Kazakh single industry town is looking for new business opportunities

MINEX FORUM | February 15, 2017 | Views: 95

Arkalyk, a town of fewer than 30,000 people in the central belt of Kazakhstan, wears its mining heritage proudly. By the municipal museum, a hunk of bauxite stands atop a plinth, close to the excavator bucket that tore it out of the ground in 1964. After winter storms, brick-red mineral dust still speckles the snow-covered streets. Waste material from the mine, built largely by locally-held prisoners of the former Soviet Union, rises out of the steppe surrounding the town like earthen fortifications asia.nikkei.com notes.

 “First there was a mine, then a town that grew up around it,” said Arystan Aitmagambetov, editor of Torgai, a local newspaper. “They joke that Arkalyk was built by the [Communist youth movement], but it was inmates that did a lot of the work.”

More than 1,000 people are employed at the mine, but reserves are projected to be exhausted by 2022. That presents a big problem for Arkalyk, which is an extreme example of what policymakers in the energy-rich Central Asian state refer to as a “monotown,” or single-industry town.

In early 2012 the government rolled out a plan to boost the local economies of such settlements — weeks after an oil workers’ strike in the western city of Zhanaozen, another monotown, morphed into clashes with police that left at least 14 protesters dead.

Zhanaozen, Arkalyk and 25 other towns were earmarked for increased economic support, including loans and grants to develop small businesses. Residents of the monotowns, which are home to more than 1.5 million of the country’s 18 million people, were to gain new skills, allowing them to find employment in cities with better economic prospects.

“The government has an interest in developing these towns, because many of them have socioeconomic situations similar to Zhanaozen,” said Tulegen Askarov, an economist who heads the Biz Media business journalism center in Kazakhstan.

“The Zhanaozen incident happened when prices for oil and other commodities were high. Now they are low, which can affect salaries and so forth. So the risk of another social explosion somewhere else is not so distant from reality,” Askarov said.

However, the government initiative has not led to huge improvements in the monotowns. Moreover, falling prices for commodities — Kazakhstan’s main exports — have had a serious impact on the project, initially costed at 1.1 trillion tenge ($3.3 billion) between 2012 and 2020.

The country’s ministry for regional development, which was charged with implementing the program, was disbanded in 2014, and funding was scaled back the following year. But an incident at the beginning of 2017 served to reinforce the need to extend support to Kazakhstan’s infrastructure-strapped monotowns.

On Jan. 1, a suspected boiler explosion caused an apartment block to collapse in Shakhtinsk, another Soviet-built mining city in Karaganda province, killing nine people. Regional officials cited a lack of funds for heating infrastructure as the reason for the fatal accident.

Shadows of the past

The economically depressed monotowns are a stark contrast to Astana, Kazakhstan’s capital, and Almaty, its largest city, which have relatively well-developed public services and skylines that flaunt wealth generated by energy.

In Arkalyk, locals hark back to a rose-tinted past in the late 1970s and the 1980s, a period they refer to as “peak Alkalyk,” when the town’s mine accounted for a fifth of the Soviet Union’s output of bauxite, which is a raw material for aluminum production. Then, the town had a working airport, and had begun building a factory to produce aircraft engines.

“I cannot say a bad word about the Soviet Union,” said Yerlik Adeyev, a pensioner and former teacher who grew up in the town. “Full employment, stability, knowing the future — what is wrong with that?”

But Arkalyk’s transition from a mining town into a regional industrial hub was thwarted by the Soviet economic collapse, Kazakhstan’s move to independence as the Soviet Union dissolved in 1991, and the country’s subsequent shift to a market economy.

Demand for the mine’s bauxite fell as the Russian aluminum industry endured a crisis and began to search for raw materials inside Russia. The city lost its status as a provincial administrative center twice, once just before independence and again in 1997.

Arkalyk faced heating and electricity shortages into the 21st century, and residents suffered a steep decline in living standards. The population of the city and its surrounding villages fell by more than half from a Soviet high of more than 70,000 people.

“Arkalyk has already collapsed once, and it was a very rapid collapse. Now it is recovering somewhat,” said Berik Abdygaliuli, who has served as mayor of both Arkalyk and Zhezkazgan, another monotown 300km to the south.

“These other monotowns face different challenges depending on the health of their industries, but they all look at Arkalyk’s experience with a certain amount of dread. Almost overnight, it became unneeded,” Abdygaliuli said.

More recently, Russia’s economic slowdown and a fall in orders from government-backed factories in Kazakhstan have hit Arkalyk hard. Official unemployment of more than 9% is well above the national average of 5%, although officials say it has fallen slightly since the monotown improvement program came into force.

One project that local officials are keen to trumpet is an egg production plant that was built before the program began in 2009. More than 200 people work there now, mostly women. The ongoing expansion of the state rail network through the region also offers prospects for new markets and increased production.

But there is concern about the fate of the city after the mine’s projected closure, even though there will be a period of reclamation that will keep some workers in jobs. The town also hopes to find a market for large local deposits of fire clay, a material used in the manufacture of ceramics, especially fire bricks.

Municipal officials are confident that the deposits are high grade, which should attract interest from the construction industry. “This period is a window for us, to secure the town’s future,” said Amantai Balgarin, the town’s mayor.

Like many local officials in the country’s remote steppe regions, Balgarin dreams of better roads, including one that will run through the area under Kazakhstan’s “Nur Zhol” infrastructure program in the coming years.

“[The new] road should help connect Arkalyk to the Caspian Sea and beyond,” said Balgarin, who also hopes that neighboring China’s Belt and Road infrastructure initiative, in which Kazakhstan features, will benefit the town.

“We know very well what a road means,” he said. “A road means jobs for the people, the growth of services, some kind of impulse, money. A road means life!”

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