JSC Rating Agency Regional Financial Centre of Almaty 136 Dostyk ave., 9 th floor, office 94, 551 Almaty, The Republic of Kazakhstan Transport and automotive industry of the Republic of Kazakhstan Analyst: Dmitriy Sheikin Tel#: (727) 224 48 41 (727) 224 48 44 d.sheikink@rfcaratings.kz http://www.rfcaratings.kz December 215 1
Transport and automotive industry in Kazakhstan On a way to the future The Republic of Kazakhstan is located in the center of Eurasian continent. In terms of economy the republic borders with dynamically developing export-oriented economy of the Republic of China and economically developed countries of Europe. The transport flows from eastern and south-eastern Asia to Europe and reverse offers a favorable opportunity to develop transport and transition potential of the country. As experts say the Republic of Kazakhstan may take 2% of the transport routes. The transportation potential of the routes in value terms amounts to USD 4 bln. However, vast land and low density of population of the republic make the economy of Kazakhstan transport intensive and transport infrastructure dependent. There was adopted the Transport strategy of the Republic of Kazakhstan until 22 to realize the territorial and economic potential and to improve the transport infrastructure of the republic. Starting form this year the strategy is in its third and last stage of implementation. Besides, there is implemented the Plan of Nation. 1 steps to implement 5 institutional reforms in the frame of it the special attention is paid to the integration of Kazakhstan in the international transport routes. In the plan there is launched a project to establish a multi-modal Eurasian transcontinental transport corridor. This corridor maps several directions through the territory of Kazakhstan, the Russian Federation in Europe the first route, the second one through Kazakhstan from Khorgos to the Aktau port and through the Caspian Sea to Azerbaijan, and Georgia in Europe. The transport system of Kazakhstan will be in a ray form structure that will interconnect all macroregions of the country. Thus, in 215-22 it is planned to build and reconstruct 6.7 thous. km of the automobile roads of 1 and 2 categories. The development of the transport complex of the Kazakhstan includes the plan to establish an international aviation hub near Almaty together with the strategic investor and building a new international airport. It is also planned to attract the strategic investor and organize the single operator to maintain and develop the road-transport infrastructure of the country. By using Air Astana and KTZ to open new international routes and to develop the logistic system of transcontinental freights. Quantitative analysis of transport industry of Kazakhstan According to the Law of the Republic of Kazakhstan on Transport in the Republic of Kazakhstan from 21 of September 1994, the transport complex of the republic consists of railway, automobile, water, inland water, air, city electric types of transport, subway and mainstream pipeline system on the territory of the country. Gross value added (GVA) analysis of the transport industry (fig. 1) measured to GDP of the republic in a period of 24-214 evidence three periods. The first period from 24 to 29, when there was observed the continual decrease of the GVA of the industry from 1.1% in 24 to 8.3% in 29. The second one post crisis period, when GVA of the industry suffered a 6.4% decline in 21 to 5.2% in 211. The third one is in 212-214, when the industry demonstrated a continual increase of GVA from 5.6% in 212 to 6.3% in 214. 2
Demonstrated changes of the specific weight of transport industry measured to GDP of the republic are determined by slowing of GVA dynamics of the industry compared to the dynamics of the other industries as well as by larger growth of specific weight of the other industries. Figure 1. Transport industry GVA to GDP in Kazakhstan, 24-214 45 4 35 3 25 2 15 1 5 1,1% 9,8% 9,3% 9,% 8,5% 8,3% 6,4% 5,6% 6,% 6,3% 5,2% 24 25 26 27 28 29 21 211 212 213 214 12% 1% 8% 6% 4% 2% % GVA of transport industry, KZT bln. Transport specific weight in GDP, %, right scale GDP of Kazakhstan, KZT bln. In 24-214, there is observed a 97% increase of freight transportation by all modes of transport from 184.5 mln. tons in 24 to 3634.4 mln. tons in 214 (fig.2). Freight turnover of all modes of transport increased from 283.1 bln. ton/km to 49.8 bln. ton/km in 214, i.e. a 73% increase for the analyzed period. Mode transportation analysis indicates that 81.3% of the transportation on the territory of Kazakhstan is motor road transport. It is noteworthy, that in 24-28 the change was