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Kazakh economy grows 4 percent in 2017 on increases in manufacturing, non-extraction industries

19 Feb 2018 9:19 PM | Laziz Rasulov (Administrator)

Astana Times, 16 February 2018

The Ministry of National Economy leadership outlined Kazakhstan’s economic results for 2017 and shared its plans for the current year at a Feb. 12 press conference, reported the ministry press service.

National Economy First Vice Minister Ruslan Dalenov (С)

Kazakhstan’s gross domestic product (GDP) grew 4 percent in 2017, said National Economy First Vice Minister Ruslan Dalenov. The outcome was determined by the following factors: two-thirds of the growth was provided by non-extractive industries, almost all sub-industries showed growth (31 against 22 in 2016), manufacturing hit a five-year maximum (5.1 percent), the “desired” industries showed a significant increase (e.g., pharmaceuticals grew 41.8 percent) and non-primary exports and deeply processed goods also grew.

“The contribution to the country’s economic growth in 2017 was also made by the implementation of the Nurly Zher programme, due to which 11.2 million square metres of housing were commissioned, 4,000 kilometres of roads were reconstructed within the Nurly Zhol programme and 120 projects were implemented as part of the Industrialisation Map. The Export Strategy provided support to 400 exporters and 192,000 business entities were supported within the Business Roadmap 2020,” he noted.

The ministry’s tasks for 2018 include ensuring the country’s macroeconomic stability, improving intergovernmental fiscal relations, strengthening the tax policy, expanding the tools and approaches of public-private partnership and effectively managing the country’s debt.

“To date, 1,145,994 SMEs (small and medium-sized enterprises) are operating in the country, manufacturing products worth 14.44 trillion tenge ($44.5 billion) and employing 3,118,448 people,” said ministry representatives.

In the past year, the ministry developed systemic measures aimed at deregulating businesses, including reducing the administrative pressure and significantly improving conditions for doing business. A full-scale audit of governmental bodies’ control and supervisory functions was carried out to reduce and optimise them. “To date, 114 spheres of control and 18 spheres of supervision have been revised, with 25 control and three supervision spheres proposed for exclusion due to duplication and lack of efficiency. In addition, 17,654 requirements for SME inspection were proposed for exclusion,” said the ministry.

A new concept of state control and supervision has also been proposed by introducing preventive control to replace selective inspections. The main tasks of preventive control will be identifying the reasons and conditions for unlawful conduct, explaining the legal consequences of offenses and reinforcing law-abiding behaviour.

In order to ease the burden on businesses of presenting various papers, information requirements are to be reduced 30 percent. Certain new legislative amendments have also been elaborated to improve the business climate. “Our long-term objective is to let the private sector take the leading role and increase the share of the SMEs in the GDP to 50 percent by 2050,” said the ministry.

Kazakhstan’s external trade showed good results in all categories in 2017, noted Ministry of National Economy Vice Minister Baurzhan Bekeshev. “We observed a significant increase of 25.1 percent in foreign trade turnover compared to 2016. In monetary terms, the 2017 indicator amounted to $69.5 billion (in 2016, the indicator reached $55.5 billion),” he said.

He added Kazakhstan’s foreign trade structure changed significantly in 2017, with an increase in non-primary products and some new export items. Export volume increased 31.6 percent to $43.1 billion compared to $32.7 billion in 2016. The share of non-raw materials increased 22.1 percent. Kazakhstan exported more than $14 billion in non-primary products, which represented 32.7 percent of the total export volume. Export growth was seen in timber, paper and paper products, busses and medicine.

Bekeshev also dwelled on the digitisation of the Eurasian Economic Union (EAEU) economies that are Kazakhstan’s main trade partners. The key aspects have been determined to implement the union’s 2025 digital agenda, which primarily affect the speedy launch of initiatives and project approach to executing the EAEU digital agenda.

