Technological upgrade, investment inflow, innovation boom, or how Kazakhstan made an industrial breakthrough

Thursday, 12 December 2019, 18:02:37

At the beginning of its independent formation, Kazakhstan took a course towards general industrialization. A special direction of development was the manufacturing industry, which subsequently will become the main driver of the country's industry growth. During the years of industrialization, thousands of new modern high-tech industries were created, which ensured the release of hundreds of types of new products and contributed to the creation of thousands of jobs. On the eve of Industrialization Day, the editorial board of prepared a review of the implementation of the industrial policy of Kazakhstan over the years of independence.

Industrialization in 2010 and Now: Where It All Started

Under the program of the first five-year industrialization plan (2010-2014), the state targeted all the main sectors of the economy, including industry, agriculture and the services sector. At that time, the goal of the program was to make the economy more stable in times of crisis in the world.

The State Program of Accelerated Industrial and Innovative Development (2010-2014) included most of the system-wide directions for the development of the state, such as the development of entrepreneurship and SMEs, industrial infrastructure, employment, and the creation of a favorable investment climate. The program includes almost all industries, including the raw materials sector, and infrastructure development, thus indicating a broad focus of priorities.

Along with this, within the framework of the first five-year plan, important basic prerequisites were laid for launching the process of economic diversification – the laws were adopted, including the Law of the Republic of Kazakhstan “On state support for industrial and innovative activities,” “Program for attracting investments, developing special economic zones and stimulating exports in the Republic of Kazakhstan for 2010-2014 ”and the Law of the Republic of Kazakhstan “On Energy Saving and Energy Efficiency.” In addition, more than 50 laws have been amended.

Over the years, most infrastructure issues have been resolved: about 4 thousand km of roads (Western Europe – Western China, two transit corridors Center-South and Center-East) were built and reconstructed, about 1,700 km of railways were built (Uzen – State border with Turkmenistan, Zhetygen – Korgas, Beineu – Zhezkazgan, Arkalyk – Shubarkul), 13 special economic zones and 23 industrial zones began to function.

To support the business, the following programs were adopted: Productivity 2020, Investor 2020, Business Roadmap 2020. Dozens of new support tools have been developed and launched – soft loans and leasing, innovative, export grants, service support, etc. To date, about 100 support tools are available to private entrepreneurs.

The second “five-year plan” (2015-2019) was focused on the manufacturing sector specifically, as the sector most resistant to external economic shocks and having the potential to become a “safety cushion” for the Kazakhstani economy. Within the framework of this five-year plan, 14 priority sectors of the manufacturing industry were identified, on which support tools focused.

Implementation of the Program led to Several Positive Results for the Economy of Kazakhstan

The range of exported manufacturing goods increased by 21%. New export products appeared such as batteries, flat-rolled products from iron or non-alloy steel, non-alloy aluminum wire, etc.

For 2010-2018, a framework was formed for the development of the manufacturing industry. So, new growth points appeared as a result of the implementation of 1,250 projects worth 7.9 trillion tenge and the attraction of 29 investors from the Global-2000 / TNK list. An effective basic industry has been created through the modernization of 35 enterprises, the emergence of new areas of the economy and new goods with high export and innovative potential.

Industrialization Attracted 7.5 Trillion Tenge to Manufacturing

Over the years of the implementation of the two five-year plans of the SPIID, 7.5 trillion tenge was attracted to the manufacturing industry (for the period of the SPIID-1 – 3 trillion tenge, for the period of the SPIID-2 – 4.5 trillion tenge).

It should be noted that the plan for investment in fixed assets in the manufacturing industry in the amount of 4.5 trillion tenge was executed.

In general, Kazakhstan has seen a positive trend in investment inflows into the manufacturing industry. In 2018, the volume of investment in fixed assets attracted by the manufacturing enterprises of Kazakhstan amounted to 1,242 billion tenge, which is three times higher than the 2010 level (413 billion tenge).

The largest investment in 2010-2018 was received by the metallurgical industry – 34.6% of the total investment for the entire period, coke and oil products – 23.9%, other non-metallic mineral products – 9.5%, chemical products – 8.5%, food – 7.7%.

