KTZ Railway Project

National Company Kazakhstan Temir Zholy Joint Stock Company (KTZ, or Project Enterprise, or PE) is a 100% state-owned vertically integrated group (via Samruk-Kazyna JSC, Kazakhstan’s Sovereign Wealth Fund), operating through 13 (out of which 11 are fully owned subsidiaries). It owns and operates all the state railway network inherited from the Soviet Union era (16,000 km in total operational length), and is the country’s largest owner of locomotives, freight, and passenger cars. Transportation activities of KTZ provide economic connectivity among 17 regions of Kazakhstan, and five neighboring countries, rendering KTZ as one of the 15 largest railway companies in the world in terms of freight turnover. KTZ is the largest employer in the Kazakhstan (circa 1% of the population). More information about the company is available at www.railways.kz.

MIGA is expecting to provide a non-honoring of a state-owned enterprise obligations (NHSOE) cover to guarantee the financial obligation of KTZ on a ten-year loan of EUR 500 million (or the equivalent in CHF) from Citibank N.A, Banco Santander SA, and other financial institution yet to be identified, which will be used to finance a portion of KTZ’s capital expenditure (CAPEX) program for the period of 2023-24. The proceeds of the loan will be used for:  i) renovation, rehabilitation, and repairs of existing sections of rail tracks; and ii) purchase of passenger cars; and electric freight and passenger locomotives (the term “Project” hereinafter applies both to i) and ii)). Construction of new railway lines and new stations, as well as any other new construction, are excluded from the loan.

KTZ has contractor companies responsible for the track renovation, rehabilitation, and repairs works. The works include replacing wooden sleepers with concrete sleepers, replacing bolted rail joints with continuous-welded rails, reinforcement and levelling of ballasts, improvement of the railway bed and straightening of tracks. Through the 2023-2024 CAPEX Program, KTZ is planning to repair approximately one thousand kilometers (km) of tracks. The 2023 program includes the upgrade of 28 sections, totaling 542 km (please see Annex 2 for the detailed list of sections) with individual sections ranging from 3 km to 36 km. The detailed list of sections to upgrade in 2024 was not finalized during the time of due diligence.

The 2023-2024 CAPEX Program partially financed by MIGA guaranteed loan will also include the  purchase of 105 freight and passenger locomotives to expand the existing fleet of locomotives, and a purchase of 50 passenger cars to replace the retired ones. Locomotives and cars will be purchased from several local and international suppliers, some of which have production facilities in Kazakhstan.  

The Project is a Category B under MIGA’s Policy on Environmental and Social (E&S) Sustainability (2013) because the potential E&S impacts are limited, site-specific and readily addressed through mitigation measures. The main E&S risk is related to the implementation of the KTZ’s Environmental and Social Management System (ESMS) to facilitate E&S compliance of the CAPEX Program activities funded by the MIGA-guaranteed loan.

Potential E&S risks and impacts related to renovation, rehabilitation, and repairs of tracks include: (i) occupational health and safety (OHS) including falling objects, manual handling, ergonomics, exposure to heat stress, dust, noise, vibration and construction camp hygiene issues; (ii) labor and working conditions; (iii) gender-based violence (GBV) risks; and (iv) community health and safety impacts related railway safety, traffic safety and construction impacts such as dust, noise and vibration.

Potential risks associated with acquiring and maintaining the rolling-stock include i) hazardous materials (solvents, coolants, acids), wastewater (containing residues from transported materials, paint, oil and grease) and waste management issues (e.g. sludge from cleaning), and ii) physical hazards associated with work in proximity to moving equipment.

While all Performance Standards (PSs) are applicable to this Project, based on our current information, the Project will have impacts which must be managed in a manner consistent with the following Performance Standards:

• PS1:  Assessment and Management of Environmental and Social Risks and Impacts
• PS2:  Labor and Working Conditions
• PS3:  Resource Efficiency and Pollution Prevention
• PS4:  Community Health, Safety and Security

Project activities do not include any new construction. Renovation, rehabilitation, and repairs of tracks will only be implemented within the existing right of way (ROW). These works will not be conducted in or near protected biodiversity ecosystems or World Heritage Sites. Identified E&S impacts are site specific and are minor to moderate in scale. Therefore PS5: Land acquisition and Involuntary Resettlement; PS 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources, PS7: Indigenous Peoples and PS 8: Cultural Heritage are not triggered for this project.

