Accomplishments and new tasks ahead

July 04. Kazpravda

Accomplishments and new tasks aheadBy Laura Tussupbekova, Yuliya Mager, Yuliya Polonskaya, Ludmila Korina, Vyacheslav Lebedev, Chingiz Tashenov, Valery Vedenko, Sergei Gorbunov, Stanislav Pesnev, Svetlana Abenova, Yuri Lee, Zhubanysh Baigurinov

Yesterday President Nursultan Nazarbayev took part in the video-conference, devoted to the Day of industrialization, in which he tallied up what the Government has accomplished in the first year-half.

The President examined the industrial exhibition of companies, participating in the program of accelerated industrial-innovative development (AIID).

Opening the meeting in the new media center, he pointed out that industrialization is a matter of Kazakhstan’s competitiveness in the global developing world.

– Today we are holding a traditional reporting meeting on the implementation of the program for accelerated industrial-innovative development. Our meeting takes place in a new innovative building, equipped with the latest technology. Kazakhstan is confidently introducing innovations and opens modern productions. We have started making own cars and aircraft. I have recently visited the plant making helicopters, which is an innovative production. We have also started producing “Farmer” airplanes, civil aviation aircraft will be next, – said N.Nazarbayev.

At a meeting the progress reports were made by the Economic Development and Trade minister Bakytzhan Sagintayev and Industry and New Technologies minister Asset Isekeshev. Transport and Communications Minister Askar Zhumagaliyev talked on the possibilities of new digital broadcasting network.

A countrywide teleconference was held on the commissioning of investment projects that are on the industrialization map. The National digital broadcasting network and new Kazakh TV channel «» were launched in a ceremony. The national satellite broadcasting will provide access to the domestic television channels in all localities of the country, including 600 remote villages that previously were not covered by state television. The Head of State pointed out that «» – is the first broadcaster in the country, which will show only the Kazakh TV program production.

AIID state program. Rebooting

During the teleconference the President outlined three main priority areas to the Government: industrialization, balanced development of the regions and social modernization.

– What has been accomplished in these six months? Of the 225 projects launched in 2010 and the first half of 2011, and they had minimum a year to get things up and running, only half of them are 60% loaded. You can draw your own conclusions from it!

Further, Nursultan Nazarbayev, elaborated the focus areas for the Cabinet.

First. To elevate the status of the industrialization Map. The ministers and governors should not have a simplistic understanding of industrialization. Some of them understand it as a nicely made report, cutting the ribbon and forgetting all about it. The governors are not in full command of the situation, the President admonished.

The government must keep a permanent track of the problems in the projects, and enable the businessmen to signal the challenges they come across. The Union “Atameken” should be actively involved in this work.

Second. The government should tap the reserves of investment activity. Of course, the main source is finances.

– I often hear complaints that the country lacks “big” money. I have already given instructions to the National Bank and the Government to motivate 2-tier banks to direct the available liquidity to a real support to development of economy.

-It is necessary to fully tap the potential of our development institutions. They are in possession of “the big” money and they should really support the business, in place of positioning themselves as commercial financial institutions just giving loans.

– I was informed the Development Bank has rid itself of troubled assets. Now it’s necessary to focus on systemic and strategic projects. An important question that I constantly keep under control is attracting investment, particularly to the manufacturing sector, – said Nursultan Nazarbayev. – It is in times of crisis, when capital is seeking “safe havens”, and we need to bring it to the domestic economy. Looking for investors is the job of Samruk-Kazyna fund. It is important to attract world-scale companies with not only funds but also advanced innovative technologies. During the official visits I am continually negotiating with the heads of the leading countries. We sign documents on cooperation, on investment. Just recently, I held talks in France, Germany, Korea, Indonesia, Malaysia, Turkey. The government should avail of these agreements.

Tariff policy wields hefty reserves for investment drawing, the President pointed. Marginal rates were adopted for power producers. Power companies are given the opportunity to address modernization problems and compensate the costs by tariffs. However, no significant changes are observed in the dynamics of investments growth, or in reduction of asset depreciation either.

