Industrial & Technology Development :

President Nazarbayev at the 12th Congress of Nur Otan

“No crisis is eternal... Those surviving stand a better chance to flourish thereafter” said Kazakhstan’s President Nursultan Nazarbayev a decade ago (in response to the Asia Crisis). The president invoked his own words last week in relation to the current global economic crisis during a congress of the Nur Otan party in Kazakhstan’s capital Astana. “10 years ago we were starting to build independent Kazakhstan on the ruins of the USSR” he said. “We struggled to overcome lack of infrastructure, still-standing plants, empty stalls, shortages of heating. Such negative experiences are easy to forget. But we took the responsibility to initiate a number of reforms targeted at improving the living conditions of every citizen in Kazakhstan and to drastically modernize the economy. Despite the hard trials, we did not surrender, we did not give way to panic - instead, we united and reached a higher level. The main thing that helped us at that time was our unity; unity among all 130 ethnic groups living in our country.

“For 10 years” continued President Nazarbayev, “the nation’s GDP increased nearly eight-fold. GDP per capita increased from USD 1000 to USD 8400, reaching the level of Central and Eastern Europe states. Foreign trade for the same period has grown tenfold; the total of investments into small business since 2000 has increased nearly 23 times to reach KZT 1.5 trillion in 2008. For ten years, state support to healthcare and education augmented 8.5 times. Only 5 years ago the number of Internet users [in Kazakhstan] made up only several thousand people; today their number has exceeded 2 million. 98% of all schools across the country now have access to the Internet.

“Today we enjoy many things that we didn’t even dream of… Construction of the new capital Astana has been the grandest project in the post-Soviet era in terms of scale. Astana is a symbol of modern Kazakhstan, of our joint well-being, success and reliable future!

“The source of today’s hardships lies not in our mistakes; rather, it is the global economy’s lack of balance and a financial system in need of radical reform… We have been doing everything right; we have been fostering market economy, put in place institutes of development and established a National Oil Fund to accumulate oil revenue windfalls.

“Indeed, Kazakhstan was among the first nations to implement anti-crisis measures. By the end of 2008 many external sources of financing had dried-up - global prices for commodities had plummeted, export revenues had shrunk. In this context, our Government adopted two stabilization plans. To implement the second stabilization plan, the National Fund allocated KZT 2.7 trillion, 14% of the national GDP.

“Sectors most severely hit by the current crisis have seen the first signs of stabilization. The construction industry is being reanimated. Despite the lack of funds, 213 investment projects totaling KZT 1.5 trillion were put in operation last year. Another 328 projects worth a total of KZT 8.5 trillion are under way. I have recently reached agreements with foreign partners on foreign direct investments of over USD 15 billion into the Kazakh economy. We have implemented forward-looking tax, budget, administrative and customs reforms… State assets are now concentrated in the Samruk-Kazyna National Wellbeing Fund - a channel to inject budget funds into the real sector.

“Within the crisis environment we have not cut down on social programmes.

As planned, salaries for public sector employees have been raised by 30%.

“The global crisis has, however, shown vulnerability in our economy. First of all, I am talking of dependence on extraction industries. … The share of processing industries in the GDP remains low. The development in science and high tech industry has been sluggish.

“There has not been sufficient work done to start relying on domestic resources…

The Government has not made all the necessary steps to make resources available to businesses. Even free economic zones lack some conditions that are normally put in place in developed countries…

Coordination of the work of state bodies and with businesses has been inadequate. We have lacked a single public body to take charge of economic diversification. The banking sector has become a conductor of external shocks that facilitates spill-over of crisis impulses into the real sector. As a result, the state has to act as the ‘creditor of last resort’. The state has to bail out banks, guarantee household deposits, protect owners of pre-paid apartments under construction, and support S&MBs. The crisis has shown that there is no alternative to economic diversification.

“Today I am outlining the major points of the Post-crisis Break-through Plan.

Starting from January 1, 2010, within the Kazakhstan-2030 Strategy, we are launching a 5-year plan of accelerated industrial development. The state will be strengthening its role in planning and encouraging the national economy.

At the same time, basic free market principles – such as fair competition, sanctity of private property and incentives for business initiative – will remain inviolable.

“The Government has to concentrate its efforts on the following realms:

Agriculture and processing of agricultural produce…

We need to secure large-scaled modernization of the agriculture sector. …

Over these last few years, we have been working to lay a solid industrial foundation for agriculture. For the first time ever Kazakhstan has become one of the largest exporters of grain and the biggest exporter of flour.

2) We need to develop a construction and construction materials industry.

We still import over 50% of materials. We need to launch production of cement, glass plates, finishing materials and ceramic products. By 2015, 80% of domestic needs for construction materials should be met by local producers.

3) We need to develop oil processing and O&G infrastructure.

This year we need to complete the second stage of the Kazakhstan-China oil pipeline to link the Caspian oil-bearing region to Western China. This will constitute a new export route…

4) We need to develop metallurgy and production of metal ware.

We are presently restoring the industry that was nearly destroyed in the early 1990s.

In the last two years, a number of large-scale projects have been implemented. Another 26 projects - estimated cost KZT 1.6 trillion - are currently under way. Our task is to double production and exports of metallurgy products by 2015.

5) We should accelerate development of the chemical industry, pharmaceutical industry and defense industry. In the chemical industry we have 18 projects totaling KZT 1 trillion being implemented.

In the realm of pharmaceuticals, I am seeking the meeting of 50% domestic demand for products through domestic production.Strengthening of the nation’s defense is another obligation…

I am commissioning the Government to work out a special programme to ensure technology modernization of our Armed forces and the setting up of production facilities in Kazakhstan.

6) The sixth priority is development of the electric power industry. Projects are under way to expand power generation capacities in certain regions and develop the National Electrical Power System.

This year will see the beginning of construction of the Balkash thermal plant involving Samsung and KEPCO. An important direction is the development of renewable sources of energy – wind power and solar energy…

7) The seventh priority is the development of transport and telecom infrastructure.

We are constructing the West Europe – West China motor corridor. Its total length across our country will reach 3.500km. Five international financial institutions will invest a total of USD 3.5 billion.”

“Implementation of all the above mentioned plans” said President Nazarbayev, “will enable Kazakhstan to increase gross value added by 63%.

“The Customs Union of Kazakhstan, Belarus and Russia is the first and the most serious integration initiative. I hope we will complete its implantation next year. To ensure innovation-driven industrialization of our nations, we need to open-up internal markets to each other.

“The Ministry of Industry & Trade should coordinate the diversification efforts… I am instructing the National Bank, the Agency for Financial Supervision and the Government to work out a new concept for the national financial architecture and the attraction of required funds…

“2010 is the year of our OSCE chairmanship. This is a great honor and responsibility for Kazakhstan. We are grateful to all OSCE member states for their confidence.

“In two years’ time we will be celebrating the 20th anniversary of Kazakhstan’s independence. The celebrations should strengthen Kazakh patriotism and national pride. This special date should be celebrated alongside new achievements in the economy, social sphere, culture and sciences” concluded Kazakhstan’s President.

THIS TEXT IS AN EDITED VERSION OF A SPEECH GIVEN BY PRESIDENT NURSULTAN NAZARBAYEV OF KAZAKHSTAN IN ASTANA ON MAY 15, 2009.