Economic growth and new opportunities

The world economy is going through a turning point, and our country is also involved in them.

The Minister of National Economy Alibek Kuantirov told our publication about the challenges facing Kazakhstan and how the republic copes with them.Начало формы

- Alibek Sakenovich, the last two or three years have been especially difficult for the world economy. Pandemic, war in Ukraine, disruption of supply chains, high inflation... How does Kazakhstan feel in the context of a geo-economic storm?

Yes, there are many difficulties. Since last year, we have been adapting to the changed external conditions, and based on the results of 2022, we can judge that we have coped with the situation, the economy is in a stable state.

First of all, of course, we need to look at GDP as the most important indicator. Last year, real growth was 3.2%, although we previously forecast much lower numbers.

Growth was provided by the manufacturing industry (3.4%), construction (9.4%), trade (5%), agriculture (9.1%), transport services (3.9%).

Good results have been achieved in the investment sphere and foreign trade. Thus, we managed to attract a record amount of foreign direct investment - $28 billion. This has not happened in the last 10 years. The volume of investments in fixed capital increased by 8%, exceeding 15 trillion tenge.

As for trade turnover, it increased by 32% to $134 billion. Including exports grew by 40% and amounted to $84 billion, while non-oil exports accounted for $34.4 billion. The positive trade balance increased by 82% and amounted to $34.4 billion. For the first time in several years, we have achieved a positive current account balance.

This year the numbers are even better. For the first half of the year, real GDP growth was already 4.8%. This year we are targeting economic growth at the level of 4.5–5% and further in the medium term – up to 6%.

As for the difficulties. The war in Ukraine caused logistical difficulties and came as a big shock to domestic businesses. Therefore, we were looking for new logistical ways. For example, through the so-called "Middle Corridor", which covers Kazakhstan and then leads through the Caspian Sea to Azerbaijan, Georgia and Turkey.

The second point is that inflation has risen sharply. Last year, it was largely formed under the influence of external factors related to global processes and the imbalance of supply and demand. Therefore, a set of measures to control and reduce inflation has been implemented since 2022. This year, measures are being taken to saturate the domestic market with food products. We can already see how inflation, having peaked at 21.3% in February, dropped to 14% in July.

By the end of the year, the goal is to reach 9.5-10%. Therefore, one of the main directions of the Government is import substitution. This applies not only to food, but also to building materials and textiles. I often visit the regions to understand which areas require additional funding. For example, the positive experience of the North Kazakhstan region in the production of dairy products is now being applied in the West Kazakhstan and Akmola regions.

At the same time, we continue to successfully build bilateral trade, economic and investment relations with all our partners. The confirmation of such work in extremely difficult conditions was the preservation of the sovereign credit rating of Kazakhstan by the international agencies Standard & Poor's, Moody's and Fitch at the level of investment reliability. For example, in March S&P updated its country outlook for Kazakhstan, changing it from negative to stable.

In general, there is a positive trend in all major industries. Financial stability is ensured by sufficient international reserves, which at the end of July amounted to $94.4 billion. Including gold and foreign exchange - 34.2 billion. The assets of the National Fund rose to 60.2 billion dollars.

– As you have already said, our small and medium-sized businesses have faced serious financial and economic difficulties. How does the ministry support this area?

– Well, first of all, the Business Roadmap and the Economy of Simple Things programs are being actively implemented. In 2022, about 25 thousand projects were subsidized for a total amount of loans of about one trillion tenge and more than 20 thousand projects were guaranteed for a total amount of 368.5 billion tenge.

Since the beginning of 2023 (as of August 1, 2023), more than 8,000 projects have been subsidized for a total amount of loans of 584.5 billion tenge and about 6,000 projects have been guaranteed for a total of 227 billion tenge.

In general, this year 96 billion tenge more has been allocated for subsidizing and guaranteeing businesses in the republic than a year earlier. Systematic work continues to implement institutional reforms and maintain sustainable economic growth.

Since last year, the so-called new regulatory policy has been introduced. Active work is underway to cancel and revise business requirements. To date, more than 9 thousand irrelevant requirements have already been canceled, the rest, about a thousand, will be reduced before the end of the current year.