– The question arises: what happened to the funds for modernization? Where did they go? Facts have already been revealed, when dividends were paid at their expense,- the President went on.

– Such practices ought to be dropped. The ARNM and MINT must radically tighten control of funds derived from the rates growth. These funds should be directed solely to the modernization of fixed assets.

Getting down to local content development, Nursultan Nazarbayev quoted figures: last year the volume of domestic production in public procurement decreased by 5%. The local content in goods procurements of domestic subsoil users is: the “TCO” – 4.3%, Kashagan project – 2.1 “Aktobemunaigas” – 1.4, KPO – 1.2 “Kazchrome” – 3.8 , SSGPO – 3.4.

The President urged the Government to reverse the situation, and, if need be, to make appropriate changes in the regulatory framework to encourage subsoil users to purchase domestic goods.

To enter everything on the Map…

Next, Nursultan Nazarbayev reminded that at the beginning of the year he instructed the government and Samruk-Kazyna to enter on the industrialization Map the projects on producing output with high added value. How is it carried out? Of the 108 projects entered on the Map a month ago, 70 are in agribusiness and construction industry. And only about 30 of the projects might by a long stretch be referred to this category.

Of the 174 projects slated for commissioning in this year, only 14 can be referred to the fifth level of technological complexity. And how many export productions are there in the country? Of the 389 projects on the Map that are already commissioned, only 65 make goods for export.

– Third. We need to look ahead. The Government must now prepare for the next five years. In today’s world a tendency for reindustrialization is traceable – continued the President.

– European countries recognized the need to develop their own industrial base. Today, only the states, who accomplish a third global industrial revolution will benefit. Composite materials, nanotechnologies, provide different possibilities for the production. Carbon fibers are widely used in the manufacture of aircraft parts. Digitalization, automation and total robotization of production are ongoing.

Energy efficiency and environmental friendliness are the technologies, dramatically reducing energy consumption and emissions into the environment. Renewable energy sources are also being developed actively. In the European Union there are 191 million buildings. Each of them can become a small power plant, drawing energy from the roofs and walls with solar panels.

As Nursultan Nazarbayev pointed out, such approaches are changing the paradigm of the economic system. At the same time the demand will never be sustainable either. In the crisis of 2008 engineering was among most affected industries, when demand fell by 24%.

– We should be aware of these key technologies and trends and prepare for changes in the global economy right now, not to find ourselves overboard 10 years later. To avert it, there’s an urgent need to reset the AIID and Strategic Plan- 2020 – said the President.

Revision is also needed in the system of education, training and retraining of personnel, civil servants, engineers, and technologists, tailoring it to the requirements of the third industrial revolution. To improve performance of AIID we have to concentrate available resources on a limited number of priority areas and projects. In the future, the country needs constant monitoring system for the new technology and innovation with the introduction of corrective operational changes.

– We will have to work in extremely adverse conditions, when the tone is set by a possible second wave of the global crisis. We have experience in crisis management – the President said.

The Government and the National Bank will develop a new anti-crisis “bear” strategy.

The looming crisis, according to President Nursultan Nazarbayev, is a kind of “test drive” for public service.

Center-region: mutual responsibility

In the year-start the President instructed the Government to place more emphasis on regional policy, improving coordination of the center with the regions. Central state agencies, administrations, state holdings should daily work in the following areas.

First. Loading of the launched projects.

Second. Actively tapping reserves of regional economies, reducing disparities in development areas.

The Government and governorates, the President resented, have not yet got down to management of economic growth reserves, although the required by-the-region analysis of the reserves had been duly made and submitted to the Government in March.

Third. To enhance the share of small and medium business in economy.

– At present the backbone of any developed economy are small and medium businesses. However, many of our businessmen actually know very little about the state support measures. It is a gross omission on the part of MEDT and the Fund “Damu”.

Despite the allocation in 3 years of more than KZT 80 billion for the “Business Roadmap- 2020”, this program covers only 0.3% of active businessmen (1600). In this year of the 12 billion tenge meant for bigger micro-loans, more than a quarter of this sum was requested by West Kazakhstan region. At the same time Kostanai requested only 174 million, Mangistau – 200 million, Almaty – 375 million.

