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Development Bank of Kazakhstan updates strategy, seeks expansion of private investment


ASTANA – The Development Bank of Kazakhstan (DBK) announced Sept. 29 immediate changes to its development strategy for 2014-2023 which establish expanding private business projects and private funding sources among its key priorities along with expansion of its lending activities and development of new financial instruments, according to the bank’s press service.

Established in 2000 by the decree of Kazakh President Nursultan Nazarbayev, the DBK seeks to enhance state investment activities, support development of industrial infrastructure and manufacturing and attract foreign and domestic investments in the nation’s economy. At present, the bank’s loan portfolio includes 44 investment and 12 export operation projects.

The bank plays an important role in the nation’s economy with a total amount of investments reaching $6.9 billion as of 2016 and its strong emphasis on the regional development, where 99 percent of loan portfolio account for regional projects in the economy’s key sectors.

The changes in the bank’s development strategy are in line with Nazarbayev’s state-of-the-nation address this year that embarked the nation on the so-called third modernisation meant to enhance its global competitiveness, where the decrease of government share in the economy is one of the priorities.

The relevant changes were presented in June last year during an extended meeting of the bank’s Board of Directors and government officials, representatives of the National Bank and the National Chamber of Entrepreneurs, noted DBK Chair of the Board Bolat Zhamishev.

“Participants of the meeting approved all proposals, including increasing the share of private business funding. The implementation of the initiatives required amendments to the key documents regulating the DBK activities, including the bank’s ten-year development strategy,” added Zhamishev.

Apart from stepping up lending activities and developing new financial instruments, including a syndicated loan and project financing using public private partnerships, the updated document envisions no less than a 70 percent increase in the share of private business projects in the bank’s loan portfolio until 2023 that currently accounts for 57.4 percent.

Seeking to decrease the government share in the bank’s structure, the bank’s management agreed to expand the share of private funding sources from 58.9 percent in 2016 to at least 80 percent until 2023.

The annual volume of project and programme funding is set to increase from 426 billion tenge (US$1.23 billion) in 2016 up to 544 billion tenge (US$1.57 billion) in 2023.

Serving as the nation’s development institute, the DBK does not pursue profit maximisation as its main goal, but rather seeks to ensure a break-even of its activities. The change in the bank’s target profitability indicators from previous three percent to at least one percent is expected to allow accomplishing the objective.



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S&P expects Kazakhstan’s GDP to grow 3 percent in 2017-2020


ASTANA – Kazakhstan’s real GDP growth is projected to reach 3 percent in 2017-2020, according to the recent S&P Global Ratings report. The implementation of government infrastructure development programmes and expanding oil production at the Kashagan oilfield, one of the world’s largest fields discovered in the past 40 years, are cited as main drivers of the nation’s economic growth.

The real GDP per capita growth is estimated at 1.4 percent on average in the period of 2011 and 2020, which, according to experts, stands near a lower end of the range (1-4 percent) pertaining to countries with a similar level of development.

“The ratings of Kazakhstan remain constrained due to highly centralised decision making process which decreases predictability [of future policy responses],” the report reads.

The report also noted an increasingly effective monetary policy carried out in Kazakhstan underpinned by a declining dollarisation of the economy.

Yet, dollar denominated deposits accounted for 50.3 percent of the total volume of deposits in the economy in August, according to a Sept. 27 report published by the Kazakh National Bank, a 3.7 percent increase since July, in total making 8,886.2 billion tenge (US$25.75 billion).

The agency also assessed the Kazakh government’s debt servicing costs as worsening, though remaining at a modest level. “It remains modest, slightly over five percent of the budget revenues on average in 2017-2020. The government, however, still holds a strong position as a net creditor,” the agency stated emphasising the potential of a new tax code to allow increasing budget revenues by approximately three percent of the nation’s GDP, which demonstrates a significant fiscal flexibility of Kazakhstan unlike other economies with a similar level of development.