Since January 2023, the Register of Mandatory Requirements has been functioning. Thanks to him, business will always be informed about the norms that regulate entrepreneurial activity in specific areas. As a result, regulatory barriers are being reduced, and the number of scheduled business inspections has decreased many times over.

On December 31 this year, the moratorium on inspections of small and micro businesses ends. From January 1, 2024, an automated Risk Management System will be launched, which will allow selecting problematic business entities for verification without human participation. Already last year, automation of 35 areas of control was ensured, by the end of this year it is planned to automate the remaining 36 areas.

In general, last year the number of operating SMEs increased by 27% and exceeded 1.8 million. The total number of people employed in SMEs increased by 18% and reached 4.1 million people. The share of SMEs in the economy increased to 36.5%.

– Now in the world all the major economies expect a recession. Do you take this into account?

- Yes, sure. But at the moment our forecasts are conservative with an optimistic bias. We have, how to say, no other choice: we need to set more ambitious goals and look for new opportunities.

Moreover, when we forecast, we necessarily study the data of international organizations. These are the IMF, the World Bank, the Asian Development Bank and other financial institutions. When planning the basic parameters of the budget (oil price, inflation), we also look at global trends. For example, about 20 forecasts are taken for the price of oil, which are given by various companies. Some may give more than $100, others much less. We try to calculate the "golden mean", make a consensus forecast.

– You mentioned the Middle Corridor. How does Kazakhstan use its geographical position to develop the economy?

– Transit is one of the important sources of income, especially for landlocked countries. We have a huge transit potential. For example, the potential of the Trans-Caspian International Transport Route by 2030 is estimated at more than 20 million tons of cargo per year, which is 10 times higher than the current level. We see a lot of interest in him.

Today, the basis for the integration of Kazakhstani infrastructure into global transport and logistics flows has been formed. At the same time, it is necessary to expand a number of existing "bottlenecks" on this route.

It is also necessary to accelerate the implementation of projects for the construction of a container hub, a multifunctional marine terminal, as well as the modernization and renewal of the existing port infrastructure.

Regarding the railway lines, the implementation of a major project on the Dostyk-Moiynty section, as well as planned projects, such as Bakhty-Ayagoz, Darbaza-Maktaaral, a bypass road around Almaty... This will significantly increase the capacity and will provide an opportunity to further increase the export of domestic products.

We understand that the effectiveness of economic reforms, the achievement of a balanced structure of industries, and the creation of favorable conditions for business largely depend on the transport accessibility of the road network. Roads are the main arteries of the economy. Therefore, they need to invest in their construction.

Thus, according to World Bank estimates, increasing people's access to their jobs by developing the road network by 1% can lead to an increase in the number of companies and jobs by 0.3-0.4%. At the same time, from each tenge invested in road infrastructure, over 30% is returned to the budget in the form of taxes.

It should be noted that many companies relocated to Kazakhstan. More than 40 firms from Russia. These are both international and Russian companies. For example, the same inDriver moved to Almaty.

In general, the Head of State set the task of modernizing international transit corridors, including crossing points across the state border, as well as bringing regional and district roads in order to the standard technical condition.

Now it is necessary to work out the appropriate development of infrastructure, modernize international transit corridors, and provide high-quality road transport to all settlements in the country.

- Concerning settlements. What attention is paid to the development of regions?

- Last year, three new regions were formed - Abay, Ulytau and Zhetysu. It affected the lives of about 1.5 million of our citizens.

I note that the creation of new regions is a powerful impetus for the socio-economic development of both newly formed and reorganized regions, and the country as a whole.

For example, according to the results of the first half of 2023, the Abay region showed the best indicators of socio-economic development among all regions of the republic. We see growth in investment, manufacturing, as well as in the construction sector and agriculture.

In turn, the Zhetysu region occupies a leading place in the growth of construction and installation works, and Ulytau is the leader in terms of commissioning new housing.

Since regional development is our direct competence, since March last year, my deputies and I have been actively making working trips to the regions to meet with local residents, especially in the countryside, deputies, entrepreneurs and activists. We hold personal receptions on the ground, visit social and industrial facilities, thermal power plants...

