1360 projects in 24 sectors of the processing industry launched for years of Kazakhstan industrialization | FinReview
13 December 2019

1360 projects in 24 sectors of the processing industry launched for years of Kazakhstan industrialization

The industrialization program allowed domestic enterprises to achieve competitiveness in the export of about 50 new products. The expansion of the manufacturing industry in the country made it possible to create about 137.1 thousand new jobs. And the production of highly profitable goods attracted the attention of foreign investors, whose investment volume reached 34.2 billion US dollars.

The economy of Kazakhstan over the past twenty years has developed under the pressure of external factors and global turbulence. The effects of the financial and global crises had a particularly acute impact on the country’s economic growth. So, in the early 2000s, rising prices on world markets for the main goods of Kazakhstan’s exports – oil, metals and Kazakh grain – accelerated the pace of economic development by an average of 10%.

In 2003, Kazakhstan began the path to a new industrialization of the economy. This stage was reinforced by the adoption of the Strategy for Industrial and Innovative Development of Kazakhstan until 2015, aimed at stimulating the growth of manufacturing in GDP, changing the structure of the economy and industrial production and developing the export of goods and services with high added value.

However, the economic crisis that began in 2008 slowed Kazakhstan’s GDP growth to 3.3%. In response to difficult economic conditions, in 2010, the Government of Kazakhstan adopted the State program for accelerated industrial and innovative development.

Moreover, in the framework of industrialization, the basic conditions for strong industrial entrepreneurship were formed. So, to start the process of diversification of the economy, changes were made to more than 50 laws and new ones were adopted, such as:

  • Law “On State Support of Industrial and Innovative Activities”;
  • Law “On Energy Saving and Energy Efficiency”;
  • Entrepreneurial code;
  • Law on Public Procurement;
  • Law “On Special Economic and Industrial Zones”;
  • Law “On Customs Regulation”.

Over the nine years of the implementation of the state program of industrialization in Kazakhstan, 1,250 projects have been launched, the total cost of which, taking into account private investments and accumulated capacities, is about 7.9 trillion tenge. About 128 thousand jobs were created at these enterprises.

Moreover, if 770 projects were implemented during the first five-year period of industrialization, then according to the results of four years the second – 480. And in 2019, as of November 1, an additional 111 projects were launched worth 423.1 billion tenge, including a ferrosilicon plant in the Karaganda region at the amount of 32.1 billion tenge, a plant for the production of power transformers in the city of Shymkent for 18.9 billion tenge and a solar power station in the East Kazakhstan region for 10.6 billion tenge. This year, projects have already ensured the creation of 9,086 new jobs.

Sectorally, the largest number of projects has been implemented in the agricultural sector and agricultural processing, construction industry and mechanical engineering.

Within the framework of the state program, the implemented projects represent not only the launch of a new production, but also the expansion of the existing one. For example, in 2017, at the Sokolovsko-Sarbaisky mining and processing production association in the Kostanai region, a draft dispatching system was introduced, which allowed to increase the productivity of transport equipment by 10%.

In general, the implementation of industrial projects has significantly changed the Kazakhstan structure of the manufacturing industry, which, in addition to the traditionally strong metallurgy and food industries, has replenished with 24 new manufacturing sectors, including the aerospace industry, railway engineering, the automotive industry, the production of communication equipment, electronic parts, fiber optic cable , major pharmaceutical products, etc.

To bring new industries to the industrial activity zone, the Government has implemented a number of measures related primarily to the elimination of obstacles that prevent them from reaching optimal production capacity. In this regard, the country is working to increase investment flows. So, for the period from 2010 to 2018, investments in fixed assets of the manufacturing industry grew almost 3 times from 413.1 billion tenge to 1.2 trillion tenge.

The volume of foreign direct investment during the implementation of the state program as of the first half of 2019 reached $ 34.2 billion. The share of manufacturing industries in the gross inflow of foreign investment was 15.7%.

At the same time, in the framework of industrialization in Kazakhstan, 12 special economic zones and 23 industrial zones have been created. Thanks to the packages of preferences and benefits, their functioning had a positive effect on the development of the national economy. As of the end of May 2019, more than 350 projects were implemented on the basis of SEZ and IZ, which attracted 1.1 trillion tenge of investments, provided 184 billion tenge of tax revenues, and created about 24 thousand new jobs.

An important role in the development of the manufacturing industry was facilitated by positive advances in the country’s integration policy. Thus, the participation of Kazakhstan in the EAEU and the WTO allowed not only to strengthen the country’s position at the global level, but also to develop export supplies. As a result, the export volume increased by 111.9% with a 1.4-fold increase in output.

As a result, domestic enterprises have achieved competitiveness in the export of about 50 new products, such as oil bitumen, gold powder, sugar confectionery, chocolate, Portland cement, pasta, phosphoric acid and polyphosphoric acids, etc.

Labor productivity in the manufacturing industry grew 1.3 times. Growth was achieved in 8 of the 14 priority sectors of industrialization, including: in mining engineering by 35.5%; in electrical engineering by 30.1%; in petrochemical chemistry 25.3%; in oil refining by 22.6%; in the automotive industry by 14.3%; in oil and gas engineering by 16.3%; in railway engineering by 15.9%; in non-ferrous metallurgy by 3.6%.

As a result, the state program of industrialization, focusing specifically on the manufacturing industry, as the sector most resistant to foreign economic influences, allowed for the first time in the history of independent Kazakhstan to get ahead of the pace of development of the mining sector. That is, over nine years, the share of the mining industry in GDP decreased from 19.5% to 14.9%, while the manufacturing sector, by contrast, increased by 1.6 percentage points, reaching 11.6%. In nominal terms, the GVA of the manufacturing sector amounted to 7 trillion tenge.

In general, the development of the manufacturing industry is characterized by positive stability, but the growth rate remains low due to the implementation of the program in the context of certain economic events, including the instability of the national currency and the worsening economic situation in the trading partner countries.

At the same time, about 4.2 trillion tenge was allocated for the first five-year plan of the SPFIID. More than 85% (3 571.3 billion tenge) of these funds were used to create infrastructure: 4 thousand km of roads (“Western Europe – Western China”, 2 transit corridors Center-South and Center-East), about 1,700 were built km of railways (Uzen – the state border with Turkmenistan, Zhetygen-Korgas, Beineu-Zhezkazgan, Arkalyk-Shubarkul).

624.1 billion tenge was allocated directly for industrialization, which is 14.8% of the total budget. About 811.3 billion tenge are provided for the implementation of the SPIIID.

That is, it is obvious that industrialization itself was underfunded, although the necessary infrastructure was created for logistics, as well as in cities. In addition, part of the funds went to support entrepreneurship through the Business Roadmap, over four years of which 13 thousand small and medium-sized businesses were funded, and 10 thousand jobs were created.

The industrialization process is long-term and requires constructive approaches. Currently, Kazakhstan has created the necessary conditions for industrial development, but the country needs to stimulate the business environment. In this regard, the goal of industrialization in the framework of the third stage of the SPIID for 2020-2025 will be to create conditions for stimulating the competitiveness of manufacturing in the domestic and foreign markets, taking into account obligations in the framework of membership in international economic organizations.