The distribution of investment in manufacturing by region of the country depends on industry specialization and the geographical concentration of industrial enterprises. Most investments in fixed assets are made in those regions where large enterprises of the basic industries of the manufacturing industry (metallurgical and oil refining) are located – these are Pavlodar, Karaganda, Turkestan, Atyrau regions.

Second Five-Year Plan of the State Program of Industrial and Innovative Development for 2015-2019

Today, the implementation of the State program of industrial and innovative development for 2015–2019 is under special control of the Government. It was in 2015 that the implementation of the SPIID began, which became a logical continuation of the first five-year period of industrialization and part of the country's economic policy. The main goal of the program is to stimulate the competitiveness of the manufacturing industry, increase labor productivity and increase exports of processed goods.

The SPIID provides four target indicators in the manufacturing industry until 2019: an increase in the value of exports of manufacturing products, a real increase in labor productivity, an increase in investment in fixed assets and a decrease in its energy intensity.

Over the years, new state programs, support measures, targeted investment policies and technological re-equipment of industry have appeared, which are designed to help the country effectively go the third way of modernization. The stake is on human resources: mass entrepreneurship and effective employment are hundreds of thousands of new jobs and a competitive nation.

Since 2015, over 500 new industrial projects of the Industrialization Map have been introduced with an investment volume of about 5 trillion tenge. As a result of the launch of these projects, more than 80 thousand permanent jobs were created.

The projects were implemented in agriculture and agricultural processing (156), production of building materials (152), engineering (59), mining and metallurgical complex (41), chemistry (31), light industry (22), oil refining (21), energy (15), pharmaceuticals (6) and others.

  • The most significant projects of the second five-year industrialization period:
  • The construction of the Bozshakol Mining and Processing Enterprise by KAZ Minerals Bozshakol LLP;
  • The construction of a rail and girder plant by Aktobe Rail and Gully Plant LLP;
  • The reconstruction and modernization of the Atyrau refinery by KazMunayGas JSC NC;
  • The expansion of the Aktau international sea trade port by AMST LLP;
  • The modernization and reconstruction of the Shymkent oil refinery by Petro Kazakhstan Oil Products LLP (stage 1);
  • The construction of the Aktogay Mining and Processinf Enterprise by KAZ Minerals Aktogay LLP
  • The modernization of the Pavlodar refinery by Pavlodar Petrochemical Plant LLP;
  • The modernization and reconstruction of the Shymkent Oil Refinery by Petro Kazakhstan Oil Products LLP (2nd stage);
  • The construction of a mining and processing complex with a capacity of 2 million tons of ore per year, BGP LLP;
  • The creation of a complex for the production of wheels for railway use, Prommashkomplekt LLP.

From 2015 to November 2019, Production of Manufacturing Industry Reached 42.9 Trillion Tenge

The mining and metallurgical complex forms about 6.7% of GDP, 23.3% of industrial production. Over the years of the second five-year period in metallurgy, the volume of output increased by 2.2 times (from 2.1 trillion tenge in 2014 to 4.6 trillion tenge in 2018, according to the results of 10 months of 2019 - 4 trillion tenge).

In mechanical engineering, during the implementation period of the second five-year industrialization period, the volume of production increased 1.2 times (from 902.5 billion tenge in 2014 to 1,090 billion tenge in 2018, according to the results of 10 months of 2019 – 1,033 billion tenge).

The chemical industry is developing steadily. The volume of production in the industry grew 1.7 times (from 230.3 billion tenge in 2014 to 401.1 billion tenge in 2018, following the results of 10 months of 2019 – 386.4 billion tenge).

The pharmaceutical industry doubled the volume of production (from 38 in 2014 to 79 billion tenge in 2019, following the results of 10 months of 2019 – 75 billion tenge).

The production of consumer goods increased 1.6 times (from 63.2 in 2014 to 99.4 billion tenge in 2019, according to the results of 10 months of 2019 – 87.5 billion tenge).

The production of building materials increased 1.3 times (from 452.1 in 2014 to 563.7 billion tenge in 2019, according to the results of 10 months of 2019 – 475.3 billion tenge).

