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 PrimeMinister.kz 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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Prime Minister Askar Mamin holds meeting of National Qualifications Council
04 December 2019, 17:19
Prime Minister Askar Mamin holds board meeting of Kazakh Invest
03 December 2019, 12:19
113 investment projects worth 4.4 trillion tenge under development and implementation in agro-industrial complex — Ministry of Agriculture
03 December 2019, 10:51
We must eliminate dependence on imports of socially significant food products – Askar Mamin
03 December 2019, 10:46
Government reviews tax and customs administration issues
03 December 2019, 10:41
Government considers draft State Program for Development of Regions until 2025
03 December 2019, 10:34
Tax amnesty for SMEs and individuals led to payment of 23 billion tenge of tax debts — Smailov
03 December 2019, 09:49
Seventeen thousand specialists received preferential budget loans for purchase of housing under the program "With a Diploma – to the Village"
03 December 2019, 08:05
Askar Mamin meets with President of International Association of Athletics Federations Sebastian Coe
03 December 2019, 07:58
Askar Mamin meets with Governor of Qatar Central Bank Abdulla Bin Saoud Al Thani
29 November 2019, 18:00
Government session to be held Dec. 3 in Ukimet Uyi
29 November 2019, 13:33
Prime Minister Askar Mamin opens road ring around Nur-Sultan
29 November 2019, 10:58
Askar Mamin holds negotiations with largest business community in France
29 November 2019, 09:35
Berdibek Saparbayev holds meeting on child safety
28 November 2019, 18:11
Prime Minister Askar Mamin holds meeting of National Commission for Modernization
28 November 2019, 14:55
Prime Minister Askar Mamin reviews preparations for a meeting of Foreign Investors' Council chaired by the President of Kazakhstan
27 November 2019, 17:42
Head of Government holds third meeting of Dialogue on Investment Cooperation between Kazakhstan and the EU
27 November 2019, 17:27
Prime Minister Askar Mamin holds meeting on development of construction industry
27 November 2019, 15:03
Public Service Center in your pocket, amendments to labor legislation, excise taxes on gasoline — how Government Tuesday took place
26 November 2019, 14:33
Askar Mamin receives Head of Rosatom State Corporation Alexey Likhachev
26 November 2019, 14:23
Which categories of employees will get salary increase in 2020?
26 November 2019, 12:39
Level of industrial injuries decreased by 13% in 2019 — Ministry of Labor and Social Protection of the Population
26 November 2019, 12:15
Marat Tazhin appointed ambassador extraordinary and plenipotentiary of the Republic of Kazakhstan in the Czech Republic
26 November 2019, 11:54
Since early 2019, enterprises increased salary of 1.2 million employees by 32%
26 November 2019, 11:12
Government for Citizens State Corporation provided over 24 million public services in 10 months
26 November 2019, 09:53
Government considers labor regulation issues
26 November 2019, 09:53
Prime Minister Askar Mamin set the task to bring availability of internet public services to 90%
26 November 2019, 09:49
In 2020, digital literacy rate of population to increase to 80% — Askar Zhumagaliyev
25 November 2019, 12:35
Yerzhan Yerkinbaev appointed chairman of Kazakh Tourism National Company 
25 November 2019, 11:51
Government session to be held Nov. 26 in Ukimet Uyi
22 November 2019, 16:41
Children's rehabilitation: What will change after implementing compulsory social health insurance
22 November 2019, 11:45
Prime Minister Askar Mamin holds negotiations with President of the Swiss Confederation Ueli Maurer
22 November 2019, 08:23
Prime Minister Askar Mamin holds a board meeting of Baiterek National Holding
21 November 2019, 22:10
Video Digest on results of Prime Minister Askar Mamin’s working trip to Mangystau region
21 November 2019, 21:44
“Sea Gates” of Kazakhstan and mining industry: Development of Mangystau region
20 November 2019, 15:16
When providing gas, utility meters will be given to each consumer for free — Akimat of Nur-Sultan
20 November 2019, 13:58
Ministry of Energy on cost of gas: Our goal is to form the lowest and affordable price for the population
20 November 2019, 13:52
Saryarka gas pipeline to be completed Dec. 31, 2019 — Zhurebekov
19 November 2019, 17:29
Single exporter support portal to be launched in December 2019
19 November 2019, 17:20
From producing to entering foreign markets: QazTrade to launch Export Acceleration Program in 2020
19 November 2019, 17:00
Prime ministers of Kazakhstan and Azerbaijan launched construction of fiber optic links along the bottom of the Caspian Sea
19 November 2019, 16:26
Developing new program and launching single portal: How QazTrade organizes export promotion work
19 November 2019, 15:43
Press conference to be held on progress of Saryarka gas pipeline construction as part of the Five Social Initiatives
19 November 2019, 15:29
Five areas of new housing program, results of pilot project on health insurance and food prices — as discussed at the Government session
19 November 2019, 09:50
Alikhan Smailov attends meeting of the Council of Eurasian Economic Commission
18 November 2019, 17:57
Who can get soft loan to purchase housing under 5-20-25 program and how to do it
18 November 2019, 16:33
E-Qurylys Unified Information System to be introduced in 2020 as part of new Nurly Zher program
18 November 2019, 16:21
Askar Mamin holds a meeting of Council on Improving Investment Climate
18 November 2019, 16:09
Olzhas Smagulov appointed deputy head of the Office of the Prime Minister of Kazakhstan
18 November 2019, 15:09
New Nurly Zher program: Housing waiting lists to be formed based on level of population’s income
18 November 2019, 13:33
Ministry of Trade and Integration announces mechanisms of preventing growth of prices for socially significant goods
18 November 2019, 13:15
Medical services becoming increasingly available — Ministry of Healthcare about results of pilot on implementation of compulsory social health insurance in Karaganda region
18 November 2019, 12:02
Kazakhstan and Uzbekistan adopt roadmap for enhancing cooperation in agriculture
18 November 2019, 11:37
Beibut Atamkulov speaks about five main areas of new 2020-2025 Nurly Zher Housing Program
18 November 2019, 10:31
It is important to prevent increase of prices for socially significant food products — Askar Mamin
© 2019 Press service of the Prime Minister of the Republic of Kazakhstan