What lessons should Kazakhstan learn from the collapse of the real estate market?
When the real estate market burst in Kazakhstan in the summer of 2007, it caught the country by surprise. There were signs that were missed or grossly underestimated; these signs could have assisted in the mitigation of the effects of the burst of the construction bubble. There are very many lessons from the events that led to the collapse of the real estate market. First, the introduction of mortgages into Kazakhstan played a key role in the creation of surplus demand for the already booming construction industry (Griffin & Pustay, 2015). This in turn led to an increase in real estate prices, which ultimately made it quite expensive for these potential buyers to acquire said properties. Naturally, Kazakhstan’s construction industry became so dependent on unchecked debt leading to its collapse. This resulted from individuals being unable to service their debts. If the relevant authorities monitored and regulated both the lending of mortgages and the construction prices, it would have made it possible to control the trends the real estate market hence ultimately controlling the outcome (Griffin & Pustay, 2015).
Many homebuyers and investors bought most property off plan. This meant that most of those construction projects were already in debt even before their completion. After the collapse of the real estate market there were many were faced with problem of having paid for goods they would never own. The complications that are created by this situation have the potential to severely affect the recovery process. To avoid getting in this predicament, any substantial off plan real estate investment needed insurance. Homebuyers seldom had international investments so when turmoil hit the Kazakhstan they were severely affected. The lesson to learn from this is that if one is looking to invest it is advisable to spread the risk by making investments in many different areas of business.
On average, how long does it take for goods to be shipped from China to Europe and how will the new route cut this time?
A train network connecting China and Europe will cut the distance and thus the cost of transporting goods manufactured in China to Europe. The old route involves taking a different variety of land-based modes of transport like trucks and trains to the coast so that one can load their goods into a ship. The ships then take the goods to the West through the Suez Canal in the Indian Ocean. The ship goes through the Mediterranean Sea before reaching their final destinations in Europe (Branch & Stopford, 2013). This journey via ship could take about one month and that is if the ocean conditions allow it. This new route will be an inland modern train network that moves in near straight-line direction through very many Asian counties upwards through Russia into the Western Europe. It is estimated to be around 10,000km long. Covering that kind of distance on a modern train could be done in about a week. This shows that the new rail system will cut time by more than 50% which is very beneficial to the related businesses.
How is Kazakhstan intending to raise the funds for the massive expansion and modernization programme of its railway infrastructure?
Since the collapse of Kazakhstan’s real market, there has been a shift towards more overseas investments. This is being achieved in a number of ways, the main one being by taking advantage of their geographical location between major suppliers of raw materials like the gulf and successful manufacturing economies like South Korea and China. Towards this end, Kazakhstan is undertaking several massive construction projects that are supposed to make it easier for manufacturers to transport the raw materials they need and their finished products using Kazakhstan’s infrastructure. These projects are typically massive in nature hence extremely expensive. The funds needed in to undertake these projects are being raised in a number of ways. First, they are seeking to collaborate with the governments of countries that are willing to invest in the transport sector. Most of these governments will invest in Kazakhstan’s transport sector because once these project are completed most of them will benefit directly from the use of Kazakhstan’s infrastructure. This successfully raises the funds needed to undertake these projects.
The Kazakhstan senate is also looking into the creation of draft laws that encourage the public to collaborate with the government in the construction of state property. This will make it easier to source funds from entrepreneurial citizens of the state. This is something very new in Kazakhstan and when successful will provide much-required funds. Kazakhstan has a wealth of natural resources (Brummell, 2011). The exploitation of these resources provides a means to raise the funds needed to complete its construction projects. Furthermore, because the Gulf States are the most versed in the exploitation of natural resources they have been very close partners, providing the expertise needed to exploit these resources. Year round Tourism has also been pursued in the search for funds. Kazakhstan has partnered with Suraya Holdings, a Jordanian company to develop a city that is tourism oriented. This will provide a destination for year round tourists within Kazakhstan which in turn will provide much sort after funds (Brummell, 2011).
How does Kazakhstan intend to continue to forge relations with countries such as the United Arab Emirates and Gulf States in general for their mutual benefit?
The maintenance of healthy economic relationships with countries like the U.A.E and the Gulf States is very important for Kazakhstan. In fact, these relationships bear the potential to be beneficial to all parties involved (Brummell, 2011). As such, the construction and upgrade of infrastructure had provided as opportunities for these states to work together. The Gulf States have a wealth of experience in the exploitation of natural resources. Partnering with them to exploit Kazakhstan’s wealth of natural resources will provide the expertise required to carry out these projects in Kazakhstan. This will be very beneficial to Kazakhstan. The Gulf States will benefit by getting fair deals for the consumption natural resources and to some degree, from the provision of employment. The U.A.E. also has a lot to gain from Kazakhstan’s desire to work with other countries.
Tourism is a very important source of revenues in the U.A.E. Several projects in Kazakhstan aim towards the growth of the tourism industry in Kazakhstan. By working with the U.A.E Kazakhstan will benefit from the U.A.E. wealth of experience in this field experience. These interactions will make it easier for top U.A.E hotel franchises to enter the Kazakhstan market. So long as the benefits are mutual, these relations will continue. After the 2007 collapse of Kazakhstan’s real estate market it became very important engage in overseas investments. Some of these investments are made in Gulf States and the U.A.E. So long as the people of Kazakhstan have investments in such countries, they will always have legitimate interests in those countries. That will lead to the growth of the relationships between these states because of the increase in common interests brought on by foreign investment.
References
Branch, A., & Stopford, M. (2013). Maritime economics. New York: Routledge.
Brummell, P. (2011). Kazakhstan. Chalfont St. Peter: Bradt Travel Guides.
Griffin, R. W., & Pustay, M. W. (2015). International business: A managerial perspective. Harlow, England: Pearson Education.