decimal basis points and remained at 78%, but in 29-214 the share evidences a dynamic change from 8.2% in 29 to 86.1% in 214. Railroad freight transportation evidence decline. In 24-29 the share averaged 12% per a period. Starting from 21 to 214 the specific weight of the railway transportation suffered a substantial decline from 11% to 7.6% in the end of the period. The decrease in the specific weight of the railway freight transportation affects the railway freight turnover. Thus, in 25-29 specific weight of the railway freight turnover measured to the total freight turnover amounted 58%. Starting from 21 specific weight of the railway freight turnover evidenced a 55% decrease down to 44% in 214. Specific weight of the motor road transport demonstrated a noticeable increase from 15.9% in 25 to 31.7% in 214. Specific weight of freight transportation and turnover by other modes of transport is small due to expensive tariffs for transportation (air freight) or due to the specificity of transportation mode (pipelines). Thus the pipeline transportation increased by 17% in 214 versus 25 and amounted to 225 thous. tons. Pipeline freight turnover increase by 5% from 77.1 mln. ton/km in 25 to 116 mln. ton/km in 214. There were transported by pipelines 225 mln. tons of oil and gas whilst in 213 it was 225.9 mln. tons. 3
Freight transportation by water transport has a small share in total freight transportation. In 24 there were transported 2 thous. tons by water. As of 214 the freight transport by water amounted 3.6 mln. tons evidencing a decrease from 4 mln. tons of the previous year. Figure 2. Freight transportation and freight turnover in Kazakhstan 4 3 5 3 2 5 2 1 5 1 5 49,8 478 495,4 448,8 35,5 369,7 385,3 328,5 337 283,1 296,3 24 25 26 27 28 29 21 211 212 213 214 Freight transportation by all modes of transport, KZT mln. Freight turnover by all modes of transport, t/km, right scale 6 5 4 3 2 1 In 24-214 there is observed a noticeable increase of passengers carried by all modes of transport from 9 39 mln. persons in 24 up to 21 293 mln. persons in 214. An increase amounted to 2.3 times. Passengers turnover by all modes of transport increased from 1,35 mln. p/km to 255,959 mln p/km in 214, i.e. the turnover grew by 2.6 times in the period. Passengers turnover analysis reveals that the major passengers transportation in the republic is performed by bus and taxi. Their share amounts to 99% of all transportation. Thus in 25, 7.1% of passengers transportation was performed by motor road transport it amounts to 6,96.9 mln. persons,, 28.4% or 2,814.8 mln. persons by taxi. Railway transport in passengers transportation amounted to.2% or 16.5 mln. persons. The number of passengers transported by railway in 214 amounted to 16,755.4 mln. persons or 78.8%. There were transported 4,414.5 mln. of passengers by taxi to the total. 35.2 mln. passengers were transported by transport or.2% of total. The analysis of passengers turnover by all modes of transport in 25-214 reveals that the maximum load of passengers turnover was in bus transport, taxi and railway transport and approximate 95.8% in the period. It is worthy to note, that starting form 29 there is observed a heavy decrease in passengers turnover by railway from 11.2% to 8.7% in 213. In 214 specific weight of the railway passengers turnover amounted 1.9% or 27,999 mln. p/km, showing a small increase over the average level of 1.6% in the period. Specific weight of passengers turnover carried by taxi decrease from 22% in 29 to 15% in 211. As of 214 specific weight of the taxi transportation increased and amounted to 17% or 42,374 mln. p/km. Along with the decrease of the passengers turnover in those modes of transport we evidence a noticeable increase of the turnover of bus transport. Bus transport specific weight in 25-214 amounted 64.8%. As of 25 bus share of passengers turnover amounted to 59.3% or 63,831 mln. p/km. In 211 the share of the transport peaked 72%. In 211 the passengers turnover amounted to 135,965 mln. p/km. In 214 the 4
