Kazakh retailers see positive dynamics in online shopping, plan to strengthen customer service

ASTANA – The government anticipates e-commerce will account for 2-3 percent of the retail market by 2021. The figure is currently approximately 1.9 percent of the total trade market, according to the Kazakhstan Internet Business and Mobile Commerce Association. 

The Ministry of National Economy reported the 101-billion tenge (US$270 million) e-commerce market represented 2.9 percent of the total retail turnover for the first half of 2018, a two-fold increase compared to 2017.

Last year, 250 new e-commerce entities were registered and approximately 1,700 online stores operate. The number of customers increased to 1.5 million.

The tax code provides tax benefits for entrepreneurs who began operating through an online store or online platform in 2018. Legal entities are exempt from paying corporate income tax and individual entrepreneurs from individual income tax until 2023. The entrepreneur must conclude the contract with the buyer online, use cashless payment and have his or her own delivery service or an agreement with a company engaged in transportation, shipment and delivery of goods.

Major online retailers, while cognizant of the challenges facing their growth, see positive dynamics and promising future of online commerce.

Launched in 2007, Flip.kz, one such retailer, offers more than 400,000 items from 200 suppliers, including books, toys, cosmetics, household appliances and electronics. The company, which opened its first brick and mortar store in Almaty in 2016, now has its own logistics system and courier service operating in 16 cities.

“Positive dynamics are observed entirely in the industry. People now use online shopping more often. Last year, the figures increased by more than 50 percent compared with 2017. This is a positive trend, but we know that it is possible to grow at even faster rates,” Flip.kz Director Alexander Sokolov said in an interview for this story.

The company is distinguished by excellent and fast service, according to social media reviews. As a result, improving service is always a priority.

“At the moment, we are doing everything to make it easy for our customers to make purchases. It is the most important task of our team. When the customer faces some problems, it becomes a challenge for the whole team. We solve this issue starting from the contact centre and other departments. I personally read comments on products and responses to publications on social media, so I control most of the situations that arise,” he noted.

The company employs more than 300 people, with the staff growing in proportion to the number of customers and orders.

“There’s still low confidence in online commerce in our country. This is one of the main challenges. We are glad that this indicator decreases with time. We work to increase the range of items and improve the quality of customer service,” he added.

Lamoda.kz, one of the largest online stores, launched Lamoda Market for independent clothing manufacturers and designers in 2016. The store promotes local brands and welcomes new partners.

“We are delighted to see a positive growth trend every year. According to the analytical department of Lamoda.kz, the number of orders increased by an average of 10 percent. By the number of orders, November leads both in 2017 and 2018. This is undoubtedly due to the most anticipated sale of the year, Black Friday,” said Lamoda Kazakhstan General Manager Molder Ryssaliyeva.

Lamoda Kazakhstan General Manager Molder Ryssaliyeva

The company has 282 employees including office staff, sales representatives and employees at points across Kazakhstan.

“We are constantly working to improve our service. We pay special attention to the new alternative methods of delivery,” she noted.

The company conducts trainings with call centre employees and sales representatives. Logistics, however, remains the main challenge for any Kazakh online company.

“Our company was founded seven years ago. Since that time, we significantly changed the service and market conditions. On-time order delivery is important for the customer, but logistics is still expensive for a company in Kazakhstan. The remoteness of cities is one of the main disadvantages for e-commerce. The percentage of people who shop online is still high. All the Internet platforms are interested in increasing the number of online consumers,” said Ryssaliyeva.

Most customers prefer paying in cash when receiving orders, a tendency observed in online clothing shops. Many want to try clothes on before purchasing them.

“We intend to increase the network of points for issuing orders. We will plan to develop the marketplace model – when third-party sellers can use the website as a platform for selling their goods. Now, we are attracting new partners and we are planning to attract large brands to the Lamoda.kz website by the end of 2019,” she added.



E-services transition in public procurement exceeds state budget plan, says Kazakh Minister of Finance

ASTANA – The Kazakh government is fulfilling 117.9 percent of budget revenues, according to the January monthly report presented at a recent government meeting.

Photo credit: bnews.kz.

The main factor for timely fund disbursement is simplified public procurement procedures that have been fully converted to electronic format.