In addition, the following World Bank Group (WBG) Environmental, Health, and Safety (EHS) Guidelines are applicable to the Project:

• World Bank Group (WBG) General EHS Guidelines (2007)
• WBG EHS Guidelines for Railways (2007)

The following documents were reviewed by MIGA:

• MIGA E&S Due Diligence Questionnaire, April 2023
• Gender Equality Development Plan 2023-2024, KTZ, February 2023 (in Russian)
• Emergency Preparedness and Response Standard, KTZ, April 2022 (in Russian)
• Integrated Annual Report, KTZ, 2021
• Rules for remuneration and bonus payment for employees, KTZ, June 2021
• Standard on Identification and Management of E&S Risk and Impacts, KTZ, April 2021 (in Russian) 
• Health and Safety Management System Manual, KTZ, November 2020 (in Russian)
• Environmental Management System Manual, KTZ, November 2020 (in Russian)
• Ethics and Behavior Code,  KTZ, September 2019 (in Russian)
• Human Resources Policy for 2019-2029, KTZ, September 2019 (in Russian)
• Corporate Ideology and Philosophy, Company Policy KTZ, November 2017 (in Russian and in Kazakh)
• Rules for the Organization of Professional Development and Training, KTZ, August 2017
• Automated E&S Management System user manuals, KTZ (no date specified, in Russian)
• Energy savings and energy efficiency plan 2020-2025, KTZ (no date specified, in Russian)

In addition to reviewing the above documents, MIGA carried out an E&S due diligence (ESDD) visit in April 2023, which included meetings with key KTZ staff and management, as well as discussions with the World Bank. ESDD also included a visit to the rail tracks rehabilitation site in the Atyrau region of Kazakhstan. 

The implementation of the 2023-2024 CAPEX Program is the responsibility of KTZ, and, therefore, the focus of MIGA due diligence was on KTZ’s ability to implement MIGA PSs. This includes KTZ’s existing E&S management systems, and mechanisms to ensure compliance with PS requirements for the identified rehabilitation works in 2023 as well as the works to follow in 2024.

MIGA’s due diligence review considered the E&S management planning process and documentation for the Project and identified gaps (if any) between these and MIGA’s requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable time period, are summarized in the paragraphs that follow and in the E&S Action Plan (ESAP) attached to this ESRS. Through the implementation of these measures, the Project is expected to be designed and operated in accordance with the Performance Standards. Key E&S issues associated with the Project business activities are summarized in the paragraphs that follow.

PS1:  Assessment and Management of Environmental and Social Risks and Impacts

Environmental and Social Assessment and Management System

KTZ has obtained the following certifications issued by TÜV Certification body in February 2021 and are valid until February 2024: ISO 9001:2015 Quality Management Systems, ISO 14001:2015 Environmental management systems and ISO 45001:2018 Occupational Health and Safety and ISO 50001:2018 Energy Management Systems . These certifications cover KTZ’s primary operations and services, i.e. management of processes of providing mainline railways network services, freight transportation services and passenger transportation services.

Based on the requirements of Kazakhstan Environmental Code (Jan 2021), the rehabilitation and renovation of tracks fall under Category III or IV, i.e. activities with potential “insignificant” or “minor” environmental impacts. Therefore, the Project was not required to conduct an environmental impact assessment or obtain an environmental permit.

Policy:

KTZ has developed and is implementing an Occupational Health and Safety (OHS) Policy, Environmental Policy and a Corporate Ideology and Philosophy (November 2017). These documents are in line with the PS 1 requirements and describe a commitment towards environmental and social sustainability. The policies focus on the prevention of accidents and incidents and the compliance with Kazakhstan’s laws and regulations and international standards. These policies also outline the responsibilities for the policies execution. As per the ESAP, KTZ will ensure that the requirements of these policies are communicated to all levels of its organization, as well as the contractors responsible for the Project activities. KTZ will develop and disclose a GBV and Sexual Harassment (SH)  Policy in line with PSs that will be applicable to KTZ staff, contactors and KTZ clients (ESAP Action item).