share suffered a decrease to 68.3% and amounted 174,695 mln. p/km. The air passengers turnover evidenced small changes and averaged 4%. Figure 3. Passengers transportation and passengers turnover in Kazakhstan 3 25 2 15 1 135 176 118824 124366 127455 13834 14965 188939 21336 235738 255959 25 2 15 1 5 5 24 25 26 27 28 29 21 211 212 213 214 Passengers transportation by all modes of transport, mln. persons Passengers turnover by all modes of transport, mln.p/km Passengers transportation and turnover analysis (fig. 3) reveals a considerable share increase of the bus transport. We explain it by increasing number of private and commercial carriers as well as by increase of the private cars. Length of general purpose roads as of 214 was 96,421 km whilst hard surface roads was 86,419 km. In 214, length of highway roads of general purpose increased by 7.1% versus 24 whereas length of hard surface roads suffered a 2.7% increase. The motor road transportation is favored by considerable improvement of the road infrastructure in the Republic of Kazakhstan. Along with the increase of passengers transportation and turnover there is observed the increase of motor units. Thus in 24 there were 1,532.3 thous. motor units. In 1 years motor vehicles increased by 3 times up to 4,533.7 units. The observed decrease of commercial freight by railway transport is explained by high tariffs, low profit margin for the companies contracting the railway carriers and limited railway coverage of the territory. Whereas motor transportation is preferable due to 15% of profit margin and unconstrained territory logistics. The absence of multi-mode logistics centers also hampers the development of this mode of transport. In 24-214, length of railway of general purpose increased by 1.7% and as of 214 amounted 15,341 km. Railway density excluding Kazakhstan railway on the territory of other countries accounted for 5.41 km per 1 km of the territory as of 24, remaining unchanged since 24. Such a low density of railway is one of the factors of decrease in freight transportation by this transport. Small increase of air transportation indicates the growing availability of this type of transport though it is not available for all income brackets. Increase in number of civil air planes favored increase in 5
air transportation. Thus the number of air planes in 24-214 increased by 24.3% and accounted for 843 units. It is noteworthy to mention the growth of mainstream pipeline infrastructure of the Republic of Kazakhstan. Thus, length of mainstream pipelines in 2 4 accounted for 16,828 km. As of the end of 214 length of mainstream pipelines increased by 37.8% and accounted for 23,196.4 km. Among them the largest increase is registered in gas pipelines length that increased by 46.9% and accounted for 14,895 km in the 214 versus 24. Length of oil mainstream pipelines increased by 24.9% and as of the end of 214 accounted for 8,31 km. The largest increase in length of oil and gas mainstream pipeline system is observed in 214. Along with an increase of motor road length (fig.4) there is observed a decrease of city infrastructure of electromotive transport. Operating trolley-bus double-way length amounted to 357 km in 24 in the republic, in 214 there was a decrease by 33.2% to 118.7 km. Operating tram double-way length is also on the decrease. Thus, tram double-way length as of the end of 214 amounted to 17.9 km, having decreased by 88.9% versus 24. The decrease of tram double-way length is accompanied by the decrease of tram and trolley-bus in number. In 24, the number of trolley-buses was 388 units whilst in 214 there was 234 units left. There were 264 units in the tram park of the republic in 24 and as of 214 it decreased to 22 units. All this affected the passengers transportation by that transport. Thus, transportation of the passengers by trolley-buses decreased from 63.2 mln. persons in 24 to 16.5 mln. persons in 214. Transportation of the passengers by trams decreased from 74.2 mln. persons in 24 to 39.1 mln. persons last year. Figure 4. Railway and motor roads length in Kazakhstan, km 12 1 9 18 9 845 91 563 93 14 93 612 96 846 96 18 97 155 97 418 96 873 96 421 8 6 4 2 84 112 82 818 83 72 84 31 84 141 85 7 85 961 86 217 87 14 86 581 86 419 15 81 15 21 15 82 15 82 15 82 15 79 15 16 14 892 15 333 15 341 15 341 24 25 26 27 28 29 21 211 212 213 214 General purpose motor roads length General purpose railway length (other countries incl.) Hard surface motor roads length Such a decrease was conditioned by growth of the private car park, on the one hand, and by relatively high operating cost of units and infrastructure maintenance, on the other. However, such a decrease of ecologically friendly vehicles of transportation and an increase of ecologically harmful vehicles could not have affected the ecology of metropolises of the republic, and health of population at large. Analysis of road-transport infrastructure reveals that about 33% of general purpose roads are worn 6