Revenues exceeded the budget plan at all levels. State budget revenues (without transfers) in January were 593 billion tenge (US$1.58 billion), 130 billion tenge (US$346.47 million) more than last year. Corporate income and value-added tax were the main revenue sources, said Minister of Finance Alikhan Smailov at the Feb. 12 government meeting.

Kazakhstan experienced 2.9-percent growth in the gross domestic product (GDP) in January. The slightly lower economic growth than last year’s average was “mainly due to the decline in the manufacturing industry and construction, as well as a slowdown in investment activity,” said Minister of National Economy Timur Suleimenov.

January’s main growth source was continued demand in the consumer market and extractive industries. The highest growth indicators are in light industry (17.5 percent), beverage production (15.6 percent) and rubber and plastic goods production (14.3 percent).

The investment volume in fixed assets decreased by 2.5 percent.

“The decline is associated with the completion of work on the modernisation and reconstruction of the Shymkent refinery and the Aksu Ferroalloy Plant,” he added.

Monthly inflation was 0.5 percent and by Jan. 14,  annual inflation had slowed to 5.2 percent. The National Bank kept the base rate at 9.2 percent, reported its Chairman Daniyar Akishev.

The current base rate level should keep inflation at 4-6 percent, provided there’re no shocks. The exchange rate of the tenge, which strengthened by 1.4 percent against the dollar during the month, is associated with the favourable situation in the oil market and strengthening of the Russian rouble. As of Feb. 8, the rate was 378.73 tenge per dollar.

The National Bank will continue to adhere to the free floating exchange rate regime, Akishev said.

The financial market is seeing gradual improvement. Bank assets increased by 4.5 percent to 25.2 trillion tenge (USD$67.16 billion) and insurance organisations’ assets grew by 13 percent to one trillion tenge (US$2.67 billion).



Kazakhstan to expand types of goods exported

ASTANA – Kazakhstan will expand the types of products it exports this year,, said Kazakh Vice Minister for Industry and Infrastructure Development Arystan Kabykenov at a January press conference.

“Sodium cyanide will be shipped to Russia; semolina to China, Europe, Kyrgyzstan, Iran, Russia and Uzbekistan; bags to Russia and Tajikistan; ammonium sulfate to Kyrgyzstan, Russia and Tajikistan; chromium products and non-alcoholic beverages to Afghanistan, Belarus, Japan, the United Kingdom, Turkey and Turkmenistan; construction services, buses and synthetic, microfiber and cast iron products to neighbouring countries,” he said.

The ministry also plans to expand the export of railway products to Azerbaijan, Egypt and Uzbekistan; yellow phosphorus and potassium fertiliser to the United States, the Czech Republic, Germany and Poland; water, milk and meat to Afghanistan, China and Singapore; cars to Kyrgyzstan; armature to Tajikistan; cereals to Russia’s Tatarstan; safflower oil to Japan; ammonium nitrate to Georgia; ice cream to Mongolia.

Kazakhstan currently offers more than 800 manufactured goods in 113 countries and added 46 new products to its list of exported goods over the past few years.

“Kazakhstan increases its output to the external market by eight to 10 product types annually – if not new ones, then existing ones enter production on an industrial scale,” said the vice minister.

Last year, the country commissioned more than 30 export-oriented projects. Over the next three years, it plans to increase the export potential of the non-primary sector of the economy 1.5 times, said Vice Minister for Industry and Infrastructure Development Kairbek Uskenbayev. Within this time period, approximately 500 billion tenge (US$1.32 million) will be allocated toward concessional lending, pre-export financing and state guarantee provisions.

This year, export promotion and efforts to attract investment, tourism, transport and logistics opportunities will also be supported by Kazakhstan’s new trade offices. The Kazakh Chamber of Commerce is expected to open offices in Belarus (Minsk), Kyrgyzstan (Bishkek), the Russian Federation (Kazan, Moscow and Yekaterinburg), the United Arab Emirates and Uzbekistan (Tashkent). Additional offices are planned within the Eurasian Economic Union and the European Union.



Zhambyl region reports 4-5 percent growth in almost all economic sectors

ASTANA – The Zhambyl region observed a 4-5 percent increase in all sectors of its economy in 2018, reported the regional akimat (administration) press service based on the information from the Department of Economy and Budget Planning.

