)• Industrial Zone• Residential Zone

Strategic sites:• Airport• Altynkol Station• Zhetygen-Khorgos Railways• West Europe – West China Highway

Tax and customs privileges and preferences • CIT - 0 %• Land tax- 0 %• Property tax - 0 %• VAT - 0 %• Release from payment for the use of land for up to 10 years • Increase maximum level of depreciation on software from 15% to 40%• Regime of a free customs zone

Benefits to investors: • Provision of infrastructure facilities (power, heat, water, CBS) by

government• Simplified procedure for labour importation• Guarantee of legal protection of SEZ participants

SEZ“Khorgos – East Gate” is located in Panfilov area of Almaty region at the distance of 1 km from the state border with China

Priority activities: • Warehousing and supporting transportation activities;• Food production;• Leather goods Manufacturing;• Textile Manufacturing;• Nonmetallic mineral product manufacturing;• Chemical products manufacturing’• Manufacture of metal products other than machinery and equipment;• Manufacture of machinery and equipment not elsewhere classified ; • Construction of buildings for exhibitions, museums, warehouses and offices in accordance with the design estimate documentation.

International airport

Industrial zone Dry Port

Residential zone

Altynkol Station

Reserved zone for

SEZ

ICBC

Highway Western China and Western Europe

PRC

CPP 1

Total cost of the project – 3, 49 billion US dollarsIncluding:Public funds – 0, 72 billion US dollarsPrivate investments – 2 ,76 billion US dollars

• Geographical location, where East and West intersect• Creation of production with a difference of customs tariffs onfinished products and components imported from China• Dry port as an integral part of transport zone• Management on the principle «one window»• Proper level of preferences (customs duties, property andincome taxation)• National economic policy and Government financial support• Availability of electricity and utilities• Availability of skilled labor

Benefits of SEZ “Khorgos – East Gate”

Kazakhstan SEZ is betterthan benchmarked Locations

Kazakhstan SEZ is worse than benchmarked Locations

Kazakhstan SEZ is neutral to benchmarked Locations

Benefits to companies are competitive to other SEZ developments

Page 5

Assessed Location Factors

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Phili

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UAE

Nominal GDPReal GDP Growth GDP Per CapitaInflationFDI InflowsOverall Doing Business ScoreOverall Economic FreedomStarting a BusinessObtaining Construction PermitsRegistering PropertyGetting CreditProtecting InvestorsPaying TaxesExport/Import DocumentsEnforcing ContractsResolving Insolvency

Assessed Location Factors

Gua

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Free

Zon

e,

CHIN

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Pard

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, Cze

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Repu

blic

Sukh

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Egyp

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Tang

ier F

ree

Zone

, M

ORO

CCO

Subi

c Ba

y FZ

, Ph

ilipp

ines

Jebe

l Ali

Free

Zon

e,

UAE

Labor Costs ($/year)Land Lease ($/m2/year) TBD TBD TBD TBD TBD TBDLand Sale ($/m2) TBD TBD TBD TBD TBD TBDConstruction Cost for SFB ($/m2)Electricity Cost (kWh)Cost of Getting Electricity (% of income/capita)Water ($/m3)Diesel ($/liter)

Business Environment

Operating Costs

With an ease of Doing Business in Kazakhstan

Page 6

Source: The World Bank

0

180Starting a Business (57)

Dealing with Construction Permits (147)

Registering Property (29)

Getting Credit (78)

Protecting Investors (10)

Paying Taxes (13)

Trading Across Borders (176)

Enforcing Contracts (27)

Resolving Insolvency (54)

Getting Electricity (86)

SEZ: Industry Model

Page 7

Automotive assembly and machine assembly

Multi-modal logistics hub

Core Logistics Plus support function

•Financial•Legal•Administrative

Light Manufacturing /Engineering/Metal Products

Agriculture agro-food sector / processing

Construction and Building Materials

Automotive assembly plants

•Automotive supply cluster•Agricultural vehicles•Trains/rolling stock•Processing Machinery

Supporting the other sectors

•Automotive supply chain•Light manufacturing •Precision Engineering •Agricultural supply industry

Opportunity for value added processing

• Added value food processing

•Canning and packaging

Supporting development of the zone

•Added-value assembled products and components

Visitor economy

•Casino (long-term)•Hotels•Complementary food/drink and leisure offer•Other leisure and recreational

Workforce development and Technical College

•Technical level and basic skills provision•Sector specific workforce training facilities•High Education Facility

alleged zoning plan ALLEGED SEZ ZONING PLAN

Stage-by-stage development of SEZ zones (logistical, trading, industrial) within 25 years is planned

1) ICBC "Khorgos" - a network of trade andexhibition centers with appropriate transportand logistics, social, domestic, administrativeand business infrastructure, and with a speciallegal regime to conduct of cross-border tradeand cooperation with China and other countries.

