Kazakh government to change method of assigning basic pensions

ASTANA – Beginning July 1, the Kazakh government will change the method of assigning basic pension payments. The figure will depend on the duration of the individual’s participation in the pension system, reported the Government for Citizens press service.

The base pension will be appointed only if a citizen reaches the general established retirement age. The changes will affect newly emerging and established pensioners whose payment will be recalculated from the base pension.

The basic pension payment is currently 15,274 tenge (US$44.75), which is 54 percent of the subsistence minimum. The amount is the same for all pensioners, regardless of income and seniority.

Under the change, the basic pension payment will be recalculated depending on the number of years a person has participated in the pension system. The new number will include solidarity experience before July 1, 1998 and accumulated experience after this date.

If a citizen worked and made deductions to a single accumulative pension fund for 10 years or less (or did not work at all), the basic pension is set at 54 percent of the subsistence minimum. For each working year, the basic payment increases by 2 percent over 10 years. For example, with 20 years of employment experience, the size of the basic pension payment will reach 74 percent of the subsistence minimum; 30 years – 94 percent. If a pensioner worked 33 years or more, the size of the basic pension will be 100 percent of the subsistence minimum, or 28,284 tenge (US$82.90).

Years of pensionable service will include work years before January 1, 1998, including time periods during which mandatory pension contributions were paid; while caring for children under 3 years old or those who are disabled (childhood to 16 years) or living with a spouse who is a military servant, special agency employee or diplomatic worker.

The recalculation of the basic pension payment will be made automatically to all recipients. Citizens will not need to go anywhere and provide additional documents and statements.

The single pension system was destroyed with the collapse of the Soviet Union. Kazakhstan was the first of the Commonwealth of Independent States to implement pension reform in 1998. The state used the Chilean pension system as a prototype for its system.

Since January 1, 1998, all working citizens have been required to deduct 10 percent of their accumulative pension fund income for individual pension accounts. Grigoriy Marchenko and Daulet Sembayev, the chairmen of the National Bank in the 1990s and 2000s, developed the pension reform.



AIX appoints Chief Executive Officer, prepares for launch

ASTANA – The Astana International Exchange (AIX) administration has appointed Timothy Bennett to the position of Chief Executive Officer. Arman Tastanbekov was named Chief Legal Officer and a member of the management committee and Jean-Philippe Louvancour will serve as head of regulation and compliance.

Tim Bennett.

Bennett was most recently the CEO of NZX, which operates New Zealand’s securities and derivatives markets and provides trade, post-trade and data services. He led NZX through a period of significant organisational and regulatory change, including replacing and upgrading its trading and clearing systems and launching 23 ETFs (exchange-traded funds) through NZX Funds Management.

During his time with NZX, the New Zealand government privatised some state-owned businesses, driven in part by the desire to develop the country’s capital markets as a key driver of economic growth. Experts believe such experience will be valuable as Kazakhstan embarks on a similar privatisation programme.

Before joining NZX, Bennett was a partner at Oliver Wyman and the Boston Consulting Group in Asia. His consulting experience includes strategy and capital market development for governments and exchanges in Asia and the Middle East and developing commodity derivatives markets, most notably iron ore.

“I am excited by the prospect of supporting the development of Kazakhstan’s capital markets through the launch of the AIX and the Astana International Financial Centre (AIFC) more broadly. The AIX will be developed, managed and regulated to international standards to ensure we build both domestic and global investor confidence,” he said.

“AIX has undertaken a thorough global search and selection process and is very pleased to have attracted a someone with Bennett’s deep global experience exchange and capital markets experience to lead AIX,” said AIX Chairperson and AIFC CEO Nurlan Kussainov.

Tastanbekov has broad experience as an international legal advisor, having worked for more than 17 years as an associate and partner for prominent international law firms and country-lead counsel for a FTSE 100 company.

“I’m honoured and excited to be chosen for this challenging role. I look forward to working closely with the AIX, AIFC and other stakeholders to help the AIX become a market of choice for Kazakhstan and international issuers,” he said.

Louvancour has a broad international career at financial institutions including NYSE, Euronext, Societe Generale and Kleinwort Hambros. In his hew post, he will be responsible for regulating AIX’s markets, issuers and trading members under the self-regulatory model approved by the Astana Financial Services Authority.