Photo credit: zhambyl.gov.kz.

The akimat set goals to increase regional socio-economic indicators by 2.8 percent in the beginning of the year. Although there was a risk of non-fulfilment of product volumes and construction and industry investments near the end of the year, the final indicator assessment showed upward trends. The industrial output index was 102.6 percent (reaching 396.2 billion tenge or US$1.04 billion), construction was 105 percent and investment volume in fixed assets was 108.4 percent (more than 2.3 billion tenge or $6.04 million). Positive dynamics was also maintained in managing state budgets.

The growth was mainly from production volume in the chemical, metallurgy and mechanical engineering industries. The dynamics were associated with improved engagement of small and medium-sized businesses and an increase in enterprise productivity during the year, said Zhambyl region Akim (Governor) Askar Myrzakhmetov.

“We cannot rest on our laurels; in the new year, even larger projects are to be implemented,” he said.


Zhambyl region Akim (Governor) Askar Myrzakhmetov. Photo credit: inform.kz.

The akimat is now leaning towards a top-down approach of controlling indicators in upcoming reports. It will introduce a new format of final assessment works focusing on current issues and revising their timely solutions. In addition, regional authorities plan to start joint work with 30 territorial departments, inspections and other administrations within the region. The memorandum specifying the requirements among regional, town and village administrations is underway.

Despite the general positive trends, the 80-percent planned export growth target was unfulfilled at only 38.1 percent.

The annual report analysis showed the need to open a support centre for entrepreneurs and investors. The Business Road Map 2020 programme cannot serve its targeted audience, as the analysis showed a low lending rate of financial support for those who want to start a business. In particular, there is no support for those who would like, but cannot get, a 6-percent loan.

This year, the centre plans to implement 13 directions, 16 indicators, 17 projects, 60 initiatives and 313 events.



Producing block containers is complicated, but worthwhile business

ASTANA – Kazkont produces mobile homes primarily for field workers and oil and gas and construction companies. Considering Kazakhstan’s vast territory and severe climate, such products are in great demand.

Photo creidt: kapital.kz.

Kazkont founder Raimbek Sagadinov decided to start producing modular homes after working with them for a number of years. On average, the 10-year-old company manufactures 360 homes each year and is planning to automate production.

“There was no money and no machine tools for the production, too. At first, we got 70 percent prepayment and bought materials and we got the remaining 30 percent after a modular home was ready. I made my very first home with a friend at a country house,” he said.

Kazkont founder Raimbek Sagadinov. Photo creidt: kapital.kz.

“As demand began to grow, I realised that I needed a separate workshop with an adjacent territory. We rented a building and this was our first large workshop. Our company developed gradually and in five years we were able to purchase a land plot where our workshop was built and we purchased the necessary equipment,” he added, reported Kapital.kz.

The company uses block containers, structures popular as offices, showers, toilets and even homes.

“We often have orders for modular homes for shift workers in the Atyrau and Mangystau regions. In addition, they can be used as commercial premises or temporary structures. People also like to use them as small houses where a land lot is small and they don’t want to construct a house. Of course, a modular home can’t be compared with a real house, but its advantage is that it can be quickly transported and you can live in it,” said Sagadinov.

“The demand for products is high, although our production capacity is not so great. Our main customers are different companies. Every month we produce approximately 50 homes and sell approximately 30. In general, we sell approximately 360 homes per year,” he noted.

Sagadinov has competitors, but doesn’t pay attention to them.

“I believe if there is competition, then the market becomes more alive and production grows. I think that every product has a consumer,” he said.

“Kazakhstan is a large country and a significant part of the costs is spent on logistics. Disassembled mobile homes’ transportation allows transporting eight modules, rather than three as it was before, and you can collect them on the site. We produce different sizes – six, eight, nine and 12-metre modular homes, depending on customers’ needs,” he added.

Sagadinov recently trained in Germany, where he learned ways to standardise production.

“It is unprofitable when each client dictates [his or her] own needs. We continue to stand on our own, offering standardised dimensions. I understand that with the new approach I have lost some clients, but this will help the production to reach a new level and hone workers in a certain skill,” he said.



