Bakytzhan Sagintayev, Kazakhstan coped with external challenges to the economy

Bakytzhan Sagintayev, Kazakhstan coped with external challenges to the economy

Despite the deterioration in the external environment in the current year, Kazakhstan was able to mitigate their negative impact on its economy. Such opinion in interview was expressed by the first Deputy Prime Minister Bakytzhan Sagintayev.

“Prompt measures succeeded in halting this year, a significant reduction in the growth rate of the economy, stimulate business activity, primarily in the sphere of small and medium business”, – he noted. According to first Vice Premier, this year “the greatest progress has been in areas such as antitrust and competition, administrative regulations and reducing trade barriers”.

– Bakytzhan Sagintayev, how would You assess the results of integration within the Eurasian economic Union? How it has affected the economy of Kazakhstan?

– Chief architect of the Eurasian integration is considered the President of Kazakhstan Nursultan Nazarbayev. Over 20 years ago at Moscow state University, he proposed a principally new mechanisms of economic interaction, which would correspond to the changed geopolitical realities, without infringing on sovereignty, non-interference in the internal Affairs of States.

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As a result, three countries – Kazakhstan, Belarus and Russia – established a Customs Union. Then we moved on to a new stage, and for almost a year functioning of the Eurasian economic Union (EEU). During this time our Association was joined by Armenia and Kyrgyzstan. The economic potential of the Eurasian economic Union for each of the participants is of great interest. The market in 182,3 million people is generating interest not only from producers of member States, but also to potential investors from third countries.

Note that foreign trade turnover of the countries of the EEU in the aggregate $1 trillion. For Kazakhstan, a significant factor is the creation of a single economic territory. This allowed us to significantly increase the capacity of the internal market. Since the beginning of the formation of the Customs Union annual turnover of Kazakhstan with the partners has grown in 1,6 times – to nearly $13 billion in 2009 to $21 billion in 2014. Significantly increased exports by 80%, and the share of processed goods in total volume of Kazakhstan export in the countries of the Customs Union has increased from 45 to 58%.

Not incidentally, I earlier noted the increase of investment attractiveness due to the formation of a common market in the EEC. Statistics show that foreign direct investment in manufacturing since the beginning of the functioning of the Customs Union in comparison with the previous five-year period has tripled. If we talk in monetary terms, from $6 billion to $18 billion Certainly, it is the result of complex measures, including the implementation of domestic development programs.

Unfortunately, at the end of this year, the numbers in many ways, including in mutual trade will be quite different due to a number of objective reasons. Primarily related to the global conjuncture of prices for our export commodities and volatility in the global financial markets.

At the same time, the format of the EAEU opens new opportunities for Kazakhstan. As a closed continental country, we are interested in providing access to infrastructure and domestic tariffs for the transportation of goods. This reduces shipping costs for our producers. With the launch of the Union, the application of the internal Russian railway tariffs for transportation of goods from Kazakhstan to Europe via the Russian seaports, by separate calculations, can give our shipping savings of up to $240 million annually.

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However, existing arrangements for the phased development of the Eurasian economic integration already suggest that the main positive benefits from our Association should be expected in the future. So, until 2025 will be created common markets in different sectors. For example, in the field of gas, oil and petroleum products provides for the absence of mutual trade of export customs duties and restrictions. By 2025, the market participants will be provided with equal access to transport infrastructure and transport systems of oil and oil products.

Common electricity market is planned to be set up by 2019. For Kazakhstan it is very important, as it will allow you to fully realize the export potential of the electricity industry. According to forecasts, by 2030 electricity generation will exceed 6 billion kilowatt-hours. It’s up to $300 million additional export revenue annually. In addition, we can provide our Western regions, the electricity from the Northern regions via the Russian network.

Next year it is planned to create a common market of medicines on the basis of international standards GMP (good manufacturing practice). It will facilitate free movement of pharmaceuticals participating countries to the markets of each other. According to the calculations of local business, it will allow to increase export of domestic products to $360 million a year.

Can we talk about the aggravation of inner competition in the Eurasian economic Union?

Of course, in the markets of the Eurasian economic Union there is competition, which has intensified in connection with the establishment of a single customs territory. But, I think, for the development of our industries, it is rather a positive factor. Increased competition contributes to the development of markets of goods, increase of their quality. It also stimulates the domestic business to the use of new innovative solutions and technologies. We learn from each other, adopt best practices, technologies. Agree on joint projects and industrial cooperation.

Ultimately, we the basic purpose of participation in the integration process – not to compete with each other, and joint efforts to increase their competitiveness for employment niches in world markets. Therefore, we are actively working with partners working on issues of international cooperation. Various countries and international associations are interested in deepening cooperation with our economic Union in a variety of formats, from the expansion of trade and economic relations prior to the creation of free trade zones.

Given the difficult situation in the global economy and the slowdown in economic growth, we are interested in new promising markets. In the EEU worked out 8 priority areas for international cooperation. Among them, the European Union, CIS, Asia Pacific, middle East,black sea and Caspian regions, Northern, Latin America and Africa.

By order of the Supreme Eurasian economic Council at the level of heads of States we have carried out work on the pairing of the Eurasian integration process with the Chinese initiative “Economic zone silk road”. At present, the joint research group to study the feasibility of establishing a free trade zone with Iran, Israel, India and Egypt. In General, the interest in cooperation with the EAEU show more than 30 countries. It speaks to the credibility of our Association.

