Enhancing the Kazakhstan-ASEAN Countries Economic Partnership
Aug 4, 2020
Kazakhstan and the countries of the Association of Southeast Asian States (ASEAN) have been gradually enhancing their economic partnership to promote increased transit connectivity, joint infrastructure projects, and free trade agreements. Established in 1967, ASEAN is comprised of ten Southeast Asian nations, including Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. Southeast Asia has a population of more than 650 million, a combined GDP of nearly $3 trillion and an abundance of natural resources and critical shipping lanes. Southeast Asia and Kazakhstan are both endowed with strategic geographical positions. Most of Southeast Asia’s maritime nations benefit from the high traffic of goods transported through the Strait of Malacca, the busiest strait in the world by ship traffic seeing nearly 100,000 vessels pass through annually. Similarly, Kazakhstan is transforming into a regional transit hub. The country is wedged between China and Russia with access to the Caspian Sea to transport goods to the Southern Caucasus and the European Union.
China has already realized the potential of both regions and has pushed for the implementation of Belt and Road Initiative (BRI) infrastructure projects to improve transit and energy connectivity for the region. Kazakhstan is an essential link to Belt and Road Initiative projects, unofficially being dubbed the “buckle” of the BRI. Chinese President Xi Jinping launched both the Silk Road Economic Belt to bolster regional cooperation with Central Asia and the 21st Century Maritime Silk Road to stimulate economic partnerships with Southeast Asia in 2013, linking the two regions through their collaboration with China. Though Kazakhstan and ASEAN are located at different points on China’s geopolitical network in Asia, the BRI has considerable potential to increase collaboration between the two entities.
Singapore is eyeing Kazakhstan’s emerging market as an opportunity to expand its growing business sector. The historical partnership between the two countries could spark increased cooperation in their business sectors. Following the collapse of the Soviet Union in 1991, Kazakhstan’s first president, Nursultan Nazarbayev, invited Singapore’s then-Prime Minister Lee-Kuan Yew to visit the newly independent Central Asian republic to gain insight from Lee on how to transform Kazakhstan into a booming economic hub like Singapore. Since then, both countries have retained close economic partnerships. In November 2018, the two countries signed the Bilateral Investment Treaty to develop more joint business opportunities for Kazakhstani and Singaporean businesses. Singapore also reaffirmed its commitment to this strategic partnership by becoming the second Southeast Asian nation to sign a free trade agreement with the Eurasian Economic Union (EAEU), of which Kazakhstan is a member, in October 2019. Vietnam was the first to sign such an agreement in 2015 and recorded a 48 percent increase in Kazakhstani-Vietnamese trade in 2017 as a result. Indonesia, Cambodia, and Thailand have all signed Memorandums of Cooperation with the Eurasian Economic Council (EEC) of the EAEU, a possible first-step to signing a free trade agreement with the union.
China is not alone in its plan to move goods overland through Central Asia. Southeast Asian nations are also exploring the possibility of using Kazakhstan as a route to transport products to Europe. In March 2019, Vietnam launched the Vietnam-China-Kazakhstan transit route which allows Vietnamese goods to be transported by rail to Europe in 21 days. The land route is at least twice as fast as shipping goods across the Indian Ocean. Kazakhstan’s Khorgos dry port with China, its logistics terminal in Lianyungang port in China, and its Aktau port on the Caspian Sea make it appealing for Southeast Asian nations looking to reduce the time it takes to ship their goods to Europe.
Kazakhstan’s ambitions to become a booming center for Islamic finance are also drawing the predominantly-Muslim ASEAN members of Indonesia and Malaysia to improve bilateral relations with their Central Asian partner. There have been discussions between the Astana International Finance Centre (AIFC) and firms in the Malaysian financial sector on improving the Islamic banking partnership between the two countries. Similarly, Kazakhstan’s Deputy Foreign Affairs Minister Akylbek Kamaldinov noted that his country could learn from Indonesia if it wishes “to become a center for Islamic finance and halal industry in Central Asia.” Kazakhstan’s decision to develop its Islamic finance sector will likely attract the Muslim nations in Southeast Asia to bolster their economic ties with the country.
Kazakhstan is a dynamic emerging market and should not shy away from investment opportunities from beyond its immediate neighbors. The Central Asian country benefits from Chinese investment projects in the Belt and Road Initiative, linking Kazakhstan to Southeast Asia through their mutual relationship with China. Kazakhstan’s emerging market is also promising for Southeast Asian countries looking to invest in nontraditional partners, and its decision to develop Islamic finance will compel Indonesia and Malaysia to increase their investments in the country. By diversifying its BRI trade partners beyond China, Kazakhstan will be better equipped to avoid future reliance on China for trade and would elevate Kazakhstan’s status are an emerging global market and regional transit hub.