“I’m delighted to have been asked to lead regulation and compliance at the AIX. My first priority will be to use my skills and experience to support the successful listing of companies and on-boarding of trading firms on the AIX market. My long-term objectives are to ensure AIX becomes a place of choice for worldwide investors and the reference venue for investing in the Central Asian region,” he said.

The decision to create AIX was made during the October meeting of the AIFC Board of Directors. The exchange’s main strategic partners are the Shanghai Stock Exchange and NASDAQ, which provided a technical platform. AIX aims to enable domestic and regional development through mobilising domestic resources and foreign portfolio flows.





Kazakh-owned bakery brings new flavour to sourdough bread in Newcastle

ASTANA – What are the benefits and challenges of running your own business? How do you find the way to your customers’ hearts?

The Astana Times interviewed Shynara Bakisheva, owner of Fresh Artisan Bread (FAB) Bakery, to learn about her company and the perfect dough recipe.

Photo credit: FAB Bakery.

Started in early 2017 in Newcastle, England, FAB Bakery produces a large variety of sourdoughs and other breads whenever possible using organic and locally produced ingredients. Before opening the business, Karaganda-born Bakisheva participated in a 10-month artisan-baking course in 2014 at the School of Artisan Food in Welbeck, Nottinghamshire. She also worked for Fenwick in Newcastle and the Vallum Farm food hub in the Tyne Valley.

“We try to support local businesses. If a new company, café or restaurant opens, they give priority to local traders and local producers to keep the money within the area. Whatever a customer spends, they pack straight into the area, so everybody benefits from it,” she said.

Bakery products such as bloomers, rolls, continental focaccia, ciabatta, panmarino and baguettes are delivered daily to 20 locations.

“I literally found a fantastic little place called Kiln. I gave them my samples and they loved it and they became my customer for ever. They were in a new business, I was a new business and we decided to support each other. I have done supplies now for over a year and we are both happy. They recommended me to other restaurants and cafés,” said Bakisheva.

“I have been telling all my friends and other people I know about this wonderful place that is not only a restaurant, but they also produce pottery on the same site and they supply different restaurants as well with their products. Kind of organically, our relationship grew from there. They are quite dear to my home because they were the first customers,” she added.

Photo credit: FAB Bakery.

Photo credit: FAB Bakery.

Her list of clients now includes the House of Tides, Newcastle’s only one-star Michelin and 4 AA Rosette awarded restaurant, The French Quarter restaurant and wine bar and Harrisa Mediterranean Kitchen.

“My husband helps me a lot, although he’s got a full-time job. He is an architect in a local practice. I do have just one employee. My business is still quite small. I have only one van, bakery and a driver. He is a trustworthy local man,” she said.

Bakisheva mostly bakes using sourdough with additional ingredients including rosemary, seeds, wild garlic, onion, tomato and sweet potato.

“My breads only use three main ingredients – flour, water and salt – and have a lovely tangy flavour,” she said.

Photo credit: FAB Bakery.

Photo credit: FAB Bakery.

Bakisheva plans to grow her business organically and slowly, as quality is paramount. At present, they currently produce approximately 200 loaves a day.

“I just aim to make a little bit more profit the next month and so on; for example, one month to make 1,000 pounds and next month, I would like to make 1,100 pounds. This is how I plan to grow. I do not want to grow too fast or too soon, because I think that is a recipe for disaster and error. I would like to just have retail, because now I’m a wholesale bakery and I would like to also offer my products to people. To have a retail outlet where you can come in, grab some coffee, a loaf of bread, have chitchat and go home happy,” she said.

She feels that the advantages and disadvantages of being an entrepreneur go hand in hand.

“Being your own boss is great. At the same time, no one else is going to take responsibility. If anything goes wrong, you did it yourself, but as long as you like what you’re doing, I think it is the main and important thing,” she said.

Customer feedback is a good way to distinguish quality products.

“Shynara supplies my cafe The Wild Trapeze with all of our bread and I honestly wouldn’t and couldn’t use any other baker. It feels like we have our bread delivered by a member of the family! A truly lovely person and of course and importantly… the bread is the best around and I can’t stop eating it myself. Keep it coming,” Anthony Blevins, one of her customers, wrote on Facebook.