and that impedes the development of the freight transportation. Besides the road surface in most cases was built to sustain 6 tons of cargo capacity of axial load whilst nowadays the road surfaces sustain 11-15 tons axial load that accelerates its wear. To decrease the wear of the road and transport infrastructure in 21-214 there were re-constructed 58 thous. km of general purpose roads, 15 thous. of them were completely re-build. There are implemented several projects to realize the ray/vector transport structure in the republic. The projects are Center-South (completion period 219, motor road construction of 1 technical category), Center-East (completion period -219, motor road construction of 1-st and 2- nd technical category) Center-West (completion period -219, motor road construction of 2- nd technical category). In 217 there will be completed the transport corridor Western Europe Western China). The implementation of the projects will considerably increase the traffic capacity of motor roads, will decrease costs of the republic freight transportation, and will interconnect hub-cities and macro-regions in a single integrated transport system and considerably increase the transit potential of the country form 18 mln. tons to 33 mln. tons in 22. It is planned to introduce toll roads in the republic to speed up recoupment of the investments and to fund the maintenance of the road-transport infrastructure at 7 thous. km that are to be reconstructed in the framework of state program Nurly Zhol. Railway infrastructure analysis evidences that approximately 6% of railway has low traffic capacity being single way. The most part of the railway is not electrified. To overcome the present limitations of the railway infrastructure, there are planned to set in operation the railway route Zhezkazgan Beineu (central Kazakhstan Aktau-port), building the railway route Borzhakty-Ersai, there will be implemented double way railway project at the Almaty 1 Chu and will be performed electrification of it. Qualitative analysis of transport industry of Kazakhstan In our qualitative analysis of transport industry of the republic we will apply profitability ratio, capital productivity, capital intensity, capital per labor ratio, average labor productivity per worker, wage productivity and wage intensity ratio and also screen the actual state of fixed capital and its depreciation. Profitability analysis evidences (fig.5) the relative profitability of the transport industry of Kazakhstan. Excluding two slumps in profitability in 25 and 29 as well as in 214 the period average profitability amounts to 14.5%. Receding profitability in transport industry was conditioned by loss in railway industry in 25 at KZT -2,1.1 mln. In 29, loss under item - other land transport amounted to KZT -4,346.8 mln. and another loss at KZT -15,95 mln. under the item storage and auxiliary transport activity. In 214, there was observed the overall decrease of profitability down to KZT 228,995 mln. in the industry due to loss in KZT -48,36.1 mln. in railway industry, loss in KZT -3,594.4 mln. under the item other land transport and loss under the items of inland water transport in KZT -589.3 mln. The maximum profit was gained by transport enterprises from the main activity in 213 when profit amounted to KZT 458,38 mln. The specific weight of land transport and pipeline transport in profit structure of the transport industry averages 72% in the period. 7
Figure 5. Profitability of transport industry in Kazakhstan 5 45 4 35 3 25 2 15 1 5 16,4% 18,9% 19,3% 16,8% 12,6% 13,4% 11,3% 7,5% 3,2% 6,8% 4,9% 89 62 46 21 136 138 155 48 119 712 57 932 245 421 387 839 399 58 458 38 228 995 24 25 26 27 28 29 21 211 212 213 214 Profit/Loss before taxation, KZT mln. Transport total, right scale 25% 2% 15% 1% 5% % The maximum profitability of the industry was in 211 when it peaked to 19.3% whilst the minimum was in 29 when it plummeted to 3.2%. Let us refer to capital productivity and capital intensity in transport industry in 24-214 (fig.6). Capital productivity of transport industry declined from.76 in 24 to.41 in 214. Figure 6. Capital productivity and capital intensity of transport industry in Kazakhstan, KZT 3, 2,5 2,24 2,23 2,42 2, 1,5 1,31 1,55 1,45 1,42 1,43 1,63 1,9 1,86 1,,5,76,64,69,71,7,61,53,54,45,45,41, 24 25 26 27 28 29 21 211 212 213 214 Capital productivity Capital intensity 8
