ASTANA – Kazakhstan has successfully completed the first five-year plan under the Strategy of Accelerated Industrial and Innovative Development aimed at boosting its economy. Now President Nursultan Nazarbayev has assigned a new task – to develop a strategy for a second five-year period of the programme which will begin in 2015.
However, the next stage requires new approaches from the Government. It is well known that the global financial crisis of 2008 had a negative impact on the financial markets of many developing countries, including Kazakhstan. For example, the growth of investment in fixed assets in the country decreased from 25 percent in 2007 to 2.2 percent in the post-crisis period. The share of so-called “bad” loans in the banking sector increased almost 30-fold from 1.3 to 29 percent.
In this regard, the Government has set a goal for the newly established Baiterek National Holding Company JSC, which oversees all of the financial institutions of the country, to identify new sources of investment in the economy, as well as new areas where it would be better to send these financial flows. Therefore, the Baiterek JSC is currently working on a new project titled “Improving the funding model of the industrialization programme of Kazakhstan.”
For this purpose, the JSC has established a steering committee, which includes leading economists, representatives of commercial banks, the Government, the Presidential Administration, business and the public.
Recently, the first meeting of this committee was held in Astana, attended by Deputy Prime Minister – Minister of Industry and New Technologies Asset Issekeshev, deputy head of the Presidential Administration Bakhyt Sultanov and Chairman of the Board of “Baiterek” JSC Kuandyk Bishimbayev .
Opening the meeting, the Deputy Prime Minister pointed out that the plan for the coming five years will take into account the experience of previous years.
“There are several priorities layed out in the document. The first is defining industry specialization, i.e. a limited number of priority sectors and clusters in the regions that will be primarily financed and supported by the state. Second is the need to link this to regional development, infrastructure development, employment and other issues on the basis of the developed scheme of productive forces,” Issekeshev said.
The third priority, according to him, is an improved model of financing. In turn, the head of Baiterek Kuandyk Bishimbayev said his agency invited leading foreign experts to conduct analysis of the country’s financial sector. Among them are the former Finance Minister of Norway, ex-governor of the Central Bank of Iceland Svein Harald Ovgard, Nobel laureate in economics Michael Spence, professor of the international economics department at Harvard University Richard Cooper and former chairman of the Economic Council under the President of the United States Martin Bailey.
“On the basis of their diagnosis, we are developing a strategy, the main focus of which will be the development of small and medium-sized business, which is the core of the manufacturing industry,” Mr. Bishimbayev said.
According to him, with an average annual economic growth from 5% to 7% the country will require an additional infusion of investments of US$ 150 billion.
In addition, according to experts, Kazakhstan can diversify its domestic economy upwards by increasing the share of the service sector in the nation’s GDP. According to their estimates, the GDP will grow by 6-8% in 7 years, which would require the investment of 107 to 125 billion dollars.
As for the conclusions of international experts on the diagnosis of problems in the financial sector of Kazakhstan, the country’s main challenges are high interest rates and requirements on provision of collateral and its evaluation. In the future, invited experts are expected to suggest reforms to resolve those problems on a systematic basis.