Kazakh National Bank approves Qazkom voluntary reorganisation

ASTANA – Kazakh National Bank approved June 14 the voluntary reorganisation of Qazkom, formerly known as Kazkommertsbank, through its accession to Halyk Bank.

The permit issued by the country’s financial regulator also envisions the purchase of Qazkom subsidiaries by Halyk Bank, owned by Kazakh businessman Timur Kulibayev and Dinara Nazarbayeva.

“Halyk Bank was granted a permit to purchase subsidiaries of Qazkom. These include Kazkommerts-Life, Kazkommerts-Polis insurance company, Kazkommerts Securities,” said the national bank statement.

Halyk Bank bought 98.61 percent of Qazkom common shares in July 2017. The same month it recapitalised Qazkom by 185 billion tenge (US$549.2 million).

Synchronisation of the banking procedures and processes and integration of IT systems and banking infrastructure is underway.

The integration of the two banks, the largest such deal in the history of Kazakh banking system, is expected to finish in the second half of this year, according to Halyk Bank CEO Umut Shayakhmetova. The new bank will hold roughly 40 percent of the Kazakh financial assets.

“We receive many questions whether Qazkom brand will remain after the merger of Halyk Bank and Qazkom. I would like to note that the main brand will be that of Halyk Bank. Yet, we reserve the right to Qazkom trade mark. There will be a transition period during the acquisition process. But our clients will not be affected by his process. The system, however, will be uniform and will be served by Halyk Bank,” said Shayakhmetova in May.

The recent Qazkom shareholders meeting decided to voluntarily submit an application to the National Bank for termination of the Qazkom banking license during 30 days following the signing of the transfer act.

Shayakhmetova noted it was an “an expected stage in the history of integration of two banks.”“We recognise the full responsibility of this moment, therefore, we are making every effort for Qazkom clients to feel positive changes. Over last months, the teams of two banks have been undertaking practical work to consolidate banking operations into Halyk Bank, which will take over all assets and obligations of Qazkom. Qazkom will no longer need a banking license when its client accounts will be transferred to the integrated bank, therefore the decision was made to return it. This legal procedure will be completed once the assets will be merged. Until that moment, Qazkom will continue its work,” said Shayakhmetova.







Chinese company to invest $1.1 billion in Kostanai car assembly plant

ASTANA – China National Machinery Import and Export will invest $1.1 billion to develop an automotive cluster in cooperation with the Kostanai-based Allure Group Company. The agreement was inked at the Kazakh-Chinese Business Council in Beijing in early June, during the visit of Kazakh President Nursultan Nazabayev to the city.

New investment in Kostanai includes 21 projects for a total of 146.1 billion tenge (US$426 million) with over 80 percent of foreign investments.

Kazakh Invest Board Chair Saparbek Tuyakbayev and Kostanai Region Akim (Governor) Arkhimed Mukhambetov signed a memorandum on cooperation to improve the investment attractiveness of the region June 14.

According to the memorandum, regional authorities will develop a list of appropriate projects, taking into account raw material availability, land resources, infrastructure provisions and other factors. The parties also agreed to review investors’ appeals promptly using a single window principle and to conduct joint monitoring of project implementation through the Investors Relationship Management (IRM) system developed by Kazakh Invest.

“We are cooperating with Kazakh Invest to implement major anchor projects in the region. The industrial zone on an area of 400 hectares is currently being constructed,” said Mukhambetov.

The region has introduced an interactive map (map.investinkostanay.kz) showing investment project sites, infrastructure facilities and natural resources. The document is available in Kazakh, Russian and English.

An investors’ council to support and resolve administrative barriers and issues potential investors may encounter has also been launched in the region.

“Favourable conditions are created for investors and Kazakh Invest provides support on all issues. We have plans to conduct negotiations with certain foreign investors on regional projects. Kazakh Invest held negotiations with the largest companies from the 11 countries to receive invest from. More than 60 new investors were identified and now we work with regional administrations to manage the projects,” said Tuyakbayev.

