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Kazakhstan under President Tokayev – transformation in all spheres

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Around two years ago, a change of leadership took place in Kazakhstan, when Kassym-Jomart Tokayev (pictured) took over as Head of State following presidential elections. Since then, numerous reforms have been implemented in the country. Prior to these elections, Nursultan Nazarbayev was the president for almost three decades until 2019 and built a foundation that enabled Kazakhstan to become the biggest economy and top investment destination in the region. Under Nazarbayev, Kazakhstan also managed to build good relations with all its neighbours, as well as with Europe and the United States, writes Paulo Afonso Brardo Duarte.

There has been a shift in focus after 2019. President Tokayev is concentrating not just on economic reforms and foreign relations, but also on political changes in the country. Prior to change in leadership, the country primarily focused on economic development and investment attraction. Indeed, Kazakhstan still has the ambition to become one of the top 30 most developed countries in the world.  Yet according to Kazakhstan’s current president, political changes are necessary to achieve economic development. One may wonder why these reforms matter outside of Kazakhstan. Yet the country is the top trading partner in Central Asia for the European Union and plays a key role in facilitating trade between China and the rest of the world through the Belt and Road project. Kazakhstan is also a founding member of the Eurasian Economic Union and is an active member of the international community, supporting the United States, Russia and other global powers in the resolution of conflicts in Syria and Afghanistan. Ultimately, the political and economic course of Kazakhstan impacts not only the country itself, but also the wider region and beyond.

One of Tokayev’s most significant changes is bringing the population closer to politics, and establishing what he calls “a listening state” – a government that listens to the feedback and criticisms of the population. To enhance dialogue between the government and the people, a National Council of Public Trust was established by Tokayev in 2019. Its aim is to develop specific proposals for reforms and legislation, taking into account the suggestions of civil society and the wider public. Making the national and local government more accountable improves its effectiveness and enables it to better fight long-lasting problems, such as corruption. In this regard, the country’s legal system has been transformed by transitioning it to a service model of work, which calls for a more active and responsible role for law enforcement personnel.

Public administration also required substantial reform as it is plagued by serious bureaucracy. As such, Tokayev instructed the government to reduce the number of civil servants by 25% while also hiring younger cadres. The President, who himself frequently uses social media, also made it a priority to digitise government services to increase efficiency.

In addition to political reforms, Tokayev has prioritised diversifying the economy to avoid excessive dependence on natural resources. For this reason, despite the lure of focusing on oil, gas, uranium and other raw materials that Kazakhstan exports, Tokayev has instructed the government to maximise the potential of agriculture, especially due to the fact that Kazakhstan neighbours China and other rapidly developing Asian countries, which require vast amount of seeds, grains and livestock.

Social reforms have also been realised. Tokayev recently stressed that “economic reforms are justified and supported only when they increase the income of a country’s citizens and ensure higher standards of living”. In practice this means protecting the most vulnerable, as well as individuals and companies that depend on loans to start a business. As such, Tokayev is aiming to expand the amount of bank loans, and direct them to companies that increase value by means of innovation, while reducing the number of inefficient enterprises run by the state. To support those that suffered the most from the economic consequences of the pandemic, the president offered his support to cancel penalties for bank loans.

Another interesting social measure that is likely to have long-term effect is Tokayev’s attempt to gradually revert the idea that higher education should be the ultimate goal of every student. Instead, Tokayev aims to reduce the number of universities to promote vocational centres and colleges that teach specific technical skills. The belief is that this is necessary in order to adapt to the needs of the market, which requires a variety of specialists.

Overall, while it is too early to assess the long-term impact of Tokayev’s presidency and his reform programme, it is clear that he is trying to fight old demons domestically, by shifting Kazakhstan away from old Soviet thinking and system of governance. The interplay between the domestic and external challenges aggravated by the test of COVID-19 and its consequences, will demonstrate whether Tokayev’s reforms are strong enough to help the country cope with the new era.

Kazakhstan

President Tokayev focuses on economic diversification and greener economy at Foreign Investors’ Council

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Kazakh President Kassym-Jomart Tokayev (pictured) spoke about the need for greater economic diversification and greener solutions in the economy at the 33rd session of the Foreign Investors’ Council hosted June 10 by the Kazakh capital Nur-Sultan, reported the Akorda press service, writes Assel Satubaldina in Business.President Tokayev and senior officials during the meeting. Photo credit: Akorda press service

The session was attended by senior Kazakh officials, heads of large multinational companies, heads of government agencies and representatives of international organizations.

The council that consists of heads of 37 large transnational companies and international organizations as well as heads of key ministries has served as an important platform for connecting major foreign investors in Kazakhstan and the government and helping the nation to improve the investment climate.  

This year’s meeting focused on boosting noncommodity exports as well as post-crisis tax incentives, human capital development, subsoil use and digitization. 

“Kazakhstan, as an economic system, cannot rely only on domestic investment, domestic demand and export of raw materials. Our country will continue the policy to ensure the most favorable environment to attract quality foreign investments. We are determined to maintain our leadership in the region and in the Commonwealth of Independent States (CIS),” said Tokayev in his opening remarks. 

