Kazakhstan steps up military production

By bne IntelliNews January 22, 2014

Clare Nuttall in Astana -

December saw progress on two major new defence-related factories in Kazakhstan, where demand for military hardware is set to grow as Astana continues to modernise its armed forces.

On December 13, South Africa's Paramount Group started building a factory to produce military armoured vehicles and civilian buses in Astana, working with local manufacturing company Kazakhstan Engineering and its subsidiary Kazakhstan Engineering Distribution. The factory will produce between 120 and 230 vehicles a year when it goes into operation.

Paramount chairman Ivor Ichikowitz said at the launch ceremony that production would be targeted at both Kazakhstan and other markets in the region. "It is our intention to establish a fully-fledged armoured vehicle and land forces manufacturing facility to engage not only in manufacturing but also in research and development," Ichikowitz said, according to a statement from Paramount.

Three days earlier, the Kazakhstan Aselsan Engineering defense facility, a Kazakh-Turkish joint venture to produce electron-optical devices for defence applications, opened. It will initially produce electronic plates used in vehicles ranging from submarines to space vehicles, and will later start production of infrared lenses.

Another Turkish company, Otokar, announced in October 2012 that it will set up a production line in Kazakhstan, shortly after winning a contract to supply armoured vehicles to the Kazakhstani army. Kazakhstan Engineering is to build the factory, while Otokar will provide technical know-how and components, as well as training for army officers.

Despite enjoying friendly relations with its neighbours as well as regional heavyweights Russia and China, over the last decade Kazakhstan has considerably stepped up its investments into the military. As well as replacing the obsolete weapons and equipment inherited from the Soviet Red Army, Kazakhstan is also building a professional military and phasing out conscription. In October, the army's chief of staff General Saken Zhasuzaqov said the armed forces would be fully professional by 2016.

In line with Astana's strategy of investing into local manufacturing, President Nursultan Nazarbayev has set to the target of producing 80% of Kazakhstan's military equipment domestically by 2020. A report from Companies and Markets forecasts that spending by Kazakhstan's defence industry will grow by a compound annual growth rate (CAGR) of 8.13% over the next five years, from an expected $2.7bn in 2014 to $3.7bn by 2018. However, given the size of Kazakhstan's economy, the figure is modest by international standards, and defence spending is actually expected to drop as a percentage of GDP from 1.2% in 2014 to 1.1% in 2018.

While Kazakhstan has no international enemies, the buildup of the armed forces has been motivated by increased fears about terrorism and a possible increase in regional instability following the withdrawal of international forces from Afghanistan in 2014. Kazakhstan saw a wave of bombings and small-scale clashes between police and alleged militants starting in 2011. The most serious attack to date carried out by a lone gunman, believed to be an Islamist terrorist, who shot seven people in the southern city of Taras in 2011, then blew himself up to avoid arrest.

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