– Complete adaptation to new market conditions monetary and financial-economic system? How did the situation with ruble, the Kazakhstan-Russian trade this year?

– As you know, 20 August 2015, Kazakhstan has started implementation of a new monetary policy based on inflation targeting regime, with the abolition of the currency corridor and the transition to floating exchange rate of the national currency. Thus, in Kazakhstan the exchange rate is formed on the basis of market supply and demand taking into account the fundamental internal and external macroeconomic factors. However, the national Bank retains the option to respond to significant fluctuations that do not reflect the ratio of supply and demand and actions of fundamental factors. It is also assumed that further dynamics of the tenge exchange rate will be formed under the influence of factors that are determined mainly by the dynamics of the price situation on the world financial and commodity markets.

As for the situation with the ruble devaluation, it was true that in late 2014 and early 2015 has seen some changes in the structure of mutual trade with Russia. This primarily affected the import of us cars. But now we see the alignment of trade. The reason for this was the restoration of the parity of the ruble against the tenge. Another factor that has currently a significant effect on our mutual trade is lower prices for main export commodities of Kazakhstan and Russia. For the first 9 months the trade turnover with Russia for this reason decreased by a quarter, to $11 billion.

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Therefore, our efforts in Kazakhstan, I think, and in Russia, aimed primarily at diversifying the economy.

– Despite the collapse of commodity markets, Kazakhstan’s economy is still in the growth zone. That was his main driver?

Kazakhstan since the beginning of this year, indeed, develops in the face of slowing global growth. As I said, lower prices and demand for main export goods of Kazakhstan. Thanks to the measures taken in the framework of the state program of infrastructure development “Nurly Zhol” and the Plan of operational measures of the government for 2015-2016, we are not left in “a minus”, the growth of Kazakhstan’s economy for the first 10 months amounted to 1%.

Investments in fixed capital grew by 3.8% due to the implementation in the first place, infrastructure projects under the state program. Along with the decrease of industrial production by 1.3%, which is associated with a decline in production in the mining sector, manufacturing sector, however, shows positive growth rates – at 0.5%.

The growth observed in agriculture, construction, trade, transport and communication. I would like to note the positive dynamics in the gas industry. In 10 months 2015 the volume of gas production increased by 5% compared to the same period last year and amounted to 37 billion cubic meters. With the end of the year the planned volume of gas production is 43.8 billion cubic meters. In a significant increase and export of gas: more than 10 billion cubic meters with an increase of 14% compared to the same period last year.

If you managed to prepare the economy for accession to the WTO?

– From 1 December 2015 Kazakhstan officially became the 162nd member of the WTO. However, we, in fact, already living in conditions of WTO. So as the Russian Federation, as our partner EEAS, in 2012 joined the WTO. For the past ten years in our country was carried out large-scale work to bring national legislation in line with international requirements and standards. So, by the time of Kazakhstan’s accession to the WTO has been amended more than 50 legislative acts, 10 of the agreements adopted in the framework of the Customs Union, concerning the sphere of foreign trade.

Thus, Kazakhstan de facto operates for several years in the context of the WTO and complies with all its requirements and obligations. However, now in addition to the responsibilities we have rights as a member of the organization. It should be noted that for the most sensitive of the domestic manufacturer issues Kazakhstan has kept transition periods.

For example, in providing preferential treatment under the SEZ and Free warehouses, the local content requirements in investment contracts, to subsidize agriculture transitional periods until 2017 and 2018. This will allow our economy to more seamlessly transition to the competitive environment, existing within the WTO, without breaking, the, rules of this organization.

– What would You name the main results of socio-economic development of the Republic in the past year and the main challenges?

– As I mentioned earlier, the economy of Kazakhstan with the beginning of the year is developing in difficult conditions. We are witnessing a significant decline in world prices for oil and metals, the slowdown of economies of major trading partners, primarily Russia and China, slow and unsustainable development of the European economy. New geopolitical risks associated with the migration crisis in Europe and the unstable situation in the middle East. This applies to calls.

Now about the positive. As we can see, positive results brought by the implementation of the program of infrastructure development “Nurly Zhol” and the Plan of operational measures of the government for 2015-2016. This year Kazakhstan has significantly improved its position in the world Bank’s Doing Business report, occupying the 41st position among 189 economies in the world. Kazakhstan noted the state having the most number of reforms – 19 reforms in seven of the ten directions.

In the WEF competitiveness ranking Kazakhstan went up from 50 to 42. In this case, the greatest progress has been in areas such as antitrust and competition, administrative regulations and reducing trade barriers. This year passed laws aimed at the abolition of routine checks, the restriction of state participation in entrepreneurial activities on the principles of Yellow Pages Rules, development of self-regulation. In General, operational measures have been taken to prevent this year a significant reduction in the growth rate of the economy, stimulate business activity, primarily in the sphere of small and medium-sized businesses.

I would like to emphasize that Kazakhstan today is moving to implement the President Nursultan Nazarbayev five main institutional reforms: the formation of modern, professional and Autonomous bureaucracy; the rule of law, guarantee property rights, create conditions for entrepreneurship; industrialization and economic growth based on diversification; strengthening of national values and patriotism to form a single nation of the future; transparent and accountable government.

100 defined specific steps for the implementation of those reforms. To implement these steps, the President of Kazakhstan has signed the legislative package developed – all 59 laws. For these reforms, we start from next year. These new technologies will determine the future of our country.