Expanding the Range of Products in Manufacturing Industry over the Years of Industrialization

During the years of industrialization (from 2010 to 2019), the production of 500 new types of products that were not previously produced in Kazakhstan was mastered: freight and passenger cars, electric locomotives, trucks, cars and buses, transformers, X-ray equipment, LED lights, titanium ingots and slabs, medicines and others.

A significant shift has taken place in metallurgy: a transition has been made from the production of base metals (copper, lead, zinc, etc.), intermediate products (slabs, blooms and other billets) and semi-finished products (rolled products) to the production of finished products (steel pipes, metal structures, rails, wire).

During the years of industrialization, 54 projects have been implemented in the chemical industry, more than 4 thousand jobs have been created. Significant projects made a significant contribution to the development of the industry and expanded the assortment of manufactured products not previously produced: caustic soda, sodium hypochlorite, detergents, new types of paints and varnishes, explosives, agricultural chemistry, etc. (JSC Caustic in Pavlodar region, LLP Kazphosphate in the Zhambyl region, KazAzot LLP in the Mangystau region, Talas Investment Company LLP in the Zhambyl region).

Also, 302 new manufactures totaling 458.8 billion tenge were put into operation for the production of building materials, more than 20.3 thousand jobs were created.

Production of new products of building materials was launched, the production of which was absent in Kazakhstan: metal tile (Taukel LLP), profiles for PVC windows and doors (Funke Kunststoffe LLP), energy-saving double-glazed windows (Kazstroysteklo LLP), sanitary products from polymer-composite materials (Tenus LLP), fiberglass composite profiles (Kompozit Profil), production of porcelain tile (Zerde Keramik LLP in SKO) was resumed.

Over the Years of the Implementation of Industrial Programs, Domestic Enterprises Exported $163 Billion of Manufactured Products

In terms of goods, the largest export volumes of manufacturing industry were in three groups of industries – metallurgy, coke and petroleum products, and chemical products. This is followed by food and drinks, as well as engineering products.

Over the years of industrialization, production has been increased and new non-oil export items for 70 goods have been generated, the amount of which exceeds $1 million. So, if in 2010 batteries were not supplied to foreign markets, in 2018 their export value amounted to $60.1 million .

Today the country is one of the world leaders in the supply of certain types of ferroalloys, yellow phosphorus, flour, cottonseed oil.

It should be noted that for the 9 months of 2019, the processed export of the country amounted to $11,430.3 million.

Currently 13 Special Economic Zones and 23 Industrial zones Created and Functioning.

Today, systemic support for the manufacturing industry continues through the development of the necessary industrial infrastructure – 13 special economic zones have been created, three of which already have full infrastructure readiness.

Of the 13 zones, four were created in 2017-2019 (ICBC Khorgos, Astana-Technopolis, Turkistan, and Kyzylzhar).

13 zones were created in 11 regions. Currently, the ministry is considering proposals of akimats on the creation of an additional three new free economic zones: in the cities of Kostanay, Aktobe and Baikonur.

In nine regions of the country, 23 industrial zones have been created.

In the territories of special economic zones for the entire time of their functioning (from 2002 to 2019) 185 projects have been launched, 46 of which are with foreign participation. As a result of the implementation of these projects, 15.6 thousand jobs were created, tax revenues to the budget amounted to 167 billion tenge.

142 production facilities have been launched in industrial zones, with an investment volume of about 213.8 billion tenge. Created more than 8.5 thousand jobs. 58.9 billion tenge was invested in the infrastructure of industrial zones. Thus, 3.6 tenge investments were attracted per 1 invested budget tenge.

The budgetary costs for the construction of the infrastructure of all SEZs amounted to 340.8 billion tenge, while the volume of attracted investments amounted to about 976.9 billion tenge. That is, 1 budget tenge invested in the infrastructure of the SEZ allowed to attract 2.9 tenge of private investment.

Of the existing free economic zones, it is possible to single out PAVLODAR SEZ as an effective one, where aluminum production with a higher redistribution of finished products is developing. Successfully implemented cooperative ties between functioning enterprises.