He stressed the need to develop exports of processed products, which, as he described, is a guarantee against volatile prices for raw materials, an indicator of the economy’s capacity to produce quality demanded goods and services.

Over the past year, global trade suffered from dramatic losses. Kazakhstan’s foreign trade turnover was down 13 percent last year amounting to $85 billion. 

Despite this downward trend, Kazakhstan’s noncommodity exports showed a lesser decrease of 2.8 percent to $15 billion and foreign direct investments made $18 billion. 

Last year saw the implementation of 41 investment projects worth $1.6 billion and involving foreign investors. 

“As the global economy recovers, Kazakhstan is also on its path to economic recovery. Our government forecasts the growth to be at least 3.5 percent and we expect the possibility of higher growth,” said Tokayev. From L to R: Kazakh PM Askar Mamin, Deputy PM and Foreign Minister Mukhtar Tileuberdi and Minister of Trade and Integration Bakhyt Sultanov. Photo credit: Akorda press service.

Exports remain a priority for the Kazakh economy, said Tokayev, noting that the utmost potential is yet to be unlocked for Kazakhstan. 

The target for Central Asia’s largest economy is $41 billion of noncommodity exports by 2025. To support this target, Kazakhstan allocated nearly $1.2 billion. 

Tokayev agreed with the Asian Development Bank proposal to digitize the export support system.

“We have to agree that digital transformation reduces trade costs, especially for small and medium-sized businesses. The Ministry of Trade (and Integration) and Digital Development (Innovations and Aerospace Industry) should formulate proposals together with the Asian Development Bank,” said Tokayev.

Boosting agricultural exports

The participants noted Kazakhstan could benefit from developing and promoting agricultural exports. Vast natural resources allow the country to be a world leader in the exports of agricultural products, but more could be done. 

Ashok Lavasa, Vice-President for Private Sector Operations and Public-Private Partnerships at the Asian Development Bank, said that the sector could serve as a driver of economic growth. Ashok Lavasa from the ADB during a video conference. Photo credit: Akorda press service

“The agribusiness sector is crucial to enabling more economic growth, job creation, and economic diversification. While agribusiness has enjoyed substantial government subsidies, this has yet to lead to substantive gains in productivity. The sector’s competitiveness and access to market-based financing with suitable tenors should be enhanced,” he said. 

Greater railway connectivity 

During the session, Tokayev also spoke about the need to boost Kazakhstan’s railway system. In 2020, the volume of transit rail transportation grew by 17 percent.  

Five international railway corridors pass through the territory of Kazakhstan, which gives an opportunity to the country to capitalize on its strategic geographic location.

91 percent of containers transported in 2020 through the territory of Kazakhstan accounted for the China-Europe-China route. 

“We can surely say that Kazakhstan has really become a key link in overland transportation between Asia and Europe. Kazakhstan is an important and reliable partner in implementing China’s Belt and Road project,” said Tokayev. 

But the efficiency and quality of transport and logistics services should be improved, including at Khorgos. 

Greener technologies 

Tokayev reaffirmed the country’s commitment to introducing cleaner technologies and accelerating the efforts as the country transitions to a green economy. 

Kazakhstan has great opportunities in this area, according to Andy Baldwin, EY Global Managing Partner – Client Service.

“In the context of the inevitable decarbonization and reorientation of investments in «clean» technologies, Kazakhstan has a unique opportunity to create and boost non-commodity exports. With the right modeling and development strategy, you can turn the changes taking place in the world to your advantage and be ready for them in order to remain competitive in the coming decades,” he said. The meeting participants. Photo credit: Akorda press service

Paving a way to sustainable goals could help Kazakhstan in its effort to boost non commodity exports, according to Joerg Bongartz, Deutsche Bank CEO for Northern and Eastern Europe, which could be done through the implementation of the Environmental, Social and Governance (ESG) principles.

“ESG principles are key components of long-term value and business resiliency, as they are implemented in the strategy and measured on long-term development. In the last few years, investors around the world are increasingly paying attention not only to the financial and production performance of a company but also to the extent to which its activities correspond to the ESG principles,” said Bongartz.

Renewable energy

Last week, President Tokayev revised the country’s target – bringing the share of renewable energy in the nation’s total energy grid to 15 percent by 2030 – instead of the previous ten percent.

To achieve this goal, the national legislation should be changed, said Eurasian Resources Group Chair Alexander Mashkevich. Exempting power-generating organizations that use renewable energy sources and their direct consumers from power transmission services payments could be a solution. 

“This will not have a significant impact on the power transmission organizations and KEGOC (Kazakhstan’s major electricity operator), but it will give a significant boost to renewable energy development. In the future, given our country’s wealth of renewable energy resources (such as wind and solar), clean energy in various forms may become an export product of Kazakhstan, especially as part of the creation of a common energy market within the Eurasian Economic Union,” said Mashkevich

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7th EU-Kazakhstan High-Level Business Platform focused on transition to low-carbon and green technologies

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The EU-Kazakhstan High-Level Platform of dialogue on economic and business matters (Business Platform) held its 7th meeting in Nur-Sultan on 11 June, chaired by Prime Minister Askar Mamin.

