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Kazakhstan at Global Partner MARKING THE 25TH ANNIVERSARY OF INDEPENDENCE

An official publication of the Government of the Republic of Kazakhstan Supported by Samruk-Kazyna

Embassy of Kazakhstan in the UK


DELIVERING WORLD CLASS MINING PROJECTS


KAZ Minerals is proud to offer its support and congratulations as we celebrate together the 25th anniversary of the independence of Kazakhstan. We are a high growth, large scale, low cost copper company focused on open pit mining in Kazakhstan. KAZ Minerals is bringing significant foreign direct investment and new skills to Kazakhstan which will have long term benefits, both for local communities and for the national economy. In 2016 we developed two major new copper mines, Bozshakol and Aktogay, which are industrial facilities of national significance. Due to local infrastructure and the modern processing technologies employed, Bozshakol and Aktogay are amongst the lowest cost copper mining operations in the world. They are set to generate employment and contribute to the economic development of Kazakhstan for the next 50 years.

Find out more about our company at www.kazminerals.com KAZ Minerals PLC is listed on the London Stock Exchange, the Kazakhstan Stock Exchange and the Hong Kong Stock Exchange and employs around 13,000 people, principally in Kazakhstan.


Kazakhstan

Global Partner

at

MARKING THE 25TH ANNIVERSARY OF INDEPENDENCE

An official publication of the Government of the Republic of Kazakhstan Supported by Samruk-Kazyna

Editor Alan Spence Managing Editor Barry Davies Editorial Contributors Emilie Ally, Emily Eastman Art Director J-P Stanway Managing Director Andrew Howard Printed by Cambrian Printers

Embassy of the Republic of Kazakhstan to the United Kingdom 125 Pall Mall, London SW1Y 5EA kazembassy.org.uk

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+ Chantry House, Suite 10a, High Street, Billericay, Essex CM12 9BQ United Kingdom Tel: +44 (0) 1277 655100

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© 2016. The entire contents of this publication are protected by copyright. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means: electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher. The views and opinions expressed by independent authors and contributors in this publication are provided in the writers’ personal capacities and are their sole responsibility. Their publication does not imply that they represent the views or opinions of the Government of the Republic of Kazakhstan, Global Media Partners or Integrative Media and must neither be regarded as constituting advice on any matter whatsoever, nor be interpreted as such. The reproduction of advertisements in this publication does not in any way imply endorsement by Government of the Republic of Kazakhstan, Global Media Partners or Integrative Media of products or services referred to therein.

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CONTENTS

Contents STRATEGIC VISION

WELCOME TO KAZAKHSTAN

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22

Nursultan Nazarbayev

25 years of peace and progress

President of the Republic of Kazakhstan

The story behind Kazakhstan’s highly successful development over recent years

FOREWORDS AND INTRODUCTIONS PETR BAUMANN / SHUTTERSTOCK

13

Bakytzhan Sagintayev Prime Minister of the Republic of Kazakhstan

15

Kairat Abdrakhmanov Foreign Minister of the Republic of Kazakhstan

BUILDING EURASIA’S ECONOMIC POWERHOUSE

20

26

Securing growth, maintaining momentum

An expanding energy sector

Umirzak Shukeyev, CEO, Samruk-Kazyna JSC

An insight into how Kazakhstan is harnessing the power of its natural resources

29

From the ground up Kazakhstan’s mining sector remains resilient in the face of challenging economic conditions throughout the world

34

Made in Kazakhstan Economic diversification is behind a surge in growth in the manufacturing industry, underpinned by interest from foreign investors

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CONTENTS

37

63

The tech economy

Progress in learning

Kazakhstan has positioned itself as a regional leader in delivering and creating technology

Kazakhstan’s modern approach to learning is bringing education into the digital age

40

66

Better connected

On the tourist trail

Creating a digital hub is a key national priority

With attractions for thrillseekers and culture lovers alike, tourism in Kazakhstan is growing

43

Driving change in transport Exploring the major developments that are under way in Kazakhstan’s transport sector

ZANGAR SKAKOV

46

Feeding the world Kazakh agriculture is entering some of the world’s biggest and fastest-growing markets

50

FOCUS ON THE FUTURE

70

A greener Kazakhstan How targeted investment will support the development of a successful green economy

EXPO 2017 Astana Dedicated to Future Energy, EXPO 2017 will be a global platform for climate-change initiatives

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73

Foundations for the future New housing, hotels, offices and shopping malls are being built to serve a growing population

A new paradigm in Kazakhstan’s financial sector Profiling Astana International Financial Centre

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78

Buying into retail Investors are clamouring to meet the consumer demand being driven by rising incomes

A catalyst for development The New Silk Road will see Kazakhstan revive its traditional role as a trade and transport hub

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82

Healthcare: 25 years of reform and achievement

Index of advertisers

Investment in health is delivering big benefits

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Interview

Saule Jundubayeva CHAIRMAN OF THE BOARD OF DIRECTORS, INTERTEACH

What are the origins of Interteach and its initial relationship with the World Health Organization? Interteach is a domestic Kazakh medical services corporation that became the first to implement medical standards in Kazakhstan based on international best practice, while simultaneously taking into account local customs and traditions. Indeed, our basic mission is to combine international experience with local wisdom. Kazakhstan founded its International School of Public Health in 1989 with the support of the European Regional Office of the World Health Organisation based in Copenhagen, Denmark. In 1991, the school was reorganised into Interteach – the Kazakh Corporation of Health and Medical Insurance – and in 1995 the company acquired its first license to carry out medical insurance in Kazakhstan. The creation of the company was part of the country’s overall plan of pursuing innovative and effective policies to address healthcare issues and medical service standards. Since its foundation, Interteach has been one of the leaders in the voluntary medical insurance market

in Kazakhstan - and remains so. Indeed, it is not only the pioneer and originator of insurance medicine in Kazakhstan, but also in Central Asia. Interteach has a network of representative offices in Kazakhstan’s largest cities, as well as across Central Asia. Additionally, it has a record of long-term cooperation with European insurance companies, including Europ Assistance, Allianz Global Assistance, BUPA and Allianz Worldwide Care.

What range of services does InterTeach offer? Interteach offers special insurance programmes and unique treatment plans designed to meet a broad range of requirements and is committed to constantly raising service quality whilst reducing, where possible, the budgetary burden of healthcare costs.

The company’s operational ethos focuses on patients’ uniqueness and individuality, high-quality medical services, professionalism, team spirit, responsibility and respect.

What is the company’s geographical reach across and beyond Kazakhstan? The company has opened regional branches and representative networks in the largest cities of Kazakhstan and also in neighbouring Kyrgyzstan, Turkmenistan and Uzbekistan. Currently, there are 25 medical clinics staffed by skilled personnel, including general practitioners, and equipped with the latest medical equipment and a fleet of ambulances.

What is the composition of the organisation’s client base?

Interteach has made significant progress during the past 20 years or so. What is the organisation’s long-term business development vision and how will this be achieved?

Interteach is Kazakhstan’s leading provider of medical insurance and services and its clients include state enterprises and large foreign and domestic businesses and joint

In line with President Nazarbayev’s objective of promoting closer interactive relations between the state and private healthcare sectors, Interteach has been granted wide

“The creation of Interteach was part of the country’s plan of pursuing innovative and effective healthcare policies” companies. Over the years, Interteach has evolved highly efficient medical service systems that interactively integrate with state and private medical institutions, facilitating the provision of specialised medical assistance to both Kazakh and foreign citizens.

opportunities to actively participate in state-private-sector partnerships given its organisational experience in the management of clinic networks. Indeed, one of our main business objectives is the further geographical expansion of this network, coupled with growth in international alliances.

INTERTEACH KCH&MI JSC Legal Address: 275D, Furmanov St, Almaty, 050059, Republic of Kazakhstan +7 (727) 3 200 200 (24-hours) | interteach@interteach.kz | www.interteach.kz


STR ATEGIC VISION

“ By 2050, Kazakhstan must become one of the top 30 most-developed countries in the world and has every chance of achieving this.” Nursultan Nazarbayev PRESIDENT OF THE REPUBLIC OF KAZAKHSTAN

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FOREWORD

Bakytzhan Sagintayev PRIME MINISTER OF THE REPUBLIC OF KAZAKHSTAN

T

wenty-five years after gaining its independence, Kazakhstan stands strong and proud at the economic centre of Eurasia, committed to economic development driven by President Nursultan Nazarbayev’s Strategy 2050, designed to take the country into the top 30 most developed countries in the world by 2050. In its short lifetime, Kazakhstan has weathered a number of economic storms, but has proven both resilient in adversity and relentless in its economic and social ambitions. President Nazarbayev’s response to the fall in oil prices in recent years was to launch in 2014 the Nurly Zhol – Path to the Future economic stimulus policy for 2015-20. This involves releasing approximately $9.5 billion from the National Investment Fund, saved up during the years of high commodity prices, to drive investment in the country’s road and rail infrastructure, logistics, IT, agribusiness and manufacturing, as well as to provide major financial support for education, research and SMEs to boost production and create thousands of new jobs. The foundation of the country’s economic wealth over the past 25 years has been Kazakhstan’s impressive reserves of natural resources, including hydrocarbons and uranium. Kazakhstan has worked closely with western oil companies to create some of the world’s largest oil fields, including Karachaganak, Tengiz and Kashagan, while simultaneously becoming the world’s largest exporter of uranium. However, Kazakhstan soon became committed to a policy of industrial diversification designed to maximise added value from its raw material base – minerals and agricultural products – through the development of processing and manufacturing operations and the promotion of new industrial sectors, in particular IT, high-tech manufacturing and green renewable energy focusing on wind and solar farms. The diversification of Kazakhstan’s industrial base is reflected in the steadily increasing range and number of both exporters and exports. The country now exports 970 types of goods to 118 different countries. The value of finished or non-basic resource exports has now risen to 30% of overall exports, compared with 24% five years ago. Kazakhstan, which last year became a member of the World Trade Organization, is now in the top 50 exporting countries, with approximately 1,800 exporters, underpinning its integration into the global economic community. Moreover, the country will soon witness further diversification into financial services when the site of Astana’s EXPO 2017: Future Energy will be transformed into the Astana

Kazakhstan stands strong and proud at the economic centre of Eurasia

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FERIZAT JUSSUPBEKOVA

FOREWORD

Astana’s Bayterek Tower is being joined by further iconic buildings, incuding the high-tech site of EXPO 2017

International Financial Centre, which has been modelled on the Dubai Financial Services Centre and will utilise English commercial law. EXPO 2017, with five million visits anticipated between June and September 2017, demonstrates the country’s prime focus on advanced alternative energy technology, while the launch of the Astana International Financial Centre is an example of Kazakhstan’s desire to create a major financial market in the Eurasian time zone, part fuelled by the sale of shares in state enterprises. Since independence, Kazakhstan has increasingly sought to attract foreign direct investors into long-term mutually beneficial partnerships based not only on the attractiveness of available business opportunities, but also by creating a business-friendly regulatory climate and increasing the ease with which foreign companies can operate in the country. Initially, much of the foreign direct investment focused on the hydrocarbons sector, but in recent years the investment has covered the entire arc of industry, reflecting wider industrial priorities. All foreign direct investment in Kazakhstan now stands at approximately $265 billion, and the door remains open for future investors attracted in particular by wider access to the markets of the Eurasian Economic Union, of which Kazakhstan was a founding member, along with Russia and Belarus. Meanwhile, Nurly Zhol, coupled with the revival of the old Silk Road across central Eurasia through China’s One Belt, One Road initiative linking east and west, will further drive development in Kazakhstan, given its advantageous geographical position.

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INTRODUCTION

Kairat Abdrakhmanov FOREIGN MINISTER OF THE REPUBLIC OF KAZAKHSTAN

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s Kazakhstan turns 25, now is the time to reflect on its achievements, both at home and in foreign policy, and to look forward to playing a role as a trusted force for good. Born as a diverse nation with more than 100 ethnic groups, a multitude of religious denominations, together with a questionable legacy of Soviet nuclear arsenal and a natural resource-based economy, Kazakhstan has turned the challenges of its birth into opportunities. Led by President Nursultan Nazarbayev, our country has made a journey from a vulnerable society to a peaceful and ambitious nation, with a vibrant NGO community in the heart of Eurasia, as well as becoming a much-respected member of the international community. Kazakhstan is now an increasingly important bridge between countries and civilisations, maximising cooperation and common good. It has acted as a force for good for many years, both in our own region of Central Asia and globally. We established a precedent by voluntarily giving up the fourth-largest nuclear arsenal in the world. We are proud of the role our President has played in building trust across Asia through his initiative, which brought together leaders of nations such as India and Pakistan, Israel and Palestine to discuss peace and security under the aegis of the CICA forum. President Nazarbayev’s record of mediation includes recent successful efforts to rebuild relations between Russia and Turkey. Leaders of all the world’s major faiths regularly come to our young capital, Astana, to exchange thoughts on religious tolerance and prevention of extremism, finding inspiration in Kazakhstan’s history of mutual respect among religious and ethnic communities. But Kazakhstan’s qualifications as a worthy global citizen extend far beyond its achievements in international diplomacy. It is the largest economy in Central Asia, attracting over $265 billion in foreign direct investment. The World Bank’s Doing Business Index puts us in 35th position among 190 countries. As part of our nation’s 2050 Strategy, Kazakhstan is aiming to enter the rank of the most-developed countries in the next 25 years. This reflects ambitious industrial growth and diversification plans, increased support for small and medium-sized businesses, and the consolidation of the country as an international location for foreign direct investment. Moreover, Kazakhstan will also benefit from the progress it is making, together with other regional partners, on the revival of the ancient Silk Road as a strategic transport corridor between Asia and Europe.

Our country has made a journey from a vulnerable society to a peaceful and ambitious nation

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ARTEM PAVELYEV

INTRODUCTION

Astana’s Mangilik El (Eternal Nation) arch was erected in 2011 to mark the 20th anniversary of independence

Our drive to become a force for good is reflected in staging EXPO 2017 on Future Energy – a global effort to build a better and cleaner future for a planet struggling with climate change. As a legacy of the exhibition, supported by over 100 countries, Astana will host an International Financial Centre (AIFC) and a United Nations (UN) Green Technology Centre, designed to accelerate both national and regional progress in financial services and the green economy. Kazakhstan has entered 2017 on a wave of optimism and responsibility. It is the beginning of Kazakhstan’s non-permanent, two-year tenure in the UN Security Council. At the end of January, Almaty plays host to the world’s largest-ever Winter Universiade sports event. Kazakhstan has achieved much over a short period of time and remains determined to build on its success – helping to promote a better and safer world for everyone.

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Interview How competitive are the Kazakhstan financial services, management consultancy and other services you provide?

Mark Smith MANAGING PARTNER,

The professional services market in Kazakhstan is very competitive and, in order to be successful, it is essential that we tailor our product offerings in line with our client’s needs. The Kazakhstan market is continually becoming more sophisticated and, in order to add value, it is critical that we leverage our international market-leading expertise.

DELOITTE CASPIAN REGION

Please briefly describe the history of Deloitte’s involvement in Kazakhstan and the evolution of the services it provides Deloitte has been operating in Kazakhstan for over 20 years and has grown into a multi-functional full-service professional services firm, offering audit and advisory, tax and legal, financial advisory and consulting services, with around 400 people employed in Kazakhstan.

Which of the services provided by Deloitte gives the firm its keenest commercial edge on competitors in Kazakhstan? Each of our five core businesses – Audit, Consulting, Financial Advisory, Risk Advisory, and Tax and Legal – grew during the last fiscal year. Last year, we launched a new service line in Kazakhstan – Forensic, the main objective of which is to help clients identify and mitigate risks related to fraud, illegal practices or unethical conduct. We have the leading Forensic practice in Russia and the CIS, leading our competitors in both scale and focus, and are well on our way to repeating that success locally.

What is the composition of your client base in terms of foreign and local businesses, and also by industrial and financial sectors? We have a broad range of local and international companies across all sectors that we are privileged to

project. As the largest professional services firm in the world, we are well positioned to assist the AIFC, particularly given our strong capabilities in financial services both internationally and locally here in Kazakhstan. We have assisted many of the newly established financial centres around the world, an example being the Abu Dhabi Financial Centre, where we played an integral role in its development. We have already been sharing our experience of the establishment of the Abu Dhabi Financial Centre with the AIFC team. The AIFC and the Government of Kazakhstan have already established some key objectives, essential for the success of the AIFC, such as the use of English law, an internationally recognised regulatory

“We have the leading Forensic practice in Russia and the CIS, and are well on our way to repeating that success locally” call our clients. Different sectors have a different composition of local and international players and thus that affects our client mix. A good example is the banking sector, where we have a strong established presence consisting almost entirely of local banks.

To what extent are you gearing up to provide services to members of the Astana International Financial Centre to be launched in January 2018? We fully support the Astana International Financial Centre (AIFC) initiative and had the pleasure of working with the AIFC team during the early stages of the

framework and the use of English as its working language. Given the strategic importance of the AIFC, we are committed to sharing experiences and assisting in its successful development.

