President Gives Cabinet New Tasks to Fulfil Kazakhstan 2050 Strategy

By Rysty Alibekova, Maryam Turezhanova, Assel Mukanova and Vladimir Kuryatov

ASTANA – On Jan. 23, 2013, President Nursultan Nazarbayev chaired a special Cabinet meeting at the Akorda presidential palace in Astana to review the work done in 2012 and define the measures needed to implement the new Kazakhstan 2050 national strategy to advance the nation to among the 30 most developed countries in the world by 2050.

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President Nursultan Nazarbayev (center) chairs the expanded meeting of the Goverment giving tough messages to ministers on imple,emting his new strategy, Kazakhstan 2050.

President Nazarbayev said the goal of the programme was not to produce impressive abstract economic statistics but to improve the standards of life in every town, district and village in the country. He blamed officials for their failure to competently implement the development goals set for 2012.

The 2012 national budget allocated more than 17 billion tenge to build new homes for rent but the programme failed, the president said. Some 2.5 billion tenge, or 21 percent of allocated resources were never used and only 70 percent of the planned number of apartments were built.

The president criticized what he called the inertia and irresponsibility of underperforming regional governors and the disbanded Agency for Construction and Housing for the shortfall.

President Nazarbayev also criticized the government’s planning policy in constructing new social facilities. Some of the new hospitals and kindergartens looked more like palaces, he said. Planners should follow widely-accepted international procedures where preschools were located in small buildings suited to children’s training and educational needs. The paradox of current policy was that, despite all the costly construction, nearly 100 billion tenge on allocated budget funds had still not been spent, he said.

“Some 189 schools and 68 healthcare facilities are still in emergency condition. In 91 schools, 33,000 children are taught in three shifts,” the president said.

Social projects built within state plans often miss their deadlines, such as the construction of the new perinatal center in Kyzylorda and of new clinics in the Zhambyl and Akmola regions, President Nazarbayev said.

“In this connection, my instruction is not to start the construction of more new facilities, but to redirect state funds to overhaul and repair existing public facilities and to address the issue of the three-shift schools’ problem,” he said.

A New Anti-Crisis Road Map to Be Drawn

The President instructed Prime Minister Serik Akhmetov to draw up a new anti-crisis economic roadmap patterned on the highly successful one that stabilised the national economy four years ago.

“We must be prepared to overcome a possible global crisis and recession, as we did in 2008-2009,” President Nazarbayev said.

He instructed the government and regional governors to pursue his primary goals of providing employment and stable economic growth even under possible crisis conditions.

“Industrialisation alone will lead us into the rank of the 30 most developed nations,” he said.

President Nazarbayev noted that international studies have projected a global shortage of 40 million specialists by 2020. He said this underscored the need to attract efficient managers as well as foreign direct investment (FDI) to Kazakhstan. The successful operations of such companies and institutions as Air Astana and Nazarbayev University were good examples of hiring the best experts from around the world.

The standards of the Organisation for Economic Co-operation and Development (OECD) must be implemented in the shortest possible time to improve the business climate that Kazakhstan needed, the president told the Cabinet. New industrialisation plans should also focus on creating and expanding regional clusters of new factories and companies, he added.

The president said major state-owned development corporations, especially the Samruk-Kazyna National Sovereign Fund, were investing too narrowly in high-profile development companies and projects. He instructed the government to establish a new National Agency for Development to run and coordinate all current development and financial institutions.

“We have established the Development Bank of Kazakhstan to offer accredited long-term loans. Commercial banks cannot do it, they are meant for giving short-term loans,” he said.

The president said he had lifted the moratorium on investing new resources in geological surveys to find new mineral resources.

“Kazakhstan is now nearly on the last place in this area (in the ranks of resource-extracting nations),” he said.

The president said Kazakhstan only spent “$20 per square kilometre (on geological surveys) whereas China spends $45 per sq. km, Australia – $167 per sq. km and Canada $203 per sq. km.”