Therefore, one tenge of fixed capital (FC) in production created only.76 tenge of return in 24, whilst in 214 FC created only.41 tenge of return. Conversely to capital productivity, capital intensity ratio increased from 1 tenge 31 tyin in 24 to 2 tenge 42 tyin in 214. It is the highest ratio in the period. It indicates, what share of FC is in one tenge of return. The observed changes of both ratios indicate that FC increased in value with concurrent decrease of return in value terms. The dynamics of FC value change in 24-214 averaged 23% whilst transport industry returns averaged 16% in the period. Therefore, the industry becomes capital intensive and inefficient in FC application. Increase of capital intensity in the industry is determined by increase in number of vehicle of foreign production, on one side, and by icrease of maintenance and repair costs, on the other. Average labor productivity in transport industry (fig.7) increased by 3.5 times in the period and amounted to KZT 12,398 thous. as of the end of 214. When the average number of enrolled employees in the transport industry increased by 18.8% in the period. Capital labor ratio in the industry increased by 6 times and as of 214 amounted to KZT 3,13 thous. per worker. As we have mentioned before, this is conditioned by accelerated rate of FC growth in the industry that averaged 23%. The average rate of labor profitability in 24-214 amounted to 16% whilst capital labor ratio amounted to 22%. In 214, there is observed a noticeable decrease in average labor productivity which amounted to 2% from KZT 12,181 thous. to 12,398 thous. Figure 7. Capital labor ratio and transport industry profitability in Kazakhstan, KZT thous. 35 3 27 187 3 13 25 23 454 2 16 37 17 695 15 1 5 9 153 9 988 6 684 7 45 7 986 4 63 9 57 1 466 8 45 12 181 12 398 3 53 4 32 5 117 5 64 6 396 6 115 24 25 26 27 28 29 21 211 212 213 214 Capital labor ratio Labor productivity Let us analyze wage productivity in transport industry (fig. 8) that averages KZT 79 in 24-214. It implies that one tenge of labor invested in worker yields KZT 79 of return. The maximum wage productivity was in 25 when the ratio amounted to KZT 86. In 21-213 we evidence an increase of the ratio to the level comparable with the ratio before 29. However, in 214, wage productivity ratio suffers a noticeable decrease to KZT65. 9
Figure 8. Wage productivity and wage intensity of transport industry in Kazakhstan, KZT 9 8 7 6 5 4 3 2 1 83 86 85 8 83 77 8 82 77 71,2,1 65,1,1,1,1,1,1,1,1,1 24 25 26 27 28 29 21 211 212 213 214,2,2,1,1,1,1,1,,, Wage productivity Wage intensity Wage intensity amounted to one hundredth of percentage that indicates low dependence upon labor in creating a return in transport industry. However, along with wage productivity ratio decrease we evidence wage intensity increase to 2 hundredth of percentage. Compared to capital productivity ratio it reveals that the industry becomes cost intensive in FC and wage, through the wage cost is still low to be indicative. We cannot omit FC analysis (fig.9) when performing qualitative analysis of transport industry of the republic. Thus, in 24 FC depreciation in transport industry was 21.1% that constitutes to the lowest ratio in the period. Since 25, depreciation ratio of FC, having peaked 34.9%, started to decrease and as of 211 reached 21.5%. The average depreciation ratio in the last three years amounted to 25.9%. In 214, the ratio was 24.2% in the industry. Depreciation analysis of all modes of transport reveals that inland water transport has the highest accumulated depreciation that amounts to 44.8% in 24-214. As of the end of 214, the depreciation ratio of that transport amounted 44.9%. Bus and electromotive transports evidence the second highest accumulated depreciation in the industry. Thus, its depreciation averaged 39.4%. In 214, depreciation amounted to 26.8% that was considerably less of the average in the period. The in-group analysis revealed that bus transport depreciation in 24-214 averaged 41.8%. As of the end of 214, depreciation ratio of bus transport stock in the country amounted to 47%. Depreciation ratio of trolley bus stock averaged 44.8% in the period. As of the end of 214, trolley bus stock amounted to 14%. That is the minimum ratio among all modes of transport. Depreciation of marine transport amounted to 14.6%. As of the end of 214, depreciation of marine transport amounted to 16.5%. Air transport depreciation ratio averaged 26.7% in the period and as of the end of the period it amounted to 17.7%. 1
Figure 9. FC depreciation ratio in transport industry in Kazakhstan, % 8 7 6 5 4 3 2 1 FC depreciation ratio in transport industry in Kazakhstan, % 34,9 34,6 34,3 33,8 3,6 28,1 26,4 27,2 21,1 21,5 24,2 24 25 26 27 28 29 21 211 212 213 214 Railway transport Inland water transport Marine transport Air transport Motor and electromotive city transport Transport, total, right scale 4 35 3 25 2 15 1 5 Therefore, one can make the preliminary conclusions of the industry. Along with the solid quantitative growth, we evidence increase of capital intensity and fall in capital productivity. Indirectly it indicates that FC is inefficiently used or there are introduced expensive FC in the industry accompanied