What are Deloitte’s long-term plans and aspirations in Kazakhstan? Kazakhstan is a key market for Deloitte CIS and we will continue to focus on our core services, along with developing new capabilities to add value to our clients – for example, the forensic service line mentioned earlier and our consulting services, which are currently engaged in assisting the transformation of many of the strategic companies in Kazakhstan.


INTRODUCTION

Umirzak Shukeyev CEO, SAMRUK-KAZYNA JSC

Securing growth, maintaining momentum

I

offer my warmest wishes to all of you as we observe the 25th anniversary of independence of Kazakhstan. It is my honour to extend my greetings through this special edition dedicated to such a significant day in our history. It is truly a moment of celebration for all of us as, in the past 25 years post-independence, we have become the largest and the strongest economy in Central Asia, generating almost 60% of the GDP of this region. Sovereign wealth fund Samruk-Kazyna plays a critical role in ensuring the leading position of Kazakhstan. The fund’s portfolio companies make up about a quarter of all investments in Kazakhstan. Samruk-Kazyna unites enterprises in oil and gas, transport and logistics sectors, chemical and nuclear industry, mining and metallurgy, energy, engineering, and real estate. The Government of the Republic of Kazakhstan is the sole shareholder of Samruk-Kazyna, and the fund’s assets are estimated at $61.5 billion. Since its foundation in 2008, the fund paid 716 billion tenge in dividends and other distributions to the shareholder. Around eight trillion tenge was our fund’s contribution to the state through taxes and other payments. In 2012, the Head of State announced a new ambitious goal for Kazakhstan – to join the 30 most developed countries by 2050. Given the strategic role of Samruk-Kazyna in Kazakhstan’s economy, we assumed a principal role in implementing this mission and launched a large-scale transformation programme. The main aim of this is to completely redesign business processes and transform from an operational company to an investment holding company. According to our calculations, by 2020 eight portfolio companies of the fund will be comparable with their foreign counterparts; the annual increase in value of the assets is expected to be around 8-12%; and the 12 largest companies of the fund will reach positive economic value added (EVA). One of our strategic objectives today is to support emerging sectors of the economy and develop new companies. Currently, there are five growing companies in the fund’s portfolio. One of them is Tau-Ken Samruk, which aims to develop complex deposits by introducing advanced up-to-date technologies. So far, the company has already launched a refinery with annual production capacity of 25 tons of gold and 50 tons of silver. Additionally, the company commissioned a silicon plant with annual capacity of 23,000 tons of metallurgical silicon. At present, the company is developing three large projects: a high-quality steel metallurgical complex, as well as lead and zinc concentrating mills .

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INTRODUCTION

Oil and gas represents a key element in the Samruk-Kazyna portfolio of industrial activities in Kazakhstan

United Chemical Company, which plays the role of establishing new petrochemical and agrochemical clusters, is also one of our growing assets. The company has put two plants into operation, producing polymer products and sulphuric acid. A special economic zone, Chemical Park Taraz, which is currently under construction, will host the production of glyphosate, trichloride phosphate, caustic soda and other products. The National Industrial Petrochemical Technology Park, which is under construction in Atyrau, is an integrated gas chemical complex aimed at the deep processing of gas feedstock from the Tengiz oil field. The core of Samruk-Kazyna’s portfolio comprises large national companies such as Kazatomprom – one of the world’s leading uranium producers, which provides feedstock for about 20% of nuclear power plants around the world; KazMunayGas, which provides 28% of the total volume of oil and gas condensate produced here; transport and logistics holding company Kazakhstan Temir Zholy; and air carrier Air Astana, among others. Because of such assets, Samruk-Kazyna is already among the world’s 25 largest sovereign wealth funds. Nevertheless, we are committed to setting even higher objectives to improve the quality of the fund’s assets and increase returns on invested capital. This will lead to higher profitability of our companies and larger wealth for our country. All our efforts are made with the goal of sustaining growth and modernising our economy.

Samruk-Kazyna is already among the world’s 25 largest sovereign wealth funds

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WELCOME TO K A ZAKHSTAN

Kazakhstan has taken huge strides to establish itself as a peaceful and prosperous country, and today it sits at the heart of one of the world’s most exciting regions for innovation and development

25 years of peace and progress

T

Moreover, the country’s multifaceted foreign policy of engagement at all points of the compass rapidly became the international platform on which it was able to foster greater trade and attract increasing volumes of foreign direct investment (FDI). Initially, the Government of Kazakhstan focused on the hydrocarbons sector, before diversifying across the entire spectrum of technological, industrial and agricultural development and innovation. President Nazarbayev’s decision in the early days of independence to dismantle Kazakhstan’s nuclear arsenal – the fourth largest in the world at that time – and sign the International Nuclear Non-Proliferation Treaty

he Republic of Kazakhstan has travelled a long way since becoming an independent sovereign state in 1991 when the Soviet Union collapsed – an event that spawned a cluster of new states whose economic and political future seemed, at that time, far from assured. Of all those states, Kazakhstan has been the most successful, reflecting not only its vast reserves of natural resources – principally oil, gas and uranium – and agricultural hectares, but also a development policy, driven relentlessly by President Nursultan Nazarbayev, aimed uncompromisingly at modernisation, industrial diversification and balanced economic growth.

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WELCOME TO K A ZAKHSTAN

was fundamental to the successful evolution of the country’s foreign relations strategy. It sent out a message of peaceful intent, which over the years that followed was increasingly reinforced as Kazakhstan became a world ambassador for nuclear disarmament, encouraging others to follow suit. To date, Kazakhstan’s biggest achievement in this regard has probably been the seminal role it played in encouraging and facilitating talks between Iran and, principally, the United States – the so-called P5+1 dialogue between the permanent members of the United Nations (UN) Security Council plus Germany – which led to a breakthrough deal on Iran’s nuclear programme.

In a short period of time, Kazakhstan has evolved into a modern country focused on development and inclusive growth

Kazakhstan’s stance on nuclear weapons has also resulted in its hosting of the world’s first low-enriched uranium bank to securely warehouse surplus enriched uranium from nuclear power producers around the world. Ultimately, Kazakhstan’s nuclear security achievements – along with energy supply security, and food and water security – were a key feature of its successful campaign to become a non-permanent member of the UN’s Security Council in 2017-18 – its greatest single foreign policy success to date.

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PLANETPIX/ALAMY LIVE NEWS

WELCOME TO K A ZAKHSTAN

Kazakhstan was a founding member of the Eurasian Economic The global matrix of good relations that the country Community, now renamed the Eurasian Economic Union has developed needed (and still needs) skill, energy and statesmanship, particularly so given the rise in global Over 25 years, Kazakhstan has become a model of political and financial tensions in recent years. interethnic and inter-religious harmony. More than Although Kazakhstan was formed in the wake of 130 ethnic groups and 20 religious faiths have positive the Soviet Union’s collapse, it immediately became and friendly relations within the country. Interethnic and remains a member of the Commonwealth of relations are regulated by the Assembly of the People Independent States (CIS), a body designed to promote of Kazakhstan, which was established by President political and economic cooperation between former Nursultan Nazarbayev on 1 March 1995. members of the Soviet Union. Kazakhstan has made an important contribution to Additionally, Kazakhstan – along with Russia, strengthening global peace. One of the key initiatives Belarus, Tajikistan and Krygyzstan – founded the suggested by Kazakhstan is the establishment of the Eurasian Economic Community as a customs union Congress of Leaders of World and Traditional designed to promote cross-border commerce and Religions, aimed at establishing peace, accord investment. It later morphed into the Eurasian and tolerance between world faiths. Economic Union, designed to rigorously Kazakhstan has been a member of focus on free trade in goods and services NATO’s Partnership for Peace since the and the free movement of people and programme’s inception in the 1990s. The capital, as well as harmonisation of country promotes closer security ties national social and economic policies. between NATO and Astana, is a committed The country has also established part of the coalition against terror and initiatives that have built key trade and has continuously sought to help stabilise investment ties with a host of other leading Afghanistan. Moreover, in international markets, including the European Union, matters where Kazakhstan has deemed it the United States and China. of foreign direct investment into the country could help resolve disputes or arguments it has willingly acted to promote harmony. PROMOTING PEACE Kazakhstan’s diplomatic attainments undoubtedly Today a committed member of the Organization for played a role in helping the country become a trusted Security and Co-operation in Europe, Kazakhstan chaired member of the global trade and investment community the 2010 summit, adding significantly to the country’s – latterly as a fully fledged member of the World Trade foreign policy credentials. Moreover, Kazakhstan also Organization. In particular, it helped attract huge became a prominent member of the Organisation of levels of FDI into the country – a cumulative figure now Islamic Cooperation, which it chaired in 2011-12. As a rising to around $265 billion – and gain the support of secular but majority Muslim country, it provides a international financial institutions such as the bridge between Muslim and non-Islamic states.

$265bn

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WELCOME TO K A ZAKHSTAN

across Kazakhstan, and is a key element of China’s One Belt, One Road strategy. This is designed to boost cooperation and revolutionise logistics between China and Europe by land and between China and Oceania, India, Pakistan and Africa by sea. This vast project will bring new investment to Kazakhstan, some of it underpinned by the recently launched Asian Infrastructure Bank, of which it is a founder member. Meanwhile, Kazakhstan is well aware that the future of energy is not hydrocarbons, but renewables. The former will not last forever and are not, in any case, in keeping with the country’s commitment to a greener future, both nationally and internationally. Thus, the President has decreed that by 2050 half the country’s energy needs must be met by renewables such as solar, wind, hydro and biomass. Given its topography, climate and agricultural base, this should be an achievable goal. Moreover, Kazakhstan could also generate significant foreign revenue through the sale of renewably generated power on the Eurasian electricity grid. The country’s commitment to renewables will be globally underlined in mid 2017 when Astana EXPO 2017: Future Energy opens its gates to an expected five million attendees in the event’s three-month run. Involving 100 countries and 10 major international organisations, Astana EXPO 2017 will showcase energy best-practice technology from around the world and help focus the global energy industry on a green future.

Improving Kazakhstan’s railway network is part of the comprehensive Nurly Zhol development plan

European Bank for Reconstruction and Development. Further, it enabled the country to develop and diversify its economy with the assistance not only of external funding, but also the technology transfer and business practices that often comes with it. However, the passion and ambition that drove Kazakhstan’s development dream came from within. President Nazarbayev’s ambition is to build a country that by the middle of this century joins the top 30 mostdeveloped countries in the world. The strategy and the policy architecture are laid out in Strategy 2050, a development plan set out by the President in 2012. It was further underpinned by the Nurly Zhol (Bright Path) $9 billion stimulus package in 2014, in response to the collapse in the price of oil. Nurly Zhol is designed to kickstart a series of major infrastructure projects, including roads, bridges, railways and IT, as well as incentivise investment in the non-oil sectors. These include agribusiness, manufacturing and tourism. In addition, Nurly Zhol serves to funnel funding into the underinvested small and medium-sized enterprises sector. The infrastructure component of Nurly Zhol partly integrates into Kazakhstan’s contribution to the re-establishment of the Old Silk Road. This route traverses the territory from China to Europe, running

Kazakhstan is well aware that the future of energy is not hydrocarbons, but renewables

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BUILDING EUR ASIA’S ECONOMIC POWERHOUSE

Kazakhstan is well positioned to harness the potential of its natural resources – from oil, gas and uranium to renewables

ANDREY RUDAKOV/BLOOMBERG VIA GETTY IMAGES

An expanding energy sector

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BUILDING EUR ASIA’S ECONOMIC POWERHOUSE

I

n the 25 years since independence, Kazakhstan, in partnership with foreign direct investors (FDIs), has developed not only a flourishing energy industry, but has put in place overarching, long-term policy frameworks designed to ensure the country’s own energy security, while it becomes an increasingly significant and trusted energy supplier in global markets. Kazakhstan is seeking to maximise the benefits of its vast natural resource base by focusing firmly on responsible production and industrial strategies geared to optimising long-term returns. Moreover, it is also closely committed to efficient “green” energy consumption and the rapid, costeffective development of a broad range of renewables – so much so that it successfully bid to host Astana EXPO 2017: Future Energy, a world exhibition on this fundamentally important sector that will run in the Kazakh capital from June to September and has a projected attendance of around five million people.

Kashagan – they are far from easy to exploit due to temperature extremes, varying pressure levels and the amounts of sulphur involved. That said, with steadily rising output driven by Kashagan coming on stream and vast areas of Kazakhstan still to be explored, crude oil is set to be a key component of Kazakh economic development for many years ahead.

INCREASING GAS OUTPUT Meanwhile, natural gas production is making an ever-increasing contribution to the Kazakh economy with rising output from the country’s reserves of over 1.5 trillion cubic metres set to generate greater export availability – a trend that is partly underpinned by reducing the amount of gas reinjected into oil wells to boost crude production. FDIs, which have focused on the Kazakh hydrocarbons industry, emanate from around the globe and include western majors such as Chevron, Exxon, Shell and ENI, ussia’s Rosneft and Lukoil, and China’s Sinopec and CNPC.

30 billion barrels

1.5 trillion cubic metres

of crude oil reserves

gas reserves

Richly endowed with oil, natural gas, coal and uranium, the country is blessed with an almost ideal natural platform for the development of renewables – much heat and sunshine, fast-flowing water and enormous tracts of open land, and even mountainous valleys close to the Chinese border that funnel winds naturally and accelerate their speed. For the time being, however, crude oil remains the single most important contributor to the Kazakh economy, accounting for nearly two-thirds of revenue and around one-third of the country’s GDP. It was the first industrial sector on which FDIs focused after Kazakh independence in 1991 and accounts for around 30% of overall net cumulative FDI. While the country’s currently deemed recoverable crude oil reserves of around 30 billion barrels are conveniently concentrated in a small number of massive oil fields – most prominently Karachaganak, Tengiz and Kazakhstan is Central Asia’s largest oil producer, with output of around 1.72 million barrels per day

In addition to their specific role as partners in hydrocarbon exploration, development and production, their increasing presence and involvement in Kazakhstan has also facilitated high levels of technology transfer, as well as the introduction of new business practices within and substantially beyond the energy industry. Their presence has also been important in helping Kazakhstan maximise local added value to oil and gas production, by increasing the country’s refining capacity in a drive to eventually make the country self-sufficient in oil derivatives. Currently possessing three refineries at Shymkent, Pavladar and Atyrau, the country’s refining capacity development plans involve boosting both the volume and spread of product to include substantial supplies of high-octane gasoline and jet fuel. The same local beneficiation policy has also been adopted in the uranium industry. Kazakhstan has around 12% of world uranium reserves and is the world’s largest producer, accounting for over 40% of global output.

27 KAZAKHSTAN AT 25 – GLOBAL PARTNER


BUILDING EUR ASIA’S ECONOMIC POWERHOUSE

PETR BAUMANN / SHUTTERSTOCK

50% of Kazakhstan’s own energy consumption has to be met by renewables – wind, solar, hydro and biomass. To help achieve this, the government is continuing to develop a framework of special incentives designed to boost investment in this sector, both domestically and internationally.

FUNDING AGREEMENT

However, its long-term objective is to maximise its exports of semi-processed uranium pellets, thereby generating a greater economic return. Kazakhstan aims to maximise its presence at all stages of the nuclear industry fuel cycle. Since 1999, when it closed down its only nuclear reactor at Atyrau, it has not possessed any domestic nuclear power-generation capacity. This is set to change, with plans to build at least one such facility with foreign partners, in line with its aim of becoming a regional supplier of electricity, particularly within the tariff-reducing Eurasian Economic Union. It is also committed to direct involvement in nuclear power in foreign energy markets, as demonstrated by its acquisition of a stake in nuclear energy company Westinghouse. Kazatomprom, the country’s holding company for all its nuclear activities, is at the core of all agreements between Kazakhstan and foreign governments and companies, including Cameco, Areva, Sumitomo, Russia’s Uranium One and China’s CGN. Elsewhere in the energy mining sector, coal production continues to expand, driven by the world’s largest open-cast mine at Bogatyr. By 2020, the output target is around 150 million tonnes, substantially above current levels with increased production targeted at exports. Much of the country’s thermal coal is consumed in the domestic market, though about a quarter of output is exported to Russia. However, China and India look set to become important markets. Meanwhile, Kazakhstan is very much aware that fossil fuels are not the way of the future. President Nursultan Nazarbayev declared in his 2050 Strategy for economic development that, by the middle of the century,

Solar is an important element of Kazakhstan’s renewable energy mix

By 2050

50% of Kazakhstan’s energy consumption is to be met by renewables

The government continues to work closely with the European Bank for Reconstruction and Development (EBRD) on the development of its renewables sector, and recently received an endorsement of its aims when the Bank signed off a €200 million framework funding agreement covering mainly private projects across the entire arc of alternative energy. The funding is targeted mainly at privatesector projects and is designed to generate an additional 300MW of power over the next five years. Around 20% of the funding is expected to underwrite improvements in the electricity grid to boost delivery efficiency and, overall, the EBRD’s solid backing is likely to result in other substantial international support including from the Clean Energy Fund and the Green Technology Fund. The EBRD has previously featured strongly in the development of Kazakhstan’s renewables sector – for example, funding Burnoye Solar, the Yereymentau wind farm and the rehabilitiation of the Shahdara hydropower plant rehabilitation. Under the latest funding arrangement, the EBRD will continue to work closely with the Kazakh government on the evolution of energy policies that facilitate the development of the renewables sector, including appropriate mechanisms for the creation of an incentivising regime of feed-in tariffs. Currently, Kazakh renewable energy output is dominated by hydroelectric power schemes – including mini generation systems that require no retaining dam – but the potential on all fronts is vast, given favourable landscapes, high sunshine levels and the massive potential for biomass energy generation from extensive agricultural waste. The seemingly endless steppe and the mountains beyond Almaty towards the Chinese border are alone considered capable of generating wind energy equivalent to 10 times current annual Kazakh consumption.