Identification of Risks and Impacts:

KTZ has developed several procedures for identification and management of E&S risk and impacts in line with MIGA PS 1. They describe the steps for identifying hazards, assessing probability and severity of harm, assigning responsibilities for managing risks and developing a universal company risk register. The risks include floods, landslides, extreme winds, wildfires, etc. These procedures are implemented by means of the electronic Integrated System for Industrial Safety (ISIS). The ISIS app is installed in the mobile phones of KTZ employees. The E&S risk screening data from each KTZ location in Kazakhstan flows into the central data processing facility in the KTZ headquarters in Astana. ISIS allows KTZ employees to report and investigate near misses, incidents, and accidents. The system automatically develops mitigation actions, assigns responsibilities, and tracks the implementation.   

The railroad infrastructure can be affected by extreme weather events, that can be increased due to changing climate. These risks for Kazakhstan include increased average and extreme temperatures, that can lead to expansion of bridge joints and buckling of railway tracks, heavy precipitation can damage railway networks, lead to flooding in tunnels, landslides and mudslides can damage to physical infrastructure blocking circulation on railways. Track renovation with replacement of wooden sleepers with concrete sleepers, replacing bolted rail joints with continuous-welded rails, reinforcement and levelling of ballasts, improvement of the railway bed and straightening of tracks will help to alleviate those risks and decrease possible damage. KTZ also has an “Emergency Preparedness and Response Standard” to identify, manage and prevent various emergency event, including potential climate related events.

Management Programs:

Health and Safety Management System Manual (Nov 2020) describes a procedure for developing and monitoring the implementation of the E&S plans for the company activities conducted within a given period. For the Project activities, KTZ will require contractors to develop OHS and environmental plans which will cover such risks as safety during construction works, transportation and pedestrian safety, traffic management, construction camp hygiene, security, emergency response and preparedness, water, wastewater and rainwater management, asbestos management, waste management, vegetation cover management in line with the requirements of the WBG EHS Guidelines. As per the ESAP, these plans will be shared with MIGA once developed.

In addition, KTZ will help contractors develop Social Management Plans in line with PS1 which will aim at reducing negative E&S impacts of construction activities on local communities (ESAP Action Item).

Organizational Capacity and Competency:

In KTZ headquarters in Astana, E&S and OHS departments belong to the Directorate of the Technical Policy. E&S and OHS departments are present at each level of KTZ organization: corporate level (KTZ headquarters in Astana), network level (companies that are a part of KTZ such as KTZ-“Freight Transportation”, KTZ-“Passenger Transportation” etc.), regional level (regional railway networks, branches and affiliations of the KTZ companies), and local level (specific railway sections lead by the road masters). These departments focus on E&S monitoring and control, which includes inspection, surveillance and control of both KTZ activities and third party contractors. KTZ has developed E&S and OHS competency assurance plans to ensure timely delivery of E&S and OHS training.   

Another function which is also a part of the Directorate of the Technical Policy is a transportation safety department whose main function is to ensure safety and security of the tracks, locomotives and passenger and freight cars to avoid accidents and incidents such as collisions and derailment.  As per the ESAP, KTZ will designate a senior official from the Directorate of the Technical Policy in KTZ headquarters in Astana with the overall responsibility for ensuring and reporting on compliance with MIGA’s PSs and implementation of the agreed ESAP (ESAP action item).

Emergency Preparedness and Response:

KTZ has developed an Emergency Preparedness and Response Standard (April 2022) which is in line with the requirements of MIGA PS1 and which describes a tiered response to incidents, emergencies and crises. OHS department has an responsibility for the standard implementation. The Standard outlines the requirements for training, emergency equipment supply, procedure for forming an emergency management team, steps for emergency investigation with a purpose of identifying a root cause, as well as regular drills and monitoring and auditing of the emergency response system. In addition, KTZ develops and updates life and fire safety (L&FS) plans in offices, train stations, rolling stock, infrastructure. For Project activities, KTZ will pass down its requirements to contractors and require them to develop Emergency Preparedness and Response Plans in accordance with the L&FS / structural section of the WBG General EHS Guidelines (ESAP action item).