2) Dry port - transport and logistics center withrailway lines, railway branches deadlocks, railand truck terminals, a set of specializedterminals and warehouses.

3) Industrial Zone - a complex of industrialenterprises on various types of industrialactivity, linked by a single engineering andtransport infrastructure.

4) Basic infrastructure of SEZ "Khorgos - East Gate":Railway line Zhetygen - Khorgos was opened on December 9, 2011.Highway Western Europe - Western China will be opened in 2013Airport Khorgos is a perspective.

Components SEZ «Khorgos – East gate»

Main preconditions: Initiative of Presidents of the RK and PRC during the visit

of President of the RK Nursultan Nazarbayev to China 22-25 December 2002

Agreement between the Government of the RK and theGovernment of the PRC on the regulationof "Khorgos"ICBC dated July 4, 2005.

Aims: To develop cross-border trade and economic, scientific-

technical and cultural cooperation of the RK and PRC

Special legal regime:: 30 days a visa-free regime; Free moving of citizens of Kazakhstan, China and other

countries between the Kazakhstan and Chinese parts of the Center within its borders through special pedestrian traffic shift.

Exemption from customs duties for goods, the amount and weight of less than 1,500 euros, and 50 kg;

Cost of project according to Feasibility Study – 2, 551 billion US dollars:

Private investments – 2,061 bill. US dollars Public budget - 0,49 bill. US dollars

Stages of completion of constriction at «Khorgos» ICBC: December 2, 2011 - construction sites to ensure free people

flow August 2012 - construction sites to provide freight flows December 2012 - completion of major infrastructure sites

From 2013 to 2018 - phased completion of constructionprojects funded by private investment.

3,42 km sq area1 ,85 km sq area

STATE BORDER

International Center for Boundary Cooperation (ICBC):

www.mcps-khorgos.kz

Vehicle and pedestrian crossing

*CCP-1

Total area of ICBC 5,28 km2

Center for regional cooperation and small

business (0,10 km sq )

Ethnographicpark

(0,192 km sq)

Cultural Ehxibition Zone (0,065 km sq )

International TouristResort Area

(0, 033 km sq )

Center for International

Business Cooperation

(0, 047 km sq )

Hospitality area(0, 031 km sq )

Sports andrecreational area

(0, 06 km sq )

Trade Exhibition Zone

(0,384 km sq )Transportation and

Transshipment terminals

(0,166 km sq )

designed objects

free objects

under construction objects

Investment objects:There are 103 investment objects on the territory of Kazakhstan part of the ICBC “Khorgos" and 48 of them are free.

Free investment objects:7 ethnographic parks, hotel and tourist complex• International Tourist Resort area• 12 hotels• 2 administrative buildings• 5 conference rooms• 16 trade pavilions with warehouses• 5 terminals

Conditions for attracting investors: • Provision of infrastructure facilities (power, heat, water, CBS) by government • Preferential rates for renting lands •Duty-free trading (1500 euro,

up to 50 kilos)•Simplified procedure for labour importation

The expected amount of tariffs for communal services: Electricity 0, 08 US dollar per 1 kWh (without VAT Water 0, 31 US dollar per 1 cub. meter (excl. VAT) Drainage 0,26 US dollar per 1 cub. meter (excl. VAT)

www.mcps-khorgos.kz

Attraction of Private Investment to ICBC “Khorgos”

Total area1,85 km sq

Industrial Zone in SEZ “Khorgos – East Gate”

Features of Industrial Zone

• Industrial zone is a unified engineering and transport infrastructure

• using the features of Dry Port

• 80% from gross production is oriented to export

• 20% of gross production is oriented to import substitution • gasification territory of industrial zone

• release from payment for the use of land for 10 years

• increase in the market manufactured products due to union economic space of the Customs Union

Priority activities:

•Food production (processing of cereals, bakery, mill)

• Light industry (processing of wool and leather goods, agricultural products)

• Production of building materials (brick, cement, asphalt plant, the production of ceramic tiles, etc.)