– Don’t the people in these regions need money? Why do the governors treat this matter formally, and the Labor Ministry is not stringent in it?

The government allotted KZT 9 billion to the southern regions for the “Employment-2020” program. This year the funding was doubled. However, only 2% or 25 000 people were employed. 40 000 people underwent training under the program, but only half of them found jobs. It turns out we give people hopes, train them, but can not offer a decent job! Also, for a balanced territorial development and deployment of human resources, it is essential to encourage the workforce movement from south to north.

– In all the world people go where there are jobs. However, the Labour Ministry and governors do nothing about it, – the President reproached them.

Autos of home make to each minister

Fourth. To provide real support to domestic producers, significantly raising the share of local content.

The President gave instructions to national companies to acquire domestic cars. However, apart from NSC, Ministries of Defense and of Emergency Situations, no one else made the contracts on it, continuing to buy cars of foreign make.

– What small business development can we talk about, if ministries, governorates, “surrounded themselves” by subordinate organizations, and buy everything from them, at the price exceeding that at the free market?

Separately, the President touched upon the situation in the agri-sector. To align internal prices, last year stabilization funds were created in the regions.

For the right price forming, it is necessary to ensure direct access to sales markets for agri-businesses, and give them opportunities for sustainable production, the President believes.

– KazAgro national holding and other development institutions are given substantial funds, but there’s no real return so far. Only 10% of agro-producers are provided with concessional loans through the KazAgro holding.

The President assigned, therefore, to take measures to improve rural business, particularly given that in the next 10-20 years food consumption in the world will dramatically increase. Oversights of the past year, when the harvested grain remained lying outside must not recur, he cautioned.

Kazakhstanis’ interests prioritized

The President is unhappy about the pace and quality of fulfillment of the tasks in social modernization set in his state-of-the-nation address.

– Social issues can not be postponed until later and detached from the economic ones. Where it comes to life and well-being of ordinary Kazakhstanis, a clear long-term social policy is required- the President said, -first, a Nationwide concept of social development up to 2030, based on “Kazakhstan-2030” and other strategies. Nursultan Nazarbayev said he was working on a specific program “20 instructions on social modernization” to give answers to all the issues of ordinary people’s concern.

First. Without a doubt, the urgent task of social modernization is to create an effective model of social-labor relations. Tools for labor dispute prevention are yet to be developed in the country.

Second. We have insufficient legal responsibility for provoking social and labor conflicts. Kazakhstan codes lack articles on responsibility for provoking a labor dispute by employers, officials and other persons.

Third. Another essential point of concern is inefficient legislation on trade unions.

Its provisions on collective agreements, the responsibility of the parties for their implementation are ambiguous, and they even lack the concept of social partnership.

– Fourth. Industrial-innovative program is topmost priority for the future of the country. New jobs are created. But we see that not all the “self-employed” are much willing to work. Rather than acquire new qualifications and skills, they take private taxi-driving, peddling at the market, and the like. To be a competitive nation, we need to root out this mentality!

Fifth. Accommodation to every Kazakhstani – that’s the primary task. That’s what makes a good climate in the family, welfare and productive work.

It is important in this respect to improve the legislation for the development of rental housing market.

Sixth. We need to develop mechanisms for the socialization of socially vulnerable population- people with disabilities, from large families, and those approaching retirement etc.

– Some “smart” employers, hiring women take two applications – for the admission and for dismissal in case of pregnancy. It’s a shame! – The President fumed.

On this account there should be a special legislation, such as social jobs for example.

Seventh. Motivate young Kazakhstanis to independent living and work.

Law on state youth policy wants updating therefore. At the same time our young people should not live with illusions and remember: no sweet without sweat! And there’s no paradise outside Kazakhstan. You cannot get everything at once, but must work hard and implement your potential in your own country, here, in Kazakhstan.

Values are transforming in the world and we are getting increasingly convinced in the illusiveness of a consumer society that has developed over the recent decades.

It’s consumerism in developed countries that spawned the global crisis, the President opined.