Monitoring and Review:

A part of ISIS is a database that allows analyzing trends on E&S risks and tracking the implementation of safety and E&S measures. Line managers are required to conduct OHS and E&S regular checks and inspections and results are recorded in inspection templates are included in the ISIS interface. OHS and E&S indicators are a part of the Key Performance Indicators of employees including management. As per the ESAP, KTZ will ensure that the findings from the E&S and OHS inspections for the Projects sites are recorded in ISIS.                    

Stakeholder Engagement

KTZ will develop and implement a Stakeholder Engagement Procedure (SEP) for company operations in line with PS1 (ESAP action item). The SEP will incorporate, among other things, principles of stakeholder identification and analysis, information disclosure, stakeholder consultation, grievance management and stakeholder engagement in the project planning and monitoring. It will also include steps for documenting engagement activities and ensure that consultation is gender-sensitive, and the vulnerable population is identified and consulted.

External Communication and Grievance Mechanisms

The KTZ website presents several ways for communicating grievances including a hotline phone number, mobile application, and a third-party provider’s website (www.nysana.cscc.kz) that contain a complaint form. The KTZ website also refers to a hotline website of Samruk Kazyna, KTZ’s parent company (https://sk-hotline.kz/). KTZ developed an external Grievance Redress Procedure in line with PS 1 that allows for (i) receiving and registering external communications from the public including anonymous communication; (ii) screening and assessing the issues raised and determining how to address them; (iii) providing, tracking, and documenting responses, if any; and (iv) adjusting the management program, as appropriate. KTZ will ensure that the grievance redress mechanism incorporates a separate channel for grievances related to GBV. KTZ extends its grievance redress mechanism (GRM) to contractors.

PS2:  Labor and Working Conditions

Working Conditions and Management of Worker Relationship:

KTZ is the largest employer in the country with a total number of  approximately 115,000 employees. 26% of employees are women. 9% of women are in management, 64% are administrative and managerial personnel, 27% are production personnel.

Track rehabilitation works are conducted by contractors who utilize a mobile train-based construction camps where approximately 100 people reside. Shifts are 30 days long and typical works are 7 hours a day.  10% of the contractor’s workforce are women. All workforce is local. Contractors’ workers accommodation are railway passenger sleeper cars with a separate lockable coupes for women. The camps visited during the due diligence mission had acceptable accommodation including sanitary and toilet facilities, on-site first aid and medical facilities, canteen and cooking facilities, access to clean water, and provided minimum living space. KTZ will review its OHS, environment and social inspection program at contractors’ sites including track rehabilitation sites, workers’ accommodation and technical workshops to ensure that reports are issued and follow-up visits are made (as per ESAP).      

Human Resources (HR) Policies and Procedures, Working Conditions and Terms of Employment

KTZ is a party to a collective bargaining agreement with workers which is in line with MIGA PS2 requirements. Collective bargaining agreement is disclosed at the KTZ website. Policies and procedures governing KTZ’s Human Resources (HR) practices have been developed in line with national legislation and are consistent with PS2. They include provisions for working conditions, internal grievance mechanisms, non-discrimination, payments, prohibitions against child labor (with no employment of people under the age of 18) and forced labor, occupational health and safety and third-party suppliers. HR plans and procedures include personnel policy, rules for remunerations and bonus payment, rules for professional development and training and code of ethics and behavior.

For all Project activities KTZ will require contractors to provide workers written contracts and documented information regarding their rights under national labor law. Information about contractors’ employees involved in Project activities such as the type and duration of contracts will be retained and maintained by the KTZ (ESAP action item).

To ensure the implementation of the GBV and SH Policy, KTZ will develop and implement a GBV and SH policy, procedure and management plan for its operations and will extend the requirements of the procedure to all contractors involved in the Project activities. The procedure will include guidelines for filing and handling of sexual harassment and GBV complaints and associated disciplinary actions, as well as guidelines for avoiding and mitigating GBV and SH risks (e.g. training) (ESAP Action Item).

Workers’ Organization:

HR policies including the collective bargaining agreement are aligned with the Law of the Republic of Kazakhstan on Workers Organizations (June 2014). The Law recognizes workers’ rights to form and to join workers’ organizations of their choosing without interference and to bargain collectively.  