OneWeb to launch satellites from Baikonur

ASTANA – OneWeb will be launching a constellation of satellites which will provide broadband Internet access to users worldwide by fully covering the Earth’s surface.

Photo credit: kazpravda.kz.

OneWeb British communications satellites mounted on Soyuz spacecraft will be launched from Baikonur Cosmodrome beginning in the fourth quarter of the year, reported Arianespace. The company, headquartered in France, provides services using Ariane, Soyuz and Vega launch vehicles.

The Kourou launch site in French Guiana will also launch a Soyuz rocket with OneWeb satellites this year, paving the way for subsequent launches from Baikonur in the fourth quarter of 2019, according to the Arianespace press service.

Russian news agency RIA Novosti earlier reported that four OneWeb launches are scheduled from the cosmodrome this year – one in the third and three in the fourth quarter.

In June 2015, Roscosmos, the Russian federal space agency, signed a contract with Arianespace and OneWeb for 21 commercial launches of 672 satellites using Soyuz launch vehicles from Baikonur, Kourou and Vostochny (Russia) spaceports. Soyuz rockets are developed and manufactured by Samara Progress.

Airbus, Coca-Cola, Qualcomm, SoftBank and Virgin Group are among the investors in the OneWeb project.

The company had difficulty in obtaining frequencies in Russia last year due to opposition from the Russian Federal Security Service and Roskomnadzor. Despite the issues, Roscosmos Director General Dmitry Rogozin said his corporation will continue its cooperation with OneWeb.

OneWeb Satellites is a joint venture between OneWeb and Airbus, the world’s second largest space company producing low-cost and high performing satellites. The satellites will be logically interlocked and closer to the Earth, allowing for better web performance and creating complete coverage of the planet. The company is distinguished by manufacturing up to 15 satellites per week and pioneering large volume spacecraft production.



Kazakh national programme provides housing for 40,000 people

ASTANA – Approximately 40,000 Kazakh citizens received housing in the past year and every fourth loan was issued as part of the Nurly Zher national programme, reported Housing Construction Saving Bank of Kazakhstan Chairperson Lyazzat Ibragimova at a Jan. 17 press conference.

“The bank issued and provided housing for approximately 100 billion tenge (US$264.5 million) in three years as part of the Nurly Zher initiative. 2018 was a record-setting year. Our depositors and people on the waiting list received 8,659 apartments this year. Now we have more than 1.2 million deposits in the portfolio and more than 150,000 depositors are on the waiting list of the local executive bodies. The housing was provided for 64 billion tenge (US$169.28 million) and 10 percent of customers saved up on this value and were able to repay the loan in full,” said Ibragimova.

The state housing programme offers favourable loan conditions to Kazakh citizens and those who have not had housing for the last five years.

“The bank provides loans only for those who have no housing. They should have the assessment of solvency and receive a loan for 20 percent down payment with a rate of 5 percent for this loan. [Construction of] one square metre of rental housing is fixed and costs 180,000 tenge (US$477) in Astana, Almaty, Atyrau and Aktau. The price does not exceed 140,000 tenge (US$370) in other regions,” she said.

The bank intends to provide loans for 59.7 billion tenge (US$158 million) in all regions. This year, according to regional executive bodies, it is planned to commission 14,220 houses.

The bank also offers preferential home loan terms to military personnel. The interest rate is from 6 to 8 percent per annum with the down payment from 5 to 20 percent. Applicants who have more points will receive the loans. Points are calculated at the rate for each full month of service.

“Some 2,250 people received affordable loans last year. We plan to review the documents submitted by 5,500 state employees who received a positive decision on the loan and start the second programme until April,” she said.

All the bank services are provided online at the website www.baspana.kz. The user can choose the city in which he or she wants to buy an apartment, find what houses are being built and apply for participation in the programme.

“Every year the number of depositors is rising. We already have 1.2 million depositors, although there were only 600,000 people three years ago. We focus on the automation of all business processes,” she said.

Overall, 13,197 people received housing since the end of 2016. Some 98.2 billion tenge of loans (US$260 million) were issued. The government financed 69 percent and the bank covered 31 percent. More than 60 percent of housing are two-bedroom apartments.