“The Rio Tinto world-class company was willing to invest tens of millions of dollars in exploration from scratch in our country. But it had to go from one office to another for two years, going through endless red-tape to obtain the permit. But it achieved nothing in the long run,” President Nazarbayev said. “In the Ministry of Industry and Innovative Technology (MINT), the contract-making process takes another two to three years. The Tau-Ken Samruk National Company, which was created by my decree in 2009, is still not operating. Think of it, only four contracts have been concluded in three years. Where will we be if we go on like that?”

Minister of Industry and Trade Asset Isekeshev was ordered to work out the solutions to this problem within a three month timetable. He was instructed to simplify existing bureaucratic and legal procedures for the registration of mineral rights and to bring the regulations into line with international standards.

In railway transportation, the president ordered a new high-speed line to be built from Almaty to Astana, possibly including a bridge over Lake Balkhash to reduce travel times and boost tourism in the Balkhash region.

He also approved projects to build new pipelines and gas distribution networks to help develop the Karachaganak and Kashagan giant fields.

President Nazarbayev also asked the government to choose a new site to build the country’s first domestic nuclear power plant and start negotiations with potential contractors to build it.

“Kazakhstan needs its own nuclear power plant,” he said.

The president and the Cabinet also discussed integration proposals for Central and West Kazakhstan power grid. He instructed the government to draw up and implement new special programmes on balanced energy production and consumption in accordance with the “Energy Saving – 2020” programme by July 1.

EXPO 2017 Seen as Catalyst for Innovative Development

The president called the upcoming international specialized exhibition EXPO 2017 a catalyst for innovative economic development. He said it would probably be fully provided with electricity generated from alternative energy sources. By July 1, the Samruk-Kazyna National Sovereign Fund and the Astana city government were tasked with drawing up and submitting a pilot project for the Green Block area of the city where the EXPO site will be constructed.

The Astana EXPO 2017 National Company and the Astana city government were instructed to hold an international competition in February 2013 to select companies to draw up a master plan and architectural design for the exhibition, to present a new promotional programme to rebrand the city and to organise a professional and integrated marketing campaign.

“No later than by the second quarter of this year, the Ministry of Environment is to develop and submit the draft concept of the EXPO 2017 to the State Commission,” the president said. The State Commission would coordinate and oversee all EXPO-related initiatives and all regional and municipal governors must join the work by drawing up new regional innovation systems, he said.

Agriculture Management to Be Cleaned Up, Supported

President Nazarbayev also instructed the government to investigate and end the widespread embezzlement of 500 million tenge in budget funds uncovered by the Prosecutor General’s Office in agricultural programmes. These included the issuing of loans without guarantees or collateral, and a grain shortage in the Food Corporation.

Prime Minister Akhmetov and the Prosecutor General’s Office had been instructed to conduct a thorough investigation to restore the state’s interests, penalize responsible officials and take systematic measures to prevent them from happening again.

The president said the government also needed to do far more to ensure sufficient low-interest loans were available for farmers around the country and to create an effective and accessible agriculture credit system.

“Only 10 percent of farmers are provided with soft loans from KazAgro,” he said. “A drastic breakthrough must be made in the loan services area. It is also necessary to ensure the refund of loans. Everywhere in the world, anyone who does not return their business loan goes into bankruptcy, but in our country the payments are postponed every year. It has to be stopped. That is a priority for the Ministry of Agriculture, regional governors, KazAgro and the Atameken National Chamber of Commerce.”

In the bumper harvest year of 2011 wheat yields averaged more than twice what they were in the drought year of 2012. Regional Development Minister Bakhytzhan Sagintayev was, therefore, instructed to provide increased supplies of moisture-saving technologies, fertilisers and pesticides.

Agriculture Minister Asylzhan Mamytbekov was told to present a report on livestock breeding within the next month and the government is to submit specific recommendations for regional development.

Business Inspections, Audits to Be Curtailed, Pension Fund System to Be Reformed

President Nazarbayev called on the government to reduce inspections of small and medium-sized enterprises (SMEs).

“We are witnessing positive results in this area,” he said. “The number of tax audits over the last three years has decreased four times while the efficiency of their assessments has risen to 98 percent.”

In 2012, 260,000 tax audits were conducted around the country. The government and the Prosecutor General’s Office were instructed to conduct an inspection on this field within the next month.