Retrenchment

There is no retrenchment anticipated as a result of the renovation works. KTZ’s collective bargaining agreement describes a procedure for a socially responsible retrenchment that focuses on viable alternatives for retrenchment such as retraining of redundant workers, providing opportunities for home-based work, maintaining a database of dismissed workers (not related to the project) who are prioritized as new hires, early retirement plans, compensation and severance payment plans.  

Grievance Mechanism

The KTZ’s provisions for the internal grievance mechanism are described in the collective bargaining agreement and the Code of Ethics and Behavior. The mechanism allows for anonymous complaints and grievances to be registered through a toll-free number, intranet, and grievance boxes distributed in the offices and facilities. In addition, KTZ has appointed a corporate ombudsmen whose functions include assisting employees in resolving grievances and labor disputes.

Occupational Health and Safety:

KTZ’s Health and Safety Management System Manual (November 2020) requires parties who have contractual relations with KTZ comply with the requirements of the Kazakhstan laws and regulations on OHS. Contactors responsible for renovation of tracks have developed site-specific OHS plans that cover risks associated with manual handling, lifting equipment, moving objects, works at height and electric safety in case of working with high voltage power lines.

Workers are required to obtain OHS certificates pertinent to their technical roles and qualifications (e.g. train, crane operator, bulldozer operators, welders etc.). Induction training is provided to all visitors and new employees and refresher general OHS training is provided periodically to all employees. Contractor OHS specialist is present at all times during track replacement job. Workers are provided with personal protection equipment which includes safety goggles, gloves, helmets, safety shoes and high visibility vests.

Track replacement is performed within the limited time window of opportunity during which the regular railway traffic is brought to a stop. As the service crew moves along the section of the railway, associated traffic such as service and visitor vehicles also move along via temporary service roads many of which are unpaved and not equipped with traffic safety signs. This creates additional risks of vehicle overturning and colliding with other vehicles, as well as pedestrians and livestock. KTZ will require contractors to develop traffic safety plans which will include requirements for speed limits, route mapping and journey management, and drivers training. These plans will be shared with MIGA (as per the ESAP).             

Workers Engaged by Third Parties:

To facilitate compliance with PS 2, KTZ will ensure that all its contracts with contractors and suppliers (e.g. of the railway cars and locomotives) specifically include general E&S conditions and requirements, including the prevention of child labor, forced labor, discriminatory conducts, GBV and access to grievance mechanisms (ESAP action item).

PS3:  Resource Efficiency and Pollution Prevention

Project related PS 3 risks and impacts are related to rolling-stock maintenance and wastes and wastewater generated during railway tracks rehabilitation works.

Resource Efficiency 

Energy savings and energy efficiency plan for 2020-2025 reflects KTZ’s company-wide measures on improving energy efficiency in the KTZ buildings by installing energy-efficient windows and lighting systems, as well as retrofitting some of the heating systems to work on energy efficient fuel. KTZ has a network of train washing stations and the Project activities will not lead to an increase of water consumption for washing. KTZ monitors and discloses its annual water consumption on the KTZ’s website.          

Pollution Prevention

KTZ publishes its emissions data on their website. During 2020-2022 some company-wide measures to reduce emissions from company operations included i) introduction of the energy-efficient locomotives which help reduce air emissions, ii) purchase of energy efficient passenger cars equipped with a closed-cycle toilets which help avoid the tracks pollution; iii) coal-to-gas retrofitting of boiler houses; and iv) waste segregation measures.   

Wastes and Hazardous Materials Management

Rail car maintenance and refurbishment typically involves a high-pressure water wash which may contain residues from transported materials, paint, oil and grease, and other contaminants. KTZ facilities that are deployed for washing of the rolling-stock are required to apply a pre-treatment of effluents prior to their discharge to municipal systems. KTZ regularly publicly discloses and also reports its effluent discharge data to the Ministry of Environment and Natural Resources of Kazakhstan.

Insignificant amount of waste is generated during the tracks’ rehabilitation works. When wooden sleepers are replaced with concrete sleepers all wooden sleepers are removed from the site and are either reused or recycled based on their condition. Wastewater generated at the mobile construction camp is removed by licensed third-party contractors.