28 KAZAKHSTAN AT 25 – GLOBAL PARTNER


Competitive costs coupled with abundant mineral resources continue to define Kazakhstan’s mining sector, which remains resilient in the face of challenging economic waves in the global arena

T

he commodities boom of the early 2000s was a golden era for Kazakhstan. Marked by a good run of prosperity from its plentiful mineral wealth, the country reaped the rewards, quite literally, from its abundant landscape. And although it is now feeling the effects of lower prices, Kazakhstan is well placed to stake an increasing claim to global mineral markets. Richly endowed with an array of resources, the prospects of the country’s mining sector remain strong and continue to catch the attention of international investors. A dredge extracts minerals from Kazakhstan’s rich ground reserves

Kazakhstan produces a diverse range of mineral commodities. It remains the world’s leading producer of uranium, accounting for 39% of the global supply in 2015, and is also a leading miner of non-ferrous metal ores, iron ores, coal and lignite, as well as natural gas. In terms of mineral potential, Kazakhstan has a large share of the world’s known mineral reserves. It boasts 30% of global reserves of chrome ore, 25% of manganese ore and 10% of iron ore. It ranks first globally for reserves of wolfram; second in chromium and uranium stores; fourth in reserves of manganese and silver; and fifth in zinc. More than 60 different elements found in the country are converted into some form of industrial output.

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ABUTYRIN / SHUTTERSTOCK

From the ground up


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The country’s economy has benefited significantly from such rich mineral reserves, with the industry accounting for a large share of Kazakhstan’s GDP and foreign trade revenue. The sector’s success has partly been a result of a government drive to promote the development of the mineral industry, and today it is still one of the country’s most competitive and fastest-growing sectors.

INCREASING EXPORT REVENUE Kazakhstan’s focus in terms of the mining sector and related metallurgical activities lies on the export of raw materials and primary metals. The ongoing development of the sector is a prominent area of interest, with plans to establish new manufacturing industries for metallurgy tied to these growth plans. Ensuring the rapid growth of high-tech production processes, expanding exports to foreign markets and meeting domestic needs are all areas under the spotlight. For foreign investors, Kazakhstan’s mining sector offers an attractive environment. Tax breaks and other incentives serve to draw investment from around the world, and the rapid implementation of projects can partly be attributed to the success of such incentives. The country is climbing the rankings in terms of ease of doing business, and many prospective investors are looking to cash in on Kazakhstan’s competitively low operation costs. Given its vast resources, Kazakhstan operates its mining sector on a level unseen in other countries. The sheer scale of operations means that mining costs are very low. Given the weak state of the international market, many investors consider this to be an attraction too strong to resist. Lower costs have been an ongoing trend. In 2015, copper producer and listed company (on the stock exchanges in London, Kazakhstan and Hong Kong) Kaz Minerals (formerly Kazakhmys) hit its output target after posting production of more than 19,000 tonnes of copper cathode in the first quarter. This followed a restructuring in 2014, which shifted the company’s focus to large-scale, low-cost open-pit mining in Kazakhstan, and transformed it into a smaller, but lower-cost, producer. In October

SHARE OF GLOBAL RESERVES

30% Chrome ore

2016, the company reported quarter-on-quarter production growth, having produced 44,500 tonnes of copper cathode equivalent during the third quarter – up considerably on figures from the first and second quarters of 2016. Following the announcement, broker Shore Capital commented that the full-year guidance of between 135,000 and 145,000 tonnes might be “eminently achievable and, indeed, beatable”. By 2018, Kaz Minerals plans to expand its output to around 300,000 tonnes through three major new projects: Bozshakol, Aktogay and Koksay. Commissioning at the Bozshakol clay plant began in September 2016, and the plant has an annual processing capacity of five million tonnes. The Aktogay project, meanwhile, underwent a reduction in cost of $100 million. The company reported that it was applying its experience from the Bozshakol mine project, and production of copper in concentrate from sulphide ore at Aktogay is expected to begin this year.

INTERNATIONAL INVESTMENT

25% Manganese

10% Iron ore

Kaz Minerals is in good company when it comes to major mining businesses in Kazakhstan, and many are receiving significant investment from international sources. In 2015, Eurasian Resources Group (ERG) secured more than $2.5 billion in financing from Chinese banks for new projects in Kazakhstan and Africa, with China Development Bank providing at least $2 billion for three projects in Kazakhstan’s aluminium, iron ore and power sectors. The agreement comes under the umbrella of China’s major One Belt, One Road initiative, which seeks to revive the historic trade routes of the old Silk Road economic belt and give economies along the way a significant boost in activity. ERG has also signed deals with Russia, borrowing more than $350 million in two separate loans from Russian lender VTB to provide pre-export financing for ERG’s aluminium plant. Though resilient, Kazakhstan has suffered some collateral damage from low oil prices and the recession in Russia. Amid slowing growth, the effects were felt last year throughout the economy, yet Kazzinc, another big player in the country’s mining sector, has reason to stay positive. The company credits its success to well-skilled, mobile and motivated human capital, and it is placing

30 KAZAKHSTAN AT 25 – GLOBAL PARTNER


PHOTOSPB / ISTOCK

BUILDING EUR ASIA’S ECONOMIC POWERHOUSE

focus on continually improving and innovating its long-term development strategy. It is an adaptable approach. Speaking to The Astana Times  in 2016, the company said, “The situation in the global mining and metals industry is very complicated because of the decline in economic activity and metal prices, but due to the efforts taken by the government and the company’s management, Kazzinc is

Open-pit mining has become a more costeffective option for some mining companies

enterprise of EuroChem Group AG, which signed a memorandum of understanding (MoU) and partnership with the Kazakh Ministry of Investment and Development for the project.

MAJOR INVESTOR

Given its vast resources, Kazakhstan operates its mining sector on a level unseen in other countries overcoming the current difficult economic period with minimal losses.” At the same time, new investments are taking place. In October 2016, it was announced that nitrogen and phosphate fertilizer company EuroChem is investing in a mineral fertilizer production complex to be built in the Zhambyl region in the north of Kazakhstan. EurChem-Karatau is the Kazakh subsidiary

The company is one of the biggest investors in Kazakhstan, having undertaken a number of projects in the Zhambyl region since 2013. One example is its allocation of $18 million to social and economic development in the region. EuroChem director general Dmitry Sterzhnev said, “Signing a memorandum is an important and consecutive step on the way to implementing one of our strategic projects. We thank Kazakhstan’s authorities for supporting our efforts and are glad about this cooperation becoming stronger. [The signing of the MoU] confirms that we keep our commitments on implementing our project, improving the region’s social and transport infrastructure and expanding a format of public and private partnership.” During the second phase of the project, EuroChem plans to reach 1.5 million tonnes of rock phosphate production volume per year.

31 KAZAKHSTAN AT 25 – GLOBAL PARTNER


INDUSTRY PERSPECTIVE

KAZ Minerals is entering a new growth phase, ramping up output from its mines and delivering new projects of national and international significance

Delivering world-class mining projects A NEW HIGH-GROWTH MINING COMPANY IS CREATED KAZ Minerals was formed after the separation of Kazakhmys and KAZ Minerals in October 2014. Following the demerger of these two businesses, KAZ Minerals retained four operating copper mines in the East Region of Kazakhstan and three major growth projects, two of which were under construction. In the past two years, KAZ Minerals has continued the development of the projects Bozshakol and Aktogay, and we are now at the beginning of a new phase of high production growth as we ramp up output from these mines. We expect copper production of between 135 kt and 145 kt in 2016 compared to 84 kt in 2015, representing growth of around 67 per cent. We will sustain our annual production growth at more than 50 per cent for the next two years, and by 2018 KAZ Minerals will be the largest copper miner in Kazakhstan, producing more than 300 kt of copper with more than 80 per cent of its production from new open-pit copper mines.

MAJOR GROWTH PROJECTS The two new projects that will deliver this growth are Bozshakol in the Pavlodar Region and Aktogay in the East Region of Kazakhstan. These projects are both of national and international significance given their scale and low-cost position compared

to other copper mines globally. Together, they are forecast to account for more than two-thirds of the total increase in new copper production across the entire Commonwealth of Independent States (CIS) region in the period from 2016 to 2018. Bozshakol is a first-quartile asset on the global cost curve and will have an annual ore-processing capacity of 30 million tonnes when fully ramped up, with a mine life of 40 years at a copper grade of 0.36 per cent. The mine and processing facilities will produce 100 kt of copper cathode equivalent and 120 koz of gold in concentrate per year over the first

Aktogay is competitively positioned on the global cost curve and will produce an average of 90 kt of copper cathode equivalent from sulphide ore and 15 kt of copper cathode from oxide ore per year over the first 10 years of operations. Both projects employ modern technology to process large volumes of ore into copper concentrate, which is then exported for processing into copper cathode. In the open pits we have deployed a highly efficient fleet of mining vehicles capable of moving more than 70 million tonnes of material per year over the life of the mines. The fleet is controlled by

Demand from emerging economies – in particular China – is continuing to grow 10 years of operations. Aktogay is a large-scale openpit mine similar to Bozshakol, with a mine life of more than 50 years and average copper grades of 0.37 per cent (oxide) and 0.33 per cent (sulphide). Aktogay commenced production of copper cathode from oxide ore in December 2015, and the production of copper in concentrate from sulphide ore is expected to begin in the first half of 2017. The sulphide concentrator will have an annual ore-processing capacity of 25 million tonnes when fully ramped up.

an automated dispatch system that tracks the movements, loads and fuelling requirements of every vehicle in real time. Both Bozshakol and Aktogay will process ore on-site through modern and efficient sulphide concentrator plants, each capable of processing 25 million tonnes of ore per year. The semi-autogenous grinding and ball mills are among the largest in the world. After flotation and drying, copper concentrate is automatically loaded directly onto the rail network for export to smelting customers


INDUSTRY PERSPECTIVE

in China. All the equipment within the concentrator plants has been supplied by leading international manufacturers with reputations for reliability and efficiency. Each new mine will employ 1,500 people when fully operational, offering exciting employment opportunities in Kazakhstan. The sites are operating to the highest global standards and our training programmes are already transferring valuable skills to a new generation.

THE FUTURE FOR COPPER KAZ Minerals is focused on copper production, and while short-term movements in commodity prices can be difficult to predict, we have a positive view of the market over the medium to long term. Globally, a number of large-scale mines are approaching the end of their lives and suffering from reducing copper grades, which increases the cost of production and ultimately, output from these mines will cease altogether. At the same time, demand from emerging economies – in particular China, where close to half of the world’s annual copper output is consumed – is continuing to grow. On current projections, most market analysts agree that there will be a significant deficit in the market from

2020, and possibly sooner, which would need to be met by new supply, such as the projects KAZ Minerals is developing. As the world moves towards adopting clean energy-generation technologies or low-emission vehicles to meet the challenges of climate change, we expect copper usage to increase significantly. Both new product applications and the installation of electrical distribution networks required to support new technologies are expected to boost demand for copper in the longer term.

KAZ Minerals is a listed company in the UK, Hong Kong and Kazakhstan, with a market value of more than $2 billion and more than $10 million of shares traded every day on the

London Stock Exchange. The group’s listed status, held since 2005, gives it access to international investors, and more than 50 per cent of the shares in KAZ Minerals are owned by such investors. The group has been able to secure approximately $4 billion of foreign direct investment into Kazakhstan to fund the construction of the Bozshakol and Aktogay projects. We are excited to be delivering our world-class mining projects and their associated benefits at the same time as Kazakhstan marks its 25th year of independence. We are proud to join in the celebration of this important milestone in our shared history and we look forward to continuing the responsible development of Kazakhstan’s natural resources, in partnership with all of our stakeholders.

LONDON OFFICE

KAZAKHSTAN OFFICE

KAZ Minerals PLC 6th Floor, Cardinal Place, 100 Victoria Street, London SW1E 5JL TEL: +44 (0) 207 901 7800

KAZ Minerals Services Ltd 8 Zh.Omarova Street Almaty 050020 TEL: +7 727 244 03 53

BRINGING INTERNATIONAL INVESTORS TO KAZAKHSTAN

EMAIL: info@kazminerals.com | WEBSITE: www.kazminerals.com


Economic diversification is behind a surge in growth in the manufacturing industry, which is being underpinned by government funds and driven by interest from foreign investors

Made in Kazakhstan

34 KAZAKHSTAN AT 25 – GLOBAL PARTNER


BUILDING EUR ASIA’S ECONOMIC POWERHOUSE

T

he manufacturing sector in Kazakhstan is undergoing rapid growth – a fact that hasn’t gone unnoticed by foreign investors. In the first quarter of 2016, more than $2.5 billion was funnelled into the manufacturing industry by foreign direct investors. More significantly, this figure was forecast to quadruple by the end of the year. The past five years have seen the industry’s production volume double, and those at the forefront of the sector are now looking towards the potential in chemical manufacturing, which has significant export capacity. Kazakhstan already produces petrochemical products, fertilizers, agrochemicals and polypropylene, and the chemical industry has experienced healthy growth over the past few years. On average, the chemical industry has expanded by 5-6% each year. In 2015, the Development Bank of Kazakhstan JSC began financing 61 projects worth $167 million in the manufacturing sector. A number of the projects are in the chemicals sector, with funding being provided for the construction of a granulation workshop and the purchase of equipment for polypropylene powder production in the Pavlodar region. Financing is also being directed towards the modernisation and expansion of a lubricant production project in South Kazakhstan, and the reconstruction of an extraction phosphoric acid production workshop is being funded in the Zhambyl region. Such financing is part of the Kazakh government’s programme of industrial and innovative development; within this, the manufacturing sector and the chemical industry have been pinpointed as priority

BRENDAN SMIALOWSKI AP/PA IMAGES

Then US Secretary of State John Kerry tours the Kazakhstan Temir Zholy locomotive plant in 2015

Average annual growth of the Kazakh chemical industry

5-6%

areas. According to Borisbiy Zhangurazov, Chairman of Kaznex Invest, the country’s National Export and Investment Agency, the chemical industry in particular has become increasingly active in recent years. “The average growth of the chemical industry in Kazakhstan amounted to five to 6% and reached 30% per year,” he says. “During 2015, the volume of the chemical industry reached 244 billion tenge [$732 billion], and today the share of the chemical industry in the manufacturing industry is 4.2%. It increased nearly twofold since 2010, when the share of the chemical industry was only 2.7%.”

REVERSING GLOBAL TRENDS The investment agency reports that foreign direct investment (FDI) in the chemical industry over the past six years amounts to $191 million – an impressive figure given the pattern of declining FDI seen globally during that period. “Despite the fact that in 2015 we saw the decline in foreign direct investment in the whole world, for the first quarter of 2016 Kazakhstan has attracted more than $2.5 billion of the net FDI in the manufacturing industry,” says Zhangurazov. He went on to reiteate the forecast figure of $10 billion in net FDI by the end of last year. These growth figures are testament to the business acumen that Kazakhstan has applied to fostering sector expansion in recent years. Arguably, it is knowing the necessity of conveying the country’s advantages to foreign observers that has led to this success. Kaznex Invest has channelled efforts into advertising, events and generally promoting the country as being home to an investment-attractive economy. In doing so, it has established fruitful direct relations with foreign enterprises, and raised awareness of the country as a good place to do business for prospective investors.

