Sergei Nozhkin Adviser on international contacts and foreign trade, Altai krai Administration
Until the beginning of the 1990s, the possibilities for cross-regional, cross-border cooperation in the Altai Mountain region were not a topic for research. The socio-economic development of the territories in the area – namely East Kazakhstan, Altai krai and Mongolia’s western aimaks – was within the scope of the Soviet Union’s single national economy. The Soviet Union’s border with Mongolia was merely a line on a map and in no way separated the two sister states. Sections of China’s border with Mongolia and the Soviet Union, though, resembled an ‘iron curtain’ and were, in effect, closed areas, severing ties between the countries that border the Altai Mountains.
This all changed with the collapse of the Soviet Union, as the Altai Mountain region quickly transformed into the so-called cross-border Altai junction. Not only do the natural habitats of the main religions and cultures meet here, but also the borders and the political and economic interests of what are now four distinct states: China; Kazakhstan; Mongolia; and Russia.
For the bordering territories of Russia (Altai krai and Altai Republic), China (the Altay prefecture of the Xinjiang Uighur Autonomous Region (XUAR), and the XUAR itself), Mongolia (the Bayan-Olgiy and Hovd aimaks) and Kazakhstan (the East Kazakhstan oblast), the border issue has acquired great significance, as far as their internal and external development is concerned. (See map of Western Siberia and Central Asia.)
At the beginning of the 1990s, the economic and political disintegration that took place in relation to Russia and the former Soviet republics of Kazakhstan and Mongolia meant that manufacturing links, inter alia, were significantly weakened along the northern perimeter of the Altai Mountains. At the same time, the opening of the Russia–China border brought new opportunities for direct contact between Altai and Xinjiang.
This article analyses the socio-economic development of some of the territories in the Altai region, as well as the levels and conditions of bilateral trade in order to define possibilities for cooperation based on how the economic potential of the contiguous states and territories complement each other.
The Xinjiang Uighur Autonomous Region of China (XUAR)
Against the backdrop of the socio-economic crisis in Russia, Kazakhstan and Mongolia, the rapid development of the XUAR in the 1990s is rather impressive, as are its links with neighbouring states. The XUAR’s development programme envisages the effective use of the province’s geographical position. Xinjiang is regarded as China’s western gateway to Central Asia, Russia and Europe, as well as being a new centre of economic growth and cross-state and regional cooperation. XUAR is an agricultural region, one of the largest provinces in China and is sparsely populated. At present, nine million people reside in the XUAR, 60% of whom live in rural locations. Xinjiang’s economy is developing at an advanced rate relative to the Chinese average. By 2005, the region’s growth will have reached 7.9%; the predicted growth rate for China itself is 7.8%.
Urumchi, the region’s capital, has turned into a massive shipment point in the west of the country. This is the place where all produce is imported, and the area from where Chinese goods are exported further west and to Asia and Central Asia. According to Chinese statistics, Xinjiang-made products account for only 10% of the goods that China exports through the region and the XUAR uses 20% of the produce that is imported via this route. Thus, Russia's trade with Xinjiang is rapidly helping to initiate a trade alliance with the whole of China.
Over the past few years, the XUAR’s trade with Kazakhstan has increased considerably. (Its second biggest trading partner is Kyrgyzstan.) 1% of Russia’s trade with China is with Xinjiang, while Russia accounts for 5–8% of Xinjiang’s foreign trade turnover.
Chinese economists predict that annual trade between Russia and Xinjiang will grow to $1 billion, and that trade between Russia and China will rise to $20bn. Between 1985 and 1999, the weight of goods that passed through the 16 border checkpoints of the XUAR increased by over 200% per year. The volume of cargo crossing the border increased twelve-fold from 1991–99.
The Altay prefecture of the XUAR
The Altay prefecture of the XUAR covers 117,000 square kilometres and has a population of 583,000 people. It has a rural economy (accounting for 60% of the region’s gross domestic product (GDP)) and is supported by the mining and service industries. The standard of living remains low. Agricultural revenue brings in less than $300 million a year on average. Its future growth and development depends on the processing of farm produce, the development of the paper industry, the manufacture of building materials, the exploitation of natural resources, and the modernisation of the mining industry. Tourism is also important. Economic growth will continue to rely on improvements in the transport infrastructure, which links remote areas to the central regions of China, as well as providing access routes to neighbouring states.