Using the EAEU platform allows expanding access to the markets of third countries through trade agreements, he said. “For example, exports to Vietnam, with whom we concluded a free trade agreement in 2015, rose to $274.2 million in 2017, which is 25 times higher than in 2015 (before the conclusion of the free trade agreement). To date, we have also completed negotiations on a free trade agreement with Iran and on trade and economic cooperation with China. This will help increase the volume of trade with these countries in the future,” he said.

In 2018, the ministry plans to enhance the access of Kazakh goods to wider markets. “We are actively negotiating free trade with Israel, Serbia and India. In addition, this year we will continue working on the implementation of the provisions of the treaty with the EAEU and improving the regulatory framework, as well as removing obstacles in mutual trade in order to create favourable conditions for doing business,” he added.

Vice Minister Aibatyr Zhumagulov spoke about the ministry’s work on developing local self-government (LSG). According to the LSG development law adopted in 2017, LSG budget and municipal property have been introduced since Jan. 1 in rural districts with a population of more than 2,000 people. The rule will be introduced throughout the country starting Jan. 1, 2020. Rural district budgets have already received seven types of tax revenues and five types of non-tax revenues. “The main peculiarity of LSG budgets is the obligatory participation of citizens in LSG budget and municipal property management,” he said.

Kazakh Investment Ministry to focus on manufacturing, exports and labour productivity Astana Times, 16 February 2018

The Ministry for Investment and Development will concentrate this year on manufacturing, focusing on export-oriented sectors and labour productivity under the Accelerated Industrial and Innovative Development programme, said Minister Zhenis Kassymbek during a Feb. 13 weekly government meeting.

Minister Zhenis Kassymbek (Photo credit: primeminister.kz)

“To meet the tasks given by President Nursultan Nazarbayev during the Feb. 9 extended government meeting, we will start working on the industrial projects to back export-oriented sectors and increase labour productivity. This year, we plan to introduce 150 projects worth one trillion tenge (US$3.06 billion) and create 15,000 jobs,” he said.

The next stage of industrial expansion involves transitioning to a new level of technological development with key elements of Industry 4.0. Last year, basic industries were re-equipped in an attempt to create an ecosystem to introduce digital technology under the Digital Kazakhstan state programme. “Some support measures will be partially revised for a more targeted stimulation of digitisation in terms of determining the types of costs when reimbursing enterprises, providing grants, etc,” he added.

Kassymbek said the ministry will also concentrate on the third five-year industrialisation plan focused on the digital-era industry to fulfil the tasks set by the President in the state-of-the-nation address “New opportunities for development under the Fourth Industrial Revolution.”

“In general, the implementation of scheduled activities will increase the value of processed exports by 10.3 percent (compared to the level of 2017), boost labour productivity of the manufacturing industry by 6 percent and attract investment worth one trillion tenge (US$3.06 billion) in fixed assets of the manufacturing industry,” he said.

Within the Nurly Zhol programme, the ministry will strengthen control over the efficient and transparent use of funds allocated for road construction and repair. Mechanisms will be revised to continue executing the Nurly Zher programme. “We have begun work to improve the national standards in architecture, urban planning and construction,” he added.

This year, commercial banks will grant real estate developers 125 billion tenge (US$382.5 million) in subsidised loans and 105 billion tenge (US$ 321.3 million) in mortgages. The banking sector revival will increase the annual loan volume to 350 billion tenge (US$1.07 billion) and investors’ share of the House Construction Savings Bank to the economically active population up to 12 percent. “Planned measures are supposed to increase housing construction volume 6-8 percent, or 11.2 million square metres of housing,” said Kassymbek.

Oilfield service companies seek state support to increase competition in industry Astana Times, 16 February 2018

The Union of Kazakhstan Oilfield Service Companies wants to increase the involvement of domestic businesses and state support for the $45 billion in projects underway by Tengizchevroil, Karachaganak Operating Company and North Caspian Operating Company, according to a Feb. 13 press briefing.