The Finance Ministry currently leases 243,000 square metres of premises to private businesses. But at the same time there is a shortage of kindergartens and schools in the country and it costs billions of tenge to build new ones. The government was told that thousands of square metres of building space that could be used for kindergartens and schools are currently lying idle under the control of state-owned businesses or republican state enterprises (RSEs) and private companies.

Finance Minister Bulat Zhamishev was instructed to study and report what state-controlled premises could be given to kindergartens and schools, and transferred to the private sector.

As part of the second wave of its privatization programme the government plans to start privatization of non-strategic businesses this year. “This programme should be carried out in cooperation the Atameken Union National Chamber of Commerce,” President Nazarbayev said. He said Prime Minister Akhmetov would be in charge of it.

“To improve the pension system, it is necessary to create a single pension fund and transfer the accounts of all private pension funds to it,” the president said.

The consolidation and management of the nation’s pension funds under the control of the National Bank will help manage the people’s savings more effectively and safely, the president said. He said some of these resources should be allocated to expand credit in the economy to boost industrialization and entrepreneurship. New initiatives are also planned to raise new financial resources for the insurance market through the issuing of new securities. The government and the National Bank will present the new proposals within the next month.

New National Social Insurance System Against Natural Disasters

President Nazarbayev said the recent hurricane disaster in Zhambyl region had underlined the importance of making national social insurance coverage more efficient and comprehensive.

“As we know, the recent devastating hurricane in the Zhambyl region caused huge damage to hundreds of private houses,” he said. “I express my deep sympathy to all citizens affected by the calamity. The state will organize extensive aid in the reconstruction efforts.”

The president said all developed countries have an effective system of insurance against natural disasters. President Nazarbayev tasked the government with accelerating its efforts to expand and streamline the national social insurance system take the necessary decisions this year. Responsibility for implementing these measures was given to Vice Premier Yerlan Orynbayev.

Regional Government to Become More Effective, Local Akim Elections to Be Introduced

The president said the areas of education, health, employment and social protection would be covered by the new programme.

He also instructed government ministers to withdraw from their “Soviet-style” of working and not to complicate the lives of citizens.

“I have issued instructions to clearly divide powers between the central government and the regions, and to strengthen local administrations before the elections of mayors in rural areas,” the president said. “However, as I was told, this work is hampered by our central government. Ministries and departments are happy to pass part of the responsibility to the regions, but at the same time they do not want to transfer authority personnel and funds.”

“Over the past six years, the number of akimats, or municipal administrations was reduced by 30 percent from 47 000 to 37,000, but the staff of civilian central government ministries and departments and national agencies has not decreased,” he continued. “Instead of transferring functions to the regions, the ministries and agencies are concentrating powers in their own hands.” President Nazarbayev said the underlying cause of the problem was the “Soviet-style” outlook of too many senior officials and their desire to keep control.

There are other problems which need to be addressed in the context of local self-government, the president said. Some 90 rural districts around the country were located far from any major cities and government centres and this complicated the solution of many problems, he said.

Regional Development Minister Sagintayev was instructed to analyze this problem over the next month and draw up appropriate proposals for the Interagency Commission for Administrative Reform.

New Agency for Strategic Planning to Be Established?

President Nazarbayev then noted the need to strengthen the effectiveness of the central government.

“It is important to strengthen work on strategic planning. And it is necessary to consider setting up a new Agency for Strategic Planning,” he said.

PM Says PAIID Programme Working

Prime Minister Akhmetov said the manufacturing sector of the economy was continuing to experience steady growth under the state Programme for Accelerated Industrial and Innovative Development (PAIID).

“For the first time, the production of photovoltaic modules has begun in Kazakhstan,” he said. “A new industry of transport engineering has been established. Since 2008, the production of oil and gas processing equipment has increased by 510 percent; of oil processing equipment by 320 percent and of farm equipment by 200 percent. Over the past four years, labour productivity in the manufacturing industry has increased by 140 percent from $38,000 to $52,000 per employee. Over the past three years, 537 projects costing 2.1 trillion tenge have been launched under the Industrialization Map, of which 162 were commissioned within the past year.”