The East Kazakhstan oblast of Kazakhstan
East Kazakhstan oblast covers an area of 283,300 square kilometres. On 1 January 2002 it had 1,504,300 inhabitants, including 621,700 rural people. The oblast is one of Kazakhstan’s industrially developed regions. Its main source of income is the export of non-ferrous metals, accounting for 52.3% of the region’s industrial output.
In addition, factories produce output for the defence industry, the light-industry sector produces silk and textiles, and a developed food industry produces alcoholic and non-alcoholic beverages. The energy sector is also very important, accounting for 13.2% of the oblast's industrial output. Energy is produced by three hydroelectric power stations and four thermoelectric power stations. The oblast has the capacity to export a significant amount of this energy to neighbouring states. This could become the main basis for future economic cooperation in the Altai region, since the other border territories are energy deficient. The countries that share a border with the Altai region are already solving their energy shortage by means of coal and electricity from Kazakhstan.
In 2000, the rate at which the population was decreasing stabilised. There has also been a marked fall in the number of people migrating from the region, indicating that population numbers will stabilise.
Altai Republic, Russian Federation
The Altai Republic accounts for 0.04% of western Siberia’s total industrial output. It is one of the Russian Federation’s many subsidised regions. Federal grants and subsidies account for 90% of its budget. The main industrial sectors in Altai Republic are non-ferrous metallurgy, food processing and timber. It has deposits of mineral reserves, pastures for livestock, forests and leisure and resort facilities. Thanks to its location on the highway that links western Siberia and western Mongolia, the republic’s trade with Mongolia has increased. Over one-third of Altai Republic’s exports to Mongolia are cars, while it mainly imports meat, silk, and foodstuffs from China and Mongolia.
Altai krai, Russian Federation
Altai krai is a large agricultural and industrial region. It is home to 2,000 firms that are involved in light and heavy industry. The krai is one of the largest producers of foodstuffs in eastern Russia; food processing is one the most important branches of this industry and has the brightest future. Altai krai is the largest producer of grain, sugar and meat in Siberia and is the second largest producer of cheese of all of the Siberia’s regions.
Electric power, car manufacturing, chemical and petrochemical production, building-material production, textiles and light industry are the major business sectors. The Altai kra’s resources of raw minerals will result in it becoming Russia’s main supplier of non-ferrous and precious metals. Since 1991, the krai has managed to combat the fall in industrial output. A 42% increase in output between 1999 and 2001 has compensated for the decline experienced in the four years prior to 1999. The Altai krai's foreign trade in 2001 amounted to $386m, an increase of 27.1% on the previous year.
All four states in the Altai region (China, Kazakhstan, Mongolia and Russia) realise that they have to establish good relations with their neighbours. Links between businesses of the different countries are an important base on which to build and expand cultural, educational, scientific and technical relationships. At the same time, socio-political and economic developments are also important, as is legislation on cross-border cooperation.
Normative legislation is in force, and forms the basis for cross-regional, trans-border cooperation between the territories that border the Altai region. The Altai krai authorities and their counterparts in neighbouring regions signed this legislation. At present, trade and economic agreements and scientific and technical treaties exist between Russia’s Altai krai, Kazakhstan’s East Kazakhstan oblast, Mongolia’s Bayan-Olgiy aimak and China’s Xinjiang Uighur Autonomous Region.
The Altai krai and Kazakhstan
For some time, Kazakhstan has been the Altai krai’s main trading partner and is certainly its biggest ally in terms of trade volume. In the last three years alone, Russia’s trade with Kazakhstan was worth $450m. Since 1991, 133 Russian-Kazakh joint ventures have been registered in Altai krai. These include some trade houses established by major businesses and manufacturers, which facilitate agreements on lower prices and allow more flexible payment plans to be worked out. Subsequently, long-term trade partnerships have been established.
Altai krai’s main exports to Kazakhstan are coke, explosives, timber and wood products, steam boilers and related equipment, spare parts, tractors and ferrous-metal goods. The list of commodities that the krai imports from Kazakhstan is just as long. At the top of it are grain, flour and cereal products, meat and meat by-products.
At present, two agreements exist between the Altai krai and oblasts in Kazakhstan. The first is a trade and economics treaty drawn up by the administrations of the Altai krai and the East Kazakhstan oblast. The second is an agreement on cultural exchange and socio-economic cooperation drawn up by the krai's administration and the akim (local government) of the North Kazakhstan oblast. An agreement focussing on trade and economics, science and technology, and culture has been drafted and agreed on by the Altai krai and Kazakhstan’s Pavlodar oblast. Agreements with East Kazakhstan incorporate the following initiatives:
the holding of exhibitions in Barnaul and Ust-Kamenogorsk;
expansion of the range of goods to be traded;
creation of wholesale markets;
establishment of a payments system using a clearing centre and the Altai krai's accounts chamber;
ongoing efforts to increase the volume of bilateral trade; and
the signing of new trade treaties on a frequent basis.
