Government Develops National Export Strategy

ASTANA – The head of state has repeatedly said that Kazakhstan should not remain a raw materials source for the world’s economically developed countries, but rather build its own highly industrialized and developed society.

In recent years, with the implementation of the State Programme of Accelerated Industrial and Innovative Development (SPAIID,) new factories have appeared in the country that may be competing with similar businesses abroad.

The opportunities which the Customs Union and the Common Economic Space have created for Kazakhstan necessitated the new National Export Strategy (NES). Specialists from the Ministry of Industry and New Technologies and the National Agency for Exports and Investment KAZNEX INVEST partook in formulating it.

Deputy chairman of KAZNEX INVEST Meyrzhan Maykenov, while presenting the document in Astana in mid-January, spoke in detail about its essence. First, he described the current situation regarding exports.

Today, Kazakhstan is ranked 42nd on the list of world exporters. The main export item of the republic is oil at almost 65 percent of exports; next in importance and volume of deliveries abroad are uranium, ferroalloys, wheat and flour.

According to Maykenov, despite the fact that Kazakh products reach 119 countries, active trade is conducted with only 10 of them. Only 25 percent of exports are processed goods, the remainder is by and large raw materials.

“Unfortunately, domestic exports are still characterised by low commodity diversification,” said a representative of KAZNEX INVEST.

Thereby, the drafters of the strategy were facing a concrete challenge: Kazakhstan must have a quality and diversified export basket.

“In the new strategy, we have taken into account these factors. The plan consists of three main parts. The first gives the answer to the question over which goods Kazakhstan can supply to the world markets. The second determines the markets on which our products may be in demand. The third contains measures of support to Kazakh exporters which will help them to become competitive,” said Maykenov.

According to him, priority export industries will include metallurgy, the chemical sector and food production. Major outlet markets are the country’s main neighbours – Russia and China. To the south, they include Uzbekistan, Kyrgyzstan, Tajikistan, Turkmenistan, Afghanistan and Iran. The three south Caucasus nations and the EU will also be targeted.

The main question, however, relates to measures to be provided to support domestic exporters.  In this regard, said Maykenov, much work must be done in the country. The first issue is creating an overseas trade network.

“Unfortunately, we have not developed a network of foreign support; we have only established diplomatic missions, while other countries abroad have commercial and trade representations. According to official data, a network of trade support abroad provides a ten percent increase in export volumes,” Maykenov said.

In his opinion, there are two solutions to this problem. First is the introduction of the institute of trade attaches in the Kazakhstan embassies in 12 the abovementioned countries. The second step is to open, in conjunction with private business, trade missions and offices of enterprises in the major cities of other countries based on demand for various Kazakhstan products.

“In addition, to support domestic exporters, we need to improve transportation and logistics services, as well as greatly expand the range of financial services,” he said.

In particular, the agency proposes introducing so-called pre-export financing of products for domestic enterprises.

“This tool will allow the manufacturer to apply to second tier Kazakh banks and obtain loans under already concluded export contracts,” explained Maykenov.

Indeed, in many countries, financial and insurance support for exporters from the state today is quite effective and popular measure. There are 75 export credit agencies in the world that cover 10 percent of all world trade, which is $1.8 trillion.

During the global financial crisis, many exporters were able to remain afloat due to their insurance. The amount of compensation they received was $20 billion.

As for domestic producers, they do not have such support and are consequently in unequal conditions with their competitors.

“About 80 percent of our exporters work only on the terms of preliminary payments, because nobody covers their risks. Soft-term financing is not available to them either. Our manufacturers are left with high risk options, for example, while delivering goods to Afghanistan,” he said.

According to Maykenov, having large financial guarantees and insurance, exporters in foreign countries can offer other incentives for the same export contracts: for example, they can work on deferred payment.  But to introduce such tools as pre-export insurance in Kazakhstan, it is necessary to capitalise Kazekspogarant. Today, the share of its coverage does not reach even 1 percent of national exports, while the same institute in Belarus, for example, covers 2.3 percent of national exports.

Therefore, the successful implementation of the National Export Strategy will require better coordination in the field of export support and development and adoption of the law “On National Exports,” Maykenov concluded.

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