Seven Days of Industrialisation Examine Country’s Industrial Progress

Astana – As Kazakhstan seeks to expand and diversify its economy, a campaign, “Seven Days in the Industrial Life of Kazakhstan,” was held June 29-July 5 in Astana to draw attention to different aspects of the country’s growing industrial economy.

Day one covered export, which has grown recently due in part to different mechanisms of state support. The president hopes to see the export of products grow by 40 percent by 2017. The Export 2020 programme has been developed to help achieve that goal. The State Programme of Accelerated Industrial-Innovative Development (SPAIID) also provides key support for Kazakhstan’s export industry and has so far helped 1,500 non-oil-sector enterprises. In 2010, a programme to compensate businesses for 50 percent of their expenses in promoting Kazakh goods in foreign markets was instituted. So far, 131 businesses have taken advantage of the programme. Kazakhstan’s export sector has increased by 54 percent in the past three years, reaching $92.3 billion total. The export of processed goods grew by 14 percent and reached a record of $25.5 billion in 2012. Processed goods actually edged out commodities in Kazakhstan’s exports to the Customs Union in 2012, as was reported by the Central Communications Service.

Day two drew attention to small and medium businesses, which the Business Road Map of the SPAIID seeks to support. Small and medium businesses have been referred to as a key part of the future economy of Kazakhstan and measures have been enacted to support entrepreneurship among all segments of the population, including specialised support through the Damu Entrepreneurship Development Fund for entrepreneurs in rural areas and entrepreneurs with disabilities. Since the Business Road Map programme has been implemented, 35.1 billion tenge (more than $230 million) in subsidies has been paid, grants totaling 8.077 billion tenge ($52.6 million) have been allocated and 34,000 new jobs have been created.

Day three reflected on the SPAIID itself. The policy, in effect through 2015, is meant to accelerate Kazakhstan’s industrialisation across the board. Specifically, its goals are to increase productivity in manufacturing by at least 1.5 percent, increase the manufacturing industry’s share in GDP to 12.5 percent, increase the share of non-raw materials exports to 40 percent and increase the share of innovative enterprises to 10 percent of all active enterprises. It also aims to implement investment projects in the export sector and support the creation of new opportunities for small and medium businesses. Support for these goals comes through the Export 2020, Productivity 2020 and the Business Road Map 2020 programmes. National Welfare Fund Samruk Kazyna and other strategic companies will initiate large projects undertaken as part of the larger SPAIID. Kaznext Invest, recently at the forefront at the Kazakh-British Business Forum on July 1, is also positioning itself as a one-stop-shop for investors interested in the export sector, as well as a supporter of small and medium-sized projects.

On Day four, the focus shifted to energy and transport, two key sectors of the economy. The Central Communication Service reported that 13 electricity projects underway or recently completed will provide a total of 3,200 MW of power. The completed projects have already added 1,341 MW to the national energy production capacity.

Two railways have been major projects of the SPAIID: the Zhezkazgan-Beineu line from central Kazakhstan to the west of the country and on to Europe, and the Akralyk-Shubarkol connecting the north and central regions. The Western Europe-Western China highway is also in process and has just seen the completion of a segment in southern Kazakhstan. Right now, a state programme of transport infrastructure development to 2020 is being drawn. The programme will upgrade transportation infrastructure for passengers and try to increase the transit transport of goods through Kazakhstan.

Innnovation was the focus of Day five, which, falling on July 3, coincided with the tenth anniversary of the National Agency for Technological Development. At a press conference to celebrate the anniversary, Chairman of the Board of the National Agency for Technological Development Aidyn Kulseitov reviewed some of the agency’s achievements. He noted that Kazakhstan has improved its standing in international rankings covering technological development, innovation potential, availability of new technologies, and capacity to adopt modern technologies. “The volume of innovation products increased from 82 to 379 billion tenge ($539 million-$2.49 billion) and their share in the GDP of Kazakhstan made 1.25 percent (since 2009). The agency has considered more than 3,000 applications over the recent 10 years and rendered practical assistance in the implementation of 600 of them. And 396 ideas and projects of innovators received practical help in implementation within the State Programme of Accelerated Industrial-Innovative Development,” Kulseitov said.

Day six noted the country’s investment activity. Though foreign direct investment is falling around the world, in Kazakhstan it continues to increase, reaching a record of $22.5 billion in 2012. Over the past four years, since the implementation of the SPAIID, foreign direct investment has shot up. More significantly for the purposes of the programme, the structure of those investments has changed: the share of foreign investment in oil and gas extraction has actually fallen by 18 percent, while investment in construction, communications, food and pharmaceuticals sectors have grown, sometimes by huge amounts.

Fittingly, it was reported on Day six, July 4, that there are currently over 400 investors involved in projects in Kazakhstan worth over $15.7 billion. These projects include a dairy plant and a ball valve plant.

Local content, something the government is seeking to increase in every aspect of industrialisation, was the theme of the last day of “Seven Days in the Industrial Life of Kazakhstan,” as well as a uniting theme. Developing local content is one of the president’s economic priorities. He has said he wants local content to reach 50 percent of the GDP. The SPAIID hopes to increase local content through prioritised procurement, conditional discounts and other measures.

The National Agency for the Development of Local Content within the Ministry of Industry and New Technologies works to facilitate the development of local content through a variety of state support instruments. The agency’s chairman of the board, Kairat Bekturgenev, said, “We offer new state support instruments such as compensation of expenses for certification of goods, works and services and quality management systems, expertise for the local content share in the projects of the Industrialization Map.” Visits to its website have gone from 500 to 40,000 per day in the past year, Bekturgenev said.

With membership in the Customs Union and Kazakhstan’s pending accession to the WTO, as well as other regional trade blocs in the works, developing local content has become vital. In 2013, the number of long-term agreements between national companies and domestic manufacturers is expected to reach a value of one trillion tenge (over $6.5 billion) and exceed 1,500 products or commodities. Local content in the oil, gas and mining industries is also increasing. Kazakhmys Corporation, for example, procured 252 billion tenge’s worth (over $1.6 billion) of goods and services from local companies last year and increased the share of local content in its procurement from 36 percent in 2009 to 62 percent this year.

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