Kazakhstan May Act to Protect Domestic Producers; NCE Describes Proposals

GAITHERSBURG, MD – With the Eurasian Economic Union (EEU) launching on the wave of a Russian recession and a tumbling rouble, some of Kazakhstan’s first actions within the union may be to protect its domestic producers. The country’s National Chamber of Entrepreneurs recently explained a list of measures it has suggested be taken to help Kazakhstan’s businesses.

In a television interview on Dec. 22, President Nursultan Nazarbayev commented that the falling rouble was “not good for us, as Russia is our main partner, and our people rushed to Russia to buy cheap goods there,” and that Kazakhstan might enact measures to protect local producers.

“Within the Customs Union and the EEU, we will have to watch closely what goods to bring to Kazakhstan, in order not to put our businesses to disadvantage,” the President said, as reported by Interfax Kazakhstan.

Business News Europe reported on Dec. 18 that in November alone, Kazakhs spent more than 32 percent more on online shopping from Russia, presumably drawn by low prices, than in the previous November. Spending rates by Belorussians and Armenians in Russia were even higher. Cross-border purchases of cars and real estate are also increasing, while exporters’ sales are slowing as their products become more expensive than they once were.

In a Jan. 14 Central Communications Service briefing in Astana, Chairman of the Board of the National Chamber of Entrepreneurs (NCE) Ablai Myrzhakmetov said, “The collapse of the rouble has put our producers in unequal competitive conditions, especially in regions bordering Russia.” Kazakhstan’s young automobile industry has been especially affected, he said, with sales falling by around 60 percent year on year.

“Our car-making industry has just begun to develop, and this is a signal to which we should certainly respond,” Myrzakhmetov said.

Myrzakhmetov also explained some of the trade restrictions the NCE had suggested in a Dec. 26 message to help protect Kazakh producers against the repercussions of the falling rouble. In a Jan. 14 article on its website, the NCE outlined its proposals in some detail.

Subsidies for agricultural and food industry manufacturers are among the proposals, as well as a comprehensive plan to support import substitution that will work in coordination with existing government programmes promoting industrial development. Specifically, the NCE is calling for an increase in public and public-private procurement orders from domestic producers, particularly small and medium enterprises; the introduction of industrial certificates that confirm the production capacities of domestic producers; an extension of the investment subsidy for import substitute producers of competitive domestic products; and the continuation and expansion of concessional lending programmes, including refinancing in tenge of loans issued in foreign currencies.

According to the NCE, Article 29 of the EEU Treaty provides the legal basis for levying some restrictions on trade in cases where “national defence and security of the Member State” may be affected.

Kazakhstan’s national concept of security, enshrined in the law “On National Security” includes the concept of economic security and the country’s obligation to ensure its sustainable development and economic independence, said the NCE website. Kazakhstan therefore has a right to impose restrictions including quotas, import bans or licenses to protect key domestic enterprises, it said.

The government announced that it had created a working group to develop recommendations for protecting the national economy on Dec. 22. Its recommendations also included suggestions for reducing the dependence on dollars in the national economy. Kazpravda.kz, reporting from the website of the prime minister, listed several steps to be taken, including raising the guaranteed payout from the Kazakhstan Deposit Insurance Fund on deposits in tenge from 5 million tenge to 10 million in order to encourage savings in tenge; reducing the maximum interest rates on guaranteed deposits in dollars from 4 percent annually to 3 percent; and banning setting prices for goods or services in currencies other than tenge.

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