 

 

 

 



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Central Asia’s largest solar power plant to launch in Karaganda region


ASTANA – A solar power plant with a 100-megawatt capacity will open next year in Saran in the Karaganda region. The facility, with 370,000 next-generation solar panels situated on 160 hectares, will be the largest station in Central Asia.

Photo credit: Kazinform

The project is fully funded by foreign direct investments from the European Union and has the support of public and private investment structures from the Czech Republic, Germany and Slovakia.

“Seven projects in the green energy sector have been introduced in the region. All the innovative projects were presented at the Nur Alem national pavilion during EXPO 2017. Three of them have already been implemented to solve a number of issues,” said Karaganda region akimat (administration) press service head Aliya Syzdykova.

The projects involve a biogas plant launched in Dubovka village which uses organic waste technology to produce electricity, heat and organic fertilizers. Electricity generated from a small, 570-kilowatt hydropower plant operating at Intumak Reservoir is supplied to the Amangeldy village public networks through the Karaganda Zharyk power system. ABsalut Ecology, an innovative gas cleaning system, was also launched to address energy issues and purify industrial emissions.

“Two more projects are currently under implementation, including the solar power plant in Saran and the hydrodynamic fluid media heater. The heater was developed by specialists of Karaganda State Technical University. Several experimental installations were developed and produced. They showed that significant energy savings can be achieved during the pilot tests,” said industrial and innovative development department head Galymzhan Zhumasultanov

The projects using second generation biofuels and aluminium-fumed heaters are operating in test mode. The advanced biofuels were developed by specialists at Buketov Karaganda State University using perennial grasses as a raw material. Developers are now seeking investors ready to support the project and bring it to production. Designed for industrial and domestic buildings, the aluminium-fumed heaters have a high coefficient of efficiency.

Zhumasultanov noted universities and development institutes selected the most promising foreign developments among 35 presented at the expo. The projects involve recycling and processing solid domestic waste, energy saving and energy efficiency and alternative energy sources.

“Six companies, including the Kazakhmys Corporation, Kazakhmys Smelting, Eurasian Foods, Dala Mining, Kazgeology and GorKomTrans, expressed interest in launching technologies developed by foreign experts,” he added.

The projects are intended as part of the Business Road Map.

 



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Inflation to remain in 6.9-7.5% targeted corridor in 2017, says Kazakh NB governor


ASTANA – Kazakh National Bank Governor Daniyar Akishev said during an Oct. 3 government meeting that inflation is projected to remain in the targeted corridor of 6.9 percent to 7.5 percent until the end of the year.

 

Kazakh National Bank Governor Daniyar Akishev

Akishev noted inflation reached 4.2 percent in the first nine months of 2017 and that Kazakhstan seeks to slow down the growth of inflation at 4 percent by 2020.

“All these monetary policy measures, which are part of inflation targeting, are undertaken to accomplish these goals. National Bank base rate is held at 10.25 percent, which stimulates the flow of bank’s available resources to the real sector of the economy and at the same time ensures the stability at financial, but most importantly, currency market,” he noted.

Though the National Bank continues its policy of a floating exchange rate, which means the market is regulated by demand and supply forces, it still reserves the right to some market interventions to maintain stability at foreign exchange market.

In August and September, the bank had to undertake such measure and sell foreign currency, according to Akishev, seeking to stabilise the market amidst rising devaluation expectations.

Akishev also outlined certain risks that drive inflation rate growth, where the government’s increasingly strong fiscal policy is one of them.

“First, despite common consensus about the lack of money supply, fundamental inflation tension stems from the stimulating fiscal policy. In 2016, pensions and social benefits saw a 16 percent increase, salaries from the national budget grew 18 percent, with inflation rate at 8.5 percent,” he explained, referring to the example of Russia that did not adjust social benefits to inflation rate changes allowing for a faster achievement of mid-term inflation rate objectives.