The region is looking ahead to the launch of major investment projects. The Kazmeal company will open an agricultural hub with Chinese investors for deep processing of grain and oilseeds at a total cost of 81.4 billion tenge (US$237 million). Its designed capacity for processing is 600,000 tonnes of wheat, including 100,000 tonnes of flour; 100,000 tonnes of gluten; 350,000 tonnes of noodles; 120,000 tonnes of oil crops; and up to 1 million tonnes of mixed feed.

The Allure Group company, China National Machinery Import and Export, and Baiterek Holding concluded an agreement to produce buses, large road vehicles and electric vehicles through a total investment of about $1.1 billion.

Photo credit: Allurgroup.kz.

Photo credit: Allurgroup.kz.

Agromash Holding will cooperate with YTO Group, the largest manufacturer of tractors, to produce tractors in Kazakhstan. A roadmap for implementing that project is being prepared.

Overall, 40 Kazakh-Chinese agreements worth about $13 billion were signed June 9 as part of the business council meeting. Kazakh Invest initiated 15 projects. New high-tech production in engineering, biotechnology and other sectors will be launched. Solar stations totalling $300 million will be constructed in collaboration with French company ECM Technologies and Chinese company CEEC-NWPC International.





Investigation finds health violations among EAEU dairy providers

ASTANA – A recent investigation by the Kazakh Ministry of Healthcare found 17 dairy producers from Russia, Belarus and Kyrgyzstan had violated Eurasian Economic Union (EAEU) standards.

Chairman of Public Health Committee of Ministry of Health Zhandarbek Bekshin reported on the violations in the products of Russian Danone, which supplies the Kazakh market, at a press conference in Central Communications Service.

“This year, we examined the dairy products, even the products of the Shadrinskiy canning and dairy plant, and it turned out that it is part of Danone corporation. We found that this product contains vegetable fats, which are used in its production process,” he said.

He also noted that Kazakhstan has informed the Russian manufacturer that according to the rules of the EAEU all violations of the unified standards should be eliminated.

Bekshin said many Danone products are imported into Kazakhstan, and in the light of the latest scandal, when Russia’s Rosselkhoznadzor discovered antibiotics in the dry milk of this company, the health ministry began to thoroughly check the imported dairy products.

Earlier, Rosselkhoznadzor found tetracycline group antibiotics in Danone products. After their discovery, Rosselkhoznadzor conducted an unscheduled inspection of the plant and found that it had taken raw milk without veterinary accompanying documents, didn’t return milk with residual amounts of medicines and produced dairy in a room that didn’t meet sanitary standards. The company was fined.

In 1992, Danone became one of the first Western companies to enter the Russian market. At the end of 2010, Danone merged its dairy business with Russian Unimilk. The latter united about 30 milk processing plants and baby food plants. After the merger, the Danone-Unimilk group of companies became the largest producer of dairy products in Russia.




We need more livestock, says Kazakh agriculture vice minister

ASTANA – Kazakhstan needs to increase its livestock population, according to First Vice Minister of Agriculture Arman Yevniyev. The ministry expects the new cattle farming development programme will raise the population from seven million to 15 million heads.

First Vice Minister of Agriculture Arman Yevniyev. Photo credit: Agriculture Ministry press service

He noted cattle farming is a “most optimal element” for agricultural production due to its relatively low cost and high quality, and the 10-year programme seeks to capitalise on these advantages.

Possessing vast grasslands and ranking fifth in the world with more than 180 million hectares of pastures, livestock has been a key component of Kazakh agriculture as well as a source of income and employment for the rural population which accounts for roughly half of the nation’s total population.

The new development programme addresses acute issues in the field, said Yevniyev.

“We see a big potential for livestock development. The country has all the resources to develop the sector,” he added. “The infrastructure is there, but we need to increase the livestock.”

The programme is meant to create a “new class of farmers” by growing the number of farms from 20,000 to 100,000 and raising rural employment from 100,000 to 500,000. With poverty in rural areas (4.9 percent) almost four times higher than in urban areas (1.3 percent), additional employment opportunities are of paramount importance.

Export revenues are forecast to reach $2.4 billion, he added.

Large meat industry companies, including Australian Cedar Group, Chinese Rifa Holding, Citic Group and Inalca Eurasia, will be investing in the programme. Developing cattle farming comes with certain challenges, however, including the search for money and land.