During 2015, the volume of the chemical industry reached

KZT 244 billion [$732 billion]

35 KAZAKHSTAN AT 25 – GLOBAL PARTNER


BUILDING EUR ASIA’S ECONOMIC POWERHOUSE

Transparency has also been key, with Kaznex Invest providing detailed information on the investment climate and there being assistance available from the government. Speaking in 2015, Zhangurazov reported that webpage views for investment-related resources had jumped significantly, with major increases in traffic from visitors all around the world. That same year, with a view to increasing the number of domestically manufactured products, President Nursultan Nazarbayev launched the Made in Kazakhstan campaign. As well as developing local production, the initiative works to make goods produced in the country more competitive in global markets. The government’s export agency provides tools and advice for exporters, including how to evaluate whether a company is ready to export its products or services and how to research potential export markets. The scheme has seen some success, with a Made in Kazakhstan product store opening in Astana in May 2016. Here, customers can buy more than 2,000 domestically produced goods. need to maintain its cost competitiveness. AUTOMOTIVE EXPANSION Regardless, the rising demand for vehicles in But the country’s breadth of manufacturing the country is being noticed by international skills stretches further still. Automotive car manufacturers and exporters, who are production remains one of the manufacturing attuned to the huge import potential here. sector’s most successful segments. Speaking Expansion in the automotive sector is a to Edge KZ, Erik Sagymbayev, trend that can be seen elsewhere in the president of the Azia Avto car manufacturing sector. Kazakhstan manufacturing company in has long sought to diversify Oskemen, put into context the its economy and become less unprecedented growth and dependent on energy exports, planned expansion in the and the country already has sector. “On average, there a strong manufacturing base is a car in every second on which to build. household [in Kazakhstan]. Growth is filtering into all Let’s do a little math. The corners of the manufacturing By 2020, Azia Avto plans average [monthly] salary in sector, and the increased to produce more than Kazakhstan is 107,000 tenge inflows of FDI can be partly ($700). This is to say that attributed to the Nurly Zhol one of the family members state programme. Announced cars for the Kazakh of any Kazakh household by President Nazarbayev market each year could afford to pay for an in 2014, it is responsible automobile made in Oskemen for a significant increase [by Azia Avto] within 16 months.” in investment in non-oil sectors, including By 2020, Azia Avto plans to produce more manufacturing, which grew by 19.5% in 2016 than 40,000 cars per year for the Kazakh to September. The programme seeks to market and in excess of 70,000 vehicles for encourage foreign investment and strengthen markets in Russia. Yet the country’s new the Kazakh economy, and its impact alongside customs union with Russia and Belarus could growing international interest in Kazakhstan’s pose challenges to the industry, which will markets is hotly anticipated.

40,000

36 KAZAKHSTAN AT 25 – GLOBAL PARTNER

Car production is rising to meet demand at home and abroad


From groundbreaking technology clusters to rapidly improving digital infrastructure, Kazakhstan has positioned itself as a regional leader in delivering and creating technology

A

s Kazakhstan moves away from energy sectors and towards becoming a knowledge economy, its technology sector is thriving. The country is making strides in this area, from building innovative technology parks to leading the way in launching communication satellites, and its determination to push ahead has led Kazakhstan to become a test bed for new ideas and projects. Creating value-added industry is at the heart of the country’s development plans. With a firm focus on boosting competitiveness and economic sustainability, Kazakhstan is working hard to attract innovators and technology enterprises to create the Central Asian equivalent of Silicon Valley. Such targeted efforts are already reaping considerable rewards.

In 2015, it was announced that information technology giants General Electric, Microsoft and Samsung would be among six companies joining the country’s hotly awaited Science Park Astana Business Campus at Nazarbayev University, which is intended to serve an an intellectual innovation cluster. Construction of the campus began that same year, and President Nursultan Nazarbayev has said that the new university should become the platform for the country’s knowledge economy. It will be largely responsible for delivering new technologies to market, which will originate from the campus’s four clusters: ICT, engineering, biomedicine and geology. The cluster zones are based on the demands of the current economy, yet the prioritisation of the knowledge economy will give rise to higher profitability of intellectual capital. Increasing demand for mobile payment options led Visa to join forces with Kazkommertsbank

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MARTIN DIMITROV / ISTOCK

The tech economy


BUILDING EUR ASIA’S ECONOMIC POWERHOUSE

more than

half the population

Kazakhstan currently ranks

58th

139

countries in terms of fixed broadband internet subscriptions per 100 people

enjoys internet access

4G mobile services are currently being rolled out in Astana and across most Kazakh cities

out of

To ensure that Kazakhstan is economically competitive in the global arena, the country’s government has pursued a range of programmes and initiatives aimed at growing and promoting the ICT sector. An example that recently concluded is the InnovationIndustrial Development Strategy, which spanned more than a decade and sought to modernise the economy. To achieve this, it created conditions favourable for the production of competitive products; cultivated a business-friendly environment and took measures to stimulate private-sector growth; diversified the country’s export portfolio; and enhanced Kazakhstan’s integration into regional and global markets.

The effect of such programmes has had a positive impact on the economic structure of the country. Not only that, but Kazakhstan is carefully positioning itself as Central Asia’s technology hub. In late 2015, Astana’s Palace of Independence hosted TechConnect, the largest technology conference in the region. More than 150 start-up companies and investors attended the event, along with 2,000 visitors from all over the world. “This forum is a platform to deepen cooperation, as well as a unique opportunity to attract the leading players of the technological business community and a new impulse to develop innovation in the country. I am sure that hosting this event will allow Kazakhstan to position itself as a key technology hub of the former Soviet Union,” said President Nazarbayev in his message to delegates.

CREATING OPPORTUNITY

ERIC LAFFORGUE/GAMMA-RAPHO VIA GETTY IMAGES

During the event, Sanzhar Kettebekov, CEO of investment service Almaty Tech Garden, shared details of the Startup Kazakhstan programme. The initiative provides opportunities for all students, scientists and entrepreneurs to launch start-up companies in areas that will benefit the city. Sectors of interest include education, infrastructure, the environment and e-commerce. Speaking at TechConnect, Kettebekov explained that the programme is about attracting start-ups from Kazakhstan and abroad to the country’s technology centres. “We hope it creates a wave of new companies,” he said. Fifty companies are expected to be established as a direct result of the programme

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BUILDING EUR ASIA’S ECONOMIC POWERHOUSE

more than

Kazakhstan is currently ranked

31 million

seventh

mobile subscribers

in the CEMEA region for overall volume of transactions with contactless cards

– growth that is regarded by many as just the beginning of an explosion of start-ups and small and medium-sized enterprises. Yet it is not only businesses that are benefiting from the proliferation of technology in Kazakhstan. Internet usage has grown rapidly in recent years, and today more than half the population has internet access. In line with this increase there has also been a rise in the uptake of superfast broadband. The country ranks 58th out of 139 countries in terms of fixed broadband internet subscriptions per 100 people, according to the World Economic Forum’s (WEF) Global Competitiveness Report for 2015-16.

PAYMENTS ON THE MOVE Mobile penetration has also boomed. Mobile subscribers reached more than 31 million people this year, and the country’s four major operators are, at the time of writing, working to have 4G LTE (long-term evolution) services available in all regional capitals and most cities. This has led to a rise in demand for mobile payment options. Although there is already a range of operators offering mobile payments, in early 2016 American financial giant Visa joined forces with Kazkommertsbank to launch their own contactless payments, using Android smartphones. “Visa payWave technology accelerates and simplifies the payment for goods and services, thus creating additional comfort, both for buyers and for sellers,” says Galym Tabyldiev, regional manager of Visa in Central Asia. “Therefore, contactless payment volumes are growing: today Kazakhstan takes third place

in the CEMEA [Central and Eastern Europe, Middle East and Africa] region in terms of contactless transactions carried out abroad, and seventh place by the overall volume of transactions with contactless cards.” This technology is being welcomed by Visa cardholders in Kazakhstan, who can now easily use their Android smartphones to pay for products and services. This method of payment can also be used in other countries where Visa payWave is available. There has been a recent surge Global in global interest in Kazakhstan’s Competitiveness technology markets, which offer significant potential for Index investors. In the WEF’s 2016-17 Global Competitiveness Report, Kazakhstan rose in the Global Competitiveness Index in Technological Readiness (+5) and Technological Innovation (+13). The country has readiness expressed eagerness to cooperate in developing information technologies with other countries, including China and Belarus. Speaking ahead of the Innovation Broadening the Horizons: Investment, Finance, Development forum in Minsk in September 2016, Galymbek Mamrayev, Deputy Chairman of the Board of the Kazakhstan Public Private Partnership Center, explained how Kazakhstan is expanding its IT market. “We are now opening our market to IT companies. Belarus is a leader in this field, and this is why we expect that cooperation between our countries in this area will advance,” he said.

+5

+13

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From sparsely populated steppe to towering metropolises, much of Kazakhstan has experienced rapid transformation in recent years. Now, the country has its sights set on developing a digital hub, and foreign investors are invited to share their expertise

KYNNY / ISTOCK

Better connected

40 KAZAKHSTAN AT 25 – GLOBAL PARTNER


BUILDING EUR ASIA’S ECONOMIC POWERHOUSE

W

ith the uptake of technology at Certainly, the city is piquing the interest an all-time high in Kazakhstan, of international investors. At the 2015 Astana measures must be taken to Invest Forum, more than $1.5 billion in deals ensure the right tools and a were signed, with the biggest-ticket item a favourable environment are in place to foster $400 million deal on implementing the ongoing development of the information infrastructure projects in Astana. and communications technology (ICT) sector. A separate major agreement was signed For this, infrastructure is key. Ideas and with Zoolion Heavy Industry Science and innovation can happen anywhere, but nothing Technology of China. Speaking at the event, can move forward without the right ICT Akhmetzhan Yessimov, Chairman of the infrastructure in place. Astana EXPO 2017 National Company, also Nowhere is this point more evident than in noted that five investment projects worth Astana, Kazakhstan’s futuristic capital city. $100 billion had begun at the site of EXPO 2017, Since replacing Almaty as the capital in 1997, which will be held in Astana. Astana has had its foot on the accelerator, becoming a commercial and cultural hub for the entire Central Asia region. Well connected by roads, rail SMART SMART and air, the city has swollen in economy management size and population, and industry has ballooned. Yet it would be wrong to dismiss this development as the natural progression of a city. In fact, Astana today is the product SMART SMART of careful planning. environment life The decision to reduce focus on Kazakhstan’s energy sectors and concentrate on supporting the new knowledge economy aligns with President Nursultan Nazarbayev’s strategy SMART SMART to turn Astana into a ‘smart city’. The Smart Astana project is being implemented as part of the President’s long-term development strategy, which aims to improve quality of life and modernise infrastructure throughout the capital. Drawing on the infrastructure of European cities for inspiration, the project is targeting six key city features: –– Smart economy –– Smart management –– Smart life –– Smart mobility –– Smart people –– Smart environment Astana has looked towards cities such as Toronto, Singapore, New York and Tokyo for guidance, but the challenge is to ensure that the ICT infrastructure of Kazakhstan’s capital will be able to measure up to those of such developed metropolises.

people

mobility

Efforts are being made to encourage investors to Kazakhstan, and particularly to the country’s innovation industries. Asset Issekeshev, Minister of Investment and Development, has indicated that the country is working hard to meet the investment standards of the Organisation for Economic Cooperation and Development (OECD). In addition, major reform and modernisation efforts aim to increase investor confidence. Many international investors are keeping a close eye on opportunities presented by Kazakhstan’s evolving infrastructure needs. As the cities grow, so do demands for better ICT infrastructure, which are also filtering out into the country’s more rural areas.

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SCOTTO72 / ISTOCK

which was part of the government’s wider Innovation Industrial Development Strategy 2003-15. This programme provided more than $1 billion in foreign direct investment (FDI) opportunities, and the country’s ICT sector welcomed the international business community in specific economic sectors. Back in 2009, a memorandum of cooperation was signed by entities from Russia, the United States and Kazakhstan to build a supercomputer technology centre, which serves to boost academic and scientific research programmes. Another major step in the development of Kazakhstan’s ICT capabilities was the establishment of the International University of Information Technologies in Almaty, which has cooperation memorandums and partnerships with major global technology entities including Huawei Technologies, IBM and Apple Inc. New research into cellular networks is aimed at increasing connection speeds and capacity

In 2015, a new research facility, the 5G Development Centre, opened at Nazarbayev University – backed by the China Mobile Research Institute, the research division of the world’s largest cellular telecommunications company. The centre is channelling efforts into increasing 5G connection speeds and achieving a thousand-fold increase in capacity. It also serves as a test bed for new components and techniques that aim to accommodate more users and connected devices, reduce power consumption and increase data rates.

Input and know-how from those at the forefront of digital technology and infrastructure will be essential if Kazakhstan is to realise its ambitions The centre is supported by Canada’s Nutaq Innovation and the Hong Kong University of Science and Technology. Telecoms in general is undergoing something of a transformation in Kazakhstan. Positive changes have been made in recent years, such as the implementation of programmes and initiatives that promote the country’s ICT sector. These include the Liberalization of Telecoms Program on De-monopolization and Liberalization of the Telecommunications Market in Kazakhstan,

SPECIAL ECONOMIC ZONES While technology continues to evolve at a rapid pace, there remain significant gaps in the country’s ICT infrastructure, due in part to a shortage of domestic expertise. To plug these gaps, Kazakhstan is taking further steps to attract investors. One of the country’s special economic zones – which offer tax and other incentives to both foreign and domestic enterprises engaged in prescribed economic activities – focuses specifically on ICT. As part of the Astana Economic Forum 2016, a round table was held on the topic of Digital Kazakhstan in 2020. With Kazakhstan’s Ministers of Investment and Development and Information and Communications in attendance, the discussion explored global trends and opportunities for cooperation, the implementation of ICT projects in the country and the participation of local and foreign entrepreneurs, business leaders and investors. With a view to fuelling the development of smart cities, the organisers produced a list of foreign and Kazakh entrepreneurs and investors who would potentially be interested in implementing ICT projects under the country’s public-private partnership model. Input and know-how from those at the forefront of digital technology and infrastructure will be essential if Kazakhstan is to realise its ambitions, and it is clear that myriad investment opportunities exist in developing the country’s digital future.

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Driving change in transport

K Kazakhstan relies on its vast rail network for passenger and cargo transport

azakhstan is vast. Its 17 million people are spread over 2.75 million square kilometres – around the same area as the whole of Western Europe – making it the world’s largest landlocked country. With so much ground to cover, a modern, well-run transport system is crucial. Between 2010 and 2020, investment in the country’s transport infrastructure is forecast at $35 billion, and transhipment volumes are increasing in tandem. Kazakhstan has much to offer as a logistics hub, not least because of its enviable location at the heart of Eurasia. Despite the ongoing and planned investment, further development is needed

to ensure that Kazakhstan retains its ‘hub’ status. The Kazakh Government is courting engagement from foreign entities in publicprivate partnerships (PPPs) to secure further investment in its transport infrastructure, using a raft of benefits to attract investment where it is most needed. Alongside these efforts, the government is implementing plans that will connect Europe and Asia, recognising that a worldclass transport network is of little use if it is not integrated internationally. The result is a cyclical effect: better transport links attract more investors, and more investors gives rise to even more improved transit options.

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MINISTRY OF INVESTMENTS AND DEVELOPMENT OF THE REPUBLIC OF KAZAKHSTAN

Ambitious developments are under way in Kazakhstan’s transport sector as the country takes steps to benefit from the rapidly developing New Silk Road


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Kazakhstan transports more than

two-thirds of its freight and passenger traffic along...

15,000km

of rail

MID.GOV.KZ

In the 2020 Transit Plan, Kazakhstan has its first large-scale initiative for the development of transport and infrastructure, and its integration into the global system. The plan was adopted in late 2013 and runs through to 2020, by which time transit capacity will increase twofold and Kazakhstan will have gradually improved links with the international network. Crucially, the project will also develop local infrastructure outside of city centres.

DEVELOPMENT PLANS At a cost of around $27 billion, the plan is comprehensive. At the end of 2012, Kazakhstan ranked 86th in the World Bank’s Logistics Performance Index, yet the project is expected to boost the country to 40th place by its conclusion. In addition to physical infrastructure, changing rules on non-physical logistics barriers are likely to have a positive impact on Kazakhstan’s ranking. Special attention is being paid to the railway network, which transports more than two-thirds of the country’s freight and passenger traffic along 15,000km of rail. With regard to rail, Kazakhstan is certainly benefiting from its position as China’s neighbour. Kazakhstan’s rail network has become part of the New Eurasian Land Bridge, a system that reportedly spans 11,800km. The laying of new track and the electrification of existing lines is already under way and high-speed lines are being developed. From this, a knock-on effect can be seen in the throughput of cargo between China and Kazakhstan. Transport times have been reduced, and the list of destination countries has grown, yet challenges remain. Overcoming technical obstacles is a priority, and coordinating multinational

interests poses difficulties. Particularly for development in Central Asia, transport offerings need to marry up with modern logistics requirements, and there is still a need for increased transport capacity here – not only for cargo transit, but also for the greater movement of people.

EYES ON THE SKY To increase capacity and offer greater transport options, Kazakhstan is also looking skywards. Speaking to EU Reporter, Air Astana CEO Peter Foster detailed the country’s international connections. Air Astana is the country’s largest airline – a joint venture between Kazakhstan’s sovereign wealth fund, Samruk-Kazyna, and British aerospace company BAE Systems – and from the capital it can fly to all of Europe and almost all of China in just six hours. “We’re replicating the railway strategy in the air,” explained Foster. Under the Infrastructure Development Plan, 11 of Kazakhstan’s 18 airports will undergo reconstruction. Runways and terminals will receive a makeover, in readiness to welcome flights from the 75 new international air routes that will be opened.