Today, 1 budget tenge of SEZ has attracted more than 14.2 tenge of investments.

A great example is the ONTUSTIK SEZ, where 3.5 tenge of investments were attracted for 1 budget tenge. A textile cluster has been formed where SMEs are also concentrated. SEZ functions independently, without state support.

Positive Results Achieved on Key Target Indicators for the Years of Implementation of Industrial Policy (from 2010 to 2018)

During the years of industrialization, the volume of production in the manufacturing industry increased from 3 to 10 trillion tenge (3.5 times). The largest growth was recorded in the metallurgical industry (from 1.1 to 4.6 trillion tenge), food production (from 630 billion to 1.5 trillion tenge) and engineering (from 281 billion to 1.1 trillion tenge).

Gross value added in the manufacturing industry has grown over the years from 2 to 7 trillion tenge. The largest growth was noted in the metallurgical industry (from 768.5 billion to 2.7 trillion tenge), oil refining (from 121.87 billion to 1.1 trillion tenge) and food production (from 341.3 to 954.2 billion tenge)

Taxes from the manufacturing industry over the years of industrialization increased 2.9 times (tax growth amounted to +844 billion tenge).

During the same period, taxes from the transport and storage sectors grew 3.1 times, trade and HoReCa 1.2 times, and agriculture 2.2 times.

Investments in fixed assets of the manufacturing industry increased three times (from 413.1 billion tenge in 2010 to 1,241.9 billion tenge in 2018).

From 2010 to 2018, $32.8 billion of foreign direct investment was attracted to the manufacturing industry, which is 15.8% of all attracted investments in the total investment.

The volume of exports of manufacturing products from 2010 to 2018 amounted to $154 billion.

It is worth noting that in 2018, 19 operating enterprises for the production of food, building materials, chemical and light industry products, metallurgy, engineering, oil refining for a total of more than 736 billion tenge were modernized and expanded in eight regions of the country. These are modernization and reconstruction of the Shymkent Oil Refinery, Oxygen AZOK LLP, KBS Engineering LLP, Astana Ceramic LLP, VERF-Stroy LLP, Bread Factory No 7 LLP, Maker LLP, etc.

Implementing Industry 4.0

Within the framework of industry digitalization and implementation of industry 4.0 technologies, the Ministry is working in two directions: the implementation of the Model Digital Factories project and the backbone companies of the mining and metallurgical complex.

In the direction of Model Digital Factories, the selected enterprises initiated the implementation of 51 projects with an investment volume of 13.61 billion tenge, of which 12 projects were completed in 2018-2019, with an investment volume of 2.8 billion tenge.

So, Khimfarm JSC (Shymkent) implements 6 projects, Eurasian Foods JSC (Karaganda region) initiated 7 projects to transfer production to Industry 4.0, Altynalmas JSC (Karaganda region) implements 15 subprojects under the Digital mine.

Baltekstil LLP uses innovative technologies such as business process reengineering, digitization of databases, implementation of an enterprise resource management system, quality control system for products, product tracking, staff training and development system.

As part of the digitalization of the mining and metallurgical complex, 53 projects are being implemented; as of Nov. 15, 2019, 22 projects were commissioned.

ArcelorMital Temirtau JSC initiated the implementation of thre projects. This year the project was completed – tracking and accounting of coal from the mine to the consumer using the Coal Tracking System, the effect is the reduction of coal losses.

Kazakhmys Corporation LLP is implementing four projects. In May 2019, the company commissioned a telecommunications infrastructure as part of the project “Personnel and Transport Positioning System at 67 Mine.” The system reflects all technological processes in real time, this allowed to increase the safety of mining operations, to eliminate equipment downtime.

The company JSC Varvarinskoye implements 6 projects until 2021. In 2018, it completed the implementation of two projects at the gold recovery and concentration plant: updating the software for storing MDC data (Manufacturing Data Collection) and implementing a program for generating an operational report on the operation of all PDA (Production data Acquisition) cycles.