Increasing number of loans also contributes to the rising inflation rate. “Since the beginning of this year, the volume of loans grew 11 percent or 270 billion tenge (US$788.4 million),” added Akishev.

Yet, he noted the influence of structural features of the economy on the nation’s progress in achieving its objective of a lower inflation rate. “This includes insufficient depth of durable goods market, weak competition, presence of trade margins and intermediaries,” he said, emphasising the need for a stronger coordination and interaction between all competent bodies.



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Kazakh car manufacturers ask officials to revise tariff policy with Uzbekistan


ASTANA – KazAvtoProm, the Kazakh Car Industry Union, released an open letter to Minister of National Economy Timur Suleimenov expressing concern about access of their products to the Uzbek market.

Photo credit: kapital.kz

“The draft resolution of the Uzbek President ‘On measures for streamlining of foreign economic activity of Uzbekistan’ adopted Sept. 19 raises concerns about the prospects for Kazakh products’ access to the Uzbek market. The document includes the prohibitive excise tax on automotive equipment from Kazakhstan in the amount of $2.40 per cubic centimetre. At the same time in terms of car import, cars from Russia and Ukraine, a symbolic excise rate of 2 percent of the customs value is provided. In other words, the Uzbek market will remain closed for Kazakhstan automakers and their products will be under price discrimination,” read the letter.

The correspondence added “the unequal position of Kazakhstan and Uzbekistan in the supply of automotive equipment has been preserved for almost a decade and a half.” Since 1996, the Uzbek automobile industry has exported more than 85,000 cars valued at $720 million to the Kazakh market. The products are not subject to customs duties and excises when crossing the border into Kazakhstan. The Kazakh automotive equipment industry is unable to supply the Uzbek market, however, as access is blocked by strict customs tariffs barriers.

“This situation cannot be characterised as the relations of equal foreign trade partners. It’s time to move from a zero-sum game to a dialogue based on respect for mutual interests and the negotiations held as part of the recent interstate forum created the necessary prerequisites for such changes,” according to the letter.

The union asked the ministry to find negotiating opportunities for revising the Uzbek tariff policy in relation to Kazakh car industry products and assist in organising its access to the Uzbek market in accordance with the principles of free competition.

KazAvtoProm seeks to consider “the possibility of introducing symmetric measures of market protection of the Kazakhstan automobile market in terms of excise duty – both for cars and car equipment supplied by Uzbek enterprises to the local market,” noted the correspondence, in case the negotiation process does not lead to the expected result.

 



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KIOGE 2017, 25th anniversary oil and gas exhibition and conference – to be held in Almaty Oct. 4-6


For a quarter of a century the Kazakhstan International Exhibition and Conference KIOGE has been annually gathering representatives of the world oil and gas market in Almaty.

This year the 25th Anniversary Oil and Gas Exhibition and Conference KIOGE 2017 will be held on Oct. 4-6. It will bring together more than 250 companies from 25 countries. It is considered to be a unique event in the oil and gas industry.

A rich programme of seminars is planned for the participants of the exhibition. Seminars are devoted to the issues of human resources, secrets of working with large operators such as  TCO, KPO, NCOC as well as technical aspects related to safety at work and assessing the condition of the facilities. Key players in Kazakhstan’s oil industry will be holding workshops as well.

Tengizchevroil (TCO) will provide participants with an overview of the pre-qualification process at the Future Growth Project – Wellhead Pressure Management Project (FGP-WPMP). It is known that this year the company has allocated $5 billion for this project at the Tengiz field.

The operator of the North Caspian Project NCOC will dedicate its seminar to the compliance with the norms of Kazakhstan content. The North Caspian project has a significant impact on the economy of the country. The total amount of payments for local goods, works and services, amounted to more than $13.3 billion since 2004.

This year the KIOGE conference covers a number of important topics, primarily related to the activities of companies against the backdrop of low oil prices, attracting investment and improving the efficiency of oil production.