Representatives of the Altai and Kazakh business communities meet regularly. A database of all goods produced by businesses in neighbouring regions has been compiled. The Altai krai Council of People’s Deputies (local parliament) has set up a committee charged with expanding links with Russian expatriates in the neighbouring oblasts of Kazakhstan.
Coordination between local authorities Kazakhstan on either side of the Russian-Kazakh border that runs through Altai krai is necessary due to the ‘transparent’ nature of the border. Unfortunately, the five customs inspection areas and the six vehicle and three railway checkpoints are no barrier to cross-border flows of contraband or drugs. The delimitation and demarcation of Russia’s border with Kazakhstan requires the special attention of, and coordination between, the authorities of the two countries.
The tax-free export of timber and scrap ferrous and non-ferrous metals to Kazakhstan poses another major problem. As Russia and Kazakhstan now share a single customs zone, large amounts of the aforementioned goods (originating in Kazakhstan) can be bought in Altai krai duty-free. Russians then resell these goods to China, again, duty free. Chinese firms have realised that it is more profitable to buy timber and scrap metal direct from Kazakhstan than to sign contracts with companies in Altai krai. Consequently, Russia is now losing huge sums of money.
Plans are being drawn up to open a car-assembly factory in the town of Ust-Kamenogorsk. This may become important in establishing close technological and manufacturing ties between the Altai krai and the East Kazakhstan oblast. Regardless of how successful this agreement is, at the very least, the Siberian city of Barnaul will manufacture diesel engines, electro-mechanical equipment, tyres and other rubber goods for Kazakh-made Zhiguli automobiles. There are plans to sell the finished products (passenger cars) to Russia and China, using Altai krai as the supply route. Collaboration of this kind will act as a catalyst for cooperation on a grander scale between all of the territories in the Altai region.
The Altai krai and China
The level of cooperation between Altai krai and China is rising at a constant rate. There are 83 Russo-Chinese joint ventures in Altai krai. The latter mostly exports steam boilers and related parts, metalworking products, and timber, and imports everyday goods like toys, clothes and processed agricultural products.
Relations between Altai krai and the XUAR were at their best between 1998 and 2001. In February 1999, the governing bodies of the Altai krai and the XUAR drew up a socio-economic, scientific, technical and cultural treaty. A permanent working group was created as part of this agreement, and a wholesale market for Chinese goods was opened in Barnaul. A group of companies operating in the areas of the timber trade, crop cultivation, and the manufacture of mixed fodder has also been established. Between 1999 and 2000, cargo and passenger flights flew from Barnaul to Urumchi. Because the planes’ capacity was not being fully utilised, however, these direct flights were terminated and they now fly via Novosibirsk. Due to the large number of business delegates, experts, and tourist groups passing between Altai krai and Siberia from the XUAR, Russo-Sino consulates need to be set up in Urumchi and in one of the towns in western Siberia.
Another issue that may hinder progress in relation to socio-economic cooperation between the two regions is the lack of adequate transport systems. At present, the main means of conveying goods and people between Altai krai and the XUAR is by car or train via Kazakhstan. The carrying capacity, coupled with the high cost of transporting goods via Kazakhstan, means that neither Russian nor Chinese firms find this to be an attractive option. As for direct routes between Altai krai and Mongolia, the crossing at Tashanta on the Russo-Mongolian border will soon be upgraded to the status of a major international vehicle checkpoint. Freight is transported not only from Russia into Mongolia, but also from Mongolia into Russia and China. If road conditions improve, and if large-capacity rolling stock is made available, an increase in cargo transportation is to be expected.
The Altai krai and Mongolia
Mongolia is traditionally one of Altai krai’s most important partners as far as cross-border cooperation is concerned. During the Soviet period, most Soviet-Mongolian trade went through the krai. The Chuskii highway linked southern Siberia with Mongolia’s western aimaks. For many years, various goods made in the krai reached Mongolia via this road. At the beginning of the 1990s, Mongolia announced its intention to diversify its trade links away from Russia and to seek out new partnerships with other nations, namely China and South Korea. There was, in effect, no trade or business between Russia and Mongolia between 1991 and 1995, when it began to pick up.
