Damn Khorgos? New scandal on the Kazakh-Chinese border

Another scandal on the Chinese-Kazakh border. Participants in the special economic zone of the International Center for Cross-Border Cooperation “Khorgos” complained about systematic extortion and threats from the new head of the ICBC “Khorgos” Ersyn Orazaev, a friend of Dariga Nazarbayeva’s son.

Sand and corrupt officials

During its entire existence, the International Center for Cross-Border Cooperation “Khorgos” has acquired nothing but notoriety. This place has long been called cursed by the people. It’s impossible to count how many officials were taken away from here in handcuffs; the Khorgos case alone is worth it. Then 80 people were sent to jail. Even the head of the Khorgos international center, Vasily Ni, was caught with a bribe of a million dollars.

Almost 10 years have passed since then, but at intervals of two or three times a year, anti-corruption fighters detain someone here. But this is the first time for prostitutes and pimps. 

The detention happened right in time for our trip to the Khorgos International Center for Cross-Border Cooperation, where we gathered after a collective complaint from investors to the president of the country about unbearable working conditions in the “free economic zone.” Employees of the Department for Financial Monitoring of the Zhetysu region on the Kazakh side busted six underground casinos and one prostitution den, which was organized by Chinese citizens. 

According to the press service of the Financial Monitoring Agency of the Republic of Kazakhstan, in four commercial buildings they found 76 slot machines, 43 gaming tables, technical equipment for gambling, and more than 60 thousand yuan. The pre-trial investigation continues. 

Where was the akimat looking?

There was a feeling that all these arrests were prepared specifically in order to distract people from the main problem - the lawlessness in the special economic zone of the ICBC Khorgos, which began to happen after the appointment of Ersyn Orazaev to the post of head of the ICBC management company. He is not only a friend of Nurali Aliyev, but also a brother-in-law by his first wife with Daniyar Aikynbaev, chairman of the board of the SEC “Zhetysu” (as part of the board of directors of JSC Management Company SEZ ICPS “Khorgos”) and a close friend of Darkhan Kaketay, son-in-law of the region akim Beibit Isabaev.

However, everything is in order

Let’s return to the opening of the Khorgos International Center for Cross-Border Cooperation; it was closed during the pandemic. Then, Bolat Nazarbayev’s company, Kazakhstan Technology Solutions Ltd LLP, which transported luggage through the special economic zone of the Khorgos ICBC, was replaced by a new company, Terminal A LLP. Its director Adil Orynbasarov assured us that the company has nothing to do with either Bolat or his son Nurbol Nazarbayev, they bought the luggage terminal, and who is a trade secret. The buses are also theirs, they were simply donated to the Khorgos ICBC so that they could transport tourists. 

The head of the management company, Birzhan Zhylkaidarov (by the way, the VIP client of the pimp Aika asked us to give him time so that he could direct all the work of the center in the right direction. They did. They returned, and then there were scandals again. 

At the very least, the center worked for almost a year, but we did not notice any significant changes. The territory was so neglected that it is beyond words: mountains of garbage, dried out trees that were once planted with love, and broken roads.

Management complained about work that was very difficult for them to establish after the pandemic. But evil tongues assured that the problem was not at all in low performance, but in the conflict between Birzhan Zhylkaidarov and his deputy Ersyn Orazaev. One was appointed by Astana, the other by Taldykorgan. People are not easy. They have excellent education, work experience in large national companies, and good connections. Maybe that’s why they had high hopes. They believed that they would breathe new life into the center, which was mired in corruption scandals. But nothing came of this venture. 

Huge queues began to form at the terminals on both the Chinese and Kazakh sides of the Khorgos ICBC. People stood until late at night to receive goods deposited on the Chinese side. Everywhere there are carriers and pushers who, for money, help pull any tonnage goods from the Chinese side. After seven months, the Zhylkaidarovas survived, Orazaev took over the territory, and then this began...

A new broom sweeps in a new way

Immediately after his appointment as the head of ICBC Khorgos JSC, Ersyn Orazaev found competitors in the company Terminal A LLP and opened another baggage terminal. True, he did not build a new one, but adapted a hangar, which, after the pandemic, was urgently built by Zhetisu Logistics LLP. This company won a competition for luggage transportation in April 2023, but refused to participate in this enterprise, which was profitable in all respects. 