– Let’s be realistic: in the XXI century labor alone can give Kazakhstanis well-being and good life.

Development and progress

Minister of Economic Development and Trade Bakytzhan Sagintayev reported on main indicators of socio-economic development in the first half of 2012.

– Despite the volatility in the global economy and in foreign markets, Kazakhstan has achieved positive economic growth – the minister stated.

Thus, according to preliminary estimates, GDP over the term in question went 5.6% up. Macroeconomic stability keeps on. Inflation in January – June was 2.7% versus 5.1% last year. The population’s real incomes have increased by 12.8%, and salaries – 11.5%. The unemployment rate as of May is 5.3%. A growing consumer demand is traceable, which has a positive impact on the economy.

Growth in processing industry is 101.9%. Investment in fixed assets went 5.9% up from the year-start. Growth in housing construction is 20.8% (2.4 million sqm have been commissioned).

B.Sagintayev reported a full and timely execution of orders given in the President’s state-of-the-nation Address, targeted support to agriculture, systematic work to improve the business climate, adopted amendments to the law “On Investments”, pending amendments to the tax legislation, curtailing of administrative hurdles to business.

Amendments were also adopted to the program “Business Roadmap 2020”, providing for grants to start-ups ranging from KZT 1.5 to 3 million. Progress was reported on “Employment-2020”, “Development of rural areas”, “Affordable Housing 2020” “Potable water (Ak-B?la?)”, “People’s IPO” and other national programs.

Integration processes are enhanced: from January 1 this year, 17 agreements came into effect that form the legal framework of the Common Economic Space, the roadmap for Kazakhstan’s accession to the WTO is under implementation, investment policies are harmonization with the standards of the Organization for Economic Cooperation and Development.

In view of the expected aggravation of the debt crisis in the euro zone, economic processes in the world and their impact on Kazakhstan are continuously monitored. An anti-crisis plan was drawn factoring in all the possible scenarios for the economy, said the minister.

– The objective is to avert negative scenarios of economic development and maintain social stability.

Strategy for the Future

Asset Isekeshev, minister of industry and new technologies made a progress report on the state AIID program within the last 2.5 years.

At present there is a complete framework for implementation of the state industrial and innovation program, more than 50 laws were adopted and amended, 23 sectoral and functional programs were approved. Speaking about the main aspects of the SP AIID, the minister reminded that creation of favorable conditions for competitive businesses, providing sustainable economic growth is among priorities.

One of them is attraction of foreign investors with funds and technologies. National Plan for investment has been adopted for that, 20 priority countries-investors and 150 technology leaders were identified; the work on more than 400 investment initiatives worth $ 20 billion is underway. As a result Kazakhstan today has a leading position in the CIS in investment attractiveness, and within 2.5 years an inflow of direct investments in the manufacturing sector grew by 60% and decreased by 14% in mining industry, showing changes in the structure of investment flows.

– Taking into account the limited resources a focus on a narrow list of sectors is needed in a highly competitive world, – said A. Isekeshev. – Within two years we have studied all branches of the program, their export potential and impact on employment market. As a result two main groups of priority sectors have been identified. The first group is the basic industries such as mineral resources sector, energy and transport. The second is the deep processing of raw materials – a mining and metallurgical complex, chemicals and petrochemicals, agriculture and nuclear power industries, as well as export-oriented service – transit logistics and tourism.

According to the minister ambitious goals and focus on public resources will be set in these directions. As for other sectors (such as machinery, light industry, pharmaceuticals, building industry and others), they are important in terms of employment in the country.

Another direction of the industrialization map is a project work. Within 2.5 years thousands of business initiatives were studied, 706 projects worth KZT 11.4 trln were included in the Map, 400 thousand jobs were created. Within 2.5 years 443 projects totaling KZT 1.8 trillion were launched, 97 thousand jobs opened. According to the Statistics agency in 2011 and 5 months of 2012, output worth more than KZT 800 bln was produced.

Role of regions in industrial-innovative development was enhanced: at present local governors are in charge of 667 projects. The government is focused on 39 major strategic projects, which account for 70% of the total value of the industrialization map. Besides, a list of 20 promising projects was made up. According to preliminary calculations the launch of these projects will give the effect no less than 7% of GDP by 2020.