“Proper use of resources is an essential task for all parties. In this regard, the Union of Oilfield Service Companies Union traditionally acts as an important dialogue platform for protecting the interests of Kazakh companies. Domestic enterprises face a number of challenges including low margins of service-based businesses, closed tender procedures, certain preferences proposed by foreign companies and other things. They believe that the effective measures will be taken to resolve all existing disputes,” said union presidium chairperson Rashid Zhaksylykov, adding the three operators account for 75 percent of all the domestic oilfield service purchases.

He noted the companies need state support, as they currently must compete in unequal conditions with foreign enterprises that are exempt from import duties and have access to finance.

“Our oilfield service market is profitable for foreign companies. More than 20 out of the 100 largest contracting companies operate in Kazakhstan. Domestic companies have been able to improve their competences due to competition in the local market. At least 1,000 companies with a total number of more than 170,000 employees work in the oilfield service industry. Turnover of oilfield services averages $7 billion per year in the subsoil use sector. The share of the three large operators accounts for 77 percent of the oilfield services. There are 66 oilfield service companies in the list of top 500 largest companies in Kazakhstan with a total tax payment of 280 billion tenge (US$868 million) by the end of 2016,” he said.

Kazakhstan Oilfield Service Companies Union Presidium chairperson Rashid Zhaksylykov.

Photo credit: Abctv.kz.

Foreign investments enable local companies to improve their competencies as part of the joint ventures and consortia. “One of the conditions proposed by the government is that the subsoil user provides the transfer of knowledge, technology and experience. The increase of local content share through the participation of Kazakh companies in major oil and gas contracts is an important part of bilateral cooperation,” said Zhaksylykov.

Russia remains an important market for Kazakhstan’s oilfield services. Domestic companies participate in the projects in Moscow, Sakhalin, Yamal and other oil and gas regions, providing construction, engineering and drilling services. They also operate in Georgia, Iran, Iraq and Jordan.

The active phase of the future expansion project at Tengiz field will start this year. Tengizchevroil has obligations that the share of local content should be at least 50 percent. The company purchased goods and services from Kazakh suppliers for $494 million in the first quarter of 2017.

Precision agriculture technology, digitisation introduced to boost productivity Astana Times, 16 February 2018

The Kazakh Ministry of Agriculture has presented plans to focus this year on introducing precision technology and intensive irrigation, livestock development and renewing agricultural machinery. The four key areas are expected to increase labour productivity in the agro-industrial sector. To increase technical equipment, 5.5 billion tenge (US$17 million) will be allocated to subsidise the agricultural leasing interest rate and raise the investment subsidy by 20 billion tenge (US$62 million) by reducing inefficient subsidies.

“We plan to introduce electronic field mapping, accurate weather data and wireless sensors, space monitoring and other solutions to validate precision agricultural practices. We will develop an economic model for introducing precision technologies for different types of farms and an entirely new system of subsidy. We will launch pilot projects in certain farms in cooperation with local executive bodies. The educational institutions, research institutes and the world’s leading companies that are engaged in agriculture digitisation and development of technologies will assist in training farmers,” said Deputy Prime Minister and Minister of Agriculture Umirzak Shukeyev during the Feb. 13 governmental meeting.

Minister of Agriculture Umirzak Shukeyev

The approach to cooperatives will also be revised to increase meat export. The action is expected to encourage cooperation of small and medium-sized businesses with large feedlot sites to ensure marketing, technology distribution, knowledge and access to financing. “We expect to ensure the investments in technology up to 240 billion tenge (US$742 million) by 2021 with a gradual increase of support measures. The renewal of agricultural machinery will reach approximately 6 percent in three years; now, it stands at 2 percent,” he added.

Measures will also be taken to rehabilitate irrigation. Water supply will be restored this year to 65,000 hectares. The agricultural producers and processing enterprises will join as meat cooperatives to solve the issues concerning processing agricultural products. Agricultural science aims to focus mainly on introducing new technologies rather than inventing livestock breeds.

