Investment Challenge for Kazakh and Georgian Railways

Kazakhstan Pushes Georgia to synchronously develop its own infrastructure by Investing $600 Million in the Middle Corridor

Kazakhstan’s decision to invest $600 million in its own section of the Middle Corridor, on the one hand, is aimed at increasing the capacity of the transport corridor passing through it, and on the other hand, it sends a clear signal to the countries involved in the Middle Corridor, including Georgia, to synchronously begin developing their own transport infrastructure.

Otherwise, due to the “bottleneck” created on the Georgian section, the financial resources invested by Kazakhstan in its own infrastructure will be returned with a low return, thereby harming all states of the corridor.

According to the agreement, Kazakhstan will receive a loan of $600 million for a period of three years from Abu Dhabi Commercial Bank and Deutsche Bank.

It is planned that the financial resources will be mainly directed to the construction of sections of the Trans-Kazakhstan Railway Corridor with limited capacity and new railway sections, in addition, part of the funds will be used to refinance previously taken out loans by Kazakhstan Railways.

Based on the Transport Strategy Document of Kazakhstan, it is planned to complete three important ongoing railway projects:

Modernization of the Altynkol - Zhetygen section;

Modernization of the Dostyk - Moyint section;

Construction of the Almaty bypass railway;

 

In a situation where Kazakhstan considers the development of the Almaty bypass railway a priority, the Georgian government has for some reason canceled the almost completed Tbilisi bypass railway project.

It is worth noting that in the conditions of increased transportation, the Tbilisi bypass railway project will regain relevance in the 20-25 years perspective - under the conditions of the decision made today, its restoration will be impossible.

Naturally, the question arises: what is the reason that the Kazakh Railways was able to attract 600 million dollars from financial and banking institutions without any obstacles for the modernization of its railway infrastructure, while the Georgian Railways has attracted no or zero investment from financial and banking institutions for the modernization of the railway and the renovation of its rolling stock over the past 10 years?

Over the past 15 years, the credit rating of Georgian Railways has not improved and is actually suspended at the non-investment grade of “BB-”, a high-risk level, which indicates that the interest of financial and banking organizations in Georgian Railways in terms of investment attractiveness is low.

According to the assessment of the international rating agency “Fitch”, the investment attractiveness of Georgian Railways is significantly lower compared to similar indicators of railways in the region, including those of the Middle Corridor countries.

Info: transcor.ge