KIOGE 2017 key speakers will be First Vice Minister of Energy of Kazakhstan Makhambet Dosmukhambetov, Deputy General Director of Tengizchevroil Murat Mukashev, Deputy Managing Director of NCOC Zhakyp Marabayev, EBRD Director for Kazakhstan Agris Preimanis, General Director of PSA LLP Murat Zhurebekov,  Chairman of the Presidium of the KazService Union Rashid Zhaksylykov and representatives of KazMunayGas, General Director of Caspian Pipeline Consortium Nikolay Gorban, Chairman of the Board of EmbaMunaiGas Anuar Zhaksybekov and many others.

The conference will discuss the development of innovative technologies in the sphere of transportation and storage of hydrocarbons. This topic is especially relevant for Kazakhstan, as it is an integral part of the global hydrocarbon supply community. Major projects of the country, connected with hydrocarbons transportation via oil pipelines, railways or sea, provide Kazakhstan with a reliable place in the East-West supply chain.

The conference programme includes a special session dedicated to the anniversary of KIOGE – “National treasure. Faces of oil and gas industry of Kazakhstan.” This session will serve as a platform for meeting with the legends of the industry, who will tell how the oil and gas industry of independent Kazakhstan was created in an open dialogue format.

Organisers of KIOGE 2017 are Kazakhstan exhibition company Iteca and its international partner ITE Group of companies from Great Britain.

Sponsors of the event are HMS Group, DOW, Caspian Pipeline Consortium, KPO, NCOC, SIMONE, Tengizchevroil and EmbaMunaiGas JSC, ILF Consulting Engineers, Dahua Technologies Kazakhstan LLP.

More details at www.kioge.kz

 



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Kazakh government to change approach to labour migration and repatriation


ASTANA – The Ministry of Labour and Social Protection revised its approaches to migration and the issuance of permits for foreign labour. The new policy lightens repatriation of ethnic Kazakhs and makes getting work permits easier for highly skilled foreign specialists.

Minister of Labour and Social Protection Tamara Duissenova

“It is proposed to use three types of work permits for foreign immigrants,” said Minister of Labour and Social Protection Tamara Duissenova as she presented the draft of the new migration policy for 2017-2021 at a government meeting on Sept. 19.

“The first type of permit is used for low-skilled workers and gives them an opportunity to work up to one year, to limit their inflow. It applies to seasonal foreign workers and labour immigrants working for individuals, with an age restriction [not younger than 18 years] and with the preservation of the payment of the fee,” she explained.

The second type of permit is given to qualified foreign workers for up to three years. This permit is intended for highly skilled foreign personnel participating in the implementation of projects that are of high priority for the country. Duissenova noted that it will be easier to prolong the second type of the permit annually than to reapply every year.

The third type of permit will be issued to qualified foreign specialists for professional activities for the implementation of long-term projects.

“This is a system of references, which was introduced this year. It is proposed to extend the validity period of special certificates from three months to three years,” she said.

These measures will be accompanied by the implementation of a nationwide professional development programme to replace foreign specialists with national personnel in the future. The minister gave an example: since the beginning of the year, the Astana city administration has issued more than 19,000 paid permits worth 6.5 billion tenge (US$19.2 million). That money can eventually be used to train local staff, she said.

The government is going to continue its policy of resettling citizens from the south to the north of the country, and retain the accompanying subsidies.

“These measures should increase the territorial mobility of labour resources, the rational resettlement of citizens in accordance with the needs of the economy,” Duissenova said.

One of the main directions of the new migration policy is ethnic migration. A number of problems impeding the return of ethnic Kazakhs were solved last year. Thanks to this, 16,500 ethnic Kazakhs returned to Kazakhstan in 2016, eight times more than in the previous year.

The ministry is now proposing that the issue of resettling ethnic Kazakhs be reconsidered, including methods to strengthen ties with ethnic Kazakhs living abroad who don’t return to Kazakhstan. This will be handled using cultural centres and embassies. The government also plans to target Kazakh qualified experts living abroad and create a separate electronic database of people who have achieved good results.

