Deputy Prime Minister – Minister of National Economy Nurlan Baybazarov reported on the current measures to support and stimulate investment, as well as further plans to improve them at the Government session. 

Deputy Prime Minister noted that investment activity is of great importance to ensure dynamic economic growth of Kazakhstan. The Government has set ambitious tasks to attract investment. 

It is planned that in 2024, 22.1 trillion tenge will be invested in fixed assets, which is 22% more than the results of last year. Within the framework of the Unified Pool of Investment Projects, 234 projects worth 2.3 trillion tenge are expected to be implemented this year.

"KPIs have been assigned to each regional akim and minister of a sectoral state body. Measures are taken to promptly resolve investor issues within the framework of the Investment Headquarters. On the instructions of the Head of State, prosecutors in all regions accompany projects from the pool. The work on re-location of 37 companies continues," Baibazarov noted.

Today the country has a number of tools to attract investment. The mechanism for concluding an agreement on investment has been improved by switching from a list of priority activities to the formation of a prohibited list. A total of six such agreements have been concluded.

There is also an opportunity to conclude an agreement on investment commitments, which guarantees producers stability of tax legislation for 10 years. This allows enterprises to plan financial flows for a long-term period, ensuring the predictability of return on investment. It is stated that to date six agreements on investment commitments have been concluded.

Nurlan Baibazarov reported on the measures taken to attract investment in geological exploration and replenishment of the mineral resource base of the oil and gas industry. In 2023, the republic introduced fiscal incentives for the conclusion of the Improved Model Contract. 

For FEZ participants there is an opportunity to buy out the land plot after fulfilment of all investment obligations.

"Territories with a combined regime have been identified, where priority projects will receive benefits in the FEZ regime, and others who plan to implement projects outside the priorities - only infrastructure. Also, a differentiated approach of providing tax benefits for FEZ participants has been introduced according to the principle "the more investments - the more benefits," Deputy Prime Minister said.

Taking into account the National Development Plan being developed, work is also underway to update the Investment Policy Concept until 2029. Regional and sectoral investment needs are being formed for subsequent targeting of quality investments oriented towards labour productivity growth and export basket sophistication. The issue of establishing new KPIs on the investment climate, taking into account international ratings, is also being considered. In general, it was noted that the relevant department is actively studying international experience in improving the investment climate. 

When granting investment preferences a selective approach will be applied depending on the complexity of the project and its export orientation. Approaches to post-monitoring of investment projects and assessment of the effectiveness of preferences granted are also envisaged. The updated Concept will be adopted after the approval of the National Development Plan. 

The Ministry, together with interested government agencies and the business community, is working to update existing support measures to ensure the effectiveness of investment incentives. Thus, the analysis of the practice of concluding investment agreements has shown that granting tax preferences (exemption from CIT) from the moment of signing the document affects the attractiveness of this instrument, since a significant part of the grace period falls on the stages of design and construction and installation work.

"Out of 10 years of CIT exemption, the investor actually receives benefits for 7-8 years, i.e. after the facility is put into operation. In this regard, it is proposed that as part of the investment agreement, CIT exemption should be applied in accordance with the actual commencement of the project. This will ensure a more fair and balanced distribution of tax benefits for the investorm," Nurlan Baibazarov noted.

In order to support projects and improve the ecosystem for attracting investment in the country's economy, the Ministry of National Economy has developed comprehensive measures, where the Investment Headquarters has been identified as a single coordinator. In addition, the Fast Track or "green corridor" system of investment projects support will be introduced. The advantage of this system is the accelerated and simplified passage of all necessary procedures by the investor: from registration of the enterprise to putting the production into industrial operation.

"It is necessary to fully launch the National Investment Platform, which will make it possible to track the practical implementation of the formed pool of investment projects in the context of regions and sectors of the economy. In addition, a systematic work on the formation of "orders" from government agencies to attract investment with due regard to sectoral and regional specifics will be built," the Deputy Prime Minister said.

He emphasised that in this matter it is critical to ensure the availability of ready-made infrastructure. Now at the stage of development is the National Infrastructure Plan until 2029. In order to accelerate the process of infrastructure supply, the issue of allowing investors to do it independently is being worked out. And to reduce the costs of investors in the construction of production facilities, the possibility of applying international standards for construction is being considered.

"The absence of the need to adapt to national standards will reduce the time of project implementation by 1.5-2 times and reduce costs at the stage of design and construction by 20-30%," Baibazarov said.

As part of the new Tax Code in Kazakhstan will be introduced a service model of administration, focused on the taxpayer, who will be provided with fiscal assistance - from registration to deregistration. Also, the agency intends to revise the mechanism of seizure of accounts in the collection of arrears. 

