9Executive SummaryAfter a decade of exceptionally strong economic growth and development, Kazakhstan’s ability to withstand shocks has been tested since the onset of the global liquidity crisis in Against expectations by many, appropriate policy responses and strong financial ratios have enabled Kazakhstan, which was identified as being among the worst affected, to avoid a severe banking crisis with a run on deposits, a currency crisis and depletion of FX reserves and a recession.The government’s key priorities for the next two years include the stabilisation of the financial sector, supporting the small and medium sized enterprise (SME) sector, develop the agro- industrial sector and the real estate market, advancing the diversification of the economy, boosting employment and supporting socially vulnerable groups of the population.External liquidity position strengthened in the beginning of 2010 as a result of improved balance of payments dynamics. Due to comfortable export prices and continuous FDI inflows in 2010, the current account of balance of payments is positive.Long-term prospects remain good given Kazakhstan’s vast endowment of natural resources and the government policies to support the economy’s diversification through infrastructure development and improvements to the business environment.
10Resilient fundamentals supported by a strong sovereign balance sheet… Key macroeconomic indicatorsGDP growth rate (% change oya)Per capita GDP (US$) , , , , , , , ,978Current account (% GDP) (0.9) (1.8) (2.4) (7.8)Trade balance (% GDP)Exports of goods (US$ bln)International reserves (US$ bln)
11…and a government’s broad ranging Anti-Crisis Plan to limit the extent of the economic slowdown Total anti-crisis funds allocated amount bln tenge (20.2 bln. USD), including:Anti-crisis measures on 5 directions – bln tenge (11.3 bln USD)Reduction of minimal reserve requirements – 490 bln tenge (3.3 bln. USD)Reduction of tax pressure bln tenge (3.3 bln. USD)Implementation of new plan of further modernization of economy and realization of employment strategy (Road Map) bln tenge (2.3 bln. USD)
12Outstanding and diverse natural resource wealth supports long-term growth prospects The country holds about 3.2% of the world’s total proven oil reserves. Overall prospective resources are estimated at between two and three times the size of proven reserves- Over the next decade, Kazakhstan is expected to double oil production on theback of higher production at the Tengiz field and launch of the Kashagan field, whichis the fifth largest in the world by reservesThe republic holds 1.4% and 3.4% of the total world reserves of natural gas and coal, respectively.Kazakhstan possesses all known useful minerals including major deposits of ferrous and non-ferrous metals, uranium and goldKazakhstan is also a significant exporter of grain, ranking among the world’s leading ten exporting countries
13New measures of the Government for the industry development The Program of forced industrial-innovative development of Kazakhstan for (PFIID)Main goal of PFIID – maintenance of diversification and competitive recovery of Kazakhstaneconomy for a long periodPFIID Objectives:- consolidation of business and government effort and concentration of state resources ondevelopment of priority sectors of economy;forming of favorable macroeconomic and investment climate and forming of efficient institutions and mechanisms of government and business interactionWithin the framework of PFIID the Industrialization Map is being implementedIn present the preliminary portfolio of 115 investment projects with amount of 11,26 trln. tenge has been selected.Expected results:sustained pace of economic development with the annual EVA growth approx. to 50%- competitive recovery of economy and structural shifts in economy and industry in benefit toproductions with high-technological products and high added value- improvement of growth rates of working efficiency and shifts in the structure of GDP with increase of share of manufacture up to 14,5%1313
14Largest projects of Industrialization Map Agriculture: Construction of grain elevator complex in Mangystau oblast, 7 bln. tenge1Construction industry and production of construction materials: Construction of cement plant in EKO, 19.5 bln tenge23Oil processing, infrastructure of oil & gas sector: Modernization and reconstruction of Atyrau Oil processing plant, 395 bln. tengeMetallurgy and production of finished metal products: Reconstruction of Taraz metallurgy plant, 12 bln. tenge4Chemical and pharmaceutical industry: Construction of Gas-Chemical complex in Atyrau oblast, 945 bln. tenge5Energy: Construction of Balkhash thermal power-station, 375 bln. tenge6Transport and telecommunication infrastructure: Reconstruction of “Astana-Schuchinsk” automobile road, 114 bln. tenge7Others: Locomtive-assembly planti in Asana, 21 bln. tengeIn purpose of realization of industrial, innovative, infrastructure projects it is projected to attract credit lines of “Eximbank” of China and China Development Bank in amount of $ 13 bln. and“Vnesheconombank” of Russia in amount of $3 bln.1414
15Multi- annual foreign investment projects ensures sustainability of FDI inflows despite the global crisisKazakhstan has become a regional leader in attracting FDI, with the EU and the US amongst the largest investors in the country. Overall FDI in January – September bln USDFDI inflows have become increasingly diversified, flowing into various non-oil sectors of economy such as metallurgy manufacture and financial sector.Despite the crisis FDI inflows will continue to come into projects of oil & gas sector development.
16Creation of a Customs Union Perspectives of Customs Union (CU) in framework of EurAzECIncrease of trade turnover between countries (Belarus, Kazakhstan and Russia). For local enterprises the market will expand to around 170 mln people.2. As a result of unification of customs tariffs on goods from third countries, the weighted average tariff almost doubled. This will promote the decrease of reliance on imports.This will give the chance to Kazakh goods to penetrate the markets which were firmly occupied by goods from third countries (particularly, from China) due to the difficulty of price competition.3. Improving the investment and business climate in Kazakhstan (lower VAT, employment taxes) should help to secure foreign inflows to non-oil sectors aimed at common market.4. The customs union will be a stimulus for cooperation of complementary enterprises and creation of vertically-integrated corporations in Russia, Belarus and Kazakhstan.5. Unification of tax tariffs will lead to its growth for Kazakhstan, and with additional investment attracted would lead to increase state budget revenues