Russian-Kazakh free-trade agreement gives EADS incentive to invest in Central Asia
A new joint-venture in the Central Asian republic of Kazakhstan could be 's key to unlocking not only the markets of Central Asia, but also Russia.
Kazakhstan is arguably the best economic gateway into Russia, thanks to the Customs Union pact among Kazakhstan, Belarus and Russia that does away with tariffs and import duties on goods exported within the group.
Aerospace, meanwhile, is a high-tech industry that Kazakhstan's government is seeking to tap in an effort to diversify the country's economy beyond oil, gas and other commodities. Kazakhstan has a genuine need for aircraft, as it covers 2.72 million sq. km (1 million sq. mi.), about the size of Western Europe.
To entice aerospace companies to invest, the government has been making aircraft deals. It has signed letters of intent (LOI) with Eurocopter for 20 EC725 multirole helicopters and 45 EC145s. An order for 14 of the latter has been firmed up: 10 are intended for the emergency situations ministry and four for the defense ministry; six of the 14 have been delivered, after being assembled at a facility in Kazakhstan.
All subsequent EC145s and all 20 EC725s are to be assembled at a new facility, Eurocopter Kazakhstan Engineering (EKE), a 50:50 joint venture between Eurocopter and state-owned Kazakhstan Engineering. The joint venture's assembly plant officially opened in early July, when Kazakhstan President Nursultan Abishuly Nazarbayev visited it, on the grounds of Astana International Airport.
The first EC145 kits to be assembled at EKE arrived in early September, and eight will have arrived by mid-November, saysKazakhstan's general director, Silvere Delaunay. The first helicopter to be assembled at the factory will be completed in time for delivery by year-end, he says. EKE is responsible for final assembly, customization and some systems integration work, he says.
The facility employs 50 people now and will employ 120 once it reaches its full production capacity of 10 EC145s per year, says Delaunay. Assembly of EC725s will increase the workforce further, but Delaunay declines to say by how much, because the work scope is still being discussed.
Eurocopter hopes to firm up some orders for the EC725s next year. The LOI calls for 20 helicopters to be delivered by 2020—a rate of 2-3 per year.
EKE will also have a regional role across Central Asia in providing helicopter maintenance and training, says Delaunay. The maintenance center within the factory has the capacity to handle both scheduled and non-scheduled maintenance for 90 helicopters, he notes.
“Kazakhstan is seen as a strategic country for the EADS group,” says Delaunay, who helped establish the EADS Kazakhstan office in 2010. Prior to that, he worked for a French company involved in Kazakhstan's mining industry.
The fact that Kazakhstan is rich in natural resources and covers an enormous geographic area—it is the world's largest landlocked nation—means it is the wealthiest Central Asian country. And Delaunay characterizes it as an economic gateway into Central Asia.
“The EC145 sold from the joint venture is at the same quality level as those imported from Europe, but due to the fact that the helicopter is assembled in Kazakhstan, the EC145 will benefit from tax incentives,” he says.
In addition to Eurocopter, EADS's military and space businesses are also benefiting from doing business with Kazakhstan. The government has signed a memorandum of understanding for eighttransports, says Delaunay, adding that the first two have been turned into a firm orders and will be delivered by year-end to the Kazakh air force.
And EADS Astrium has a contract to supply two Earth-observation satellites to Kazakhstan's space agency Kazcosmos, says the agency's chairman, Talgat Musabayev. Space technology is another industry that the government wants to develop locally, he says.
In order to fulfill Kazcosmos's requirement for transfer of technology and know-how, Astrium has established Ghalam, a joint-venture with Kazcosmos subsidiary Kazakstan Garysh Sapary, that will assemble and perform systems integration and testing of satellites at a purpose-built facility in Astana. Kazakhstan Garysh Sapary is also building a space center that will operate the country's satellites in orbit. Astrium is providing some equipment and technology for the center.
Delaunay also notes that working with Western countries is facilitated by the fact that many of Kazakhstan's elite have been educated in the West. Following the collapse of the Soviet Union, Kazakhstan's government implemented “Bolashak,” an all-expenses paid scholarship program that sends top students overseas to study at the best Western universities. The proviso is that after graduation, they return and work in Kazakhstan for at least five years.