Important problems of the regions are discussed, which are subsequently taken under the control of the ministry for their further solution with authorized state bodies. At the same time, trips are carried out not only to regional centers, but also to remote villages, where I personally inspect infrastructure facilities implemented under various budget programs. As part of the presidential decree, I visited 19 regions. In the near future, a trip to the Mangistau region is expected.

The Concept for the Development of Rural Territories of the Republic of Kazakhstan for 2023-2027 is focused on supporting the regions, which provides for various measures to increase the income and quality of life of the villagers. The main emphasis is on solving the issues of water supply, heat supply, electricity supply, access to the Internet.

As part of its implementation, measures are also being taken to develop border areas aimed at reducing the outflow of the population, creating comfortable living conditions, and giving a new impetus to economic development. Based on the results of the implementation of the concept, by 2027 it is expected that 100% of the villages will be provided with water supply services, 97% of the rural population will be covered by Internet access and 95% of the share of local roads will be brought to the standard state.

The infrastructure of 3.5 thousand villages with development potential will be modernized, about 183 rural schools will be built and 5 thousand schools will be modernized, 655 healthcare facilities, 100 sports facilities, 154 will be built and 500 cultural facilities will be modernized.

The solution of these tasks is also carried out within the framework of the program "Auyl - el besigi", which is one of the main tools of the concept. It should be noted that since its implementation, the amount of funding from the budget has increased almost seven times.

If in 2019–2022 326 billion tenge were allocated from the republican budget and as a result 3.7 thousand social and engineering infrastructure facilities were built and repaired in more than one thousand villages, then only in 2023 about 200 billion tenge were allocated for the implementation of 1, 8 thousand projects in more than 750 villages.

But it is not enough to build infrastructure, more personnel are needed. This is also given special attention. To do this, we are implementing the project “With a diploma - to the village!”. Within its framework, social support measures are provided to specialists in the field of healthcare, education, social security, culture, sports and the agro-industrial complex, civil servants of the administrations of akims of villages, towns, rural districts, who arrived to work and live in rural areas.

The project provides for the payment of a one-time lifting allowance in the amount of 100 MCI (345 thousand tenge) and a budget loan for the purchase or construction of housing in an amount not exceeding 1,500 MCI (5.2 million tenge).

According to the proposals of the population and participants of the project “With a diploma - to the village!” the ministry has worked to increase the size of the budget loan for the purchase of housing up to 2,500 MCI (8.6 million tenge) for district centers and up to 2,000 MCI (6.9 million tenge) for other rural settlements.

Over the entire period of the project (from 2009 to 2022), over 95 thousand specialists received a lifting allowance in the amount of 17 billion tenge, and over 45 thousand received budget loans for the purchase of housing in the amount of 143 billion tenge.

This year, 20 billion tenge is provided for 3.8 thousand specialists to provide budget loans for the purchase of housing.

In order to improve the socio-economic situation in single-industry towns, the Ministry, together with the akimats of Akmola, East Kazakhstan, Zhambyl, Karaganda and Kostanay regions, developed draft comprehensive plans for the socio-economic development of the cities of Altai, Arkalyk, Balkhash, Zhanatas, Zhitikara, Karatau, Lisakovsk, Ridder, Serebryansk and Stepnogorsk for 2023-2027.

During business trips to the regions, I often visit single-industry towns and see that there are not enough healthcare facilities, education, sports, and engineering infrastructure. We have specific plans for all these issues, which will be approved by the Government in the near future.

In addition, the ministry is implementing budget programs for the development of the engineering infrastructure of single-industry towns. So, in 2022, 26 billion tenge was allocated for the implementation of 54 projects for the construction and reconstruction of engineering networks and roads in 36 small and single-industry towns. In 2023, 35 billion tenge was allocated under the same programs for the implementation of 74 projects. According to new approaches, this amount will be increased to 50 billion tenge per year.

Along with this, in order to implement the task voiced by the Head of State in the Address to the people of Kazakhstan, the ministry is carrying out an administrative reform through the decentralization of powers.

At the first stage of the reform, part of the powers of the Government were transferred to the central state bodies, and the powers of the LEAs were partially expanded. They were given 21 implementation functions, 496 functions were redistributed between the levels of government.