In 2001, despite many difficulties, Mongolia’s trade turnover with Russia almost tripled compared to figures for 2000. The nature of Mongolia’s trade and economic relations have been tainted by lack of development in the western aimaks, which share a border with Altai krai, and by the breakdown of the import–export system between the neighbouring states. The fact is, however, that, until the 1990s, all that the Soviet Union received from Mongolia was live cattle, which were subsequently transferred to meat-processing factories in Biisk (Altai krai) and Semipalatinsk (Kazakhstan). For the most part, everyday goods were exported from the Soviet Union to Mongolia. Subsequently, and to the present day, trade between Russia and Mongolia is insubstantial, with Russia exporting diesel generators, flour and consumer goods in exchange for meat and meat products from Mongolia. Although overall imports were up, imports of meat have declined due to a ban on Mongolian meat implemented by the Russian Ministry for Agriculture’s Department of Veterinary Medicine following the discovery of foot-and-mouth disease in Mongolia’s eastern aimaks. Although the ban has, in theory, been lifted, the department has informed regional veterinary units that no new licences to import Mongolian meat will be issued to Russian importers for the time being, although existing ones are valid. No limitations have been placed on the import of live cattle, though. One problem yet to be solved is the question of meat that is being reprocessed at Biisk meat-packing plants after it was imported in accordance with a barter agreement between the Russian and Mongolian governments, which allows Mongolia to pay off some of its foreign debt to Russia in meat. At present, because the federal government is managing this trade, the distribution of this meat comes under the jurisdiction of the Russian Ministry for Agriculture. Moscow-based firms have been given contracts to sell the meat and local Altai companies are not happy at being excluded from this market.
However, relations with Mongolia are not based around meat imports alone. There is scope to explore western Mongolia’s rich fossil-ore deposits. If plans to build gas pipelines from Russia to China via Mongolia are realised, the necessary energy and infrastructure conditions might exist to allow the Siberian regions and Russia as a whole to participate in the exploration of Mongolia’s raw-material deposits.
In 2001, a memorandum concerning cooperation between regions in the Siberian Federal District and the Mongolian section of the Russo-Mongolian intergovernmental commission was signed. Whether or not the majority of the projects mentioned in the memorandum will come to fruition depends on whether the problem of meat and animal by-product imports is solved.
The Altai krai has traditionally had good ties with Mongolia as far as culture and education is concerned. Business delegates from the respective regions visit each other on a regular basis, Mongolian students attend higher education institutes in the Altai krai and there are joint art exhibitions.
East Kazakhstan oblast and China
Most goods exported by East Kazakhstan oblast to China are linked to the redistribution of ferrous and non-ferrous metals. China mainly sells shoes, clothes and household appliances to the East Kazakhstan oblast. The respective regional authorities feel that joint investment is key to improving their trade turnover. There is scope for scientific and technical cooperation, as well as cooperation in the service industries. There is a lot of potential for goods exported from China to Russia and Europe to cross Kazakhstan by railroad. The Kazakhs could benefit from transit tariffs. Another area where there is scope for further bilateral cooperation is the establishment of Chinese-Kazakh joint businesses in Kazakstan to produce household appliances.
East Kazakhstan oblast and Mongolia's western aimaks
East Kazakhstan oblast would like to sign a treaty with Mongolia to open a cattle-driving route from Mongolia via Russia’s Altai Republic into East Kazakhstan. This would provide a boost for Kazakhstan’s trade dynamics in general and the local market in particular by supplying a product which the eastern Kazakh city of Semipalatinsk can reprocess. It could restart a process that halted with the collapse of the Soviet Union. During the Soviet era, meat imported from Mongolia was processed at the meat-processing plants in Biisk and Semipalatinsk. In June 2001, there was a trilateral meeting during which agreement was reached on cattle driving. However, this treaty has not been implemented. The Altai Republic is reluctant to give its permission for access, as this route would pass through the Ukok plateau, a designated peace zone that has recently become a United Nations world-heritage site.
Conclusion
The major prerequisites for the stable development of the states, nations and territories in the Altai region are:
stability in Central Asia;
greater dialogue between politicians;
sensitivity to the various attitudes and approaches of regional policies; and
making the most of the existing economic, diplomatic and intellectual potential.
The onus is on the central governments of the four nations to pay attention to the problems in these bordering territories, as well as to analyse and support thoroughly any legitimate local initiatives.
Residents, businesses and local-government officials from the Altai area are actively participating in the process of cross-national integration through cross-border cooperation. This makes the region well disposed to place itself in the vanguard of this new economic and cultural expanse, which is reviving the traditions of the Great Silk Route. It is a starting point for Central Asia to live in harmony in the new millennium.