The event brought together representatives of business and EU Heads of Mission led by the Ambassador of the EU to the Republic of Kazakhstan, Sven-Olov Carlsson. Visiting EU Special Representative for Central Asia Ambassador Peter Burian joined the event.

The High-level Business Platform complements the technical dialogue between the EU and Kazakhstan within the Enhanced Partnership and Cooperation Agreement, in particular the Cooperation Committee in Trade Configuration, which took place in October 2020.  

The EU has committed to climate neutrality by 2050 and is fully translating the implementation of the Paris Agreement into legislation. Ambitious targets and decisive actions demonstrate that EU is and will remain to be a global leader in the transition to green economy. The climate challenge is inherently global, the EU is only responsibly for approximately 10% of all global Greenhouse Gas emissions. The EU expects from its partners to share a comparable level of ambition to fight climate change and is ready to deepen co-operation with Kazakhstan in this area, including exploring new opportunities for trade and investment.

The recent EU-Kazakhstan Cooperation Council welcomed the progress made in the framework of the Business Platform chaired by the Prime Minister Mamin. The Platform acknowledges the importance of the EU in Kazakhstan's external trade, and discussions on a range of issues contribute to attract more investment in Kazakhstan.

Background Information

The EU-Kazakhstan Enhanced Partnership and Cooperation Agreement (EPCA), fully in force from 1 March 2020, aims at creating a better regulatory environment for businesses in areas such as trade in services, establishment and operation of companies, capital movements, raw materials and energy, intellectual property rights. It is a tool of regulatory convergence between Kazakhstan and the EU, with some “WTO plus” provisions, notably on public procurement. Even in a year as difficult as 2020, the EU has consolidated its position as Kazakhstan’s first trade partner and first foreign investor, and Kazakhstan remains the main trade partner of the EU in Central Asia. Total EU-Kazakhstan trade reached €18.6 billion in 2020, with EU imports worth €12.6bn and EU exports €5.9bn. The EU is by far Kazakhstan's first trading partner overall, representing 41% of total Kazakh exports.

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Kazakhstan

Kazakhstan to focus on economic diversification and a greener economy

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Kazakh President Kassym-Jomart Tokayev spoke about the need for greater economic diversification and greener solutions in the economy at the 33rd session of the Foreign Investors’ Council hosted on 10 June in the Kazakh capital Nur-Sultan.

The council consists of heads of 37 large transnational companies and international organizations as well as heads of key ministries has served as an important platform for connecting major foreign investors in Kazakhstan and the government and helping the nation to improve the investment climate. 

Over the past year, global trade suffered from dramatic losses. Kazakhstan’s foreign trade turnover was down 13 percent last year amounting to $85 billion.

Despite this downward trend, Kazakhstan’s non commodity exports showed a lesser decrease of 2.8 percent to $15 billion and foreign direct investments made $18 billion.

Last year saw the implementation of 41 investment projects worth $1.6 billion and involving foreign investors.

“As the global economy recovers, Kazakhstan is also on its path to economic recovery. Our government forecasts the growth to be at least 3.5 percent and we expect the possibility of higher growth,” said Tokayev.

During the session, Tokayev also spoke about the need to boost Kazakhstan’s railway system. In 2020, the volume of transit rail transportation grew by 17 percent. 

Five international railway corridors pass through the territory of Kazakhstan, which gives an opportunity to the country to capitalize on its strategic geographic location.

91 percent of containers transported in 2020 through the territory of Kazakhstan accounted for the China-Europe-China route.

“We can surely say that Kazakhstan has really become a key link in overland transportation between Asia and Europe. Kazakhstan is an important and reliable partner in implementing China’s Belt and Road project,” said Tokayev.

Tokayev also reaffirmed the country’s commitment to introducing cleaner technologies and accelerating the efforts as the country transitions to a green economy.

Also emphasising focussed on Transition to Low Carbon and Green Technologies,  Prime Minister Askar Mamin chaired the EU-Kazakhstan High-Level Platform of dialogue on economic and business matters (Business Platform) on 11 June.

The event brought together representatives of business and EU Heads of Mission led by the Ambassador of the EU to the Republic of Kazakhstan, Sven-Olov Carlsson. Visiting EU Special Representative for Central Asia Ambassador Peter Burian joined the event.

The High-level Business Platform complements the technical dialogue between the EU and Kazakhstan within the Enhanced Partnership and Cooperation Agreement, in particular the Cooperation Committee in Trade Configuration, which took place in October 2020. 

The EU has committed to climate neutrality by 2050 and is fully translating the implementation of the Paris Agreement into legislation. Ambitious targets and decisive actions demonstrate that EU is and will remain to be a global leader in the transition to green economy. The climate challenge is inherently global, the EU is only responsibly for approximately 10% of all global Greenhouse Gas emissions. The EU expects from its partners to share a comparable level of ambition to fight climate change and is ready to deepen cooperation with Kazakhstan in this area, including exploring new opportunities for trade and investment.

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