– We remember that last winter many regions froze. Several thermal power plants were out of order. The current state of the housing and communal services infrastructure requires updating, there is an outflow of specialists. How are these problems solved?

“Now we are working hard in this direction. Thus, the ministry launched the Tariff for Investment program, according to which for 2023-2029 it is planned to attract about three trillion tenge of investments to modernize 62,000 kilometers of engineering networks. According to our calculations, this will reduce the wear and tear of networks by 20% by 2029.

For the current year, about 250 billion tenge of investments are being attracted to repair 5.8 thousand kilometers of engineering networks, which will reduce wear and tear by 3.2%.

As part of the new approaches, in the second quarter of this year, the ministry approved 212 applications for changing tariffs and investment programs with entry into force from July 1 of this year. As a result, utilities increased by an average of 10 to 30%, taking into account the balance of interests of consumers and enterprises. At the same time, vulnerable segments of the population are protected from rising tariffs through the implementation of the housing assistance mechanism. Speaking in detail, for example, the average check for a two-room apartment (60 square meters) will be about 3-4 thousand tenge.

It also allows raising the salaries of 200,000 workers in the housing and communal services sector from 135,000 to 200,000–300,000 tenge, which will reduce the outflow of personnel. Acceptance on balance and transfer to trust management and communal ownership of more than 25 thousand kilometers of ownerless networks will ensure the stability and quality of the services provided.

All these measures are aimed at modernizing networks, improving the quality of public services, reducing accidents, and a gradual transition to the careful consumption of resources.

In general, the tariff policy should have a positive impact on economic growth.

As for transparency and openness, consumers are necessarily involved in the process of tariff regulation by holding public hearings (offline and online format), meetings of regional commissions (with public participation), reporting by enterprises to consumers ... All events are covered by the mass media information. Each stage of regulation of the sphere of natural monopolies is digitized in the electronic database "Monopolist".

Every citizen can log into the system and view the documentation. Purchases of enterprises are also transferred to electronic format. The control of the intended use of consumer funds is ensured with the involvement of the public and technical experts.

In case of unreasonable overstatement of utility bills, funds will be returned to consumers through recalculation. If there is a suspicion of a possible withdrawal of capital abroad, the materials are transferred to law enforcement agencies.

A risk management system has been introduced, according to which state control and supervision are automated, inspections are scheduled without human intervention.

At the same time, in order to ensure transparency in the use of funds raised for their intended purpose within the framework of the Tariff for Investment program, the Ministry, together with local authorities, public figures and the media, held press tours of 87 utilities in August this year.

– One of the important factors of sustainable economic growth is the investment climate. Tell us more about it.

– I must say right away that a lot has been done in recent years. Systematic work is being carried out, investment support tools are being improved.

In June 2022, the Concept of Investment Policy until 2026 was adopted and is being implemented, aimed at creating a new investment cycle and revising the investment attraction policy taking into account new trends, including ESG standards.

There are exemptions from customs duties, various tax incentives, as well as in-kind grants. Under the Investment Agreement, stability of legislation is provided for 25 years for the implementation of investment projects worth at least 7.5 million MCI, or about $50 million. For each project, individual conditions will be provided and counter obligations for the investor will be established.

I will especially note the AIFC platform, where investors are provided with unprecedented conditions for doing business. These are tax holidays, flexible labor rules, operations in any currency are allowed. The procedures for opening and running a business have been simplified, most services are available online through the egov.kz website.

In order to increase business activity for investors, 76 countries have a visa-free regime. An accentuated work is being carried out with a nationwide pool of investment projects presented in non-primary sectors of the economy. A single pool of investment projects has been formed, which consists of 873 projects with the participation of more than 30 countries of the world for a total amount of 28.1 trillion tenge with the creation of over 138.4 thousand jobs, of which 281 objects are planned to be commissioned this year for a total amount of about 1 .97 trillion tenge with the creation of over 32 thousand jobs.

Work is underway to relocate to the Republic of Kazakhstan large industrial enterprises and international corporations that have announced the termination of their activities in the Russian Federation and Belarus. A list of more than 400 largest companies from 38 countries of the world has been formed. To date, there are concrete results for 70 companies.

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