“There are three universities and 23 research institutes at the ministry. This number will be reduced to 12 due to consolidation. Agricultural universities will become research institutions with research institutes and farms,” said Shukeyev.

An effective system ensuring epizootic, veterinary and sanitary well-being will be developed to increase the efficiency of state control and supervision. Veterinary border control will be established and unified approaches developed in cooperation with Russian and Kyrgyz veterinary services to combat transboundary animal diseases, monitor quality control of vaccines at the World Organisation for Animal Health (OIE) laboratories and implement against nodular dermatitis and foot and mouth disease.

January’s agriculture, forestry and fishery gross output was 113.4 billion tenge (US$350 million), a 3.7-percent increase compared to the corresponding month in 2017, reported the committee on statistics.

China's CSRC signs MOU with Kazakhstan's AFSA xinhuanet.com, 15.02.2018

China's top securities regulator has signed a Memorandum of Understanding (MOU) with its Kazakhstan's counterpart to enhance cooperation on securities and futures regulation.

The document was signed by Liu Shiyu, chairman of China Securities Regulatory Commission (CSRC) and Stephen Glynn, chief executive officer of the Astana Financial Services Authority (AFSA) in Beijing last week.

With the signing of the document, China-Kazakhstan cooperation on securities and futures regulation has entered a new stage, the CSRC said in an online statement.

The MOU also signed against the backdrop of growing economic, trade and financial cooperation between the two countries in the past several years, said the CSRC, adding that the two sides had achieved positive progress in capital markets cooperation.

In May 2015, CSRC signed an MOU with the National Bank of Kazakhstan on securities and futures regulation cooperation. In May 2017, Shanghai Stock Exchange and Astana International Exchange established a strategic partnership, and the former became a shareholder of the latter.

The MOU between the CSRC and AFSA will help bilateral exchanges, cooperation and coordination in regulations, promote financial and economic and trade cooperation between the two countries, and support the real economy and the building of the Belt and Road, the statement said.

CSRC has signed 67 MOUs on regulation cooperation with 61 countries or regions, according to the statement.

http://www.xinhuanet.com/english/2018-02/15/c_136977966.htm

Kazakhstan launches online platform to monitor greenhouse gas emissions Astana Times, 12 February 2018

The Kazakh Ministry of Energy and the World Bank recently launched an online platform to monitor and report greenhouse gases (GHG) emission sources.

“Kazakhstan’s emissions trading system is the first of its kind in the Central Asia region,” said World Bank Country Manager for Kazakhstan Ato Brown. “With support from the Partnership for Market Readiness, the country has made a great effort to develop policy options for mid- and long-term emissions pathways and to develop an action plan on GHG emissions reductions by 2030. The World Bank will continue to support the government during the crucial stages of policy implementation.”

According to the press service of the World Bank in Kazakhstan, the system has no analogues in the Commonwealth Independent States and meets all information security requirements.

This platform is an essential part of the National Emissions Trading System of Kazakhstan, which was launched in 2013 as the main instrument for regulating internal CO2 emissions and developing low-carbon technologies. Today, the system covers all major companies in the energy, oil and gas, mining, metallurgical and chemical industries.

The platform enables Kazakhstan’s major emitters to transmit and record data on GHGs emissions, as well as trade online.

“The electronic platform undoubtedly proves the evolution of the Kazakhstan emission control system, which will allow the monitoring, reporting and verification system to be upgraded to a much higher level,” said Deputy General Director of Zhasyl Damu Sergei Tsoi.

Emissions data is confirmed by accredited bodies for verification and validation and transferred to a registry using an electronic digital signature. To date, there are seven verification companies accredited in Kazakhstan, with five more in the process of accreditation.

