Kazak Builders Face Concrete Problems

Despite Kazakstan’s construction boom, there is a shortage of building materials – principally cement – which looks set to push house prices up further. NBCentralAsia experts say the focus on Kazak energy is robbing other industries of investment.



Last week, the Association of Construction Firms in Kazakstan asked the government to ensure a stable supply of cement, warning that shortages could make house prices rise by 25-30 per cent.



Association members say the price of cement has doubled to 35,000 tenge, around 290 US dollars, per ton in the past month.



In the last two years, the price of housing in the southern city of Almaty has increased threefold to reach 3,600 US dollars per square metre.



Analysts say that the lack of building materials shows that investors are still shying away from non-energy based sectors of the economy.



NBCentralAsia economic observer Petr Svoik says the cement shortage is due to the poor investment climate and the absence of the kind of genuine competition that normally balances out supply and demand.



“Money is not flowing into domestic industry - even areas that are seeing a boom. This is probably because once you get beyond all the talk of a good investment climate, the investment is actually only going into the resource-extracting sectors,” he said.



Five local plants supply four million tons of cement a year to the domestic market, but this is not meeting Kazakstan’s construction needs and an extra two million tons is imported from Kyrgyzstan, Russia and Uzbekistan.



Kanat Berentaev, an expert from the Centre for the Analysis of Social Problems, agrees that the oil and gas sector is taking the lion’s share of investment while the construction materials industry lies stagnant despite the growing demand for housing.



“The government has been working on the assumption that raising the demand will also ensure that the supply side increases,” said Berentaev, adding that this was not proving to be the case.



While people are being encouraged to take on mortgages, thus boosting demand for housing, nothing is being done to stimulate investment in the construction materials industry, and this could give rise to a housing shortage, he said.



(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)