•Chemical industry (domestic chemistry, lacquers, paints)

• Assembly plants (basing on the assemblages of the Assembly machine-building equipment)

• Other manufacturing (reinforced concrete products, metal constructions, metal alloy)

Perspective:-Pharmaceuticals -Car Assembly production

www.kaznextinvest.kzwww.mint.gov.kz

Dry Port in SEZ “Khorgos – East Gate”

• Implementation of warehousing and supporting transport activities

• Operation of multimodal transport, linking the port with rail and road routes

• The prospect of the construction of the airport

• Maintenance of high consequence dangerous goods, goods with temperature

Features of dry port Objects

• Terminal zone • Warehouse zone• Special storage area • Container yard • Business Centre • Administrative

building Forecast for goods traffic in the direction of the China-Europe to

2020 year

• Good traffic will reach 170 million tones, 45% above the year 2010 (117 million tonnes).

• The challenge of Kazakhstan to attract 15 million. tones (8%) of this goodtraffic

•Via Khorgos 3-4 million tons

Customs Procedures

• Creation of industrial and logistics free economic zones, using free customs zone treatment.• Giving the status of SEZ-FCZ during construction of infrastructure facilities with amendments to the Law on SEZ.• Initiation of the prohibitions and restrictions ordering in the CU• Fully interconnected electronic system of customs for both sides of the border, to avoid duplication.

Logistics SEZ• The import of foreign goods into the territory of the logistics SEZ does not require declaration, but only the implementation of procedures at the arrival of the goods.• In order to avoid double declarations, to coordinate a question on allocation LSEZ to the area of the customs authority of st. Altynkol.• In order to use simplified procedures, to develop a procedure for customs declarations and verification of goods imported \ exported from the territory LSEZ.• Fencing of railway line and construction of selected path from the checkpoint at the border to LSEZ.

Industrial zone• To speed up customs clearance procedures, to provide for the temporary storageKey requirements for border and customs checkpoints:•Existing border and customs checkpoints at railway•Border and customs checkpoints at the new road (the Kazakh side of the boundary)•The customs checkpoint in the Dry Port Transport Area•The customs checkpoint at the road between transport area / duty-free zone (containing industrial and processing zones)

Customs procedures scheme of “Khorgos – East Gate” hub

Direct Transit:Products are issued at the Altynkol station by transit procedure based on customs declaration and followed by logistics SEZ.

Logistics SEZ (storage, loading, unloading, crushing):Items are followed to logistics SEZ and are issued by the customs authorities in a simplified manner by putting a mark on railway invoices at Altynkol station and at entrance to logistics SEZ.After the terminal operations, goods, exported from logistics SEZ, are declared with statement in customs declaration as a transit procedure or release for a domestic consumption.

Industrial SEZ (recycling):The goods are followed to the industrial SEZ through the logistics SEZ with customs declaration registration in the customs procedure of Customs-free zone;Placing of the goods in territory of logistics SEZ is carried out in the simplified order;Export of the processed goods from SEZ territory is carried out by the statement of transit procedure or release for internal consumption (re-import), re-export.

Management

Page 16

Functions:

• Developer• Infrastructure funding• Services to zone and tenants • One stop shop• Investment promotion

25% Government

75% Private

Operator

The question of international managingcompany involvement is considered to ensure effective administration and management of

SEZ "Khorgos - East gate“

Created by:

JSC Managing company of special economic zone “Khorgos – East Gate”

with 100% participation of JSC “NC “KTZH”

82Participants, out of

each:

38

In Dry Port In industrial zone

44

Showing interest:• Panalpina World Transport LLP • Kuehne + Nagel Ibrakom L.L.P • TOO «AsstrA Almaty» • TOO «Apply Logistics»• «Deutsche Bahn Schenker»• Panalpina World Transport LLP • China Shipping• Cosco Group • M&M Logistics • DHL • InterRail

In a perspective:

Participants:

Registered in SEZ

JSC MANAGING COMPANY "KHORGOS – EAST GATE”

reverse traffic

Kunming

Bangkok

Yangon

Bender-Homeini

Kishinev

Praha

HelsinkiSaint Petersburg

Kandalaksha

TLC and hubs on the territory of the RK

TLC and hubs in foreign countries

Gravity cargo for distribution

The direction of traffic after the distribution

Murmansk

Arkhangelsk

Vanino

Ulan-Bator

Chita

Beijing

Vladivostok

Dushanbe

Ussuriisk

Changzhou

SeoulPyongyang

Pusan

Transcontinental corridor "Western Europe -Western China"