– At present the AIID program is rapidly developing, but at the time we are facing a growing financial crisis, change of technological structure, geography and nature of demand.

At the same time, the crisis gives opportunities for industrialization, reduces prices on raw materials, equipment, services, engineering companies’ services.

A documentary “Kazakhstan industrial way. Results of 2.5-year work” was run as a part of the minister’s progress report.

Digital TV

In the first half of 2012 54 new productions were launched under the SP AIID. Much work has been done to create a national network of digital broadcasting, a promising European standard – DVB-T2 was applied. According to Askar Zhumagaliyev, minister of transport and communications the first phase of the project is completed, allowing more than 3.5 million citizens living in 370 remote villages an access to digital TV this year.

During the teleconference Abai Kadraliev, head of “Kazteleradio” in Almaty Center for monitoring and control of national TV networks reported on successful testing of the network and the President OKed the broadcasting.

Due to the national digital network broadcasting the most remote regions of the country will be able to watch up to 30 national channels, whereas previously they watched only 5, new Kazakhstan channels are to be opened: «» will be a first non-stop channel in the country, broadcasting only domestic TV projects. Its launch is planned for 1 September. During the teleconference the President OKed the start of testing broadcasting and congratulated all Kazakhstanis on the important event.

Industrial vector

Also in the frames of the national teleconference President Nursultan Nazarbayev launched online another six new industrial projects and construction of four more productions.

Thus, West Kazakhstan oblast presented an industrial-innovative project, aimed at increase of domestic content in mining companies. In Aksai Karachaganak oil and gas field, the first phase of industrial park’s construction is completed. This is a pilot project where Kazakhstan and the United Arab Emirates investors joined their efforts under support of RK ministry of industry and trade and the National Innovation Fund. According to Marco Kastanini, director general of the industrial park, the project costs about KZT 1.5 billion and the park avails of production workshops, powerful cranes, gas distribution systems, testing labs, warehouses and offices.

According to Nurlan Nogayev, West Kazakhstan oblast governor new productions and jobs are established in industry and agriculture of Priuraliye region. Special attention is paid to attracting of investments: in 2011, 11 projects worth KZT 157 billion were fulfilled in the oblast. A dozen of projects are to be launched by 2014.

Increasing the volume

Southern region is an agricultural and industrial center of the country. The leader of chemical industry in South Kazakhstan is JSC “Kazphosphate”. A Novodzhambyl phosphorus plant was commissioned jointly with Czech company Fosfa a.s. to produce high quality output. Due to ongoing modernization, the JSC “Kazphosphate” doubled the volume of production and reduced power consumption by a third. 11 new products have appeared in the competitive range of the partnership products.

The first output of the joint venture will go to CIS and European consumers soon and in September the production will reach its design capacity of 5 000 tons a year.

In Stepnogorsk another polyethylene plant was launched, producing pressure-free double-layer corrugated pipes “Korsis”. Demand for such output is growing in the country and the plant sends its products to Astana, Rudny, southern regions of the country, eastern regions of Russia, expanding its geography.

The plant’s capacity is to be 30 thousand tons of polyethylene pipes a year with 50-year life time. It is able to meet the internal need in pipes by 40%, thereby increasing Kazakhstan share.

During the teleconference, Nursultan Nazarbayev gave a start to other three new lines for corrugated pipes production.

Mega-projects in action

Today, Kostanai oblast’s industrialization map includes 76 productions with total investment of KZT 367.5 billion: 23 projects worth KZT 330 billion in industry sector and 53 projects worth KZT 37.5 billion in agriculture. The region is implementing a national mega-project – a plant producing metallized product the capacity of 1.8 million tons of briquettes a year – worth KZT 99 bln (investments).

Construction of Arkalyk – Shubarkol railway and a joint venture “Lude-Kaz” in Kostanai to produce 80 asphalt mixing units a year was started during the teleconference.

The new road will reduce distance between northern and central regions of the republic by 700 km and boost export and regional transportations. The project’s cost is KZT 133 billion, commissioning is planned for 2015.