According to Adil Orynbasarov, director of Terminal A LLP, their company acquired a property that ICPS Khorgos JSC built in 2015 for 103.3 million tenge. Of this amount, 86.2 million tenge were spent on construction and installation work, and the remaining funds were allocated to design work and designer and technical supervision services.

Sharks go to war

The Kazakhs have a good proverb: “Tynysh turgan burkitti, Kotin shukyp urkitti.” It’s about the fact that it’s better not to wake up a sleeping dog. Orazaev also reached the participants in the special economic zone of the ICBC “Khorgos”, who spent a lot of money on the construction of facilities on the Kazakh part.

As they claim, he began to abuse his official position, interfere with their activities, and agree to extremely unfavorable business conditions. And also extort significant amounts of money or a share in the monthly revenue from existing and planned projects.

“Orazaev personally asked me for 600 thousand US dollars for business patronage, and when I refused him, he turned off my electricity and water. “I have not yet wanted to renew the contract for the construction of the facility,” complains the owner of Tulip Khorgos LLP, David Lee. — My company at the Khorogos ICBC is building a five-star hotel worth about 39 billion tenge. Now I have already invested about seven million dollars. Ready from 11 four floors. But Orazaev, instead of helping, puts a spoke in the wheels. We don’t know what to do anymore.”

Mr. Lee complained about theft in his office. It turns out that during the pandemic, the construction workers’ office and dormitory were completely looted. Seven computers and televisions were taken away. The aquarium with fish alone cost about five thousand dollars.

According to investors, some of them have already lost their land plots and real estate in the free economic zone. Without any compensation, Orazaev terminated several contracts and transferred them to third parties. They are now going to build objects on the confiscated land plots in violation of the general plan and the detailed planning plan for the free economic zone of the Khorgos ICBC. In addition, it obliges the subsidiaries of the management company to charge participants in the FEZ ICBC Khorgos and their clients dubious and unreasonably high fees for using the infrastructure, which is not the case on the Chinese side of Khorgos. All these levies greatly worsen the investment climate in the Kazakh part and place local entrepreneurs in obviously unequal competitive conditions in comparison with Chinese entrepreneurs.

Investors complained about the lack of normal infrastructure, communication and engineering networks, although at one time they claimed that they had built a boiler house with a capacity of 120 MW, an electrical substation, water intake structures and sewage treatment plants.

“There is no sewage system, human waste is dumped anywhere, we are charged 6,500 tenge per cubic meter for garbage removal, but the waste is stored at abandoned construction sites. You can visit any frozen facility and make sure that we are telling the truth. We only dream about hot water and heating, although we know that there is a boiler room built at great expense, why they don’t start it up is a big question,” Kairat Makulbaev, a representative of the company “Rezon Project” LLP, is indignant.

By the way, Orazaev, they say, asked him for 300 thousand dollars for patronage, and then agreed to extend the contract for 50 thousand dollars. 

“We are building the entire Victoria City exhibition complex, we invested about 10 million US dollars, the work is almost 80 percent completed, but the management of the Khorgos ICBC writes all sorts of letters and does not want to renew the construction contract. The electricity was cut off, although it is very expensive here. He banned the entry of our vehicles that were transporting construction materials to the site.”

City of Craftsmen LLP also suffers huge losses. As the company’s investor Hou Lingyun assures, they invested 7.2 billion tenge in this project and built an entire city on 2.4 hectares, but they cannot put the facility into operation.

“For some reason, the management of the Khorgos ICBC decided that we are not participants in the free economic zone, imposed a fine of 1.5 billion tenge, were able to protect our rights through the court, but now they demand a cooperation agreement so that we register it with the JSC” KazIndustry, which is located in Astana, complains Howe. “We are just investors from China, so why is Orazaev creating additional problems for us instead of helping us?”

Arthur Kostandyan, owner of Aksa Invest Group LLP, is a different story. According to eyewitnesses, his partner organized a brothel at his facility, and when he was caught in this crime, he fled to China. Now all the problems fall on Kostandyan’s shoulders, and Orazaev is also going to terminate the construction contract with him, although it has already been almost 80 percent built up. 

Bolat is dead, long live Dariga Nazarbayeva?

The luggage terminal TOO “Terminal A” is now like a bone in Orazaev’s throat, and he wants to return it to his ownership at all costs, despite the 1.5 billion investments. Although a year ago they almost begged them to sign a consortium agreement. 