“The first challenge for farmers that are thinking about starting their business is where to get money. There is no money [easily available]. The programme addresses this issue,” said Yevniyev.

KazAgro, the leading Kazakh leasing company with a more than 70-percent share, will provide 15-year loans to farmers at a subsidised 4-percent interest rate. The funds can be used to purchase stock for further breeding and agriculture machinery and equipment or construct livestock housing.

Approximately 50 billion tenge (US$152.2 million) will be allocated to support farmers this year, said KazAgro Board Chair Nurlybek Malelov.

“There was no such thing before. The second question is where to get land. The programme has an answer to this question as well. Comprehensive work is being done. All the recent changes provide a mechanism to confiscate pastures and give them to those who need this,” he noted.

Pastures will be given without competition.

“We were reviewing the regions and some farms were found to be possessing hundreds or more than a million hectares and it is clear there is no livestock. This will be equal to irrational use of lands and will be subject to confiscation,” said Yevniyev.

More specialists are needed, he added, as “lack of competency and knowledge” is hampering development.

“With the National Chamber of Entrepreneurs, we run the Bastau Business (Start Business) programme funded by the national budget, where anyone willing to take up the business can learn how to work with livestock and other specifics,” he added.



Chinese company to build wind and solar power stations in Kentau

ASTANA – China’s Jiangsu Zhenfa Holdings Group Co. Ltd investment company will start construction in August on $154.5 million wind and solar power stations in the South Kazakhstan region. The new facilities are expected to generate 50 megawatts per hour of wind power and 30 megawatts per hour of solar energy. Kentau is a city located 150 kilometres north-west from the regional capital Shymkent.

Kazakhstan’s Ambassador to China Shakhrat Nuryshev and Vice President of Jiangsu Zhenfa Holdings Group Co. Ltd Hu Wei discussed the implementation of the renewable energy projects during a March 19 meeting.

“The construction of the projects will be completed within two years. The sides exchanged views on the inclusion of this project in the list of priority projects of cooperation within the Programme on Industrialisation and Investments implemented between Kazakhstan and China,” the press service of Kazakhstan’s embassy in China reported.

Nuryshev stressed that Kazakhstan attaches great importance to the development of alternative energy sources.

“In 2017, Astana hosted the EXPO 2017, the main theme of which was the future energy. Our country will continue developing the potential of clean energy,” the ambassador said.

The diplomat focused on the country’s preferential policies for foreign investors engaged in priority areas for cooperation in Kazakhstan, such as transport and logistics infrastructure, water supply, energy and others. Wei noted that Kazakhstan has great potential to implement renewable energy projects. Upcoming projects can become exemplary in renewable energy cooperation between the two countries, he said, according to the embassy.

The Jiangsu Zhenfa Holdings Group Co. Ltd company owns 40 power plants in China and provides 10 percent of the Chinese market with photovoltaic power stations. Recently, the corporation completed a four-gigawatt power plant. The investment company cooperates with the China Energy Conservation Association and the China Guangdong Nuclear Power Group. The company’s branches are located in Turkey, Pakistan, the U.S. and other countries.



SPIID programme increases manufacturing value

ASTANA – The 2015-2019 State Programme of Industrial and Innovative Development (SPIID) has contributed to increasing the manufacturing industry volume by 5.7 percent while raising industry exports by 10.5 percent last year compared to 2015, said Minister for Investment and Development Zhenis Kassymbek during the March 27 government meeting.

Photo credit: kapital.kz

The growth was the result of increases in metallurgy, oil refining, the chemical industry, pharmacy and food production, the minister told the meeting chaired by Prime Minister Bakytzhan Sagintayev. Manufacturing exports totalled $15.5 billion and investment volume increased 8.8 percent from 2015, reaching approximately $3 billion.

Kazakhstan’s manufacturing products are exported to 122 countries. The nation is among the top five suppliers and occupies an 8-percent share of the imports to Central Asia countries. Supplying products to neighbouring countries grew by 30 percent, or $1.5 billion.

In the last three years, SPIID has generated 378 projects worth $9.4 billion, resulting in 30,000 jobs. The ministry added 150 new projects valued up to $3.1 billion, creating 15,000 jobs by the end of the year. A Prommashkomplekt railway wheels production complex and Asia Steel Pipe Corporation factory manufacturing large diameter welded pipes are among the projects, according to Kassymbek.