Zhasyl Damu developed the platform with the support of France’s Technical Centre on Air Pollution and Greenhouse Gases. Since 2014, the World Bank has provided technical assistance to Kazakhstan in the implementation of this system and related measures to mitigate the climate change impact.

Green Bridge Partnership Programme offers tool for Paris Climate Agreement implementation

Astana Times, 13 February 2018

President of Kazakhstan Nursultan Nazarbayev, in his state-of-the-nation address earlier this year, as a priority, underlined the importance of increasing requirements for energy efficiency and energy saving by enterprises, as well as the environmental friendliness and efficiency of the energy producers themselves. The implementation of this objective requires the enhancement of environmental and energy programmes at the national and regional levels and strengthening international cooperation in these areas. A dynamic acceleration to this process was the successful holding of the EXPO 2017 and Kazakhstan’s participation in the Paris Climate Agreement.

Dr. Bakhyt Yessekina

As is known, the 23rd UNFCCC Conference on global climate change (COP-23) was held in Bonn on Nov. 6-17, 2017, where all countries agreed that climate change is a real challenge for the world economy. Numerous activities of COP-23 were discussed, including low-carbon initiatives and successes at the level of sub-national actors: states, provinces, cities, companies and associations. Successes of low-carbon development and examples of solving climate problems were demonstrated.

For other Kyoto mechanisms that exist up to 2020 – Clean Development Mechanisms (CDM) and Joint Implementation (JI), – they are yet to be recommended for use, but with a number of features in the new context of the Paris Agreement. Now, emission-buying countries (mainly developed countries) must adopt nationally defined goals, and their projects will be considered primarily as a tool for promoting business and technology and not as an instrument for acquiring emission reduction units.

Future implementation mechanisms can encompass a wider range of activities that contribute to reducing emissions and sustainable development in general. Accounting for activities can be, in particular, financial resources transferred for action in another country.

It should be noted that the costs of reducing of greenhouse gas emissions for different countries and sectors of the economy will be different. Those countries where economic growth is traditionally provided by the development (expansion) of industries with high specific emissions, more significant structural and technological changes will be required, and hence more time for transition to a low-carbon development model.

World experience demonstrates that the transition to low-carbon development at the first stage will require significant financial costs. In terms of value, measures on reduction of greenhouse gas emissions include: the costs of developing and implementing high-performance, climate-friendly technologies that reduce emissions, and consumers’costs of switching from goods and services whose production and/or consumption involve significant greenhouse gas emissions, to low-emission products and services. Together, these costs and expenses are estimated to average 1 percent of global GDP and, in the worst case scenario, 3.5 percent of global GDP. It should be noted that under certain scenarios, measures on reduction of greenhouse gas emissions on a global scale may not lead to a decrease, but, on the contrary, to additional GDP growth. Costs can be further reduced by increasing energy efficiency, demand management as well as through the use of energy-saving technology in the production of energy, heat and in the transport sector.

For the most developed and richest countries the agreement will optimise their financial and technological role in the global effort. As for the less developed countries, but with a large carbon potential, such as China, Brazil, Turkey, the financial component of agreement is secondary for them, since international assistance is relatively small or approximately equal to their help to weaker states. The economy of these countries depends significantly on the global trend on development of low-carbon, and, to a large extent, they shape it by themselves, especially China.

For Eastern Europe, Caucasus and Central Asia (EECCA), then for the Trans-Caucasian countries, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, the agreement should be a powerful factor of international support; and for Russia, Belarus and Kazakhstan, it should help their integration into the global investment process and encourage a deep modernisation of economy structure.

International experts have identified at least three trends within the framework of the Paris Agreement, which now underpin and strengthen its implementation.

Firstly, planning the development of economy and energy taking into account possible changes in the 2020-2040. In many cases, it leads to delays in the approval of international and national projects while maintaining the current situation would have been profitable.