The Khorgos International Center for Cross-Border Cooperation was supposed to resume its work after the pandemic, but it did not have its own baggage terminal. Previously, the baggage terminal was owned by the company Kazakhstan Technology Solutions Ltd, the son of Bolat Nazarbayev Nurbol. The then head of ICBC Khorgos JSC, Birzhan Zhylkaidarov, assured us that the old thing was over, and the company of Nazarbayev’s younger brother had sunk into oblivion, and another company, LLP “Terminal A,” won the transportation of luggage. 

However, the main transport prosecutor’s office of the Republic of Kazakhstan intervened in the situation. Although, according to its competence, it should deal with the transport sector, and not with the transactions of the Khorgos ICBC. The prosecutor’s office did not find any violations in the actions of the management company’s management that could serve as grounds for administrative or criminal liability. The only thing she could latch on to was the sale of a baggage terminal. For some reason she decided that it had been sold without a preliminary appraisal. 

A lawsuit was initiated in March. The Specialized Interdistrict Economic Court of the Zhetysu Region invalidated the purchase and sale agreement for the building of the luggage terminal TOO "Terminal A", as well as the land under the facility. 

According to Adil Orynbasarov, director of Terminal A LLP, their company purchased the property for 103.3 million tenge from ICBC Khorgos JSC back in 2018. Of this amount, 86.2 million tenge were spent on construction and installation work, and the remaining funds were allocated to design work and designer and technical supervision services. 

According to the purchase and sale agreement, Terminal A LLP paid the management company MCPS Khorgos 89,510,00 tenge for a warehouse and a land plot measuring 1.9 hectares. The cost of the warehouse was determined by the management company ICPS "Khorgos" based on an independent assessment. The total cost of the warehouse, taking into account 25 hectares of land, was determined to be 92,038,00 tenge, of which the cost of the facility was 89,510,00 tenge, the cost of the land plot (25 hectares) was 2,528,000 tenge. At the same time, the total territory of the warehouse is 1.9 hectares. After the completion of the transaction to acquire the property, the management company MCPS "Khorgos" for almost three years, despite the requirements of land legislation, prevented the transfer of rights to the land plot. Instead, the management company forced Terminal A to enter into an agreement to sublease the land, as a result of which the latter paid 6,411,551 tenge from 2018 to 2022. Only after a change in the owner and management of Terminal A in 2023 was it possible to resolve this issue. The new owners spent more than seven months restoring their rights, negotiating with both the management company and government agencies, which failed to take measures to protect the interests of the investor.

The facility was used as a regular warehouse, on the territory of which customs inspection of goods and cargo was carried out, and detained goods were also stored there. 

A little later, the company launched an electronic system for recording the movements of visitors, the import and export of goods to the territory of the Khorgos ICBC, and completely reconstructed the baggage terminal - investing more than 700 million tenge. At the same time, the total investment volume of Terminal A exceeded 1.5 billion tenge.

“We provided all the supporting documents, but the judge ignored them,” the investor complains. — From April 2018 to March 2024, the Terminal A company received about 1 billion tenge into the budget in the form of taxes, mandatory payments, as well as social and customs payments, the total amount of wages to employees amounted to more than 1 billion tenge. The company employs 584 residents of the Panfilov district. 230 thousand entrance tickets were sold, the proceeds from which amounted to 430 million tenge. Of these, 417 million tenge were sent to Khorgos Commerce LLP, a subsidiary of ICBC Khorgos JSC. Monthly customs payments to the budget from the tourist flow increased from 4.5 million tenge to 36 million.”

The Chief Transport Prosecutor’s Office insists on returning the parties to their original state, which was confirmed by the court. And that facility, acquired by Terminal A in 2018, no longer exists, replaced by a modern baggage terminal, the market value of which is now estimated at $5 million. Who will compensate Terminal A for losses after the property is returned?

The current head of ICBC Khorgos JSC, Ersyn Orazaev, a friend of Nurali Aliyev, the son of Dariga Nazarbayeva, is not going to do this. It was clear that he had prepared thoroughly for the meeting. I collected a dossier on all the investors indicated under the letter to Kassym-Zhormat Tokayev. According to him, all of them are unreliable people and violators of the law of the Republic of Kazakhstan.

“They opened casinos and brothels, organized an illegal gambling business, that’s all the evidence,” he said, holding out photographs of half-naked women, “apparently from the materials of the criminal case. “I terminated the contract with all of them because of this; such things are unacceptable here.”