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Hope for huge dying industrial cities

ZHANATAS, KARATAU, February 2000 - After an hour drive through the bare steppe in South West Kazakhstan, Karatau appears on the foot of the ‘black hill’ the industrial city is named after. In the far distance, a mysterious veil of fog seems to surround the huge chemical plant, lying behind the city. Karatau owes its existence to this factory. Now, the detoriating factory buildings and houses give the impression of a dying city.

After another hundred kilometres, the big apartment blocks of the industrial town Zhanatas appear like an oasis in the desert. A closer look shows that it is an optical illusion: the buildings are completely empty, even the window frames have been removed to serve as firewood. The streets are wide and deserted; the only movement is goats looking for food between rusty half-destroyed factory equipment. Welcome to the ghost town Zhanatas.

Zhanatas and Karatau are two of approximately forty industrial towns in Kazakhstan built by the Russians in the 30s and 40s. Tens of thousands of highly educated people from all over the Soviet Union were brought to Zhanatas and Karatau to work in the metal or chemical industry, or in mineral processing. Apart from jobs, the Russians provided them with luxury apartments, food, clothes, central heating and electricity.

For years, the factories brought wealth to the inhabitants of Zhanatas and Karatau. However, when the Soviet system collapsed, the orders from Russia diminished. Too slow to adapt to any kind of market economy, the factories had to close down. It is very unlikely that the massive, Russian style factories will re-open. Ten thousands are left with as little as a roof over their heads. No job, no food, no clothes, no central heating and no electricity. First they were made dependent; now they suddenly had to provide for themselves.


The European Union’s Tacis Programme in Kazakhstan believes that the development of small and medium sized enterprises (SME) is part of the solution for the revival of these cities. The Tacis programme is a European Union initiative for the Newly Independent States and Mongolia and provides grant finance for know-how to support the process of transformation to market economies and democratic societies. In July last year Tacis designed and launched a project to stimulate new enterprises in Zhanatas and Karatau. Tacis uses an open competitive tender system to find the best local contractors for all projects. The ‘Business Woman Association’ from Zhambul won the tender for this SME project.

The contractor organised a meeting for all unemployed people in Zhanatas and Karatau in September 1999. Hundreds of people showed up. The goal was to explain the project. According to Tacis project co-ordinator Galina Vrabie, most people still believed that the factories would re-open any day. ‘We explained to them that the future of the city depends on the people themselves.’ Fifty people were selected in each city for enterprise start up training.

The main aim of the training was to teach the people basic business skills. In the past, some have tried to set up some kind of business. However, most initiatives failed because of lack of experience. In three days, the trainees learned how to write a business plan. Project co-ordinator Vrabie says it was difficult to convince them that a lot can be done with little money. ‘The goal was to change the attitude of the people. In the beginning, all they wanted was lots of money. We tried to teach them that it is possible to start a small business with limited funds.’ After the general training, a consultant was available for individual coaching for up to four months.

Another element of the SME project was to raise awareness with the local government how best to support initiatives of potential entrepreneurs. They were advised to use existing buildings and other available materials to assist starting entrepreneurs. This worked out very well in Karatau, where most of the buildings and equipment are city property. In Zhanatas however, most of the buildings were already privatised. Generally, in Zhanatas progress has been slow in creating support from local officials, since the key players have been replaced four times in the seven months of the project. Most support came from the head of the SME Development Department in Zhanatas.


In both cities together, thirty businesses were set up after the completion of the training. Luybov Zernaeva (49) used to work in the chemical plant in Zhanatas as an engineer. ‘I was very depressed before, I did not know how to survive. I used to think that business was nothing for me. However, the training was very useful. Now I see that it can be done. I bought a dacha, four chickens and two ducks. That made me feel good.’ She hopes to sell the eggs of the chicken – two every day - on the market. She borrowed the money for the dacha from her neighbour. The ‘Business Women Association’ provided the money for the animals.

Zatybek Bekzhigit (40) already owned a small restaurant in Karatau with three employees. Since the training, eight people are working here. ‘I learned a lot about the tax regulations in the training. Before, I just paid the amount the tax inspectors wanted, now I know when they charge too much.’ With little money, he re-decorated the main room; he bought some new tablecloths and wall decoration. He has big plans for the future: ‘I want to make a sauna in the building, because we do not have central heating. The second floor is still empty, the plan is to start Karatau’s first hotel there.’

According to the Akim, the project has given a boost to the development of Karatau. Seventeen businesses were set up, providing 68 people with a job. An additional twelve businesses are planned. Apart from that, the local authorities granted a loan to three trainees for a total of USD 1,800. Another result was that the people had faith in the local government for the first time. ‘After the training, many entrepreneurs have come with proposals to set up some business.’

There are some additional options to create employment in Karatau. ‘In the beginning of the year, a plant for fertilisers re-opened. We hope to create 500 to 600 jobs there. We think to create another 800 jobs later this year with supplying the raw materials to a plant in Zhambul.’ In the course of this year, Karatau hopes to start with the production of natural gas from its own region, in order to become more self-sufficient. ‘We are convinced that these initiatives together will be sufficient to provide employment for hundred percent of the people. Some people even believe that the empty apartment blocks will be re-occupied within three years.’

In Zhanatas, the project has not had the same impact, although thirteen businesses were set up and twenty-five working places have been created. Five trainees are still waiting for the approval of their business plan. According to the Akim, the project is ‘the first step on a very long road’. More is needed for the revival of the city. Unlike Karatau, Zhanatas has no natural resources, except for salt some 230 kilometres from Zhanatas. The local government is trying to attract foreign companies to invest in the region, but has not succeeded so far. However, most is expected from the development of small agricultural businesses. The local government will support these initiatives by providing a plot of land.

Six depressed industrial cities have prepared a joint proposal to the Kazakhstani government to create a ‘no tax zone’. That is the first result of the ‘Business Association of Small Industrial Cities’ (BASIC), founded by delegates from Zhanatas, Karatau, Alga, Tekely, Shahtinsk and Ush-Tobe during a Tacis sponsored conference in February. The objectives of the association are to exchange experiences and to protect the interests of the cities. The foundation of this association is especially important for the continuation of the development of SME’s after the completion of the Tacis project in April 2000.

This article was published on 8 April 2000 in the Belgian newspaper 'Financieel-Economische Tijd' .

Do you want to see images of these dying industrial cities? Check out the following site: