Kazakh President unveils plans for massive infrastructure investments

Nursultan NazarbayevAstana (Kazakhstan), Nov 12 : In a surprise and before time state of the union address, Kazakhstan's President, Nursultan Nazarbayev, has announced a new economic policy that heavily places emphasis on massive state investment in infrastructure over the next several years.

Usually, the state of the union address is delivered in the months of January and February, or sometimes in December, but, reflecting the urgency of preventive measures needed to help steer the economy towards sustainable growth, President Nazarbayev decided to pre-pone his address so that the government has the time to introduce proposed anti-crisis steps into the budget plans for the upcoming year and to proceed to work promptly on them.

Kazakhstan's economy has grown four per cent in the first nine months of 2014, slower than expected, and is already feeling the heat from both the 25 [er cent reduction in the oil price, its key export commodity, over the past two months, and the reciprocal sanctions between the West and Russia over Ukraine.

"I, on the basis of my experience, feel that the next few years will be a time of global challenges. Kazakhstan as a part of the global economy and a country situated close to the epicentre of geo-political tensions is affected by these [changes in the world economy]. We see decreases in prices on international markets and a general slow-down of the economy," he said during an extended session of the Political Council of the Nur Otan party on Tuesday.

"The World Bank and IMF [International Monetary Fund] had re-evaluated their global growth forecast for 2014. That is why we need to quickly examine our positions and adjust plans for the coming years," the President said in his address televised live on several TV channels," he added.

The new economic policy is called "Nurly Zhol" or "Bright Path", and resembles what Kazakhstan has done rather successfully to alleviate the pressure from the 2007-2009 global economic slowdown, as well as the New Deal policy by U. S. President Franklin Delano Roosevelt in 1930s.

The policy embraces all aspects of economic growth, including finances, industry and social welfare, but especially emphasises investments into the development of infrastructure and construction works. Given recent decreases in revenues from the export of raw materials, funds will be used from Kazakhstan's National Fund.

Created in 2000 and modelled on the lines of Norway's Petroleum Fund and other similar "rainy day" funds, it has accumulated USD 76 billion from Kazakhstan's oil and other raw material exports revenues.

In the 2007-2009 period, the government used USD 10 billion out of the National Fund to mitigate the effects of the global financial crunch that negatively impacted Kazakhstan's economy.

"The remaining money [in the National Fund] was not spent, instead we saved [those funds] and more. Now is the period when we should use these reserves. They can help us weather tough times and stimulate growth in our economy," President Nazarbayev emphasised.

He said the new allocation should be used for building objects of transport, energy, industrial and social infrastructure, as well as supporting small and medium enterprises (SMEs).

"I've made a decision that the National Fund will allocate an additional USD three billion annually to support our economy in the upcoming three-year period. To this end, the government is to prepare the corresponding decree in a week and allot the necessary funds in the draft national budget for 2015," he announced.

Nazarbayev added that "a special commission will strictly observe the use of each tenge" and report to him personally.

He underlined that the second tranche of 500 billion tenge (USD 2.8 billion) from 1 trillion tenge (USD 5.6 billion) allocated by the National Fund in February to boost economic growth and employment in 2014-2015 should contribute to implementing five key goals.

First, 100 billion tenge (USD 560 million) will be allocated for concessional lending to SMEs and ensuring implementation of important projects in the food and chemical industries, mechanical engineering and service sector.

Second, 250 billion tenge (USD 1.4 billion) would provide additional capitalisation for the government-run bad loans fund. This would help further rehabilitate the country's banking sector by buying out the private banks' non- performing loans.

Third, 81 billion (USD 447.7 million) will be channelled into the construction of infrastructure of the special Khorgos economic zone, which serves as Kazakhstan's gate into the enormous market of China, and the national industrial petrochemical technology park objects in Atyrau and Taraz.

Fourth, the head of state ordered the allocation of an additional 40 billion tenge (USD 220 million) into construction of the EXPO 2017 complex in Astana.