RG Gold JSC is implementing three projects. This is the modernization of the analog-to-digital technological radio communication system at the production site of the field, the effect of the introduction of which is the organization of high-quality voice radio communication with coverage at any point on the production site, and dispatch communication to ensure the process at the enterprise. Implementation of a comprehensive solution for 3D modeling of deposits and planning of mining operations and automation of geological exploration.

Aktobe Copper Company LLP in 2018 upgraded the processing plant with elements of Industry 4.0, which made it possible to establish production for the deep processing of copper-zinc ore for the production of zinc concentrate.

Bogatyr Komir LLP plans to complete the dispatching project in 2020, which will increase the efficiency and reliability of mining equipment, coal quality, work safety, labor productivity and reduce operating costs.

What did the new Industrialization Program for 2020-2025 Prepare?

The goal of the new state program is to ensure the competitiveness of manufacturing in the domestic and foreign markets. To achieve this goal, the following tasks:

  • increasing production and expanding the range of processed goods that are in demand in the domestic and foreign markets;
  • increasing industrial capacities by stimulating the development of basic industries and the implementation of strategic projects;
  • ensuring technological development and digitalization of manufacturing industries.

It is worth noting that, taking into account the experience of the two five-year SPIID, new approaches have been developed that contribute to the further development of industrialization in the country.

First of all, the emphasis will be placed on efficient enterprises in the manufacturing sector, focused on saturating the domestic market with quality products and exporting. It will also be important to move from disparate instruments of state support to a system of comprehensive development stimulation in exchange for counter obligations and business responsibility. In addition, it is necessary to take into account the transition from an industry principle to the identification of specific priority goods, as well as the emphasis on proactive integration into global value chains.

The implementation of these tasks will lead to the achievement of the following target indicators:

  • real growth of labor productivity by 1.6 times (from 11.8 to 19.2 million tenge or from 35.3 to $55.9 thousand);
  • a 1.9-fold increase in manufacturing exports (from 15.8 to $29.5 billion);
  • real growth of investments in fixed assets by 1.6 times (from 1,247.2 billion to 2,041.6 billion tenge or from 3.6 to $5.9 billion);
  • increase in the Economic Complexity Index.

