On the 4th of April an extended meeting on the discussion of large-scale reforms in the framework of the Transformation Program of the Company took place in JSC «NC» Kazakhstan Temir Zholy».

The meeting was held with the participation of CEO of «Sovereign Wealth Fund «Samruk-Kazyna» JSC  U. E. Shukeyev, the president of JSC «NC» Kazakhstan Temir Zholy «A.U. Mamin, representatives of state bodies, the management of the central office and the Company’s subsidiaries, heads of regional divisions of transportation directorates and main railway networks, as well as linear enterprises and stations.

While noting dramatic changes in the world markets and technologies, the Chairman of the Management Board of «Samruk-Kazyna» Umirzak Shukeyev, stressed the need «to adapt to these changes, search for reserves, the wins in the competitive practices.» U. Shukeyev informed that the life cycle of the world's leading companies has declined, there is a severe competition in the market, including such areas as railway and noted the timeliness of the initiative of the Transformation Program and significant activity of “Kazakhstan Temir Zholy” in this direction. The process of Transformation is not a theory, but a guide to practical action.”

The company has completed all the necessary preparatory work for the transition to the new operating model.

During 2015 and the beginning of 2016, the strategy of the company has been upd ated, a process model has been formed, strategic efficiency has been approved, a tree efficiency and IT architecture have been developed. 

«The structure of freight traffic will be changed. High competition of the alternative routes on the transit market requires the transformation of structures, processes and technologies to satisfy customer needs. Thus, today there is a need for structural change and profound transformation of JSC «NC» Kazakhstan Temir Zholy,» said A. Mamin.

President of JSC «NC» KTZ «Askar Mamin has marked the correspondence of the changes in relation to state plans of the institutional transformation and the legal requirements of the railway sector reforms. 

Within the framework of the Roadmap for 2016, approved by the Fund, the Company begins to implement key changes to the organization’s performance. 

“For today, all necessary preparatory work for the transition to the new operating model and the implementation of practical actions within the framework of the transformation of the new organizational structure have been completed,” said A. Mamin.

According to him, “taking into account the structural changes and trends of the global economy, the main sources of growth of Company’s business is the segment of a multimodal and transit traffic and the improvement of the efficiency of operational work in the course of the bulk transport.” 

According to the head of JSC «NC» KTZ »,» timely selection of a strategy aimed at winning market position of transcontinental transit, allowed the Company to increase the volume of container traffic between China-Europe-China during 5 years.»

In 2016 the volume of container traffic in this area will be 100 times higher than the expected level of 2011, whereas by 2020 the volume of container traffic will be increased to 800 thousand TEU.

The achievement of the target parameters is provided under the competitive climate with alternative overland and sea routes.

As Mamin noted, for the last 8 years, the Company has carried out large-scale modernization of assets and has broken the long-term trend of accumulation of fixed assets depreciation, thereby having created the foundation for the future.

During this time, more than 1000 locomotives, 37.2 thousand freight cars, 1 309 passenger cars have been updated, modernization and overhaul of the railway lines in the amount of 4 347 km (11 751 - taking into account the average repair) have been carried out, 1707 km of new railway lines and 8628 km of fiber-optic communication line (FOCL) have been built.

To replace assets spent their resource the most modern high-performance equipment is supplied.

“In new conditions, a source of Company business growth becomes the segment of a multimodal and transit traffic, where a potential growth of container transit market by 2020 will be 1.7 million TEU per year,” said A. Mamin.

He also noted that during the preparation of the new operating model of JSC «NC» KTZ » the best world experience on business transformation of rail transport and logistics companies has been studied.

Vice-President of JSC «NC» KTZ «Kanat Alpysbayev presented a plan for the reorganization of JSC» NC «KTZ» and the privatization of the assets of JSC «NC» KTZ » group of companies.

According to K. Alpysbyaev “the new operating model of JSC» NC «KTZ» corresponds to the main areas of railway reform. The main step of the reform is the organizational separation of infrastructure and transport activities for the formation of market-oriented service of freight and multimodal transport, competitive on the global market.”

Such model of railway transport is functioning in countries of the European Union, Australia and Latin America.

According to K. Alpysbayev, now within the framework of the reform non-core activities are derived from the JSC «NC «KTZ”, the  market of  railcars’ operators is established, the question of the separation of transport activities from  infrastructure is  institutionally worked out, the mechanism of state subsidies for passenger transport is partially implemented.

He emphasized the main stages of the formation of the target structure, mechanism of creating a cargo carrier and operator of infrastructure and changes of key functions in the new structure.

Particularly, in 2016 on the basis of JSC «Locomotive» Cargo carrier will be se t up, in 2017 - the Infrastructure operator.

With the development of a logistic portfolio of assets, target structure of KTZ after privatization will include about 35 companies.

According to K. Alpysbayev, organizational changes of JSC «NC» KTZ» will simplify the group’s management structure by eliminating the duplication of functions and transaction costs, and will introduce more flexible and customer-oriented structure.

During the extended meeting the representative of the consulting company PWC Rahul Gupta and Managing Director for Transformation Program of «Samruk- Kazyna» JSC Adamas Ilkevicius made a speech.

The heads of regional departments of directorates of transport and the main railway network, line companies and stations expressed their willingness to give full support for the realization of the new organizational changes and noted the timeliness of their implementation.