He noted the ministry has initiated the industrial-innovative development concept for 2020-2024 and will finish the work by the end of the year. While in the drafting phase, Sagintayev suggested Kassymbek consider possible new technologies.

Despite the good results and manufacturing industry growth, its share of the economy has not exceeded 11 percent in recent years, he added.

Minister of National Economy Timur Suleimenov and Minister of Energy Kanat Bozumbayev summed up SPIID’s results for 2017. The former noted the quality of the programme planning, as SPIID indicators were not revised, achieving 78 percent of their goals.

The second stage of reconstructing and modernising the Shymkent oil refinery will end this year, increasing the refining depth to 87-90 percent, said Bozumbayev.

A polypropylene production plant with a capacity of 500,000 tonnes and six major projects will be implemented in the energy sector. The Pavlodar oil refinery was also modernised.

“The motor fuels production of ecological K4 and K5 classes and production of 100 percent high-octane gasoline was established. Pavlodar oil refinery processes West Siberian oil with 5.5 million tonnes per year and Kazakhstan’s oil is 4.7 million tonnes per year. The production of aviation fuel will be set at about 13,000 tonnes per month in the second half of 2018,” he added.

Up to 100 projects were included in regional business maps, but not all of them follow the industrialisation priorities and need to be under the control of the National Economy and Investment and Development ministries, said Sagintayev.



TCO reaches record-high oil production in 2017, seeks to expand in 2018

ASTANA – Last year was a milestone for Tengizchevroil (TCO), the Chevron-led joint venture operating the Tengiz oil and gas field in Atyrau region, as the company achieved a record-high 28.7 million tonnes in oil production. TCO General Director Ted Etchison reported the 2017 results and plans for 2018 during a recent press conference in Almaty.

Ted Etchison. Photo credit: TCO press service

TCO was formed by the Kazakh government and Chevron Corporation in April 1993. Kazakhstan currently holds a 20-percent stake through the KazMunayGas national oil and gas company, Chevron owns 50 percent, ExxonMobil owns 25 percent and Russian-American company LukArco owns 5 percent.

The company produced 27.56 million tonnes of crude in 2016, said Etchison, boosting oil production by 4.1 percent the following year. The figure included 1.38 million tonnes of liquefied petroleum gas, 7.45 billion cubic metres of dry gas and 2.49 million tonnes of sulphur.

June 2017 marked another milestone in TCO history, as the company produced its three billionth barrel of crude oil.

To date, TCO has contributed $125 billion to the Kazakh economy, including salaries to local workers, purchasing $24 billion in local goods and services, payments to state bodies and dividends to local partners, as well as taxes and royalty to the national budget, said Etchison. Payments reached $8.5 billion in 2017.

“Oil prices drastically fell more than three years ago, which resulted in the decrease in payments to Kazakhstan starting in 2015. In 2017, however, the indicators were much better,” he added.

The current production volume is not the limit, he noted. In July 2016, TCO partners announced the launch of the Future Growth (FGP) and Wellhead Pressure Management (WPMP) projects, which are expected to increase crude oil production by 12 million tonnes per year or 260,000 barrels per day. The cost of the expansion is estimated at $36.8 billion.

WPMP will provide for the full load of the Tengiz plants’ processing capacity by decreasing flowing wellhead pressures and boosting pressure at the six existing processing lines. FGP will incorporate sour gas injection technology used during the company’s previous expansion project.

“In 1992 and 1993, the focus was on initial production, but by then we were already considering possible sour gas injection technology. The questions we faced within this experiment included sour gas injection back into the reservoir, which on one hand is good for the environment and on the other will help boost production. We launched this pilot project in the mid-2000s and built what we now call the second generation plant. The experiment turned out to be very successful from a technical point of view,” said Etchison.

Social responsibility remains vitally important for TCO, he added. The company has invested $3 billion since 2000 to decrease negative consequences on the environment and managed to achieve a 70-percent reduction in carbon dioxide emissions per tonne of crude oil.

The company will continue its social infrastructure projects, which to date total $1.4 billion in addition to the $25 million allocated annually to its Igilik voluntary social infrastructure project, said Etchison.