Last year, 1.2 trillion tenge (US$3 billion) was invested in housing construction, which is 8.1 percent higher than in 2017. Eighty-six percent of the main share is the investments of private developers and individuals. For one tenge of public funds six tenge of private investment was attracted.



Kazakh government makes strides in e-government development, plans further services

ASTANA – Kazakhstan does not plan to lag behind in the global digitisation trend and the Kazakh government is taking an active approach to developing electronic government services, planning to digitise 90 percent of those by 2020.

Photo credit: primeminister.kz.

The United Nations E-Government Survey in 2018 examined how digital technologies affect public services across its member states, and placed Kazakhstan in the 39th spot. Kazakhstan was for the first time ranked among the countries with the most developed e-governments, and listed among the top 10 countries in Asia.

Kazakh Minister of Information and Communications Dauren Abayev said at a Jan. 16 government meeting that the current register includes 741 services and only 61 percent of them are provided in an electronic format. Of those, 165 are available only in digital formats, including licenses, permitting documents and business subsidising services.

Kazakhstan’s electronic government website, currently the main channel for providing public services online, has more than 8.5 million users and in 2018 facilitated nearly 30 million services.

The ministry, however, said digitising 100 percent of services is not possible: some services require the presence of an individual and the involvement of specialists.

Last year witnessed the digitisation of 64 services. Citizens can now submit driving license applications and register vehicles online. Since launching these digitised services, they have been used more than 23,000 times.

Registering a vehicle previously took six hours. The time has now been cut to two hours, or only 20 minutes if doing it during a vehicle purchase or sale. Registration documents can be delivered through Kazpost.

The government is currently working to cut the time people spend at services provision centres trying to access such services as disability statements or social allowances and benefits.

Electronic government can also be accessed through a mobile government application that currently provides 87 services. The app has 1.3 million users.

In a broader effort to optimise the effectiveness of public administration and public services, the government prepared a bill that envisions 500 amendments to 43 laws and 10 codes.

They are meant to optimise 121 services, including cutting the time it takes to register a marriage from one month to three working days, sending automatic refunds of tax overpayments and cancelling more than 3,500 standards and regulations in state services provision.

Officials expect to reach 80 percent digitisation this year and 90 percent by 2020, reducing the number of paper documents by 110 million.

Head of Government for Citizens State Corporation Abylaikhan Ospanov said the corporation currently provides 598 services offered in 325 front offices, 16 specialised public services provision centres, 70 mobile centres and 1,656 post offices.

Using public services online requires an electronic signature that every citizen can obtain at the National Certification Centre.

Ospanov said the electronic signature is a very open mechanism.

“There are many apps on the market today, including start-ups used by private companies. I know people who develop platforms where businesses can sign agreements in electronic format using electronic signature,” said Ospanov.

National Information Technologies Chair Aset Turyssov assured the meeting that electronic signatures are safe.

“It is issued by the national certification centre. It is the only one in Kazakhstan. Electronic signature has a technical structure that includes two keys, one open, one closed. Any use of an electronic signature, even in the private sector, will deal with our national certification centre, which will confirm authentication. This is an authentication of the signer being a citizen and signing with the signature. So, the issue of security complies with the uniform requirement of information security and the requirements of the ministry,” said Turyssov.

Ospanov said biometrics could replace electronic signatures in providing services.

“Since launching, nearly 1,500 people submitted their biometric data within just two weeks. We also plan to expand the mobile electronic government and add more services to that,” said Ospanov.

Currently, only Astana and Almaty residents can submit biometrics; by the end of the year, the government plans to reach all regions.



Islamic Development Bank provides $40 million loan for Kazakh businesses

ASTANA – The Islamic Development Bank (IsDB) has provided a $40 million loan to Kazakhstan’s Damu Entrepreneurship Development Fund, said fund Deputy Chairperson Daulet Abilkairov at the Central Communications Services Dec. 11 press conference. The loan will be given to businesses corresponding to the requirements of Islamic finances.

Photo credit: alhilalbank.kz.

“These funds will be used to develop Islamic finance and provide small and medium-sized entrepreneurs (SME) with alternative sources of financing. There are no industry restrictions. Given that the money is specific to the development of Islamic finance, we will work with those organisations, leasing companies and the Al Hilal Islamic Bank, that comply with Islamic finance legislation. But we want to note that the funds are without restrictions on the business area and they are for all regions of the country,” he said, as reported by abctv.kz.

