A Journey to Khorgos ICBC, China and Kazakhstan’s Free Trade Zone

When I mentioned that I was going to the Khorgos (Horgos) Free Trade Zone, Dmitri scoffed. “Why would you want to go there?” he asked. “That’s just a place where old Kazakh ladies go to buy things from China to take back here to sell.”

What was intended to be a game changing catalyst of international commerce clearly wasn’t of much interest to the jet set of Almaty, but it would take a dip into its depths before I would understand why.

Location of Horgos

The International Center for Boundary Cooperation (ICBC) is a free trade zone that straddles the border of China and Kazakhstan, 670 kilometers west of Urumqi and 300 kilometers east of Almaty, far out in the Saryesik-Atyrau desert in the shadow of the Dzungarian Alatau Mountains — which is to say, proverbial no-mans-land. Until very recently this was a place cut off from the rest of the world by sheer distance, closed borders, and inhospitable terrain. Following the decline of the Silk Road, this area was buried in the sands of irrelevance, but now, with a revived emphasis on cross-border trade and political cohesion, China and Kazakhstan are working to change this fast. Now a major stop on what has been dubbed the New Silk Road, new cities, land ports, and special economic zones are being built in these hinterlands; at the center of which is the ICBC duty free zone.

The ICBC opened in December of 2011 as a bilateral project to bolster trade, strengthen political ties, and further develop the busiest border between China and Kazakhstan. Covering five and a half square kilometers in total — 3.43 square kilometers in China and 1.85 square kilometers in Kazakhstan — it is China’s first attempt at an international free trade zone.

I entered into the ICBC from the Chinese side after enduring an intensive and invasive security protocol which consisted of two metal detectors, a luggage inspection, multiple stare-downs by machine gun toting military police, and a complementary private search and interrogation in a back room by antsy immigration officers. Once on the inside, I found myself corralled within a maze of eight foot high barbed wire fences. Thousands of meters of such fencing, barricades, and partitioning walls were obsessively spread around this place, giving me the feeling that I was about to begin shopping trip in a prison camp. Trade may be free here but that seems to be about it, I muttered to myself.

When it was first announced, the ICBC was heralded as a benchmark of Central Asia’s newfound regional connectivity and elevated political and economic position. “The importance of Khorgos to Kazakhstan should not be understated . . . [it] will spur economic growth across the whole of Eurasia,” sang an article in the Astana Times. With trade relations between China and Kazakhstan beginning to boom, the adjacent new Chinese city of Horgos rising up from the earth, multiple international rail lines rolling through, and the Western Europe-Western China Highway passing nearby, the Khorgos FTZ was poised to become a leading project of the New Silk Road — a network of trade routes, markets, pipelines, and logistics zones bridging the expanse between China and Europe.

The ICBC was envisioned to become a multi-cultural forum where Kazakhs, other Central Asians, Russians, and Chinese could come together to get a taste of each other’s goods, cuisine, entertainment, and culture. There were to be hotels, amusement centers, restaurants, and opportunities for international exchange for visitors from every corner of Eurasia, who would technically be permitted to remain in the zone for up to 30 days visa free. But this grand vision has yet to transpire.

Although the ICBC is a trans-national area, the border between China and Kazakhstan is still clearly demarcated. A high chain link, razor wire topped fence runs along its length, only opening at a giant ceremonial gateway that’s in the shape of the Chinese character for friendship. Affixed to one side of the gate is the emblem of China on the other is the emblem of Kazakhstan. Visitors can freely pass through this gate on their way between each side, but if you look closely you will see that submerged beneath the gate’s opening are two parallel rows of hidden fences that can be erected at a moment’s noticed just in case either country decides to flex its territorial sovereignty and reassert the status-quo.

Luxury goods that are not really at the Khorgos (Horgos) FTZ.

The Chinese side of the ICBC consists of five giant, four-story, flea market-like shopping outlets. They are positioned side by side in block formation with large sidewalks and roadways connecting them. There are no personal cars allowed here, which gives the place an amusement park kind of feel. In their stead are public golf carts and mini-buses which ferry shoppers from shopping complex to shopping complex, from each respective border and back again. It was difficult not to notice that the bulk of China’s side of the ICBC is littered with half-finished construction projects and entire square kilometers of vacant, fenced-in lots. “More to come soon” may be an appropriate catchphrase to sum this place up.

Inside the shopping centers themselves, vendors rent out individual booths and shops, and most of the buildings, floors, and corridors are organized by product type. So if you have a particular hankering to buy quilted blankets, there’s an entire hallway full of shops selling nothing but; if you’re in the market for curtains, there’s an entire floor just for you; if you want a nice, genuine hair wig, there’s a section for that too. The vendors call out to you as you wade through aisles that are strewn with giant, waist high bundles of merchandise, trying to get you to enter their shop rather than the ones on both sides of it which are selling the exact same things.

The vendors themselves are mostly Han Chinese from other parts of the country who were encouraged to move out to this remote outpost on the promise of tax breaks, cheap rent, and the potential that this could be the making of the country’s next big boomtown.