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An extensive programme of road renovation is in progress


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11

75

airports will undergo reconstruction

new

international air routes will be operational

EWOUT PAHUD DE MORTANGES

London for a tender to build a ring road around the city. Worth $680 million and designed to address Almaty’s gridlock, the project is Central Asia’s first internationally tendered public-private partnership. It represents a huge shift in Kazakhstan’s stance on unlocking funding to meet its development needs. Speaking to the Financial Times, Thomas Maier, managing director for infrastructure at the European Bank for Reconstruction and Development, said: “For the Central Asian region it’s absolutely groundbreaking. It is the first such transaction not only in Kazakhstan – it’s the first such transaction in Central Asia.” Maier expects this to be the first in a wave of PPPs in the country’s infrastructure sector.

Air Astana is expanding its range of international destinations

MID.GOV.KZ

Kazakhstan’s airports will be upgraded for new routes

SILK ROAD REVIVAL

Once on the ground, visitors and freight carriers can continue their journeys on the 30,000km of road that is being renovated. As well as major repair and construction work, the Kazakh Government is also focusing on the development of roadside services. Nine bus stations, 45 terminals, 155 service stations and more than 1,000 taxi stands are being built in rural or suburban locations. Improving and increasing bus services is a core element of the 2020 vision. Approximately 300 additional bus routes will be in action by 2020, covering all of the country’s villages. Attention is also being given to the roads leading to Kazakhstan’s urban centres. During 2014, the government launched a roadshow in

Amid initiatives to enhance and develop Kazakhstan’s transport network, observers are no doubt witnessing the revival of the Silk Road. This economic belt stretches from China to Europe, and the routes cover every mode of transport, from land to sea. The 2020 project includes plans to add three dry cargo terminals to the seaport at Aktau, where throughput capacity is expected to increase from 16.8 million tons to 20.5 million tons per year. Kazakhstan is well aware that developing its transport links isn’t just about better transit and travel options. Economic development can only occur when it is underpinned by strong, reliable transport networks, and whenever and wherever cities and countries have found themselves at the crossroads of trade and investments, they have also reaped the rewards of increased business activity. With its strategic transport plans and projects in motion, sustained investment will enable Kazakhstan to achieve its vision.

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Agriculture will play an important part in Kazakhstan’s future prosperity as the sector pursues opportunities in many of the world’s biggest and fastest-growing markets, particularly China

Feeding the world M

omentum is gathering for the future development of agriculture in Kazakhstan as the government pursues its Agribusiness 2020 programme and investors move in to make the most of the vast tracts of arable land suitable for farming and animal husbandry. Over the past few years, companies from China, Iran, the United Arab Emirates, the Netherlands and Italy (to name but a few) have

committed to – or are considering – building processing plants and establishing feedlots in Kazakhstan, as well as importing a range of Kazakh products into their domestic markets. And more opportunities are presenting themselves as new laws are established and trade barriers with neighbouring countries are lowered. Acknowledging the importance of agriculture to the future growth of

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VVLASENKO

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Kazakhstan, the government is directing three trillion tenge between 2013-20 towards direct aid and subsidies to encourage increased private participation. Investments in priority areas are being subsidised at a rate of 30%-80%. Other incentives include exemption from customs duties on the import of equipment, corporate income tax exemptions (0% for 10 years), and a discount of up to 40% for elite seeds. Improving access

to finance is also on the list of government objectives, as is enhancing the affordability of goods, works and services.

RECORD HARVEST Kazakhstan is among the top 10 grain exporters in the world, particularly for flour. According to national statistics, the country produced just over 18 million tonnes of grain in 2015, and figures released in October

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demonstrated that, in 2016, grain production reached an all-time high of 23.1 million tonnes in bunker weight. This record-breaking harvest is expected to boost exports, with current projections estimating a total grain export volume of 8.5 million tonnes in 2016. Traditional markets for Kazakh grain include Russia, Uzbekistan, Kyrgyzstan, Tajikistan, Turkmenistan and Afghanistan. Exports to China are still relatively small (given the scale of its market), but may increase as a result of negotiations to reduce trade barriers.

CROP DIVERSIFICATION While the state is keen to maintain a high level of wheat production (through technology-driven growth in yield), it has for many years supported a crop diversification programme. This campaign has In 2016, grain been driven by ambitions to boost production hit an the country’s livestock industry, all-time high of which require a greater volume of feed crops such as barley, corn and soybeans. Oilseeds – such as sunflower, flax and rapeseed – are also in bunker weight considered priority crops, and direct subsidies have had a huge impact on the area of Kazakh land given over to non-wheat crops. Over the past 10 years, total oilseed area has tripled to 2.06 million hectares. To cater for this growth, the government is considering the construction of three new oilseed-processing factories, which would increase the country’s processing capacity Over the past 10 by 1.2 million tonnes – roughly half years, total oilseed of its current production. area has tripled to Beyond crops, Kazakhstan is exploring the potential of meat exports, and there are several farms hectares reportedly engaged in livestock growth and breed improvements. At KazMeat Astana 2016, the country’s first international forum for the meat and meat-processing industry, participants familiarised themselves with export organisations and the utilisation of new technologies. Representatives from leading foreign firms (including Inalca Eurasia and Rifa Holding) and Kazakh

23.1 million tonnes

2.06 million

The beef industry is set to benefit from rising demand for halal foods

companies also discussed opportunities for cooperation and investment. Beef is currently receiving the most investment (close to $150 million), as the Ministry of Agriculture aims to boost beef export volumes from almost 14,000 tonnes in 2015 to 180,000 tonnes by 2020. In 2016, Dubai-based steel company AMK Metal FZCO announced plans to invest $30 million into building a meat-processing plant in the Baidibek district of southern Kazakhstan. The new plant will be the largest halal meat facility in the country, with a feedlot of 20,000 cattle and an annual capacity of 5,000 tonnes of beef. It will cover around 2,000 hectares of irrigated land for feed production and 17,000 hectares for pasture, and most of the meat produced there will be exported to Islamic countries. With the global

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“Kazakhstan is suitable for the cultivation and production of meat,” says Wu Jie, chairman and CEO of Rifa Holding. “China is currently the world’s largest importer of meat. So why should we not import meat from our partner, Kazakhstan?” The family-owned Chinese company is considering total investments of $200 million into similar projects before 2020. The Kazakh poultry market is estimated at 300,000 tonnes per year, only half of which is met by domestic production. The government hopes that Kazakhstan will become self-sufficient within the next two years. Arguably the most interesting prospect for Kazakhstan’s agricultural sector is in carving a niche as a global organic food producer. In November 2015, President Nazarbayev signed a new law outlining the institutional and Chinese companies regulatory framework for organic are investing farming. The law prohibits synthetic inputs, such as pesticides, and promotes sustainable farming practices and activities. China currently represents the biggest market for Kazakh organic goods, and the two in 19 agricultural countries are already negotiating projects producing the establishment of a system to organic products monitor the quality of organic food being sold in China. In February 2016, Chinese companies agreed to invest $1.7 billion in 19 agricultural projects producing organic products earmarked for export to China. COFCO, for example, plans to build three plants for the processing of organic tomatoes and tomato paste.

$1.7 billion

REUTERS/ALAMY

market share of halal food expected to increase from 16% last year to 20% in 2020, Kazakhstan could yet attract business from land-strapped Islamic countries.

INVESTMENT FROM CHINA Interest is also flowing in from China. In January 2016, Rifa Holding committed to

Arguably the most interesting prospect for the sector is in carving a niche as a global organic food producer invest $11 million in the construction of beef and lamb farms, feedlots and meat processing plants in eastern Kazakhstan. The project is being run as a joint venture with local company Eurasia Holding, with an agreement that at least 80% of the finished products will be sold in China.

Success in China is key to Kazakhstan’s export hopes. China is one of the world’s fastest-growing markets, and could later serve as a springboard to other Southeast Asian countries. It is partnerships such as these that will help to strengthen and define Kazakhstan’s role in global agricultural supply chains.

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With the help of targeted investment, Kazakhstan has the conditions and resources to develop and sustain a successful green economy

A greener Kazakhstan

I

n 2012, when President Nursultan Nazarbayev announced the 2050 development strategy for Kazakhstan, he identified water shortages as a key global challenge and declared that “the era of the hydrocarbon economy is coming to its end”. As the country undergoes rapid modernisation, the government is taking care to ensure that the basics of any prosperous economy are securely in place. It is focusing on the development of Kazakhstan’s renewable energy policy and overseeing the

implementation of ‘green economy’ policies – an objective that ties closely with muchdiscussed notions of future energy and the so-called Third Industrial Revolution. In many ways, Kazakhstan’s late development could be the key to its environmental success. Though its gains today can be attributed to the country’s oil wealth, the government is seeking to diversify the economy. Later development has meant an effective bypassing of the high-polluting, big-industry stage that many countries

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RYAN KOOPMANS / GETTY IMAGES

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went through during the last century, and Kazakhstan can now continue its development in an era of clean, green energy. As it seeks to add significant energy capacity to the grid, for example, the government is investing heavily in wind, solar and hydrocarbon production. However, the downside of this late development is a lack of basic infrastructure in certain areas. Some regions, particularly those that are rural, have a severe lack of high-quality drinking water. As reported in Kazakhstan’s Statistic Yearbook for 2009-13,

by the end of 2013 93% of households in Kazakh cities had running water, but in remote areas the figure was just 25%.

TACKLING WATER SHORTAGES Access to safe drinking water is a universal marker of a developed economy, and Kazakhstan aims to solve the challenges of rural water supply by 2050. One issue that needs to be addressed is the condition of the country’s water supply network. According to the Ak Bulak water programme

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A large pipeline transports fresh water from Big Almaty Lake reservoir, through the Tien Shan Mountains into the southern city of Almaty


introduced in mid 2011, in 2009 just 36% of Kazakhstan’s water supply network was in working condition, and 64% needed complete replacement or major renovation. The programme acknowledges the need for better policies for accurately metering water use and ensuring supplies for end users. Boosting capacity is a recurring theme in the water sector. In September 2016, the government announced plans to boost the Astrakhan-Mangyshlak water pipeline. Reconstruction work will gradually increase capacity to 35,000 cubic metres of water per day by 2020. of Kazakhstan’s water supply Meanwhile, in Aktau, a project to network was in improve cold water storage and supply to working condition residential apartment buildings has been in 2009 implemented successfully. Following green guidelines, the project has supplied more than 3,000 homes with drinking water. According to Nursultan Aubakirov, Chairman of the public association of the International Energy Centre, the project has overseen installation of containers, pumps and monitoring systems that provide realtime data on water consumption, as well as the replacement of old pipes. This marks a big shift from the situation prior to the project, when worn-out networks hindered reliable supply. Those leading the project are now looking to roll out the model to other areas of the city. For foreign investors, there are a number of projects in the sector out to tender. Current The capacity of the examples include a Astrakhan-Mangyshlak water contract to manage pipeline will increase to the rehabilitation and modernisation of the water and wastewater systems in Semey, a city in East Kazakhstan Region, and a separate contract to take on similar of water per day by 2020 work in Kyzylorda. At the heart of water and environment issues is the Caspian Sea. Last year, Astana hosted a meeting on the biological resources of what is the largest enclosed body of water on Earth. On the agenda was conservation of marine biological

1001SLIDE / ISTOCK

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36%

35,000

cubic metres

Workers carry out horizontal drilling operations in Astana as part of a programme to increase the capacity of the local water supply network

resources and general guidelines for the allowable catch of aquatic bioresources. An agreement signed by President Nursultan Nazarbayev on the conservation of the Caspian’s water biological resources entered into force on 24 May 2016. In August 2016, the United Nations Development Programme (UNDP) launched a pilot project to create oases in Kazakhstan’s desert regions. Wells will be drilled in three areas, providing much-needed drinking water and irrigation to rural villages and farms. The country’s water resources are not its only environmental concern. Environmental rehabilitation and the management of forest landscapes is also a government priority, and the country has embarked on a programme of afforestation. President Nazarbayev has urged each of the country’s regions to engage in afforestation, stating during a visit to Astana’s forest zone that “our country will be clean, green. The ecology will be excellent, and the forest is always the lungs of our city.” From 1997 to 2016, Astana’s ‘green zone’ stretched over 75,100 hectares, of which 14,800 hectares have been planted in the city.

IMPORTANT STEPS Last year saw a succession of steps taken towards the development of a greener Kazakhstan. In August, Minister of Foreign Affairs Erlan Idrissov signed the landmark Paris Climate Agreement on behalf of the

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NASA / DEMBINSKY PHOTO ASSOCIATES / ALAMY

A satellite view of Lakes Tengiz, Korgaljinski and Kourgaldzhin

Astana

Caspian Sea

country. Idrissov also had a meeting with outgoing United Nations (UN) SecretaryGeneral Ban Ki-moon, during which the men exchanged views on projects in the field of sustainable development and cooperation between the UN and Kazakhstan. The country has made a commitment to cut its greenhouse gas emissions significantly by 2030, and authorities have set an ambitious goal of

development goals: combating climate change and delivering resilient infrastructure. Pursuing a green economy is a model that can boost prosperity for countries as they work to remain competitive. “Kazakhstan adopted a national vision for the transition to the green economy,”

Pursuing a green economy is a model that can boost prosperity generating half of Kazakhstan’s energy with renewable resources by 2050. President Nazarbayev has significantly broadened the authority of the Ministry of Environmental Protection, and the country’s overall commitment to sustaining a green economy is evident. At a forum in London in May 2016, Kazakh Government officials elaborated on initiatives to attract foreign direct investors and presented detailed plans on financing green infrastructure development in line with two of the key sustainable

said Munkhtuya Altangerel, UNDP Kazakhstan aims to generate Deputy Resident Representative in Kazakhstan, at a press conference last year. “It is a wise and far-sighted decision. The main directions of the concept began to of its energy using work on more efficient use of the renewables by 2050 natural resources, infrastructure and overall infrastructural base, improving public welfare by easing the pressure on the environment [and] enhancing national security, including water security.”

50%

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Skylines across Kazakhstan are changing rapidly – and nowhere faster than in the country’s capital city, Astana, where new housing, hotels, offices and shopping malls are being constructed to serve a growing population

IGOR ZHOROV / ALAMY

Foundations for the future

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8.9

million sq m

COMBINED APPROACH

and rental and private housing construction. It is hoped that the programme will attract about 10 tenge for every one tenge of budgetary funds in housing construction.

GREEN CONSTRUCTION Becoming a ‘green’ economy is also a top government priority. By 2030, Kazakhstan aims to generate 30% of its domestic electricity supply from renewable sources, rising to 50% by 2050. Kazakhstan also hopes to become a world leader in eco-minded techniques, including green construction. National statistics estimate that buildings, primarily residential, account for 13.5% of power consumption and 24% of heat demand in Kazakhstan. To render housing more energy efficient, the government has launched the EnergyEfficient Design and Construction of Residential Buildings programme, which outlines mandatory energy codes, standards and a rating system, and promotes energy-efficient design and international best practices. The Kazakhstan Green Council (KazBC) has set a goal of ensuring that all buildings in the country are built and operated to meet green building standards by 2030. The green revolution is quickly gaining momentum, with several buildings, including the Park View Office in Almaty and the Q-2 building in Astana, being classified as “very good” and “good” developments with BREEAM (Building Research Establishment Environmental Assessment Method) certification. Eco-projects such as these are likely to receive a boost from Astana’s staging of EXPO 2017, which will take place under the theme of ‘Future Energy’.

Furthermore, under President Nazarbayev’s instruction the government is currently combining the country’s various housing programmes to create a single, integrated approach – Nurly Zher – that aims to develop mortgage lending, credit housing, The fast pace of construction in Kazakhstan in recent years has been set by its capital, Astana A succession of modern developments is creating a new backdrop to suburban areas

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SHYNAR JETPISSOVA / WORLD BANK

A

ccording to global financial services firm EY, real estate and construction are among the five most attractive sectors for foreign direct investment in Kazakhstan, outpacing high-growth areas such as telecommunications. Investment has been particularly focused on Astana, which has become a thriving metropolis renowned for its futuristic architectural designs. Indeed, many of the world’s top architects have had a hand in shaping Astana’s impressive skyline in the two decades since the city became the new capital of Kazakhstan. In response to increasing demand, and spurred by government-backed modernisation plans, construction rates are starting to rise as older units dating back to the Soviet era are replaced with modern facilities. National statistics indicate that the total housing built in Kazakhstan in 2015 covered 8.9 million sq m – of housing completed a 19% increase on in 2015 the previous year. Figures from 2016 are expected to show further growth as a result of President Nursultan Nazarbayev’s announcement in February last year to allocate 360 million tenge to build affordable housing. “This will help build an additional 1.5 million sq m of housing, making a contribution to GDP growth,” said President Nazarbayev. The package also includes government-backed mortgages – a crucial aid in a country where the availability of mortgage lending remains low and where average mortgage rates are prohibitively high for the majority of the population.