Hazardous waste that maybe generated during the rehabilitation works may include accidental spills of diesel and diesel byproducts, used oils and lubricants and greased rags. They will be removed and disposes of safely based on the Waste Management Plans that contractors will be required to develop (ESAP action item).

The railroad sleepers are mounted in a bed of ballast, with underlying sub-ballast and a fine-grained subgrade foundation. It is known that asbestos materials were used during Soviet era to enhance the ballast integrity and reduce the impacts of rainwater and vegetation. Workers may be exposed to the risks of respiratory diseases associated with asbestos because the track rehabilitation works in some sections include a removal of the asbestos layer replacing it with a gravel ballast. To address this issue KTZ will require contractors to develop site-specific asbestos management plans in line with WBG EHS Guidelines and (ESAP action item).   

PS4:  Community Health, Safety and Security

Community Health and Safety

Potentially negative community health risks and impacts during the rehabilitation of the railroad tracks  stem from dust and noise due to the movement of vehicles and equipment, materials and project personnel, traffic accidents, increased demand for natural resources such as water, and soil erosion. As mentioned previously, these impacts will be managed following the SEP and the SMP. Contractors also must ensure compliance with environmental and OHS regulations. These responsibilities are part of the contract with KTZ. As mentioned above, KTZ will require contractors to develop traffic safety plans which will include requirements pertinent to the general public and communities residing nearby (ESAP action item).

For site specific impacts, communities have an opportunity to communicate grievances through the local governments, which are usually informed about the upcoming works and publish this information in their local offices. KTZ developed and disclosed on its website an external grievance redress mechanism which  includes ways for general public to file petitions, complaints and suggestions.

Security Personnel

No security personnel will be deployed for the purpose of the Project activities. One of the companies within the KTZ is a “Militarized Railway Security” LLC who are in charge of providing security services for high value cargo such a precious metals. The security for passenger trains is provided by the state police. KTZ will develop a Security Policy in line with PS 4 to ensure that security arrangements are guided by the principles of proportionality and good international practice in relation to hiring, rules of conduct, training, equipping, and monitoring of security workers, and by applicable law (ESAP action item).

A Broad Community Support determination is not required for the Project.

• Health and Safety Management System Manual, KTZ, November 2020 (in Russian)
• Environmental Management System Manual, KTZ, November 2020 (in Russian)
• Ethics and Behavior Code,  KTZ, September 2019 (in Russian)
• Human Resources Policy for 2019-2029, KTZ, September 2019 (in Russian)
• Corporate Ideology and Philosophy, Company Policy KTZ, November 2017 (in Russian and in Kazakh)

For additional information on the Project, please contact:

Bakhytzhan Shakhmanov

Senior manager of department | JSC “NC “Kazakhstan Temir Zholy” |

Borrowings and investor relation department

M:   +7 702 112 22 00

W:   +7 7172 60 37 37

E:  Shakhmanov_b@railways.kz  

A: 6 Kunayev str., block B, room 3301

www.railways.kz

MIGA supports its clients (as defined in MIGA Policy on Environmental and Social Sustainability) in addressing environmental and social issues arising from their business activities by requiring them to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities.

In addition, Affected Communities have unrestricted access to the Compliance Advisor/Ombudsman (CAO), the independent accountability mechanism for MIGA. The CAO is mandated to address complaints from people affected by MIGA-guaranteed business activities in a manner that is fair, objective, and constructive, with the goal of improving environmental and social project outcomes and fostering greater public accountability of MIGA.

Independent of MIGA management and reporting directly to the World Bank Group President, the CAO works to resolve complaints using a flexible, problem-solving approach through its dispute resolution arm and oversees project-level audits of MIGA’s environmental and social performance through its compliance arm.

Complaints may relate to any aspect of MIGA-guaranteed business activities that is within the mandate of the CAO. They can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of a MIGA-guaranteed business activity. Complaints can be submitted to the CAO in writing to the address below:

Compliance Advisor/Ombudsman
International Finance Corporation
2121 Pennsylvania Avenue NW
Room F11K-232
Washington, DC 20433 USA
Tel: 1 202 458 1973
Fax: 1 202 522 7400
E-mail: cao-compliance@ifc.org