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Roman Sklyar gives instructions on emergency situations on republican roads
27 January 2020, 18:47
Zhanat Elimanov appointed chair of Financial Monitoring Committee of the Ministry of Finance
27 January 2020, 14:32
Government session to be held Jan. 28 in Ukimet Uyi
26 January 2020, 14:51
Prime Minister Askar Mamin holds meeting on protecting the population from coronavirus
24 January 2020, 18:40
Berdibek Saparbayev holds meeting of working group on modernization of pension system
24 January 2020, 17:16
Nur-Sultan's GRP in 2019 increased by 7.2% — Altai Kulginov
24 January 2020, 15:58
Over 48 thousand jobs created in Almaty region in 2019
24 January 2020, 15:26
About 1 million square meters of housing commissioned in 2019 in Aktobe region, which is a record level for region — Ondasyn Urazalin
24 January 2020, 15:01
In 2019, 136 thousand families taken out of poverty — Berdibek Saparbayev
24 January 2020, 14:42
Following results of 2019, growth dynamics of all main socio-economic indicators ensured in East Kazakhstan region
24 January 2020, 12:46
Strengthening tenge and increasing deposits in national currency: Erbolat Dossaev reports on the state of financial sector in 2019
24 January 2020, 11:30
Government sums up results of socio-economic development for 2019 and sets goals for 2020
22 January 2020, 12:28
Extended Government Session under chairmanship of President Kassym-Jomart Tokayev to be held Jan. 24 in Ukimet Uyi
22 January 2020, 11:39
Alikhan Smailov holds meeting on implementation of investment policy in Kazakhstan
21 January 2020, 16:04
Berdibek Saparbayev gets acquainted with work of Mental Health Center in Nur-Sultan
21 January 2020, 13:03
Roman Sklyar discusses prospects for attracting German direct investment in Kazakhstan with German businessmen
21 January 2020, 11:02
Murat Aytenov appointed akim of Shymkent
21 January 2020, 08:48
Prime Minister Askar Mamin introduces new akim of Pavlodar region Abylkair Skakov
21 January 2020, 08:23
Abylkair Skakov appointed akim of Pavlodar region
20 January 2020, 19:11
Prime Minister Askar Mamin holds meeting on development of digital economy and innovation
18 January 2020, 16:40
Pilot project on improving quality of education in rural schools to be launched in Kazakhstan
18 January 2020, 11:59
“The Best Volunteer of the Year” and social student loans: How volunteers are encouraged in Kazakhstan
18 January 2020, 11:53
Educational volunteering: Children from rural schools to be prepared for subject Olympiads and UNT
18 January 2020, 11:37
Over 50 thousand people participate in volunteer movement — interview with Aliya Galimova
18 January 2020, 10:21
Roman Sklyar meets with Ambassador Extraordinary and Plenipotentiary of Germany to the Republic of Kazakhstan Tilo Klinner
17 January 2020, 14:42
Prime Minister Askar Mamin instructs to complete implementation of large road projects in 2020
17 January 2020, 09:44
New approaches to targeted social assistance and implementation of CSHI — Berdibek Saparbayev holds a conference call
16 January 2020, 19:25
Bakhyt Sultanov invites members of Presidential Personnel Reserve to work at Ministry of Trade and Integration
16 January 2020, 19:23
Asset Issekeshev appointed Assistant to the President – Secretary of the Security Council of the Republic of Kazakhstan
16 January 2020, 16:08
Prime Minister Askar Mamin holds a meeting on development of livestock
16 January 2020, 15:14
97% of Kazakhstanis are participants in CSHI — how is the implementation of medical insurance taking place
16 January 2020, 14:27
Eight thousand jobs created under state program “Digital Kazakhstan” in 2019
16 January 2020, 12:29
Kalmukhanbet Kassymov replaces Anuar Sadykulov as head of the State Security Service of the Republic of Kazakhstan
14 January 2020, 14:36
Almabek Mars appointed chairman of Committee on State Inspection in Agro-Industrial Complex of the Ministry of Agriculture
13 January 2020, 20:08
Berdibek Saparbayev instructs to strengthen control over permit issuance to foreigners
10 January 2020, 18:54
Updated format of social assistance: What changed since Jan. 1, 2020
10 January 2020, 16:46
Since beginning of 2020, over 250 thousand large families already received benefits
10 January 2020, 16:29
Guaranteed social package for children from low-income families: What is included and who will receive
08 January 2020, 19:30
Nursultan Nazarbayev holds a meeting with leadership of the Office of the First President of Kazakhstan
08 January 2020, 19:05
Nursultan Nazarbayev receives Asset Issekeshev, Executive Director, Foundation of the First President of Kazakhstan
08 January 2020, 15:15
President Kassym-Jomart Tokayev held a meeting on the situation in the Persian Gulf
07 January 2020, 14:12
Employment, housing, microcredit: What was done in 2019 for Kazakhstani youth
07 January 2020, 09:27
Head of State congratulates Kazakhstanis on Christmas Day
05 January 2020, 19:32
Yelzhan Birtanov: All controversial situations within Compulsory Social Health Insurance should be resolved in favor of patients
04 January 2020, 13:59
The President held a meeting with the leadership of his administration on priority tasks in 2020
31 December 2019, 14:24
Level of urbanization to be brought up to 62% by 2025 — Ministry of National Economy
31 December 2019, 14:04
New regional development program will improve lives of 90% of rural population
31 December 2019, 12:44
President Kassym-Jomart Tokayev received Prime Minister Askar Mamin
30 December 2019, 16:27
Consumers must demand their legitimate checks: State Revenues Committee calls on citizens to combat shadow economy
30 December 2019, 16:24
480 thousand taxpayers started using online cash registers — Zangar Shyndali
30 December 2019, 16:12
In 2020, all payments must be made using online cashier — interview with Zangar Shyndali
30 December 2019, 11:06
Azamat Batyrkozha appointed vice minister of digital development, innovation and aerospace industry of the Republic of Kazakhstan
30 December 2019, 10:46
Miras Daulenov appointed vice minister of education and science
30 December 2019, 09:34
In 2019, Government introduced 32 bills to Parliament
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