Ethnic Kazakhs living abroad will have a temporary opportunity to come to Kazakhstan and work through a process the ministry says will be easy. Assistance in adapting will be provided at special service centres.



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ADB and WB to establish infrastructure fund in Kazakhstan


ASTANA – The Asian Development Bank (ADB) and the World Bank have proposed establishing a municipal infrastructure fund in Kazakhstan. ADB intends to facilitate financing small utility companies in the state, said bank representation director Giovanni Capannelli at a Central Communications Service briefing.

“We, together with the World Bank, propose to create a municipal infrastructure fund. Until now, our main problem was the creditworthiness of small-scale utilities at the level of cities and settlements to obtain our financing, our investments. Other international financial institutions provided certain types of financing to utilities in the region, but interest rates were quite high and this creates problems on the way forward in terms of fiscal sustainability. Therefore, now we are discussing the creation of a municipal infrastructure fund in the government, because that’s how we can alleviate certain conditions, especially in the financial part,” he said.

He added ADB is interested in determining a way to grant financing in tenge, which is important since purchases are made in local currency. In February, a $20 million repurchase (repo) agreement was signed with Kazakhstan’s National Bank to be used for projects in the near future. Issuing bonds in tenge will also be discussed.

Capannelli added ADB plans to provide financing for sovereign (governmental or state-guaranteed) and long-term projects for up to 25 years at the Libor rate +50 base points, with LIBOR being around 1.4-percent. The bank will be creating a special mechanism to finance in tenge, where sovereign conditions will be combined with non-sovereign ones and the government can only be asked to give support to a certain share of the project. Instead of the 14-15 percent rate, as in the market, the bank will be able to provide a special rate for concessional financing. Detailed conditions will be arranged for each specific project.

ADB, established in the early 1960s, was created to boost economic growth and cooperation in developing countries. The bank assists its members and partners, providing loans and technical assistance, grants and equity investments to promote social and economic development. ADB is composed of 67 members, 48 of which are from the Asia and Pacific region.



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AIFC governor talks blockchain development, mid-shore concept and head hunting


ASTANA – December will be a fascinating month for Kazakhstan’s financial sector, as the long discussed and awaited Astana International Financial Centre (AIFC) will be officially presented. AIFC Governor Kairat Kelimbetov talked about some of the nuances of the project during a Sept. 20 press conference.

The centre will be located within a portion of the EXPO 2017 pavilions, as the grounds are suitable for developing the trending blockchain and cryptocurrency technologies, he said.

“We assume that the territory of the expo will become a kind of crypto valley or crypto harbour. The whole world is very interested in this. Some central banks are supporting this direction, others are looking [at them] closely. The United States and Singapore want to equate the activities of crypto-economic with ordinary activities in the financial sphere. In Switzerland, this direction is strongly encouraged and Japan supports some cryptocurrencies as a means of payment. We want to say that in this direction AIFC will be on the ‘edge’ concerning understanding the processes that are taking place. But on the other hand, we are responsible for issues of financial stability and regulation of certain financial institutions,” he added.

Earlier this month, AIFC signed a memorandum of cooperation with Microsoft to create the Blockchain Innovation Centre, which will create an effective platform to initiate and develop start-up projects.

Kelimbetov also spoke about the Astana International Exchange (AIX). High-tech infrastructure for the exchange, which promises to adhere to the best world standards, will be installed in the centre. AIX is expected to become the main platform to privatise the companies of Samruk Kazyna Sovereign Wealth Fund.

He also addressed the issue of the capital becoming another offshore by saying that AIFC prefers the term ‘mid-shore.’

“Some expert circles have a negative connotation of that word [offshore], but there are different types of offshores. The London network was the first world offshore. That is, this is the direction where international sites as a whole interact with each other. We like the concept of ‘mid-shore’ more. We will join all initiatives. Kazakhstan supports the Financial Action Task Force on combating money laundering and combating terrorism. We will stick to the position of Singapore, which says that a very strict regulatory regime is better than some offshore schemes that quickly appear and quickly disappear,” said Kelimbetov.