Tax reporting in Kazakhstan intends to reduce by 30%, tax payments - by 20%. At the same time, incentive and effective benefits will be preserved: for example, the procedure for paying VAT on imports by offset method with optimisation of the list of goods. In addition, new projects in the manufacturing industry will be granted incentives for 3 years.

Within the framework of the new Tax Code, unification of preferences is being considered by providing a "single package" of benefits with a differentiated approach depending on the volume of investment, complexity of production processes and other factors that are important for the development of domestic production of end products. This will make it possible to optimise the procedures for granting tax incentives. Thus, while maintaining the existing incentives, new measures of business support will be adopted.

On the instructions of the Head of State, the Ministry has developed a draft programme for the provision of state support measures, which provides for the unification of the programmes "Business Road Map" and "Economy of Simple Things". Budget allocation for subsidising new projects will be made primarily for enterprises in the manufacturing industry.

New approaches to subsidising SME projects envisage a differentiated method of subsidising with a gradual transition to market conditions. 

In order to increase the effectiveness of state support measures, counter obligations have also been strengthened. Input basic criteria for selecting competitive SMEs have been established. Today, the guarantee instrument is the most effective measure and solves the main problem of business - the lack of collateral to the HLB. A gradual transition from the subsidy instrument to the expansion of the Damu Fund's loan guarantees is also envisaged.

"In general, all the proposed initiatives are aimed at improving the effectiveness of support measures and will provide further stimulation of investment," the Deputy Prime Minister summarised.

Chairman of the Board of NUH "Baiterek" Rustam Karagoyshin in his report at the Government session said that the assets of the holding today are estimated at 13.7 trillion tenge, investment and loan portfolios - 10.1 trillion tenge, net profit - at the level of 408 billion tenge. 

"The total financial support to business through NUH Baiterek at the end of 2023 totalled more than 2.6 trillion tenge. The volume of financing of large projects and leasing transactions under the CDB line was in the amount of 689.2 billion tenge. In terms of supporting small and medium-sized businesses, Damu Fund provided support in the form of loans to 23,900 projects totalling about 1.57 trillion tenge. As part of the development of export potential, the amount of support through CDB and KazakhExport totalled 716 billion tenge," he said.

According to the head of the holding, in 2023, subsidiaries of Baiterek in the field of agribusiness allocated 554.7 billion tenge to finance agrarians through lending and leasing. Housing 2,155,000 square metres of housing was commissioned through the line of the Housing and Construction Company. About 65 thousand families improved their housing conditions through mortgage loans issued by Otbasy Bank.

Rustam Karagoyshin voiced a number of measures proposed to ensure annual 6% economic growth and increase the effectiveness of support measures. Thus, in the next three years, Baiterek sees opportunities in providing comprehensive support for entrepreneurship in such areas as agriculture, manufacturing, infrastructure, transport, logistics and housing construction.

"The holding implements measures to support and nurture leaders in each sector that will become growth points of the economy. For example, the agribusiness sector is in dire need of both investment and working capital. Our subsidiaries will work to increase the volume of financing for agriculture. There is also a problem of low coverage of SMEs by state support measures and programmes for the purchase of affordable housing. In this regard, measures will be taken to increase the coverage of rural entrepreneurship with further development of targeted regional programmes. In addition, we will increase the coverage of rural population with affordable housing programmes," the head of the holding said.

New initiatives will include the use of guarantee, syndication and co-financing instruments. They are necessary to involve commercial banks in lending to the real sector of the economy. 

It is also envisaged to develop and apply factoring instruments to cover cash gaps and replenish working capital of entrepreneurs. 

The issues of introducing a mechanism for securitisation of the mortgage portfolio, increasing the share of in-country value in purchases of the holding group and in projects financed by them by means of corresponding counterclaims are also being worked out. 

In general, analytical support will be strengthened in all areas, and the Damu Fund's experience will be scaled up.

The digitalisation of the holding group is also continuing. Relevant action plans and roadmaps have been developed. It is expected that within two years the application processing time will be reduced threefold, and a digital portrait of the business will be created. In total, 60 types of services will be digitised, with centralised integration with all databases of government agencies. In general, the level of digitalisation of internal processes in "Baiterek" intends to reach 100%.

"At the end of 2023, for every tenge of budgetary funds, 2.36 tenge of extra-budgetary funds were attracted. The holding received a sustainable development rating of "3" according to Sustainable Fitch, credit ratings at the level of sovereign were confirmed. Meetings with foreign investors are held on a regular basis, agreements and memoranda of understanding are signed. For further development it is necessary to involve free liquidity of commercial banks, to carry out joint work with government agencies in terms of improving Kazakhstan's position in the OECD country classifier of credit risk. And the development of the venture capital market," Rustam Karagoyshin concluded.

#Economy #Government session #Investments