The shopping centers of the ICBC seem to have more akin to a flea market than a modern shopping mall, which probably has a lot to do with the class of products that are being sold. Like many of China’s other free trade zones, the items that are available “duty free” are far from what the trend-setting middle and upper classes of Asia are hungry to buy. While there are signs advertising the presence of Chanel, Calvin Klein, Clinique, Prada, and Gucci, none of these luxury brands actually have a presence here — at least not in a form that isn’t an abject knock-off. Rather, the merchandise is starkly run-of-the-mill, consisting of no-brand clothing, white-brand electronics, car parts, farm equipment, luggage — the typical strain of mundane “Made in China” stuff. There is clearly nothing being sold here that’s going to disrupt the ebbs and flows of global commerce, unless shanzhai walkie talkies or flowery blouses suddenly go in vogue.

Although the scene on the Kazakh side was far grimmer. To put it succinctly, there was nothing there. Kazakhstan’s entire 1.87 square kilometers of the ICBC was barren, literally consisting of nothing more than an empty dirt lot, a long vacated row of podunk-style outdoor vendor stalls, a solitary abandoned yurt, and a smoldering pile of trash. There was once fledgling traces commerce here — local vendors selling cheap trinkets and canned meat out of shipping containers — but by the time I arrived this had ceased to exist. Although a billboard still rose overhead, stubbornly proclaiming Kazakhstan’s great future in the ICBC, showing it as a place of skyscrapers, modern shopping malls, and luxury hotels. I watched as smoke rose up from the burning garbage pile below, appropriately obscuring the billboard with a billowing cloud of satire.

On the Kazakh side there is nothing but a burning pile of garbage.

There was nothing on the Kazakh side of the ICBC and there was little reason for there to be. The consumers coming here, who are mainly from Kazakhstan, are looking to buy the cheap Chinese products a little cheaper. Most of the signs here are written in Russian and most of the prices are listed in Tenge, the currency of Kazakhstan. There is very little interest from Chinese visitors here in the few consumer goods that Kazakhstan produces, duty free or not. As of now, the cooperative dynamics of this duty free zone are clear: China sells, Kazakhstan buys. The place is less an international center for commercial exchange than a Chinese wholesale market flung out on the Central Asian steppes.

Kazakhstan’s contribution to the ICBC. Seriously.

As I walked through the nearly deserted streets of the ICBC it was difficult for me to imagine who it was all being built for. The traders who actually stay overnight in the Chinese city of Horgos, just outside the FTZ, are those wearing cheap, crinkled suits and ruffled blouses, chain smoking cigarettes in the lobby of the $15 per night Heaven on Earth hotel — definitely not lavish spenders bent on being entertained. While there are technically 85,000 people in Horgos, this is a place that until last June was classified as rural and still has a mostly agrarian population that’s dispersed over an area the size of New York City. While outside of the ICBC on the Kazakh side there is a fledgling logistics port, special economic zone that’s in the initial stages of construction, and then nothing until you get to the small, 30,000 person town of Zharkent a half hour away. Even when the new highway that is being built to the border is finished, the ICBC will still be four long hours away from Almaty, Kazakhstan’s cultural and commercial capital.

While the Khorgos ICBC originally anticipated 30,000 daily visitors, just 1,500 are currently showing up. It seems to be a get in fast, get out faster kind of a place. The buses from Almaty arrive in the morning, visitors make it through customs by 10AM, shop a little, then hurry back to the bus by 3:30PM for the return trip home. Nobody dawdles in Khorgos; coming here is a job, not something that’s done for amusement. When I originally purchased my bus ticket to Khorgos from Almaty I told the vendor at the station that I wanted to stay for two days, to which she just glared at me cluelessly, as though I suggested something freakish, before denying my request. I suppose I was better off for the lack of cooperation. Although pretty much all nationalities can stay here visa-free for 30 days I can’t imagine what a month of having nothing to do but browse through wholesale markets of cheap Chinese stuff and having nothing to eat but 10 RMB beef noodles would do to a person.

Although it must be acknowledged that the staleness of the Khorgos ICBC may not completely be due to market forces alone. As Kazakhstan is a member of the Eurasian Economic Union, the border at Khorgos is also the frontier of Russia, Belarus, and Kyrgyzstan. So goods that pass through here can be shipped freely throughout this massive chunk of the former Soviet Union without any additional customs inspections or duties. Fearing that Khorgos could serve as a gateway for cheap Chinese products flooding into the union, the amount of merchandise that can be imported from the ICBC is limited to 50 kilos or 1,500 Euros per person, per month. While China is not free of import restrictions of their own, imposing an 8,000 yuan (US$1,250) per day limit. So even if high-priced luxury goods were being sold here nobody would even be permitted to buy them in effectual quantities.

As of now, the monumental China-Kazakhstan free trade zone is little other than a retreat for small-time traders or people buying utilitarian personal items — in the words of Dmitri, old Kazakh women looking to make a little pin money.

Although the fortunes of the ICBC could potentially change very quickly, and a single snapshot cast from a single visit is ill methodology for making a concrete projection of the shape it will take in the future. While the place appears to be suspended in a state of false starts and half measures, big plans continue being made and big money continues flowing in. China has already laid down US$4 billion and has reserves on the way and Kazakhstan keeps promising to up their US$300 million investment to US$2.5 billion. Talk continues of building a passenger airport, luxury hotels, casinos, spas, entertainment areas, a university for foreign languages, a Disneyland-like theme park . . . but the only thing that is clear as of now is that as the New Silk Road grows so too will the Khorgos ICBC.

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