The infrastructure is important, but the professionals working at AIFC play an even bigger role, especially when talking about English common law, which has never before been introduced in Kazakhstan. Kelimbetov said that the financial centre will be focused on hiring local people, such as graduates of the Bolashak Programme who studied at the world’s leading universities, the country’s IT and financial universities and Nazarbayev University.

“Therefore, even in the direction of the judicial corps, we signed a special memorandum with the Supreme Court. [Members of] the Prosecutor General’s Office of Kazakhstan are taking a relevant internship in London and the U.S. under the Bolashak Programme in order to understand how English common law will come into contact with ordinary Kazakh law. We agreed that the Supreme Court will support the activities of our court and ensure the execution of those decisions, which our court will accept. In those areas where we do not currently have world-class specialists, we will attract them. In those areas where there is an opportunity to pull up local personnel, as well as regional ones in a broad sense, we will stick to this direction,” he stressed.

One of the financial hub’s priorities will be developing capital markets, said Kelimbetov.

“You know that our financial sector is more focused on the work of banking institutions and traditional instruments of interaction with the public such as deposits and lending. We are now working on the creation of a non-banking financial community. We believe that the capital markets will significantly improve the situation in the financial sector of Kazakhstan, on the one hand, and on the other will create a regional platform for the development of stock markets in our region,” he said.

Another priority will be managing private and public assets and individual funds and wealth management, often called private banking. AIFC is also focused on developing Islamic finance and Kazakhstan has hosted several conferences on the topic this year.

Financial technologies will also be important for AIFC.

“You know that the head of state recently held a meeting on the Digital Kazakhstan programme. This is a serious and important programme of the government for the coming period. At this meeting, he has instructed making AIFC a leading expert centre in the development of new financial technologies. We are in close contact with all the world’s leading players in this field. In the near future, we plan to join a consortium of international hi-tech hubs which include leading global banks which are currently searching for appropriate solutions, including national and regional cryptocurrencies and in the field of blockchain technologies,” he added.



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Government should control bitcoin operations, says Mazhilis deputy


ASTANA – Kazakhstan Mazhilis (lower house) deputy Amanzhan Zhamalov suggested placing bitcoin operations under the government control during a Sept. 13 Mazhilis plenary session.

Photo credit: kazpravda.kz.

Referring to the rapid development and spread of bitcoin operations worldwide, Zhamalov asserted Kazakhstan should keep the operation under control to determine the trends in the emerging market.

“The crypto currency is gaining ground around the world, including Kazakhstan. The head of state suggested introducing international currency unit, including cryptocurrency, during the Astana Economic Forum. The Astana International Financial Centre announced the establishment of a working group together with Deloitte CIS, Juscutum and other firms to develop the system in the Commonwealth of Independent States (CIS). The National Bank declared the development of a new mobile app that allows conducting block chain operations,” said Zhamalov as he addressed the deputies.

Lack of control over these operations rules out the possibility to determine the cryptocurrency trends – who buys it and in what amounts.

“I believe it is high time to consider setting up a competent body responsible for coordinating all agencies dealing with block chain and cryptocurrency and an interagency commission involving deputies and the public to discuss the relevant legislative framework,” noted Zhamalov.

Only investors should be allowed to access cryptocurrency, added the deputy, explaining the risks of involving people and business community.

“The cryptocurrency itself does not have any material value and is not subject to the control of any regulator. It constitutes a highly risky financial asset. For example, in the beginning of 2017, the bitcoin rate made $1,000, and now it is already $5,000. The rate dropped by $400 since June 13 and rose $120 the next day. So, the rate is determined in a speculative framework. People who buy it to get money fast, take big risks and they could not rely on protection in case of losing the money because the legislation does not envision this,” noted Zhamalov.



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