The prime minister said 2,733 projects were approved for subsidy during the three years that the 2020 Business Road Map programme had been operating.

In 2012, 6.7 million square metres of housing were commissioned within the new 2020 Affordable Housing programme, and this figure is planned to rise to 10 million square metres per year by 2020.

“We are constantly working on the improvement of the business climate,” Akhmetov said. “In 2012, the number of permits required to open new businesses was reduced by 30 percent.”

“In 2012, we developed and approved by presidential decree the Concept of local self-government in Kazakhstan and adopted an action plan for it,” the prime minister said. “This year we will draft a new law on the development of local government and the first elections of rural akims will be held.”

The new Kazakhstan – 2050 national strategy announced by President Nazarbayev in December 2012 will provide the main direction of the government’s future activities and the Cabinet approved a detailed plan for its implementation. This year, the government will draw up and submit two new plans for national infrastructure and industrial development to 2020, the Cabinet was told.

The newly organized Ministry of Regional Development was confirmed as the main centre for coordination and resolution of territorial issues.

Employment Programme Creates 200,000 New Jobs

Deputy Prime Minister Orynbayev reported on administrative reforms and social issues. He said the most important programme for social modernization was the one to create new jobs around the country. It is now in its second year and is bringing tangible results. The programme so far has created new jobs for 200,000 people.

Thanks to the 202 Employment programme, PAIID and other government initiatives, unemployment has been steadily declining. At the beginning of 2012, it stood at 5.4 percent and has now dropped to 5.2 percent. Orynbayev told the Cabinet he was confident the situation in the employment sector was stable and there was no need to take additional measures.

Over the past year, 13,000-14,000 people received microcredits. Previously, rural entrepreneurs had no access to credit resources, and the new programme gives them greatly improved access to finance. About 80,000 people were retrained for new professions.

Orynbayev said the national education system had been strengthened by the introduction of the Balapan programme, which was launched three years ago. The coverage of pre-school children from ages three to six in national kindergarten programmes had grown from 36 percent to 71 percent By 2015, the government planned to eliminate three-shift schooling. In the regions, the construction of new schools is underway, especially in the south.

Starting this year schoolchildren will learn English from first grade, the Cabinet was told. The dual system introduced in the vocational training will be extended to all 888 colleges around the country.

Significant progress has been made in the healthcare programme, which started four years ago. Since then, 80 percent of 700 public hospitals have been transferred to new and more efficient economic management.

Major progress has also been made in the application of modern technologies to medicine, especially in the fields of cardiac surgery and organ transplants.

The Cabinet was told one of the greatest health care achievements in recent years has been the reduction of maternal mortality by 250 percent. The infant mortality rate is also gradually decreasing, approaching Eastern European levels and life expectancy is rising.

Transit of Goods Grows 20 Percent Last Year, Further Infrastructure Development Planned

Transport and Communications Minister Askar Zhumagaliyev said that thanks to a massive programme of improved roads maintenance and repairs, the transit of goods increased by 20 percent last year and reached 1,152,000 tons, 90 percent of which was domestic cargoes.

On President Nazarbayev’s instructions, 700 km (420 miles) of the Western Europe-Western China international transport corridor were completed in 2012.

In the railway industry, cargo transportation increased to 293 million tons in 2012 and the number of passengers who were carried rose to 23.5 million. The railways adopted new measures to increase passenger traffic and improve transportation standards. Some 16 regions of the country adopted new plans to develop their transport sectors and nine of them are already being implemented.

A new special transportation centre was opened for more effective control and video-monitoring equipment was installed to help enforce the collection of fines and fees, which increased from 500 million tenge to 1.1 billion tenge.

In the civilian aviation industry, the number of international routes serving Kazakhstan grew to 64, 11 new services were opened and the domestic market airline market was liberalized with reduced tariffs.

Transport Minister Zhumagaliyev said a number of new infrastructure projects will be launched and national transportation systems will be further developed in order to meet the needs of the regions.

President Nazarbayev told the Cabinet that they had only considered some of the issues they needed to. But in conclusion, he expressed his confidence that the ambitious goals set for the country would be successfully achieved.