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of London. Expected to reach completion in mid 2017, the $1 billion, five-tower ‘integrated community’ will have direct access to the Astana Metro System (also under construction) and will include 568 apartments, 190 hotel rooms and 100 service apartments, all sat atop a retail podium, office space and a car park. The Starwood Group will be operating the hotel under its Sheraton brand.

TALAN TOWERS

LEISURE AND RETAIL PROJECTS

Expected to attract more than five million visitors, EXPO 2017 is also driving hotel construction. Malika Bekturova, Head of the Business and Industry Department of Astana City, last year announced that 24 hotels and four hostels are being constructed in Astana. These new projects will add an additional 5,000 hotel rooms to the current capacity of 30,000 rooms in the city. Marriott, Hilton, Rixos, Ibis and Radisson are among the major hotel chains already present in Astana, with Kempinski, St Regis and Four Seasons expected to enter the market by the end of 2017. Also expected to open its doors in 2017 is the Ritz-Carlton Astana, which will add 157 luxury rooms and suites to the city’s offering. The hotel will occupy 20 floors of the new 27-storey Talan Towers, Astana’s first high-end mixed-use development, which has received $350 million in investment from Kazakh private equity firm Verny Capital and has been designed by American architectural firm Skidmore, Owings and Merrill LLP. The building employs energy-saving technologies and has been constructed in accordance with LEED (Leadership in Energy and Environmental Design) international green building rating standards.

The Talan Towers will be Astana’s first high-end mixed-use development The Abu Dhabi Plaza is set to become Kazakhstan’s tallest building

These hotel developments are accompanied by various other commercial construction projects, including the new Mega Silk Way shopping mall in Astana, which will accommodate fashion galleries, restaurants, shops, 10 cinema screens, a children’s entertainment centre, a concert hall, a supermarket and an ice rink. Commercial projects such as these typically involve multiple firms, each bringing their particular area of expertise. Consequently, as the country prepares to host EXPO 2017 and pursues its aim to become one of the world’s top 30 competitive economies, there will be a wealth of opportunities for contractors, advisory firms and architects from all over the world to partner and invest in building Kazakhstan’s homes, offices, hotels, shopping centres, sports facilities and more.

HKR ARCHITECTS

INTEGRATED COMMUNITY Another major development currently under construction in Astana is the Abu Dhabi Plaza, developed by the United Arab Emirates’ Aldar Euroasia and designed by HKR Architects

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High-quality retail developments are springing up across Kazakhstan. As incomes rise and the population has more money to spend on goods and leisure, investors are taking the opportunity to meet growing consumer demand

Buying into retail Today, Kazakhstan has a number of big retail centres, with internationally recognisable retail and designer brands such as Gap, Zara, Esprit and Tommy Hilfiger. In fact, the march of big western brands into Central Asia is seemingly unstoppable – a stroll through some of Kazakhstan’s major cities will take you past food-and-drink giants Starbucks, Burger King and KFC, as well as McDonald’s, which chose to launch its Central Asian operations in Astana. McDonald’s has since announced plans to open 15 more outlets in the country, including one in Almaty. Another high-profile entrant to the Kazakh retail market is French supermarket giant Carrefour – one of the first major Demand from Kazakh consumers with increasing disposable income is fuelling rapid growth in retail

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ANDREY RUDAKOV/BLOOMBERG

O

ver the past two decades, Kazakhstan’s urban retail scene has changed almost beyond recognition. Back in the early 2000s, most Kazakhs shopped at large and largely brandless outdoor markets. The general consensus was that brands were overpriced and, therefore, unaffordable, and there was an absence of competition in the country’s clothing market. Gradually, this began to change with the opening of Kazakhstan’s first indoor market, Adem. The building was destroyed in a fire in 2015, but before its demise it was home to small boutiques and independent stores – a new concept to the Kazakh consumer market. A flood of new retail centres soon followed, but it took time for global retailers to enter the scene.


MAJID AL FUTTAIM

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President world-class supply routes, good local products European supermarket chains to launch Nazarbayev and strong connections to the wider region. in Central Asia – which opened a store in visits the first Almaty in 2016. Speaking to EurasiaNet.org, Carrefour store DESIGNER BRANDS Carrefour’s general manager in Kazakhstan, in Kazakhstan Yet logistics challenges do not seem to hinder Stephane Maurier, commented that now is the consumer demand, which goes from strength best time for competitively priced stores to to strength. In late 2012, Esentai Mall opened open. “The purchasing power of the country in Almaty. Following years of development, is quite high in the cities,” he said. As a result, planning and construction work, the Carrefour is already considering expansion $450 million mall opened its doors, to Astana, Aktobe and Shymkent. attracting the fashionable and wealthy. The chain has invested $14 million These well-heeled consumers entered a in Kazakhstan, and the store’s opening glossy world of high-profile stores, with was sufficiently important for President names including Burberry, Fendi and Nursultan Nazarbayev to pay a visit. Omega all selling their designer wares. His shopping trip is symbolic of the The mall forms just a small part of importance that Kazakhstan is placing a sprawling complex comprising on attracting Western investors to French supermarket chain residential spaces and the Esentai non-energy sectors, and the presence Carrefour has so far invested Tower, which opened in 2013. of global brands can work wonders The Tower hosts office space, a in reassuring other investors luxury spa and a JW Marriott hotel. that the country is a safe and It is clear that visitors to profitable place to trade. Kazakhstan with a love of shopping are spoilt The government is working hard to boost for choice – from the huge, crowded market the economy and iron out logistical issues space of Barakholka to the more refined associated with the country’s transport experience of Almaty’s Mega Park. In the links. Significant public investment is being capital, Astana, shoppers can pick up goods channelled towards making the investment at the Khan Shatyr, a three-storey complex climate as favourable as possible, which means

$14 million

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CHAPMAN TAYLOR LLP

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dubbed the world’s largest tent, or visit Mega Mall, positioned at the heart of the city and home to both familiar and exotic brands. Those less concerned with entertainment options head to the Sary Arka or Sine Tempore, the latter of which is Astana’s oldest shopping centre. With retailer competition on the rise in Kazakhstan, investors may question exactly what the country’s consumers are demanding. Euromonitor reports that, as incomes have risen, so the buying habits and attitudes of consumers have changed. People can afford to dine out more and have larger disposable incomes, meaning greater demand across a wider variety of products and services.

Astana’s Mega Mall combines entertainment and shopping attractions

DEVELOPING RETAIL MARKETS 2016 Global Retail Development Index

CHANGING HABITS Pinpointing the requirements of the Kazakh market is key to investors’ success. The country’s shopping habits are in a state of flux, where eating and drinking habits are changing, new fashion trends are emerging – leading to changing tastes in style – and consumers are spending their leisure and recreation time in ways that are unfamiliar to earlier generations. Investors are being encouraged to come and cater to the market’s developing tastes. As Kazakhstan and China push to resurrect the Silk Road, trade relations in the region are booming, due in part to efforts in creating free trade zones. The Khorgos Free Trade Zone, which straddles the border between

the two countries, is designed as a place where traders from across the CIS region can exchange goods duty free. Khorgos is being given a new lease of life as efforts are undertaken to relink the essential trade route between east and west.

China India Malaysia

4th

Kazakhstan Indonesia

Such trade, retail and logistics initiatives are bearing fruit. When consultancy AT Kearney released the findings from its 2016 Global Retail Development Index, Kazakhstan was listed in fourth place, behind China, India and Malaysia, respectively, and ahead of Indonesia. According to the report, retail growth in developing countries has far outstripped gross domestic product and population growth – a finding reflected in the rapid expansion of international brands. Swedish furniture giant IKEA and multinational clothing retailer H&M are reportedly in negotiations to open stores in Kazakhstan, and the rise in numbers of people dining out is piquing the interest of numerous global food chains. Increasingly, consumers are demanding shopping experiences that are tailored to their individual needs. Alongside Kazakhstan’s fast-improving digital infrastructure, internet shopping is also a developing area of interest for retail brands. Kazakhstan’s thriving consumer market seems set for further investment and innovation to fit in with the ever-changing lifestyles of shoppers.

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Saule Jundubayeva, Chairman of Interteach, outlines the progress of public health in Kazakhstan and discusses the opportunities in the country’s growing healthcare market

4X-IMAGE / ISTOCK

Healthcare: 25 years of reform and achievement

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uilding the solid foundations of a state healthcare system to emulate global best practices was one of the key policy priorities laid down by President Nursultan Nazarbayev in the early days of the country’s independence from the former Soviet Union. Not only did he believe that people should have the right to higher standards of healthcare and overall wellbeing, but he also saw a healthier population as a core element in Kazakhstan’s long-term social and economic development. Kazakhstan’s 1995 constitution consolidated statutes concerning the state’s social welfare responsibilities and set down a statutory pathway for the evolution of the country’s welfare state. As a consequence, the general health of Kazakhstan’s people improved significantly, particularly so given the subsequent

programme also includes the launch of mandatory health insurance now set for 2018, which will commence a new era in healthcare management and services, and patient care. These outcomes, and the health reforms that underpin them, are very much an integral part, both aspirationally and operationally, of the country’s unfolding overall development plan Strategy 2050, which is designed to make Kazakhstan one of the 30 most prosperous countries in the world during the next three-and-a-half decades. Unveiling Strategy 2050 in 2013, President Nazarbayev stated: “Kazakhstan shall Life become one of the most expectancy secure and comfortable progress countries for living. All our actions to achieve the main purpose of Strategy 2050 shall follow clear principles. One of 2010 these principles is the principle of welfare years reinforcement for the people of Kazakhstan that states that social welfare of the common people shall be the most important indicator of our advancement towards the main goal.” Global experience 2016 also demonstrates that investment in a nation’s health creates many years economic and social benefits beyond a healthier population. For example, birth rates increase, absenteeism for health reasons in industry declines, and there is a greater sense of social cohesion. In essence, investment in healthcare is investment in human capital which, combined with other 2020 economic resources, such as the efficient deployment of new technology, underpins years future industrial growth and development. Healthcare investment practices are similar to standard approaches used in other sectors

Investment in a nation’s health creates many economic and social benefits beyond a healthier population implementation of the Salamatty Kazakhstan State Health Programme for 2011-15 and its successor currently in play, the Densaulyk Programme for 2016-19.

LONGER LIFE EXPECTANCY The progress of the country’s health service reform programme can be seen in many different patient and population surveys, but is probably best illustrated by the statistics for life expectancy, birth and mortality. In 2010, life expectancy in Kazakhstan was 68.41 years, but by 2016 had risen to 72 years. Over the same period, the birth rate increased by 2.8% and the mortality rate fell 14.4%. The Densaulyk programme was designed to raise Kazakh life expectancy to 73 years by 2020, partly reflecting an increased focus on primary medical and sanitary care, more effective management and the greater availability of funds. The Densaulyk investment in health creates many economic and social benefits, underpinning future development

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NIMON / SHUTTERSTOCK

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Investment and partnerships are helping to bring Kazakh healthcare in line with global standards

of the national economy, including, for example, the mobilisation of public- and private-sector partnerships to help the cost-effective advance of Kazakh healthcare to new levels of efficiency and delivery comparable with international best practices.

A BRIEF HISTORY OF INTERTEACH The Kazakh Corporation of Health and Medical Insurance Interteach JSC was founded in 1989. State license No. 2.1.17 dated 30 May 2014 for the right to carry out insurance activities for the general insurance sector.

1995 2001

The company was licensed to carry out insurance activities in the territory of Kazakhstan (C3 No. 0000001). Interteach separated the functions of insurance and healthcare due to the adoption of the Law on Insurance, and Interteach Medical Assistance Company was established. It carries out the activities of organising and providing medical assistance in the Republic of Kazakhstan. The company has an exclusive agreement with Allianz Global Benefits, a global insurance company engaged in the field of medical insurance and medical services.

2016

The Expert RA Kazakhstan ratings agency confirmed the rating of Interteach Insurance Company at the A+ level, meaning ‘a very high level of reliability’.

In line with other key industries in Kazakhstan, the healthcare sector has benefited substantially from government measures to encourage and sustain inward investment flows, accompanied in many cases by the transfer of technology. Moreover, the more the private healthcare sector develops, the more attractive it becomes to both foreign and local investors as opportunities expand. A key factor in the future development of Kazakhstan’s healthcare sector will be the implementation of mandatory medical insurance (MMI) in 2018. In this respect, the government is actively focused on the creation of the most appropriate ways in which private medical organisations can participate in MMI, and help create healthy competition between them. The government is also examining the implementation of new forms of personal participation in the co-financing of medical services. The introduction and expansion of MMI is set to have a positive impact on all aspects of Kazakhstan’s future development as more people, either as individuals or through company schemes, access better and more regular health checks and receive more appropriate treatment.

Saule Jundubayeva is Chairman of the Board of JSC KK H&Mi Interteach

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Kazakhstan’s education system has made great strides forward in recent years, with world-class institutions and an increasingly digital approach to learning

GAUKHAR YERK / ALAMY

Progress in learning A The State Programme of Education Development aims to prepare preschoolers for future years

s Kazakhstan works towards its goal of becoming one of the world’s top 30 most-developed economies by 2050, attention is turning towards the nation’s younger generation – those who will make up the new knowledge economy. To ensure they get the best start, the government has implemented a number of sector reforms to underpin the world-class education system it envisages. Children in Kazakhstan typically start nursery at age five, before moving to primary school the following year. Lower secondary school is followed by higher secondary school, and then students have the option to continue their studies at tertiary institutions. The World

Bank reports that in 2014, approximately 1% of boys and girls of primary-school age were out of school. The biggest disparity can be seen between rural and urban children – a gap that the government is trying to bridge with rural education programmes. One example is the State Programme of Education Development in the Republic of Kazakhstan for 2011-20. Led by the Ministry of Education and Science and with a long-term view to foster sustainable economic growth, the programme aims to increase competitiveness and develop human capital by ensuring access to quality education. Core facets of the programme are to improve the financing stream for education services and to establish

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MAXIM ZOLOTUKHIN / WORLD BANK

BUILDING EUR ASIA’S ECONOMIC POWERHOUSE

a state-public management system responsible for ensuring access to school and educational resources. It intends to provide all children with preschool education and training, and will deliver a range of initiatives that will prepare preschoolers for the years ahead. The programme, coupled with other stateled efforts, has already seen some success. The country now sits at the top of international tables for primary education participation. As well as ensuring access for all, the government is also modernising the education system. By 2020, it intends to increase the share of secondary institutions using e-learning systems to 90%. Broadband internet is being rolled out in schools and learning resources are becoming available online. In enabling this, and coupled with targeted efforts to improve ICT education and deliver more technologyfocused vocational courses, the government is equipping the nation with the skills required in an increasingly digitised world.

FURTHER EDUCATION Since independence, Kazakhstan has been thinking ahead when it comes to education. In 1993, it became the first country in the region to launch a presidential scholarship programme enabling students to study abroad. The Bolashak (‘The Future’ in Kazakh) scholarship is awarded to high-performing students, who

are given the opportunity to study overseas with all expenses paid. Thousands of students have been involved in the programme since its launch, with the majority studying in the United States before returning to work in Kazakhstan for at least five years after graduation. Many go on to work for state organisations. Extending a helping hand to its most promising students is a common theme within the country’s education policies. Improving the quality of teaching was one of the key drivers behind the introduction of Nazarbayev Intellectual Schools (NIS). The mission of the NIS is to enhance the intellectual capacity of Kazakhstan through an innovative approach of learning. The specialist schools concentrate on maths and science-oriented subjects, while integrating Kazakh traditions and meeting international standards of best practice. The NIS cooperates with prominent institutions worldwide – for example, working closely with the UK’s Cambridge International Examinations board to develop the curriculum. In 2010, Nazarbayev University opened to great fanfare. Situated in Astana and headed by Japanese economist Shigeo Katsu, the university is dedicated to research and innovation with a view to boosting the

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Students from Kazakhstan celebrate their graduation

By 2020

90%

of secondary institutions are expected to be using e-learning systems


BESHBARMAK

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Nazarbayev University has numerous joint research projects with institutions in China

country’s long-term development. In part, this means creating stronger ties with its regional neighbours, and in 2016 the university launched joint research projects with Chinese universities and research institutions. It also established a research centre for China studies.

STRENGTHENING TIES

普 通 话 In 2014, a Mandarinlanguage course was launched at Nazarbayev University to help establish closer ties with China

In 2014, a Mandarin-language course launched at the university as part of efforts to establish closer ties with China. Speaking on the sidelines of the Asian Development Bank annual conference in Astana that year, Katsu said: “One cannot choose neighbours and it is clear that China will continue to develop close economic ties with Kazakhstan, both for export and import.” This mentality is reflected in the two countries working jointly to reconstruct the Silk Road transport corridor – dubbed the ‘Belt-Road’ initiative. Katsu and his colleagues have visited Beijing on several occasions as Kazakhstan deepens cooperation with Chinese institutions on Belt and Road studies. Meanwhile, the Chinese Embassy to Kazakhstan and Kazakhstan Diplomatic Service have together launched a ‘Quick Chinese’ service, which helps Kazakh nationals learn to speak their neighbours’ language and promotes academic exchanges between universities in the two countries. According to Ren Shi, Minister-Counsellor of the Chinese Embassy to Kazakhstan, this is a long-term

arrangement tied to efforts to promote interconnectivity and maintain cultural and academic exchanges. Nazarbayev University is currently offering more higher-learning options than ever before. The university boasts a wealth of applied research programmes within its Innovation Intellectual Cluster. It intends to become a world-leading research university, and the cluster is designed to create favourable conditions in which innovators can thrive. The university also hopes to encourage research-intensive and high-technology companies to base their operations nearby, which will promote knowledge transfer and investment in high-value learning streams.