with relatively insufficient output of the industry and that in return is reflected in the decreasing profitability observed in the recent years, especially in 214. The accumulated depreciation of FC of the industry amounted to 25% at large. Along with the increasing capital labor ratio there is observed the average labor productivity plateau and decrease in wage productivity in 214. Forecast analysis of transport industry We called our analysis on a way to the future and that is not simply a title. Now, when we have traced the history of transport industry, and know its present state, let us envisage its future development. We choose 5 year timescale. Empirically such a period is the most favorable for acceptable results of regression analysis. We apply two forecast models to investigate the future of the industry. The first one is multifactor linear regression. It mitigates devaluation effect in the model as US dollar is the unit of measure. Cobb-Douglas production function is the mathematical basis of the second one. The dependent variables are calculated by two factor linear regression. There are used KZT in the second model. The first model considers nominal growth of the economies that produce direct impact on the economy of Kazakhstan, i.e. the economies are the basic end consumers of Kazakhstan exports. Thus, the first model (fig.1) predicts a slight decrease of the transport industry in 215 and will amount to 6.6%. In value terms GDP of Kazakhstan will be USD 183 bln. whilst GVA of the industry will amount to USD 12.1 bln. Converted in KZT at annual average FX rate of 221.73, it will amount to KZT 2,677.9 bln. In 216, GVA of transport industry will increase to USD 12.5 bln. whilst GDP of the country will amount to USD 185.1 bln. Subsequently we forecast the moderate growth of nominal GDP of the republic. As of 22, GVA of transport industry to GDP will amount to 7.3% or USD 19.7 bln. We believe 11
that the mainspring of transport industry development will be transit freight transportation through the territory of Kazakhstan. Figure 1. Transport industry forecast 215-22 3 25 2 1,1% 9,8% 9,3% 9,% 8,5% 8,3% 6,4% 5,5% 6,% 6,3% 6,7% 6,6% 6,7% 6,9% 7,% 7,2% 7,3% 12% 1% 8% 15 6% 1 4% 5 4,4 5,6 7,5 9,4 11,3 9,6 9,5 1,3 12,2 14,6 14,5 12,1 12,5 13,8 15,5 17,5 19,7 24 26 28 21 212 214 216П 218П 22П 2% % GDP,USD bln. GVA of transport industry, USD bln. Transport industry specific weight to GDP, right scale The second model (fig.11) omits the economic potential of growth of the countries involved in international trade with Kazakhstan, but considers the internal potential of growth of the industry based on factors of production FC growth and the employed in the industry. Figure 11. Transport industry forecast 215-22 35 3 25 2 15 1 5 28,% 25,7% 28,2% 21,9% 18,3% 2,7% -1,2% 1,% 21,6% 18,7% 16,3% -4,7% 6,6% 6,2% 5,8% 5,6% 5,3% 59 742 951 1 16 1 372 1 49 1 392 1 531 1 818 2 211 2 57 2 45 2 611 2 773 2 935 3 98 3 262 24 26 28 21 212 214 216 218 22 3% 25% 2% 15% 1% 5% % -5% -1% GVA, Cobb-Douglas, KZT bln. GVA growth rate, right scale 12
According to the results of the Cobb-Douglas model, GVA of transport industry of Kazakhstan in 215 will amount to KZT 2,45 bln. that is 4.7% less than in 214. In 216, the growth rate of GVA of the industry will be 6.6% and in value terms will amount to to KZT 2,611 bln. Subsequently we anticipate decline of GVA in the industry. Thus, in 22, GVA will grow by 5.3% and amount to KZT 3,262 bln. Yet one should consider that the nominal GVA growth of the industry will depend upon the devaluation and inflation in the country that directly impact the nominal economy. Transport industry of Kazakhstan is capital intensive and has high rate of depreciation of FC, therefore the accumulated depreciation funds in KZT will be eroded by inflation in the country. To match the value of FC in the industry to the present market value economic agents will revalue their FC. The higher is the inflation, the higher will be the revaluation of FC as the accumulated depreciation funds will fail to recover the wear and tear of it. Devaluation impact of FC is indirect but is also in close link to FC value and the amount of cost reallocations. Transport vehicles are not produced locally and those that are assembled in Kazakhstan do not have the repair and maintenance base (spare parts). Spare parts are purchased abroad and under devaluation will cost more in KZT. To compensate the cost economic agents will revalue the FC and will use accelerated methods of depreciation. Doubly declining depreciation. Therefore, FC nominal value change will indirectly influence the nominal GVA in the transport industry. 13