Pavlodar oblast presented three projects of the industrialization map: two of them – Ekibastuz LLP “B. Nurzhanov GRES-1″ and LLP” Prommashkomplekt” are ready for launch, construction of Bozshakol mining and processing complex is just beginning.

During the teleconference, Nursultan Nazarbayev gave a start to construction of Bozshakol mining and processing complex of LLP “Kazakhmys Bozshakol”. Commenting on the event, Eduard Ogai, chair of LLP “Kazakhmys Corporation” said ” Kazakhmys” starts its largest project. In Bozshakol complex the Corporation will extract almost a third part of current copper production volume. Construction of Bozshakol mining complex is a significant contribution to development of Kazakhstan mining industry. The first output is to be produced in 2015.

The field’s service life is over 40 years with average capacity of 75 tons of concentrate copper a year. 1 500 new jobs are to open there.

Pavlodar oblast has 174 projects; total amount of investments exceeds KZT 1 trln 300 bln. Within upcoming 2.5 years of the AIID program it is planned to create 13 000 new jobs. This year, the region is commissioning 49 projects with investments of KZT 136 billion with 1 952 jobs. 21 projects have been fulfilled. Pavlodar oblast has more than 25% of investment projects on the industrialization map.

A new refinery will be constructed in Astana to boost industrialization processes in the country. Advanced innovative technologies of leading German refining companies are to be installed there. The plant will start operating in late 2013 the capacity of 25 tons of gold and 50 tons of silver a year.

Exit into big world

Development of transport infrastructure is one of industrial policy’s priorities. During the teleconference with Karaganda oblast the construction of Zhezkazgan – Beineu railway was started.

The railway will open new markets, cut the distance down by 1 200 km, and increase turnover significantly. On average 4 570 people will be engaged in the railway construction: it is planned to build the length of the road three district and three intermediate stations with 901 permanent jobs, 171 semi-detached houses, two middle and three elementary schools, 5 kindergartens, two clinics, obstetric stations and other facilities.

These days in the oblast 56 projects are being implemented in the frames of the SP AIID. In 2010-2011 33 productions were commissioned. This year, nine projects are underway.

For example in Shakhtinsk a unit assembling methane gas to generate electricity was installed there to save KZT 42 mln a year. Another project is a garment factory “Yutariya” in Zhezkazgan, hiring 230 women with the capacity of 1 mln 800 thousand garments a year.

Another important infrastructural project is Arkalyk – Shubarkol railway with the total length of 214 km. During the construction time – 41 months, more than two thousand people will be involved in the work, with 600 people to be employed thereafter.

Kazakhstan share focused on

More than KZT 15 billion is a total value of memoranda signed during the industrialization Days. Producers and large consumers of Kazakhstan output signed 50 contracts to increase Kazakhstan share and improve further cooperation.

In particular, the healthcare ministry signed a contract with LLP “SaryarkaAvtoProm” for supply of made-in-Kazakhstan reanimobiles; national company “Kazakhtelecom” – with four Kazakh manufacturers, KEGOC – with two companies, Pavlodar petrochemical plant – with ten RK enterprises, Atyrau refinery – with three, JCS “Intergas Central Asia” – with eight businesses, “Samruk-Kazyna Invest” – with two companies.

– The AIID program started manufacturing 100 new products, which have never been produced in the republic before, – said Albert Rau, first deputy minister of industry and trade. – It is of special importance for such branches as machinery, light industry, etc.

– In order to build a competitive economy the Government set a task to develop domestic industries and increase Kazakhstan share. Today we have signed important documents, allowing to modernize infrastructure to speed up economic development, – said B. Kazhiev, head of JSC KEGOC.

FEZ “Seaport Aktau” is attractive for investments. The memorandum, signed in the frames of the industrialization Days, will contribute to research of goods that are in demand in Kazakhstan and Caspian region’s markets.

The industrialization map’s projects are regularly monitored: within 2.5 years 202 productions out of 443 reached the design capacity. Thanks to various products “Made in Kazakhstan” brand came to Kazakhstan markets.