The IsDB is providing the seven-year loan under guarantee of the Damu Fund.

“These funds will be mixed with our own funds. That is, we will reduce their cost for entrepreneurs. We attract the funds in tenge, which means there is no currency load and they are for a long period. Funds for seven years are hard to find on the market now,” he noted.

“The basic rate will be 14 percent (per annum); we will not subsidise all that is higher. If a financial institution issues them at 14 percent, then an entrepreneur can still receive a subsidy,” he added.

Abilkairov noted only those organisations that have received Islamic council approval in Malaysia, Qatar or other countries will be eligible for the funds. Damu is currently conducting internal procedures to obtain the loan.

“They [IsDB] confirmed that they allocated $40 million to Kazakhstan in tenge. We are now conducting internal procedures, agreeing on draft agreements between us and other financial institutions [such as]… Islamic leasing companies, Al Hilal Bank and Kazakhstan Development Bank Leasing. We are also working out the legal subtleties. We plan to make the fund available on the Kazakh market in January or the beginning of February,” he said.

The Damu Fund is a financial agent implementing and monitoring financial support to SMEs and providing guarantees to banks on entrepreneurs’ loans as part of Business Road Map 2020.

The fund’s branches operate in all regions of Kazakhstan working with local businesses, public organisations and local executive authorities.



Kazakh government to take new approach to ensuring product safety, quality

ASTANA – The Kazakh government recently adopted amendments to its laws on standardisation to enhance control over the safety and quality of domestic products. The changes will come into effect April 11, ministers announced at a Jan. 15 governmental meeting.

The Ministry of Healthcare’s recent monthly monitoring report showed that 69 percent of products are non-compliant with manufacturers’ labelling, 23 percent do not comply with safety requirements and 7.2 percent are inconsistent in physical and chemical indicators, said Minister of Healthcare Yelzhan Birtanov.

This data suggested that traditional measures of banning faulty products were ineffective. In 2017, the courts issued more than 2,000 orders to eliminate safety or quality violations. As a result, more than 22 tonnes of hazardous products were removed from sale and destroyed.

The ministerial report outlined three main changes that should bring Kazakhstan’s standardisation law closer to the international model. The first change will be the creation of a single national standardisation body. The second will be the reorientation of all technical committees into specified consensus discussion centres of standards that will act as mediators in state-business-consumer relations. The third will be the extension of standards in public procurement, through technical specifications.

The Ministry of Healthcare and Ministry of Agriculture have developed the action plan that, as Minister of Industry and Infrastructure Development Zhenis Kassymbek said, will “eliminate technical barriers in product promotion.”

The Ministry of Healthcare will create a new committee that will control “quality and safety of goods and services that affect human health, the quality of medical services in the circulation of drugs and medical devices, including monitoring compliance with retail limit prices in pharmacies, ensuring the sanitary and epidemiological welfare of the population,” said Birtanov.

Minister of Healthcare Yelzhan Birtanov. Photo credit: primeminister.kz.

“The key activities are the study and coordination of requirements for processed products, the adaptation of standards, as well as preparation of a base of accredited testing centres to attract foreign certification bodies to apply for accreditation in the Kazakh system,” Kassymbek said.

Vice Minister of Agriculture Berik Beisengaliyev suggested the Committee for Technical Regulation and Metrology of the Ministry of Industry and Infrastructure Development simplify and reduce the time required for accreditation of “internationally recognised conformity assessment bodies operating in the EU, the US and Chinese markets,” so that those bodies could certify products on Kazakh markets as well.

Vice Minister of Agriculture Berik Beisengaliyev. Photo credit: primeminister.kz.

The Atameken National Chamber of Entrepreneurs took the responsibility for issuing industrial certificates to domestic entrepreneurs. Atameken works along with the Kazakhstan Industry Development Institute to create a register of commodity producers and their products, said Chair of Atameken Ablai Myrzahmetov.

Prime Minister Bakhytzhan Sagintayev, concluding the meeting, mentioned the need to complete work on consolidating state control over industrial products.