Deli

Dhaka

Kuandzhu

Omsk

Alma-AtaUrumchi

Bishkek

Bucharest Rostov-na-Donu

AnkaraSarakhs

Turkmenbashi

Dubai

Tallinn

Klaipeda

ShymkentTashkent

Konstanca

Поти

Tbilisi

Kiev

Quryk

Amirabad

BakuGorgan

Bender-Abbas

Qaragandy

Astana

Aktobe

Aktau

Direction of reversetraffic

Agent network

Ust-Luga

Ekaterinburg

Moscow

TLC and hubs in the TC

MinskBerlin

Warsaw

Budapest Odessa

Transport and Logistics Cluster

Novosibirsk

Krasnoyarsk

N.Novgorod

Novorossiisk

KaliningradUlan-Ude

Khabarovsk

Chingqing

BurgasSofia

Duisburg Semey

Dostyk

Khorgos

Istanbul

Samara

Tehran

Ashkhabad

Liayungang

Riga

17

Transportation and logistics hub "Khorgos – East Gate”

RUSSIA

KYRGYZSTAN

ИСЛАНДИЯ

Antequera

Karagandy

AKTAU

Mongolia

Pusan

Hakata

Хельсинки

CHINA

ИСЛАНДИЯ

TURKEY

ТУНИ

СА

ZhezkazganShalkar

Aktobe

Pavlodar

Kashgar

Uralsk

Тбилиси

Semey

ГРУЗИЯ

Lianyungang

Urumchi

Nahodka

Shubarkol

Серахс

Lokot

Khorgos

Dostyk

Yekaterinburg

Petropavlovsk

Omsk

Saint Petersburg

The Map of the Transeuroasian Routes

Уральск

Poti

Chop

Ablyk

Saryagash

Sarakhs

1

2

3

4

5

6

NaushkiZabaykalsk 7-1

7-2 7-3

8

ASTANA

KAZAKHSTAN

Georgia

Baku

Ozinki

Saksaulskaya

Shymkent

Almaty

Ukrain

Brest

Moscow

Beineu

Route Distance, km

Lianyungang – Riga – Krasta exp. 9 754Lianyungang – Brest – Severny exp. 9 654Lianyungang – Chop exp. 10 184Lianyungang – Poti exp. 9 195Lianyungang – Ablyk 6 128Lianyungang – Sarakhs exp. 6 7217-1 Nahodka exp. – Brest – Severny exp. 10 5047-2 Zabaykalsk exp. – Brest – Severny exp. 7 7397-3 Naushki exp. – Brest – Severny exp. 6 981

Building of a railways lineZhezkazgan – Beineu

Length – 988 км;

Cost – 591 млрд. тг.

Volume of transportations to 2020 – 13 mln.t/year

Reduction of distance of a route Dostyk st. –Aktau st. on 1200 km;

The realization beginning – December, 2012

TRANSIT CORRIDORS OF KAZAKHSTAN

Main objective – to ensure the establishment of SEZ “Khorgos – East Gate” as one of the Customs Uniongates and the realization of transit potential, corresponding to the existing potential of Kazakhstan, oninternational transport corridors.

TRANSIT CORRIDORS OF KAZAKHSTAN

Thank you for attention!

АО «Национальный Центр Развития Транспортной

Логистики»

ContactsYermek ZhumashevActing President of JSC "International Centre for Boundary Cooperation “Khorgos" 041310, 28 Ten In Gen st.Golovackiy village,Almaty region,Republic of KazakhstanPhone: +7 (72831) 3 63 51 Phone/Fax:+7 (72831) 3 63 12E-mail: ao_mcpshorgos@mail.ruWeb-site: www.mcps-khorgos.kz

Dastan ZholzhanovPresident of JSC “Khorgos – Eastern Gates” Special Economic Zone Management Company”Phone:+ 7(701)7159395Fax 8 (72831) 3-62-01E-mail: karatal-73@mail.ruWeb-sites: www. ncrtl.kazlogistics.kz

www.railways.kz

Yerhat IskalievLogistics Vice-presidentJSC «National Company«Kazakhstan Temir Zholy»Telephone: +7 7172 604308Email: iskaliev_e@railways.kzWebsites: www.kazlogistics.kz

www.railways.kzSvetlana AubakirovaVise-president of JSC «National Center for Development of Transport Logistics»Phone: +7 (7172) 611 735E-mail: aubakirova_s@kazlogistics.kz

sveta.01.70@gmail.comWeb-site: www. ncrtl.kazlogistics.kz

www.railways.kz

National Center for Development of Transport Logistics

KAZAKHSTAN TEMIR ZHOLY