Fifth, with the global exhibition event getting closer, President Nazarbayev directed 29 billion tenge (USD 160.2 million) be allocated to expand Astana Airport, including constructing a new terminal and reconstructing the air strip, as the existing facility has already reached its maximum capacities in serving a passenger flow of 3.5 million annually.

The new economic policy will be centred around the infrastructure development plan, designed for five years, to coincide with the second five-year Programme of Accelerated Industrial and Innovative Development (PAIID). The plan's overall investment portfolio is estimated at 6 trillion tenge (USD 33.1 billion), of which 85 percent would come from private investors, including from foreign countries.

The plan envisages extensive development of transport networks and logistics infrastructure as part of shaping the macro-regions inside the country that would be concentrated around their hub cities.

The nationwide network would connect macro-regions between them, as well as with Astana, through roads, railway links and airlines.

In energy infrastructure, the Kazakh Government's focus will be on developing two high-voltage lines: Ekibastuz - Semey - Ust-Kamenogorsk and Semey - Aktogai - Almaty - Shymkent that would ensure a balanced energy supply by local power plants to all regions of the country.

Other significant issues include upgrading public utilities infrastructure and water supply systems, attracting investment from the European Bank for Reconstruction and Development (EBRD), the Asian Development Bank (ADB), and the Islamic Development Bank (IDB), as well as private investors. This would require annual allocation of no less than 200 billion tenge (USD 1.1 billion) until 2020.

President Nazarbayev also announced an upgrade to state programmes on construction of rental houses (with apartments available for long lease with a purchase option). The change would exempt less affluent candidates from the need to make an initial deposit and help get lower interest rates from banks.

To this end, 180 billion tenge (USD 995 million) would be allocated in 2015-2016. If implemented, the programme is clearly going to make rent and housing more affordable for citizens.

About 70 billion tenge (USD 387 million) would be allocated toward repairing several schools on an emergency basis and eliminating by 2017 three-shift education where it remains. Regional authorities would receive and additional 20 billion tenge (USD 111 million) to radically reduce overcrowding in the pre-school system.

The President instructed the government to allocate 10 billion tenge (USd55.5 million) by 2017 to upgrade equipment and other relevant infrastructure of ten key universities.

Highlighting the importance of SMEs for the national economy, he said that in line with the Kazakhstan 2050 Strategy, the work on increasing SMEs' share in the nation's GDP to 50 percent is to be continued.

He instructed that loans totaling 155 billion tenge (USD 857 million) over the next three years from the Asian Development Bank (ADB), EBRD and World Bank be used efficiently.

He underlined that structural reforms in relevant areas of the economy should accompany investments from the National Fund, and this requires drawing from international financial organisations to implement joint projects.

He said the World Bank, ADB, EBRD and IDB were ready to allocate about USD nine billion to 90 priority projects to support investment activity, prevent a decrease in incomes and stimulate job creation.

This would ensure the sustainable growth of the economy in the short and medium term, he said.

Overall, the new economic policy will help create up to 200,000 new jobs through road construction projects only, as well as create a multiplier effect on other sectors of the economy including the production of cement, steel, machinery, bitumen, equipment and related services.

President Nazarbayev highlighted that economic growth was heavily dependent on domestic peace and inter-ethnic accord in the country.

Celebrations related to 550 years of statehood, 70 years of the end of the Second World War, 20 years of the Constitution and the Assembly of the People of Kazakhstan in 2015 must help promote unity and tolerance, he said.

The younger generation has never seen inter-ethnic conflicts, nor the depression and strife of the 1990s, Nazarbayev reminded.

"Many treat stability and a comfortable life in Kazakhstan as something omnipotent. But what is stability? It is the well-being of our families, security and a roof over heads. Peace is the joy of parenthood, the health of our own parents and the happiness of our kids. Peace is a steady job, salaries paid and confidence in the future. Peace is stability, a public heritage that should be protected, preserved and enhanced day by day," the head of state concluded, stating the values that are most important to the people of Kazakhstan. (ANI)