Second, introduction of carbon price (fees for greenhouse gas emissions in a particular stimulating form), carried out or expected in the future, which shifts the competitiveness of various projects and trade flows. This is clearly demonstrated by the results of bilateral meetings of major issuers (China, the U.S., the EU and India).

Third, a global trend towards choosing low-carbon solutions, if they are not more expensive than traditional solutions, when the planning horizon is set for 20-30 years. This is clearly confirmed by signing partnership deals and the choice of investment options in virtually all countries of the world and in state and private companies in all sectors of economy.

In general, COP-23 has achieved the understanding of the leading role of global low-carbon development trends and its impact on the economy. The outcome document, the Fijian moment for implementation (Fiji was chair of COP-23), reflects the need to accelerate work on the set of rules of the Paris Agreement and its adoption at the COP-24, the organisation of special session of the subsidiary bodies in the second half of the 2018, Dialogue-2018 on consideration of the actions and goals of countries in the field of greenhouse gas emissions and the summing at COP-24 of the intermediate results of activities of countries until 2020. As a result of COP-23, the 20th partnership initiatives were presented, including cities, infrastructure, transport, waste, education, risks assessment, financial support and tools.

The famous environment partnership initiative presented by Kazakhstan on the global level is the Green Bridge Partnership Programme (GBPP) proposed by President Nazarbayev at the 66th Session of the UN General Assembly in 2011. This initiative was entered to the final declaration of the UN Summit in 2012. The GBPP was also supported at the sub-regional conferences by ESCAP, UNECE, ISESCO and was supported by more than 120 states of Europe, Asia and the Pacific. The reason for this interest in the GBPP is its potential to support the transition to a green economy and sustainable development, including the following.

The international status establishes a more reliable political and legal framework for long-term green investments and additional guarantees for investors in conditions of political instability in countries with economies in transition. Agreements on projects that have been granted a status of the GBPP –between countries and investors – must be long-term, and international agreements must not depend on changes of governments, decision-makers or withdrawals from international agreements (similar to agreements of UN, EU, WB, etc.).

It establishes a broader regional and inter-sectoral basis for mutually beneficial cooperation (water-energy-food-climate). Within the GBPP, there are mutually beneficial regional agreements between countries on interregional green business and trade with maximum productivity of water, energy, land or in sharing ecosystem services among Eurasian countries, for example, within the framework of the Belt and Road Initiative.

It allows to create more trustful business environment, to involve additional parties for mutually beneficial solutions of problems, i.e. go out in search of solutions beyond the limited formats of regional agreements (IFAS, ICWC, etc.).

It creates a more professional basis for analytical work and searching for best solutions through participation of authoritative and internationally recognised experts of the GBPP, working groups, including elimination of cases of lobbying for “dirty” technologies, equipment or environmentally unfriendly programmes and laws.

It provides a special status of international expertise of projects and technologies that have a status of the GBPP – international, professional and neutral. This expertise will substantially complement the capacity of local, national and regional organisations in the interests of saving budgetary and other resources as well as to prevent mistakes in implementing green reforms, procurement, etc.

Presently, the GBPP Charter has been signed by 16 countries and 16 NGOs from Kazakhstan, Russia, Finland, Kyrgyzstan, Germany, Austria, Turkey, Estonia, Uzbekistan and Tajikistan.

The GBPP and Paris Climate Agreement have a common goal – the need to find joint solutions to the problems of the transition to low-carbon development and adaptation to climate change. Reducing greenhouse gas emissions and environmental pollution is one of the main areas of the GBPP at the global level.

In this regard, Kazakhstan could re-start activity in GBPP promotion in terms of the Paris Climate Agreement implementation and to suggest to UNFCCC to register this global Partnership. This step will allow Kazakhstan to strengthen cooperation with global financial institutions and to join Dialogue-2018 in terms of COP-24.

The author is a member of the Green Council under President of the Republic of Kazakhstan, Director of the Green Academy Scientific-Education Centre.