INVESTOR INTEREST Such efforts in the realm of education will be reflected in a strengthened economy that is supported by a multi-skilled labour force. Not only that, but investors’ eyes are opening to opportunities in the sector – particularly within the vocational system. A number of deals have been struck to establish world-class colleges and courses in Kazakhstan’s major cities – for example, in 2014, education market development company TVET UK was selected to deliver the design element of the Kazakh Government’s ‘WorldClass College’ initiative. The project is bringing high-quality, specialist technical training and education to the country’s talented students through two new state-of-the-art colleges in Almaty and Astana, which opened in 2015.

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With activities to satisfy thrill-seekers, top-class accommodation and cultural offerings not found anywhere else in the world, Kazakhstan is putting itself firmly on the map

ZANGAR SKAKOV

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ell known for its nomadic roots, Kazakhstan has long attracted curious and adventurous travellers. But the face of Kazakhstan’s tourism industry is changing, and there are more tourism offerings than ever before – from epic overland adventures to cultured sojourns. The development of the country’s tourism sector has come about partly as an offshoot of preparations for EXPO 2017 in Astana. In February 2017, Astana will host the international forum Tourism Without Borders, which is aimed at unlocking Kazakhstan’s tourism potential ahead of the EXPO 2017. More than 1,000 representatives of large domestic and foreign companies are expected to attend the event.

WHEN TO VISIT Kazakhstan experiences its most agreeable weather conditions from May to September. July is hiking season, when locals and tourists alike take to the mountains to enjoy the panoramic views over steppe and city. The Ile Alatau mountains south of Almaty are home to popular trails and can be easily reached from the city via a short bus ride, and the natural alpine reservoir of Big Almaty Lake is not to be missed. Just under 30km from the city, the lake is within the Ile-Alatau National Park, nestled in the midst of spectacular mountain scenery. Other natural attractions to visit during the warmer months include Butakovka waterfall, which is within reach of hikers and cyclists, and the Prokhodnaya River Valley, which skirts Big Almaty peak. From Astana, visitors often seek out the beautiful hiking trails of Burabai, which lies about a two-and-ahalf-hour drive from the capital. The area, also known as the ‘Pearl of Kazakhstan’, is rich with lakes, forests and an abundance of wildlife. There are plenty of hotels and resorts at which to stay, too. During the summer months, Charyn Canyon also draws its share of tourists. Often referred to as Kazakhstan’s version of the Grand Canyon, the gorge stretches for more than 150km along the Charyn River. As the weather cools when autumn approaches, Aksai Valley and Monastery are must-sees for those located closer to Almaty, with the trail becoming especially beautiful when the leaves begin to turn. From Astana,

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The picturesque Kolsai Lakes are among the country’s most stunning natural attractions


ALEXEY_ARZ / ISTOCK

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TARASOV_VL / ISTOCK

Bayanaul National Park sits east of the capital and is ripe with glistening lakes, natural springs, thick forests and caves waiting to be explored. Given the size of the park, guided hikes are popular. Though the country has much to offer throughout the year, winter remains a firm favourite with tourists to Kazakhstan. Having hosted the Winter Asian Games in 2011, Kazakhstan has the infrastructure in place to keep winter sports enthusiasts happy. Almaty is home to a large multipurpose sports complex, a ski jump and a biathlon

Snowboarders prepare to ride the slopes at one of the many winter resorts in Kazakhstan

stadium, and the country’s top ski resorts have undergone renovations in recent years. In 2017, the city will host the Winter Universiade – an international festival of sport and culture – for which new venues are being purpose-built.

WINTER SPORTS

Kazakhstan’s natural landscape provides dramatic sights to be discovered by intrepid tourists

Long before the UK’s Prince Harry was pictured skiing in Shymbulak, locals had been enjoying the incredible vistas from the mountain town’s cable-car line. Yet the Prince’s visit did reveal the secret to an international audience: Shymbulak offers the best skiing in Central Asia. Just 25 minutes from downtown Almaty, the resort boasts off-piste skiing on crisp, cold snow under a warm sun, and has seen significant investment in recent years. Turkish/Kazakh property developers Capital Partners have spent millions improving the resort’s utilities and infrastructure, which now has a ski school, slalom course and snow park. Night-time skiing sessions are available, too. Shymbulak is not Kazakhstan’s only world-class ski attraction: Almatau is a family-friendly resort with slopes for skiing and snowboarding, as well as hills for sledding and tubing, while Tabagan, near Almaty, offers a cosier feel and is popular with those new to winter sports. With other options including Lesnaya Skazka mountain resort and Ak-Bulak ski resort, it is little wonder that Kazakhstan is fast gaining a reputation as the Switzerland of Central Asia.

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MINISTRY OF FOREIGN AFFAIRS OF KAZAKHSTAN

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Medeu outdoor rink, on the outskirts of Almaty, is an essential stop for ice skating enthusiasts. Situated at an altitude of more than 1,500 metres, it is the highest ice rink in the world. As well as hosting top-class bandy and speed skating events, the 8,500-capacity arena is also open to the public throughout the year, including for night skating sessions accompanied by lights and music.

Astana’s tentshaped Khan Shatyr centre is a prime example of the city’s innovative architecture

SAMPLING CITY LIFE Away from the powdery slopes, visitors interested in Kazakhstan’s cultural offerings will find plenty to keep them occupied. Although no longer the capital, Almaty remains Kazakhstan’s biggest city, and its leafy, tree-lined avenues are reminiscent of the chic boulevards of Europe. Shopping centres inhabited by designer brands attract customers from far and wide, and visitors to the city can look forward to a lively nightlife. In Astana, travellers are awestruck by the bold, glistening architecture. This is where tourists can discover the Khan Shatyr, a giant entertainment centre that takes the shape of an enormous, futuristic tent. They can also visit the Presidential Cultural Centre, which houses

an impressive collection of Kazakh creations, from elaborate jewellery to colourful carpets, and presents a real sense of the country. The Bayterek Monument is, literally, an unmissable sight – the 97-metre-high latticed monument embodies a Kazakh legend, where along the World River bank grows the Tree of Life. According to legend, the mythical bird Samruk lays a golden egg containing the secrets of human happiness and symbolising life and hope in a tall poplar tree, where it sits beyond the reach of humans.

A NEW BREED OF TRAVELLER With new air routes to Kazakhstan being launched and the country establishing itself as a regional hub, it is no longer just long-haul travellers that are enjoying the country’s many offerings. Visa rules are being relaxed for some countries and, as a The Bayterek Monument result, Kazakhstan has become an stands at increasingly popular stopover for holidaymakers and businesspeople heading to destinations such as tall Bangkok, Beijing, Ho Chi Minh City and Hong Kong. In whatever capacity visitors arrive, tourism can be expected to continue playing a major role in the development of Kazakhstan and the region.

97 metres

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FOCUS ON THE FUTURE

In the wake of the Paris climate agreement, which came into effect in November 2016, the transformation of the planet’s energy sector has become more topical and inevitable than ever. EXPO 2017 Astana, which is dedicated to Future Energy, will become a key global platform for the promotion of climate change initiatives

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FOCUS ON THE FUTURE

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he first world exhibition was held in Hyde Park 165 years ago. It was at the international EXPOs over the years that such meaningful inventions as the X-ray machine, synthetic fabric, the mobile phone, the touchscreen and live TV broadcasting made their debut. In 2017, between 10 June and 10 September, the International Specialised Exhibition EXPO 2017 will take place in the capital of Kazakhstan. The suggestion to hold the event in Astana was put forward by Nursultan Nazarbayev, President

of the Republic of Kazakhstan. EXPO 2017 will serve as a platform for showcasing the world’s achievements in the sphere of green technologies. To date, more than 100 countries and 17 international organisations have confirmed that they will participate in the exhibition. The event will bring together representatives from the global community. Together, they will draft global policy documents aimed at promoting an energy-efficient lifestyle and widespread use of renewable energy sources.

EXPO 2017

More than 100 countries are participating in EXPO 2017, which will take place in the futuristic city of Astana

EXPO 2017 occupies an area of 174 hectares, with an exhibition area spanning 25 hectares. The centrepiece of the exhibition is a sphere 80 metres in diameter, with a total area of 24,000 square metres. The seven floors of the world’s largest spherical structure, which has already become a popular tourist attraction, will showcase a number of projects dedicated to the future of Astana and present space, solar, biomass, wind, water and kinetic energy in an interactive and informative way. The foundation of the structure has an area of 5,000 square metres and will be occupied by the Kazakhstan Pavilion, which will be divided into two main zones: Getting to Know

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EXPO 2017

FOCUS ON THE FUTURE

Kazakhstan and Creative Energy. According to plans, the first zone will be devoted to the diversity of Kazakhstan’s landscape, the country’s rich history and culture, and its present and future. The second zone will include the best projects of Kazakh scientists, as well as initiatives in energy and environmental protection. The national pavilions of participating countries will undoubtedly be the highlights of the exhibition. Besides showcasing the latest achievements in green energy, they will also allow guests to immerse themselves in the culture of each country. At the two themed pavilions, visitors will be able to learn about the evolution of energy. The first pavilion gives an insight into energy needed for life. It is divided into four zones: Universe and Energy, Renewable Energy of the Earth, Smart Cities and Smart Life, and Tech-Garden. The second pavilion explores two topics: Energy for All and My Future Energy. The Energy Best Practices Area will be one of the most fascinating

pavilions at EXPO 2017, showcasing the 24 best green energy projects in the world from 13 countries. The architecture and design of EXPO 2017 facilities are based on the principles of energy efficiency. The key facilities will be partly powered by solar, wind and geothermal energy. The smart grid system will reduce energy

The world’s largest spherical structure is the centrepiece of the EXPO 2017 site

mix to three per cent by 2020, and to 10 per cent by 2030. By 2050, half of all electric energy generated in Kazakhstan will be green. By late 2020, more than 100 renewable energy facilities will be commissioned in Kazakhstan. EXPO 2017 will also drive the development of Kazakhstan’s tourism industry. In 2015, in the run-up to the exhibition, it was decided to introduce a visa-free regime for citizens of 35 countries. In 2017, this list will comprise as many as 56 countries, including the OECD member states. The event expects about five million visits. The hosts have prepared special tourist routes for the guests of the exhibition and residents of Kazakhstan. Besides a visit to EXPO 2017, they include trips to the country’s most exciting tourist attractions, national parks and UNESCO World Heritage Sites. In addition, the exhibition will have more than 3,000 themed, cultural and entertainment events.

By 2050, half of all electric energy generated in Kazakhstan will be green losses during transportation by up to 50 per cent, while smart street lighting will substantially decrease energy consumption. In addition, two wind turbines will be installed in the upper part of the sphere. Alongside preparations for EXPO 2017, Kazakhstan (a party to the Paris climate agreement) has been actively pursuing a policy focused on the development of renewable energy. It plans to increase the share of renewable energy sources in the national energy

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FOCUS ON THE FUTURE

As Kazakhstan marks its 25th anniversary of independence, the occasion also provides a prime opportunity for the country to consider current trends in the financial sector and its future role

A new paradigm in Kazakhstan’s financial sector

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he Astana International Financial Centre (AIFC), as part of the structural reforms aimed at diversifying Kazakhstan’s economy and supporting sustainable economic growth, is expected to raise the financial sector of the country to a whole new level. It all started in December 2015, when President of Kazakhstan Nursultan Nazarbayev proposed an ambitious project and signed a Constitutional Law on the establishment of the AIFC, which laid out unprecedented privileges for all investors. During the presentation of the new financial centre, the president said, “We believe that the Astana International Financial Centre will become a core of Kazakhstan’s financial infrastructure and later

transform into a regional financial hub of Central Asia.” The aim of the AIFC is to change the DNA of the financial services industry in the post-soviet region; promote the growth and development of financial services

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by opening the way for global investment to the Commonwealth of Independent States (CIS) and Central Asian markets; and provide services in accordance with international standards and best practices.


FOCUS ON THE FUTURE

The AIFC has a number of important objectives, including: –– Attraction of investment into the economy of Kazakhstan by creating a favourable environment in the financial services industry

–– Development of the capital market in Kazakhstan and its successful integration with global markets

–– Development of markets for insurance and banking services and for Islamic financing in Kazakhstan

–– Development of financial and professional services based on the principles of world best practices

–– Achievement of international recognition of Kazakhstan as a financial centre

Governor of the AIFC Kairat Kelimbetov says that the establishment of the AIFC is a key reform aimed at diversifying the economy and forming a welldeveloped financial system.

President Nazarbayev and AIFC Governor Kairat Kelimbetov discuss the new centre

Considerable work has been done since the inception of the idea to create a financial centre. The Constitutional law on the AIFC has been adopted in order to provide a legal framework for the functioning of the AIFC. In addition, the following bodies have been established: the AIFC Management Council as the highest governing body and the AIFC Authority as a main project management office. The establishment of a clear legal regime based on the principles of common law shall increase the confidence of the international community in the AIFC and protect the interests of investors and clients of financial services. The independent AIFC court will ensure transparency and fairness of justice. Moreover, based on the success of leading financial centres around the world such as London, Hong Kong, Dubai and Singapore, the AIFC provides unprecedented privileges for investors who have no analogues in the post-Soviet region. These privileges include tax exemptions for AIFC bodies, AIFC participants and their employees for the first 50 years (zero rates on corporate

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income, personal income, land and property taxes). Simplified visa and labour regimes for participants and employees of the AIFC will also be applied. Foreign employees of AIFC participants or AIFC bodies, as well as members of their families, can obtain an entry visa for a period of up to five years. In addition, citizens of member states of the Organisation for Economic Cooperation and Development, United Arab Emirates, Malaysia, Singapore and the Principality of Monaco, as well as citizens of countries designated by the Government of Kazakhstan, will enjoy visafree entry for a period of up to 30 calendar days from the date of entry. In addition, regular direct flights from Astana to leading financial centres will be established in order to make the AIFC accessible from destinations around the world. The Management Council of the AIFC is a permanent collegial body headed by President Nazarbayev, and is the highest governing body. Prime Minister of Kazakhstan Bakytzhan Sagintaev is the Deputy Chairman of the Management Council. The members


REUTERS / ALAMY

EPA B.V. / ALAMY

EPA B.V. / ALAMY

FOCUS ON THE FUTURE

(Left to right) JPMorgan Chase’s Jacob Frenkel, European Bank for Reconstruction and Development President Suma Chakrabarti and Arkady Volozh, CEO of Russian technology giant Yandex, are the foreign participants on the AIFC Management Council

of the Management Council are represented by the Minister of the National Economy, Minister of Finance, Chairman of the National Bank, the AIFC Governor and influential leaders of the world’s financial corporations. The AIFC Management Council meetings are held at least twice a year to take important decisions regarding development of the AIFC. The foreign participants of the Council (Chairman of the JPMorgan Chase International management board Jacob Frenkel, President of the European Bank for Reconstruction and Development [EBRD] Suma Chakrabarti, President and Chairman of Sberbank of Russia, and CEO of Yandex Arkady Volozh) all gave a speech during the last meeting in May 2016. Frenkel noted that Kazakhstan’s economy can become stable only when it integrates completely into the international financial market, and the AIFC will become a mechanism for the integration process.

PILLARS OF DEVELOPMENT Our core pillars of development are capital markets, asset management, private banking, Islamic finance and financial technologies. To develop a capital market pillar, the AIFC is working on introducing necessary reforms

and establishing the AIFC exchange in partnership with a globally recognised stock exchange to provide investors with access to attractive financial instruments, trading technology and exchange regulation. A new high-tech exchange platform will be created in the AIFC based on best international practices in the global exchange industry. The AIFC is building a multi-asset exchange (securities, commodities, derivatives), introducing markets in thoroughly planned stages and providing a full value chain of

To increase the liquidity of the local capital market, the AIFC exchange will become a platform for attracting investments into the Kazakh economy through the public offering of ‘national champions’ and the privatisation of state-owned enterprises (SOEs). Policy-driven privatisation of SOEs that belong to National Welfare Fund SamrukKazyna will be a major driver for the development of capital markets from the capital demand side. A well-developed asset management market is another essential component of any major

The establishment of the AIFC is a key reform aimed at diversifying the economy services, including listing, trading, clearing, settlement, depository and registrar. Having held negotiations with the leading world exchanges such as London Stock Exchange and Metal Exchange, Chicago Mercantile Exchange, New York Stock Exchange, Nasdaq, Japan Stock Exchange, Saudi Stock Exchange (Tadawul), Shanghai Stock Exchange and others, the AIFC is in the process of selecting a reliable and highly advanced strategic partner from among global exchanges.

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financial centre. The success of market development depends on the presence of top-tier asset management firms that enjoy the strong confidence and credibility of both institutional and individual investors. Therefore, the AIFC is exploring a set of measures aimed at incentivising established asset management firms to localise their operations at the AIFC. To that end, we are endorsing the revision of the National Fund’s and Unified Accumulative Pension Fund’s asset


EXPO 2017

FOCUS ON THE FUTURE

allocation strategy, as well as an external asset manager selection process. The existence of such local ‘anchor’ institutional funds is crucial for successfully drawing foreign investors to the AIFC market. In addition, private banking expertise will gradually be developed on the basis of localised international asset management companies. The AIFC has held meetings with representatives of the largest global asset managers, such as BlackRock, Goldman Sachs, Hamilton Lane, Lindsay Goldberg, Nomura, Schroders, Amundi, UBS, Pictet and others. All of them noted the timeliness of this initiative and expressed interest in participating in our project.

ISLAMIC FINANCE As part of developing an Islamic finance pillar, the AIFC Authority is working on creating a favourable legal and regulatory framework for Islamic financial institutions. As it

The AIFC will be situated within the futuristic Astana EXPO 2017 site

is known, President Nazarbayev has set a goal for the AIFC to develop Kazakhstan into a regional Islamic banking hub of the CIS and Central Asian region by 2020. Currently, the AIFC is studying the experience of Hong Kong, the United Kingdom, Luxembourg, the Middle East and Southeast Asia in regulating the activities of Islamic financial institutions, and the issuance and circulation of Islamic securities. The AIFC Authority signed a Memorandum of Understanding with the Islamic Development Bank Group in April 2016 to develop an Islamic financial services industry in Kazakhstan and the CIS. The development of financial technology has been identified as a key new strategic direction of the AIFC. Within the next five years, this industry will significantly change the landscape of the global

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financial services industry. The AIFC is set to become a centre of attraction for FinTech (financial technology) projects based on modern infrastructure, the development of laboratories and close cooperation with major financial and technology companies operating in the financial centre. Given the current process of mobilisation and reorientation of the world economy towards clean technologies, the AIFC is planning to introduce and develop green financing tools at the AIFC. In this regard, the high-tech platform of Astana EXPO 2017 will provide physical infrastructure for green technology research, while the financial component will be supported by the AIFC. The AIFC is in the process of becoming Eurasia’s financial gateway, providing a crucial route


FOCUS ON THE FUTURE

for trade and financial flows between developed and developing countries of the East and West. It will also play an essential role in the development of China’s One Belt, One Road project.

LEGAL REGIME OF THE AIFC Transparent, understandable and sufficiently predictable law enforcement practice is the cornerstone of the AIFC, upon which the confidence of all market participants will be built. A key feature of the AIFC will be a special jurisdiction formed under the Constitution of the Republic of Kazakhstan with its own commercial and civil laws in English, based on English common law.

transactions of AIFC participants, will be carried out in English. This will ensure fairness and justice and will greatly enhance the credibility of Kazakhstan in the eyes of foreign investors. The AIFC has a special legal status to be situated within the Astana EXPO 2017 site. The territory on which the EXPO will be held, along with its unique transport, and urban and engineering infrastructure, will be the main territory of the AIFC. Following the example of successful financial centres based around the world, the AIFC will have all the components of its own developed infrastructure. A set of enterprises and buildings, high-tech

lawyers, consultants and other professionals. Creating a financial centre in Astana is expected to have a positive long-term effect on the economy. One direct effect is an estimated 1% annual increase in non-hydrocarbon GDP until 2025, or about $13.4 billion of absolute cumulative increase in GDP from 2016-25.

DRIVING DEVELOPMENT Advanced training institutions, technical laboratories and financial services development centres will make up innovative infrastructure within the AIFC. This is expected to have a massive impact on the development of education in the country as a whole, particularly in

The development of the AIFC as an international financial platform is an opportunity for knowledge exchange between foreign and local experts and the application of global best practices The proposed legal structure of the AIFC will include the AIFC Court, separate from the national court system and consisting of qualified judges with practical experience in countries with English law jurisdiction. This will become the main institution resolving disputes between AIFC participants. The independent AIFC Court will play a key role in providing transparency and justice. Additionally, the Astana Financial Services Authority (AFSA) will be responsible for the regulation of financial services and related activities in the AIFC. As part of this, parties will have access to alternative dispute settlement solutions such as the Astana International Arbitration Centre. English will be the official language of the AIFC, and will be used in all regulated areas of public relations of the AIFC. Court proceedings, as well as all

engineering, advanced training institutions, technical laboratories, and developed institutions are all prerequisites for the success of this innovative international centre. The AIFC is set to become the main project of a rapidly growing Astana, driving development by stimulating the improvement of transport connections in the city and the quality of social infrastructure. This comprises quality housing for residents and guests, social and cultural amenities, healthcare and education/preschool education systems, as well as leisure and recreation-related organisations.

HUMAN CAPITAL The AIFC will be fully operational in early 2018. Around 18,000 jobs will be created in services within the AIFC territory over the next seven to 10 years, including employment for Kazakh financiers,

77 KAZAKHSTAN AT 25 – GLOBAL PARTNER

improving the skills of financial professionals. The development of the AIFC as an international financial platform is an opportunity for knowledge exchange between foreign and local experts and the application of global best practices. To this end, the AIFC has designed a special programme for professional development that will help to create a pool of local talented experts. Thus, the creation of the AIFC will contribute towards realising the full potential of such government programmes as the Bolashak International Scholarship, which enables high-performing students to study abroad. We are actively working to realise President Nazarbayev’s declaration that the AIFC shall become the core of Kazakhstan’s financial infrastructure and later transform into a regional financial hub of the CIS and Central Asia.


FOCUS ON THE FUTURE

Kazakhstan’s advantageous geographic location in Central Asia means that the country is poised to revive its traditional role as a trade and transport hub between China and Europe

A catalyst for development P

resident of Kazakhstan Nursultan Nazarbayev and Chinese President Xi Jinping entered the Conference Hall at Kazakhstan’s Narzabayev University in Astana at precisely 10.30 local time on 7 September 2013. What happened next is likely to go down in history as the moment that the economies of the Far East, Central Asia, the Middle East, Europe and Africa were first formally introduced to China’s long-term vision of massive collaborative economic development by land and sea corridors, ushering in a new era of sustainable prosperity and business interdependency across the region and, indeed, across continents. The choice of location for President Xi’s speech was no coincidence. For 2,000 years, Kazakhstan has sat at the epicentre of rich east-west and – to a lesser extent – north-south trade routes, which the old Silk Road (although, in fact, there were several) from China to Europe came to exemplify. In more recent and different times with varied products, the practice and concept of the old Silk Route has come back to life as the New Silk Route or – for railway

enthusiasts – the Iron Silk Road. Activity has not only been fuelled by economic development in the region, especially that of China, but also by Kazakhstan’s own rapid economic take-off through 25 brief years of independence, coupled with a multivector foreign and trade policy that engenders escalating commercial contacts at all points of the compass.

ONE BELT, ONE ROAD Stretching from east to west, the Silk Road Economic ‘Belt’ element will trace a line from China to Europe through Central Asia, and the Maritime Silk ‘Road’ will link China’s sea lanes to Southeast Asia, the Middle East and Africa. Taken together they are known as ‘One

Estimated overall infrastructure cost of One Belt, One Road to 2020:

$6 trillion 78 KAZAKHSTAN AT 25 – GLOBAL PARTNER

Belt, One Road’ (OBOR). The hope is that through joint cooperation in five areas – policy, infrastructure construction, trade, financial integration and people-to-people exchanges – OBOR will revive the once thriving Silk Road and create a common area of development and prosperity. The success of OBOR hinges on collaboration, of which there is no shortage from Kazakhstan, arguably the country most intellectually, physically and economically bound into this vast project. If China and its partners can make a success of reviving the trading route, Kazakhstan is perfectly situated to reap the rewards and become Eurasia’s major trading hub – not only for the Central Asian region, but for trade emanating thousands of miles away to the east and west. Encouraged by the potential benefits of OBOR, some 60 countries have expressed interest in partnering with China, and more than two dozen Asian countries, including Kazakhstan, have joined the Asian Infrastructure

The 2013 meeting in Astana between the presidents of China and Kazakhstan began a new era of collaboration


ILYAS OMAROV/AFP/GETTY IMAGES

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FOCUS ON THE FUTURE

Key cargo hub Khorgos Eastern Gate port is forecast to handle

500,000 containers annually by 2020

Investment Bank (AIIB) – a new financial institution specifically created to support the building of infrastructure in the Asia-Pacific region. Other financial instruments investing in OBOR include the $40 billion Silk Road Fund and the BRICS-led New Development Bank, which has initially pledged $10 billion towards the initiative. Global business services giant PwC estimates an overall infrastructure cost of around $6 trillion to 2020.

KEY REGIONAL HUB OBOR has been greeted with particular enthusiasm by Kazakhstan, as the country is working to diversify its economy, add extra value to its vast raw material base by installing related processing and manufacturing capacity to capture added unit value, and generally seeking to boost its competitiveness in global markets. OBOR lends itself well to these goals, underpinning Kazakhstan as a key regional hub for business and transit. As the largest landlocked

country in the world, and as the only country connecting China, Russia and Europe, many consider Kazakhstan to be the buckle to China’s one-belt initiative.

GREATER COLLABORATION Since OBOR was announced, China and Kazakhstan have signed agreements to the value of $50 billion, most of which are geared towards building Kazakhstan’s transit potential. Collaboration between the two countries has already led to the development of the Khorgos Eastern Gate, a dry port complex and key cargo hub located on the border with China. The port, managed by United Arab Emiratesbased DP World, expected to handle 200,000 containers annually in 2016, rising to 500,000 annually by 2020. The area around the dry port is also receiving substantial investment. More than $600 million is expected to come from China’s Jiangsu province to turn the area into a special economic zone. In a similar vein, plans are being

$20 billion Value of agreements signed between China and Kazakhstan since OBOR was announced

drawn up for the construction of an international distribution centre, which will process goods destined for Russia, Europe, Central Asia, Turkey and the Gulf countries. Kazakhstan’s own infrastructure development strategies (outlined in several of the country’s national development plans, including the overarching Nurly Zhol, Kazakhstan 2050 and 100 Concrete Steps) are supporting OBOR investments by ensuring that all 14 regions in the country are connected to the New Silk Road. “We plan to invest about $20 billion dollars in transport infrastructure through 2020,” said First Deputy Minister of Investment and Development Zhenis Kasymbek in 2015. “[Investments] will focus on east-west infrastructure, including transport networks towards the Caspian and beyond to Azerbaijan, Georgia and Turkey.” It is through these kinds of upgrades that Kazakhstan intends to capture 10% of the $600 billion trade volume between China and Europe by 2020.

THEODORE KAYE / ALAMY

TRANSPORT LINKS

Khorgos Eastern Gate dry port is situated at a key position on the border with China

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A more efficient national transport system will also boost regional development. Previously considered inaccessible and remote, vast areas of land in Kazakhstan are slowly being considered for large-scale production facilities and processing operations, which will create muchneeded formal employment in rural communities. Bringing investment and employment prospects to these previously isolated regions is just one example of how the initiative is


FOCUS ON THE FUTURE

By 2025, OBOR is expected to add at least

Greater connectivity for SMEs, which account for

$2.5 trillion

94%

of all enterprises in Kazakhstan

of annual trade value

WANG JIANMIN/XINHUA / ALAMY

delivering direct economic rewards. Key evidence of this is the activity of China’s COFCO Corporation, which is set to build export-orientated tomato-paste processing plants in western and eastern Kazakhstan. Also, in northern Kazakhstan, in close proximity to the Europe-China transport corridor, Russia’s Lukoil oil company is building a lubricant manufacturing plant.

BOOST FOR SMALL BUSINESS Greater connectivity will also boost the productivity of Kazakhstan’s small and medium-sized enterprises (SMEs), which account for 94% of all enterprises in the country, but only 31.7% of gross domestic product (GDP). As Jack Ma, founder of e-commerce giant Alibaba, explained at the St Petersburg International Economic Forum in June 2016, countries along the New Silk Road traditionally lack the necessary infrastructure required to sell their goods and services online. Rail and road improvements will ensure that Kazakhstan’s SMEs can participate in regional and global value chains. As well as facilitating the movement of goods and services, it is hoped that basic infrastructure improvements in the region will promote the growth of Kazakhstan’s burgeoning information technology sector. For example, a stronger fibre-optic backbone across Central Asia would significantly reduce the cost of connecting to international data networks and increase the speed at which Europe and Asia are able to exchange data. This could be extremely profitable to

The first train pulls out of a logistics terminal jointly built by China and Kazakhstan in Lianyungang City. The new rail line links with Kazakhstan’s largest city, Almaty

Kazakhstan, which is launching the Astana International Financial Center in 2018. According to some estimates, one millisecond gained in high-frequency trading (a system whereby computers buy and sell automatically and electronically) can be worth $100 million per year to a hedge-fund company. “The major slogan of [OBOR] is connectivity,” Dominik Mierzejewski, a Chinese Studies professor at the University of Lodz in Poland, told the South China Morning Post. “Behind [the initiative], there is a simple understanding of development: infrastructure first, development second. And because China experienced this pattern, China will promote it in a broader perspective.”

REVIVING DORMANT REGIONS The perspective certainly is broad: targeting the creation of six economic corridors across 65 countries, OBOR could completely reshape the region’s infrastructure network

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and pump upwards of $2.5 trillion of annual trade value by 2025. This will breathe new life into previously dormant enclaves of Central Asia and spur development in ancillary sectors, including real estate, telecoms, e-commerce, financial services, education, tourism, creative industries and green technology. This will create opportunities for multinationals with expertise in more advanced industries, such as engineering and renewable energy, to co-invest with Chinese contractors. For instance, French power-equipment giant Alstom – which recently rebuilt a turbineconstruction factory in China that was originally created to supply the Three Gorges dams – is now expected to supply Chinese hydropower firms as they invest in Central Asia, including Kazakhstan, where, despite its huge hydrocarbon reserves, the country is seeking to substantially diversify its energy production mix.


Index of advertisers Air Astana........................................................................................... 12 Aksai Industrial Park........................................................................84 Deloitte............................................................................................... 18 EXPO 2017 Astana – Future Energy................................................ 10 Fluor.................................................................................................... 17 Interteach............................................................................................ 8 KAZ Minerals.............................................................................. 2 & 32 Skymax Technologies......................................................................... 4 University of Hull..............................................................................83

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DRIVING INNOVATION The University of Hull is ranked in the top 3% in the world* Building international research partnerships Incubating pioneering technology spin-offs Creating sustainable solutions in logistics Serving the world’s largest offshore windfarm

Research with impact in: Renewables – Logistics – Energy and the Environment – Medical *Times Higher World University Rankings 2016

www.hull.ac.uk


Aksai Industrial Park www.aip.kz

Aksai Industrial Park is a production hub located in Aksai city in West Kazakhstan Region and participates to the Technology Transfer Project developed by the Republic of Kazakhstan with United Arab Emirates, in order to raise the level of expertise of technicians and engineers working within the AIP.

With the territory of 3.5 hectares, the park possesses 6000 m2 of production workshops, 3000 m2 of Office complex and 6000 m2 of Closed/Open Warehouses. It is designed as per the norms and requirements of American Metal Building Manufacturers Association (MBMA).

AIP possesses the best human resources and facilities to support your business from Western Kazakhstan. AIP has the latest available equipment for mechanical works, electrical works, fabrication and painting.

Aksai Industrial Park offers to its customers 4200 m2 of bounded area (Flat & Smooth) for cargo storage. The warehouse building with an area of 225 m2 is made up of structural skeleton and frame of metal structures, walls and roof of sandwich panels. The warehouse serves as closed bonded premises for storage of cargo.

Aksai Industrial Park is integrated into the West Kazakhstan economic and social net, and eagers to be the first Kazakhstan private Technology Hub to serve near Stakeholders like KPO, as well as distant O&G Majors, considering the export aims of many of AIP associates.

AIP’s aim is to provide Multinational Companies with the same environment they have or would like to have at home, the same quality of resources, facilities, latest technology and equipment. AIP provides vibrant environment of Companies and contractors that can support their business with dedicated outsourcing.

AIP has a modern laboratory to control and certify your products.

Production & Services  Control panels and Skid production  Welding activities  Valves & Actuators (Manufacturing & Testing)  Design and Engineering services  Accredited Technological Laboratory to ISO 17025  Training Center

 Fittings and production

Flanges

 Passive Fire Protection (PFP) and Thermal Insulation  Drilling equipment  Heat Exchangers and Boilers (Manufacturing & Testing) Resident Companies

Kazakhstan at 25 – Global Partner  

An official publication of the Government of the Republic of Kazakhstan, supported by Samruk-Kazyna, marking the 25th anniversary of indepen...